<PAGE>
As filed with the Securities and Exchange Commission on June 4, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ALTIGEN COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3661 94-3204299
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
47427 Fremont Boulevard
Fremont, California 94538
(510) 252-9712
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
GILBERT HU
Chief Executive Officer
AltiGen Communications, Inc.
47427 Fremont Boulevard
Fremont, California 94538
(510) 252-9712
Fax (510) 252-9738
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies of Communications to:
<TABLE>
<S> <C>
Eric W. Wright, Esq. Jorge del Calvo, Esq
Carmen Chang, Esq. Stanton Wong, Esq.
David Wang, Esq. Gabriella Lombardi, Esq.
Susan Tien, Esq. Davina Kaile, Esq.
Wilson Sonsini Goodrich & Rosati Pillsbury Madison & Sutro LLP
Professional Corporation 2550 Hanover Street
650 Page Mill Road Palo Alto, California 94304
Palo Alto, California 94304 (650) 233-4500
(650) 493-9300 Fax (650) 233-4545
Fax (650) 493-6811
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
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- --------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum Amount of
Title of Each Class of Aggregate Registration
Securities to be Registered Offering Price(2) Fee
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<S> <C> <C>
Common stock, par value $0.001 per
share................................ $51,750,000 $14,387
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- --------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) of the Securities Act of 1933, as amended.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall hereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
Subject to Completion, Dated , 1999
The information contained in this prospectus is not complete and may be
changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities, and it is not soliciting
an offer to buy these securities in any state where the offer or sale is not
permitted.
Shares
[LOGO]
AltiGen Communications, Inc.
Common Stock
$ per share
- -------------------------------------------------------------------------------
This is an initial public offering of common stock of AltiGen Communications,
Inc. This is a firm commitment underwriting.
AltiGen expects that the price to the public in the offering will be between
$ and $ per share. The market price of the shares after the offering
may be higher or lower than the offering price.
We have applied to include the common stock on the Nasdaq National Market
under the symbol "ATGN."
Investing in the common stock involves risks. See "Risk Factors" beginning on
page 6.
<TABLE>
<CAPTION>
Per Share Total
--------- ---------
<S> <C> <C>
Price to the public................................ $ $
Underwriting discount..............................
Proceeds to AltiGen................................
</TABLE>
AltiGen has granted an over-allotment option to the underwriters. Under this
option, the underwriters may elect to purchase a maximum of additional
shares from AltiGen within 30 days following the date of this prospectus to
cover over-allotments.
- -------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
CIBC World Markets
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
FAC/Equities
The date of this prospectus is , 1999.
<PAGE>
[ARTWORK TO COME]
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 6
Forward-Looking Statements............................................... 16
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 29
Management............................................................... 40
Principal Stockholders................................................... 48
Certain Transactions..................................................... 49
Description of Capital Stock............................................. 51
Shares Eligible for Future Sale.......................................... 55
Underwriting............................................................. 57
Legal Matters............................................................ 59
Experts.................................................................. 59
Where Can You Find More Information...................................... 59
Index to Consolidated Financial Statements............................... F-1
</TABLE>
-------------------------
As used in this prospectus, the terms "we," "us," "our" and "AltiGen" mean
AltiGen Communications, Inc. and its subsidiaries (unless the context
indicates a different meaning), and, unless otherwise indicated, the term
"common stock" means our common stock, par value $0.001 per share.
AltiGen's principal executive offices are located at 47427 Fremont Boulevard,
Fremont, California 94538. Its telephone number is (510) 252-9712.
Except as otherwise indicated, all information contained in this prospectus:
. reflects the reincorporation of AltiGen into Delaware to be effected prior
to completion of the offering;
. assumes no exercise of the over-allotment option granted to the
underwriters; and
. reflects the conversion of all outstanding shares of our preferred stock
into shares of our common stock upon the closing of this offering.
The underwriters are offering the shares subject to various conditions and may
reject all or part of any order.
AltiGen(R) is a registered trademark, and Zoomerang(TM) is a trademark pending
registration, of AltiGen in the United States and other jurisdictions. In
addition, the AltiGen logo is a trademark of AltiGen in the United States and
other jurisdictions. All other trademarks or service marks appearing in this
prospectus are trademarks or service marks of the respective companies that
use them.
3
<PAGE>
Prospectus Summary
This summary highlights information contained in other parts of this
prospectus. Because it is a summary, it is not complete and may not contain all
of the information that you should consider before investing in the shares. You
should read the entire prospectus carefully.
The Company
AltiGen designs, manufactures and markets next generation, server-based
telecommunications systems that allow businesses to use the Internet and the
Public Switched Telephone Network, or PSTN, interchangeably and seamlessly to
carry voice and data communications. The Internet is accelerating the
convergence of voice and data communications, creating the need for a next
generation communications system. As an increasing percentage of voice
communication is carried over the same networks as data is today, we believe
that businesses--particularly small and medium-sized businesses--will deploy
integrated systems that receive, manipulate and transmit voice communications
over the PSTN, as well as the Internet and similar "packet-switched" networks.
Our telecommunications systems enable a new array of applications that give
businesses the choice of placing calls over the Internet or traditional phone
lines. This capability is generally not built into today's traditional private
branch exchanges, or PBXs, but may be purchased and installed separately.
As businesses seek capabilities beyond those of traditional PBXs to meet
today's communication needs, they have recently begun to purchase server-based
telecommunications systems in place of traditional PBXs. These new systems,
which are generally based on open hardware and software standards, provide
switching between communications lines, basic telephony services such as
placing and receiving calls, multi-media messaging, web-based administration
and computer telephony integration, or CTI, applications, which integrate
computer and telephone systems. Server-based telecommunications systems that
provide these functions over the PSTN are commonly known as server-based PBX
systems. Systems that provide these functions over networks that use the
Internet Protocol, or IP, are commonly known as IP-based PBX systems. IP is a
standard format for the delivery of information over corporate intranets and
the Internet. Our server-based telecommunications systems combine the
attributes of these two types of systems and allow small to medium-sized
businesses to communicate over both the PSTN and the Internet, providing these
businesses with a telecommunications solution for the Internet era.
We are a leader in the server-based PBX market and have been shipping our
products since July 1996. We sell our server-based telecommunications systems
through our network of over 400 dealers and distributors, including Ingram
Micro Inc. and Tech Data Corporation. We also sell our systems through original
equipment manufacturers, or OEMs, such as Nitsuko Corporation in Japan. We have
joint marketing agreements with Compaq Computer Corporation and Hewlett-Packard
Company.
Our objective is to extend our leadership position in the server-based PBX
market and expand our current position in the IP-based PBX market. We intend to
achieve this goal by:
. increasing our brand name recognition;
. expanding our distribution channels;
. establishing relationships with technology and strategic partners;
. targeting key markets worldwide; and
. enhancing technology leadership in server-based telecommunications.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered by AltiGen ................ shares
Common stock to be outstanding after the
offering....................................... shares
Use of proceeds................................. General corporate purposes,
including working capital
Proposed Nasdaq National Market symbol.......... ATGN
</TABLE>
The number of shares outstanding is based on shares outstanding as of March 31,
1999, excluding 2,716,844 shares that are issuable upon exercise of outstanding
options at a weighted average exercise price of $0.60 per share.
Summary Consolidated Financial Information
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months
Fiscal Year Ended September 30, Ended March 31,
------------------------------------- ----------------
1995 1996 1997 1998 1998 1999
----------- ------- ------- ------- ------- -------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Revenues, net........... -- $ 229 $ 1,379 $ 3,890 $ 1,510 $ 2,356
Gross profit (loss)..... -- (9) 339 1,370 323 1,133
Loss from operations.... $(1,101) (1,755) (3,325) (4,041) (1,921) (3,492)
Net loss................ $(1,068) $(1,631) $(3,119) $(3,795) $(1,832) $(3,293)
======= ======= ======= ======= ======= =======
Basic net loss per
share................. $ (1.06) $ (1.28) $ (2.34) $ (2.75) $ (1.37) $ (1.91)
======= ======= ======= ======= ======= =======
Shares used in comput-
ing basic net loss
per share............. 1,007 1,272 1,330 1,378 1,339 1,721
Unaudited pro forma ba-
sic net loss
per share............. $ (0.29) $ (0.15) $ (0.23)
Shares used in comput-
ing unaudited
pro forma basic net
loss per share........ 13,069 12,496 14,493
</TABLE>
<TABLE>
<CAPTION>
March 31, 1999
---------------
As
Actual Adjusted
------ --------
(Unaudited)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents....................................... $4,243
Working capital................................................. 5,243
Total assets.................................................... 8,521
Total shareholders' equity ..................................... 6,102
</TABLE>
See Note 2 of the Notes to Consolidated Financial Statements for an explanation
of the determination of the number of shares used in computing per share data.
The pro forma numbers give effect to the conversion of all preferred stock
outstanding. The as adjusted numbers give effect to the sale of shares of
common stock offered by this prospectus at an assumed public offering price of
$ per share, after deducting the estimated underwriting discount and the
estimated offering expenses payable by us and the application of the estimated
net proceeds from this offering.
5
<PAGE>
Risk Factors
You should carefully consider the following factors and other information in
this prospectus before deciding to invest in the shares. The risks and
uncertainties described below are not the only ones we face. If any of these
risks and uncertainties occurs, our business, operating results and financial
condition could be seriously harmed. In addition, the trading price of our
common stock could decline due to any of these risks and uncertainties, and you
may lose all or part of your investment. Additional risks and uncertainties
that are not presently known to us or that we currently believe are immaterial
may also impair our business, financial condition or operating results.
This prospectus contains forward-looking statements that involve risks and
uncertainties, including those set forth below. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of risks and uncertainties discussed below or in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this prospectus.
We have a history of losses and expect to incur future losses
We have experienced operating losses since our inception. As of March 31, 1999,
we had an unaudited accumulated deficit of $13.0 million. We expect to incur
operating losses for the foreseeable future, and these losses may be
substantial. Further, we expect our operating cash flows to be negative for the
foreseeable future. Because we expect increased expenditures for product
development and general and administrative expenses, and substantial increases
in sales and marketing expenses, we will need to increase revenues
significantly to achieve profitability and positive operating cash flows. Even
if we do achieve profitability and positive operating cash flows, we may not be
able to sustain or increase profitability or positive operating cash flows on a
quarterly or annual basis.
We have a limited operating history, which makes it difficult to evaluate our
business
We shipped our first products in July 1996. As a result of our limited
operating history, we have limited financial data that you can use to evaluate
our business. You must consider our prospects in light of the risks, expenses
and challenges we might encounter because we are at an early stage of
development in a new and rapidly evolving market. To address these risks and
achieve profitability and increased sales levels, we must:
. establish and increase market acceptance of our technology, products and
systems;
. expand our network of distributors, dealers and OEMs;
. introduce products and systems incorporating our technology and
enhancements to our product applications on a timely basis;
. respond effectively to competitive pressures; and
. successfully market and support our products and systems.
We may not successfully meet any of these challenges, and our failure to do so
will seriously harm our business and results of operations. In addition,
because of our limited operating history, we have limited insight into trends
that may emerge and negatively affect our business.
6
<PAGE>
Our operating results fluctuate, making future operating results difficult to
predict
Our quarterly and annual operating results have varied significantly in the
past and will likely vary significantly in the future. A number of factors,
many of which are beyond our control, may cause our operating results to vary,
including:
. our ability to develop, market and sell new products and enhancements on a
timely basis;
. changes in pricing by us or our competitors;
. the introduction of products and services by our competitors;
. our sales cycle, which may vary substantially from customer to customer;
. unfavorable changes in the prices and delivery of the components we
purchase;
. the loss of any single significant distributor, such as Ingram Micro or
Tech Data;
. the size and timing of orders for our products, which may vary depending
on the season, and the contractual terms of those orders;
. the size and timing of our expenses, including operating expenses and
expenses of developing new products and product enhancements;
. the ability of our distributors and dealers to sell and deliver our
products;
. the availability, price and reliability of key components sole-sourced
from third party vendors;
. deferrals of customer orders in anticipation of new products, services, or
product enhancements introduced by us or by our competitors;
. our ability to attain and maintain production volumes and quality levels
for our products;
. costs we may incur if we become involved in future litigation; and
. general domestic and global economic conditions.
In addition, our expense levels are based in part on expectations of future
sales. If our sales do not meet expectations, it will be difficult for us to
reduce our expenses quickly, and consequently our operating results may suffer.
In addition, our dealers often require immediate shipment and installation of
our products. As a result, we have historically operated with limited backlog,
and our sales and operating results in any quarter depend primarily on orders
booked and shipped during that quarter.
Any of the above factors could harm our business, financial condition and
results of operations. We believe that period-to-period comparisons of our
results of operations are not meaningful, and you should not rely upon them as
indicators of our future performance.
Our market is highly competitive and we may not have the resources to compete
adequately
The server-based telecommunications systems market is new, rapidly evolving and
highly competitive. We expect competition to intensify in the future as
existing competitors develop new products and new competitors to enter the
market. We believe that a critical component to success in this market is the
ability to establish and maintain strong partners and customer relationships
with a wide variety of domestic and international providers. If we fail to
establish or maintain these relationships, we will be at a serious competitive
disadvantage.
We face competition from companies providing traditional PBX systems,
principally Lucent Technologies and Nortel Networks. We also compete against
providers of server-based PBXs, including Picazo Communications, Inc. and
Artisoft, Inc. We potentially face competition from companies such as Shoreline
7
<PAGE>
Teleworks, Inc., NBX Corporation, acquired by 3Com Corporation, and Selsius
Systems, acquired by Cisco Systems, Inc., as well as any number of future
competitors. Many of our competitors are substantially larger than we are and
have significantly greater name recognition, financial, sales and marketing,
technical, customer support, manufacturing and other resources. These
competitors may also have more established distribution channels and stronger
relationships with service providers. These competitors may be able to respond
more rapidly to new or emerging technologies and changes in customer
requirements or devote greater resources to the development, promotion and sale
of their products. These competitors may enter our existing or future markets
with solutions that may be less expensive, provide higher performance or
additional features or be introduced earlier than our solutions. Given the
market opportunity, we also expect that other companies may enter our market
with better products and technologies. If any technology that is competing with
ours is more reliable, faster, less expensive or has other advantages over our
technology, then the demand for our products and services could decrease.
We expect our competitors to continue to improve the performance of their
current products and introduce new products or new technologies. Successful new
product introductions or enhancements by our competitors could reduce the sales
or market acceptance of our products and services, increase price competition
or make our products obsolete. To be competitive, we must continue to invest
significant resources in research and development, sales and marketing and
customer support. We may not have sufficient resources to make these
investments or to make the technological advances necessary to be competitive,
which in turn will cause our business to suffer.
Losing either of our two key distributors would harm our business. We also need
to establish and maintain relationships with additional distributors and
original equipment manufacturers
Sales through our two key distributors, Ingram Micro Inc. and Tech Data
Corporation, accounted for 47.4% of our revenues in the six months ended March
31, 1999. Our business and operating results will suffer if either of these
distributors does not continue distributing our products, fails to distribute
the volume of our products that they currently distribute or fails to expand
our customer base. We also need to establish and maintain relationships with
additional distributors and original equipment manufacturers. We may not be
able to establish, or successfully manage, relationships with additional
distribution partners. In addition, our agreements with distributors typically
provide for termination by either party upon written notice to the other party.
For example, our agreement with Tech Data provides for termination, with or
without cause, by either party upon 30 days' written notice to the other party,
or upon insolvency or bankruptcy. Generally, these agreements are non-exclusive
and distributors sell products that compete with ours. If we fail to establish
or maintain relationships with distributors and original equipment
manufacturers, our ability to increase or maintain our sales and our customer
base will be substantially harmed.
We rely on sole-sourced components and third-party technology and products; if
these components are not available, our business may suffer
We purchase technology from third parties that is incorporated into our
products. We incorporate the following sole-sourced components in our products:
. Mitel Corporation's chip that supports Multi-Vendor Integration Protocol,
or MVIP. This chip is included in all of our boards and is particularly
important because it is the means by which our boards communicate with
each other to enable our products to function correctly;
. Texas Instruments' digital signal processor, or DSP, for our Triton family
of boards and our Integrated Services Digital Network Basic Rate Interface
board, or ISDN BRI board. Although sales of these boards are an
insignificant portion of our revenue to date, we expect that they will
represent an increasing percentage of our revenues in the future.
. PMC Sierra, Inc.'s T1 is a single-source chip for our Triton T1 board. We
have only recently begun shipping this board, and sales of these boards
have been an insignificant portion of our revenue to date, but we expect
that they will represent an increasing percentage of our revenues in the
future.
8
<PAGE>
Lead times for materials and components used in the assembly of our products
vary significantly, and depend on factors such as the specific supplier,
contract terms, and demand for a component at a given time. If orders do not
match forecasts, we may have excess or inadequate inventory of certain
materials and components, which may seriously harm our business, financial
condition and results of operations.
We order sole-sourced components by way of purchase orders and do not have
supply contracts for them. If we were unable to purchase an adequate supply of
these sole-source components on a timely basis, we would be required to develop
alternative solutions. This could entail qualifying an alternative source or
redesigning our products based on different components. We may face these types
of problems and delays in the future. Our inability to obtain these sole-source
components could significantly delay shipment of our products, which could have
a negative effect on our business, financial condition and results of
operations.
Our success depends on market acceptance of server-based telecommunications
systems
The market for server-based telecommunications systems is relatively new and
rapidly evolving. Businesses have invested substantial resources in existing
telecommunications infrastructure, including proprietary PBXs, and may be
unwilling to replace these systems in the near-term or at all. Furthermore, the
transmission of voice communications over data networks, including the
Internet, is limited by the current capabilities of those networks. For
example, end users have experienced voice delays and reduced voice quality in
calls routed over IP networks. Also, bundling voice and data communications
over common networks could cause these transmissions to suffer in the event
that networks have insufficient bandwidth. If the market for server-based
telecommunications systems does not grow or develops more slowly than we
anticipate, our business would suffer.
We rely on dealers to promote, sell, install and support our products and their
failure to do so may severely harm our business
We rely on dealers who can provide high quality sales and support services. As
with our distributors, we compete with other telecommunications systems
providers for our dealers' business, as our dealers generally market competing
products. If a dealer promotes a competitor's products to the detriment of our
products or otherwise fails to market our products and services effectively, we
could lose market share. In addition, the loss of a key dealer or failure of
dealers to provide adequate customer service could cause our business to
suffer. If we insufficiently train our dealers to sell, install and service our
products, our business will suffer.
Software or hardware errors may seriously harm our business and damage our
reputation
Users expect telephone systems to provide a high level of reliability.
Telephony server products such as ours are inherently complex and may contain
undetected software or hardware errors. We have detected and may continue to
detect errors and product defects in connection with our installed base of
products, new product releases and product upgrades. For example, a small
number of our boards failed and were returned. We have replaced these boards
and made certain design changes. We cannot be sure that the problem has been
fully addressed and that similar or different problems may not occur in
existing or new boards in the future. In addition, end users may install,
maintain and use our products improperly or for purposes for which they were
not designed. These problems may degrade or terminate the operation of our
products, which could cause end users to lose telephone service, cause us to
incur significant warranty and repair costs, damage our reputation and cause
significant customer relations problems. Any significant delay in the
commercial introduction of our products due to errors or defects, any design
modifications required to correct these errors or defects or any negative
effect on customer satisfaction as a result of errors or defects could
seriously harm our business, financial condition and results of operations.
Any claims brought because of problems with our products or services could
seriously harm our business, financial condition and results of operations. We
currently offer a one-year hardware guarantee to end-users. If our products
fail within the first year, we face replacement costs. Our insurance policies
may not provide sufficient or any coverage should a claim be asserted. In
addition, our introduction of products and systems with reliability, quality,
or compatibility problems could result in reduced revenues, uncollectible
accounts
9
<PAGE>
receivable, delays in collecting accounts receivable, warranties and additional
costs. Errors might be found in our products and systems after commencement of
commercial deployment, resulting in product redevelopment costs and loss of, or
delay in, market acceptance. Further we may experience significant product
returns in the future. Any of these events could have a material adverse effect
on our business, financial condition, and results of operations.
If we do not manage our growth effectively, our business will suffer
We have expanded our operations rapidly since our inception. In order to grow,
we will need to expand or enhance our management, manufacturing, research and
development, sales and marketing capabilities. We may not be able to hire the
management, staffing, or other resources required. We may not be able to
install adequate control systems in an efficient and timely manner, and our
current or planned operational systems, procedures and controls may not be
adequate to support our future operations. Difficulties in installing and
implementing new systems, procedures and controls may significantly burden our
management and our internal resources. Delays in the implementation of new
systems or operational disruptions when we transition to new systems would
impair our ability to accurately forecast sales demand, manage our product
inventory, and record and report financial and management information on a
timely and accurate basis. We may not be successful in managing any future
growth.
Our planned expansion in international markets will involve new risks
For the six months ended March 31, 1999, approximately 10.7% of our net
revenues were outside of the United States. We intend to expand our
international sales and marketing efforts. Our efforts are subject to a variety
of risks associated with conducting business internationally, any of which
could seriously harm our business, financial condition, and results of
operations. These risks include:
. import or export licensing and product certification requirements;
. tariffs, duties, price controls or other restrictions on foreign
currencies or trade barriers imposed by foreign countries, especially on
technology;
. potential adverse tax consequences, including restrictions on repatriation
of earnings;
. seasonal reductions in business activity in parts of the world;
. fluctuations in foreign currency exchange rates, which could make our
products relatively more expensive in foreign markets;
. changes in regulatory requirements;
. burdens of complying with and enforcing a wide variety of foreign laws,
particularly with respect to intellectual property and license
requirements;
. difficulties and costs of staffing and managing foreign operations;
. political instability; and
. the impact of recessions in economies outside of the United States.
Evolving standards may delay our product introductions, increase our product
development costs or cause end users to defer or cancel plans to purchase our
products, any of which could adversely effect our business
The standards in our market are still evolving. These standards are designed to
ensure that server-based telecommunication products from different
manufacturers can operate together. Some of these standards are proposed by
other participants in our market, including some of our competitors, and
include proprietary technology. In recent years, these standards have changed,
and new standards have been proposed, in response to developments in our
market. Our failure to conform our products to existing or future standards may
limit their acceptance by market participants. We may not anticipate which
standards will achieve the broadest
10
<PAGE>
acceptance in our market in the future, and we may take a significant amount of
time and expense to adapt our products to these standards. We may also have to
pay additional royalties to developers of proprietary technologies that become
standards in our market. These delays and expenses may seriously harm our
results of operations. In addition, customers and users may defer or cancel
plans to purchase our products due to concerns about the ability of our
products to conform to existing standards or to adapt to new or changed
standards, and this could seriously harm our results of operations.
Our market is subject to rapid technological change; if we do not keep up with
this change our business may not grow
The market for server-based telecommunications systems is subject to:
. rapid technological change;
. frequent new product introductions;
. changing customer requirements for new products and features; and
. multiple, competing and evolving industry standards.
In particular, we expect that increasing acceptance of IP-based communications
systems will require us to rapidly develop and adapt our products to remain
competitive. For example, the open architectural standards for the data
network, over which businesses send their data communications, are not
universally followed. We must therefore decide which open standards to use with
our products and determine which application programs are most popular. As a
result, the life cycles of our products are difficult to estimate. To be
competitive, we will need to develop and market new products and product
enhancements that respond to technological changes or evolving industry
standards on a timely and cost-effective basis. Introduction of new products
could require us to write off existing inventory as obsolete. Our failure to
produce technologically competitive products and product enhancements in a
cost-effective manner and on a timely basis would seriously harm our business,
financial condition and results of operations.
Without additional qualified personnel, our business will suffer
We depend, in large part, on our ability to attract and retain highly skilled
personnel, particularly engineers, sales personnel and marketing personnel. We
need highly trained technical personnel to design and support our server-based
telecommunications systems. In addition, we need highly trained sales and
marketing personnel to expand our marketing and sales operations in order to
increase market awareness of our products and generate increased revenues.
Competition for highly trained personnel is intense, especially in the San
Francisco Bay area where most of our operations are located. We cannot be
certain that we will be successful in our recruitment and retention efforts. If
we fail to attract or retain qualified personnel or suffer from delays in
hiring required personnel, our business, financial condition and results of
operations may be seriously harmed.
We may face infringement issues that could harm our business
We cannot be certain that our products do not, or will not, infringe patents,
trademarks, copyrights or other intellectual property rights held by third
parties. We may be subject to claims relating to the intellectual property of
others in the ordinary course of business.
Generally, litigation related to these claims may be necessary to determine the
scope and validity of others' proprietary rights, to enforce any patents issued
to us or to prevent unauthorized use of our proprietary information by third
parties. This litigation could be costly and time consuming. An adverse outcome
could limit our ability to prevent third parties from using information or
technology that we consider proprietary, subject us to significant liabilities
to third parties, require us to obtain licenses from third parties or require
us to cease sales of one or more of our products and possibly alter the design
of those products, any of which could materially harm our business. Any
licenses required under any other third-party patents or proprietary
11
<PAGE>
rights may not be available on acceptable terms, if at all. We believe that an
increasing portion of our revenues in the future will come from sales of
software applications for our hardware products. The software market has
traditionally experienced widespread unauthorized reproduction of products in
violation of developers' intellectual property rights. This activity is
difficult to detect, and legal proceedings to enforce developers' intellectual
property rights are often burdensome and involve a high degree of uncertainty
and substantial costs.
Our business may be affected by government regulation and legal uncertainties
At present, there are few laws or regulations that specifically address access
to or commerce on the Internet, including the transmission of voice over IP. In
April 1998, the Federal Communications Commission submitted a report to
Congress stating that it may regulate certain Internet services if it
determines that such Internet services are functionally equivalent to
conventional telecommunications services. The increasing growth of the IP
telephony market and popularity of IP telephony products and services, however,
heighten the risk that national governments will seek to regulate the
transmission of voice communications over networks such as the Internet. In
addition, large and sophisticated telecommunications companies may devote
substantial lobbying efforts to influence the regulation of the IP telephony
market so as to benefit their interests, which may be contrary to our
interests. These regulations may include, for example, assessing access or
settlement charges, imposing tariffs or imposing regulations based on
encryption concerns or the characteristics and quality of products and
services. We cannot predict the impact, if any, that future legislation, legal
decisions or regulations concerning the Internet may have on our business,
financial condition or results of operations.
In addition, many countries have standards for safety and other certifications
that must be met for our products to be legally sold in those countries.We
cannot guarantee for all countries or for any individual country that our
products currently meet such standards or that our products will meet any
future standards. If our products cannot meet such standards, our business,
financial condition and results of operations could be seriously harmed.
We sell through dealers and distributors, which limits our ability to control
the timing of our sales
We do not recognize revenue from the sale of our products to our distributors
until these products are sold to either dealers or end users. We have limited
or no control over the timing of product sales to dealers and end users. Our
lack of control over the revenue which we recognize from our disributors' sales
to dealers and end users limits our ability to predict revenue for any given
period.
Any failure by us to protect our intellectual property could harm our business
and competitive position
Our success depends, to a certain extent, upon our proprietary technology. We
currently rely on a combination of patent, trade secret, copyright and
trademark law, together with non-disclosure and invention assignment
agreements, to establish and protect the proprietary rights in the technology
used in our products.
Although we have filed patent applications, we are not certain that our patent
applications will result in the issuance of patents, or that any patents issued
will provide commercially significant protection to our technology. In
addition, others may independently develop substantially equivalent proprietary
information not covered by patents to which we own rights, may obtain access to
our know-how, or may claim to have issued patents that prevent the sale of one
or more of our products. Also, it may be possible for third parties to obtain
and use our proprietary information without our authorization. Further, the
laws of some countries, such as those in Japan, one of our target markets, may
not adequately protect our intellectual property or may be uncertain. Our
success also depends on trade secrets that cannot be patented and are difficult
to protect.
If we fail to protect our proprietary information effectively, or if third
parties use our proprietary technology without authorization, our competitive
position and business will suffer.
12
<PAGE>
We face risks associated with the assembly of our products
We perform final assembly, software installation and testing of our products at
our facility in Fremont, California. Our facilities are located on or near
known earthquake fault zones and are vulnerable to damage from fire, floods,
earthquakes, power loss, telecommunications failures and similar events. If
such a disaster occurs, our ability to perform final assembly, software
installation and testing of our products at our facilities would be seriously,
if not completely, impaired. If we were unable to identify and qualify an
alternative location for or provider of these functions in a timely and cost-
effective manner, our business, financial condition and results of operations
would suffer. We cannot be sure that the insurance we maintain against fires,
floods, earthquakes and general business interruptions will be adequate to
cover our losses in any particular case.
Based on volume or customer requirements, we may begin outsourcing some
assembly and test functions. In addition, we may determine that we need to
establish assembly and test operations overseas to better serve our
international customers. Establishing overseas assembly and test operations may
be more difficult or take longer than we anticipate. This outsourcing strategy
involves certain risks, including the potential lack of adequate capacity and
reduced control over delivery schedules, manufacturing yield, quality, and
costs. In the event that any significant subcontractor were to become unable or
unwilling to continue to manufacture or test our products in the required
volumes, we would have to identify and qualify acceptable replacements. Finding
replacements could take time, and we cannot be sure that additional sources
would be available to us on a timely basis. Any delay or increase in costs in
the assembly and testing of products by third-party subcontractors could
seriously harm our business, financial condition, and results of operations.
We may need to raise additional capital, but the availability of additional
financing is uncertain
We expect the net proceeds from this offering and recent private equity
financings to be sufficient to meet our working capital and capital expenditure
needs for at least the next 12 months. Subsequently, we may need to raise
additional funds, and additional financing may not be available on favorable
terms, or at all. We may also require additional capital to acquire or invest
in complementary businesses or products, or obtain the right to use
complementary technologies. If we cannot raise funds, if needed, on acceptable
terms, we may not be able to develop or enhance our products, take advantage of
future opportunities, or respond to competitive pressures or unanticipated
requirements, which could seriously harm our business, financial condition, and
results of operations. If additional funds are raised through the issuance of
equity securities, the net tangible book value per share may decrease, the
percentage ownership of then current stockholders may be diluted, and these
equity securities may have rights, preferences or privileges senior to those of
the holders of our outstanding securities.
We face year 2000 risks
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. As a result, within
this year, computer systems and software, used by many companies may need to be
upgraded to comply with these "Year 2000" requirements. Our failure to complete
implementation of the required changes to address Year 2000 requirements prior
to the year 2000 might result in significant difficulties in our administration
of management information systems and consequently have a material adverse
effect on our business, financial condition and results of operations. We have
not yet completed a review of the preparations of all of our major suppliers,
distributors and shippers to meet the Year 2000 requirements. We therefore do
not have a basis to assess the impact, if any, that the Year 2000 requirements
will have on our suppliers, distributors, dealers and other shippers and
consequently on us. Failure by our suppliers, distributors, dealers and
shippers and other parties with which we do business to address Year 2000
requirements could negatively affect our ability to distribute products for
some period of time and otherwise disrupt our business operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Compliance" for a more complete discussion of these
matters.
13
<PAGE>
Our certificate of incorporation and bylaws and Delaware law will contain
provisions that could deter takeovers and prevent you from receiving a premium
for your shares
Provisions of our certificate of incorporation, our bylaws and Delaware law
(upon our reincorporation in Delaware) could make it more difficult for a third
party to acquire us, even if doing so might be beneficial to our stockholders.
For example, our certificate of incorporation to be effective upon the closing
of this offering will provide that our board may issue up to 5,000,000 shares
of preferred stock without stockholder approval. See "Description of Capital
Stock" for a more complete discussion of these matters.
There is currently no public market for our common stock, and our stock price
may be volatile, exposing us to securities class action litigation
Prior to this offering, you could not buy or sell our common stock in a public
market. An active public market for our common stock may not develop or be
sustained after this offering. Although the initial public offering price will
be fixed, the market price for our common stock will vary from the initial
offering price after this offering. The market price of our common stock may
fluctuate significantly, which is particularly common among high technology
companies. Factors which may contribute to such fluctuations, some of which are
beyond our control, include:
. failure to meet the published expectations of securities analysts for a
given quarterly period;
. changes in financial estimates of our revenue and operating results by
securities analysts;
. variations in quarterly operating results;
. loss of or decrease in sales to a major customer or failure to complete
significant transactions;
. announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
. introductions of new products or new pricing policies by us or our
competitors;
. changes in market values of comparable companies;
. any future sales by us, or any of our officers, directors or affiliates,
of common stock or other securities;
. additions or departures of key personnel; and
. commencement of our involvement in litigation.
The stock market in general, and the stock prices of Internet-related companies
in particular, have recently experienced extreme volatility, which has often
been unrelated to the operating performance of any particular company or
companies. Our stock price could decline below our initial public offering
price regardless of our actual operating performance. In the past, securities
class action litigation has often been brought against companies following
periods of volatility in their stock prices. We may in the future be the target
of similar litigation. Securities litigation could result in substantial costs
and divert our management's time and resources, which could harm our business,
financial condition, and operating results. In addition, an active market for
our stock may not develop after this offering.
Our management may not use the proceeds of this offering effectively
Our management has broad discretion over the use of a substantial portion of
the proceeds of this offering. Accordingly, it is possible that our management
may allocate the proceeds differently than investors in this offering would
have preferred, or that we will fail to maximize our return on the proceeds.
14
<PAGE>
Investors will incur immediate dilution because the initial public offering
price of a share of our stock will exceed its book value
The initial public offering price of our common stock will be substantially
higher than the book value per share of the outstanding common stock
immediately after the offering. If you purchase common stock in this offering,
you will incur immediate dilution of approximately in the book value per share
of common stock from the price you pay. This calculation assumes you purchase
the common stock for per share. See "Dilution."
Substantial future sales of our common stock in the public market may depress
our stock price
Our current stockholders hold a substantial number of shares, which they will
be able to sell in the public market in the near future. All of the
shares sold in this offering will be freely tradeable, with the
other shares outstanding, based on the number of shares outstanding as of
, 1999, being restricted securities as defined in Rule 144 of the
Securities Act of 1933. Approximately of these restricted shares
will be freely tradeable beginning 180 days after the effective date of this
offering, and the remainder will become freely tradeable at various times
thereafter. Sales of a substantial number of shares of our common stock after
this offering could cause our stock price to fall. In addition, the sale of
these shares could impair our ability to raise capital through the sale of
additional stock. See "Shares Eligible for Future Sale."
Our officers and directors and their affiliates will exercise significant
control
Upon completion of this offering, our executive officers and directors and
their affiliates will beneficially own, in the aggregate, approximately %
of our outstanding common stock. As a result, these stockholders will be able
to exercise significant control over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions, which could delay or prevent someone from acquiring or
merging with us. See "Principal Stockholders."
15
<PAGE>
Forward-Looking Statements
Some of the information in this prospectus contains forward-looking statements
within the meaning of the federal securities laws. These statements include,
among others, statements regarding the following: expected product revenues as
a percentage of sales, expense levels, use of proceeds, liquidity and expansion
strategy and possible effects of changes in government regulation. These
statements may be found under "Prospectus Summary," "Risk Factors," "Business,"
"Use of Proceeds," "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Forward-looking statements typically are identified
by use of terms such as "may", "will", "expect", "anticipate", "intend",
"estimate", and similar words, although some forward-looking statements are
expressed differently. You should be aware that our actual results could differ
materially from those contained in the forward-looking statements due to a
number of factors, including insufficient capital resources, inability to
integrate acquired businesses successfully, adverse economic conditions and
unanticipated difficulties in product development. You should also consider
carefully the statements under "Risk Factors" and other sections of this
prospectus, which address additional factors that could cause our actual
results to differ from those set forth in the forward-looking statements.
Use of Proceeds
We estimate that the net proceeds from the sale of the shares of common stock
we are offering will be approximately $ . If the underwriters fully
exercise the over-allotment option, the net proceeds of the shares we sell will
be $ . "Net proceeds" is what we expect to receive after paying the
underwriting discount and other expenses of the offering. For the purpose of
estimating net proceeds, we are assuming that the initial public offering price
will be $ per share.
We intend to use the net proceeds of this offering for working capital and
general corporate purposes. We may also use a portion of the net proceeds for
potential acquisitions of business or technologies that are complementary to
our business, although we have no current agreements or commitments in this
regard.
The timing and amount of our actual expenditures will be based on many factors,
including the status of our research and development efforts and cash flow from
operations.
Until we use the net proceeds of the offering, we intend to invest the funds in
short-term, investment grade, interest-bearing securities.
Dividend Policy
We have never declared or paid any cash dividends on our capital stock. We
currently expect to retain future earnings, if any, to support operations and
to finance the growth and development of our business. Therefore, we do not
expect to pay cash dividends in the foreseeable future.
16
<PAGE>
Capitalization
The following table shows:
. The capitalization of AltiGen on March 31, 1999, as a California
corporation.
. The capitalization of AltiGen on March 31, 1999, assuming the completion
of the offering at an assumed initial public offering price of $ per
share and the receipt of the net proceeds of the offering.
You should read the following table with our consolidated financial statements
and related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
March 31, 1999
------------------
As
Actual Adjusted
-------- --------
(in thousands)
<S> <C> <C>
Short-term debt......................................... $ 378 $
======== ========
Shareholders' equity:
Common stock; no par value; 40,000,000 shares
authorized, 1,985,165 shares issued and outstanding,
actual; 60,000,000 shares authorized, 14,757,255
shares issued and outstanding, as adjusted............ 2,152
Convertible preferred stock; no par value; 20,000,000
shares authorized, 12,772,090 shares issued and
outstanding, actual, 5,000,000 shares authorized, no
shares issued and outstanding, as adjusted............ 18,882 --
Deferred stock compensation............................ (1,938) (1,938)
Accumulated deficit.................................... (12,994) (12,994)
-------- --------
Total shareholders' equity............................ 6,102
-------- --------
Total capitalization................................ $ 6,102 $
======== ========
</TABLE>
This table excludes 2,716,844 shares of common stock issuable upon exercise of
outstanding options as of March 31, 1999, at a weighted average price of $0.60
per share.
17
<PAGE>
Dilution
AltiGen's net tangible book value on March 31, 1999 was approximately $
or per share. "Net tangible book value" is total assets minus the sum of
liabilities and intangible assets. "Net tangible book value per share" is net
tangible book value divided by the total number of shares outstanding before
the offering.
After giving effect to adjustments relating to the offering, AltiGen's pro
forma net tangible book value on March 31, 1999, would have been $ or
$ per share. The adjustments made to determine pro forma net tangible book
value per share are the following:
. An increase in the total assets to reflect the net proceeds of the
offering as described under "Use of Proceeds" assuming that the initial
public offering price will be $ per share.
. The addition of the number of shares offered by this prospectus to the
number of shares outstanding.
The following illustrates the pro forma increase in net tangible book value of
$ per share and the dilution (the difference between the offering price
per share and net tangible book value per share) to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $
Net tangible book value per share as of ............ $
Increase in net tangible book value per share attributable to
the offering...................................................
-----
Pro forma net tangible book value per share as of
after giving
effect to the offering.........................................
-----
Dilution per share to new investors in the offering............. $
=====
</TABLE>
The following table shows the difference between existing stockholders and new
investors with respect to the number of shares purchased from AltiGen, the
total consideration paid and the average price paid per share. The table
assumes that the initial public offering price will be $ per share.
<TABLE>
<CAPTION>
Total
Shares Purchased Consideration
---------------- ----------------- Average Price
Number Percent Amount Percent Per Share
-------- ------- --------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... % $ % $
New investors...............
-------- ----- --------- -----
Total..................... 100.0% $ 100.0%
======== ===== ========= =====
</TABLE>
The table above assumes no exercise of any stock options outstanding as of
March 31, 1999. As of March 31, 1999, there were options outstanding to
purchase 2,716,844 shares of common stock at the weighted average exercise
price of $0.60 per share. To the extent any of these options are exercised,
there will be further dilution to investors. See "Capitalization,"
"Management--Employee Benefit Plan," "Description of Capital Stock" and Note 5
of Notes to Consolidated Financial Statements.
18
<PAGE>
Selected Consolidated Financial Data
This section presents selected historical financial data of AltiGen, as a
California corporation. You should read carefully the financial statement
included in this prospectus, including the notes to the financial statements.
The selected data in this section are not intended to replace the financial
statements.
AltiGen derived the consolidated statement of operations data for the year
ended September 30, 1995 and consolidated balance sheet data as of September
30, 1995 from our unaudited consolidated financial statements that are not
included in this prospectus. AltiGen derived the consolidated statement of
operations data for the years ended September 30, 1996, 1997 and 1998, and
consolidated balance sheet data as of September 30, 1997 and 1998 from the
audited consolidated financial statements in this prospectus. Those financial
statements were audited by Arthur Andersen LLP, independent public accountants.
AltiGen derived the consolidated balance sheet data as of September 30, 1996
from audited consolidated financial statements that are not included in the
prospectus. AltiGen derived the consolidated statement of operations data for
the six months ended March 31, 1998 and 1999, and consolidated balance sheet
data as of March 31, 1999 from the unaudited consolidated financial statements
included in this prospectus. AltiGen's management believes that the unaudited
historical financial statements contain all adjustments needed to present
fairly the information included in those statements, and that the adjustments
made consist only of normal recurring adjustments. Results for the six months
ended March 31, 1999 are not necessarily indicative of the results for the year
or for any future period.
<TABLE>
<CAPTION>
Six Months
Fiscal Year Ended September 30, Ended March 31,
------------------------------------- ----------------
1995 1996 1997 1998 1998 1999
----------- ------- ------- ------- ------- -------
(Unaudited) (Unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues, net........... -- $ 229 $ 1,379 $ 3,890 $ 1,510 $ 2,356
Cost of revenues........ -- 238 1,040 2,520 1,187 1,223
------- ------- ------- ------- ------- -------
Gross profit (loss).... -- (9) 339 1,370 323 1,133
------- ------- ------- ------- ------- -------
Operating expenses:
Research and develop-
ment.................. $ 700 753 1,498 1,927 799 2,036
Sales and marketing.... 72 446 1,448 2,770 1,106 1,779
General and administra-
tive.................. 329 547 718 675 339 702
Deferred stock compen-
sation ............... -- -- -- 39 -- 108
------- ------- ------- ------- ------- -------
Total operating ex-
penses............... 1,101 1,746 3,664 5,411 2,244 4625
------- ------- ------- ------- ------- -------
Loss from operations.... (1,101) (1,755) (3,325) (4,041) (1,921) (3,492)
------- ------- ------- ------- ------- -------
Interest and other in-
come, net.............. 33 124 206 246 89 199
------- ------- ------- ------- ------- -------
Net loss................ $(1,068) $(1,631) $(3,119) $(3,795) $(1,832) $(3,293)
======= ======= ======= ======= ======= =======
Basic net loss per
share................. $ (1.06) $ (1.28) $ (2.34) $ (2.75) $ (1.37) $ (1.91)
======= ======= ======= ======= ======= =======
Shares used in comput-
ing basic net loss per
share................. 1,007 1,272 1,330 1,378 1,339 1,721
</TABLE>
<TABLE>
<CAPTION>
September 30,
------------------------------------- March 31,
1995 1996 1997 1998 1999
----------- ------- ------- ------- ----------
(Unaudited) (Unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash, cash equivalents
and short term invest-
ments.................. $ 1,768 $ 3,152 $ 3,093 $ 8,057 $ 4,243
Working capital......... 1,948 3,501 3,535 8,698 5,243
Total assets............ 2,076 3,762 4,714 11,269 8,521
Convertible preferred
stock.................. 3,159 6,348 9,671 18,882 18,882
Accumulated deficit..... (1,156) (2,787) (5,906) (9,701) (12,994)
Total shareholders' eq-
uity (deficit)......... (2,020) 3,763 3,787 9,251 6,102
</TABLE>
19
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
You should read this discussion with the financial statements and other
financial information included in the prospectus. The following discussion
contains forward-looking statements. Our actual results may differ materially
from those discussed in these forward-looking statements. Factors that may
cause future results to differ materially from those discussed in the forward-
looking statements include, but are not limited to, those discussed in "Risk
Factors," the following paragraph and elsewhere in this prospectus.
Overview
We are a leading provider of server-based telecommunications systems. We were
incorporated in May 1994 and began operations in July 1994. From inception
through July 1996, we were a development stage company and had no revenues.
During this period, our operating activities consisted primarily of developing
our initial product, recruiting personnel, raising capital and building our
corporate infrastructure. We first recognized revenues from product sales of
our Quantum board and AltiWare software in July 1996. We generated net revenues
of $229,000 in fiscal year 1996, $1.4 million in fiscal year 1997 and $3.9
million in fiscal year 1998. As of March 31, 1999, we had an accumulated
deficit of $13.0 million.
