SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2013
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-35828
Silver Spring Networks, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 43-1966972 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
555 Broadway Street
Redwood City, California 94063
(Address of principal executive offices) (Zip Code)
(650) 839-4000
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of August 2, 2013, there were approximately 46,643,446 shares of the Registrants Common Stock outstanding.
SILVER SPRING NETWORKS, INC.
Page No. |
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2 | ||||||
PART I. FINANCIAL INFORMATION | ||||||
Item 1. |
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3 | ||||||
4 | ||||||
Condensed Consolidated Statements of Comprehensive Income (Loss) |
5 | |||||
6 | ||||||
7 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
21 | ||||
Item 3. |
37 | |||||
Item 4. |
37 | |||||
PART II. OTHER INFORMATION | ||||||
Item 1. |
38 | |||||
Item 1A. |
39 | |||||
Item 2. |
59 | |||||
Item 3. |
59 | |||||
Item 4. |
59 | |||||
Item 5. |
59 | |||||
Item 6. |
60 | |||||
61 |
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations, are forward-looking statements. The words believe, may, could, should, will, plan, estimate, continue, anticipate, intend, expect, potential, predict, project, and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs as of the date of this Quarterly Report on Form 10-Q. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A. (Risk Factors) in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
Unless expressly indicated or the context requires otherwise, the terms Silver Spring Networks, company, we, us, and our in this document refer to Silver Spring Networks, Inc., a Delaware corporation, and, where appropriate, its wholly owned subsidiaries.
2
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for par value)
June 30, 2013 |
December 31, 2012 |
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(Unaudited) | ||||||||
Assets |
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Current assets: |
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Cash and cash equivalents |
$ | 124,970 | $ | 72,646 | ||||
Accounts receivable |
69,711 | 56,528 | ||||||
Inventory |
12,620 | 7,731 | ||||||
Deferred cost of revenue |
114,208 | 45,298 | ||||||
Prepaid expenses and other current assets |
6,563 | 3,456 | ||||||
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Total current assets |
328,072 | 185,659 | ||||||
Property and equipment, net |
12,951 | 12,701 | ||||||
Deferred cost of revenue, non-current |
154,028 | 199,865 | ||||||
Deferred tax assets, non-current |
8,029 | 8,265 | ||||||
Other long-term assets |
3,805 | 11,254 | ||||||
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Total assets |
$ | 506,885 | $ | 417,744 | ||||
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Liabilities, convertible preferred stock and stockholders deficit |
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Current liabilities: |
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Accounts payable |
$ | 35,636 | $ | 28,104 | ||||
Accrued liabilities |
21,054 | 14,831 | ||||||
Deferred revenue |
192,530 | 89,838 | ||||||
Current portion of capital lease obligations |
1,449 | 1,647 | ||||||
Deferred tax liability |
7,897 | 7,897 | ||||||
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Total current liabilities |
258,566 | 142,317 | ||||||
Deferred revenue, non-current |
318,192 | 418,218 | ||||||
Preferred stock warrant liability |
| 11,261 | ||||||
Convertible promissory notes and embedded derivatives |
| 56,319 | ||||||
Other liabilities |
16,866 | 18,412 | ||||||
Commitments and contingencies (Note 5) |
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Convertible preferred stock: |
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$0.001 par value; no shares authorized, issued and outstanding, and aggregate liquidation preference of $0 as of June 30, 2013; 26,072 shares authorized, 22,366 shares issued and outstanding, and aggregate liquidation preference of $381,338 as of December 31, 2012 |
| 270,725 | ||||||
Stockholders deficit: |
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Preferred stock, $0.001 par value, 10,000 shares authorized and no shares issued or outstanding as of June 30, 2013; no shares authorized, issued or outstanding, as of December 31, 2012 |
| | ||||||
Common stock, $0.001 par value; 1,000,000 shares authorized and 46,638 shares issued and outstanding as of June 30, 2013; 80,000 shares authorized and 3,764 shares issued and outstanding as of December 31, 2012 |
46 | 4 | ||||||
Additional paid-in capital |
518,594 | 51,078 | ||||||
Accumulated other comprehensive loss |
(29 | ) | (136 | ) | ||||
Accumulated deficit |
(605,350 | ) | (550,454 | ) | ||||
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Total stockholders deficit |
(86,739 | ) | (499,508 | ) | ||||
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Total liabilities, convertible preferred stock and stockholders deficit |
$ | 506,885 | $ | 417,744 | ||||
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See accompanying Notes to Condensed Consolidated Financial Statements.
3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30, |
Six Months
Ended June 30, |
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2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenue: |
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Product revenue |
$ | 47,996 | $ | 43,958 | $ | 89,716 | $ | 91,898 | ||||||||
Service revenue |
55,514 | 7,626 | 67,497 | 15,140 | ||||||||||||
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Total revenue, net |
103,510 | 51,584 | 157,213 | 107,038 | ||||||||||||
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Cost of revenue: |
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Product cost of revenue |
39,565 | 32,132 | 65,308 | 65,512 | ||||||||||||
Service cost of revenue |
15,695 | 12,782 | 33,521 | 24,789 | ||||||||||||
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Total cost of revenue |
55,260 | 44,914 | 98,829 | 90,301 | ||||||||||||
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Gross profit |
48,250 | 6,670 | 58,384 | 16,737 | ||||||||||||
Operating expenses: |
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Research and development |
18,752 | 15,422 | 43,871 | 31,392 | ||||||||||||
Sales and marketing |
8,637 | 6,619 | 19,090 | 14,910 | ||||||||||||
General and administrative |
10,879 | 6,920 | 25,015 | 14,425 | ||||||||||||
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Total operating expenses |
38,268 | 28,961 | 87,976 | 60,727 | ||||||||||||
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Operating income (loss) |
9,982 | (22,291 | ) | (29,592 | ) | (43,990 | ) | |||||||||
Other income (expense), net: |
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Interest expense |
(184 | ) | (1,229 | ) | (1,236 | ) | (2,153 | ) | ||||||||
Conversion of promissory notes and remeasurement of warrants and derivatives |
| 151 | (23,676 | ) | 4,400 | |||||||||||
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Other income (expense), net |
(184 | ) | (1,078 | ) | (24,912 | ) | 2,247 | |||||||||
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Income (loss) before income taxes |
9,798 | (23,369 | ) | (54,504 | ) | (41,743 | ) | |||||||||
Provision for income taxes |
328 | 38 | 392 | 96 | ||||||||||||
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Net income (loss) |
$ | 9,470 | $ | (23,407 | ) | $ | (54,896 | ) | $ | (41,839 | ) | |||||
Deemed dividend to convertible preferred stockholders |
| | (105,000 | ) | | |||||||||||
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Net income (loss) attributable to common stockholders |
$ | 9,470 | $ | (23,407 | ) | $ | (159,896 | ) | $ | (41,839 | ) | |||||
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Net income (loss) per share attributable to common stockholders: |
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Basic |
$ | 0.20 | $ | (6.38 | ) | $ | (5.58 | ) | $ | (11.45 | ) | |||||
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Diluted |
$ | 0.19 | $ | (6.38 | ) | $ | (5.58 | ) | $ | (11.45 | ) | |||||
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Weighted average shares used to compute net income (loss) per share attributable to common stockholders: |
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Basic |
46,599 | 3,669 | 28,637 | 3,655 | ||||||||||||
Diluted |
48,995 | 3,669 | 28,637 | 3,655 | ||||||||||||
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See accompanying Notes to Condensed Consolidated Financial Statements
4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
(Unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | 2013 | 2012 | |||||||||||||
Net income (loss) |
$ | 9,470 | $ | (23,407 | ) | $ | (54,896 | ) | $ | (41,839 | ) | |||||
Other comprehensive income (loss): |
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Unrealized gain (loss) on foreign currency exchange |
60 | (73 | ) | 107 | (57 | ) | ||||||||||
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Other comprehensive income (loss) |
60 | (73 | ) | 107 | (57 | ) | ||||||||||
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Comprehensive income (loss) |
$ | 9,530 | $ | (23,480 | ) | $ | (54,789 | ) | $ | (41,896 | ) | |||||
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See accompanying Notes to Condensed Consolidated Financial Statements
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30, |
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2013 | 2012 | |||||||
Cash flows provided by (used in) operating activities: |
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Net loss |
$ | (54,896 | ) | $ | (41,839 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
3,366 | 3,644 | ||||||
Stock-based compensation |
37,513 | 8,606 | ||||||
Conversion of promissory notes and remeasurement of warrants and derivatives |
23,676 | (4,400 | ) | |||||
Other non-cash adjustments |
1,452 | 1,656 | ||||||
Changes in operating assets and liabilities: |
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Accounts receivable |
(13,183 | ) | (16,756 | ) | ||||
Inventory |
(5,007 | ) | (3,255 | ) | ||||
Prepaid expenses and other current assets |
(3,187 | ) | (376 | ) | ||||
Deferred cost of revenue |
(23,073 | ) | 2,991 | |||||
Other long-term assets |
2,362 | (1,454 | ) | |||||
Accounts payable |
7,373 | 3,210 | ||||||
Accrued liabilities |
(538 | ) | (1,671 | ) | ||||
Customer deposits |
(246 | ) | (6,808 | ) | ||||
Deferred revenue |
2,666 | 26,498 | ||||||
Other liabilities |
(1,239 | ) | 1,873 | |||||
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Net cash used in operating activities |
(22,961 | ) | (28,081 | ) | ||||
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Cash flows provided by (used in) investing activities: |
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Decrease in restricted cash |
| 140 | ||||||
Purchases of property and equipment |
(2,462 | ) | (3,133 | ) | ||||
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Net cash used in investing activities |
(2,462 | ) | (2,993 | ) | ||||
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Cash flows provided by (used in) financing activities: |
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Payment upon termination of preferred stock warrants of a related party |
(12,000 | ) | | |||||
Proceeds from initial public offering, net of offering costs |
84,705 | | ||||||
Proceeds from private placement of common stock with a related party |
12,000 | | ||||||
Payments on capital lease obligations |
(944 | ) | (508 | ) | ||||
Proceeds from sale-leaseback of property and equipment |
| 1,676 | ||||||
Proceeds from issuance of convertible promissory note |
| 28,993 | ||||||
Proceeds from issuance of common stock, net of repurchases |
190 | 402 | ||||||
Taxes paid related to net share settlement of equity awards |
(6,204 | ) | | |||||
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Net cash provided by financing activities |
77,747 | 30,563 | ||||||
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Net increase in cash and cash equivalents |
52,324 | (511 | ) | |||||
Cash and cash equivalentsbeginning of period |
72,646 | 71,687 | ||||||
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Cash and cash equivalentsend of period |
$ | 124,970 | $ | 71,176 | ||||
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Supplemental cash flow informationcash paid for taxes |
$ | 133 | $ | 203 | ||||
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Supplemental cash flow informationcash paid for interest |
$ | 151 | $ | 70 | ||||
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Non-cash investing and financing activities: |
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Conversion of convertible preferred stock into common stock |
$ | 270,725 | $ | | ||||
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Fair value of common stock issued on conversion of convertible promissory notes |
$ | 79,441 | $ | | ||||
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Deferred offering costs not yet paid |
$ | 474 | $ | | ||||
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Property and equipment acquired under capital lease |
$ | 510 | $ | 1,676 | ||||
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See accompanying Notes to Condensed Consolidated Financial Statements
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Description of Business and Summary of Significant Accounting Policies
We provide a networking platform and solutions that enable utilities to transform the power grid infrastructure into the smart grid. The foundation of our technology is a standards-based and secure Internet Protocol, or IP, network. Our networking platform provides two-way communications between the utility back office and devices on the power grid. In addition to our networking platform, we offer a suite of solutions that run on top of our network and complementary services, all of which we collectively refer to as our Smart Energy Platform. Our solutions include advanced metering, distribution automation and demand-side management. Our service offerings include professional services to implement our products, managed services and software as a service, or SaaS, to assist utilities with managing the network and solutions, and ongoing customer support. Silver Spring Networks, Inc., headquartered in Redwood City, California, was founded in July 2002 and was incorporated in the State of Delaware on July 3, 2002 as Real Time Techcomm, Inc. On August 6, 2002, we changed our name to Silver Spring Networks, Inc.
Accounting Principles and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in our prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on March 13, 2013 (Prospectus).
The condensed consolidated balance sheet as of December 31, 2012, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP.
The condensed consolidated financial statements include the accounts of Silver Spring Networks, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated.
The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income (loss), and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year ending December 31, 2013.
There have been no changes to our significant accounting policies described in the Prospectus that have had a material impact on our condensed consolidated financial statements and related notes.
Initial Public Offering
In March 2013, we completed our initial public offering (IPO) in which we issued and sold 5,462,500 shares of common stock at a public offering price of $17.00 per share. We received net proceeds of $84.7 million after deducting underwriting discounts and commissions of $6.5 million and paid offering costs in the six months ended June 30, 2013 of $1.7 million, but before deducting previously paid offering expenses of approximately $4.7 million. Concurrently with our IPO, we issued and sold in a private placement 705,881 shares of common stock at the public offering price of $17.00 per share, which resulted in net proceeds of $12.0 million. In addition, in connection with our IPO:
| All of our outstanding convertible preferred stock converted into 32,406,995 shares of common stock. |
| Our $24.0 million and $30.0 million convertible notes together with contractual accrued interest of $2.3 million converted into 3,764,954 shares of common stock. In connection with the conversion, we recorded a loss on debt extinguishments of $22.9 million. Please see Note 4 (BorrowingsSubordinated Convertible Notes) for further discussion on the conversion features of the convertible notes, the calculation of the number of shares into which the notes were converted and the accounting for debt extinguishment. |
| We reduced our preferred stock warrant liability by $11.2 million and recorded a loss of $0.8 million in the six months ended June 30, 2013 resulting from our payment of $12.0 million as consideration for the termination of certain warrants to purchase shares of Series A preferred stock and all warrants to purchase shares of Series C preferred stock, which occurred immediately prior to the effectiveness of our IPO. Please see Note 6 (Convertible Preferred Stock and Preferred Stock Warrants). |
7
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
| We reclassified the preferred stock warrant liability for the surviving warrant to purchase shares of Series A preferred stock and all warrants to purchase shares of Series E preferred stock to additional paid-in capital, as these warrants converted to warrants to purchase shares of common stock. Please see Note 6 (Convertible Preferred Stock and Preferred Stock Warrants). |
| We recognized stock-based compensation expense of $4.4 million in the six months ended June 30, 2013 upon the issuance of 87,507 shares of common stock following the vesting upon the effectiveness of the Registration Statement on Form S-1 of 87,507 restricted stock units previously granted in connection with our incentive bonus plans. Please see Note 8 (Stock-Based Compensation) for further discussion of this stock-based compensation expense. |
| We recognized stock-based compensation expense of $10.2 million in the six months ended June 30, 2013 upon the issuance of 602,274 shares of common stock following the granting upon the effectiveness of the Registration Statement on Form S-1 of 602,274 fully vested restricted stock units in connection with our incentive bonus plans. Please see Note 8 (Stock-Based Compensation) for further discussion of this stock-based compensation expense. |
| We recognized stock-based compensation expense of approximately $4.1 million in the six months ended June 30, 2013 related to the modification of stock options held by current employees. Please see Note 8 (Stock-Based Compensation) for further discussion of this stock-based compensation expense. |
| We reclassified $6.4 million of deferred issuance costs previously recorded in other long-term assets as an off-set to the equity proceeds in connection with our IPO. |
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and revenue and expenses during the reporting period. Estimates are used for revenue and cost recognition, inventory valuation, warranty obligations, preferred stock warrants and embedded derivatives valuations, stock-based compensation, classification of current and non-current deferred revenue and deferred cost of revenue, income taxes and deferred income tax assets and associated valuation allowances. These estimates generally involve complex issues and require judgments, involve the analysis of historical and prediction of future trends, can require extended periods of time to resolve and are subject to change from period to period. Actual results may differ materially from managements estimates.
Inventory
Inventory is stated at the lower of cost or market. Inventory consisted of the following (in thousands):
June 30, 2013 |
December 31, 2012 |
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Component parts |
$ | 244 | $ | 299 | ||||
Finished goods |
12,376 | 7,432 | ||||||
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Inventory |
$ | 12,620 | $ | 7,731 | ||||
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Finished goods inventory included consigned inventory totaling $5.6 million and $3.5 million as of June 30, 2013 and December 31, 2012, respectively.
Product Warranty
We provide warranties for substantially all of our products. Our standard warranty period extends from one to five years. We accrue for costs of standard warranty at the time of product shipment, and record changes in estimates to warranty accruals when it is probable a liability has been incurred and the amount of loss can be reasonably estimated.
Product warranty obligation is presented as follows on the condensed consolidated balance sheets (in thousands):
June 30, 2013 |
December 31, 2012 |
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Warranty obligationclassified in accrued liabilities |
$ | 3,017 | $ | 3,109 | ||||
Warranty obligationclassified in other liabilities |
2,978 | 3,207 | ||||||
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$ | 5,995 | $ | 6,316 | |||||
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8
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Product warranty activity was as follows (in thousands):
Six Months Ended June 30, |
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2013 | 2012 | |||||||
Warranty obligationbeginning of period |
$ | 6,316 | $ | 9,631 | ||||
Warranty expense for new warranties issued |
907 | 703 | ||||||
Utilization of warranty obligation |
(1,110 | ) | (740 | ) | ||||
Changes in estimates for pre-existing warranties |
(118 | ) | (2,172 | ) | ||||
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Warranty obligationend of period |
$ | 5,995 | $ | 7,422 | ||||
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During the six months ended June 30, 2013 and 2012, we revised our estimated warranty liability to reflect updated product field reliability experience and recorded a reduction of product warranty liability and product cost of revenue by $0.1 million and $2.2 million, respectively.
At the time of product shipment, we estimate and accrue for the amount of standard warranty cost and record the amount as a cost of revenue. Determining the amount of warranty costs requires management to make estimates and judgments based on historical claims experience, industry benchmarks, test data and various other assumptions including estimated field failure rates that are believed to be reasonable under the circumstances. The amount of warranty costs accrued are net of warranty obligations to be fulfilled by our suppliers. The results of these judgments formed the basis for our estimate of the total charge to cover anticipated customer warranty, repair, return and replacement and other associated costs. Should actual product failure rates, claim levels, material usage or supplier warranties on parts used in our products differ from our original estimates, revisions to the estimated warranty liability could result in adjustments to our cost of revenue in future periods.
Certain of our standard product warranty obligations require us to reimburse a customer for installation and other related costs in the event that field reliability rates fall below contractually specified thresholds. We consider the probability that we will have to pay such incremental warranty costs based on the expected performance of a delivered product when we record new warranty obligations issued in a period as well as when we determine if any changes are required to our original estimates for pre-existing warranty obligations.
Our warranty obligations are affected by product failure rates, claims levels, material usage and supplier warranties on parts included in our products. Because our products are relatively new and we do not have the benefit of long-term experience observing products performance in the field, it is possible that the estimates of a products lifespan and incidence of claims could vary from period to period.
In certain customer arrangements, we have provided extended warranties for periods of up to 15 years following the initial standard warranty period. We recognize revenue associated with extended warranties over the extended warranty period when the extended warranty period commences. Costs associated with providing extended warranties are expensed as incurred during the extended warranty period. As of June 30, 2013 and December 31, 2012, we had deferred revenue associated with extended warranty arrangements of $0.2 million and $0.4 million, respectively, included in other current liabilities, and $6.4 million and $5.5 million, respectively, included in other long-term liabilities on our condensed consolidated balance sheets.
9
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Net income (loss) per share
In connection with our IPO in March 2013, all of our outstanding convertible preferred stock converted into common stock. In addition, we recognized a deemed dividend of $105.0 million to common stockholders on the date of conversion, as discussed further in Note 6 (Convertible Preferred Stock and Preferred Stock Warrants). Basic net income (loss) per share applicable to common stockholders is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share applicable to common stockholders is computed by giving effect to all potential shares of common stock, including convertible debt, stock options, warrants and convertible preferred stock, to the extent dilutive.
The following table sets forth the computation of basic and diluted net income (loss) per share applicable to common stockholders (in thousands, except per share data):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net income (loss) |
$ | 9,470 | $ | (23,407 | ) | $ | (54,896 | ) | $ | (41,839 | ) | |||||
Deemed dividend to convertible preferred stockholders |
| | (105,000 | ) | | |||||||||||
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Net income (loss) available to common stockholders |
$ | 9,470 | $ | (23,407 | ) | $ | (159,896 | ) | $ | (41,839 | ) | |||||
Weighted average common shares outstandingbasic |
46,599 | 3,669 | 28,637 | 3,655 | ||||||||||||
Dilutive effect of employee equity incentive plans |
2,342 | | | | ||||||||||||
Dilutive effect of warrants to purchase common stock |
54 | | | | ||||||||||||
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Weighted average common shares outstandingdiluted |
48,995 | 3,669 | 28,637 | 3,655 | ||||||||||||
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Basic earnings per common share |
$ | 0.20 | $ | (6.38 | ) | $ | (5.58 | ) | $ | (11.45 | ) | |||||
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Diluted earnings per common share |
$ | 0.19 | $ | (6.38 | ) | $ | (5.58 | ) | $ | (11.45 | ) | |||||
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The following potential common shares outstanding were excluded from the computation of diluted net income (loss) per share because including them would have been anti-dilutive (in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | 2013 | 2012 | |||||||||||||
Options to purchase common stock and restricted stock units |
2,636 | 5,624 | 6,565 | 5,624 | ||||||||||||
Warrants to purchase convertible preferred stock |
| 386 | | 386 | ||||||||||||
Warrants to purchase common stock |
1 | 50 | 55 | 50 | ||||||||||||
Convertible preferred stock |
| 22,366 | | 22,366 | ||||||||||||
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Total common stock equivalents |
2,637 | 28,426 | 6,620 | 28,426 | ||||||||||||
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3. Financial Instruments
As of June 30, 2013 and December 31, 2012, there were no financial assets recorded at fair value on a recurring basis. As of June 30, 2013, there were no financial liabilities recorded at fair value on a recurring basis.
10
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of December 31, 2012, the fair value of financial liabilities recorded at fair value on a recurring basis was determined using the following inputs (in thousands):
Fair Value Measurement Using | ||||||||||||||||
Quoted Prices in Active Markets for Identical Instruments (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
Total | |||||||||||||
Liabilities: |
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Preferred stock warrants |
$ | | $ | | $ | 11,261 | $ | 11,261 | ||||||||
Embedded derivatives |
| | 3,519 | 3,519 | ||||||||||||
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Total liabilities measured at fair value |
$ | | $ | | $ | 14,780 | $ | 14,780 | ||||||||
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We held no short-term investments as of June 30, 2013 and December 31, 2012.
Convertible Promissory Notes and Compound Embedded Derivatives
As of December 31, 2012, we had outstanding a $24.0 million convertible note (the December 2011 Note) and a $30.0 million convertible note (the February 2012 Note), each of which contained certain features that were accounted for as compound bifurcated derivative instruments. The compound bifurcated derivative instruments were recorded on the balance sheet at fair value at issuance and at each balance sheet date as discussed further in Note 4 (Borrowings).
At issuance on December 6, 2011, we estimated the fair value of the December 2011 Note, including the compound embedded derivative, at $24.0 million, which approximated the original transaction value with an unrelated third party, and which approximated the fair value at December 31, 2011. At issuance on February 21, 2012, we estimated the fair value of the February 2012 Note, including the compound embedded derivative, at $30.0 million, which approximated the original transaction value with an unrelated third party. At issuance of the December 2011 Note and February 2012 Note, we determined that the fair values of the respective compound embedded derivatives were $1.5 million and $3.6 million, by utilizing a Monte Carlo simulation model using Level 3 inputs. The Monte Carlo simulation model measured the fair value of the compound embedded derivative utilizing a probability weighted discounted cash flow model in a risk-neutral framework for probability of the occurrence of certain of the conversion features as discussed in Note 4 (Borrowings). As of December 31, 2012, the fair values of the compound embedded derivatives related to the December 2011 Note and February 2012 Note were $1.8 million and $1.7 million, respectively.
The compound embedded derivatives were marked to market each period and the changes in the fair value were included as a non-cash item in other income (expense), net on our condensed consolidated statements of operations. In connection with our IPO in March 2013, the December 2011 Note and February 2012 Note, together with accrued interest, were converted into shares of common stock and accounted for as debt extinguishment, as discussed further in Note 4 (Borrowings).
As of December 31, 2012, the carrying amount and estimated fair value of the convertible promissory notes and compound embedded derivatives using Level 3 measurements were as follows (in thousands):
Carrying Amount |
Estimated Fair Value |
|||||||
Convertible promissory notes |
$ | 52,800 | $ | 54,846 | ||||
Compound embedded derivatives |
3,519 | 3,519 |
Fair Value Remeasurement of Preferred Stock Warrants
We recorded the warrants as liabilities at their initial grant date fair value and thereafter recorded gains and losses arising from the change in fair value as a component of other income, net, in the condensed consolidated statements of operations. We recorded an unrealized gain of $4.7 million for the six months ended June 30, 2012. As of June 30, 2013, there were no longer any preferred stock warrants outstanding, as discussed further in Note 6 (Convertible Preferred Stock and Preferred Stock Warrants).
The fair value of the warrant liability was estimated using a probability weighted expected return model, which determines the present value of future distributions that equity classes may realize based on the probability of occurrence of certain sale or IPO exit events.
11
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table provides a roll-forward of the fair value of the convertible preferred stock warrants and compound embedded derivative categorized with Level 3 inputs (in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Beginning of period |
$ | | $ | 14,409 | $ | 14,780 | $ | 15,018 | ||||||||
Remeasurement and termination of convertible preferred stock warrants |
| (116 | ) | (11,261 | ) | (4,743 | ) | |||||||||
Issuance of compound embedded derivatives |
| | | 3,640 | ||||||||||||
Remeasurement and extinguishment of compound embedded derivatives |
| (35 | ) | (3,519 | ) | 343 | ||||||||||
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End of period |
$ | | $ | 14,258 | $ | | $ | 14,258 | ||||||||
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4. Borrowings
Credit Facility
We have available a line of credit with a bank, which originally provided for advances and the issuance of letters of credit of up to $40 million. On May 8, 2013, we amended our credit agreement to increase the available capacity from $40 million to $50 million. As of June 30, 2013, there were no borrowings outstanding under the credit agreement; however, $14.7 million of letters of credit were outstanding, leaving $35.3 million of available capacity for cash borrowings or additional letters of credit, subject to compliance with financial covenants and other customary conditions to borrowings. As of June 30, 2013 we were in compliance with the financial covenants in the credit agreement.
The credit agreement is guaranteed by certain of our accounts receivable, inventory and cash. Loans under the credit agreement bear interest at the banks prime rate plus a margin. The credit agreement will terminate and all amounts owing thereunder will be due and payable on May 17, 2015, unless (a) the commitments are terminated earlier, either at our request or, if an event of default occurs, by the bank (or automatically in the case of certain bankruptcy-related events of default), or (b) the maturity date is extended upon our request, subject to the agreement of the bank. The credit agreement contains customary representations, warranties, affirmative and negative covenants, including financial covenants, events of default and indemnification provisions in favor of the bank. The negative covenants include restrictions regarding the incurrence of liens, subject to certain exceptions. The financial covenants require us to meet monthly financial tests with respect to liquidity ratio and unrestricted cash.
Subordinated Convertible Promissory Notes
In December 2011, we issued the December 2011 Note for an aggregate principal amount of $24.0 million, with a maturity date of December 6, 2014. Interest accrued for the first six months at a rate of 3.0% per year and increased by 1.0% every six months to a maximum of 6.0% per year.
The unpaid principal amount of the December 2011 Note, together with any interest accrued but unpaid thereon, were convertible (a) automatically into shares of a new series of convertible preferred stock at a price per share equal to 85% of the per share selling price of the new preferred stock upon completion of a financing, (b) automatically into shares of common stock immediately prior to the closing of an initial public offering of our common stock at a conversion price equal to 88% of the price to the public in such offering, or (c) at any time upon the election of the investor into shares of Series E preferred stock at a conversion price equal to $50.00 per share. If the December 2011 Note had not automatically converted immediately prior to the closing of our IPO, the outstanding amount of the December 2011 Note would have been due prior to a change of control. We also could have elected to repay the outstanding balance prior to maturity subject to a 7% prepayment penalty with 10 days written notice.
12
In February 2012, we issued the February 2012 Note for an aggregate principal amount of $30.0 million, with a maturity date of February 21, 2015. Interest accrued for the first six months at a rate of 3.0% per year and increased by 1.0% every six months to a maximum of 6.0% per year.
The unpaid principal amount of the February 2012 Note, together with any interest accrued but unpaid thereon, were convertible (a) upon the election of the investor into shares of a new series of convertible preferred stock at a price per share equal to 88% of the per share selling price of the new preferred stock upon completion of a financing, or (b) automatically into shares of common stock immediately prior to the closing of an initial public offering of our common stock at a conversion price equal to 88% of the price to the public in such offering. If the February 2012 Note had not automatically converted immediately prior to the closing of our IPO, the outstanding amount of the February 2012 Note would have been due prior to a change of control. We also could have elected to repay the outstanding balance prior to maturity subject to a 7% prepayment penalty with 10 days written notice.
13
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We concluded that the conversion and repayment features of both the December 2011 Note and the February 2012 Note were accounted for as embedded derivative instruments, and accordingly were bundled as a compound embedded derivative pursuant to the guidance of ASC 815, Derivatives and Hedging. These features were not considered clearly and closely related to either the December 2011 Note or the February 2012 Note and did not qualify for any exceptions from derivative accounting. Therefore, they were bifurcated as a compound embedded derivative that were recorded on the balance sheet at fair value at issuance and at each balance sheet date the notes remained outstanding.
We concluded that the fair values of the December 2011 Note and February 2012 Note, including the compound embedded derivative, were $24.0 million and $30.0 million, respectively, which approximated the original transaction value with an unrelated third party. The fair values of the compound embedded derivative at the date of issuance for the December 2011 Note and the February 2012 Note were $1.5 million and $3.6 million, respectively, which created an issuance discount for each convertible note that was amortized over the term using the effective interest rate method. We determined the fair value of each compound embedded derivative using a Monte Carlo simulation model which measured the probability weighted discounted cash flows in a risk-neutral framework for the occurrence of each of the conversion features in which the outstanding amount of the convertible note would be converted into shares of our stock or would be repaid to the lenders in cash.
In connection with our IPO in March 2013, the December 2011 Note and February 2012 Note together with contractual accrued interest of $2.3 million thereon through March 18, 2013, the closing date of our IPO, converted into 3,764,954 shares of common stock-based on the outstanding principal and accrued interest at a conversion price equal to 88% of the IPO price of $17.00 per share. The conversion of the convertible notes and issuance of common stock were accounted for as debt extinguishments and accordingly, the convertible notes, unamortized debt issuance costs and bifurcated compound embedded derivatives were removed at their respective carrying amounts and the shares of common stock issued were measured at fair value based on the closing price on the date our IPO closed. As a result, we recorded a loss on debt extinguishments of $22.9 million in the six months ended June 30, 2013.
The following table provides a roll-forward of the carrying value of the convertible promissory notes and compound embedded derivatives (in thousands):
Convertible Promissory Notes |
Compound Embedded Derivatives |
Total | ||||||||||
Balances at December 31, 2012 |
$ | 52,800 | $ | 3,519 | $ | 56,319 | ||||||
Accrued interest on convertible promissory notes |
558 | | 558 | |||||||||
Accretion of discount on convertible promissory notes |
377 | | 377 | |||||||||
Conversion of convertible promissory notes and embedded derivatives |
(53,735 | ) | (3,519 | ) | (57,254 | ) | ||||||
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Balances at June 30, 2013 |
$ | | $ | | $ | | ||||||
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5. Commitments and contingencies
Operating and Capital Leases
As of June 30, 2013, we had an aggregate of $14.3 million of financial commitments related to office space under noncancelable operating leases and equipment under capital leases. The aggregate of $14.3 million of future minimum commitments consisted of $2.5 million due for the remainder of fiscal 2013, $4.6 million due in fiscal 2014, $4.0 million due in fiscal 2015 and $3.2 million due in fiscal 2016.
Legal Contingencies
We were named in a lawsuit filed on September 9, 2010 in the Superior Court of the State of California, San Mateo County (Edwards v. Silver Spring Networks). The lawsuit claims to be a class action on behalf of California consumers, and alleges that smart meters are defective and generate incorrect bills. We have filed a motion to dismiss this case and, on September 1, 2011, the San Mateo Superior Court granted our motion without leave to amend as to two of the plaintiffs causes of action and with leave to amend as to a third claim. On February 25, 2012 the plaintiffs filed an amended complaint. On May 30, 2012, we filed an answer to the amended complaint denying the plaintiffs allegations. On August 3, 2012, the plaintiffs filed a second amended complaint, and on September 18, 2012, we filed a demurrer to one of the two claims asserted in the second amended complaint. The court has overruled our demurrer. On November 9, 2012, the plaintiffs filed a motion for class certification. A hearing on the class certification motion was held on January 25, 2013. On April 11, 2013, the court denied the class certification motion without prejudice. The court allowed the plaintiffs to file a revised class certification motion, which the plaintiffs filed on June 28, 2013. A hearing on the revised class certification motion is scheduled for September 2013. We intend to continue vigorously defending against the action. The amount of any potential exposure to us is not estimable at this time.
14
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
On June 17, 2011, EON Corp. IP Holdings, LLC, a non-producing entity, filed suit in United States District Court for the Eastern District of Texas, Tyler Division against a number of smart grid providers, including Landis+Gyr, which was since acquired by Toshiba, Aclara Power-Line Systems Inc., Elster Solutions, LLC, Itron, Inc., Trilliant Networks Inc. and us. The lawsuit alleges infringement of United States Patent Nos. 5,388,101, 5,481,546, and 5,592,491 by certain networking technology and services that we and the other defendants provide. We filed amended answers, affirmative defenses and counterclaims on August 21, 2012, September 24, 2012, October 31, 2012 and November 16, 2012 denying the plaintiffs allegations and asserting that we do not infringe plaintiffs patents and that plaintiffs patents are invalid. The trial has been scheduled for April 2014. We believe that we have meritorious defenses to EONs allegations and intend to vigorously defend ourselves. The amount of any potential exposure to us is not estimable at this time.
On September 16, 2011 TransData, Inc. filed suit in United States District Court for the Western District of Oklahoma, against our customer, Oklahoma Gas & Electric Company, alleging infringement of United States Patent Nos. 6,181,294, 6,462,713, and 6,903,699 by certain wireless communication-enabled meters. Together with the meter manufacturer, General Electric Company, we have agreed to indemnify and defend Oklahoma Gas & Electric Company in connection with the TransData suit. An early claim construction hearing was held for one claim term on February 5, 2013, and the court provided an order on that term on June 25, 2013. The parties are currently briefing a full claim construction, and a hearing for the full claim construction has not yet been scheduled. We believe that we have meritorious defenses to TransDatas allegations, and together with General Electric Company intend to vigorously defend our customer. The amount of any potential exposure to us is not estimable at this time.
On March 21, 2013, Linex Technologies, Inc., a non-producing entity, filed suit against us in United States District Court for the Southern District of Florida. The complaint alleges infringement of United States Patent Nos. 6,493,377 and 7,167,503 by certain networking technology that we provide. We filed an answer on May 20, 2013. The trial is currently scheduled for May 2014. We believe that we have meritorious defenses to Linexs allegations and intend to vigorously defend ourselves. The amount of any potential exposure to us is not estimable at this time.
We are directly involved with various unresolved legal actions and claims, and indirectly are involved with proceedings by administrative bodies such as public utility commissions, arising in the ordinary course of business. We do not believe that any liability from any reasonably foreseeable disposition of such legal actions and claims, individually or in the aggregate, would have a material effect on our condensed consolidated financial statements. There are many uncertainties associated with any litigation or claim, and we cannot be certain that these actions or other third-party claims will be resolved without costly litigation, fines and/or substantial settlement payments. If that occurs, our business, financial condition and results of operations could be materially and adversely affected. If information becomes available that causes us to determine that a loss in any of our pending litigation matters, claims or settlements is probable, and a reasonable estimate of the loss associated with such events can be made, we will record the estimated loss at that time.
Customer Performance and Other Commitments
Certain customer agreements require us to obtain letters of credit or surety bonds in support of our obligations under such arrangements. These letters of credit or surety bonds typically provide a guarantee to the customer for future performance, which usually covers the deployment phase of a contract and may on occasion cover the operations and maintenance phase of service contracts.
As of June 30, 2013 and December 31, 2012, we had a total of $14.7 million and $16.5 million, respectively, of standby letters of credit issued under the credit facility with a financial institution, of which $4.9 million (A$5.1 million) and $5.9 million (A$5.1 million), respectively, were denominated in Australian dollars. In accordance with the terms of our credit facility, increases or decreases in the exchange rate between the Australian dollar and the U.S. dollar will increase or decrease the amount available to us under the credit facility.
As of June 30, 2013, we had a $15.0 million unsecured surety bond. The surety bond provides insurance to support performance obligations under certain customer agreements. As of December 31, 2012, there were no surety bonds outstanding. In the event any such letters of credit or surety bonds are called, we would be obligated to reimburse the issuer of the letter of credit or surety bond. We do not believe there will be any claims against currently outstanding letters of credit or surety bonds.
Our contracts with utility customers and meter manufacturers typically contain provisions that could result in payments or other liabilities related to late or improper delivery of products, services, installations or operations or failure to meet product or performance specifications or other product defects. Any payments made to utility customers pursuant to the terms of these provisions are recorded as reductions of deferred revenue.
15
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Indemnification Commitments
Directors, Officers and Employees. In accordance with our bylaws and/or pursuant to indemnification agreements we have entered into with directors, officers and certain employees, we have indemnification obligations to our directors, officers and certain employees for claims brought against these persons arising out of certain events or occurrences while they are serving at our request in such a capacity. We maintain director and officer liability insurance coverage to reduce our exposure to such obligations, and payments made under indemnification agreements. To date, there have been no indemnification claims by these directors, officers and employees.
Utility Customers and Meter Manufacturers. Our contracts with utility customers and meter manufacturers typically provide indemnification for claims filed by third parties alleging that our products and services sold to the customer or manufacturer infringe or misappropriate any patent, copyright, trademark or other intellectual property right. Refer to the discussion above under the heading Legal Contingencies for a description of certain matters involving our indemnification obligations.
In our utility customer contracts, we also typically provide an indemnification for third-party claims resulting from death, personal injury or property damage caused by the negligence or willful misconduct of our employees and agents in connection with the performance of certain contracts.
Under our utility customer and meter manufacturer indemnities, we typically agree to defend the utility customer or meter manufacturer, as the case may be, from such claims, and pay any resulting costs, damages and attorneys fees awarded against the indemnified party with respect to such claims, provided that (a) the indemnified party promptly notifies us in writing of the claim, (b) the indemnified party provides reasonable assistance to us at our expense, and (c) we have sole control of the defense and all related settlement negotiations.
Insurance. We maintain various insurance coverages, subject to policy limits, that enable us to recover a portion of any amounts paid by us in connection with our obligation to indemnify our utility customers and meter manufacturers. However, because our maximum liability associated with such indemnification obligations generally is not stated explicitly in the related agreements, and further because many states prohibit limitations of liability for such indemnified claims, the maximum potential amount of future payments we could be required to make under these indemnification provisions could significantly exceed insurance policy limits.
Historically, payments made by us under these indemnification provisions have not had a material effect on our results of operations, financial position or cash flows.
6. Convertible Preferred Stock and Preferred Stock Warrants
Convertible Preferred Stock
In connection with our IPO in March 2013, our previously authorized and outstanding convertible preferred stock was converted into 32,406,995 shares of common stock. Included in this amount were incremental shares issued to Series D and Series E preferred stockholders in accordance with their contractual conversion rights which stated that if the IPO conversion price for Series D and Series E preferred stockholders was below $38.927 and $50.00 per share, respectively, then we would issue to the eligible holders additional shares of common stock for no additional consideration pursuant to an automatic adjustment in our certificate of incorporation. The additional shares resulted in a beneficial conversion feature for Series E preferred stock and we recognized a $105.0 million deemed dividend to Series E preferred stockholders at the conversion date. This non-cash charge impacts net loss applicable to our common stockholders and basic and diluted net loss per share applicable to common stockholders.
Warrant Termination and Concurrent Private Placement with a Related Party
Prior to our IPO, entities affiliated with Foundation Capital (together, Foundation Capital) beneficially owned 32.7% of our common stock. Foundation Capital is considered a related party. Foundation Capital held warrants to purchase 41,993 shares of our Series A Preferred Stock and 333,333 shares of our Series C Preferred Stock prior to our IPO. All such warrants terminated immediately prior to the effectiveness of our IPO in exchange for the aggregate payment by us of $12.0 million to these entities. In connection with the transaction, we reduced our preferred stock warrant liability by $11.2 million and recorded a loss of $0.8 million in the six months ended June 30, 2013.
16
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
We also entered into a private placement purchase agreement whereby Foundation Capital purchased an aggregate of $12.0 million of shares of our common stock at the same price as the price offered to the public, or 705,881 shares based on the IPO price of $17.00 per share. This private placement purchase was consummated on the same day that our IPO closed.
Conversion of Convertible Preferred Stock Warrants to Common Stock Warrants
In connection with our IPO, the remaining outstanding warrants to purchase shares of Series A and Series E preferred stock converted into warrants to purchase 20,768 shares of our common stock, and we reclassified the related preferred stock warrant liability to additional paid-in capital.
17
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. Common Stock
Reverse Stock Split
Prior to our IPO, our Board of Directors and holders of the requisite number of outstanding shares of our capital stock approved an amendment to our restated certificate of incorporation to effect a 5-for-1 reverse stock split of our outstanding capital stock. The reverse stock split was effected on February 11, 2013. The reverse stock split did not result in an adjustment to par value. In the amendment to our restated certificate of incorporation filed to effect the reverse stock split, we changed the number of authorized shares of common and convertible preferred stock to 80,000,000 shares and 26,071,540 shares, respectively. The reverse stock split is reflected in the accompanying condensed consolidated financial statements and related notes on a retroactive basis for all periods presented.
Restated Certificate of Incorporation and Amended and Restated Bylaws
Our restated certificate of incorporation and amended and restated bylaws became effective upon the closing date of our IPO. Our restated certificate of incorporation: (a) eliminated the references to the terms of our existing series of preferred stock, which converted to common stock in connection with the IPO; (b) increased the authorized number of shares of common stock to 1,000,000,000 shares; (c) authorized 10,000,000 shares of undesignated preferred stock; (d) provided that holders of common stock will not be entitled to vote on amendments to the restated certificate that relate solely to the terms of any preferred stock designated by our Board of Directors if the holders of such preferred stock are entitled to vote on such amendment; (e) provided that our Board of Directors are classified into three classes of directors; (f) provided that at least two-thirds of the voting power of all of the then-outstanding shares of our capital stock is required to amend the bylaws; (g) provided that stockholders cannot call a special meeting of stockholders, act by written consent without a meeting, fill vacancies in the Board of Directors, remove a director other than for cause, or change the authorized number of directors; and (h) included certain other provisions customary for public companies.
Common Stock Warrants
In March 2011, we granted a warrant to purchase 50,000 shares of common stock at $0.005 per share. The warrant was immediately exercisable and non-forfeitable, and expires on the earlier of a change in control or March 31, 2016. The fair value of the warrant was determined to be $2.5 million based on the Black-Scholes-Merton option pricing model. We accounted for the warrant as an equity instrument and recorded the fair value as a general and administrative expense during the year ended December 31, 2011.
In connection with our IPO in March 2013, warrants to purchase shares of our preferred stock converted into warrants to purchase 20,768 shares of our common stock, at a weighted average exercise price of $13.91 per share. In June 2013, we issued 2,910 shares of common stock pursuant to the net exercise of a warrant to purchase 15,519 shares of common stock, with an exercise price of $17.00 per share. Following the exercise, there remains one outstanding warrant to purchase 5,249 shares of our common stock with an exercise price of $4.76 per share, which expires in 2014.
8. Stock-Based Compensation
We recorded stock-based compensation expense as follows (in thousands):
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | 2013 | 2012 | |||||||||||||
Cost of revenue |
$ | 2,531 | $ | 640 | $ | 9,255 | $ | 1,472 | ||||||||
Research and development |
3,607 | 1,101 | 13,151 | 2,419 | ||||||||||||
Sales and marketing |
1,526 | 725 | 4,872 | 1,640 | ||||||||||||
General and administrative |
3,181 | 1,423 | 10,235 | 3,075 | ||||||||||||
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Stock-based compensation expense |
$ | 10,845 | $ | 3,889 | $ | 37,513 | $ | 8,606 | ||||||||
|
|
|
|
|
|
|
|
Our Board of Directors adopted the 2012 Equity Incentive Plan (the 2012 Plan), which became effective on March 12, 2013 and serves as the successor to our 2003 Stock Option Plan (the 2003 Plan). Pursuant to the 2012 Plan, 3,400,000 shares of our common stock were initially reserved for grant, plus (1) any shares that were reserved and available for issuance under the 2003 Plan at the time the 2012 Plan became effective, and (2) any shares that become available upon forfeiture or repurchase by us under the 2003 Plan and 2007 Greenbox Plan, will be reserved for issuance. Under the 2012 Plan, we may grant both incentive and non-statutory stock options, restricted stock and restricted stock units to employees, directors and service providers.
18
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes our shares available to grant under the 2012 Plan (in thousands):
Shares Available to Grant |
||||
Balance at December 31, 2012 |
2,996 | |||
Additional shares authorized |
3,400 | |||
Options granted |
(611 | ) | ||
Options cancelled or expired |
315 | |||
Restricted stock units granted |
(2,332 | ) | ||
Restricted stock units cancelled |
36 | |||
|
|
|||
Balance at June 30, 2013 |
3,804 | |||
|
|
The following table summarizes our stock option activity and related information for the six months ended June 30, 2013 (in thousands, except per share data):
Options Outstanding | ||||||||||||||||
Number of Shares |
Weighted Average Exercise Price per Share |
Weighted Average Remaining Contractual Term (years) |
Aggregate Intrinsic Value |
|||||||||||||
Balance at December 31, 2012 |
4,616 | $ | 21.73 | |||||||||||||
Options granted |
611 | 17.78 | ||||||||||||||
Options exercised |
(78 | ) | 3.24 | |||||||||||||
Options cancelled or expired |
(315 | ) | 30.99 | |||||||||||||
|
|
|||||||||||||||
Balance at June 30, 2013 |
4,834 | $ | 10.40 | 6.33 | $ | 70,299 | ||||||||||
|
|
|||||||||||||||
As of June 30, 2013: |
||||||||||||||||
Options vested and expected to vest |
4,775 | $ | 10.32 | 6.30 | $ | 69,846 | ||||||||||
Options exercisable |
3,694 | $ | 8.23 | 5.64 | $ | 61,759 |
The following table summarizes our restricted stock unit activity and related information for the six months ended June 30, 2013 (in thousands, except per share data):
Restricted Stock Units Outstanding |
||||||||
Number of Shares |
Weighted Average Grant Date Fair Value per Share |
|||||||
Balance at December 31, 2012 |
231 | $ | 49.51 | |||||
Restricted stock units granted |
2,332 | 17.02 | ||||||
Restricted stock units vested |
(796 | ) | 23.13 | |||||
Restricted stock units cancelled |
(36 | ) | 20.62 | |||||
|
|
|||||||
Balance at June 30, 2013 |
1,731 | $ | 18.48 | |||||
|
|
In March 2013, as approved by our Board of Directors, we modified certain stock options held by employees and directors to purchase 1,752,895 shares of our common stock with an exercise price of $34.90 per share or greater to reduce the exercise price equal to $17.00 per share, the IPO price. There were no changes to vesting terms or conditions. We incurred an incremental charge to stock-based compensation expense of $4.1 million for the six months ended June 30, 2013, and expect to incur $2.2 million of incremental stock-based compensation expense related to the modification over a weighted average period of 1.6 years.
As of June 30, 2013, there was $44.5 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.7 years.
19
SILVER SPRING NETWORKS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Employee Stock Purchase Plan
Our Board of Directors adopted the 2012 Employee Stock Purchase Plan (ESPP), which became effective on March 12, 2013, pursuant to which 400,000 shares of our common stock have been reserved for future issuance. Eligible employees can enroll and elect to contribute up to 15% of their compensation through payroll withholdings in each offering period, subject to certain limitations. Each offering period is six months in duration, with the exception of the initial offering period which commenced in March 2013 upon the date our IPO was declared effective and ends on February 14, 2014. The purchase price of the stock is the lower of 85% of the fair market value on (a) the first day of the offering period or (b) the purchase date.
9. Income Taxes
Our provision for income taxes for the three and six month period ended June 30, 2013 reflects an effective tax rate of 3.4% and (0.7%), respectively, and primarily consists of foreign income and withholding taxes. Our provision for income taxes for the three and six month period ended June 30, 2012 reflected an effective tax rate of (0.2%) and (0.2%), respectively, and primarily consisted of foreign income taxes.
20
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our prospectus filed on March 13, 2013, pursuant to Rule 424(b) under the Securities Act of 1933, as amended (Securities Act) with the SEC. In addition, the following discussion contains forward-looking statements that are based on our managements beliefs and assumptions and on information currently available to our management. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly the section entitled Risk Factors.
Overview
We provide a leading networking platform and solutions that enable utilities to transform the power grid infrastructure into the smart grid. The smart grid intelligently connects millions of devices that generate, control, monitor and consume power, providing timely information and control to both utilities and consumers. We believe that the application of networking technology to the power grid has the potential to transform the energy industry through better communication just as the application of networking technology to the computing industry enabled the Internet.
We believe the power grid is one of the most significant elements of contemporary industrial infrastructure that has yet to be extensively networked with modern technology. We were founded in 2002 to address this challenge, pioneering a fundamentally new approach to connect utilities with millions of devices on the power grid. We believe our technology will yield significant benefits to utilities, consumers and the environment, both in the near term and the future. These benefits include more efficient management of energy, improved grid reliability, capital and operational savings, the ability to pursue new initiatives, consumer empowerment, and assistance in complying with evolving regulatory mandates through reduced carbon emissions. We believe networking the power grid will fundamentally transform the worlds relationship with energy.
The foundation of our technology is a standards-based and secure IP network. Our networking platform provides two-way communications between the utility back office and devices on the power grid. In addition to our networking platform, we offer a suite of solutions that run on top of our network and complementary services, all of which we collectively refer to as our Smart Energy Platform. Our solutions include advanced metering, which allows utilities to automate a number of manual processes and improve operational efficiencies, offer flexible pricing programs to consumers, and improve customer service with faster outage detection and restoration; distribution automation, which provides utilities with real-time visibility into the health of the grid, enabling better management and control of power distribution assets to improve grid reliability; and demand-side management, which enables utilities to offer consumers a variety of programs and incentives to use energy more efficiently and reduce usage at times of peak demand. Our service offerings include professional services to implement our products, managed services and SaaS, to assist utilities with managing the network and solutions, and ongoing customer support. Our Smart Energy Platform comprises hardware, software and services and combines with devices manufactured by third-party partners to form end-to-end smart grid offerings. We have architected our networking platform to support multiple current and future smart grid solutions. As a result, we believe utilities can increase the value of their network investment as they deploy additional solutions on this network. Over the long term, we believe our networking platform has the potential to be extensible to areas beyond energy, including smart homes, smart buildings, and smart cities, thereby enabling the internet of things. The internet of things refers to an architecture where physical devices gain the capacity to communicate with each other through the application of networking technology.
We market our Smart Energy Platform directly to utilities around the world. Leading utilities have selected our networking platform to be the foundation of the smart grid. Since inception through December 31, 2012, we were awarded contracts to network more than 22 million Silver Spring-enabled devices that connect homes and businesses. Our utility customers, as of June 30, 2013, include: Atlantic City Electric Company, a subsidiary of Pepco Holdings Inc., or PHI; Baltimore Gas and Electric Company, or BG&E, a subsidiary of Exelon Corporation; CitiPower Pty and Powercor Australia Ltd., or CHED, subsidiaries of CHEDHA Holdings Pty Limited; Commonwealth Edison Company, a subsidiary of Exelon Corporation; CPFL Energia; CPS Energy; Delmarva Power and Light Company, a subsidiary of PHI; Florida Power & Light Company, or FPL, a subsidiary of NextEra Energy, Inc.; Guelph Hydro Electric Systems, Inc.; Jemena Electricity Networks (Vic) Ltd; Modesto Irrigation District, or MID; Oklahoma Gas and Electric Company, or OG&E, a subsidiary of OGE Energy Corp.; Pacific Gas and Electric Company, or PG&E, a subsidiary of PG&E Corporation; Potomac Electric Power Company, a subsidiary of PHI; Progress Energy Carolinas, Inc. and Progress Energy Florida, Inc., subsidiaries of Progress Energy, Inc.; Sacramento Municipal Utility District, or SMUD; and SP PowerAssets Limited, or Singapore Power. As of June 30, 2013, we had delivered 17.0 million Silver Spring-enabled devices that connect homes and businesses.
21
Financial Overview
Revenue
We derive revenue from sales of products and services that enable utility customers to deploy our Smart Energy Platform.
Our product revenue is derived from sales of hardware such as communications modules, access points, relays and bridges, and software. We sell our communications modules primarily to meter manufacturers, however when requested by our utility customers, we sell third-party devices such as meters integrated with our communications modules directly to our utility customers. In addition, we sell our other hardware and software products directly to our utility customers.
Our service revenue includes fees for professional services, managed services and SaaS, and ongoing customer support.
To date, a substantial majority of our revenue is attributable to a limited number of utility customer deployments of our advanced metering solution.
Our revenue includes amounts related to the utility customers deployments that were billed directly to our meter manufacturers, as well as direct revenue from our utility customers. We expect that a limited number of utility customers will continue to account for a substantial portion of our revenue in future periods although these utility customers have varied and are likely to vary from period to period.
Substantially all of our customer arrangements include acceptance provisions that require testing of the network against specific performance criteria. Once we complete the required network testing and receive acceptance of the initial phase of deployment, we receive customer acceptances for follow-on phases of deployment on a routine basis, which leads to additional revenue until the completion of the specific customer deployment.
Cost of Revenue and Gross Profit (Loss)
Product cost of revenue consists of contract manufacturing costs, including raw materials, component parts and associated freight, and normal yield loss in the period in which we recognize the related revenue. In addition, product cost of revenue includes compensation, benefits and stock-based compensation provided to our supply chain management personnel, and overhead and other direct costs, which are recognized in the period in which we recognize the related revenue. Further, we recognize certain costs, including logistics costs, manufacturing ramp-up costs, expenses for inventory obsolescence, warranty obligations, lower of cost or market adjustments to inventory, and amortization of intangibles, in the period in which they are incurred or can be reasonably estimated. We record a lower of cost or market adjustment in instances where the selling price of the products delivered or expected to be delivered is less than cost. We also include the cost of third-party devices in cost of revenue in instances when our utility customers contract with us directly for such devices. In accordance with our accounting policies, we recognize product cost of revenue in the periods we recognize the related revenue.
Service cost of revenue includes compensation and related costs for our service delivery, customer operations and customer support personnel, facilities and infrastructure cost and depreciation, and data center costs. In accordance with our accounting policies, we recognize service cost of revenue in the period in which it is incurred even though the associated service revenue may be required to be deferred.
Our gross profit (loss) varies from period to period based on the volume, average selling prices, and mix of products and services recognized as revenue, as well as product and service costs, expense for warranty obligations, and inventory write-downs. The timing of revenue recognition and related costs, which depends primarily on customer acceptance, can fluctuate significantly from period to period and have a material impact on our gross profit and gross margin results.
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and general and administrative expenses, as well as amortization of acquired intangibles. Personnel-related expense represents a significant component of our operating expenses. Our regular full-time employee headcount grew from 566 employees as of December 31, 2012 to 589 as of June 30, 2013.
22
Research and Development
Research and development expense represents the largest component of our operating expenses and consists primarily of:
| compensation, benefits and stock-based compensation provided to our hardware and software engineering personnel, as well as facility costs and other related overhead; |
| cost of prototypes and test equipment relating to the development of new products and the enhancement of existing products; and |
| fees for design, testing, consulting, legal and other related services. |
We expense our research and development costs as they are incurred.
Sales and Marketing
Sales and marketing expense consists primarily of:
| compensation, benefits, sales commissions and stock-based compensation provided to our sales, marketing and business development personnel, as well as facility costs and other related overhead; |
| marketing programs, including expenses associated with industry events and trade shows; and |
| travel costs. |
General and Administrative
General and administrative expense consists primarily of:
| compensation, benefits and stock-based compensation provided to our executive, finance, legal, human resource and administrative personnel, as well as facility costs and other related overhead; and |
| fees paid for professional services, including legal, tax and accounting services. |
Key Non-GAAP Financial Measures
We believe that our results of operations under GAAP, when considered in isolation, may only provide limited insight into the performance of our business in any given period. As a result, we manage our business, make planning decisions, evaluate our performance and allocate resources by assessing non-GAAP measures such as non-GAAP revenue (billings), cost of non-GAAP revenue (billings), gross profit (loss) on non-GAAP revenue (billings), and adjusted EBITDA, in addition to other financial measures presented in accordance with GAAP. We believe that these non-GAAP measures offer valuable supplemental information regarding the performance of our business, and will help investors better understand the sales volumes, and gross margin and profitability trends, as well as the cash flow characteristics, of our business. These non-GAAP measures should not be considered in isolation from, are not a substitute for, and do not purport to be an alternative to, revenue, cost of revenue, gross profit (loss), net loss or any other performance measure derived in accordance with GAAP.
Non-GAAP revenue (billings) represents amounts invoiced for products for which ownership, typically evidenced by title and risk of loss, has transferred or services that have been provided to the customer, and for which payment is expected to be made in accordance with normal payment terms. Non-GAAP revenue (billings) excludes amounts for undelivered products, services to be performed in the future, and amounts paid or payable to customers. Non-GAAP revenue (billings) is initially recorded as deferred revenue and is recognized as revenue when all revenue recognition criteria have been met under our accounting policies as described in our Prospectus. We reconcile revenue to non-GAAP revenue (billings) by adding revenue to the change in deferred revenue in a given period.
Cost of non-GAAP revenue (billings) represents the cost associated with products and services that have been delivered to the customer, excluding stock-based compensation and amortization of intangibles. Cost of product shipments for which revenue is not recognized in the period incurred is recorded as deferred cost of revenue. Deferred cost of revenue is expensed in the statement of operations as cost of revenue when the corresponding revenue is recognized. Costs related to services are expensed in the period incurred. We reconcile cost of revenue to cost of non-GAAP revenue (billings) by adding cost of revenue to the change in deferred cost of revenue, less stock-based compensation and amortization of intangibles included in cost of revenue, in a given period.
Gross profit (loss) on non-GAAP revenue (billings) is the difference between non-GAAP revenue (billings) and cost of non-GAAP revenue (billings).
23
Adjusted EBITDA is net loss adjusted for changes in deferred revenue and deferred cost of revenue, other (income) expense, net, provision for income taxes, depreciation and amortization, stock-based compensation and certain other items management believes affect the comparability of operating results.
The non-GAAP financial measures set forth below for the three and six months ended June 30, 2013 and 2012 have been derived from our condensed consolidated financial statements. Reconciliations to the comparable GAAP measures are contained in the notes below.
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(unaudited, in thousands, except for percentages) |
(unaudited, in thousands, except for percentages) |
|||||||||||||||
Non-GAAP revenue (billings)(1) |
$ | 86,451 | $ | 74,033 | $ | 160,222 | $ | 133,536 | ||||||||
Cost of non-GAAP revenue (billings)(2) |
60,444 | 49,129 | 112,664 | 85,742 | ||||||||||||
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|
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Gross profit (loss) on non-GAAP revenue (billings)(3) |
$ | 26,007 | $ | 24,904 | $ | 47,558 | $ | 47,794 | ||||||||
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Gross margin on non-GAAP revenue (billings) |
30 | % | 34 | % | 30 | % | 36 | % | ||||||||
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Adjusted EBITDA(4) |
$ | (2,306 | ) | $ | 1,001 | $ | (8,890 | ) | $ | (2,251 | ) | |||||
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|
(1) | The following table reconciles revenue to non-GAAP revenue (billings): |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||
Revenue, net |
$ | 103,510 | $ | 51,584 | $ | 157,213 | $ | 107,038 | ||||||||
Change in deferred revenue, net of foreign currency translation |
(17,059 | ) | 22,449 | 3,009 | 26,498 | |||||||||||
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Non-GAAP revenue (billings) |
$ | 86,451 | $ | 74,033 | $ | 160,222 | $ | 133,536 | ||||||||
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(2) | The following table reconciles cost of revenue to cost of non-GAAP revenue (billings): |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||
Cost of revenue |
$ | 55,260 | $ | 44,914 | $ | 98,829 | $ | 90,301 | ||||||||
Change in deferred cost of revenue, net of foreign currency translation |
7,763 | 4,903 | 23,186 | (2,991 | ) | |||||||||||
Less: Stock-based compensation included in cost of revenue |
(2,531 | ) | (640 | ) | (9,255 | ) | (1,472 | ) | ||||||||
Less: Amortization of intangibles included in cost of revenue |
(48 | ) | (48 | ) | (96 | ) | (96 | ) | ||||||||
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Cost of non-GAAP revenue (billings) |
$ | 60,444 | $ | 49,129 | $ | 112,664 | $ | 85,742 | ||||||||
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|
(footnotes continued on the next page)
24
(3) | The following table reconciles gross profit (loss) to gross profit on non-GAAP revenue (billings): |
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(unaudited, in thousands, except for percentages) |
(unaudited, in thousands, except for percentages) |
|||||||||||||||
Gross profit |
$ | 48,250 | $ | 6,670 | $ | 58,384 | $ | 16,737 | ||||||||
Change in deferred revenue, net of foreign currency translation |
(17,059 | ) | 22,449 | 3,009 | 26,498 | |||||||||||
Change in deferred cost of revenue, net of foreign currency translation |
(7,763 | ) | (4,903 | ) | (23,186 | ) | 2,991 | |||||||||
Stock-based compensation included in cost of revenue |
2,531 | 640 | 9,255 | 1,472 | ||||||||||||
Amortization of intangibles included in cost of revenue |
48 | 48 | 96 | 96 | ||||||||||||
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Gross profit on non-GAAP revenue (billings) |
$ | 26,007 | $ | 24,904 | $ | 47,558 | $ | 47,794 | ||||||||
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Gross margin on non-GAAP revenue (billings) |
30 | % | 34 | % | 30 | % | 36 | % | ||||||||
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(4) | The following table reconciles net loss to adjusted EBITDA: |
Three Months ended June 30, |
Six Months ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||
Net income (loss) |
$ | 9,470 | $ | (23,407 | ) | $ | (54,896 | ) | $ | (41,839 | ) | |||||
Change in deferred revenue, net of foreign currency translation |
(17,059 | ) | 22,449 | 3,009 | 26,498 | |||||||||||
Change in deferred cost of revenue, net of foreign currency translation |
(7,763 | ) | (4,903 | ) | (23,186 | ) | 2,991 | |||||||||
Other (income) expense, net |
184 | 1,078 | 24,912 | (2,247 | ) | |||||||||||
Provision for income taxes |
328 | 38 | 392 | 96 | ||||||||||||
Depreciation and amortization |
1,689 | 1,857 | 3,366 | 3,644 | ||||||||||||
Stock-based compensation |
10,845 | 3,889 | 37,513 | 8,606 | ||||||||||||
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Adjusted EBITDA |
$ | (2,306 | ) | $ | 1,001 | $ | (8,890 | ) | $ | (2,251 | ) | |||||
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|
Non-GAAP measures have limitations and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. The most significant of these limitations include:
| our non-GAAP measures do not reflect the effect of customer acceptance provisions as required under GAAP; |
| our non-GAAP measures do not reflect the effect of contingent revenue recognition limits due to potential refunds and penalty provisions related to future delivery or performance as required under GAAP; |
| our non-GAAP measures are based on contractual invoiced amounts and therefore do not reflect the effect of relative selling price allocations between separate units of accounting as required under GAAP; |
| our non-GAAP measures do not reflect the impact of issuing equity-based compensation to our management team and employees or in connection with acquisitions; |
| our non-GAAP measures do not reflect the impact of the amortization of acquired intangibles arising from acquisitions; |
| our non-GAAP measures do not reflect other (income) expense primarily related to gains and losses from the remeasurement of embedded derivative and preferred stock warrant liabilities, and interest expense or loss on conversion from our promissory notes; |
| our non-GAAP measures do not reflect income tax expense or legal settlement costs; |
| although depreciation and amortization are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future, and adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditures; |
25
| our non-GAAP measures do not reflect changes in, or cash requirements for, our working capital needs; and |
| other companies, including companies in our industry, may not use such measures, may calculate non-GAAP measures differently or may use other financial measures to evaluate their performance, all of which reduce the usefulness of our non-GAAP measures as comparative measures. |
26
Results of Operations and Other Financial Measures
The following table sets forth our condensed consolidated results of operations for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||
Condensed Consolidated Statements of Operations Data: |
||||||||||||||||
Revenue, net |
$ | 103,510 | $ | 51,584 | $ | 157,213 | $ | 107,038 | ||||||||
Cost of revenue |
55,260 | 44,914 | 98,829 | 90,301 | ||||||||||||
|
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|
|
|
|
|
|
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Gross profit |
48,250 | 6,670 | 58,384 | 16,737 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
18,752 | 15,422 | 43,871 | 31,392 | ||||||||||||
Sales and marketing |
8,637 | 6,619 | 19,090 | 14,910 | ||||||||||||
General and administrative |
10,879 | 6,920 | 25,015 | 14,425 | ||||||||||||
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Total operating expenses |
38,268 | 28,961 | 87,976 | 60,727 | ||||||||||||
|
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|
|||||||||
Operating income (loss) |
9,982 | (22,291 | ) | (29,592 | ) | (43,990 | ) | |||||||||
Other income (expense), net |
(184 | ) | (1,078 | ) | (24,912 | ) | 2,247 | |||||||||
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|
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|
|
|||||||||
Income (loss) before income taxes |
9,798 | (23,369 | ) | (54,504 | ) | (41,743 | ) | |||||||||
Provision for income taxes |
328 | 38 | 392 | 96 | ||||||||||||
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|
|
|
|
|
|
|||||||||
Net income (loss) |
$ | 9,470 | $ | (23,407 | ) | $ | (54,896 | ) | $ | (41,839 | ) | |||||
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|
Revenue
The following table sets forth our revenue for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||
2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||||||||||
Product revenue |
$ | 47,996 | $ | 43,958 | $ | 4,038 | $ | 89,716 | $ | 91,898 | $ | (2,182 | ) | |||||||||||
Service revenue |
55,514 | 7,626 | 47,888 | 67,497 | 15,140 | 52,357 | ||||||||||||||||||
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|
|
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Revenue, net |
$ | 103,510 | $ | 51,584 | $ | 51,926 | $ | 157,213 | $ | 107,038 | $ | 50,175 | ||||||||||||
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Of the $103.5 million total revenue recognized in the three months ended June 30, 2013, 89%, or $92.6 million, was due to the receipt of customer acceptances and the performance of related services for follow-on phases of deployment of our networking platform and solutions from utility customers for which acceptance of initial phases of deployment was achieved prior to 2013, and 11%, or $10.9 million, was due to the receipt of customer acceptances of initial phases of deployment of our networking platform and solutions during 2013. Revenue from our advanced metering solution and demand-side management and distribution automation solutions represented 94% and 6%, respectively, of total revenue for the three months ended June 30, 2013.
Of the $51.6 million total revenue recognized in the three months ended June 30, 2012, 99%, or $50.9 million, was due to the receipt of customer acceptances and the performance of related services for follow-on phases of deployment of our networking platform and solutions from utility customers for which acceptance of initial phases of deployment was achieved prior to 2012, and 1%, or $0.7 million, was due to the receipt of customer acceptances of initial phases of deployment of our networking platform and solutions during 2012. Revenue from our advanced metering solution and demand-side management and distribution automation solutions represented 88% and 12%, respectively, of total revenue for the three months ended June 30, 2012.
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Of the $157.2 million total revenue recognized in the six months ended June 30, 2013, 93%, or $146.3 million, was due to the receipt of customer acceptances and the performance of related services for follow-on phases of deployment of our networking platform and solutions from utility customers for which acceptance of initial phases of deployment was achieved prior to 2013, and 7%, or $10.9 million, was due to the receipt of customer acceptances of initial phases of deployment of our networking platform and solutions during 2013. Revenue from our advanced metering solution and demand-side management and distribution automation solutions represented 91% and 9%, respectively, of total revenue for the six months ended June 30, 2013.
Of the $107.0 million total revenue recognized in the six months ended June 30, 2012, 94%, or $100.4 million, was due to the receipt of customer acceptances and the performance of related services for follow-on phases of deployment of our networking platform and solutions from utility customers for which acceptance of initial phases of deployment was achieved prior to 2012, and 6%, or $6.6 million, was due to the receipt of a customer acceptance of initial phase of deployment of our networking platform and solutions during 2012. Revenue from our advanced metering solution and demand-side management and distribution automation solutions represented 89% and 11%, respectively, of total revenue for the six months ended June 30, 2012.
The increase in revenue for follow-on phases of deployment for the three and six months ended June 30, 2013 as compared to three and six months ended June 30, 2012 was primarily due to the recognition of revenue of approximately $48.5 million that was previously deferred in accordance with our revenue recognition policy in connection with contingency provisions in an agreement with a customer that is nearing completion of its network optimization and deployment.
Product Revenue. The $4.0 million increase in product revenue for the three months ended June 30, 2013 as compared to the three months ended June 30, 2012 was due to an increase of $6.8 million resulting from the recognition of product revenue that was previously deferred subject to contingency provisions for a customer, partially offset by a net decrease of $2.8 million due to lower acceptance volumes partially offset by product mix.
The $2.2 million decrease in product revenue for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 was due to a net decrease of $9.0 million resulting from lower acceptance volumes partially offset by product mix. This decrease was partially offset by an increase of $6.8 million resulting from the recognition of product revenue that was previously deferred subject to contingency provisions for a customer.
Service Revenue. The $47.9 million increase in service revenue for the three months ended June 30, 2013 as compared to the three months ended June 30, 2012 was primarily due to an increase of $41.6 million resulting from the recognition of services revenue that was previously deferred subject to contingency provisions for a customer, and an increase of $5.0 million for services associated with the receipt of customer acceptances for initial phases of deployment of our networking platform and solutions. Revenue from managed services and SaaS, and professional services represented 36% and 17%, respectively, of total revenue for the three months ended June 30, 2013, and 8% and 7%, respectively, of total revenue for the three months ended June 30, 2012.
The $52.4 million increase in service revenue for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 was primarily due an increase of $41.6 million from the recognition of services revenue that was previously deferred subject to contingency provisions for a customer, and an increase of $6.3 million for services associated with the receipt of customer acceptances for initial phases of deployment of our advanced metering solution and distribution automation solution. Revenue from managed services and SaaS, and professional services represented 27% and 16%, respectively, of total revenue for the six months ended June 30, 2013, and 7% and 8%, respectively, of total revenue for the six months ended June 30, 2012.
We anticipate that total revenue in the three months ended September 30, 2013 will decrease sequentially and will fluctuate from period to period for the remainder of 2013 and beyond, and may lead to gross losses primarily due to the timing of when we expect to meet the completion and acceptance criteria in our customer arrangements.
Non-GAAP Revenue (billings)
The following table sets forth our non-GAAP revenue (billings) for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||||||||||
Non-GAAP revenue (billings) |
$ | 86,451 | $ | 74,033 | $ | 12,418 | $ | 160,222 | $ | 133,536 | $ | 26,686 | ||||||||||||
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The $12.4 million increase in non-GAAP revenue (billings) for the three months ended June 30, 2013 as compared to the three months ended June 30, 2012 was due to increases in billings of $8.2 million from changes in product mix partially offset by lower volumes and $4.2 million in services billings.
Non-GAAP revenue (billings) from our advance metering solution and demand-side management and distribution automation solutions represented 88% and 12%, respectively, of total billings for the three months ended June 30, 2013, and 91% and 9%, respectively, of total billings for the three months ended June 30, 2012.
Non-GAAP revenue (billings) from product, managed services and SaaS, and professional services represented 76%,11% and 13%, respectively, of total billings for the three months ended June 30, 2013, and 78%, 11% and 11%, respectively, of total billings for the three months ended June 30, 2012.
The $26.7 million increase in non-GAAP revenue (billings) for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 was due to increases in billings of $19.2 million from changes in product mix partially offset by lower volumes and $7.5 million in services billings.
Non-GAAP revenue (billings) from our advance metering solution and demand-side management and distribution automation solutions represented 90% and 10%, respectively, of total billings for the six months ended June 30, 2013, and 90% and 10%, respectively, of total billings for the six months ended June 30, 2012.
Non-GAAP revenue (billings) from product, managed services and SaaS, and professional services represented 76%,11% and 13%, respectively, of total billings for the six months ended June 30, 2013, and 77%, 11% and 12%, respectively, of total billings for the six months ended June 30, 2012.
Cost of Revenue and Gross Profit
The following table sets forth our cost of revenue and gross profit (loss) for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||||||||||
Product cost of revenue |
$ | 39,565 | $ | 32,132 | $ | 7,433 | $ | 65,308 | $ | 65,512 | $ | (204 | ) | |||||||||||
Service cost of revenue |
15,695 | 12,782 | 2,913 | 33,521 | 24,789 | 8,732 | ||||||||||||||||||
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Cost of revenue |
$ | 55,260 | $ | 44,914 | $ | 10,346 | $ | 98,829 | $ | 90,301 | $ | 8,528 | ||||||||||||
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Product gross profit (loss) |
$ | 8,431 | $ | 11,826 | $ | (3,395 | ) | $ | 24,408 | $ | 26,386 | $ | (1,978 | ) | ||||||||||
Service gross profit (loss) |
39,819 | (5,156 | ) | 44,975 | 33,976 | (9,649 | ) | 43,625 | ||||||||||||||||
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Gross profit |
$ | 48,250 | $ | 6,670 | $ | 41,580 | $ | 58,384 | $ | 16,737 | $ | 41,647 | ||||||||||||
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In the three and six months ended June 30, 2013, we recognized $2.5 million and $9.3 million, respectively, of stock-based compensation expense in cost of revenue, as compared to $0.6 million and $1.5 million of stock-based compensation expense for the three and six months ended June 30, 2012, respectively. The increases are due to restricted stock units that vested in connection with our IPO, the modification of stock options held by employees as of the date of our IPO, expenses related to our 2013 corporate bonus program, equity awards granted at IPO that were previously communicated to employees but not granted during the period from February 2012 to the date of our IPO, and the implementation of our Employee Stock Purchase Plan that became effective at our IPO.
Product Cost of Revenue. The $7.4 million increase in product cost of revenue for the three months ended June 30, 2013 as compared to the three months ended June 30, 2012 was due to changes in product mix partially offset by lower acceptance volumes.
The $0.2 million decrease in product cost of revenue for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 was primarily due to a decrease of $3.6 million resulting from changes in product mix partially offset by lower acceptance volumes, offset by an increase of $1.9 million in stock-based compensation and, during the six months ended June 30, 2012, product cost of revenue was lower due to a $1.5 million higher benefit resulting from changes in estimates related to warranties.
Service Cost of Revenue. The $2.9 million increase in service cost of revenue for the three months ended June 30, 2013 as compared to the three months ended June 30, 2012 was due to an increase of $1.5 million in higher service costs and $1.4 million in stock-based compensation.
The $8.7 million increase in service cost of revenue for the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 was primarily due to an increase of $5.9 million in stock based compensation and $2.9 million in higher service costs.
We anticipate that cost of revenue will increase in the three months ended September 30, 2013 as compared to the three months ended September 30, 2012, and will fluctuate for the remainder of 2013 and beyond. Changes in our service cost of revenue are disproportionate to changes in our service revenue because we recognize service cost of revenue in the period in which it is incurred even though the associated service revenue may be required to be deferred, as described under Financial OverviewCost of Revenue and Gross Profit (Loss).
Cost of Non-GAAP Revenue (billings) and Gross Profit on Non-GAAP Revenue (billings)
The following table sets forth our cost of non-GAAP revenue (billings) for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||||||||||
Cost of Non-GAAP revenue (billings) |
$ | 60,444 | $ | 49,129 | $ | 11,315 | $ | 112,664 | $ | 85,742 | $ | 26,922 |
Cost of non-GAAP revenue (billings) increased by $11.3 million during the three months ended June 30, 2013 as compared to the three months ended June 30, 2012 primarily due to an increase of $10.2 million in product cost of non-GAAP revenue primarily due to changes in the mix of products shipped partially offset by lower volumes and an increase of $1.5 million in cost of services.
Cost of non-GAAP revenue (billings) increased by $26.9 million during the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 primarily due to an increase of $24.6 million in product cost of billings primarily due to changes in the mix of products shipped partially offset by lower volumes and an increase of $2.9 million in cost of services.
The following table sets forth our gross profit (loss) on non-GAAP revenue (billings) for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
(unaudited, in thousands except percentages) |
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Gross profit on non-GAAP revenue (billings) |
$ | 26,007 | $ | 24,904 | $ | 1,103 | $ | 47,558 | $ | 47,794 | $ | (236 | ) | |||||||||||
Gross margin on non-GAAP revenue (billings) |
30 | % | 34 | % | 30 | % | 36 | % |
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Gross profit on non-GAAP revenue (billings) increased by $1.1 million during the three months ended June 30, 2013 as compared to the three months ended June 30, 2012 primarily due to increases in gross profit of $2.7 million from services, offset by a decrease in gross profit of $1.6 million from changes in product mix.
For the three months ended June 30, 2013, gross margin on non-GAAP revenue (billings) was 30% as compared with 34% for the comparable period in 2012. The gross margin decline was driven primarily by changes in product mix, partially offset by an increase in gross profit from services.