We derive our revenues from sales of our AltiServ system, which includes
Quantum boards, Triton boards and AltiWare software. Software sales currently
make up less than 10% of our net revenues. Although we cannot assure you that
this will be the case, we currently anticipate that software sales will
comprise a greater portion of our net revenues in the future. Product revenues
consist of sales to end users (including dealers) and to distributors. Revenues
from product sales to end users are recognized upon shipment. We defer
recognition of sales to distributors until such distributors resell our
products to their customers. Under our distribution contracts, a distributor
has the right in some circumstances to return products it determines are
overstocked, so long as it provides an offsetting purchase order for products
in an amount equal to or greater than the dollar value of the returned
products. In addition, we afford distributors protection from subsequent price
reductions.
We market and sell our products primarily through a small number of our
distributors and a network of over 400 dealers worldwide. In fiscal year 1998,
distributor Tech Data accounted for 24.4% of our net revenues, and distributor
Ingram Micro accounted for 3.1% of our net revenues. For the six months ended
March 31, 1999, Tech Data accounted for 26.9% of our net revenues and Ingram
Micro accounted for 20.5% of our net revenues. To date, we have sold only a
small amount of our products to original equipment manufacturers, or OEMs, but
we currently anticipate that sales to OEMs could account for a significant
portion of our sales in the future. For the six months ended March 31, 1999,
sales to customers outside the United States accounted for approximately 10.7%
of net revenues. We currently anticipate that international sales will account
for an increasing portion of our sales in the future.
Our cost of revenues consists of component and material costs, direct labor
costs, provisions for excess and obsolete inventory, warranty costs and
overhead related to manufacturing our products. Software sales typically carry
a higher gross margin than hardware sales.
In connection with stock option grants, we recorded deferred stock compensation
on our consolidated balance sheets of $155,000 in fiscal year 1998 and
$1,930,000 in fiscal year 1999, respectively. Deferred stock compensation
expense reflects the amortization of stock compensation charges resulting from
granting stock options at prices below the deemed fair value of our common
stock. These amounts are being amortized using the straight line method over
the vesting period of the stock options. Of the total deferred stock
compensation, approximately $39,000 was amortized in fiscal year 1998. We will
amortize approximately $369,000 of this deferred stock compensation in fiscal
year 1999, $521,000 in fiscal year 2000, $521,000 in fiscal year 2001, $483,000
in fiscal year 2002 and $152,000 in fiscal year 2003.
20
<PAGE>
We have experienced operating losses and negative cash flows from operations in
each quarterly and annual period since our inception and we currently expect to
continue to incur losses for the foreseeable future. We have not recognized any
future tax benefits of our cumulative net operating losses due to uncertainty
as to future realizability.
Results of Operations
The following table sets forth consolidated statements of operations data for
the periods indicated as a percentage of net revenues.
<TABLE>
<CAPTION>
Six Months
Fiscal Year Ended Ended March
September 30, 31,
------------------------ ---------------
1996 1997 1998 1998 1999
------ ------ ------ ------ ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Revenues, net................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............. 104.1 75.4 64.8 78.6 51.9
------ ------ ------ ------ ------
Gross profit (loss)......... (4.1) 24.6 35.2 21.4 48.1
Operating expenses:
Research and development.... 328.5 108.7 49.6 52.9 86.4
Sales and marketing......... 194.3 105.0 71.2 73.2 75.5
General and administrative.. 238.5 52.1 17.3 22.5 29.8
Deferred stock compensa-
tion....................... -- -- 1.0 -- 4.6
------ ------ ------ ------ ------
Total operating expenses.... 761.3 265.8 139.1 148.6 196.3
------ ------ ------ ------ ------
Loss from operations......... (765.4) (241.2) (103.9) (127.2) (148.2)
Interest and other income,
net......................... 54.0 15.0 6.3 5.9 8.5
------ ------ ------ ------ ------
Net loss................... (711.4)% (226.2)% (97.6)% (121.3)% (139.7)%
====== ====== ====== ====== ======
</TABLE>
Six Months Ended March 31, 1999 Compared to Six Months Ended March 31, 1998
Revenues, net. Revenues consist of sales to end users (including dealers) and
to distributors. Net revenues increased to $2.4 million in the first six months
of fiscal year 1999 from $1.5 million in the first six months of fiscal year
1998, representing an increase of 56.0%. This change resulted primarily from
increased sales of our AltiServ systems. In the first six months of fiscal year
1999, sales to Tech Data accounted for 26.9% of our net revenues and sales to
Ingram Micro accounted for 20.5% of our net revenues.
Cost of revenues. Cost of revenues in both the first six months of fiscal year
1999 and the first six months of fiscal year 1998 were approximately $1.2
million. Cost of revenues consists primarily of component and material costs,
direct labor costs, provisions for excess and obsolete inventory, warranty
costs and overhead related to manufacturing our products. Cost of revenues
decreased as a percentage of net revenues in the first six months of fiscal
year 1999 compared to the first six months of fiscal year 1998. This decrease
was primarily as a result of production efficiencies as well as lower component
and overhead costs due to increased production. In addition, the cost of
revenues for the first six months of fiscal year 1998 includes a provision for
excess and obsolete inventory of $301,000 related primarily to the impact of
design changes to our Quantum product. As a result, gross profit increased to
$1.1 million in the first six months of fiscal year 1999 from $323,000 in the
first six months of fiscal year 1998.
Research and development expenses. Research and development expenses increased
to $2.0 million for the first six months of fiscal year 1999 from $799,000 for
the first six months of fiscal year 1998. Research and development expenses
consist principally of salaries and related personnel expenses, consultant fees
and prototype expenses related to the design, development and testing of our
products. We expense our research
21
<PAGE>
and development costs as incurred. The increase was primarily due to our hiring
additional engineers, as well as opening of a research and development office
in China, and increases in depreciation and other related charges due to
increases in capital spending on design and simulation software. We currently
intend to increase research and development expenses in absolute dollars in the
forseeable future.
Sales and marketing expenses. Sales and marketing expenses increased to $1.8
million for the first six months of fiscal year 1999 from $1.1 million for the
first six months of fiscal year 1998, representing an increase of 60.9%. Sales
and marketing expenses consist of compensation, commissions and related costs
for personnel engaged in sales and marketing functions, trade show expenses,
selling and promotional programs, marketing programs and related expenses. This
increase was primarily due to hiring additional sales and marketing personnel,
increasing advertising and promotional activities and increasing training to
identify and educate new qualified authorized dealers. We currently intend to
increase sales and marketing expenses in absolute dollars as we continue to
pursue new channels and markets and to promote customer and end-user awareness
of the features and benefits of our products.
General and administrative expenses. General and administrative expenses
increased to $702,000 for the first six months of fiscal year 1999 from
$339,000 for the first six months of fiscal year 1998. General and
administrative expenses consist primarily of salaries and related expenses for
executive, finance and administrative personnel, recruiting expenses,
professional fees and other general corporate expenses. The increase was
primarily due to the hiring of additional personnel in our finance and
accounting, management information systems and administrative groups, an
increase in related facilities expenses and professional services expenses. We
currently intend to increase general and administrative expenses in absolute
dollars as we add personnel and incur additional costs related to the growth of
our business.
Deferred stock compensation expenses. Deferred stock compensation expenses were
$108,000 in the first six months of fiscal year 1999. We did not record any
deferred stock compensation expenses in the first six months of fiscal year
1998.
Interest and other income, net. Net interest and other income increased to
$199,000 in the first six months of fiscal year 1999 from $89,000 in the first
six months of fiscal year 1998. This increase was due primarily to higher
average cash and cash equivalents balances between periods.
Fiscal Year Ended September 30, 1998 Compared to Fiscal Year Ended September
30, 1997
Revenues, net. Net revenues increased to $3.9 million in fiscal year 1998 from
$1.4 million in fiscal year 1997, representing an increase of 182.1%. This
increase resulted primarily from increased sales of our Quantum boards and
increased sales due to the addition of Tech Data and Ingram Micro as
distributors of our products. Sales to Tech Data accounted for 10.0% of our net
revenues in fiscal year 1997 and for 24.4% of our net revenues in fiscal year
1998.
Cost of revenues. Cost of revenues increased to $2.5 million in fiscal year
1998 from $1.0 million in fiscal year 1997. This increase was due primarily to
increased sales of our products and higher provision for excess and obsolete
inventory related primarily to the impact of design changes in our Quantum
product, offset by higher volume of lower cost software products and cost
reductions in our manufacturing process. As a result, gross profit increased to
$1.4 million in fiscal year 1998 from $339,000 in fiscal year 1997.
Research and development expenses. Research and development expenses increased
to $1.9 million in fiscal year 1998 from $1.5 million in fiscal year 1997,
representing an increase of 28.7%. The increase was primarily related to
increases in personnel and personnel related costs and increases in the
depreciation and other related charges due to capital spending on design and
simulation software.
Sales and marketing expenses. Sales and marketing expenses increased to $2.8
million in fiscal year 1998 from $1.4 million in fiscal year 1997, representing
an increase of 91.3%. The increase was primarily due to
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<PAGE>
the hiring of additional sales and marketing personnel as well as increased
spending for marketing promotional programs and materials, advertising and
trade show expenses.
General and administrative expenses. General and administrative expenses
remained relatively flat at $675,000 in fiscal year 1998, compared to $718,000
in fiscal year 1997.
Deferred stock compensation expenses. Deferred stock compensation expenses were
$39,000 in fiscal year 1998. We did not record any deferred stock compensation
expenses in fiscal year 1997.
Interest and other income, net. Net interest and other income increased to
$246,000 in fiscal year 1998 from $206,000 in fiscal year 1997, representing an
increase of 19.4%. This increase was due to higher average cash balances in
fiscal year 1998 due to our preferred stock financings.
Fiscal Year 1996
We began selling products in July 1996, and net revenues for fiscal year 1996
consisted primarily of sales of our AltiServ system. Cost of revenues of
$239,000 exceeded net revenues due to the impact of establishing additional
production capacity. Operating expenses generally were high as a percentage of
net revenues compared to subsequent periods due primarily to the fact that we
incurred operating costs for the full year but sold products only in the last
three months of the year. We did not incur any deferred stock compensation
expenses in fiscal year 1996. Net interest income of $124,000 primarily
represented interest earned on cash balances resulting from preferred stock
financings.
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<PAGE>
Quarterly Results of Operations
The following tables set forth the unaudited consolidated statement of
operations data for each of the six quarters ended March 31, 1999, as well as
that data expressed as a percentage of our total revenues for the quarters
presented. This unaudited quarterly information has been prepared on the same
basis as our audited consolidated financial statements and, in the opinion of
our management, reflects all normal recurring adjustments that we consider
necessary for a fair presentation of the information for the periods presented.
Operating results for any quarter are not necessarily indicative of results for
any future period.
<TABLE>
<CAPTION>
Quarter Ended
---------------------------------------------------------------------
December 31, March 31, June 30, September 30, December 31, March 31,
1997 1998 1998 1998 1998 1999
------------ --------- -------- ------------- ------------ ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenues, net........... $ 581 $ 929 $1,049 $ 1,331 $ 917 $ 1,439
Cost of revenues........ 670 517 561 772 478 745
------- ----- ------ ------- ------- -------
Gross profit (loss).... (89) 412 488 559 439 694
Operating expenses:
Research and develop-
ment.................. 371 428 549 579 854 1,182
Sales and marketing.... 477 629 720 944 703 1,076
General and administra-
tive.................. 166 173 163 173 300 402
Deferred stock
compensation.......... -- -- -- 39 17 91
------- ----- ------ ------- ------- -------
Total operating
expenses............. 1,014 1,230 1,432 1,735 1,874 2,751
------- ----- ------ ------- ------- -------
Loss from operations.... (1,103) (818) (944) (1,176) (1,435) (2,057)
Interest and other in-
come, net.............. 49 40 50 107 93 106
------- ----- ------ ------- ------- -------
Net loss................ $(1,054) $(778) $ (894) $(1,069) $(1,342) $(1,951)
======= ===== ====== ======= ======= =======
As a Percentage of Total
Revenues:
Revenues, net........... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........ 115.4 55.6 53.5 58.0 52.1 51.8
------- ----- ------ ------- ------- -------
Gross profit (loss).... (15.4) 44.4 46.5 42.0 47.9 48.2
Operating expenses:
Research and develop-
ment.................. 63.8 46.1 52.3 43.6 93.1 82.1
Sales and marketing.... 82.1 67.7 68.6 71.0 76.7 74.8
General and administra-
tive.................. 28.5 18.7 15.6 12.9 32.7 27.9
Deferred stock
compensation.......... -- -- -- 2.9 1.8 6.3
------- ----- ------ ------- ------- -------
Total operating
expenses............. 174.4 132.5 136.5 130.4 204.3 191.1
------- ----- ------ ------- ------- -------
Loss from operations.... (189.8) (88.1) (90.0) (88.4) (156.4) (142.9)
Interest and other in-
come, net.............. 8.4 4.4 4.7 8.1 10.2 7.3
------- ----- ------ ------- ------- -------
Net loss................ (181.4)% (83.7)% (85.3)% (80.3)% (146.2)% (135.6)%
======= ===== ====== ======= ======= =======
</TABLE>
Our net product revenues increased in each of the consecutive quarters, except
the quarter ended December 31, 1998, due primarily to the continued acceptance
of our AltiServ system and enhancements to that system, as well as the
introduction of our Triton boards in March 1999. The seasonal decrease in
purchases by our customers in the quarter ended December 31, 1998 was worsened
due primarily to a sales promotion during the quarter ended September 30, 1998,
which may have resulted in end users accelerating purchases that would
otherwise have been made in the December quarter. Our gross profit for the
quarter ended December 31, 1997
24
<PAGE>
decreased as a percentage of net revenues due primarily to a change in the
design of our Quantum boards that caused us to write-off as obsolete our
existing inventory of Quantum boards and related components that could no
longer be used for the new design. Our research and development expenses have
increased in absolute dollars in each of the consecutive quarters, but have
fluctuated as a percentage of net revenues, especially during the first two
quarters of fiscal year 1999 as we hired additional engineers to support
development of our products. Sales and marketing expenses decreased in absolute
terms for the quarter ended December 31, 1998 due primarily to reduced expenses
for advertising from seasonal softness in our market.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily from the sale of
private equity securities. We have raised an aggregate of $18.9 million, net of
offering expenses, through the sale of preferred stock. As of March 31, 1999,
we had cash and cash equivalents of $4.2 million.
Net cash used in our operating activities was $3.4 million for the six months
ended March 31, 1999, was $3.8 million for fiscal year 1998, $3.1 million for
fiscal year 1997, and $1.8 million for fiscal year 1996. Net cash use in
operating activities primarily reflected the impact of the net loss for each of
the periods.
Net cash provided by investing activities was $622,000 for the six months ended
March 31, 1999, which was primarily a result of redemption of short-term
investments. Cash (used in) provided by investing activities for fiscal year
1998 was ($388,000), ($1.0 million) for fiscal year 1997 and $641,000 for
fiscal year 1996. The relative decrease in cash used for investing activities
in the fiscal year 1998 compared to the prior year was primarily due to
decreases in the net cash being invested in the year. The relative increase in
cash used for investing activities for fiscal year 1997 compared to the prior
period was primarily due to an increase in purchases of $207,000 for
engineering capital equipment and a decrease in redemption of short-term
investments of $2.0 million between the periods.
Net cash provided by financing activities was $36,000 for the six months ended
March 31, 1999. Cash provided from financing activities was $9.2 million for
fiscal year 1998, $3.3 million in fiscal year 1997 and $3.2 million in fiscal
1996. The increase in cash provided by investing activities for fiscal year
1998 compared to the prior period was primarily due to $1.4 million in net
proceeds from our issuance of series C preferred stock and $7.8 million in net
proceeds from our issuance of series D preferred stock.
We currently believe that the net proceeds from this offering, together with
the existing cash and cash equivalents balances, will provide us with
sufficient funds to finance our operations through at least the next twelve
months. Our management intends to invest our cash in excess of current
operating requirements in short-term, interest-bearing investment-grade
securities. Subsequently, we may need to raise additional funds, and additional
financing may not be available on favorable terms, if at all. We may also
require additional capital to acquire or invest in complementary businesses or
products, or obtain the right to use complementary technologies. If we cannot
raise funds, if needed, on acceptable terms, we may not be able to develop or
enhance our products, take advantage of future opportunities, or respond to
competitive pressures or unanticipated requirements, which could seriously harm
our business, financial condition, and results of operations. If additional
funds are raised through the issuance of equity securities, the net tangible
book value per share may decrease, the percentage ownership of then current
stockholders may be diluted, and such equity securities may have rights,
preferences or privileges senior to those of the holders of our common stock.
Year 2000 Compliance
The information in this section is a "Year 2000 Readiness Disclosure" as
defined in the Year 2000 Information and Readiness Disclosure Act of 1998 and
contains forward-looking statements. These statements include, but are not
limited to, anticipated costs and the date by which we expect to complete
actions and are based on management's current estimates, which are in turn
based on assumptions about future events, including, but not limited to, the
availability of resources, representations received from third parties and
25
<PAGE>
other factors. There can be no guarantee that these estimates will be achieved,
and actual results could differ materially from those anticipated. Specific
factors that might cause material differences include, but are not limited to,
our ability to identify and remediate all relevant systems, results of year
2000 testing, adequate resolution of year 2000 issues by business and other
third parties that are service providers, suppliers and customers of ours,
unanticipated system costs, the adequacy of and ability to implement
contingency plans and similar uncertainties. The forward-looking statements
made in this year 2000 discussion speak only as of the date on which these
statements are made, and we undertake no obligation to update these forward-
looking statements.
Impact of the year 2000 computer problem. The year 2000 computer problem refers
to the potential for system and processing failures of date-related data as a
result of computer-controlled systems using two digits rather than four to
define the applicable year. For example, computer programs that have time-
sensitive software may recognize a date represented as "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
To date, we have not experienced any year 2000 issues with any of our internal
systems or our products, and we do not expect to experience any of them.
Assessment. The year 2000 problem affects the computers, software and other
equipment that we use, operate or maintain for our operations. Accordingly, we
have organized a program team responsible for monitoring the assessment and
remediation status of our year 2000 issues and reporting to our management.
This project team is currently assessing the potential effect and costs of
remediating year 2000 issues for our internal systems. To date, we have not
obtained independent verification or validation to assure the reliability of
our risk and cost estimates because we do not feel that the scope of our
program warrants this time and expense.
Internal infrastructure. We believe that we have identified most of the major
computers, software applications and related equipment used in connection with
our internal operations that will need to be evaluated to determine if they
must be modified, upgraded or replaced to minimize the possibility of a
material disruption to our business. We are currently assessing the potential
impact of year 2000 issues on these computers, equipment and applications. We
expect to complete this evaluation by July 1999 and will then begin modifying,
upgrading and replacing major systems that we believe have year 2000 issues.
Systems other than information technology systems. In addition to computers and
related systems, the operation of office and facilities equipment, such as fax
machines, security systems and other common devices may have year 2000 issues.
We are currently assessing the potential effect on and the costs of remediating
these issues, if any, for our office equipment and our facilities in Fremont,
California and Shanghai, China.
Products. We have designed our products to be year 2000 compliant and believe
that using our products as documented should not cause any year 2000-related
issues. We have tested and intend to continue to test all of our products for
year 2000 issues. While we believe our products are year 2000 compliant, it is
impractical for us to test our products in every telecommunications systems
environment or with all available combinations of our products with components
supplied by our customers or other third party suppliers. As a result, there
may be situations where the combination of our products working with components
supplied by other third parties could result in year 2000 issues.
Costs of remediation. We currently anticipate that our total cost of addressing
our year 2000 issues will be $50,000, of which approximately $22,000 has been
incurred through March 31, 1999 and expensed to date. We do not have a separate
information technology or similar budget. The cost of addressing year 2000
issues will be reported as a general and administrative expense. We have not
deferred any material information technology projects due to our year 2000
efforts.
26
<PAGE>
Suppliers. We are contacting with third-party suppliers of components and our
key subcontractors used in the manufacturing of our products to identify, and
to the extent possible, resolve issues relating to the year 2000 issue. While
we expect that we will be able to resolve any significant year 2000 issue
identified with these third parties, because we have limited to no control over
the actions of these parties, there is no assurance that these third parties
will remediate any or all of the year 2000 issues identified. Any failure of
any of these third parties to timely resolve year 2000 issues with either their
products sold to us, or their systems could have a material adverse effect on
our business, operating results and financial condition.
Most likely consequence of year 2000 issues. We expect to identify and resolve
all year 2000 issues that could materially adversely affect our business
operations. However, for the reasons discussed above, we believe that it is not
possible to determine with complete certainty that all year 2000 issues
affecting us have been identified or corrected. As a result, we believe that
the following consequences are possible:
. operational inconveniences and inefficiencies for us, our contract
manufacturers and our customers that will divert our management's time and
attention and our financial and human resources from ordinary business
activities;
. business disputes and claims for pricing adjustments or penalties by our
customers due to year 2000 issues, which we believe will be resolved in
the ordinary course of business; and
. business disputes alleging that we failed to comply with the terms and
conditions of contracts or industry standards of performance that result
in litigation on contract termination.
Contingency plans. We are currently developing contingency plans to be
implemented if our efforts to identify and correct year 2000 issues affecting
our internal systems are not effective. We expect to complete our contingency
plans by the end of July 1999. Depending on the systems affected, these plans
could include:
. accelerated replacement of affected equipment or software;
. short to medium-term use of backup equipment and software;
. increased work hours for our personnel; and
. use of contract personnel to correct on an accelerated schedule any year
2000 issues that arise or to provide manual workarounds for information
systems.
Our implementation of any of these contingency plans could have a material
adverse effect on our business, operating results and financial conditions.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
presentation of comprehensive income. SFAS No. 130, which was adopted by the
Company in the first quarter of 1998, requires companies to report a new
measurement of income. "Comprehensive Income (Loss)" is to include as other
comprehensive income foreign currency translation gains and losses and other
unrealized gains and losses that have historically been excluded from net
income (loss) and reflected instead in equity. The Company does not have any
items of other comprehensive income and is, therefore, not required to report
comprehensive income.
In June 1997, the Financial Accounting Standards Board also issued SFAS No.131
"Disclosures About Segments of an Enterprise and Related Information." ("SFAS
No. 131"). SFAS No. 131 was adopted by the Company beginning on October 1,
1997. SFAS No. 131 establishes standards for disclosures about operating
segments, products and services, geographic areas and major customers. The
Company is organized and operates as one operating segment. The Company
operates primarily in one geographic area, the United States.
27
<PAGE>
In June 1998, FASB also issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards, requiring every derivative instrument be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings. SFAS No. 133 is effective for fiscal years beginning
after June 15, 1999. The Statement must be applied to derivative instruments
and to certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantively modified after September 30, 1997. In
management's opinion, the impact of adopting SFAS No. 133 on the financial
statements will not be material.
Qualitative and Quantitative Disclosures About Market Risk
Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since the majority of our investments are in cash
equivalents and short-term instruments. Due to the short-term nature of our
cash equivalents and investments, we have concluded that there is no material
market risk exposure. Therefore, no quantitative tabular disclosures are
required.
28
<PAGE>
Business
AltiGen designs, manufactures and markets next generation, server-based
telecommunications systems that allow businesses to use the Internet and the
Public Switched Telephone Network, or PSTN, interchangeably and seamlessly to
carry voice and data communications. The Internet is accelerating the
convergence of voice and data communications, creating the need for a next
generation communications system. As an increasing percentage of voice
communication is carried over the same networks as data is today, we believe
that businesses--particularly small and medium-sized businesses--will deploy
integrated systems that receive, manipulate and transmit voice communications
over the PSTN, as well as the Internet and similar "packet-switched" networks.
Our telecommunications systems enable a new array of applications that give
businesses the choice of placing calls over the Internet or traditional phone
lines. This capability is generally not built into today's traditional private
branch exchanges, or PBXs, but may be purchased and installed separately.
As businesses seek capabilities beyond those of traditional PBXs to meet
today's communication needs, they have recently begun to purchase server-based
telecommunications systems in place of traditional PBXs. These new systems,
which are generally based on open hardware and software standards, provide
switching between communications lines, basic telephony services such as
placing and receiving calls, multi-media messaging, web-based administration
and computer telephony integration, or CTI, applications, which integrate
computer and telephone systems. Server-based telecommunications systems that
provide these functions over the PSTN are commonly known as server-based PBX
systems. Systems that provide these functions over networks that use the
Internet Protocol, or IP, are commonly known as IP-based PBX systems. IP is a
standard format for the delivery of information over corporate intranets and
the Internet. Our server-based telecommunications systems combine the
attributes of these two types of systems and allow medium-sized businesses to
communicate over both the PSTN and the Internet, providing small to these
businesses with a telecommunications solution for the Internet era.
Industry Background
The Growth of the Internet
The Internet is experiencing tremendous growth and is emerging as a global
medium for communications and commerce. A number of factors are driving the
growth of the Internet, including improvements in the architecture of
communications networks, increasing numbers of network-enabled applications,
the emergence of technologies which facilitate e-commerce and easier, faster
and cheaper Internet access through a large and growing base of personal
computers, or PCs and other devices. According to International Data
Corporation, or IDC, the number of Internet users worldwide will grow from 69
million at the end of 1997 to 320 million by 2002. The increasing capabilities
and use of the Internet and other networks such as corporate intranets are
significantly influencing telecommunications today.
Convergence of Voice and Data
Traditionally, businesses have supported two separate, incompatible networks to
handle their communications needs: a circuit-switched network for voice, such
as the telephone system, and a packet-switched network for data. A circuit-
switched network establishes and maintains a dedicated circuit between calling
parties for the duration of a call. In contrast, most data traffic today,
traversing local area networks, or LANs, wide area networks, or WANs, and the
Internet, is transmitted over packet-switched networks. In packet-switched
networks, a signal is divided into packets that are simultaneously routed over
different paths to a final destination where they are recombined. Packet-
switched networks are more efficient because network paths are not dedicated to
a single user, but instead are available to be shared by all users. In contrast
to a circuit-switched network, network capacity is allocated only during
transmission, and messages can be compressed and stored more efficiently. The
Internet is accelerating the convergence of voice and data to a single
integrated packet-based network that can support both voice and data using
Internet Protocol.
29
<PAGE>
A growing number of businesses have recognized the Internet as a valuable and
economical medium for public and corporate communications. These businesses
seek to move their voice communications to packet-switched networks such as
corporate intranets and the Internet to reduce their telecommunications costs.
Although packet-switched networks can offer more efficiency and value to
businesses, the PSTN remains the standard for voice communication today. As a
result, businesses that wish to take advantage of packet-switched networks for
voice communications must nevertheless be able to place and receive calls over
the PSTN with customers, suppliers and others who rely solely on the PSTN for
voice communications. Consequently, there is a need for one common switching
system that can interface with both packet-based networks and the PSTN.
Evolution Begins in Small to Medium-Sized Businesses
Small to medium-sized businesses of up to 150 employees are likely to be the
first to use converged voice and data networks because, unlike large
organizations, they may not be heavily invested in legacy systems and can more
quickly take advantage of new technological trends. Most of these businesses
today use a PBX as the backbone of their connection to the voice network, and
maintain a separate data network. The traditional PBX switches calls between
users on internal lines, while allowing all users to share a fixed number of
external phone lines.
Today's traditional PBX remains an expensive, proprietary solution that can be
difficult to install, upgrade and maintain. A traditional PBX comes in an
enclosure that requires skilled personnel to physically prepare the
installation site and install the equipment. In contrast to server-based PBX
systems, whose capabilities can be expanded through software upgrades, adding
even basic telephony services to a traditional PBX often requires preparing
and installing more hardware. For example, adding voice mail to a traditional
PBX system requires not only a separate database for tracking system users,
but also requires configuring and connecting a separate server to the PBX. A
traditional PBX may resemble the figure below after adding features like voice
mail and the ability to transmit voice over IP-based networks, or VOIP.
Traditional Telecommunications System
[Traditional Telecommunications System Graphic appears here]
This graphic illustrates that PBX systems are traditionally enhanced by
establishing connections with separate specialized communication systems such
as integrated voice response units, voice over IP gateways, voice mail
systems, and other adjunct communication systems.
Once installed, this type of system can be difficult to maintain because of
its many hardware components and the connections among them. Administering
this system may become prohibitively expensive for small to medium-sized
businesses that have limited resources.
In recent years, a new generation of server-based telecommunications system,
including server-based PBXs and IP-based PBXs, has emerged to address the
challenges and inadequacies associated with traditional PBX systems. Frost &
Sullivan estimates that the market for server-based PBX systems was $41.8
million in 1998 and will grow to $403.9 million in 2002, representing a
compounded annual growth rate of 76.3%. Frost & Sullivan also estimates that
the market for IP-based PBX systems was $31.5 million in 1998 and will grow to
$595.1 million in 2002, representing a compounded annual growth rate of
108.4%.
Most existing server-based telecommunications systems do not address the needs
of businesses that wish to transmit voice communications over both the PSTN
and the packet-switched networks. For example,
30
<PAGE>
businesses may wish to route internal calls over their existing voice network
and route calls between offices over the Internet, all using the same
telecommunications system. We believe a significant opportunity exists to
provide small to medium-sized businesses with an integrated solution that
delivers the benefits of server-based telecommunications systems using the
Internet as well as the PSTN.
The AltiGen Solution
We design, manufacture and market next generation, server-based
telecommunications systems that use both the Internet and the PSTN to enable a
new array of applications that were unavailable with traditional PBX systems.
AltiServ, our Windows NT-based system, interfaces with the circuit-switched
network and packet-switched networks, permitting our customers to take
advantage of the converging communications infrastructure. Our systems
integrate voice and data communications with fewer components than traditional
systems and other server-based telecommunications systems. An example of our
system is illustrated below.
This graphic illustrates that AltiGen's server-based PBX system contains PBX,
voice messaging, auto-attendant, E-mail, and VoIP capabilities within a single
server-software platform. The server-based PBX can connect with both the PSTN
and IP networks.
Key benefits of our solution include:
. Integration of the Internet and the PSTN. Our systems provide the benefits
of the converging communications infrastructure by enabling businesses to
route voice calls over the Internet and other packet-switched networks or
the PSTN. Our system design integrates seamlessly with both types of
networks, providing flexibility for businesses to configure their
telecommunications systems to suit their needs.
. Lower Telecommunications Costs. By routing voice over packet-switched
networks, including the Internet, our systems eliminate toll charges
associated with long-distance calls. Using our products, businesses can
send and receive voice communications over the Internet or existing leased
data lines that constitute their intranets.
. Extensive Feature Set. Our systems provide integrated voice and data
functionality, enabling numerous features previously available only with a
combination of multiple systems, typically from different vendors.
AltiServ not only enables call handling and routing functions, but also
provides specialized functions such as Zoomerang, which enables users to
retrieve a voice mail message, automatically place a call to respond, and
return to the voice mail system without having to hang up.
. Ease of Installation, Use and Maintenance. The configuration of the
AltiServ system and its use of industry-standard hardware and software
platforms enable easy installation and system maintenance. AltiServ allows
systems administrators to manage the voice, voice messaging, email and
Internet features of our products through a single consistent user
interface.
. Reduced Administration Costs. Our user interface allows end users to
administer their system internally. With a traditional PBX, businesses
frequently require a third party service provider to perform tasks as
simple as changing a phone extension or adding a phone line. These
expenses can be significant for installation, system upgrades and
modifications. Using AltiServ, system administrators can perform many of
these tasks and reduce additional expenditures.
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<PAGE>
Strategy
Our strategy is to capitalize on the need for a next generation
telecommunications system, which results from the convergence of voice and data
communications. Our objective is to extend our leadership position in the
server-based PBX market and expand our current position in the IP-based PBX
market.
Key elements of our business strategy are as follows:
. Increase our brand name recognition. We intend to increase awareness of
our brand name among our end users, dealers, distributors and OEMs,
through radio, print and Web advertisements, direct mail and other
activities. We believe these efforts will generate more sales leads for
our dealers by increasing end-user awareness of our products.
. Expand our distribution channels. We sell our products through a network
of more than 400 dealers and distributors. We intend to expand this
network and to focus our sales efforts on larger dealers and distributors
with the goal of leveraging their ability to provide more complete
services to end users. We also intend to expand sales with existing and
new OEMs.
. Establish relationships with technology and strategic partners. We have
established strategic alliances and intend to pursue additional alliances
with various telecommunications and computer industry leaders. We believe
these alliances facilitate and accelerate the acceptance of our
technology, as well as enhance the marketing and distribution of our
products.
. Target key markets worldwide. We intend to expand our presence globally by
increasing the size of our sales force, including adding dedicated sales
resources in both Western Europe and Japan. Currently, Nitsuko, one of our
key Japanese distributors, is localizing our products for that market. We
intend to establish additional relationships with distributors and dealers
in our targeted markets to expand our sales presence.
. Enhance technology leadership in server-based telecommunications
technologies. We believe that we are a technology leader in the server-
based telecommunications systems market. We intend to maintain this
position by leveraging our expertise in the areas of switching and
communications applications that integrate voice and data networks. We
intend to leverage our engineering expertise and our core technologies to
enhance the capabilities of our existing products and to develop new
products to meet the evolving needs of our market.
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<PAGE>
Products and Core Technologies
We provide AltiServ, a server-based telecommunications system that allows
businesses to use the Internet and the PSTN interchangeably and seamlessly to
carry voice and data communications. AltiServ is composed of server software
components and desktop client applications that operate with our telephony
communications boards to connect to these networks and provide services to
users.
The main features of our products are as follows:
<TABLE>
<CAPTION>
Product Description
------- -----------
<C> <S>
Software
AltiWare IP.......... AltiWare IP enables VoIP calls.
AltiView............. AltiView is a desktop call control application that
also provides workgroup and extension monitoring,
remote call access via the Internet, and integration
with Microsoft Outlook to provide display caller ID
information when available.
AltiWare OE.......... AltiWare Open Edition is server-based software that
provides the main telephony switching functions for
call processing and includes auto-attendant
prompting, routing, queuing, reporting, and voice
messaging services.
AltiWare CE.......... AltiWare Classic Edition provides basic telephony
functionality, such as sending and receiving voice,
fax, and data communications.
Hardware
Triton IP............ Triton is a protocol-based peripheral component
interconnect, or PCI, board that provides VoIP call
processing resources for the AltiServ VoIP gateway.
Triton T1............ Triton T1 is a PCI board to provide 24 channels of
digital voice processing in addition to 24 full voice
mail ports in a T1 environment.
Quantum board........ Quantum board is the all-in-one Industry Standard
Architecture, or ISA, platform for AltiServ to
provide analog trunk, or telephone lines, and voice
mail ports.
ISDN BRI............. Integrated Services Digital Network Basic Rate
Interface, or ISDN BRI, is a PCI board that supports
four BRI ports for a total of eight digital trunks
and complies with Japanese telecommunications
standards.
</TABLE>
Software
AltiWare IP. AltiWare IP is an integrated VoIP gateway. Because AltiWare IP can
network multiple locations, it is particularly suited for businesses with
branch offices that wish to save money by placing long distance calls over
their intranet. AltiWare IP also provides seamless integration with AltiWare OE
software, giving end users a comprehensive package of call features, not all of
which may be available in other IP solutions. AltiWare IP also offers a
simplified dialing plan and user interface making it very similar to placing
traditional PSTN calls. In addition, it enables businesses to administer the
telecommunications system for multiple branch locations from a single location,
with the ability to maintain a centralized operator presence.
AltiView. AltiView is a desktop call management software application. It
provides a full complement of calling features, such as caller identification,
dial-by-name using a Microsoft Outlook directory, incoming call screen pop
display, and the ability to place calls over the PSTN or a packet-switchboard
network from a call log.
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<PAGE>
AltiWare OE. AltiWare Open Edition is sophisticated server-based software that
provides the main telephony switching functions for call processing, auto
attendant prompting, routing, queuing, reporting and voice messaging services.
AltiWare OE supports third party Telephony Application Programming Interface,
or TAPI, and Microsoft Exchange Server software applications. In addition to
PBX switching, voice mail automated attendant and email, AltiWare OE provides
advanced call capabilities including:
. automatic call distribution, or ACD, which routes incoming calls for
informal call center operations;
. Zoomerang, which enables users to retrieve a voice mail message,
automatically place a call to respond, and return to the voice mail system
without having to hang up; and
. One Number Access, which is a "find-me" feature that allows calls to be
forwarded sequentially to up to four different numbers. Users can set
their One Number Access options using a telephone keypad or web browsers.
Users can configure One Number Access to forward calls from specific
caller IDs or at specific times of day.
AltiWare CE. AltiWare CE is a primary platform for users who require a full
complement of call features without the need for third party software or
Microsoft Exchange integration. AltiWare CE provides small to medium-sized
businesses with all of the call features of AltiWare OE with the exception of
TAPI, Messaging Mail Application Programming Interface, or MAPI, and Microsoft
Exchange integration. Customers who purchase AltiWare CE can easily upgrade to
AltiWare OE at a later date.
Hardware
Triton IP. The Triton IP board provides voice over IP call processing resources
for the AltiServ VoIP gateway. The MVIP/PCI based Triton IP board supports four
concurrent voice sessions based on H.323, the standard protocol for data
network-based multi-media communications, and on the Multi-Vendor Integration
Protocol, or MVIP, a protocol standard to connect different telephone boards in
a server. The board automatically and dynamically manages the compression of
voice for transmission during the H.323 call setup. A server-based platform can
be configured with up to four Triton IP boards in a single chassis.
Triton T1. The MVIP/PCI based Triton T1 board supports digital trunks carrying
digitized voice signals. It supports Super Frame and Extended Super Frame
methods of synchronizing the T1 transmission. To ensure quality transmission,
the board supports Binary Eight Zero and Alternate Mark Inversion line encoding
schemes. Further, for the trunk to originate the call, the board supports
ground start and loop start. Additionally, the board supports ear and mouth
signaling, where the trunk originates and receives calls, and supports DID, or
Direct Inward Dialing, trunk protocols, methods by which the trunk originates
or answers the call. It also provides 24 channels of voice processing resources
for non-blocking voice processing support. As a result, all channels can play
voice mail messages or interact with automated attendants simultaneously on all
trunks.
Quantum board. Our Quantum board is based on the Integrated Systems
Architecture standard and supports 12 ports of analog trunks and stations, or
telephone sets. All 12 channels connecting phone lines can make calls at the
same time. In addition, each Quantum board supports up to six channels of
concurrent voice processing for applications such as voice mail and automated
attendant, so that channels can play voice mail or interact with the automated
attendant at the same time. Quantum comes in four models, which give users
different configurations from which they can select line and trunk ratios. The
trunk ports support the reception of caller ID information, which also can be
passed through to the station lines. Additionally, the station side supports
include Frequency Shift Keying which is a frequency modulation to carry digital
data, as well as message waiting, voltage-based message waiting, and stutter
dial tone-based message waiting, which puts gaps in the dial tone to indicate
message waiting. A server-based platform can be configured with up to 14
Quantum boards, for a total of 168 analog ports.
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<PAGE>
ISDN BRI board. The ISDN BRI board is designed to run with AltiWare OE 3.0 to
meet the needs of the Japanese telecommunications market. The ISDN BRI board
supports four BRI ports for a total of eight ISDN trunks. This ISDN board can
handle both voice and data calls. It complies with the Japanese INS64 standard
for ISDN BRI and has received approval from the Japan Approvals Institute for
Telecommunications Equipment.
Triton Resource Board. The MVIP/PCI based Triton Resource Board provides up to
24 channels of voice processing and eight channels of conferencing support. It
is used in Japan to provide voice processing for both ISDN BRI trunks and
wireless telephones.
Marketing, Sales and Customer Support
Marketing
Our marketing efforts currently focus on increasing demand for our products in
North America, Japan, Europe and Latin America. We work to increase market
awareness of our technology and demand for our products in the small to medium-
sized business market through cooperative marketing, print, radio and web
advertising, and direct mail campaigns. We have a customer referral program
through which our AltiServ customers can refer potential buyers to us through
our Web site.
To assist distributors, dealers, original equipment manufacturers and strategic
partners in marketing, selling and supporting our products, we provide market
development funds and technical and sales training developed specifically for
our products. In return, these companies must provide us with point-of-sale
reports that allow us to develop a profile of end users of our systems and
evaluate the effectiveness of our marketing efforts.
We have recently formed marketing alliances with Hewlett-Packard and Compaq. We
have signed a memorandum of understanding with the Covision Internet Solutions
Program of Hewlett-Packard, under which this group will market our products
through its Internet channels. We have signed a Compaq Solutions Alliance
Agreement, under which Compaq will market and bundle our products to its
channel members and to customers. To date we have not recognized significant
revenue as a result of these alliances.
Sales
We currently have sales and support staff in New York, Chicago, Atlanta,
Dallas, and Fremont, California. Our network of over 400 dealers and
distributors sell our system to end user. Our sales force answers incoming
customer calls and refers new leads to the qualified dealer that is nearest the
caller.
Customers
Our customers are distributors and dealers who sell and resell our products to
end users. We have distribution agreements with Ingram Micro and Tech Data
Corporation in the United States and Kanematsu Semiconductor Corporation and
Nitsuko Corporation abroad, as well as with leaders in the domestic
telecommunications equipment and customer premises equipment, or CPE, markets.
Sales through Ingram Micro and Tech Data accounted for a significant portion of
our revenue in fiscal year 1998, and approximately 47.4% of revenue in the six
months ended March 31, 1999. We also have over 400 authorized dealers, who sell
our products directly to end users. We continually seek to identify and
authorize new dealers. We review our dealers quarterly and de-authorize those
who do not meet our standards.
Customer Support
We believe that consistent, high-quality service and support are key factors in
attracting and retaining customers. Our customer support organization, located
in Fremont, California, coordinates service and technical support of our
products and provides service 24 hours a day, seven days per week. This
organization
35
<PAGE>
assists our distributors, dealers and others in resolving configuration and
support issues that arise from their sales to end users and also provides
limited support to end users in conjunction with their dealer support.
Customers can also access technical information and receive technical support
through our Web site.
Research and Development
The market for our products is characterized by rapidly changing technology,
evolving industry standards and frequent product introductions. We believe that
our future success depends in large part upon our ability to continue to
enhance the functionality and uses of our core technology. We intend to extend
the functionality and uses of our hardware and software technology by
continuing to invest in research and development.
We currently conduct the majority of our product development in-house. We also
use a small number of independent contractors to assist with certain product
development and testing activities. We intend to continue working with our
strategic partners to enhance our products. We have expanded our research and
development group from 10 software engineers as of July 31, 1997 to 27 as of
March 31, 1999. Research and development expenses were approximately $1.5
million in fiscal year 1997 and $1.9 million in fiscal year 1998.
Technology
We designed our hardware, firmware, system software, and application software
with the Internet as a possible transmission medium. We have built a seamlessly
integrated system that combines IP telephony, PBX switching, voice mail,
automated attendant, ACD and mixed media messaging applications in one server.
Each product component is designed for ease of use and installation, and
flexibility for expansion and enhancement.
Our program uses standardized modules with open interfaces that conform with an
object-oriented software architecture. This architecture is designed to shorten
our development cycle, increase the predictability of our development schedule,
and enable us to incorporate new hardware and software features without
redesigning existing modules. We avoided developing a cumbersome code base that
would demand a change in low-level support when a change in a high-level
application is made, and a change in the high-level application when a change
in a low-level component is made.
We designed the AltiServ architecture to:
. support independent development of applications and hardware devices,
packet switching and circuit switching, and Internet-enabled applications;
. leverage existing time-tested and market-accepted applications;
. facilitate strategic development partnerships;
. facilitate localization for international markets; and
. provide a shorter development cycle.
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<PAGE>
This level of module separation allows independent evolution of applications
and hardware devices, including our telephony boards. Because applications are
shielded from the specifics of the hardware, they are more hardware
independent. For example, when a new wireless telephony board is added with its
Service Provider module, all the existing and time-tested AltiWare applications
become instantly available to the wireless extension users without much change
in the application code. Likewise, the hardware is software application
independent. The result is a clearly layered architecture, as illustrated
below.
[GRAPH OF ALTISERV ARCHITECTURE APPEARS HERE]
This graphic illustrates four major server-based PBX communication layers using
the AltiGen product offering; these layers are client applications, server
applications, a resource manager, and a service provider layer.
Each hardware device type is encapsulated by a Service Provider module, or
software component that communicates with hardware. These modules conform to
the Microsoft Component Object Model, or COM-based Service Provider Interface,
or SPI. The Service Provider module reports the hardware's capability and
supported feature set to the AltiConnect resource manager, or program.