Gross profit on non-GAAP revenue (billings) decreased by $0.2 million during the six months ended June 30, 2013 as compared to the six months ended June 30, 2012 due to a decrease in gross profit of $4.8 million from changes in product mix, partially offset by an increase in gross profit of $4.6 million from services.
For the six months ended June 30, 2013, gross margin on non-GAAP revenue (billings) was 30% as compared with 36% for the comparable period in 2012. The gross margin decline was driven primarily by changes in product mix, partially offset by an increase in gross profit from services.
We expect gross margin on non-GAAP revenue (billings) to fluctuate from period to period throughout 2013.
Operating Expenses
The following table sets forth our operating expenses for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||||||||||
Research and development |
$ | 18,752 | $ | 15,422 | $ | 3,330 | $ | 43,871 | $ | 31,392 | $ | 12,479 | ||||||||||||
Sales and marketing |
8,637 | 6,619 | 2,018 | 19,090 | 14,910 | 4,180 | ||||||||||||||||||
General and administrative |
10,879 | 6,920 | 3,959 | 25,015 | 14,425 | 10,590 | ||||||||||||||||||
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Operating expenses |
$ | 38,268 | $ | 28,961 | $ | 9,307 | $ | 87,976 | $ | 60,727 | $ | 27,249 | ||||||||||||
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Personnel-related expenses represent the most significant component of our operating expenses and increased from period to period. We intend to continue to manage our operating expenses in line with our existing cash and available financial resources and anticipate continued spending in future periods in order to execute our long-term business plan. In addition, the timing of additional hires could materially affect our operating expenses, both in absolute dollars and as a percentage of revenue.
In the three and six months ended June 30, 2013, we recognized $8.3 million and $28.3 million respectively of stock-based compensation expense in operating expenses, as compared to $3.2 million and $7.1 million for the three and six months ended June 30, 2012 respectively. The increases are due to restricted stock units that vested in connection with our IPO, the modification of stock options held by employees as of the date of our IPO, expenses related to our 2013 corporate bonus program, equity awards granted at IPO that were previously communicated to employees but not granted during the period from February 2012 to the date of our IPO, and the implementation of our Employee Stock Purchase Plan that became effective at our IPO.
Research and Development. The $3.3 million increase in research and development expense for the three months ended June 30, 2013 was primarily due to an increase of $2.5 million in stock-based compensation and $0.7 million in personnel-related expenses.
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The $12.5 million increase in research and development expense for the six months ended June 30, 2013 was primarily due to an increase of $10.7 million in stock-based compensation and an increase of $1.6 million in personnel-related expenses.
We intend to continue to invest significantly in our research and development efforts, which we believe are essential to enhancing our competitive position and developing new products. Accordingly, we expect research and development expense to increase in future periods and remain the largest component of our operating expenses.
Sales and Marketing. The $2.0 million increase in sales and marketing expense for the three months ended June 30, 2013 was primarily due to an increase of $0.9 million in personnel-related and commission expenses and $0.8 million in stock based compensation.
The $4.2 million increase in sales and marketing expense for the six months ended June 30, 2013 was primarily due to an increase of $3.2 million in total stock-based compensation.
We expect sales and marketing expense to increase in future periods as we hire new personnel and increase our global marketing and sales activities.
General and Administrative. The $4.0 million increase in general and administrative expense for the three months ended June 30, 2013 was primarily due to an increase of $1.8 million in stock-based compensation and $1.4 million in professional services due to increased legal expenses.
The $10.6 million increase in general and administrative expense for the six months ended June 30, 2013 was primarily due to an increase of $7.2 million in total stock-based compensation and an increase of $1.6 million in professional services due to increased legal expenses.
We expect general and administrative expense to increase as we incur additional costs related to operating as a publicly-traded company including increased audit, legal, regulatory and other related fees.
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Operating Income (Loss)
The following table sets forth our operating income (loss) for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||||||||||
Operating income (loss) |
$ | 9,982 | $ | (22,291 | ) | $ | 32,273 | $ | (29,592 | ) | $ | (43,990 | ) | $ | 14,398 |
Operating income (loss) consists of gross profit less operating expenses. The $32.3 million increase in operating income for the three months ended June 30, 2013 was due to a $41.6 million increase in gross profit, partially offset by an increase in operating expenses of $9.3 million.
The $14.4 million decrease in operating loss for the six months ended June 30, 2013 was due to a $41.6 million increase in gross profit, partially offset by an increase in operating expenses of $27.2 million.
We expect to continue to incur operating losses in future periods as we continue to invest in our growth.
Other Income (Expense), Net
The following table sets forth our other income (expense), net, for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||||||||||
Interest expense |
$ | (184 | ) | $ | (1,229 | ) | $ | 1,045 | $ | (1,236 | ) | $ | (2,153 | ) | $ | 917 | ||||||||
Conversion of promissory notes and remeasurement of warrants and derivatives |
| 151 | (151 | ) | (23,676 | ) | 4,400 | (28,076 | ) | |||||||||||||||
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Other income (expense), net |
$ | (184 | ) | $ | (1,078 | ) | $ | 894 | $ | (24,912 | ) | $ | 2,247 | $ | (27,159 | ) | ||||||||
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Other income (expense), net, for the three months ended June 30, 2013 consists of interest expense on our capital leases. For the three months ended June 30, 2012, other income (expense), net also consisted of interest expense from our convertible promissory notes of $1.0 million and to a lesser extent, changes in the fair value of preferred stock warrants and embedded derivatives.
Other income (expense), net, for the six months ended June 30, 2013 consists primarily of a $22.9 million loss on conversion of convertible promissory notes, $0.8 million loss on termination of warrants, and $1.1 million of interest expense on our convertible promissory notes and capital leases. For the six months ended June 30, 2012, other income (expense), net also consisted of changes in the fair value of our preferred stock warrants and embedded derivatives and interest expense on our convertible notes payable, both of which converted upon IPO (see Note 1 in the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information). We have historically invested our cash in money market accounts and U.S. Treasury bills. We anticipate continuing to invest in short-term and long-term marketable securities in the near term.
Provision for Income Taxes
Since inception, we have incurred net losses and have not recorded provisions for U.S. federal and state income taxes, except state minimum taxes. We have not reported a benefit for federal and state income taxes in the condensed consolidated financial statements as the deferred tax asset arising from our net operating losses has been offset by a valuation allowance because it was more likely than not that the tax benefit of the net operating losses may not be realized. We have recorded a provision for foreign taxes associated with our foreign subsidiaries.
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Net Income (Loss)
The following table sets forth our net income (loss) for the periods shown:
Three Months Ended June 30, |
Six Months Ended June 30, |
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2013 | 2012 | Change | 2013 | 2012 | Change | |||||||||||||||||||
(unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||||||||||
Net loss |
$ | 9,470 | $ | (23,407 | ) | $ | 32,877 | $ | (54,896 | ) | $ | (41,839 | ) | $ | (13,057 | ) |
Net income (loss) consists of operating income (loss) plus other income (expense), net, less provision for income taxes. The $32.9 million increase in net income for the three months ended June 30, 2013 was primarily due to the $32.3 million decrease in operating loss. The $13.1 million increase in net loss for the six months ended June 30, 2013 was primarily due to the $27.2 million increase in other expense primarily due to the $23.7 million loss on conversion of convertible notes and termination of warrants, offset by a $14.4 million decrease in operating loss.
For the six months ended June 30, 2013, we recorded a non-cash deemed dividend of $105.0 million related to anti-dilution provisions of certain shares of preferred stock that were triggered by the IPO. (See Note 6 in the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information).
We expect to continue to incur net losses in future periods as we continue to invest in our growth.
Liquidity and Capital Resources
As of June 30, 2013 we had $125.0 million in cash and cash equivalents. We expect that operating expenses will constitute a material use of our cash balances. In the near term, we intend to continue to manage our operating expenses in line with our existing cash and available financial resources and anticipate increased spending in future periods in order to execute our long-term business plan. In addition, we may use cash to fund acquisitions or invest in other businesses, technologies or product lines. We have incurred net losses and negative cash flows from operating activities since our inception, and we expect we will continue to incur operating and net losses and cash flows to fluctuate from period to period in 2013 and beyond. We believe that our available cash balances and credit facilities will be sufficient to meet our presently anticipated working capital, capital expenditure and business expansion requirements for at least the next 12 months. Our future capital requirements will depend on many factors, including our rate of customer wins and related billings and the expansion of our production capacity, as well as sales and marketing activities, timing and extent of spending on research and development efforts and the continuing market acceptance of our networking platform and solutions.
Prior to fiscal 2013, we funded our operations primarily through private sales of equity securities and debt financing and, more recently, cash generated from our IPO. In March 2013, we completed our IPO in which we issued and sold 5,462,500 shares of common stock at a public offering price of $17.00 per share. We received net proceeds of $84.7 million after deducting underwriting discounts and commissions of $6.5 million and paid offering costs in the six months ended June 30, 2013 of $1.7 million, but before deducting previously paid and unpaid offering expenses of approximately $4.7 million. Concurrently with our IPO, we issued and sold in a private placement 705,881 shares of common stock at the IPO price of $17.00 per share. We received net proceeds of $12.0 million.
In addition, in connection with our IPO, our December 2011 Note and February 2012 Note together with accrued interest converted into 3,764,954 shares of common stock (see -Note 4 (Borrowings), to our condensed consolidated financial statements, included in Part 1, Item 1 of this Quarterly Report on Form 10-Q), and we paid $12.0 million in consideration for the termination of certain Series A and all Series C preferred stock warrants.
We have available a line of credit with a bank, which originally provided for advances and the issuance of letters of credit of up to $40 million. In May 2013, we amended our credit agreement to increase the available capacity from $40 million to $50 million. As of June 30, 2013, there were no borrowings outstanding under the credit agreement; however, $14.7 million of letters of credit were outstanding, leaving $35.3 million of available capacity for cash borrowings or additional letters of credit, subject to compliance with financial covenants and other customary conditions to borrowings. As of June 30, 2013 we were in compliance with the financial covenants in the credit agreement.
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We are occasionally required to provide performance bonds to secure our performance under customer contracts. Our ability to obtain such bonds primarily depends upon our capitalization, working capital, past performance, management expertise and reputation and external factors beyond our control, including the overall capacity of the surety market. Surety companies consider those factors in relation to the amount of our tangible net worth and other underwriting standards that may change from time to time. Surety companies may require that we collateralize a percentage of the bond with our cash. Events that affect surety markets generally may result in bonding becoming more difficult to obtain in the future, or being available only at a significantly greater cost. In addition, some of our utility customers also require collateral in the form of letters of credit to secure performance or to fund possible damages as the result of an event of default under our contracts with them. If we enter into significant long-term agreements that require the issuance of letters of credit, our liquidity could be negatively impacted. Our inability to obtain adequate bonding or letters of credit and, as a result, to bid or enter into significant long-term agreements could have a material adverse effect on our future revenues and business prospects.
Cash Flows
The following table sets forth the major sources and uses of cash for each of the periods set forth below (in thousands):
Six Months Ended June 30, |
Change | |||||||||||
2013 | 2012 | |||||||||||
(unaudited, in thousands) | ||||||||||||
Cash used in operating activities |
$ | (22,961 | ) | $ | (28,081 | ) | $ | 5,120 | ||||
Cash used in investing activities |
(2,462 | ) | (2,993 | ) | 531 | |||||||
Cash provided by financing activities |
77,747 | 30,563 | 47,184 |
Cash Flows from Operating Activities
Operating activities used $23.0 million of cash during the six months ended June 30, 2013, primarily as a result of a net loss of $54.9 million, which was partially offset by non-cash stock-based compensation expense of $37.5 million, non-cash loss on conversion of convertible promissory notes and termination of warrants of $23.7 million, the change in our operating assets and liabilities of $(34.1) million, and depreciation and amortization of $3.4 million.
Operating activities used $28.1 million of cash during the six months ended June 30, 2012, primarily as a result of a net loss of $41.8 million and an adjustment for the non-cash gain associated with the remeasurement of preferred stock warrants and embedded derivatives of $4.4 million, which was partially offset by non-cash stock-based compensation expense of $8.6 million, the change in our operating assets and liabilities of $4.2 million, and depreciation and amortization of $3.6 million.
Cash Flows from Investing Activities
Cash flows from investing activities primarily relate to capital expenditures to support our growth. Cash used in investing activities consisted primarily of cash used in the purchases of property and equipment and totaled $2.5 million and $3.0 million, for the six months ended June 30, 2013, and June 30, 2012, respectively.
Cash Flows from Financing Activities
Cash provided by financing activities totaled $77.8 million during the six months ended June 30, 2013, and consisted primarily of $84.7 million in net proceeds from the sale of 5,462,500 shares of common stock in our IPO, $12.0 million proceeds from the sale of 705,881 shares of common stock in a private placement, partially offset by the payment of $12.0 million payment for the termination of certain Series A and Series C preferred stock warrants, and $6.2 million for taxes paid related to the net share settlement of equity awards.
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Cash provided by financing activities totaled $30.6 million during the six months ended June 30, 2012, and consisted primarily of $29.0 million in net proceeds from the issuance of a convertible note.
Concentration of Credit Risk
We typically extend credit to our utility customers and meter manufacturers and do not require collateral or other security in support of accounts receivable. We attempt to mitigate the credit risk in our trade receivables through our credit evaluation process and payment terms. We analyze the need to reserve for potential credit losses and record allowances for doubtful accounts when necessary. As of June 30, 2013, BGE, Progress Energy, Secure Meters, and GE accounted for 25%, 17%, 14%, and 5%, respectively, of our accounts receivable, as compared to 26%, 15%, 16%, and 10%, respectively, as of December 31, 2012.
To date, we have not had any significant write-offs of uncollectable accounts receivable, and there was no material allowance for doubtful accounts as of June 30, 2013 and December 31, 2012.
Off-Balance Sheet Arrangements
We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements (as that term is defined in Item 303(a)(4)(ii) of Regulation S-K) or other contractually narrow or limited purposes.
During the ordinary course of business, we provide standby letters of credit or other guarantee instruments to third parties as required for certain transactions initiated either by us or our subsidiaries. As of June 30, 2013, our financial guarantees that were not recorded on our balance sheet consisted of $14.7 million of standby letters of credit and $15.0 million of surety bonds related to performance guarantees, facility leases, workers compensation insurance, and a contract bid bond.
Contractual Obligations
There were no material changes in our commitments under contractual obligations, as disclosed in Managements Discussion and Analysis of Financial Condition and Results of Operations contained in our Prospectus.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. GAAP requires us to make certain estimates and judgments that affect the amounts reported in our financial statements. We base our estimates on historical experience, anticipated future trends and other assumptions we believe to be reasonable under the circumstances. Because these accounting policies require significant judgment, our actual results may differ materially from our estimates.
There have been no material changes in our critical accounting policies and estimates during the three months ended June 30, 2013 as compared to the critical accounting policies and estimates disclosed in Managements Discussion and Analysis of Financial Condition and Results of Operations contained in our Prospectus.
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Item 3. | Quantitative and Qualitative Disclosures about Market Risk. |
Interest Rate Risk
We had cash and cash equivalents totaling $125.0 million as of June 30, 2013. Our exposure to interest rate risk primarily relates to the interest income generated by excess cash invested in highly liquid investments. The cash and cash equivalents are held for working capital purposes. We have not used derivative financial instruments in our investment portfolio. We have not been exposed, nor do we anticipate being exposed, to material risks due to changes in market interest rates given the historic low levels of interest being earned on the short-term fixed-rate instruments in which we invest our cash. These instruments included money market funds and U.S. Treasury bills.
Interest rate risk also reflects our exposure to movements in interest rates associated with our credit facility. The interest bearing credit facility is denominated in U.S. dollars and the interest expense is based on the prime interest rate plus an additional margin. As of June 30, 2013, we had not drawn on this credit facility. Our capital leases do not change based on changes in market interest rates.
Foreign Currency Exchange Risk
Our sales contracts are denominated primarily in U.S. dollars and, to a lesser extent, Australian dollars and Brazilian real. Consequently, our customer billings denominated in foreign currency are subject to foreign currency exchange risk. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Australian dollar and Brazilian real. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our statement of operations. To date, we have not entered into derivatives or hedging strategies as our exposure to foreign currency exchange rates has not been material to our historical operating results, but we may do so in the future if our exposure to foreign currency should become more significant. There were no significant foreign exchange gains or losses in the six months ended June 30, 2013 and 2012.
Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2013. The term disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the companys management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of June 30, 2013, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Limitations on the Effectiveness of Controls
Control systems, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Because of the inherent limitations in any control system, misstatements due to error or fraud may occur and not be detected.
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Item 1. | Legal Proceedings. |
From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We have received, and may in the future continue to receive, claims from third parties asserting infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves and our customers by determining the scope, enforceability and validity of third party proprietary rights or to establish our proprietary rights. There can be no assurance with respect to the outcome of any current or future litigation brought against us or pursuant to which we have indemnification obligations and the outcome could have a material adverse impact on our business, operating results and financial condition.
We were named in a lawsuit filed on September 9, 2010 in the Superior Court of the State of California, San Mateo County (Edwards v. Silver Spring Networks). The lawsuit claims to be a class action on behalf of California consumers, and alleges that smart meters are defective and generate incorrect bills. We have filed a motion to dismiss this case and, on September 1, 2011, the San Mateo Superior Court granted our motion without leave to amend as to two of the plaintiffs causes of action and with leave to amend as to a third claim. On February 25, 2012, the plaintiffs filed an amended complaint. On May 30, 2012, we filed an answer to the amended complaint denying the plaintiffs allegations. On August 3, 2012, the plaintiffs filed a second amended complaint, and on September 18, 2012, we filed a demurrer to one of the two claims asserted in the second amended complaint. The court has overruled our demurrer. On November 9, 2012, the plaintiffs filed a motion for class certification. A hearing on the class certification motion was held on January 25, 2013. On April 11, 2013, the court denied the class certification motion without prejudice. The court allowed the plaintiffs to file a revised class certification motion, which the plaintiffs filed on June 28, 2013. A hearing on the revised class certification motion is scheduled for September 2013. We intend to continue vigorously defending against the action.
On June 17, 2011, EON Corp. IP Holdings, LLC, a non-producing entity, filed suit in United States District Court for the Eastern District of Texas, Tyler Division against a number of smart grid providers, including Landis+Gyr, which was since acquired by Toshiba, Aclara Power-Line Systems Inc., Elster Solutions, LLC, Itron, Inc., Trilliant Networks Inc. and Silver Spring Networks, Inc. The lawsuit alleges infringement of United States Patent Nos. 5,388,101, 5,481,546, and 5,592,491 by certain networking technology and services that we and the other defendants provide. We filed amended answers, affirmative defenses and counterclaims on August 21, 2012, September 24, 2012, October 31, 2012 and November 16, 2012 denying the plaintiffs allegations and asserting that we do not infringe plaintiffs patents and that plaintiffs patents are invalid. The trial has been scheduled for April 2014. We believe that we have meritorious defenses to EONs allegations and intend to vigorously defend ourselves.
On September 16, 2011 TransData, Inc. filed suit in United States District Court for the Western District of Oklahoma, against our customer, Oklahoma Gas & Electric Company, alleging infringement of United States Patent Nos. 6,181,294, 6,462,713, and 6,903,699 by certain wireless communication-enabled meters. Together with the meter manufacturer, General Electric Company, we have agreed to indemnify and defend Oklahoma Gas & Electric Company in connection with the TransData suit. An early claim construction hearing was held for one claim term on February 5, 2013, and the court provided an order on that term on June 25, 2013. The parties are currently briefing a full claim construction, and a hearing for the full claim construction has not yet been scheduled. We believe that we have meritorious defenses to TransDatas allegations, and together with General Electric Company intend to vigorously defend our customer.
On March 21, 2013, Linex Technologies, Inc., a non-producing entity, filed suit against us in United States District Court for the Southern District of Florida. The complaint alleges infringement of United States Patent Nos. 6,493,377 and 7,167,503 by certain networking technology that we provide. We filed an answer on May 20, 2013. The trial is currently scheduled for May 2014. We believe that we have meritorious defenses to Linexs allegations and intend to vigorously defend ourselves.
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Item 1A. | Risk Factors. |
Our business is subject to many risks and uncertainties, which may affect our future financial performance. If any of the events or circumstances described below occurs, our business and financial performance could be harmed, our actual results could differ materially from our expectations and the market value of our stock could decline. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties not currently known to us or that we currently do not believe are material that may harm our business and financial performance.
We have a history of losses and anticipate continued losses and negative operating cash flow for the foreseeable future, and we may not achieve or sustain profitability on a quarterly or annual basis.
We have incurred significant losses to date, with an accumulated deficit of $605.4 million as of June 30, 2013. For the years ended December 31, 2010, 2011 and 2012, and for the six months ended June 30, 2013, we incurred net loss of $(148.4) million, $(92.4) million, $(89.7) million and $(54.9) million, respectively. We expect these losses to continue. We anticipate negative operating cash flow for the foreseeable future, as we expect to incur significant operating expenses in connection with the continued development and expansion of our business. Our expenses include research and development expenses, general and administrative expenses, selling and marketing expenses and customer service and support expenses. Many of these expenses relate to prospective utility customers that may never place any orders and products that may not be introduced or generate revenue until later periods, if at all. There can be no assurance that we will ever achieve or sustain profitability on a quarterly or annual basis.
Our quarterly results are inherently unpredictable and subject to substantial fluctuations, and, as a result, we may fail to meet the expectations of securities analysts and investors, which could adversely affect the trading price of our common stock.
Our revenue, billings and other operating results may vary significantly from quarter to quarter due to a number of factors, many of which are outside of our control. While our revenue and billings have increased in recent periods, there can be no assurances that our revenue and billings will continue to increase or will not decrease on a quarterly or annual basis. For example, we had lower revenue for the three months ended March 31, 2013 compared to the three months ended March 31, 2012. We expect revenue, gross margin on non-GAAP revenue (billings), and adjusted EBITDA to fluctuate from period to period throughout 2013. We also expect operating losses in certain future periods. See Managements Discussion and Analysis of Financial Condition and Results of OperationsKey Non-GAAP Financial Measures above.
The factors that may affect the unpredictability of our quarterly results and cause our stock price to fluctuate include, but are not limited to:
| long, and sometimes unpredictable, sales and customer deployment cycles; |
| changes in the mix of products and services sold; |
| our dependence on a limited number of utility customers; |
| the timing of acceptance of our products and services by our utility customers, which can have a material impact on when we recognize related revenue under our revenue recognition policies; |
| changing market conditions; |
| competition; |
| failures of our products, components that we use in our products or third-party devices containing our products that delay deployments, harm our reputation or result in high warranty costs, contractual penalties or terminations; |
| product or project failures by third-party vendors, utility customers or competitors that result in the cancellation, slowing down or deferring of projects; |
| liquidated damages provisions in our contracts, which could result in significant financial penalties if triggered or, even if not triggered, could affect our ability to recognize revenue in a given period; |
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| the ability of our suppliers and manufacturers to deliver supplies and products to us on a timely basis; |
| delays associated with government funding programs for smart grid projects; |
| delays in regulatory approvals for our utility customers and utility customer deployments; |
| political and consumer sentiment and the related impact on the scope and timing of smart grid deployment; and |
| economic, regulatory and political conditions in the markets where we operate or anticipate operating. |
As a result, we believe that quarter to quarter comparisons of operating results are not necessarily a good indication of what our future performance will be. It is likely that in some future quarters our operating results may be below the expectations of securities analysts or investors, in which case the price of our common stock may decline.
Sales cycles to utility customers can be lengthy and unpredictable and require significant employee time and financial resources with no assurances that a prospective customer will select our products and services.
Sales cycles with utilities, our potential customers, tend to be long and unpredictable. Utilities generally have extensive budgeting, procurement, competitive bidding, technical and performance review, and regulatory approval processes that can take up to several years to complete. Utilities may choose, and many historically have often chosen, to follow industry trends rather than be early adopters of new products or services, which can extend the lead time for or prevent acceptance of more recently introduced products or services such as ours. In addition, in many instances, a utility may require one or more pilot programs to test our new products and services before committing to a larger deployment. These pilot programs may be quite lengthy and further delay the sales cycle with no assurance that they will lead to a larger deployment or future sales. Furthermore, to the extent our products are required to be deployed with the products of others, such as meters, delays related to such third-party products will further lengthen the sales cycle.
This extended sales process requires us to dedicate significant time by our senior management, and sales and marketing and customer services personnel, and to use significant financial resources without any assurance of success or recovery of our related expenses. Similarly, we are likely to incur these significant operating expenses well ahead of recognizing the related revenue because our ability to recognize revenue is typically dependent on meeting contractual customer acceptance and other requirements.
The lengthy sales cycles of our products and services also make it difficult to forecast new customer deployments, as well as the volume and timing of orders, which, in turn makes forecasting our future results of operations challenging. In the event that we publicly disclose any forecasts of our future results of operations or other performance metrics and those forecasts ultimately turn out to be inaccurate, the value of our common stock could significantly decline.
In addition, we have agreements with our primary contract manufacturer, which provides for tiered volume-based pricing. To the extent our volumes decrease below specific thresholds, our gross profit and gross margins will be negatively impacted, which has occurred previously. Alternatively, in order to take advantage of the tiered volume-based pricing in any one quarter, we may purchase, and have previously purchased, additional inventory exposing us to the risk that we may incur costs for excess and obsolete inventory.
Our revenue is not predictable and recognition of a significant portion of it will be deferred into future periods.
Once a utility decides to move forward with a large-scale deployment of our products and services, the timing of and our ability to recognize related revenue will depend on several factors, some of which may not be under our control. These factors include shipment schedules that may be delayed or subject to modification, the rate at which our utility customers choose to deploy our Smart Energy Platform, customer acceptance of all or any part of our products and services, our contractual commitments to provide new or enhanced functionality at some point in the future, other contractual provisions such as liquidated damages, our manufacturers ability to provide an adequate supply of components, the requirement to obtain regulatory approval, and our ability to deliver quality products according to expected schedules. In light of these factors, the application of complex revenue recognition rules to our products and services has required us to defer, and in the future will likely continue to require us to defer, a significant amount of revenue until undetermined future periods. As of June 30, 2013, we had $510.7 million in deferred revenue. It may be difficult to predict the amount of revenue that we will recognize in any given period, and amounts recognized may fluctuate significantly from one period to the next.
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Amounts included in our total backlog and order backlog may not result in actual billings or revenue or translate into profits.
Our total backlog disclosed in the Prospectus represents future product and service billings that we expect to generate pursuant to contracts that we have entered into with our utility customers and meter manufacturers. Our total backlog includes our order backlog, also disclosed in the Prospectus, which represents future billings for open purchase orders and other firm commitments. We anticipate that our total backlog and order backlog will fluctuate from period to period throughout 2013 and beyond.
We cannot guarantee that our total backlog or order backlog will result in actual billings in the originally anticipated period or at all. In addition, the contracts reflected in our total backlog and order backlog may not generate margins equal to or better than our historical operating results. We only recently began to track total backlog and order backlog on a consistent basis as performance measures and as a result, we do not have significant experience in determining the level of realization that we will actually achieve on our total backlog and order backlog. Our customer contracts are typically structured as master purchase and service agreements, or MSAs, under which the customer may place purchase orders over the course of a deployment. These deployments can extend for a number of years. Because our MSAs do not typically require a customer or meter partner to purchase a minimum amount of product or services, total backlog is an estimate based upon contractual terms, existing purchase orders and other available information regarding the amount and timing of expected future purchase orders to be placed by our utility customers and meter manufacturers, including non-binding forecasts. No assurance can be made that firm purchase orders will be placed under these MSAs in the amounts we estimate, within the time period we expect, or at all. Total backlog is subject to adjustments due to the long-term nature of our customer deployments. Adjustments can result from a variety of factors, including changes in the nature or scope of customer deployments, the impact of contingency provisions related to future delivery or performance, customer cancellations, market conditions, delayed regulatory approvals and customer defaults. Delays due to external market factors or delays in deployments and required regulatory approvals have in the past and may in the future cause us to extend the deployment schedule or make modifications under customer contracts. For example, ongoing regulatory uncertainties previously delayed the timing of the planned deployment schedule of Commonwealth Edison Company, or ComEd. In addition, under our MSAs, our utility customers generally have the right to terminate the MSA for any reason, including for their sole convenience, a material breach or insolvency on our part or their inability to obtain required regulatory approval. The occurrence of such adjustments or terminations could materially reduce the amount of, or delay the fulfillment of, our total and order backlog. If our total backlog or order backlog fails to materialize as expected, we could experience a material reduction in future billings, revenue, operating results or cash flow.
We are dependent on the utility industry, which has experienced volatility in capital spending. This volatility could cause our results of operations to vary significantly from period to period.
Similar to other industries, the utility industry has been affected by recent economic factors, including continued global economic uncertainty, concerns over the downgrade of U.S. sovereign debt and continued sovereign debt, monetary and financial uncertainties in European and other foreign countries. We derive substantially all of our revenue from sales of products and services directly and indirectly to utilities. Purchases of our products and services may be reduced or deferred as a result of many factors including economic downturns and uncertainty, slowdowns in new residential and commercial construction, a utilitys access to capital on acceptable terms, the timing and availability of government grants or incentives, utility specific financial circumstances, mergers and acquisitions, regulatory decisions, weather conditions, consumer opposition and fluctuating interest rates. Even with economic recovery, it may take time for our utility customers to establish new budgets and return to normal purchasing patterns. We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of the economic recovery, worldwide, in the United States or in our industry. We have experienced, and may in the future experience, variability in operating results on an annual and a quarterly basis as a result of these factors. Because a significant portion of our expenses is fixed in the short term or is incurred in advance of anticipated sales, we may not be able to decrease our expenses in a timely manner to offset any shortfall of sales. This could materially and adversely affect our operating results, financial condition and cash flows.
Substantially all of our current products depend on the availability and are subject to the regulation of radio spectrum in the United States and abroad.
Substantially all of our current hardware products are designed to communicate wirelessly via radio frequencies and therefore depend on the availability of adequate radio spectrum in order to operate. While these products could be designed to operate in a variety of different frequencies or by using other technologies such as cellular, in the United States they are primarily designed to form a wireless RF mesh using the unlicensed 902-928 megahertz, or MHz, band. The 902-928 MHz band is available for a wide variety of uses and requires us to manage interference by other users who operate in accordance with the Federal Communications Commission, or FCC, rules. The unlicensed frequencies are also often the subject of proposals to the FCC requesting a change in the rules under which such frequencies may be used. In the past, the FCC has re-allocated spectrum for new or additional uses, and has adopted
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changes to the requirements for equipment using radio spectrum. It is possible that the FCC or the U.S. Congress could adopt additional changes, which may be incompatible with our current or future product offerings, as well as products currently installed in the field, or require them to be modified at significant, or even prohibitive, cost. If the unlicensed frequencies become unacceptably crowded, restrictive or subject to changed laws, regulations or rules governing their use, our business, financial condition and results of operations could be materially and adversely affected.
Our international growth and future success also depend on the availability of radio spectrum that is compatible with our products or on our ability to develop products that use alternative communications technology, such as Gen4, our next-generation networking technology, which is available to utility customers in some products today and will support cellular communications, with more products coming to market as we continue to integrate it with products from additional device partners. In Australia, we primarily use unlicensed spectrum in the 915-928 MHz band with relatively minimal modifications needed to our products. In many other countries, however, there may not be spectrum available or we may be required to obtain a license to operate in any frequency band that is compatible with our products, including, but not limited to, the 902-928 MHz band. Licenses to appropriate spectrum in these countries may be unavailable or only available at unreasonably high prices. Similarly, in the event that we were only able to obtain a license outside of the 902-928 MHz band, the cost of modifying or redesigning our products to make them compatible with available spectrum could be significant or even cost-prohibitive. Alternatively, if we are not able to obtain available spectrum on financially advantageous terms, we may not be able to compete without investing in alternative communication technology. If limitations on the availability of spectrum or the cost of making necessary modifications or investments in new technology preclude us from selling our products in markets outside of the United States, our growth, prospects, financial condition and results of operations could be materially and adversely affected.
A limited number of our utility customers are responsible for a significant portion of our billings, revenue and cash flow. A decrease in sales to these utility customers or delays in customer deployments could have a material adverse effect on our operating results and financial condition.
A substantial majority of our revenue, billings and cash flow depends on relatively large sales to a limited number of utility customers. The combination of lengthy sales cycles and relatively large sales to a small number of utility customers increases the risk of quarterly fluctuations in our billings, revenue and operating results. Please see Managements Discussion and Analysis of Financial Condition and Results of OperationsKey Non-GAAP Financial Measures above for further information regarding customer concentration. Our master purchase and service agreements, or MSAs, do not impose purchase obligations on our utility customers until we have received a purchase order or agreed to a statement of work. Further, the MSAs are typically subject to termination for any reason, including for convenience following a specified notice period. We expect that a limited number of utility customers will continue to account for a substantial portion of our revenue in future periods. Changes in the business requirements, vendor selection, or purchasing behavior of our utility customers could significantly decrease our sales. In addition, our MSAs are complex, often requiring close coordination with our customers over extended preparation and deployment periods and involving large-scale delivery of our products and services. From time to time we have experienced and may in the future experience challenges in satisfying our customers throughout these preparation and deployment periods regarding all aspects of our performance. Additionally, we have, in the past, received correspondence from customers claiming that there have been deficiencies in our timeliness and coordination regarding hardware, software and services for deployment, and requesting that we remedy the deficiencies noted. If we are unable to address customers concerns, we could be required to pay penalties, liquidated damages or other expenses, the customer could terminate our MSA and our reputation could be damaged. Additionally, delays in customer deployments can affect our results of operations. For example, ongoing regulatory uncertainties previously delayed the timing of ComEds planned deployment schedule. Any of these factors could materially and adversely affect our business, financial condition, and results of operations.
Our marketing efforts depend significantly on our ability to receive positive references from our existing utility customers.
Our marketing efforts depend significantly on our ability to call on our current utility customers to provide positive references to new, potential utility customers. Given our limited number of utility customers, the loss or dissatisfaction of any customer could substantially harm our brand and reputation, inhibit the market acceptance of our products and services, and impair our ability to attract new utility customers and maintain existing utility customers. Any of these consequences could have a material adverse effect on our business, financial condition and results of operations.
The market for our products and services, and smart grid technology generally, is still developing. If the market develops less extensively or more slowly than we expect, our business could be harmed.
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The market for our products and services, and smart grid technology generally, is still developing, and it is uncertain whether our products and services will achieve and sustain high levels of demand and market acceptance. Our near-term and long-term success will depend to a substantial extent on the willingness and ability of utilities to implement smart grid technology. Many utilities lack the financial resources and/or technical expertise required to evaluate, deploy and operate smart grid technology. Utilities activities are governed by regulatory agencies, including public utility commissions, which may not create a regulatory environment that is conducive to the implementation of smart grid technologies in a particular jurisdiction. Furthermore, some utilities may be reluctant or unwilling to adopt smart grid technology because they do not perceive the benefits or are unable to develop a business case to justify the up-front and ongoing expenditures. If utilities do not implement smart grid technology or do so in fewer numbers or more slowly than we expect, our business and operating results would be adversely affected. For example, in 2010, the rate of smart grid adoption slowed due to uncertainty surrounding the timing and tax treatment of U.S. government stimulus funding, negative publicity and consumer opposition, and regulatory investigations. These uncertainties caused many potential utility customers that had been considering smart grid programs in the United States to further evaluate their smart grid initiatives and delay their procurement processes or extend their deployment schedules. Smart grid adoption in international markets has trailed adoption in the United States as international markets continue to explore the technology and define the benefits and regulatory requirements for the smart grid.
Similarly, our success depends on our ability to expand beyond advanced metering sales and sell additional products and services, such as distribution automation and demand-side management solutions, to our existing utility customers. There can be no assurance that these products and services will be accepted by utilities or consumers. Other competing products and services may emerge and may be more successful.
Adverse publicity about, or consumer or political opposition to, the smart grid could inhibit the growth of the overall market.
The safety and security of the power grid, the accuracy and protection of the data collected by meters and transmitted via the smart grid, and concerns about the safety and perceived health risks of using radio frequency communications have been the focus of recent adverse publicity. For example, in Northern California, PG&Es full-scale deployment of our networking platform and advanced metering solution has been subject to continued scrutiny following allegations of inaccurate bills generated by newly-installed smart meters and safety concerns about the levels of radio frequency electromagnetic fields emitted by the wireless communications technology used by the meters. As a result, the California State Senate created a special committee and the California Public Utilities Commission, or CPUC, hired an independent investigator to review the installation and use of advanced metering products. Negative publicity and consumer opposition in California, Maine and elsewhere have caused other utilities or their regulators to respond by delaying or modifying planned smart grid initiatives, mandating that utilities allow their customers to opt out of smart metering programs, or calling for investigations and/or implementation of unfavorable regulations and legislation. For example, in January 2012, the CPUC ruled that PG&E must let its customers retain or receive an analog meter, for nominal initial and monthly fees, if they, for any reason, opt out of PG&Es deployment of PG&Es smart meters. Similarly, outside the United States, public concern over smart grid projects in places such as Victoria, Australia has resulted in increased government scrutiny. Additionally, testing commissioned by the CPUC and other organizations could, in the future, contain negative information regarding the accuracy and safety of smart grid solutions. Finally, smart grid projects by other companies may be, or could be viewed by the public as, unsuccessful. Any of the foregoing factors could directly impact our current or future deployments, as well as inhibit the growth of the overall smart grid market, either of which could cause our business to suffer.
Security breaches involving our smart grid products or services, publicized breaches in smart grid products and services offered by others, or the public perception of security risks or vulnerability created by the deployment of the smart grid in general, whether or not valid, could harm our business.
The security technologies we have integrated into our networking platform and solutions that are designed to detect unauthorized activity and prevent or minimize security breaches may not function as expected and there can be no assurance that our products and services, those of other companies with whose products our products and services are integrated or interact, or even the products of other smart grid solutions providers will not be subject to significant real or perceived security breaches.
Our networking platform allows utilities to collect, monitor, store, compile and analyze sensitive information related to consumers energy usage, as well as the performance of different parts of the power grid. As part of our data transfer and managed services and SaaS, we may store and/or come into contact with sensitive consumer information and data when we perform operational, installation or maintenance functions for our utility customers. If, in handling this information, we, our partners or our utility customers fail to comply with privacy or security laws, we could face significant legal and financial exposure to claims of government agencies, utility customers and consumers whose privacy is compromised. Even the perception that we, our partners or our utility customers have improperly handled sensitive, confidential information could have a negative effect on our business. In addition, third parties may attempt to breach our security measures or inappropriately use or access our network services or the network hardware and software we have in the field through computer viruses, physical or electronic break-ins, and other means. If a breach is successful, sensitive information may be improperly obtained, manipulated or corrupted, and we may face legal and financial exposure. In addition, a breach could lead to a loss of confidence in our products and services and our business could suffer.
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Our current and anticipated future products and services allow authorized personnel to remotely control equipment at residential and commercial locations, as well as at various points on the power grid. For example, our software allows a utility to remotely connect and disconnect electricity at specific customer locations. If an unauthorized third party were to breach our security measures and disrupt, gain access to or take control of any of our products or services, our business and reputation could be severely harmed.
Our products and services may also be integrated or interface with products and services sold by third parties, and rely on the security of those products and their secure transmission of proprietary data over the Internet and cellular networks. Because we do not have control over the security measures implemented by third parties in their products or in the transmission of data over the Internet and cellular networks, we cannot ensure the complete integrity or security of such third-party products and transmissions.
Concerns about security or customer privacy may result in the adoption of state or federal legislation that restricts the implementation of smart grid technology or requires us to make modifications to our products, which could significantly limit the deployment of our technologies or result in significant expense to modify our products.
Any real or perceived security breach could seriously harm our reputation and result in significant legal and financial exposure, including increased remediation costs and security protection costs, inhibit market acceptance of our products and services, halt or delay the deployment by utilities of our products and services, cause us to lose customers, harm our reputation, trigger unfavorable legislation and regulatory action, and inhibit the growth of the overall market for smart grid products and services. Any of these risks could have a material adverse effect on our business, financial condition and results of operations.
If our products contain defects or otherwise fail to perform as expected, we could be liable for damages and incur unanticipated warranty, recall and other related expenses, our reputation could be damaged, we could lose market share and, as a result, our financial condition or results of operations could suffer.
Our products are complex and may contain defects or experience failures due to any number of issues in design, materials, deployment and/or use. If any of our products contain a defect, compatibility or interoperability issue or other error, we may have to devote significant time and resources to find and correct the issue. Such efforts could divert the attention of our management team and other relevant personnel from other important tasks. A product recall or a significant number of product returns could: be expensive; damage our reputation and relationships with utilities, meter vendors and other third-party vendors; result in the loss of business to competitors; and result in litigation against us. Costs associated with field replacement labor, hardware replacement, re-integration with third-party products, handling charges, correcting defects, errors and bugs, or other issues could be significant and could materially harm our financial results. For example, in March 2010, we discovered that a faulty capacitor from a third-party supplier was used in a discrete number of our communications modules. We recorded costs associated with this faulty capacitor of $6.3 million for the year ended December 31, 2009, which represented the write-off of deferred costs associated with returned products of $2.4 million and $3.9 million related to estimated future product warranty claims. In the first quarter of 2010, we recorded product warranty costs associated with this faulty capacitor of $12.5 million, which represented $8.2 million in costs associated with returned product and $4.3 million related to the estimated future product warranty claims. In addition, due to a product repair program we implemented for one of our customers, in the second quarter of 2011, we recorded a $2.5 million charge against billings for estimated amounts payable to a customer in connection with the product repair program and a $1.0 million increase to cost of product revenue and warranty liability.
Estimated future product warranty claims are based on the expected number of field failures over the warranty commitment period, the term of the product warranty period, and the costs for repair, replacement and other associated costs. Our warranty obligations are affected by product failure rates, claims levels, material usage and product re-integration and handling costs. Because our products are relatively new and we do not yet have the benefit of long-term experience observing products performance in the field, our estimates of a products lifespan and incidence of claims may be inaccurate. Should actual product failure rates, claims levels, material usage, product re-integration and handling costs, defects, errors, bugs or other issues differ from the original estimates, we could end up incurring materially higher warranty or recall expenses than we anticipate.
Our utility customer contracts typically contain provisions that could cause us to incur penalties, be liable for damages, and/or incur unanticipated expenses with respect to the functionality, deployment, operation and availability of our products and services, and that provide the customer with the right to terminate the contract for any reason.
In addition to the risk of unanticipated warranty or recall expenses, our utility customer contracts typically contain provisions that could cause us to incur penalties, be liable for damages, including liquidated damages, or incur other expenses, if we experience
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difficulties with respect to the functionality, deployment, operation and availability of our products and services. In the event of late deliveries, late or improper installations or operations, failure to meet product or performance specifications or other product defects, interruptions or delays in our managed service offerings, our customer contracts may expose us to penalties, significant damages and other liabilities. For example, we have in the past agreed to reimburse utility customers for their costs and incurred liquidated damages by failing to timely meet contractual milestones or other contractual requirements. In addition, our utility customer contracts are typically subject to termination for any reason, including for convenience following a specified notice period, our material breach or insolvency, or the failure to obtain required regulatory approval. If a customer terminates its customer contract for any reason, our estimates of total backlog and order backlog will be reduced. Reductions in total backlog and order backlog may have a negative effect on future revenue, billings, profitability and liquidity. In the event we were to incur contractual penalties, such as liquidated damages or other related costs that exceed our expectations, or our utility customers terminate their contracts with us, our business, financial condition and operating results could be materially and adversely affected.
Our success depends in part on our ability to integrate our technology into meters and our relationship with meter manufacturers.
Our business depends on our ability to integrate our communications modules with electricity meters that are manufactured by third parties such as General Electric Company, Landis+Gyr AG, which was acquired by Toshiba Corporation, and Secure Meters Limited, or Secure Meters. In a typical smart grid deployment, our utility customer purchases our communications modules from one or more meter manufacturers after integration into the meters. Accordingly, even if demand for our products is strong, we have in the past and may in the future be constrained by the production capacity and priorities of the meter manufacturers. In addition, several of these meter manufacturers offer competing smart grid products, partner with other smart grid providers or may otherwise choose not to integrate our communications modules with their meters. If for technical or any other reason we were to lose the ability to integrate our communications modules with meters manufactured by third parties, or if our relationships with meter manufacturers were to be terminated or renegotiated on unfavorable terms, our business, financial condition, and operating results could suffer. Further, there have been instances where meters with which our technology had been integrated experienced defects or had other problems that were unrelated to our technology. If this occurs in the future and the defects or problems are more significant or occur more frequently, our reputation could suffer and our business could be harmed.
From time to time, we have worked and expect to continue to work with third parties to pursue smart grid market opportunities. If we were unable to establish and maintain these relationships, or if our initiatives with these third parties are unsuccessful, our business may suffer.
For some of our existing and anticipated future products and services, we expect to maintain and may seek to establish relationships with third parties in order to take advantage of smart grid market opportunities. For example, we have designed our products to interface with electric vehicle charging stations, in-home devices and data analytics products, and will need to work with third parties to successfully deploy these products. Before a utility is willing to move forward with a deployment of our products, they may require that we partner with third-party vendors and/or obtain a certification from these vendors that our products will function as intended when integrated with their products. In addition, third-party vendors may offer competing products, partner with other networking providers or otherwise choose not to partner with us. In the event that we are unable to establish or maintain new relationships on favorable terms, or at all, our ability to successfully sell our existing and anticipated future products and services could be jeopardized.
There are no assurances we will be able to formalize any joint development activities with EMC.
In December 2011, we and EMC Corporation, or EMC, entered into a memorandum of understanding to deliver a smart grid analytics solution. We have not finalized any agreement with EMC for such arrangement, and there are no assurances that we will ever be able to do so on terms favorable to us, if at all. If we do finalize an agreement with EMC, there can be no assurance that joint activities with EMC will be successfully deployed.
We may not be able to identify adequate strategic relationship opportunities, or form strategic relationships, in the future.
Strategic business relationships may be an important factor in the growth and success of our business. For example, we entered into memorandums of understanding with EMC and Hitachi and following negotiation, entered into a master collaboration agreement with Hitachi based on such memorandum of understanding. However, there are no assurances that we will be able to identify or secure suitable business relationship opportunities in the future and our competitors may capitalize on such opportunities before we do. Concurrently with the execution of the memorandums of understanding, EMC and Hitachi made significant investments in us pursuant to convertible notes that converted into shares of our common stock in connection with our IPO. We may not be able to offer similar benefits to other companies which could impair our ability to establish such relationships. Moreover, identifying such opportunities could demand substantial management time and resources and involves significant costs and uncertainties. If we are unable to successfully source and execute on strategic relationship opportunities in the future, our business and results of operations could be significantly harmed.
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Our technology, products and services have only been developed in the last several years and we have had only limited opportunities to deploy and assess their performance in the field at full scale.
The current generation of our networking platform and solutions has only been developed in the last several years and is continuing to evolve. Deploying and operating our technology is a complex endeavor and, until recently, had been done primarily in small pilot programs. As the size, complexity and scope of our deployments have expanded, we have been able to test product performance at a greater scale and in a variety of new geographic settings and environmental conditions. These larger deployments have presented a number of unforeseen operational and technical challenges, which in some cases have caused delays and required us to commit significant resources to address these challenges. As the number, size and complexity of our deployments grow, we may continue to encounter unforeseen operational, technical and other challenges, some of which could cause significant delays, trigger contractual penalties, result in unanticipated expenses, and/or damage to our reputation, each of which could materially and adversely affect our business, financial condition and results of operations.
If we fail to respond to evolving technological changes, our products and services could become obsolete or less competitive.
Our industry is highly competitive and characterized by new and rapidly evolving technologies, standards, regulations, customer requirements, and frequent product introductions. Accordingly, our operating results depend upon, among other things, our ability to develop and introduce new products and services, as well as our ability to reduce production costs of our existing products. For example, in January 2012, we announced Gen4, our next-generation networking technology, which is available in some products today, with more products coming to market as we continue to integrate it with products from additional device partners. The process of developing new technologies and products is complex, and if we are unable to develop enhancements to, and new features for, our existing products or acceptable new products that keep pace with technological developments or industry standards, our products may become obsolete, less marketable and less competitive and our business could be significantly harmed.
We depend on our ability to develop new products and to enhance and sustain the quality of existing products.
Most of our current billings and revenue are derived from our networking platform and advanced metering solution, but our growth and future success will depend, in part, on our ability to continue to design and manufacture new competitive products and to enhance and sustain the quality and marketability of our existing products. As such, we have made, and expect to continue to make, substantial investments in technology development. For example, in January 2012, we announced Gen4, our next-generation networking technology, which is available in some products today, with more products coming to market as we continue to integrate it with products from additional device partners. In the future, we may not have the necessary capital, or access to capital on acceptable terms, to fund necessary levels of research and development. Even with adequate capital resources, we may nonetheless experience unforeseen problems in the development or performance of our technologies or products. The market for smart grid technology products is still in its early stages, and we cannot assure you that we will be successful in developing or selling new products in this market. In addition, we may not meet our product development schedules and, even if we do, we may not develop new products fast enough to provide sufficient differentiation from our competitors products, which may be more successful.
We and our utility customers operate in a highly regulated business environment and changes in regulation could impose costs on us or make our products less economical.
Our products and our utility customers are subject to federal, state, local and foreign laws and regulations. Laws and regulations applicable to us and our products govern, among other things, the manner in which our products communicate, and the environmental impact and electrical reliability of our products. Additionally, our utility customers are often regulated by national, state and/or local bodies, including public utility commissions, the Department of Energy, the Federal Energy Regulatory Commission and other bodies. Prospective utility customers may be required to gain approval from any or all of these organizations prior to implementing our products and services, including specific permissions related to the cost recovery of these systems. Regulatory agencies may impose special requirements for implementation and operation of our products. We may incur material costs or liabilities in complying with government regulations applicable to us or our utility customers. In addition, potentially significant expenditures could be required in order to comply with evolving regulations and requirements that may be adopted or imposed on us or our utility customers in the future. Such costs could make our products less economical and could impact our utility customers willingness to adopt our products, which could materially and adversely affect our revenue, results of operations and financial condition.
Furthermore, changes in the underlying regulatory conditions that affect utilities could have a potentially adverse effect on a utilitys interest or ability to implement smart grid technologies. For example, ongoing regulatory uncertainties previously delayed the timing of ComEds planned deployment schedule. Many regulatory jurisdictions have implemented rules that provide financial incentives for the implementation of energy efficiency and demand response technologies, often by providing rebates or through the restructuring of utility rates. If these programs were to cease, or if they were restructured in a manner inconsistent with the capabilities enabled by our products and services, our business, financial condition and results of operations could be significantly harmed.
The adoption of industry standards applicable to our products or services could limit our ability to compete in the marketplace.
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Standards bodies, which are formal and informal associations that seek to establish voluntary, non-governmental product and technology standards, are influential in the United States and abroad. We participate in voluntary standards organizations in order to both help promote non-proprietary, open standards for interoperability with our products and prevent the adoption of exclusionary standards. However, we are not able to control the content of adopted voluntary standards and do not have the resources to participate in all voluntary standards processes that may affect our markets. Some of the standards bodies and alliances in which we participate may require that we license to other participants including competitors certain of our patent claims that are necessary or essential to practice a particular standard, who elect to produce products compliant with that standard. These obligations to license our necessary patent claims may allow our competitors to use our patents to develop and sell products that compete with our products without spending the time and expense that we incurred to develop the technology covered by the patents, thereby potentially reducing any time to market advantage we might have as a result of these patents. These obligations could also substantially restrict and may eliminate our ability to use our patents as a barrier to entry or as a significant source of revenue. Moreover, because the specifications for these industry standards are generally available to members of the applicable standards bodies and alliances for little or no cost, competitors might be able to more easily create products that compete with our products.
The adoption, or expected adoption, of voluntary standards that are incompatible with our products or technology or that favor our competitors products or technology could limit the market opportunity for our products and services or render them obsolete, any of which could materially and adversely affect our revenue, results of operations, and financial condition.
Some of our customers and potential customers have applied for government grants and may also seek to participate in other government incentive programs, and if those grants or other incentives are not received or are significantly delayed, our results of operations could suffer.
Many utilities, including some of our customers and potential customers, apply for grants and may seek to participate in other government incentive programs, designed to stimulate the economy and support environmental initiatives, including smart grid technologies. Our customers and potential customers who apply for these government grants or incentives may delay or condition the purchase of our products and services upon receipt of such funds or upon their confidence in the future disbursement of those funds. If our customers and potential customers do not receive these funds or if receipt is significantly delayed, our results of operations could suffer. Similarly, the receipt of government funds or incentives may be conditioned upon utilities meeting milestones and other requirements, some of which may not be known until a future point in time. In addition, if our products and services do not meet the requirements necessary for receipt of government funds or other incentives, or if third parties fail to meet their obligations, our customers and potential customers may delay or condition the purchase of our products and services until they meet these requirements and our results of operations could suffer. Furthermore, there can be no assurance of government funds or incentives for utilities in future periods, either in the United States or in other countries where we may pursue business. As a result, our customers and potential customers may not have the resources or incentives to purchase our products and services.
If our products do not interoperate with our utility customers other systems, the purchase or deployment of our products and services may be delayed or cancelled.
Our products are designed to interface with our utility customers back office billing and other systems, each of which may have different specifications and utilize multiple protocol standards and products from other vendors. Our products will be required to interoperate with many or all of these products as well as future products in order to meet our utility customers requirements. If we find errors in the existing software or defects in the hardware used in our utility customers systems, we may need to modify our products or services to fix or overcome these errors so that our products will interoperate with the existing software and hardware, which could be costly and negatively affect our business, financial condition, and results of operations. In addition, if our products and services do not interoperate with our utility customers systems, utility customers may seek to hold us liable, demand for our products could be adversely affected or orders for our products could be delayed or cancelled. This could hurt our operating results, damage our reputation, and seriously harm our business and prospects.
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Interruptions or delays in service from our third-party data center facilities, or problems with the third-party hardware or software that we employ, could impair the delivery of our service and harm our business.
We currently offer managed services and SaaS, including disaster recovery services, utilizing two data center facilities operated by separate third parties in California and Nevada. These facilities may be vulnerable to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, war, acts of terrorism, unauthorized entry, human error, and computer viruses or other defects. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. We rely on software and hardware technology provided by third parties to enable us to provide these services. Any damage to, or failure of, these third-party data centers or the third-party hardware and software we employ, could result in significant and lengthy interruptions in the services we provide to our utility customers. Such interruptions could reduce our revenue and billings, cause us to issue credits or pay penalties, cause customers to terminate their service, harm our reputation and adversely affect our ability to attract new utility customers.
We do not control certain critical aspects of the manufacture of our products and depend on a limited number of contract manufacturers.
Our future success will depend significantly on our ability to manufacture our products timely and cost-effectively, in sufficient volumes, and in accordance with quality standards. Our primary manufacturing relationship is with Plexus Corp., who provides us with a wide range of operational and manufacturing services, including material procurement, final assembly, test quality control, warranty repair, and shipment to our utility customers and third-party vendors.
Our reliance on our contract manufacturers reduces our control over the manufacturing process, exposing us to risks, including reduced control over quality assurance, product costs and product supply. Any manufacturing disruption by our contract manufacturers could impair our ability to fulfill orders. We may be unable to manage our relationships with contract manufacturers effectively as they may experience delays, disruptions, capacity constraints or quality control problems in their manufacturing operations or otherwise fail to meet our future requirements for timely delivery. Similarly, to the extent that our contract manufacturers procure materials on our behalf, we may not benefit from any warranties received by the contract manufacturers from the suppliers or otherwise have recourse against the original supplier of the materials or even the contract manufacturer. In such circumstances, if the original supplier were to provide us or our contract manufacturers with faulty materials, we might not be able to recover the costs of such materials or be compensated for any damages that arise as a result of the inclusion of the faulty components in our products. For example, in March 2010, we discovered that a faulty capacitor from a third-party supplier was used in a discrete number of our communications modules.
One or more of our contract manufacturers may suffer an interruption in its business, or experience delays, disruptions or quality control problems in its manufacturing operations, or seek to terminate its relationship with us, or we may choose to change or add additional contract manufacturers for other reasons. Additionally, we do not have long-term supply agreements with our contract manufacturers. As a result, we may be unable to renew or extend our agreement on terms favorable to us, if at all. Although the contract manufacturing services required to manufacture and assemble our products may be readily available from a number of established manufacturers, it is risky, time consuming and costly to qualify and implement contract manufacturer relationships.
Any of these risks could have a material adverse effect on our business, financial condition and results of operations.
We depend on a limited number of key suppliers and if such suppliers fail to provide us with sufficient quantities of components at acceptable levels of quality and at anticipated costs, our revenue and operating results could be materially and adversely affected.
Several of the components used in our products come from sole, limited source or geographically concentrated suppliers, such as Analog Devices and Renesas Electronics America Inc. Additionally, our suppliers are not typically contractually obligated to supply us with components in minimum quantities or at predetermined prices over the long term. Accordingly, we may be vulnerable to price increases, component quality issues, financial, natural disasters, or other difficulties faced by our suppliers, causing shortages or interruptions in supply of components and materials, including components that have been or will be discontinued, which could cause us to delay shipments to our utility customers. For example, some of our key suppliers are located in Japan and their ability to timely provide us with the necessary components used in our products was compromised as a result of the catastrophic earthquake and tsunami in March 2011. To help address these issues, we may purchase quantities of these items that are in excess of our estimated requirements. As a result, we could be forced to record excess and obsolete inventory charges to provide for these excess quantities and we may also be subject to pricing risk or carrying charges, which could harm our operating results.
If we experience any shortages due to reliance on a limited number of suppliers, commodity supply constraints, capacity constraints, natural disasters or price fluctuations related to the raw materials used, or if we are not able to procure components from
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alternate sources at acceptable prices and within a reasonable period of time, our reputation could suffer and our business, financial condition and results of operations could be materially and adversely effected. In addition, we may also be subject to contractual penalties if we fail to deliver our products and services on time.
Further, our utility customers may reschedule or cancel orders on relatively short notice. If our utility customers cancel orders after we have ordered the corresponding product from our suppliers, we may be forced to incur cancellation fees or to purchase products that we may not be able to resell, which could have a material adverse effect on our business, financial condition and results of operations.
Our business could be severely harmed by natural disasters or other catastrophes.
A significant catastrophic event such as war, acts of terrorism, natural disasters, such as earthquakes, or global threats, including, but not limited to, the outbreak of epidemic disease, could disrupt our operations and impair deployment of our Smart Energy Platform by our utility customers, interrupt critical functions, cause our suppliers to be unable to meet our demand for parts and equipment, reduce demand for our products, prevent our utility customers from honoring their contractual obligations to us or otherwise affect our business negatively. To the extent that such disruptions or uncertainties result in delays or cancellations of customer orders or the deployment of our products, or the manufacture or shipment of our products, our business, operating results and financial condition could be materially and adversely affected.
We operate in a highly competitive industry and we compete against many companies with substantially greater financial and other resources, and our market share and results of operations may be reduced if we are unable to respond to our competitors effectively.
Competition in our market is intense and involves rapidly changing technologies, evolving industry standards, frequent new product introductions, and changes in customer requirements. To maintain and improve our competitive position, we must keep pace with the evolving needs of our utility customers and continue to develop and introduce new products, features and services in a timely and efficient manner. Our competitors range from small companies to very large and established companies. These competitors offer a variety of products and services related to the smart grid, and come from a number of industries, including traditional meter manufacturers, application developers, telecommunications and other service providers. We compete with traditional meter manufacturers that incorporate various communications technologies that provide some level of connectivity to the utilitys back office. Our key competitors currently include Echelon Corporation, Elster Group SE, Itron Inc., Landis+Gyr AG, which was acquired by Toshiba Corporation, Sensus Metering Systems Inc. and Trilliant Holdings, Inc. Similarly, we compete with traditional providers of distribution automation equipment, such as S&C Electric Company and Schweitzer Engineering Laboratories, Inc. We also face competition from newer entrants that are providing specific narrowly focused products for the smart grid, including Coulomb Technologies Inc., Grid Net Inc., OPOWER Inc. and Tendril Networks Inc. Furthermore, other large companies such as Alcatel-Lucent, AT&T Inc., Cisco Systems, Inc., Enel SpA, Électricité Réseau Distribution France, Fujitsu Limited, General Electric Company, International Business Machines Corporation, Mitsubishi Corporation, Motorola Solutions, Inc., Siemens AG, Sprint Nextel Corporation and Verizon Communications Inc. have announced plans to pursue business opportunities related to the smart grid. As we look to expand into new international markets, we expect to face additional competitors that may be more established in specific geographies. We anticipate that in the future, additional competitors will emerge that offer a broad range of competing products and services related to the smart grid.
Several of our competitors enjoy substantial competitive advantages such as:
| greater name recognition and longer operating histories; |
| larger sales and marketing budgets and resources; |
| greater ability to integrate their products with existing systems; |
| broader distribution channels; |
| established relationships with existing and potential partners and utility customers; |
| lower labor and development costs; and |
| significantly greater financial, technical, customer support and other resources. |
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Some of these larger competitors have substantially broader product offerings and may be able to leverage the existing relationships they have with utilities. In some cases, our larger competitors are also currently vendors of ours, and they could decide in the future to develop their own products instead of working with us. Any inability to effectively manage these relationships could have a material adverse effect on our business, operating results, and financial condition, and accordingly affect our chances of success. In addition, some of our competitors may have larger patent portfolios than we have, which may provide them with a competitive advantage and may require us to engage in costly litigation to protect and defend our freedom to operate and/or intellectual property rights.
Conditions in our market could change rapidly and significantly as a result of technological advancements or market consolidation. The development and market acceptance of alternative technologies could decrease the demand for our products or render them obsolete. Our competitors may introduce products and services that are less costly, provide superior performance or achieve greater market acceptance than our products and services. In order to remain competitive, we may need to lower prices or attempt to add incremental features and functionality, which could negatively impact our revenue, billings, gross margin and financial condition. In addition, our larger competitors often have broader product lines and are in a better position to withstand any significant reduction in capital spending by utilities, and will therefore not be as susceptible to downturns in a particular market. If we are unable to compete successfully in the future, our business may be harmed.
We have experienced rapid growth in recent periods. If we fail to manage our growth effectively, our financial performance may suffer.
We have substantially expanded our overall business, customer base, employee headcount and operations in recent periods both domestically and internationally. We increased our total number of regular full-time employee headcount from 394 employees as of December 31, 2009 to 589 as of June 30, 2013. Our expansion has placed, and our expected future growth will continue to place, a significant strain on our managerial, customer operations, research and development, sales and marketing, manufacturing, administrative, financial and other resources. If we are unable to manage our growth successfully, our operating results will suffer.
We rely on our management team and need additional personnel to grow our business, and the loss of one or more key employees or our inability to attract and retain qualified personnel could harm our business.
Our success and future growth depend on the skills, working relationships and continued services of our management team and other key personnel. The loss of any member of our senior management team, and in particular our Chief Executive Officer, could adversely affect our business. In addition, our current senior management team has worked together for a relatively short period of time.
Our future success will also depend on our ability to attract, retain and motivate highly skilled management, product development, operations, sales, technical and other personnel in the United States and abroad. Even in todays economic climate, competition for these types of personnel is intense, particularly in the Silicon Valley, where our headquarters are located. All of our employees in the United States work for us on an at-will basis. Given the lengthy sales cycles with utilities and deployment periods of our networking platform and solutions, the loss of key personnel could adversely affect our business.
Volatility or lack of performance in our stock price may also affect our ability to attract and retain our senior management and key personnel. Many of our longest-tenured employees, including members of our senior management and key personnel with deep institutional knowledge, hold significant vested stock options and shares of our common stock. Employees may be more likely to leave us if the shares they own or the shares underlying their vested stock options have significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or if the exercise prices of the options that they hold are significantly above the market price of our common stock. As a result of these factors, we may be unable to attract or retain qualified personnel. Our inability to attract and retain the necessary personnel could adversely affect our business.
Our ability to provide bid bonds, performance bonds or letters of credit is limited and could negatively affect our ability to bid on or enter into significant long-term agreements.
We have in the past been, and may in the future be, required to provide bid bonds or performance bonds to secure our performance under customer contracts or, in some cases, as a pre-requisite to submit a bid on a potential project. Our ability to obtain such bonds primarily depends upon our capitalization, working capital, past performance, management expertise and reputation and external factors beyond our control, including the overall capacity of the surety market. Surety companies consider those factors in relation to the amount of our tangible net worth and other underwriting standards that may change from time to time. Surety companies may require that we collateralize a percentage of the bond with our cash or other form of credit enhancement. Events that
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affect surety markets generally may result in bonding becoming more difficult to obtain in the future, or being available only at a significantly greater cost. In addition, some of our utility customers also require collateral guarantees in the form of letters of credit to secure performance or to fund possible damages as the result of an event of default under our contracts with them. If we enter into significant long-term agreements that require the issuance of letters of credit, our liquidity could be negatively impacted. Our inability to obtain adequate bonding or letters of credit and, as a result, to bid or enter into significant long-term agreements, could have a material adverse effect on our future revenues and business prospects.
We are subject to international business uncertainties.
Our ability to grow our business and our future success will depend to a significant extent on our ability to expand our operations and customer base worldwide. Operating in international markets requires significant resources and management attention, and other than our operations in Australia and Brazil, we have limited experience entering new geographic markets. There can be no assurance that our international efforts will be successful. International sales and operations may be subject to risks such as:
| technology compatibility; |
| the imposition of government controls; |
| government expropriation of facilities; |
| lack of a well-established system of laws and enforcement of those laws; |
| lack of a legal system free of undue influence or corruption; |
| exposure to a business culture in which improper sales practices may be prevalent; |
| political instability; |
| terrorist activities; |
| restrictions on the import or export of critical technology; |
| currency exchange rate fluctuations; |
| adverse tax burdens; |
| lack of availability of qualified third-party financing; |
| generally longer receivable collection periods than in the United States; |
| trade restrictions; |
| changes in tariffs; |
| labor disruptions; |
| difficulties in staffing and managing foreign operations; |
| preference for local vendors; |
| burdens of complying with different permitting standards; and |
| a wide variety of foreign laws and obstacles to the repatriation of earnings and cash. |
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Fluctuations in the value of the U.S. dollar may impact our ability to compete in international markets. International expansion and market acceptance depend on our ability to modify our business approach and technology to take into account such factors as differing customer business models, product requirements and needs, the applicable regulatory and business environment, labor costs and other economic conditions. In addition, the laws of certain countries do not protect our intellectual property to the same extent as do the laws of the United States. There can be no assurance that these factors will not have a material adverse effect on our future international sales and, consequently, on our business, financial condition and results of operations.
Developments in data protection laws and regulations may affect technology relating to smart grid products and solutions, which could adversely affect the demand for our products and solutions.
Our products and services may be subject to data protection laws and regulations that impose a general framework for the collection, processing and use of personal data. Our networking platform and solutions rely on the transfer of data relating to individual energy use and may be affected by these laws and regulations. It is unclear how the regulations governing the transfer of personal data in connection with privacy requirements will further develop in the United States and internationally, and to what extent this may affect technology relating to smart grid products and solutions. This could have a material adverse effect on our business, financial condition and results of operations.
Adverse changes in general economic or political conditions in any of the major countries in which we do business could adversely affect our operating results.
Our business can be affected by a number of factors that are beyond our control, such as general geopolitical, economic, and business conditions. The continued global economic uncertainty, concerns over the downgrade of U.S. sovereign debt and continued monetary, financial and sovereign debt uncertainties in European and other foreign countries continue to have a negative effect on our business. Further, the recent worldwide financial and credit crisis has reduced the availability of liquidity and credit to fund the continuation and expansion of business operations worldwide. Even with economic recovery, it may take time for our utility customers or potential utility customers to establish new budgets and return to normal purchasing patterns. We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of the economic recovery, worldwide, in the United States or in our industry. These and other economic factors could adversely affect the demand for our products and services and, consequently, on our business, financial condition and results of operations.
There can be no assurance that a deterioration in financial markets will not impair our ability or our utility customers ability to obtain financing in the future, including, but not limited to, our or our utility customers ability to incur indebtedness if that became necessary. In addition, there could be a number of follow-on effects from the credit crisis on our business, including insolvency of certain of our key utility customers or suppliers, which could result in the inability of our utility customers to obtain credit to finance purchases of our products.
Our inability to acquire and integrate other businesses, products or technologies could seriously harm our competitive position.
In order to remain competitive, obtain key competencies or accelerate our time to market, we may seek to acquire additional businesses, products or technologies. To date, we have completed only one small acquisition, and we therefore have limited experience in successfully acquiring and integrating additional businesses, products or technologies. If we identify an appropriate acquisition candidate, we may not be successful in negotiating the terms of the acquisition, financing the acquisition, or effectively integrating the acquired business, product or technology into our existing business and operations. We may have difficulty integrating acquired technologies or products with our existing products and services. Our due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related to intellectual property, product quality or product architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or customer issues. If we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted, which could affect the market price of our stock. In addition, any acquisitions we are able to complete may not result in the synergies or any other benefits we had expected to achieve, which could result in substantial write-offs. Further, contemplating or completing an acquisition and integrating an acquired business, product or technology will significantly divert management and employee time and resources.
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Our business may suffer if it is alleged or found that our products infringe the intellectual property rights of others.
Our industry is characterized by the existence of a large number of patents and by litigation based on allegations of infringement or other violations of intellectual property rights. Moreover, in recent years, individuals and groups have purchased patents and other intellectual property assets for the purpose of making claims of infringement in order to extract settlements from companies like ours. From time to time, third parties have claimed and may continue to claim that we are infringing upon their patents or other intellectual property rights. For example, we are currently engaged in litigation as further described in Legal Proceedings. In addition, we may be contractually obligated to indemnify our utility customers or other third parties that use or resell our products in the event our products are alleged to infringe a third partys intellectual property rights. Responding to such claims, regardless of their merit, can be time consuming, costly to defend in litigation, divert managements attention and resources, damage our reputation and brand, and cause us to incur significant expenses. Even if we are indemnified against such costs, the indemnifying party may be unable to uphold its contractual obligations. Further, claims of intellectual property infringement might require us to redesign affected products, delay affected product offerings, enter into costly settlement or license agreements or pay costly damage awards or face a temporary or permanent injunction prohibiting us from marketing, selling or distributing the affected products. If we cannot or do not license the alleged infringed technology on reasonable terms or at all, or substitute similar technology from another source, our revenue and earnings could be adversely impacted. Additionally, our utility customers may not purchase our products if they are concerned that our products infringe third-party intellectual property rights. This could reduce the market opportunity for the sale of our products and services. The occurrence of any of these events may have a material adverse effect on our business, financial condition and results of operations.
The success of our business depends on our ability to protect and enforce our intellectual property rights.
We rely on a combination of patent, trademark, trade dress, copyright, unfair competition and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our proprietary rights. These laws, procedures and restrictions provide only limited protection and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated. Further, the laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States and, therefore, in certain jurisdictions, we may be unable to protect our proprietary technology adequately against unauthorized third-party copying, infringement or use, which could adversely affect our competitive position.
As of June 30, 2013, we had 52 patents issued and 87 patent applications pending in the United States and, in foreign jurisdictions, we had 58 patents granted and 188 patent applications pending, which are collectively based on 57 U.S. patent applications. Our patents expire at various times between 2015 and 2031. We cannot ensure that any of our pending applications will be granted or that any of our issued patents will adequately protect our intellectual property. In addition, third parties have in the past and could in the future bring infringement, invalidity, co-inventorship, re-examination, or similar claims with respect to any of our currently issued patents or any patents that may be issued to us in the future. Any such claims, whether or not successful, could be extremely costly to defend, divert managements attention and resources, damage our reputation and brand, and substantially harm our business and results of operations.
In order to protect or enforce our patent rights, protect our trade secrets or know-how, or determine the enforceability, scope and validity of the proprietary rights of others, we may initiate patent litigation or other proceedings against third parties, such as infringement suits or interference proceedings. Any lawsuits or proceedings that we initiate could be expensive, take significant time and divert managements attention from other business concerns. Litigation and other proceedings also put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing. Additionally, we may provoke third parties to assert claims against us. We may not prevail in any lawsuits or other proceedings that we initiate and the damages or other remedies awarded, if any, may not be commercially valuable. The occurrence of any of these events may have a material adverse effect on our business, financial condition and results of operations.
Some of our products rely on technologies developed or licensed by third parties. We may seek to license technology from third parties for future products and services. We may not be able to obtain or continue to obtain licenses and technologies from these third parties on commercially reasonable terms or at all. Our inability to retain our current third-party licenses or obtain third-party licenses required to develop new products or product enhancements could require us to obtain alternate technology that may be of lower quality or performance standards or at greater cost, or could require that we change our product and design plans, any of which could limit or delay our ability to manufacture and sell our products.
If we are unable to protect the confidentiality of our proprietary information, the value of our technology and products could be adversely affected.
In addition to patented technology, we rely on our unpatented technology and trade secrets. We generally seek to protect this information by confidentiality, non-disclosure and assignment of invention agreements with our employees and contractors and with parties with which we do business. These agreements may be breached and we may not have adequate remedies for any such breach. We cannot be certain that the steps we have taken will prevent unauthorized use or reverse engineering of our technology. Moreover, our trade secrets may be disclosed to or otherwise become known or be independently developed by competitors. To the extent that
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our employees, contractors, or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. If, for any of the above reasons, our intellectual property is disclosed or misappropriated, it would harm our ability to protect our rights and have a material adverse effect on our business, financial condition, and results of operations.
We use open source software in our products and services that may subject our products and services to general release or require us to re-engineer our products and services, which may cause harm to our business.
We use open source software in connection with our products and services. From time to time, companies that incorporate open source software into their products have faced claims challenging the ownership of open source software and/or compliance with open source license terms. Therefore, we could be subject to suits by parties claiming ownership of what we believe to be open source software or noncompliance with open source licensing terms. Some open source software licenses require users who distribute open source software as part of their software to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code on unfavorable terms or at no cost. While we monitor the use of open source software in our products and services and try to ensure that none is used in a manner that would require us to disclose the source code to the related product or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur and we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our products, discontinue the sale of our products in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could adversely affect our business, operating results and financial condition.
We are an emerging growth company, and any decision on our part to comply with certain reduced disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act enacted in April 2012, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although, if the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30 of any year before the end of that five-year period, we would cease to be an emerging growth company as of December 31 of that year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may decline or be more volatile.
Under Section 107(b) of the Jumpstart Our Business Startups Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail our company of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Our business is subject to changing regulations regarding corporate governance and public disclosure that will increase both our costs and the risk of noncompliance.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules and regulations of the New York Stock Exchange. Achieving and maintaining compliance with these rules and regulations, particularly after we cease to be an emerging growth company, will increase our legal, accounting and financial compliance costs, will make some activities more difficult, time-consuming and costly and may also place undue strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and, in the future, internal control over financial reporting. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our prior period financial statements. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting that we will be required to include in our periodic reports filed with the SEC, beginning for the year ending December 31, 2014 under Section 404(a) of the Sarbanes-Oxley Act or the annual auditor attestation reports regarding effectiveness of our internal controls over financial reporting that we will be required to include in our annual reports filed with the SEC, beginning for the year ending December 31, 2018, unless, under the Jumpstart Our Business Startups Act, we meet certain
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criteria that would require such reports to be included prior to then, under Section 404(b) of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock.
In order to maintain the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we will need to expend significant resources and provide significant management oversight. We have a substantial effort ahead of us to implement appropriate processes, document our system of internal control over relevant processes, assess their design, remediate any deficiencies identified and test their operation. As a result, managements attention may be diverted from other business concerns, which could harm our business, operating results and financial condition. These efforts will also involve substantial accounting-related costs. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the New York Stock Exchange.
Implementing any appropriate changes to our internal controls may require specific compliance training of our directors, officers and employees, entail substantial costs in order to modify our existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. In the event that we are not able to demonstrate compliance with Section 404 of the Sarbanes-Oxley Act in a timely manner, that our internal controls are perceived as inadequate or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and our stock price could decline.
The Sarbanes-Oxley Act and the rules and regulations of the New York Stock Exchange will make it more difficult and more expensive for us to maintain directors and officers liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to maintain or increase coverage. If we are unable to maintain adequate directors and officers insurance, our ability to recruit and retain qualified directors, especially those directors who may be considered independent for purposes of the New York Stock Exchange rules, and officers may be curtailed.
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
In the future, we may require additional capital to respond to business opportunities, challenges, acquisitions or unforeseen circumstances and may determine to engage in equity or debt financings or enter into credit facilities for other reasons. For example, in December 2011, we issued a convertible note with an aggregate principal amount of $24.0 million and in February 2012, we issued a convertible note with an aggregate principal amount of $30.0 million, both of which converted into shares of our common stock at the closing of our IPO. In the future, we may not be able to timely secure additional debt or equity financing on favorable terms, or at all. Any debt financing obtained by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new equity securities we issue could have rights, preferences and privileges senior to those of holders of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited.
We may not be able to utilize a significant portion of our net operating loss or research tax credit carryforwards, which could adversely affect our operating results.
As of December 31, 2012, we had federal and state net operating loss carryforwards due to prior period losses, which if not utilized will begin to expire in 2027 and 2016 for federal and state purposes, respectively. We also have federal research tax credit carryforwards that will begin to expire in 2024. Realization of these net operating loss and research tax credit carryforwards is dependent upon future income, and there is a risk that our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our operating results.
In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, our ability to utilize net operating loss carryforwards or other tax attributes, such as research tax credits, in any taxable year may be limited if we experience an ownership change. A Section 382 ownership change generally occurs if one or more stockholders or groups of stockholders who own at least 5% of our stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. It is possible that an ownership change, or any future ownership change, could have a material effect on the use of our net operating loss carryforwards or other tax attributes, which could adversely affect our operating results.
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Our business and financial performance could be negatively impacted by changes in tax laws or regulations.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time. Those enactments could adversely affect our domestic and international business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. These events could require us or our utility customers to pay additional tax amounts on a prospective or retroactive basis, as well as require us or our utility customers to pay fines and/or penalties and interest for past amounts deemed to be due. If we raise our prices to offset the costs of these changes, existing and potential future utility customers may elect not to continue or purchase our products and services in the future. Additionally, new, changed, modified or newly interpreted or applied tax laws could increase our utility customers and our compliance, operating and other costs, as well as the costs of our products. Further, these events could decrease the capital we have available to operate our business. Any or all of these events could adversely impact our business and financial performance.
Our stock price has been and may continue to be volatile and may decline regardless of our operating performance.
Prior to our IPO in March 2013, there had not been a public market for our common stock. If you purchase shares of our common stock, you may not be able to resell those shares at or above your purchase price. An active or liquid market in our common stock may not be sustainable. The trading prices of the securities of technology companies have been highly volatile and the trading price of our common stock has been and may continue to be volatile. The market price of our common stock may fluctuate significantly in response to numerous factors, many of which are beyond our control, including:
| actual or anticipated fluctuations in our billings, revenue and other operating results or our backlog; |
| the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; |
| delays in regulatory approvals for our utility customers and utility customer deployments; |
| failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; |
| ratings changes by any securities analysts who follow our company; |
| announcements by us or our competitors of significant customer wins, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; |
| changes in operating performance and stock market valuations of utilities, technology companies generally, or those in our industry in particular; |
| political and consumer sentiment, including concerns over accuracy of advanced metering technology, economic impact on consumers, privacy, security, consumer choice and the safety, health and environmental aspects of smart grid technology; |
| price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; |
| lawsuits threatened or filed against us; and |
| other events or factors, including those resulting from war, incidents of terrorism or responses to these events. |
In addition, the stock markets, and in particular the New York Stock Exchange on which our common stock is listed, have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many technology companies. Stock prices of many technology companies have fluctuated in a manner unrelated or disproportionate to the operating performance of those companies. During the three months ended June 30, 2013, the closing price of our common stock on the New York Stock Exchange ranged from $16.17 to $24.94 per share. In the past, stockholders have instituted securities class action litigation following
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periods of market volatility. If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, operating results and financial condition.
A significant portion of our total outstanding shares may be sold into the market in the near future. If there are substantial sales of shares of our common stock, the price of our common stock could decline.
The price of our common stock could decline if there are substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, or if there is a large number of shares of our common stock available for sale. As of June 30, 2013, 46,637,948 shares of our common stock were outstanding. The 5,462,500 shares of common stock sold in our IPO are available for sale in the public market and the remaining outstanding shares of our common stock are currently restricted as a result of market standoff and/or lock-up agreements but will be available for sale in the public market on September 9, 2013.
The holders of an aggregate of 32,973,595 shares of our common stock have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders. All of these shares are subject to market standoff and lock-up agreements restricting their sale until September 9, 2013. Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC may, in their sole discretion, permit one or more parties who are subject to the contractual lock-up to sell shares prior to the expiration of the lock-up agreements.
The market price of the shares of our common stock could decline as a result of sales of a substantial number of our shares in the public market or the perception in the market that the holders of a large number of shares intend to sell their shares.
We have broad discretion in the use of the net proceeds from our IPO and may not use them effectively.
We cannot specify with any certainty the particular uses of the net proceeds that we received from our IPO. Our management has broad discretion in the application of the net proceeds, including working capital, possible acquisitions and other general corporate purposes, and we may spend or invest these proceeds in a way with which our stockholders disagree. The failure by our management to apply these funds effectively could harm our business and financial condition. Pending their use, we may invest the net proceeds from our IPO in a manner that does not produce income or that loses value. These investments may not yield a favorable return to our investors.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. Industry analysts that currently cover us may cease to do so. If industry analysts cease coverage of our company, or if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Our directors, executive officers and principal stockholders have substantial control over us and could delay or prevent a change in corporate control.
As of June 30, 2013 our directors, executive officers and their respective affiliates, beneficially owned, in the aggregate, 43.4% of our outstanding common stock. As a result, these stockholders, acting together, would have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, would have the ability to control the management and affairs of our company. Accordingly, this concentration of ownership might harm the market price of our common stock by:
| delaying, deferring or preventing a change in control of us; |
| impeding a merger, consolidation, takeover or other business combination involving us; or |
| discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of us. |
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We do not intend to pay dividends for the foreseeable future.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. In addition, the terms of our credit facility with Silicon Valley Bank currently restricts our ability to pay dividends. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases.
Delaware law and provisions in our amended and restated certificate of incorporation and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock.
We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and restated bylaws contain provisions that may make the acquisition of our company more difficult without the approval of our Board of Directors, including the following:
| our Board of Directors is classified into three classes of directors with staggered three-year terms; |
| only our chairman of the board, our lead independent director, our chief executive officer, our president or a majority of our Board of Directors is authorized to call a special meeting of stockholders; |
| our stockholders are only able to take action at a meeting of stockholders and not by written consent; |
| vacancies on our Board of Directors are able to be filled only by our Board of Directors and not by stockholders; |
| directors may be removed from office only for cause; |
| our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established, and shares of which may be issued, without stockholder approval; and |
| advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders. |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) Sales of Unregistered Securities
Not applicable.
(b) Use of Proceeds
On March 18, 2013, we closed our IPO in which we sold 5,462,500 shares of our common stock at an offering price per share of $17.00 pursuant to a registration statement on Form S-1 (File No. 333-175393), which was declared effective by the Securities and Exchange Commission on March 12, 2013. The offering commenced on March 12, 2013 and did not terminate before all of the securities registered in the registration statement were sold. Goldman, Sachs & Co. and Credit Suisse Securities (USA) LLC acted as joint book-running managers for the offering and Stifel, Nicolaus & Company, Incorporated, Piper Jaffray & Co., Canaccord Genuity Inc., Evercore Group L.L.C., Pacific Crest Securities LLC and Robert W. Baird & Co. acted as co-managers. We received net proceeds of $84.7 million after deducting underwriting discounts and commissions of $6.5 million and paid offering costs in the six months ended June 30, 2013 of $1.7 million, but before deducting previously paid offering expenses of approximately $4.7 million. No payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates. As of June 30, 2013, the funds were held in cash. There has been no material change in the planned use of proceeds from our IPO as described in our prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act on March 13, 2013.
(c) Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Effective on August 8, 2013, Ben Kortlang resigned as a member of the Board of Directors of Silver Spring Networks to focus on investments in privately held companies as a partner of Kleiner Perkins Caufield and Byers.
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Item 6. | Exhibits. |
Incorporated by Reference | Filed Herewith | |||||||||
Number |
Exhibit Title |
Form |
File No. |
Filing Date |
||||||
10.11* | SmartMeter Program Upgrade Supply Agreement, dated July 23, 2008, as amended, between the Registrant and Pacific Gas and Electric Company | X | ||||||||
31.1 | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||
31.2 | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | ||||||||
32.1** | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||
32.2** | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | ||||||||
101.INS | XBRL Instance Document. | X | ||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X |
* | Registrant has omitted portions of the referenced exhibit and filed such exhibit separately with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Exchange Act. |
** | The certifications attached as Exhibit 32 hereto are deemed not filed for purposes of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
| Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed for purposes of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall they be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act. |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Redwood City, State of California, on August 8, 2013.
SILVER SPRING NETWORKS, INC. | ||
By: | /s/ Scott A. Lang | |
Scott A. Lang Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer) | ||
By: | /s/ John R. Joyce | |
John R. Joyce Vice Chairman and Chief Financial Officer (Principal Financial Officer) |
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Exhibit 10.11
***Confidential Treatment Requested
SmartMeter Program Upgrade
Supply Agreement
Pacific Gas and Electric Company
Silver Spring Networks
Effective July 15, 2008
*** | Certain omitted portions of this exhibit have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934, while the remaining omitted portions were granted confidential treatment pursuant to an order by the Securities and Exchange Commission. |
PG&E/SSN Confidential
SmartMeter Program Upgrade Supply Agreement (SSN)
Table of Contents
TABLE OF CONTENTS
1. | PREAMBLE | |||||||
1.1 | BACKGROUND AND PURPOSE | |||||||
1.2 | CONSTRUCTION OF PREAMBLE | 2 | ||||||
1.3 | DEFINED TERMS | 2 | ||||||
1.4 | STATEMENT OF WORK | 2 | ||||||
2. | SUPPLY OF PRODUCTS | 2 | ||||||
2.1 | SUPPLY OF PRODUCTS; SERVICES | 2 | ||||||
2.2 | PRODUCT CHANGES AND MANUFACTURING CHANGES | 3 | ||||||
2.3 | ADDITIONAL PRODUCT VOLUMES | 3 | ||||||
2.4 | NEW PRODUCTS | 3 | ||||||
2.5 | TRAINING | 3 | ||||||
2.6 | INCORPORATION OF PRIOR PRODUCT SUPPLIES | 3 | ||||||
3. | FORECASTING AND VOLUMES | 4 | ||||||
3.1 | INVENTORY ORDERING AND MANAGEMENT | 4 | ||||||
3.2 | ANNUAL FORECASTS | 4 | ||||||
3.3 | PRODUCT ROADMAP | 4 | ||||||
3.4 | KEY SUPPLIERS AND ALTERNATE SUPPLY SOURCES | 4 | ||||||
3.5 | NO MINIMUM VOLUME | 5 | ||||||
4. | ORDERING, DELIVERY, INSPECTION AND ACCEPTANCE TESTING | 5 | ||||||
4.1 | PURCHASE ORDERS | 5 | ||||||
4.2 | DELIVERY; TITLE; RISK OF Loss | 6 | ||||||
4.3 | INSPECTION | 6 | ||||||
4.4 | ACCEPTANCE TESTING | 6 | ||||||
4.5 | LIQUIDATED DAMAGES AND *** | 7 | ||||||
4.6 | CANCELLATION ANDRE-SCHEDULING | 7 | ||||||
4.7 | CHANGE REQUEST | 7 | ||||||
5. | DEPLOYMENT | 8 | ||||||
5.1 | DEPLOYMENT OF SMARTMETER SYSTEM | 8 | ||||||
5.2 | SYSTEM INTEGRATION | 8 | ||||||
5.3 | ON-SITE PRODUCTION SUPPORT | 9 | ||||||
6. | DESIGN AND CONSULTING SERVICES | 9 | ||||||
6.1 | UPDATES TO NETWORK DESIGN | 9 | ||||||
6.2 | ONGOING DESIGN AND CONSULTING SERVICES | 9 | ||||||
7. | SOFTWARE MAINTENANCE AND SUPPORT SERVICES | 10 |
PG&E/SSN Confidential
Page i
8. | PRODUCT SUPPORT TOOLS | 10 | ||||||
9. | PAYMENT AND FEES | 10 | ||||||
9.1 | INVOICING AND PAYMENT | 10 | ||||||
9.2 | *** | 11 | ||||||
9.3 | NEW PRODUCTS | 11 | ||||||
10. | GOVERNANCE | 11 | ||||||
10.1 | GOVERNANCE | 11 | ||||||
11. | QUALITY ASSURANCE | 11 | ||||||
11.1 | CERTIFICATION | 11 | ||||||
11.2 | PRODUCT PERFORMANCE METRICS | 11 | ||||||
11.3 | ROOT CAUSE ANALYSIS | 12 | ||||||
11.4 | PERFORMANCE ASSESSMENTS | 12 | ||||||
12. | DOCUMENTATION | 12 | ||||||
12.1 | PROVISION OF DOCUMENTATION | 12 | ||||||
12.2 | PROVISION OF USER DOCUMENTATION | 12 | ||||||
12.3 | TECHNICAL INFORMATION SERVICE | 12 | ||||||
12.4 | PRODUCT NUMBERING AND LABELING | 13 | ||||||
13. | TECHNOLOGY | 13 | ||||||
13.1 | LICENSE GRANT | 13 | ||||||
13.2 | SOFTWARE | 14 | ||||||
13.3 | MANUFACTURING KNOW-HOW | 14 | ||||||
13.4 | APIS AND COMMUNICATION PROTOCOL TECHNOLOGY | 15 | ||||||
13.5 | *** | 15 | ||||||
13.6 | COVENANT | 15 | ||||||
14. | ESCROW ARRANGEMENTS AND MANUFACTURING FEES | 15 | ||||||
14.1 | ESCROW OF CERTAIN MATERIALS | 15 | ||||||
14.2 | ESCROW OF MANUFACTURING KNOW-HOW AND SUPPLIER MATERIAL | 15 | ||||||
14.3 | ESCROW OF SOURCE CODE | 17 | ||||||
14.4 | OBLIGATIONS ON RELEASE OF ESCROWED MATERIALS | 17 | ||||||
15. | OWNERSHIP OF MATERIALS | 18 | ||||||
15.1 | PRODUCTS AND PRODUCT ENHANCEMENTS | 18 | ||||||
15.2 | MANUFACTURING KNOW-HOW | 19 | ||||||
15.3 | JOINTLY DEVELOPED WORK | 19 | ||||||
15.4 | NO LIENS IN DELIVERABLES | 19 | ||||||
16. | PRODUCT PERFORMANCE AND SERVICE WARRANTIES | 19 |
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16.1 | PRODUCT AND SERVICE WARRANTIES | 19 | ||||
16.2 | SERVICES AND SUPPORT WARRANTIES | 19 | ||||
17. | GENERAL WARRANTIES | 19 | ||||
17.1 | MUTUAL WARRANTIES | 19 | ||||
17.2 | SSN WARRANTIES | 20 | ||||
18. | INDEMNIFICATION | 20 | ||||
18.1 | DEFINITIONS | 20 | ||||
18.2 | INDEMNITY FROM SSN | 21 | ||||
18.3 | INDEMNITY FROM PG&E | |||||
18.4 | REMEDIES FOR IP INFRINGEMENT | 22 | ||||
18.5 | INDEMNIFICATION PROCEDURES | 22 | ||||
18.6 | LIABILITY FOR *** | 23 | ||||
19. | LIMITATIONS OF LIABILITY | 24 | ||||
19.1 | MAXIMUM LIABILITY | 24 | ||||
19.2 | INCREASED MAXIMUM LIABILITY FOR CERTAIN CLAIMS | 24 | ||||
19.3 | NO SPECIAL DAMAGES | 24 | ||||
20. | TERM AND TERMINATION | 24 | ||||
20.1 | TERM | 24 | ||||
20.2 | TERMINATION BY PG&E | 25 | ||||
20.3 | TERMINATION BY SSN | 25 | ||||
20.4 | EFFECT OF TERMINATION | 26 | ||||
20.5 | NO DAMAGES AS A RESULT OF RIGHTFUL TERMINATION | 26 | ||||
20.6 | DISENGAGEMENT ASSISTANCE | 26 | ||||
21. | DATA SECURITY AND PROTECTION | 27 | ||||
21.1 | PG&E DATA DEFINED | 27 | ||||
21.2 | PG&E DATA, GENERALLY | 27 | ||||
21.3 | DATA SECURITY | 27 | ||||
21.4 | COMPLIANCE WITH DATA PRIVACY AND DATA PROTECTION LAWS, REGULATIONS, AND POLICIES |
28 | ||||
22. | CONFIDENTIALITY | 28 | ||||
22.1 | CONFIDENTIALITY | 28 | ||||
22.2 | NO IMPLIED RIGHTS | 29 | ||||
22.3 | COMPELLED DISCLOSURE | 29 | ||||
22.4 | CONFIDENTIAL TREATMENT OF THE AGREEMENT | 29 | ||||
22.5 | DISCLOSURE OF INFORMATION CONCERNING TAX TREATMENT | 30 | ||||
22.6 | RETURN OR DESTRUCTION | 30 | ||||
22.7 | DURATION OF CONFIDENTIALITY OBLIGATIONS | 30 | ||||
22.8 | ADDITIONAL PG&E CONFIDENTIAL INFORMATION | 30 | ||||
22.9 | PUBLICITY | 31 |
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23. | AUDITS AND RECORDS | 32 | ||||
23.1 | PG&E AUDIT RIGHTS | 32 | ||||
23.2 | AUDIT FOLLOW-UP | 33 | ||||
23.3 | RECORDS RETENTION | 33 | ||||
23.4 | SSN AUDIT RIGHTS | 33 | ||||
24. | COMPLIANCE WITH POLICIES, PROCEDURES AND LEGAL REQUIREMENTS | 34 | ||||
24.1 | COMPLIANCE WITH PG&E POLICIES AND PROCEDURES | 34 | ||||
24.2 | LEGAL REQUIREMENTS | 34 | ||||
24.3 | NETWORK HARDWARE LOCATION | |||||
24.4 | GRATUITIES | 35 | ||||
24.5 | COSTS ASSOCIATED WITH COMPLIANCE WITH LEGAL REQUIREMENTS | 35 | ||||
24.6 | CERTAIN COMPLIANCE OBLIGATIONS RELATING TO SARBANES-OXLEY | 35 | ||||
24.7 | FURTHER COOPERATION | 35 | ||||
25. | SERVICES AND SAFETY | 35 | ||||
26. | SSN PERSONNEL | 37 | ||||
26.1 | GENERAL REQUIREMENTS FOR SSN PERSONNEL | 37 | ||||
26.2 | *** | |||||
26.3 | WOMEN, MINORITY, AND DISABLED VETERAN BUSINESS ENTERPRISES | 39 | ||||
27. | SUBCONTRACTORS | 40 | ||||
28. | INSURANCE AND *** | 40 | ||||
28.1 | INSURANCE | 40 | ||||
28.2 | *** | 40 | ||||
29. | DISPUTE RESOLUTION | 40 | ||||
29.1 | INFORMAL DISPUTE RESOLUTION | 40 | ||||
29.2 | CONTINUED PERFORMANCE | 41 | ||||
29.3 | EQUITABLE REMEDIES | 41 | ||||
30. | MISCELLANEOUS | 42 | ||||
30.1 | FORCE MAJEURE | 42 | ||||
30.2 | ASSIGNMENT | 43 | ||||
30.3 | PROVISION OF *** | 43 | ||||
30.4 | NOTICE OF *** | 44 | ||||
30.5 | ORDER OF PRECEDENCE | 44 | ||||
30.6 | GOVERNING LAW AND JURISDICTION | 44 | ||||
30.7 | SEVERABILITY | 45 | ||||
30.8 | AMENDMENTS | 45 | ||||
30.9 | INTERPRETATION | 45 | ||||
30.10 | SURVIVAL | 45 | ||||
30.11 | NOTICES | 46 |
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30.12 | WAIVERS | 46 | ||||
30.13 | RELATIONSHIP | 46 | ||||
30.14 | ENTIRE AGREEMENT; GOVERNING TERMS | 47 | ||||
30.15 | COUNTERPARTS | 47 | ||||
30.16 | *** | 47 | ||||
30.17 | DEFINITIONS | 47 |
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Schedules and Annexes
SCHEDULES AND ANNEXES | ||
A. | Technical Annexes | |
Annex A-1: SmartMeter Master Project Plan | ||
Annex A-2: Statement of Work | ||
Annex A-3: Product Documentation | ||
Annex A-4: Third Party Products and IT Infrastructure Specifications | ||
Annex A-5: Functional Requirements and Product Roadmap | ||
Attachment A-5.1: SmartMeter System Performance Standards | ||
Annex A-6: Service Territory | ||
Annex A-7: List of SSN Products and Product Tools | ||
Annex A-8: NIC/HAN Technical Specifications | ||
B. | Pricing and Payment Terms | |
Annex B-1: Pricing Tables | ||
C. | Minimum Lead Times | |
D. | Governance Framework and Processes | |
Annex D-1: Change Control Procedures | ||
E. | Review, Testing and Acceptance Process for Deliverables | |
Annex E-1: Severity Levels and Response/Resolution Requirements | ||
F. | Compensation for *** and *** | |
G. | Product and Service Warranties | |
H. | Software Maintenance And Support | |
I. | Security Requirements | |
J. | Approved Subcontractors and *** | |
K. | Non-Production Hosting Terms and Conditions | |
L. | Additional Policies and Procedures | |
Annex L-1: PG&E Policies | ||
M. | Insurance | |
N. | Diversity Subcontracting Policy | |
EXHIBITS | ||
Exhibit 1: Form of Escrow Agreement | ||
Exhibit 2: *** | ||
Exhibit 3: PG&E SmartMeter System Level Requirements | ||
Exhibit 4: Test Strategy | ||
Exhibit 5: PG&E IT Change Management Standard |
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GENERAL TERMS AND CONDITIONS
1. | PREAMBLE |
1.1 | Background and Purpose |
The Agreement is made and entered into with reference to the following:
(a) | PG&E is one of the largest combination natural gas and electric utilities in the United States. Based in San Francisco, the company is a wholly owned subsidiary of PG&E Corporation. Its operations are regulated by the California Public Utilities Commission (CPUC), the Federal Energy Regulatory Commission, and other regulatory agencies. |
(b) | PG&E intends to acquire and deploy radio frequency mesh technology (RF Mesh) and home area network (HAN) technology and solid state electric meters incorporating integrated service management switches capable of supporting disconnect, reconnect and load limitation functionality (Meters) for use in PG&Es electric metering network (such technology is referred to as the SmartMeter System and such project is referred to as the SmartMeter Upgrade Project). |
(c) | The SmartMeter Upgrade Project involves: (i) the acquisition, installation and operation of the RF Mesh, HAN and Meters for the capture, analysis, storage and processing of data from PG&Es residential customers; (ii) the integration of those systems with PG&Es existing systems; and (iii) the coordination of changes in key PG&E business processes. PG&E desires all of those activities be performed in a manner that delivers automated metering and other business functionality, and the associated financial, operational and other benefits expected from the SmartMeter Upgrade Project, without impairing PG&Es ongoing operations, billing, and customer service. |
(d) | PG&E will procure the installation of the SmartMeter Systems and Meters and the integration of such systems with PG&Es existing systems through separate agreements with third party product and service providers. In particular, PG&E, SSN and a number of Meter suppliers have collaborated to develop a number of Meter options incorporating SSNs RF Mesh and HAN technology. |
(e) | SSNs role and responsibilities under this Agreement will be to provide certain products comprising a portion of the SmartMeter System (as more fully described in the Annexes to Schedule A) and associated implementation support, training, documentation and other services as necessary to enable PG&E to implement the SmartMeter System. In respect to Meters, SSN will work closely with PG&Es Meter suppliers to deliver integrated Meter, RF Mesh and HAN end point devices through contracts between PG&E and the Meter suppliers. |
(f) | The SmartMeter Upgrade Project is being conducted in accordance with the CPUCs 2002 Order Instituting Rulemaking (OIR) to improve demand response by retail customers in California. |
(g) | The Agreement establishes the terms and conditions on which PG&E will, through the execution and delivery of Purchase Orders, purchase Products and Services from SSN. |
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SMART METER PROGRAM UPGRADE
SUPPLY AGREEMENT
Between
1. | Pacific Gas and Electric Company (PG&E) a California corporation with offices at 77 Beale Street, San Francisco, California 94177; and |
2. | Silver Spring Networks (SSN) a Delaware corporation with offices at 575 Broadway Street, Redwood City, California 94063. |
Effective Date: July 23, 2008
This Smart Meter Program Upgrade Supply Agreement (the Agreement) consists of this signature page plus the attached GENERAL TERMS AND CONDITIONS and Schedules A through N.
Intending to be legally bound, each of the undersigned Parties has caused its duly authorized representative to execute the Agreement as of the Effective Date.
Pacific Gas and Electric Company By: /s/ Charles Tuiamugabo Printed: Charles Tuiamugabo Title: Sr. Director - Supply Chain Date: 7-23-2008 |
Silver Spring Networks By: /s/ Scott A. Lang Printed: Scott A. Lang Title: CEO Date: 7-23-2008 |
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1.2 | Construction of Preamble |
This preamble is intended to provide a general introduction to the Agreement. It is not intended to alter the plain meaning of the Agreement or to expand the scope of the Parties express obligations under it. However, to the extent the terms and conditions of the Agreement do not address a particular circumstance or are otherwise unclear or ambiguous, such terms and conditions are to be interpreted and construed so as to give full effect to the provisions of this preamble.
1.3 | Defined Terms |
Capitalized terms used in the Agreement are defined in Section 30.17 (Definitions) or in-place where the term is used and have the meanings given unless otherwise specified herein.
1.4 | Statement of Work |
(a) | The initial scopes of work to be performed by SSN (all of which collectively are referred to as the Statement of Work) are attached as Annex A-2. The Statement of Work may be updated or supplemented from time to time upon the mutual agreement of PG&E and SSN. SSN will perform and deliver the Products and Services to PG&E in accordance with the Statement of Work. |
(b) | The Parties may execute additional scopes of work which will be incorporated into the Statement of Work, together with pricing tables applicable to those scopes of work which shall be incorporated into Schedule 8 (Pricing and Payment Terms). |
(c) | The Statement of Work (including each additional scope of work agreed by the Parties) will be subject to and deemed to incorporate the terms and conditions of this Agreement as if fully included in the text of the Statement of Work from the effective date of each scope of work. |
2. | SUPPLY OF PRODUCTS |
2.1 | Supply of Products; Services |
(a) | Subject to PG&Es payment of the applicable fees in accordance with this Agreement, SSN will: |
(i) | sell to PG&E the Equipment and spare parts or other components ordered by PG&E through the issuance of Purchase Orders as described in Section 2.1(b); |
(ii) | license to PG&E the Licensed Material; and |
(iii) | provide PG&E with the Services (as defined in this Agreement), in accordance with the terms of this Agreement. |
(b) | Subject to Section 4.1(d), PG&E agrees to purchase from SSN the Products and spare parts as ordered by PG&E pursuant to Purchase Orders. This Agreement will not be construed to limit PG&Es right to negotiate or contract with any other vendors, suppliers, sellers, service providers or other third parties, nor will it be construed to limit PG&Es right to obtain products or services from third parties. |
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(c) | PG&E and its Affiliates, shall have the right to purchase Products and Services under this Agreement. |
2.2 | Product Changes and Manufacturing Changes |
(a) | *** The parties will follow the change control process to be agreed upon pursuant to Section 4(a)(ii) of Schedule D-1 (Change Control Procedures) with respect to any such change and SSN will *** in accordance with that agreed-upon process which ***. If SSN is unable to meet an Equipment delivery schedule due to the*** under this Section, then the date(s) for***delivery shall be *** PG&Es approval of any change proposed by SSN does not, unless the parties expressly agree otherwise in writing, alter, invalidate or nullify the warranties provided in Schedule G (Product and Service Warranties). |
(b) | If SSN makes a change of the type identified in Section 2.2(a), PG&E shall have the right to conduct acceptance testing of the changed Products, manufacturer and/or manufacturing process prior to delivery in accordance with the acceptance testing processes set forth in the Statement of Work and Schedule E (Review, Testing and Acceptance Process for Deliverables). Without limitation to any other remedies that may be available to PG&E, PG&E shall have the right to reject the new Products if the new Products do not pass acceptance testing. |
2.3 | Additional Product Volumes |
SSN will sell to PG&E additional Products as needed by PG&E to support the maintenance, operation and expansion of the SmartMeter System during the Service Period.
2.4 | New Products |
SSN will *** work with PG&E to develop new product offerings related to the Products and to evolve the existing Products as necessary to meet PG&Es evolving business objectives throughout the Deployment Period. SSN will review PG&Es proposals, and the Parties will use Commercially Reasonable Efforts to determine a mutually agreeable scope, responsibilities, fees and timing for any such potential project.
2.5 | Training |
SSN will provide training to PG&E and the SmartMeter Suppliers as more fully described in the Statement of Work to enable PG&E to install, operate and maintain the SmartMeter System.
2.6 | Incorporation of Prior Product Supplies |
Any Products and Services provided by SSN to PG&E pursuant to the Testing Agreement entered into by the Parties on November 19, 2007 are deemed to have been provided to PG&E under this Agreement and pursuant to the terms hereof, including Section 4.5 (Liquidated Damages and ***), applicable warranties in Section 16 (Product Performance and Service Warranties) and indemnities in Section 18 (Indemnification).
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3. | FORECASTING AND VOLUMES |
3.1 | Inventory Ordering and Management |
(a) | PG&E will work with SSN and other SmartMeter Suppliers to develop a written inventory ordering and inventory management process that provides reasonable forecasting and reasonable assurance of supply. |
(b) | SSN will hold at least *** inventory of Products (ready to ship) based upon the then most recent PG&E Purchase Order at SSNs facilities or at its suppliers facilities during the Deployment Period. SSN must meet its delivery obligations under this Agreement regardless of the location at which it holds inventory. |
3.2 | Annual Forecasts |
(a) | *** PG&E will provide SSN a forecast for all Products on an ongoing basis and no less frequently than ***. |
(b) | All forecasts are for planning purposes only and are non-binding upon PG&E and, for the avoidance of doubt, SSN will not be entitled to any compensation in respect of costs it may incur based on forecasts provided by PG&E. |
3.3 | Product Roadmap |
(a) | The Product Roadmap sets out the enhancements, Upgrades and Product developments that SSN will provide to PG&E and the dates by which they must be delivered. |
(b) | SSN will commence initial production start-up in accordance with the Product Roadmap and, in any event, commence shipment of Products no later than *** days after receiving PG&Es initial Purchase Order. |
3.4 | Key Suppliers and Alternate Supply Sources |
(a) | Pursuant to Section 14.1, SSN will deposit into escrow copies of SSNs agreements with third party suppliers of material components of the Equipment provided to PG&E hereunder (Supplier Material) or summary descriptions of such agreements if SSN is prohibited by confidentiality obligations from depositing the agreements in escrow, despite using Commercially Reasonable Efforts to obtain the consent of the other party. SSN will request assurances from each of SSNs major suppliers for the Equipment provided to PG&E hereunder that, upon release of the Escrowed Materials, each such supplier will provide the applicable Equipment components to PG&E on agreed upon terms. |
(b) | SSN will provide PG&E with summary descriptions of the Supplier Material and, upon request of PG&E, SSNs *** of such agreements and the accuracy of the summary descriptions provided by SSN. |
(c) | SSN will update the Supplier Material whenever and if the contractual scope of SSNs arrangements with third party material suppliers are changed. |
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(d) | At PG&Es written request, SSN will use Commercially Reasonable Efforts to establish alternate supply sources for key components of the Products. |
3.5 | No Minimum Volume |
(a) | PG&E has no obligation to purchase any minimum volume of Products or Services under this Agreement. |
(b) | PG&E will, subject to Section 4.6 (Re-Scheduling and Cancellation), incur a commitment to purchase Products or Services only upon the issuance by PG&E of Purchase Orders. |
4. | ORDERING, DELIVERY, INSPECTION AND ACCEPTANCE TESTING |
4.1 | Purchase Orders |
(a) | PG&E will order the Products by issuance of a Purchase Order. |
(b) | PG&E or its agent will make periodic requests for releases of Products issued against the Purchase Order (Release Authorizations). Each Release Authorization will include the desired quantity of Products, specified days for delivery, which will be in accordance with the Minimum Lead Times specified in Schedule C (Minimum Lead Times) (the Delivery Schedule), and the delivery destination. |
(c) | SSN will confirm acceptance of Purchase Orders no later than *** Business Days after the date upon which SSN receives a Purchase Order and will confirm acceptance of Release Authorizations no later than *** Business Days after the date upon which SSN receives a Release Authorization. SSN may reject a Purchase Order or Release Authorization (or part thereof) only if the requested Delivery Schedule is earlier than the Minimum Lead Times or if the Purchase Order or Release Authorization is otherwise not in accordance with the terms of this Agreement. SSN will notify PG&E in writing with the reason for rejection no later than *** after the date upon which SSN receives a Purchase Order and no later than *** after the date upon which SSN receives a Release Authorization. If SSN fails to ***, SSN***will be *** |
(d) | The placing by PG&E of a Purchase Order and SSNs acceptance thereof in accordance with this Agreement will create a contract of sale between SSN and PG&E pursuant to the terms of such Purchase Order and this Agreement and subject to Section 4.6 (Cancellation) and Section 4.7 (Change Request). PG&E is not obligated to purchase any products from SSN under a Purchase Order unless and until such Purchase Order is duly executed by an authorized representative of both Parties. |
(e) | The terms of any Purchase Order or Release Authorization issued by PG&E or its designee (as identified in writing to SSN), or any Purchase Order or Release Authorization acceptance issued by SSN (Order Documentation), will not alter the terms of this Agreement. If there is any conflict or inconsistency between the Order Documentation and the terms of this Agreement, the terms of this Agreement will control; provided, however, that such Order Documentation may, with respect to the Products to be provided under such Order Documentation, amend or override the terms set forth in other documents that form part of the Agreement if that Order Documentation specifically identifies the document and the specific terms that the Order Documentation is intended to amend or override, and has been reviewed and approved by legal counsel for both Parties, as evidenced in writing on the final version of the Order Documentation signed by the Parties. |
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(f) | If SSN does not receive Release Authorizations accounting for all Products in a Purchase Order, it will ***. |
4.2 | Delivery; Title; Risk of Loss |
(a) | SSN shall deliver all Equipment to the PG&E locations designated in a Release Authorization or by PG&E in accordance with Section 4.1(f) and unless otherwise stated in Schedule B (Pricing and Payment Terms), the Product prices include the ***. |
(b) | Risk of loss in the Products will pass to PG&E upon *** of the Products to PG&E. |
(c) | Title to the Products will pass to PG&E upon *** of the Products by PG&E. |
(d) | *** Products are subject to PG&Es prior written consent. |
(e) | SSN will be responsible for assuring that the quantity of Products delivered is consistent with the quantity and the Delivery Schedule specified in the Release Authorization. Any variation from the quantity of Products (including over-deliveries) and/or Delivery Schedule will be subject to the prior written consent of PG&E, provided that SSN will remain responsible for fulfillment of the Release Authorization. |
(f) | Without limiting the generality of the foregoing, SSN will promptly notify PG&E upon becoming aware of any circumstances that may reasonably be expected to jeopardize or interfere with the timely and successful performance of SSNs obligations under this Section 4. |
4.3 | Inspection |
(a) | PG&E shall have the right at its own cost and discretion to conduct an inspection of the Products as delivered to the delivery destinations identified in the Release Authorization. |
(b) | If PG&E reasonably determines that the Products or delivery are not compliant with this Agreement or the applicable Purchase Order or Release Authorization, PG&E shall notify SSN of the non-compliance in writing within *** days of the date of delivery and PG&E will at its discretion have the right to require SSN, at SSNs risk and expense, to, in SSNs sole discretion, immediately repair the non-compliant Products or ship replacement Products to PG&Es designated location on an expedited basis. |
4.4 | Acceptance Testing |
(a) | The Parties will test the Products pursuant to acceptance testing processes as set forth in the Statement of Work and Schedule E (Review, Testing and Acceptance Process for Deliverables). |
(b) | SSN will comply with the testing procedures set forth in Schedule E and (subject to the terms of this Agreement) such compliance will not limit PG&Es right to remedies for any breach of warranties arising from the subsequent failure of the Products after acceptance testing. |
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4.5 | Liquidated Damages and *** |
(a) | SSN acknowledges and agrees that time is of the essence with respect to all provisions of this Agreement that specify a time for SSNs performance or delivery. |
(b) | As provided in Schedule F (Compensation for *** and ***) and subject to the terms set forth in that Schedule: (i) SSN shall pay PG&E Liquidated Damages if any breach of SSNs obligations under this Agreement results in ***; and (ii) SSN shall also reimburse PG&E for *** that result from any breach of this Agreement by SSN. |
(c) | Any amounts due from SSN pursuant to Schedule F (Compensation for *** and ***) will be paid within *** days from written notice from PG&E to SSN. In the case of any payment due from PG&E to SSN, PG&E may *** from SSN pursuant to Schedule F (Compensation for *** and ***) *** by PG&E to SSN. |
(d) | The amounts payable by SSN to PG&E pursuant to Schedule F (Compensation for *** and ***) shall be SSNs ***, for the events that gave rise to SSNs obligation to make such payments except *** in accordance with *** of Schedule F (Compensation for *** and ***), in which event (subject to the other provisions of Schedule F) PG&E shall *** set forth in *** of Schedule F. |
4.6 | Cancellation and Re-Scheduling |
(a) | PG&E may, ***, cancel a *** upon written notice at least *** days prior to the designated ship date in the Purchase Order. *** |
(b) | PG&E may, with at least *** days prior notice, delay a requested shipment of Products under a ***. |
(c) | *** |
(d) | PG&E may change a scheduled release quantity or mix of Products upon written notice at least *** days prior to the designated ship date specified in the Purchase Order. If PG&E does not issue any further Purchase Orders under this Agreement, PG&E shall pay SSN for ***. SSN will use Commercially Reasonable Efforts to mitigate the cost of ***. |
(e) | Nothing in this Section 4.6 shall be deemed a Change Request pursuant to Section 4.7. |
4.7 | Change Request |
(a) | From time to time, PG&E may issue Change Requests to modify functional, technical or other requirements or specifications for the Products, the *** (if SSN has given its prior written consent to such change in ***, such consent not to be unreasonably withheld) or the terms of a Purchase Order. No such modification will be deemed effective unless embodied in a Change Request duly issued by PG&E and unless agreed upon in writing by both Parties. |
(b) | Each Change Request shall be processed according to the Change Control Procedure set forth in Annex D-1 (Change Control Procedures). |
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(c) | The price of any new equipment or services required by a Change Request will be a *** price agreed by the Parties. Any adjustment in price is subject to the prior written agreement of PG&E and SSN. |
5. | DEPLOYMENT |
5.1 | Deployment of SmartMeter System |
(a) | SSN will cooperate with PG&E and other SmartMeter Suppliers in the integration and deployment of the SmartMeter System, under PG&Es overall management and direction. |
(b) | Commencing upon receipt of an initial Purchase Order and thereafter during the Deployment Period, SSN will: |
(i) | provide training for PG&E and SmartMeter Suppliers installing the SmartMeter System; |
(ii) | Operate a help desk to support PG&E and SmartMeter Supplier installation operations from *** to *** Pacific time; |
(iii) | Provide comprehensive assistance to PG&E in testing and quality assurance of the SmartMeter System as more fully described in Schedule E (Review, Testing and Acceptance Process for Deliverables); and |
(iv) | Assist PG&E in development of installation guides, standard drawings and other materials relating to the SmartMeter System. |
(c) | SSN will comply with PG&Es project timeline for deployment of the SmartMeter System. |
5.2 | System Integration |
(a) | SSN will supply a fully functioning *** and provide reasonable assistance necessary to enable PG&E to *** as specified in the Statement of Work and Schedule E (Review, Testing and Acceptance Procedures for Deliverables). |
(b) | PG&E will procure the hardware and third party software specified by SSN as required for the *** system as specified in Annex A-4 (Third Party Products and IT Infrastructure Specifications). |
(c) | SSN will work with PG&E and the other SmartMeter Suppliers to perform the integration, testing and certification tasks set out in the Statement of Work and Schedule E (Review, Testing and Acceptance Process for Deliverables). |
(d) | SSN will provide reasonable assistance to PG&E for the integration, testing and certification activities referred to in Section 5.2(c) above. |
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5.3 | On-site Production Support |
SSN will provide on-site production support for Software in accordance with Schedule H (Software Maintenance and Support):
(a) | leading up to the date upon which the SmartMeter System goes into production with billing based upon system-derived meter reads (Live Billing); |
(b) | for *** after Live Billing begins; |
(c) | at other times ***, including when PG&E is ***; and |
(d) | during ***. |
6. | DESIGN AND CONSULTING SERVICES |
6.1 | Updates to Network Design |
During the Deployment Period, as more fully described in the Statement of Work, SSN will periodically update the network design and recommend reconfigurations and changes to the network and Software to keep pace with changes in PG&Es customer base and network traffic.
6.2 | Ongoing Design and Consulting Services |
(a) | SSN will provide network design consulting support to PG&E during the Service Period as set forth in the Statement of Work. |
(b) | The warranties regarding network design and the Products and Services set out in Schedule G (Product and Service Warranties) will apply to ***. |
6.3 | Network Hardware Location |
(a) | PG&E has the right to review and approve the network design, for regulatory compliance, including compliance with environmental regulations. The Parties will work together to review the network design to identify any regulatory issues, including to identify and mitigate any potential environmental impact issues with respect to placement of Network Hardware. In the event PG&E identifies a potential regulatory concern with the network design, including any environmental impact issues, the Parties will meet within *** Business Days to discuss ways to mitigate the issue so that the network design complies with all regulatory requirements. PG&E shall have final approval over the relocation of any Network Hardware. |
(b) | In addition, in the event PG&E identifies a potential regulatory concern with the network design, including any environmental impact issues, PG&E has the right to relocate Network Hardware. PG&E shall notify SSN in writing of its request to relocate the Network Hardware; SSN shall respond in writing to PG&E within *** Business Days identifying to PG&E any performance issues regarding the relocation; the Parties will work together to revise the network design. PG&E shall have final approval over the relocation of any Network Hardware. |
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7. | SOFTWARE MAINTENANCE AND SUPPORT SERVICES |
Unless terminated in accordance with Section 14.3(c):
(a) | SSN will provide PG&E the support and maintenance Services, including the Upgrades as set forth in Schedule H (Software Maintenance and Support). |
(b) | The Software license fees set out in Schedule B (Pricing and Payment Terms) cover all*** during the Deployment Period. |
(c) | During the Service Period, PG&E may, at its option, continue to purchase Software support and maintenance Services as provided in Schedule H (Software Maintenance and Support) by providing written notice to SSN not less than *** days before the start of, and each anniversary of the commencement of, the Service Period and paying the support and maintenance fees set out in Schedule B (Pricing and Payment Terms). If PG&E elects not to continue to purchase Software support and maintenance Services, it may thereafter reinstate such Services ***. |
(d) | PG&E will decide if and when to implement any Current Release of the Software, firmware, or Products. SSN will provide support for all current versions of Products, and will provide support for any prior version of a Product for a period of *** commencing on the date that the new version of the Product is made available to PG&E for use in its operations. |
(e) | SSNs liability and support obligations hereunder with respect to any defect, *** or nonconformity which otherwise would have been corrected or remedied in a Current Release is subject to PG&E implementing the *** which, for *** (as defined in Schedule H (Software Maintenance and Support)) may be up *** after SSN provides *** to PG&E; provided, however, that if *** would satisfy SSNs obligation under Section *** to address ***, then PG&E will use diligent efforts to *** by ***. |
8. | PRODUCT SUPPORT TOOLS |
(a) | SSN will make the Product Support Tools and associated Documentation available to PG&E in electronic form. |
(b) | SSN will provide PG&E and other SmartMeter Suppliers with training on each level of the Products (from field test tools through backend systems) and the Product Support Tools. |
(c) | SSN will maintain and support the Product Support Tools for as long as the ***. |
(d) | ***. |
(e) | Notwithstanding the obligations set out in Sections 8(a) to 8(d) above, SSN may discontinue providing support for a particular Product Support Tool if the functionality of that item has been either duplicated through another mechanism or the Parties agree that further support is unnecessary. |
9. | PAYMENT AND FEES |
9.1 | Invoicing and Payment |
SSN will issue invoices and PG&E will pay for the Products and Services accordance with Schedule B (Pricing and Payment Terms).
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9.2 | *** |
(a) | If, during the Deployment Period or the Service Period, SSN ***as contemplated by this Agreement*** to PG&E under this Agreement, SSN shall so *** as set forth below. For a period of *** |
(b) | *** under this Agreement ***determined as follows ***(i)***(ii)*** |
(c) | For the purposes of this Section 9.2, *** means *** under this Agreement after making *** |
(d) | Beginning with the *** of the Effective Date and ***thereafter, SSNs*** shall provide a *** pursuant to this Section and, if so, the ***. SSN shall, if ***, either (i) *** in***accordance with the terms of this Agreement, or (ii) *** in accordance with the procedures set forth in Section 23 (Audits and Records). |
9.3 New Products
During the term of this Agreement, SSN will advise PG&E of its development of any new products having appropriate capabilities that could be substituted for Products being purchased hereunder at a lower price. SSN agrees to negotiate, in good faith, the Fees for those products and agrees that PG&E may purchase such substituted products pursuant to the terms and conditions of this Agreement.
10. | GOVERNANCE |
10.1 | Governance |
Schedule D (Governance Framework and Processes) shall set forth the principles governing the interactions among SSN, PG&E and other SmartMeter Suppliers and certain key processes they will implement to ensure that each SmartMeter Supplier is able to fully execute its roles and responsibilities in a manner that maximizes the success of the SmartMeter Upgrade Project. The Parties will periodically review those principles and processes and PG&E and SSN will update Schedule D (Governance Framework and Processes) as needed to reflect the most productive and beneficial working relationship.
11. | QUALITY ASSURANCE |
11.1 | Certification |
(a) | SSN will comply with the following PG&E certification requirements for the Products: *** for Network Hardware and *** for Meters. PG&E may introduce additional certification requirements through the Change Control procedure in Section 4.7. |
(b) | Upon *** Business Days ***, no more than *** PG&E will have the right to ***. Any such *** below. |
11.2 | Product Performance Metrics |
On a periodic basis as requested by PG&E, SSN will provide detailed written reports to PG&E listing specific metrics for each SSN Product, including performance failures in the period and on a cumulative basis, or as otherwise mutually agreed upon in writing by the Parties.
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11.3 | Root Cause Analysis |
SSN shall conduct a root cause analysis with respect to any Products not conforming to the requirements set forth in this Agreement and provide a written report for such root cause analysis and its final determination regarding specific unit returns for inoperable Products or in- warranty repair. SSN shall provide such report within *** days from SSNs learning of such non-conformity or as otherwise mutually agreed upon in writing by the Parties. The report will include, but not be limited to, the following:
(a) | number of units related to this issue; |
(b) | full description of the symptom; |
(c) | final root cause determination; |
(d) | methodology of identifying and resolving the root cause; and |
(e) | target dates for installation of resolution for all units involved. |
Such report will be in a form as agreed upon in writing by PG&E and SSN. At the written request of PG&E, SSN shall provide additional information with respect to SSNs root cause analysis as requested by PG&E, with such information to be provided within *** days from such request or as otherwise mutually agreed upon in writing by the Parties.
11.4 | Performance Assessments |
SSN will participate in periodic business reviews with PG&E and other SmartMeter Suppliers.
12. | DOCUMENTATION |
12.1 | Provision of Documentation |
SSN will provide PG&E with a master copy and a soft copy of the Documentation for each Product.
12.2 | Provision of User Documentation |
SSN will provide PG&E with a master copy and a soft copy of the User Documentation for each Product. SSN will supply User Documentation in electronic format suitable for internal electronic dissemination by PG&E to anyone who may access the User Documentation pursuant to the License. SSN will provide a *** upon the request of PG&E. If PG&E requires additional hardcopies of the User Documentation, it may ***.
12.3 | Technical Information Service |
(a) | SSN will provide PG&E with prompt updates to the Documentation as well as updates of other SSN Product information in order to ensure such Documentation and other information remains materially current, complete and accurate: |
(i) | With respect to Software, for as long as PG&E is receiving support and maintenance; and |
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(ii) | With respect to Equipment, for the Warranty Period and the Extended Warranty Period (as defined in Schedule G (Product and Service Warranties)). |
(b) | The updates referred to above will include, but not be limited to, the ***. SSN will supply information in electronic format suitable for internal electronic dissemination by PG&E. If the electronic format is not available, SSN will supply information in hardcopy format. |
12.4 | Product Numbering and Labeling |
SSN will comply with PG&Es Product numbering, labeling and other similar requirements.
13. | TECHNOLOGY |
13.1 | License Grant |
(a) | Subject to payment of applicable license fees as set forth in Schedule B (Pricing and Payment Terms), and subject to the restrictions on use set out in this Agreement, SSN hereby grants to PG&E, and PG&E accepts, an irrevocable and perpetual (subject to Section 13.2(b)), sub-licensable, non-exclusive, royalty-free, fully paid-up right and license to Use the Licensed Material in the Service Territory (the License). |
(b) | PG&E acknowledges that SSN may, over time, develop a range of new and unique products that would not be covered in this Agreement. |
(c) | The License entitles PG&E to make or cause to be made such *** under this Agreement *** as permitted by this Agreement, including for PG&Es back-up and *** purposes. PG&E may make copies of the Licensed Materials without further permission of SSN and regardless of whether the Licensed Materials and other materials are copyrighted or otherwise restricted or proprietary; provided, however, that PG&E shall replicate and not alter all proprietary notices on the Licensed Materials. Such copying for PG&Es use shall not constitute infringement or misappropriation of the Intellectual Property Rights of SSN. |
(d) | The License expressly includes the grant of a license and rights to contractors, consultants, outsourcing vendors, auditors, regulators and other third parties to Use the Licensed Materials to perform services for PG&E provided that any such license is in writing, contains obligations of confidentiality that are no less protective than those set forth in this Agreement and ***. PG&E will notify SSN of *** engages to host or operate the Software for PG&Es benefit and ***. |
(e) | Notwithstanding Section 13.1(a), PG&E may host the Software on equipment located outside the Service Territory and such hosting does not constitute unauthorized Use of the Software. Except for the foregoing, ***. |
(f) | All rights and licenses granted under or pursuant to this Agreement shall be deemed to be, for purposes of section 365(n) of the U.S. Bankruptcy Code, licenses or rights to intellectual property as defined under section 101(52) of the U.S. Bankruptcy code. The Parties agree that PG&E, as a licensee of such rights under this Agreement, shall retain and may fully exercise all of its rights and elections under the U.S. Bankruptcy code. |
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13.2 | Software |
(a) | The License includes both *** and *** forms of the Software. |
(b) | The Software License grant is effective immediately but in respect of any Software with a license fee ***, the License to that Software may be terminated by SSN if: |
(i) | The event giving rise to PG&Es obligations to pay the license fee *** has occurred and is undisputed and PG&E fails to pay SSN a license fee ***when due, and fails to make such payment for a period of *** days after the date PG&E receives a notice of non-payment from SSN given in***accordance with Section 13.2(b)(ii) (a License Fee Demand Notice); and |
(ii) | the License Fee Demand Notice is delivered to PG&Es Program Manager with copies to PG&Es General Counsel, Chief Financial Officer and Senior Vice President and Chief Customer Officer. Such License Fee Demand Notice will refer to PG&Es failure to pay the Software license fee *** in accordance with Schedule B (Pricing and Payment Terms), state that the notice is being given under Section 13.2(b)(i) and state SSNs intention to terminate the License if PG&E fails to make payment within *** days after receiving the***License Fee Demand Notice. |
(c) | There is no limit on PG&Es use of the Software within the Service Territory. For the avoidance of doubt, there is no restriction on (and no additional license fees will be payable based upon) the number of Meters, access points or relays, or the uses to which the network may be put by PG&E within the Service Territory including the provision of services to third parties located within the Service Territory (including other utilities). |
(d) | PG&E may concurrently use the Software on any number of mainframe, mid-tier, network, workstation and portable computers at such site or sites as PG&E may determine from time to time and may change the location or configuration of the hardware used to operate the Software, in PG&Es sole discretion and ***. |
(e) | PG&E may use the Software in production and non-production environments, including development, test, back-up, archival and *** environments. |
(f) | As provided by Section 14.3 (Source Code Escrow), PG&E may access the Source Code at ***. Until such time as PG&E is entitled to obtain a permanent release of the Source Code from escrow (as provided in Section 14.3), ***. If PG&E becomes entitled to permanent release of the Source Code from escrow (as provided in Section 14.3), PG&E may thereafter Use, *** the Software (all of the foregoing collectively the ***) for the uses permitted by, and subject to the terms of, the License. All *** shall be owned by *** and licensed exclusively to *** under the terms of this Agreement. PG&E shall execute such documents and take such steps as are *** ownership of the Intellectual Property Rights in ***. PG&E shall have no obligation to deliver the Derivative Works to SSN. |
13.3 | Manufacturing Know-How |
The License includes the grant to PG&E of the right to Use the Manufacturing Know-How, and all SSNs Intellectual Property Rights related thereto, to manufacture or have manufactured Equipment (including all firmware and Software included in or necessary for operation of the Equipment in accordance with the Functional Requirements) for use within the Service Territory in the circumstances in which the Manufacturing Know-How is released from escrow pursuant to Section 14.2.
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13.4 | APIs and Communication Protocol Technology |
SSN must, throughout the Deployment Period and the Service Period:
(a) | provide to PG&E application programming interfaces (APIs) to permit PG&E and third party programmers to interface external applications to the SmartMeter System and the Software; |
(b) | *** or Software (and that SSN generally makes available to its customers) available to third parties on commercially reasonable terms; and |
(c) | ***. |
13.5 | *** |
If requested by PG&E, SSN will *** restrictions of this Agreement.
13.6 | Covenant |
SSN covenants that it will not bring a Claim against PG&E, or otherwise assert against PG&E a Claim, that PG&Es Use of any third party products or software as contemplated for the implementation and operation of the SmartMeter System infringes any Intellectual Property Rights of SSN.
14. | ESCROW ARRANGEMENTS AND MANUFACTURING FEES |
14.1 | Escrow of Certain Materials |
(a) | SSN agrees to deposit the Escrowed Materials with NCC Group, Inc. (the Escrow Agent). |
(b) | The Parties will enter into an agreement with the Escrow Agent on substantially the same terms as those set out in Exhibit 1 (Form of Escrow Agreement) which will provide for release of the Escrowed Materials as set out in this Section 14. The Form of Escrow Agreement set out in Exhibit 1 shows changes to the Escrow Agents standard terms and conditions that are requested by PG&E and subject to approval by the Escrow Agent. |
(c) | SSN must deposit regular updates of the Escrowed Materials to ensure the Escrowed Materials are up to date versions of the Software, Documentation, Manufacturing Know- How and Supplier Materials for the Products as used by or supplied to PG&E at that time. |
14.2 | Escrow of Manufacturing Know-How and Supplier Material |
(a) | PG&E may not use the Manufacturing Know-How to manufacture the Products or have the Products manufactured for it unless one of the conditions for release of the Escrowed Material described in Section has occurred 14.2(c). |
(b) | The Escrow Agent will release the Manufacturing Know-How from escrow to PG&E as required by PG&E for PG&Es ***provided that PG&E ***. |
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(c) | The Manufacturing Know-How and Supplier Material will be released from escrow to PG&E upon the occurrence of one or more of the following events: |
(i) | Termination of this Agreement by PG&E pursuant to Section ***; |
(ii) | If *** SSN is unable to pay its debts as they come due in the ordinary course of business, has made a general assignment for the benefit of creditors, has entered into bankruptcy or suffers or has permitted the appointment of a receiver for its business or assets or has otherwise ceased to conduct business in the normal course; |
(iii) | Interruption in the supply of any Product for more than *** due to a Force Majeure Event (as provided in Section 30.1(e)); and |
(iv) | the occurrence of a Force Majeure Event that *** is likely to interrupt the supply of any Product for more than ***. |
(d) | If the Manufacturing Know-How is released to PG&E pursuant to Section 14.2(c) above, PG&E will (subject to Section 14.2(e)) *** |
(e) | *** PG&E pursuant to Section 14.2(d) will be ***. Should SSN ***, SSN will immediately notify PG&E and reduce the *** commencing with ***. For the purposes of this Section, *** means the ***. |
(f) | PG&E will report the number and type of Products manufactured and *** quarterly, within *** days following the end of each calendar quarter. |
(g) | If the Manufacturing Know-How or Supplier Material is released from escrow pursuant to Section 14.2(c)(i) such release will not relieve SSN of liability to PG&E for any breach or non-performance of SSNs obligations under this Agreement. |
(h) | If PG&E elects to have the Manufacturing Know-How released from escrow pursuant to this Section, SSN shall: |
(i) | provide reasonable assistance and cooperation to PG&E to assist PG&E to establish a source of Equipment supply using the Manufacturing Know-how and Supplier Material; and |
(ii) | At PG&Es, provide PG&E with engineering and consulting Services relating to the Manufacturing Know-How for such period as PG&E may request, not to exceed the shorter of the ***. If the release is made pursuant to Section 14.2(c)(ii), (iii) or (iv) SSN may ***. |
(i) | Upon release of the Manufacturing Know-How and Supplier Material from escrow pursuant to this Section 14.2, PG&E may: |
(i) | Use the Manufacturing Know-How including all SSN Intellectual Property Rights related thereto to manufacture or have manufactured Products for use within the Service Territory in connection with the conduct of PG&Es business; and |
(ii) | Enter into agreements with SSNs suppliers for the continuing supply of Product components to PG&E on substantially the same terms and conditions as those set forth in the Supplier Materials. |
(j) | Notwithstanding anything contained in this Agreement or any Schedule, Annex or Exhibit to the contrary, PG&Es obligation to *** shall survive and continue despite any expiration or termination of this Agreement. |
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14.3 | Escrow of Source Code |
(a) | The Escrow Agent will perform validation and testing of the Source Code held in escrow upon request by PG&E, *** but no more frequently than ***. |
(b) | PG&E may obtain release of the Source Code from escrow, without obtaining SSNs prior approval, upon the occurrence of one or more of the following events: |
(i) | As required by PG&E for PG&Es validation, testing and business continuity purposes as contemplated by Section 13.2(f) above; provided that PG&E returns the Source Code to the Escrow Agent when such validation or testing is complete without retaining any copies; |
(ii) | upon *** for ***, on or after the *** anniversary of***commencement of the Software support and maintenance Services provided by SSN under this Agreement; |
(iii) | if SSN materially breaches its obligation to provide Software support and maintenance as required by the terms of this Agreement for more than *** consecutive days; |
(iv) | upon the occurrence of a *** days; |
(v) | if SSN materially breaches its delivery obligations under this Agreement with respect to the Product *** set out in the *** and fails to cure such breach within *** days of the applicable due date; |
(vi) | Termination of this Agreement by PG&E pursuant to Section ***; and |
(vii) | If PG&E ***, that SSN is ***. |
(c) | If PG&E obtains the release of the Source Code from Escrow for any purpose other than validation, testing and business continuity purposes as contemplated by Section 13.2(f) above: |
(i) | it shall so notify SSN promptly; and |
(ii) | notwithstanding anything contained in this Agreement or any Schedule, Annex or Exhibit hereto to the contrary, except in circumstances where the Source Code is released during a *** of this***Agreement, SSN shall have no further obligation under this Agreement to *** provided, however, that such release will not relieve SSN of liability to PG&E for any breach or non-performance of SSNs obligations under this Agreement. |
14.4 | Obligations on release of Escrowed Materials |
(a) | The provisions of this Section 14.4 apply in the event that Escrowed Materials are released to PG&E. |
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(b) | The Escrowed Materials will be deemed to constitute SSN Confidential Information. |
(c) | PG&E shall not provide the Manufacturing Know-How or Source Code to *** |
(d) | *** |
(e) | A *** is any party to whom SSN has granted a *** |
(f) | PG&E shall keep the Escrowed Material confidential and use it solely for the purposes set forth in this Agreement and inform all employees who are given access to the Escrowed Materials by PG&E that the Escrowed Materials are confidential trade secrets of SSN and are licensed or provided to PG&E as such. |
(g) | PG&E shall restrict access to the Escrowed Materials to those employees, *** and auditors of PG&E who have agreed to be bound by confidentiality and use obligations consistent with those set forth herein, and who have a need to access the Escrowed Materials in order to carry out their duties or provide services for PG&E. Upon request by SSN, PG&E shall *** |
(h) | PG&Es confidentiality agreements with *** and auditors who obtain access to the Escrowed Materials shall *** |
(i) | The Products, including technical data, are subject to applicable U.S. export control laws, including the U.S. Export Administration Act and its associated regulations, and may be subject to export or import regulations in other countries. PG&E agrees to strictly comply with all applicable U.S. export control laws and any other applicable regulations and customs laws and regulations of any other country for which the government or any agency thereof requires an export license or other governmental approval at the time of modification, transport, export, or re-export. |
15. | OWNERSHIP OF MATERIALS |
15.1 | Products and Product Enhancements |
(a) | As between PG&E and SSN but subject to Section 15.1(b), SSN owns all right, title and interest including, without limitation, all Intellectual Property Rights in the Products and the Product Documentation, and any *** that SSN or PG&E makes, unless it is agreed in writing by the Parties (on a case by case basis) that PG&E is to own such ***. |
(b) | PG&E will own all right, title and interest, including, without limitation, all Intellectual Property Rights in, any *** (PG&E-Specific Work Product) including PG&E-specific ***, PG&E-specific*** and PG&E-specific ***. |
(c) | Section 15.1(b) shall not be deemed to prohibit SSN from independently developing work product that is similar to the PG&E-Specific Work Product for other utility customers, provided that, in so doing, SSN does not incorporate any PG&E-Specific Work Product or breach any obligations with respect to PG&E Confidential Information. |
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15.2 | Manufacturing Know-How |
SSN owns all right, title and interest including, without limitation, all Intellectual Property Rights in the Manufacturing Know-How.
15.3 | Jointly Developed Work |
If the Parties wish to work together to jointly develop technology, the Parties shall first enter into a separate written scope of work which shall govern the terms of such joint development work and specify the ownership of such jointly developed technology.
15.4 | No Liens in Deliverables |
(a) | SSN will keep all Deliverables free and clear of liens, claims, encumbrances and interests of third parties and will not encumber, sell, assign, donate, transfer or mortgage to, or grant any security interest in favor of, any third party any Deliverables under any circumstances. |
(b) | SSN agrees that it will cooperate with PG&E and execute any agreements, instruments and other documents required to evidence or perfect PG&Es ownership interest in the Equipment and any PG&E-Specific Work Product. |
(c) | SSN hereby designates PG&E as its attorney-in-fact to take all such steps as contemplated under this Agreement and to sign all such agreements, instruments, documents and notices to protect and perfect PG&Es ownership interests consistent with this Section 15.4. The foregoing power is coupled with an interest and is therefore irrevocable and will survive any termination or expiration of this Agreement. |
16. | PRODUCT PERFORMANCE AND SERVICE WARRANTIES |
16.1 | Product and Service Warranties |
SSN hereby makes the representations and warranties with respect to the Products set forth in Schedule G (Product and Service Warranties).
16.2 | Services and Support Warranties |
SSN hereby makes the representations and warranties with respect to the Services as set forth in Schedule G (Product and Service Warranties).
17. | GENERAL WARRANTIES |
17.1 | Mutual Warranties |
Each Party represents and warrants that:
(a) | it has the requisite power, capacity and authority and all necessary licenses, permits and consents to enter into this Agreement and to carry out the obligations contemplated by it; |
(b) | there is no pending or threatened litigation or other matters which may have a material adverse affect on this Agreement or on its ability to carry out its obligations under this Agreement; |
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(c) | it does not have any commitments to third parties that conflict with its obligations under this Agreement; and |
(d) | its execution, delivery and performance of this Agreement: |
(i) | will not constitute a violation of any Legal Requirement, and that it will comply with all such Legal Requirements including Legal Requirements related to workplace health and safety, equal opportunity hiring, non-discrimination in the workplace, hazardous substances, sexual harassment, and rights of disabled persons; and |
(ii) | will not constitute a violation, breach or default under any agreement by which it or any of its assets (whether tangible or intangible) are bound (whether by charge, pledge, lien or otherwise). |
17.2 | SSN Warranties |
SSN represents and warrants that:
(a) | As of the Effective Date, except as disclosed to PG&E by SSN in writing prior to the Effective Date, SSN will not ***; |
(b) | None of the *** will, at the time they are ***, and *** by PG&E as***contemplated by this Agreement will not, ***; |
(c) | SSN is not insolvent, is not undergoing a liquidation, nor has a receiver or trustee been appointed for the benefit of its creditors, whether voluntary or otherwise; |
(d) | SSN is not in the process of seeking protection under the bankruptcy code, or any similar statute and is not unable to pay its debts as and when they come due; |
(e) | SSN is not aware as of the Effective Date of anything within its reasonable control which will or might adversely affect its ability to fulfill its obligations under this Agreement; |
(f) | SSN does and shall not have any material financial obligation or liability (absolute, contingent, liquidated or unliquidated) except for those reflected in the Financial Statements; and |
(g) | The execution, delivery and performance of this Agreement will not result in the termination, cancellation or acceleration (whether after the giving of notice, lapse of time, or both) of any contract by which SSN or any of its assets (whether tangible or intangible) are bound (whether by charge, pledge, lien or otherwise). |
18. | INDEMNIFICATION |
18.1 | Definitions |
For the purposes of this Section 18:
(a) | Claim means any claim, demand, action, proceeding or suit. |
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(b) | Liabilities means all losses, damages, expenses, costs (including, but not limited to, fees for attorneys and other professionals and costs of litigation) and liabilities. |
(c) | Indemnity Items means the Products, the Communication Protocol Technology, Deliverables and Documentation provided to or for PG&E pursuant to this Agreement or to or for Meter Suppliers for incorporation in Meters that are supplied to PG&E by Meter Suppliers. |
(d) | PG&E Product Modification means any modification of an Indemnity Item that is not *** provided that: |
(i) | any modification made to an Indemnity Item supplied by SSN to a Meter Supplier for incorporation in Meter products that are to be supplied to PG&E shall be deemed to have been *** unless such modification is made at the express direction of PG&E without SSNs written approval; |
(ii) | any modification contemplated by the relevant Documentation shall be deemed to have been ***; and |
(iii) | any modification reasonably expected to be made based on the nature of an Indemnity Item shall be deemed to have been ***. |
(e) | Combination means the use or combination, by PG&E or its customers, of the Products with any product or service ***, except for (i) any such use or combination where the ***, (ii) any such use or combination contemplated by the relevant Documentation, (iii) any such use or combination contemplated by *** (iv) any use or combination of the ***. |
18.2 | Indemnity from SSN |
SSN will defend PG&E, its Affiliates, and their respective customers, officers, directors, employees, agents, assigns and successors (collectively, PG&E Indemnitees) from and against any and all Claims brought against PG&E Indemnitees, and will indemnify and hold harmless PG&E Indemnitees from and against all Liabilities arising out of or relating to any Claims, in connection with any of the following:
(a) | Injury or death of persons, including employees of PG&E or SSN or tangible property damage caused by any negligent or intentional acts or omissions of SSN; |
(b) | SSNs performance pursuant to this Agreement, including SSNs breach of its representations, warranties, obligations or covenants; |
(c) | Any allegation that the Indemnity Items, or their purchase or use by PG&E as contemplated by this Agreement, infringes or misappropriates any Intellectual Property Right of any third party, except that: |
(i) | SSNs liability to PG&E for any Claim arising out of any *** shall be determined as set forth in Section 18.6; and |
(ii) | SSN does not indemnify PG&E Indemnitees against Liability to the extent that such Liability results from any *** or use of the Indemnity Items other than in accordance with this Agreement and the relevant Documentation. |
(d) | Any lien or encumbrance filed or placed on the Indemnity Items or otherwise filed or placed in connection with the Services; |
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(e) | SSNs breach of any Legal Requirement relating to the Indemnity Items or Services or relating to SSNs performance pursuant to this Agreement; and |
(f) | Strict liability imposed by any Legal Requirement. |
***
18.4 | Remedies for IP Infringement |
(a) | If PG&E is entitled to indemnification from SSN under section 18.2(c), PG&E shall also be entitled to recover damages from SSN for the cost to ***, subject to the maximum liability specified in Section 19.1. The foregoing rights constitute *** with respect to Claims against PG&E that are the subject of the indemnity in Section 18.2(c) and the warranty in Section 17.2(a). |
(b) | Should the manufacture, use, distribution, sale, or shipment of any of the Indemnity Items be found to misappropriate or infringe a third partys Intellectual Property Rights, SSN will (in addition to its other obligations under this Section 18), at SSNs option and at no expense to PG&E: |
(i) | by license or other release, procure for PG&E the right to continue to manufacture, use, distribute, sell, or ship the same on a substantially uninterrupted basis; or |
(ii) | replace or modify the same to make it non-infringing, in a manner reasonably acceptable to PG&E, without materially changing the form, fit, or function. |
(c) | If neither of the outcomes set out in Section 18.4(b), can be achieved using Commercially Reasonable Efforts, then, without limiting SSNs obligation to indemnify and without limiting its liability for damages pursuant to Section 18.4(a), the Parties will cooperate to mitigate the impact of such Claim on both Parties. |
18.5 | Indemnification Procedures |
The following procedures will apply only to third party Claims for which a PG&E lndemnitee *** (an Indemnitee) seeks to be indemnified by SSN *** (the Indemnitor) pursuant to the Agreement:
(a) | Notice. Promptly after an lndemnitee receives notice of any Claim for which it will seek indemnification pursuant to the Agreement, the Indemnitee will promptly notify the Indemnitor of the Claim in writing and, in that notice, will advise the lndemnitor whether the Indemnitor is the sole indemnifying party with respect to the Claim. No failure to so notify the Indemnitor will abrogate or diminish the Indemnitors obligations under this Section 18.5 if the Indemnitor has or receives Knowledge of the Claim by other means or if the failure to notify does not materially prejudice its ability to defend the Claim. |
(b) | Right to Control Multiple Indemnifying Parties. If the Indemnitor is not the sole indemnifying party with respect to the claim, the Parties shall enter into a joint defense agreement regulating the defense of the Claim. |
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(c) | Right to Control Sole Indemnifying Party. If the lndemnitor is the sole indemnifying party with respect to the Claim, within *** days after receiving an Indemnitees notice of a Claim, but no later than *** days before the date on which any formal response to the Claim is due, the Indemnitor will notify the lndemnitee in writing as to whether the Indemnitor acknowledges its indemnification obligation and elects to assume control of the defense and resolution of the Claim (a Notice of Election). In issuing a Notice of Election, the Indemnitor waives any right of contribution against the Indemnitee unless the Notice of Election expressly states that the Indemnitor believes in good faith that the lndemnitee may be liable for portions of the Claim that are not subject to indemnification by the Indemnitor, in which case the lndemnitee will have the right to participate jointly in the defense and settlement of the Claim at its own expense using counsel selected by it. If the Indemnitor timely delivers a Notice of Election, the Indemnitor will be entitled to have sole control over the defense and resolution of the Claim except as provided in this Section. Nothing in this Section will preclude the Indemnitee from participating in its defense and retaining its own counsel at its own expertise. |
(d) | Procedure Where No Notice of Election Is Delivered. If the Indemnitor does not deliver a timely Notice of Election for a Claim, the Indemnitee may defend and/or settle the Claim in such manner as it may deem appropriate, at the cost and expense of the Indemnitor, including payment of any settlement, judgment or award and the costs of defending or settling the Claim. The Indemnitor will promptly reimburse the Indemnitee upon demand for all indemnifiable Liabilities suffered or incurred by the Indemnitee as a result of or in connection with the Claim. |
(e) | Indemnitee to Provide Reasonable Assistance. The Indemnitee will provide reasonable assistance to the Indemnitor, at the Indemnitors cost and expense, including reasonable assistance from the Indemnitees employees, agents, and Affiliates, as applicable. Notwithstanding anything to the contrary in this Section 18.5, the lndemnitor may not consent to the entry of any judgment or enter into any settlement that provides for injunctive or other non-monetary relief affecting the Indemnitee without the prior written consent of the Indemnitee. |
18.6 | Liability for *** |
Any Intellectual Property Right infringement or misappropriation Claim against PG&E arising out of any *** shall be defended *** and the cost of such defense and any settlements or liabilities incurred shall be ***. If the Parties cannot agree as to *** then they shall be ***
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19. | LIMITATIONS OF LIABILITY |
19.1 | Maximum Liability |
EXCEPT AS PROVIDED IN SECTION 19.2, AND TO THE FULL EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, EACH PARTYS MAXIMUM AGGREGATE LIABILITY TO THE OTHER PARTY FOR ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT, WILL NOT EXCEED THE GREATER OF:
(a) | *** DOLLARS ***; or |
(b) | THE *** PAID AND PAYABLE BY: |
(i) | *** UNDER THIS***AGREEMENT; AND |
(ii) | *** PURSUANT TO *** DURING THE TERM OF THIS***AGREEMENT ((I) AND (II), CUMULATIVELY, ARE THE ***). |
19.2 | Increased Maximum Liability for Certain Claims |
TO THE FULL EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, EACH PARTYS MAXIMUM AGGREGATE LIABILITY TO THE OTHER PARTY FOR ALL CLAIMS LISTED BELOW WILL NOT EXCEED THE GREATER OF *** DOLLARS*** OR ***:
(a) | DEATH OR PERSONAL INJURY RESULTING FROM NEGLIGENT ACTS OR OMISSIONS; |
(b) | ***; |
(c) | *** SET OUT IN SECTIONS ***; AND |
(d) | THE NON-EXCLUDABLE STATUTORY RIGHTS OF CONSUMERS (E.G., UNDER LAWS PROVIDING FOR STRICT PRODUCT LIABILITY). |
19.3 | No Special Damages |
(a) | NEITHER PARTY WILL BE LIABLE FOR ANY *** DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT ***, HOWEVER SUCH ARISE, WHETHER IN BREACH OF CONTRACT, BREACH OF WARRANTY OR IN TORT, INCLUDING NEGLIGENCE, AND EVEN IF THAT PARTY HAS PREVIOUSLY BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER OR NOT FORESEEABLE. LIABILITY FOR DAMAGES WILL BE *** EVEN IF *** |
(b) | The following damages are not excluded from recovery pursuant to Section 19.3(a) but are subject to the limitations of liability set forth in Section 19.2: Any *** set forth in this Agreement, to the extent that such damages are properly characterized as *** notwithstanding that such damages may represent *** |
20. | TERM AND TERMINATION |
20.1 | Term |
Unless terminated earlier pursuant to this Agreement, the term of this Agreement will commence on the Effective Date and will continue until all obligations of the Parties have been fully discharged.
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20.2 | Termination by PG&E |
PG&E may terminate this Agreement in whole or in part:
(a) | for convenience, with *** days written notice, and subject to payment of the termination charges set forth in Schedule B (Pricing and Payment Terms); |
(b) | as to Purchase Orders, in the time and manner set forth in Section 4.6 (Cancellation and Re-Scheduling); |
(c) | pursuant to Section 30.1(d) or Section 30.1(e) (force majeure); |
(d) | immediately by written notice if SSN fails to cure any other material breach of this Agreement within *** days after receiving notice of such breach; |
(e) | at any time if SSN becomes insolvent, is unable to pay its debts as they become due in the ordinary course of business, makes a general assignment for the benefit of creditors, or suffers or permits the appointment of a receiver for its business or assets or otherwise ceases to conduct business in the normal course; or |
(f) | for material breach of this Agreement as set out in Schedule E ( Review, Testing and Acceptance Process for Deliverables), Schedule F (Compensation for *** and ***) or Schedule G (Product and Service Warranties). |
20.3 | Termination By SSN |
(a) | SSN may terminate the Agreement if, and only if: |
(i) | PG&E fails to pay SSN when due undisputed charges totaling at least *** dollars *** and fails to make such payment for a period of *** days after the date PG&E receives a notice from SSN given in accordance with this Section 20.3 (a Demand Notice); or |
(ii) | Subject to Section 20.3(b), PG&E materially breaches *** and fails to take prompt and commercially reasonable steps to prevent further repetition or continuation of such material breach after receiving a Demand Notice from SSN. |
(b) | Any dispute between the Parties as to whether an act or omission of PG&E amounts to a material breach that would allow termination by SSN pursuant to Section 20.3(a)(ii) will be submitted to binding arbitration in San Francisco, California, under the commercial arbitration rules of the American Arbitration Association (AAA). |
(c) | Demand Notices delivered under this Section 20.3 must be delivered to PG&Es Program Manager with copies to PG&Es General Counsel, Chief Financial Officer and Senior Vice President and Chief Customer Officer. A Demand Notice must state that demand is being made under this Section 20.3 and: |
(i) | In the case of a Demand Notice issued under Section 20.3(a)(i) must refer to PG&Es failure to pay in accordance with Section 9.1 (Invoicing and Payment) of this Agreement and state SSNs intention to terminate the Agreement if PG&E fails to make payment within *** days after receiving the Demand Notice; or |
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(ii) | In the case of a Demand Notice issued under Section 20.3(a)(ii) refer to PG&Es recurring or continued breach of *** and state SSNs intention to terminate this Agreement if PG&E fails to take prompt and commercially reasonable steps to prevent further repetition or continuation of such material breach. |
20.4 | Effect of Termination |
Upon expiration or termination of this Agreement, and unless otherwise provided in the applicable Schedules to this Agreement:
(a) | Each Party will return within *** Business Days of such expiration or termination (or at the other Partys option destroy) all Confidential Information and other property and materials of the other Party that was provided by the other Party or otherwise is in the Partys (or its employees, contractors or agents) possession or under its control, in good condition (reasonable wear and tear excepted), except to the extent necessary for the Partys use in continuing performance or exercising its License and other rights under this Agreement; |
(b) | SSN will deliver to PG&E all Deliverables, whether finished or unfinished, accepted and paid for by PG&E prior to termination; |
(c) | Subject to Section 20.4(d), SSN will be entitled to receive payment for Deliverables and Products accepted by and provided to PG&E in accordance with this Agreement; the termination charges set out in Schedule B (Pricing and Payment Terms), if applicable and *** (if any), as SSNs sole and exclusive compensation for such expiration or termination of this Agreement; and |
(d) | On termination of this Agreement PG&E may *** in accordance with Schedule *** in accordance with***the *** provisions of this Agreement. |
20.5 | No Damages as a Result of Rightful Termination |
(a) | The Parties acknowledge and agree that neither Party will be entitled to damages, indemnification or other remedy solely by virtue of the other Partys termination of this Agreement in accordance with the terms of this Section 20. This provision does not affect any other remedies that may be available to either Party for breach of the Agreement. PG&E will not be responsible for any costs incurred by SSN after the termination of this Agreement. |
(b) | Except as provided in Section 13.2(b), termination of this Agreement does not affect the validity of the License granted to PG&E under Section 13.1 or the ***. |
20.6 | Disengagement Assistance |
On the termination or expiration of this Agreement for any reason, SSN shall provide disengagement assistance reasonably required by PG&E to effect an orderly termination of this Agreement. Except in circumstances where PG&E terminates this Agreement pursuant to Section 20.2(d), PG&E will pay SSN for the Disengagement Assistance ***
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21. | DATA SECURITY AND PROTECTION |
21.1 | PG&E Data Defined |
PG&E Data means all data regarding PG&E and/or its Affiliates, customers and other suppliers that is either: (i) furnished, disclosed or otherwise made available to SSN Personnel, directly or indirectly, by or on behalf of PG&E pursuant to the Agreement or otherwise; or (ii) collected, modified or created by SSN Personnel in the course of performing the Services, including without limitation all data received, processed or generated by the Products, Software or SmartMeter interface software (including without limitation meter readings, billing information and all other customer data and statistical analysis).