AltiConnect is the middleware, or software enabling client applications to
request system services, to manage resource allocation, usage and connections.
It shields AltiWare from the specifics and complexities of various hardware
devices, making communications easier. AltiConnect pools all the resources
reported from all the Service Provider modules and make them available to the
AltiWare application through the COM based API so that our products can share
system resources, including hardware. Furthermore, the server applications make
themselves available to client applications via several open protocols--H.323,
Hyper Text Transfer Protocol, or HTTP, Telephony Application Interface, or TAPI
2.1, Simple Mail Transfer Protocol, or SMTP, Post Office Protocol version 3, or
POP3, Distributed Common Object Model, or DCOM, and AltiGen's proprietary
Transmission Control Protocol, Internet Protocol or TCP/IP-based AltiLink.
Both the Quantum and the Triton boards are designed with enough on-board DSP
resources such that we can achieve non-blocking call processing support. In
addition, we designed the boards to make the ports, or channels between the PBX
and the phone line, for multi-use; therefore, every switching port can be a
voice processing port, and every voice processing port can be a switching port.
The Triton boards can support an extensive feature set because of its powerful
DSP technology, accompanied by 16 megabytes of memory to run multiple,
concurrent signal processing applications.
Competition
The markets for our products are intensely competitive, continually evolving,
and subject to changing technologies. We currently compete with such companies
providing traditional PBX systems, principally Lucent Technologies and Nortel
Networks. We also compete against server-based PBXs including Picazo
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<PAGE>
Communications, Inc. and Artisoft, Inc. and Shoreline Teleworks. We potentially
face competition from companies such as Shoreline Teleworks, Inc., NBX
Corporation, acquired by 3Com Corporation, Selsius Systems, acquired by Cisco
Systems, Inc., as well as a big number of future competitors. Many of our
competitors are substantially larger than we are and have significantly greater
name recognition, financial, sales and marketing, technical, customer support,
manufacturing and other resources. These competitors may also have more
established distribution channels and stronger relationships with service
providers. These competitors may be able to respond more rapidly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sale of their products. These
competitors may enter our existing or future markets with solutions that may be
less expensive, provide higher performance or additional features or be
introduced earlier than our solutions.
We believe the principal competitive factors in our market include, or are
likely to include:
. product performance and features such as the ability to integrate voice
and data;
. reliability;
. ease of use;
. size of customer base;
. quality of service and technical support;
. sales and distribution capabilities; and
. strength of brand name.
We believe that our principal competitive advantages include:
. established brand-name recognition;
. well-developed, trained, and loyal channel; and
. a considerable lead in product development and marketing.
We cannot be certain that we will be able to compete successfully with existing
or new competitors. If we fail to compete successfully against current or
future competitors, our business could suffer. A description of our principal
competitors and the risks associated with the competitive nature of our market
are discussed in greater detail in "Risk Factors--Our market is highly
competitive."
Intellectual Property
We generally rely upon patent, copyright, trademark and trade secret laws to
protect and maintain our proprietary rights for our technology and products. We
have filed several U.S. patent applications relating to various aspects of our
client and server software, mixed-media communications, computer telephony, and
analog telephones. We expect to file patent applications as we deem appropriate
to protect our technology and products. We cannot be certain that our patent
applications will result in the issuance of patents, or that any issued patents
will provide commercially significant protection to our technology.
Generally, litigation, which could be costly and time consuming, may be
necessary to determine the scope and validity of others' proprietary rights, or
to enforce any patent issued to us, in either case, in judicial or
administrative proceedings. An adverse outcome could subject us to significant
liabilities to third parties, require us to obtain licenses from third parties,
or require us to cease product sales and possibility alter the design of the
products. Not all licenses required under any third-party parents or
proprietary rights may be available on acceptable terms. In addition, the laws
of certain countries may not product our intellectual property.
To help protect our rights, employees, consultants and strategic partners to
enter into confidentiality agreements that prohibit disclosure of our
proprietary information. We also currently require employees and consultants to
assign to it their ideas, developments, discoveries and inventions. A
description of our dependence on proprietary technology and the associated
risks are discussed in greater detail in "Risk Factors--Any failure by us to
protect our intellectual property could harm our business and competitive
position."
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<PAGE>
Manufacturing and Assembly
Our manufacturing operations consist of purchasing, receiving, inspection,
inventory, testing, packaging and shipping. We purchase hardware product
components, put them into kits, and send them to a sub-contractor or external
manufacturing facility for assembly. The final hardware assembly, software
installation and testing of our products is performed in-house at our 11,000
square-foot manufacturing floor, located at our corporate headquarters in
Fremont, California. Our manufacturing and assembly processes enable us to
configure our products to adapt to different customer specifications at the
final assembly stage. This flexibility is designed to reduce both our assembly
cycle time and our need to maintain a large inventory of finished goods. We
believe that the efficiency of our assembly process to date is largely due to
our product architecture and our commitment to assembly process design.
We test our products both during and after the assembly process using
internally-developed product assurance testing procedures, which include
initial visual inspection and functional testing and final systems testing.
Although we generally use standard components for our products and try to
maintain alternative sources of supply, we purchase some key components from
sole or single source suppliers for which alternative sources are not currently
available. See "Risk Factors--We rely on third-party technology and products,
and single-source components."
Employees
As of March 31, 1999, we employed 67 people, including 30 in engineering,
research and development, and support and 29 in sales, marketing and
administration. We also employed 8 people in manufacturing. None of our
employees is subject to collective bargaining agreement, and we consider our
relations with our employees to be good.
Competition for technical personnel in our industry is intense. We believe that
we have been successful in recruiting qualified employees, but there is no
assurance that it will continue to be as successful in the future. We believe
that our future success depends in part on our continued ability to hire,
assimilate and retain qualified personnel.
Facilities
We occupy approximately 35,000 square feet of space in Fremont, California,
which we lease at an annual rental of $324,672. We occupy approximately 2,919
square feet in Shanghai, China, which we lease at an annual rate of
approximately $30,000. We believe that our existing facilities are adequate for
our needs through at least the end of 1999. We believe that any additional
space we may need in the future will be available on commercially reasonable
concerns.
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<PAGE>
Management
Executive Officers and Directors
Our executive officers and directors, and their ages as of June 1, 1999, are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Gilbert Hu(2)................. 42 President, Chief Executive Officer, Director
Philip M. McDermott........... 53 Chief Financial Officer
Simon Chouldjian.............. 46 Vice President of Manufacturing
Tricia Chu.................... 45 Vice President of Finance and Administration
En-Kuang Lung................. 32 Vice President of Research and Development
Carl M. Marszewski............ 56 Vice President of Business Development
Michele Shannon............... 37 Vice President of Sales
Anthony Spielman.............. 51 Vice President of Marketing
Richard Black(1).............. 65 Director
Wen-Huang (Simon) Chang(1).... 47 Director
Thomas Shao(1)................ 64 Director
Masaharu Shinya(2)............ 55 Director
Kenneth Tai(2)................ 49 Director
</TABLE>
- -------------------
(1) Member of the Audit
Committee.
(2) Member of the Compensation
Committee.
Gilbert Hu founded AltiGen and has served as our President and Chief Executive
Officer since May 1994. Before founding AltiGen, Mr. Hu was founder, President
and Chief Executive Officer of Centrum Communications, Inc., a networking
company acquired by 3Com Corporation in early 1994. Mr. Hu has also served in
technical and managerial roles at technology companies such as Vitalink
Communication Corporation, Convergent Technologies, Inc., and Luxcom, Inc. He
received a Bachelor of Science degree in Electrical Engineering from National
Chiao-Tung University in Taiwan and a Masters of Science degree in Electrical
Engineering from Arizona State University. Mr. Hu is a brother-in-law of
director Wen-Huang (Simon) Chang.
Philip M. McDermott has served as our Chief Financial Officer since June 1999.
From October 1995 until May 1999, Mr. McDermott served as Director of Finance
Americas Sales for 3Com Corporation, a networking equipment company. From
October 1994 to October 1995, Mr. McDermott served as Vice President of
Finance, Operation and Administration for Chipcom Corporation, a networking
company. From June 1990 to October 1994, Mr. McDermott served as Chief
Financial Officer for DAVID Systems, Inc., a networking company. Mr. McDermott
has also held executive positions with Prentice Corporation and Northern
Telecom, Inc. Mr. McDermott received Certified Management Accountant
accreditation from The Society of Management Accounting in Montreal, Canada.
Simon Chouldjian has served as our Vice President of Manufacturing since June
1997. From June 1984 to June 1997, Mr. Chouldjian was the founder and Executive
Vice President of Engineering at Luxcom, Inc., a manufacturer of communication
hub equipment. Mr. Chouldjian has also held managerial positions in engineering
at the Hewlett-Packard Company and TRW, Inc. He received a Bachelor of Science
degree in Electrical Engineering from the University of California at Berkeley
and a Masters of Science degree in Electrical Engineering from Stanford
University.
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Tricia Chu has served as our Vice President of Finance and Administration since
June 1999. From March 1999 to June 1999, Ms. Chu served as our Senior Director
of Finance and Administration. From February 1994 to March 1999, Ms. Chu worked
for 3Com Corporation, first as Controller of 3Com's Remote Access Division,
then as Controller of Americas Sales. Ms. Chu has also held finance and
accounting positions with Centrum Communications, Inc. (a networking company
acquired by 3Com Corporation in early 1994), Integrated Silicon Solutions,
Inc., Rugged Digital Systems Inc. and Altos Computer Systems. Ms. Chu received
a Bachelor of Science degree in Finance and International Trade from Tankung
University in Taiwan and a Masters in Business Administration from Central
State University in Oklahoma.
En-Kuang Lung has served as our Vice President of Research and Development
since May 1998. Mr. Lung first joined our engineering group in September 1995
as Director of Platform Engineering. From January 1990 to September 1995, Mr.
Lung worked for Centigram Communications Corporation, first as Senior Software
Engineer/Project Lead, then as Manager of Product Development. Prior to working
at Centigram, Mr. Lung spent approximately three years at Bell Northern
Research/Nortel, where he worked on the development of Nortel's Meridian
digital telephone sets. Mr. Lung received a Bachelor of Science degree in
Electrical Engineering and Computer Science from The Johns Hopkins University.
Carl M. Marszewski has served as our Vice President of Business Development
since November 1998. From August 1997 to November 1998, Mr. Marszewski worked
as an independent sales and marketing consultant who specialized in
distribution channel development for small companies. From January 1994 to July
1997, Mr. Marszewski served as Vice President of Worldwide Sales Repeater
Technology, Inc., a wireless telecommunications company. Mr. Marszewski has
also held managerial positions with Compression Labs, Inc. a videoconferencing
equipment manufacturer, and Northern Telecom, a company specializing in
telecommunications equipment. Mr. Marszewski received a Bachelor of Science
degree in Psychology from Seton Hall University.
Michele Shannon has served as our Vice President of Sales since October 1996.
From March 1995 to October 1996, Ms. Shannon was Director of Worldwide Channel
Sales and Marketing at NetManage, Inc., an international supplier of standards-
based intranet software. Ms. Shannon served from December 1991 to February 1995
as Director of Field Marketing at Novell, Inc., a networking applications
company. Ms. Shannon has also held sales and marketing positions with
Businessland Inc. and Computer Management Services. Ms. Shannon received a
Bachelor of Arts degree in music from Arizona State University.
Anthony Spielman has served as our Vice President of Marketing since May 1999.
From September 1997 until December 1998, Mr. Spielman was Senior Director of
U.S. Sales and Business Development for Teltrend Ltd., a European and U.S.-
based networking company. From January 1997 through July 1997, he worked as
Division Manager, Internetworking for Allied Telesyn International, a privately
held LAN networking company. From May 1994 to October 1997, Mr. Spielman served
as Vice President of Marketing and Asian Sales for SBE, Inc., a data
communications company. Mr. Spielman has also held marketing positions at
Asante Technologies, Inc., 3Com Corporation, Network Systems Corporation and
Hewlett Packard Company.
Richard Black has served as a director of AltiGen since May 1999. Since
December 1987, while serving as a director of Oak Technology, Inc., a supplier
of semiconductor products to the personal computer and consumer electronics
markets, he also served as President of that company from January 1998 to March
1999, and Vice-Chairman of Oak since March 1999; since August 1983, he has
served as the Chairman of ECRM, Incorporated, a supplier of electronic imaging
devices. Currently, Mr. Black also sits on the boards of directors of
Benedetto, Garland, Inc., Gabelli Funds, Inc., Gabelli Asset Management, Inc.,
GSI Lumonics Inc., Grand Eagle Companies, Inc., and Morgan Group, Inc. For more
than a decade, he has been the owner of R Black + Associates, a business
providing management assistance to technology companies. From April 1987 until
December 1998, he was a general partner of KBA Partners, L.P., a venture
capital firm. Mr. Black has also served as the President and Chief Executive
Officer of AM International, Inc., Alusuisse of America,
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and Maremont Corporation. He has also served in managerial positions with
Warner Brake & Clutch Company and Vulcan Material Company. Mr. Black received a
Bachelor of Science degree in Engineering from Texas A&M University, a Masters
in Business Administration from Harvard University and an honorary Ph.D. from
Beloit College.
Wen-Huang (Simon) Chang has served as a director of AltiGen since June 1994.
Since September 1995, Mr. Chang has served as the Chief Executive Officer of
investment firm Kane Investment Corporation. From June 1984 to September 1995,
he was the Chairman of Kane Construction Corporation, a construction company
based in Taiwan. From July 1991 to January 1995, he also was Chairman of
Centrum Technology Corporation, a networking company. From August 1991 to early
1994, he served as a director of Centrum Communications, Inc., a networking
company acquired by 3Com Corporation in early 1994. Mr. Chang received a
Bachelor of Science Degree in Forest Industry from the National Taiwan
University in Taiwan. Mr. Chang is a brother-in-law of Gilbert Hu, our
President and Chief Executive Officer and a director.
Thomas Shao has served as a director of AltiGen since April 1996. Since
September 1997, Dr. Shao has served as Managing Director of Technology
Associates Management Co., Ltd., a venture fund manager. He also has been the
President of TSS Enterprises, a privately held high technology management
consulting, investment and trading company, since August 1992. From September
1995 to September 1997, Dr. Shao was a senior consultant for Technology
Associates Corporation of Taiwan, a venture capital firm. From September 1985
to September 1995, he served as Senior Vice President of DynaTech Development
Corporation, a management consulting and investment firm. Prior to 1985, Mr.
Shao held positions with AT&T/Bell Labs and IBM. In addition to AltiGen, Dr.
Shao is a member of the board of directors of AboveNet Communications Inc.,
1BT.com, Inc., and Acrotron Systems. Dr. Shao received a Bachelor of Science
degree in Mechanical Engineering from the National Taiwan University in Taiwan,
a Masters of Science in Aeronautical Engineering from the University of
Illinois, and a Ph.D. in Applied Mathematics and Computer Science from the
University of Illinois.
Masaharu Shinya has served as a director of AltiGen since April 1999. From July
1990 to March 1999, he served as President of Kanematsu Semiconductor
Corporation. Mr. Shinya continues to serve as an advisor to Kanematsu
Semiconductor Corporation. Since April 1999, Mr. Shinya also has served as the
Chairman and Chief Executive Officer of Global Alliance, Inc. and as the
Chairman of Programmable Silicon Solutions, Inc. Mr. Shinya is also a director
of Capella Microsystems, Inc., Impala Linear Corporation, Internet Image, Inc.,
Quality Semiconductor, Inc., and Universe Electron Corporation. Mr. Shinya
received a Bachelors degree in Economics from Waseda University in Japan.
Kenneth Tai has served as a director of AltiGen since April 1998. Since March
1996, Mr. Tai has been the Chairman of InveStar Capital (Taiwan), Inc., a
venture capital firm. Since April 1998, he also has served as the Chairman of
DigiTimes Publication, Inc., a daily newspaper on technology issues. Mr. Tai is
also a director of Capella Microsystems, Inc., Scenix Semiconductor, Inc.,
Aetas Peripheral Corp and Rise Technology Company. From March 1993 to December
1995, Mr. Tai served as the Vice-Chairman of UMAX USA, which makes computer
peripherals. Mr. Tai was one of the co-founders of the Acer Group, and held
various positions with the Acer Group, including Vice President of Worldwide
Sales and Marketing, and President of the Acer Group USA from 1990 to March
1993. Mr. Tai received a Bachelor of Science degree in Electrical Engineering
from the National Chiao Tung University in Taiwan and a Masters of Science
degree in Electrical Engineering from Stanford University.
Board Committees
Our Board of Directors currently has two committees: an Audit Committee and a
Compensation Committee.
The Audit Committee makes recommendations to our Board of Directors regarding
the selection of independent auditors reviews the results and scope of audit
and other services provided by our independent auditors and reviews the
accounting principles and auditing practices and procedures to be used for the
financial statements of AltiGen.
42
<PAGE>
The Compensation Committee reviews and makes recommendations to our Board of
Directors regarding the compensation of officers and other managerial
employees.
Compensation Committee Interlocks and Insider Participation
Mr. Hu, our President and Chief Executive Officer, also is a member of the
Compensation Committee of our Board of Directors. None of our executive
officers serves as a member of the Board of Directors or compensation committee
of another entity that has one or more executive officers serving on our Board
of Directors or compensation committee.
Director Compensation and Other Arrangements
Our directors do not receive cash compensation for their services as directors,
but are reimbursed for their reasonable and necessary expenses associated with
attendance of meetings of the Board of Directors and its committees.
Additionally, in April 1998, our non-employee directors each received options
to purchase 10,000 shares of our common stock at $0.50 per share under our 1994
Stock Option Plan, as amended. At that time, our non-employee directors were
Messrs. Chang, Lin, Shao and Tai. Also, in June 1999 our directors Messrs.
Black and Shinya were granted options to purchase 10,000 shares of our common
stock at $7.00 per share under our 1999 Stock Option Plan.
Executive Compensation
The following table sets forth the compensation earned for services rendered to
AltiGen in all capacities for fiscal year 1998 by our Chief Executive Officer
and our other most highly compensated executive officers whose salary and bonus
during the last completed fiscal year exceeded $100,000. These individuals are
referred to as the "Named Executive Officers" here and elsewhere in this
prospectus.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
-------------------- ------------
Bonus and Securities
Salary Commissions Underlying
Name and Principal Position ($) ($) Options (#)
--------------------------- ------ ----------- ------------
<S> <C> <C> <C>
Gilbert Hu................................ $120,000 $30,218 500,000
President and Chief Executive Officer
Simon Chouldjian.......................... 110,004 -- 80,000
Vice President of Manufacturing
Michele Shannon........................... 120,000 33,616 2,390
Vice President of Sales
</TABLE>
Option Grants in Last Fiscal Year
The following table sets forth certain information with respect to stock
options granted to the Named Executive Officers in fiscal year 1998. The
figures representing percentages of total options granted to employees in the
last fiscal year are based on an aggregate of 1,430,452 options granted by
AltiGen during the fiscal year ended September 30, 1998 to our employees and
consultants, including the Named Executive Officers.
43
<PAGE>
Also shown below is the potential realizable value over the term of the option.
In accordance with the rules of the Securities and Exchange Commission, we have
based our calculation of the potential realizable value on the term of the
option at its time of grant, and we have assumed that:
. the value of our stock at the assumed initial public offering price
appreciates at the indicated annual rate compounded annually for the
entire term of the option; and
. the option is exercised and sold on the last day of its term for the
appreciated stock price.
These amounts are based on 5% and 10% assumed rates of appreciation and do not
represent our estimate of future stock prices. Actual gains, if any, on stock
option exercises will be dependent on the future performance of the common
stock. The gains shown are net of the option exercise price, but do not include
deductions for taxes and other expenses payable upon the exercise of the option
or for sale of underlying shares of common stock. Unless otherwise indicated,
the options in this table were granted under the 1994 Stock Option Plan, have
10-year terms, and vest over a period of 4 years. Twenty-five percent of the
shares subject to each option will vest on the first anniversary of the vesting
start date, and 1/48th of the shares subject to each option will vest each
month thereafter. All of the options have exercise prices equal to the fair
market value of our common stock on the date of grant.
Option Grants During Fiscal Year Ended September 30, 1998
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed
Annual Rates
Percent of of Stock
Total Price
Number of Options Appreciation
Securities Granted to for Option
Underlying Employees Exercise Price Term ($)
Options In Fiscal Per Share Expiration ------------
Name Granted (#) Year 1998 ($/share) Date(1) 5% 10%
---- ----------- ---------- -------------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Gilbert Hu(2)........... 500,000 35.0% $0.14 10/30/07 $ $
Simon Chouldjian(3)..... 80,000 5.6 0.14 10/30/07
Michele Shannon......... 2,390 0.2 0.14 10/30/07
</TABLE>
- -------------------
(1) The options may terminate before their expiration dates if the optionee's
status as an employee or consultant is terminated.
(2) The vesting start date for the options granted to Mr. Hu is July 1, 1994.
(3) The vesting start date for the options granted to Mr. Chouldjian is June 9,
1997.
Aggregate Option Exercises in Last Fiscal Year
The following table summarizes the value of options held at September 30, 1998
by our Named Executive Officers. The value of unexercised in-the-money options
at September 30, 1998 figures in the right-hand columns are based on the fair
market value of our Common Stock at September 30, 1998 as determined by our
Board of Directors, minus the per-share exercise price, multiplied by the
number of shares issued upon exercise of the option.
Aggregated Option Exercises in Fiscal Year Ended September 30, 1998
<TABLE>
<CAPTION>
Value of
Unexercised
Number of Securities In-the-Money
Underlying Unexercised Options at
Shares Options at September 30, 1998
Acquired on Value September 30, 1998 (#) ($)
Exercise Realized ------------------------------------------
Name (#) ($) Vested Unvested Vested Unvested
---- ----------- -------- ------------ -------------------- --------
<S> <C> <C> <C> <C> <C> <C>
Gilbert Hu.............. -- -- 1,033,300 -- $ $
Simon Chouldjian........ -- -- 25,000 55,000
Michele Shannon......... 37,500 $15,000 10,417 54,473
</TABLE>
44
<PAGE>
Employee Benefit Plans
1994 Stock Option Plan
Our Board of Directors has adopted, and our stockholders have approved, the
1994 Stock Option Plan, under which stock options may be granted to our
officers, employees, consultants and outside directors. Currently, 3,500,000
shares of common stock have been reserved for issuance under our 1994 Stock
Option Plan. Any options which have been granted but which expire or terminate
unexercised are returned to the plan and may be granted at a later date to any
qualified recipient. As of May 31, 1999, there were a total of 2,675,948
options outstanding under the 1994 Stock Option Plan.
The Compensation Committee of our Board of Directors administers our 1994 Stock
Option Plan. The Committee has the authority to interpret the 1994 Stock Option
Plan and to determine:
. the persons to whom options are granted;
. when options are granted;
. the number of shares subject to each option; and
. the terms and conditions associated with each option, including the
exercise price and the time period during which the option will be
exercisable.
Our 1994 Stock Option Plan permits the grant of stock options that qualify as
incentive stock options, or ISOs, under Section 422 of the Internal Revenue
Code, and non-qualified stock options, or NSOs, which do not so qualify. The
exercise price of options granted under our 1994 Stock Option Plan may not be
less than 100% of the fair market value of our common stock on the date of
grant in the case of ISOs, and not less than 85% of the fair market value of
our common stock on the date of grant in the case of NSOs. In addition, the
exercise price of options granted to a greater than 10% stockholder may not be
less than 110% of the fair market value on the date of grant. The value of
common stock subject to ISOs that become exercisable by any one employee in any
calendar year may not exceed $100,000.
The term of each option granted under our 1994 Stock Option Plan is determined
by our Board's Compensation Committee; provided, however, that the maximum term
of any option granted under the 1994 Stock Option Plan is ten years or, in the
case of an option granted to a greater than 10% stockholder, five years.
Generally, options granted under our 1994 Stock Option Plan vest and become
exercisable over a four-year period. In the event there is a change of control
of AltiGen, all of the unexercised options granted under our 1994 Stock Option
Plan will terminate unless those options are assumed or substituted by the
successor corporation (or a parent or subsidiary thereof). The 1994 Stock
Option Plan may be terminated or suspended by our Board of Directors in its
sole discretion.
1998 Stock Purchase Plan
Our Board of Directors has adopted, subject to stockholder approval, AltiGen's
1998 Stock Purchase Plan, pursuant to which 25,800 shares of series D preferred
stock were reserved for issuance to some of our employees, consultants, and
outside directors. The 1998 Stock Purchase Plan is intended to qualify under
Section 423 of the Internal Revenue Code.
Our Board of Directors or a Board committee administers our 1998 Stock Purchase
Plan. The Board or committee has authority to set the purchase price of shares
subject to the 1998 Stock Purchase Plan; provided, however, that the price of
each share purchased under our 1998 Stock Purchase Plan may not be less than
85% of the fair market value at the time of purchase and, in the case of a
purchase by a greater than 10% stockholder, the price may not be less than 110%
of the fair market value.
45
<PAGE>
1999 Stock Option Plan
Our Board of Directors has adopted, subject to stockholder approval, AltiGen's
1999 Stock Option Plan, under which stock options may be granted to our
officers, employees, consultants, and outside directors. 3,500,000 shares of
common stock have been reserved for issuance under the 1999 Stock Option Plan.
An annual increase will be added on the first day of our fiscal year beginning
in 2000 equal to the lesser of:
. 3,000,000 shares;
. 5% of the outstanding shares on that date; or
. an amount determined by the Board of Directors.
Any options which have been granted but which expire or terminate unexercised
are returned to the plan and may be granted at a later date to any qualified
recipient. As of May 31, 1999, there were a total of 126,581 options
outstanding under the 1999 Stock Option Plan.
The Compensation Committee of our Board of Directors administers our 1999 Stock
Option Plan. The Committee has the authority to interpret the 1999 Stock Option
Plan and to determine:
. the persons to whom options are granted;
. when options are granted;
. the number of shares subject to each option;
. the terms and conditions associated with each option, including the
exercise price and the time period during which the option will be
exercisable; and
. the forms of agreement for use under the 1999 Stock Option Plan.
Our 1999 Stock Option Plan permits the grant of stock options that qualify as
ISOs under Section 422 of the Internal Revenue Code, and NSOs which do not so
qualify. The exercise price of options granted under our 1999 Stock Option Plan
may not be less than 100% of the fair market value of our common stock on the
date of grant in the case of ISOs, and not less than 85% of the fair market
value of the common stock on the date of grant in the case of NSOs. Also, the
exercise price of options granted to a greater than 10% stockholder may not be
less than 110% of the fair market value on the date of grant. The value of
common stock subject to ISOs that become exercisable by any one employee in any
calendar year may not exceed $100,000.
Our Board's Compensation Committee determines the term of each option granted
under our 1999 Stock Option Plan; provided, however, that the maximum term of
any option granted under the 1999 Stock Option Plan is ten years or, in the
case of an option granted to a greater than 10% stockholder, five years.
Generally, options granted under our 1999 Stock Option Plan vest and become
exercisable over a four-year period. In the event there is a change of control
of AltiGen, any unexercised options granted under our 1999 Stock Option Plan
may be assumed or substituted by the successor corporation. Any unexercised
options not assumed or substituted will become fully vested and exercisable,
and the optionee will be provided a fixed time period in which to exercise
those options. Any options that remain unexercised at the end of that period
will immediately terminate. At its sole discretion, our Board of Directors may
terminate or suspend the 1999 Stock Option Plan.
46
<PAGE>
1999 Employee Stock Purchase Plan
Our 1999 Employee Stock Purchase Plan was adopted in June 1999 by our Board of
Directors, subject to stockholders' approval and will be effective upon the
completion of this offering. Initially, 500,000 shares of common stock will be
reserved for issuance under the 1999 Employee Stock Purchase Plan. An annual
increase will be added on the first day of our fiscal year beginning in 2000
equal to the lesser of:
. 1,000,000 shares;
. 2% of the outstanding shares on that date; or
. an amount determined by the Board of Directors.
The 1999 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Code, will be administered by the Board of Directors or by a
committee of the Board. Our employees, including officers and directors of
AltiGen who are also employees, or any subsidiary designated by the Board of
Directors for participation in the 1999 Employee Stock Purchase Plan, are
eligible to participate in the 1999 Employee Stock Purchase Plan if they are
customarily employed for more than 20 hours per week and more than five months
per year. The 1999 Employee Stock Purchase Plan will be implemented by
consecutive offering periods generally six months in duration. However, the
first offering period under the 1999 Employee Stock Purchase Plan will commence
on the effective date of this offering and terminate on or before July 31,
2001. The Board of Directors may change the dates or duration of one or more
offering periods.
The 1999 Employee Stock Purchase Plan permits our eligible employees to
purchase shares of common stock through payroll deductions at 85% of the lower
of the fair market value of the common stock on the first day of the offering
period or a specified exercise date. Participants generally may not purchase
shares on any exercise date or stock, to the extent that, immediately after the
grant, the participant would own stock or options to purchase stock totaling 5%
or more of the total combined voting power of all stock of AltiGen, or greater
than $25,000 worth of our stock in any calendar year. In addition, no more than
10,000 shares may be purchased by any participant during any offering period.
In the event of a sale or merger of AltiGen, the Board may accelerate the
exercise date of the current purchase period to a date prior to the change of
control, or the acquiring corporation may assume or replace the outstanding
purchase rights under the 1999 Employee Stock Purchase Plan.
47
<PAGE>
Principal Stockholders
The following table sets forth information regarding the beneficial ownership
of shares of our common stock as of May 31, 1999 and as adjusted to reflect the
sale of shares in this offering. The table shows ownership by:
. each person or entity known to us to own beneficially more than 5% of the
shares of our outstanding stock;
. each of our directors;
. each of our named executive officers; and
. all of our directors and executive officers as a group.
The percentage ownership figures are based on 15,932,278 shares of common stock
outstanding as of May 31, 1999 and shares outstanding after completion of
this offering. The numbers are adjusted to reflect the conversion of all
outstanding shares of preferred stock upon the closing of this offering,
assuming no exercise of the underwriters' overallotment option, and include the
issuance of 328,965 shares of common stock in June 1999 in relation to the
conversion of promissory notes.
Unless otherwise indicated, the principal address of each of the stockholders
below is: c/o AltiGen Communications, Inc., 47427 Fremont Boulevard, Fremont,
California 94538. Except as otherwise indicated in the footnotes to this table,
and subject to applicable community property laws, the persons named in the
table have sole voting and investment power with respect to all shares of
AltiGen common stock as beneficially owned by them.
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned as Percent of Shares
Number of a Result of Options Beneficially Owned
Shares Beneficially Exercisable Within 60 ------------------------------
Name of Beneficial Owner Owned(1) Days of May 31, 1999 Before Offering After Offering
------------------------ ------------------- --------------------- --------------- --------------
<S> <C> <C> <C> <C>
Directors and Executive
Officers
Gilbert Hu(2) (8)....... 2,386,700 1,033,300 14.1%
Kenneth Tai(3).......... 1,503,125 3,125 9.4
Wen-Huang (Simon)
Chang(4) (8)........... 1,000,590 3,125 6.3
Thomas Shao(5).......... 351,875 21,875 2.2
Masaharu Shinya......... 200,000 -- 1.3
Michele Shannon......... 74,796 32,296 *
Simon Chouldjian(6)..... 74,356 41,667 --
Richard Black........... -- -- --
All directors and
executive officers as a
group (8 persons)...... 6,066,859 1,165,805 38.1
5% Stockholders
Technology Associates
Corporation(7)......... 1,574,174 -- 9.9
Shing-Kao (Jerry) Liao.. 829,380 -- 5.2
</TABLE>
- -------------------
* Less than 1%
48
<PAGE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, based on factors including voting and
investment power with respect to shares. Shares of common stock subject to
options that are currently exercisable or exercisable within 60 days of May
31, 1999 are deemed to be outstanding and to be beneficially owned by the
person holding such options for the purpose of computing the percentage
ownership of such person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
Therefore, for each person, the figure appearing in the column titled
"Number of Shares Beneficially Owned" includes the number of shares listed
in the column titled "Number of Shares Beneficially Owned as a Result of
Options Exercisable Within 60 Days of May 31, 1999".
(2) Includes 20,000 shares registered in the name of Mr. Hu's wife May Kuei-
Rong Hu, 166,700 registered in the name of his daughter Michelle Hu, and
166,700 shares registered in the name of his daughter Stephanie Hu.
(3) Includes shares held by the following affiliated entities: 1,000,000 shares
registered in the name of InveStar Burgeon Venture Capital, Inc.; 166,667
shares registered in the name of InveStar Dayspring Venture Group, Inc.;
166,667 shares registered in the name of InveStar Excelsus Venture Capital
(Int'l) Inc., LDC; and 166,666 shares registered in the name of Forefront
Venture Partners, L.P. Director Kenneth Tai is a general partner of all of
the above entities and disclaims beneficial ownership of the securities
held by the entities except for his proportional interest in the entities.
(4) Includes 250,000 shares registered in the name of Mr. Chang's wife, Hsiang-
Li Chang Hu, and 240,000 shares registered in the name of his daughter Ya-
Ting Chang.
(5) Includes 300,000 shares registered in the name of Techgains Corporation, of
which Mr. Shao is managing director, and 30,000 shares registered in the
name of TSS Enterprises. Also includes 18,750 vested, but unexercised,
shares held by TSS Enterprises. Mr. Shao disclaims beneficial ownership of
the securities held by these entities except for his proportional interest
in the entities.
(6) Includes 22,689 shares to be issued in June 1999 upon conversion of
promissory notes held by Mr. Chouldjian.
(7) Principal address is 11F 201, Chien Kuo South Road, Section 2, Taipei,
Taiwan R.O.C. Includes 234,267 shares registered in the name of affiliated
entity Tech Alliance Corporation.
(8) Mr. Hu and Mr. Chang are brothers-in-law.
Certain Transactions
Equity Investment Transactions
Series B Preferred Stock. In August 1995 and January 1996, we sold 2,495,286
shares of our series B preferred stock for $0.70 per share. The purchasers of
the series B preferred stock included, among others:
<TABLE>
<CAPTION>
Shares of
Purchaser Series B Preferred Stock
--------- ------------------------
<S> <C>
Tricia Chu(1)...................................... 200,000
Shing-Kao (Jerry) Liao............................. 197,680
Gilbert Hu(2)...................................... 133,300
Hsiang-Li Chang Hu(3).............................. 86,831
Ya-Ting Chang(3)................................... 86,831
Nicholas Shih(4)................................... 50,000
Diana Shih(4)...................................... 50,000
En-Kuang Lung...................................... 40,000
Chang-Hou Lin...................................... 39,536
</TABLE>
- -------------------
(1) Of the 200,000 series B shares purchased by Ms. Chu, 30,000 were
subsequently transferred to other individuals.
(2) Mr. Hu subsequently transferred all 133,300 shares to his sister Hsiang-Li
Chang Hu.
(3) Hsiang-Li Chang Hu is the spouse, and Ya-Ting Chang is the child, of
director Wen-Huang (Simon) Chang. Ms. Chang Hu is the sister of our
President and Chief Executive Officer Gilbert Hu.
(4) Nicholas Shih is the son, and Diana Shih is the daughter, of our Vice
President of Finance and Administration Tricia Chu.
49
<PAGE>
Series C Preferred Stock. From June 1996 to December 1997, we sold 5,999,995
shares of our series C preferred stock at a weighted average price of $1.31 per
share. The purchasers of our series C preferred stock included, among others:
<TABLE>
<CAPTION>
Shares of
Purchaser Series C Preferred Stock
--------- ------------------------
<S> <C>
Entities affiliated with Technology Associates
Corporation(1)................................... 1,000,000
Entities affiliated with InveStar Capital,
Inc.(2).......................................... 1,000,000
Entities affiliated with Techgains Corpora-
tion(3).......................................... 560,000
Shing-Kao (Jerry) Liao............................ 265,000
Masaharu Shinya................................... 200,000
Wen-Huang (Simon) Chang(4)........................ 107,465
Hsiang-Li Chang Hu(4)............................. 103,169
Ya-Ting Chang(4).................................. 73,169
Chin-Tzu Lin Wu(5)................................ 80,000
May Kuei-Rong Hu(6)............................... 20,000
Simon Chouldjian.................................. 10,000
Michele Shannon................................... 5,000
</TABLE>
- -------------------
(1) Technology Associates Corporation and Tech Alliance Corporation are
affiliated. Together, these entities are considered a greater than 5%
stockholder of AltiGen.
(2) InveStar Capital, Inc. includes affiliated entities InveStar Burgeon
Venture Capital, Inc., InveStar Dayspring Venture Capital Group, Inc.,
InveStar Excelsus Venture Capital (Int'l) Inc., LDC. and Forefront Venture
Partners L.P. Together, these entities are considered a greater than 5%
stockholder of AltiGen. Director Kenneth Tai is a general partner of all of
the above funds, and disclaims beneficial ownership of the securities held
by such entities, except for his proportional interest in the entities.
(3) Techgains Corporation is affiliated with Tekkang Management Consulting Inc.
and TSS Enterprises. Together, these entities are considered a greater than
5% stockholder of AltiGen. Director Thomas Shao is a Managing Director of
Techgains Corporation and a joint owner and principal of TSS Enterprises.
(4) Hsiang-Li Chang Hu is the spouse, and Ya-Ting Chang is the child, of
director Wen-Huang (Simon) Chang. Ms. Chang Hu is the sister of our
President and Chief Executive Officer Gilbert Hu.
(5) Chin-Tzu Lin Wu is the mother-in-law of our Vice President of Research and
Development En-Kuang Lung.
(6) May Kuei-Rong Hu is the spouse of our President and Chief Executive Officer
Gilbert Hu.
Series D Preferred Stock. In April, August and September 1998 and May 1999, we
sold a total of 2,376,282 shares of our series D preferred stock at a weighted
average price of $5.73 per share. The purchasers of our series D preferred
stock included, among others:
<TABLE>
<CAPTION>
Shares of
Purchaser Series D Preferred Stock
--------- ------------------------
<S> <C>
Entities affiliated with Technology Associates
Corporation(1)................................... 574,174
Entities affiliated with InveStar Capital,
Inc.(2).......................................... 500,000
Entities affiliated with Kanematsu Corpora-
tion(3).......................................... 214,222
Wen-Huang (Simon) Chang........................... 140,000
</TABLE>
- -------------------
(1) Technology Associates Corporation and Tech Alliance Corporation are
affiliated. Together, these entities are considered a greater than 5%
stockholder of AltiGen.
(2) InveStar Capital, Inc. includes affiliated entities InveStar Burgeon
Venture Capital, Inc., InveStar Dayspring Venture Capital Group, Inc.,
InveStar Excelsus Venture Capital (Int'l) Inc., LDC. and Forefront Venture
Partners L.P. Together, these entities are considered a greater than 5%
stockholder of AltiGen. Director Kenneth Tai is a general partner of all of
the above funds, and disclaims beneficial ownership of the securities held
by such entities, except for his proportional interest in the entities.
(3) Kanematsu Corporation, Kanematsu Semiconductor Corporation, and Kanematsu
USA, Inc. are affiliated entities. Director Masaharu Shinya formerly was
President of Kanematsu Semiconductor Corporation.
50
<PAGE>
Distributor Agreement with Kanematsu Semiconductor Corporation
In a distributor agreement dated as of April 1997, we granted Kanematsu
Semiconductor Corporation, a non-exclusive, non-transferable right to market
and distribute certain of our products to original equipment manufacturers,
system integrators, and dealers in several East and South Asian countries,
including Japan, China, Korea, Taiwan, Singapore, the Philippines, and India.
At the time we signed this agreement, Mr. Shinya, who is currently one of our
directors, was the President of Kanematsu Semiconductor Corporation. In fiscal
year 1998, our agreement with Kanematsu Semiconductor generated approximately
$82,000 in revenue to us. Unless terminated by written notice provided by
either party, the distributor agreement automatically renews on an annual
basis.
Employment Contract with Tricia Chu
In March 1999, we entered into an employment contract with Tricia Chu, our Vice
President of Finance and Administration. Ms. Chu currently holds options that,
when fully vested, will have an aggregate exercise price of $138,000. The
contract provides that in the event Ms. Chu is terminated without cause prior
to the vesting of all her options, the vesting of any unvested portion will
accelerate so that all options then held by her will be immediately vested and
exercisable.
Description of Capital Stock
Authorized Shares
Immediately following the closing of this offering, our authorized capital
stock will consist of shares of common stock, $0.001 par value per share,
and shares of preferred stock, $0.001 par value per share, issuable in
series. As of May 31, 1999, and assuming the conversion of all outstanding
shares of preferred stock into shares of common stock upon the closing of this
offering and including the issuance of 328,965 shares of common stock in June
1999 in relation to the conversion of promissory notes, there were outstanding
15,932,278 shares of common stock held by stockholders.
Common Stock
Subject to preferences that may apply to shares of preferred stock outstanding
at the time, the holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available therefor at such times and in
such amounts as our Board may from time to time determine. Each stockholder is
entitled to one vote for each share of common stock held on all matters
submitted to a vote of stockholders. The common stock is not entitled to
preemptive rights and is not subject to conversion or redemption. Upon a
liquidation, dissolution or winding up of AltiGen, the assets legally available
for distribution to stockholders are to be distributed ratably among the
holders of the common stock and any participating preferred stock outstanding
at the time after payment of liquidation preferences, if any, on any
outstanding preferred stock and payment of other claims of creditors. Each
outstanding share of common stock is, and all shares of common stock to be
outstanding upon completion of this offering will be, fully paid and
nonassessable.
51
<PAGE>
Preferred Stock
Our Certificate of Incorporation authorizes our Board of Directors to create
and issue one or more series of preferred stock and to determine the rights and
preferences of each wholly unissued series and any qualifications, limitations
or restrictions thereon. Among other rights, our Board may determine, without
further vote or action by our stockholders, dividend rights, voting rights,
redemption rights, conversion rights, liquidation preferences and the number of
shares constituting any series or the designation of any series. The issuance
of preferred stock could, among other things, have the effect of delaying,
deferring or preventing a change in control of AltiGen without further action
by the stockholders, and may adversely affect the voting and other rights of
the holders of our common stock. The issuance of preferred stock with voting
and conversion rights may have the effect of decreasing the market price of our
common stock, and may adversely affect the voting power of the holders of our
common stock, including the loss of voting control to others. Upon the
completion of this offering, each outstanding share of preferred stock will be
converted into a share of common stock, leaving no shares of preferred stock
issued or outstanding. At present, we have no plans to issue any shares of
preferred stock after the completion of this offering.
Registration Rights
We have entered into registration rights agreements with stockholders who own
shares of our common stock issuable upon the conversion of their preferred
stock. Under the registration rights agreements, the holders or their
transferees are entitled to rights with respect to the registration of these
shares under the Securities Act. If we propose to register any of our
securities under the Securities Act, either for our own account or the account
of other security holders, the holders are entitled to notice of the
registration and, subject to certain conditions and limitations, are entitled
to include their shares in the registration. The holders' shares may be
excluded completely from an initial public offering if certain determinations
are made by the underwriters of the offering. In addition, at any time, the
holders of at least a majority of the these shares of common stock may require
us, on not more than one occasion, to file a registration statement under the
Securities Act with respect to the outstanding registrable securities. We are
required to use our best efforts to effect the required registration, subject
to certain conditions and limitations set forth in the registration rights
agreements. Further, the holders of at least 30% of these shares of common
stock may require us to file additional registration statements on Form S-3
when the form becomes available to us, subject to conditions and limitations.
The expenses incurred in connection with all of these registrations will be
borne by us.
Limitations on Director Liability
Our Certificate of Incorporation provides that, to the fullest extent permitted
by the Delaware General Corporation Law, none of our directors will be
personally liable to our stockholders for monetary damages, subject to our
reincorporation in Delaware. Section 102(b)(7) of the Delaware General
Corporation Law provides that a director's liability for breach of fiduciary
duty may be eliminated, except for liability:
. for any breach of the director's duty of loyalty to the corporation or its
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law, for unlawful
dividends or unlawful stock repurchase or redemptions
. for any transaction from which the director derives an improper personal
benefit.
Any amendment to these provisions of the Delaware General Corporation Law will
automatically be incorporated by reference into our Certificate of
Incorporation, without any vote on the part of our stockholders unless
otherwise required.
52
<PAGE>
Our Bylaws provide that we will indemnify our directors and officers to the
fullest extent permitted by Delaware law. Generally, we are required to
indemnify our directors and officers for all:
. judgments;
. fines;
. settlements;
. legal fees; and
. other expenses incurred in connection with pending or threatened legal
proceedings arising from the director's or officer's position with us.