21.2 | PG&E Data, Generally |
As between the Parties, PG&E Data will be and remain the property of PG&E. SSN may not use PG&E Data for any purpose other than to provide the Products or render the Services. No PG&E Data will be transferred to disclosed to third parties or commercially exploited by or on behalf of SSN (or its Subcontractors). Neither SSN nor SSN Personnel may possess or assert any lien or other right against or to PG&E Data or in any way restrict or impair PG&Es ability to use PG&E Data.
21.3 | Data Security |
(a) | When present at PG&E facilities or accessing PG&E Data or PG&E systems, SSN and SSN Personnel will observe and comply with PG&Es security procedures that have been communicated in writing to SSN. Schedule I (Security Requirements) lists or describes the PG&E security procedures that have been communicated in writing to SSN as of the date of execution of the Agreement. |
(b) | SSN will establish and maintain safeguards against the improper destruction, loss or alteration of PG&E Data in the possession or control of SSN (or its Subcontractors) that are no less rigorous than the PG&E Security Procedures listed or described in Schedule I (Security Requirements), as it may be amended from time to time subject to Section 24.1 (Compliance with PG&E Policies and Procedures), and are no less rigorous than those maintained by SSN for its own data of a similar nature. |
(c) | Without limiting the generality of the foregoing: |
(i) | In accordance with the requirements of California law, SSN, when in the possession or control of personal information (e.g., name, address, phone number, PG&E account number and any other financial account numbers in PG&Es files, including bank account or social security numbers, and customer energy usage data) about a California resident, will implement and maintain reasonable security procedures and practices appropriate to the nature of the information to protect the personal information from unauthorized access, destruction, use, modification, or disclosure; and |
(ii) | SSN will use Commercially Reasonable Efforts to cause SSN Personnel to refrain from attempting to access, or allowing access to, any PG&E Data that they are not permitted to access under the Agreement. |
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(iii) | If SSN becomes aware that any unauthorized access to PG&E Data has been attained, SSN will immediately report such incident to PG&E, describing in reasonable detail the accessed PG&E Data, and take all reasonably necessary measures within its control to stop the access, prevent recurrences, and return to PG&E any copied or removed PG&E Data. |
21.4 | Compliance with Data Privacy and Data Protection Laws, Regulations, and Policies |
In carrying out its activities under the Agreement, each Party will observe and comply with all applicable data privacy and data protection laws and regulations, including consumer privacy laws (e.g., California Civil Code S. 1798.82 and California Civil Code S. 1798.81.5). In addition, when accessing or handling any PG&E Data that contains personal identifying information, SSN will comply with all reasonable policies of PG&E that have been disclosed to SSN in writing relating to the use and disclosure of such information. SSN will immediately notify PG&E if SSN becomes aware of any use or disclosure of PG&E Data that is not permitted by the Agreement.
22. | CONFIDENTIALITY |
22.1 | Confidentiality |
(a) | As used in this Section, the Receiving Party means the Party that is given access to the Confidential Information of the other Party or to whom Confidential Information of the other Party is furnished or otherwise disclosed, and the Disclosing Party means the Party whose Confidential Information is furnished, disclosed or otherwise made available to the Receiving Party. |
(b) | In the course of performing the Services under this Agreement, each Party may have access to confidential commercial or personal information of the other Party concerning, but not limited to, research, development, products, services, technological, ratemaking, legislative and personnel matters and practices of the other Party, its parent company, subsidiaries, affiliates, or members of the public (Confidential Information). Confidential Information shall specifically include confidential, commercial or proprietary information provided or disclosed to the Receiving Party prior to the Effective Date of this Agreement. |
(c) | Without the prior written approval of the Disclosing Party, but subject to Section 22.1(e) below, the Receiving Party agrees not to disclose any Confidential Information of the Disclosing Party or otherwise make it available to any person other than personnel of the Receiving Party who have a need to know such information to carry out the purposes of the Agreement, and further agrees not to use such Confidential Information for any purpose other than in connection with this Agreement or (in the case of PG&E) the use of the Products as contemplated by this Agreement. |
(d) | The confidentiality restrictions in this Section 22.1 will not apply to any particular information (other than personal information) that the Receiving Party can demonstrate was: |
(i) | previously known to the Receiving Party, prior to its receipt from the Disclosing Party; |
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(ii) | independently developed by the Receiving Party without use of the Confidential Information; |
(iii) | acquired by it from a third party which was not, to the Receiving Partys knowledge, under an obligation to the Disclosing Party not to disclose such information; or |
(iv) | has become publicly available through no breach of the Agreement by the Receiving Party. |
(e) | SSN acknowledges that PG&E may be required to disclose some or all of SSNs Confidential Information to PG&Es regulators, legislators, and other third parties as part of regulatory proceedings. In so doing, PG&E will request a materially similar level of protection for such information as PG&E would require for its own similar confidential information. |
22.2 | No Implied Rights |
Each Partys Confidential Information will remain the property of that Party. Nothing contained in this Section 22 (Confidentiality) will be construed as obligating a Party to disclose its Confidential Information to the other Party, or as granting to or conferring on a Party, expressly or by implication, any rights or license to the Confidential Information of the other Party. Any such obligation or grant will only be as provided by other provisions of the Agreement.
22.3 | Compelled Disclosure |
If the Receiving Party becomes legally compelled to disclose any Confidential Information of the Disclosing Party in a manner not otherwise permitted by the Agreement, the Receiving Party will provide the Disclosing Party with prompt notice of the request so that the Disclosing Party may seek a protective order or other appropriate remedy. If a protective order or similar order is not obtained by the date by which the Receiving Party must comply with the request, the Receiving Party may furnish that portion of the Confidential Information that it determines it is legally required to furnish.
22.4 | Confidential Treatment of the Agreement |
(a) | SSN acknowledges that PG&E may be required to file the Agreement with regulatory entities and, if PG&E is required to do so, PG&E agrees to seek confidential treatment of *** |
(b) | Nothing contained in this Agreement shall limit the ability of either Party from making such disclosures regarding this Agreement as required, or deemed necessary by legal counsel, to comply with any applicable laws or regulations (including without limitation those imposed by applicable securities laws and regulations). |
(c) | Each Party will otherwise refrain from disclosing the specific terms and conditions of the Agreement to third parties except as provided in Section 22.3 (Compelled Disclosure). |
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22.5 | Disclosure of Information Concerning Tax Treatment |
The Parties acknowledge and agree that they have not been advised by any advisor that has placed a limitation (whether or not legally binding) on either Partys (or the Partys employees, representatives, agents or members) ability to disclose the tax treatment or tax structure of the transactions effectuated by the Agreement or to disclose any materials of any kind (including tax opinions or any other analyses) that have been provided to either of the Parties by its advisors relating to the tax treatment and the tax structure of the transactions effectuated by the Agreement.
22.6 | Return or Destruction |
(a) | As requested by the Disclosing Party (but subject to Section 22.6(c)), the Receiving Party will return or provide the Disclosing Party any designated Confidential Information of the Disclosing Party. |
(b) | When Confidential Information of the Disclosing Party is no longer required for the Receiving Partys performance under the Agreement, or in any event upon expiration or termination of the Agreement, the Receiving Party will return or destroy all materials in any medium that contain, refer to, or relate to Confidential Information of the Disclosing Party in accordance with Section 20.4(a). |
(c) | The Receiving Party may keep any Confidential Information of the Disclosing Party that the Receiving Party has a license to continue using and it may also keep in the files of its legal department or outside counsel, for record purposes only, one copy of any material requested to be returned or destroyed. |
(d) | At the Disclosing Partys request, the Receiving Party will certify in writing that it has returned or destroyed all copies of the Disclosing Partys Confidential Information in the possession or control of the Receiving Partys or any of its Affiliates or contractors. |
22.7 | Duration of Confidentiality Obligations |
The Receiving Partys obligations under this Section 22 will continue during the term of this Agreement and survive the expiration or termination of the Agreement as follows:
(a) | The Receiving Partys obligations under Section 22.6 (Return or Destruction) will continue in effect until fully performed; |
(b) | As to any portion of the Disclosing Partys Confidential Information that constitutes a trade secret under applicable law, the obligations will continue for as long as the information continues to constitute a trade secret (including *** and |
(c) | As to all other Confidential Information of the Disclosing Party, the obligations will survive for *** years after the Receiving Partys fulfillment of its obligations under Section 22.6 (Return or Destruction) with respect to the Confidential Information in question. |
22.8 | Additional PG&E and SSN Confidential Information |
(a) | The following information shall be PG&E Confidential Information: |
(i) | Meter readings, billing information and all other customer data and information; |
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(ii) | PG&E Data and the content and substance of the PG&E-Specific Work Product; |
(iii) | All non-public information relating to PG&Es information systems, operations and facilities (which information is proprietary to PG&E and will remain the exclusive property of PG&E); and, |
(b) | The following information shall be SSN Confidential Information: |
(i) | SSN Financial Statements; |
(ii) | The Source Code; |
(iii) | The Escrowed Materials; |
(iv) | The Fees; and |
(v) | All non-public information relating to SSNs. Products, Services, technology, business, employees, operations and facilities, including the Documentation, provided that such information is marked or identified as SSNs Confidential Information. |
22.9 | Publicity |
(a) | Except as provided in Section 22.4 (Confidential Treatment of the Agreement), neither Party will disclose any information or make any news release, advertisement, public communication, response to media inquiry or other public statement regarding this Agreement or either Partys performance hereunder or the processes, models, data or other information related to this Agreement without the prior written consent of the other Party. |
(b) | Each Party shall immediately inform the other Party in writing of any media inquiries. |
(c) | Neither Party will publish or make available to any individual or organization, either before, during or after the termination of this Agreement, any such materials or information without the prior written consent of the other Party. |
(d) | Neither Party will make any reference to the other Party or to the existence of this Agreement in any advertising or other publication (except for confidential, internal company publications), without the other Partys prior written consent, which consent will not be unreasonably withheld, and neither Party will associate or in any way connect its name, trademark or any other intellectual property right to any name, trademark or any other Intellectual Property Right of the other Party without the other Partys prior written consent. |
(e) | The fact that the Parties have entered into this Agreement does not constitute, nor does it imply in any way, endorsement by one Party of the other Party, and neither Party will indicate or imply that such Party endorses, recommends, or vouches for the other Party in any form of written, verbal, or electronic advertisement, communication, or any other business development effort, without such Partys prior written consent. |
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23. | AUDITS AND RECORDS |
23.1 | PG&E Audit Rights |
(a) | PG&E and its agents, auditors (internal and external), regulators and other representatives as PG&E may designate (collectively, Auditors) will have the right to inspect, examine and audit the systems, records, data, practices and procedures of SSN, its Affiliates, and its Subcontractors that are used in providing the Products or rendering the Services or pertain to the Products and Services (collectively, Audits) for any of the following purposes: |
(i) | to verify the accuracy of SSNs invoices; |
(ii) | to verify the integrity of PG&E Data and SSNs compliance with the data privacy, data protection, confidentiality and security requirements of this Agreement; and |
(iii) | to verify SSNs compliance with any other provisions of this Agreement, including but not limited to, verifying SSNs provision of Products and performance of the Services under this Agreement and compliance with the terms of Section 9.2 ***. |
(b) | Audits will be conducted during business hours or as mutually agreed between the Parties, except in cases of emergency, and shall take place upon such advance notice as is reasonable under the circumstances. Audits will be conducted in a manner that does not unreasonably interfere with SSNs, its Affiliates or its Subcontractors business. |
(c) | PG&E and its Auditors will comply with SSNs standard (and reasonable) security and confidentiality requirements when accessing facilities or other resources owned or controlled by SSN. |
(d) | The Auditors will not be given access to SSN cost data except in those cases where SSNs cost is used as the explicit basis for SSNs invoiced charges. |
(e) | SSN will cooperate with PG&E and its Auditors in conducting Audits and provide such assistance as they reasonably require to carry out the Audits. |
(f) | Financial Audits and routine data security audits will not be conducted more than once per calendar year. |
(g) | If any Audit determines that SSN has failed to comply with its obligations under Section 9.2 *** or that SSN has overcharged PG&E for the Products or Services, SSN shall reimburse PG&E for any over-charge within *** days from such finding, and in the event that SSN has over-charged PG&E by an amount equal to or greater than *** of SSNs total invoiced charges for the period being audited, then SSN will reimburse PG&E upon request for the cost of the Audit within *** days from PG&Es written notice to SSN of such over-charge. |
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23.2 | Audit Follow-up |
(a) | Following an Audit, PG&E may provide SSN a written report summarizing the Audits findings as to any actual or potential errors or problems affecting the Products, Services or PG&E Data, violations of the Agreement or other issues pertaining to SSN (or its Subcontractors) (each, an Audit Finding). |
(b) | Within *** days after receiving a report from PG&E containing Audit Findings, SSN will meet with PG&E to jointly develop and agree upon an action plan to promptly address and resolve any deficiencies, concerns, and/or recommendations in such Audit report. |
(c) | To the extent SSN is in possession or control of PG&E Data, SSN will conduct its own periodic reviews or examinations of its data security procedures, consistent with prevailing industry good practices. If any such review or examination indicates an actual adverse impact (or a reasonable expectation of a future adverse impact) to PG&E Data, or to PG&E, or violations of the Agreement, SSN will immediately notify PG&E, providing pertinent details so that PG&E can take steps to avoid or minimize the adverse impacts. SSN will also correct the errors or problems as soon as reasonably possible. |
23.3 | Records Retention |
(a) | In support of PG&Es Audit rights, SSN will keep and maintain: |
(i) | financial records as reasonably necessary to substantiate SSNs invoices; |
(ii) | records pertinent to verifying the integrity of PG&E Data under the possession or control of SSN (and its Affiliates and Subcontractors) and such entities compliance with the data privacy, data protection, confidentiality, intellectual property and security requirements of the Agreement; and |
(iii) | such other operational records pertaining to provision of Products and performance of the Services as SSN keeps in the ordinary course of its business. |
(b) | SSN will retain such records in accordance with generally accepted accounting principles applied on a basis consistent with applicable legal requirements. Financial data must be retained for at least *** years after termination or expiration of the applicable Purchase Order. SSN will provide access to such records upon request for Audits during such time periods. |
23.4 | SSN Audit Rights |
SSN shall have the right, at its sole cost and expense, to have an independent certified public accountant conduct during normal business hours and not more frequently than annually, an audit of the appropriate records of PG&E to verify PG&Es compliance with License usage restrictions in this Agreement and, if applicable, with PG&Es *** obligations to SSN. PG&E shall reimburse SSN for any undisputed *** underpayment within *** days from such audit, and in the event that PG&E has under-paid SSN by an amount equal to or greater than *** of the total *** payable for the period being audited, then PG&E will reimburse SSN upon request for the cost of the Audit.
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24. | COMPLIANCE WITH POLICIES, PROCEDURES AND LEGAL REQUIREMENTS |
24.1 | Compliance with PG&E Policies and Procedures |
SSN will perform under this Agreement in accordance with PG&Es policies and procedures (including those policies and procedures set forth in Schedule L (Additional Policies and Procedures)) as such are provided by PG&E to SSN from time to time, provided that if such policies or procedures are provided to SSN subsequent to the Effective Date and such policies or procedures, or revisions to existing policies provided as of the Effective Date, have a material impact on SSN under this Agreement, such new policies and procedures will be addressed through the Change Control Procedure set forth in Annex D-1 (Change Control Procedures).
24.2 | Legal Requirements |
(a) | In connection with the performance of this Agreement, SSN will obtain and maintain, at all times, all required Governmental Authorizations and comply with all Legal Requirements, including, but not limited to, Legal Requirements related to: |
(i) | shipping and handling of the Products prior to delivery to PG&E; |
(ii) | employee health and workplace safety; |
(iii) | income tax withholding; |
(iv) | non-immigrant workers visas; |
(v) | U.S. import and export laws and the applicable export and import laws of other countries; |
(vi) | discrimination, harassment, privacy and other prohibited practices in employment; |
(vii) | public health and safety and protection of the environment or use of hazardous materials; |
(viii) | work permits, training, licensure, or professional certification; and |
(ix) | requiring permits for specific work or services. |
(b) | SSN will comply with the provisions of the Equal Opportunity Clause set forth in 41 CFR 60-1.4(a) and Executive Order 11246 (as amended). |
(c) | In connection with this Agreement, SSN will not discriminate in any manner against any individual because of race, religion, national origin, color, age, sex, sexual orientation, marital status, pregnancy, physical or mental disability, veteran status, or any other classification protected by applicable local, state or federal employment discrimination laws. |
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24.3 | Gratuities |
SSN will not, and will not permit any of the SSN Personnel to, offer or cause any offer to give to any PG&E personnel, family members of PG&E personnel or any of PG&Es vendors, subcontractors, agents or representatives any gratuity, entertainment, payments, loans, compensation, gift, remuneration, perquisite or other benefit of more than a nominal value (defined in accordance with the PG&E policy set out in Schedule L (Additional Policies and Procedures)).
24.4 | Costs Associated with Compliance with Legal Requirements |
All costs arising from SSNs obtaining and maintaining all legal authorizations and complying with Legal Requirements will be borne solely by SSN.
24.5 | Certain Compliance Obligations Relating to Sarbanes-Oxley |
SSN shall not, by virtue of this Agreement, be obligated to comply with the Sarbanes-Oxley Act of 2002, as it may be amended, supplemented and updated from time to time (SOX). SSN agrees to work with PG&E in good faith and at PG&Es cost to enable PG&E to comply with SOX, including in particular but without limitation PG&Es management assessment and PG&Es auditors opinion on the adequacy of internal controls over financial reporting pursuant to section 404 of SOX. To that end, and in addition to SSNs other obligations set forth in this Agreement, SSN agrees to the following:
(a) | SSN will, if requested by PG&E, *** related to this Agreement; and |
(b) | SSN will maintain complete and accurate records and documentation of transactions, processes and controls performed for PG&E or otherwise relating to the Products, especially as it relates to financial information and any required disclosures thereof, which records and documentation will be subject to audit by PG&E or its representatives as provided in this Agreement. |
24.6 | Further Cooperation |
The Parties acknowledge that, as of the Effective Date, PG&E may not fully know its obligations under SOX, including without limitation Section 404. Accordingly, the Parties agree that evaluation and determination of these obligations will be guided by the requirements of Section 404 as applicable to PG&E as determined by PG&Es auditors acting reasonably from time to time giving effect to changes in Legal Requirements or standard practices. The Parties will cooperate in good faith to modify the requirements, and obligations set forth in Section 24.5.
25. | SERVICES AND SAFETY |
(a) | SSNs work practices, equipment, materials and Services covered by this Agreement will meet or exceed all applicable safety standards and regulations including those established and promulgated by the federal Occupational Safety and Health Administration (OSHA). |
(b) | All tools, machinery, equipment, rigging and scaffolding used by SSN in performance of its responsibilities under this Agreement will be safe, efficient, serviceable, in good condition and fit for the purpose intended. SSN agrees to replace any tool, machinery, equipment, rigging or scaffolding which in the judgment of PG&E is unsafe. |
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(c) | Pursuant to OSHA 29 C.F.R. 1910.1200 Hazard Communication and at least *** days prior to use or storage of any chemical at the work site, SSN must provide copies of material safety data sheets to PG&E for chemicals covered by OSHA 29 C.F.R. 1910.1200 which SSN intends to use in the work. Two copies of the material safety data sheets will be submitted to the PG&E field representative (who will place a copy into the sites hazard communication information center) and one copy will be submitted to PG&E, Safety Operations. SSN will specify at which locations the chemical is to be used and the intended use of the chemical. Unless specified elsewhere in this Agreement, SSN will remove such chemicals from the work site prior to completion of the Services. |
(d) | SSN shall identify and provide PG&E with a list of all hazardous materials subject to Legal Requirements included in the Products so as to enable PG&E to fulfill its hazardous waste disposal requirements. |
(e) | SSN will have a safety program and work and safety rules for the Services and will comply with and enforce them for all Services performed on the work site. SSN will ensure that all SSN Personnel receive, read and sign a copy of the work and safety rules. Proof of compliance will be retained and made available to PG&E upon request. SSN will designate a safety contact person for all matters concerning SSNs work and safety programs. |
(f) | SSN will take all reasonable precautions for the safety of all SSN Personnel engaged in the Services, and will continuously maintain adequate protection of PG&E persons and property to prevent damage, injury or loss. SSN will at all times exercise due care with regard to all equipment, machinery and materials to prevent damage, loss or injury to persons and property, and will use such adequate protective devices, warning signs, crossover points and barriers as may be reasonably required under the circumstances. |
(g) | PG&E will have the right, from time to time, to undertake a safety performance audit of SSNs work, work practices, tools, equipment and materials. PG&E may, at any time and in its sole discretion, suspend all or a portion of the Services for safety-related reasons. SSN will take immediate, appropriate corrective action. Notwithstanding any other provisions of this Agreement, neither the suspension of the Services nor any corrective action taken will result in any increase in the contract price or extension of the schedule for the Services. |
(h) | It will be the duty and responsibility of SSN or any Subcontractor performing any cutting or welding to comply with the safety provisions of the National Fire Protection Associations National Fire Codes, and Factory Mutual Engineerings cutting and welding procedures and the applicable requirements specified in PG&Es associated documents. |
(i) | Whenever working on PG&Es property, SSN will, at no additional cost to PG&E, ensure that PG&Es safety requirements are met including, but not limited to, the following: all SSN Personnel will wear ANSI Class 75 steel toe safety shoes, hard hats, safety glasses and hearing protection, as required. |
(j) | SSN will at all times enforce strict discipline and good order among SSN Personnel and will not employ on the work any unfit person or anyone not skilled in the work assigned. PG&E will have the right to request the removal of any such SSN Personnel from the site either with or without cause. SSN further agrees that it will comply with such requests at no additional cost to PG&E. |
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(k) | Firearms, illegal drugs and alcohol use or possession on PG&E property is prohibited, and any SSN Personnel who are under the influence of or in possession of any such items will be removed from PG&Es property by SSN. |
(l) | In any emergency affecting the safety of persons or property, SSN will act reasonably and as required to prevent threatened damage, loss or injury. |
(m) | The purpose of this Section 25 is to define SSNs safety responsibilities under this Agreement. Although PG&E may monitor SSNs safety performance, may review safety performance with SSNs safety contact person, or may suspend the work for safety-related reasons, these actions are for the primary purpose of protecting PG&E personnel and property. SSN will remain solely responsible for the safe performance of the work under this Agreement. The provisions of Section 25 will be interpreted and construed in a manner consistent with SSNs status as an independent contractor. |
26. | SSN PERSONNEL |
26.1 | General Requirements for SSN Personnel |
(a) | SSN will assign an adequate number of SSN Personnel to perform its obligations under this Agreement who are properly educated, trained, familiar with and fully qualified for the tasks to which they are assigned. |
(b) | Prior to assigning any SSN Personnel to perform any Services, SSN will screen and perform background checks of the personnel. Such background checks may have been performed as part of SSNs standard pre-employment screening process and will include the following, at a minimum: |
(i) | ***; |
(ii) | ***; |
(iii) | ***; |
(iv) | ***; and |
(v) | [Deleted in its entirety by Amendment No. 6] |
(c) | SSN will assign only SSN Personnel who have a current legal right to work in the country where they will be assigned. SSN assumes all responsibility for immigration law compliance with respect to the SSN Personnel it assigns pursuant to this Agreement. |
(d) | SSN will manage, supervise and provide direction to SSN Personnel and cause them to comply with the obligations and restrictions applicable to SSN under this Agreement. SSN is responsible for the acts and omissions of SSN Personnel. |
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(e) | As between SSN and PG&E, SSN is responsible for all wages, salaries and other amounts due SSN Personnel, and for all tax withholdings, unemployment insurance premiums, pension and social welfare plan contributions, and other employer obligations with respect to SSN Personnel and will pay SSN Personnel promptly and in accordance with applicable state and federal wage and hour laws. |
(f) | Irrespective of the manner in which SSN is compensated by PG&E, it is the intent of the Parties that no SSN Personnel will be eligible for any PG&E-sponsored benefits, including, but not limited to, paid vacation, sick leave, medical insurance, employee stock purchase plans, bonuses, awards or 401k participation. |
(g) | PG&E may at any time, require SSN to remove any SSN Personnel from PG&Es premises or to otherwise replace SSN Personnel assigned to perform Services, provided that such removal and/or replacement is in compliance with all Legal Requirements. PG&Es sole liability and responsibility in connection with the replacement or removal of a SSN Personnel will be to pay SSN for Services actually performed by SSN Personnel. |
26.2 | *** |
(a) | SSN will cause each of the SSN Personnel filling the *** identified in Schedule J (Approved Subcontractors and ***) as being *** as set out in Schedule J (Approved Subcontractors and ***). |
(b) | SSN will cause each of the SSN Personnel filling the *** who are identified in Schedule J (Approved Subcontractors and ***) as being *** as set out in Schedule J (Approved Subcontractors and ***); provided, however, that the SSN Personnel filling such *** shall not be restricted from providing services to other SSN customers and performing other responsibilities for SSN. |
(c) | Before the initial and each subsequent assignment of an individual to a ***, SSN will notify PG&E of the proposed assignment, introduce the individual to appropriate PG&E representatives and, consistent with SSNs personnel practices, provide PG&E a curriculum vitae and other information about the individual reasonably requested by PG&E. If PG&E objects to the proposed assignment for reasons not prohibited by Law, the Parties will attempt to resolve PG&Es concerns on a mutually agreeable basis. if the Parties have not been able to resolve PG&Es concerns within *** Business Days, SSN may not assign the individual to that position and must propose the assignment of another suitably qualified individual. |
(d) | SSN will not replace or make *** as set out in Schedule J (Approved Subcontractors and ***) except in cases of ***. SSN Personnel ***. |
(e) | SSN will give PG&E, where reasonably possible, at least *** days advance notice of a proposed change in personnel filling a ***, and will discuss with PG&E any objections PG&E may have. Where reasonably possible, SSN will arrange, at no charge, for the proposed replacement to work side-by-side with the individual being replaced during the notice period to effectuate a seamless transfer of knowledge prior to the incumbent leaving his or her position. |
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26.3 | Women, Minority, and Disabled Veteran Business Enterprises |
(a) | PG&E and SSN agree that Supplier Diversity is fundamental to PG&Es core business strategy and that SSN will actively participate in PG&Es Supplier Diversity Subcontracting Program to utilize women, minority and disabled veteran business enterprise (WMDVBE) enterprises when appropriate and comply with the requirements set out in Schedule N (Diversity Subcontracting Policy). |
(b) | PG&E is subject to CPUC General Order (GO) 156, which sets forth an overall goal to purchase a minimum of 21.5% of its goods and services from WMDVBEs. GO 156 sub-goals are to purchase goods and services at a minimum of: 15% from minority-owned, 5% from women-owned, and 1.5% from disabled veteran-owned business enterprises. GO 156 requires each utility to establish and maintain a subcontracting program for the purpose of encouraging its prime contractors to utilize WMDVBE subcontractors. GO 156 does not authorize or permit a utility to utilize set-asides, preferences, or quotas in administration of its WMDVBE program. |
(c) | During the Deployment Period and the Service Period, SSN will assist PG&E to meet and exceed PG&Es GO 156 supplier diversity goals by subcontracting *** of the work covered by this Agreement to diverse suppliers who have been certified as minority-owned, women-owned, or veteran-owned business enterprises by the CPUC Clearinghouse. SSN agrees to make Commercially Reasonable Efforts to assist PG&E in meeting its goals through the implementation of SSNs subcontracting plan. |
(d) | PG&E and SSN agree that if SSN fails to use Commercially Reasonable Efforts to meet its diverse subcontracting goal during any year of the Term, PG&E may *** |
***
(e) | SSN shall submit documentation to PG&E of opportunities extended, mentoring efforts, and events held, as well as submit reports of subcontracting and sub-supplier spending as it relates to PG&Es program supporting the use of verifiable WMDVBE businesses. |
(f) | SSN shall use Commercially Reasonable Efforts to increase WMDVBE spending over the entire course of this Agreement. |
(g) | SSN agrees to provide PG&E a subcontracting plan with respect to its proposed use of WMDVBEs. |
(h) | SSN agrees to submit enrollment forms and utilize PG&Es Supplier Diversity Management System (SDMS) for on-line reporting of spend with WMDVBEs for reporting periods as specified by PG&E. |
(i) | SSN will provide PG&E with monthly reports in the form required under PG&Es supplier diversity program, to report its use of WMDVBEs. |
(j) | SSN will document the process used to solicit the participation of WMDVBEs for the Product to be provided under each Purchase Order, and this documentation will be maintained with the monthly WMDVBE reports by SSN. |
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27. | SUBCONTRACTORS |
(a) | SSN may assign, delegate or subcontract all or any part of its rights, duties, responsibilities or obligations under this Agreement to third parties only with the prior written consent of PG&E not to be unreasonably withheld, (approved third parties are Subcontractors). In seeking PG&Es approval of a third party pursuant to this Section, SSN will provide PG&E with notice summarizing the Services to be performed and the location for provision of the Service. |
(b) | SSN may use one or more Subcontractors in the performance of SSNs obligations pursuant to this Agreement provided that: |
(i) | SSN remains fully and solely responsible and liable for proper performance of all SSN obligations under this Agreement; and |
(ii) | SSN ensures all such Subcontractors are informed of and agree in writing to comply with all applicable terms and conditions of this Agreement. |
(c) | SSN will immediately notify PG&E in writing if SSN learns or reasonably believes any Subcontractor is failing to perform or make reasonable progress under the terms and conditions of any subcontract. |
(d) | PG&Es consent with respect to any subcontracting will not relieve SSN of its responsibility for its full performance under this Agreement. |
(e) | PG&E approves the subcontractors listed in Schedule J (Approved Subcontractors and***). |
28. | INSURANCE AND LETTERS OF CREDIT |
28.1 | Insurance |
SSN shall maintain insurance as set forth in Schedule M (Insurance).
28.2 | [Amended and Restated in its entirety by Amendment 7] |
29. | DISPUTE RESOLUTION |
Any material dispute between the Parties arising out of or relating to the Agreement, including with respect to the interpretation of any provision of the Agreement or with respect to performance or non-performance under the Agreement, will be resolved as provided in this Section 29 (Dispute Resolution).
29.1 | Informal Dispute Resolution |
(a) | Subject to Section 29.1(b), the Parties initially will attempt to resolve any dispute arising out of or relating to the Agreement informally in accordance with the following: |
(i) | Within *** Business Days after a Party receives written notice of a dispute from the other Party (Dispute Date), it will designate a senior representative (i.e., a person whose rank within the company is superior to that Partys project manager), who will offer to meet with the designated senior representative of the other Party for the purpose of attempting to resolve the dispute amicably; |
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(ii) | The appointed representatives will meet promptly to discuss the dispute and attempt to resolve it without the necessity of any formal proceeding. They will meet as often as the Parties deem necessary in order that each Party may be fully advised of the others position. During the course of discussion, all reasonable requests made by one Party to the other for non-privileged information reasonably related to the matters in dispute will be honored promptly; |
(iii) | The specific format for the discussions will be left to the discretion of the appointed representatives; and |
(iv) | If the dispute has not been resolved within *** Business Days after the Dispute Date, upon the written request of either Party, the Chief Executive Officer of SSN and PG&Es Senior Vice President and Chief Customer Officer will promptly meet and negotiate in good faith to resolve the dispute. |
(b) | If a dispute between the Parties arising out of or relating to the Agreement has not been resolved pursuant to the processes set forth in Section 29.1(a) within *** Business Days from the Dispute Date, then either Party may initiate non-binding mediation of the dispute by submitting a written request to JAMS or the American Arbitration Association (AAA), with a copy to the other Party, seeking the appointment of a mediator to assist in resolving the dispute. The Parties will cooperate with the mediator and each other in the mediation process. The mediation will be conducted in accordance with the applicable practices and procedures employed by the mediator. If litigation is commenced, either Party may terminate the mediation process by so notifying the mediator and the other Party. Each Party will bear its own expenses in the mediation process and will share equally the charges of the mediator and his/her sponsoring entity. |
(c) | The foregoing shall not preclude either partys initiation of binding arbitration under Section 28.2. |
29.2 | Continued Performance |
Each Party agrees to continue performing its obligations under the Agreement while a dispute is being resolved except to the extent performance is prevented by the other Party or the issue in dispute precludes performance. For the avoidance of doubt, PG&Es withholding payment of disputed charges as permitted in accordance with Schedule B (Pricing and Payment Terms) will not be considered to prevent SSN from performing the Services, nor will this Section 29 be interpreted to limit either Partys right to terminate the Agreement as provided in Section 20 (Term and Termination).
29.3 | Equitable Remedies |
Each Party acknowledges that a breach of any of its obligations under the Sections of the Agreement listed below, or its infringement or misappropriation of any Intellectual Property Rights of the other Party, may irreparably harm the other Party in a way that could not be adequately compensated by money damages. In such a circumstance, the aggrieved Party may proceed directly to court notwithstanding the other provisions of this Section 29 (Dispute Resolution). If a court of competent jurisdiction should find that a Party has breached (or
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attempted or threatened to breach) any such obligations, such Party agrees that without any additional findings of irreparable injury or other conditions to injunctive relief, it will not oppose the entry of an appropriate order compelling its performance of such obligations and restraining it from any further breaches (or attempted or threatened breaches) of such obligations. The following Sections are subject to this paragraph:
(a) | Sections 13.1 (License Grant); |
(b) | Section 14 (Escrow Arrangements); |
(c) | Section 15 (Ownership of Materials); |
(d) | Section 16 (Indemnification); |
(e) | Section 20 (Term and Termination); |
(f) | Section 22 (Confidentiality); and |
(g) | Section 30.16 (***). |
30. | MISCELLANEOUS |
30.1 | Force Majeure |
(a) | Force Majeure Event means a fire, flood, earthquake, other act of God or nature, riot, civil disorder, act of terrorism or other similar cause beyond the reasonable control of a Party that delays or prevents the Party, directly or indirectly, from performing its obligations in accordance with the Agreement. |
(b) | A Party will not be liable for any default or interruption in performing its obligations under the Agreement to the extent the default or interruption is attributable to a Force Majeure Event provided: |
(i) | the non-performing Party (and any other suppliers or contractors of the non-performing Party to whom the performance has been delegated) are without material fault in causing the default or interruption; and |
(ii) | the default or interruption could not have been prevented by reasonable precautions and cannot reasonably be circumvented by the affected Party through the use of alternate sources, workaround plans or other means. |
(c) | In such event the affected Party will be excused from further performance or observance of the obligations so affected for as long as the Force Majeure Event continues and the affected Party continues to use Commercially Reasonable Efforts to perform whenever and to whatever extent is possible without default or interruption. A Party so hindered in its performance will immediately notify the Party to whom performance is due by telephone and describe at a reasonable level of detail the circumstances causing the default or interruption (to be confirmed in writing within twenty-four (24) hours after inception of such default or interruption, if possible). That Party will also notify the other Party promptly when the Force Majeure Event has abated. |
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(d) | If a Force Majeure Event prevents provision of Products for more than *** days or performance of Services reasonably identified by PG&E as critical (Critical Services) for more than *** days or causes SSN to fail to meet the *** required in Attachment 2 of Schedule ***, then PG&E may ***, in which case PG&E will ***, provided, however, that if PG&E ***. |
(e) | In addition to the rights and remedies set forth in Section 30.1(d) above, if a Force Majeure Event prevents provision of Products or Services for more than *** days ***, then PG&E may ***, as well as ***, provided however that if the disruption of Products or Services continues for more than *** months, then PG&E shall have the right to ***, provided, however, that PG&E will *** as provided in Section ***. |
(f) | Upon the occurrence of a Force Majeure Event that PG&E reasonably determines is likely to interrupt the provision of Software support and maintenance for more than *** days, PG&E may *** in accordance with Section ***. |
(g) | If PG&E terminates the Agreement under 30.1(e) above, PG&E will pay SSNs charges for all Products supplied and/or Services performed under the Agreement, ***, but will not be liable for payment of any termination charges or demobilization costs. SSN will not be entitled to any additional payments from PG&E for costs or expenses incurred by SSN as a result of any Force Majeure Event. |
30.2 | Assignment |
(a) | The rights, duties and obligations of SSN under this Agreement may not be assigned in whole or in part, whether by agreement or by operation of law (including by merger or acquisition) without the prior express written consent of PG&E, which PG&E shall not unreasonably withhold or delay, and any attempted assignment of any rights, duties or obligations hereunder without such consent will be null and void; provided, however, that PG&Es consent shall not be required for an assignment of SSNs rights, duties and obligations under this Agreement in connection with a merger, acquisition or sale of substantially all of the assets or capital stock of SSN: |
(i) | if the merger, acquisition or sale ***; or |
(ii) | if ***; or |
(iii) | if ***. |
In all cases, whether PG&Es consent is required or not, SSN will use Commercially Reasonable Efforts to obtain reasonable assurances from the acquirer that the acquirer will retain key SSN personnel and *** in accordance with the Agreement and the Product Roadmap.
(b) | PG&E may, without SSNs consent, assign its rights and obligations under this Agreement, *** |
(c) | This Agreement will be binding on the Parties and their respective successors and permitted assigns. |
30.3 | Provision of *** |
(a) | From the Effective Date until the earliest of: (i) ***; (ii) ***; or (iii) *** |
(i) | SSN shall provide PG&E with: (A) ***; and (B) ***; and |
(ii) | SSN will ensure that: (A) ***; and (B) ***. |
(b) | PG&E will ***. |
(c) | All information provided to PG&E pursuant to this Section shall be certified in writing by SSNs Chief Financial Officer. Upon satisfaction of the ***, SSNs Chief Financial Officer will, in lieu of providing Financial Statements, certify to PG&E *** no later than forty five (45) days after the end of each calendar quarter. If thereafter SSN no longer *** , SSNs obligation to provide the Financial Statements shall thereupon recommence until such time as its obligation to provide such Financial Statements shall terminate in accordance with Section 30.3(a) above. |
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30.4 | Notice of Material Adverse Change |
SSN shall *** PG&E in the event SSN suffers or reasonably expects to suffer a Material Adverse Change, with such notice detailing the ***
30.5 | Order of Precedence |
In the event of a conflict between or among the documents comprising the Agreement, the following order of precedence will apply (documents listed in descending order of priority):
(a) | these GENERAL TERMS AND CONDITIONS, together with Annex A-5 (Functional Requirements and Product Roadmap); Schedule F (Compensation for *** and ***); Schedule G (Product and Service Warranties); Schedule M (Insurance); Schedule L (Additional Policies and Procedures) and Schedule N (Diversity Subcontracting Policy); |
(b) | Schedule B (Pricing and Payment Terms), including its Annexes (and other attachments, if any); |
(c) | Annex A-3 (Product Documentation); |
(d) | the Statement of Work (including any additional scopes of work that the Parties may execute pursuant to this Agreement); |
(e) | Annex A-1 (SmartMeter Master Project Plan); |
(f) | other Schedules and Annexes; and |
(g) | Purchase Orders and Release Authorizations; provided, however, that a Purchase Order or Release Authorization may amend other documents that form part of this Agreement only in accordance with Section 4.1(e). |
30.6 | Governing Law and Jurisdiction |
(a) | The Agreement will be construed and governed according to laws of the State of California, without regard to the conflicts of law principles. |
(b) | The Parties expressly exclude from this Agreement all the provisions of the Vienna Convention, 1980 (The United Nations Convention on Contracts for the International Sale of Goods). |
(c) | The Uniform Computer Information Transactions Act (the UCITA), including any law that incorporates substantially all of the provisions of the UCITA, however titled, shall not apply to the Licenses granted under this Agreement. |
(d) | For any litigation arising out of or relating to the Agreement or the transactions and relationships contemplated by the Agreement, regardless of the form of action or the Party that initiates it, the Parties irrevocably and unconditionally submit to the exclusive jurisdiction of and venue in the Superior Court of the State of California, San Francisco County or, if that court does not have jurisdiction, in the United States District Court for the Northern District of California. |
(e) | The Parties irrevocably and unconditionally waive any objection to the laying of venue of any proceeding arising out of or relating to the Agreement in those courts. |
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(f) | The Parties consent to the jurisdiction of any state court located within a district that encompasses assets of a Party against whom a judgment (or award) has been rendered for the enforcement of the judgment against the assets of such Party. |
30.7 | Severability |
The provisions of this Agreement will be deemed severable. If any provision of this Agreement will be held unenforceable by any court of competent jurisdiction, it will be severed from this Agreement and the remaining provisions will remain in full force and effect.
30.8 | Amendments |
This Agreement will not be amended or modified except in writing signed by the Parties.
30.9 | Interpretation |
(a) | All headings and captions in this Agreement are for convenience and ease of reference only and are not to be considered in the construction or interpretation of any provision of this Agreement. |
(b) | Numbered or lettered paragraphs, subparagraphs, schedules annexes and exhibits contained in this Agreement refer to sections, subsections, schedules annexes and exhibits of this Agreement. |
(c) | This Agreement will be deemed to have been written by both Parties. |
(d) | Unless the context requires otherwise: |
(i) | use of the singular imports the plural and vice versa; and |
(ii) | use of a specific gender imports the other genders. |
(e) | Exhibits attached to this Agreement are provided for convenience of reference only and do not form part of this Agreement. |
30.10 Survival
The following provisions shall survive termination or expiration of the Agreement for any reason: Sections 4.5 (Liquidated Damages and ***), 9,1 (Invoicing and Payment), 12 (Documentation), 13.1 (License Grant), 14.2(d) (Manufacturing Fees), 14.4 (Obligations on Release of Escrowed Materials), 15 (Ownership of Materials), 16 (Product Performance and Service Warranties), 17 (General Warranties), 18 (Indemnification), 19 (Limitations of Liability), 20.5 (No Damages as a Result of Rightful Termination), 20.6 (Disengagement Assistance), 21 (Data Security and Protection), 22 (Confidentiality), 23 (Audits and Records) 28.1 (Insurance), 29 (Dispute Resolution), 30.6 (Governing Law and Jurisdiction), 30.16 (***) and any provision of the Agreement that contemplates or governs performance or observance to termination or expiration of the Agreement.
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30.11 Notices
Any notice required to be sent or given under this Agreement will be sent in person, by certified or registered mail return receipt requested or by nationally-recognized express courier, addressed as follows:
To PG&E |
To SSN | |
Pacific Gas and Electric Company ATTN: President and Chief Executive Officer Hand Delivered copies: 77 Beale Street San Francisco, California 94177 Copies delivered by US mail: P.O. Box 7442 San Francisco, California 94120 |
Silver Springs Network ATTN: Controller 575 Broadway Street Redwood City, California 94063 | |
With Copies to: Pacific Gas and Electric Company ATTN: Senior Vice President Customer Service and Pacific Gas and Electric Company ATTN: General Counsel At the address indicated above. |
With copies to: Silver Springs Network ATTN: VP of Marketing At the address indicated above. and Silver Springs Network ATTN: General Counsel At the address indicated above. |
Notice will be effective as of the date of delivery in the case of personal delivery, or the third (3rd day following the date of deposit for registered mail delivery, addressed to the Party intended at its address set forth in the caption if delivered by certified or registered mail.
30.12 Waivers
Any consent by any Party to, or waiver of, a breach by the other, whether express or implied, will not constitute a consent to, or a waiver of any other, different or subsequent breach. Regardless of PG&Es review, audit or inspection of SSN, payment or other act or omission, or the Products successfully passing acceptance testing, SSN will remain responsible for complying with all the terms and conditions of this Agreement and such acts or omissions of PG&E will not constitute a waiver.
30.13 Relationship
(a) | The relationship of the Parties is that of buyer and seller only. |
(b) | This Agreement is not intended by the Parties to constitute or create a joint venture, pooling arrangement, partnership, agency or formal business organization of any kind. |
(c) | Neither PG&E nor SSN will represent that its relationship with respect to the other Party is other than as an independent supplier. |
(d) | Nothing in this Agreement will create in either Party any right or authority to incur any obligations on behalf of, or to bind in any respect, the other Party and nothing in this Agreement will be construed to create any agency, joint venture or partnership. |
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30.14 Entire Agreement; Governing Terms
This Agreement constitutes the entire agreement between the Parties with respect to its subject matter, and merges, integrates, cancels and supersedes any prior understanding and agreements between the Parties whether written or oral concerning its subject matter.
30.15 Counterparts
This Agreement may be executed in two counterparts, each of which will be deemed an original, but all of which will constitute but one and the same instrument.
30.16 Non-Solicitation
(a) | Subject to Section 30.16(b), *** acknowledges and agrees that ***. Accordingly, *** agrees that it will not, without the consent of *** under this Agreement. |
(b) | Section 30.16(a) applies only during the period that *** under this Agreement and for a period of *** thereafter. |
(c) | In the event *** breaches the provisions of this Section 30.16, the Parties agree that it would be difficult to determine the amount of actual damages to *** that would result from such breach. The Parties further agree that in the event ***breaches the provisions of this Section 30.16 *** shall pay ***, liquidated damages equal to ***, which is the parties good faith estimate of the amount of damages to *** from such breach. |
30.17 Definitions
The following capitalized terms, when used in the Agreement, will have the meanings given to them below unless the context requires otherwise. Other capitalized terms used in the Agreement are defined in places where they are used.
Defined Term |
Meaning | |
Affiliate | Means, when used with reference to a specified corporation, partnership or limited liability company, any other entity that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the partnership, corporation or limited liability company specified. For purposes of the foregoing, control and under common control with with respect to any entity will mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities, partnership interests or by contract or otherwise. | |
Aggregate Revenue | Has the meaning provided in Section 19.1(b)(ii). | |
Agreement | This SmartMeter Program Upgrade Supply Agreement and all attached Schedules and Annexes, as such may be amended in accordance with the provisions herein. | |
APIs | Application programming interfaces. | |
Approved Vendors | Has the meaning provided in Section 14.4(d). | |
Audit Finding | Has the meaning provided in Section 23.2(b). | |
Auditors | Has the meaning provided in Section 23.1(a). | |
Audits | Has the meaning provided in Section 23.1(a). |
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SmartMeter Program Upgrade Supply Agreement (SSN)
Defined Term |
Meaning | |
Bank | Has the meaning provided in Section 28.2(a). | |
*** | Has the meaning provided in Section 9.2(c). | |
Business Days | Days when PG&Es corporate offices are open for business during standard business hours. | |
Change Request | A request for a change made by either Party in accordance with Annex D-1 (Change Control Procedures). | |
Claim | Has the meaning provided in Section 18.1(a). | |
*** | Has the meaning provided in Section 18.1(e). | |
Commercially Reasonable Efforts | Taking all such steps and performing in such a manner as a well managed company would undertake under the circumstances where it was acting in a determined, prudent and reasonable manner to achieve a particular desired result for its own benefit. | |
Communication Protocol Technology | The technology that permits communication to take place to a third party device in the nature of devices having similar functionality to those devices described in the Technology Plan. | |
*** | Has the meaning provided in Section 9.2(a). | |
Confidential Information | Has the meaning provided in Section 22.1(b). | |
CPUC | California Public Utilities Commission. | |
Critical Services | Has the meaning provided in Section 30.1(d). | |
Current Releases | Has the meaning provided in Section 7(b). | |
Deliverable | Anything to be delivered by SSN to PG&E under this Agreement. Deliverables may include Products, Documentation and PG&E-Specific Work Product. | |
Delivery Schedule | The date specified in a Release Authorization issued by PG&E in accordance with the Minimum Lead Times upon which SSN undertakes to deliver the Products pursuant to the conditions of this Agreement. | |
Demand Notice | Has the meaning provided in Section 20.3(a)(i). |
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SmartMeter Program Upgrade Supply Agreement (SSN)
Defined Term |
Meaning | |
Deployment Period | The period commencing on the Effective Date and ending on December 31, 2013. | |
Derivative Works | Has the meaning provided in Section 13.2(f). | |
Disclosing Party | Has the meaning provided in Section 22.1(a). | |
Dispute Date | Has the meaning provided in Section 29.1(a)(i). | |
Documentation | The technical and functional specification and other technical and functional documentation relating to the Products as specified in Annex A-3 (Product Documentation). | |
*** | Has the meaning provided in Section 28.2(c) | |
*** | Has the meaning provided in Section 28.2(c) | |
Effective Date | The date first written above. | |
Equipment | The tangible components of the Products listed in Annex A-7 (List of SSN Products and Product Tools). | |
Escrow Agent | Has the meaning provided in Section 14.1(a). | |
Escrowed Materials | The Source Code version of the Software, Documentation, Manufacturing Know-How and Supplier Information, all of which shall be updated from time to time by SSN to include any changes to any of the foregoing. | |
Existing *** | Has the meaning provided in Section 28.2(a). | |
Fees | Means the prices and fees for the Products and Services specified in Schedule B (Pricing and Payment Terms), and the Manufacturing Fees, subject to any reduction or increase in prices and fees pursuant to the provisions of this Agreement. | |
*** | Has the meaning provided in Section 30.3(a). | |
*** | The *** of SSN delivered in accordance with this Agreement. | |
*** | Has the meaning provided in Section 4.2(a). | |
Force Majeure Event | Has the meaning provided in Section 30.1(a). | |
Functional Requirements | The technical, operational and functional requirements for the Products as set forth in this Agreement and Annex A-5 (Functional Requirements and Product Roadmap) and any additional features and capabilities of the Products as described in the Documentation. In the event of a conflict |
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SmartMeter Program Upgrade Supply Agreement (SSN)
Defined Term |
Meaning | |
between any of the requirements of this Agreement and the requirements of Annex A-5 (Functional Requirements and Product Roadmap) and the Documentation, the most stringent will apply (that is, the requirement providing the most favorable functionality and performance to PG&E). | ||
Governmental Authority | Any federal, state, local, government, department, commission, board, bureau, agency, official or other regulatory, administrative or governmental authority official or authority, including, without limitation, the Federal Communications Commission, California Energy Commission and the California Public Utilities Commission. | |
Governmental Authorization | Any permit, license, franchise, approval, certificate, consent, ratification, permission, confirmation, endorsement, waiver, registration, qualification or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Legal Requirement. | |
HAN | Home area network. | |
including (and any of its derivative forms) | Including but not limited to. | |
Indemnitee | Has the meaning provided in Section 18.5. | |
Indemnitor | Has the meaning provided in Section 18.5. | |
Indemnity Items | Has the meaning provided in Section 18.1(c). | |
Initial *** | Has the meaning provided in Section 28.2(a). | |
Intellectual Property Rights | All worldwide common law or statutory (a) patents, patent applications, and patent rights; (b) rights associated with original works, authorship, moral rights, copyrights and all its exclusive rights; (c) rights relating to the protection of trade secrets and confidential information, (d) rights associated with algorithms, designs, industrial designs, and semi conductor design; (e) rights related to the possession, use or exploitation of signs, trademarks, service marks, trade names, trade dress and related goodwill; (e) rights analogous to those set forth above and any and all other industrial or intellectual property rights; and (f) registrations, divisionals, continuations, continuations-in-part, renewals, reissues, reexaminations, and extensions of the foregoing (as applicable) now existing or hereafter filed, issued or acquired. |
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SmartMeter Program Upgrade Supply Agreement (SSN)
Defined Term |
Meaning | |
*** | Has the meaning provided in Section 28.2(f)(i). | |
*** | Those positions identified in Schedule J (Approved Subcontractors and ***). | |
Knowledge | The actual knowledge of the officers or supervisory employees of a Party after reasonable investigation. | |
Legal Requirements | Any applicable law, statute, ordinance, decree, requirement, order, writ, judgment, injunction, award, treaty, proclamation, convention, rule or regulation (or interpretation of the foregoing) of, and the terms of any Governmental Authorization issued, required, or promulgated by, any Governmental Authority. | |
Liabilities | Has the meaning provided in Section 18.1(b). | |
License Fee Demand Notice | Has the meaning provided in Section 13.2(b)(i). | |
License | Has the meaning provided in Section 13.1(a). | |
*** | The *** and *** versions of SSNs Software, User Documentation, all Product Documentation and Manufacturing Know-How. | |
Live Billing | Has the meaning given to it in Section 5.3 (On-site Production Support). | |
*** | *** | |
Manufacturing Know-How | All information, rights (including Intellectual Property Rights), materials and support required to enable a reasonably experienced contractor who is generally familiar with the manufacture and maintenance of similar Equipment and Products and capable of doing so to independently understand, manufacture, test and repair the Products within PG&Es own facilities. | |
Material Adverse Change | A material adverse change in (a) the ***, (b) the *** or (c) *** under this Agreement, in all cases whether ***, including without limitation any *** | |
may not | Not having the right to do something. | |
may | Having the right, but not the obligation to do something. |
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SmartMeter Program Upgrade Supply Agreement (SSN)
Defined Term |
Meaning | |
Meters | Has the meaning provided in Section 1.1(b). | |
Minimum Lead Times | The time frame in which SSN will deliver the Products to PG&E or its designee, commencing upon SSNs acceptance of the Release Authorization as set out in Schedule C (Minimum Lead Times). | |
Network Hardware | The new or replacement network data collection units provided by SSN, as such units are described in Annex A-7 (List of SSN Products and Product Tools). | |
NIC Card | SSNs Network interface Card that provides wireless networking and HAN capability for commercial and industrial Meters. | |
Notice of Election | Has the meaning provided in Section 18.5(a). | |
*** |
*** | |
Order Documentation | Has the meaning provided in Section 4.1(e). | |
OSHA | Occupational Safety and Health Administration. | |
Parties | PG&E and SSN, together. | |
PG&E Data | Has the meaning provided in Section 21.1. | |
PG&E Indemnitees | Has the meaning provided in Section 18.1. | |
PG&E Product Modification | Has the meaning provided in Section 18.1(d). | |
PG&E-Specific Work Product | Has the meaning provided in Section 15.1(b). | |
*** Date | Has the meaning provided in Section 9.2(b). | |
*** | Has the meaning provided in Section 1.4.4(e). | |
Product Roadmap | Means the list of future Product enhancements described in lines 61 through 66 of Annex A-5 (Functional Requirements and Product Roadmap) which are to be made available to PG&E by the due dates specified in that document. | |
Product Support Tools | Any SSN developed tools, test equipment, software, firmware versions and processes that are used to test, tune and certify the SmartMeter System, including meter simulators and |
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SmartMeter Program Upgrade Supply Agreement (SSN)
Defined Term |
Meaning | |
access point simulators. A list of the Product Support Tools current as of the Effective Date is set forth in Annex A-7 (List of SSN Products and Product Tools). | ||
Products | The Equipment and the Software (including Upgrades) listed in Annex A-7 (List of SSN Products and Product Tools). | |
Purchase Order | A written order issued by PG&E in accordance with Section 4. | |
Receiving Party | Has the meaning provided in Section 22.1(a). | |
Release Authorization | Has the meaning provided in Section 4.1(a). | |
*** | Has the meaning provided in Section 28.2(a). | |
RF Mesh | Has the meaning provided in Section 1.1(b). | |
Service Period | The period of ongoing operations and maintenance of the SmartMeter System, beginning on *** and continuing for *** years. | |
Service Territory | PG&Es gas and electric service territory as of the Effective Date as set forth on Annex A-6 (Service Territory). | |
Services | All professional services, training, maintenance, support and other services provided by, or on behalf of, SSN under this Agreement. | |
shall | An expression of command, not merely an expression of future intent or expectation. | |
SmartMeter Interface | Has the meaning set forth in Section 1.1(b). | |
SmartMeter Supplier | Third parties who are involved in supplying components of, installing or providing other services for, the SmartMeter System. | |
SmartMeter System | Has the meaning set forth in Section 1.1(b). | |
SmartMeter Upgrade Project | Has the meaning set forth in Section 1.1(b). | |
Software | Programs, codes, algorithms, development tools, formulae, libraries, computer programs or applications to the extent provided by SSN to PG&E hereunder, including any Upgrades. |
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SmartMeter Program Upgrade Supply Agreement (SSN)
Defined Term |
Meaning | |
*** |
*** | |
SOX | The Sarbanes-Oxley Act of 2002, as it may be amended, supplemented and updated from time to time. | |
SSN Indemnitee | Has the meaning provided in Section 18.3. | |
SSN Personnel | Any and all personnel assigned to provide the Products or perform any part of the Services in, on or at property or facilities of or locations controlled by PG&E, including employees and independent contractors of (i) SSN, (ii) its Affiliates and (iii) Subcontractors. | |
Statement of Work | Has the meaning provided in Section 1.4(a). | |
Subcontractor | Has the meaning provided in Section 27. | |
Supplier Material | Has the meaning provided in Section 3.4(a). | |
*** | Has the meaning provided in Section 28.2(f)(ii). | |
*** | Has the meaning provided in Section 28.2(g). | |
*** | Has the meaning provided in Section 28.2(g). | |
*** | Has the meaning provided in Section 28.2(g). | |
UCITA | The Uniform Computer Information Transactions Act. | |
Upgrade | Is defined in Schedule H (Software Maintenance and Support). | |
Use | The right to use, install, execute, load, operate, display, copy, perform and maintain the Licensed Material. | |
User Documentation | An electronic version of the then-current installation instructions and user manuals customarily provided by SSN to customers of the Software | |
will | Unless the context requires otherwise, an expression of command, not merely an expression of future intent or expectation. | |
WIP | Has the meaning provided in Section 4.6(d). |
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SmartMeter Program Upgrade Supply Agreement (SSN)
Defined Term |
Meaning | |
*** | Has the meaning provided in Section 28.2(c). | |
*** | Has the meaning provided in Section 28.2(c). | |
WMDVBEs | Has the meaning provided in Section 26.3(a). | |
written or in writing | Is used for emphasis in certain circumstances, but that will not derogate from the general application of the notice requirements set forth in the Agreement in those and other circumstances. |
(End of General Terms and Conditions)
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Schedule A
Technical Annexes
The following Annexes comprise Schedule A to the Agreement:
Annex A-1: SmartMeter Master Project Plan
Annex A-2: Statement of Work
Annex A-3: Product Documentation
Annex A-4: Third Party Products and IT Infrastructure Specifications
Annex A-5: Functional Requirements and Product Roadmap
Annex A-6: Service Territory
Annex A-7: List of SSN Products and Support Tools
Annex A-8: NIC/HAN Technical Specifications
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Schedule A
Annex A-1 SmartMeter Master Project Plan
The Parties intend that the attached Project Plan will develop and evolve during the planning and deployment phases of the SmartMeter Project.
PG&E may update the attached Project Plan at any time by providing SSN with an updated version.
*** [2 pages redacted]
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Schedule A
Annex A-2
[Amended and restated in its entirety by Amendment No. 6]
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SmartMeter Program Upgrade Supply Agreement (SSN)
Schedule A
Annex A-3 Product Documentation
The following documents comprise Schedule A, Annex A-3 to the Agreement as of the Effective Date of the Agreement. SSN will provide updates of the Product Documentation in accordance with Section 12 of the Agreement.
File name |
Document |
Product |
Notes | |||
*** | *** | *** | *** |
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SmartMeter Endpoint Supply Agreement (SSN)
Schedule A
Annex A-4
[Deleted in its entirety and replaced by Amendment No. 5]
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SmartMeter Upgrade Project Supply Agreement (SSN)
Schedule A
Annex A-5
[Amended and restated in its entirety by Amendment No. 6]
SmartMeter Upgrade Project Supply Agreement (SSN)
Schedule A
Annex A-6 PG&E Service Territory
PG&E and SSN Confidential
Page 4
Schedule A
Annex A-7
[Amended and restated in its entirety by Amendment No. 6]
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Schedule A
Annex A-8 NIC/HAN Technical Specifications
PG&E and SSN Confidential
SSN NIC for L+G *** Meters***Product Specification
Catalog Number ***
Introduction
Silver Spring Networks (SSN) manufactures a network interface card (NIC) for the Landis+Gyr *** meter lines. The NIC has three interfaces; the ***
***
The NIC is a generic platform and configured as part of the meter assembly process for the meter and service.
NIC Specifications
Table 1 NIC Specification
LAN Transceiver | HAN Transceiver | |||||
*** | *** | *** | *** | |||
LAN Network | HAN Network | |||||
*** | *** | *** | *** | |||
Processing | Physical | |||||
*** | *** | *** | *** | |||
Meter Interface | Environmental | |||||
*** | *** | *** | *** |
Meter Interface
The SSN NIC uses a *** for both the *** meters as defined in the following table.
Table 2 Meter *** Configuration
*** |
Description | |
*** | *** |
The NIC communicates with the *** meter using the *** protocol and *** data tables.
The NIC connects to the *** side voltage and operates from either ***or ***.
Silver Spring Networks - Confidential and Proprietary |
Agency Approvals
FCC ***
Industry Canada ***
ANSI ***
SSN NIC for L+G *** Meters***Product Specification
Catalog Number ***
Introduction
Silver Spring Networks (SSN) manufactures a network interface card (NIC) for the Landis+Gyr *** meter lines. The NIC has three interfaces; the ***
***
The NIC is a generic platform and configured as part of the meter assembly process for the meter and service.
NIC Specifications
Silver Spring Networks - Confidential and Proprietary |
Table 3 NIC Specification
LAN Transceiver | HAN Transceiver | |||||
*** | *** | *** | *** | |||
LAN Network | HAN Network | |||||
*** | *** | *** | *** | |||
Processing | Physical | |||||
*** | *** | *** | *** | |||
Meter Interface | Environmental | |||||
*** | *** | *** | *** |
Meter Interface
The SSN NIC uses a *** connector to interface with the *** meter as defined in the following table.
Table 4 Meter *** Configuration
*** |
Description | |
*** |
*** |
The NIC communicates with the *** meter using the *** protocol and *** data tables.
The NIC connects to voltage on the *** of the meter. The power supply is *** and operates from voltages between *** and ***.
Agency Approvals
FCC ***
Industry Canada ***
ANSI ***
SSN NIC for L+G***Meters***Product Specification
Catalog Number ***
Introduction
Silver Spring Networks (SSN) manufactures a network interface card (NlC) for the GE Energy *** and *** meter lines. The NIC has three interfaces; the ***
***
The NIC is a generic platform and configured as part of the meter assembly process for the meter and service.
NIC Specifications
Table 5 NIC Specification
LAN Transceiver | HAN Transceiver | |||||
*** | *** | *** | *** | |||
LAN Network | HAN Network | |||||
*** | *** | *** | *** | |||
Processing | Physical | |||||
*** | *** | *** | *** | |||
Meter Interface | Environmental | |||||
*** | *** | *** | *** |
Meter Interface
The SSN NIC uses the same *** for both the *** and *** meters as defined in the following table.
Table 6 Meter *** Configuration
Silver Spring Networks - Confidential and Proprietary |
*** |
Description | |
*** |
*** |
The NIC communicates with the *** meter using a proprietary ***.
The NIC communicates with the *** meter using the *** protocol and *** data tables.
The NIC connects to voltage on the *** of the meter and operates from either *** or ***
Agency Approvals
FCC ***
Industry Canada ***
ANSI ***
SSN NIC for L+G*** Meters | ||||
Product Specification |
||||
Catalog Number *** |
Introduction
Silver Spring Networks (SSN) manufactures a network interface card (NIC) for the GE Energy *** meter lines. The NIC has three interfaces; the ***
***
The NIC is a generic platform and configured as part of the meter assembly process for the meter and service.
NIC Specifications
Table 7 NIC Specification
LAN Transceiver |
HAN Transceiver | |||||
*** |
*** | *** | *** | |||
LAN Network |
HAN Network | |||||
*** |
*** | *** | *** | |||
*** |
Physical | |||||
*** |
*** | *** | *** | |||
Meter Interface |
Environmental | |||||
*** |
*** | *** | *** |
Meter Interface
The SSN NIC uses a *** for interfacing with the *** meter as defined in the following table.
Table 8 Meter *** Configuration
*** |
Description |
*** |
Description | |||
*** | *** | *** | *** |
The NIC communicates with the *** meter using the *** protocol and ***data tables.
The NIC connects to voltage on the *** of the meter. The power supply is *** and operates from voltages between *** and ***
Agency Approvals
FCC ***
Industry Canada ***
ANSI ***
Silver Spring Networks - Confidential and Proprietary |
Schedule B
Pricing and Payment Terms
1. | GENERAL PROVISIONS |
1.1 | Overview |
(a) | This Schedule B sets forth the Fees for Products and Services to be provided by SSN to PG&E under the Agreement. |
(b) | Annex B-1 to this Schedule B (the Pricing Tables) lists the unit rates and other charges that are to be used to calculate the Fees. The Pricing Tables form part of this Schedule B. |
(c) | The Fees determined in accordance with this Schedule B, together with the Manufacturing Fees that PG&E may be required to pay pursuant to Section 14.2 of the Agreement, and any other fees, expenses or reimbursements to SSN that are specified in the Agreement, are the only charges and expenses that PG&E shall pay to SSN for SSNs provision of the Products and Services as set forth in the Agreement and for SSN to fulfill its obligations under the Agreement. In the event that any fees, charges or expenses for any additional products or services are required for SSN to perform its obligations as originally specified and within the original scope of the Agreement, such products and/or services shall be provided by SSN at no additional cost or expense to PG&E. Additional Fees may be payable with respect to Change Requests, as provided in Section 4.7 (Change Request) of the Agreement, and with respect to any additional Statements of Work or the addition of SSN Products to this Agreement. |
(d) | Subject to Section 1.1(e) below, the Fees set forth in this Schedule B will *** as described in this Schedule B. |
(e) | The Fees *** |
(i) | Section *** of the Agreement; |
(ii) | Section *** of this Schedule; and |
(iii) | Section *** of this Schedule. |
(f) | Prices and terms set out in this Schedule B (and Annex B-1) represent a binding offer from SSN to supply Products as ordered by PG&E pursuant to Purchase Orders during the Deployment Period and the Service Period. PG&E will have no obligation to purchase Products or services under this Schedule B and a commitment binding upon PG&E to purchase Products will arise only upon PG&E issuing Purchase Orders as described in Section 4 (Ordering, Delivery, Inspection and Acceptance Testing) of the Agreement. |
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Schedule B Pricing and Payment Terms
Annex B-1 - Pricing Tables
1.2 | Invoicing and Payment |
(a) | SSN will issue invoices: |
(i) | *** (including the Equipment referred to in Pricing Tables 1, 2, 3, 4 and 5) to PG&Es or its designees nominated ***; |
(ii) | for the services described in the Statement of Work, as provided in Pricing Table 6. |
(iii) | ***for the provision of Services that are provided on a *** basis in accordance with the charges set out in Pricing Table 7 (Ad-hoc Consulting); |
(iv) | for the Software license fee set forth in Pricing Table 8, in ***; and |
(v) | commencing at the *** for the Software Maintenance and Support (as described in Schedule H) fees set out in Pricing Table 9. The fees payable for Software Maintenance and Support during the Deployment Period are ***pursuant to the Agreement. |
(b) | SSN will include in all invoices the information required under this Schedule B and will submit all invoices using PG&Es electronic invoicing system. |
(c) | PG&E will pay undisputed, invoiced amounts within *** the date of PG&Es receipt of the applicable invoice. |
(d) | If PG&E does not pay invoices within *** of the due date, SSN may charge a late payment fee on the unpaid amounts, commencing *** from the due date, equal to the lesser of *** per month and the maximum legal rate. |
(e) | Payments will be made in United States currency by bank transfer to SSNs nominated bank account. |
(f) | PG&E may withhold amounts due under an invoice that are subject to a good faith dispute with respect to Products and/or Services covered under that invoice without SSNs assertion of a payment default. PG&E will promptly provide SSN with written notice describing any such good faith dispute. Under no circumstances will SSN suspend or delay its performance under this Agreement during any such payment dispute. |
(g) | PG&E will have *** in accordance with Section 1.2(a) above. |
(h) | PG&E shall have the right to ***under the Agreement. |
1.3 | *** |
(a) | *** |
(b) | *** *** |
(c) | *** |
(d) | *** |
(e) | *** *** |
(f) | *** |
1.4 | Taxes |
(a) | Except for California sales and use taxes and taxes on PG&Es net income, all other taxes of any kind that may be levied or assessed with respect to any payments made hereunder by PG&E to SSN, and any withholding obligations of SSN with respect to any of its employees or subcontractors for all such taxes are the sole responsibility of, will be for the account of, and will be paid by SSN. |
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SmartMeter Project Upgrade Supply Agreement
Schedule B Pricing and Payment Terms
Annex B-1 - Pricing Tables
(b) | SSN and PG&E will cooperate in structuring, separating and implementing the various transactions contemplated by this Agreement in a manner reasonably designed to appropriately account for California sales and use taxes on or with respect to such transactions. Costs that may be excludable from taxable costs for sales and use tax purposes, including excludable design services, training, shipping and transportation, installation and project management, will be separately stated and invoiced. |
(c) | If SSN is authorized to collect California sales and use taxes with respect to the Products hereunder, PG&E will remit to SSN the amount of any such taxes (excluding any fines, penalties, interest charges or the like resulting from SSNs failure to timely or properly perform its obligations as the entity responsible for remitting such taxes) relating to the transactions contemplated by this Agreement at the same time PG&E is invoiced by and makes payment to SSN, provided, however, that PG&E will not be required to remit any such amount to SSN unless and until SSN has provided its California sellers permit number to PG&E in writing. |
1.5 | Shipping and Insurance |
The prices set forth in the Pricing Tables are ***. Shipping and insurance charges for any new Products that are not priced in the Pricing Tables shall be ***.
2. | ARRANGEMENT WITH METER SUPPLIERS |
(a) | If PG&E enters into agreements with other SmartMeter Suppliers for the manufacture and provision of Meters incorporating the Equipment set out in Pricing Table 3 (Endpoint Communication Modules), SSN shall sell that Equipment directly to the Smart Meter Supplier in accordance with the terms and conditions agreed between it and the SmartMeter Supplier (an SSN/SmartMeter Supplier Contract). PG&E is not liable to SSN for any default in payment or other liability that such SmartMeter Supplier may have to SSN under the terms of the SSN/SmartMeter Supplier Contract. |
(b) | The pricing set out in Pricing Table 3 applies to any endpoint communication modules that PG&E elects to purchase directly from SSN under the Agreement. The total volume of endpoint communication modules supplied to PG&E under this Agreement and (indirectly) all *** shall be*** under this Agreement in accordance with Section 5 (***) below. |
3. | *** |
The charges set out in Pricing Table 5 *** are the only additional charges that PG&E will be responsible for in respect of any Meters that are ***. In no event will such charges exceed *** per end point for *** of the total number of endpoints. For the avoidance of doubt, SSN will be ***
4. | *** AND *** |
(a) | SSN will invoice PGE for *** set out in Pricing Table 8 in accordance with the following: |
(i) | ***; |
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Schedule B Pricing and Payment Terms
Annex B-1 - Pricing Tables
(ii) | ***; |
(iii) | ***; |
(iv) | ***; |
(v) | ***; |
(vi) | ***; |
(vii) | ***; and |
(viii) | ***. |
(b) | The SSN network will be *** as set out in Schedule E (Review, Testing and Acceptance Process for Deliverables)*** and are outside the scope of SSNs Services under this Agreement. |
(c) | PG&E may elect to purchase Software Maintenance and Support services during the Service Period in accordance with Section 7(c) of the Agreement for the charges set out in Pricing Table 9 (Software Support and Maintenance Fees). |
(d) | If, on the commencement of the Service Period, any part of the Software license fee remains unpaid because the condition for payment has not been met (for example, an enhancement set out in the Product Roadmap has not been provided), the Support and Maintenance fees will be ***, for so long as those Software fees remain unpaid. |
5. | *** |
(a) | *** |
(b) | *** |
(c) | *** |
6. | TERMINATION FOR CONVENIENCE |
6.1 | Termination Charges |
(a) | If PG&E terminates the Agreement for convenience in accordance with Section 20.2(a) of the Agreement, then PG&E will compensate SSN as follows: |
(i) | For Software: *** in accordance with Section *** |
(ii) | For Services: *** |
(iii) | For Equipment: |
(1) | ***; and*** |
(2) | *** |
(b) | The amounts set out in this Section 6 are PG&Es sole and exclusive liability to SSN based on termination of the Agreement for PG&Es convenience. |
6.2 | Cancellation of a Purchase Order |
If PG&E cancels a Purchase Order pursuant to Section 4.6 (Cancellation and Re-Scheduling) of the Agreement, PG&E will pay for Equipment subject to the Purchase Order in accordance with such Section 6.1(a)(iii) above.
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Schedule B Pricing and Payment Terms
Annex B-1 - Pricing Tables
6.3 | Delivery of Equipment |
Upon termination of the Agreement pursuant to Section 20.2(a) of the Agreement or a Purchase Order in accordance with Section 4.6 (Cancellation and Re-Scheduling) of the Agreement and payment by PG&E for the Equipment in accordance with Section 6.1(a)(iii) above, SSN will promptly deliver the Equipment and any work-in-progress relating to the Purchase Order to PG&E.
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Schedule B - Pricing and Payment Terms
Annex B-1 - Pricing Tables
Table 1 - Network Infrastructure
Network Infrastructure |
Model Code | Volume required for Network Footprint |
*** | |||||||||||||
*** | ||||||||||||||||
*** | *** | *** | ||||||||||||||
*** |
*** | *** | *** | *** | *** | |||||||||||
*** | *** | *** | ||||||||||||||
*** |
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Table 2 - Network Accessories
Network Accessories |
Model Code | Volume required for Network Footprint |
*** | |||
*** |
*** | *** | *** |
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Schedule B Pricing and Payment Terms
Annex B-1 - Pricing Tables
Table 3 - Endpoint Communication Modules
Endpoint Communication Modules |
Model Code | Planned volume |
*** | *** | *** | |||||||||||
*** |
*** | *** | *** | *** | *** | |||||||||||
*** | *** | *** | ||||||||||||||
*** | *** | *** | ||||||||||||||
OPTIONS | ||||||||||||||||
*** |
*** | *** | *** | *** | *** |
Note 1 to Table 3
This category includes the following:
(a) | ***; |
(b) | ***; |
(c) | ***; |
(d) | ***; |
(e) | ***; and |
(f) | *** |
Note 2 to Table 3
This category includes the following:
(a) | ***; |
(b) | ***; |
(c) | ***; and |
(d) | ***. |
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Schedule B Pricing and Payment Terms
Annex B-1 - Pricing Tables
Table 4 Endpoint Accessories
Endpoint Accessories |
Model Code | Volume required for Network |
*** | |||
*** |
*** | *** | *** |
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Schedule B Pricing and Payment Terms
Annex B-1 - Pricing Tables
Table 5 ***
*** situation |
Planned Resolution | % of volume of endpoints covered |
*** | |||
*** |
*** | *** | *** |
Refer to Section 3 of Schedule B (Pricing and Payment Terms)
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Schedule B - Pricing and Payment Terms
Annex B-1 - Pricing Tables
Table 6
[Replaced by Amendment No. 6]
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Annex B-1 - Pricing Tables
Table 7
[Replaced by Amendment No. 6]
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Table 8
[Deleted in its entirety and replaced by Amendment No. 5]
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Table 9 - Software Support and Maintenance Fees | ||||
Description |
*** | |||
*** | *** |
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Schedule B Pricing and Payment Terms
Annex B-1 - Pricing Tables
Table 10 - Quantities Required for each Division | ||||||||
Location |
AMI Network Concentrators (Gateways/Take-out Points) |
AMI Network Repeaters Equipment |
Deployment/ Mounting |
Battery Back-ups for APs | ||||
*** |
*** | *** | *** | *** |
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Schedule C
Minimum Lead Times
AMI Network Concentrators: The minimum lead time for AMI Network Concentrators is ***weeks.
AMI Network Repeaters: The minimum lead time for AMI Network Repeaters is *** weeks.
Network Accessories (Including mounting brackets, battery back-ups, remote antennas, cables): The minimum lead time for Network Accessories is *** weeks.
Endpoint Communication Modules: The minimum lead time for Endpoint Communication Modules is *** weeks.
Other Equipment (Including Field Service Units and Field Service Radios): The minimum lead time for Endpoint Communication Modules is ***weeks.
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Schedule D
Governance Framework and Processes
1. | GOVERNANCE FRAMEWORK |
The following graphic depicts the governance framework for the SmartMeter Upgrade Project. It depicts how SSN will work with PG&E during the deployment phase of the SmartMeter Upgrade Project.
Project Team |
Program Management |
Steering Committee | ||||
Optimization | PMO | PG&E CCO | ||||
Deployment | Project Managers | PG&E CIO | ||||
Roles | Procurement | Finance | PG&E, VP, Products | |||
System Integration | Communication | and Services | ||||
Operations | PG&E, Sr. Dir., Smart | |||||
Silver Spring Networks | Energy Web | |||||
SSN CEO | ||||||
Task/Project execution | Joint PG&E and vendor decisions | Critical decision making | ||||
Responsibilities | Risk mitigation / Issue | Conflict resolution | Executive Guidance | |||
resolution | Risk mitigation / Issue resolution | Issue probing | ||||
Project planning / resource loading | ||||||
Budgeting | ||||||
Status reporting
|
||||||
Output | Project deliverables | Project status | Formal approval of decisions | |||
Ongoing documentation and | Conflict escalation | Formal approval of meeting | ||||
updates of issues and risks | Risk escalation | major milestones | ||||
Scope changes | ||||||
Resource changes
|
||||||
Timing | Daily | Weekly | Monthly |
2. | GOVERNANCE PROCESSES |
The governance framework is segmented into three levels: the Project Team; Program Management; and Steering Committee. Each level has distinct roles, responsibilities, and reporting obligations. The levels are segmented based on their degree of tactical versus strategic focus on project issues.
3. | PROJECT TEAM |
3.1 | Overview |
(a) | The Project Team is composed of the following functional areas: The PG&E Optimization team addresses the functional specifications of the system and develops procedures for testing and operating the network. The PG&E Deployment team installs the physical network and meters. PG&E Procurement purchases and receives the equipment. PG&E Systems Integration ensures that data collected by the network can be received and used by existing back-end systems. PG&E Operations runs the meter and network once it is installed and the system is operating. SSN is the vendor that delivers network Equipment, Meter NICs, and Software. |
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(b) | The SSN team will be composed of a project manager and field engineer, both on a full time basis. On a part time basis the SSN team will have contributions from a field manager, field engineer, technical support representative, system administrator, testing coordinator, systems integration manager and systems integration engineer. |
(c) | The Project Team is responsible for daily execution of the project. These teams are responsible to work together and adhere to timelines and cost budgets. The Project Teams are also responsible for identifying risk and mitigating risks. The Project Team leaders are enabled to manage their projects and the interaction with other projects according to their own prudent project management techniques, while adhering to all relevant procedures (e.g., PG&E Delivery Model) and contract provisions. |
3.2 | Reporting Requirements |
The output of the Project Teams are project Deliverables as defined in the overall Project Plan and Statement Of Work. Project Teams will report out the status of their workstreams against plan as defined in Annex A-1 (SmartMeter Master Project Plan) to the Agreement. The Project Teams also elevate issues and risks that they are unable to resolve at their level.
3.3 | Meeting Timing and Required Attendees |
Project Teams meet and interact on a daily basis. Their focus is tactical project management and project issues. Required attendees will be determined by individual workstream project manager.
4. | PROGRAM MANAGEMENT |
4.1 | Overview |
(a) | The Program Management Team is composed of the following functional areas: The Program Management Office (PMO) is the function that manages the administrative functions of the project. Project managers monitor and run the project. Finance tracks the budget and expenditures. Communications crafts messages and updates about the project for internal and external audiences. |
(b) | Program Management is responsible for coordinating and managing all of the Project Teams. It is responsible for making decisions jointly with the vendor and resolving conflicts between Project Teams. Program Management is responsible for publishing master project plans, checking status, and reporting out updates to the plan. Program Management also tracks expenditures and is responsible for meeting budgetary goals. |
(c) | The PMO is the first step of the informal issue and dispute escalation process. The PMO should seek to resolve conflicts to the degree that it is able. Issues that cant be resolved should be raised to the Steering Committee for the next level of informal dispute resolution. |
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4.2 | Reporting Requirements |
The outputs of Program Management are project status reports for the Steering Committee. Program Management also creates the monthly report that escalates unresolved risks and conflicts (Risk and Conflict Report). Additionally, Program Management makes recommendations to the Steering Committee for significant decisions, including scope and budget changes. All of the information in this reporting requirements section can be included in a Steering Committee presentation that guides the discussion, provides information, and presents key questions.
4.3 | Meeting Timing and Required Attendees |
Program Management meets on a weekly basis with the Project Teams and has both a tactical and strategic focus. Required attendees will be determined by the program manager and will generally include project managers from each of the major workstreams and workstream project team members, as appropriate.
5. | STEERING COMMITTEE |
5.1 | Overview |
(a) | The Steering Committee is composed of the following PG&E positions. Chief Customer Officer drives overall program success and benefits. Chief Information Officer controls technical aspects of the program. The VP of Products and Services enables new value-added service offerings for the SmartMeter Upgrade Project. The Senior Director of Smart Energy Web focuses the Steering Committee on strategic project issues. The CEO of SSN will be invited to attends parts of the Steering Committee meeting to represent SSNs capabilities and performance, but is not a member of, or decision maker on the Steering Committee. |
(b) | The Steering Committee is responsible for making the critical decisions that the other levels couldnt make or didnt have the authority to make. The Steering Committee leverages its collective experience to provide executive level guidance for the project, uncovering potential risks or opportunities. The Committee probes issues to discover root causes. Finally, the Committee is a venue for executive to executive, cross-company communication that can drive to immediate closure of issues not resolved at lower levels. |
(c) | The Steering Committee is the final informal step in the dispute resolution process. The PMO should ensure that the Steering Committee has all relevant information to resolve any disputes that reach the Steering Committee. |
5.2 | Reporting Requirements |
The outputs of the Steering Committee are formal decisions as well as formal recognition of the achievement of significant project milestones, which may also signify payment points. The Program Manager will distribute an email after the Steering Committee meeting to all attendees and relevant parties. The email should indicate key decisions made and action items.
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5.3 | Meeting Timing and Required Attendees |
The Steering Committee meets on a monthly basis and has a strategic focus. Steering Committee members will be required attendees, with particular emphasis on PG&Es CCO and SSNs CEO being in attendance. The Program Manager and project managers with Steering Committee business are also required attendees. The Program Manager may also call on specific subject matter experts, as appropriate.
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Schedule D
Annex D- 1 Change Control Process
1. | INTRODUCTION |
This Annex D-1 sets out the high level Change Control Process the parties will follow for the identification, analysis and approval or rejection of all changes to (i) Products (including changes to Software, Network Equipment, Meters or the manufacturer of any Equipment or manufacturing process or location as identified in Section 2.2 of the Agreement; (ii) Purchase Orders; (iii) SSNs performance under the Agreement; (iv) the terms and conditions of the Agreement; or (v) any other change requested by a party (each of which is a Change).
2. | INITIATION OF CHANGES |
(a) | *** |
(b) | *** |
(c) | *** |
(d) | *** |
3. | APPROVAL/REJECTION OF PROPOSED CHANGES |
(a) | *** |
(b) | *** |
(c) | *** |
4. | IMPLEMENTATION OF PROPOSED CHANGES |
(a) | Within *** of the Effective Date the Parties will agree upon processes by which Changes to: |
(i) | *** *** *** |
(ii) | *** |
5. | COSTS AND EXPENSES |
*** specified in this Annex D-1.
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Schedule E
Review, Testing and Acceptance Process for Deliverables
1. | INTRODUCTION |
1.1 | Overview |
*** |
1.2 | Definitions |
2. | DEVELOPMENT TESTING |
***
3. | SYSTEM ACCEPTANCE TESTING |
***
4. | FINAL ACCEPTANCE |
***
5. | FAILURE TO ACHIEVE PG&ES PROVISIONAL OR FINAL ACCEPTANCE OF DELIVERABLES |
***
***
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Annex E-1 Severity Levels and Response/Resolution Requirements
SCHEDULE E
REVIEW, TESTING AND ACCEPTANCE PROCESS FOR DELIVERABLES
ANNEX E-1
Development and Testing Defects - Severity Levels and Response/Resolution Requirements
Level |
Definition/Description |
Response Requirements |
Resolution Requirements | |||
Severity 1 |
System Failure | SSN will: | SSN Will: | |||
*** | *** | *** |
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Annex E-1 Severity Levels and Response/Resolution Requirements
Development and Testing Defects - Severity Levels and Response/Resolution Requirements
Level |
Definition/Description |
Response Requirements |
Resolution Requirements | |||
Severity 2 |
*** | SSN will: | SSN will: | |||
*** | *** |
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Annex E-1 Severity Levels and Response/Resolution Requirements
Development and Testing Defects - Severity Levels and Response/Resolution Requirements
Level |
Definition/Description |
Response Requirements |
Resolution Requirements | |||
Severity 3 |
*** | SSN will: | SSN will: | |||
*** | *** | |||||
Severity 4 |
*** | SSN will: *** |
SSN will: *** |
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Schedule F
Compensation for ***and ***
(a) | Overview. SSN shall pay PG&E Liquidated Damages if any breach of SSNs obligations under the Agreement results in *** as defined below and as contemplated by Section 4.5 of the Agreement. SSN shall also reimburse PG&E for *** of the Agreement. |
(b) | Definitions. For the purposes of this Schedule: |
(i) | ***. |
(ii) | ***. |
(iii) | ***. |
(c) | Liquidated Damages. If any breach of the Agreement by SSN results in ***, SSN shall (subject to paragraph (f) below) pay PG&E Liquidated Damages which the parties agree for purposes of this Schedule F shall be *** for each affected Meter (Liquidated Damages) for the duration of the ***, provided that the period of delay for which SSN shall pay Liquidated Damages will not exceed the duration of the uncured breach by SSN. |
Example #1. In breach of the Agreement, SSN is *** days late in delivering network Products to PG&E. The delay causes *** delays to PG&Es implementation schedule as a result of which a group of Meters that would have been *** to allow *** to *** to PG&E are delayed by ***days. SSN is liable for Liquidated Damages for *** days.
Example #2. In breach of the Agreement, SSN is *** days late in delivering network Products to PG&E. PG&E is able to mitigate the impact of the delay on the implementation schedule, as a result of which a group of Meters that would have been *** to allow *** to *** to PG&E are delayed by *** days. SSN is liable for Liquidated Damages for *** days.
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Schedule F Compensation for Lost AMR Benefits
and Incremental Installation Charges
(d) | Reimbursement of ***In addition to the foregoing, SSN shall reimburse PG&E for any *** that result from a breach of the Agreement by SSN. *** as a result of such breach. |
(e) | Deemed material breach. SSN shall be deemed to have committed a material breach of the Agreement and PG&E shall have all of its rights and remedies available under the Agreement if: |
(i) | the total amount of Liquidated Damages payable by SSN pursuant to this Schedule exceeds ***; or |
(ii) | SSNs unexcused delay in performing its obligation under the Agreement gives rise to a *** or longer. |
(f) | *** If, during any part of a ***Period, *** are in part responsible for a failure of PG&E to realize, or a delay in realizing, the *** during that period (the ***) the amount of Liquidated Damages that SSN is obligated to pay will be reduced for the *** in accordance with the following formula: |
***
Where:
***
Example # 3. SSN causes a delay lasting ***, with ***. The Liquidated Damages accruing with respect to that delay is therefore ***
(i) | ***; plus |
(ii) | ***; plus |
(iii) | ***. |
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***.
(g) | Liquidated Damages - intent. The Parties acknowledge and agree that the Liquidated Damages determined in accordance with this Schedule are a reasonable estimate of the damages associated with PG&Es inability to achieve *** as a result of a breach of the Agreement by SSN. Such Liquidated Damages are not penalties. |
(h) | Unless and until PG&E terminates this Agreement for SSNs material breach, the *** and *** shall be *** against SSN for delays. Upon a termination by PG&E for SSNs material breach, SSN shall ***, but PG&E shall be entitled to all other rights and remedies available to it under the Agreement, including damages that are incurred by PG&E after the date of termination and for which PG&E has not already received Liquidated Damages hereunder. |
(i) | Any Liquidated Damages and *** paid by SSN shall be applied toward the limitations of liability in Section 19 (Limitations of Liability) of the Agreement. |
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Schedule G - Product and Service Warranties
Schedule G
Product and Service Warranties
Pursuant to Section 16 (Product Performance and Service Warranties) of the Agreement, SSN warrants and covenants to PG&E as follows:
1. | PRODUCT COMPATIBILITY |
(a) | Subject to Section 1(b), each of the Products that are intended or required to *** (including ***, and *** and ***) will be compatible with, will remain compatible ***, and will work together as components, of *** and will be compatible with and inter-operate and work together with the *** so as to meet the Functional Requirements. |
(b) | The warranty in Section 1(a) does not apply to any incompatibility caused by any ***. |
2. | SMARTMETER NETWORK DESIGN |
(a) | In this Section, Network Footprint means the geographic area which, as of the Effective Date, is identified by *** and which may be updated as a result of changes in network coverage as contemplated by Section 6 (Design and Consulting Services) of the Agreement. |
(b) | [Amended and restated in its entirety by Amendment No. 6] |
(c) SSN warrants that the *** required to achieve the Network Design will be no greater in *** value and will be within ***counts as listed in Pricing Table *** of Annex B-1 of the Agreement. If the *** ultimately required exceeds these parameters, SSN will provide any additional *** required for PG&Es implementation at no cost to PG&E.
3. | CONTINUATION OF PRODUCT *** |
During the Deployment Period and the Service Period, SSN will not discontinue, phase out or abandon further development of the Products or otherwise limit PG&Es ability to purchase Products (as the same may be changed in accordance with Section 2.2 of the Agreement); provided that nothing in this Section shall prohibit SSN from developing upgrades, updates, enhancements and new versions of the Products in accordance with Section 2.2 of the Agreement or discontinuing support for obsolete versions of Software as permitted by Section 7(d) of the Agreement.
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Schedule G - Product and Service Warranties
4. | SERVICES |
With respect to Services to be performed by SSN under the Agreement, the Services will be performed in a professional, competent and timely manner by persons appropriately qualified and trained to perform such Services.
5. | SOFTWARE FUNCTIONALITY AND SCALABILITY |
(a) | The Software, when implemented using the quantity and specifications of third party equipment and software listed in Annex A-4 (Third Party Products and IT Infrastructure Specifications) (the *** Infrastructure), will: |
(i) | have sufficient ***, in accordance with the Functional Requirements; and |
(ii) | When in operation, will comply with the Functional Requirements. |
(b) | If the *** Infrastructure is insufficient to operate as warranted under Section 5(a), SSN shall provide *** to enable the Products to operate in accordance with the warranty set out in Section 5(a). |
6. | NIC/HAN TECHNICAL SPECIFICATIONS |
Annex A-8 (NIC/HAN Technical Specifications) sets forth SSNs technical specifications for the NIC Card. PG&E will ***. SSN represents and warrants that, if PG&E ***
7. | EQUIPMENT COMPLIANCE |
(a) | Each of the Products will comply with the Functional Requirements (the Equipment Warranty). |
(b) | Equipment that fails to comply with the Equipment Warranty due to one or more of the following causes is not covered by the Equipment Remedy and will be repaired or replaced only upon the payment of additional charges: |
(i) | an alteration or modification *** |
(ii) | *** |
(iii) | misuse or abuse, including the failure to operate Equipment in accordance with its specifications (as set forth in the applicable Product Documentation); |
(iv) | improper handling, installation, testing, or use; |
(v) | fire originating outside of the Equipment; |
(vi) | Force Majeure Events; and |
(vii) | during the Extended Warranty Period, *** |
(c) | During the *** will be included in the calculation of the Actual Failure Rate. |
(d) | During the *** and are not included in the calculation of the Actual Failure Rate. |
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7.2 | Actual Failure Rates |
(a) | For determining remedies available to PG&E for failure of individual items of Equipment to comply with the Equipment Warranty, Equipment is grouped into ***by ***. |
(b) | The Actual Failure Rate for each *** in any *** will be determined in accordance with the following formula: |
Actual Failure Rate = |
*** |
|||
*** |
(c) | By way of example only, if ***. |
(d) | PG&E will track and calculate Actual Failure Rates on a ***. |
7.3 | *** Equipment Claims |
(a) | SSN will provide the Equipment Remedy for all Failed Equipment ***during the *** of each item of Equipment. |
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(b) | In addition if, in any year of the ***, the Actual Failure Rate for an *** is greater than the Expected Annual Failure Rate set out in Table 1, SSN will (for the number of items of Failed Equipment above the Expected Annual Failure Rate): |
(i) | ***; and |
(ii) | ***. |
(c) | If, in any year of the ***, the Actual Failure Rate for an ***is greater than the Upper Limit Failure Rate in Table 1, in addition to the remedies set out in Sections 7.3(a) and 7.3(b) above, PG&E may *** under the Agreement. |
Table 1 1
*** Expected Annual Failure Rate (By ***)
Endpoint Communication Module (including HAN) |
AMI network concentrator (gateway/takeout point) |
AMI network repeater | ||||||||||
*** |
Expected Failure Rate |
Upper Limit Failure Rates |
Expected Failure Rate |
Upper Limit Failure Rates |
Expected Failure Rate |
Upper Limit Failure Rates | ||||||
1 |
*** | *** | *** | *** | *** | *** | ||||||
2 |
*** | *** | *** | *** | *** | *** | ||||||
3 |
*** | *** | *** | *** | *** | *** | ||||||
4 |
*** | *** | *** | *** | *** | *** | ||||||
5 |
*** | *** | *** | *** | *** | *** |
1 | *** are included in accordance with Section 7(c). |
7.4 | *** Equipment Claims |
(a) | The provisions of this Section 7.4 will apply during the ***. |
(b) | In any *** during which the *** applies for an ***, if the Actual Failure Rate in an *** is higher than the applicable Expected Annual Failure Rate set out in Table 2 below, SSN will provide the Equipment Remedy for each item of Failed Equipment in excess of the Expected Failure Rate***. |
(c) | In addition if, in any year of the ***, the Actual Failure Rate for an *** is within the range of the Upper Zone shown in Table 2, SSN will (for the number of items of Failed Equipment above the lower limit of the Upper Zone): |
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Schedule G - Product and Service Warranties
(i) | ***; and |
(ii) | ***. |
(d) | If, in any year of the ***, the Actual Failure Rate for an *** is greater than the Upper Zone in Table 2, in addition to the remedies set out in Sections 7.4(b) and 7.4(c) above, PG&E may ****** under the Agreement. |
Table 2 1
*** Expected Annual Failure Rate (By ***)
Endpoint Communication Module (including HAN) |
AMI network concentrator (gateway/takeout point) |
AMI network repeater | ||||||||||
*** |
Expected Failure Rate |
Upper Zone |
Expected Failure Rate |
Upper Zone |
Expected Failure Rate |
Upper Zone | ||||||
6 |
*** | *** | *** | *** | *** | *** | ||||||
7 |
*** | *** | *** | *** | *** | *** | ||||||
8 |
*** | *** | *** | *** | *** | *** | ||||||
9 |
*** | *** | *** | *** | *** | *** | ||||||
10 |
*** | *** | *** | *** | *** | *** | ||||||
11 |
*** | *** | *** | *** | *** | *** | ||||||
12 |
*** | *** | *** | *** | *** | *** | ||||||
13 |
*** | *** | *** | *** | *** | *** | ||||||
14 |
*** | *** | *** | *** | *** | *** | ||||||
15 |
*** | *** | *** | *** | *** | *** | ||||||
16 |
*** | *** | *** | *** | *** | *** | ||||||
17 |
*** | *** | *** | *** | *** | *** | ||||||
18 |
*** | *** | *** | *** | *** | *** | ||||||
19 |
*** | *** | *** | *** | *** | *** | ||||||
20 |
*** | *** | *** | *** | *** | *** |
1 | *** are not included as provided in Section 7(d). |
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Schedule G - Product and Service Warranties
8. | RETURNS PROCEDURE |
Prior to returning a unit of Equipment for repair or replacement, PG&E shall obtain from SSN an RMA number, which shall be indicated on all packaging, labeling, and other communications relating to the return. SSN may require that the Equipment be evaluated prior to issuing an RMA number. Once SSN confirms the nonconformity or defect and determines that it cannot be repaired at PG&ES site, then SSN shall accept return of such Equipment for repair or replacement as promptly as possible.
9. | DEFINITIONS |
The following definitions apply to this Schedule G:
Actual Failure Rate the rate of failure of Equipment in a particular *** during an ***, determined in accordance with Section 7.2.
*** Size means the aggregate number of items of Equipment in an ***.
*** means all Equipment *** that are ***.
Equipment Remedy means that SSN will***
Equipment Warranty has the meaning given to it in Section 7(a).
***
Failed Equipment means any Equipment that fails to comply with the Product Warranty and which necessitates physical repair or replacement of the Equipment.
***Head End System Infrastructure has the meaning given to it in Section 5(a).
*** means the number of *** that an item of Equipment has been installed. *** is measured from the year in which an item of Equipment is ***, until *** of the following year. Subsequent *** are measured from July 1 to ***. For example, for Equipment installed in 2009, *** is measured from *** to ***. *** is measured from *** to ***, and so on.
Network Design has the meaning given to it in Section 2.
Network Footprint has the meaning given to it in Section 2.
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Schedule H
Software Maintenance and Support
1. | GENERAL PROVISIONS |
1.1 | Background and Context |
(a) | As part of the SmartMeter Upgrade Project, PG&E has licensed certain Software from SSN under the terms set forth in the Agreement. |
(b) | This Schedule H supplements the Agreement by setting forth the maintenance and support services SSN will provide to PG&E for the Software (collectively, the Support Services). |
1.2 | Defined Terms |
Capitalized terms used in this Schedule are either defined in Section 18 below or in the Agreement.
2. | SUPPORT SERVICES |
(a) | SSN will provide to PG&E the Support Services described in this Schedule H during the *** and any additional period during which PG&E exercises its option to continue to purchase the Support Services in accordance with Section 7(c) of the Agreement and pays Software support and maintenance fees as set out in Schedule B (Pricing and Payment Terms). |
(b) | PG&E may elect to purchase Support Services on an annual basis after the end of the *** by giving SSN notice in accordance with Section 7 of the Agreement. |
(c) | At PG&Es request, SSN will make SSN Personnel available for and provide on-site Support Services *** within ***hours from such request, or within a mutually agreed response time frame. |
(d) | *** |
(e) | PG&E will have the option of separately obtaining from SSN, at the time and materials rates set forth in Schedule B (Pricing and Payment Terms), and subject to mutual agreement as to scope, specifications, timing, software development and enhancement services not covered by Support Services. |
3. | SUPPORT SERVICE HOURS |
(a) | SSN will provide the Support Services ***. |
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(b) | PG&E will be entitled to ***. SSN will ***. |
4. | TECHNICAL SUPPORT |
(a) | SSN will provide telephone support by a qualified technician for the purpose of answering questions and otherwise assisting PG&E in its use of the Software and any interfaces developed by SSN as necessary for PG&Es personnel (whether employees or contractors) to operate, maintain, support and enhance that portion of PG&Es SmartMeter System provided by SSN. |
(b) | SSN will ensure that the SSN Personnel providing technical support are experienced in the installation and deployment of the SmartMeter System and familiar with the Products and Services provided under the Agreement. PG&E may request that SSN Personnel providing technical support be included in the list of *** set out in Schedule Q (Approved Subcontractors and ***), and subject to the provisions of Section 26.2 of the Agreement (***). |
(c) | SSN intends to develop and implement a ***. Once implemented, SSN will provide PG&E ***. Until such ***, and SSN will ***. SSN will update the status of PG&Es open Severity 1, 2 and 3 problem tickets ***. |
5. | CORRECTIVE MAINTENANCE |
(a) | SSN will provide services to acknowledge, diagnose and correct Defects relating to the Software (including Upgrades and enhancements) as described below so that the Software (including Upgrades and enhancements) operates and performs in accordance with the Documentation and the Product Description and the Software warranties set out in Schedule G (Product and Service Warranties). |
(b) | SSN will make qualified technicians available for the purpose of receiving (and responding to) Incident Reports (IRs) via telephone or e-mail. |
(c) | Promptly upon receiving an Incident Report (IR), SSN will provide the services necessary to Respond to it, Diagnose it and, if the source of the IR is confirmed to be a Defect, Resolve it, all in accordance with the procedures set forth in Section 15 (IR Management and Classification) and the Service Levels set forth in Annex H-1 (Service Levels). |
(d) | SSN will coordinate and cooperate with PG&E and necessary third parties to the extent reasonably required to achieve prompt Diagnosis of IRs and Resolution of Defects. |
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Schedule H Software Maintenance and Support
6. | PROACTIVE MAINTENANCE |
SSN will perform proactive maintenance for the Software, including:
(a) | If SSN becomes aware of any Defect or other issue associated with the Software through its own research, or through reports of Defects or other issues by other users, SSN will use Commercially Reasonable Efforts to notify PG&E and work with PG&E to prevent that Defect or other issue from occurring in PG&Es environment. |
(b) | Analyzing and recommending to PG&E methods to improve the performance of the Software, including: |
(i) | Recommending to PG&E methods for improving performance and processing capabilities and efficiencies of the Software through system performance tuning, load balancing, other run time improvements and system performance reviews; |
(ii) | Monitoring trends related to performance of the Software as deployed by PG&E and other licensees; and |
(iii) | Examining new features of hardware, operating systems, databases and automated tools/products to determine how they could be utilized to improve and optimize use of the Software. |
7. | SUPPORT FOR PRIOR AND DIFFERENT MAJOR RELEASES |
(a) | In accordance with Section 7(d) of the Agreement, SSN will maintain each Major Release of the Software then in use by PG&E, provided that the Major Release has not been superseded by a newer Major Release for longer than *** and the Parties will develop a mutually agreeable plan in the event of obsolescence of any third party component of the Software. |
(b) | SSN will provide additional Support Services for ***that may be configured with either: |
(i) | ***; |
(ii) | ***; or |
(iii) | ***. |
8. | FUTURE PRODUCT DIRECTION AND STRATEGY |
(a) | Consistent with SSNs Support Services responsibilities, SSN will prepare an annual product direction and strategy for the Software. Each annual product direction and strategy after the first one will include a review and assessment of the immediately preceding annual product direction and strategy. The product direction and strategy will be a statement of intention, but will not create a binding contractual obligation for SSN to implement the direction and strategy. |
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(b) | SSN will host a users group for the Software at which users of the Software, including PG&E, have regular opportunities to meet with SSN and other users of the Software to discuss the Software and provide recommendations to SSN regarding: |
(i) | Product features and development priorities; |
(ii) | Software development and priorities, functionality and overall direction of the Software; and |
(iii) | Product phase-out and obsolescence. |
The user group shall also have a *** for customers with committed deployments of over ***.
9. | UPGRADES AND ENHANCEMENTS |
(a) | SSN will notify PG&E of and make all Upgrades available to PG&E promptly at no additional charge. SSN will provide Minor Releases and Patches as necessary to correct Defects in accordance with the requirements of Annex H-1 (Service Levels). No Upgrade will reduce the capabilities or functionality of the Software. SSN will provide all Upgrades and documentation to PG&E electronically for installation and implementation by PG&E. |
(b) | Implementation of any Upgrade will be subject to the change control procedures set out in Annex D-1 (Change Control Procedures) and SSN will cooperate with PG&E in the implementation of any Upgrade or other enhancement of the Software. |
(c) | SSN will update all relevant Documentation, including manuals, guides, instructions, scripts, FAQs and training materials, ***. SSN will also update and document the ***. |
(d) | If a correction is required for any Defect or other problem with the Software, SSN will issue a *** to correct the Defect. If the Defect is corrected in a ***, SSN will also provide a *** to PG&E for *** of the Agreement. |
(e) | In connection with developing Upgrades to the Software, SSN will ***: |
(i) | test the Upgrade in a manner consistent with good industry practices, including testing of the installation procedures and testing of the corresponding installation instructions/documentation; |
(ii) | support PG&Es testing and quality assurance of interfaces and other PG&E systems that may be affected by the Upgrade; |
(iii) | provide an ***. |
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(iv) | provide reasonable ***; |
(v) | assist PG&E with the ***; and |
(vi) | ***. |
(f) | PG&E will have the right to remove the Source Code for all Upgrades from escrow in the same manner and under the same conditions as described in the Agreement. |
(g) | SSN will provide an ***. |
10. | *** |
(a) | SSN will develop and release Upgrades (including Software updates, releases and versions) to PG&E ***of the Agreement. |
(b) | SSN will take use *** |
(i) | ***; and |
(ii) | ***. |
11. | OTHER SUPPORT SERVICES |
In addition to the Support Services described above, SSN will:
(a) | Provide in a responsive time frame *** related to the Software; |
(b) | Provide reasonable levels of support to PG&E in the ***; and |
(c) | Maintain reasonable levels of industry knowledge of the utility industry. |
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Schedule H Software Maintenance and Support
12. | TRAINING AND EDUCATION |
In addition to SSNs obligations with regard to training as specified in the Agreement, SSN will provide the following training-related services:
(a) | SSN shall provide training as described in Annex A-2(Statement of Work); and |
(b) | SSN will work with PG&E to develop additional PG&E training materials. |
13. | *** |
***
(a) | *** |
(b) | ***; and |
(c) | *** |
14. | REPORTS |
(a) | Daily. SSN will provide PG&E daily reports on the status of *** issues. |
(b) | Weekly. Until support site in section 4(c) is implemented, SSN will provide PG&E a weekly report of ***. |
(c) | Monthly. SSN will provide PG&E the following reports on a monthly basis: |
(i) | ***; |
(ii) | ***; |
(iii) | ***; and |
(iv) | ***. |
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Schedule H Software Maintenance and Support
15. | IR MANAGEMENT AND CLASSIFICATION |
15.1 | Severity Classification of IRs |
*** will assign the Severity Level classification to each IR and may change the Severity Level classification of any IR at any time by ***
15.2 | IR Management |
SSN will provide IR Management services for the Software, including the following:
(a) | *** |
(b) | *** |
(c) | *** |
(d) | *** |
(e) | *** |
(f) | *** |
(g) | *** |
(h) | During the Resolution of a Defect SSN will: |
(i) identify and propose to PG&E any ***; and
(ii) implement and support any ***;
(i) Providing to PG&***; and
(j) Collecting and reporting *** to PG&E on a ***
15.3 | IR Response and Resolution |
(a) | SSN will Respond to all IRs submitted by PG&E and Resolve all Defects in the Software in accordance with the applicable Service Levels set forth in Annex H-1 (Service Levels). |
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(b) | The time taken by SSN to Respond and Resolve an IR will be measured from the earlier: |
(i) | ***; and |
(ii) | *** |
(c) | From time to time, but no more than ***, PG&E may perform a test call to verify whether SSNs Response time conforms with the applicable Service Levels set forth in Annex H-1 (Service Levels). |
16. | PG&E RESPONSIBILITIES |
PG&E shall:
(a) | *** |
(b) | *** |
(c) | *** |
(d) | *** |
(e) | *** |
(f) | *** |
17. | EXCLUSIONS |
Defects do not include, and SSN will have no responsibility for, any of the following circumstances:
(a) | *** |
(b) | *** |
(c) | *** |
(d) | *** |
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Schedule H Software Maintenance and Support
18. | DEFINITIONS |
The following capitalized terms, when used in this Software Maintenance and Support Schedule, will have the meanings given them below unless the context requires otherwise.
Defined Term |
Meaning | |
*** | *** | |
Diagnose | Means to determine the root cause of an Incident Report, including making a determination whether or not the root cause is a Defect in the Software. | |
IR or Incident Report | Means a communication from PG&E to SSN, in accordance with PG&E policies and procedures, reporting a suspected Defect or other problem PG&E is having with the Software and identifying an Incident and specifying the Severity Level according to the Severity Level classifications set forth in Annex H-1 (Service Levels) or Priority Level for that Incident. | |
IR Management System | Has the meaning given in Section 15.2(b). | |
Major Release | Means an updated release of the Software to support ***. Major Releases may also be developed to address ***. A Major Release is designated by a whole integer change to the version number of the Software (e.g., from v. 1.3 to v. 2.1). | |
Minor Release | Means an updated release of the Software containing ***. Minor Releases may also address ***. Minor Releases will not typically require ***. Minor Releases will not typically require any ***. A Minor Release is designated by a decimal change to the version number of the Software (e.g., from v. 1.3 to v. 1.4). | |
Patch | Means an updated release of the Software or program code containing corrections for Defects or other problems with the Software. A Patch is designated by minor release designators. | |
Product Description | Means Annex A-7 | |
Resolve | Means to provide a *** correction of a Defect without causing another Defect. *** |
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Schedule H Software Maintenance and Support
Defined Term |
Meaning | |
*** | ||
Respond | Means to take the following steps: (i) ***; (ii) ***; and (iii) ***. | |
Service Request or SR | Means a request for an enhancement. | |
Severity Level 1 | Has the meaning given in Annex H-1 (Service Levels). | |
Severity Level 2 | Has the meaning given in Annex H-1 (Service Levels). | |
Severity Level 3 | Has the meaning given in Annex H-1 (Service Levels). | |
Severity Level 4 | Has the meaning given in Annex H-1 (Service Levels). | |
Support Services | Has the meaning given in Section 1.1(a)(ii). | |
Upgrade | Means any Major Release, Minor Release or Patch. Upon delivery to PG&E, all Upgrades will be considered part of the Software. |
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Schedule H - Software Maintenance and Support
Schedule H
Annex H-1
Service Levels
This Annex H-1 describes the Service Levels that SSN is required to meet in performing the Support Services.
IR Severity Levels and Response and Resolution Service Levels | ||||||||
Severity |
Technical (System) IR |
Operational IR |
Response Time |
Resolution Time | ||||
*** |
*** | *** | *** | *** |
1. | ESCALATION PROCEDURES |
1.1 | Escalation for Response Time |
(a) | If a Severity Level 1 issue is not responded to within the targeted response timeframe, the case is automatically escalated within SSN as follows: |
(i) | After ***: *** is notified |
(ii) | After ***: *** is notified*** |
(iii) | After ***: *** is notified |
(iv) | After ***: *** is notified |
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(b) | If a Severity Level 2 issue is not responded to within the targeted response timeframe, the case is automatically escalated as follows: |
(i) | After ***: *** is notified |
(ii) | After ***: *** is notified |
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(iii) | After ***: *** is notified |
(iv) | After ***: *** is notified*** |
1.2 | Continuing Communication |
The SSN representative handling the case will provide continuing follow-up calls or e-mails as follows:
(a) | Severity 1: *** (repeat as necessary) |
(b) | Severity 2: *** (repeat as necessary) |
(c) | Severity 3: *** |
(d) | Severity 4: *** |
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Schedule I
Security Requirements
1. | INTRODUCTION |
(a) | SSN acknowledges that protecting PG&E computer resources, electronic data and information is a critical component of PG&Es continued success because, among other reasons, information protection ensures the security of PG&Es employee and customer information, the reliable operation of PG&Es computer systems, the safe and efficient operation of PG&Es electric and gas delivery systems and the reputation of PG&E as a professional organization. |
(b) | This Schedule I supplements the terms of the Agreement by setting forth additional information and systems security requirements to be observed by SSN and SSN Personnel in connection with performing the Services. |
2. | APPLICABILITY OF SECURITY POLICIES, GENERALLY |
Subject to Section 4, below, SSN agrees to the following:
2.1 | Compliance with PG&E Information Security Policies |
SSN represents and warrants to PG&E that it will implement and comply:
(a) | with information security standards that are no less stringent than PG&Es information security policies and procedures that have been provided to SSN with reasonable opportunity for review; or |
(b) | if no PG&E policy or procedure exists with regard to a given function or activity, SSN will comply with its own information security policies and procedures, which shall at least be substantially similar to the industry standard for information security policies and procedures. SSN will provide copies of such policies and procedures to PG&E for review. |
2.2 Compliance with *** and ***
SSN represents and warrants to PG&E that it will implement and comply with information security controls that are no less stringent than *** as updated from time to time.
2.3 | When Using PG&E Networks, Systems and Offices |
Whenever SSN Personnel use or access the SmartMeter System or any other PG&E-owned or PG&E-controlled networks or IT systems or equipment, they will be subject to and must comply with all applicable PG&E information protection and security policies, procedures and standards that have been disclosed in writing to SSN or to the SSN Personnel individually (collectively PG&E Security Policies), as such PG&E Security Policies may be revised from time to time. Some of the current PG&E Security Policies in effect as of the Effective Date are described below in Section 3 (PG&E SECURITY POLICIES).
2.4 | When Using SSN Networks, Systems and Offices |
(a) | Whenever SSN Personnel use or access any SSN (or Subcontractor) owned or controlled networks or IT systems or equipment in connection with performing the Services, they will be subject to and must comply with Section 2.1 (Compliance with PG&E Information Security Policies). |
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(b) | Prior to storing or transferring any PG&E Data and/or PG&E Confidential Information on any SSN (or Subcontractor) owned or controlled networks or IT systems or equipment, SSN will meet with PG&E to discuss (i) the types and quantities of PG&E Data and/or PG&E Confidential Information involved, and (ii) the steps and procedures SSN will implement to ensure it is properly secured and protected, and to obtain PG&Es approval of those steps and procedures. |
(c) | SSN will maintain written records regarding its implementation and maintenance of the SSN Security Policies. |
(d) | Whenever SSN Personnel use or access any SSN (or Subcontractor) owned or controlled offices, they will be subject to and must comply with Section 2.1 (Compliance with PG&E Information Security Policies). |
3. | PG&E SECURITY POLICIES |
Subject to Section 4, below, SSN agrees to the following:
3.1 | Information Security Website |
(a) | If any SSN Personnel require access to PG&Es network in order to perform the Services, they must submit a network access request to PG&E and complete PG&Es network access approval process. |
(b) | ***. |
(c) | ***. |
(d) | ***. |
(e) | ***. |
3.2 | PG&E Utility Standard Practices |
PG&E periodically issues, revises and codifies its standard practices, which may include but are not limited to PG&Es Utility Standard Practices (USPs). *** providers personnel will nevertheless comply with all relevant utility security standards including the following specific USPs (as they may be revised from time to time) insofar as such USPs are applicable to their activities under or in connection with the Agreement:
(a) | Record Retention and Disposal (USP 4); |
(b) | Classification and Legal Protection of Information (USP 8); |
(c) | Protection of Computer Resources and Electronic Information (USP 9); |
(d) | Safety and Health Program (USP 22); and |
(e) | Third Party Inquires Regarding Individual Customers (USP 23). |
SSN acknowledges that it has a received a copy of the USPs listed above. During the Term, PG&E may designate additional PG&E information security policies as applicable SSNs performance under the Agreement.
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3.3 | Virus Protection |
SSN will:
(a) | ***; |
(b) | ***; |
(c) | ***; |
(d) | ***; and, |
(e) | ***. |
3.4 | Product Tampering or Modification |
SSN will:
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(a) | ***; |
(b) | ***; |
(c) | ***; |
(d) | ***; and, |
(e) | ***. |
3.5 | Injection, Modification or Alteration of Data Between Equipment Components By a Third Party |
SSN will:
(a) | ***; |
(b) | ***; |
(c) | ***; |
(d) | ***; and, |
(e) | ***. |
3.6 | Network Connections |
(a) | If a network connection is established between PG&E and the computing environment used by SSN to perform the Services, SSN will ensure that: |
(i) | ***; |
(ii) | ***; and |
(iii) | ***. |
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(b) | ***. |
3.7 | Unauthorized Use or Access; interference |
PG&E and SSN shall cooperate reasonably in efforts to prevent and cure unauthorized access to or use of the SmartMeter network by third parties or any communication interference to the network (for example, network jamming) by ***. SSN shall, upon PG&Es request, advise PG&E regarding methods to minimize such unauthorized access, use and interference. Appropriate representatives of SSN and PG&E shall meet in the event of unauthorized use, abuse or interference or otherwise at the reasonable request of PG&E to discuss appropriate control procedures.
4. | SSN SECURITY STANDARDS |
Notwithstanding any other provision of this Schedule I, the Parties agree to the following:
4.1 | Statement of Intent |
It is the intent of both parties that the Products will meet ***Due to the anticipated life of the Products and the inability to predict future technological developments, the parties understand that changes to the Products and Services may ***. Therefore, the parties agree to the following process for determining when, if ever, Product changes are warranted and, if so, how the costs associated with such changes should be allocated.
4.2 | Security *** |
Upon SSNs initial delivery of the Products containing the functionality specified in Annex A-6 (Product Roadmap), PG&E will *** test the Products for compliance with *** (the Security ***). Within ***calendar days, PG&E shall provide SSN with a written security acceptance or a statement identifying any non-conformity with the Security ***. The Product security shall be ***. SSN shall *** address any such non-conformity, ***, and resubmit the Products for security testing. Within ***calendar days of redelivery, PG&E will again accept the Product security or provide a written notice of non-conformity. This process will be repeated until the Product security is accepted.
4.3 | Evolution of Security Standards |
If, following the establishment of the *** as described in Section 4.1, either PG&E or SSN determines that a change to *** may be necessary or desirable, the parties shall, through the ***.
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Schedule J
Approved Subcontractors and ***
1. | Approved SSN Subcontractors |
The following Subcontractors of SSN are approved by PG&E in accordance with Section 27(a) of the Agreement:
***
2. | Approved PG&E Subcontractors |
The following PG&E subcontractors are approved by SSN to access SSN Source Code after it has been released from escrow in accordance with Section 14.3 of the Agreement.
***
3. | *** |
In accordance with Section 26.2(a) of the Agreement, the following positions are *** and the *** to the provision of the Services as specified in, and subject to the obligations set out in, the Agreement:
*** *** | ||
Position Title |
Period of Assignment | |
*** | *** |
4. | *** |
In accordance with Section 26.2(b) of the Agreement, the following positions ***
*** *** | ||
Position Title |
Period of Assignment | |
*** | *** |
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Schedule K
[Deleted in its entirety by Amendment No. 6]
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Schedule L
Additional Policies and Procedures
1. | PG&E Ethics Policy |
SSN will comply with PG&Es Contractor, Consultant and Supplier Code of Conduct, as updated by PG&E from time to time.
A copy of the Contractor, Consultant and Supplier Code of Conduct in effect as of the Effective Date is Annex L-1.
2. | PG&E Travel Policy |
SSN will comply with PG&Es travel police, set out below and as updated by PG&E from time to time.
(a) | Rental Cars Shall be Economy Class, contracted at the best rates available; |
(b) | Meals shall be reasonable ($5-10 for breakfast, $5-15 for lunch, $25-45 for dinner); |
(c) | Reimbursement for expenses such as phone calls home, laundry, taxis, parking, etc are dependent upon assignment; |
(d) | Air plane tickets shall be economy class, and bought in advance if possible; |
(e) | Contractors should use hotels offering PG&E discounted rates (if the hotel will provide the rate to non-PG&E employees); and |
(f) | If reimbursing per diem, per diem rates shall be in accordance with established IRS guidelines, including amounts and eligibility. |
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Schedule M
Insurance
1. | WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE |
(a) | SSN shall maintain workers compensation insurance indicating compliance with any applicable labor codes, acts, laws or statutes, state or federal, of any jurisdictions in which SSN performs under this Agreement including USL&H and Jones Act coverage. |
(b) | SSN shall maintain employers liability insurance of *** dollars *** per bodily injury, disease, personal injury or death. |
2. | COMMERCIAL GENERAL LIABILITY INSURANCE |
SSN shall maintain commercial general liability insurance with the following characteristics:
(a) | Coverage shall be at least as broad as the Insurance Services Office (ISO) Commercial General Liability Coverage occurrence form, with no coverage deletions; |
(b) | As of the Effective Date of the Agreement, the occurrence limit shall not be less than ***dollars *** per occurrence for bodily injury, property damage, personal injury, completed operations. Requirements may be satisfied with an excess or umbrella policy. |
(c) | Coverage shall: |
(i) | by Additional Insured endorsement or blanket endorsement add as additional insured PG&E, PG&Es officers, managers, directors, employees and agents as additional insureds to the extent of SSNs indemnity obligations in the Agreement with respect to liability arising out of or in connection with work performed under the Agreement by or for SSN. If the Commercial General Liability Policy includes a blanket endorsement by contract, the following language added to the certificate of insurance shall satisfy PG&Es additional insurance requirement: PG&E, and PG&Es officers, managers, directors, agents and employees, with respect to liability arising out of work performed by or for SSN, are additional insureds under a blanket endorsement; and |
(ii) | be endorsed to specify that SSNs commercial general liability insurance is primary and that any insurance or self-insurance maintained by PG&E shall not contribute with it. |
3. | BUSINESS AUTO INSURANCE |
SSN shall carry business auto insurance with coverage at least as broad as the ISO Business Auto Coverage form covering Automobile Liability, codes 8 and 9 (hired and non-hired autos), and the limit shall not be less than *** dollars *** each accident for bodily injury and property damage. Requirements may be satisfied with an excess or umbrella policy(ies).
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4. | PROFESSIONAL LIABILITY INSURANCE |
SSN shall maintain Errors and Omissions (Technology Liability) Insurance appropriate for its profession and performance under the Agreement, covering the professional errors, acts or omissions arising out of the professional services rendered under this Agreement. The limit of such insurance shall not be less than ***million dollars *** each claim.
5. | ADDITIONAL INSURANCE PROVISIONS |
(a) | SSN shall maintain the insurance coverage set forth in this Schedule M in full force and effect commencing on the Effective Date and continuing throughout the Deployment Period and the Service Period. |
(b) | SSN shall furnish PG&E with certificates of insurance and endorsements or blanket endorsements (as it may choose) of all required insurance for SSN (the Insurance Documentation) before commencing performance under this Agreement. The Insurance Documentation shall state that coverage shall not be cancelled except after *** days prior written notice has been given to PG&E. The Insurance Documentation shall be signed by a person authorized by the relevant insurer to bind coverage on its behalf and shall be submitted to: |
Pacific Gas and Electric Company
Insurance Department
One Market, Spear Tower, Suite 2400
San Francisco, CA 94105
(c) | A copy of the Insurance Documentation shall also be made available to PG&E at SSNs designated offices in the United States. Upon request, SSN shall furnish PG&E with the same evidence of insurance for all Subcontractors. |
(d) | The insurance requirements under this Schedule M shall include a severability of liability clause. |
(e) | All policies and binders shall include a clause or endorsements denying the insurer any rights of subrogation against the other Party to the extent rights have been waived by the insured prior to the occurrences of injury or loss. SSN hereby waives any right of recovery against PG&E for injury or loss due to damages covered by insurance containing such a waiver of subrogation clause or endorsement, to the extent of the injury or loss covered thereby. |
6. | INSURANCE COMPANY |
All insurance required of SSN pursuant to this Agreement shall be with an insurer licensed to do business in the United States and having an AM Best or Standard & Poors rating of A- or better.
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SmartMeter Program Upgrade Supply Agreement (SSN)
Schedule N
Diversity Subcontracting Policies
1. | PG&ES Supplier Diversity Purchasing Policy |
(a) | SSN and Subcontractors must comply with PG&Es Supplier Diversity Purchasing Policy in the award of all subcontracts and sub-subcontracts. |
(b) | This policy requires that Women, Minority, and Disabled Veteran Business Enterprises (WMDVBEs) shall have the maximum practicable opportunity to participate in the performance of Work. 1 |
(c) | SSN shall provide to each prospective Subcontractor a copy of this Schedule. |
(d) | SSN shall provide a separate, signed Subcontracting Plan consisting of a specific list of Subcontractors that will participate in the performance of the Work and a statement setting forth the SSNs goals for WMDVBE subcontracting of all tiers and setting forth such additional good faith efforts SSN and Subcontractors will employ to increase the participation of WMDVBE in the performance of the Work. |
(e) | No later than the 15th of each month, SSN shall submit its subcontracting spend with women, minority, and service disabled veteran owned suppliers using PG&Es electronic reporting system located at: https://www.pgesupplierdiversity.com/pge/login.asp |
(f) | To establish a user ID, SSN shall request via email to: supplierdiversityteam@pge.com |
(g) | In addition, for contracts exceeding $500,000 (or $1 million for construction contracts), SSN must comply with the Policy Regarding Utilization of Small Business Concerns and Small Disadvantaged Business Concerns, as described in Section 2 below. The Subcontracting Plan for these contracts must include provisions for implementing the terms prescribed in Section 2 below. |
(h) | Small Business, and Small Disadvantaged Business Subcontracting Plans are not required for small business contractors, personal service contracts, contracts that will be performed entirely outside of the United States and its territories, or modifications to existing contracts which do not contain subcontracting potential. |
(i) | For all PG&E contracts, SSN shall act in accordance with the Subcontracting Plan in the performance of the Work and in the award of all Subcontracts. |
(j) | SSNs supplier diversity goal (as set out in Section 26.3(c) of the Agreement) shall be reported as SSNs spend with verified WMDVBE subcontractors on PG&E work under the Agreement. |
2. | POLICY REGARDING UTILIZATION OF SMALL BUSINESS CONCERNS AND SMALL DISADVANTAGED BUSINESS CONCERNS |
The following policy of the United States shall be adhered to in the performance of this Agreement:
1 | WMDVBEs must be verified pursuant to the procedures prescribed in Section 2 of CPUC General Order 156. |
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SmartMeter Program Upgrade Supply Agreement (SSN)
(a) | It is the policy of the United States that small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals shall have the maximum practicable opportunity to participate in performing contracts let by any federal agency, including contracts and subcontracts for subsystems, assemblies, components, and related services for major systems. It is further the policy of the United States that prime contractors establish procedures to ensure the timely payment of amounts due pursuant to the terms of their subcontracts with small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals. |
(b) | SSN hereby agrees to carry out this policy in the awarding of subcontracts to the fullest extent consistent with efficient contract performance. SSN further agrees to cooperate in any studies or surveys as may be conducted by the United States Small Business Administration or the awarding agency of the United States as may be necessary to determine the extent of SSNs compliance with this clause. |
(c) | As used in this Schedule, the term small business concern shall mean a small business as defined in Section 3 of the Small Business Act as amended, 15 U.S.C. §637(d), and relevant regulations promulgated pursuant thereto. The term small business concern owned and controlled by socially and economically disadvantaged individuals shall mean a small business concern (1) which is at least 51 percent unconditionally owned by one or more socially and economically disadvantaged individuals; or, in the case of any publicly owned business, at least 51 percent of the stock of which is unconditionally owned by one or more socially and economically disadvantaged individuals; and (2) whose management and daily business operations are controlled by one or more of such individuals. This term also means a small business concern that is at least 51 percent unconditionally owned by an economically disadvantaged Indian tribe or Native Hawaiian Organization, or a publicly owned business having at least 51 percent of its stock unconditionally owned by one of these entities which has its management and daily business controlled by members of an economically disadvantaged Indian tribe or Native Hawaiian Organization, and which meets the requirement of 13 C.F.R. Part 124. SSN shall presume that socially and economically disadvantaged individuals include Black Americans, Hispanic Americans, Native Americans, Asian-Pacific Americans, Subcontinent Asian Americans, and other minorities, or any other individual found to be disadvantaged by the Administration pursuant to Section 8(a) of the Small Business Act. SSN shall presume that socially and economically disadvantaged entities also include Indian Tribes and Native Hawaiian Organizations. |
(d) | SSN acting in good faith may rely on written representations by its Subcontractors regarding their status as either a small business concern or a small business concern owned and controlled by socially and economically disadvantaged individuals.2 |
2 | Notwithstanding this provision of the federal statute, all WMDVBE Subcontractors must be verified pursuant to the procedures prescribed in Section 2 of the California Public Utilities Commission General Order 156, as such procedures may be amended periodically. |
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SmartMeter Program Upgrade Supply Agreement (SSN)
Exhibit 1
Escrow Agreement
The Attached Escrow Agreement contains redlined changes which represent the changes that the Parties will request that the Escrow Agent make to its standard terms and conditions to reflect the terms of the Agreement.
The Parties will work diligently to have an Escrow Agreement executed within *** days of the Effective date.
Single Licensee
Software Escrow Agreement
(Premium Solution)
Date | June 24, 2009 | |
Licensor | Silver Spring Networks, Inc. | |
Licensee | Pacific Gas and Electric Company | |
Agreement Number | 43077 |
Notice: The parties to this Agreement are obliged to inform NCC Group of any changes to the Software or In their circumstances (including change of name, principal office, contact details or change of owner of the intellectual property in the Software).
|
Version: 12.15.06
PG&E Internal Information | 1 | |
For use by Authorized Persons Only |
Escrow Agreement Dated:
Between:
(1) | Silver Spring Networks, Inc. whose principal office is at 575 Broadway Street, Redwood City, CA 94063 (Licensor); |
(2) | Pacific Gas and Electric Company whose principal office is at 77 Beale Street, San Francisco, CA 94105 (Licensee); and |
(3) | NCC Group, Inc. a corporation organized and existing under the laws of Virginia with its principal office at 1731 Technology Drive, Suite 880, San Jose, California 95110, USA (NCC Group). |
Background:
(A) | Licensee has been granted a license to use the Software which comprises computer programs. |
(B) | Certain technical information and/or documentation relating to the Software is the confidential information and intellectual property of Licensor or a third party. |
(C) | Licensor acknowledges that in certain circumstances, such information and/or documentation would be required by Licensee in order for it to continue to exercise its rights under its License Agreement with the Licensor. |
(D) | The parties therefore agree that such information and/or documentation should be placed with a trusted third party, NCC Group, so that such information and/or documentation can be released to Licensee should certain circumstances arise. |
Agreement:
In consideration of the mutual undertakings and obligations contained in this Agreement, the parties agree that:
1 | Definitions and Interpretation |
1.1 | In this Agreement the following terms shall have the following meanings: |
Agreement means the terms and conditions of this single licensee software escrow agreement set out below, including the Schedules hereto.
Confidential Information means all technical and/or commercial information not in the public domain and which is designated in writing as confidential by any party.
Deposit Form means the form of Schedule 1 which is to be completed by Licensor and delivered to NCC Group with each deposit of the Escrow Material.
Escrow Material means the Manufacturing Know-How, Supplier Material and the Source Code of the Software and such other material and documentation (including updates and upgrades thereto and new versions thereof) as are necessary to be delivered or deposited to comply with Clause 2 of this Agreement.
Full Verification means the tests and processes forming NCC Groups Full Verification service and/or such other tests and processes as may be agreed between the parties for the verification of the Escrow Material.
Integrity Testing means those tests and processes forming NCC Groups Integrity Testing service, in so far as they can be applied to the Escrow Material.
PG&E Internal Information | 1 | |
For use by Authorized Persons Only |
SmartMeter Program Upgrade Supply Agreement (SSN)
Intellectual Property Rights mean any copyright, patents, design patents, registered designs, design rights, utility models, trademarks, service marks, trade secrets, know how, database rights, moral rights, confidential information, trade or business names, domain names, and any other rights of a similar nature including industrial and proprietary rights and other similar protected rights in any country or jurisdiction together with all registrations, applications to register and rights to apply for registration of any of the aforementioned rights and any licenses of or in respect of such rights.
License Agreement means the agreement under which Licensee was granted a license to use the Software.
Letter of Intent means the form completed by Licensor and/or Licensee containing the information to enable NCC Group to set up this Agreement.
Release Purposes means licensee may, upon release of the Escrow Materiel, use the Escrow Material as permitted by the terms of the SmartMeter Agreement.
Software means the software together with any updates and upgrades thereto and new versions thereof licensed to Licensee under the License Agreement details of which are set out in Schedule 1. Software may be accompanied by technical specifications relating to hardware and firmware.
Source Code means the computer programming code of the Software in human readable form.
1.2 | This Agreement shall be interpreted in accordance with the following: |
1.2.1 | headings are for ease of reference only and shall not be taken into consideration in the interpretation of this Agreement; |
1.2.2 | all references to Clauses and Schedules are references to Clauses and Schedules of this Agreement; and |
1.2.3 | all references to a party or parties are references to a party or parties to this Agreement. |
2 | Licensors Duties and Warranties |
2.1 | Licensor shall: |
2.1.1 | deliver a copy of the Escrow Material to NCC Group within 30 days of the date of this Agreement; |
2.1.2 | deliver an update or replacement copy of the Escrow Material to NCC Group within 30 days of a material update, error correction, enhancement, maintenance release or functional modification to the Software which results in an updated delivery of the object code version of the Software to Licensee; |
2.1.3 | ensure that each copy of the Escrow Material deposited with NCC Group comprises the Source Code of the latest version of the Software used by Licensee; |
2.1.4 | deliver to NCC Group an update or replacement copy of the Escrow Material within 30 days after the anniversary of the last delivery of the Escrow Material to ensure that the integrity of the Escrow Material media is maintained; |
2.1.5 | deliver with each deposit of the Escrow Material a Deposit Form which includes the following information: |
2.1.5.1 | details of the deposit including the full name of the Software (i.e. the original name as set out under Schedule 1 together with any new names given to the Software by Licensor), version details, media type, backup command/software used, compression used, archive hardware and operating system details; and |
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SmartMeter Program Upgrade Supply Agreement (SSN)
2.1.5.2 | password/encryption details required to access the Escrow Material; |
2.1.6 | deliver with each deposit of the Escrow Material the following technical information (where applicable): |
2.1.6.1 | documentation describing the procedures tor building, compiling and installing the Software, including names and versions of the development tools; |
2.1.6.2 | Software design information (e.g. module names and functionality); and |
2.1.6.3 | name and contact details of employees with knowledge of how to maintain and support the Escrow Material; and |
2.1.7 | deposit a detailed list of the suppliers of any third party software or tools required to access, install, build or compile or otherwise use the Escrow Material. |
2.2 | Licensor warrants to both NCC Group and Licensee at the time of each deposit of the Escrow Material with NCC Group that: |
2.2.1 | it has the full right, ability and authority to deposit the Escrow Material; |
2.2.2 | in entering into this Agreement and performing its obligations under it, it is not in breach of any of its ongoing express or implied obligations to any third party(s); and |
2.2.3 | the Escrow Material deposited under Clause 2.1 contains all information in human-readable form and is on suitable media to enable a reasonably skilled programmer or analyst to understand, maintain, modify and correct the Software. |
3 | Licensees Responsibilities and Undertakings |
3.1 | Licensee shall notify NCC Group of any change to the Software that necessitates a replacement deposit of the Escrow Material. |
3.2 | In the event that the Escrow Material is released under Clause 6, Licensee shall utilize the Escrow Material only for the Release Purposes. |
4 | HCC Groups Duties |
4.1 | NCC Group shall: |
4.1.1 | at all times during the term of this Agreement, retain the Escrow Material in a safe and secure environment; and |
4.1.2 | inform Licensor and Licensee at the receipt of any deposit of the Escrow Material by sending to both parties a copy at the Deposit Form, and/or the Integrity Testing report or Full Verification report (as the case may be) generated from the testing processes carried out under Clause 10. |
4.2 | In the event of failure by Licensor to deposit any Escrow Material with NCC Group, NCC Group shall not be responsible for procuring such deposit and may, of its sole discretion, notify the Licensor and Licensee of Licensees failure to deposit any Escrow Material. |
4.3 | NCC Group may appoint agents, contractors or sub-contractors as it deems fit to carry out the Integrity Testing and the Full Verification processes. NCC Group shall ensure that any such agents, contractors and sub-contractors are bound by the some confidentiality obligations as are contained In Clause 8. |
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SmartMeter Program Upgrade Supply Agreement (SSN)
4.4 | NCC Group has the right to make such copies of the Escrow Material as may be necessary solely for the purposes of this Agreement. |
5 | Payment |
5.1 | The parties shall pay NCC Groups fees and charges as published from time to time or as otherwise agreed, as listed In the Letter of Intent between the parties. NCC Groups fees as published are exclusive of any applicable sales tax. |
5.2 | If NCC Group is required to perform any additional or extraordinary services as a result of being an escrow agent including intervention in any litigation or proceeding, NCC Group shall receive reasonable compensation for such services and be reimbursed for all costs incurred, including reasonable attorneys fees. |
5.3 | NCC Group shall be entitled to review and vary its standard fees and charges for its services under this Agreement from time to time but no more than once a year and by no more than eight percent (8%) of the prior years fees and only upon 45 days written notice to the parties. |
5.4 | All invoices ore payable within 45 days from the date of invoice. Interest shall accrue at the lesser of 1.5% per month or the maximum amount permitted by applicable law for any fees that are undisputed by the paying party and remain unpaid for more than 45 days past the due date of the applicable invoice. |
5.5 | In the event of a dispute made in good faith as to the amount of fees, the parry responsible for payment agrees to remit payment on any undisputed amount(s) in accordance with Clause 5.1 above. In such circumstances, the interest on the fees shall not accrue as to any disputed amounts unless not paid within 30 days after such dispute has been resolved by the parties. |
5.6 | NCC Group shall have no obligations under this Agreement until the initial invoice has been paid in full. |
6 | Release Events and Procedures |
6.1 | Subject to: (i) the remaining provisions of this Clause 6 and (ii) the receipt by NCC Group of the fees chargeable upon a release and any other fees and interest (if any) outstanding under this Agreement, NCC Group will release the Escrow Material including Manufacturing Know-How, Supplier Material and Source Code to a duly authorized representative of Licensee if any at the following events (Release Event(s)) occur: |
6.1.1 | upon issuance of a release request by Licensee in accordance with the terms of the SmartMeter Upgrade Supply Agreement between Licensor and Licensee (the SmartMeter Agreement), which is the Letter of Intent for the purposes of the Escrow Agreement. |
6.1.2 | NCC Group will also release a copy of the Source Code, Supplier Material and Manufacturing Know-How from escrow to Licensee as requested in writing by Licensee, copying in Licensor, for Licensees validation, testing and business continuity purposes provided that Licensee returns the Manufacturing Know-How to NCC Group when such validation or testing is complete without retaining any copies. |
6.2 | Licensee must notify NCC Group of the Release Event specified in Clause 6.1 by delivering to NCC Group a notice in writing (Notice) declaring that such Release Event has occurred, setting out the facts and circumstances of the Release Event, that the License Agreement and any maintenance agreement, if relevant, for the Software was still valid and effective up to the occurrence of such Release Event and exhibiting such documentary evidence in support of the Notice as NCC Group shall reasonably require. |
6.3 | Upon receipt of a Notice from Licensee claiming that a Release Event has occurred: |
6.3.1 | NCC Group will release a copy of the Escrow Material to Licensee within 5 days of Licensee submitting a Notice to NCC Group; and |
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SmartMeter Program Upgrade Supply Agreement (SSN)
6.3.2 | NCC Group shall submit a copy of the Notice to Licensor (with a copy to the Licensee in order to acknowledge receipt of the Notice) by courier or other form of guaranteed delivery; and |
6.3.3 | unless within 5 calendar days after the date of dispatch of the Notice by NCC Group, NCC Group receives a counter-notice in writing from Licensor stating that in their view no such Release Event has occurred or, if appropriate, that the event or circumstance giving rise to the Release Event has been rectified as shown by documentation in support thereof, NCC Group will release the Escrow Material to Licensee for its use for the Release Purposes. |
6.4 | Upon receipt of the counter-notice from licensor under Clause 6.3.2, NCC Group shall send a copy of the counter-notice and any supporting evidence to Licensee (with a copy to Licensor in order to acknowledge receipt of the counter-notice) by courier or other form of guaranteed delivery. |
6.5 | Within 90 days of dispatch of the counter-notice by NCC Group, Licensee may give notice to NCC Group that they wish to invoke the dispute resolution procedure under Clause 7. |
6.6 | If, within 90 days of dispatch of the counter-notice by NCC Group to Licensee, NCC Group has not been informed by Licensee that they wish the dispute resolution procedure under Clause 7 to apply, the Notice submitted by Licensee will be deemed to be no longer valid and Licensee shall be deemed to have waived their right to release of the Escrow Material for the particular reason or event specified in the original Notice. In such circumstances, this Agreement shall continue in full force and effect. |
7 | Disputes |
7.1 | Upon receipt of Licensees notice requesting dispute resolution pursuant to Clause 6.5 above, NCC Group shall notify Licensor of the Licensees request for dispute resolution. Licensor and Licensee may submit their dispute to expedited nonbinding arbitration in Santa Clara County, California or Palm Beach County, Florida under Commercial Arbitration Rules of the American Arbitration Association by one arbitrator appointed by the said rules. A copy of such decision shall be delivered immediately to Licensor, Licensee and NCC Group. To the extent Licensor and Licensee elect binding arbitration, the parties shall use their best efforts to commence the arbitration proceedings within 14 days following delivery of the counter-notice. Prior to the initiation of any binding arbitration procedure, the Licensor and Licensee shall use their commercially reasonable efforts to mutually agree upon (i) the maximum length of time of the arbitration from the date of notice of binding arbitration to the date of the arbitrators decision, (ii) the number of document requests (including subparts), (iii) the number of interrogatories (including subparts) on opposing parties, (iv) number of subpoena to third parties for testimonial depositions (and the length of such depositions), and (v) all other discovery matters will be governed by the Federal Rules of Civil Procedure. The arbitrator shall not have authority to award punitive damages. All expedited procedures prescribed by the AAA Commercial Arbitration Rules shall apply. The arbitrator shall either be a retired jurist or engaged in the practice of law with no less than ten (10) years experience in the area of software licensing or commercial information systems contract disputes. No person may be appointed as an arbitrator unless he or she is independent of each party, is knowledgeable regarding the subject matter of the dispute. The sole question to be determined by the arbitrator shall be whether or not there existed a Release Event at the time Licensee delivered the Notice to NCC Group and whether the event or circumstance giving rise to the release event has been rectified. |
7.2 | If the arbitrator finds that a Release Event existed at the time of delivery of the Notice to NCC Group, NCC Group Is hereby authorized to release and deliver the Escrow Material to the Licensee within 5 working days of the decision being notified by the arbitrator to the parties. If the arbitrator finds to the contrary, then NCC Group shall not release the Escrow Material and shall continue to hold it in accordance with the terms of this Agreement. |
7.3 | The parties hereby agree that the costs and expenses of the arbitrator, the reasonable attorneys fees and costs incurred by the prevailing party in the arbitration and any costs incurred by NCC Group in the arbitration shall be paid by the non-prevailing party. |
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SmartMeter Program Upgrade Supply Agreement (SSN)
7.4 | In any litigation arising from or related to this agreement, the parties hereto each hereby knowingly, voluntarily and intentionally waive the right each may have to a trial by jury with respect to any litigation based hereon, or arising out of, under or in connection with this agreement, or any course of conduct, course of dealing, statement (whether oral or written) or actions of either party to this agreement. This prevision is a material inducement for the customer to enter into this agreement. |
8 | Confidentiality |
8.1 | The Escrow Material shall remain of all times the confidential and intellectual property of Licensor. |
8.2 | Subject to Clause 8.4, NCC Group agrees to keep all Confidential Information relating to the Escrow Material and/or the Software that comes into its possession or to its knowledge under this Agreement in strict confidence and secrecy. NCC Group further agrees not to make use of such information and/or documentation other than for the purposes of this Agreement and, unless the parties should agree otherwise in writing and subject to Clause 8.4, will not disclose or release it other than in accordance with the terms of this Agreement. |
8.3 | NCC Group may release the Escrow Material to the extent that it is required by applicable court order, judgment or decree provided that NCC Group has notified Licenser and Licensee prior to such required release, has given Licensor and/or Licensee an opportunity to contest (at their own expense) such required release, within the time parameters mandated by such applicable court order, judgment or decree. NCC Group is hereby expressly authorized in its sole discretion to obey and comply with all orders, judgments, decrees so entered or issued by any court, without the necessity of inquiring as to the validity of such order, judgment or decree, or the courts underlying jurisdiction. Where NCC Group obeys or complies with any such order, judgment or decree, NCC Group shall not be liable to licensee, Licensor or any third party by reason of such compliance, notwithstanding that such order, judgment or decree may subsequently be reversed, modified or vacated. |
9 | Intellectual Properly Rights |
9.1 | The release of the Escrow Material to Licensee will not act as an assignment of any Intellectual Property Rights that Licensor or any third party possesses in the Escrow Material. However, upon deposit of the Escrow Material, the title to the media upon which the Escrow Material is deposited (Media) is transferred to NCC Group. Upon delivery of the Escrow Material back to Licensor, the title to the Media shall transfer back to the Licensor. If the Escrow Material is released to the Licensee, the title to the Media shall transfer to the Licensee. |
9.2 | The Intellectual Properly Rights in the Integrity Testing report and any Full Verification report shall remain vested in NCC Group. Licenser and Licensee shall each be granted a non-exclusive right and license to use such report for the purposes of this Agreement and their own internal purposes only. |
10 | Integrity Testing and Full Verification |
10.1 | NCC Group shall bear no obligation or responsibility to any party to this Agreement or person, firm, company of entity whatsoever to determine the existence, relevance, completeness, accuracy, operation, effectiveness, functionally or any other aspect of the Escrow Material received by NCC Group under this Agreement. |
10.2 | As soon as practicable after the Escrow Material has been deposited with NCC Group, NCC Group shall apply its Integrity Testing processes to the Escrow Material. |
10.3 | Any party to this Agreement shall be entitled to require NCC Group to carry out a Full Verification. Subject to Clause 10.4, NCC Groups prevailing fees and charges for the Full Verification processes and all reasonable expenses incurred by NCC Group in carrying out the Full Verification processes shall be payable by the requesting party. |
10.4 | If the Escrow Material fails to satisfy NCC Groups Full Verification tests as a result of being defective or incomplete in content, NCC Groups fees, charges and expenses in relation to the Full Verification tests shall be paid by Licensor. |
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SmartMeter Program Upgrade Supply Agreement (SSN)
10.5 | Should the Escrow Material deposited fail to satisfy NCC Groups Integrity Testing or Full Verification tests under Clauses 10.2 or 10.3, Licensor shall, within 14 days of the receipt of the notice of test failure from NCC Group, deposit such new, corrected or revised Escrow Material as shall be necessary to ensure its compliance with its warranties and obligations in Clause 2. If Licensor fails to make such deposit of the new, corrected or revised Escrow Material, NCC Group will issue a report to Licensee (with a copy to Licensor) detailing the problem with the Escrow Material as revealed by the relevant tests. |
11 | NCC Groups Liability |
11.1 | Nothing in this Clause 11 excludes or limits the liability of NCC Group for its gross negligence or intentional misconduct. |
11.2 | Subject to Clause 11.1, no party shall be liable for any loss or damage caused to either Licenser or Licensee except to the extent that such loss or damage is caused by the negligent acts or omissions of or a breach at any contractual duty by such party, its employees, agents or sub-contractors and in such event such partys total liability in respect of all claims arising under or by virtue of this Agreement or in connection with the performance or contemplated performance of this Agreement, shall not exceed the minimum dollar amounts of the insurance coverage required by clause 14.13 except in the case where such liability relates to the indemnification protection afforded NCC Group by Licensor and Licensee. |
11.3 | NCC Group shall not be responsible in any manner whatsoever for any failure or inability of Licensor or Licensee to perform or comply with any provision of this Agreement. |
11.4 | NCC Group shall not be liable in any way to Licensor or Licensee for acting in accordance with the terms of this Agreement and specifically (without limitation) for acting upon any notice, written request, waiver, consent, receipt, statutory declaration or any other document furnished to it pursuant to and in accordance with this Agreement. |
11.5 | Subject to Clause 10, NCC Group shall not be required to make any investigation into and shall be entitled in good faith without incurring any liability to Licensor or Licensee to assume (without requesting evidence thereof) the validity, authenticity, veracity and due and authorized execution of any documents, written requests, waivers, consents, receipts, statutory declarations or notices received by it in respect of this Agreement. |
12 | Indemnity |
Licensor and Licensee each agrees to defend and Indemnify NCC Group and to hold NCC Group harmless from and against any claims, suits or other proceedings, actions, losses, casts, liabilities or expenses incurred in connection with the defense thereof (including reasonable attorneys fees), in each case which may be imposed on, or incurred by or asserted against NCC Group in any way arising out of or relating to this Agreement, provided that neither Licensor nor Licensee shall be liable for that portion of any such indemnification amount resulting from NCC Groups gross negligence or intentional misconduct or material breach of any contractual duly hereunder, and Licensee shall only be liable for that portion of any such indemnification amount resulting from Licensees negligence or intentional misconduct. NCC group agrees to defend and Indemnify licensee and hold Licensee harmless from and against any third party claims, suits or other proceedings, actions, losses, costs, liabilities or expenses incurred in connection with the defense thereof (including reasonable attorneys fees), in each case which may be imposed on, or incurred by or asserted against Licensee in any way arising out of or relating to NCC Groups negligence or intentional misconduct.
13 | Term and Termination |
13.1 | This Agreement shall continue until terminated in accordance with this Clause 13. |
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SmartMeter Program Upgrade Supply Agreement (SSN)
13.2 | If Licensor or Licensee, as the case may be, foils to pay an invoice addressed to it for services under this Agreement within 45 days of its issue, NCC Group reserves the right to give that party written notice to pay the outstanding Invoice within 30 days. If Licensor has not paid its invoice by the expiry of the 30 day notice period, NCC Group will give Licensee a period of 45 days to pay Licensers invoice. If Licensor or Licensee (as appropriate) has not paid its invoice alter being given notice in accordance with this Clause, NCC Group shall have the right to terminate this Agreement without further notice. Any amounts owed by Licensor but paid by Licensee will be recoverable by Licensee direct from Licenser as a debt and, if requested, NCC Group shall provide appropriate documentation to assist in such recovery. |
13.3 | Upon termination under the provisions of Clause 13.2, for 30 days from the date of termination NCC Group will make the Escrow Material available for collection by Licensor or its agents from the premises of NCC Group during office hours. Alter such 30 day period NCC Group will destroy the Escrow Material. |
13.4 | Notwithstanding any other provision of this Clause 13, NCC Group may resign as Escrow Agent hereunder and terminate this Agreement by giving sixty (60) days written notice to Licensor and Licensee. In that event, Licensor and Licensee shall appoint a mutually acceptable new custodian on similar terms and conditions to those contained herein. If a new custodian is not appointed within 14 days of delivery of such notice, Licensor or Licensee shall be entitled to request the American Arbitration Association to appoint a suitable new custodian upon terms and conditions consistent with those in this Agreement. Such appointment shall be final and binding on Licensor and Licensee. It NCC Group is notified of the new custodian within the notice period, NCC Group will forthwith deliver the Escrow Material to the new custodian. If NCC Group is not notified of the new custodian within the notice period, NCC Group will return the Escrow Material to Licensor. |
13.5 | Licensee may terminate this Agreement at any time by giving sixty (60) days prior written notice to NCC Group. Upon such termination, NCC Group will return the Escrow Material to Licensor. |
13.6 | If the License Agreement has expired or has been lawfully terminated, then Licensee shall endeavour to give notice to NCC Group within 14 days thereof to terminate this Agreement which, Licensor shall be entitled to give written notice to NCC Group to terminate this Agreement. Upon receipt of such a notice from Licensor, NCC Group shall notify Licensee of Licensors notice to terminate. Unless within 30 days of NCC Group giving such notice to Licensee. NCC Group receives a counter-notice from Licensee disputing the termination of the License Agreement, then Licensee shall be deemed to have consented to such termination and this Agreement shall immediately automatically terminate. Any disputes arising under this Clause shall be dealt with in accordance with the dispute resolution procedure in Clause 7. Upon termination under this Clause, NCC Group shall return the Escrow Material to Licensor. |
13.7 | Subject to Clause 13.6, Licensor may only terminate this Agreement with the written consent of Licensee. |
13.8 | This Agreement shall automatically immediately terminate upon release of the Escrow Material to Licensee in accordance with Clause 6. |
13.9 | It this Agreement is superseded and replaced by a new agreement in respect of the Escrow Material, this Agreement shall, upon the coming into force of the new agreement, automatically terminate. Licensor shall request NCC Group to either transfer the Escrow Material to the new agreement. If new material is deposited, upon its receipt, NCC Group shall, unless otherwise instructed, destroy the Escrow Material. |
13.10 | The provisions at Clauses 1, 3.2, 5, 8, 9, 10.1, 11, 12, 13.10 to 13.12 (inclusive) and 14 shall continue in full force and after termination of this Agreement. |
13.11 | On and alter termination of this Agreement, Licensor and/or Licensee (as appropriate) shall remain liable to NCC Group for payment in full of any fees and interest which have become due but which have not been paid as of the date of termination. |
13.12 | The termination of this Agreement. however arising, shall be without prejudice to the rights accrued to the parties prior to termination. |
8
SmartMeter Program Upgrade Supply Agreement (SSN)
14. | General |
14.1 | A party shall notify the other parties to this Agreement, within 30 days of its occurrence, of any of the following: |
14.1.1 | a change of its name, principal office, contact address or other contact details: and |
14.1.2 | any material change in its circumstances that may affect the validity or operation of this Agreement. |
14.2 | This Agreement shall be governed by and construed according to the laws of the stale of California, excluding that body of law known as conflict of law. |
14.3 | This Agreement represents the whole agreement relating to the escrow arrangements between NCC Group and the other parties for the Software and shall supersede all prior agreements, discussions, arrangements, representations, negotiations and undertakings. |
14.4 | Unless the provisions at this Agreement otherwise provide, any notice or other communication required or permitted to be given or made in writing hereunder shall be validly given or made if delivered by hand or courier or it dispatched by certified or registered mail (airmail if overseas) addressed to the address specified for the parties in this Agreement (or such other address as may be notified to the parties from time to time) or if sent by facsimile message to such facsimile number as has been notified to the parties from time to time and shall be deemed to have been received: |
(i) | If delivered by hand or courier, one day following the time of delivery; |
(ii) | If sent by certified or registered mail (airmail if overseas), 3 business days after posting (6 days if sent by airmail); |
(iii) | If sent by facsimile, one day following the time of completion of the transmission of the facsimile with facsimile machine confirmation of transmission to the correct facsimile number of all pages of the notice. |
14.5 | Except where Licensor or Licensee merges, is acquired or has substantially all of its assets acquired and the new entity or acquirer agrees to assume all of their obligations and liabilities under this Agreement, Licensor and Licensee shall not assign, transfer or subcontract this Agreement or any rights or obligations hereunder without the prior written consent of the other parties. |
14.6 | NCC Group shall not be entitled to transfer or assign this Agreement without the prior written consent of Licensor and thereupon written notice to all Licensees, provided, however, that in the event of the acquisition of NCC Group. NCC Group shall be entitled to transfer or assign this Agreement in connection with such acquisition upon written notice to both Licensor and Licensee. |
14.7 | The Agreement shall be binding upon and survive for the benefit of the successors in title and permitted assigns of the parties. |
14.8 | If any provision of this Agreement is declared too broad in any respect to permit enforcement to its full extent, the parties agree that such provision shall be enforced to the maximum extent permitted by law and that such provision shall be deemed to be varied accordingly. If any provision of this Agreement is found by any court, tribunal or administrative body of competent jurisdiction to be wholly or partly illegal, invalid, void or unenforceable, it shall to the extent of such illegally, invalidity of unenforceability, be deemed severable and the remaining part of the provision and the rest of the provisions of this Agreement shall continue in full force and effect. |
14.9 | Save as expressly provided in this Agreement, no amendment or variation at this Agreement shall be effective unless in writing and signed by a duly authorized representative of each of the parties to it. |
9
SmartMeter Program Upgrade Supply Agreement (SSN)
14.10 | The parties shall not be liable to each other or be deemed to be in breach of this Agreement by reason of any delay in performing, or failure to perform, any of their obligations under this Agreement if the delay or failure was for a reason beyond that partys reasonable control (including. without limitation, fire, flood, explosion, epidemic, riot, civil commotion, any strike, lockout or other Industrial action, act of God, war or warlike hostilities or threat of war, terrorist activities, occidental or malicious damage, or any prohibition or restriction by any governments or other legal authority which affects this Agreement and which is not in force on the date of this Agreement). A party claiming to be unable to perform its obligations under this Agreement (either on time or at all) in any of the circumstances set out above must notify the other parties of the nature and extent of the circumstances in question as soon as practicable. If such circumstances continue for more than six months, any of the other parties shall be entitled to terminate this Agreement by giving one months notice in writing. |
14.11 | No waiver by any party of any breach of any provisions of this Agreement shall be deemed to be a waiver of any subsequent or other breach and, subject to Clause 6.6, no failure to exercise or delay in exercising any right or remedy under this Agreement shall constitute a waiver thereof. |
14.12 | This Agreement may be executed in any number of counterparts and by different parties in separate counterparts. Each counterpart when so executed shall be deemed to be on original and all of which together shall constitute one and the same agreement. |
14.13 | NCC Group shall, at its sole cost and expense, throughout the term of this Agreement, procure and maintain in full force and effect, the following insurance coverage with on insurance carrier that is rated B+ or better by A.M. Best. NCC Group shall provide Licensor and all Licensees hereunder with a certificate of insurance evidencing such coverage. All certificates of insurance shall require that Licensor and Licensee be provided with no less than thirty (30) days advance written notice of cancellation of the stated coverage, and NCC Group shall request that its insurer use its best efforts to provide at least thirty (30) days advance written notification of such cancellation. |
Type of Insurance |
Coverage Amount | Type of Insurance | Coverage Amount | |||
General Liability |
$2,000,000 General Aggregate | |||||
General Liability |
$1,000,000 Each Occurrence | Umbrella Coverage | $5,000,000 General Aggregate | |||
Professional Liability |
$1,000,000 Each Occurrence |
10
SmartMeter Program Upgrade Supply Agreement (SSN)
Signed for and on behalf of Silver Spring Networks, Inc. | ||||||
Name: |
|
| | ||||
Position: |
|
| (Authorized Signatory) | ||||
Signed for and on behalf of Pacific Gas and Electric Company | ||||||
Name: |
|
| | ||||
Position: |
|
| (Authorized Signatory) | ||||
Signed for and on behalf of NCC GROUP, INC. | ||||||
Name: |
|
| | ||||
Position: |
|
| (Authorized Signatory) |
11
SmartMeter Program Upgrade Supply Agreement (SSN)
Exhibit 2
Form of ***
Notwithstanding notations on the attached *** that this draft is for discussion purposes only, the Parties agree that the terms and conditions of the attached *** are agreed and will not be subject to further negotiation or change.