Delaware law and certain provisions of our certificate of incorporation and
bylaws
Certain provisions of Delaware law and our certificate of incorporation and
bylaws could make more difficult the acquisition of our company by means of a
tender offer, a proxy contest, or otherwise, and the removal of incumbent
officers and directors. These provisions are expected to discourage certain
types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of our company to first negotiate
with us. We believe that the benefits of increased protection of our company's
potential ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to acquire or restructure our company outweighs the
disadvantages of discouraging such proposals, including proposals that are
priced above the then current market value of our common stock, because, among
other things, negotiation of such proposals could result in an improvement of
their terms.
We are subject to section 203 of the Delaware General Corporation Law. This
provision generally prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three
years following the date such stockholder became an interested stockholder,
unless:
. prior to such date the Board of Directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned by persons who are
directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer; or
. on or subsequent to such date, the Board of Directors approves the
business combination and the stockholders authorize the business
combination at an annual or special meeting of stockholders, and not by
written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines business combination to include:
. any merger or consolidation involving the corporation and the interested
stockholder;
. any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
. subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder;
. any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
53
<PAGE>
. the receipt of the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation. In general, section 203 defines an interested
stockholder as any entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person
affiliated with or controlling or controlled by such entity or person.
Our certificate of incorporation and bylaws require that any action required or
permitted to be taken by our stockholders must be effected at a duly called
annual or special meeting of the stockholders and may not be effected by a
consent in writing. In addition, special meetings of our stockholders may be
called only by the Board of Directors, certain of our officers or stockholders
holding a majority of our outstanding voting securities. Our certificate of
incorporation and bylaws also provide that, beginning upon the closing of the
offering, our Board of Directors will be divided into three classes, with each
class serving staggered three-year terms and that certain amendments of the
certificate of incorporation and of the bylaws require the approval of holders
of at least 66 2/3% of the voting power of all outstanding stock. These
provisions may have the effect of deferring hostile takeovers or delaying
changes in control or management of our company.
Transfer Agent and Registrar
The Transfer Agent and Registrar for our common stock is Boston EquiServe L.P.
Its address is 150 Royal Street, Canton, Massachusetts 02021. Its telephone
number at this location is (781) 575-3010.
54
<PAGE>
Shares Eligible for Future Sale
Shares Eligible for Future Sale
When this offering is completed, we will have a total of shares of
common stock outstanding, assuming no exercise of outstanding options. The
shares offered by this prospectus will be freely tradeable unless they
are purchased by our "affiliates", as defined in Rule 144 under the Securities
Act of 1933. The remaining shares are "restricted", which means they were
originally sold in offerings that were not subject to a registration statement
filed with the Securities and Exchange Commission. These restricted shares may
be resold only through registration under the Securities Act of 1933 or under
an available exemption from registration, such as provided through Rule 144.
Rule 144
In general, under Rule 144, a person, or persons whose shares are aggregated,
who has beneficially owned restricted securities for at least one year,
including the holding period of any holder who is not an affiliate, is entitled
to sell within any three month period a number of our shares of common stock
that does not exceed the greater of:
. 1% of the then-outstanding shares of our common stock; or
. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the date on which
notice of sale is filed with the Securities and Exchange Commission.
Sales under Rule 144 are subject to restrictions relating to manner of sale,
notice and the availability of current public information about us. Under Rule
144 and subject to certain volume limitations, 219,437 of the restricted shares
are immediately eligible for sale upon consummation of this offering,
14,537,818 of the restricted sales will be eligible for sale beginning the
181st day after the date of this offering, and 1,158,294 will become saleable
in May 2000.
A person who is not deemed an affiliate of ours at any time during the 90 days
preceding a sale and who has beneficially owned shares for at least two years,
including the holding period of any prior owner who is not an affiliate, would
be entitled to sell shares following this offering under Rule 144(k) without
regard to the volume limitations, manner of sale provisions, public information
or notice requirements of Rule 144.
Rule 701 and Options
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with certain restrictions, including the holding period requirement,
of Rule 144. Any employee, officer or director of or consultant to AltiGen who
purchased his or her shares pursuant to a written compensatory plan or contract
may be entitled to rely on the resale provisions of Rule 701. Rule 701 permits
affiliates to sell their Rule 701 shares under Rule 144 without complying with
the holding period requirements of Rule 144. Rule 701 further provides that
non-affiliates may sell such shares in reliance on Rule 144 without having to
comply with the holding period, public information, volume limitation or notice
provisions of Rule 144. All holders of Rule 701 shares are required to wait
until 90 days after the date of this prospectus before selling such shares.
However, all shares issued by us pursuant to Rule 701 are subject to lock-up
provisions and will only become eligible for sale upon the expiration of 180
days after this offering.
Immediately after this offering, we intend to file a registration statement
under the Securities Act covering shares of common stock subject to outstanding
options or issued or issuable under our 1994 Stock Option Plan, 1999 Stock
Option Plan, 1998 Stock Purchase Plan and our 1999 Employee Stock Purchase
Plan. Based on the number of shares subject to outstanding options at May 31,
1999, and currently reserved for issuance under all such plans, such
registration statement would cover approximately 7,525,800 shares. Such
55
<PAGE>
registration statement will automatically become effective upon filing.
Accordingly, shares registered under such registration statement will, subject
to Rule 144 volume limitations applicable to our affiliates, be available for
sale in the open market immediately after the 180-day lock-up agreements
expire. Also beginning 180 days after the date of this offering, certain
holders of shares of common stock will be entitled to certain rights with
respect to registration of such shares of common stock for offer and sale to
the public. See "Description of Capital Stock--Registration Rights".
Lock-up Agreements
The holders of shares of common stock have agreed to a 180-day "lock-
up" with respect to these shares. This generally means that they cannot sell
these shares during the 180 days following the date of this prospectus. See
"Underwriting" for additional details. After the 180-day lock-up period, these
shares may be sold in accordance with Rule 144.
56
<PAGE>
Underwriting
We have entered into an underwriting agreement with the underwriters named
below. CIBC World Markets Corp., Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated, and FAC/Equities, a division of First Albany
Corporation, are acting as representatives of the underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares. Subject to the terms
and conditions of the underwriting agreement, each underwriter has severally
agreed to purchase the number of shares of common stock set forth opposite its
name below:
<TABLE>
<CAPTION>
Underwriter Number of Shares
----------- ----------------
<S> <C>
CIBC World Markets Corp.....................................
Dain Rauscher Wessels ......................................
FAC/Equities................................................
------
Total......................................................
======
</TABLE>
This is a firm commitment underwriting. This means that the underwriters have
agreed to purchase all of the shares offered by this prospectus (other than
those covered by the over-allotment option described below) if any are
purchased. Under the underwriting agreement, if an underwriter defaults in its
commitment to purchase shares, the commitments of non-defaulting underwriters
may be increased or the underwriting agreement may be terminated, depending on
the circumstances.
The shares should be ready for delivery on or about , 1999 against
payment in immediately available funds. is the th business day
following the date of this prospectus. The th day settlement may affect the
trading of the shares on the date of this prospectus and on the [ ]
following business day[s]. The representatives have advised AltiGen that the
underwriters propose to offer the shares directly to the public at the public
offering price that appears on the cover page of this prospectus. In addition,
the representatives may offer some of the shares to other securities dealers at
such price less a concession of $ per share. The underwriters may also
allow, and such dealers may reallow, a concession not in excess of $ per
share to other dealers. After the shares are released for sale to the public,
the representatives may change the offering price and other selling terms at
various times.
AltiGen has granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of additional shares
from AltiGen to cover over-allotments. If the underwriters exercise all or part
of this option, they will purchase shares covered by the option at the initial
public offering price that appears on the cover page of this prospectus, less
the underwriting discount. If this option is exercised in full, the total price
to public will be $ , and the total proceeds to AltiGen will be $ .
The underwriters have severally agreed that, to the extent the over-allotment
option is exercised, they will each purchase a number of additional shares
proportionate to the underwriter's initial amount reflected in the foregoing
table.
The following table provides information regarding the amount of the discount
to be paid to the underwriters by us.
<TABLE>
<CAPTION>
Total without Exercise
of Over-Allotment Total with Full Exercise
Per Share Option of Over-Allotment Option
--------- ---------------------- ------------------------
<S> <C> <C> <C>
AltiGen........... $ $ $
</TABLE>
57
<PAGE>
AltiGen estimates that its total expenses of the offering, excluding the
underwriting discount, will be approximately $ .
AltiGen has agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
AltiGen, its officers and directors, and substantially all of its stockholders
have agreed to a 180-day "lock up" with respect to shares of common stock and
certain other of AltiGen securities that they beneficially own, including
securities that are convertible into shares of common stock and securities that
are exchangeable or exercisable for shares of common stock. This "lock up"
means that, subject to certain exceptions, for a period of 180 days following
the date of this prospectus, AltiGen and such persons may not offer, sell,
pledge or otherwise dispose of these securities without the prior written
consent of CIBC World Markets Corp.
The representatives have informed AltiGen that they do not expect discretionary
sales by the underwriters to exceed five percent of the shares offered by this
prospectus.
The underwriters have reserved for sale up to shares for employees,
directors and certain other persons associated with AltiGen. These reserved
shares will be sold at the initial public offering price that appears on the
cover page of this prospectus. The number of shares available for sale to the
general public in the offering will be reduced to the extent reserved shares
are purchased by such persons. The underwriters will offer to the general
public, on the same terms as other shares offered by this prospectus, any
reserved shares that am not purchased by such persons.
There is no established trading market for the shares. The offering price for
the shares has been determined by and the representatives and us, based on the
following factors:
. our record of operations;
. our current financial position and future prospects;
. the experience of our management;
. the economics of our industry in general; and
. the character of the equities markets.
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of the
shares is completed. However, the underwriters may engage in the following
activities in accordance with the rules:
. Stabilizing transactions--The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of the shares,
so long as stabilizing bids do not exceed a specified maximum.
. Over-allotments and syndicate covering transactions--The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is created
in connection with the offering, the representatives may engage in
syndicate covering transactions by purchasing shares in the open market.
The representatives may also elect to reduce any short position by
exercising all or part of the over-allotment option.
. Penalty bids--If the representatives purchase shares in the open market in
a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group
members who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of such transactions. The
imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.
58
<PAGE>
Neither AltiGen nor the underwriters make any representation or prediction as
to the effect that the transactions described above may have on the price of
the shares. These transactions may occur the Nasdaq National Market or
otherwise. If such transactions are commenced, they may be discontinued without
notice at any time.
AltiGen and the underwriters expect that the shares will be ready for delivery
on the th business day following the date of this prospectus. Under
Securities and Exchange Commission regulations, secondary market trades are
required to settle in three business days following the trade date (commonly
referred to as "T+3"), unless the parties to the trade agree to a different
settlement cycle. As noted above, the shares will settle in T+ . Therefore,
purchasers who wish to trade on the date of this prospectus or during the next
succeeding business day[s] must specify an alternate settlement cycle at
the time of the trade to prevent a failed settlement. Purchasers of the shares
who wish to trade shares on the date of this prospectus or during the next
succeeding business day[s] should consult their own advisors.
Legal Matters
The validity of the shares of common stock offered hereby will be passed upon
for us by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Pillsbury Madison & Sutro LLP, Palo Alto, California, is
acting as counsel for the underwriters in connection with various legal matters
relating to the shares of common stock offered by this prospectus.
Experts
The consolidated financial statements and schedule included in this Prospectus
or elsewhere in the Registration Statement have been audited by Arthur Andersen
LLP, independent public accountants, to the extent and for the periods
indicated in their reports and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
Where Can You Find More Information
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission in connection with this offering. In addition, upon
completion of the offering, we will be required to file annual, quarterly and
current reports, proxy statements and other information with the Securities and
Exchange Commission. You may read and copy the registration statement and any
other documents filed by us at the Securities and Exchange Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the Public Reference Room. Our Securities and Exchange
Commission filings are also available to the public at the Securities and
Exchange Commission's Internet site at "http://www.sec.gov".
This prospectus is part of the registration statement and does not contain all
of the information included in the registration statement. Whenever a reference
is made in this prospectus to any contract or other document of ours, the
reference may not be complete, and you should refer to the exhibits that are a
part of the registration statement for a copy of the contract or document.
This prospectus includes statistical data that were obtained from an industry
publication generated by International Data Corporation and Frost & Sullivan.
These industry publications generally indicate that the authors of these
publications have obtained information from sources believed to be reliable,
but do not guarantee the accuracy and completeness of their information. While
Altigen believe these industry publications to be reliable, AltiGen has not
independently verified their data.
59
<PAGE>
Altigen Communications, Inc.
Index To Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Shareholders' Equity............................ F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
Report of Independent Public Accountants
To AltiGen Communications, Inc.:
We have audited the accompanying consolidated balance sheets of AltiGen
Communications, Inc. (a California corporation) and subsidiary as of September
30, 1997 and 1998 and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended September 30, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AltiGen Communications, Inc.
and subsidiary as of September 30, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Jose, California
November 20, 1998
F-2
<PAGE>
AltiGen Communications, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30,
------------------------ March 31,
1997 1998 1999
----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 1,987,869 $ 7,003,569 $ 4,243,430
Short-term investments................ 1,105,538 1,053,060 --
Accounts receivable, net of allowances
of $41,000, $133,000 and $266,000,
respectively......................... 438,015 1,190,291 1,334,187
Inventories........................... 846,178 1,294,080 1,706,883
Prepaid expenses and other current
assets............................... 85,199 175,248 378,571
----------- ----------- ------------
Total current assets................. 4,462,799 10,716,248 7,663,071
----------- ----------- ------------
Property and equipment:
Furniture and equipment............... 305,291 528,448 814,505
Computer software..................... 78,211 295,947 440,842
----------- ----------- ------------
383,502 824,395 1,255,347
Less: Accumulated depreciation........ (131,830) (271,241) (397,123)
----------- ----------- ------------
Net property and equipment........... 251,672 553,154 858,224
----------- ----------- ------------
$ 4,714,471 $11,269,402 $ 8,521,295
=========== =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 188,016 $ 441,457 $ 381,888
Notes payable......................... 278,573 365,687 378,485
Accrued liabilities--
Payroll and related benefits......... 47,807 91,160 178,011
Warranty............................. 139,000 474,410 705,101
Other................................ 92,362 187,722 125,513
Deferred revenue...................... 182,168 458,078 650,575
----------- ----------- ------------
Total current liabilities.............. 927,926 2,018,514 2,419,573
----------- ----------- ------------
Commitments (Note 4)
Shareholders' equity:
Convertible preferred stock, no par
value; aggregate liquidation
preference of $16,846,388 at
September 30, 1998 and March 31, 1999
(unaudited); Authorized--20,000,000
shares; Outstanding (Series A, B, C
and D) 10,817,677 shares at September
30, 1997, 12,772,090 shares at
September 30, 1998 and March 31, 1999
(unaudited).......................... 9,671,242 18,882,198 18,882,198
Common stock, no par value
Authorized--40,000,000 shares
Outstanding--1,338,770 shares at
September 30, 1997, 1,454,811 shares
at September 30, 1998,
1,985,165 shares at March 31, 1999
(unaudited)......................... 21,712 186,300 2,152,115
Deferred stock compensation........... -- (116,250) (1,938,613)
Accumulated deficit................... (5,906,409) (9,701,360) (12,993,978)
----------- ----------- ------------
Total shareholders' equity........... 3,786,545 9,250,888 6,101,722
----------- ----------- ------------
$ 4,714,471 $11,269,402 $ 8,521,295
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
AltiGen Communications, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Six Months Ended March
Fiscal Year Ended September 30, 31,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues, net........... $ 229,277 $ 1,378,528 $ 3,889,336 $ 1,509,939 $ 2,356,242
Cost of revenues........ 238,697 1,039,721 2,519,794 1,186,958 1,223,581
----------- ----------- ----------- ----------- -----------
Gross profit (loss).... (9,420) 338,807 1,369,542 322,981 1,132,661
Operating expenses:
Research and develop-
ment.................. 753,160 1,497,860 1,927,433 799,159 2,035,708
Sales and marketing.... 445,442 1,447,905 2,770,090 1,105,926 1,778,990
General and administra-
tive.................. 546,838 718,139 674,626 339,055 701,535
Deferred stock compen-
sation................ -- -- 38,750 -- 107,946
----------- ----------- ----------- ----------- -----------
Total operating ex-
penses............... 1,745,440 3,663,904 5,410,899 2,244,140 4,624,179
----------- ----------- ----------- ----------- -----------
Loss from operations.... (1,754,860) (3,325,097) (4,041,357) (1,921,159) (3,491,518)
Interest and other in-
come, net.............. 123,700 206,315 246,406 89,375 198,900
----------- ----------- ----------- ----------- -----------
Net loss................ $(1,631,160) $(3,118,782) $(3,794,951) $(1,831,784) $(3,292,618)
=========== =========== =========== =========== ===========
Basic net loss per
share................. $ (1.28) $ (2.34) $ (2.75) $ (1.37) $ (1.91)
=========== =========== =========== =========== ===========
Shares used in comput-
ing basic net loss per
share................. 1,272,040 1,330,176 1,378,019 1,338,770 1,721,097
=========== =========== =========== =========== ===========
Unaudited pro forma ba-
sic net loss per
share................. $ (0.29) $ (0.15) $ (0.23)
=========== =========== ===========
Shares used in comput-
ing unaudited pro
forma basic net loss
per share............. 13,069,080 12,495,997 14,493,187
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
AltiGen Communications, Inc.
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Deferred Total
---------------------- -------------------- Stock Accumulated Shareholders'
Shares Amount Shares Amount Compensation Deficit Equity
---------- ----------- --------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
SEPTEMBER 30, 1995..... 5,098,142 $ 3,158,714 1,263,187 $ 17,354 $ -- $ (1,156,467) $ 2,019,601
Issuance of Series B
convertible preferred
stock................. 127,000 88,900 -- -- -- -- 88,900
Issuance of Series C
convertible preferred
stock................. 3,100,005 3,100,005 -- -- -- -- 3,100,005
Exercise of stock
options............... -- -- 22,708 1,186 -- -- 1,186
Net loss............... -- -- -- -- (1,631,160) (1,631,160)
---------- ----------- --------- ---------- ----------- ------------ -----------
BALANCE,
SEPTEMBER 30, 1996..... 8,325,147 6,347,619 1,285,895 18,540 -- (2,787,627) 3,578,532
Issuance of Series C
convertible preferred
stock................. 2,492,530 3,323,623 -- -- -- -- 3,323,623
Exercise of stock
options............... -- -- 52,875 3,172 -- -- 3,172
Net loss............... -- -- -- -- -- (3,118,782) (3,118,782)
---------- ----------- --------- ---------- ----------- ------------ -----------
BALANCE,
SEPTEMBER 30, 1997..... 10,817,677 9,671,242 1,338,770 21,712 -- (5,906,409) 3,786,545
Issuance of Series C
convertible preferred
stock................. 407,460 1,426,123 -- -- -- -- 1,426,123
Issuance of Series D
convertible preferred
stock................. 1,546,953 7,784,833 -- -- -- -- 7,784,833
Exercise of stock
options............... -- -- 116,041 9,588 -- -- 9,588
Deferred stock
compensation.......... -- -- -- 155,000 (155,000) -- --
Amortization of de-
ferred stock compensa-
tion.................. -- -- -- -- 38,750 38,750
Net loss............... -- -- -- -- -- (3,794,951) (3,794,951)
---------- ----------- --------- ---------- ----------- ------------ -----------
BALANCE,
SEPTEMBER 30, 1998..... 12,772,090 18,882,198 1,454,811 186,300 (116,250) (9,701,360) 9,250,888
Unaudited:
Exercise of stock
options............... -- -- 530,354 35,506 -- -- 35,506
Deferred stock
compensation.......... -- -- -- 1,930,309 (1,930,309) -- --
Amortization of de-
ferred stock compensa-
tion.................. -- -- -- -- 107,946 -- 107,946
Net loss............... -- -- -- -- -- (3,292,618) (3,292,618)
---------- ----------- --------- ---------- ----------- ------------ -----------
BALANCE,
MARCH 31, 1999
(Unaudited)............ 12,772,090 $18,882,198 1,985,165 $2,152,115 $(1,938,613) $(12,993,978) $ 6,101,722
========== =========== ========= ========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
AltiGen Communications, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the Six Months
Fiscal Year Ended September 30, Ended March 31,
------------------------------------- ------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss............... $(1,631,160) $(3,118,782) $(3,794,951) $(1,831,784) $(3,292,618)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation.......... 32,390 75,382 139,411 57,215 125,882
Amortization of
deferred stock
compensation......... -- -- 38,750 -- 107,946
Provision for accounts
receivable
allowance............ 10,000 31,000 92,000 20,605 132,779
Provision for excess
and obsolete
inventories.......... 94,000 187,000 418,000 301,000 96,000
Increase in notes
payable.............. 4,315 274,258 87,114 40,885 12,798
Changes in operating
assets and
liabilities:
Accounts receivable... (175,426) (303,589) (844,276) (195,658) (276,675)
Inventories........... (242,778) (679,595) (865,902) (301,109) (508,803)
Prepaid expenses and
other current
assets............... 20,760 (70,824) (90,049) 73,158 (203,323)
Accounts payable...... 30,585 145,583 253,441 62,559 (59,569)
Accrued liabilities... 34,901 195,868 474,123 193,288 255,333
Deferred revenue...... 54,048 128,120 275,910 (12,605) 192,497
----------- ----------- ----------- ----------- -----------
Net cash used in
operating
activities........... (1,768,365) (3,135,579) (3,816,429) (1,592,446) (3,417,753)
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from sale of
short-term
investments........... 2,340,441 371,000 52,478 81,631 1,053,060
Purchases of short-term
investments........... (1,657,096) (1,138,538) -- -- --
Purchases of property
and equipment......... (42,161) (249,644) (440,893) (83,427) (430,952)
----------- ----------- ----------- ----------- -----------
Net cash provided by
(used in) investing
activities........... 641,184 (1,017,182) (388,415) (1,796) 622,108
----------- ----------- ----------- ----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Net proceeds from
issuance of
convertible preferred
stock................. 3,188,905 3,323,623 9,210,956 1,426,123 --
Net proceeds from
issuance of common
stock................. 1,186 3,172 9,588 -- 35,506
----------- ----------- ----------- ----------- -----------
Net cash provided by
financing
activities........... 3,190,091 3,326,795 9,220,544 1,426,123 35,506
----------- ----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS............ 2,062,910 (825,966) 5,015,700 (168,119) (2,760,139)
CASH AND CASH
EQUIVALENTS, BEGINNING
OF PERIOD.............. 750,925 2,813,835 1,987,869 1,987,869 7,003,569
----------- ----------- ----------- ----------- -----------
CASH AND CASH
EQUIVALENTS, END OF
PERIOD................. $ 2,813,835 $ 1,987,869 $ 7,003,569 $ 1,819,750 $ 4,243,430
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements
September 30, 1998
(All information as of and for the six months ended
March 31, 1998 and 1999 is unaudited)
1. ORGANIZATION OF THE COMPANY:
AltiGen Communications, Inc. (the "Company") was incorporated in California on
May 18, 1994 and began operations in July of that year. The Company designs,
manufactures, and markets server-based telecommunications systems that allow
businesses to use the Internet and the Public Switched Telephone Network
interchangeably to carry voice and data communications.
The Company is subject to the risks associated with early stage technology
companies. These risks include, but are not limited to: history of losses,
limited operating history, dependence on a smaller number of key individuals,
customers and suppliers, competition from larger, more established companies,
the continued need for additional financing, the impact of rapid technological
changes and changes in customer demand/requirements. There is no assurance that
the Company's efforts will be successful.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation and Fiscal Year-End
The Company's consolidated financial statements for the six months ended March
31, 1999 reflect the operations of the Company and its wholly owned subsidiary.
The subsidiary is located in Shanghai, China and was incorporated in November
1998. All significant intercompany transactions and balances have been
eliminated. The Company's fiscal year-end is September 30. Unless otherwise
stated, all references to 1998, 1997, and 1996 refer to the twelve months ended
September 30 of that year.
Unaudited Interim Financial Data
The unaudited consolidated financial statement data as of March 31, 1999 and
for the six months ended March 31, 1998 and 1999 have been prepared on the same
basis as the audited financial statements and, in the opinion of management,
include all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial information set forth therein, in
accordance with generally accepted accounting principles.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Concentration of Risk
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. The Company performs
ongoing credit evaluations of its customers' financial condition and requires
letters of credit whenever deemed necessary to help reduce its credit risk.
Additionally, the Company establishes an allowance for doubtful accounts based
upon factors surrounding the credit risk of specific customers, historical
trends related to past losses and other information. As of September 30, 1997
and 1998, approximately 65% and 66%, respectively, of accounts receivable were
concentrated with ten customers.
F-7
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company's purchases are concentrated with three suppliers and certain key
components of the Company's products are sole sourced. For fiscal years 1996,
1997, 1998 and for the six months ended March 31 1999 these three suppliers
provided 73%, 72%, 78% and 73%, respectively, of all raw materials purchased.
Loss of one of these suppliers could adversely impact the Company's operations.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity
of three months or less from the date of purchase to be cash equivalents.
Investments in highly liquid financial instruments with original maturities
greater than three months but less than one year are classified as short-term
investments. As of September 30, 1998, the Company's cash and cash equivalents
consisted of cash deposited in checking, money market accounts and a mutual
fund and short-term investments consisted of a certificate of deposit with an
original maturity of one year. The certificate of deposit matured in October
1998. For fiscal years 1996, 1997, and 1998, the Company did not make any cash
payments for interest or income taxes.
Inventories
Inventories (which include costs associated with components assembled by third-
party assembly manufacturers, as well as internal labor and overhead) are
stated at the lower of cost (first-in, first-out) or market. Provisions, when
required, are made to reduce excess and obsolete inventories to their estimated
net realizable values. Provisions for excess and obsolete inventory totaled
approximately $94,000, $187,000 and $418,000 for fiscal years 1996, 1997 and
1998, respectively, and $301,000 and $96,000 for the six months ended March 31,
1998 and 1999, respectively. The components of inventories include:
<TABLE>
<CAPTION>
September 30,
------------------- March 31,
1997 1998 1999
-------- ---------- -----------
(Unaudited)
<S> <C> <C> <C>
Raw materials................................ $529,632 $ 966,516 $ 986,208
Work-in-progress............................. 41,088 -- 198,073
Finished goods............................... 275,458 327,564 522,602
-------- ---------- ----------
$846,178 $1,294,080 $1,706,883
======== ========== ==========
</TABLE>
Prepaid Royalties
The Company is in the process of developing a multifunction resource card which
contains certain third party proprietary technology. In connection with the
development of this product, the Company prepaid royalty payments to the
developer of this technology totaling $100,000 and $250,000 as of September 30,
1998 and March 31, 1999 (unaudited), respectively. The prepayments are included
in prepaid expenses and other current assets in the accompanying consolidated
balance sheets and will be amortized against future product shipments. Royalty
payments will be determined based on 40% of the profit (as defined) realized
from the Company's sales of this product. Such sales are expected to commence
in the third quarter of fiscal 1999.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the assets which is
three years. Depreciation expense for fiscal years 1996, 1997, 1998 was
$32,000, $75,000 and $139,000, respectively. All repairs and maintenance costs
are expensed as incurred.
F-8
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements (Continued)
Software Development Costs
In accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," the Company capitalizes eligible computer software development costs
upon the establishment of technological feasibility, which it has defined as
completion of a working model. The amount of costs eligible for capitalization,
after consideration of factors such as realizable value, were not material and,
accordingly, all software development costs have been charged to research and
development expense in the accompanying consolidated statements of operations.
Stock-Based Compensation
The Company has adopted the disclosure provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation," which establishes a fair value method of
accounting for stock-based compensation plans. As allowed under the provisions
of SFAS No. 123, the Company applies APB Opinion 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for its
employee stock option plan (see Note 5 for a discussion of compensation cost
recorded related to certain employee stock options granted).
Revenue Recognition
Product revenues consist of sales to end users, including dealers, and to
distributors. Revenues from product sales to end users are recognized upon
shipment. The Company provides for estimated sales returns and allowances and
warranty costs related to such sales at the time of shipment. Sales to
distributors are made under terms allowing certain rights of return and
protection against subsequent price declines on the Company's products held by
the distributors. Pursuant to the Company's distributor agreements, the Company
assumes its distributors' financial exposure related to the impact on
distributor margin of price reductions as well as for products at distributors
that are slow moving or have been discontinued. These agreements, which may be
canceled by either party based on a specified notice, generally contain a
provision for the return of the Company's products in the event the agreement
with the distributor is terminated. Accordingly, the Company defers recognition
of revenues and the proportionate costs of revenues derived from sales to
distributors until such distributors resell the Company's products to their
customers. The amounts deferred as a result of this policy are reflected as
"deferred revenue" in the accompanying consolidated balance sheets.
For fiscal years 1996, 1997, 1998 and for the six months ended March 31, 1999,
sales to four distributors of the Company's products accounted for
approximately 24%, 25%, 46% and 56% of net revenues, respectively.
The following customers accounted for more than 10% of net revenues:
<TABLE>
<CAPTION>
Fiscal Year
Ended
September 30, Six Months
---------------- Ended March
1996 1997 1998 31, 1999
---- ---- ---- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Customer A........................................... -- 10% 24% 27%
Customer B........................................... -- -- -- 21%
Customer C........................................... 24% -- 14% --
</TABLE>
Revenues derived from sales to customers outside of the United States,
primarily in Japan, accounted for approximately 4%, 11%, 7% and 11% of the
Company's net revenues for fiscal years 1996, 1997, 1998 and for the six months
ended March 31, 1999, respectively.
F-9
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements (Continued)
Computation of Basic Net Loss Per Share and Pro Forma Basic Net Loss Per Share
Historical net loss per share has been calculated under Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share." SFAS No. 128
requires companies to compute earnings per share under two methods (basic and
diluted). Basic net loss per share is calculated by dividing net loss by the
weighted average shares of common stock outstanding during the period. No
diluted loss per share information has been presented in the accompanying
consolidated statements of operations since potential common shares from the
conversion of preferred stock, stock options and warrants are antidilutive. The
Company evaluated the requirements of the Securities and Exchange Commission
Staff Accounting Bulletin No. 98 ("SAB"), and concluded that there are no
nominal issuances of common stock or potential common stock which would be
required to be shown as outstanding for all periods presented herein as
outlined in SAB 98.
Unaudited pro forma basic net loss per share has been calculated assuming the
conversion of the outstanding preferred stock into an equivalent number of
shares of common stock, as if the shares had been converted on the dates of
their issuance.
Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which establishes standards for reporting and
presentation of comprehensive income. SFAS No. 130, which was adopted by the
Company in the first quarter of 1998, requires companies to report a new
measurement of income. "Comprehensive Income (Loss)" is to include as other
comprehensive income foreign currency translation gains and losses and other
unrealized gains and losses that have historically been excluded from net
income (loss) and reflected instead in equity. The Company does not have any
items of other comprehensive income and is, therefore, not required to report
comprehensive income.
Segment Reporting
In June 1997, the Financial Accounting Standards Board also issued SFAS No.131
"Disclosures About Segments of an Enterprise and Related Information." ("SFAS
No. 131"). SFAS No. 131 was adopted by the Company beginning on October 1,
1997. SFAS No. 131 establishes standards for disclosures about operating
segments, products and services, geographic areas and major customers. The
Company is organized and operates as one operating segment. The Company
operates primarily in one geographic area, the United States.
Financial Instruments
In June 1998, FASB also issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards, requiring every derivative instrument be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings. SFAS No. 133 is effective for fiscal years beginning
after June 15, 1999. The Statement must be applied to derivative instruments
and to certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantively modified after September 30, 1997. In
management's opinion, the impact of adopting SFAS No. 133 on the financial
statements will not be material.
3. NOTES PAYABLE:
As of September 30, 1998, the Company has non-interest-bearing notes payable of
$365,687 outstanding to consultants in exchange for services received by the
Company primarily during fiscal years 1996 and 1997.
F-10
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements (Continued)
The Company has agreed to issue a total of 327,121 shares of preferred stock at
the fair market value on the date of the issuance of the notes which is $0.70-
$5.20 per share as payment for the notes.
4. COMMITMENTS:
The Company leases its facilities under operating lease agreements expiring
through February 2002. Rent expense for all operating leases totaled
approximately $74,000, $125,000 and $167,000 for fiscal years 1996, 1997 and
1998, respectively. Minimum future lease payments under all noncancellable
operating leases as of March 31, 1999 are as follows (Unaudited):
<TABLE>
<S> <C>
1999............................................................ $264,000
2000............................................................ 331,000
2001............................................................ 27,000
--------
$622,000
========
</TABLE>
5. CAPITAL STOCK:
Convertible Preferred Stock
Preferred stock consists of the following:
<TABLE>
<CAPTION>
September 30,
------------------- March 31,
1997 1998 1999
--------- --------- -----------
(Unaudited)
<S> <C> <C> <C>
Series A, 2,729,856 shares authorized,
2,729,856 shares outstanding at September
30, 1997 and 1998 and March 31, 1999..... 1,500,914 1,500,914 1,500,914
Series B, 2,495,286 shares authorized,
2,495,286 shares outstanding at September
30, 1997 and 1998 and March 31, 1999..... 1,746,700 1,746,700 1,746,700
Series C, 5,999,995 shares authorized,
5,592,535 shares outstanding at September
30, 1997, 5,999,995 shares outstanding at
September 30, 1998 and March 31, 1999.... 6,423,628 7,849,751 7,849,751
Series D, 6,000,000 shares authorized,
1,546,953 shares outstanding at September
30, 1998 and March 31, 1999.............. -- 7,784,833 7,784,833
</TABLE>
The rights and preferences of the outstanding series A, B, C and D preferred
stock are as follows:
Dividends
The holders of series A, B, C and D preferred stock are entitled to receive
non-cumulative dividends at an annual rate of $0.05, $0.07, $0.10 and $0.50 per
share, respectively. Such dividends shall be payable only when, as, and if
declared by the Board of Directors. No dividends shall be payable on any common
stock until dividends to series A, B, C and D preferred stock have been paid or
declared by the Board of Directors. Additionally, no dividends shall be paid or
declared for any series of preferred stock unless at the same time a like
proportionate dividend, ratably in proportion to the respective annual dividend
rates fixed therefore, is paid and declared for the shares of all other series
preferred stock. As of September 30, 1998 and March 31, 1999 (unaudited), no
dividends have been declared.
F-11
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements (Continued)
Liquidation Preference
In the event of any liquidation, dissolution or winding up of the Company,
holders of series A, B, C and D preferred stock are entitled to receive, in
preference to holders of common stock, the amounts of $0.50, $0.70, $1.00 and
$5.00 per share, respectively, plus all declared but unpaid dividends. Such
amounts will be adjusted for any stock split, stock dividends and
recapitalizations. After payment of the above amounts, holders of common stock
are entitled to receive the amount of $0.50 per share, adjusted for any stock
split, stock dividends and recapitalizations. If such amounts are not available
to sufficiently satisfy the full preferential amount, the entire assets of the
Company will be distributed to the preferred shareholders in proportion to
their aggregate liquidation preference of the shares of preferred stock held.
After payment to the holders of preferred stock and common stock of the above
preferential amounts, the entire remaining assets and funds of the Company
shall be distributed to the holders of common stock and preferred stock in
proportion to the shares of common stock and preferred stock, on an as-
converted basis, held by these holders.
Voting Rights
The holders of the series A, B, C and D preferred stock are entitled to the
number of votes equal to the number of shares of common stock into which such
preferred stock is convertible.
Conversion
Each share of series A, B, C and D preferred stock is convertible into one
share of common stock at (a) the date specified by vote or written consent by
preferred shareholders of at least two-thirds of outstanding preferred stock or
(b) the consummation of the Company's sale of common stock in an underwritten
public offering which results in aggregate cash proceeds to the Company in
excess of $10,000,000 and the public offering price is not less than $5.00 per
share. The conversion rate is subject to adjustment for dilution, including,
but not limited to, stock splits, stock dividends and stock combinations.
Common Stock
According to the Company's amended Articles of Incorporation, the Company is
authorized to issue 40,000,000 shares of common stock. At September 30, 1998,
the Company had reserved the following shares for future issuance:
<TABLE>
<S> <C>
Conversion of Series A outstanding preferred stock................ 2,729,856
Conversion of Series B outstanding preferred stock................ 2,495,286
Conversion of Series C outstanding preferred stock................ 5,999,995
Conversion of Series D outstanding preferred stock................ 1,546,953
Reserved for consultants.......................................... 327,121
1994 Stock Option Plan............................................ 3,264,626
----------
16,363,837
==========
</TABLE>
1998 Stock Purchase Plan
In June 1999, the Company ratified the 1998 Stock Purchase Plan and authorized
the issuance of 25,800 shares of Series D preferred stock to employees,
consultants and directors. The price of each preferred share purchased under
the 1998 Stock Purchase Plan may not be less than 85% of the fair market value
at the time of purchase and, in the case of a purchase by a greater than 10%
shareholder, the price may not be less than 110% of the fair market value. All
shares available under the 1998 Stock Purchase Plan were sold during fiscal
year 1998.
F-12
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements (Continued)
Stock Option Plans
In October 1994, the Company adopted the 1994 Stock Option Plan (the "1994
Plan") and authorized the issuance of 3,500,000 shares, as amended, thereunder
to employees, directors, and consultants. Under the 1994 Plan, the Board of
Directors may grant incentive and nonqualified stock options to employees,
directors, and consultants of the Company. The exercise price per share for an
incentive stock option cannot be less than 100% of the fair market value, as
determined by the Board of Directors, on the date of grant. The exercise price
per share for nonqualified stock options cannot be less than the 85% of the
fair market value, as determined by the Board of Directors, on the date of
grant. Also, the exercise price of options granted to a greater than 10%
shareholder may not be less than 110% of the fair market value on the date of
grant. The value of common stock subject to incentive stock options that become
exercisable by any one employee in any calendar year may not exceed $100,000.
Options generally vest over a four year period and generally expire ten years
after the date of grant.
In 1999, the Company adopted the 1999 Stock Option Plan (the "1999 Plan") and
authorized the issuance of 2,500,000 shares to employees, directors and
consultants. Under the 1999 Plan, the Board of Directors may grant incentive
and nonqualified stock options to employees, directors and consultants of the
Company. The exercise price per share for an incentive stock option cannot be
less than 100% of the fair market value, as determined by the Board of
Directors, on the date of grant. The exercise price per share for a
nonqualified stock option cannot be less than 85% of the fair market value, as
determined by the Board of Directors, on the date of grant. Also, the exercise
price of options granted to a greater than 10% shareholder may not be less than
110% of the fair market value on the date of grant. The value of common stock
subject to incentive stock options that become exercisable by any one employee
in any calendar year may not exceed $100,000. Options under this plan generally
vest over a four year period and generally expire ten years after the date of
grant. Option activity under the 1994 and 1999 Plans was as follows:
<TABLE>
<CAPTION>
Weighted
Average
Options Exercise
Outstanding Price
----------- --------
<S> <C> <C>
September 30, 1995...................................... 380,000 $0.05
Authorized............................................. -- --
Granted................................................ 1,046,301 0.07
Exercised.............................................. (20,208) 0.05
Canceled............................................... (18,500) 0.06
--------- -----
September 30, 1996...................................... 1,387,593 0.07
Authorized............................................. -- --
Granted................................................ 168,000 0.10
Exercised.............................................. (55,375) 0.06
Canceled............................................... (88,125) 0.06
--------- -----
September 30, 1997...................................... 1,412,093 0.07
Granted................................................ 1,430,452 0.27
Exercised.............................................. (116,041) 0.08
Canceled............................................... (26,000) 0.31
--------- -----
September 30, 1998...................................... 2,700,504 0.17
Unaudited:
Authorized............................................. -- --
Granted................................................ 641,500 1.91
Exercised.............................................. (530,354) 0.07
Canceled............................................... (94,806) 0.28
--------- -----
March 31, 1999 (Unaudited).............................. 2,716,844 $0.60
========= =====
</TABLE>
F-13
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements (Continued)
<TABLE>
<CAPTION>
Weighted
Number of Average
Options Exercise Price
--------- --------------
<S> <C> <C>
Exercisable at September 30, 1997................... 830,133 $0.06
Exercisable at September 30, 1998................... 1,243,657 $0.09
Exercisable at March 31, 1999 (Unaudited)........... 1,393,182 $0.14
</TABLE>
The following table summarizes information concerning outstanding and
exercisable options at September 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------------------------------------------------
Number
Number Weighted Exercisable
Outstanding at Average Weighted at Weighted
Exercise September 30, Remaining Average September 30, Average
Prices 1998 Life Exercise Price 1998 Exercise Price
-------- -------------- --------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
$0.05-
$0.07 1,135,760 5.97 $0.06 945,474 $0.06
0.10-
0.14 1,027,962 5.84 0.16 256,297 0.14
0.35-
0.52 536,782 8.55 0.42 41,886 0.46
------ --------- ---- ----- --------- -----
$0.05-
$0.52 2,700,504 6.45 $0.17 1,243,657 $0.09
====== ========= ==== ===== ========= =====
</TABLE>
The Company accounts for the Plan under APB Opinion No. 25, "Accounting for
Stock Issued to Employees." Had compensation expense for the Plan been
determined consistent with SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company's net loss and basic net loss per share would have
been increased to the following pro forma amounts (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Fiscal Year Ended September 30,
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net loss:
As reported....................... $(1,631,160) $(3,118,782) $(3,794,951)
Pro forma......................... (1,632,026) (3,122,558) (3,806,197)
Basic net loss per share:
As reported....................... $ (1.28) $ (2.34) $ (2.75)
Pro forma......................... (1.28) (2.35) (2.76)
</TABLE>
The weighted-average grant date fair value of options granted during fiscal
years 1996, 1997 and 1998 was $0.02, $0.03 and $0.07, respectively. The fair
value of each option grant is estimated on the date of grant using the Black-
Scholes option pricing model with the following weighted average assumptions
used for grants in 1996, 1997 and 1998: risk free interest rates ranging from
6.0-6.2%; expected dividend yields of zero percent; expected lives of 5 years.
Because the Company has been a non-public entity, it has omitted expected
volatility in determining a value for its options.
In connection with the issuance of certain stock options to employees in fiscal
1998, the Company has recorded deferred stock compensation in the aggregate
amount of approximately $155,000, representing the difference between the
deemed fair value of the Company's common stock and the exercise price of stock
options at the date of grant. The Company is amortizing the deferred stock
compensation expense over the vesting period of four years. For fiscal year
1998 and for the six months ended March 31, 1999, amortization expense was
$38,750 and $19,375, respectively.
In connection with the issuance of stock options to employees during the six
months ended March 31, 1999, the Company has recorded deferred stock
compensation in the aggregate amount of approximately
F-14
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements (Continued)
$1,930,000, representing the difference between the deemed fair value of the
Company's common stock and the exercise price of the stock options at the date
of grant. The Company is amortizing the deferred compensation expense over the
vesting period of four years. For the six-months ended March 31, 1999,
amortization expense was $88,571.
6. INCOME TAXES:
The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting for
Income Taxes". SFAS No. 109 requires recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. The components of the net
deferred income tax asset are as follows:
<TABLE>
<CAPTION>
September 30
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Net operating loss carryforwards................. $ 1,575,000 $ 2,807,000
Capitalized start-up costs....................... 353,000 263,000
Reserve and other cumulative temporary differ-
ences......................................... 273,000 414,000
----------- -----------
2,201,000 3,484,000
Valuation allowance.............................. (2,201,000) (3,484,000)
----------- -----------
Net deferred tax asset....................... $ -- $ --
=========== ===========
</TABLE>
As of September 30, 1998, the Company has cumulative net operating loss
carryforwards for federal and state income tax reporting purposes of
approximately $7.8 million and $2.6 million, respectively, which expire in
various periods from 2003 to 2013. Under current tax law, net operating loss
carryforwards available in any given year may be limited upon the occurrence of
certain events, including significant changes in ownership interests, such as
an initial public stock offering.
A valuation allowance has been recorded for the entire deferred tax asset as a
result of uncertainties, regarding realization of the asset including limited
operating history of the Company, the lack of profitability to date and the
uncertainty over future operating profitability and taxable income.
As of September 30, 1997 and 1998, the Company had no significant deferred tax
liabilities.
7. SUBSEQUENT EVENTS (Unaudited):
In April 1999, the Board of Directors approved the reincorporation of the
Company in the State of Delaware, subject to shareholder ratification.