The Parties also agree that the ***
*** (1 page redacted)
PG&E and SSN Confidential
Page 1
Exhibit 3
PG&E SmartMeter System Level Requirements
SMARTMETER UPGRADE SYSTEM REQUIREMENTS
ISTS Architecture and Strategy
Technology Innovation Center
Document Version: 3.2
Copyright 2008, Pacific Gas and Electric Company
All rights reserved.
For PG&E internal use only.
PG&E Internal Information For use by Authorized Persons Only *** [94 pages redacted] |
Exhibit 4
Test Strategy
SmartMeter Release D
Test Approach
ISTS Architecture and Strategy
Technology Innovation Center
Document Version: 1.1
Copyright 2008, Pacific Gas and Electric Company
All rights reserved.
For PG&E internal use only.
*** (26 pages redacted)
Exhibit 5
PG&E IT Change Management Standard
Information Systems
Technology Services (ISTS)
IT Change Management Standard
Issued By
Greg Kassabian, Principal, IT Process and Standards Management
Document Sponsor
Chris Maturo, Sr. Director, the Office of the CIO
Current Version Number | 2.1.0 | |||
Date of Current Version | 01/15/2008 | |||
Date Document Created | 9/28/2005 |
EDMS # 003937926
PG&E Internal Information
For use by Authorized Persons Only
*** (49 pages redacted)
4
AMENDMENT NO. 17
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
*** The omitted portions of this amendment have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934.
Amendment 17 to PG&E/SSN Agreement | 1 | PG&E and SSN CONFIDENTIAL |
Amendment No. 17
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
Effective Date: May 1, 2013
This Amendment No. 17 (Amendment) to the SmartMeter Program Upgrade Supply Agreement (Agreement) as previously amended between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23, 2008, is made and entered into with effect as of the date set forth above (the Effective Date). Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties. Unless otherwise defined herein, all capitalized terms shall have the meaning given in the Agreement.
In consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
1. | LIMITATION ON CERTAIN REMEDIES |
(a) | Pursuant to Section 4.5 of the Agreement and as more fully described in Schedule F (Compensation for *** and ***), SSN is potentially liable for Liquidated Damages for ***). Pursuant to Amendment No. 6 to the Agreement, effective as of March 24, 2010, ***. |
(b) | SSNs cumulative maximum liability for all of the above-stated *** shall not exceed $***. For clarity, the provisions of Section 19 of the Agreement (Limitations of Liability) remain unchanged by the provisions of this Section 1. |
2. | MODIFICATION OF *** WARRANTY |
*** contains certain warranties from SSN (the *** Warranties). ***. The Parties agree to ***:
(a) | Effective on and from the date hereof, *** is superseded and replaced by the following provision: |
In this Section, *** means ***. For the avoidance of doubt, the Parties agree: (1) that ***; and (2) that ***.
(b) | Effective on and from the date hereof, but subject to paragraph (f) below, *** is amended as follows: |
(i) | In the first paragraph, delete ***. |
Amendment 17 to PG&E/SSN Agreement | 2 | PG&E and SSN CONFIDENTIAL |
(ii) | *** is superseded and replaced by the following provision: |
(i) If PG&E ***, then:
A. ***; and
B. ***; and
(iii) | Insert the following paragraphs as Sections *** [1 page redacted] |
(c) | Effective on and from the date hereof, but subject to paragraph (f) below, Functional Requirement number ***1 in Annex A-5.2 is hereby superseded and replaced by the warranties set forth above and by the commitments set forth in Section 4 of this Amendment. For clarity, all other Functional Requirements (including Functional Requirements numbered ***) continue to apply. |
(d) | Effective on and from the date hereof, but subject to paragraph (f) below, PG&E shall ***. PG&E shall not be bound by this covenant if it gives a Rescission Notice pursuant to paragraph (f) below. |
(e) | The parties acknowledge that ***. |
(i) | ***. |
(ii) | ***. |
(f) | If a ***, PG&E may give SSN a notice (a Rescission Notice) rescinding its covenant under paragraph (d). If PG&E issues a Rescission Notice, then: |
(i) | ***; |
(ii) | PG&E may ***; |
(iii) | Any applicable *** during the time elapsed between the execution of this Amendment and the date of the Rescission Notice; |
(iv) | For clarity, the *** set forth above in Section 2(b) of this Amendment shall remain in full force and effect regardless of any Rescission Notice issued by PG&E. |
3. | NETWORK EQUIPMENT, SATELLITE BACKHAUL KITS AND ANTENNA KITS |
(a) | ***. |
(b) | ***. |
1 | Functional Requirement Number *** states: ***. |
Amendment 17 to PG&E/SSN Agreement | 3 | PG&E and SSN CONFIDENTIAL |
4. | MICROAP SOLUTION |
(a) | The MicroAP Solution is defined as *** that will work on ***. The Parties agree that (i) the MicroAP Solution represents Products for the purposes of the Agreement and shall be subject to all of the terms of the Agreement including acceptance testing, approval by PG&E, warranties, and except as provided in Attachment 1 hereto or as may be further modified by mutual agreement of the Parties, the Functional Requirements applicable to Access Points and NIC Cards under the Agreement (as modified pursuant to Attachment 1); and (ii) the MicroAP Solution shall be included in the Hosting Services provided pursuant to Schedule O at no additional charge. For the purposes of this Section: (i) MicroAP means an ***; and (ii) ***. |
(b) | SSN will supply MicroAPs to PG&E as follows: |
*** [2 pages redacted]
(c) | SSN shall provide to PG&E at no additional cost the following services: |
(i) | ***. |
(ii) | ***. |
(iii) | ***. |
(iv) | ***. |
(d) | At PG&Es request, ***, SSN will provide field engineers and other technical support to work side by side with PG&E for up to *** in each case for (1) ***, and (2) ***. |
(e) | Should PG&E determine, based on the applicable acceptance testing under this Agreement that the MicroAP Solution does not meet the requirements of this Agreement (PG&Es Rejection), then SSN shall, ***. |
5. | *** SERVICES |
(a) | *** to maintain *** will be provided as follows: |
(i) | ***. |
(ii) | ***. |
6. | PROJECT MANAGEMENT |
*** shall provide a *** for *** at a rate of $*** for the period *** through *** (payable as set forth in ***). *** thereafter for the remainder of the *** Term identified in Paragraph *** at the rate of $***.
7. | ESCROW CERTIFICATION AND INVENTORY |
SSN shall certify to PG&E by April 30, 2013 that the Escrowed Materials SSN is required to deposit with the Escrow Agent pursuant to Section 14.1 of the Agreement, are complete and up-to-date. SSN shall also provide a detailed inventory of all Escrowed Materials currently deposited with the Escrow Agent.
Amendment 17 to PG&E/SSN Agreement | 4 | PG&E and SSN CONFIDENTIAL |
8. | MOST FAVORED CUSTOMER PRICING |
Section 9.3 of the Agreement (New Products) is deleted in its entirety and replaced with the following: During the term of this Agreement, SSN will advise PG&E of the release of any new equipment or software SSN has developed (New Products). New Products shall not include the Products listed in Annex A-7. ***.
9. | REMAINING ITEMS IN ANNEX A-5.2 |
The parties agree to negotiate in good faith to resolve by May 31, 2013 the remaining open items in Annex A-5.2.
10. | MODIFICATION OF HOSTING TERMS |
(a) | Amendment 16 to the Agreement shall be terminated effective May 1, 2013. |
(b) | Change Order *** is modified as follows: Section 3 of Attachment 1 of *** is deleted in its entirety. All other terms and conditions of the *** shall remain unchanged. *** set forth in Section (c) below, provided that ***. |
(c) | Amendment and Restatement of Schedule O. Schedule O is amended and restated in its entirety as set forth in Attachment 3. |
11. | CHANGES TO DEPLOYMENT PROCESSES (ANNEX A-2 AND SCHEDULE O) |
(a) | *** Program. With reference to Section *** of Annex A-2: |
(i) | By December 31, 2013, SSN shall complete (i) ***; and (ii) ***. |
(ii) | In January 2015, SSN shall complete a ***. |
(iii) | PG&E may request additional ***. |
(iv) | The comprehensive *** referred to in paragraph (ii) and any subsequent *** will be performed as described in Annex A-2, Section *** with the following exceptions: |
(a) | SSN Project management and coordination with PG&E teams is included. |
(b) | ***. |
Amendment 17 to PG&E/SSN Agreement | 5 | PG&E and SSN CONFIDENTIAL |
(c) | PG&E may perform on-site field work or contract with SSN to complete on-site field work. |
(d) | *** will not include ***. |
(b) | Sections 2.4 (***), 2.6 (***), the last sentence of Subsection 2.5(c) and Section 2.5(d) of Annex A-2 Statement of Work (as amended and restated pursuant to Amendment No. 6) are hereby eliminated in their entirety. |
(c) | In Attachment A-5.1 to Annex A-5, delete the following sentence on the first page: |
The following Functional Requirements apply to each *** (Statement of Work) Section 2.1(k).
(d) | In Attachment A-5.1 to Annex A-5, delete paragraph 3(a)(ii). |
12. | MODIFICATIONS TO OPERATING LEVEL AGREEMENT (OLA) PROCEDURES |
Sections 2.9(a) and (b) of the OLA are superseded and replaced with the text in Attachment 4.
(a) | *** Schedule O, ***, Section 2.4(e), are eliminated in their entirety. |
*******************************
Except as set forth above, all other terms of the Agreement as amended shall remain in full force and effect. In the event of a conflict between this Amendment and the Agreement, this Amendment shall govern.
This Amendment may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment, including the signature pages hereto, will be deemed to be an original. This Amendment is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment, on the date set forth below.
Amendment 17 to PG&E/SSN Agreement | 6 | PG&E and SSN CONFIDENTIAL |
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||
By: | *** |
By: | *** | |||||
Printed: | *** |
Printed: | *** | |||||
Title: | *** |
Title: | *** | |||||
Date: | April 30, 2013 |
Date: | April 30, 2013 |
***
Amendment 17 to PG&E/SSN Agreement | 7 | PG&E and SSN CONFIDENTIAL |
Functional Requirements | PG&E and SSN CONFIDENTIAL |
Orig. |
Requirement |
Exhibit 3 |
Dependency / |
Amendment 17 | ||||
*** |
*** | *** | *** | *** | ||||
*** |
*** | *** | *** | *** | ||||
*** |
*** | *** | *** | *** | ||||
*** |
*** | *** | *** | *** | ||||
*** |
*** | *** | *** | *** | ||||
*** |
*** | *** | *** | *** | ||||
*** |
*** | *** | *** | *** | ||||
*** |
*** | *** | *** | *** | ||||
*** |
*** | *** | *** | *** | ||||
*** |
*** | *** | *** | *** |
Amendment 17 Attachment 1 MicroAP Functional Requirements (Final 4-26-2013)
Amendment 17 Pricing Tables | SSN and PG&E CONFIDENTIAL |
Amendment 17 Attachment 2 Pricing Exhibit
***
Amendment 17Attachment 2 Pricing Exhibit (Final 4-26-2013) | 1 of 2 |
Amendment 17 Pricing Tables | SSN and PG&E CONFIDENTIAL |
***
Amendment 17Attachment 2 Pricing Exhibit (Final 4-26-2013) | 2 of 2 |
SmartMeter Upgrade Supply Agreement
ATTACHMENT 3 to Amendment 17
Schedule O
(Amendment 17 Restatement)
PG&E and SSN Confidential | Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
SCHEDULE O - HOSTING AND MANAGED SERVICES
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
Amended and restated pursuant to Amendment No. 17
(April 2013)
PG&E and SSN Confidential Page 1 |
Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
Table of Contents
1. |
OVERVIEW |
1 | ||||||||
1.1 |
Purpose and Related Documents. |
1 | ||||||||
2. |
TERM AND TERMINATION |
2 | ||||||||
2.1 |
Term. |
2 | ||||||||
2.2 |
Termination and Transition Assistance. |
3 | ||||||||
2.3 |
***. |
4 | ||||||||
3. |
CROSS-FUNCTIONAL SERVICES |
4 | ||||||||
3.1 |
General Requirements. |
4 | ||||||||
3.2 |
Service Ticket Management Process. |
4 | ||||||||
3.3 |
Change Management. |
5 | ||||||||
3.4 |
Reporting. |
6 | ||||||||
3.5 |
Training and ***. |
7 | ||||||||
3.6 |
Miscellaneous Operational Support Services. |
11 | ||||||||
3.7 |
Capacity and Configuration Management. |
11 | ||||||||
4. |
UIQ MANAGEMENT SERVICES |
13 | ||||||||
4.1 |
UIQ Management Services Generally. |
13 | ||||||||
4.2 |
Database Management. |
14 | ||||||||
4.3 |
Implementation of UtilityIQ Software Upgrades and Firmware. |
15 | ||||||||
4.4 |
PG&E Participation. |
15 | ||||||||
4.5 |
Third Party Software UtilityIQ System. |
15 | ||||||||
5. |
FIELD NETWORK SERVICES |
16 | ||||||||
5.1 |
Field Network Management. |
16 | ||||||||
5.2 |
Field Network Monitoring and Reporting. |
17 | ||||||||
6. |
DATA CENTER SERVICES |
17 | ||||||||
6.1 |
General Terms. |
17 |
PG&E and SSN Confidential Page i |
Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
6.2 |
Locations, Allocation of Processing Environments and Access. |
18 | ||||||||
6.3 |
General and Facility-Related Requirements. |
18 | ||||||||
6.4 |
Front Haul Communications. |
18 | ||||||||
6.5 |
Back-haul Communications |
19 | ||||||||
6.6 |
***. |
20 | ||||||||
6.7 |
Baseline Support for Core Network Infrastructure in the Data Center. |
20 | ||||||||
6.8 |
Ownership and Acquisition of Hardware and Third Party Software. |
20 | ||||||||
6.9 |
Data Center Hardware Installation and Maintenance. |
20 | ||||||||
6.10 |
Data Center Asset Management. |
21 | ||||||||
6.11 |
*** Specific Requirements. |
21 | ||||||||
6.12 |
Backup of *** Environment |
21 | ||||||||
7. |
SECURITY REQUIREMENTS |
22 | ||||||||
7.1 |
Security Policies. |
22 | ||||||||
7.2 |
Physical Security. |
23 | ||||||||
7.3 |
Virus Protection. |
23 | ||||||||
7.4 |
Penetration Testing. |
23 | ||||||||
7.5 |
Security Breaches |
24 | ||||||||
7.6 |
*** |
24 | ||||||||
8. |
*** |
24 | ||||||||
8.1 |
***. |
24 | ||||||||
8.2 |
***. |
24 | ||||||||
8.3 |
*** |
24 | ||||||||
8.4 |
***. |
24 | ||||||||
8.5 |
[Deleted pursuant to Amendment 17] |
24 | ||||||||
8.6 |
***. |
24 | ||||||||
8.7 |
***. |
24 |
PG&E and SSN Confidential Page ii |
Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
8.8 |
***. |
24 | ||||||||
8.9 |
***. |
24 | ||||||||
8.10 |
***. |
24 | ||||||||
9. |
*** |
24 | ||||||||
9.1 |
***. |
24 | ||||||||
9.2 |
***. |
25 | ||||||||
9.3 |
***. |
25 | ||||||||
9.4 |
***. |
25 | ||||||||
10. |
PRICING |
25 | ||||||||
10.1 |
*** |
25 | ||||||||
11. |
ADDITIONAL TASK ORDERS |
25 | ||||||||
12. |
DEFINITIONS |
25 |
PG&E and SSN Confidential Page iii |
Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
SCHEDULE O
HOSTING and MANAGED SERVICES
1. | OVERVIEW |
1.1 | Purpose and Related Documents. |
(a) | This Schedule O sets out the terms and conditions upon which SSN will provide the Hosting Services (more particularly defined in Subsection 1.1(e), below) to support PG&Es SmartMeter System production, *** and testing environments. |
(b) | Definitions relating specifically to the terms of this Schedule O are set out in Section 11. |
(c) | This Schedule O memorializes the arrangements that took effect beginning September 1, 2009. It supersedes and replaces Section 4 (UIQ Hosting) of Annex A-2 (Statement of Work) to the Agreement and the associated one time and monthly recurring charges in Table 6 of Annex B-1 (Pricing Tables). |
(d) | Table 1 below specifies the UtilityIQ System Hosted Environments in and to which SSN will perform the Hosting Services as of the Amendment 6 Effective Date. The list of Hosted Environments may be updated and revised by agreement between the Parties from time to time. The category of each environment (Production, ***, Lower Environment) is shown in the table below. *** and Lower Environments are also referred to as Non-Production Environments. |
ID |
Environment Category |
UtilityIQ Hosted Environments Environment Name |
Maximum Number of Meters supported by SSN UIQ hosting | |||
1 | *** | *** | *** | |||
2 | *** | *** | *** | |||
3 | *** | *** | *** | |||
4 | *** | *** | *** | |||
5 | *** | *** | *** | |||
6 | *** | *** | *** | |||
7 | *** | *** | *** |
HCM Hosting: *** (in each environment as described in the table below) as of the Effective Date.
PG&E and SSN Confidential Page 1 |
Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
ID |
Environment Category |
Environment Name |
Maximum Number of *** *** supported by SSN HCM hosting | |||
1 | *** | *** | *** | |||
2 | *** | *** | *** | |||
3 | *** | *** | *** | |||
4 | *** | *** | *** |
(e) | The Hosting Services are comprised of the following four severable categories of services, each of which is supported by the additional cross-functional services described in Section 3: |
(i) | SSN will host, manage, operate, maintain and support the UtilityIQ System, with responsibility for all Infrastructure Components on the terms described in this Schedule O, up to the Front-haul interface on the Front-haul router at the SSN Data Center, as necessary to enable operation of functions and features of the UtilityIQ Software during the Term, and as more fully described in Section 4 below (the UIQ Management Services). Different requirements may apply to the Production Environment, *** Environment and Lower Environments, as described in this Schedule O; |
(ii) | SSN will operate, manage, maintain, support and monitor the Field Network and provide detailed analyses and reports to PG&E as fully described in Section 5 below (the Field Network Services); |
(iii) | SSN will provide sufficient data center space and associated services to meet PG&Es hosting requirements for the Hosted Environments, as more fully described in Section 6 below (the Data Center Services); |
(iv) | ***. |
(f) | SSN will provide the Hosting Services in accordance with the security requirements and the Service Levels set out in Sections 7 and 8 below. |
2. | TERM AND TERMINATION |
2.1 | Term. |
(a) | Subject to Section 2.2 below, the term of this Schedule O (the Term) will commence on the Amendment 6 Effective Date and will end on April 30, 2018 (the Termination Date). |
PG&E and SSN Confidential Page 2 |
Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
2.2 | Termination and Transition Assistance. |
(a) | No earlier than ***, PG&E may elect to (A) terminate Schedule O and the Hosting Services in full or (B) discontinue the Data Center Services portion of the categories of Hosting Services by giving written notice of termination or discontinuance to SSN. The notice may be given before *** but termination may not be effective until on or after that date. If PG&E terminates Data Center Services, then following the Discontinuance Date, ***. If PG&E terminates the Data Center Services, ***. |
(b) | [Section deleted pursuant to Amendment 17] |
(c) | A notice provided pursuant to this Section 2.2 (a Termination Notice) shall be in writing, shall describe the Hosting Services to be terminated or discontinued in reasonable detail and shall include a proposed Services end date. |
(d) | If PG&E issues a Termination Notice, SSN and PG&E shall work together to develop a plan to transition the provision of these Services from SSN to PG&E. This plan is referred to as the Transition Plan and the act of developing the Transition Plan is referred to as Transition Planning. The Transition Plan will include a mutually acceptable date upon which the related Services will cutover to PG&E and SSNs responsibility to provide the Hosting Services will end (the Discontinuance Date). The Parties will work in good faith to complete the Transition Plan within *** days of receipt of the Termination Notice and to make the Discontinuance Date as close as possible to the Hosting Services end date PG&E proposed in its Termination Notice. |
(e) | PG&E may give another Termination Notice before the Discontinuance Date for a prior notice, but PG&E acknowledges that SSN is not staffed to support multiple simultaneous transition efforts. Consequently, if more than one Termination Notice is outstanding at any time, the Parties will work together to prioritize transition efforts within the constraints of SSNs available resources. |
(f) | Discontinuance of Services pursuant to the Transition Plan (Discontinuance) will not cause the termination or discontinuance of the other Services provided under this Schedule. ***. |
(g) | [Section deleted pursuant to Amendment 17] |
(h) | Termination Fees. *** |
(i) | The fees and reimbursements payable by PG&E for termination of the Hosting Services pursuant to this Schedule O apply in lieu of the payment obligations set forth in Section 20.2(a) of the Agreement. |
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(j) | The Transition Plan shall describe reasonable transition services to be provided by SSN (according to a mutually agreed upon schedule) to enable PG&E to take over operation of the affected Services and to take possession and control of the physical infrastructure and systems used to provide such Services (the Transition Services). The Transition Plan shall include ***. SSN shall provide related costing following mutual agreement of the plan. |
(k) | The Transition Plan also will require SSN to assign qualified resources to perform each of the Transition Services on the schedule indicated below, to the extent acceptable to PG&E, ***. |
(l) | SSN shall: |
*** [1 page redacted]
(m) | SSN will maintain a stable account service team during the Transition Planning period and will not transfer personnel from the PG&E account until a personnel transition plan providing for such transfers is agreed by the Parties, except as PG&E may approve in advance on a case by case basis. |
2.3 | *** |
3. | CROSS-FUNCTIONAL SERVICES |
The obligations set out in this Section 3 apply to all Services.
3.1 | General Requirements. |
(a) | SSN will support PG&Es project schedule and deadlines during the deployment phase of the SmartMeter Project and ongoing UtilityIQ Software Upgrades. |
(b) | SSN will keep Data available to and accessible by PG&E ***, on demand and in a mutually agreed manner and structured data format, subject to maintenance periods as described in Section 8.8 below. |
(c) | SSN will participate in *** planning activities and will participate in PG&Es *** walk-throughs and *** tests. |
(d) | SSN personnel will participate in regularly scheduled SmartMeter IT operations planning, analysis and status meetings and in regularly scheduled AMS Operations planning, analysis and status meetings, as requested by PG&E. |
3.2 | Service Ticket Management Process. |
SSN will provide centralized ticketing and management of Incidents, Service Requests and Tech Support Requests for all Services (and applicable to each environment in which any instance of the UtilityIQ System is hosted) in accordance with the OLA, which shall be deemed incorporated into this Schedule O as if fully set forth herein.
(a) | The Production and *** Environment infrastructure will be monitored ***. |
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(b) | SSN Personnel will be available for telephone or email contact ***. All other hours will be supported through automated monitors maintained by SSN with SSN Personnel contacted by pager service during these hours. PG&E shall have the ability to contact SSN Personnel via pager or other mechanism required by PG&E and SSN will respond in accordance with the timeframes set forth in the OLA. SSN shall provide to PG&E the SSN holiday schedule annually in advance. |
(c) | SSN Personnel will be available ***. |
(d) | SSN will notify PG&E of each Incident affecting the infrastructure. Notification will be provided as specified in the OLA. Even if the issue is resolved within the applicable response time window, SSN shall communicate the details regarding the issue and its resolution to PG&E. |
(e) | With respect to all Infrastructure Components, SSN will provide the following operational support services: |
(i) | Break-fix, and repair in response to Tickets; and |
(ii) | Create, maintain, and document a suite of UtilityIQ System monitoring and configuration management tools and scripts owned by SSN. |
(f) | Network Device Ticketing and Procedures. The following activities will be performed at *** to PG&E. |
(i) | *** |
(ii) | *** |
(iii) | *** |
3.3 | Change Management. |
(a) | SSN will follow the IT Change Management Process for any Request for Change or System Change made relative to the UtilityIQ System. |
(b) | With respect to all Infrastructure Components, SSNs use of the IT Change Management Process must result in the creation of documentation sufficiently detailed for use by an experienced IT professional (and in a format reasonably acceptable to PG&E) on all relevant Change Management activities, including without limitation the following: |
(i) | outage notification and scheduling; |
(ii) | monitoring and reporting of changes to the Infrastructure Components; |
(iii) | Defect and third party vendor management. SSN and PG&E will use reasonable commercial efforts to cause third party vendor activities to comply with the IT Change Management Process. In particular, SSN will, and as applicable will direct third party vendors to: |
(1) | Track, prioritize, and report defects and map them to patch delivery by the applicable third party vendor; |
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(2) | Track open third party vendor Incident Response SLAs; |
(3) | Track open third party vendor SRs and establish priority and target delivery dates; and |
(4) | Where necessary and provided there is no impact to UtilityIQ System functionality, maintain versions of packaged software (including RDBMS software) to levels of currency required by PG&E technical standards, and in compliance with applicable third party vendor patch management and configuration management procedures. |
(c) | Requests for user access and planned modifications that constitute a System Change shall be subject to the IT Change Management Process. |
(d) | *** |
3.4 | Reporting. |
SSN will comply with the reporting requirements set forth in this Section. As noted for each of the reporting categories listed below, SSN will either provide electronic reports to PG&E delivered at the frequency noted, or on-demand self-service access to reporting capabilities to PG&E which PG&E can use to obtain pre-formatted reports or to design and obtain custom reports. To the extent a self-service reporting feature is not functioning properly, such malfunction shall be considered a Defect pursuant to Schedule H. SSN will participate in a monthly performance review meeting with PG&E.
(a) | ***. SSN will provide the monthly *** and *** reports referred to in Section 8. |
(b) | ***. SSN will provide reports on the following for the *** Environment only: |
***
(c) | ***. SSN will commence providing the following reports for all Environments by the Amendment 6 Effective Date, either via electronic reports or by enabling self-service reporting: |
*** [1 page redacted]
(d) | ***. SSN will also provide PG&E these reports for the *** Environments: |
***
(e) | Real-time Utilization Reports. *** Reports. For completeness, the parties acknowledge that SSN will provide additional reports as required pursuant to Section 8.7(a) of this Schedule. |
(g) | Taskstats reports. *** |
(h) | The taskstats report will be delivered on a weekly basis via File Transfer Protocol (FTP). PG&E will be responsible for collecting the report from the FTP server. ***. |
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3.5 | Training and ***. |
(a) | The training and *** activities contemplated by this Section 3.50 are intended to provide training and *** regarding the four Services categories provided by SSN under this Schedule O. ***. |
(b) | SSNs obligation to provide training and *** activities pursuant to this Section shall be limited by and subject to confidentiality obligations of SSN to third parties such as third party software vendors and SSNs other customers. |
(c) | PG&E acknowledges that SSN and its licensors retain all right, title and interest, including without limitation all Intellectual Property Rights, in all SSN Confidential Information, concepts, methodologies, product roadmap information, Documentation and other documents provided by SSN to PG&E pursuant to this Section. SSN hereby grants to PG&E a license, on the terms stated at Subsections 13(a)-(c) of the Agreement, to use the concepts, methodologies, product roadmap information, Documentation and other documents provided by SSN to PG&E pursuant to this Section. |
(d) | The training and *** activities: |
(i) | will take place on a periodic basis, but shall in any event be conducted in preparation for and co-incident with the implementation of Major Release Upgrades to the UtilityIQ System and/or in general preparation for any discontinuation of the Hosting Services (in whole or in part), as further described in Section 2.2. ***; |
(ii) | will be attended by PG&E employees who have appropriate basic training, skills, and experience for each course and SSN shall notify PG&E of course prerequisites as soon as curricula are finalized by SSN; |
(iii) | will be provided at an SSN training facility (or a PG&E facility, if PG&E approves) with all required training infrastructure and materials provided by SSN; |
(iv) | shall be delivered in the following manner, subject to reasonable modifications by SSN as it evolves its training and *** practices: |
(1) | End User Application Training: |
***, PG&E will deliver a *** forecast of onsite training requirements for dedicated training delivery. The forecast will be updated on a quarterly basis by PG&E. PG&E acknowledges that *** days notice is required for any onsite delivered course work regardless of whether the course is
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hosted at SSN or PG&E facilities to allow SSN adequate lead time to secure staffing coverage. Open enrollment for mixed customer training delivery does not require advanced notice.
| UtilityIQ AMM The course covers company and product suite overview, key functions of the tool, typical tasks that it is used for, sample workflows, device management, importing device and location information, device edits and swaps, meter programs, schedules and meter read results, exports, monitoring, and configuration. |
| UtilityIQ NEM This course covers product overview and description, NEM advanced network management capabilities based on industry standards, including fault and performance management. Product overview and key functions are covered, typical tasks it is used for including fault management, capacity management, performance management, and security management. The course will also cover NEM dashboard and reporting, configuring policies for bandwidth utilization for WAN and NAN and diagnostics, NMS integration and common use cases. |
| UtilityIQ FWU This course covers product overview and description, background information, typical tasks it is used for, Seed, Float, Flip and running FWU to upload a firmware image, set up an FWU project and distribution and installation of firmware |
| UtilityIQ MPC This course covers product overview and description, typical tasks that MPC is used for, creating and uploading a meter program and programming meters. |
| UtilityIQ ODS This course covers product overview and description, how ODS is used and how it functions, viewing outages, running reports, and configuration with a menu walkthrough. |
| CATT/FSU Tools This course covers field service tool overview and description, what tasks can be performed and how it is used, starting the application, installing the FSU, and the different features and options available including hands-on demonstration work. |
(2) | Administrator and Role-based Training: |
SSN shall provide training, required to enable PG&Es IT staff to install, configure, and observe best practices operation of the SmartMeter System. Administrator training topics include the required qualifications for each functional role, including business operations, IT operations, NOC operations, the maintenance and operation of the *** environment, implementation of the ***, and management of third-party data center operations. Additional training topics include system architecture and administration, network engineering, UtilityIQ System application
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administration and *** tasks. Prerequisites include but may not be limited to completion of relevant End User Application Training (or equivalent knowledge) noted in Subsection 3.5(d)(iv)(1). Curriculum materials will include summaries of in-class topics, as well as concept documents, white papers, and other important materials such as release notes and runbook procedures as appropriate for Role-based Training.
PG&Es forecast of onsite training requirements should include any Role-based training required and may request such sessions starting in ***. Open enrollment schedule for the *** has been provided by SSN and will be updated on a quarterly basis. Training will be scheduled by agreement between PG&E and SSN, but SSN must be resourced to deliver training within *** days of request by PG&E unless otherwise agreed. Minimum class size for these courses is 4 people, maximum 12.
(3) | Custom Training: |
SSN shall provide custom training classes addressing unique topics requested by PG&E not already covered by documentation materials and training provided in the context of training covered in Subsection 3.5(d)(iv)(1) or (2). Each session is assumed to be one day in delivery duration for purposes of quoting scope and pricing in the absence of firm topic requirements. If PG&E requests production of documentation materials that are supplemental to the scope of a single 1-day training, *** lead times may apply.
PG&E may schedule sessions of Custom Training starting in *** with *** days notice. Training will be scheduled by agreement between PG&E and SSN. Maximum class size for these sessions is 12 people.
(4) | ***: |
This training material will involve less formalized training, provided as SSN performs normal operational tasks on PG&E environments. This typically will involve ***. Typical activities will involve:
| *** |
| *** |
| *** |
| *** |
| ***. |
PG&E may schedule *** at any time to coincide with existing SSN/PG&E activities.
(e) | In order that its training materials and curricula remain current and consistent with the evolution of the UtilityIQ System, SSN shall offer PG&E an annual refresh of materials and delta training covering changes in materials and/or operational procedures. If changes by SSN render obsolete prior training and procedures, SSN shall |
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notify PG&E and make training available within *** days of such notice. Delta training, obsolescence training, and additional training sessions pursuant to Subsection 3.5(d)(iv) shall be offered at reasonable costs, in light of the pricing for the original training and *** described in Subsection 3.5(d)(iv). |
(f) | SSNs *** activities shall comply with any confidentiality obligations SSN may have to its other customers and with the rights and restrictions applicable to Licensed Material under Section 13 of the Agreement. All concepts, methodologies, and documents embodied by or produced in connection with Documentation (as described in this 3.5) shall be deemed Licensed Materials. |
(g) | SSN will provide documentation, where existing, of the processes, methodologies and technologies used by SSN to support incident, problem, capacity and change management covering the UtilityIQ System (UIQ-AMM, UIQ-NEM) (Front haul, Back haul, Field Area Network and Data Center technologies). Documentation must include coverage of non-application Infrastructure Components, including configuration and operation of the OS, JBOSS, and the database components. Such documentation should cover and explain the derivation and use of all reporting metrics used by SSN in connection with reporting against SLAs, the Operational Targets (as specified in Section 8.2), and in support of each other report referenced in Section 3.4, all in sufficient detail for use by an experienced IT professional. SSN will update such existing documentation from time to time so that it remains consistent with the OLA and the IT Change Management Process, as such may evolve. |
(h) | Pricing for *** activities included in this Section 3.5 is as follows: |
Table 2 *** Pricing |
||||||||
Activity |
Cost per Unit | Unit | ||||||
*** |
*** | *** | ||||||
*** |
*** | *** | ||||||
*** |
*** | *** | ||||||
*** |
*** | *** | ||||||
*** |
*** | *** | ||||||
*** |
*** | *** | ||||||
*** |
*** | *** |
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(i) As of December 10, 2009, PG&E was entitled to training services to the value of $*** that were not consumed prior to that date. SSN will credit that amount against any training purchased by PG&E until December 31, 2014 at the rates specified in Table 2. Once the credit is exhausted, PG&E will pay for additional training at the rates specified in Table 2.
3.6 | Miscellaneous Operational Support Services. |
SSN will:
(a) | Import device data, including configuration of manufacturer shipment data in format for UtilityIQ System import and resolution of exceptions/errors in device import and imported data; and |
(b) | Assist with the resolution of data discrepancies relating to deployment, shipment, or manufacturing problems. |
3.7 | Capacity and Configuration Management. |
(a) | Capacity Management. SSN shall be responsible for capacity management with respect to each of the Hosted Environments. SSN shall plan and arrange for services and resources to be available within the Hosted Environments as appropriate to satisfy PG&Es current and anticipated future business needs within the parameters of this Schedule O, including: |
(i) | Developing, maintaining and documenting capacity plans for the Production and *** Hosted Environments; |
(ii) | Developing predictive and ongoing capacity indicators for the Production and *** Hosted Environments; |
(iii) | Creating and analyzing utilization and trend forecasts and proactively changing the Production and *** Hosted Environments (e.g., upgrades, downgrades, enhancements, reconfiguration and performance tuning) to correctly align the performance and availability needs with infrastructure capacity while optimizing the utilization of that capacity; |
(iv) | Responding to capacity-related threshold events and initiating the appropriate activities to avoid bottlenecks and performance degradation; |
(v) | Notifying PG&E of capacity and capacity-related performance issues as soon as possible to allow PG&E to provision additional capacity when required; |
(vi) | Diagnosing and resolving performance and capacity-related incidents and problems; |
(vii) | With input from PG&E, modeling the implications of PG&Es short, medium and long term plans on the capacity requirements for the Hosted Environments; |
(viii) | Assessing the impact of change in the Hosted Environments on capacity plans; and |
(ix) | Monitoring the production head end servers to the level of detail appropriate to produce the reports referred to in section 3.4(c) and other mutually agreed upon performance criteria. SSN will provide historical data, to the extent available, to PG&E upon PG&Es request. In particular, SSN will monitor and predict system performance through trending, modeling, testing and analysis of detailed statistical and qualitative performance data for the UtilityIQ System. |
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(b) | Configuration Management. SSN shall be responsible for configuration management with respect to each of the Hosted Environments. SSN shall collect, track, manage, maintain and report on the physical presence, asset data (serial number, etc), contractual terms and configuration states of each Infrastructure Component in the Hosted Environments, including: |
(i) | Establishing for PG&E approval the requirements for what asset and configuration information is to be maintained; |
(ii) | *** |
The configuration data for all Hosted Environments shall include:
ID |
Category |
Subcategory |
Types of data to be collected | |||
1. |
*** | *** | *** | |||
2. |
*** | *** | ||||
3. |
*** | *** | *** | |||
4. |
*** | *** | *** | |||
5. |
*** | |||||
6. |
*** | *** |
Within *** days of the Effective Date, the Parties shall finalize the configuration data, based on a list provided by SSN.
SSN shall provide the reports by the ***. PG&E may submit questions by opening an SSN Customer Support ticket, Priority 3, unless mutually agreed otherwise. ***.
(iii) | Compiling, and making available for review and/or publication, management reports regarding assets and their association with other information in the Configuration Database; |
(iv) | Monitoring and enforcing software license compliance; and |
(v) | Performing, as necessary, audits of the Database to verify accuracy. |
(vi) | Maintaining synchronization of all configurations (including hardware, software, databases and data center infrastructure) between production and *** |
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environments. Any updates to *** environment configurations shall be completed within *** days after the Production Environment configuration change occurs. |
4. | UIQ MANAGEMENT SERVICES |
4.1 | UIQ Management Services Generally. |
(a) | This Section 4 is applicable to all Production and Non-Production Environments except as expressly stated below. |
(b) | SSN will be responsible for the sizing, provisioning, setup, configuration, implementation, monitoring, management, operation, maintenance, upgrading and support of the production and (with respect to Production and *** Environments) backup infrastructure for the UtilityIQ System including all necessary servers, data storage, routers, firewalls, network connectivity, bandwidth, third party software and other hardware. |
(c) | Notwithstanding PG&Es maintenance responsibility for hardware initially sized to the UtilityIQ System infrastructure requirements per Annex A-4, if any additional hardware is required to address performance issues attributable to SSNs UtilityIQ System design, PG&E shall fund the first *** of purchases, and SSN shall fund any additional purchases, exclusive of costs related to data backup, as the proposed solution has yet to be proven operationally viable. SSN shall work in good faith with PG&E to minimize PG&Es data storage requirements and to develop a written action plan acceptable to PG&E regarding this issue prior to ***. Notwithstanding the foregoing, SSN shall not be responsible for furnishing additional hardware at its cost if the deployment scale, functional scope (as contemplated in Annex A-4) or major version release of the UtilityIQ Software changes, or if the proposed backup solution proves not to be operationally viable. |
(d) | SSN will install new versions of the UtilityIQ Software and perform applicable routine management tasks in accordance with the IT Change Management Process. |
(e) | ***. |
(f) | SSN will make (i) all Data collected from Meters available to PG&E online for the ***, and (ii) all NEM network Data available to PG&E online for the ***, or such other duration as PG&E may reasonably require as its business requirements evolve. The Parties will mutually agree on modified pricing to the extent such requirements change. |
(g) | Testing for Maintenance. Whenever SSN wishes to implement a change to the UtilityIQ System as part of its maintenance activities, SSN will be responsible for testing the change to the UtilityIQ System as specified by the IT Change Management Process and Schedule E, Section 2 (Development Testing). Testing of enhancements requested by PG&E will be conducted on a project basis pursuant to a separate statement of work. |
(h) | Production Data Issue Resolution. SSN will assist PG&E with the resolution of production data issues. In particular, but without limitation, SSN will: |
(i) | upon PG&Es request, design strategies to resolve or mitigate data exceptions or data synchronization or data interface (e.g., to CC&B, ***, etc.) issues; |
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(ii) | Document acceptance criteria and acceptance testing plans; |
(iii) | Design, develop, and generate test data; |
(iv) | Design, develop and test data clean up routines; and |
(v) | Design, develop and test any exception handling processes and tools. |
(i) | SSN will provide PG&E with detailed As-Built Documentation of the following aspects of the environments hosted by SSN: Data Center location (row, rack, rack unit), environment identifier (customer, type, hostname), hardware information (make, model, serial number, service code), network information (MAC Address, IPv4 address, IPv6 address), remote access info (DRAC IP, DRAC switch port), power information (PDU ID, PDU socket ID), asset tag info (SSN, PG&E), and server information (CPU, Disk, memory, O/S, software). SSN will deliver documentation to PG&E within ***days following the initial build of any UtilityIQ System instance (including the ***environment). Changes to the UtilityIQ System hardware or software configuration shall be documented through the review and approval procedures in the IT Change Management Process. As-built Documentation shall be revised and delivered by SSN at least annually to incorporate any material UtilityIQ System hardware or software configuration changes. |
(j) | If PG&E determines that new batch processing or automated tools, such as UC4, are needed to interface between the UtilityIQ System and other PG&E systems, then PG&E and SSN will work together to install and configure such tools as needed pursuant to a separate statement of work. |
4.2 | Database Management. |
SSN will perform physical and logical database management support and administration including maintaining database structures, performing periodic standard database housekeeping and maintenance scripts, re-indexing, stored procedure re-builds, defragmentation, periodic purging of obsolete definitions and procedures and all other functions necessary to maintain the database. In addition, SSNs database maintenance activities will include, to the extent applicable:
(a) | Capacity management of storage for database objects (tables, indexes, large objects); |
(b) | Management of ASM (Oracle file server manager), other database-related file systems, and SAN storage for database files; |
(c) | Management of batch jobs for data loading and reference tables; |
(d) | Monitoring and research of security events occurring in the database; |
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(e) | Management of user security access to the database (including roles and privileges); and |
(f) | Database restore/rollback as required for testing or to address Data corruption or Data loss. |
4.3 | Implementation of UtilityIQ Software Upgrades and Firmware. |
(a) | SSN will implement UtilityIQ Software Upgrades by installing them on the servers operated by SSN, in accordance with the IT Change Management Process and the terms of the Agreement. ***. |
(b) | With advance notice and approval by PG&E, SSN will perform firmware upgrades in deployed Endpoints, Access Points and Relays. For training purposes, ***. Implementation may include applying the latest firmware version to all deployed Endpoints, Access Points and Relays, as reasonably determined by PG&E. All firmware releases will be coordinated and approved in advance by PG&E and will be in accordance with the IT Change Management Process. |
4.4 | PG&E Participation. |
(a) | SSN will provide PG&E personnel with access to the following: |
(i) | Access to the UtilityIQ Software (including all application GUIs, functions, features) ***; |
(ii) | ***; |
(iii) | ***; and |
(iv) | ***. |
(b) | PG&E shall have access (***) to the UtilityIQ System to monitor and report metrics. PG&Es monitoring of the UtilityIQ System does not relieve SSN of its accountability for overall systems operations, monitoring and management for each Service to the extent it has not been discontinued pursuant to Section 2.2. Subject to the foregoing, ***. |
(c) | PG&E shall not implement changes in the Production Environment unless agreed by, and under the direction of, SSN, or unless responsibility for the specific task has been transitioned to PG&E. |
(d) | Upon agreement between SSN and PG&E on the need for Field Network and Endpoint maintenance, PG&Es AMS Ops team will be responsible for PG&E work order dispatch and timely work completion. |
4.5 | Third Party Software UtilityIQ System. |
(a) | SSN will be responsible for coordinating with third party software vendors to properly support all third party software required to operate, manage and maintain the UtilityIQ |
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System and to provide all Services under this Schedule O. SSN will provide PG&E with details of all required third party software and will take PG&Es reasonable recommendations into account in relation to the purchase of such software. |
(b) | SSN will be responsible for adding to, replacing, and upgrading any third party software, and managing on PG&Es behalf support and maintenance services provided by vendors of software procured by PG&E in accordance with Section 5.2(b) of the Agreement, to the extent necessary to support the UtilityIQ System and to provide all Services under this Schedule O. SSNs responsibilities with respect to third party software include installing, configuring, applying third party patches and performing quality assurance testing of third party software (subject always to any third party suppliers recommendations or requirements regarding installation, configuration, testing or support of such third party software). SSN will provide documentation regarding such test results when required by PG&E. |
(c) | SSN will coordinate with third party software vendors to perform patch management services for the third party software in accordance with the IT Change Management Process including: |
(i) | monitor the availability of, and implement as appropriate, third party software fixes/patches made available by third party software suppliers; |
(ii) | co-operate with third party suppliers, as necessary to properly support third party software; |
(iii) | co-ordinate, verify and, as appropriate, implement critical patches (including security patches), service packs, hot fixes and upgrades and new releases of third party software; |
(iv) | in cooperation with the third party software vendor monitor, maintain (in accordance with applicable specifications) and tune the third party software on a periodic basis; and |
(v) | co-operate with third party suppliers to properly support third party software as necessary for the successful operation of the UtilityIQ System operates according to its documentation, specifications and operational requirements. |
5. | FIELD NETWORK SERVICES |
5.1 | Field Network Management. |
(a) | This Section 5.1 is applicable to the Production Environment, the San Francisco pilot and the TIC lab Environment only. |
(b) | SSN will be responsible for management and coordination of the Field Network including: |
***
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(c) | As part of the Field Network Services, SSN will: |
***
(d) | PG&E will, based upon input from SSN, be responsible for ***. |
5.2 | Field Network Monitoring and Reporting. |
(a) | SSN will monitor the Field Network and the reachability of all network devices comprising the Field Network ***, and will follow the OLA procedures to promptly report any failures or unavailability for appropriate escalation. Notwithstanding the foregoing, PG&E will investigate any issue affecting fewer than ***. PG&E will escalate such issues to SSN, as necessary to help resolve the problem. SSN will investigate any Meter issue impacting *** and any issue that a preliminary assessment suggests is caused by a systemic problem (architectural, engineering, software, product design, etc). SSN will escalate such issues to PG&E as necessary. PG&E will perform all in-field investigations. SSN resources can be made available at PG&Es request with a minimum of *** advance notice *** for in-field investigations. |
(b) | SSN will manage and maintain all tools used in Field Network monitoring and performance reporting. |
(c) | SSN will obtain the data from the Field Network equipment that is necessary to meet reporting requirements and will retain the data for *** days unless mutually agreed otherwise via the Change Control Process set forth in Annex D-1. |
6. | DATA CENTER SERVICES |
6.1 | General Terms. |
(a) | This Section 6 is applicable to all Production Environments and Non-Production Environments except as expressly stated below. |
(b) | Through its subcontractors, ***, SSN shall provide Data Center Services from a Data Center environment that meets the standards set out below. |
(c) | *** are approved subcontractors for the purposes of Schedule J. |
(d) | Any relocation of the Data Center Services (whether between separate data center facilities or within a data center) shall require PG&Es prior written approval upon adequate prior notice. The addition, termination, or substitution of a Data Center subcontractor shall trigger the Change Control Process set forth in Annex D-1. |
(e) | The parties have agreed to replace *** with an alternative Data Center facility as described in Section 7.6. |
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6.2 | Locations, Allocation of Processing Environments and Access. |
(a) | The Data Center Services will be located at *** (each separately and jointly to be referenced herein as the Data Center). |
(b) | SSN will establish certain Environments at the Data Center as approved by PG&E, and will relocate Environments as directed by PG&E from time to time. Any relocation of Environments after the Amendment 6 Effective Date and any associated fees or cost reimbursements due to SSN will be documented and agreed in a separate statement of work in accordance with the Change Control Process set forth in Annex D-1. |
(c) | SSN will coordinate PG&E access to the Data Center in order to conduct security inspections, scheduled and unscheduled penetration testing and security audits within 48 hours of a request for access. |
6.3 | General and Facility-Related Requirements. |
(a) | SSN will establish the PG&E Areas which will be secure facilities for the location of the UtilityIQ System within the Data Center that have been designed to provide non-stop operations and protection of the UtilityIQ System. |
(b) | ***. |
(c) | The Data Center must provide the following environmentals as required to meet the capacity, processing and communications requirements of the UIQ System: |
Space;
Power;
Cooling;
Connectivity;
***
6.4 | Front Haul Communications. |
(a) | SSN will work together with PG&E as shown in the table immediately following this Section 6.4 (entitled Section 6.4 Table) to establish robust communications services for the Front-haul (Primary Hosting Data Center up to the demarcation point at ***) and between the Data Center and any backup or *** facility such that there is no single point of failure in the communications network, with rapid fail-over from primary to backup circuits in the event of failure (with primary and secondary circuits provided by different service providers), such that SSN can meet its Data Delivery and *** (as described in Section 8.3 and Subsection 6.6(c), respectively). As part of its NOC operating procedures, SSN shall establish a plan to maintain communications with the Field Network if a major interruption in service occurs or a disaster is declared. Deliver and Delivery of Data are defined in the Section entitled Definitions in Annex A-5. |
(b) | SSN will provide and manage any load balancing for the UtilityIQ System. |
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SmartMeter Upgrade Supply Agreement
Section 6.4 Table: Circuits and Responsibilities
(To be used only for describing responsibilities by circuit.)
Responsible Party | ||||||||||||||
Circuit description |
Circuit |
Define Requirements |
Purchase & maintain contract with Service Provider |
Monitor & Manage |
||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** |
*** | *** | *** | *** | ||||||||||
*** | ||||||||||||||
*** |
6.5 | Back-haul Communications |
(a) | SSN will work together with PG&E to establish specifications (bandwidth, technology, etc.) for the Back-haul communication circuit(s) shown in the table immediately above entitled Section 6.4 Table; |
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Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
(b) | PG&E will procure and pay for the Back-haul communication services; |
(c) | PG&E will submit a letter of agency to the necessary telecommunications providers giving SSN permission to submit and escalate operational issues on their behalf; and |
(d) | SSN will perform ***. |
6.6 | *** [1 page redacted] |
6.7 | Baseline Support for Core Network Infrastructure in the Data Center. |
SSN will perform:
(a) | Break-fix and/or repair Services; |
(b) | Performance monitoring and tuning of core Data Center Infrastructure Components (including routers, switches, firewalls, security tools, etc.); |
(c) | Operational maintenance of network Infrastructure Components (i.e., day-to-day operational support with upgrades and enhancements as required). |
6.8 | Ownership and Acquisition of Hardware and Third Party Software. |
(a) | SSN will keep the PG&E hardware located at the Data Center free from all liens, charges and encumbrances and shall bear the risk of loss of or damage to the hardware (ordinary wear or tear excepted) from any cause occurring on or after delivery of the hardware to SSN or to the Data Center except to the extent caused by PG&E. |
(b) | SSN will clearly label all hardware which is the property of PG&E as being the property of PG&E. PG&E will provide all asset tags to SSN. |
(c) | *** |
6.9 | Data Center Hardware Installation and Maintenance. |
(a) | SSN will manage receiving, unpacking, racking, installation, configuration, and quality assurance testing of the hardware that is to be hosted at the Data Center (subject always to any third party suppliers recommendations or requirements regarding installation, configuration or support of such hardware). |
(b) | Any hardware purchased by PG&E will be dedicated to PG&Es exclusive use. PG&E-dedicated equipment must be in a dedicated cage segregated from SSN and third party equipment unless otherwise approved by PG&E. |
(c) | SSN will manage, as appropriate, de-installing and removing Data Center hardware; providing initial troubleshooting, diagnosis and problem resolution services in the event that problems are discovered with any hardware during the installation process. |
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SmartMeter Upgrade Supply Agreement
(d) | [Deleted pursuant to Amendment 17]. |
(e) | SSN will cooperate with third party maintenance providers to provide troubleshooting, diagnosis and problem resolution services and will manage maintenance and warranty services provided by Data Center hardware vendors to the extent enforceable by SSN. |
(f) | If PG&E enters into a third party maintenance agreement that provides a *** causes SSN to fail to comply with a service level or other requirement of this Schedule O, then SSNs failure to comply with the service level or requirement will be excused to the extent caused by that ***. |
6.10 | Data Center Asset Management. |
(a) | SSN will assist PG&E to maintain a Data Center asset register listing details of all licenses, consents and approvals; all SSN and third party software; all hardware and associated leases and maintenance agreements; all service contracts; and the location, configuration and utilization of those items, relating to the UtilityIQ System and assets at each Data Center. |
(b) | SSN will not remove any PG&E hardware (or any part of the hardware such as storage media) or transfer or remove any third party software licensed by PG&E or other PG&E material without prior written consent of PG&E. |
(c) | SSN will advise PG&E if any Data Center hardware needs to be refreshed over the Term and will replace or upgrade the hardware as part of a refresh program only with PG&Es prior written approval. |
6.11 | *** Specific Requirements. |
SSN will configure all equipment in the *** Environment to run the PG&E production environment in the event of ***.
6.12 | Backup of *** Environment |
(a) | Frequency. SSN will implement a backup solution to back up the *** Environment (meaning the *** Environment excluding the logical environment associated with ***) as agreed with PG&E on a case by case basis. Unless otherwise agreed, the default backup frequency will be *** backups. At other times, backups on a less frequent basis may be adequate. Upon request by PG&E, SSN will backup the *** Environment at the *** conducted in *** Environment. SSN shall retain that backup until the earlier of: |
(i) | the next *** commences; or |
(ii) | *** from the backup. |
PG&E and SSN Confidential Page 21 |
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SmartMeter Upgrade Supply Agreement
(b) | If any Data in the *** Environment are corrupted or lost, or PG&E requests that Data be restored during a PG&E test cycle, SSN will take immediate steps to begin restoring Data from the most recent back-up. PG&E will specify the *** to use in restoring the Data, which will be consistent with the period for which backups are retained, as set out in Subsection 6.6(a). SSN will complete Data recovery: |
(i) | If Data restoration is required due to ***; or |
(ii) | If Data restoration is required due to ***. |
(c) | SSN will test the recovery functionality of the backup solution upon initial implementation and then on a *** and provide test plans and results to PG&E on these tests. |
6.13 | Backup of Lower Environments |
For each of the Lower Environments, SSN shall provide an operational backup or standby copy of the database at appropriate times, for example prior to upgrades to the environments, ***. Such backup or copy may be kept onsite or offsite.
7. | SECURITY REQUIREMENTS |
7.1 | Security Policies. |
(a) | SSN shall comply with the PG&E information security policies and standards referenced in Attachment 1 hereto as applicable to SSNs Data Center Services, and the policies referred to in Schedule I of the Agreement (collectively, the Security Policies), as well as with any updates and supplements to them so long as PG&E provides *** days notice to SSN ***. SSN agrees to take whatever remedial action may be required to cause the Data Center, the Services, and the Infrastructure Components under the control of SSN to remain compliant with the Security Policies. |
(b) | SSN acknowledges and agrees that the Security Policies shall apply to each environment in which any instance of the UtilityIQ System is hosted. |
(c) | ***, PG&E may perform a thorough security survey of SSN and its subcontractors from time to time. Following such review, PG&E may request additional security measures beyond those required by the Security Policies. SSN, and any relevant subcontractors, shall review such requests and either agree to comply or propose alternative methods of mitigation subject to approval by PG&E ***. In either case, the Parties will agree to appropriate commercial terms related to additional security measures, ***. |
(d) | PG&E reserves the right to perform additional on site assessments to verify the implementation of security controls in accordance with this Section 6.13. |
(e) | SSN will grant PG&E the requisite access to each Data Center in order to perform its routine information security monitoring activities, including ***, which may be provided by one or more third party agents to PG&E. |
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SmartMeter Upgrade Supply Agreement
(f) | SSN will cause its subcontractors to comply with the provisions of this Section 7. Nothwithstanding the foregoing, the parties agree that certain PG&E policies and standards listed in Section 2 of Attachment 1 are not relevant to SSNs subcontractors that are Data Centers; the relevant PG&E policies and standards are noted in that Attachment. |
(g) | SSN shall implement all material aspects of its adopted security policy relevant to SSNs obligations under this Schedule O by no later than ***. |
(h) | ***. |
(i) | SSN (using its subcontractors when necessary) shall reasonably assist PG&E in its compliance efforts (and any related remediation projects) relative to emerging standards, regulations, risk management activities, and the following specific initiatives (all to the extent they materially impact any aspect of the Hosting Services): |
(i) | Cyber security; |
(ii) | Audit compliance; |
(iii) | NERC-CIP requirements; |
(iv) | IT asset management; |
(v) | NIST IR 7628 SmartGrid CyberSecurity Strategy and Requirements, and |
(vi) | FERC 2004 Order of Separation. |
(j) | SSN acknowledges the evolving nature of the foregoing requirements and initiatives and agrees to provide PG&E ongoing assistance as they evolve. ***. |
7.2 | Physical Security. |
*** [4 pages redacted]
7.3 | Virus Protection. |
SSN shall install mutually agreed upon virus scanning software, update virus signature in a timely fashion and maintain secure configuration over time on all servers that send data to or are connected to the PG&E network.
7.4 | Penetration Testing. |
(a) | PG&E may carry out penetration testing of any environment that is part of the UtilityIQ System to identify and analyze any potential security vulnerabilities, hardware or software flaws or operational weaknesses in the UtilityIQ System; provided that it coordinates the conduct of such testing with SSN. |
PG&E and SSN Confidential Page 23 |
Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
(b) | In carrying out penetration testing, PG&E may: |
(i) | Use a third party contractor to perform the tests provided that such third party contractor has entered into a non-disclosure agreement with PG&E regarding the conduct and results of the penetration testing; and |
(ii) | ***. |
(c) | SSN will cooperate with PG&E in planning and performing penetration testing, as well as in the prompt remediation of any vulnerabilities detected as a result of penetration testing. PG&E shall be entitled to perform penetration testing ***. |
7.5 | Security Breaches |
SSN will perform security monitoring and log events. SSN will advise PG&E *** if SSN becomes aware of any vulnerability or unauthorized access to any SSN systems used by PG&E or any other customer of SSN.
7.6 | *** |
*** |
8. | *** |
8.1 | *** |
8.2 | *** |
8.3 | *** [4 pages redacted] |
8.4 | *** [1 page redacted] |
8.5 | [Deleted pursuant to Amendment 17] |
8.6 | *** [2 pages redacted] |
8.7 | *** [2 pages redacted] |
8.8 | *** |
8.9 | *** [1 page redacted] |
8.10 | *** |
9. | *** |
9.1 | *** |
(a) | Standalone Tests. SSN shall perform regular testing of *** capabilities and procedures approximately *** using test objectives approved by PG&E. PG&E will have the right to |
PG&E and SSN Confidential Page 24 |
Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
participate in and audit the *** and procedures. SSN shall provide PG&E with a written report of the test results, and shall perform problem resolution and retesting of unsuccessful test components in a timely manner. The timing of such testing will be subject to the prior written approval of PG&E and will be scheduled so as not to conflict with testing of new releases of the UtilityIQ Software being conducted in ***. |
(b) | Integrated Tests. SSN will schedule one of the semi-annual tests referred to in Subsection 9.1(a) to coincide with PG&Es *** walk-throughs and *** tests. SSN will participate in PG&Es test process. PG&E will give SSN reasonable notice of PG&Es testing schedule. |
9.2 | *** [1 page redacted] |
9.3 | *** |
9.4 | *** [1 page redacted] |
10. | PRICING |
10.1 | *** |
(a) | ***. |
(b) | ***. |
(c) | Applicability of Certain Schedule B Terms. |
(i) | ***. |
(ii) | ***. |
(iii) | ***. |
11. | ADDITIONAL TASK ORDERS |
PG&E may authorize SSN to perform additional and ancillary services in support of the Hosting Services by executing task orders in a form acceptable to both parties, subject to any applicable funding and approval limits as advised by PG&E from time to time. Services provided pursuant to a task order, when approved and executed by both parties, will be provided under and subject to the terms of this Schedule O except as specifically provided in the task order. Significant changes to the services and activities performed by SSN pursuant to this Statement of Work will be documented in a separate statement of work.
12. | DEFINITIONS |
Capitalized terms used and not otherwise defined herein will have the meanings set forth in the Agreement. In addition, the following definitions apply to this Schedule O:
*** |
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Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
Amendment 6 Effective Date is defined in Amendment 6.
Back-haul means the wide area network between Access Points and the Data Center.
Billing Endpoint is defined in Subsection 8.5(a)(i).
Clearance Conditions means the PG&E announced window approved for maintenance.
Data means all information generated by the Field Network equipment and Endpoints for all data, analysis and reports generated from such information. Data includes, but is not limited to, Meter reads, Field Network status, and equipment configuration/status.
Data Center is defined in Subsection 6.2(a).
Data Center Services is defined in Subsection 1.1(e)(iii).
Deliver and Delivery of Data are defined in the Section entitled Definitions in Annex A-5.
*** Manager is defined in Section 9.3.
Discontinuance is defined in Subsection 2.2(f).
Discontinuance Date is defined in Subsection 2.2(d).
Endpoint means a Meter.
***.
Exclusions is defined in Subsection 8.9(a).
***.
***.
Field Network means the RF Mesh Network being constructed by PG&E in the SmartMeter Project and includes Relays, Access Points and the Back-haul network. The Field Network does not include Meters, eBridges or sBridges. The Field Network communicates with the UtilityIQ System.
Field Network Services is defined in Subsection 1.1(e)(ii).
Front-haul means the communications network between the Data Center and PG&Es other data centers.
Hosted Environments means the system environments that are hosted and supported by SSN pursuant to this Schedule from time to time. The Hosted Environments are identified in Table 1 in Subsection 1.1(d). The list of Hosted Environments may be updated by the Parties via Change Order from time to time. The Hosted Environments are comprised of Production Environments and the Non-Production Environments (*** and Lower Environments) as identified in the table in Section 1.1(d).
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SmartMeter Upgrade Supply Agreement
Hosting Services means any of the UIQ Management Services, the Field Network Services, the Data Center Services, and the *** Services to be provided by SSN pursuant to this Schedule, as described in Section 1.1(e).
Infrastructure Components means all of the hardware, software, facilities, communications links and tools forming part of, or used (i) to operate or manage the UtilityIQ System and, through it, (ii) to operate or manage the Field Network, and (iii) to communicate between the UtilityIQ System and PG&Es data centers. The Infrastructure Components include:
(a) | SSNs proprietary software products, as existing now and in the future, and as licensed to PG&E pursuant to the Agreement; |
(b) | The equipment used to operate and run the UtilityIQ System and products described in paragraph (a), including server equipment, data storage and peripherals; |
(c) | ***; |
(d) | ***; |
(e) | Relays; |
(f) | NICs, including onboard HAN interface; |
(g) | Firmware; |
(h) | Back-haul dedicated circuit(s) or *** to WAN Carrier (***); |
(i) | Fronthaul dedicated circuit(s) or *** to PG&E; and |
(j) | Data Center. |
IT Change Management Process means the mutually agreed upon change management process that is set out in the document entitled PG&E Vendor Change Management Process Manual, SmartMeter IT Infrastructure (Silver Spring Networks).
***.
Lower Environment means an Environment designated as such in the table in Section 1.1(d).
Managed Appliance is defined in Section 6.8.
Neighborhood Area Network or NAN means the wireless network connectivity between Endpoints and Access Points. The NAN is also sometimes referred to as the LAN.
Non-Production Environment means an Environment designated as such in the table in Section 1.1(d).
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SmartMeter Upgrade Supply Agreement
OLA means the Operating Level Agreement.
Operational Targets is defined in Subsection 8.2(a).
Optimization or Optimize mean the process or set of actions described as such in Annex A-2, Section 2.1.
PG&E Areas means the location in the Data Center where PG&Es hardware is located.
PG&E *** Coordinator is defined in Section 9.3.
Preventive Maintenance means those activities performed by SSN which are necessary or desirable for the continuous provision of Hosting Services at their stated Service Levels, including, but not limited to, those activities which require the temporary cessation of one or more services.
Pricing Exhibit means the pricing tables and terms set forth in an Attachment to this Schedule, as updated and amended from time to time1.
Primary Hosting Data Center means the data center provided by SSN for Hosting Services for the Production Environment in accordance with this Schedule O.
Production Environment means the environment(s) designated as such in the table in Section 1.1(d).
Provisioned Endpoint is defined in Annex A-5.1.
Provisioned AP and Provisioned Relay means a network infrastructure device located in an area of the Field Network that is in an Active operational state within the UtilityIQ System.
Reachable is defined in Subsection 8.2(c).
Resolved and Resolution is defined at Subsection 8.5(a)(iii).
***.
***.
Security Policies is defined in Subsection.
Service Level means a measure of performance of the SmartMeter System and/or SSNs delivery of Services pursuant to this Schedule O, as specified in Section 8.
***.
System Change means any change that constitutes a modification of infrastructure, UtilityIQ Software, third party software, process or policy, including:
(a) | Configuration Management which includes modification to, addition or removal of, any of the Infrastructure Components within the UtilityIQ System, including servers, firewalls, Access Points, Relays or NIC components; |
1 | As of the Amendment 17 Effective Date, the Pricing Exhibit is Attachment 2 to Amendment 17. |
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SmartMeter Upgrade Supply Agreement
(b) | Software Version Control which includes a change or modification to any applications, operating systems, firmware, databases, source code or features / functions of any application components within the UtilityIQ System that would constitute a version change; |
(c) | Process/Policy modifications which includes changes made to any operational or security policies and or processes associated with use and integration of the UtilityIQ System; and |
(d) | Configurable Settings which includes any parameter that may be configured or adjusted at the option of system users or administrators. |
Term is defined in Subsection 2.1(a).
Transition Plan is defined in Subsection 2.2(d).
Transition Planning is defined in Subsection 2.2(d).
Transition Services is defined in Subsection 2.2(k).
UIQ Management Services is defined in Subsection 1.1(e)(i).
Unreachable is defined at Subsection 8.5(a)(ii).
***.
UPS means uninterruptible power systems.
UtilityIQ Software means the object code version of the SSN software described in Annex A-7 to the Agreement and associated Documentation (each as may be updated from time to time), including UtilityIQ Software Upgrades.
UtilityIQ System means the implemented production system running the Software licensed to PG&E pursuant to the Agreement, including associated data, interfaces, databases, middleware, operating systems, network and storage infrastructure, peripherals, as well as all third party software (whether packaged or not) and hardware required to operate the foregoing.
UtilityIQ Software Upgrades means upgrades, updates and/or enhancements of the UtilityIQ Software as created or developed by or for SSN.
[End]
PG&E and SSN Confidential Page 29 |
Schedule O (Amendment 17 Restatement) |
SmartMeter Upgrade Supply Agreement
LIST OF ATTACHMENTS TO SCHEDULE O
Attachment 1 to Schedule O | Security Policies and Standards | |
Pricing Exhibit to Schedule O | Hosting and Management Fees | |
Attachment 3 to Schedule O | Operating Level Agreement (OLA) |
PG&E and SSN Confidential Page 30 |
Schedule O (Amendment 17 Restatement) |
Schedule O (Hosting and Managed Services)
Attachment 1 PG&E Information Security Policies and Standards
Section 1. PG&E security configuration manuals.
***
Section 2. PG&E Security Policies
***
PG&E and SSN Confidential Page 31 |
Schedule O (Amendment 17 Restatement) |
Attachment 4 to Amendment 17
Modification of OLA Procedures
Reason For Outage (RFO) & Associated Remediation Plans
Reference: replace OLA, Sections 2.9(a) & 2.9(b) with the following:
The term Root Cause shall be defined as a major cause of the Incident that is capable of resolution. A cause shall not qualify as the Root Cause if there is a deeper cause of the incident.
***
Within ***business days of the incident occurring, SSN will provide PG&E with an update on the progress made toward ***. This will be an informal communication (i.e. conference call) and will be superseded by the ***.
Within *** business days of the incident occurring, SSN will provide PG&E with ***. SSN and PG&E will meet (via conference call) to review the report to determine if (a) SSN has provided sufficient information to determine the ***.
Within *** business days of occurrence ***, SSN shall provide PG&E with ***. The Plan must receive PG&Es written approval before expiration of the above deadlines unless SSN has requested and received from PG&E an extension to the deadline before the deadline has passed. ***.
***
Upon PG&Es written approval of the Plan, SSN shall deliver on-time those activities, products, and services specified in the Plan. In the event SSN requires more time to deliver those activities, products or services specified in the Plan, SSN may request an extension from PG&E. All extension requests must include the details of the work that has been done to date and the further action that SSN plans to take to complete the deliverable, and the impact, if any, on the overall Plan completion date. ***.
***
If PG&Es approval is required for any remediation activity pursuant to the IT Change Management Process, SSN will implement the activity in accordance with the IT Change Management Process.
Page | 1
AMENDMENT NO. 16
[Three month extension of Hosting Services Term to August 30, 2013]
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
*** The omitted portions of this amendment have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934.
Amendment 16 to PG&E/SSN Agreement | 1 of 3 | PG&E and SSN CONFIDENTIAL |
Amendment No. 16
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 16 (Amendment 16) to the SmartMeter Program Upgrade Supply Agreement (Agreement) as amended, between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23, 2008, is made and entered into with effect as of the date of the last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties. Unless otherwise defined herein, all capitalized terms shall have the meaning given in the Agreement.
WHEREAS, the term of the Hosting and Managed Services provided by SSN pursuant to Schedule O is to expire on May 31, 2013, and the Parties desire to extend its term, as set forth herein; and
WHEREAS, the Parties wish to amend and modify certain other terms of the Agreement as further set forth herein;
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
1. Section 2.1 of Schedule 0 Hosting and Managed Services to the Agreement is hereby amended by deleting it in its entirety and replacing it with the following:
2.1 Term.
(a) | Subject to Section 2.2 below, the term of this Schedule O the Term) will commence on the Amendment 6 Effective Date and will end on August 30, 2013 (the Termination Date). |
(b) | PG&E may extend the Term with respect to any of the Hosting Services for *** additional one-year periods by giving SSN notice in writing not less than *** days prior to the expiration of the then-current Term. |
2. For the avoidance of any doubt, the extension of the Term by mutual agreement pursuant to this Amendment does not constitute the exercise by PG&E of an extension option pursuant to Section 2.1(b) of Schedule O. Notwithstanding the dates specified in the Period Covered column for Year 3 of Attachment 2 to Schedule O, PG&E shall continue to pay SSN *** for all Hosting Services provided during the period commencing on June 1, 2013 through August 31, 2013 in accordance with the amounts identified in the
Amendment 16 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
2 of 3 |
*** column for Year 3 of Attachment 2 to Schedule O. To the extent that PG&E wishes to extend the Term in accordance with Section 2.1(b), the terms of Section 10.2 (Extension Term Pricing) of Schedule O shall apply.
3. Except as set forth above, all other terms of the Agreement, including Schedule O Hosting and Managed Services, as previously amended shall remain unchanged and in full force and effect.
**************************
This Amendment 16 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 16, including the signature pages hereto, will be deemed to be an original. This Amendment 16 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 16, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||||
By: | *** |
By: | *** | |||||||
Printed: | *** |
Printed: | *** | |||||||
Title: | *** |
Title: | *** | |||||||
Date: | 3-26-13 |
Date: | 3-21-13 | |||||||
Amendment 16 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
3 of 3 |
AMENDMENT NO. 15
[Three month extension of Hosting Services Term to May 31, 2013]
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
*** The omitted portions of this amendment have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934.
Amendment 15 to PG&E/SSN Agreement | 1 of 1 | PG&E and SSN CONFIDENTIAL |
Amendment No. 15
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 15 (Amendment 15) to the SmartMeter Program Upgrade Supply Agreement (Agreement) as amended, between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23, 2008, is made and entered into with effect as of the date of the last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties. Unless otherwise defined herein, all capitalized terms shall have the meaning given in the Agreement.
WHEREAS, the term of the Hosting and Managed Services provided by SSN pursuant to Schedule O is to expire on May 31, 2013, and the Parties desire to extend its term, as set forth herein; and
WHEREAS, the Parties wish to amend and modify certain other terms of the Agreement as further set forth herein;
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
1. Section 2.1 of Schedule O Hosting and Managed Services to the Agreement is hereby amended by deleting it in its entirety and replacing it with the following:
2.1 Term.
(a) | Subject to Section 2.2 below, the term of this Schedule O (the Term) will commence on the Amendment 6 Effective Date and will end on May 31, 2013 (the Termination Date). |
(b) | PG&E may extend the Term with respect to any of the Hosting Services for *** additional one-year periods by giving SSN notice in writing not less than *** days prior to the expiration of the then-current Term. |
2. For the avoidance of any doubt, the extension of the Term by mutual agreement pursuant to this Amendment does not constitute the exercise by PG&E of an extension option pursuant to Section 2.1(b) of Schedule O. Notwithstanding the dates specified in the Period Covered column for Year 3 of Attachment 2 to Schedule O, PG&E shall continue to pay SSN *** for all Hosting Services provided during the period commencing on March 1, 2013 through May 31, 2013 in accordance with the amounts identified in the *** column for Year 3 of Attachment 2 to Schedule O. To the extent that PG&E wishes to extend the Term in accordance with Section 2.1(b), the terms of Section 10.2 (Extension Term Pricing) of Schedule O shall apply.
Amendment 15 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
2 of 2 |
3. Except as set forth above, all other terms of the Agreement, including Schedule O Hosting and Managed Services, as previously amended shall remain unchanged and in full force and effect.
*******************************
This Amendment 15 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 15, including the signature pages hereto, will be deemed to be an original. This Amendment 15 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 15, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||||
By: | *** |
By: | *** | |||||||
Printed: | *** |
Printed: | *** | |||||||
Title: | *** |
Title: | *** | |||||||
Date: | 12-19-12 |
Date: | Dec. 17, 2012 | |||||||
Amendment 15 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
3 of 3 |
AMENDMENT NO. 14
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
*** The omitted portions of this amendment have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934.
Amendment 14 to PG&E/SSN Agreement | 1 of 3 | PG&E and SSN CONFIDENTIAL |
Amendment No. 14
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 14 (Amendment 14) to the SmartMeter Program Upgrade Supply Agreement (Agreement) as amended between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated November 9, 2012, is made and entered into on the date of last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties. Unless otherwise defined herein, all capitalized terms shall have the meaning given in the Agreement.
WHEREAS, pursuant to Table 7 of Annex B-1(Pricing Tables) of Schedule B (Pricing and Payment Terms), SSN provided pricing for Ad Hoc Consulting.
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
1. Amend Table 7 (Ad Hoc Consulting Services) in its entirety and replace it with the following:
Resource Type | SSN Rate Per Day |
SSN rate Per hour |
||||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** |
Amendment 14 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
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The rates listed above shall replace Annex B-1 Table 7 in Amendment 11 effective on January 1, 2013. The rates listed above reflect a ***% increase over 2012 Ad Hoc Consulting Services rates. Rates will be revised on January 1st of each year, beginning January 1, 2014, ***.
*******************************
This Amendment 14 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 14, including the signature pages hereto, will be deemed to be an original. This Amendment 14 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 14, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||||
By: | *** |
By: | *** | |||||||
Printed: | *** |
Printed: | *** | |||||||
Title: | *** |
Title: | *** | |||||||
Date: | 11 13 12 |
Date: | 11/9/2012 | |||||||
Amendment 14 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
3 of 3 |
AMENDMENT NO. 13
[Three month extension of Hosting Services Term to February 28, 2013]
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
*** The omitted portions of this amendment have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934.
Amendment 13 to PG&E/SSN Agreement | 1 of 3 | PG&E and SSN CONFIDENTIAL |
Amendment No. 13
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 13 (Amendment 13) to the SmartMeter Program Upgrade Supply Agreement (Agreement) as amended, between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23, 2008, is made and entered into with effect as of the date of the last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties. Unless otherwise defined herein, all capitalized terms shall have the meaning given in the Agreement.