In May 1999, the Company issued 829,329 additional shares of series D preferred
stock at $7.00 per share for gross proceeds to the Company of approximately
$5.8 million.
In June 1999, the Board of Directors approved an amendment to the Company's
1999 Stock Plan (the "1999 Plan") to increase the number of shares of common
stock reserved under the 1999 Plan from 2,500,000 to 3,500,000 shares.
In June 1999, the Board of Directors adopted the 1999 Employee Stock Purchase
Plan whereby 500,000 shares of common stock was reserved for issuance to
eligible employees at a price of 85% of the lower of the fair market value of
the common stock on a specified exercise date. An annual increase will be added
on the first day of each fiscal year beginning in 2000 equal to the lesser of
(i) 1,000,000 shares,
F-15
<PAGE>
AltiGen Communications, Inc.
Notes to Consolidated Financial Statements (Continued)
(ii) 2% of the outstanding shares on that date or (iii) a lesser amount
determined by the Board of Directors. Participants under the 1999 Purchase Plan
generally may not purchase shares on any exercise date to the extent that,
immediately after the grant, the participant would own stock totaling 5% or
more of the total combined voting power of all stock of the Company, or greater
than $25,000 worth of stock in any calendar year. In addition, no more than
10,000 shares may be purchased by any participant during any offering period.
In the event of a sale or merger of the Company, the Board may accelerate the
exercise date of the current purchase period to a date prior to the change of
control, or the acquiring company may assume or replace the outstanding
purchase rights under the 1999 Purchase Plan. The first offering period under
the 1999 Plan will commence on the effective date of this offering and
terminate on or before July 31, 2001.
F-16
<PAGE>
<TABLE>
<S> <C>
[LOGO]
AltiGen CIBC World Markets
Communications, Inc.
Shares
Common Stock
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
-----------------
PROSPECTUS
-----------------
FAC/Equities
</TABLE>
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
You should rely only on the information contained in this prospectus. No
dealer, salesperson or other person is authorized to give information that is
not contained in this prospectus. This prospectus is not an offer to sell nor
is it seeking an offer to buy these securities in any jurisdiction where the
offer or sale is not permitted. The information contained in this prospectus is
correct only as of the date of this prospectus, regardless of the time of the
delivery of this prospectus or any sale of these securities.
Dealer Prospectus Delivery Obligation: Until , (25 days after the
commencement of the offering), all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
Part II
Information Not Required In Prospectus
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale
and distribution of the securities being registered. All amounts are estimated
except the Securities and Exchange Commission and NASD registration fees and
the Nasdaq National Market listing fee. All of the expenses below will be paid
by AltiGen.
<TABLE>
<CAPTION>
Item
---- --------
<S> <C>
Registration fee................................................... $ 14,387
NASD filing fee.................................................... 5,675
Nasdaq National Market listing fee................................. *
Blue sky fees and expenses......................................... *
Printing and engraving expenses.................................... *
Legal fees and expenses............................................ *
Accounting fees and expenses....................................... 320,000
Transfer Agent and Registrar fees.................................. *
Miscellaneous...................................................... *
--------
Total............................................................ $ 20,062
========
</TABLE>
- -------------------
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers.
Under Section 145 of the Delaware General Corporation Law, we can indemnify
our directors and officers against liabilities they may incur in such
capacities, including liabilities under the Securities Act of 1933, as amended
(the "Securities Act"). Our bylaws provide that we will indemnify our
directors and officers to the fullest extent permitted by law and require us
to advance litigation expenses upon our receipt of an undertaking by the
director or officer to repay such advances if it is ultimately determined that
the director or officer is not entitled to indemnification. Our bylaws further
provide that rights conferred under such bylaws do not exclude any other right
such persons may have or acquire under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
Our certificate of incorporation provides that, pursuant to Delaware Law,
our directors shall not be liable for monetary damages for breach of the
directors' fiduciary duty of care to AltiGen and our stockholders. This
provision in the certificate of incorporation does not eliminate the duty of
care, and in appropriate circumstances equitable remedies such as injunctive
or other forms of non-monetary relief will remain available under Delaware
Law. In addition, each director will continue to be subject to liability for
breach of the director's duty of loyalty to the Company or our stockholders,
for acts or omissions not in good faith or involving intentional misconduct or
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemption's that are unlawful under Delaware Law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws.
In addition, our certificate of incorporation (Exhibit 3.1 to this
registration statement) provides that we shall indemnify our directors and
officers if such persons acted (1) in good faith, (2) in a manner reasonably
believed to be in or not opposed to our best interests, and (3) with respect
to any criminal action or proceeding, with reasonable cause to believe such
conduct was lawful. The certificate of incorporation also provides that,
pursuant to Delaware law, our directors shall not be liable for monetary
damages for breach of the directors' fiduciary duty of care to our company and
our stockholders. This provision in the certificate of incorporation
II-1
<PAGE>
does not eliminate the duty of care, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief
will remain available under Delaware law. In addition, each director will
continue to be subject to liability for breach of the director's duty of
loyalty to AltiGen for acts or omissions not in good faith or involving
intentional misconduct, for knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemption's that are unlawful under Delaware
law. The provision also does not affect a director's responsibilities under
any other law, such as the federal securities laws or state or federal
environmental laws. The certificate of incorporation further provides that we
are authorized to indemnify our directors and officers to the fullest extent
permitted by law through the bylaws, agreement, vote of stockholders or
disinterested directors, or otherwise. We intend to obtain directors' and
officers' liability insurance in connection with this offering.
In addition, we have has entered or, concurrently with this offering, will
enter into agreements to indemnify our directors and certain of our officers
in addition to the indemnification provided for in the certificate of
incorporation and bylaws. These agreements will, among other things, indemnify
our directors and certain of our officers for certain expenses (including
attorneys fees), judgments, fines and settlement amounts incurred by such
person in any action or proceeding, including any action by or in our right,
on account of services by that person as a director or officer of AltiGen or
as a director or officer of any subsidiary of AltiGen, or as a director or
officer of any other company or enterprise that the person provides services
to at the request of AltiGen.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the underwriters of AltiGen and its officers and directors, and by AltiGen
of the underwriters, for certain liabilities arising under the Securities Act
or otherwise.
Item 15. Recent Sales of Unregistered Securities
AltiGen has sold and issued the following securities within the past three
years. None of the transactions as set forth below involved any public
offering or any underwriter, and we believe that each transaction was exempt
from the registration requirements of the Securities Act by virtue of Section
4(2) thereof, Regulation D promulgated thereunder, or Rule 701 pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under such Rule 701, or, with respect to paragraph ( ) below, in reliance on
Rule 145(a)(2) under the Securities Act. The recipients in each transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof,
and appropriate legends were affixed to share certificates and instruments
issued in such transactions. All recipients had adequate access, through their
relationships with AltiGen, to information about AltiGen.
(1) In June 1996 through December 1997, we completed a series of private
placements of 5,999,995 shares of series C preferred Stock to a group of
institutional investors, certain members of senior management and employees,
including Michele Shannon, and immediate family members of our directors and
executive officers, for an aggregate purchase price of $7,849,750. Each of
these investors was sophisticated within the meaning of the exemption provided
for by Section 4(2) of the Securities Act and/or accredited within the meaning
of the exemption provided for by Regulation D promulgated under the Securities
Act.
(2) In March 1998 through May 1999, we completed a series of private
placements of 2,376,282 shares of series D preferred stock for an aggregate
offering price of $13,624,299. Of these 2,376,282 shares, 25,800 were sold to
certain of our employees pursuant to our 1998 Stock Purchase Plan. Each of the
investors was sophisticated within the meaning of the exemption provided for
by Section 4(2) of the Securities Act and/or accredited within the meaning of
the exemption provided for by Regulation D promulgated under the Securities
Act.
(3) In May 1999, we issued 328,965 shares of common stock to twelve
consultants in satisfaction of certain promissory notes held by them, for
aggregate consideration of $378,486. Each of the purchasers was sophisticated
within the meaning of the exemption provided for by Section 4(2) of the
Securities Act.
II-2
<PAGE>
(4) We have from time to time granted stock options to employees,
consultants and outside directors in reliance upon an exemption under the
Securities Act pursuant to Rule 701. From June 1, 1996 through May 31, 1999,
an aggregate of 721,978 shares of common stock were issued pursuant to option
exercises at exercise prices ranging from $0.05 to $0.35.
Item 16. Exhibits and Financial Statement Schedules
The following Exhibits are attached hereto and incorporated herein by
reference.
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation.
3.2* Form of Amended and Restated Certificate of Incorporation, to be filed
and effective upon completion of this offering.
3.3 Bylaws.
3.4* Form of Amended and Restated Bylaws, to be filed and effective upon
completion of this offering.
4.1 See Exhibit 3.1, 3.2, 3.3 and 3.4 for provisions of the Certificate of
Incorporation and Bylaws defining the rights of holders of Common
Stock.
4.2* Specimen Common Stock certificates.
4.3 Third Amended and Restated Rights Agreement dated May 7, 1999 by and
among AltiGen Communications, Inc. and the Investors and Founder named
therein.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati.
10.1* Form of Indemnification Agreement.
10.2 1994 Stock Option Plan, as amended, and form of stock option
agreement.
10.3 1998 Stock Purchase Plan.
10.4 1999 Stock Option Plan, as amended, and form of stock option
agreement.
10.5* 1999 Employee Stock Purchase Plan and form of subscription agreement.
10.6 Sublease and Consent to Sublease Agreement: 47427 Fremont Boulevard,
Fremont, California between Hitachi America, Ltd. and Phase Metrics,
Inc., dated April 1, 1997.
10.7 Sub-Sublease and Consents to Sub-Sublease: 47427 Fremont Boulevard,
Fremont, California between Phase Metrics, Inc. and AltiGen
Communications, Inc., dated December 11, 1998.
10.8+ Dealer Agreement and Addendum between Teleco Inc. and AltiGen
Communications, Inc., dated September 9, 1996
10.9+ Distributor Agreement between Kanematsu Semiconductor Corporation and
AltiGen Communications, Inc., dated April 21,1997 and Modification
dated May 13, 1997.
10.10+ Distribution Agreement between Tech Data Product Management, Inc. and
AltiGen Communications, Inc., dated July 21, 1997.
10.11+ Distribution Agreement between TerraComSortium and AltiGen
Communications, Inc., dated November 3, 1997.
10.12+ OEM Private Label License Agreement between Renaissance Network
Technology Corporation and AltiGen Communications, Inc., dated May
1998.
10.13 Services Agreement between Sumitronics, Inc. and AltiGen
Communications, Inc., dated June 2, 1998 and related Commission
Agreement dated March 1999.
10.14+ Distribution Agreement between Ingram Micro Inc. and AltiGen
Communications, Inc., dated June 12, 1998.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.15 Contract Purchase Agreement between RadiSys Corporation and AltiGen
Communications Inc., dated July 31, 1998.
10.16 Software License and Binary Distribution Agreement between Lucent
Technologies Inc. and AltiGen Communications, Inc., dated as of
September 23, 1998.
10.17 Consulting and Development Agreement between Sollecon, Inc. and
AltiGen Communications, Inc., dated as of October 27, 1998.
10.18 Employment Agreement by and Between the Registrant and Tricia Chu,
dated April 26, 1999.
10.19* Employment Agreement by and Between the Registrant and Philip
McDermott, dated .
10.20* Compaq Solutions Alliance Agreement between Compaq Computer
Corporation and AltiGen Communications, Inc., dated as of January 18,
1999.
10.21* Memorandum of Understanding between Hewlett-Packard Covision Internet
Solutions Program and AltiGen Communications, Inc., dated as of
November 9, 1998.
10.22*+ Original Equipment Manufacture Private Label Agreement between Nitsuko
Corporation and AltiGen Communications, Inc., dated as of February 2,
1999.
10.23*+ Joint Development Agreement between Nitsuko Corporation, Sumisho
Electronics Co., Ltd. and AltiGen Communications, Inc., dated as of
July 14, 1998.
11.1 Statement regarding Computation of Per Share Earnings (contained in
Notes to Financial Statements).
21.1* Subsidiaries of the Registrant.
23.1* Consent of Wilson Sonsini Goodrich & Rosati (Included in Exhibit 5.1
hereto).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (Included signature pages hereto).
27.1 Financial Data Schedule
</TABLE>
- -------------------
* To be filed by amendment.
+ Confidential treatment has been requested for certain confidential portions
of this exhibit pursuant to Rule 406 under the Securities Act. In accordance
with Rule 406, these confidential portions have been omitted from this
exhibit and filed separately with the Commission.
(b) Financial Statement Schedules
The following financial statement schedules are included in this
Registration Statement:
Schedule II--Valuation and Qualifying Accounts
All other schedules for which the provision is made in the applicable
accounting regulations of the Commission are not required under the related
instructions, are inapplicable or not material, or the information called for
thereby is otherwise included in the financial statements and therefore has
been omitted.
Item 17. Undertakings
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreements certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of us
pursuant to the foregoing provisions, or otherwise, the
II-4
<PAGE>
Registrant been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment of expenses
by the Registrant incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus as filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by us pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, AltiGen
Communications, Inc. has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Fremont, State of California, on the 4th day of June, 1999.
ALTIGEN COMMUNICATIONS, INC.
/s/ Gilbert Hu
By: _________________________________
Gilbert Hu,
President and Chief Executive
Officer
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each of Gilbert Hu, Wen-Huang
Chang, Thomas Shao, Masaharu Shinya, Kenneth Tai, and Richard Black (the
undersigned) hereby constitutes and appoints Gilbert Hu his true and lawful
attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, or any registration statement
related to the same offering of securities as this Registration Statement
filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended,
and to file the same, with exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gilbert Hu Chief Executive Officer June 4, 1999
____________________________________ (principal executive,
Gilbert Hu principal financial and
principal accounting
officer)
and Director
/s/ Wen-Huang Chang Director June 4, 1999
____________________________________
Wen-Huang Chang
/s/ Thomas Shao Director June 4, 1999
____________________________________
Thomas Shao
/s/ Masaharu Shinya Director June 4, 1999
____________________________________
Masaharu Shinya
/s/ Kenneth Tai Director June 4, 1999
____________________________________
Kenneth Tai
/s/ Richard Black Director June 4, 1999
____________________________________
Richard Black
</TABLE>
II-6
<PAGE>
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Write-offs Period
- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended September 30, 1996
Allowance for returns and doubtful
accounts......................... 0 10,000 -- 10,000
Year ended September 30, 1997
Allowance for returns and doubtful
accounts......................... 10,000 31,000 -- 41,000
Year ended September 30, 1998
Allowance for returns and doubtful
accounts......................... 41,000 92,000 -- 133,000
</TABLE>
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To AltiGen Communications Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements of AltiGen Communications, Inc. included in
this Registration Statement and have issued our report thereon dated November
20, 1998. Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying Schedule II--
Valuation and Qualifying Accounts is the responsibility of the Company's
management and is presented for the purpose of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
San Jose, California
November 20, 1998
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation.
3.2* Form of Amended and Restated Certificate of Incorporation, to be filed
and effective upon completion of this offering.
3.3 Bylaws.
3.4* Form of Amended and Restated Bylaws, to be filed and effective upon
completion of this offering.
4.1 See Exhibit 3.1, 3.2, 3.3 and 3.4 for provisions of the Certificate of
Incorporation and Bylaws defining the rights of holders of Common
Stock.
4.2* Specimen Common Stock certificates.
4.3 Third Amended and Restated Rights Agreement dated May 7, 1999 by and
among AltiGen Communications, Inc. and the Investors and Founder named
therein.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati.
10.1* Form of Indemnification Agreement.
10.2 1994 Stock Option Plan, as amended, and form of stock option
agreement.
10.3 1998 Stock Purchase Plan.
10.4 1999 Stock Option Plan, as amended, and form of stock option
agreement.
10.5* 1999 Employee Stock Purchase Plan and form of subscription agreement.
10.6 Sublease and Consent to Sublease Agreement: 47427 Fremont Boulevard,
Fremont, California between Hitachi America, Ltd. and Phase Metrics,
Inc., dated April 1, 1997.
10.7 Sub-Sublease and Consents to Sub-Sublease: 47427 Fremont Boulevard,
Fremont, California between Phase Metrics, Inc. and AltiGen
Communications, Inc., dated December 11, 1998.
10.8+ Dealer Agreement and Addendum between Teleco Inc. and AltiGen
Communications, Inc., dated September 9, 1996
10.9+ Distributor Agreement between Kanematsu Semiconductor Corporation and
AltiGen Communications, Inc., dated April 21,1997 and Modification
dated May 13, 1997.
10.10+ Distribution Agreement between Tech Data Product Management, Inc. and
AltiGen Communications, Inc., dated July 21, 1997.
10.11+ Distribution Agreement between TerraComSortium and AltiGen
Communications, Inc., dated November 3, 1997.
10.12+ OEM Private Label License Agreement between Renaissance Network
Technology Corporation and AltiGen Communications, Inc., dated May
1998.
10.13 Services Agreement between Sumitronics, Inc. and AltiGen
Communications, Inc., dated June 2, 1998 and related Commission
Agreement dated March 1999.
10.14+ Distribution Agreement between Ingram Micro Inc. and AltiGen
Communications, Inc., dated June 12, 1998.
10.15 Contract Purchase Agreement between RadiSys Corporation and AltiGen
Communications Inc., dated July 31, 1998.
10.16 Software License and Binary Distribution Agreement between Lucent
Technologies Inc. and AltiGen Communications, Inc., dated as of
September 23, 1998.
10.17 Consulting and Development Agreement between Sollecon, Inc. and
AltiGen Communications, Inc., dated as of October 27, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.18 Employment Agreement by and Between the Registrant and Tricia Chu,
dated April 26, 1999.
10.19* Employment Agreement by and Between the Registrant and Philip
McDermott, dated .
10.20* Compaq Solutions Alliance Agreement between Compaq Computer
Corporation and AltiGen Communications, Inc., dated as of January 18,
1999.
10.21* Memorandum of Understanding between Hewlett-Packard Covision Internet
Solutions Program and AltiGen Communications, Inc., dated as of
November 9, 1998.
10.22*+ Original Equipment Manufacture Private Label Agreement between Nitsuko
Corporation and AltiGen Communications, Inc., dated as of February 2,
1999.
10.23*+ Joint Development Agreement between Nitsuko Corporation, Sumisho
Electronics Co., Ltd. and AltiGen Communications, Inc., dated as of
July 14, 1998.
11.1 Statement regarding Computation of Per Share Earnings (contained in
Notes to Financial Statements).
21.1* Subsidiaries of the Registrant.
23.1* Consent of Wilson Sonsini Goodrich & Rosati (Included in Exhibit 5.1
hereto).
23.2 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (Included signature pages hereto).
27.1 Financial Data Schedule
</TABLE>
- -------------------
* To be filed by amendment.
+ Confidential treatment has been requested for certain confidential portions
of this exhibit pursuant to Rule 406 under the Securities Act. In accordance
with Rule 406, these confidential portions have been omitted from this
exhibit and filed separately with the Commission.
<PAGE>
EXHIBIT 3.1
State of Delaware PAGE 1
Office of the Secretary of State
_________________________________
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "ALTIGEN COMMUNICATIONS, INC." FILED IN THIS OFFICE ON THE
FIFTH DAY OF MAY, A.D. 1999, AT 1:30 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
[SEAL] /s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
AUTHENTICATION: 9726433
DATE: 05-05-99
<PAGE>
CERTIFICATE OF INCORPORATION
OF ALTIGEN COMMUNICATIONS, INC.
ARTICLE I
The name of this corporation is AltiGen Communications, Inc. (the
"Corporation")
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, County of New Castle. The name of its
registered agent at such office is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE IV
A. Authorized Stock. The Corporation is authorized to issue two classes of
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stock to be designated, respectively, "Common Stock" and "Preferred Stock". The
total number of shares which the Corporation is authorized to issue is
60,000,000 shares. The number of shares of Preferred Stock authorized to be
issued is 20,000,000 shares, with a par value of $0.001 per share, of which
2,729,856 shares shall be designated as Series A Preferred Stock, 2,495,286
shares shall be designated as Series B Preferred Stock, 5,999,995 shares shall
be designated as Series C Preferred Stock and 6,000,000 shares shall be
designated as Series D Preferred Stock. The number of shares of Common Stock
authorized to be issued is 40,000,000 shares, with a par value of $0.001 per
share.
B. Preferred Stock. The rights, preferences, privileges and restrictions
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granted to and imposed on the Preferred Stock are as follows:
1. Dividend Provisions. The holders of shares of Series A, Series B,
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Series C and Series D Preferred Stock shall be entitled to receive dividends at
the annual rate of $0.05 per share, $0.07 per share, $0.10 per share and $0.50
per share, respectively (adjusted to reflect stock splits, stock dividends and
recapitalizations of the Preferred Stock), payable out of funds legally
available therefor. Such dividends shall be payable only when, as, and if
declared by the Board of Directors and shall not be cumulative. No dividends
(other than those payable solely in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of the corporation) shall be
payable on any Common Stock of the corporation during any fiscal year of the
corporation until dividends in the amount of $0.05, $0.07, $0.10 and $0.50 per
share (adjusted to reflect stock splits, stock dividends and
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recapitalizations) on the Series A, Series B, Series C and Series D Preferred
Stock, respectively, shall have been paid or declared and set apart during that
fiscal year. No dividend shall be paid on or declared and set apart for the
shares of any Series of Preferred Stock for any dividend period unless at the
same time a like proportionate dividend for the same dividend period, ratably in
proportion to the respective annual dividend rates fixed therefor, shall be paid
on or declared and set apart for the shares of all other such series of
Preferred Stock.
2. Liquidation Preference.
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(a) In the event of any liquidation, dissolution or winding up of the
corporation, either voluntary or involuntary, the holders of Series A, Series B,
Series C and Series D Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of the assets or surplus funds of the corporation
to the holders of Common Stock by reason of their ownership thereof, the amount
of $0.50 per share for each share of Series A Preferred Stock then held by them,
the amount of $0.70 per share for each share of Series B Preferred Stock then
held by them, the amount of $1.00 per share for each share of Series C Preferred
Stock then held by them and the amount of $5.00 per share for each share of
Series D Preferred Stock then held by them (adjusted to reflect stock splits,
stock dividends and recapitalizations of the Preferred Stock), plus all declared
but unpaid dividends on their respective shares of Series A, Series B, Series C
and Series D Preferred Stock then held by them and no more. If, upon the
occurrence of such an event, the assets and funds thus distributed among the
holders of the Series A, Series B, Series C and Series D Preferred Stock shall
be insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of the corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A, Series B, Series C and Series D Preferred Stock in
proportion to the preferential amount each such holder is entitled to receive.
(b) In the event of any liquidation, dissolution or winding up of the
corporation, either voluntary or involuntary, and subject to the payment in full
of the liquidation preferences with respect to the Preferred Stock in Section
2(a) above, the holders of Common Stock shall be entitled to receive, prior and
in preference to any further distribution of the assets or surplus funds of the
corporation to the holders of Preferred Stock by reason of their ownership
thereof, the amount of $0.50 per share for each share of Common Stock then held
by them (adjusted to reflect stock splits, stock dividends and
recapitalizations), plus all declared but unpaid dividends on their respective
shares of Common Stock then held by them and no more. If, upon the occurrence of
such an event, the assets and funds thus distributed among the holders of the
Common Stock shall be insufficient to permit the payment to such holders of the
full aforesaid preferential amounts, then the entire assets and funds of the
corporation legally available for distribution shall be distributed among the
holders of the Common Stock in proportion to the shares of Common Stock then
held by them.
(c) After payment to the holders of Preferred Stock and Common Stock
of the amounts set forth in Sections 2(a) and 2(b) above, the entire remaining
assets and funds of the corporation legally available for distribution, if any,
shall be distributed among the holders of Common Stock and Series A, Series B,
Series C and Series D Preferred Stock in proportion to the shares of Common
Stock then held by them and the shares of Common Stock which they then have
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the right to acquire upon conversion of the shares of Series A, Series B, Series
C and Series D Preferred Stock then held by them.
(d) For purposes of this Section 2, any acquisition of the
corporation by means of merger or other form of corporate reorganization in
which the outstanding shares of the corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a reincorporation transaction or a transaction in
which the stockholders of the corporation immediately before the transaction
own, immediately after the transaction, a majority of the combined voting power
of all classes of stock of the surviving entity) or a sale of all or
substantially all of the assets of the corporation shall be treated as a
liquidation, dissolution or winding up of the corporation and shall entitle the
holders of Series A, Series B, Series C and Series D Preferred Stock and Common
Stock to receive at the closing in cash, securities or other property amounts as
specified in Sections 2(a), 2(b) and 2(c) above.
(e) Any securities to be delivered to the holders of Series A, Series
B, Series C and Series D Preferred Stock and/or Common Stock pursuant to Section
2(d) above shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or the NASDAQ
National Market System, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the 30-day period ending
three (3) days prior to the distribution;
(B) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid prices over the 30-day period
ending three (3) days prior to the distribution; and
(C) If there is no active public market, the value shall
be the fair market value thereof, as determined in good faith by the Board of
Directors of the corporation.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i) (A),
(B) or (C) to reflect the approximate fair market value thereof, as determined
in good faith by the Board of Directors of the corporation.
3. Conversion. The holders of the Preferred Stock shall have conversion
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rights as follows (the "Conversion Rights"):
(a) Right to Convert.
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(i) Subject to subsection (c), each share of Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the corporation or any transfer
agent for the Preferred Stock, into such number of fully
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paid and nonassessable shares of Common Stock as is determined by dividing (i)
in the case of the Series A Preferred Stock, $0.50 for each share of Series A
Preferred Stock or (ii) in the case of the Series B Preferred Stock, $0.70 for
each share of Series B Preferred Stock or (iii) in the case of the Series C
Preferred Stock, $1.00 for each share of Series C Preferred Stock or (iv) in the
case of the Series D Preferred Stock, $5.00 for each share of Series D Preferred
Stock, in each case by the applicable Conversion Price at the time in effect for
such share. The initial Conversion Price for shares of Series A Preferred Stock
shall be $0.50 per share, the initial Conversion Price for shares of Series B
Preferred Stock shall be $0.70 per share, the initial Conversion Price for
shares of Series C Preferred Stock shall be $1.00 per share and the initial
Conversion Price for shares of Series D Preferred Stock shall be $5.00 per
share; provided, however, that the Conversion Price for each Series of Preferred
Stock shall be subject to adjustment as set forth in subsection 3(c).
(ii) Each share of Series A, Series B, Series C and Series D
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such shares of Series A, Series
B, Series C and Series D Preferred Stock, respectively, upon the earlier of (A)
the date specified by vote or written consent or agreement of holders of at
least two-thirds (2/3) of the shares of Preferred Stock then outstanding or (B)
the consummation of the corporation's sale of its Common Stock in a bona fide,
firm commitment underwriting pursuant to a registration statement under the
Securities Act of 1933), as amended (the "Securities Act"), which results in
aggregate gross cash proceeds to the corporation in excess of $10,000,000 and
the public offering price of which is not less than $5.00 per share.
(b) Mechanics of Conversion. Before any holder of Preferred Stock
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shall be entitled to voluntarily convert the same into shares of Common Stock,
or to receive a certificate for the shares of Common Stock into which the same
have been automatically converted pursuant to subsection 3(a)(ii), he shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the corporation or of any transfer agent for the Preferred Stock, and shall
deliver written notice to the corporation at its principal corporate office, of
the election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offer of securities registered
pursuant to the Securities Act, the conversion will be conditioned upon the
closing with the underwriter of the sale of securities pursuant to such
offering, unless otherwise designated in writing by the holders of such
Preferred Stock, in which event the person(s) entitled to receive the Common
Stock issuable upon such conversion of the Preferred Stock shall not be deemed
to have converted such Preferred Stock until immediately prior to the closing of
such sale of securities.
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(c) Conversion Price Adjustments of Preferred Stock. The respective
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Conversion Prices of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock shall be subject to
adjustment from time to time as follows:
(i) (A) If the corporation, at any time or from time to time
after the date of the first issuance of shares of Series C Preferred Stock (the
"Purchase Date"), shall issue any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Conversion Price
for a Series of Preferred Stock in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for such Series of Preferred Stock
in effect immediately prior to each such issuance shall forthwith be adjusted to
a price determined by multiplying such Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance plus the number of shares of Common Stock
which the aggregate consideration received by the corporation for the total
number of shares of Additional Stock so issued would purchase at such Conversion
Price, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issuance plus the number of such
shares of Additional Stock so issued. For the purposes of this subsection, the
number of shares of Common Stock outstanding immediately prior to such issue
shall be calculated on a fully diluted basis, as if all shares of Preferred
Stock and all convertible securities had been fully converted into shares of
Common Stock immediately prior to such issuance and any outstanding warrants,
options or other rights for the purchase of shares of stock or convertible
securities had been fully exercised immediately prior to such issuance (and the
resulting securities fully converted into shares of Common Stock, if so
convertible) as of such date, but not including in such calculation any
additional shares of Common Stock issuable with respect to shares of Preferred
Stock, convertible securities, or outstanding options, warrants or other rights
for the purchase of shares of stock or convertible securities, solely as a
result of the adjustment of the respective Conversion Prices (or other
conversion ratios) resulting from the issuance of the Additional Stock causing
the adjustment in question. Immediately after any Additional Stock is deemed
issued, such Additional Stock shall be deemed to be outstanding.
(B) No adjustment of the Conversion Price for a Series of
Preferred Stock shall be made in an amount less than one cent per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be either taken into account in
any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections (E)(3)
and (E)(4), no adjustment of the Conversion Price for any Series of Preferred
Stock pursuant to this subsection 3(c)(i) shall have the effect of increasing
such Conversion Price above the Conversion Price for such Series of Preferred
Stock in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any discounts, commissions or other expenses allowed, paid or incurred
by the corporation for any underwriting or otherwise in connection with the
issuance and sale thereof.
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(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof to the corporation in monetary
terms as determined by resolutions of the Board of Directors irrespective of any
accounting treatment.
(E) In the case of the issuance, whether before, on or
after the Purchase Date, of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities (which are not excluded from the definition of
Additional Stock), the following provisions shall apply:
1. The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 3(c)(i)(C) and 3(c)(i)(D)), if
any, received by the corporation upon the issuance of such options or rights
plus the minimum purchase price provided in such options or rights for the
Common Stock covered thereby.
2. The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the corporation upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in subsections 3)(c)(i)(C) and 3(c)(i)(D)).
3. In the event of any change in the number of shares
of Common Stock deliverable or any increase in the consideration payable to the
corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from any antidilution provisions thereof, the
Conversion Price of the Series A, Series B, Series C and Series D Preferred
Stock resulting from any adjustment which was made upon the issuance of such
options, rights or securities, and any subsequent adjustments based thereon,
shall be recomputed to reflect such change, but no further adjustment shall be
made for the actual issuance of Common Stock or any payment of such
consideration upon the exercise of any such options or rights or the conversion
or exchange of such securities.
4. Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price of the Series A,
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Series B, Series C and Series D Preferred Stock resulting from any adjustment
which was made upon the issuance of such options, rights or securities or
options or rights related to such securities, and any subsequent adjustments
based thereon, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities. Upon the expiration of any
such options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to such convertible
or exchangeable securities, only the number of shares of Common Stock actually
issued upon the exercise of such options or rights, upon the conversion or
exchange of such securities or upon the exercise of the options or rights
related to such securities shall continue to be deemed to be issued.
5. All Common Stock deemed issued pursuant to this
subsection 3)(c)(i)(E) shall be considered issued only at the time of its deemed
issuance and any actual issuance of such stock shall not be an actual issuance
or a deemed issuance of the corporation's Common Stock under the provisions of
this Section 3; provided however, that in the case of any options to purchase or
rights to subscribe for Common Stock which expire by their terms not more than
30 days after the date of issue thereof, no adjustment of the Conversion Price
for any Series of Preferred Stock shall be made until the expiration or exercise
of all such options or rights, whereupon such adjustment shall be made in the
same manner provided in subsection (E)(4) above.
(ii) "Additional Stock" shall mean any shares of Common Stock issued
(or deemed to have been issued pursuant to subsection 3(c)(i)(E)) by the
corporation on or after the Purchase Date other than shares of Common Stock
issued or issuable:
(A) pursuant to a transaction described in subsection 3(c)(iii)
hereof,
(B) to officers, directors, employees and consultants of the
corporation directly or pursuant to a stock option plan or agreement or
restricted stock plan or agreement, except that shares so issued in excess of
3,380,667 shares of Common Stock shall be considered "Additional Stock" unless
the issuance has been approved by the stockholders and directors of the
corporation,
(C) for which adjustment of the Conversion Price is made
pursuant to this Section 3,
(D) upon conversion of the Series A, Series B, Series C or
Series D Preferred Stock, or
(E) pursuant to an acquisition of another business entity by
the corporation, whereby the corporation owns not less than a majority of the
voting power of such entity, provided such acquisition has been approved by the
Board of Directors of the corporation, including the affirmative vote of the
director elected by the Series C Preferred Stock and the affirmative vote of the
director elected by the Series D Preferred Stock.
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(iii) In the event the corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the respective
Conversion Price of the Series A, Series B, Series C and Series D Preferred
Stock shall be appropriately decreased so that the number of shares of Common
Stock issuable on conversion of each share of each such Series shall be
increased in proportion to such increase of the aggregate shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at any
time after the Purchase Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
respective Conversion Price for the Series A, Series B, Series C and Series D
Preferred Stock shall be appropriately increased so that the number of shares of
Common Stock issuable on conversion of each share of each such Series shall be
decreased in proportion to such decrease in outstanding shares.
(d) Other Distributions. In the event the corporation shall declare a
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distribution payable in securities of other persons, evidences of indebtedness
issued by the corporation or other persons, assets (excluding cash dividends) or
options or rights not referred to in subsection 3(c)(iii), then, in each such
case for the purpose of this subsection 3(d), the holders of the Series A,
Series B, Series C and Series D Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the corporation into which their shares
of Series A, Series B, Series C and Series D Preferred Stock are convertible as
of the record date fixed for the determination of the holders of Common Stock of
the corporation entitled to receive such distribution.
(e) Recapitalizations. If at any time or from time to time there
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shall be a recapitalization of the Common Stock (other than a subdivision,
combination, dividend or merger or sale of assets transaction provided for
elsewhere in Sections 2 or 3) provision shall be made so that the holders of
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Preferred Stock the number of shares of stock or other securities or property of
the corporation or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 3 with respect to the rights of the holders of Preferred Stock
after the recapitalization to the end that the provisions of this Section 3
(including adjustment of the Conversion Price then in effect and the number of
shares purchasable upon conversion of the Series A, Series B, Series C and
Series D Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
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(f) No Impairment. Without the consent of the holders of Preferred
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Stock in accordance with Article III(B)(5) below, the corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred Stock against impairment.
(g) No Fractional Shares and Certificate as to Adjustments.
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(i) No fractional shares shall be issued upon conversion of
the Preferred Stock, and the number of shares of Common Stock to be issued upon
conversion shall be rounded to the nearest whole share with .5 being rounded to
the nearest even number. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
any Conversion Price of Series A, Series B, Series C or Series D Preferred Stock
pursuant to this Section 3), the corporation, at its expense, shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Series A, Series B, Series C and Series D
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The corporation shall, upon the written request at any time of any holder of
Series A, Series B, Series C or Series D Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price at the time in effect, and (C) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of a share of Series A, Series
B, Series C or Series D Preferred Stock.
(h) Notices of Record Date. In the event of any taking by the
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corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the corporation
shall mail to each holder of Preferred Stock, at least 20 days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
(i) Reservation of Stock Issuable Upon Conversion. The corporation
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shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Preferred Stock; and if at any time the number of authorized but
unissued
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shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of Preferred Stock, in addition to such other remedies
as shall be available to the holder of such Preferred Stock, the corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.
(j) Notices. Any notice required by the provisions of this Section 3
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to be given to the holders of shares of Preferred Stock shall be deemed given
upon actual receipt or deposit in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
corporation.
4. Voting Rights.
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(a) The holder of each share of Preferred Stock shall have the right
to one vote for each share of Common Stock into which such Preferred Stock could
then be converted (with any fractional share determined on an aggregate
conversion basis being rounded to the nearest whole share), and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any stockholders' meeting in
accordance with the by-laws of the corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote.
(b) Notwithstanding subsection 4(a) above, the holders of Series D
Preferred Stock, voting as a single class, shall be entitled to elect one (1)
member of the corporation's board of directors; the holders of Series C
Preferred Stock, voting as a single class, shall be entitled to elect one (1)
member of the corporation's board of directors; and the holders of the Common
Stock, the Series A Preferred Stock, and the Series B Preferred Stock (on an as-
converted basis), voting as a single class, shall be entitled to elect the
remaining members of the corporation's board of directors.
(c) In the case of any vacancy in the office of the director elected
by the holders of Series C Preferred Stock pursuant to Section 4(a) hereof, the
holders of such Series of Preferred Stock may, by affirmative vote of a majority
thereof, elect a successor or successors to hold the office for the unexpired
term of the director whose place shall be vacant. Any director who shall have
been elected by the holders of the Series C Preferred Stock or any director so
elected as provided in the preceding sentence hereof, may be removed during the
aforesaid term of office, whether with or without cause, only by the affirmative
vote of the holders of a majority of the Series C Preferred Stock or for cause
as otherwise provided by Section 304 of the California Corporations Code.
(d) In the case of any vacancy in the office of the director elected
by the holders of Series D Preferred Stock pursuant to Section 4(a) hereof, the
holders of such Series of Preferred Stock may, by affirmative vote of a majority
thereof, elect a successor or successors to hold the office for the unexpired
term of the director whose place shall be vacant. Any director who shall have
been elected by the holders of the Series D Preferred Stock or any director so
elected as provided in the preceding sentence hereof, may be removed during the
aforesaid term of office,
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whether with or without cause, only by the affirmative vote of the holders of a
majority of the Series D Preferred Stock or for cause as otherwise provided by
Section 304 of the California Corporations Code.
5. Protective Provisions. So long as shares of Preferred Stock are
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outstanding, the corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of the Preferred Stock, except where
otherwise required by law:
(a) sell, convey, or otherwise dispose of all or substantially all of
its property or business or merge into or consolidate with any other corporation
(other than a wholly owned subsidiary corporation) or effect any transaction or
Series of related transactions in which more than 50% of the voting power of the
corporation is disposed of;
(b) liquidate, dissolve, recapitalize or reorganize the corporation;
(c) create or issue any new class or Series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A, Series B, Series C or
Series D Preferred Stock with respect to voting, dividends or upon liquidation,
or (ii) having rights similar to any of the rights of the Series A, Series B,
Series C and Series D Preferred Stock under this Section 5;
(d) adversely alter or change the rights, preferences or privileges
of the Preferred Stock;
(e) reclassify any of the Company's outstanding capital stock;
(f) authorize any additional Preferred Stock; or
(g) amend any provision of this Section 5.
6. Status of Converted Stock. In the event any shares of Preferred Stock
-------------------------
shall be converted pursuant to Section 3 hereof, the shares so converted shall
be canceled and shall not be issuable by the corporation, and the Certificate of
Incorporation of the corporation shall be appropriately amended to effect the
corresponding reduction in the corporation's authorized capital stock.
7. Repurchase of Shares. In connection with repurchases by the
--------------------
corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof providing for such repurchases in the event of the termination
of the status of such holder as an employee, director or consultant to the
Company, each holder of Preferred Stock shall be deemed to have consented, for
purposes of Sections 502, 503 and 506 of the California General Corporation Law,
to distributions made by the corporation with respect to such repurchases.
C. Common Stock.
------------
-11-
<PAGE>
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of any assets of the
corporation legally available therefor, such dividends as may be declared
from time to time by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed
as provided in Section B.2. of this Article III.
3. Voting Rights. The holder of each share of Common Stock shall have
-------------
the right to one vote, and shall be entitled to notice of any stockholders
meeting in accordance with the By-laws of the corporation, and shall be
entitled to vote upon such matters and in such manner as may be provided by
law.
ARTICLE V
The Corporation is to have perpetual existence.
ARTICLE VI
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in the Board of Directors.
B. In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
C. Elections of directors need not be by written ballot unless a stockholder
demands election by written ballot at the meeting and before voting begins or
unless the Bylaws of the Corporation shall so provide.
ARTICLE VII
A. To the fullest extent permitted by the Delaware General Corporation Law as
the same exists or as may hereafter be amended, a director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
B. The Corporation may indemnify to the fullest extent permitted by law any
person made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was a director, officer, employee or agent of
the Corporation or any predecessor of the Corporation or serves or served at any
other enterprise as a director, officer, employee or agent at the request of the
Corporation or any predecessor to the Corporation.
-12-
<PAGE>
C. Neither any amendment nor repeal of this Article VII, nor the adoption of
any provision of this Corporation's Certificate of Incorporation inconsistent
with this Article VII, shall eliminate or reduce the effect of this Article VII,
in respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article VII, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
Vacancies created by newly created directorships, created in accordance
with the Bylaws of this Corporation, may be filled by the vote of a majority,
although less than a quorum, of the directors then in office, or by a sole
remaining director.
ARTICLE X
A. Following the Closing of the first sale of Common Stock of the Corporation
pursuant to the Securities Act of 1933, as amended, stockholders of the
Corporation may not take any action by written consent in lieu of a meeting and
any action contemplated by stockholders after such time must be taken at a duly
called annual or special meeting of stockholders.
B. The number of directors which constitute the whole Board of Directors of
the Corporation shall be fixed exclusively by one or more resolutions adopted
from time to time by the Board of Directors. Upon the closing of the first sale
of Common Stock of the Corporation pursuant to a registration statement declared
effective by the Securities and Exchange Commission pursuant to the Securities
Act of 1933, as amended, the Board of Directors shall be divided into two
classes designated as Class I and Class II, respectively. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by
the Board of Directors. At the first annual meeting of stockholders following
the date thereof, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of two years. At the second
annual meeting of stockholders following the date thereof, the term of office of
the Class II directors shall expire and Class II directors shall be elected for
a full term of two years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of two years to succeed the directors
of the class whose terms expire at such annual meeting.
C. Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Corporation.
-13-
<PAGE>
ARTICLE XI
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE XII
The name and mailing address of the incorporator are as follows:
John K. Liu, Esq.
Wilson Sonsini Goodrich & Rosati
650 Page Mill road
Palo Alto, CA 94304
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is the act and deed of such incorporator and that
the facts stated therein are true.