WHEREAS, the term of the Hosting and Managed Services provided by SSN pursuant to Schedule O is to expire on November 30, 2012, and the Parties desire to extend its term, as set forth herein; and
WHEREAS, the Parties wish to amend and modify certain other terms of the Agreement as further set forth herein;
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
1. Section 2.1 of Schedule O - Hosting and Managed Services to the Agreement is hereby amended by deleting it in its entirety and replacing it with the following:
2.1 Term.
(a) | Subject to Section 2.2 below, the term of this Schedule O (the Term) will commence on the Amendment 6 Effective Date and will end on February 28, 2013 (the Termination Date). |
(b) | PG&E may extend the Term with respect to any of the Hosting Services for *** additional one-year periods by giving SSN notice in writing not less than *** days prior to the expiration of the then-current Term. |
2. For the avoidance of any doubt, the extension of the Term by mutual agreement pursuant to this Amendment does not constitute the exercise by PG&E of an extension option pursuant to Section 2.1(b) of Schedule O. Notwithstanding the dates specified in the Period Covered column for Year 3 of Attachment 2 to Schedule O, PG&E shall continue to pay SSN *** for all Hosting Services provided during the period commencing on December 1,
Amendment 13 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
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2012 through February 28, 2013 in accordance with the amounts identified in the *** column for Year 3 of Attachment 2 to Schedule O. To the extent that PG&E wishes to extend the Term in accordance with Section 2.1(b), the terms of Section 10.2 (Extension Term Pricing) of Schedule O shall apply.
3. Except as set forth above, all other terms of the Agreement, including Schedule O Hosting and Managed Services, as previously amended shall remain unchanged and in full force and effect.
*******************************
This Amendment 13 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 13, including the signature pages hereto, will be deemed to be an original. This Amendment 13 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 13, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||||
By: | *** |
By: | *** | |||||||
Printed: | *** |
Printed: | *** | |||||||
Title: | *** |
Title: | *** | |||||||
Date: | 9 26 12 |
Date: | 9/26/12 | |||||||
***
Amendment 13 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
3 of 3 |
AMENDMENT NO. 12
[Three month extension of Hosting Services Term to November 30, 2012]
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
*** The omitted portions of this amendment have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934.
Amendment 12 to PG&E/SSN Agreement | 1 of 3 | PG&E and SSN CONFIDENTIAL |
Amendment No. 12
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 12 (Amendment 12) to the SmartMeter Program Upgrade Supply Agreement (Agreement) as amended, between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23, 2008, is made and entered into with effect as of the date of the last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties. Unless otherwise defined herein, all capitalized terms shall have the meaning given in the Agreement.
WHEREAS, the term of the Hosting and Managed Services provided by SSN pursuant to Schedule O is to expire on August 31, 2012, and the Parties desire to extend its term, as set forth herein; and
WHEREAS, the Parties wish to amend and modify certain other terms of the Agreement as further set forth herein;
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
1. Section 2.1 of Schedule O Hosting and Managed Services to the Agreement is hereby amended by deleting it in its entirety and replacing it with the following:
2.1 Term.
(a) | Subject to Section 2.2 below, the term of this Schedule O (the Term) will commence on the Amendment 6 Effective Date and will end on November 30, 2012 (the Termination Date). |
(b) | PG&E may extend the Term with respect to any of the Hosting Services for *** additional one-year periods by giving SSN notice in writing not less than *** days prior to the expiration of the then-current Term. |
2. For the avoidance of any doubt, the extension of the Term by mutual agreement pursuant to this Amendment does not constitute the exercise by PG&E of an extension option pursuant to Section 2.1(b) of Schedule O. Notwithstanding the dates specified in the Period Covered column for Year 3 of Attachment 2 to Schedule O, PG&E shall continue to pay SSN *** for all Hosting Services provided during the period commencing on September 1,
Amendment 12 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
2 of 3 |
2012 through November 30, 2012 in accordance with the amounts identified in the *** column for Year 3 of Attachment 2 to Schedule O. To the extent that PG&E wishes to extend the Term in accordance with Section 2.1(b), the terms of Section 10.2 (Extension Term Pricing) of Schedule O shall apply.
3. Except as set forth above, all other terms of the Agreement, including Schedule O Hosting and Managed Services, as previously amended shall remain unchanged and in full force and effect.
*******************************
This Amendment 12 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 12, including the signature pages hereto, will be deemed to be an original. This Amendment 12 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 12, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||||
By: | *** |
By: | *** | |||||||
Printed: | *** |
Printed: | *** | |||||||
Title: | *** |
Title: | *** | |||||||
Date: | 6-26-12 |
Date: | 6-28-12 | |||||||
Amendment 12 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
3 of 3 |
AMENDMENT NO. 11
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
*** The omitted portions of this amendment have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934.
Amendment 11 to PG&E/SSN Agreement | 1 of 3 | PG&E and SSN CONFIDENTIAL |
Amendment No. 11
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 11 (Amendment 11) to the SmartMeter Program Upgrade Supply Agreement (Agreement) as amended, between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated March 2, 2012, is made and entered into on the date of last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties. Unless otherwise defined herein, all capitalized terms shall have the meaning given in the Agreement.
WHEREAS, pursuant to Table 7 of Annex B-1(Pricing Tables) of Schedule B (Pricing and Payment Terms), SSN provided pricing for Ad Hoc Consulting.
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
1. Amend Table 7 (Ad Hoc Consulting Services) in its entirety and replace it with the following:
Resource Type | SSN Rate Per Day |
SSN rate Per hour |
||||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** |
Amendment 11 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
2 of 3 |
The rates listed above shall replace Annex B-1 Table 7 in Amendment 9 effective on January 1, 2012. The rates listed above reflect a ***% increase over 2011 Ad Hoc Consulting Services rates. Rates will be revised on January 1st of each year, beginning January 1, 2013, ***.
**************************
This Amendment 11 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 11, including the signature pages hereto, will be deemed to be an original. This Amendment 11 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 11, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||||
By: | *** |
By: | *** | |||||||
Printed: | *** |
Printed: | *** | |||||||
Title: | *** |
Title: | *** | |||||||
Date: | 3/2/12 |
Date: | 3/1/12 | |||||||
***
Amendment 11 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
3 of 3 |
AMENDMENT NO. 9
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
*** The omitted portions of this amendment have been filed with the Securities and Exchange Commission pursuant to a request for confidential treatment under Rule 24b-2 promulgated under the Securities Exchange Act of 1934.
Amendment 9 to PG&E/SSN Agreement | 1 of 3 | PG&E and SSN CONFIDENTIAL |
Amendment No. 9
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Sprint Networks, Inc.
This amendment No. 9 (Amendment 9) to the SmartMeter Program Upgrade Supply Agreement (Agreement) between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated January 1, 2011, is made and entered into on the date of last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties. Unless otherwise defined herein, all capitalized terms shall have the meaning given in the Agreement.
WHEREAS, pursuant to Table 7 of Annex B-1(Pricing Tables) of Schedule B (Pricing and Payment Terms), SSN provided pricing for Ad Hoc Consulting.
NOW THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
1. Amend Table 7 (Ad Hoc Consulting Services) in its entirety and replace it with the following:
Resource Type | SSN Rate Per Day |
SSN rate Per hour |
||||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** | ||||
*** |
$ | *** | $ | *** |
Amendment 9 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
2 of 3 |
The rates listed above shall replace Annex B-1 Table 7 effective on January 1, 2011. The rates listed above will be revised on January 1st of each year, beginning January 1, 2012, ***.
*******************************
This Amendment 9 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 9, including the signature pages hereto, will be deemed to be an original. This Amendment 9 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 9, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||||
By: | *** |
By: | *** | |||||||
Printed: | *** |
Printed: | *** | |||||||
Title: | *** |
Title: | *** | |||||||
Date: | 7 29 11 |
Date: | 7/28/11 | |||||||
***
Amendment 9 to PG&E/SSN Agreement | PG&E and SSN CONFIDENTIAL | |||
3 of 3 |
CONFIDENTIAL
Amendment No. 7
AMENDMENT NO. 7
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC.
CONFIDENTIAL
Amendment No. 7
Page 2
Amendment No. 7
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This Amendment No. 7 (Amendment 7) to the SmartMeter Program Upgrade Supply Agreement (Agreement) between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23, 2008, as amended (the Agreement) is made and entered into on the date of last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties.
RECITALS
A. Section 28 of the Agreement (Insurance and ***) obligates SSN to deliver to PG&E certain ***.
B. SSN has previously tendered its performance under Section 28 by presenting a *** issued by ***, in a form acceptable to PG&E.
C. ***
D. SSN has proposed that it be given the option, from time to time, to supply a performance bond, in lieu of a ***, in either case from an institution acceptable to PG&E.
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend and restate Section 28 of the Agreement as follows:
1. | INSURANCE AND PERFORMANCE BONDS |
1.1 | Insurance |
SSN shall maintain insurance as set forth in Schedule M (Insurance).
1.2 | Performance Bond or *** |
(a) | On or before the Initial Performance Bond Date, SSN shall deliver or cause to be delivered to PG&E a Performance Bond, in a form acceptable to PG&E and *** (the Surety) and substantially in the form attached hereto as Exhibit 1 (Form of Performance Bond), in the amount of *** (the Initial Performance Bond) issued by the Surety to serve as collateral and partial security for the rights of PG&E under this Agreement, as more fully described in this Section 28.2 until such time as PG&E is required to surrender the same pursuant to Section 28.2(f) below. The Initial Performance Bond Date is the first weekday *** days after PG&E and the Surety both notify SSN that they have |
Amendment No. 7
Page 3
reached agreement on the form of the Initial Performance Bond. SSN shall use reasonable commercial efforts to assist PG&E in finalizing the form of the Initial Performance Bond with the Surety. *** The performance bond held by PG&E at any time pursuant to this Section 28.2(a) shall be referred to as the Existing Performance Bond. The *** held by PG&E at any time pursuant to this Section 28.2(a) shall be referred to as the ***. PG&E agrees to surrender the Existing Performance Bond or ***, as applicable, to SSN upon PG&Es receipt of the replacement performance bond or *** delivered in connection with the ***. |
(b) | Claim or Draw by PG&E. PG&E may, but is not required to, make a claim against the Existing Performance Bond (in full or in part), or a draw against the *** (in full or in part), as applicable, to recover amounts that are properly due to PG&E with respect to any claim that PG&E may have against SSN under this Agreement and for which PG&E is entitled to damages, indemnity or other monetary relief. In addition, PG&E may, but is not required to, make a claim against the Existing Performance Bond (in full or in part) or draw against an *** (in full or in part) if SSN fails to satisfy any of the ***. If PG&E believes that it has a claim under this Agreement for which it is entitled to make a claim against the Existing Performance Bond, or a draw against the ***, as applicable, PG&E may make such claim or draw in an amount (up to and including the amount of the Existing Performance Bond, or ***, if applicable) equal to PG&Es good faith estimate of the maximum amount that it is entitled to recover hereunder with respect to such claim or, in the event of a failure of SSN to satisfy any of the ***, the entire amount of an Existing Performance Bond. If such maximum amount is in excess of the amount of the Existing Performance Bond or ***, any such claim against the Existing Performance Bond or *** by PG&E shall in no way prejudice PG&Es ability to seek relief directly against SSN for such excess and shall in no event obviate SSNs obligations to satisfy any subsequent ***. Promptly, and in no event later than one (1) Business Day after making such claim against the Existing Performance Bond, or draw against the ***, as applicable, PG&E shall send SSN a written notice of such claim, setting forth the amount of the claim and also setting forth, in reasonable detail, the basis for the belief as to why PG&E is entitled to such amount (the Draw Notice). If SSN disputes the basis for, or the amount of, the claim or draw, as applicable, it shall give PG&E written notice of the dispute (a Draw Objection) within *** days after delivery of the Draw Notice to SSN. If SSN fails to deliver a Draw Objection within that time period, SSN shall be deemed to have |
Amendment No. 7
Page 4
consented to the claim or draw, as applicable, and PG&Es entitlement hereunder to the amounts so claimed or drawn. If SSN delivers a timely Draw Objection, then either Party may submit the dispute to binding arbitration in San Francisco, California, under the commercial arbitration rules of the American Arbitration Association (AAA). |
(c) | ***. |
(d) | Subsequent Compliance. If PG&E makes a claim on an Existing Performance Bond or draws on an *** due to SSNs failure to satisfy a Replacement Obligation, and if SSN subsequently satisfies the Replacement Obligation, PG&E shall pay the drawn amount to SSN. |
(e) | Termination. PG&E shall surrender the Existing Performance Bond or ***, as applicable, to SSN, and SSNs *** shall terminate, upon the first to occur of: |
(i) | in connection with the closing of the sale of SSNs common stock in a firmly underwritten initial public offering under the Securities Act of 1933, as amended, if (A) *** and (B) ***, each as evidenced in the filing of a final effective Prospectus or Registration Statement or in the first quarterly report on Form 10-Q or first annual report on Form 10-K, as applicable, filed by SSN after the closing of such initial public offering (an IPO Termination Event); or |
(ii) | When the SSN network is Billing Ready (as defined in Section 4 of Schedule B (Pricing and Payment Terms)) with respect to *** Meters (a System Scale Termination Event). |
(f) | Procedure for surrender and termination. In order for PG&E to be obligated to surrender the Existing Performance Bond or ***, as applicable, and in order for the *** to terminate SSN shall deliver to PG&E a written request (a Termination Request) for such surrender and termination, setting forth, in reasonable detail together with such supporting documentation as PG&E may reasonably request (including the final Prospectus or Registration Statement or the Form 10-Q or Form 10-K referenced above, as applicable, with respect to an IPO Termination Event), the basis for the belief as to why an IPO Termination Event or a System Scale Termination Event, as applicable, has occurred. Within *** Business Days after receipt by PG&E of a Termination Request, PG&E may deliver to SSN a written objection to the Termination Request (a Termination Objection). The Termination |
Amendment No. 7
Page 5
Objection shall set forth, in reasonable detail, the basis for PG&Es dispute (a Termination Dispute) and as to why an IPO Termination Event or a System Scale Termination Event, as applicable, has not occurred. PG&Es issuance or failure to issue a Termination Objection shall not prejudice PG&Es right to draw funds against the Existing Performance Bond or ***, as applicable, as provided in Section 28.2(c) If, in connection with a Termination Request, PG&E fails to deliver a Termination Objection to SSN by the end of the *** Business Day following the receipt of the Termination Request by PG&E, the IPO Termination Event or the System Scale Termination Event, as applicable, shall be deemed to have occurred and PG&E shall surrender the Existing Performance Bond or ***, as applicable, to SSN. If PG&E delivers a timely Termination Objection with respect to a Termination Request, then such Termination Dispute shall be resolved through binding arbitration in San Francisco, California, under the commercial arbitration rules of the American Arbitration Association (AAA). |
{This section intentionally left blank.}
Amendment No. 7
Page 6
All provisions of the Agreement, except as supplemented by written amendments to the Agreement executed by each of the Parties, shall remain in full force and effect and are reaffirmed. Governing law and venue for this Amendment 7 shall be the governing law set forth in the Agreement. This Amendment 7 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 7, including the signature pages hereto, will be deemed to be an original. This Amendment 7 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 7, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||
By: | /s/ David Kevane |
By: | /s/ Warren Jenson | |||||
Printed: | David Kevane |
Printed: | Warren Jenson | |||||
Title: | Portfolio Manager |
Title: | CFO | |||||
Date: | April 13, 2010 |
Date: | April 5, 2010 |
Exhibit 1: Form of Performance Bond
Amendment No. 7
Page 7
Exhibit 1: Form of Performance Bond
***
[Redacted 3 pages]
AMENDMENT NO. 6
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
Amendment 6
Table of Contents
1. | THE DOCUMENTS | 1 | ||||
1.1 |
Amendment and Reorganization of Agreement Schedules |
1 | ||||
1.2 |
Creation of An Operating Level Agreement (OLA) for Ticket Management |
2 | ||||
1.3 |
Changes to Annex B-1 Pricing Tables |
2 | ||||
1.4 |
Software Delivery |
2 | ||||
2. | AGREEMENT SECTION 4.5 (LIQUIDATED DAMAGES) | 3 | ||||
3. | NETWORK DESIGN REQUIREMENTS | 3 | ||||
4. | CREDIT CHECKS NOT REQUIRED | 4 | ||||
5. | CHANGES TO DEFINITIONS | 4 | ||||
6. | GENERAL PROVISIONS | 5 |
Amendment 6
Amendment No. 6
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 6 (Amendment 6) to the SmartMeter Program Upgrade Supply Agreement between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23 2008, as amended (the Agreement) is made and entered into with an effective date of March , 2010 (the Amendment 6 Effective Date).
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
2. | THE DOCUMENTS |
2.1 | Amendment and Reorganization of Agreement Schedules |
(a) | Schedule O Production Hosting Services is amended and restated in its entirety in the form attached to this Amendment 6 as Attachment 1, and shall thereupon be referenced as Schedule O (Hosting and Managed Services) (or Schedule O). |
(b) | Schedule K (Non Production Hosting Terms and Conditions) is hereby deleted in its entirety. Services that were provided by SSN pursuant to the terms set forth in Schedule K, and that are continuing to be provided after the date of this Amendment, will be provided pursuant to the terms of Schedule O. Each reference to Schedule K in the Agreement (or in a Schedule to it or an Exhibit thereunder) shall be deemed a reference to Schedule O. |
(c) | The services provided by SSN pursuant to Schedule P (*** Hosting and *** Services) are hereby incorporated into Schedule O and Schedule P is hereby deleted in its entirety. On and from the Amendment 6 Effective Date, those services are provided under and subject to the terms of Schedule O. Each reference to Schedule P in the Agreement (or in a Schedule to it or an Exhibit thereunder) shall be deemed a reference to Schedule O. |
(d) | Annex A-5 is amended and restated in its entirety, as set forth in the form attached to this Amendment 6 as Attachment 2. |
(e) | Annex A-2. Schedule A, Annex A-2 (SOW for development of the Network) is amended and restated in its entirety, as set forth in the form attached to this Amendment 6 as Attachment 3. |
(f) | Annex A-4. ***, the Parties shall update Schedule A, Annex A-4 (Third Party Products and IT Infrastructure Specifications). When updating Annex A-4, the parties intent shall be to preserve the benefit to PG&E of the warranty in Section 5(a) of Schedule G, while revising Annex A-4 to take account of the impact on the SmartMeter System IT infrastructure of any changes in PG&Es functional or technical requirements from the Effective Date of the Agreement through *** days after the Amendment 6 Effective Date. |
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(g) | Annex A-7. Schedule A, Annex A-7 (List of SSN Products and Product Tools) is amended and restated in its entirety, as set forth in the form attached to this Amendment 6 as Attachment 5. |
(h) | Amendment 8. Amendment No. 8 to the Agreement, relating to the provision of certain services in connection with ***, is hereby deleted in its entirety, and is superseded and replaced by the amended and restated Annex A2 attached to this Amendment. |
2.2 | Creation of An Operating Level Agreement (OLA) for Ticket Management |
(a) | PG&E and SSN have agreed to a set of operating procedures governing the initiation, response, management and resolution of incident reports and service requests for all hosted environments. Those procedures are set forth in the SmartMeter Service Ticket Management Operating Level Agreement (the OLA). The OLA is Attachment 3 to Schedule O and is deemed to be incorporated into this Agreement. The parties will comply with the OLA, as the same may be revised by agreement between the parties from time to time in accordance with Section 1.2 of that document. |
(b) | Schedule H (Software Maintenance and Support) is amended as follows: |
(i) | The first sentence in Section 15.2 is amended to read as follows: |
SSN will provide IR (as defined in Schedule H) management services for the Software, including the following, each case to be performed in accordance with the procedures and requirements set forth in the OLA.
(ii) | Section 15.3(a) is amended to read as follows: |
SSN will respond to all IRs submitted by PG&E in accordance with the procedures and requirements set forth in the OLA. SSN will Resolve all Defects in the Software in accordance with the Target Resolution Times set forth in Annex H-1 (Service Levels).
2.3 | Changes to Annex B-1 Pricing Tables |
(a) | Table 6 (Statement of Work Charges) to Annex B-1 (Pricing Tables) to Schedule B (Pricing and Payment Terms) is replaced by the Table set forth in Attachment 7 to this Amendment 6. |
(b) | Table 7 (Ad Hoc Consulting) to Annex B-1 (Pricing Tables) to Schedule B (Pricing and Payment Terms) is replaced by the Table set forth in Attachment 8 to this Amendment 6. The time and materials rates listed at Table 7 are the rates payable by PG&E for (i) all Ad Hoc Consulting services performed by SSN under the Agreement subsequent to the Amendment 6 Effective Date; and (ii) certain Ad Hoc Consulting projects performed after June 1st, 2009 as listed in Attachment 8. |
2.4 | Software Delivery |
(a) | Insert a new Section 1.4(d) into Schedule B (Pricing and Payment Terms): At PG&Es election and direction, delivery of the Software will be made solely by electronic |
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transmission in compliance with PG&Es instructions relating to load and leave exclusions from California sales and use tax liability where applicable and, in such case, SSN will transmit to PG&E a signed Software Delivery Form in the form attached hereto as Annex B-2 (Software Delivery Form). |
(b) | Insert a new Annex B-2 into Schedule B (Pricing and Payment Terms), in the form attached to this Amendment 6 as Attachment 6, and to be entitled Software Delivery Form. |
3. | AGREEMENT SECTION 4.5 (LIQUIDATED DAMAGES) |
The heading of Section 4.5 of the Agreement is amended to read as follows:
4.5 Liquidated Damages and Service Level Credits
Section 4.5 of the Agreement is amended by inserting the following additional provisions:
(e) Any Service Level Credits due from SSN pursuant to Schedule O ***.
(f) Any credits payable by SSN pursuant to Annex A-2 (SOW), including without limitation ***, (collectively, the Annex A-2 Credits) may be set off against the amounts due from PG&E pursuant to Annex A-2.
(g) Any Service Level Credits payable by SSN to PG&E pursuant to Schedule O shall be SSNs sole monetary liability to PG&E, and PG&Es sole monetary remedy, for SSNs failure to perform the applicable Services to which the Service Level Credits apply, ***.
(h) Any Annex A-2 Credits payable by SSN to PG&E shall be SSNs sole monetary liability to PG&E, and PG&Es sole monetary remedy, for SSNs failure to perform the applicable Services to which the Annex A-2 Credits apply, ***
(i) In addition and for the avoidance of doubt, if a failure to meet a Service Level in Schedule O or a performance requirement in Annex A2 is attributable to ***, PG&E may elect to pursue a warranty claim with respect to ***. Any Service Level Credits or Annex A-2 Credits paid by SSN with respect to the failure shall not preclude PG&E from pursuing such claim, but shall be set off against any damages payable by SSN with respect to ***.
4. | NETWORK DESIGN REQUIREMENTS |
(a) | Section 2(b) of Schedule G is amended and restated in its entirety to read as follows: |
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If PG&E implements the SmartMeter System in accordance with SSNs recommended design, sizing, capacity and configuration for AMI Traffic and thereafter modifies and upgrades the network in accordance with recommendations by SSN as contemplated by Section 6 of the Agreement (such design, sizing, capacity and configuration for AMI Traffic as modified being hereinafter referred to as the Network Design), then throughout the Deployment Period:
***
***
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5. | CREDIT CHECKS NOT REQUIRED |
(a) | Paragraph 26.1(b)(v) of the Agreement is hereby deleted. |
6. | CHANGES TO DEFINITIONS |
(a) | The definition at Section 30.17 of the Agreement of Licensed Materials is revised to provide as follows: |
Licensed Materials means (a) third party Intellectual Property which SSN delivers to PGE pursuant to this Agreement (b) SSNs proprietary Intellectual Property, including without limitation firmware code, furnished by SSN with the Hardware Products listed at Annex A-7 and (c) SSNs proprietary Software Products and Tools listed at Annex A-7 (and all associated User Documentation and Product Documentation).
(b) | Section 30.17 of the General Terms and Conditions is amended by inserting the following new definitions: |
AMI Traffic means (i) communications between and among the UIQ System and APs, Relays and Meters associated with routine network management and diagnostic functions; and (ii) information and communications flowing between the UIQ System and Meters through the SSN RF mesh network, provided that the same are related to meter reading, meter configuration, meter maintenance, meter status, remote disconnect switch operation or status, HAN configuration, and additions and removals of HAN devices.
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Non-AMI Traffic means any network communications or information that does not constitute AMI Traffic.
OLA means the SmartMeter Service Ticket Management Operating Level Agreement, which is further described in Schedule O, as revised and updated by agreement between PG&E and SSN from time to time.
7. | GENERAL PROVISIONS |
(a) | Capitalized terms used but not defined in this Amendment 6 have the meanings given to them in the Agreement. |
(b) | This Amendment 6 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 6, including the signature pages hereto, will be deemed to be an original. This Amendment 6 is not effective unless signed by both Parties. |
(c) | Except as expressly provided herein, all terms and conditions of the Agreement shall continue in full force and effect. |
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 6, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||
By: | /s/ Des Bell |
By: | /s/ Warren Jenson | |||||
Printed: | Des Bell |
Printed: | Warren Jenson | |||||
Title: | SVP & CPO |
Title: | Chief Financial Officer | |||||
Date: | 3/24/2010 |
Date: | March 24, 2010 |
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List of Attachments
Attachment 1: |
Schedule O (Amended and Restated) | |
Attachment 2: |
Annex A-5 (Amended and Restated) | |
Attachment 3: |
Annex A-2 (Amended and Restated) | |
Attachment 4: |
[Not used] | |
Attachment 5: |
Annex A-7 (Amended and Restated) | |
Attachment 6: |
Annex B-2 (Software Delivery Form) | |
Attachment 7: |
Table 6 (Statement of Work Charges) to Annex B-1 (Pricing Tables) to Schedule B (Pricing and Payment Terms) | |
Attachment 8: |
Table 7 (Ad Hoc Consulting Fees) to Annex B-1(Pricing Tables) to Schedule B (Pricing and Payment Terms) |
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SmartMeter Upgrade Supply Agreement
ATTACHMENT 1
Schedule O
(Amendment 6 Restatement)
PG&E and SSN Confidential | Schedule O | |||
(Amendment 6 Restatement) |
SmartMeter Upgrade Supply Agreement
SCHEDULE O - HOSTING AND MANAGED SERVICES
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
Amended and restated pursuant to Amendment No. 6
(March 2010)
PG&E and SSN Confidential | Schedule O | |||
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Table of Contents
1. |
OVERVIEW | 1 | ||||||
1.1 | Purpose and Related Documents. | 1 | ||||||
2. |
TERM AND TERMINATION | 2 | ||||||
2.1 | Term. | 2 | ||||||
2.2 | Termination and Transition Assistance. | 3 | ||||||
2.3 | *** | 7 | ||||||
3. |
CROSS-FUNCTIONAL SERVICES | 8 | ||||||
3.1 | General Requirements. | 8 | ||||||
3.2 | Service Ticket Management Process. | 9 | ||||||
3.3 | Change Management. | 9 | ||||||
3.4 | Reporting. | 10 | ||||||
3.5 | Training and ***. | 13 | ||||||
3.6 | Miscellaneous Operational Support Services. | 17 | ||||||
3.7 | Capacity and Configuration Management. | 17 | ||||||
4. |
UIQ MANAGEMENT SERVICES | 19 | ||||||
4.1 | UIQ Management Services Generally. | 19 | ||||||
4.2 | Database Management. | 21 | ||||||
4.3 | Implementation of UtilityIQ Software Upgrades and Firmware. | 21 | ||||||
4.4 | PG&E Participation. | 22 | ||||||
4.5 | Third Party Software UtilityIQ System. | 23 | ||||||
5. |
FIELD NETWORK SERVICES | 24 | ||||||
5.1 | Field Network Management. | 24 | ||||||
5.2 | Field Network Monitoring and Reporting. | 25 | ||||||
6. |
DATA CENTER SERVICES | 26 | ||||||
6.1 | General Terms. | 26 |
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6.2 | Locations, Allocation of Processing Environments and Access. | 26 | ||||||
6.3 | General and Facility-Related Requirements. | 26 | ||||||
6.4 | Front Haul Communications. | 27 | ||||||
6.5 | Back-haul Communications | 29 | ||||||
6.6 | Back-up and Restore. | 29 | ||||||
6.7 | Baseline Support for Core Network Infrastructure in the Data Center. | 31 | ||||||
6.8 | Ownership and Acquisition of Hardware and Third Party Software. | 31 | ||||||
6.9 | Data Center Hardware Installation and Maintenance. | 31 | ||||||
6.10 | Data Center Asset Management. | 32 | ||||||
6.11 | *** Specific Requirements. | 33 | ||||||
6.12 | Backup of *** Environment | 33 | ||||||
7. |
SECURITY REQUIREMENTS | 34 | ||||||
7.1 | Security Policies. | 34 | ||||||
7.2 | Physical Security. | 36 | ||||||
7.3 | Virus Protection. | 39 | ||||||
7.4 | Penetration Testing. | 39 | ||||||
7.5 | Security Breaches | 40 | ||||||
7.6 | *** | 40 | ||||||
8. |
SERVICE LEVELS, SERVICE LEVEL CREDITS AND SERVICE LEVEL INCENTIVES | 41 | ||||||
8.1 | Time to Respond and Resolve. | 41 | ||||||
8.2 | Operational Targets. | 41 | ||||||
8.3 | Timely and Complete Data Delivery Service Level (Production Environments only) | 42 | ||||||
8.4 | Availability Service Level. | 46 | ||||||
8.5 | Resolution of Unreachable Billing Endpoint Issues. | 47 | ||||||
8.6 | On-Demand Request Service Level. | 49 | ||||||
8.7 | Reporting and Service Level Credits or Incentives. | 51 |
PG&E and SSN Confidential | Schedule O | |||
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8.8 | Scheduled and Emergency Maintenance. | 53 | ||||||
8.9 | Exclusions; Root Cause Analysis. | 53 | ||||||
9. |
*** | *** | ||||||
*** | *** | *** | ||||||
*** | *** | *** | ||||||
*** | *** | *** | ||||||
*** | *** | *** | ||||||
10. |
PRICING | 58 | ||||||
10.1 | *** | 58 | ||||||
10.2 | *** | 59 | ||||||
11. |
ADDITIONAL TASK ORDERS | 59 | ||||||
12. |
DEFINITIONS | 59 |
PG&E and SSN Confidential | Schedule O | |||
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SmartMeter Upgrade Supply Agreement
SCHEDULE O
HOSTING and MANAGED SERVICES
1. | OVERVIEW |
1.1 | Purpose and Related Documents. |
(a) | This Schedule O sets out the terms and conditions upon which SSN will provide the Hosting Services (more particularly defined in Subsection 1.1(e), below) to support PG&Es SmartMeter System production, *** and testing environments. |
(b) | Definitions relating specifically to the terms of this Schedule O are set out in Section 11. |
(c) | This Schedule O memorializes the arrangements that took effect beginning September 1, 2009. It supersedes and replaces Section 4 (UIQ Hosting) of Annex A-2 (Statement of Work) to the Agreement and the associated one time and monthly recurring charges in Table 6 of Annex B-1 (Pricing Tables). |
(d) | Table 1 below specifies the UtilityIQ System Hosted Environments in and to which SSN will perform the Hosting Services as of the Amendment 6 Effective Date. The list of Hosted Environments may be updated and revised by agreement between the Parties from time to time. The category of each environment (Production, ***, Lower Environment) is shown in the table below. *** and Lower Environments are also referred to as Non-Production Environments. |
Table 1 UtilityIQ System Hosted Environments
Environment |
Category |
Anticipated Duration of Environment | ||
Production | Production | *** | ||
*** | *** | *** | ||
***-Lite / CME (as described in Amendment 1 to the Agreement) |
Lower Environment | *** | ||
Pilot SM Ops | Lower Environment | *** | ||
Pilot TIC | Lower Environment | *** | ||
Systems Integration Environments | Lower Environment | *** |
PG&E and SSN Confidential | Schedule O | |||
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Code Drop Environments | Lower Environment | *** |
(e) | The Hosting Services are comprised of the following four severable categories of services, each of which is supported by the additional cross-functional services described in Section 3: |
(i) | SSN will host, manage, operate, maintain and support the UtilityIQ System, with responsibility for all Infrastructure Components on the terms described in this Schedule O, up to the Front-haul interface on the Front-haul router at the SSN Data Center, as necessary to enable operation of functions and features of the UtilityIQ Software during the Term, and as more fully described in Section 4 below (the UIQ Management Services). Different requirements may apply to the Production Environment, *** Environment and Lower Environments, as described in this Schedule O; |
(ii) | SSN will operate, manage, maintain, support and monitor the Field Network and provide detailed analyses and reports to PG&E as fully described in Section 5 below (the Field Network Services); |
(iii) | SSN will provide sufficient data center space and associated services to meet PG&Es hosting requirements for the Hosted Environments, as more fully described in Section 6 below (the Data Center Services); |
(iv) | *** |
(f) | SSN will provide the Hosting Services in accordance with the security requirements and the Service Levels set out in Sections 7 and 8 below. |
2. | TERM AND TERMINATION |
2.1 | Term. |
(a) | Subject to Section 2.2 below, the term of this Schedule O (the Term) will commence on the Amendment 6 Effective Date and will end on August 31, 2012 (the Termination Date). |
(b) | PG&E may extend the Term with respect to any of the Hosting Services for two additional one-year periods by giving SSN notice in writing not less than *** days prior to the expiration of the then-current Term. |
PG&E and SSN Confidential | Schedule O | |||
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2.2 | Termination and Transition Assistance. |
(a) | Subject to Section 2.2(b), no earlier than March 1, 2011, PG&E may elect to (i) terminate this Schedule O in full, (ii) terminate any of the categories of Hosting Services or (iii) discontinue any portion of the categories of Hosting Services by giving written notice of termination or discontinuance to SSN. The notice may be given before March 1, 2011 but termination may not be effective until on or after that date. |
(b) | If, by ***, SSN has not: |
***
***
***
then PG&E may elect to (i) terminate this Schedule O in full, (ii) terminate any of the categories of Services or (iii) discontinue any portion of the categories of Services by giving written notice of termination or discontinuance to SSN, in each case by giving written notice of termination to SSN on or after that date.
(c) | A notice provided pursuant to this Section 2.2 (a Termination Notice) shall be in writing, shall describe the Hosting Services to be terminated or discontinued in reasonable detail and shall include a proposed Services end date. |
(d) | If PG&E issues a Termination Notice, SSN and PG&E shall work together to develop a plan to transition the provision of these Services from SSN to PG&E. This plan is referred to as the Transition Plan and the act of developing the Transition Plan is referred to as Transition Planning. The Transition Plan will include a mutually acceptable date upon which the related Services will cutover to PG&E and SSNs responsibility to provide the Hosting Services will end (the Discontinuance Date). The Parties will work in good faith to complete the Transition Plan within *** days of receipt of the Termination Notice and to make the Discontinuance Date as close as possible to the Hosting Services end date PG&E proposed in its Termination Notice. |
(e) | PG&E may give another Termination Notice before the Discontinuance Date for a prior notice, but PG&E acknowledges that SSN is not staffed to support multiple simultaneous transition efforts. Consequently, if more than one Termination Notice is outstanding at any time, the Parties will work together to prioritize transition efforts within the constraints of SSNs available resources. |
(f) | Discontinuance of Services pursuant to the Transition Plan (Discontinuance) will not cause the termination or discontinuance of the other Services provided under this Schedule. *** |
PG&E and SSN Confidential | Schedule O | |||
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*** |
(g) | On the Discontinuance Date, PG&E shall pay SSN any *** SSN shall use Commercially Reasonable Efforts to mitigate any such charges, to the extent such mitigation is consistent with the Transition Plan. The following terms also apply to the calculation of ***: |
i. | SSN will provide substantiation of SSNs *** to be reimbursed by PG&E pursuant to this paragraph at the time of invoicing to PG&E. |
ii. | If PG&E and SSN mutually agree to change the Data Center Services provided by SSN to PG&E outside of a Transition Plan, SSN will inform PG&E of any change to the monthly maximum ***. As part of any Transition Plan, SSN will re-set the monthly maximum *** effective after that transitions Discontinuance Date. |
iii. | SSN shall keep PG&E informed as to the termination dates of each third-party provider with respect to which charges may be payable by SSN (Third-Party Providers) should PG&E terminate Data Center Services for which SSN relies on such providers. |
iv. | PG&E will be responsible for no more than *** subsequent to the Discontinuance Date; partial months will be charged on a pro rata basis. If the Discontinuance Date is less than *** prior to the Termination Date, the remaining number of months until the Termination Date will be the ***. Further, if PG&E provides SSN with less than *** days notice of Termination before the Termination Date, the ***. |
v. | If PG&E requests a continuation of Data Center Services beyond the Discontinuance Date, or causes SSN to be unable to terminate Data Center Services as of the Discontinuance Date, PG&E will reimburse SSN for ***. |
(h) | Termination Fees. |
(i) | If PG&E terminates the Hosting Services pursuant to Section 2.2(b) and the Discontinuance Date occurs between ***, then in addition to paying *** as provided in paragraph 2.2(g), PG&E shall pay SSN a termination fee for the applicable |
PG&E and SSN Confidential | Schedule O | |||
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month in which the Discontinuance Date falls as shown in the table below. If not all of the Hosting Services are terminated, the termination fee will be pro-rated based on the reduction in the monthly charges following the termination. |
*** | *** | |||
*** |
| |||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** |
(ii) | If PG&E terminates the Hosting Services pursuant to Section 2.2(a) and the Discontinuance Date occurs between *** and ***, then in addition to paying *** as provided in paragraph 2.2(g), PG&E shall pay SSN a termination fee for the applicable month in which the Discontinuance Date falls. If not all of the Hosting Services are terminated, the termination fee will be pro-rated based on the reduction in the monthly charges following the termination. |
*** |
| |||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** | ||
*** |
* | ** |
PG&E and SSN Confidential | Schedule O | |||
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(iii) | No termination fees are payable pursuant to this paragraph (h) if PG&E elects to discontinue Data Center Services as described in Section 7.6. |
(i) | The fees and reimbursements payable by PG&E for termination of the Hosting Services pursuant to this Schedule O apply in lieu of the payment obligations set forth in Section 20.2(a) of the Agreement. |
(j) | The Transition Plan shall describe reasonable transition services to be provided by SSN (according to a mutually agreed upon schedule) to enable PG&E to take over operation of the affected Services and to take possession and control of the physical infrastructure and systems used to provide such Services (the Transition Services). The Transition Plan shall include ***. SSN shall provide related costing following mutual agreement of the plan. |
(k) | The Transition Plan also will require SSN to assign qualified resources to perform each of the Transition Services on the schedule indicated below, to the extent acceptable to PG&E, ***. |
(l) | SSN shall: |
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***
***
***
PG&E and SSN Confidential | Schedule O | |||
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***
***
***
***
***
***
***
(m) | SSN will maintain a stable account service team during the Transition Planning period and will not transfer personnel from the PG&E account until a personnel transition plan providing for such transfers is agreed by the Parties, except as PG&E may approve in advance on a case by case basis. |
2.3 | *** |
*** |
PG&E and SSN Confidential | Schedule O | |||
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***
***
***
*** |
***
3. | CROSS-FUNCTIONAL SERVICES |
The obligations set out in this Section 3 apply to all Services.
3.1 | General Requirements. |
(a) | SSN will support PG&Es project schedule and deadlines during the deployment phase of the SmartMeter Project and ongoing UtilityIQ Software Upgrades. |
(b) | SSN will keep Data available to and accessible by PG&E ***, on demand and in a mutually agreed manner and structured data format, subject to maintenance periods as described in Section 8.8 below. |
(c) | SSN will participate in *** planning activities and will participate in PG&Es *** walk-throughs and *** tests. |
(d) | SSN personnel will participate in regularly scheduled SmartMeter IT operations planning, analysis and status meetings and in regularly scheduled AMS Operations planning, analysis and status meetings, as requested by PG&E. |
PG&E and SSN Confidential | Schedule O | |||
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3.2 | Service Ticket Management Process. |
SSN will provide centralized ticketing and management of Incidents, Service Requests and Tech Support Requests for all Services (and applicable to each environment in which any instance of the UtilityIQ System is hosted) in accordance with the OLA, which shall be deemed incorporated into this Schedule O as if fully set forth herein.
(a) | The Production and *** Environment infrastructure will be monitored ***. |
(b) | SSN Personnel will be available for telephone or email contact ***. All other hours will be supported through automated monitors maintained by SSN with SSN Personnel contacted by pager service during these hours. PG&E shall have the ability to contact SSN Personnel via pager or other mechanism required by PG&E and SSN will respond in accordance with the timeframes set forth in the OLA. SSN shall provide to PG&E the SSN holiday schedule annually in advance. |
(c) | SSN Personnel will be available ***. |
(d) | SSN will notify PG&E of each Incident affecting the infrastructure. Notification will be provided as specified in the OLA. Even if the issue is resolved within the applicable response time window, SSN shall communicate the details regarding the issue and its resolution to PG&E. |
(e) | With respect to all Infrastructure Components, SSN will provide the following operational support services: |
(i) | Break-fix, and repair in response to Tickets; and |
(ii) | Create, maintain, and document a suite of UtilityIQ System monitoring and configuration management tools and scripts owned by SSN. |
3.3 | Change Management. |
(a) | SSN will follow the IT Change Management Process for any Request for Change or System Change made relative to the UtilityIQ System. |
(b) | With respect to all Infrastructure Components, SSNs use of the IT Change Management Process must result in the creation of documentation sufficiently detailed for use by an experienced IT professional (and in a format reasonably acceptable to PG&E) on all relevant Change Management activities, including without limitation the following: |
(i) | outage notification and scheduling; |
(ii) | monitoring and reporting of changes to the Infrastructure Components; |
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(iii) | Defect and third party vendor management. SSN and PG&E will use reasonable commercial efforts to cause third party vendor activities to comply with the IT Change Management Process. In particular, SSN will, and as applicable will direct third party vendors to: |
(1) | Track, prioritize, and report defects and map them to patch delivery by the applicable third party vendor; |
(2) | Track open third party vendor Incident Response SLAs; |
(3) | Track open third party vendor SRs and establish priority and target delivery dates; and |
(4) | Where necessary and provided there is no impact to UtilityIQ System functionality, maintain versions of packaged software (including RDBMS software) to levels of currency required by PG&E technical standards, and in compliance with applicable third party vendor patch management and configuration management procedures. |
(c) | Requests for user access and planned modifications that constitute a System Change shall be subject to the IT Change Management Process. |
3.4 | Reporting. |
SSN will comply with the reporting requirements set forth in this Section. As noted for each of the reporting categories listed below, SSN will either provide electronic reports to PG&E delivered at the frequency noted, or on-demand self service access to reporting capabilities to PG&E which PG&E can use to obtain pre-formatted reports or to design and obtain custom reports. To the extent a self-service reporting feature is not functioning properly, such malfunction shall be considered a Defect pursuant to Schedule H. SSN will participate in a monthly performance review meeting with PG&E.
(a) | *** SSN will provide the monthly *** and *** reports referred to in Section 8. |
(b) | *** SSN will provide reports on the following for the *** Environment only: |
***
***
***
***
***
***
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***
***
***
***
***
***
***
***
(iii) | *** |
(c) | ***. SSN will commence providing the following reports for all Environments by the Amendment 6 Effective Date, either via electronic reports or by enabling self-service reporting: |
***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
***
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***
***
***
***
***
***
***
***
***
***
***
(d) | *** SSN will also provide PG&E these reports for the *** Environments: |
***
***
***
***
***
***
(e) | *** Reports. |
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For completeness, the parties acknowledge that SSN will provide additional reports as required pursuant to Section 8.7(a) of this Schedule.
3.5 | Training and ***.- |
(a) | The training and *** activities contemplated by this Section 0 are intended to provide training and *** regarding the four Services categories provided by SSN under this Schedule O. *** |
(b) | SSNs obligation to provide training and *** activities pursuant to this Section 0 shall be limited by and subject to confidentiality obligations of SSN to third parties such as third party software vendors and SSNs other customers. |
(c) | PG&E acknowledges that SSN and its licensors retain all right, title and interest, including without limitation all Intellectual Property Rights, in all SSN Confidential Information, concepts, methodologies, product roadmap information, Documentation and other documents provided by SSN to PG&E pursuant to this Section 0. SSN hereby grants to PG&E a license, on the terms stated at Subsections 13(a)-(c) of the Agreement, to use the concepts, methodologies, product roadmap information, Documentation and other documents provided by SSN to PG&E pursuant to this Section 0. |
(d) | The training and *** activities: |
(i) | will take place on a periodic basis, but shall in any event be conducted in preparation for and co-incident with the implementation of Major Release Upgrades to the UtilityIQ System and/or in general preparation for any discontinuation of the Hosting Services (in whole or in part), as further described in Section 2.2. ***; |
(ii) | will be attended by PG&E employees who have appropriate basic training, skills, and experience for each course and SSN shall notify PG&E of course prerequisites as soon as curricula are finalized by SSN; |
(iii) | will be provided at an SSN training facility (or a PG&E facility, if PG&E approves) with all required training infrastructure and materials provided by SSN; |
(iv) | shall be delivered in the following manner, subject to reasonable modifications by SSN as it evolves its training and *** practices: |
(1) | End User Application Training: |
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***, PG&E will deliver a *** forecast of onsite training requirements for dedicated training delivery. The forecast will be updated on a quarterly basis by PG&E. PG&E acknowledges that *** days notice is required for any onsite delivered course work regardless of whether the course is hosted at SSN or PG&E facilities to allow SSN adequate lead time to secure staffing coverage. Open enrollment for mixed customer training delivery does not require advanced notice.
| UtilityIQ AMM The course covers company and product suite overview, key functions of the tool, typical tasks that it is used for, sample workflows, device management, importing device and location information, device edits and swaps, meter programs, schedules and meter read results, exports, monitoring, and configuration. |
| UtilityIQ NEM This course covers product overview and description, NEM advanced network management capabilities based on industry standards, including fault and performance management. Product overview and key functions are covered, typical tasks it is used for including fault management, capacity management, performance management, and security management. The course will also cover NEM dashboard and reporting, configuring policies for bandwidth utilization for WAN and NAN and diagnostics, NMS integration and common use cases. |
| UtilityIQ FWU This course covers product overview and description, background information, typical tasks it is used for, Seed, Float, Flip and running FWU to upload a firmware image, set up an FWU project and distribution and installation of firmware |
| UtilityIQ MPC This course covers product overview and description, typical tasks that MPC is used for, creating and uploading a meter program and programming meters. |
| UtilityIQ ODS This course covers product overview and description, how ODS is used and how it functions, viewing outages, running reports, and configuration with a menu walkthrough. |
| CATT/FSU Tools This course covers field service tool overview and description, what tasks can be performed and how it is used, starting the application, installing the FSU, and the different features and options available including hands-on demonstration work. |
(2) | Administrator and Role-based Training: |
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SSN shall provide training, required to enable PG&Es IT staff to install, configure, and observe best practices operation of the SmartMeter System. Administrator training topics include the required qualifications for each functional role, including business operations, IT operations, NOC operations, the maintenance and operation of the *** environment, implementation of the ***, and management of third-party data center operations. Additional training topics include system architecture and administration, network engineering, UtilityIQ System application administration and *** tasks. Prerequisites include but may not be limited to completion of relevant End User Application Training (or equivalent knowledge) noted in Subsection 3.5(d)(iv)(1). Curriculum materials will include summaries of in-class topics, as well as concept documents, white papers, and other important materials such as release notes and runbook procedures as appropriate for Role-based Training.
PG&Es forecast of onsite training requirements should include any Role-based training required and may request such sessions starting ***. Open enrollment schedule for the *** has been provided by SSN and will be updated on a quarterly basis. Training will be scheduled by agreement between PG&E and SSN, but SSN must be resourced to deliver training within *** days of request by PG&E unless otherwise agreed. Minimum class size for these courses is 4 people, maximum 12.
(3) | Custom Training: |
SSN shall provide custom training classes addressing unique topics requested by PG&E not already covered by documentation materials and training provided in the context of training covered in Subsection 3.5(d)(iv)(1) or (2). Each session is assumed to be one day in delivery duration for purposes of quoting scope and pricing in the absence of firm topic requirements. If PG&E requests production of documentation materials that are supplemental to the scope of a single 1-day training, *** lead times may apply.
PG&E may schedule sessions of Custom Training starting in *** with *** days notice. Training will be scheduled by agreement between PG&E and SSN. Maximum class size for these sessions is 12 people.
(4) | ***: |
This training material will involve less formalized training, provided as SSN performs normal operational tasks on PG&E environments. This typically will involve ***
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***. Typical activities will involve:
***
***
***
***
***
PG&E may schedule *** at any time to coincide with existing SSN/PG&E activities.
(e) | In order that its training materials and curricula remain current and consistent with the evolution of the UtilityIQ System, SSN shall offer PG&E an annual refresh of materials and delta training covering changes in materials and/or operational procedures. If changes by SSN render obsolete prior training and procedures, SSN shall notify PG&E and make training available within *** days of such notice. Delta training, obsolescence training, and additional training sessions pursuant to Subsection 3.5(d)(iv) shall be offered at reasonable costs, in light of the pricing for the original training and *** described in Subsection 3.5(d)(iv). |
(f) | SSNs *** activities shall comply with any confidentiality obligations SSN may have to its other customers and with the rights and restrictions applicable to Licensed Material under Section 13 of the Agreement. All concepts, methodologies, and documents embodied by or produced in connection with Documentation (as described in this Section 0) shall be deemed Licensed Materials. |
(g) | SSN will provide documentation, where existing, of the processes, methodologies and technologies used by SSN to support incident, problem, capacity and change management covering the UtilityIQ System (UIQ-AMM, UIQ-NEM) (Front haul, Back haul, Field Area Network and Data Center technologies). Documentation must include coverage of non-application Infrastructure Components, including configuration and operation of the OS, JBOSS, and the database components. Such documentation should cover and explain the derivation and use of all reporting metrics used by SSN in connection with reporting against SLAs, the Operational Targets (as specified in Section 8.2), and in support of each other report referenced in Section 3.4, all in sufficient detail for use by an experienced IT professional. SSN will update such existing documentation from time to time so that it remains consistent with the OLA and the IT Change Management Process, as such may evolve. |
(h) | Pricing for *** activities included in this Section 0 is as follows: |
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Table 2 *** Pricing | ||||||
Activity |
Cost per Unit |
Unit | ||||
*** |
*** | *** | ||||
*** |
*** | *** | ||||
*** |
*** | *** | ||||
*** |
*** | *** | ||||
*** |
*** | *** | ||||
*** |
*** | *** | ||||
*** |
*** | *** |
(i) As of December 10, 2009, PG&E was entitled to training services to the value of $*** that were not consumed prior to that date. SSN will credit that amount against any training purchased by PG&E after that date at the rates specified in Table 2. Once the credit is exhausted, PG&E will pay for additional training at the rates specified in Table 2.
3.6 | Miscellaneous Operational Support Services. |
SSN will:
(a) | Import device data, including configuration of manufacturer shipment data in format for UtilityIQ System import and resolution of exceptions/errors in device import and imported data; and |
(b) | Assist with the resolution of data discrepancies relating to deployment, shipment, or manufacturing problems. |
3.7 | Capacity and Configuration Management. |
(a) | Capacity Management. SSN shall be responsible for capacity management with respect to each of the Hosted Environments. SSN shall plan and arrange for services and resources to be available within the Hosted Environments as appropriate to satisfy PG&Es current and anticipated future business needs within the parameters of this Schedule O, including: |
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(i) | Developing, maintaining and documenting capacity plans for the Production and *** Hosted Environments; |
(ii) | Developing predictive and ongoing capacity indicators for the Production and *** Hosted Environments; |
(iii) | Creating and analyzing utilization and trend forecasts and proactively changing the Production and *** Hosted Environments (e.g., upgrades, downgrades, enhancements, reconfiguration and performance tuning) to correctly align the performance and availability needs with infrastructure capacity while optimizing the utilization of that capacity; |
(iv) | Responding to capacity-related threshold events and initiating the appropriate activities to avoid bottlenecks and performance degradation; |
(v) | Notifying PG&E of capacity and capacity-related performance issues as soon as possible to allow PG&E to provision additional capacity when required; |
(vi) | Diagnosing and resolving performance and capacity-related incidents and problems; |
(vii) | With input from PG&E, modeling the implications of PG&Es short, medium and long term plans on the capacity requirements for the Hosted Environments; |
(viii) | Assessing the impact of change in the Hosted Environments on capacity plans; and |
(ix) | Monitoring the production head end servers to the level of detail appropriate to produce the reports referred to in section 3.4(c) and other mutually agreed upon performance criteria. SSN will provide historical data, to the extent available, to PG&E upon PG&Es request. In particular, SSN will monitor and predict system performance through trending, modeling, testing and analysis of detailed statistical and qualitative performance data for the UtilityIQ System. |
(b) | Configuration Management. SSN shall be responsible for configuration management with respect to each of the Hosted Environments. SSN shall collect, track, manage, maintain and report on the physical presence, asset data (serial number, etc), contractual terms and configuration states of each Infrastructure Component in the Hosted Environments, including: |
(i) | Establishing for PG&E approval the requirements for what asset and configuration information is to be maintained; |
(ii) | By ***, make available a database (the Configuration Database) for such information and the appropriate tools to: |
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(1) | Record and track the applicable asset and configuration information through the full lifecycle (e.g., purchase, configuration, installation, repair, redeployment, removal, disposal); |
(2) | Forecast changes in asset populations and configurations; |
(3) | Identify the underlying components or subcomponents; |
(4) | Monitor changes made to the Database and identify and resolve inconsistent or suspect information; and |
(5) | Facilitate the redeployment and/or reuse of assets. |
(iii) | Making asset and configuration information available to PG&E, initially upon PG&Es request via separate tools used by SSN to manage configurations, and after ***, via an automated delivery of reports (or access to) the configuration database referred to in the previous paragraph; |
(iv) | Compiling, and making available for review and/or publication, management reports regarding assets and their association with other information in the Configuration Database; |
(v) | Monitoring and enforcing software license compliance; and |
(vi) | Performing, as necessary, audits of the Database to verify accuracy. |
4. | UIQ MANAGEMENT SERVICES |
4.1 | UIQ Management Services Generally. |
(a) | This Section 4 is applicable to all Production and Non-Production Environments except as expressly stated below. |
(b) | SSN will be responsible for the sizing, provisioning, setup, configuration, implementation, monitoring, management, operation, maintenance, upgrading and support of the production and (with respect to Production and *** Environments) backup infrastructure for the UtilityIQ System including all necessary servers, data storage, routers, firewalls, network connectivity, bandwidth, third party software and other hardware. |
(c) | Notwithstanding PG&Es maintenance responsibility for hardware initially sized to the UtilityIQ System infrastructure requirements per Annex A-4, if any additional hardware is required to address performance issues attributable to SSNs UtilityIQ System design, PG&E shall fund the first $*** of purchases, and SSN shall fund any additional purchases, exclusive of costs related to data backup, as the proposed solution has yet to be proven operationally viable. SSN shall work in good faith with PG&E to minimize PG&Es data storage requirements and to develop a written action plan acceptable to PG&E regarding this issue prior to ***. Notwithstanding the foregoing, SSN shall not |
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be responsible for furnishing additional hardware at its cost if the deployment scale, functional scope (as contemplated in Annex A-4) or major version release of the UtilityIQ Software changes, or if the proposed backup solution proves not to be operationally viable. |
(d) | SSN will install new versions of the UtilityIQ Software and perform applicable routine management tasks in accordance with the IT Change Management Process. |
(e) | *** |
(f) | SSN will make (i) all Data collected from Meters available to PG&E online for the ***, and (ii) all NEM network Data available to PG&E online for the ***, or such other duration as PG&E may reasonably require as its business requirements evolve. The Parties will mutually agree on modified pricing to the extent such requirements change. |
(g) | Testing for Maintenance. Whenever SSN wishes to implement a change to the UtilityIQ System as part of its maintenance activities, SSN will be responsible for testing the change to the UtilityIQ System as specified by the IT Change Management Process and Schedule E, Section 2 (Development Testing). Testing of enhancements requested by PG&E will be conducted on a project basis pursuant to a separate statement of work. |
(h) | Production Data Issue Resolution. SSN will assist PG&E with the resolution of production data issues. In particular, but without limitation, SSN will: |
(i) | upon PG&Es request, design strategies to resolve or mitigate data exceptions or data synchronization or data interface (e.g., to CC&B, ***, etc.) issues; |
(ii) | Document acceptance criteria and acceptance testing plans; |
(iii) | Design, develop, and generate test data; |
(iv) | Design, develop and test data clean up routines; and |
(v) | Design, develop and test any exception handling processes and tools. |
(i) | SSN will provide PG&E with detailed As-Built Documentation of the following aspects of the environments hosted by SSN: Data Center location (row, rack, rack unit), environment identifier (customer, type, hostname), hardware information (make, model, serial number, service code), network information (MAC Address, IPv4 address, IPv6 address), remote access info (DRAC IP, DRAC switch port), power information (PDU ID, PDU socket ID), asset tag info (SSN, PG&E), and server information (CPU, Disk, memory, O/S, software). SSN will deliver documentation to PG&E within *** days following the initial |
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build of any UtilityIQ System instance (including the *** environment). Changes to the UtilityIQ System hardware or software configuration shall be documented through the review and approval procedures in the IT Change Management Process. As-built Documentation shall be revised and delivered by SSN at least annually to incorporate any material UtilityIQ System hardware or software configuration changes. |
(j) | If PG&E determines that new batch processing or automated tools, such as UC4, are needed to interface between the UtilityIQ System and other PG&E systems, then PG&E and SSN will work together to install and configure such tools as needed pursuant to a separate statement of work. |
4.2 | Database Management. |
SSN will perform physical and logical database management support and administration including maintaining database structures, performing periodic standard database housekeeping and maintenance scripts, re-indexing, stored procedure re-builds, defragmentation, periodic purging of obsolete definitions and procedures and all other functions necessary to maintain the database. In addition, SSNs database maintenance activities will include, to the extent applicable:
(a) | Capacity management of storage for database objects (tables, indexes, large objects); |
(b) | Management of ASM (Oracle file server manager), other database-related file systems, and SAN storage for database files; |
(c) | Management of batch jobs for data loading and reference tables; |
(d) | Monitoring and research of security events occurring in the database; |
(e) | Management of user security access to the database (including roles and privileges); and |
(f) | Database restore/rollback as required for testing or to address Data corruption or Data loss. |
4.3 | Implementation of UtilityIQ Software Upgrades and Firmware. |
(a) | SSN will implement UtilityIQ Software Upgrades by installing them on the servers operated by SSN, in accordance with the IT Change Management Process and the terms of the Agreement. ***. |
(b) | With advance notice and approval by PG&E, SSN will perform firmware upgrades in deployed Endpoints, Access Points and Relays. For training purposes, ***. Implementation may include applying the latest |
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firmware version to all deployed Endpoints, Access Points and Relays, as reasonably determined by PG&E. All firmware releases will be coordinated and approved in advance by PG&E and will be in accordance with the IT Change Management Process. |
4.4 | PG&E Participation. |
(a) | SSN will provide PG&E personnel with access to the following: |
(i) | Access to the UtilityIQ Software (including all application GUIs, functions, features) ***; |
***
***
***
(b) | PG&E shall have access *** to the UtilityIQ System to monitor and report metrics. PG&Es monitoring of the UtilityIQ System does not relieve SSN of its accountability for overall systems operations, monitoring and management for each Service to the extent it has not been discontinued pursuant to Section 2.2. Subject to the foregoing, ***. |
(c) | PG&E shall not implement changes in the Production Environment unless agreed by, and under the direction of, SSN, or unless responsibility for the specific task has been transitioned to PG&E. |
(d) | Upon agreement between SSN and PG&E on the need for Field Network and Endpoint maintenance, PG&Es AMS Ops team will be responsible for PG&E work order dispatch and timely work completion. |
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4.5 | Third Party Software UtilityIQ System. |
(a) | SSN will be responsible for coordinating with third party software vendors to properly support all third party software required to operate, manage and maintain the UtilityIQ System and to provide all Services under this Schedule O. SSN will provide PG&E with details of all required third party software and will take PG&Es reasonable recommendations into account in relation to the purchase of such software. |
(b) | SSN will be responsible for adding to, replacing, and upgrading any third party software, and managing on PG&Es behalf support and maintenance services provided by vendors of software procured by PG&E in accordance with Section 5.2(b) of the Agreement, to the extent necessary to support the UtilityIQ System and to provide all Services under this Schedule O. SSNs responsibilities with respect to third party software include installing, configuring, applying third party patches and performing quality assurance testing of third party software (subject always to any third party suppliers recommendations or requirements regarding installation, configuration, testing or support of such third party software). SSN will provide documentation regarding such test results when required by PG&E. |
(c) | SSN will coordinate with third party software vendors to perform patch management services for the third party software in accordance with the IT Change Management Process including: |
(i) | monitor the availability of, and implement as appropriate, third party software fixes/patches made available by third party software suppliers; |
(ii) | co-operate with third party suppliers, as necessary to properly support third party software; |
(iii) | co-ordinate, verify and, as appropriate, implement critical patches (including security patches), service packs, hot fixes and upgrades and new releases of third party software; |
(iv) | in cooperation with the third party software vendor monitor, maintain (in accordance with applicable specifications) and tune the third party software on a periodic basis; and |
(v) | co-operate with third party suppliers to properly support third party software as necessary for the successful operation of the UtilityIQ System operates according to its documentation, specifications and operational requirements. |
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5. | FIELD NETWORK SERVICES |
5.1 | Field Network Management. |
(a) | This Section 5.1 is applicable to the Production Environment, the San Francisco pilot and the TIC lab Environment only. |
(b) | SSN will be responsible for management and coordination of the Field Network including: |
***
***
***
***
***
***
***
(c) | As part of the Field Network Services, SSN will: |
***
***
***
***
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***
***
***
***
***
***
(d) | PG&E will, based upon input from SSN, be responsible for ***. |
5.2 | Field Network Monitoring and Reporting. |
(a) | SSN will monitor the Field Network and the reachability of all network devices comprising the Field Network ***, and will follow the OLA procedures to promptly report any failures or unavailability for appropriate escalation. Notwithstanding the foregoing, PG&E will investigate any issue affecting fewer than ***. PG&E will escalate such issues to SSN, as necessary to help resolve the problem. SSN will investigate any Meter issue impacting *** and any issue that a preliminary assessment suggests is caused by a systemic problem (architectural, engineering, software, product design, etc). SSN will escalate such issues to PG&E as necessary. PG&E will perform all in-field investigations. SSN resources can be made available at PG&Es request with a minimum of *** advance notice *** for in-field investigations. |
(b) | SSN will manage and maintain all tools used in Field Network monitoring and performance reporting. |
(c) | SSN will obtain the data from the Field Network equipment that is necessary to meet reporting requirements and will retain the data for *** days unless mutually agreed otherwise via the Change Control Process set forth in Annex D-1. |
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6. | DATA CENTER SERVICES |
6.1 | General Terms. |
(a) | This Section 6 is applicable to all Production Environments and Non-Production Environments except as expressly stated below. |
(b) | Through its subcontractors, ***, SSN shall provide Data Center Services from a Data Center environment that meets the standards set out below. |
(c) | *** are approved subcontractors for the purposes of Schedule J. |
(d) | Any relocation of the Data Center Services (whether between separate data center facilities or within a data center) shall require PG&Es prior written approval upon adequate prior notice. The addition, termination, or substitution of a Data Center subcontractor shall trigger the Change Control Process set forth in Annex D-1. |
(e) | The parties have agreed to replace *** with an alternative Data Center facility as described in Section 7.6. |
6.2 | Locations, Allocation of Processing Environments and Access. |
(a) | The Data Center Services will be located at *** data center at ***, and at *** data center at *** (each separately and jointly to be referenced herein as the Data Center). |
(b) | SSN will establish certain Environments at the Data Center as approved by PG&E, and will relocate Environments as directed by PG&E from time to time. Any relocation of Environments after the Amendment 6 Effective Date and any associated fees or cost reimbursements due to SSN will be documented and agreed in a separate statement of work in accordance with the Change Control Process set forth in Annex D-1. |
(c) | SSN will coordinate PG&E access to the Data Center in order to conduct security inspections, scheduled and unscheduled penetration testing and security audits within 48 hours of a request for access. |
6.3 | General and Facility-Related Requirements. |
(a) | SSN will establish the PG&E Areas which will be secure facilities for the location of the UtilityIQ System within the Data Center that have been designed to provide non-stop operations and protection of the UtilityIQ System. |
*** |
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*** |
(c) | The Data Center must provide the following environmentals as required to meet the capacity, processing and communications requirements of the UIQ System: |
Space;
Power;
Cooling;
Connectivity;
***
***
***
***.
6.4 | Front Haul Communications. |
(a) | SSN will work together with PG&E as shown in the table immediately following this Section 6.4 (entitled Section 6.4 Table) to establish robust communications services for the Front-haul (Primary Hosting Data Center up to the demarcation point at ***) and between the Data Center and any backup or *** facility such that there is no single point of failure in the communications network, with rapid fail-over from primary to backup circuits in the event of failure (with primary and secondary circuits provided by different service providers), such that SSN can meet its Data Delivery and *** Service Levels (as described in Section 8.3 and Subsection 6.6(c), respectively). As part of its NOC operating procedures, SSN shall establish a plan to maintain communications with the Field Network if a major interruption in service occurs or a disaster is declared. Deliver and Delivery of Data are defined in the Section entitled Definitions in Annex A-5. |
(b) | SSN will provide and manage any load balancing for the UtilityIQ System. |
Section 6.4 Table: Circuits and Responsibilities
(To be used only for describing responsibilities by circuit.)
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Responsible Party | ||||||||
Circuit |
Circuit |
Define |
Purchase & |
Monitor & Manage | ||||
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6.5 | Back-haul Communications |
(a) | SSN will work together with PG&E to establish specifications (bandwidth, technology, etc.) for the Back-haul communication circuit(s) shown in the table immediately above entitled Section 6.4 Table; |
(b) | PG&E will procure and pay for the Back-haul communication services; |
(c) | PG&E will submit a letter of agency to the necessary telecommunications providers giving SSN permission to submit and escalate operational issues on their behalf; and |
(d) | SSN will perform ***. |
6.6 | ***. |
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6.7 | Baseline Support for Core Network Infrastructure in the Data Center. |
SSN will perform:
(a) | Break-fix and/or repair Services; |
(b) | Performance monitoring and tuning of core Data Center Infrastructure Components (including routers, switches, firewalls, security tools, etc.); |
(c) | Operational maintenance of network Infrastructure Components (i.e., day-to-day operational support with upgrades and enhancements as required). |
6.8 | Ownership and Acquisition of Hardware and Third Party Software. |
(a) | PG&E will purchase all necessary hardware and third party software licenses in accordance with Annex A-4 (Third Party Products and IT Infrastructure Specifications) of the Agreement. SSN shall provide backup hardware and software (until the Parties agree that PG&Es hardware and software is capable of providing backup functionality) and the core network infrastructure connecting the Production and *** environments. |
(b) | SSN will keep the PG&E hardware located at the Data Center free from all liens, charges and encumbrances and shall bear the risk of loss of or damage to the hardware (ordinary wear or tear excepted) from any cause occurring on or after delivery of the hardware to SSN or to the Data Center except to the extent caused by PG&E. |
(c) | SSN will clearly label all hardware which is the property of PG&E as being the property of PG&E. PG&E will provide all asset tags to SSN. |
6.9 | Data Center Hardware Installation and Maintenance. |
(a) | SSN will manage receiving, unpacking, racking, installation, configuration, and quality assurance testing of the hardware that is to be hosted at the Data Center (subject always to any third party suppliers recommendations or requirements regarding installation, configuration or support of such hardware). |
(b) | Any hardware purchased by PG&E will be dedicated to PG&Es exclusive use. PG&E-dedicated equipment must be in a dedicated cage segregated from SSN and third party equipment unless otherwise approved by PG&E. |
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(c) | SSN will manage, as appropriate, de-installing and removing Data Center hardware; providing initial troubleshooting, diagnosis and problem resolution services in the event that problems are discovered with any hardware during the installation process. |
(d) | PG&E will execute hardware maintenance contracts with hardware suppliers or their certified maintenance providers, including without limitation availability of the support service ***. SSN will cooperate with third party maintenance providers to provide corrective and Preventive Maintenance for the Data Center hardware. SSN also will manage third party suppliers of such maintenance to the extent enforceable by SSN. SSN will be available as necessary on the schedule stated in the OLA to maintain the hardware in good operating condition and in accordance with manufacturers specifications or other agreements as applicable, (including, for example, replacing hard drives, power supplies, memory processors and other components as necessary) and in order to meet or exceed the Service Levels, subject always to the availability of third party maintenance providers which may not be available on a *** basis. SSN will provide PG&E with details of all required maintenance services for the Data Center hardware. PG&E will take SSNs reasonable recommendations into account in relation to the procurement of such maintenance services. |
(e) | SSN will cooperate with third party maintenance providers to provide troubleshooting, diagnosis and problem resolution services and will manage maintenance and warranty services provided by Data Center hardware vendors to the extent enforceable by SSN. |
(f) | If PG&E enters into a third party maintenance agreement that provides a ***, and if the *** causes SSN to fail to comply with a service level or other requirement of this Schedule O, then SSNs failure to comply with the service level or requirement will be excused to the extent caused by that ***. |
6.10 | Data Center Asset Management. |
(a) | SSN will assist PG&E to maintain a Data Center asset register listing details of all licenses, consents and approvals; all SSN and third party software; all hardware and associated leases and maintenance agreements; all service contracts; and the location, configuration and utilization of those items, relating to the UtilityIQ System and assets at each Data Center. |
(b) | SSN will not remove any PG&E hardware (or any part of the hardware such as storage media) or transfer or remove any third party software licensed by PG&E or other PG&E material without prior written consent of PG&E. |
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(c) | SSN will advise PG&E if any Data Center hardware needs to be refreshed over the Term and will replace or upgrade the hardware as part of a refresh program only with PG&Es prior written approval. |
6.11 | *** Specific Requirements. |
SSN will configure all equipment in the *** Environment to run the PG&E production environment in the event of ***.
6.12 | Backup of *** Environment |
(a) | Frequency. SSN will implement a backup solution to back up the *** Environment (meaning the *** Environment excluding the logical environment associated with ***) as agreed with PG&E on a case by case basis. Unless otherwise agreed, the default backup frequency will be *** backups. At other times, backups on a less frequent basis may be adequate. Upon request by PG&E, SSN will backup the *** Environment at *** conducted in *** Environment. SSN shall retain that backup until the earlier of: |
(i) | the next *** commences; or |
(ii) | *** from the backup. |
(b) | If any Data in the *** Environment are corrupted or lost, or PG&E requests that Data be restored during a PG&E test cycle, SSN will take immediate steps to begin restoring Data from the most recent back-up. PG&E will specify the *** to use in restoring the Data, which will be consistent with the period for which backups are retained, as set out in Subsection 6.6(a). SSN will complete Data recovery: |
(i) | If Data restoration is required due to ***; or |
(ii) | If Data restoration is required due to ***. |
(c) | SSN will test the recovery functionality of the backup solution upon initial implementation and then on a *** and provide test plans and results to PG&E on these tests. |
6.13 | Backup of Lower Environments |
For each of the Lower Environments, SSN shall provide an operational backup or standby copy of the database at appropriate times, for example prior to upgrades to the environments, ***. Such backup or copy may be kept onsite or offsite.
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7. | SECURITY REQUIREMENTS |
7.1 | Security Policies. |
(a) | SSN shall comply with the PG&E information security policies and standards referenced in Attachment 1 hereto as applicable to SSNs Data Center Services, and the policies referred to in Schedule I of the Agreement (collectively, the Security Policies), as well as with any updates and supplements to them so long as PG&E provides *** days notice to SSN and ***. SSN agrees to take whatever remedial action may be required to cause the Data Center, the Services, and the Infrastructure Components under the control of SSN to remain compliant with the Security Policies. |
(b) | SSN acknowledges and agrees that the Security Policies shall apply to each environment in which any instance of the UtilityIQ System is hosted. |
(c) | ***, PG&E may perform a thorough security survey of SSN and its subcontractors from time to time. Following such review, PG&E may request additional security measures beyond those required by the Security Policies. SSN, and any relevant subcontractors, shall review such requests and either agree to comply or propose alternative methods of mitigation subject to approval by PG&E ***. In either case, the Parties will agree to appropriate commercial terms related to additional security measures, ***. |
(d) | PG&E reserves the right to perform additional on site assessments to verify the implementation of security controls in accordance with this Section 6.13. |
(e) | SSN will grant PG&E the requisite access to each Data Center in order to perform its routine information security monitoring activities, including ***, which may be provided by one or more third party agents to PG&E. |
(f) | SSN will cause its subcontractors to comply with the provisions of this Section 7. Nothwithstanding the foregoing, the parties agree that certain PG&E policies and standards listed in Section 2 of Attachment 1 are not relevant to SSNs subcontractors that are Data Centers; the relevant PG&E policies and standards are noted in that Attachment. |
(g) | SSN shall implement all material aspects of its adopted security policy relevant to SSNs obligations under this Schedule O by no later than ***. |
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(h) | ***. |
(i) | SSN (using its subcontractors when necessary) shall reasonably assist PG&E in its compliance efforts (and any related remediation projects) relative to emerging standards, regulations, risk management activities, and the following specific initiatives (all to the extent they materially impact any aspect of the Hosting Services): |
(i) | Cyber security; |
(ii) | Audit compliance; |
(iii) | NERC-CIP requirements; |
(iv) | IT asset management; |
(v) | NIST IR 7628 SmartGrid CyberSecurity Strategy and Requirements, and |
(vi) | FERC 2004 Order of Separation. |
(j) | SSN acknowledges the evolving nature of the foregoing requirements and initiatives and agrees to provide PG&E ongoing assistance as they evolve. *** |
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7.3 | Virus Protection. |
SSN shall install mutually agreed upon virus scanning software, update virus signature in a timely fashion and maintain secure configuration over time on all servers that send data to or are connected to the PG&E network.
7.4 | Penetration Testing. |
(a) | PG&E may carry out penetration testing of any environment that is part of the UtilityIQ System to identify and analyze any potential security vulnerabilities, hardware or software flaws or operational weaknesses in the UtilityIQ System; provided that it coordinates the conduct of such testing with SSN. |
(b) | In carrying out penetration testing, PG&E may: |
(i) | Use a third party contractor to perform the tests provided that such third party contractor has entered into a non-disclosure agreement with PG&E regarding the conduct and results of the penetration testing; and |
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(ii) | ***. |
(c) | SSN will cooperate with PG&E in planning and performing penetration testing, as well as in the prompt remediation of any vulnerabilities detected as a result of penetration testing. PG&E shall be entitled to perform penetration testing ***. |
7.5 | Security Breaches |
SSN will perform security monitoring and log events. SSN will advise PG&E *** if SSN becomes aware of any vulnerability or unauthorized access to any SSN systems used by PG&E or any other customer of SSN.
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(a) | Standalone Tests. SSN shall perform regular testing of *** capabilities and procedures approximately *** using test objectives approved by PG&E. PG&E will have the right to participate in and audit the *** tests and procedures. SSN shall provide PG&E with a written report of the test results, and shall perform problem resolution and retesting of unsuccessful test components in a timely manner. The timing of such testing will be subject to the prior written approval of PG&E and will be scheduled so as not to conflict with testing of new releases of the UtilityIQ Software being conducted in ***. |
(b) | Integrated Tests. SSN will schedule one of the semi-annual tests referred to in Subsection 9.1(a) to coincide with PG&Es *** walk-throughs and *** tests. SSN will participate in PG&Es test process. PG&E will give SSN reasonable notice of PG&Es testing schedule. |
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11. | ADDITIONAL TASK ORDERS |
PG&E may authorize SSN to perform additional and ancillary services in support of the Hosting Services by executing task orders in a form acceptable to both parties, subject to any applicable funding and approval limits as advised by PG&E from time to time. Services provided pursuant to a task order, when approved and executed by both parties, will be provided under and subject to the terms of this Schedule O except as specifically provided in the task order. Significant changes to the services and activities performed by SSN pursuant to this Statement of Work will be documented in a separate statement of work.
12. | DEFINITIONS |
Capitalized terms used and not otherwise defined herein will have the meanings set forth in the Agreement. In addition, the following definitions apply to this Schedule O:
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Amendment 6 Effective Date is defined in Amendment 6.
Back-haul means the wide area network between Access Points and the Data Center.
Billing Endpoint is defined in Subsection 8.5(a)(i).
Clearance Conditions means the PG&E announced window approved for maintenance.
Configuration Database is defined in Subsection 3.7(b)(ii).
Data means all information generated by the Field Network equipment and Endpoints for all data, analysis and reports generated from such information. Data includes, but is not limited to, Meter reads, Field Network status, and equipment configuration/status.
Data Center is defined in Subsection 6.2(a).
Data Center Services is defined in Subsection 1.1(e)(iii).
Deliver and Delivery of Data are defined in the Section entitled Definitions in Annex A-5.
*** Manager is defined in Section 9.3.
Discontinuance is defined in Subsection 2.2(f).
Discontinuance Date is defined in Subsection 2.2(d).
Endpoint means a Meter.
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Exclusions is defined in Subsection 8.9(a).
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Field Network means the RF Mesh Network being constructed by PG&E in the SmartMeter Project and includes Relays, Access Points and the Back-haul network. The Field Network does not include Meters, eBridges or sBridges. The Field Network communicates with the UtilityIQ System.
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Field Network Services is defined in Subsection 1.1(e)(ii).
Front-haul means the communications network between the Data Center and PG&Es other data centers.
Hosted Environments means the system environments that are hosted and supported by SSN pursuant to this Schedule from time to time. The Hosted Environments are identified in Table 1 in Subsection 1.1(d). The list of Hosted Environments may be updated by the Parties via Change Order from time to time. The Hosted Environments are comprised of Production Environments and the Non-Production Environments (*** and Lower Environments) as identified in the table in Section 1.1(d).