___________________________________________
John K. Liu, Incorporator
-14-
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
ALTIGEN COMMUNICATIONS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES................................................. 1
1.1 REGISTERED OFFICE................................................ 1
1.2 OTHER OFFICES.................................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS......................................... 1
2.1 PLACE OF MEETINGS................................................ 1
2.2 ANNUAL MEETING................................................... 1
2.3 SPECIAL MEETING.................................................. 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS................................. 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE..................... 2
2.6 QUORUM........................................................... 2
2.7 ADJOURNED MEETING; NOTICE........................................ 2
2.8 CONDUCT OF BUSINESS.............................................. 3
2.9 VOTING........................................................... 3
2.10 WAIVER OF NOTICE................................................. 3
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.......... 4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS...... 4
2.13 PROXIES.......................................................... 5
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE............................ 5
2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS.. 5
ARTICLE III DIRECTORS....................................................... 6
3.1 POWERS........................................................... 6
3.2 NUMBER OF DIRECTORS.............................................. 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.......... 7
3.4 RESIGNATION AND VACANCIES........................................ 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE......................... 8
3.6 FIRST MEETINGS................................................... 8
3.7 REGULAR MEETINGS................................................. 8
3.8 SPECIAL MEETINGS; NOTICE......................................... 9
3.9 QUORUM........................................................... 9
3.10 ADJOURNED MEETING; NOTICE........................................ 9
3.11 WAIVER OF NOTICE................................................. 9
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................ 10
3.13 FEES AND COMPENSATION OF DIRECTORS............................... 10
3.14 APPROVAL OF LOANS TO OFFICERS.................................... 10
3.15 REMOVAL OF DIRECTORS............................................. 10
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE IV COMMITTEES....................................................... 11
4.1 COMMITTEES OF DIRECTORS.......................................... 11
4.2 COMMITTEE MINUTES................................................ 11
4.3 MEETINGS AND ACTION OF COMMITTEES................................ 12
ARTICLE V OFFICERS.......................................................... 12
5.1 OFFICERS......................................................... 12
5.2 APPOINTMENT OF OFFICERS.......................................... 12
5.3 SUBORDINATE OFFICERS............................................. 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS.............................. 13
5.5 VACANCIES IN OFFICES............................................. 13
5.6 CHAIRMAN OF THE BOARD............................................ 13
5.7 CHIEF EXECUTIVE OFFICER.......................................... 13
5.8 PRESIDENT........................................................ 13
5.9 VICE PRESIDENTS.................................................. 14
5.10 SECRETARY........................................................ 14
5.11 CHIEF FINANCIAL OFFICER.......................................... 14
5.12 ASSISTANT SECRETARY.............................................. 15
5.13 ASSISTANT FINANCIAL OFFICER...................................... 15
5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS................... 15
5.15 AUTHORITY AND DUTIES OF OFFICERS................................. 15
ARTICLE VI INDEMNITY........................................................ 16
6.1 THIRD PARTY ACTIONS............................................... 16
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION..................... 16
6.3 SUCCESSFUL DEFENSE................................................ 17
6.4 DETERMINATION OF CONDUCT.......................................... 17
6.5 PAYMENT OF EXPENSES IN ADVANCE.................................... 17
6.6 INDEMNITY NOT EXCLUSIVE........................................... 17
6.7 INSURANCE INDEMNIFICATION......................................... 18
6.8 THE CORPORATION................................................... 18
6.9 EMPLOYEE BENEFIT PLANS............................................ 18
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES...... 18
ARTICLE VII RECORDS AND REPORTS............................................. 19
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................. 19
7.2 INSPECTION BY DIRECTORS........................................... 19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.................................. 19
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII GENERAL MATTERS................................................ 20
8.1 CHECKS........................................................... 20
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS................. 20
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES........................... 20
8.4 SPECIAL DESIGNATION ON CERTIFICATES.............................. 21
8.5 LOST CERTIFICATES................................................ 21
8.6 CONSTRUCTION; DEFINITIONS........................................ 21
8.7 DIVIDENDS........................................................ 21
8.8 FISCAL YEAR...................................................... 22
8.9 SEAL............................................................. 22
8.10 TRANSFER OF STOCK................................................ 22
8.11 STOCK TRANSFER AGREEMENTS........................................ 22
8.12 REGISTERED STOCKHOLDERS.......................................... 22
ARTICLE IX AMENDMENTS....................................................... 23
ARTICLE X DISSOLUTION....................................................... 23
ARTICLE XI CUSTODIAN........................................................ 24
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES....................... 24
11.2 DUTIES OF CUSTODIAN............................................... 24
</TABLE>
-iii-
<PAGE>
BYLAWS
------
OF
--
ALTIGEN COMMUNICATIONS, INC.
----------------------------
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
--------------
Annual meetings of the stockholders shall be held, each year, at the time
and on the day as designated by resolution of the Board of Directors.
At the annual meeting, the stockholders shall elect a board of directors,
consider reports of the affairs of the corporation and transact such other
business as may be properly brought before the meeting.
<PAGE>
2.3 SPECIAL MEETING
---------------
Special meetings of the stockholders for any purpose or purposes may be
called by the President or Secretary, or by resolution of the directors, or by
vote of the stockholders holding fifty (50%) or more of the outstanding stock of
the Corporation.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
2.6 QUORUM
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the Chairman of the meeting or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
-2-
<PAGE>
2.8 CONDUCT OF BUSINESS
-------------------
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.9 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
as may be otherwise required by applicable law, each stockholder shall be
entitled to one vote for each share of capital stock held by such stockholder.
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, or as may be otherwise required by applicable law:
(i) in all matters other than the election of directors, the
affirmative vote of the majority of shares present in person or represented by
proxy at the meeting and entitled to vote on the subject matter shall be the act
of the stockholders;
(ii) directors shall be elected by a plurality of the votes of
the shares present in person or represented by proxy at the meeting and entitled
to vote on the election of directors; and
(iii) where a separate vote by a class or classes or series is
required, the affirmative vote of the majority of shares of such class or
classes or series present in person or represented by proxy at the meeting shall
be the act of such class or classes or series.
2.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
-3-
<PAGE>
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
-4-
<PAGE>
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.13 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for the stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. Such list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
2.15 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
---------------------------------------------------------------
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder, such stockholder must have given timely notice and in proper form
of his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the corporation not less than 90 days prior to the meeting;
provided, however, that in the event that less than 100 days notice or prior
public disclosure of the date of the meeting is given or made to
-5-
<PAGE>
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. To be in proper form, a stockholder's notice to the secretary shall set
forth:
(i) the name and address of the stockholder who intends to make
the nominations, propose the business, and, as the case may be, the name and
address of the person or persons to be nominated or the nature of the business
to be proposed;
(ii) a representation that the stockholder is a holder of record
of stock of the corporation entitled to vote at such meeting and, if applicable,
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice or introduce the business specified in the
notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, or the matter been proposed, or intended to be proposed by the
board of directors; and
(v) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
-6-
<PAGE>
3.2 NUMBER OF DIRECTORS
-------------------
The authorized number of directors shall be seven (7). This number may be
changed by a duly adopted amendment to the certificate of incorporation or by an
amendment to this bylaw adopted by the vote or written consent of the holders of
a majority of the stock issued and outstanding and entitled to vote or by
resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until the director's earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the attention of
the Secretary of the corporation. When one or more directors so resigns and the
resignation is effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
-7-
<PAGE>
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
--------------
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
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<PAGE>
3.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or a majority of the directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.10 ADJOURNED MEETING; NOTICE
-------------------------
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.11 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such
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<PAGE>
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
directors, or members of a committee of directors, need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these bylaws.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
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<PAGE>
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority to (i) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (ii) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
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<PAGE>
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.11
(waiver of notice), and Section 3.12 (action without a meeting), with such
changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may be determined
either by resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the board of directors and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend
all meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a chairman of the board,
president, a secretary and a chief financial officer/treasurer. The corporation
may also have, at the discretion of the board of directors, a chief executive
officer, one or more vice presidents, one or more assistant vice presidents, one
or more assistant secretaries, one or more assistant treasurers, and any such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
-----------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be appointed by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
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<PAGE>
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him or her
by the board of directors or as may be prescribed by these bylaws. If there is
no chief executive officer and no president, then the chairman of the board
shall also be the chief executive officer of the corporation and shall have the
powers and duties prescribed in Section 5.7 of these bylaws.
5.7 CHIEF EXECUTIVE OFFICER
-----------------------
Subject to the supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the chief
executive officer shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and the officers of
the corporation. In the absence or nonexistence of a chairman of the board, the
chief executive officer shall preside at meetings of the board of directors. The
chief executive officer shall have such other powers and duties as may be
prescribed by the board of directors or these bylaws.
5.8 PRESIDENT
---------
The president shall preside at all meetings of the stockholders and, in the
absence or nonexistence of a chairman of the board and a chief executive
officer, at all meetings of the board of directors. The president shall have the
general powers and duties of management usually vested in the office of
president of a corporation and shall have such other powers and duties as may be
prescribed by the board of directors or these bylaws. If there is no chief
executive officer, then the
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<PAGE>
president shall also be the chief executive officer of the corporation and shall
have the powers and duties prescribed in Section 5.7 of these bylaws.
5.9 VICE PRESIDENTS
---------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.10 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
5.11 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. The chief financial officer shall disburse
the funds of the corporation as may be ordered by the board of
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<PAGE>
directors, shall render to the president and directors, whenever they request
it, an account of all his or her transactions as chief financial officer and of
the financial condition of the corporation, and shall have other powers and
perform such other duties as may be prescribed by the board of directors or
these bylaws.
The chief financial officer shall be the treasurer of the corporation.
5.12 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
5.13 ASSISTANT FINANCIAL OFFICER
---------------------------
The assistant financial officer, or, if there is more than one, the
assistant financial officers, in the order determined by the stockholders or
board of directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the chief financial officer or in the
event of his or her inability or refusal to act, perform the duties and exercise
the powers of the chief financial officer and shall perform such other duties
and have such other powers as may be prescribed by the board of directors or
these bylaws.
5.14 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
5.15 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
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<PAGE>
ARTICLE VI
INDEMNITY
---------
6.1 THIRD PARTY ACTIONS
-------------------
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which such
person reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
---------------------------------------------
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) and amounts paid in settlement (if such settlement is approved in advance
by the corporation, which approval shall not be unreasonably withheld) actually
and reasonably incurred by such person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding any other
provision of this Article VI, no person shall be
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<PAGE>
indemnified hereunder for any expenses or amounts paid in settlement with
respect to any action to recover short-swing profits under Section 16(b) of the
Securities Exchange Act of 1934, as amended.
6.3 SUCCESSFUL DEFENSE
------------------
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by the
person in connection therewith.
6.4 DETERMINATION OF CONDUCT
------------------------
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court)
shall be made by the corporation only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is proper in the circumstances because the person has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall
be made (1) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (2) if there are
no such directors, or if such directors so direct, by independent legal counsel
in a written opinion, or (3) by the stockholders. Notwithstanding the foregoing,
a director, officer, employee or agent of the Corporation shall be entitled to
contest any determination that the director, officer, employee or agent has not
met the applicable standard of conduct set forth in Sections 6.1 and 6.2 by
petitioning a court of competent jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE
------------------------------
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay such amount if
it shall ultimately be determined that the individual is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
-----------------------
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in their official
capacity and as to action in another capacity while holding such office.
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<PAGE>
6.7 INSURANCE INDEMNIFICATION
-------------------------
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against the
person and incurred by the person in any such capacity or arising out of the
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article VI.
6.8 THE CORPORATION
---------------
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under and subject to the provisions of this Article VI (including,
without limitation the provisions of Section 6.4) with respect to the resulting
or surviving corporation as the person would have with respect to such
constituent corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
----------------------
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
-----------------------------------------------------------
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such person.
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<PAGE>
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive officer or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
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ARTICLE VIII
GENERAL MATTERS
---------------
8.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if the person were such
officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to
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<PAGE>
be paid therefor and the amount paid thereon shall be stated. Upon the
declaration of any dividend on fully paid shares, the corporation shall declare
a dividend upon partly paid shares of the same class, but only upon the basis of
the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
(i) the General Corporation Law of Delaware or (ii) the certificate of
incorporation, may declare and pay dividends
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upon the shares of its capital stock. Dividends may be paid in cash, in
property, or in shares of the corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
----
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
-----------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
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<PAGE>
ARTICLE IX
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
-----------
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
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<PAGE>
ARTICLE XI
CUSTODIAN
---------
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(a) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(b) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(c) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
-------------------
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
ALTIGEN COMMUNICATIONS, INC.
Adoption by Incorporator
------------------------
The undersigned person appointed in the Certificate of Incorporation to act
as the Incorporator of AltiGen Communications, Inc., a Delaware corporation,
hereby adopts the foregoing bylaws, comprising twenty-four (24) pages, as the
Bylaws of the corporation.
Executed this 25th day of May, 1999.
/s/ John K. Liu
--------------------------------------------
John K. Liu, Incorporator
Certificate by Assistant Secretary of Adoption by Incorporator
--------------------------------------------------------------
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Assistant Secretary of AltiGen Communications, Inc., a Delaware
corporation, and that the foregoing Bylaws, comprising twenty-four (24) pages,
were adopted as the Bylaws of the corporation on __________, 1999, by the person
appointed in the Certificate of Incorporation to act as the Incorporator of the
corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and affixed
the corporate seal this ____ day of __________, 1999.
____________________________________________
Gilbert Hu, Assistant Secretary
<PAGE>
EXHIBIT 4.3
ALTIGEN COMMUNICATIONS, INC.
THIRD AMENDED AND RESTATED
RIGHTS AGREEMENT
May 7, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Termination of Prior Rights........................ 1
Section 2. Amendment.......................................... 1
Section 3. Registration Rights................................ 2
3.1 Definitions........................................ 2
3.2 Requested Registration............................. 3
3.3 Company Registration............................... 4
3.4 Obligations of the Company......................... 4
3.5 Furnish Information................................ 5
3.6 Expenses of Demand Registration.................... 5
3.7 Expenses of Company Registration................... 6
3.8 Underwriting Requirements.......................... 6
3.9 Delay of Registration.............................. 6
3.10 Indemnification.................................... 7
3.11 Reports Under Securities Exchange Act of 1934...... 9
3.12 Form S-3 Registration.............................. 9
3.13 Assignment of Registration Rights.................. 10
3.14 Limitations on Subsequent Registration Rights...... 10
3.15 "Market Stand-Off" Agreement....................... 11
3.16 Termination of Registration Rights................. 11
3.17 Participation by the Company....................... 12
Section 4. Additional Rights.................................. 12
4.1 Right of First Refusal............................. 12
4.2 Delivery of Financial Statements................... 14
4.3 Inspection......................................... 14
4.4 Termination of Information and Inspection Covenants 15
Section 5. Miscellaneous...................................... 15
5.1 Assignment......................................... 15
5.2 Third Parties...................................... 15
5.3 Governing Law...................................... 15
5.4 Counterparts....................................... 15
5.5 Notices............................................ 15
5.6 Severability....................................... 15
5.7 Amendment and Waiver............................... 16
5.8 Additional Investors............................... 16
5.9 Effect of Amendment or Waiver...................... 16
5.10 Rights of Holders.................................. 16
5.11 Delays or Omissions................................ 16
5.12 Attorney's Fees.................................... 17
</TABLE>
-i-
<PAGE>
ALTIGEN COMMUNICATIONS, INC.
THIRD AMENDED AND RESTATED
RIGHTS AGREEMENT
THIS THIRD AMENDED AND RESTATED RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of May 7, 1999, by and among AltiGen Communications, Inc., a
California corporation (the "Company"), Gilbert Hu (the "Founder") and the
investors identified in Exhibit A (the "Investors").
---------
RECITALS
A. WHEREAS, the Company previously entered into a Second Amended and
Restated Rights Agreement, dated April 2, 1998, with the Founder and with
certain Investors who acquired Series A Preferred Stock (the "Series A Shares"),
Series B Preferred Stock (the "Series B Shares"), Series C Preferred Stock (the
"Series C Shares") and/or Series D Preferred Stock (the "Series D Shares").
B. WHEREAS, the Founder presently owns 1,000,000 shares of Common Stock
of the Company (the "Founder's Shares").
C. WHEREAS, certain new Investors are purchasing, concurrently herewith,
up to 2,500,000 additional shares of Series D Preferred Stock (the "Additional
Series D Shares", and collectively with Series A Shares, Series B Shares, Series
C Shares and Series D Shares, the "Preferred Shares") from the Company.
D. WHEREAS, in connection with sale and purchase of the Additional Series
D Shares, the parties desire that the Founder and all the Investors have
substantially identical registration rights, and that certain Investors have
rights of first refusal.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
Section 1. Termination of Prior Rights. This Agreement amends and
---------------------------
restates in its entirety the Rights Agreement dated June 10, 1996, the First
Amended and Restated Rights Agreement dated December 20, 1996, and the Second
Amended and Restated Rights Agreement dated April 2, 1998.
Section 2. Amendment. Except as expressly provided herein, amendment of
---------
this Agreement shall be governed by the terms of Section 5.7 hereof.
<PAGE>
Section 3. Registration Rights.
-------------------
3.1 Definitions. As used in this Agreement:
-----------
(a) The terms "register," "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act of 1933, as amended (the
"Securities Act") and the subsequent declaration or ordering of the
effectiveness of such registration statement.
(b) The term "Registrable Securities" means:
(i) the Founder's Shares,
(ii) the shares of Common Stock issuable or issued upon
conversion of the Preferred Shares (the shares of Common Stock referred to in
clauses (i) and (ii) hereof are collectively referred to hereafter as the
"Stock"),
(iii) any other shares of Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his or her rights under this Agreement are not assigned;
provided, however, that Common Stock or other securities shall only be treated
- -------- -------
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.
(c) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(d) The term "Holder" means any holder of outstanding
Registrable Securities who acquired such Registrable Securities in a transaction
or series of transactions not involving any registered public offering.
(e) The term "Form S-3" means such form under the Securities
Act of 1933, as amended (the "Act") as in effect on the date hereof or any
registration form under the Act subsequently adopted by the Securities and
Exchange Commission ("SEC") which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
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<PAGE>
3.2 Requested Registration.
----------------------
(a) If the Company shall receive at any time after the earlier
of (i) December 20, 2001, or (ii) six (6) months after the effective date of the
first registration statement for a public offering of securities of the Company
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock option, stock purchase or
similar plan or a SEC Rule 145 transaction), a written request from the Holders
of a majority of the Registrable Securities then outstanding that the Company
file a registration statement under the Act, then the Company shall, within ten
(10) days of the receipt thereof (in accordance with Section 5.5), give written
notice of such request to all Holders and shall, subject to the limitations of
subsection 3.2(b), use its best efforts to effect as soon as practicable, and in
any event within ninety (90) days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered, such requests to be in writing and to be delivered to
the Company within twenty (20) days of mailing of the Company's written notice
to Holders.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 3.2 and the Company
shall include such information in the written notice referred to in subsection
3.2(a). In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
3.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 3.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
(c) The Company is obligated to effect only one (1) such
registration pursuant to this Section 3.2.
(d) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 3.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than one
-3-
<PAGE>
hundred eighty (180) days after receipt of the request of the Initiating
Holders; provided, however, that the Company may not utilize this right more
than once in any twelve (12) month period.
(e) Notwithstanding the foregoing, the Company shall not be
obligated to effect, or to take any action to effect, any such registration
pursuant to this Section 3.2 during the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
Company-initiated registration; provided the Company is actively employing in
good faith all reasonable efforts to cause such registration statement to become
effective.
3.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
Common Stock or other securities under the Act in connection with the public
offering of such securities solely for cash (other than a registration relating
either to the sale of securities to participants in a Company stock option,
stock purchase or similar plan or to a SEC Rule 145 transaction, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 5.5, the Company shall,
subject to the provisions of Section 3.8, use its best efforts to cause to be
registered under the Act all of the Registrable Securities that each such Holder
has requested to be registered.
3.4 Obligations of the Company. Whenever required under this Section
--------------------------
3 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in
-4-
<PAGE>
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 3, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 3, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
3.5 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 3 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
3.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions and fees and disbursements of more than
one counsel for the selling Holders incurred in connection with registrations,
filings or qualifications pursuant to Section 3.2, including (without
limitation), all registration, filing and qualification fees, printers and
accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 3.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree, on behalf
of all Holders, to forfeit the right to one demand registration pursuant to
Section 3.2;
-5-
<PAGE>
provided further, however, that if at the time of such withdrawal, the Holders
have learned of a material adverse change in the condition, business, or
prospects of the Company from that known to the Holders at the time of their
request, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to Section 3.2.
3.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 3.3 for each Holder (which right may be assigned as provided
in Section 3.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees and fees and disbursements of
counsel for the Company relating or apportionable thereto, but excluding
underwriting discounts and commissions relating to Registrable Securities.
3.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 3.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling shareholders
according to the total amount of securities entitled to be included therein
owned by each selling shareholder or in such other proportions as shall mutually
be agreed to by such selling shareholders); but in no event shall (i) the amount
of securities of the selling Holders included in the offering be reduced below
fifteen percent (15%) of the total amount of securities included in such
offering, unless such offering is the initial public offering of the Company's
securities, in which case the selling shareholders may be excluded completely if
the underwriters make the determination described above and no other
shareholder's securities are included or (ii) notwithstanding (i) above, any
shares being sold by a shareholder exercising a demand registration right
similar to that granted in Section 3.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling shareholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling shareholder," and any pro rata reduction with
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder," as defined in this sentence.
3.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.
-6-
<PAGE>
3.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 3:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will pay as
incurred to each such Holder, underwriter or controlling person, any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage, liability, or action arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
such Holder or underwriter and stated to be specifically for use therein; and
provided further that the indemnity agreement contained in this subsection
3.10(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability, or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case to a Holder, underwriter or controlling
person for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 3.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement
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contained in this subsection 3.10(b) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided that in no event shall any indemnity
under this subsection 3.10(b) exceed the net proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 3.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 3.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 3.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
3.10.
(d) If the indemnification provided for in this Section 3.10 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 3.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 3, and otherwise.
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3.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
3.12 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders owning in the aggregate at least thirty percent (30)% of
the Registrable Securities a written request or requests that the Company effect
a registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall
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not be obligated to effect any such registration, qualification or compliance,
pursuant to this Section 3.12, (i) if Form S-3 is not available for such
offering by the Holders; (ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $500,000; (iii) if the Company shall furnish to the
Holders a certificate signed by the president of the Company stating that in the
good faith judgment of the Board of Directors of the Company it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 3.12; provided, however, that the Company
shall not utilize this right more than once in any twelve (12) month period;
(iv) if the Company has, within the twelve (12) month period preceding the date
of such request, already effected two (2) registrations on Form S-3 for the
Holders pursuant to this Section 3.12; or (v) in any particular jurisdiction in
which the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses other than underwriting
discounts and commissions incurred in connection with a registration requested
pursuant to Section 3.12, including (without limitation) all registration,
filing, qualification, printer's and accounting fees and fees and disbursements
of counsel for the Company shall be borne by the Company. Registrations effected
pursuant to this Section 3.12 shall not be counted as demands for registration
or registrations effected pursuant to Section 3.2 or 3.3.
3.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or assignee of at least 100,000 shares of
such securities provided the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. The foregoing 100,000 share limitation shall not
apply, however, to transfers by a Holder to shareholders, partners or retired
partners of the Holder (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by gift,
will or intestate succession) if all such transferees or assignees appoint a
single representative as their attorney in fact for the purpose of receiving any
notices and exercising their rights under this Section 3.
3.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder (a) to
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include such securities in any registration filed under Section 3.2 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of either of the dates set forth in subsection 3.2(a) or within
one hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 3.2.
3.15 "Market Stand-Off" Agreement. The Holder hereby agrees
----------------------------
that during the one hundred eighty (180) day period following the effective date
of a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, sell or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any Common Stock of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
To enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of the
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of the period.
Each Holder shall cause each stock certificate representing
the Holders' securities and any Registrable Securities issued with respect to
such securities to bear a conspicuous legend in substantially the following
form:
SALE, TRANSFER OR HYPOTHECATION OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS PROHIBITED FOR A PERIOD FOLLOWING A PUBLIC
OFFERING OF THE STOCK OF THE CORPORATION PURSUANT TO A RIGHTS
AGREEMENT BETWEEN THE HOLDER OF THE SHARES AND THE CORPORATION.
3.16 Termination of Registration Rights. No Holder shall be
----------------------------------
entitled to exercise any right provided for in this Section 3(a) after five (5)
years following the consummation of the Company's sale of its Common Stock in a
bona fide, firm commitment underwriting pursuant to a registration statement on
Form S-1 under the Securities Act of 1933, as amended, which results in
aggregate gross cash proceeds to the Company in excess of $10,000,000 and the
public offering price of which is not less than $5.00 per share (other than a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction) or (b) at and after such time following the Company's
initial public offering as such Holder holds Registrable Securities equal to 1%
or less of the
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outstanding stock of the Company and is able to dispose of all of its
Registrable Securities in one three-month period pursuant to the provisions of
Rule 144.
3.17 Participation by the Company. The Company may include securities
----------------------------
of the same class as the Registrable Securities for its own account in a
Registration pursuant to Section 3.3 or 3.12 in an amount up to at least 10% of
the total shares to be registered, provided that the amount of securities of the
selling Holders to be included in the offering is not reduced as a result.
Section 4. Additional Rights.
-----------------
4.1 Right of First Refusal. Subject to the terms and conditions
----------------------
specified in this Section 4.1, the Company hereby grants to each Investor (so
long as such Investor holds at least 100,000 shares of Stock) (the
"Rightholder"), a right of first refusal with respect to future sales by the
Company of its New Securities (as hereinafter defined). For purposes of this
Section 4.1, the term Rightholder includes any partners, retired partners,
shareholders or affiliates of an Investor. An Investor shall be entitled to
apportion the right of first refusal hereby granted among itself and its
partners, retired partners, shareholders and affiliates in such proportions as
it deems appropriate.
(a) In the event the Company proposes to issue New Securities,
it shall give the Rightholder written notice (the "Notice") of its intention
stating (i) a description of the New Securities it proposes to issue, (ii) the
number of shares of New Securities it proposes to offer, (iii) the price per
share at which, and other terms on which, it proposes to offer such New
Securities and (iv) the number of shares that the Rightholder has the right to
purchase under this Section 4.1, based on the Rightholder's Percentage (as
defined in Section 4.1(d)(ii)).
(b) Within twenty (20) days after the Notice is given (in
accordance with Section 5.5), the Rightholder may elect to purchase, at the
price specified in the Notice, up to the number of shares of the New Securities
proposed to be issued that the Rightholder has the right to purchase as
specified in the Notice. An election to purchase shall be made in writing and
must be given to the Company within such twenty (20) day period (in accordance
with Section 5.5). The closing of the sale of New Securities by the Company to
the participating Rightholder upon exercise of its rights under this Section 4.1
shall take place simultaneously with the closing of the sale of New Securities
to third parties.
(c) The Company shall have ninety (90) days after the last date
on which the Rightholder's right of first refusal lapsed to enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within forty-five (45) days from the execution thereof) to
sell the New Securities which the Rightholder did not elect to purchase under
this Section 4.1, at or above the price and upon terms not materially more
favorable to the purchasers of such securities than the terms specified in the
initial Notice given in connection with such sale. In the event the Company has
not entered into an agreement to sell the New Securities within such ninety (90)
day period (or sold and issued New Securities in accordance with the foregoing
within forty-five (45) days from the date of said agreement), the Company shall
not thereafter issue or sell any New Securities without first offering such New
Securities to the Rightholder in the manner provided in this Section 4.1.
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<PAGE>
(d) (i) "New Securities" shall mean any shares of, or
securities convertible into or exercisable for any shares of, any class of the
Company's capital stock; provided that "New Securities" does not include: (i)
the Preferred Shares, or the Common Stock issuable upon conversion thereof; (ii)
securities issued pursuant to the acquisition of another business entity by the
Company by merger, purchase of substantially all of the assets of such entity,
or other reorganization whereby the Company owns not less than a majority of the
voting power of such entity; (iii) shares, or options to purchase shares, of the
Company's Common Stock and the shares of Common Stock issuable upon exercise of
such options, issued pursuant to any arrangement approved by the Board of
Directors and the shareholders of the Company to employees, officers and
directors of, or consultants, advisors or other persons performing services for,
the Company; (iv) shares of the Company's Common Stock or Preferred Stock of any
series issued in connection with any stock split, stock dividend or
recapitalization of the Company; (v) Common Stock issued upon exercise of
warrants, options or convertible securities if the issuance of such warrants,
options or convertible securities was a result of the exercise of the right of
first refusal granted under this Section 4.1 or was subject to the right of
first refusal granted under this Section 4.1; (vi) capital stock or warrants or
options for the purchase of shares of capital stock issued by the Company to a
lender in connection with any loan or lease financing transaction approved by
the Board of Directors of the Company; (vi) capital stock or warrants or options
for the purchase of shares of capital stock issued by the Company to vendors or
customers or other persons in similar commercial situations with the Company if
such issuance is approved by the Board of Directors; (vii) securities sold to
the public in an offering pursuant to a registration statement filed with the
Securities and Exchange Commission under the Act; and (viii) securities issued
in connection with a corporate partnering transaction approved by the Board of
Directors.
(ii) The applicable "Percentage" for the Rightholder shall
be the number of shares of New Securities calculated by dividing (i) the total
number of shares of Common Stock owned by the Rightholder (assuming conversion
of all shares of Preferred Stock and exercise of any options or warrants held by
said Rightholder) by (ii) the total number of shares of Common Stock outstanding
at the time the Notice is given (assuming conversion of all shares of Preferred
Stock and exercise of all outstanding rights, options and warrants to acquire
Common Stock of the Company).
(e) The right of first refusal granted under this Section 4.1
shall expire upon the consummation of the Company's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
on Form S-1 under the Securities Act of 1933, as amended, which results in
aggregate gross cash proceeds to the Company in excess of $10,000,000 and the
public offering price of which is not less than $5.00 per share (other than a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction).
(f) The right of first refusal granted under this section may
only be assigned by an Investor to a transferee or assignee of the Investor's
shares of the Company's stock acquiring the lesser of (a) at least 100,000 of
the Investor's shares of the Company's Common Stock (treating all shares of
Preferred Stock for this purpose as though converted into Common Stock)
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<PAGE>
(equitably adjusted for any stock splits, subdivision stock dividends, changes,
combinations or the like) or (b) all of the Investor's remaining shares of the
Company's stock. In the event that the Investor shall assign its right of first
refusal pursuant to this Section 4.1 in connection with the transfer of less
than all of its shares of the Company's stock, the Investor shall also retain
its right of first refusal.
4.2 Delivery of Financial Statements.
--------------------------------
(a) The Company shall deliver to each Investor, as soon as
practicable, but in any event within ninety (90) days after the end of each
fiscal year of the Company, an income statement for such fiscal year, a balance
sheet of the Company as of the end of such year, and statements of income and
cash flows for such year, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting principles
("GAAP"), and audited and certified by independent public accountants of
nationally recognized standing selected by the Company.
(b) The Company shall deliver to each Investor, so long as it
holds at least 250,000 shares of Stock (or Common Stock issuable upon conversion
thereof):
(i) as soon as practicable, but in any event within forty-
five (45) days after the end of each fiscal quarter, a balance sheet of the
Company as of the end of each such quarterly period, and statements of income
and cash flows for such period and for the current fiscal year to date, prepared
in accordance with GAAP, subject to changes resulting from normal year-end audit
adjustments, all in reasonable detail and certified by the principal financial
or accounting officer of the Company, except that such financial statements need
not contain the notes required by GAAP;
(ii) as soon as practicable, but in any event within thirty
(30) days prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on a monthly basis, including balance sheets and
sources and applications of funds statements for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company; and
(iii) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor may from time to time reasonably request; provided, however, that the
Company shall not be obligated to provide information which it deems in good
faith to be proprietary.
4.3 Inspection. The Company shall permit each Investor who holds at
----------
least 250,000 shares of Stock (or Common Stock issuable upon conversion
thereof), at such Investor's expense, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by such Investor; provided, however, that
the Company shall not be obligated pursuant to this Section 4.3 to provide
access to any information which it considers to be a trade secret or similar
confidential information.
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<PAGE>
4.4 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in Sections 4.2 and 4.3 shall terminate as to the Investors
and be of no further force or effect immediately upon the consummation of the
Company's sale of its Common Stock in a bona fide, firm commitment underwriting
pursuant to a registration statement on Form S-1 under the Act, which results in
aggregate gross cash proceeds to the Company in excess of $10,000,000 and the
public offering price of which is not less than $5.00 per share (other than a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction).
Section 5. Miscellaneous.
-------------
5.1 Assignment. Subject to the provisions of Section 3.13 hereof,
----------
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
5.2 Third Parties. Nothing in this Agreement, express or implied,
-------------
is intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
5.3 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of California in the United States of
America as applied to agreements among California residents entered into and to
be performed entirely within California. The parties hereto consent to the
personal jurisdiction of all federal and state courts in California, and agree
that venue shall lie exclusively in Santa Clara County, California.
5.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.5 Notices. Any notice, instruction or communication required or
-------
permitted to be given under this Agreement to any party shall be in writing
(which may include telex, telegram, telecopier, or other similar form of
reproduction followed by a mailed hard copy) and shall be deemed given when
actually received or, if earlier, five (5) days after deposit in the United
States Mail, postage prepaid (or for foreign addresses by Federal Express, DHL
or other comparable delivery service), addressed to the principal office of such
party or to such other address as such party may request by written notice. Each
party shall make an ordinary, good faith effort to ensure that the person to be
given notice actually receives such notice. Each party shall ensure that the
Company has a current address, fax number, and telephone number for the purpose
of giving notice, and the Company shall ensure that each party has its current
address, fax number and telephone number.
5.6 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety,
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<PAGE>
to the extent necessary, shall be severed from this Agreement, and the balance
of this Agreement shall be enforceable in accordance with its terms.
5.7 Amendment and Waiver. Any provision of this Agreement may be
--------------------
amended with the written consent of the Company and the Holders of at least a
majority of the outstanding shares of the Registrable Securities; provided,
however, that any amendment which would adversely affect the Founder in a manner
different than the Investors shall additionally require the consent of the
Founder. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each Holder of Registrable Securities and the Company. In
the event that an underwriting agreement is entered into between the Company and
any Holder, and such underwriting agreement contains terms differing from this
Agreement, as to any such Holder the terms of such underwriting agreement shall
govern.
5.8 Additional Investors.
--------------------
If subsequent to the date of this Agreement, additional parties purchase
shares of Series D Preferred Stock ("Additional Investors"), then each such
Additional Investor shall become a party of this Agreement as an "Investor"
hereunder, without the consent, approval or signature of any Investor so long as
such Additional Investor has both: (i) purchased shares of Series D Preferred
Stock under the 1999 Series D Preferred Stock Purchase Agreement dated May 7,
1999 and paid the Company all consideration payable for such shares; and (ii)
executed one or more counterpart signature pages to this Agreement as an
"Investor," with the Company's consent.
5.9 Effect of Amendment or Waiver. The Investors and the Founder
-----------------------------
and their respective successors and assigns acknowledge that by the operation of
Section 5.7 hereof the holders of a majority of the outstanding Registrable
Securities, acting in conjunction with the Company, will have the right and
power to diminish or eliminate all rights pursuant to this Agreement.
5.10 Rights of Holders. Each Holder of Registrable Securities shall
-----------------
have the absolute right to exercise or refrain from exercising any right or
rights that such Holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such Holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
5.11 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such
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<PAGE>
writing. All remedies, either under this Agreement, or by law or otherwise
afforded to any Holder, shall be cumulative and not alternative.
5.12 Attorney's Fees. If any action at law or in equity is necessary
---------------
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
[The rest of this page is left blank intentionally]
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IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By: /s/ Gilbert Hu
-------------------------------------
Gilbert Hu, President
FOUNDER:
GILBERT HU
/s/ Gilbert Hu
----------------------------------------
INVESTOR:
________________________________________
(Print Name)
By: /s/ Stephanie Hu
-------------------------------------
Title:__________________________________
-18-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:
-------------------------------------
Gilbert Hu, President
FOUNDER:
GILBERT HU
________________________________________
INVESTOR:
/s/ Keith J. Andre
----------------------------------------
(Print Name)
By: /s/ Keith J. Andre
-------------------------------------
Title:__________________________________
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:
-------------------------------------
Gilbert Hu, President
FOUNDER:
GILBERT HU
________________________________________
INVESTOR:
/s/ Wen-Huang Chang
----------------------------------------
(Print Name)
By: /s/ Wen-Huang Chang
-------------------------------------
Title:__________________________________
-20-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_______________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
__________________________________
INVESTOR:
WEN-WHEI CHANG
----------------------------------
(Print Name)
By: /s/ Wei-Whei Chang
-------------------------------
Title:____________________________
-21-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_______________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
__________________________________
INVESTOR:
YA-TING CHANG
----------------------------------
(Print Name)
By: /s/ Ya-Ting Chang
-------------------------------
Title:____________________________
-22-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_______________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
__________________________________
INVESTOR:
ALBERT CHEN
----------------------------------
(Print Name)
By: /s/ Albert Chen
-------------------------------
Title:____________________________
-23-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_______________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
__________________________________
INVESTOR:
FEI CHEN
----------------------------------
(Print Name)
By: /s/ Fei Chen
-------------------------------
Title:____________________________
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_____________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
________________________________________
INVESTOR:
FRANK CHERN FIENG, CHENG
----------------------------------------
(Print Name)
By: /s/ Frank Chern Fieng, Cheng
-------------------------------------
Title:__________________________________
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:__________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
_____________________________________________
INVESTOR:
JOSEPH CHIN
---------------------------------------------
(Print Name)
By: /s/ Joseph Chin
------------------------------------------
Title: Director, Digital Engineering Group
--------------------------------------
-26-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_______________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
__________________________________
INVESTOR:
DUONG VI
----------------------------------
(Print Name)
By: /s/ Doung Vi
-------------------------------
Title: Purchasing
----------------------------
-27-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_______________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
__________________________________
INVESTOR:
HUANG CHEN HUEI GIN
----------------------------------
(Print Name)
By: /s/ Angela Chen
-------------------------------
Title:____________________________
-28-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_______________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
__________________________________
INVESTOR:
TSUI-YEN CHEN
----------------------------------
(Print Name)
By: /s/ Tsui-Yen Chen
-------------------------------
Title:____________________________
-29-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_______________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
__________________________________
INVESTOR:
BIN-BIN CHENG
----------------------------------
(Print Name)
By: /s/ Bin-Bin Cheng
-------------------------------
Title:____________________________
-30-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
PANG-CHEN CHENG
-----------------------------------
(Print Name)
By: /s/ Pang-Chen Cheng
--------------------------------
Title:_____________________________
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
LONG-CHU CHO
-----------------------------------
(Print Name)
By: /s/ Long Chu Cho
--------------------------------
Title:_____________________________
-32-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
Tricia Chu
-----------------------------------
(Print Name)
By: /s/ Tricia Chu
--------------------------------
Title:_____________________________
-33-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
JUDY CHU-YOUNG
-----------------------------------
(Print Name)
By: /s/ Judy Chu-Young
--------------------------------
Title:_____________________________
-34-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
FOREFRONT VENTURE PARTNERS, L.P.
-----------------------------------
(Print Name)
By: /s/ Kenneth Tai
--------------------------------
Title: GENERAL PARTNER
-----------------------------
-35-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
RAM PAUL GUPTA
-----------------------------------
(Print Name)
By: /s/ Ram Paul Gupta
--------------------------------
Title:_____________________________
-36-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
ANITA HO
-----------------------------------
(Print Name)
By: /s/ Anita Ho
--------------------------------
Title:_____________________________
-37-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
HSIANG-LI CHANG HU
-----------------------------------
(Print Name)
By: /s/ Sheree Hu
--------------------------------
Title:_____________________________
-38-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
___________________________________
(Print Name)
By: /s/ Michelle Hu
--------------------------------
Title:_____________________________
-39-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
___________________________________
INVESTOR:
HUANG CHING-HONG
-----------------------------------
(Print Name)
By: /s/ Huang Ching-Hong
--------------------------------
Title:_____________________________
-40-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
FEI-SUN HUANG CHANG
--------------------------------------------
(Print Name)
By: /s/ Fei Sun
-----------------------------------------
Title:______________________________________
-41-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
JO-WEI HUANG
--------------------------------------------
(Print Name)
By: /s/ Wendy Huang
-----------------------------------------
Title:______________________________________
-42-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
INVESTAR BURGEON VENTURE CAPITAL, I
--------------------------------------------
(Print Name)
By: /s/ Kandie Hsieh
-----------------------------------------
Title: Controller
--------------------------------------
-43-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
INVESTAR DAYSPRING VENTURE CAPITAL, INC
--------------------------------------------
(Print Name)
By: /s/ Kandie Hsieh
-----------------------------------------
Title: Controller
--------------------------------------
-44-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
INVESTAR EXCELSIUS VENTURE CAPITAL (INT'L),
LDC
--------------------------------------------
(Print Name)
By: /s/ Kandie Hsieh
-----------------------------------------
Title: Controller
--------------------------------------
-45-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
LIAO SHING KAO
--------------------------------------------
(Print Name)
By: /s/ Shing Kao Liao
-----------------------------------------
Title:______________________________________
-46-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
LIN CHANG - HOU
--------------------------------------------
(Print Name)
By: /s/ Chang - Hou Lin
-----------------------------------------
Title:______________________________________
-47-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
JENNY M. L. LU
--------------------------------------------
(Print Name)
By: /s/ Jenny L
-----------------------------------------
Title:______________________________________
-48-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
EMMANUEL PAQUIZ
--------------------------------------------
(Print Name)
By: /s/ [SIGNATURE ILLEGIBLE]^^
-----------------------------------------
Title:______________________________________
-49-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
TSONG-JYH SHIAU
--------------------------------------------
(Print Name)
By: /s/ Tsong-jyh Shiau
-----------------------------------------
Title:______________________________________
-50-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
DIANA SHIH
--------------------------------------------
(Print Name)
By: /s/ Diana Shih
-----------------------------------------
Title:______________________________________
-51-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
LI CHUNG SHIH
--------------------------------------------
(Print Name)
By: /s/ Shih Li Chung
-----------------------------------------
Title:______________________________________
-52-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
NICHOLAS SHIH
--------------------------------------------
(Print Name)
By: /s/ Nicholas Shih
-----------------------------------------
Title:______________________________________
-53-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
[ILLEGIBLE]^^
--------------------------------------------
(Print Name)
By: Techgains Corp.
-----------------------------------------
Title: Chairman & President
--------------------------------------
-54-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
C. C. CHEN
--------------------------------------------
(Print Name)
By: Tekkang Management Consulting, Inc
-----------------------------------------
Title: Chairman
--------------------------------------
-55-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
TSS ENTERPRISES
--------------------------------------------
(Print Name)
By: /s/ Tom Shao
-----------------------------------------
Title: President
--------------------------------------
-56-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
LI - HUA WANG
--------------------------------------------
(Print Name)
By:
-----------------------------------------
Title:______________________________________
-57-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
LISA TUAN WENDL
--------------------------------------------
(Print Name)
By: /s/ Lisa Wendl
-----------------------------------------
Title:______________________________________
-58-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
TENG-CHUNG CHUEN-SHAN C. WU
--------------------------------------------
(Print Name)
By:_________________________________________
Title: Chairman
--------------------------------------
-59-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended and
Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
ALTIGEN COMMUNICATIONS, INC.
By:_________________________________________
Gilbert Hu, President
FOUNDER:
GILBERT HU
____________________________________________
INVESTOR:
JEN - LI CHAO YEH
--------------------------------------------
(Print Name)
By: /s/ Jenli Chao Yeh
-----------------------------------------
Title:______________________________________
-60-
<PAGE>
EXHIBIT A
---------
Schedule of Investors
Keith Andre Bor-Niam Chen
13673 Verde Vista Ct. c/o Sheree Hu
Saratoga, CA 95070 16F-2, No. 95, Section 2
Roosevelt Road
Taipei, Taiwan, R.O.C.
Ching-Ying Chang
2F. No. 28, Lane 17
Min Sheng Road Frank Chern Feng Cheng
Tayshan Hsiang 7th Floor, Room 3, No. 21
Taipei, Taiwan, R.O.C. Section 2
Chung King S. Road
Jung-Chih Chang Taipei, Taiwan, R.O.C.
6th Floor, No. 560, Section 4
Chung-Hsiao East Road Fei Chen
Taipei, Taiwan, R.O.C. 10F, #A
8 Broadcast Dr.
Wen-Huang (Simon) Chang Kowloon Tong,
6F-3, #5, Lane 267 HONG KONG
Tong-Hwa Street
Taipei, Taiwan, R.O.C. Han Chung Chen
1st Floor, No. 28
Wen-Whei Chang Alley 15, Lane 20
Department Of Communication Engineering Ming-Chuan E. Rd., Section 6
National Chiao-Tung University Taipei, Taiwan, R.O.C.
Hsinchu, Taiwan, R.O.C.,
Hung-Chih Chen
Ya-Ting Chang No. 108, 9th Floor, Section 5
16F-2, No. 95, Sec. 2 Nan-King East Road
Roosevelt Road Taipei, Taiwan, R.O.C.
Taipei, Taiwan, R.O.C.
Huei-Gin Huang (Angela) Chen
Yi-You Chang 1F, No. 23, Lane 4
No. 6, Alley 38, Lane 492 Pu Cheng Street
Tu-Chen Road, Ta Li Taipei, Taiwan, R.O.C.
Tai Chung Country,
Taiwan, R.O.C.
Jaw-Fen Chen
Albert Chen 12 Cloverfield Drive
672 Suffolk Lane Andover, MA 01810
Carmel, IN 46032
A-1
<PAGE>
Tsui-Yen Chen Jackson Chow
5F, No. 207-1, Section 3 12346 Ted Court
Hsing Lung Road Saratoga, CA 95070
Taipei, Taiwan, R.O.C.
Tricia Chu
Bin-Bin Cheng AltiGen Communications, Inc.
21F-3, No. 95, Section 2 47427 Fremont Blvd.
Roosevelt Road Fremont, CA 94538
Taipei, Taiwan, R.O.C.
Judy Chu-Young
Eugene Cheng 4888 Pebble Glen Drive
1-7, Lane 8 San Jose, CA 95129
Ching-Tien Street
Taipei, Taiwan, R.O.C. Vi Duong
2681 Olivestone Way
Pang-Chen Cheng San Jose, CA 95132
21F-3, No. 95, Section 2
Roosevelt Rd. Shu-Hui Fan
Taipei, Taiwan, R.O.C. 16F-2, No. 95, Section 2
Roosevelt Rd.
Joseph Chiu Taipei, Taiwan, R.O.C.
2091 Clematis Ct.
Fremont, CA 94539 Forefront Venture Partners L.P.
Attn: Herbert Chang
Liang-Hwa Chiu 1737 North First Street
11F, No. 201, Section 2 Suite 650
Chien Kuo S. Rd. San Jose, CA 95112
Taipei, Taiwan, R.O.C.
Sing Ling P. Fung
Chiu's Living Trust Dated 12/2/86 16F-2, No. 95, Section 2
19163 Via Tesoro Ct. Roosevelt Rd.
Saratoga, CA 95070 Taipei, Taiwan, R.O.C.
Long-Chu Cho Bill Glau
2nd Floor, No. 8, Lane 52 121 Massol Ave., #205
Shin Chung St. Los Gatos, CA 95030
Taipei, Taiwan, R.O.C.
Goldberry Properties Ltd.
Shiu-Gin Kao Chou Attn: Emery Hsia
3rd Floor, No. 21-2, Lane 4 No. 108, 9th Floor, Section 5
Pu-Cheng St. Nan-King East Road
Taipei, Taiwan, R.O.C. Taipei, Taiwan, R.O.C.
Simon Chouldjian Ram Paul Gupta
AltiGen Communications, Inc. 15000 Blue Gum Ct.
47427 Fremont Blvd. Saratoga, CA 95070
Fremont, CA 94538
A-2
<PAGE>
GVC Corporation Hsiang-Li Chang Hu
Attn: Michael Chang 16F-2, No. 95, Sec. 2
14F, No. 76, Sec. 2 Roosevelt Road
Tung Hwa S. Road Taipei, Taiwan, R.O.C.
Taipei, Taiwan, R.O.C
Michelle Hu
Tang He 603 Windmill Ct.
1621 Thorncrest Drive Fremont, CA 94539
San Jose, CA 95131
May Kuei-Rong Hu
Rita Hiralez 603 Windmill Court
3067 Remington Way Fremont, CA 94539
San Jose, CA 95148
Stephanie Hu
Anita Ho 603 Windmill Ct.
4750 Clarendon Drive Fremont, CA 94539
San Jose, CA 95129
Wei-Liang Hu
En-Kai Ho No. 30-8, Lane 99
7F, #218, Chin Shan S. Road Hsia-Men St.
Section 2 Taipei, Taiwan, ROC
Taipei, Taiwan, R.O.C.
Yen-Han Hu
Jeffrey M. Ho & Priscilla L. Ho 30-8, Lane 99
45 Mount Sinai Rise #12-03 Hsia-men St.
Beaverton Court 276958 Taipei, Taiwan, R.O.C.
REPUB. OF SINGAPORE
Ching-Hong Huang
Ming Hung Ho and Hsia Yu 3F, No. 81, Sec. 3
1085 Grayson Way Roosevelt Road
Milpitas, CA 95035 Taipei, Taiwan, R.O.C.
Emery Y. Hsia Chuang-Kai (Rick) Huang
11F, No.201, Section 2 5443 Andromeda Circle
Chien Kuo S. Rd. Fremont, CA 94538
Taipei, Taiwan, R.O.C.
Daniel R. Huang
Fan Hsiao No. 8 Fu-Shun St.
7th Floor, No. 685 Taipei, Taiwan, R.O.C.
Ming-Tsu E. Road
Taipei, Taiwan, R.O.C. Fei-Sun Chang Huang
2nd Floor, No. 8, Lane 52
Yuan-Tung Hsieh Shin Chung St.
16F-2, No. 95, Section 2 Taipei, Taiwan, R.O.C.
Roosevelt Road
Taipei, Taiwan, R.O.C.
A-3
<PAGE>
Jack Huang InveStar Excelsus Venture Capital
605 San Conrado Terr., Unit 6 Int'l, Inc. LDC
Sunnyvale, CA 94086 Attn: Kandie Hsieh
Room 1201, 12th Floor
Jack C. Huang 333 Keelung Road, Section 1
No. 8, Fu-Shun St. Taipei, Taiwan, R.O.C.
Taipei, Taiwan, R.O.C.
Chiaming Jen
Julie Huang 45455 Concho Ct.
No. 108, 9th Floor, Section 5 Fremont, CA 94539
Nan-King East Road
Taipei, Taiwan, R.O.C. Kanematsu Semiconductor Corporation
Attn: Kunio Ito, Associate Manager
Jo-Wei Huang General Affairs Dept.
1F, No. 23, Lane 4 6-1, Shintomi 1-Chome, Chuo-Ku
Pu Cheng Street Tokyo, 104-0041
Taipei, Taiwan, R.O.C. Japan
Robert T. Huang Kanematsu USA, Inc.
Synnex Information Technologies, Inc. Yutaka Konishi
3797 Spinnaker Court 1090 E. Arques Avenue
Fremont, CA 94538 Sunnyvale, CA 94086
Su-Chuan Hung Kanematsu Corporation
c/o Sheree Hu Attn: Yushiro Degawa
16F-2, No. 95, Section 2 2-1, Shibaura 1-chome,
Roosevelt Road Minato-Ku
Taipei, Taiwan, R.O.C. Tokyo, 105-8005
Japan
InveStar Burgeon Venture Capital, Inc.
Attn: Kennath Tai Yu-Chun Kao
Leeward One Building 3F, No. 21-2, Lane 4
Safe Haven Corporate Center Pu-Cheng St.
West Bay Rd. P.O.Box 31106 Taipei, Taiwan, R.O.C.
Seven Miles Beach Grand Cayman
Cayman Islands, Donggun Keung
British West Indies 98 Marylinn Dr.
Milpitas, CA 95035
InveStar Dayspring Venture Group, Inc.
Attn: Controller KJL Investment Group
Room 1201, 12th Floor 19163 Via Tesoro Court
333 Keelung Road, Section 1 Saratoga, CA 95070
Taipei, Taiwan, R.O.C.
A-4
<PAGE>
Koos Venture Capital Co., Ltd. Chang-Hou Ln
Attn: Kenny Lu 2F, No. 8, Lane 52
No. 122 Duen Whah N. Road Shin Chung St.
Taipei, Taiwan, R.O.C. Taipei, Taiwan, R.O.C.
Cheng-Lin Lin
Kummell Investments Limited No. 108, 9th Floor, Section 5
Attn: Andy Kit-Chung Chan or Nan-King East Road
Alice Li Taipei, Taiwan, R.O.C.
22/F, Hang Lung Centre
2-20 Paterson Street Tzerng-Hong (Tom) Lin
Causeway Bay 579 Clauser Dr.
HONG KONG, Milpitas, CA 95035
Shu-Chao Kuo Fu-Yuan Lin & Jyh-Huey Lin
16F-2, No. 95, Section 2 Living Trust
Roosevelt Road 7527 Donegal Drive
Taipei, Taiwan, R.O.C. Cupertino, CA 95014
Wei-Cheng Kuo Yaw-Jing Lin
No. 108, 9th Floor, Section 5 4F, No. 9, Lane 141
Nan-King East Road Section 2
Taipei, Taiwan, R.O.C. Dar-An Road
Taipei, Taiwan, R.O.C.
Ginger Lee
1454 Whitewood Ct. Tzerng-hong Lin and Pei Yu
San Jose, CA 95131 579 Clauser Drive
Milpitas, CA 95035
Shih Hsiung (Scott) Lee
346 Becado Drive Hsiao-Hsien Leo Liu
Fremont, CA 94539 143 Walter Hays Dr.
Palo Alto, CA 94303
Wen-Te Lee
16F-2, No. 95, Section 2 Fang-Cheng Lu
Roosevelt Rd. No. 127, 3rd Floor, Sec. 2
Taipei, Taiwan, R.O.C. Da Guan Road
Panchiao City
Hsui-Chin Liao Taipei Hsien, Taiwan, R.O.C.
No. 108, 9th Floor, Section 5
Nan-King East Road Jean C. Lu
Taipei, Taiwan, R.O.C. Landmark Technology
2160 Old Oakland Road
Shing-Kao (Jerry) Liao San Jose, CA 95131
11F-1, No. 70, Sec. 2
Tun Hwa South Rd.
Taipei, Taiwan, R.O.C.
A-5
<PAGE>
Jenny M.L. Lu Pacific Rim Capital, LLC
Landmark Technology Attn: T. Chester Wang
2160 Old Oakland Road 2150 California Street
San Jose, CA 95131 Mountain View, CA 94040
Su-Jen Lu Emmanuel (Noel) Paquiz
No. 7, Lane 203 1608 Frost Drive
Te Shin E. Road San Jose, CA 95131
Shih Lin
Taipei, Taiwan, R.O.C. Yi-Jung (AKA James) Peng
445 Tramway Drive
Samuel Kai Lu Milpitas, CA 95035
Irell & Manella
1800 Avenue of the Stars Michael Plumer
Suite 900 536 Weybridge Drive
Los Angeles, CA 90067 San Jose, CA 95123
Sun Lu Thiagarajan Rajagopalan
Landmark Technology AltiGen Communications, Inc.
2160 Old Oakland Road 47427 Fremont Blvd.
San Jose, CA 95131 Fremont, CA 94538
En-Kuang Lung Robert Huang Trustee FBO Chiu
47267 Yucatan Dr. Childrens Trust Dated 11/7/83
Fremont, CA 94539 19163 Via Tesoro Ct.
Saratoga, CA 95070
Mon Yen Tsai and Kelly P. Tsai, Trustee
of the Tsai Family Trust U/D/T, Michael S. Saberman
dated 11/29/95 95 Professional Cent.
752 Talisman Court San Rafael, CA 94903
Palo Alto, CA 94303
SCF Investment Group
Steve Murphy 19163 Via Tesoro Ct.
5997 Cabral Ave. Saratoga, CA 95070
San Jose, CA 95123
Michele Shannon
Nitsuko Corporation 20634 Black Rd.
Attn: Mr. Toka, President Los Gatos, CA 95030
c/o Ms. Anne Ellefsen
Sumitronics Chih-Hsun Shen
2900 Patrick Henry Drive 3F, No. 81, Sec. 3
Santa Clara, CA 95054 Roosevelt Road
Taipei, Taiwan, R.O.C.
Tracy Oliver
36511 Frobisher Dr.
Fremont, CA 94536
A-6
<PAGE>
Shu-Lin Shen Sumitomo Corporation
No. 108, 9th Floor, Section 5 Attn: Shigeo Kurimoto
Nan-King East Road Information Electronics Dept.
Taipei, Taiwan, R.O.C. 1-2-2, Hitotsubashi
Chiyoda-ku
Tsong-Jyh Shiau Tokyo, 100-8601
6468 Edgemoor Way Japan
San Jose, CA 95129
Sumitronics
Diana Shih Attn: Ike Nakamura
4888 Pebble Glen Drive 2900 Patrick Henry Drive
San Jose, CA 95129 Santa Clara, CA 95054
Li Chung Shih Chien Hsiung Sun
Flat 2A, Tower 18 c/o Ray Sun
HKUST-SSQ 1045 Highland Circle
Clear Water Bay Los Altos, CA 94024
Kowloon, HONG KONG
The Bill Kauo-Hwa Sun and
Nicholas Shih Meiling Sun 1993 Family Trust
4888 Pebble Glen Drive 12444 Robleda Road
San Jose, CA 95129 Los Altos Hills, CA 94022
Masaharu Shinya Tsyr-Yi (Shirley) Sun
1-6-1-3601 Harumi 885 Concho Drive
Chuo-ku Fremont, CA 94539
Tokyo, 104-0053
JAPAN Tze-Yun Sung
11F, 201, Chien Kuo S. Road
Thay-Maan Shy Section 2
16F-2, No. 95, Section 2 Taipei, Taiwan, R.O.C.
Roosevelt Road
Taipei, Taiwan, R.O.C. Synnex Information Technologies, Inc.
Attn: President
Yeou-Ying Shyy 3797 Spinnaker Court
3F, No. 1, Alley 1, Lane 78 Fremont, CA 94538
Wun Hwa Road
Hsintien Shu Ping Tam
Taipei, Taiwan, R.O.C. 5159 Fairbanks Common
Fremont, CA 94555
Sumisho Electronics Corporation
Attn: Ken Fujii or H. Takemura Kuei Jung Tang
2-23, Shimomiyabi-cho 11F, 201, Section 2
Shinjyuku-ku Chien Kuo S. Rd.
Tokyo, 162-8580 Taipei, Taiwan, R.O.C.
Japan
A-7
<PAGE>
Tech Alliance Corp. TSS Enterprises
Attn: Emery Hsia Attn: Tom Shao
11F, 201 Chien Kuo S. Road 2378 W. 239th Street
Section 2 Torrance, CA 90501
Taipei, Taiwan, R.O.C
Yvonne Lau Yee Wan
Technology Partners Venture Capital c/o Crimsonasia Capital
Attn: Shang Te Chan Singapore Pte. Ltd.
3F-1, No. 130, Szu-Wei Road 250 North Bridge Road
Hsin-Chu, Taiwan, R.O.C. #17-01 Raffles City Tower
SINGAPORE 179101
Techgains Corporation
Attn: Tom Shao David S. Wang
2378 W. 239th Street No. 108, 9th Floor, Section 5
Torrance, CA 90501 Nan-King East Road
Taipei, Taiwan, R.O.C.
Technology Associates Corporation
Attn: David S. Wang Irene Wang
11F. 201, Chien Kuo S. Rd 5F, No. 19-1, Lane 13
Section 2 Yung-Kang Street
Taipei, Taiwan, R.O.C. Taipei, Taiwan, R.O.C.
Tekkang Management Consulting Inc. Jui-Chih Wang
Attn: Chairman No. 108, 9th Floor, Section 5
11F, 201,Chien Kuo S. Road Nan-King East Road
Section 2 Taipei, Taiwan, R.O.C.
Taipei, Taiwan, R.O.C.
Kevin Wang
Tina Tsai AltiGen Communications, Inc.
19 Mills Canyon Ct. 47427 Fremont Blvd.
Burlingame, CA 94010 Fremont, CA 94538
TSC Investment Advisors, Inc. Kevin T. Wang
Attn: Shang Te Chan No. 108, 9th Floor, Section 5
6F, No. 38, Chien-Kuo Nan-King East Road
North Road, Section 1 Taipei, Taiwan, R.O.C.
Taipei, Taiwan, R.O.C.
Li-Hua Wang
Nai-Min Tseng No. 83
No. 186-30, Hai-Hu Tsun Chiu Chih Road
Lu-Chu Hsiang Hsintien
TaoYuan, Taiwan, R.O.C. Taipei, Taiwan, R.O.C.
Sang-Wen Tseng Louis Wang
No. 186-30, Hai-Hu Tsun 20680 Carniel Avenue
Lu-Chu Hsiang Saratoga, CA 95070
TaoYuan, Taiwan, R.O.C.
A-8
<PAGE>
Peter Wells
628 Enright Avenue
Santa Clara, CA 95050
Lisa Tuan Wendl
486 Ferne Avenue
Palo Alto, CA 94306
Chun-Tzu Lin Wu
47267 Yucatan Drive
Fremont, CA 94539
Teng-Chung Wu and Chuen-Shang C.
Wu, Trustee of Teng-Chung Wu and
Chuen-Shang C. Wu 1994 Family Trust
1004 Rudgear
Walnut Creek, CA 94596-6448
Jennifer Wu
615 - 36th Avenue
San Mateo, CA 94403
Li-Ching Wu
16F-2, No. 95, Section 2
Roosevelt Rd.
Taipei, Taiwan, R.O.C.
Nan-Chun Wu
Jenli C. Yeh
No. 23-2, 7th Floor
Lane 232, Section 7
Chun-San North Road
Taipei, Taiwan, R.O.C.
Tze-Yu Yuan
6F-3, #5, Lane 267
Tong-Hwa Street
Taipei, Taiwan, R.O.C.
A-9
<PAGE>
EXHIBIT 10.2
ALTIGEN COMMUNICATIONS, INC.
THIRD AMENDED AND RESTATED
1994 STOCK OPTION PLAN
<PAGE>
ALTIGEN COMMUNICATIONS, INC.
THIRD AMENDED AND RESTATED
1994 STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 PURPOSE........................................................ 1
ARTICLE 2 STOCK SUBJECT TO THE PLAN...................................... 1
ARTICLE 3 TERM OF PLAN................................................... 1
ARTICLE 4 PARTICIPANTS................................................... 2
ARTICLE 5 GENERAL TERMS.................................................. 2
ARTICLE 6 TERMS OF OPTION AGREEMENTS..................................... 4
ARTICLE 7 RIGHT OF FIRST REFUSAL......................................... 7
ARTICLE 8 SHARE ESCROW................................................... 9
ARTICLE 9 ADMINISTRATION AND AMENDMENT OF THE PLAN....................... 11
ARTICLE 10 ADJUSTMENT OF AND CHANGES IN STOCK............................. 12
ARTICLE 11 SUSPENSION OF OPTIONS TO SATISFY SECURITIES LAWS............... 13
ARTICLE 12 INFORMATION TO PARTICIPANTS.................................... 14
ARTICLE 13 TAX STATUS..................................................... 14
ARTICLE 14 MISCELLANEOUS.................................................. 15
</TABLE>
<PAGE>
ALTIGEN COMMUNICATIONS, INC.
(fka Altima Communications, Inc.)
THIRD AMENDED AND RESTATED
1994 STOCK OPTION PLAN
----------------------
ARTICLE 1
PURPOSE
The purpose of this 1994 Stock Option Plan (the "Plan") is to advance the
interests of AltiGen Communications, Inc. (fka Altima Communications, Inc.), a
California corporation (the "Company"), by giving the Company's employees and
others who perform substantial services on behalf of the Company incentive
through ownership of the Company's common stock to continue in the service of
the Company and thereby to help the Company compete effectively with other
enterprises for the services of qualified individuals. This Plan is adopted
under Section 408 of the California Corporations Code.
ARTICLE 2
STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Article 10, the Company is authorized to
issue options ("Options") to purchase up to 3,500,000 shares of its common stock
("Shares"). Any unpurchased Shares that are subject to an Option that terminates
for any reason other than exercise shall, unless the Plan has been terminated,
become available for future grant under the Plan. The Company shall at all times
reserve for issuance pursuant to the Plan a number of its authorized but
unissued Shares equal to the number of Shares issuable under the Plan. Exercise
of an Option shall decrease the number of Shares available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is granted.
ARTICLE 3
TERM OF PLAN
The Plan shall become effective upon its adoption by the Board of Directors of
the Company (the "Board"). Within 12 months after the date of such adoption, the
Plan shall be approved by the shareholders of the Company in the degree and
manner required under applicable state and federal law. No Option shall become
exercisable unless and until such shareholder approval has been obtained. Unless
sooner terminated under Article 9 or 10, the Plan shall terminate upon the
earlier of (a) the tenth anniversary of its adoption by the Board or (b) the
date on which all Shares available for issuance under the Plan have been issued.
Any Option outstanding under the Plan at the time of its termination shall
remain in effect in accordance with its terms and conditions and those of the
Plan.
<PAGE>
ARTICLE 4
PARTICIPANTS
Section 4.1. Eligibility. The following persons shall be eligible to receive
- ----------- -----------
Options under the Plan: (a) any employee ("Employee") of the Company or any
present or future parent or subsidiary corporation of the Company ("Affiliate")
as defined in Sections 424(e) and (f) of the Internal Revenue Code of 1986, as
amended (the "Code"), respectively, (b) any person who is engaged by the Company
or an Affiliate to render consulting services and is compensated for such
services, but who is not an Employee ("Consultant") and (c) any director who is
not an Employee, whether compensated for such services or not ("Outside
Director"). Only Employees are eligible to receive Options that are intended to
be incentive options ("Incentive Options") within the meaning of Section 422 of
the Code. Employees, Consultants and Outside Directors are eligible to receive
Options that are not intended to be Incentive Options ("Nonstatutory Options").
Section 4.2. Participants. The Board shall have the authority in its sole
- ----------- ------------
discretion to select the Employees, Consultants and Outside Directors to whom
Options may from time to time be granted under the Plan ("Participants").
Section 4.3. Legal Representatives. As used in the Plan, the term "Participant"
- ----------- ---------------------
includes any person who acquires the legal right to exercise a Participant's
Options by reason of the death or incompetence of the Participant.
ARTICLE 5
GENERAL TERMS
Section 5.1. Option Agreement. Grants of Options shall be evidenced by a
- ----------- ----------------
written option agreement ("Option Agreement"), which shall contain the
provisions that the Plan requires and may contain additional provisions that do
not conflict with the Plan as the Board deems appropriate. Each Option Agreement
shall be signed by the Participant and an officer of the Company designated by
the Board. The form of Option Agreement for use pursuant to the Plan is attached
hereto. The Board may modify said form as it deems appropriate, subject to the
provisions of the Plan. Option Agreement need not have identical terms, but each
Option Agreement shall be subject to the Plan.
Section 5.2. Exercise Price.
- ----------- --------------
5.2.1. General Rule. The exercise price of each Incentive Option shall
----- ------------
not be less than the fair market value of the Shares, as the Board may
determine, on the date the Option is granted. The exercise price of each
Nonstatutory Option shall not be less than 85% of the fair market value of the
Shares, as the Board may determine, on the date the Option is granted.
5.2.2. Ten Percent Shareholders. The exercise price of each Option
----- ------------------------
granted to a Participant who, at the time the Option is granted, owns, as that
term is defined in Section 424(d) of the Code, stock possessing more than 10% of
the combined voting power of all stock of the
-2-
<PAGE>
Company or of its Affiliates, shall be at least 110% of the fair market value of
the Shares, as the Board may determine, on the date the Option is granted.
5.2.3. Determination of Fair Market Value. The Board's determination of
----- ----------------------------------
fair market value shall be final and conclusive for the purposes of the Plan. In
determining fair market value, the Board may, but is not obligated to, obtain
and rely upon an independent appraisal. If the Company's common stock is
publicly traded, the fair market value of the Shares as of any date shall be
determined as follows: (a) if such stock is listed on a stock exchange or
national market system, fair market value shall be the closing sales price of a
share of the Company's common stock (or the closing bid price if no sales were
reported), as quoted on such exchange or system for the last market trading day
before the time of determination; or (b) if such stock is quoted on the NASDAQ
System (but not on its National Market System) or regularly quoted by a
recognized securities dealer but selling prices are not reported, fair market
value shall be the mean between the high and low asked prices for such stock for
the last market trading day before the time of determination.
Section 5.3. Payment of Exercise Price; Taxes.
- ----------- ---------------------------------
5.3.1. Form of Payment. The Participant shall pay the per Share exercise
----- ---------------
price in full at the time of exercise by bank cashier's check or, with the
approval of the Board, a promissory note or shares of common stock of the
Company, or any combination of the foregoing such that the aggregate fair market
value of such stock (as determined by the Board) plus cash and notes equals the
total exercise price.
5.3.2. Promissory Notes. The Company may require a promissory note to be
----- ----------------
with full recourse, to be adequately secured by collateral other than the Shares
purchased, and to bear interest at market or above market rates (if such rates
are not usurious). It is the Company's policy not to accept promissory notes
except in unusual circumstances. Inability to pay cash is not necessarily an
unusual circumstance.
5.3.3. Withholding Taxes. The Participant shall pay by bank cashier's
----- -----------------
check or other form of payment acceptable to the Company, the amount of any
state or federal income or other tax that the Company is required to pay or
withhold upon exercise of an Option unless the incidence of such tax cannot
lawfully be placed on the Participant.
Section 5.4. Conditions to Exercise. No Option may be exercised if the transfer
- ----------- ----------------------
of Shares upon such exercise or the method of payment of consideration for such
Shares would constitute a violation of any applicable securities or other law or
regulation. Unless the Shares are registered under the Securities Act of 1933
and any applicable state securities law, as a condition to exercising an Option,
the Participant shall provide the Company with such written assurances as the
Company deems appropriate for the Option grant and exercise to qualify for
exemption from registration. Such assurances may include, among others, a
representation that the Participant intends to hold the Shares for investment
and not for distribution to the public. The Company has no obligation to
register the Options or Shares under the Securities Act of 1933 or any other
law.
-3-
<PAGE>
Section 5.5. No Employment Agreement. No Option Agreement, nor anything
- ----------- -----------------------
contained in the Plan, shall alter a Participant's status as an "at will"
employee of the Company, confer upon any Participant any right to continue in
the employ of the Company, or limit the right of the Company to terminate a
Participant's employment at any time and for any or no reason.
Section 5.6. Restrictions on Transfer. If transfer of the Shares is restricted
- ----------- ------------------------
under any applicable law, each certificate representing such Shares shall bear a
legend in form and substance satisfactory to the Company reflecting that such
Shares are so restricted. The Company may also place a notation on any
certificate representing Shares purchased upon exercise of an Incentive Option.
To enforce any restrictions on transfer of the Shares, the Company may set forth
in its stock transfer records a "stop transfer" order with respect to the
Shares. The Company shall not be liable for any refusal to transfer the Shares
on the books of the Company unless the transfer complies with all terms and
conditions of any restrictions imposed on such Shares.
Section 5.7. Cancellation of Option when Employment Terminates. If a
- ----------- -------------------------------------------------
Participant exercises an Option after his or her employment or other
relationship terminates, the Company may pay to the Participant an amount equal
to the then Current Market Price (as defined in Section 5.2.3) of the Shares
less the exercise price of the Shares in lieu of issuing such Shares. The
Company shall not be obligated to deliver such amount to the Participant unless
the Participant accepts such payment in full satisfaction of his or her rights
under the Option exercised.
ARTICLE 6
TERMS OF OPTION AGREEMENTS
Section 6.1. Limitation on Incentive Option Grants. The aggregate fair market
- ----------- -------------------------------------
value (determined at the time the Option is granted) of the Shares for which one
or more Incentive Options granted under the Plan (or any other incentive stock
option plan of the Company or any Affiliate) become exercisable by a Participant
for the first time during any calendar year shall not exceed $100,000 or such
other amount as may be permitted under subsequent amendments to Section 422 of
the Code. To the extent that any two or more Incentive Options violate this
limitation, such excess Options shall be treated as Nonstatutory Options. For
purposes of this Section 6.1, Incentive Options shall be taken into account in
the order in which they were granted, and the fair market value of the Shares
shall be determined as of the time the Option with respect to such Shares was
granted.
Section 6.2. Duration of Option.
- ----------- ------------------
6.2.1. General Rule. Except as provided in this Section and Section 6.3,
----- ------------
Options shall be exercisable only for so long as the Participant has the same
relationship with the Company as an Employee, Consultant or Outside Director as
the Participant had when the Option was granted, but not longer than 10 years
after the date the Option is granted.
6.2.2. Exercise Following Termination. Upon termination of a
----- ------------------------------
Participant's employment or other relationship with the Company by reason of
the Participant's death or disability (within
-4-
<PAGE>
the meaning of Section 22(e)(3) of the Code), the Participant or the
Participant's estate or any person who acquires the right to exercise the option
by bequest or inheritance, may exercise the Option at any time within one year
after such termination, but only to the extent that the Option is exercisable on
the date of such termination and does not otherwise expire. Upon termination of
a Participant's employment or other relationship with the Company by reason of
the Participant's disability other than as defined in Section 22(e)(3) of the
Code, the Participant may exercise the Option at any time within 6 months after
termination, but only to the extent that the Option is exercisable on the date
of such termination and does not otherwise expire. Upon termination of a
Participant's employment or other relationship with the Company for any other
reason, the Participant may exercise the Option at any time within three months
after such termination, but only to the extent that the Option is exercisable on
the date of such termination and does not otherwise expire. Employment shall not
be considered terminated in the case of (a) sick leave; (b) military leave; (c)
any other leave of absence approved by the Board, provided that such leave is
for a period of not more than 90 days, unless reemployment upon the expiration
of such leave is guaranteed by contract or statute; or (d) transfers between
locations of the Company or between the Company, its Affiliates or its
successor. For Consultants, employment terminates when such Consultant ceases to
render services on a periodic basis to the Company or any Affiliate.
6.2.3. Effect of Change of Relationship. If a Participant's employment or
----- --------------------------------
other relationship with the Company is terminated but the Participant continues
to be eligible under Section 4.1 of the Plan, the Board may, in its sole
discretion, elect to permit one or more of the Participant's Options to continue
as if the Participant's employment or other relationship had not terminated,
except that any such continued Option shall be a Nonstatutory Stock Option if
the Participant is no longer an Employee.
6.2.4. Ten Percent Shareholders. Any Option granted to a Participant who,
----- ------------------------
at the time the Option is granted, owns, as that term is defined in Section
424(d) of the Code, stock possessing more than 10% of the combined voting power
of all stock of the Company or of its Affiliates, shall be exercisable as
described in this Section 6.2, but for no longer than 5 years after the date the
Option is granted.
Section 6.3. Exercisability. All Options granted under the Plan shall become
- ----------- --------------
exercisable at a rate that, when considered in conjunction with all other then
unexercisable options to purchase common stock of the Company held by the
optionee, is not slower than in cumulative annual increments of 20% per year
from the date of grant. Nothing in the Plan requires Options to be exercisable
immediately upon grant.
Section 6.4. Exercise of Option. To exercise an Option for all or part of the
- ----------- ------------------
Shares, the Participant must do the following: (a) Provide the Chief Financial
Officer of the Company with a written notice of exercise that specifies the
number of Shares for which the Option is being exercised; (b) Pay the total
exercise price for that number of Shares and any withholding taxes as provided
in Section 5.3; (c) Provide the Company with any written representations as
required under Section 5.4; and (d) Furnish to the Company appropriate
documentation that the person(s) exercising the Option, if other than the
Participant named in the Option Agreement, have the right to do so.
-5-
<PAGE>
Section 6.5. Transferability of Option. Options shall be transferable only by
- ----------- -------------------------
will or the laws of descent and distribution. Only the Participant may exercise
the Options during the Participant's lifetime, except as provided in subsection
6.2.2. Any other purported transfer or assignment of any Option shall be void
and of no effect, and shall give the Company the right to terminate such Option
as of the date of such purported transfer or assignment.
Section 6.6. Notice of Disqualifying Disposition of Incentive Options.
- ----------- --------------------------------------------------------
Participants shall give the Company written notice of any disposition of any
Share acquired pursuant to exercise of an Incentive Option if such disposition
occurs before the second anniversary of the date the Option was granted or the
first anniversary of the date of purchase of the Share disposed of, whichever
occurs later. A disposition includes any sale, exchange, gift, or other transfer
or attempted transfer of legal title. The notice shall include the Participant's
name, the number of Shares disposed of and the dates and prices the Shares were
both acquired and disposed of.
Section 6.7. Adjustments to Option Rights. Subject to the general limitations
- ----------- ----------------------------
of the Plan, the Board may adjust the exercise price, term, or any other
provision of an Option by canceling and regranting the Option or by amending or
substituting the Option. Options that have been so adjusted may have higher or
lower exercise prices, have longer or shorter terms, or be subject to different
rights and restrictions than prior Options. The Board may also adjust the number
of Options granted to a Participant by canceling outstanding Options or granting
additional Options. Except for adjustments necessary to ensure compliance with
any applicable state or federal law, or adjustments deemed appropriate to
reflect a change in a Participant's duties, employment status, or other
relationship with the Company, no such adjustment shall impair a Participant's
rights under any Option Agreement without the consent of the Participant.
Section 6.8. Identification of Incentive Options. Each Option Agreement shall
- ----------- -----------------------------------
state whether or not the Option is intended to qualify as an Incentive Option.
If only a portion of an Option is intended to so qualify, (a) the Option
Agreement shall so state, and (b) the Option Agreement shall not require that
the number of Incentive Options exercised reduces the size of the Nonstatutory
Option portion, or vice-versa.
Section 6.9. Market Standoff Agreement. Participants agree in connection with
- ----------- -------------------------
any registration of the Company's securities that, upon the request of the
Company or the underwriters managing any public offering of the Company's
securities, not to sell or otherwise dispose of any Shares without the prior
written consent of the Company and such underwriters, as the case may be, for
such period of time (not to exceed 180 days) after the effective date of such
registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify.
-6-
<PAGE>
ARTICLE 7
RIGHT OF FIRST REFUSAL
Section 7.1. Restriction on Transfer. Except as expressly permitted in an
- ----------- -----------------------
Option Agreement or the Plan, a Participant shall not transfer, encumber or
dispose of any Shares or any interest in the Shares.
Section 7.2. Right of First Refusal. In the event the Participant proposes to
- ----------- ----------------------
sell, exchange, transfer, pledge or otherwise dispose of any Shares (whether
voluntarily or involuntarily) (collectively referred to sometimes herein as a
"Transfer"), the Company or its assignees shall have the right to purchase such
Shares under the terms and conditions of this Article 7 (the "Right of First
Refusal").
Section 7.3. Notice of Proposed Transfer. Before any proposed Transfer of any
- ----------- ---------------------------
Shares the Participant must deliver to the Company as its principal office (a) a
written notice describing the proposed Transfer and stating the name of the
proposed transferee, the number of Shares to be transferred, and the
consideration for which the Shares are to be transferred ("Transfer Notice") and
(b) a written offer signed by the proposed transferee (if the proposed transfer
is voluntary) to acquire the Shares on the terms specified in the Transfer
Notice, subject only to the Right of First Refusal.
Section 7.4. Exercise of Right of First Refusal. If the Company exercises the
- ----------- ----------------------------------
Right of First Refusal, the Company and the Participant shall immediately
consummate the sale of the Shares to the Company at the purchase price and on
the terms set forth in the Transfer Notice. To exercise the Right of First
Refusal, the Company shall deliver to the Participant a notice of exercise of
the Right of First Refusal within 60 days after the date the Company receives
the Transfer Notice. Shares shall be deemed purchased by the Company when the
Participant or other holder of the Shares receives such notice of exercise of
the Right of First Refusal. All rights accorded a holder of such Shares, other
than the right to payment therefor, shall cease at that time. The Company shall
pay the purchase price of any Shares so purchased within 5 business days after
tender of the certificates representing such Shares to the Company's transfer
agent. For this purpose, cancellation of any promissory note from the
Participant to the Company shall be treated as payment to the Participant in
cash to the extent of the unpaid principal and any accrued interest canceled. If
the Company purchases any Shares pursuant to the Right of First Refusal, it must
purchase all of the Shares proposed to be transferred.
Section 7.5. Exchanges or Other Transfers. When the consideration specified in
- ----------- ----------------------------
a Transfer Notice is property other than cash, the Company may nonetheless pay
the purchase price for the Shares in cash. If the consideration so specified has
a readily ascertainable fair market value, the purchase price of the Shares
shall be an amount equal to the fair market value of such consideration;
otherwise, if the Participant (a) agrees that the purchase price for the Shares
shall be the Current Market Price of the Shares determined as of the date the
Company receives the Transfer Notice; or (b) does not agree that the purchase
price for the Shares shall be the Current Market Price, then the purchase price
shall be the value of such consideration as determined in good faith by the
Company's Board of Directors.
-7-
<PAGE>
Section 7.6. Failure to Exercise Right of First Refusal. If the Company fails
- ----------- ------------------------------------------
to exercise in full the Right of First Refusal within 60 days from the date the
Company receives the Transfer Notice, the Participant may not later than 120
days following delivery to the Company of the Transfer Notice, conclude a
Transfer of the Shares to the proposed transferee named in the Transfer Notice
on the terms and conditions described in the Transfer Notice. Any proposed
Transfer on terms and conditions different from those described in the Transfer
Notice, as well as any subsequent proposed Transfer by the Participant, shall
again be subject to the Right of First Refusal and shall require compliance by
the Participant with the procedure described in this Article 7.
Section 7.7. Transferees of the Transfer Shares. All transferees of any Shares
- ----------- ----------------------------------
or any interest therein, other than the Company, shall be required as a
condition of such Transfer to agree in writing (in a form satisfactory to the
Company) that such transferee shall receive and hold such Shares or interests
subject to the provisions of the Plan, including without limitation Article 7
providing for the Right of First Refusal. Any sale or Transfer of any Shares
shall be void unless the provisions of this Article 7 are met.
Section 7.8. Special Transfers.
- ----------- ------------------
7.8.1. Creditors' Proceedings. Upon any proposed Transfer of the Shares
------ ----------------------
in connection with any receivership, bankruptcy, extension, readjustment, stay,
composition, or other creditors' proceeding regarding a Participant, or the
taking of any of the Shares by legal process (such as levy of execution), the
Right of First Refusal shall expire 60 days after the Company receives a
Transfer Notice from the Participant; provided, however, that the Company may
not exercise its Right of First Refusal during the pendency of a bankruptcy
proceeding filed under Title 11 of the United States Code to the extent not
permitted to do so by 11 U.S.C. Section 365. If the Company or its assignee does
not exercise the Right of First Refusal, the Shares may be transferred only
pursuant to the proceeding or transaction that gave rise to the Right of First
Refusal. Shares transferred pursuant to this subsection shall continue to be
subject to the provisions of the Option Agreement and the Plan, including
without limitation Article 7 of the Plan.
7.8.2. Dissolution of Marriage. Shares transferred pursuant to a
----- -----------------------
distribution of Shares by a Participant to his or her spouse as such spouse's
marital, joint, or community property pursuant to a decree of divorce or
property settlement agreement, shall continue to be subject to the provisions of
the Option Agreement and the Plan, including without limitation Article 7 of the
Plan, and the non employee spouse shall provide the employee spouse a proxy to
vote the Shares so long as the employee remains with the Company.
7.8.3. Pledge. A Participant may pledge Shares to the Company or a bank or
----- ------
other financial institution if the pledge or security agreement under which the
Shares are pledged specifies that the pledgee shall not sell or transfer the
Shares (other than to the Participant on termination of the pledge) without
first offering them to the Company pursuant to Section 7.2.
7.8.4. Family Transfers. A Participant may transfer Shares to the
----- ----------------
Participant's spouse, any parent, step-parent, child, or grandchild of the
Participant or the Participant's spouse, any
-8-
<PAGE>
other relative of the Participant or the Participant's spouse approved by the
Board, or any trust for the exclusive benefit of the Participant or any such
person, without first offering the same to the Company pursuant to Section 7.2.
Shares so transferred shall remain subject to the Option Agreement and the Plan.
The Right of First Refusal under subsection 7.8.1 shall then arise when the
transferee (as opposed to the Participant) proposes a Transfer in connection
with a creditor's proceeding.
7.8.5. Time Periods. For purposes of this subsection, the date of the
----- ------------
event giving rise to the Right of First Refusal and the date the Company is
deemed to receive notice of such event shall be deemed to be not earlier than
the date the accountants deliver to the Company their written determination of
net book value for determining the Current Market Price, if applicable.
Section 7.9. Assignment of the Right of First Refusal. The Company may assign
- ----------- ----------------------------------------
the Right of First Refusal to one or more persons as may be selected by the
Board.
Section 7.10. Termination of Right of First Refusal. The Right of First Refusal
- ------------ -------------------------------------
shall terminate when a public market exists for the Shares. A public market
shall be deemed to exist if any of the Company's shares of common stock have
been registered pursuant to Section 5 of the Securities Act of 1933 or Section
12 of the Securities Exchange Act of 1934, and (a) such stock is listed on a
national securities exchange or national market system or (b) such stock is
traded in the over-the-counter market and prices therefor are published daily
for 90 days in a recognized financial journal.
Section 7.11. Legends. Unless a public market exists for the Shares, each
- ------------ -------
certificate representing the Shares shall bear a legend in form and substance
satisfactory to the Company to the effect that the Shares are subject to the
Right of First Refusal.
ARTICLE 8
SHARE ESCROW
Section 8.1. Escrow. As security for the faithful performance of the Option
- ----------- ------
Agreement, and to ensure the availability of the Shares for delivery upon
exercise of the Right of First Refusal, the Company may require a Participant to
deposit each certificate representing Shares with the secretary of the Company,
or such other person as the Board may designate ("Escrow Agent"), along with two
stock assignments duly endorsed (with date and number of shares blank). The
Company may require the signatures to be guaranteed by a national bank or a
member of a national Stock Exchange. The Escrow Agent shall then hold the
certificates pursuant to the instructions set forth in this Article and as they
may be modified in any Option Agreement.
Section 8.2. Copies of Notices. The Participant and the Company shall give the
- ----------- -----------------
Escrow Agent a copy of any Transfer Notice, notice from the Participant advising
the Company of its right to purchase the Shares, or any other notice required or
permitted under Article 7 at the same time they deliver such notices to the
intended parties. The Company shall deliver the purchase price of Shares held in
escrow to the Escrow Agent instead of to the holder of the Shares.
-9-
<PAGE>
Section 8.3. Delivery of Shares and Purchase Price. Promptly upon receipt of a
- ----------- -------------------------------------
notice that the Company or its assignee is exercising the Right of First
Refusal, the Escrow Agent shall (a) date the stock assignments necessary for the
transfer in question, (b) fill in the number of Shares being transferred, and
(c) deliver the same, together with the certificate evidencing the Shares to be
transferred, to the transfer agent of the Company's common stock. The Escrow
Agent shall deliver the purchase price to the Participant promptly after
receiving it from the Company or its assignee.
Section 8.4. Attorney-in-Fact. Each Participant, by accepting the Option
- ----------- ----------------
Agreement, irrevocably constitutes and appoints the Escrow Agent as
Participant's attorney-in-fact and agent to execute all documents necessary or
appropriate to transfer Shares as contemplated in this Article.
Section 8.5. Ownership of the Shares. Each Participant shall have the full
- ----------- -----------------------
right to vote all Shares held in the escrow and shall receive all distributions
with respect to such Shares for so long as such Participant is the record owner
of the Shares.
Section 8.6. Release of Certificates. Upon each Participant's written request,
- ----------- -----------------------
the Escrow Agent shall release the Share certificates and stock assignments with
respect thereto if, and to the extent that, the restrictions on transfer of the
Shares set forth in Article 7.
Section 8.7. Powers and Rights of Escrow Agent.
- ----------- ----------------------------------
8.7.1. Escrow Agent's Reliance. The Escrow Agent shall be obligated only
----- -----------------------
to perform such duties as are specifically set forth in the Plan and any
applicable Option Agreement. The Escrow Agent may rely and shall be protected in
relying or refraining from acting on any instrument the Escrow Agent reasonably
believes to be genuine and to have been signed or presented by the proper party
or parties. The Escrow Agent shall not be personally liable for any act or
omission as Escrow Agent or as attorney-in-fact for Participant while acting
reasonably and in good faith. Any act or omission pursuant to the advice of
counsel shall be deemed to be reasonable and in good faith.
8.7.2. Third-Party Beneficiary. The Escrow Agent is an intended third-
----- -----------------------
party beneficiary of the Plan.
8.7.3. Warnings and Court Order. The Escrow Agent is expressly
----- ------------------------
authorized to disregard any and all warnings given by any party to the escrow or
by any other person, other than orders or process of courts or arbitrators
provided for in the Plan or the Option Agreement. The Escrow Agent is expressly
authorized to comply with and obey orders, judgments, or decrees of any court or
the arbitrators provided for in the Plan. The Escrow Agent shall not be liable
to any person by reason of such compliance, notwithstanding any such order,
judgment, or decree being subsequently reversed, modified, annulled, set aside,
vacated, or found to have been entered without jurisdiction.
-10-
<PAGE>
8.7.4. Counsel to Escrow Agent. The Escrow Agent may employ legal
----- -----------------------
counsel and such other experts as the Escrow Agent deems necessary in connection
with its duties and may pay such experts reasonable compensation.
8.7.5. Resignation. The Escrow Agent may resign by giving 10 days
----- -----------
written notice to the Company.
8.7.6. Further Instructions. If the Escrow Agent reasonably requires
----- --------------------
other or further instruments in connection with the escrow, the Company and the
affected Participant shall furnish such instructions.
8.7.7. Fees. The Company shall pay all of the Escrow Agent's fees and
----- ----
expenses in such amount as the Company and the Escrow Agent may agree.
ARTICLE 9
ADMINISTRATION AND AMENDMENT OF THE PLAN
Section 9.1. Administration. The Plan shall be administered by the Board
- ----------- --------------
and/or by a duly appointed committee of the Board having such powers as the
Board may delegate to such committee. All references to the Board in the Plan
shall also mean the committee if one has been appointed.
Section 9.2. Rights and Powers. Subject to the Plan and, in the case of a
- ----------- -----------------
committee, the specific rights and powers delegated by the Board to such
committee, the Board shall have the authority and discretion to:
(a) determine who shall be a Participant;
(b) determine when Options are granted;
(c) determine the terms and conditions of Option Agreements (which terms
and conditions may differ among Agreements);
(d) interpret the Plan;
(e) adopt rules and regulations for implementing the Plan; and
(f) take such other action as is appropriate to the administration of
the Plan.