Hosting Services means any of the UIQ Management Services, the Field Network Services, the Data Center Services, and the *** Services to be provided by SSN pursuant to this Schedule, as described in Section 1.1(e).
Infrastructure Components means all of the hardware, software, facilities, communications links and tools forming part of, or used (i) to operate or manage the UtilityIQ System and, through it, (ii) to operate or manage the Field Network, and (iii) to communicate between the UtilityIQ System and PG&Es data centers. The Infrastructure Components include:
(a) | SSNs proprietary software products, as existing now and in the future, and as licensed to PG&E pursuant to the Agreement; |
(b) | The equipment used to operate and run the UtilityIQ System and products described in paragraph (a), including server equipment, data storage and peripherals; |
(c) | ***; |
(d) | ***; |
(e) | Relays; |
(f) | NICs, including onboard HAN interface; |
(g) | Firmware; |
(h) | Back-haul dedicated circuit(s) or *** to WAN Carrier ***; |
(i) | Fronthaul dedicated circuit(s) or *** to PG&E; and |
(j) | Data Center. |
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IT Change Management Process means the mutually agreed upon change management process that is set out in the document entitled PG&E Vendor Change Management Process Manual, SmartMeter IT Infrastructure (Silver Spring Networks).
***
Lower Environment means an Environment designated as such in the table in Section 1.1(d).
Neighborhood Area Network or NAN means the wireless network connectivity between Endpoints and Access Points. The NAN is also sometimes referred to as the LAN.
Non-Production Environment means an Environment designated as such in the table in Section 1.1(d).
OLA means the Operating Level Agreement.
Operational Targets is defined in Subsection 8.2(a).
Optimization or Optimize mean the process or set of actions described as such in Annex A-2, Section 2.1.
PG&E Areas means the location in the Data Center where PG&Es hardware is located.
PG&E *** Coordinator is defined in Section 9.3.
Preventive Maintenance means those activities performed by SSN which are necessary or desirable for the continuous provision of Hosting Services at their stated Service Levels, including, but not limited to, those activities which require the temporary cessation of one or more services.
Primary Hosting Data Center means the data center provided by SSN for Hosting Services for the Production Environment in accordance with this Schedule O.
Production Environment means the environment(s) designated as such in the table in Section 1.1(d).
Provisioned Endpoint is defined in Annex A-5.1.
Provisioned AP and Provisioned Relay means a network infrastructure device located in an area of the Field Network that is in an Active operational state within the UtilityIQ System.
Reachable is defined in Subsection 8.2(c).
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Resolved and Resolution is defined at Subsection 8.5(a)(iii).
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Security Policies is defined in Subsection.
Service Level means a measure of performance of the SmartMeter System and/or SSNs delivery of Services pursuant to this Schedule O, as specified in Section 8.
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System Change means any change that constitutes a modification of infrastructure, UtilityIQ Software, third party software, process or policy, including:
(a) | Configuration Management which includes modification to, addition or removal of, any of the Infrastructure Components within the UtilityIQ System, including servers, firewalls, Access Points, Relays or NIC components; |
(b) | Software Version Control which includes a change or modification to any applications, operating systems, firmware, databases, source code or features / functions of any application components within the UtilityIQ System that would constitute a version change; |
(c) | Process/Policy modifications which includes changes made to any operational or security policies and or processes associated with use and integration of the UtilityIQ System; and |
(d) | Configurable Settings which includes any parameter that may be configured or adjusted at the option of system users or administrators. |
Term is defined in Subsection 2.1(a).
Transition Plan is defined in Subsection 2.2(d).
Transition Planning is defined in Subsection 2.2(d).
Transition Services is defined in Subsection 2.2(h).
UIQ Management Services is defined in Subsection 1.1(e)(i).
Unreachable is defined at Subsection 8.5(a)(ii).
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UPS means uninterruptible power systems.
UtilityIQ Software means the object code version of the SSN software described in Annex A-7 to the Agreement and associated Documentation (each as may be updated from time to time), including UtilityIQ Software Upgrades.
UtilityIQ System means the implemented production system running the Software licensed to PG&E pursuant to the Agreement, including associated data, interfaces, databases, middleware, operating systems, network and storage infrastructure, peripherals, as well as all third party software (whether packaged or not) and hardware required to operate the foregoing.
UtilityIQ Software Upgrades means upgrades, updates and/or enhancements of the UtilityIQ Software as created or developed by or for SSN.
[End]
LIST OF ATTACHMENTS TO SCHEDULE O
Attachment 1 to Schedule O | Security Policies and Standards | |
Attachment 2 to Schedule O | Hosting and Management Fees | |
Attachment 3 to Schedule O | Operating Level Agreement (OLA) | |
Attachment 4 to Schedule O | *** |
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Schedule O (Hosting and Managed Services)
Attachment 1 PG&E Information Security Policies and Standards
Section 1. PG&E security configuration manuals.
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SmartMeter Upgrade Supply Agreement
Amendment 6
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PG&E and SSN Confidential | Schedule O | |||
Page 66 | (Amendment 6 Restatement) |
Attachment 2 to Schedule O - One Time Charges
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Description |
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Period Covered |
One Time Charges |
Notes | |||||||
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Schedule O Attachment 2 (Pricing Tables) |
PG&E and SSN Confidential Page 1 |
ATTACHMENT 3
To Schedule O
Attachment 3
To Schedule O
(Amendment 6)
Information Systems
Technology Services (ISTS)
SmartMeter Service Ticket Management
Operating Level Agreement
SmartMeter IT Infrastructure
Silver Spring Networks (SSN)
PG&E and Silver Spring Networks Confidential Information
For use by Authorized Persons Only
Page 1 of 23 Attachment 3 To Schedule O (Amendment 6) |
Legal Notices
NOTIFICATION: Pacific Gas and Electric Co. (hereafter referred to as PG&E) practices as described in this document are intended for PG&E personnel. An authorized PG&E representative must expressly approve any conflicting interpretation or deviation(s) from this document for special applications. PG&E reserves the right to enhance or modify these in the pursuit of better business practices.
NOTICE OF COPYRIGHT: Copyright 2008 by Pacific Gas and Electric Co. as an unpublished work. All rights reserved. In claiming any copyright protection that might be applicable, PG&E reserves and does not waive any other rights it may have (by agreement, statutory or common law, or otherwise) with respect to this material. See Notice of Proprietary Rights.
NOTICE OF PROPRIETARY RIGHTS: This manual and the material on which it is recorded is the property of PG&E. Its use, reproduction, transfer, and/or disclosure to others, in this or any other form is prohibited except as permitted by a written License Agreement from PG&E.
TRADEMARKS: All company and product names in this document may be trademarks of the company with which they are associated.
Document Classification
Documentation Classification |
PG&E and SSN CONFIDENTIAL For PG&E and SSN Internal Use by Authorized Personnel. |
Trademark Information
Registered Trademarks |
ITIL ® is a Registered Trade Mark and a Community Trade Mark of the Office of Government Commerce |
© 1985-2004 The Committee of Sponsoring Organizations of the Treadway Commission, COSO |
All trademarks used or referred to in this document are the property of their respective owners> |
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Page 2 of 23 Attachment 3 To Schedule O (Amendment 6) |
Document Control
SmartMeter Process Manual Change Record
Date |
Author/ |
Description of |
Approved By Owner |
Approval Date |
Communication |
Version | ||||||
February 2010 |
Original version incorporated into Schedule O via Amendment 6 | 1.0 |
Revisions
Note: The latest Version in the change record must be entered on the title page under Document Version Number.
All changes to this document must be approved by PG&E and SSNs Document Sponsors listed below (or their replacements as notified by either party from time to time) and, when approved, recorded in the change record above using the following standards:
1. | A major change will be recorded as a first digit change: 1.0. |
2. | A minor change will be recorded as a second digit change: 0.1 |
3. | Changes made to the document after sign off will be in red until the next sign off. |
Document Sponsors
If a document sponsor is unavailable then whoever is designed by them to act in their place can also act with respect to this document.
Sponsor |
Contact Information | |
*** | *** | |
*** | *** | |
*** | *** | |
*** | *** |
Annual Review Record
The system owner and business owner must review this document annually, anytime between January 1 and December 31.
System Owner Annual Review Date |
System Owner Name |
Business Owner Annual Review Date |
Business Owner Name | |||
IT Operations | , Business Operations |
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Page 3 of 23 Attachment 3 To Schedule O (Amendment 6) |
TABLE OF CONTENTS
1. | DOCUMENT SUMMARY | 5 | ||||||||
1.1 | Purpose | 5 | ||||||||
1.2 | Document Governance and Contractual Status | 5 | ||||||||
1.3 | Contacts | 5 | ||||||||
1.4 | Internal PG&E Documents and References | 6 | ||||||||
1.5 | SmartMeter System Overview | 7 | ||||||||
2. | SERVICE TICKET MANAGEMENT REQUIREMENTS | 8 | ||||||||
2.1 | What Infrastructure and Software Is Covered? | 8 | ||||||||
2.2 | What Tickets are Covered? | 8 | ||||||||
2.3 | Overview of Ticket Management Process | 8 | ||||||||
2.4 | Ticket Response and Resolution | 10 | ||||||||
2.5 | How are Ticket Priority Levels Determined? | 14 | ||||||||
2.6 | How are Tickets Generated? | 15 | ||||||||
2.7 | How Are Security Related Incidents Handled? | 16 | ||||||||
2.8 | What are SSNs Ticket Management Responsibilities? | 16 | ||||||||
2.9 | Problem Management | 17 | ||||||||
2.10 | Escalation Procedures Priority 1 and 2 Tickets | 18 | ||||||||
3. | TICKET MANAGEMENT PROCESSES | 18 | ||||||||
3.1 | Ticket Management Process Flow | 18 | ||||||||
3.2 | Defect Remediation - Overview | 21 | ||||||||
4. | DEFINITIONS | 22 |
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Page 4 of 23 Attachment 3 To Schedule O (Amendment 6) |
1. | DOCUMENT SUMMARY |
1.1 | Purpose |
This Operating Level Agreement (the OLA) presents the requirements and processes for the management, tracking, resolution and reporting of Incidents, Service Requests and Tech Support Requests, with respect to the IT systems and operating environments of the PG&E SmartMeter System that are provided and/or hosted by SSN.
These requirements and processes form part of PG&Es over-arching incident and service ticket management process, which is referred to in this OLA as the Ticket Management Process.
The processes in this document may result in a need for change management. Change management documentation for SSN and PG&E environments can be found in the references. A familiarity with all of the referenced documents is necessary to ensure a complete understanding of requirements and processes related to Incident Reporting, Defect Reporting and the Change Management Process.
1.2 | Document Governance and Contractual Status |
Changes to this document require review and approval by PG&E and SSN Vendor Change Representatives. The Change Representative will determine whether a change or update is significant enough to require additional approval by others within their respective management hierarchies. If so they will obtain approval of the Document Owners. Sign off may be done by getting an approval e-mail from each listed Owner.
Contacts will be referred to by position or title within the main body of this document. Contact lists giving current contact information is allowed within the Appendix and may be updated without following a full approval process.
This document is intended to be an operational tool. Compliance with Version 1.5 of this document is also mandatory because this Version (and subsequent approved versions and updates) have been incorporated into the SmartMeter Program Upgrade Supply Agreement between PG&E and SSN (refer to Amendment No. 6 and amended and restated Schedule O).
1.3 | Contacts |
Contact information can be found in Appendix 4.1, 4.2, and 4.3.
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Page 5 of 23 Attachment 3 To Schedule O (Amendment 6) |
1.4 | Internal PG&E Documents and References |
Name |
Document Location / Tracking | |
Change Management Process Manual SmartMeter IT Infrastructure | As provided to SSN by PG&E from time to time | |
PG&E Vendor Change Management Process Manual | As provided to SSN by PG&E from time to time | |
PG&E SSN Hosting Contract Schedule O
Production Hosting Services |
Each party has its own copy of the executed Schedule. | |
ISTS Information Security Incident Response Plan | ||
Incident Response Team/Incident Management Team Procedures | As provided to SSN by PG&E from time to time |
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Page 6 of 23 Attachment 3 To Schedule O (Amendment 6) |
1.5 | SmartMeter System Overview |
Understanding the SSN PG&E Process for Ticket Management Process begins with a basic understanding of the SmartMeter System and of the PG&E incident and service ticket management process. The jointly managed process is tailored to provide the required input to the PG&E internal process allowing PG&E to fulfill the stewardship required of it while allowing SSN to have a more efficient process to handle incidents and service requests.
Silver Springs Network (SSN) provides a RF-based AMI system. It has Access Points as part of a Wide Area Network (WAN). Each WAN routes data for a wireless Neighborhood Area Network (NAN) comprised of SSN relays and electricity meters. Note: Figure 1 below represents existing 3.6.1 architecture. Architecture will be updated over time to meet capacity and software requirements.
Figure 1.
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Page 7 of 23 Attachment 3 To Schedule O (Amendment 6) |
2. | SERVICE TICKET MANAGEMENT REQUIREMENTS |
2.1 | What Infrastructure and Software Is Covered? |
This OLA applies to:
| The production and non-production hardware, software and services that are included in the hosting and management services provided by SSN pursuant to Schedule O; and |
| all Software that is subject to the maintenance and support obligations in Schedule H. |
2.2 | What Tickets are Covered? |
The Ticket Management Process encompasses the following types of incidents and requests:
| Incident Reports relating to the unplanned loss or degradation of service of an Infrastructure Component. The evaluation and resolution of an Incident may include a determination that the Incident is the result of a Defect in SSN Software, in which case the requirements of Schedule H (Software Maintenance and Support) will govern the correction of the Defect within the overarching Ticket Management Process as more fully explained below. |
| Service Requests minor discretionary changes to Software, hardware or services that may be requested by PG&E, such as an access-related request (new user setup, password resets, etc) and minor changes to the composition and timing of system generated reports. Significant discretionary changes (major software enhancements, etc) must follow the Change Control process and are not covered by the Ticket Management Process. |
| Tech Support Requests Requests for technical support and assistance from PG&E pursuant to Schedule H, such as how to use the Software and interfaces developed by SSN as necessary for the operation, maintenance, support and enhancement of PG&Es SmartMeter System provided by SSN. |
Each Incident Report, Service Request and Tech Support Request opened either by PG&E or SSN is referred to as a Ticket.
2.3 | Overview of Ticket Management Process |
(a) | The primary goals of the Ticket Management Process are: |
(i) | For Incident Reports, to resolve each Incident so that service functionality and security is restored and to mitigate the effects of the Incident, consistent with the priority or severity level assigned to that Incident. Secondary goals are to |
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Page 8 of 23 Attachment 3 To Schedule O (Amendment 6) |
document the Incident as well as the remedial and/or preventive measures taken to prevent or minimize the likelihood of reoccurrence of the Incident. |
(ii) | For Service Requests, to successfully complete the request within the required resolution time frame. |
(iii) | For Tech Support Requests, to successfully complete the request within the required resolution time frame. |
(b) | Tickets will be handled in the following manner: |
(i) | The Ticket is opened by SSN as described in Section 2.8. |
(ii) | A priority is assigned by PG&E based on the potential impact if the incident or request goes unresolved and may be based upon business urgency. Priority levels are identified in Table A below and are more fully described in Section 2.5. PG&E may propose changes to the priority designation of a Ticket at any time, so long as that change is consistent with the priority levels stated in this OLA, by providing notice of the change to SSN. Notification must be given by the PG&E representatives identified in the notification table in Section 3.1. If SSN disagrees with the Priority level assigned to a Ticket, or if SSN believes that a Ticket should not be opened in SSNs system, it may escalate the Ticket to one of PG&Es Designated Representatives (see Section 3.1). In order to change a Ticket priority level to P1 or P2 PG&E also must contact SSN by telephone or in person to confirm that SSN is aware of this change. |
(iii) | Acknowledgement is made by SSN within the required response times (Table 2) based upon priority. For areas within its responsibility, SSN will be responsible for Resolving the Incident or Request. This includes: |
(1) | Completing Resolution activities, which will include implementing workarounds as necessary to restore service as soon as possible pending implementation of a permanent fix. |
(2) | Determining whether the Incident or Request is caused by a Defect, in which case Defect resolution must be performed by SSN in accordance with the requirements of Schedule H. Note that Schedule H assigns Severity Levels to Defects based on the criteria described in that document; Severity Levels and response/resolution times may be different to the Priority Level assigned to the underlying Incident Report or Service Request as part of the Ticket Management Process. Note also that Defect resolution under Schedule H should proceed in parallel with the implementation of a workaround wherever appropriate to re-establish service as soon as practicable. |
(3) | Responding to and resolving any non-Defect related Service Requests and Tech Support Requests in accordance with this OLA. |
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Page 9 of 23 Attachment 3 To Schedule O (Amendment 6) |
(4) | Escalating and managing the resolution of Tickets with third party suppliers within SSNs area of responsibility (e.g., third party software and equipment suppliers) and referring field repair Tickets back to PG&E for dispatch. |
(iv) | Updates are provided by SSN within the required timeframes (Table A) as to the status of each incident or request and its resolution. Resolution of non-Defect related incidents and requests is performed by SSN within the required timeframes shown in Section 2.1. SSN will report its performance against the parameters set forth in Table A on a weekly basis, as more fully described in Section 2.12. |
(v) | If an Incident Ticket is Resolved via a temporary workaround or repair that is acceptable to PG&E without resolving the underlying root cause, the Ticket will be closed and a new Ticket (a Problem Ticket) will be opened and linked to the original Incident Ticket. The Problem Ticket will be assigned a Priority level consistent with the importance of the root cause remediation effort. |
(vi) | After Resolution, a Ticket will be marked as Resolved but will not be closed until PG&E has confirmed that Resolution has been completed. |
2.4 | Ticket Response and Resolution |
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Page 10 of 23 Attachment 3 To Schedule O (Amendment 6) |
Table A Ticket Response and Resolution
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(c) | By way of explanation of Table A: |
(i) | SSN and PG&E will work continuously to Resolve all Priority 1 incidents during the periods of required availability as shown in Table A. |
(ii) | SSN personnel will be available via telephone or email contact from *** each week, excluding SSN holidays, to work on all P2, P3 & P4 Tickets. SSN will provide a list of its holidays to PG&E annually in advance. SSN will provide support during all other hours through automated monitors maintained by SSN, and during these hours PG&E will have the ability to contact SSN personnel by a mutually agreed upon mechanism and receive a response in accordance with the timeframes set out in Table A above. |
1 | If an Incident involves a Software Defect that must be resolved pursuant to Schedule H, SSNs responsibility under the OLA is to either Resolve the Defect or implement a workaround (if practicable) during this Target Resolution Time. The Incident Ticket may be closed once the workaround is implemented. If a workaround cannot reasonably be implemented within the Target Resolution Time, the Incident Ticket will remain open but will be suspended (for purposes of calculating the Tickets resolution time) until the Defect is resolved in accordance with Schedule H. [Example: ***.] |
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Page 11 of 23 Attachment 3 To Schedule O (Amendment 6) |
(d) | PG&E may request, and SSN will provide, additional support as follows, at no additional charge: |
(i) | SSN and PG&E personnel will be available to attend war room/SWAT meetings as needed (and remotely if required). |
(ii) | When required by PG&Es IT Coordination Center or during PG&E distribution outages, Infrastructure Component maintenance, Field Network firmware upgrades, SSN and PG&E personnel will be available 24x7x365 to continuously work on and Resolve P1 and P2 Incidents and Service Requests. |
(iii) | If requested by PG&E with reasonable advance notice, SSN will provide heightened support in readiness for storms and other events that are expected to have a significant impact on PG&Es operations. |
(iv) | PG&E may schedule, and SSN will use commercially reasonable efforts to provide applicable operational support for, PG&E testing and maintenance activities and Service Requests on weekends and/or outside regular SSN business hours to minimize the operational impact of those activities on PG&Es operations. |
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* | ** | * | ** | * | ** | * | ** | * | ** | * | ** | ||||||||||||
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* | ** | * | ** | * | ** | * | ** | * | ** | * | ** | ||||||||||||
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* | ** | * | ** | * | ** | * | ** | * | ** | * | ** | ||||||||||||
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Page 12 of 23 Attachment 3 To Schedule O (Amendment 6) |
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* | ** | * | ** |
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* | ** | * | ** | * | ** | * | ** | * | ** | * | ** | ||||||||||||
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(f) | The time taken by SSN to respond and Resolve a Ticket will be measured from the earlier of: |
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(g) | Time taken to respond and Resolve a Ticket will exclude: |
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Page 13 of 23 Attachment 3 To Schedule O (Amendment 6) |
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2.5 | How are Ticket Priority Levels Determined? |
(a) | PG&E will determine the Priority level of each Ticket at the time when the Ticket is opened. PG&E may revise a Priority level after the level is initially assigned based on changed business circumstances or a better understanding of the impact of the Ticket on its business operations. A Priority change must be approved by one of the PG&E notification representatives identified in Section 3.1 or their replacement. |
(b) | Generally, PG&E will assign Priority levels using the following parameters: |
Priority Level |
Parameters | |
1 | ***
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2 | ***
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Page 14 of 23 Attachment 3 To Schedule O (Amendment 6) |
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3 | ***
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4 | ***
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Note: Non Production Systems are the ***, ***, Pilot, Integration and *** environments.
2.6 | How are Tickets Generated? |
(a) | Incident Reports, Service Requests, and Tech Support Requests may originate as follows: |
(i) | Incident Reports and Defects: Discovery of an incident or defect may be made by either PG&E or SSN in either PG&E or SSN hosted infrastructure. In some cases corrective work may be required in both environments. In all cases joint system testing will be required. |
(ii) | Service requests and tech support requests: Service requests and tech support requests will only be made by designated representatives of PG&E. SSN will not accept Requests from non-designated PG&E personnel unless directed to do so by a PG&E designated representative. The designated representative(s) will be advised to SSN in writing by PG&E and updated in writing from time to time. |
(iii) | A Ticket must be created for each Incident Report, Service Request and Tech Support Request as described in Section 2.8. A flow diagram illustrating the Ticket management process is shown and explained further in Section 3.1. |
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Page 15 of 23 Attachment 3 To Schedule O (Amendment 6) |
(b) | SSN shall provide and maintain a Ticketing system and support site that provides real-time Ticket creation, management and status tracking functionality to support the processes described in this OLA. |
(c) | Reporting from this Ticketing system will be developed progressively with PG&E input and will be finalized to meet the automated reporting requirements of this OLA no later than *** days after execution of this amendment. Prior to that date reporting will be primarily manual or via data dumps in a form acceptable to PG&E. |
2.7 | How Are Security Related Incidents Handled? |
In addition to the product support type Incidents defined in this document, PG&E also has Security Incident Response Policies that address any events or circumstances that significantly affect the confidentiality, integrity, or availability of PG&E information assets. SSN will immediately report and respond to all security-related incidents related to PG&E assets as described in the security Incident policies and plans referenced in Section 1.5. The PG&E Information Security (InfoSec) group is responsible for primary support for information security incidents. This may result in an Incident ticket being opened by PG&E for action by SSN if Infrastructure Components are implicated.
2.8 | What are SSNs Ticket Management Responsibilities? |
SSN is responsible for the following in support of PG&Es Ticket Management Process:
(a) | Overall Responsibilities. Providing centralized ticket management of Incident, Service Request and Tech Support Request Tickets assigned to SSN using a Ticket management methodology and a ticketing tool that satisfy each of the following requirements: |
(i) | Methodological alignment with the current version of ITIL. |
(ii) | A published Ticket Reporting manual reflecting SSNs approach and enabling tools; |
(iii) | Continuous coordination with PG&Es IT service desk, including the ability for PG&E to have read mode access to SSNs Ticketing platform (or to a portal interface for the same) in order to observe SSNs activities relative to the recording, assignment, tracking, escalation of Tickets. |
(iv) | On-demand access to standardized current and historical reports on PG&E Tickets, with information on current status, the overall ticket queue, and response and resolution times for each Priority level. |
(b) | Implementation and maintenance of processes under which a single SSN point of contact is assigned end-to-end responsibility for managing the resolution of each Ticket; |
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Page 16 of 23 Attachment 3 To Schedule O (Amendment 6) |
(c) | Provision, operation, maintenance and administration of a single Ticket tracking and management tool (the Ticket Management System); |
(d) | Management and tracking of Tickets to closure or Resolution, as applicable; |
(e) | Establishment and maintenance of staff support teams and escalation points for PG&E within SSN; |
(f) | Logging of Ticket requests into the Ticket Management System upon receipt from an authorized PG&E representative, automated alarm or other source; |
(g) | Providing to PG&E, maintaining and regularly updating the Documentation describing SSNs Ticketing review and reporting procedures; |
(h) | Collecting and reporting Ticket metrics to PG&E on a monthly basis, in electronic form, including the following: |
(i) | Ticket aging report (by priority level and by age, as approved by PG&E); and |
(ii) | The metrics described in Section 2.4(d) ***. |
(i) | Ensuring that the SSN Personnel providing support are experienced in the installation and deployment of the SmartMeter System and familiar with the Products and Services provided under the Agreement. PG&E may request that SSN Personnel providing technical support be included in the list of *** set out in Schedule Q (Approved Subcontractors and Key Personnel), and subject to the provisions of Section 26.2 of the Agreement (***). |
(j) | SSN will provide PG&E electronic access to SSNs Ticketing system and support site that enables PG&E to open Tickets. The support site must enable PG&E to review Ticket status and obtain consolidated Ticket reports. Until such support site is implemented, PG&E may open Tickets by telephone or e-mail, and SSN will use its internal tools to open, track and report concerning Tickets. SSN will update the status of PG&Es open Tickets weekly in the internal tool or the future support site, whichever tool/site is the currently available problem ticket system. |
(k) | Third Party Software. In connection with third party software that is required to run the UtilityIQ System, SSN will coordinate its Ticket response and problem management efforts with relevant third parties, and will assist with: |
(i) | Patch installation and migration (including the preparation of related test plans and patch testing results); |
(ii) | Root cause analyses; and |
(iii) | System configuration in preparation or following patch testing or patch installation. |
2.9 | Problem Management |
(a) | For each Priority 1 and Priority 2 Incident that is within SSNs responsibility, SSN will analyze and report as follows: |
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Page 17 of 23 Attachment 3 To Schedule O (Amendment 6) |
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(b) | In some cases and as an exception, SSN may not be able to provide a root cause analysis (for example, in the case of a one-time Incident that cannot be replicated). In this case the parties will mutually agree that a root cause analysis will not be provided. |
(c) | For Priority 3 Tickets, SSN will *** |
2.10 | Escalation Procedures Priority 1 and 2 Tickets |
(a) | If a Priority 1 Ticket is not responded to within the targeted response timeframe, the Ticket is automatically escalated within SSN as follows: |
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(b) | If a Priority 2 Ticket is not responded to within the targeted response timeframe, the Ticket is automatically escalated as follows: |
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3. | TICKET MANAGEMENT PROCESSES |
3.1 | Ticket Management Process Flow |
The Ticket Management process flow is summarized in the following flowchart:
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Page 18 of 23 Attachment 3 To Schedule O (Amendment 6) |
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Page 19 of 23 Attachment 3 To Schedule O (Amendment 6) |
The above flowchart is explained further in the following table:
Step |
Description | |
1. | *** | |
2. | ***
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3. | ***
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*** | *** | |
*** | *** |
4. | *** | |
5. | *** | |
6. | *** |
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Page 20 of 23 Attachment 3 To Schedule O (Amendment 6) |
Step |
Description | |
*** | ||
8. | *** | |
9. | ***
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Notification (via phone and email) in accordance with the above flow diagram will be to the following individuals (Designated Representatives). This table may be updated by the parties as required to reflect changes in responsibilities and staffing.
Designated Representatives | ||||||||
*** | *** | *** | *** | |||||
*** | *** | *** | *** | *** | ||||
*** | *** | *** | *** | *** | ||||
*** | *** | *** | *** | *** |
3.2 | Defect Remediation - Overview |
Defects must be addressed in accordance with Schedule H. The following chart illustrates the process that PG&E follows to track and manage Defects. SSN is responsible for supporting PG&E in the management of this process, consistent with SSNs obligations in Schedule H.
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Page 21 of 23 Attachment 3 To Schedule O (Amendment 6) |
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4. | DEFINITIONS |
Defect is a term used specifically in connection with SSN Software and is defined in Schedule H. In summary, a Defect is any failure of the Software to conform to and perform in accordance with its Documentation or the Product Description, or any warranty given by SSN.
Incident means a problem with SSN Software or any other system component for which SSN is responsible for monitoring, management and support under the Agreement.
Incident Report Means a verbal, electronic or written communication from PG&E to SSN or within SSN reporting an Incident to SSNs support desk. An Incident Report Ticket will identify the Incident and specify the Priority level assigned to it by PG&E.
Problem Ticket means a ticket opened to address the root cause of an Incident after the Incident is Resolved, as more fully described in Section 2.3(b)(v).
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Page 22 of 23 Attachment 3 To Schedule O (Amendment 6) |
Respond means to take the following steps: (i) open a Ticket for that item with the relevant information in SSNs Ticket Management System; (ii) assign the Ticket to an individual; and (iii) confirm to PG&E that the Ticket has been received and has been assigned to an individual for resolution.
Resolve means:
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Service Request or SR means a verbal, electronic or written communication from PG&E to SSNs support desk requesting minor discretionary changes to Software, hardware or services. Service Requests do not relate to Incidents. A Service Request Ticket will specify the Priority level assigned to it by PG&E.
Tech Support Request means a verbal, electronic or written communication from PG&E to SSNs support desk requesting technical support and assistance from SSN with respect to SSN Software as part of the Software support services under Schedule H. Tech Support Requests do not relate to Incidents.
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Page 23 of 23 Attachment 3 To Schedule O (Amendment 6) |
Attachment 4 to Schedule O - Summary
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Schedule O Attachment 4 | Page 1 of 1 |
SmartMeter Upgrade Project Supply Agreement (SSN)
ATTACHMENT 2
Annex A-5
(Amendment 6 Restatement)
PG&E and SSN Confidential | Attachment 2 Annex A-5 | |||
(Amendment 6 Restatement) |
SmartMeter Upgrade Project Supply Agreement (SSN)
Table of Contents
Page | ||||||
1. | DEFINITIONS | 2 | ||||
2. | FUNCTIONAL REQUIREMENTS | 2 | ||||
2.1 Interval Reads |
2 | |||||
2.2 Anchor Reads |
3 | |||||
2.3 [Reserved] |
4 | |||||
2.4 Recovered Data |
4 | |||||
3. | EXCLUSIONS | 4 |
PG&E and SSN Confidential | Attachment 2 Annex A-5 | |||
(Amendment 6 Restatement) |
SmartMeter Upgrade Project Supply Agreement (SSN)
Schedule A
Annex A-5 Functional Requirements and Product Roadmap1
(a) | This Annex A-5, together with Attachment A-5.1 (SmartMeter System Performance Standards) and Attachment A-5.2 (Functional Requirements Table) sets forth: |
(i) | certain technical, operational and functional requirements for the Products, including requirements that are *** (collectively, these technical, operational and functional requirements for the Products are referred to as the Functional Requirements); and |
(ii) | additional features and functionality that the Parties ***. |
(b) | Exhibit 3 (PG&E SmartMeter System Level Requirements) to the Agreement sets forth the system-level requirements for the SmartMeter System that have been used to develop the Functional Requirements for the Products that are set forth in this Annex A-5. Exhibit 3 is attached for informational purposes only. |
(c) | In the column headed Timing in Attachment A-5.2 (Functional Requirements Table), if where a date after 2008 is noted, the Products delivered to PG&E after that date must comply with the related timing requirement. |
(d) | The column headed Exhibit 3 Reference in Attachment A-5.2 (Functional Requirements Table) provides a cross-reference to the relevant section of Exhibit 3 (PG&E SmartMeter System Level Requirements). |
1 | Annex A-5 and its attachments have been amended and restated pursuant to Amendment No. 6. |
PG&E and SSN Confidential | Attachment 2 Annex A-5 | |||
Page 1 | (Amendment 6 Restatement) |
SmartMeter Upgrade Project Supply Agreement (SSN)
Annex A-5
SSN Compliance Statement
Attachment A-5.1
SmartMeter System Data Delivery Requirements2
This Attachment sets out the Functional Requirements pertaining to the timely and complete delivery of metering data when the SmartMeter System has been installed in accordance with SSNs network design.
The following Functional Requirements apply to each I*** (Statement of Work), Section 2.1(k).
1. | DEFINITIONS |
For the purposes of this Annex A-5.1:
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2. | FUNCTIONAL REQUIREMENTS |
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2 | Amended and Restated pursuant to Amendment 6. |
PG&E and SSN Confidential | Attachment 2 Annex A-5 | |||
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SmartMeter Upgrade Project Supply Agreement (SSN)
Annex A-5 Functional Requirements and Product Roadmap
Attachment A-5.1 Performance Standards
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SmartMeter Upgrade Project Supply Agreement (SSN)
Annex A-5 Functional Requirements and Product Roadmap
Attachment A-5.1 Performance Standards
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3. | EXCLUSIONS |
PG&E and SSN Confidential | Attachment 2 Annex A-5 | |||
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SmartMeter Upgrade Project Supply Agreement (SSN)
Annex A-5 Functional Requirements and Product Roadmap
Attachment A-5.1 Performance Standards
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SmartMeter Upgrade Project Supply Agreement (SSN)
Annex A-5 Functional Requirements and Product Roadmap
Attachment A-5.1 Performance Standards
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Page 6 | (Amendment 6 Restatement) |
SmartMeter Upgrade Project Supply Agreement (SSN)
Annex A-5 Functional Requirements and Product Roadmap
Attachment A-5.1 Performance Standards
Annex A-5
SSN Compliance Statement
Attachment A-5.2
Functional Requirements Table4
[Refer to separate spreadsheet]
4 | Amended and Restated pursuant to Amendment 6. |
PG&E and SSN Confidential | Attachment 2 Annex A-5 | |||
Page 7 | (Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN)
ATTACHMENT 3
Annex A-2
(Amendment 6 Restatement)
PG&E and SSN Confidential | Attachment 3 | |||
Annex A-2 | ||||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
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Annex A-2
Statement of Work
Amended and Restated pursuant to Amendment No. 6
PG&E and SSN Confidential | Attachment 3 | |||
Page 1 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
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Table of Contents
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1. TASK 1 - PROJECT MANAGEMENT |
4 | |||||||
1.1 | SSN Responsibilities | 4 | ||||||
1.2 | PG&E Responsibilities | 4 | ||||||
2. TASK 2 - NETWORK DESIGN AND OPTIMIZATION |
4 | |||||||
2.1 | SSN Responsibilities | 4 | ||||||
2.2 | Design Process | 5 | ||||||
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3. TASK 3 FIELD DEPLOYMENT |
15 | |||||||
3.1 | Task 3.1 General Field Deployment Responsibilities | 15 | ||||||
*** | *** | |||||||
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4. TASK 4 UIQ HOSTING |
23 | |||||||
5. TASK 5 - SYSTEM INTEGRATION |
23 | |||||||
5.1 | SSN Responsibilities | 23 | ||||||
5.2 | PG&E Responsibilities | 25 | ||||||
6. TASK 6 TESTING |
26 | |||||||
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7. TASK 7- TECHNICAL SUPPORT SERVICES AND TRAINING |
30 | |||||||
7.1 | Task 7.1 Technical Support Services | 30 | ||||||
7.2 | Task 7.2 Training | 30 | ||||||
8. |
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*** | *** | |||||||
9. *** |
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10. ADDITIONAL TASK ORDERS |
32 | |||||||
11. CHARGES |
32 |
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SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
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OVERVIEW
(a) | This Statement of Work is a description of certain work performed or to be performed1 under the SmartMeter Program Upgrade Supply Agreement (the Agreement) between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks (SSN) related to SmartMeter Upgrade Project network design, deployment, optimization, integration, testing and ongoing support. For clarity, certain SmartMeter Upgrade Project hosting services are described in Schedule O to the Agreement. |
(b) | This Statement of Work specifies the work to be provided by SSN for PG&E and it defines each Partys roles and responsibilities. |
(c) | SSN shall supply all necessary management, supervision, personnel, equipment, materials, tools, products, services, supplies, licenses and on-site support to deliver the Products and Services as set forth in this Statement of Work and in the Agreement. |
(d) | The network access points (Access Points) and relays (Relays) provided by SSN, including all associated attachments, features, accessories and peripheral devices, and other tangible components of such Access Points and Relays, as such units are described in Annex A-7 (List of SSN Products and Product Tools) (the Network Equipment) shall be scalable to support growth in the customer base through the purchase by PG&E of more Access Points, Relays and Software, as necessary, to support at least ***Meters. If more than *** Meters are deployed, refer to section 2.4 of this Annex A-2 and section 10.2 of Schedule O. |
(e) | During the SmartMeter Project, SSN shall allow and accommodate the presence of PG&E personnel at SSNs and subcontractors facilities, upon reasonable prior notice from PG&E. PG&E personnel will work at these facilities and perform QA audits and inspections in accordance with the Agreement. |
(f) | Exhibit 1 to this Statement of Work is a chart showing field network deployment activities before optimization (the Deployment Activities Chart). The Parties refer to the Deployment Activities Chart throughout this Statement of Work to clarify the sequence of deployment activities and the dependencies between deployment activities. If there is any conflict between a provision of this Statement of Work and the corresponding descriptions in the Deployment Activities Chart, the provision of this Statement of Work will have precedence. |
1 | In preparing Amendment No. 6, the parties did not attempt to update all of the Sections of this Annex A-2 to identify completed, ongoing and future activities. Consequently, this Annex A-2 describes all of the services to be provided by SSN after the Effective Date of the Agreement (i.e. after July 23, 2008) as subsequently modified by amendments up to and including Amendment 6, including certain services that have been completed prior to the Amendment 6 Effective Date. |
PG&E and SSN Confidential | Attachment 3 | |||
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(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
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(g) | This Annex A-2 is amended and restated pursuant to Amendment No. 6 to the Agreement. |
1. | TASK 1 - PROJECT MANAGEMENT |
1.1 | SSN Responsibilities |
The following project management tasks will be performed by SSN during the Deployment Period:
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2. | TASK 2 - NETWORK DESIGN AND OPTIMIZATION |
2.1 | SSN Responsibilities |
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SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
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3. | TASK 3 FIELD DEPLOYMENT |
3.1 | Task 3.1 General Field Deployment Responsibilities |
(a) | SSN Responsibilities |
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SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
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(b) | PG&E Responsibilities |
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SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
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3.2 | Task 3.2 Network Installation for initial Deployment Areas to be Completed |
The initial deployment areas to be completed are ***
(a) | SSN Responsibilities |
SSN may provide one or more of the following *** tasks for this phase:
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PG&E and SSN Confidential | Attachment 3 | |||
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SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
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(b) | PG&E Responsibilities |
***
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***
(c) | Fees for Task 3.2 |
(i) | The fees for the Services provided under this Task 3.2 are set forth in the Table 6 of Annex B-1 (Pricing Tables). |
PG&E and SSN Confidential | Attachment 3 | |||
Page 19 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
3.3 | Task 3.1.1 Deployment Support for MV-90 Replacement Project3 |
(a) | Task 3.1.1.1 - Project Management |
(i) | SSN will provide *** months of project management services as outlined in Task 1 of this Annex A-2. PG&E responsibilities are also assumed to be consistent with Task 1. |
(b) | Task 3.1.1.2 - Network Design |
(i) | SSN will ***. *** |
(ii) | SSN will also *** consistent with Section 2.2(e). of this Annex A-2. *** PG&E responsibilities are assumed to be consistent with those listed in Section 2. |
(c) | Task 3.1.1.3 Field Deployment |
(i) | SSN will provide guidelines to assist PG&E in minimizing the number of site visits. These guidelines will include ***. |
(ii) | As PG&E completes the network and meter deployment, SSN will provide field troubleshooting, for a ***-month duration, in the following steps: |
(1) | *** |
***
***
3 | Task 3.1.1 inserted pursuant to Amendment #8. |
PG&E and SSN Confidential | Attachment 3 | |||
Page 20 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
***
(iii) | Assumptions |
***
***
***
(d) | Task 3.1.1.4 Network Operations Center Support |
(i) | The SSN Network Operations Center (NOC) will provision a maximum of *** devices during the network installation period. |
(ii) | The SSN NOC will also perform ***. |
(e) | Schedule |
(i) | The following is the schedule for Task 3.1.1. Any change to this schedule is considered out of scope. |
(1) | `Network Design Completed: *** |
(2) | Site Survey: *** |
(3) | Network Installation: *** |
(4) | Meter Deployment *** |
(5) | SSN acknowledges that all Task 3.1.1 work is to be completed on or before ***. |
(f) | Network Equipment Assumptions |
Appendix A (Task 3.1.1 - MV-90 Replacement Project Network Equipment Assumptions) to this Annex A-2 shows the network equipment assumptions for Task 3.1.1.
PG&E and SSN Confidential | Attachment 3 | |||
Page 21 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
(g) | General Assumptions |
***
***
***
***
(iii) | Appendix B (Task 3.1.1 - MV-90 Replacement Project - Site Survey Schedule) to this Annex A-2 is the planned site survey schedule for Task 3.1.1. Any changes to this schedule could result in changes to pricing as they impact staffing requirements and timing. |
(iv) | Any effort beyond what is stated in this scope document is considered out of scope and will be included in a separate scope of work. |
(h) | Fees for Task 3.1.1 |
(i) | The Fees for Task 3.1.1 will be paid in a firm, fixed amount (Fixed Price) totaling $*** as specified in Table 6 (Statement of Work Charges) to Annex B-1 (Pricing Tables) to Schedule B (Pricing and Payment Terms). This stated Fixed Price will be inclusive of all overhead costs, general and administrative fees and the like, travel and living expenses, and profit. SSN will bear |
PG&E and SSN Confidential | Attachment 3 | |||
Page 22 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
the full risk of cost overruns and, conversely, will receive the full benefit of cost under-runs (except, in both cases, where the cost overruns or under-runs are due to PG&E making a material change to the scope and/or specifications of Task 3.1.1).
4. | TASK 4 UIQ HOSTING |
See Schedule O for a description of Hosting Services.
5. | TASK 5 SYSTEM INTEGRATION |
5.1 | SSN Responsibilities |
(a) | SSN will perform the following tasks related to integrating with Ecologic Analytics (EA) during this phase. |
***
***
***
***
***
***
PG&E and SSN Confidential | Attachment 3 | |||
Page 23 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
***
***
***
***
***
***
***
***
***
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***
***
***
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***
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***
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***
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***
PG&E and SSN Confidential | Attachment 3 | |||
Page 24 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
(xvi) | *** |
(b) | During the system integration phase, SSN will perform the tasks set forth below in connection with the shipper file interface. Maintenance of the interfaces or of any new interfaces requested by PG&E after network field deployment commences will require definition and scoping ***. |
***
***
***
***
***
(vi) | *** |
5.2 | PG&E Responsibilities |
***
***
4 | Inserted pursuant to Amendment #1. |
PG&E and SSN Confidential | Attachment 3 | |||
Page 25 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
***
***
***
***
***
***
6. | Task 6 Testing |
This task describes the responsibilities of each Party with respect to supporting ***.
6.1 | Task 6.1 *** |
(a) | SSN Responsibilities |
SSN will perform the tasks listed below in connection with ***
***
***
***
***
***
***
PG&E and SSN Confidential | Attachment 3 | |||
Page 26 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
***
***
***
***
(b) | PG&E Responsibilities |
***
***
***
***
***
***
***
***
PG&E and SSN Confidential | Attachment 3 | |||
Page 27 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
6.2 | Task 6.2 *** |
(a) | SSN Responsibilities |
SSN will perform the tasks related to *** which are set forth below.
***
***
***
(b) | PG&E Responsibilities |
PG&E will be responsible for creating formal testing documentation.
6.3 | Task 6.3 *** |
(a) | SSN Responsibilities |
SSN will perform the following tasks related to ***:
***
***
***
***
***
(b) | PG&E Responsibilities |
PG&E will be responsible for ***.
PG&E and SSN Confidential | Attachment 3 | |||
Page 28 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
6.4 | Task 6.4 *** |
This task is to provide equipment and assistance for ***. The plan for ongoing support is developed under Task 6.6.
(a) | SSN Responsibilities |
SSN will perform the following tasks related to ***.
***
***
***
***
***
***
***
***
***
(b) | PG&E Responsibilities |
***
***
6.5 | Task 6.5 *** |
(a) | SSN Responsibilities |
SSN will perform the tasks related *** which are set forth below.
***
PG&E and SSN Confidential | Attachment 3 | |||
Page 29 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
***
***
(b) | PG&E Responsibilities |
PG&E will be responsible for ***.
6.6 | Task 6.6 *** |
(a) | SSN Responsibilities |
SSN will perform the tasks related to *** which are set forth below.
***
***
***
(b) | PG&E Responsibilities |
PG&E will ***.
7. | TASK 7- TECHNICAL SUPPORT SERVICES AND TRAINING |
7.1 | Task 7.1 Technical Support Services |
(a) | SSN Responsibilities |
SSN will provide technical support as described in Attachment H of the Agreement.
7.2 | Task 7.2 Training |
(i) | See generally Schedule O Section 3.5 regarding training. |
PG&E and SSN Confidential | Attachment 3 | |||
Page 30 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
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*** | |
***
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***
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*** | |
***
PG&E and SSN Confidential | Attachment 3 | |||
Page 31 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN) Annex A-2 Statement of Work
|
***
***
10. | ADDITIONAL TASK ORDERS |
The parties may agree to supplement the services and activities performed by SSN pursuant to this Statement of Work through the execution of mutually agreed task orders from time to time, subject to any applicable funding and approval limits as advised by PG&E from time to time. Each task order, when approved and executed by the parties, will become part of this Statement of Work and the services performed by SSN under the task order will be performed under and subject to the terms of this Statement of Work and the Agreement. Significant changes to the services and activities performed by SSN pursuant to this Statement of Work will be documented in a separate statement of work.
11. | CHARGES |
The Fees for the Services to be provided in this scope of work are set out in Pricing Table 6 in Annex B-1 to Schedule B (Pricing and Payment Terms).
List of Exhibits
Exhibit 1 to Annex A-2 |
Chart Showing Field Network Deployment Activities Before Optimization (Deployment Activities Chart) | |
Exhibit 2 to Annex A-2 |
*** |
PG&E and SSN Confidential | Attachment 3 | |||
Page 32 | Annex A-2 | |||
(Amendment 6 Restatement) |
SmartMeter Upgrade Supply Agreement
Amendment 6
ATTACHMENT 4
[Not Used]
SmartMeter Program Upgrade Supply Agreement (SSN)
ATTACHMENT 5
Annex A-7
(Amendment 6 Restatement)
PG&E and SSN Confidential | Attachment 5 Annex A-7 | |||
(Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN)
Schedule A
Annex A-7 List of SSN Products and Product Support Tools1
Hardware Product |
Description | |
Access Point SG |
*** | |
Relay SG |
*** | |
eBridge / sBridge |
*** | |
NIC |
*** | |
Gas IMU |
***
*** | |
Water IMU |
***
*** |
1 | Annex A-7 has been amended and restated pursuant to Amendment No. 6. |
PG&E and SSN Confidential | Attachment 5 Annex A-7 | |||
Page 1 | (Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN)
Annex A-7 List of SSN Products and Product Tools
Software Product |
Description | |
UtilityIQ® AMM |
***
*** | |
UtilOS |
***
*** | |
FWU |
***
*** | |
MPC |
***
*** |
PG&E and SSN Confidential | Attachment 5 Annex A-7 | |||
Page 2 | (Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN)
Annex A-7 List of SSN Products and Product Tools
ODS |
***
*** | |
NEM |
***
***
***
*** |
Product Support Tools | ||
Tool |
Description
Note the following represents the Product Support Tools available at the Amendment 6 Effective Date. If these are augmented or replaced the new versions will be made available. | |
NODESIM |
***
*** | |
Field Service Unit (FSU) |
***
*** | |
CATT |
*** |
PG&E and SSN Confidential | Attachment 5 Annex A-7 | |||
Page 3 | (Amendment 6 Restatement) |
SmartMeter Program Upgrade Supply Agreement (SSN)
Annex A-7 List of SSN Products and Product Tools
***
*** | ||
MANTIS |
*** |
[end]
PG&E and SSN Confidential | Attachment 5 Annex A-7 | |||
Page 4 | (Amendment 6 Restatement) |
Attachment 6
Schedule B Annex B-2
Software Delivery Form
Site Name:
Site Address:
Name of Service Provider and Software Product:
Method of Delivery: (check 1 or 2)
1) Remote Telecommunications
Date Received: Time Received:
Transmission confirmation received from the Licensor (attach to this document)
2) Load and Leave Using this method, Service Provider installed the Software on permanent storage of Customers computer and immediately thereafter removed from Customers site all of the media (CDs, Diskettes, etc) from which the Software was transferred.
Date Received: Time Received:
For purposes of any optional support services and the optional professional services, if any, provided in relation to the above-referenced Software, Service Provider agrees that any additional software delivered to PG&E in the course of providing such support and/or services will be delivered only under either of the above methods.
Attestation:
PG&E Representative (Signature) Service Provider Representative (Signature)
Printed Name Printed Name
Copy of this completed form sent to Accounts Payable Name:
Purchase Order # Order Form #
Invoice # Cost Center #
Amendment 6 Attachment 5 Software Delivery Form
ATTACHMENT 7
Table 6 Statement of Work Charges - Annex B-1
to Schedule B (Attachment 7
Amendment 6 Restatement)
Annex B1 Table 6 (Amendment 6 Restatement) | PG&E and SSN Confidential |
Table 6 Statement of Work Charges Annex B-1 to Schedule B (Attachment 7 Amendment 6 Restatement) | ||
Table 6 - Statement of Work Charges (as updated by Amendment 6)
Note: The charges shown below cover all Services provided from the Effective Date, as amended and restated pursuant to Amendment 6. Some of the charges have been invoiced and/or paid prior to the Amendment 6 Effective Date, but are shown here for completeness. | ||||||||||||||||||||||
Description |
Item | PG&E P.O. Task ID |
Monthly Recurring Charges |
One Time Service Charges |
Equipment Unit Rates |
Optional Equipment Charges |
Total Equipment Charges |
Optional Monthly Recurring Charges |
Other Charges |
Notes | ||||||||||||
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*** | *** | *** | *** | ||||||||||||||||||
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*** | *** | *** | |||||||||||||||||||
*** |
Annex B1 Table 6 (Amendment 6 Restatement) |
PG&E and SSN Confidential Page 1 |
*** |
*** | *** | *** | |||||||||||||||||||||||||
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*** | *** | *** | |||||||||||||||||||||||||
*** |
*** | *** | *** | *** | ||||||||||||||||||||||||
*** |
*** | *** | *** | *** |
Annex B1 Table 6 (Amendment 6 Restatement) |
PG&E and SSN Confidential Page 2 |
*** | ||||||||||||||||||||||||
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*** | *** | *** | *** | ||||||||||||||||||||
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*** | *** | *** | *** | ||||||||||||||||||||
*** |
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*** |
*** | *** |
Annex B1 Table 6 (Amendment 6 Restatement) |
PG&E and SSN Confidential Page 3 |
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*** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
*** |
*** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** | *** |
Annex B1 Table 6 (Amendment 6 Restatement) |
PG&E and SSN Confidential Page 4 |
*** |
*** | *** | ||||||||||||||||||||||||||||||||||||||||
*** |
*** |
Annex B1 Table 6 (Amendment 6 Restatement) |
PG&E and SSN Confidential Page 5 |
Attachment 8 to Amendment 6
SSN-PG&&E Confidential
SSN Rate | ||||
Resource Type |
Per Day | Per hr | ||
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*** | *** | ||
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Annex B1 Table 7 (Amendment 6 Restatement)
AMENDMENT NO. 5
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
PG&E and SSN Confidential
Page 1
Amendment No. 5
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment no. 5 (Amendment 5) to the SmartMeter Program Upgrade Supply Agreement between Pacific Gas end Electric Company (PG&E) and Silver Spring Networks, Inc, (SSW), dated July 23 2008, as amended (the Agreement) is made and entered into on the date of last signature below.
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
1. | Amendments to Schedule A, Annex A-2 Statement of Work |
(a) | Section 4.3 (Task 4.3 - *** Hosting) of Annex A-2 (Statement of Work) is deleted in its entirety. |
(b) | Section 4.4 (Task 4.4 - *** Environment Hosting) is amended by adding new sections (a)(x) as follows: |
(x) | SSN will build a ***. |
(c) | Section 4.5 (Task 4.6 - *** Environment Hosting) is amended by adding new sections (a)(x) as follows: |
(x) | SSN will build a ***SSN will *** |
2. | Replacement of Schedule A, Annex A-4 Third Party Products and IT Infrastructure Specifications |
(a) | Schedule A, Annex A-4 (Third Party Products and IT Infrastructure Specifications) is deleted and replaced with Schedule A Annex A-4 (Amended - Version 2). Third. Party Products and IT Infrastructure Specifications in the form attached to this Amendment 5 as Attachment 1. |
(b) | For the avoidance of doubt, Schedule A - Annex. A-4 (Amended - Version 2) Third Party Products and IT Infrastructure Specifications incorporates and supersedes changes to Annex A-4 made in Amendment 3 to the Agreement. |
(c) | The *** are to-be-determined and are not included in Annex A-4 and will be agreed upon by the Parties. |
3. | Replacement of Schedule B, Annex B-1, Table 6 Pricing Table |
(d) | Table 8 (Statement of Work Charges) to Annex B-1 (Pricing Tables) to Schedule B (Pricing and Payment Terms) is deleted and replaced with Table 6 - Statement of Work Charges (Amended - Version 2) in the form attached to this Amendment 5 as Attachment 2. |
PG&E and SSN Confidential
Page 2
SmartMeter Upgrade Supply Agreement
Amendment 5
(e) | For the avoidance of doubt, Table 6 - Statement of Work Charges (Amended Version 2) incorporates and supersedes charges set out in Amendment 1, Amendment 2 and Amendment 3 to the Agreement. |
4. | Amendments to Schedule 0 Production Hosting Services |
(a) | Section 21(c) of Schedule O (Production Hosting Services) is deleted and replaced with the following: |
(c) | SSNs obligations to provide the reports referred to in this Schedule O shall commence as described in Section 3.5 |
(b) | Section 3.4 of Schedule O (Production Hosting Services) is. amended as follows: |
3.4(b)(i)(1) - *** is replaced with ***;
3.4(b)(ii)(1) - *** is replaced with ***;
3.4(b)(iii)(6) - *** is replaced with ***;
New Section 3.4(b)(iii)(7) is added as follows: Memory - available kilobytes ***;; and
Section 3.4(b)(iv) is deleted.
(c) | Sections 4.4(a) and 4.4(b) of Schedule O (Production Hosting Services) are deleted and replaced with the following: |
(a) | SSN will implement a backup solution to back up Data ***. If incremental backups are used, SSN will: |
(i) | retain the ***; |
(ii) | perform a full *** to be agreed by the Parties; and |
(iii) | perform ***. |
(b) | If any Data in the UtilityIQ System is corrupted or lost, SSN will take ***. PG&E will ***. |
(d) | Section 5.1(c) of Schedule O (Production Hosting Services) is deleted and replaced with the following: |
(c) | For the avoidance of doubt, there are *** for the provision of the Field Network Management Services associated with hosting of the *** meter system. A charge will apply to the *** and *** meter system. |
PG&E and SSN Confidential
Page 3
SmartMeter Upgrade Supply Agreement
Amendment 5
5. | Addition of Schedule P *** Hosting and *** Services |
A new Schedule P (*** Hosting and *** Services) in the form attached to this Amendment 5 as Attachment 3 is-added to the Agreement.
6. | General Provisions |
(a) | If there is any inconsistency between the terms of this Amendment 5 and the Agreement or any prior amendment to the Agreement, this Amendment 5 will take precedence. |
(b) | Capitalized terms used but not defined in this Amendment 5 have the meanings given to them in the Agreement. |
(c) | This Amendment 5 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 5, including the signature pages hereto, will be deemed to be an Original. This Amendment 5 is not effective unless signed by both Parties. |
(d) | Except as expressly provided herein, all terms and conditions of the Agreement shall continue in full force and effect. |
PG&E and SSN Confidential
Page 4
SmartMeter Upgrade Supply Agreement
Amendment 5
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 5, on the date set forth below.
PACIFIC GAS AND ELECTRIC COMPANY | SILVER SPRING NETWORKS, INC. | |||||||
By: | /S/ JOHN SKERRY | By: | /S/ ERIC P. DRESSELHUYS | |||||
Printed: | John Skerry | Printed: | Eric P. Dresselhuys | |||||
Title: | Portfolio Manager | Title: | VP | |||||
Date: | 5/27/09 | Date: | 5/26/09 |
PG&E and SSN Confidential
Page 5
Schedule A - Annex A-4 (Amended - Version 2)
Third Party Products and IT infrastructure Specifications
This Schedule is based upon PG&E specifications and assumptions as understood by the Parties at the Effective Date and may be subject to change based upon the collaboration and mutual agreement of the Parties.
1. | Utility IQ Version *** - Production Environment |
Table 1A to 1C below set out all the third party products (software, equipment and maintenance) required to implement a Utility IQ Version ****** head and system in PG&Es data center to support the deployment of a *** meter SmartMeter System with meters an *** mix of *** to *** intervals. This comprised the production system.
Table 1A UIQ v*** Production Environment - Hardware
Servers |
Contents |
Hardware. |
OS |
Quantity |
Approx Cost | |||||
*** |
*** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 1
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 1A UIQ v*** Production Environment - Hardware
Servers |
Contents |
Hardware |
OS |
Quantity |
Approx Cost | |||||
*** |
*** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 2
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 1B UIQ v*** Production Environment Network Equipment
Equipment |
Interfaces/Modules |
Purpose |
Quantity |
Approx Cost | ||||
*** |
*** |
*** | *** | *** |
Table 1C UIQ v*** Production Environment - Hardware and Software Maintenance (Yearly)
Type |
Purpose |
Comments |
Quantity | |||
*** |
*** |
*** |
*** |
PG&E and SSN Confidential
Page 3
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
2. | Utility IQ Version *** *** Environment |
Table 2A to 2D below set out all the third party products (software, equipment and maintenance) required to implement a Utility IQ Version ****** in the *** environment to support a *** meters and a ****** with meters at an *** mix of *** to *** intervals.
Table 2A - UIQ v*** Environment Hardware
Servers |
Contents |
Hardware |
OS |
Quantity |
Approx Cost | |||||
*** |
*** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 4
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 2A UIQ v.*** Environment Hardware
Servers |
Contents | Hardware | OS | Quantity | Approx Cost. | |||||
*** |
*** | *** | *** | *** | *** | |||||
Operations Equipment | ||||||||||
*** |
*** | *** | *** | *** | *** | |||||
Other Items | ||||||||||
*** |
*** | *** | *** | *** | *** |
Table-2B UIQ v*** Environment Network Equipment
Equipment |
Interfaces/Modules | Purpose | Quantity | Approx Cost | ||||
*** |
*** | *** | *** | *** |
PG&E and SSN Confidential
Page 5
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 2B UIQ v*** Environment Network Equipment
Equipment |
Interfaces/Modules |
Purpose |
Quantity |
Approx Cost | ||||
*** | *** | *** | *** | *** |
Table 2C UIQ v*** Environment Network Cables/Equipment
Type |
Purpose |
Comments |
Quantity | |||
*** |
*** | *** | *** |
Table 2D - U1Q v*** Environment - Hardware and Software Maintenance (Yearly)
Type |
Purpose |
Comments |
Quantity | |||
*** |
*** | *** | *** | |||
PG&E and SSN Confidential
Page 6
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 2D UIQ v*** Environment Hardware and Software Maintenance (Yearly)
Type |
Purpose |
Comments |
Quantity | |||
*** |
*** | *** | ||||
Software | ||||||
*** | *** | *** |
PG&E and SSN Confidential
Page 7
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
3. | Utility IQ Version *** Production Environment |
Table 3A to 3C below set out all the third party products (software, equipment and maintenance) required to implement a Utility IQ Version *** system in PG&Es data center to support the full deployment of a *** meter SmartMeter System with meters at an *** mix of *** to *** intervals. This comprises the production system.
Table 3A UIQ v*** Production Environment - Hardware
Servers |
Contents |
Hardware |
OS |
Quantity |
Approx Cost. | |||||
*** | *** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 8
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 3A- UIQ v*** Production Environment Hardware
Servers |
Contents |
Hardware |
OS |
Quantity |
Approx.Cost | |||||
*** |
*** | *** | *** | *** | *** | |||||
Operations Equipment | ||||||||||
*** |
*** | *** | *** | *** | *** | |||||
Other items | ||||||||||
*** |
*** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 9
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 35 UIC4 v*** Production Environment - Network Element
Equipment |
Interfaces/Modules |
Purpose |
Quantity |
Approx Cost | ||||
*** |
*** | *** | *** | *** |
Table 3C - UIQ v*** Production Environment - Hardware and Software Maintenance (Yearly)
Type |
Purpose |
Comments |
Quantity | |||
Hardware | ||||||
*** | *** | *** | *** | |||
Software | ||||||
*** | *** | *** | *** |
PG&E and SSN Confidential
Page 10
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
4. | Utility IQ Version *** *** Environment |
Table 4A to 4D below set out all the third party products (software, equipment and maintenance) required to implement a Utility IQ Version *** in the *** environment to support a *** environment of a *** meters and a *** meters with meters at an *** mix of *** to *** intervals.
Table 4A- UIQ v*** Environment Hardware
Servers |
Contents |
Hardware |
OS |
Quantity |
Approx Cost | |||||
*** |
*** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 11
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 4A- UIQ v*** Environment Hardware
Servers |
Contents | Hardware | OS | Quantity | Approx Cost | |||||
*** | *** | *** | *** | *** | *** | |||||
Operations Equipment | ||||||||||
*** | *** | *** | *** | *** | *** | |||||
Other Items |
||||||||||
*** | *** | *** | *** | *** | *** |
Table 4B- UIQ v*** Environment Hardware
Equipment |
Interfaces/Modules | Purpose | Quantity | Approx Cost | ||||
*** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 12
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 4B - UIQ v*** Environment Network Equipment
Equipment |
Interfaces/Modules |
Purpose |
Quantity |
Approx Cost | ||||
*** |
*** | *** | *** | *** |
Table 4C - UIQ v*** Environment Network Cables/Equipment
Type |
Purpose |
Comments |
Quantity | |||
*** |
*** | *** | *** |
Table 4D - UIQ v*** Environment Hardware and Software Maintenance (Yearly)
Type |
Purpose |
Comments |
Quantity | |||
Hardware | ||||||
*** |
*** | *** | *** |
PG&E and SSN Confidential
Page 13
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 4D - UIQ v*** Environment Hardware and Software Maintenance (Yearly)
Type |
Purpose |
Comments |
Quantity | |||
*** |
*** | *** | ||||
Software | ||||||
*** |
*** | *** | *** |
PG&E and SSN Confidential
Page 14
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
5. | Utility IQ Version *** - Production Environment |
Tables 5A to 5D below set out all the third part products (software, equipment and maintenance) and configuration required to implement a Utility IQ *** system to support the deployment of *** meters at the *** mix of *** to *** intervals. These products also support UIQ *** and UIQ *** up to *** meters, subject to SAN performance meeting SSN requirements. This comprises the production system.
Table 5A Production for PG&E Utility 1A v***
Description |
Servers |
Contents |
OS |
Quantity |
HBA | |||||
*** |
*** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 15
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 5A Production for PG&E Utility 1A v*** Hardware
Description |
Servers |
Contents |
OS |
Quantity |
HBA | |||||
*** |
*** | *** | *** |
Table 5B Production for PG&E Utility 1A v3*** - Storage
Hardware |
Quantity | |||
*** |
*** | |||
Software |
||||
*** |
*** |
Table 5C Production for PG&E Utility 1A v*** - Network
Hardware |
Quantity | |||
*** |
*** |
PG&E and SSN Confidential
Page 16
Attachment 1 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Annex A-4 Third Party Products and IT Infrastructure Specifications
(Amended Version 2)
Table 5D Production for PG&E Utility 1A v*** - Software
Hardware |
Quantity | |||
*** |
*** |
PG&E and SSN Confidential
Page 17
Attachment 2 to Amendment 5 to SmartMeter Program Upgrade Supply Agreement
Schedule B Pricing and Payments Terms
Annex B-1 Pricing Tables
Description |
Item | PG&E P.O. Task ID |
Monthly Recurring Charges |
One Time Service Charges |
Equipment Unit Rates |
Optional Equipment Charges |
Total Equipment Charges |
Optional Monthly Recurring Charges |
Other Charges | Notes | ||||||||||
*** |
*** | *** | *** | *** | *** | *** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 1
Attachment 2 to Amendment 5 to SmartMeter Program Upgrade Supply Agreement
Schedule B Pricing and Payments Terms
Annex B-1 Pricing Tables
Description |
Item | PG&E P.O. Task ID |
Monthly Recurring Charges |
One Time Service Charges |
Equipment Unit Rates |
Optional Equipment Charges |
Total Equipment Charges |
Optional Monthly Recurring Charges |
Other Charges | Notes | ||||||||||
*** |
*** | *** | *** | *** | *** | *** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 2
Attachment 2 to Amendment 5 to SmartMeter Program Upgrade Supply Agreement
Schedule B Pricing and Payments Terms
Annex B-1 Pricing Tables
Description |
Item | PG&E P.O. Task ID |
Monthly Recurring Charges |
One Time Service Charges |
Equipment Unit Rates |
Optional Equipment Charges |
Total Equipment Charges |
Optional Monthly Recurring Charges |
Other Charges | Notes | ||||||||||
*** |
*** | *** | *** | *** | *** | *** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 3
Attachment 2 to Amendment 5 to SmartMeter Program Upgrade Supply Agreement
Schedule B Pricing and Payments Terms
Annex B-1 Pricing Tables
Description |
Item | PG&E P.O. Task ID |
Monthly Recurring Charges |
One Time Service Charges |
Equipment Unit Rates |
Optional Equipment Charges |
Total Equipment Charges |
Optional Monthly Recurring Charges |
Other Charges | Notes | ||||||||||
*** |
*** | *** | *** | *** | *** | *** | *** | *** | *** | *** |
PG&E and SSN Confidential
Page 4
Attachment 3 to Amendment 5 to SmartMeter Upgrade Supply Agreement
Schedule P
SCHEDULE P
[Deleted in its entirety by Amendment No. 6]
AMENDMENT NO. 4
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC.
CONFIDENTIAL
Amendment No. 4
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 4 (Amendment 4) to the SmartMeter Program Upgrade Supply Agreement (Agreement) between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23, 2008, is made and entered into on the date of last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties.
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
| Step-Down Transformer Reimbursement |
SSN agrees to reimburse PG&E for the following costs associated with the installation of step-down transformers:
$*** per unit for step-down transformer installation, plus***$***, for travel to the step-down transformer locations
SSN will reimburse these costs contingent upon the following items:
1. | PG&E will make commercially reasonable efforts to limit the aggregate costs of the tasks performed below. |
2. | Step-down transformers will only be installed at those locations identified in the network design and whose available voltage is above *** volts. |
3. | ***. |
4. | ***. |
5. | ***. |
6. | Reimbursement by SSN applies to step-down transformer installations that occur prior to the date that SSN provides network equipment with the voltage tolerance. |
Amendment No. 4
Page 2 of 2
All provisions of the Agreement, except as supplemented by Amendments 1, 2 and 3, shall remain in full force and effect and are reaffirmed. Governing law and venue for this amendment 4 shall be the governing law set forth in the Agreement. This Amendment 4 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 4, including the signature pages hereto, will be deemed to be an original. This Amendment 4 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 4, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||
By: | /S/ P.L. DIETEBLE |
By: | /S/ ERIC P. DRESSELHUYS | |||||
Printed: | P.L. Dieteble |
Printed: | Eric P. Dresselhuys | |||||
Title: | Manager Project Support |
Title: | VP | |||||
Date: | 4/7/09 |
Date: | 3/31/09 |
SmartMeter Upgrade Supply Agreement
AMENDMENT NO. 3
TO THE SMARTMETER PROGRAM UPGRADE. SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC
SmartMeter Upgrade Supply Agreement
Amendment No. 3
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 3 (Amendment 3) to the SmartMeter Program Upgrade Supply Agreement between Pacific Gas and Electric Company (PG&E) and Silver Spring. Networks, Inc, (SSN), dated July 23 2008, as amended (the Agreement) is made and entered into on the date of last signature below.
NOW, THEREFORE, in, consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby, agree to amend the Agreement as follows:
1. | Amendment of Schedule. A, Annex A-4 - Third Party Products and IT Infrastructure Specifications. |
Section 2 (Utility IQ Version ***) to Schedule A, Annex A-4 - Third Party Products and IT Infrastructure of the Agreement is deleted and replaced with Section 2 (SSN Production for PG&E Utility IQ Version *** and Version ***) attached to this Amendment 3.
2. | Addition of Schedule O Production Hosting Services |
A new Schedule O Production Hosting Services in the form attached to this Amendment 3 is added to the Agreement.
3. | Addition to Annex BA Pricing Tables |
(a) | Table 6 (Statement of Work Charges) to Annex 8-1 (Pricing Tables) to Schedule B (Pricing and Payment Terms) is amended by adding the following new pricing for Production Hosting Services. The table below supersedes and replaces all prior charges associated with Section 4.2 (Task 4.2 Production Hosting) of Annex A-2 (Statement of Work) to the Agreement. |
Production Hosting Charges
Description |
Catalog Number |
Unit Price |
Quantity |
Total | ||||
UIQ Management | ||||||||
*** |
*** | *** | *** | *** |
PG&E and SSN Confidential
Page 1
SmartMeter Upgrade Supply Agreement
Amendment 3
Production Hosting Charges
Description |
Catalog Number |
Unit Price |
Quantity |
Total | ||||
*** | *** | *** | *** | *** | ||||
Data Center Management | ||||||||
*** | *** | *** | *** | *** | ||||
*** | *** | *** | *** | *** | ||||
Total | *** |
(b) | The Production Hosting Charges that -are noted as one time fees will be invoiced on signature of this Amendment 3 by both parties. |
(c) | The monthly recurring Production Hosting Charges will be invoiced at the commencement of the month in which services are received. |
(d) | SSN will invoice charges for development of reporting monthly on a time and materials basis, not to exceed amounts set out above, as follows: ***; SLA Reporting - ***. |
(e) | Monthly hosting fee includes all ***. |
(f) | Setup fee includes all ***. |
(g) | Expedite fee for delivery in less than the ***. |
4. | General Provisions |
(a) | Capitalized terms used but not defined in this Amendment 3 have the meanings given to them in the Agreement. |
(b) | This Amendment 3 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 3, including the signature pages hereto, will be deemed to be an original. This Amendment 3 is not effective unless signed by both Parties. |
PG&E and SSN Confidential
Page 2
SmartMeter Upgrade Supply Agreement
Amendment 3
(c) | Except as expressly provided herein, all terms and conditions of the Agreement shall continue in full force and effect. |
PG&E and SSN Confidential
Page 3
SmartMeter Upgrade Supply Agreement
Amendment 3
intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 3, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||
By: | /S/ JOHN SKERRY |
By: | /S/ ERIC P. DRESSELHUYS | |||||
Printed: | John Skerry |
Printed: | Eric P. Dresselhuys | |||||
Title: | Portfolio Manager |
Title: | VP | |||||
Date: | 4/2/09 |
Date: | 3/31/09 |
PG&E and SSN Confidential
Page 4
AMENDMENT NO. 2
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC.
SmartMeter Upgrade Supply Agreement
SCHEDULE O
[Amended and restated in its entirety by Amendment No. 6]
Amendment No. 2
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 2 (Amendment 2) to the SmartMeter Program Upgrade Supply Agreement (Agreement) between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23, 2008, is made and entered into on the date of last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties.
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend the Agreement as follows:
1. | Task 4.1 (*** Continuation of Services) in Annex A-2 (Statement of Work) is hereby extended *** months from *** through *** at the monthly hosting fee of ***. |
2. | Task 4.4 (*** Environment Hosting) in Annex A-2 (Statement of Work) is hereby extended *** months from *** through *** at the monthly hosting fee of ***. |
3. | Task 4.5 (*** Environment Hosting) in Annex A-2 (Statement of Work) is hereby extended *** months from *** through *** at the monthly hosting fee of ***. |
This amendment 2 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 2, including the signature pages hereto, will be deemed to be an original. This Amendment 2 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 2, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||
By: | /s/ John Skerry |
By: | /s/ Eric P. Dresselhuys | |||||
Printed: | John Skerry |
Printed: | Eric P. Dresselhuys | |||||
Title: | IT Portfolio Manager |
Title: | VP | |||||
Date: | 2/5/09 |
Date: | 1/30/09 |
AMENDMENT NO. 1
TO THE SMARTMETER PROGRAM UPGRADE SUPPLY AGREEMENT
BETWEEN
PACIFIC GAS AND ELECTRIC COMPANY
AND
SILVER SPRING NETWORKS, INC.
Amendment No. 1
To
SmartMeter Program Upgrade Supply Agreement
Between
Pacific Gas and Electric Company and Silver Spring Networks, Inc.
This amendment No. 1 (Amendment 1) to the SmartMeter Program Upgrade Supply Agreement (Agreement) between Pacific Gas and Electric Company (PG&E) and Silver Spring Networks, Inc. (SSN), dated July 23, 2008, is made and entered into on the date of last signature below. Herein, each of PG&E and SSN may individually be referred to as a Party and both may collectively be referred to as the Parties.
NOW, THEREFORE, in consideration of the promises and mutual covenants between the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree to amend Annex A-2 (Statement of work) and Annex B-1 (Pricing Tables) to the Agreement as follows:
1. | Amendment to Annex A-2 (Statement of Work). |
A. | The following new section 4.6 ***-Lite Hosting is hereby added: |
4.6 TASK 4.6 ***-lite Hosting
(a) | SSN Responsibilities |
(i) | SSN will set up, configure and host an ***-lite environment at *** consisting of Equipment and associated software to be used as an interim ***. These tasks and activities shall include: |
***
(ii) | *** |
(iii) | *** |
(iv) | *** |
(v) | *** |
(vi) | *** |
(vii) | *** |
(viii) | *** |
(ix) | *** |
(b) | PG&E Responsibilities |
(i) | ***. |
(ii) | ***. |
(iii) | ***. |
B. | The following is hereby added to Task 5 (System Integration, SSN Responsibilities): |
5.1(a)(xvi) ***
2. | Amendment to Table 6 (Statement of Work Charges) to Annex B-1 (Pricing Tables) to Schedule B (Pricing and Payment Terms). |
A. | The following pricing is hereby added to Task 3.2 (Network Installation for Initial Deployment Areas to be Completed in 2008): |
Description |
Unit Price | Quantity | Total | |||
*** |
*** | *** | *** | |||
| ||||||
TOTAL |
*** | |||||
|
B. | The following new Task 4.6 (***-lite Hosting) pricing is hereby added: |
Description |
Unit Price | Quantity | Total | |||
Task 4.6 *** |
*** | *** | *** | |||
Task 4.6 *** |
*** | *** | *** | |||
| ||||||
TOTAL |
*** | |||||
|
*Includes *** Cost of *** that will not be invoiced to PG&E to the extent *** and/or SSN are able to use the allotment of space and power for other customers. Included with any invoice for the recurring monthly fee, SSN will certify in writing that neither *** nor SSN were able to use the allotment of space and power for other customers for the month being invoiced.
C. | The following new pricing is hereby added to Task 5: |
Description |
One Time Service Charge |
Notes | ||
Task 5 *** |
*** | *** |
This amendment 1 may be executed in counterparts, each of which when so executed and delivered will be deemed an original, and all of which taken together will constitute one and the same instrument. Each Party will receive a duplicate original of the counterpart copy or copies executed by it. A facsimile or pdf copy of this Amendment 1, including the signature pages hereto, will be deemed to be an original. This Amendment 1 is not effective unless signed by both Parties.
Intending to be legally bound, each of the Parties has caused its duly authorized representative to execute this Amendment 1, on the date set forth below.
Pacific Gas and Electric Company | Silver Spring Networks, Inc. | |||||||
By: | /s/ John Skerry |
By: | /s/ Eric P. Dresselhuys | |||||
Printed: | John Skerry |
Printed: | Eric P. Dresselhuys | |||||
Title: | IT Portfolio Manager |
Title: | VP | |||||
Date: | 1/22/09 |
Date: | 1/14/09 |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A)/15D-14(A)
OF THE SECURITIES EXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Scott A. Lang, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Silver Spring Networks, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including any consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and; and
c. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting;
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 8, 2013 | By: | /s/ Scott A. Lang | ||||
Scott A. Lang | ||||||
Chairman of the Board of Directors, President and Chief Executive Officer | ||||||
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A)/15D-14(A) OF THE
SECURITIES EXCHANGE ACT AND SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, John R. Joyce, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Silver Spring Networks, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including any consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and; and
c. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting;
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 8, 2013 | By: | /s/ John R. Joyce | ||||
John R. Joyce | ||||||
Vice Chairman and Chief Financial Officer | ||||||
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
The undersigned, Scott A. Lang, the Chairman of the Board of Directors, President and Chief Executive Officer of Silver Spring Networks, Inc. (the Company), pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certifies that:
(i) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 of the Company (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.
Date: August 8, 2013 | By: | /s/ Scott A. Lang | ||||
Scott A. Lang | ||||||
Chairman of the Board of Directors, President and Chief Executive Officer | ||||||
(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
The undersigned, John R. Joyce, Chief Financial Officer of Silver Spring Networks, Inc. (the Company), pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certifies that:
(i) the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 of the Company (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.
Date: August 8, 2013 | By: | /s/ John R. Joyce | ||||
John R. Joyce | ||||||
Vice Chairman and Chief Financial Officer | ||||||
(Principal Financial Officer) |
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