All decisions, determinations, and interpretations of the Board shall be final
and binding on all Participants.
Section 9.3. Termination; Amendment. The Board may from time to time suspend
- ----------- ----------------------
the Plan, terminate the Plan or amend the Plan as it deems desirable, without
further action on the part of the shareholders of the Company. The approval of
the shareholders shall be required, however, to (a) increase the total number of
Shares that may be issued under this Plan (except as otherwise provided herein);
(b) change the description of the persons eligible to be Participants; or (c)
change the minimum exercise price. Except as provided in Article 10, or in an
Option
-11-
<PAGE>
Agreement, the suspension, termination, or amendment of this Plan shall not,
without the consent of the Participant, alter or impair any rights of the
Participant under any Option Agreement.
Section 9.4. Requirements of Other Laws. In the event that the Company becomes
- ----------- --------------------------
subject to Section 16 of the Securities Exchange Act of 1934, the Plan shall be
administered in accordance with Rule 16b-3 promulgated under such Act, or any
successor rule. Unless the Board determines otherwise in a specific case,
Options granted to persons subject to Section 16(b) of the Securities Exchange
Act of 1934 must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 with respect to Plan transactions. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
ARTICLE 10
ADJUSTMENT OF AND CHANGES IN STOCK
Section 10.1. Recapitalizations. If the number of the Company's outstanding
- ------------ -----------------
shares of common stock is changed by any stock dividend, stock split, reverse
stock split, combination or reclassification, the number of Shares subject to
the Plan and to Options outstanding, and the exercise price for such Shares,
shall be equitably adjusted as determined by the Board.
Section 10.2. Liquidation. In the event of the proposed liquidation or
- ------------ -----------
dissolution of the Company, the Company shall notify the Participants at least
10 days before such proposed action is taken. All unexercised Options shall
terminate immediately before such event.
Section 10.3. Reorganizations in Which the Company Disappears.
- ------------ -----------------------------------------------
10.3.1. Notice of Reorganization. The Company shall give each holder of
------ ------------------------
Options at least 10 days prior written notice of (a) a sale of all or
substantially all of the Company's assets, (b) any reorganization, merger, or
consolidation of the Company with any other corporation in which the Company is
not the surviving entity (except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated), or (c) any
other corporate reorganization or business combination in which the beneficial
ownership of 50% or more of the Company's voting securities outstanding is
transferred.
10.3.2. Right to Cancel Options. If an exercisable Option is not
------ -----------------------
exercised within 5 days before such event, the Company may cancel the Option by
paying the Participant an amount equal to the fair market value of the
consideration that the Participant would receive in exchange for the Shares
underlying the Option, less the exercise price of the Option.
10.3.3. Expiration of Options. Unless a successor corporation or parent
------ ---------------------
or subsidiary thereof assumes the unexercised Options or substitutes options to
purchase substantially equivalent securities of the successor or its parent or
subsidiary for the Options outstanding at the time of the closing of such event,
all outstanding Options shall terminate upon such event.
-12-
<PAGE>
Section 10.4 Reorganizations In Which Company Survives. Upon any other merger
- ------------ -----------------------------------------
or consolidation of the Company in which there is any adjustment in the common
stock of the Company outstanding immediately before such merger or
consolidation, there shall be substituted for each Share then subject to the
Plan, the number and kind of shares of stock or other securities or property
into which each outstanding share of common stock of the Company is converted by
such merger or consolidation.
Section 10.5 Other Charges. Upon any other relevant change in the
- ------------ -------------
capitalization of the Company, the Board may provide for an equitable adjustment
in the number of Shares then subject to the Plan, to any Options granted under
the Plan, and to the exercise price for such Shares as it deems appropriate.
Section 10.6 No Fractional Shares. No right to purchase fractional Shares
- ------------ --------------------
shall result from any adjustment in Options pursuant to this Article. Upon any
such adjustment, the Shares subject to Options of each Participant shall be
rounded down to the nearest whole Share. The Company shall give notice of any
adjustment to each holder of Options that have been so adjusted. Such adjustment
(whether or not such notice is given) shall be effective and binding for all
purposes of the Plan.
ARTICLE 11
SUSPENSION OF OPTIONS TO SATISFY SECURITIES LAWS
Section 11.1 Power to Suspend. The Board may suspend the exercisability of
- ------------ ----------------
outstanding Options from time to time if appropriate to satisfy an exemption
from registration under the Securities Act (such as SEC Rule 504) or any state
securities law.
Section 11.2 Minimum Period. The minimum period of suspension shall be long
- ------------ --------------
enough to ensure that, under applicable federal or state securities regulations
(such as SEC Rule 502(a)), sales of stock made before the suspension will not be
integrated with sales made after the suspension.
Section 11.3 Maximum Period. The maximum period of suspension shall only be so
- ------------ --------------
long as needed to ensure that, under applicable federal or state securities
regulations (such as SEC Rule 504(b)(2)(i)), sales made before the suspension
will not be aggregated with sales made after the suspension, unless the Board,
in its discretion, determines that such aggregation will not be detrimental to
the best interests of the Company or the Participants.
Section 11.4 Option Grants During Suspension. The Company may continue to
- ------------ -------------------------------
grant Options during a period of suspension, provided that such Options are not
exercisable until after the suspension.
Section 11.5 Option Termination During Period of Suspension. If an
- ------------ ----------------------------------------------
outstanding Option terminates during a period of suspension or during the 90 day
period after suspension, the Optionee shall have until 90 days after the
suspension to exercise the Option, but in no event later than 10 years after the
date of grant.
-13-
<PAGE>
Section 11.6. Allocation of Exercise Rights Before Suspension. If the Board
- ------------ -----------------------------------------------
believes that a number of Participants wish to exercise Options to an extent
that would result in non-compliance with an applicable federal or state
securities exemption, the Board may limit the right to exercise outstanding
Options and allocate such right among the Participants in a manner that the
Board determines to be fair.
Section 11.7. All Options Must Be Suspended. The Board shall not suspend any
- ------------ -----------------------------
Options granted pursuant to this Plan under this Article unless it suspends all
such outstanding Options.
Section 11.8. Advice of Counsel. The Board may rely upon advice of counsel in
- ------------ -----------------
determining whether to suspend exercisability of the outstanding Options and in
determining the period of suspension. Nothing contained in this Plan requires
the Board to determine the length of the suspension in advance.
Section 11.9. Sunset Provision. This Article shall be void and of no force and
- ------------ ----------------
effect beginning on the date the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act.
ARTICLE 12
INFORMATION TO PARTICIPANTS
Section 12.1. Information Provided. The Company shall provide to Participant on
- ------------ --------------------
a periodic basis (but not less than annually), financial statements of the
Company. The Company may provide other information regarding the Company as
determined by the Board in its discretion.
Section 12.2. Information Confidential. No Participant shall disclose any
- ------------ ------------------------
confidential information about the Company disclosed to the Participant in his
or her capacity as a holder of Options. A Participant may, however, disclose
such information to his or her legal and financial advisers in connection with
advice to be rendered by them to the Participant, or to any transferee of the
Shares, but only if the advisor or transferee agrees not to further disclose
such information or to use the information for the benefit of anyone other than
the Participant, the transferee as a holder of the Shares, or the Company.
ARTICLE 13
TAX STATUS
The Company does not, by way of the Plan, any document, Option Agreement, or
otherwise, represent or warrant to any person, including the Participant, that
the grant or exercise of an Option or the subsequent disposition of Shares
obtained by the exercise of an Option pursuant to the Plan, or any other aspect
of the Plan, will have any particular tax effect.
-14-
<PAGE>
ARTICLE 14
MISCELLANEOUS
Section 14.1. Additional Actions and Documents. Each Participant shall execute
- ------------ --------------------------------
and deliver such further documents and instruments and shall take such other
further actions as may be required or appropriate to carry out the intent and
purposes of the Plan or any Option Agreement.
Section 14.2. Successors and Assigns. All obligations imposed upon the
- ------------ ----------------------
Participants and all rights granted to the Company under the Plan, including
without limitation the provisions of Article 7, shall be binding upon each
Participant's heirs, legal representatives, successors and assigns. The Plan,
and the Option Agreement with each Participant, shall be the sole and exclusive
source of any and all rights that a Participant and his or her heirs, legal
representatives, or successors shall have in respect to the Plan or any Options
granted hereunder.
Section 14.3. No Third-Party Beneficiaries. Nothing in the Plan or any Option
- ------------ ----------------------------
Agreement is or shall be intended to confer any rights or remedies on any
persons other than the Company and the Participants and their respective
successors and assigns, other than an Escrow Agent appointed pursuant to Article
8. Nothing in the Plan or any Option Agreement is or shall be intended to
relieve or discharge the obligation or liability of any third persons to any
Participant. No provision of the Plan or any Option Agreement shall give any
third person any right of subrogation or action over or against the Company or
any Participant.
Section 14.4. Amendments, Waivers, and Consents. Except as provided in the Plan,
- ------------ ---------------------------------
no Option Agreement shall be amended except in a writing signed by the
Participant and the Company. No waiver or consent shall be binding except in a
writing signed by the party making the waiver or giving the consent. No waiver
of any provision of an Option Agreement or consent to any action shall
constitute a waiver of any other provision or consent to any other action,
whether or not similar. No waiver or consent shall constitute a continuing
waiver or consent, except to the extent specifically set forth in writing. For
the protection of all parties, amendments, waivers, and consents concerning
Option Agreements that are not in writing and signed by the party to be bound
may be enforced only if they are detrimentally relied upon and proved by clear
and convincing evidence. Such evidence may not include the alleged reliance.
Section 14.5. Notice. Any notice, instruction, or communication required or
- ------------ ------
permitted to be given under the Plan or any Option Agreement to any party shall
be in writing (which may include telex, telegram, telecopier, or other similar
form of reproduction followed by a mailed hard copy) and shall be deemed given
when actually received or, if earlier, five days after deposit in the United
States Mail by certified mail, return receipt requested, postage prepaid, or two
days after deposit with a nationally recognized air courier, fees prepaid,
addressed to the principal office or residence of such party as shown on the
books of the Company, or to such other address as such party may request by
written notice. The Company and each Participant shall make an ordinary, good
faith effort to ensure that the person to be given notice actually receives such
notice.
Section 14.6. Arbitration. At the request of any party, any and all disputes or
- ------------ -----------
controversies of law, fact, or any kind arising from or relating to the Plan or
any Option Agreement shall be
-15-
<PAGE>
decided by binding arbitration in accordance with the commercial rules of the
American Arbitration Association (except to the extent such rules are
inconsistent with the provisions of this Section). Such arbitration shall also
comply with the California Arbitration Act, except that discovery will be
allowed for a period of up to three months. Such discovery shall be conducted in
accordance with the California Code of Civil Procedure. At the request of any
party, the arbitrators, attorneys, parties to the arbitration, witnesses,
experts, court reporters, or other persons present at the arbitration shall
agree in writing to maintain the strict confidentiality of the arbitration
proceedings. Arbitration shall be conducted by a single, neutral arbitrator or,
at the election of any party, three neutral arbitrators, appointed in
accordance with the commercial rules of the American Arbitration Association.
The award of the arbitrator shall be enforceable according to the applicable
provisions of the California Code of Civil Procedure. Notwithstanding the
foregoing, a party may apply to a court of competent jurisdiction for emergency
relief in the form of a temporary restraining order pending final determination
of a claim through arbitration in accordance with this Section. The parties
shall share the costs of arbitration equally.
Section 14.7. Jurisdiction and Venue. Each Participant consents to the personal
- ------------ ----------------------
jurisdiction of all federal and state courts in the state of the Participant's
employment, and agrees that venue shall lie exclusively in the county of the
Participant's employment if the Participant is an Employee or former Employee at
the time of the dispute, or otherwise in the county of the Company's principal
place of business.
Section 14.8. Governing Law. The rights and obligations of the parties shall be
- ------------ -------------
governed by, and the Plan and each Option Agreement shall be construed and
enforced in accordance with, the laws of the State of California, excluding its
conflict of laws rules to the extent such rules would apply the law of another
jurisdiction. Incentive Options granted under the Plan shall be interpreted and
administered in accordance with Section 422 of the Code. If any provision is
susceptible of more than one interpretation, it shall be interpreted in a manner
consistent with the Plan being an incentive stock option plan. If any provision
of the Plan or any Option Agreement is found by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions shall
continue to be fully effective.
Section 14.9. Plan Governs. If there is any inconsistency between the Plan and
- ------------ ------------
any documents related to the Plan, including any Option Agreement, the Plan
shall govern. Nothing in the Plan shall be construed to constitute, or be
evidence of, any right in favor of any person to receive Options hereunder or
any obligation on the part of the Company to issue Options with respect to its
common stock.
-16-
<PAGE>
CERTIFICATE OF SECRETARY
------------------------
KNOW ALL BY THESE PRESENTS:
That the undersigned does hereby certify that the undersigned is the Secretary
of AltiGen Communications, Inc. (fka Altima Communications, Inc.), a corporation
duly organized and existing under and by virtue of the laws of the State of
California; that the above and foregoing Second Amended and Restated 1994 Stock
Option Plan was duly and regularly adopted as such by the Board of Directors on
October 31, 1994 and the shareholders of said corporation on October 31, 1994;
was amended by action of the officers on January 30, 1995 as authorized by the
Board of Directors on October 31, 1994, and amended again by action of the
officers on July 21, 1995 as authorized by the Board of Directors on July 6,
1995 to reflect the change in the name of the corporation; and that the above
and foregoing 1994 Stock Option Plan is now in full force and effect.
Dated: July 21, 1995
__________________________________
Wayland M. Brill, Secretary
-17-
<PAGE>
ALTIGEN COMMUNICATIONS, INC.
STOCK OPTION AGREEMENT
PURSUANT TO THE 1994 STOCK OPTION PLAN
________________________
Participant
This Stock Option Agreement, dated as of the Date of Grant set forth below, is
entered into between AltiGen Communications, Inc., a California corporation (the
"Company") and the Participant named above pursuant to the Company's 1994 Stock
Option Plan. Capitalized terms not defined in this Agreement are defined in the
Plan.
Pursuant to the Plan, the Company grants an Option to the Participant to
purchase shares of the common stock of the Company as follows:
Grant Number ___________
Date of Grant ___________
Exercise Price Per Share $__________
Total Number of Shares Granted ___________
Total Exercise Price $__________
Type of Option (check one) _ Incentive Option
_ Nonstatutory Option
Term ___________
Expiration Date ___________
Subject to the provisions of this Agreement and the Plan, the Options become
exercisable in cumulative installments as set forth below. Exercisable Options
may be exercised from time to time until the Expiration Date set forth above or
termination of the Options as set forth in the Plan.
<PAGE>
Date on Which Options
First Become
Number of Shares Exercisable
---------------- -----------
During the Participant's lifetime, the Option is exercisable only by the
Participant. The form of Exercise Notice and Agreement is attached hereto as
Exhibit A. The Option or this Agreement shall not be sold, pledged, assigned,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution. Any attempted sale, pledge, assignment, transfer or
other disposition of the Option shall be void and of no effect.
If the Participant is an Employee, the Participant's status as an "at-will"
Employee is not affected by the Plan or this Agreement. The Company's right to
terminate the Participant's employment is not limited or restricted by this
Agreement or the Plan.
The Participant and the Company agree that this Option is granted under and
governed by the terms and conditions of the Plan, which is attached to and made
a part of this Agreement. The Plan imposes substantial restrictions on the
Options and the Shares. By signing this Agreement, the Participant acknowledges
that Participant has read and understood the Plan and agrees to be bound by it
and this Agreement, including the provisions of Articles 7 of the Plan.
"PARTICIPANT" "COMPANY"
AltiGen Communications, Inc.,
a California corporation
________________ By:___________________
Signature
________________ Title:________________
Print Name
<PAGE>
EXHIBIT A
---------
EXERCISE NOTICE AND AGREEMENT
-----------------------------
AltiGen Communications, Inc.
47801 Fremont Blvd.
Fremont, CA 94538
Attention: Stock Option Plan Administrator
Re: Exercise of Stock Option Pursuant to
1994 Stock Option Plan
Name of Participant: _________________
Participant's Address: _________________
_________________
Participant's Social Security Number: _________________
Date of Option Agreement: ___________,199__
Exercise Date: ___________,199__
The Shares Purchased are Incentive Stock Options: Yes / No
(circle one)
Number of Shares Purchased Pursuant to this Notice: _________________
Exercise Price per Share: $______ per Share
Aggregate Exercise Price: $________________
Add Withholding: $________________
Amount of Check Enclosed: $________________
1. Exercise of Option. Pursuant to the 1994 Stock Option Plan (the "Plan") of
------------------
AltiGen Communications, Inc., a California corporation (the "Company") and
the Stock Option Agreement ("Option Agreement") entered into as of the date
set forth above between the undersigned Participant and the Company,
Participant hereby elects, effective as of the date of this notice, to
exercise Participant's option to purchase the number of shares of common
stock (the "Shares") of the Company indicated above,
2. Payment Taxes. Enclosed is Participant's check in the amount indicated above,
-------------
which is the full exercise price for the Shares plus any applicable
withholding of taxes. Before the Company issues the Shares, Participant shall
make appropriate arrangements with the
<PAGE>
Company for payment of Participant's tax obligation as a result of this
Option exercise if such withholding is not included in the above payment.
3. Deemed Date of Exercise. The date of exercise shall be deemed to be the first
-----------------------
date after which this Notice is filed with Company upon which Shares become
eligible for issuance to Participant under applicable state and federal laws
and regulatory requirements.
4. Compliance with Laws. Participant understands and acknowledges that the
--------------------
purchase and sale of the Shares may be subject to approval under the state
and federal securities laws and other laws and notwithstanding any other
provision of the Option Agreement to the contrary, the exercise of any rights
to purchase Shares is expressly conditioned upon approval (if necessary) and
compliance with all such laws.
5. Representations of Participant. Participant represents and warrants to the
------------------------------
Company, as follows:
(a) Participant has received, read, and understood the Plan and the Option
Agreement and agrees to abide by and be bound by their terms and
conditions.
(b) The Options exercised herewith are exercisable only according to the
schedule in the Option Agreement.
(c) Participant is aware of the business affairs and financial condition of
the Company and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares.
(d) Participant is acquiring the Shares for investment for Participant's own
account only and not with a view to, for resale in connection with any
"distribution" thereof within the meaning of the Securities Act of 1933,
as amended (the "Securities Act").
(e) Participant acknowledges and understands that the Shares are "restricted
securities" and have not been registered under the Securities Act in
reliance upon a specific exemption from registration. Participant
acknowledges that such exemption depends upon, among other things, the
bona fide nature of Participant's investment intent as expressed herein.
Participant further understands that the Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. Participant further
acknowledges and understands that the Company is under no obligation to
register the Shares. Participant understands that the certificate
representing the Shares will bear a legend that prohibits the transfer of
the Shares unless they are registered or such registration is not
required in the opinion of counsel satisfactory to the Company, and any
other legend required under applicable state securities law.
(f) Participant is aware of the adoption of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired directly or indirectly,
from the Company in a nonpublic offering, subject to the satisfaction of
certain conditions. Participant further understands that if the
applicable requirements of Rule 701 or Rule 144 are not satisfied, the
sale of the Shares will require registration under the Securities Act or
compliance with a
<PAGE>
registration exemption. Participant understands that no assurances can be
given that the shares will be registered or that any exemption from
registration will be available.
(g) Participant further agrees that Participant is acquiring the Shares in
accordance with and subject to the terms of the Option Agreement and the
Plan, including any share repurchase right or right of first refusal, to
all of which Participant expressly assents.
6. Refusal to Transfer. The Company shall not be required (a) to transfer on its
-------------------
books any Shares that have been sold or otherwise transferred in violation of
any of the provisions of this Agreement, the Option Agreement, or the Plan or
(b) to treat as owner of such Shares or to accord the right to vote or
receive dividends to any purchaser or other transferee to whom such Shares
shall have been so transferred.
7. Tax Consultation. Participant understands that Participant may suffer adverse
----------------
tax consequences as a result of Participant's purchase or disposition of the
Shares. Participant represents that Participant has consulted with any tax
consultants Participant deems advisable in connection with the purchase or
disposition of the Shares and that Participant is not relying on the Company
for any tax advice.
8. Entire Agreement. The Plan and the Option Agreement are incorporated herein
----------------
by reference. This Agreement, the Plan, and the Option Agreement constitute
the entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Participant with respect to
the subject matter hereof.
Submitted by: Accepted by:
"PARTICIPANT": "COMPANY"
AltiGen Communications, Inc.,
a California corporation
________________________ By: _______________________
(sign name) (sign name)
________________________ _______________________
(print name) (print name)
_______________________
(title)
<PAGE>
EXHIBIT 10.3
ALTIGEN COMMUNICATIONS, INC.
1998 STOCK PURCHASE PLAN
<PAGE>
ALTIGEN COMMUNICATIONS, INC.
1998 STOCK PURCHASE PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. PURPOSE................................................................................ 1
2. SHARES SUBJECT TO THE PLAN............................................................. 1
3. TERM OF PLAN........................................................................... 1
3.1 Term.......................................................................... 1
3.2 Shareholder Approval.......................................................... 1
4. PARTICIPANTS........................................................................... 2
4.1 Eligibility................................................................... 2
4.2 Participants.................................................................. 2
4.3 Legal Representatives......................................................... 2
5. GENERAL TERMS.......................................................................... 2
5.1 Purchase Agreement............................................................ 2
5.2 Exercise Price................................................................ 2
5.3 Payment of Exercise Price; Taxes.............................................. 3
5.4 Conditions to Exercise........................................................ 3
5.5 No Employment Agreement....................................................... 3
5.6 Restrictions on Transfer...................................................... 3
5.7 Market Standoff Requirement................................................... 4
6. TERMS OF PURCHASE AGREEMENTS........................................................... 4
6.1 Exercisability................................................................ 4
6.2 Purchase of Shares............................................................ 4
6.3 Adjustments to Terms of the Purchase Agreement................................ 4
7. SHARE REPURCHASE RIGHT................................................................. 4
7.1 Right to Repurchase Shares.................................................... 4
7.2 Termination of Employment or Other Relationship............................... 5
7.3 Exercise of Share Repurchase Option........................................... 5
7.4 Share Repurchase Price........................................................ 5
7.5 Effect of Failure to Exercise Share Repurchase Right.......................... 5
7.6 Payment for Shares and Return of Shares....................................... 6
7.7 Assignment of Share Repurchase Right.......................................... 6
7.8 Termination of Share Repurchase Right......................................... 6
7.9 Legends....................................................................... 6
7.10 "Estimated Present Value"..................................................... 6
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
8. RIGHT OF FIRST REFUSAL........................................................................... 6
8.1 Restriction on Transfer................................................................. 6
8.2 Right of First Refusal.................................................................. 6
8.3 Notice of Proposed Transfer............................................................. 7
8.4 Exercise of Right of First Refusal...................................................... 7
8.5 Exchanges or Other Transfers............................................................ 7
8.6 Failure to Exercise Right of First Refusal.............................................. 7
8.7 Transferees of the Transfer Shares...................................................... 7
8.8 Special Transfers....................................................................... 8
8.9 Assignment of the Right of First Refusal................................................ 9
8.10 Termination of Right of First Refusal................................................... 9
8.11 Legends................................................................................. 9
9. ADMINISTRATION AND AMENDMENT OF THE PLAN......................................................... 9
9.1 Administration.......................................................................... 9
9.2 Rights and Powers....................................................................... 10
9.3 Termination; Amendment.................................................................. 10
9.4 Unilateral Amendments................................................................... 10
9.5 Requirements of Rule 16b-3.............................................................. 10
10. ADJUSTMENT OF AND CHANGES IN STOCK............................................................... 11
10.1 Recapitalizations....................................................................... 11
10.2 Liquidation............................................................................. 11
10.3 Reorganizations in Which the Company Disappears......................................... 11
10.4 Reorganizations in Which Company Survives............................................... 11
10.5 Other Changes........................................................................... 11
10.6 No Fractional Shares.................................................................... 12
11. SUSPENSION OF SHARES TO SATISFY SECURITIES LAWS.................................................. 12
11.1 Power to Suspend........................................................................ 12
11.2 Minimum Period.......................................................................... 12
11.3 Maximum Period.......................................................................... 12
12. INFORMATION TO PARTICIPANTS...................................................................... 12
12.1 Copy of Plan............................................................................ 12
12.2 Financial Information Provided.......................................................... 12
12.3 Information Confidential................................................................ 12
13. TAX STATUS....................................................................................... 13
14. MISCELLANEOUS.................................................................................... 13
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
14.1 Additional Actions and Documents.................................................... 13
14.2 Successors and Assigns.............................................................. 13
14.3 No Third-Party Beneficiaries........................................................ 13
14.4 Amendments, Waivers, and Consents................................................... 13
14.5 Notice.............................................................................. 13
14.6 Dispute Resolution.................................................................. 14
14.7 Jurisdiction and Venue.............................................................. 15
14.8 Governing Law....................................................................... 15
14.9 Plan Governs........................................................................ 15
</TABLE>
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<PAGE>
ALTIGEN COMMUNICATIONS, INC.
1998 STOCK PURCHASE PLAN
------------------------
1. PURPOSE
The purpose of this 1998 Stock Purchase Plan is to advance the interests of
AltiGen Communications, Inc., a California corporation (the "Company"), by
giving the Company's employees and others who perform substantial services on
behalf of the Company incentive through ownership of the Company's Series D
Preferred Stock to continue in the service of the Company and thereby to help
the Company compete effectively with other enterprises for the services of
qualified individuals. This Plan is intended to be an employee stock purchase
plan within the meaning of Section 408 of the California Corporations Code.
2. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Article 10, the Company is authorized
to issue up to 25,800 shares of its Series D Preferred Stock ("Shares"). Any
unpurchased Shares that are subject to this Plan that terminates for any reason
prior to the Shares vesting, and any Shares that are repurchased pursuant to
right of repurchase under this Agreement, shall, unless this Plan has been
terminated, become available for future grant under this Plan. The Company shall
at all times reserve for issuance pursuant to this Plan a number of its
authorized but unissued Shares equal to the number of Shares issuable under this
Plan. Purchase of Shares under this Plan shall decrease the number of Shares
available for grant under this Plan.
3. TERM OF PLAN
3.1 Term. This Plan shall become effective upon its adoption by the
Board of Directors of the Company (the "Board"). Unless sooner terminated under
Article 9 or 10, this Plan shall terminate upon the earlier of (a) the tenth
anniversary of its adoption by the Board or approval by the shareholders,
whichever is earlier, or (b) the date on which all Shares available for issuance
under this Plan have been issued and have vested. Any Shares outstanding under
this Plan at the time of its termination shall remain in effect in accordance
with its terms and conditions and those of this Plan.
3.2 Shareholder Approval. Within 12 months after the date of such
adoption, this Plan shall be approved by the shareholders of the Company in the
degree and manner required under applicable state and federal law. No Shares
shall vest unless and until such shareholder approval has been obtained. Any
Shares purchased before the shareholders approve the Plan must be rescinded if
the shareholders do not approve the Plan within 12 months before or after the
Board adopts the Plan. Shares issued pursuant to any such exercise shall not be
counted in determining whether such approval is obtained.
<PAGE>
4. PARTICIPANTS
4.1 Eligibility. The following persons shall be eligible to receive
Shares under this Plan: (a) any employee (an "Employee") of the Company or any
present or future parent or subsidiary corporation of the Company (an
"Affiliate") as defined in Sections 424(e) and (f) of the Internal Revenue Code
of 1986, as amended (the "Code"), respectively, (b) any person who is engaged by
the Company or an Affiliate to render bona fide consulting or advisory services
(other than in connection with the offer or sale of securities in a capital
raising transaction) and who is compensated for such services, but who is not an
Employee (a "Consultant") and (c) any director of the Company or an Affiliate
who is not an Employee, whether compensated for such services or not (an
"Outside Director").
4.2 Participants. The Board shall have the authority in its sole
discretion to select the Employees, Consultants and Outside Directors who may
purchase Shares from time to time under this Plan ("Participants").
4.3 Legal Representatives. As used in this Plan, the term
"Participant" includes any person who acquires the legal right to exercise a
Participant's Shares, by reason of the death or incompetence of the Participant.
5. GENERAL TERMS
5.1 Purchase Agreement. Purchase of Shares shall be evidenced by a
written purchase agreement ("Purchase Agreement"), which shall contain the
provisions that this Plan requires and may contain additional provisions that do
not conflict with this Plan as the Board deems appropriate. Each Purchase
Agreement shall be signed by the Participant and an officer of the Company
designated by the Board. The form of Purchase Agreement for use pursuant to this
Plan is attached to this Plan. The Board may modify said form as it deems
appropriate, subject to the provisions of this Plan. Purchase Agreements need
not have identical terms, but each Purchase Agreement shall be subject to this
Plan.
5.2 Exercise Price.
5.2.1 General Rule. The exercise price of each Share shall not
be less than the fair market value of the Shares, as the Board may determine, on
the date the Shares are granted except in unusual circumstances. In any event,
the exercise price of each share shall not be less than 85% of the fair market
value of the Shares, as the Board may determine, on the date the Shares are
purchased.
5.2.2 Ten Percent Shareholders. The exercise price of each Share
granted to a Participant who, at the time the Share is granted, owns, as that
term is defined in Section 424(d) of the Code, stock possessing more than 10% of
the combined voting power of all stock of the Company or of its Affiliates,
shall be at least 110% of the fair market value of the Shares, as the Board may
determine, on the date the Shares are purchased.
-2-
<PAGE>
5.2.3 Determination of Fair Market Value. The Board's determination
of fair market value shall be final and conclusive for the purposes of this
Plan. In determining fair market value, the Board may, but is not obligated to,
obtain and rely upon an independent appraisal.
5.3 Payment of Exercise Price; Taxes.
5.3.1 Form of Payment. The Participant shall pay the per Share
exercise price in full at the time of exercise by bank cashier's check or, with
the approval of the Board, a promissory note or shares of Series D Preferred
Stock of the Company, or any combination of the foregoing such that the
aggregate fair market value of such stock (as determined by the Board) plus cash
and notes equals the total exercise price.
5.3.2 Promissory Notes. The Company may require a promissory note to
be with full recourse, to be adequately secured by collateral other than the
Shares purchased, and to bear interest at market or above market rates (if such
rates are not usurious). It is the Company's policy not to accept promissory
notes except in unusual circumstances. Inability to pay cash is not necessarily
an unusual circumstance.
5.3.3 Withholding Taxes. The Participant shall pay by bank cashier's
check or other form of payment acceptable to the Company, the amount of any
state or federal income or other tax that the Company is required to pay or
withhold upon purchase of Shares unless the incidence of such tax cannot
lawfully be placed on the Participant.
5.4 Conditions to Exercise. No Shares may be exercised if the transfer of
Shares upon such exercise or the method of payment of consideration for such
Shares would constitute a violation of any applicable securities or other law or
regulation. Unless the Shares are registered under the Securities Act of 1933
and any applicable state securities law, as a condition to purchase of Shares,
the Participant shall provide the Company with such written assurances as the
Company deems appropriate for the purchase of Shares to qualify for exemption
from registration. Such assurances may include, among others, a representation
that the Participant intends to hold the Shares for investment and not for
distribution to the public. The Company has no obligation to register the shares
under the Securities Act of 1933 or any other law.
5.5 No Employment Agreement. No Purchase Agreement, nor anything contained
in this Plan, shall alter a Participant's status as an "at will" employee of the
Company, confer upon any Participant any right to continue in the employ of the
Company, or limit the right of the Company to terminate a Participant's
employment at any time and for any or no reason.
5.6 Restrictions on Transfer. If transfer of the Shares is restricted
under any applicable law, each certificate representing such Shares shall bear a
legend in form and substance satisfactory to the Company reflecting that such
Shares are so restricted. To enforce any restrictions on transfer of the Shares,
the Company may set forth in its stock transfer records a "stop transfer" order
with respect to the Shares. The Company shall not be liable for any refusal to
transfer the Shares on the books of the Company unless the transfer complies
with all terms and conditions of any restrictions imposed on such Shares.
-3-
<PAGE>
5.7 Market Standoff Requirement. Each Participant shall, upon the
request of the Company or the underwriters managing any public offering of the
Company's securities, refrain from selling or disposing of any Shares without
the prior written consent of the Company and such underwriters, as the case may
be, for such period of time (not to exceed 180 days) after the effective date of
such registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify. The Participant and
the Company shall cause any certificates representing the Shares to bear a
legend in substantially the following form:
SALE, TRANSFER, OR HYPOTHECATION OF THE SHARES REPRESENTED
BY THIS CERTIFICATE IS PROHIBITED FOR A PERIOD OF TIME FOLLOWING
A PUBLIC OFFERING OF THE STOCK OF THE CORPORATION PURSUANT TO THE
1998 STOCK PURCHASE PLAN OF THE CORPORATION.
The legend shall be removed upon any resale of the Shares to the public in
an offering registered with the SEC or pursuant to Rule 144.
6. TERMS OF PURCHASE AGREEMENTS
6.1 Exercisability.
6.1.1 Minimum Vesting Rate. Except as provided elsewhere in this
Plan, all Shares purchased under this Plan shall become vested after one year
from the date of grant. Shares purchased by an officer, director, or consultant,
may become exercisable, in whole or in part, subject to reasonable conditions
such as continued employment, at any time during the term of the vesting.
Nothing in this Plan requires the Shares to become vested immediately.
6.2 Purchase of Shares. To purchase the Shares, the Participant must
do the following: (a) enter into a Purchase Agreement with the Company; (b) pay
the total exercise price for the Shares and any withholding taxes as provided in
Section 5.3; and (c) provide the Company with any written representations as
required under Section 5.4.
6.3 Adjustments to Terms of the Purchase Agreement. Subject to the
general limitations of this Plan, the Board may adjust the exercise price, term,
or any other provision of a Purchase Agreement by canceling and regranting the
Shares or by amending or substituting a Purchase Agreement. Except for
adjustments necessary to ensure compliance with any applicable state or federal
law, or adjustments deemed appropriate to reflect a change in a Participant's
duties, employment status, or other relationship with the Company, no such
adjustment shall impair a Participant's rights under any Purchase Agreement
without the consent of the Participant.
7. SHARE REPURCHASE RIGHT
7.1 Right to Repurchase Shares. In the event the Participant's
employment or other relationship with the Company terminates for any reason,
with or without cause, the Company
-4-
<PAGE>
or its assignee may, without the necessity of notice from the Participant,
purchase all or, with the Participant's consent, part of the Participant's
vested or nonvested Shares under the terms and conditions of this Article 7 (the
"Share Repurchase Right").
7.2 Termination of Employment or Other Relationship. For
purposes of this Plan, the phrase "employment or other relationship" refers to
the Participant's employment or other relationship with the Company on the date
the nature of the employment or other relationship changes, as follows:
(a) If the Participant is a full-time Employee, the Participant's
employment will be deemed terminated for the purpose of this Plan
if the Participant becomes a part-time Employee, a Consultant, or
an Outside Director, unless the Committee determines otherwise.
(b) If the Participant is a part-time Employee, unless the Committee
determines otherwise, the Participant's employment will be deemed
terminated for the purpose of this Plan if the Participant
becomes a Consultant or Outside Director but not if the
Participant becomes a full-time Employee.
(c) If the Participant is a Consultant or Outside Director, the
Participant's relationship will be deemed terminated for the
purpose of this Plan if the nature of such relationship changes,
unless the Participant becomes a full-time Employee. Absent a
clear written notice of termination from the Participant, the
Committee shall determine when a Consultant's consulting
relationship has terminated.
7.3 Exercise of Share Repurchase Option. The Company or its
assignee shall exercise the Share Repurchase Right by giving written notice (the
"Repurchase Notice") to the Participant. If some or all of the Participant's
Shares are held by a transferee when the Participant's employment or other
relationship with the Company terminates, the Company may repurchase the
transferred Shares by giving a Repurchase Notice to the transferee. The Share
Repurchase Right shall expire on the first to occur of (a) 30 days after the
Participant gives written notice to the Company of its right to purchase the
Shares, specifically referencing this Article 7 and the time period provided for
in this clause (a); or (b) 90 days after termination of the Participant's
employment of other relationship with the Company.
7.4 Share Repurchase Price. The price at which the Company may
repurchase the Shares shall be the greater of the price at which they were
originally issued to the Participant or their Estimated Present Value determined
as of the date the Participant's employment or other relationship with the
Company terminates.
7.5 Effect of Failure to Exercise Share Repurchase Right. If the
Company declines to exercise the Share Repurchase Right after a deemed
termination of a Participant's employment or other relationship with the
Company, it may exercise the Share Repurchase Right upon a subsequent
termination of the new employment or other relationship.
-5-
<PAGE>
7.6 Payment for Shares and Return of Shares. Shares shall be deemed
repurchased when the Participant or other holder of the Shares receives a
Repurchase Notice. All rights accorded a holder of such Shares, other than the
right to payment therefor, shall cease at that time. The Company shall deliver
the purchase price of any Shares so purchased to the holder thereof upon tender
of the certificates representing such Shares to the Company's transfer agent.
For purposes of the foregoing, cancellation of any purchase money indebtedness
of the Participant to the Company shall be treated as payment to the Participant
in cash to the extent of the unpaid principal and any accrued interest canceled.
7.7 Assignment of Share Repurchase Right. The Company may assign the
Share Repurchase Right to one or more persons as may be selected by the Board.
Any such assignee shall pay the Company upon assignment of the right (unless the
assignee is a 100% owned subsidiary of the Company or is the parent of the
Company owning 100% of the Company) cash per Share equal to the difference
between the exercise price and the Estimated Present Value of the Share if the
exercise price is less than Estimated Present Value.
7.8 Termination of Share Repurchase Right. The Share Repurchase Right
for vested Shares shall terminate when a public market exists for the Shares. A
public market shall be deemed to exist if any of the Company's shares of Series
D Preferred Stock have been registered under Section 5 of the Securities Act of
1933 or Section 12 of the Securities Exchange Act of 1934, and (a) such stock is
listed on a national securities exchange or national market system or (b) such
stock is traded in the over-the-counter market and prices therefor are published
daily for 90 days in a recognized financial journal.
7.9 Legends. Unless a public market exists for the Shares, each
certificate representing the Shares shall bear a legend in form and substance
satisfactory to the Company to the effect that the Shares are subject to the
Share Repurchase Right.
7.10 "Estimated Present Value". "Estimated Present Value" means the
fair market value of the Company's Series D Preferred Stock for the purpose of
any employee benefit plan of the Company, including this Plan, or any arm's
length transaction, as most recently determined by the Board of Directors or any
committee thereof.
8. RIGHT OF FIRST REFUSAL
8.1 Restriction on Transfer. Except as expressly permitted in a
Purchase Agreement or this Plan, a Participant shall not transfer, encumber or
dispose of any Shares or any interest in the Shares. Unless expressly permitted
in this Plan, a Participant shall not transfer (voluntarily or involuntarily),
encumber, or dispose of any nonvested Shares or any interest therein. If
nonvested Shares are to be transferred notwithstanding the provisions of this
Plan, the price at which the Company may repurchase such Shares pursuant to any
provision of this Agreement shall be the exercise price of the Shares.
8.2 Right of First Refusal. In the event a Participant proposes to
sell, exchange, transfer, pledge or otherwise dispose of any Shares (whether
voluntary or involuntarily) (collectively
-6-
<PAGE>
referred to sometimes herein as a "Transfer"), the Company or its assignees
shall have the right to purchase such Shares under the terms and conditions of
this Article 8 (the "Right of First Refusal").
8.3 Notice of Proposed Transfer. Before any proposed Transfer of
Shares, a Participant must deliver to the Company at its principal office (a) a
written notice describing the proposed Transfer and stating the name of the
proposed transferee, the number of Shares to be transferred, and the
consideration for which the Shares are to be transferred (a "Transfer Notice")
and (b) a written offer signed by the proposed transferee (if the proposed
transfer is voluntary) to acquire the Shares on the terms specified in the
Transfer Notice, subject only to the Right of First Refusal.
8.4 Exercise of Right of First Refusal. If the Company exercises the
Right of First Refusal, the Company and the Participant shall immediately
consummate the sale of the Shares to the Company at the purchase price and on
the terms set forth in the Transfer Notice. To exercise the Right of First
Refusal, the Company shall deliver to the Participant a notice of exercise of
the Right of First Refusal within 60 days after the date the Company receives
the Transfer Notice. Shares shall be deemed purchased by the Company when the
Participant or other holder of the Shares receives such notice of exercise of
the Right of First Refusal. All rights accorded a holder of such Shares, other
than the right to payment therefor, shall cease at that time. The Company shall
pay the purchase price of any Shares so purchased within 5 business days after
tender of the certificates representing such Shares to the Company's transfer
agent. For this purpose, cancellation of any promissory note from the
Participant to the Company shall be treated as payment to the Participant in
cash to the extent of the unpaid principal and any accrued interest canceled. If
the Company purchases any Shares pursuant to the Right of First Refusal, it must
purchase all of the Shares proposed to be transferred.
8.5 Exchanges or Other Transfers. When the consideration specified in
a Transfer Notice is property other than cash, the Company may nonetheless pay
the purchase price for the Shares in cash. If the consideration so specified has
a readily ascertainable fair market value, the published price of the Shares
shall be an amount equal to the fair market value of such consideration. If the
specified consideration does not have a readily ascertainable fair market value,
the purchase price shall be the Estimated Present Value of the Shares determined
as of the date the Company receives the Transfer Notice.
8.6 Failure to Exercise Right of First Refusal. If the Company fails
to exercise in full the Right of First Refusal within 60 days from the date the
Company receives the Transfer Notice, the Participant may not later than 120
days following delivery to the Company of the Transfer Notice, conclude a
Transfer of the Shares to the proposed transferee named in the Transfer Notice
on the terms and conditions described in the Transfer Notice. Any proposed
Transfer on terms and conditions different from those described in the Transfer
Notice, as well as any subsequent proposed Transfer by the Participant, shall
again be subject to the Right of First Refusal and shall require compliance by
the Participant with the procedure described in this Article 8.
8.7 Transferees of the Transfer Shares. All transferees of any Shares
or any interest therein, other than the Company, shall be required as a
condition of such Transfer to agree in
-7-
<PAGE>
writing (in a form satisfactory to the Company) that such transferee shall
receive and hold such Shares or interests subject to the provisions of this
Plan, including without limitation Article 7 providing for the Share Repurchase
Right and Article 8 providing for the Right of First Refusal. Any sale or
Transfer of any Shares shall be void unless the provisions of this Article 8 are
met.
8.8 Special Transfers.
8.8.1 Creditors' Proceedings. Upon any proposed Transfer of the
Shares in connection with any receivership, bankruptcy, extension, readjustment,
stay, composition, or other creditors' proceeding regarding a Participant, or
the taking of any of the Shares by legal process (such as levy of execution),
the Right of First Refusal shall expire 60 days after the Company receives a
Transfer Notice from the Participant. The time during which the Company may not
exercise its Right of First Refusal shall be tolled or extended during any time
when the Company may be prohibited or restricted from exercising the Right of
First Refusal under applicable laws or by court ruling. If the Company or its
assignee does not exercise the Right of First Refusal, the Shares may be
transferred only pursuant to the proceeding or transaction that gave rise to the
Right of First Refusal. Shares transferred pursuant to this subsection 8.8.1
shall continue to be subject to the provisions of the Purchase Agreement and
this Plan, including without limitation Articles 7 and 8 of this Plan.
8.8.2 Dissolution of Marriage. If a Participant divides his or
her marital, joint, or community property in connection with a decree of divorce
or a property settlement, the Participant shall use his or her best efforts to
retain the Shares and transfer other assets to his or her spouse in lieu of the
Shares. The other assets the Participant may transfer may include a promissory
note from the Participant to the spouse. In the event of any distribution of
Shares to the Participant's spouse pursuant to a decree of divorce or property
settlement agreement, the Company shall have, without the necessity of notice,
an irrevocable option to purchase the nonvested Shares proposed to be
transferred at their exercise price and the vested Shares proposed to be
transferred at their Estimated Present Value by giving a Repurchase Notice to
the Participant. The option shall expire 60 days after the Company receives
written notice of such distribution or intended distribution advising the
Company of its right to purchase the Shares.
8.8.3 Pledge. A Participant may pledge Shares to the Company or
a bank or other financial institution if the pledge or security agreement under
which the Shares are pledged specifies that the pledge shall not sell or
transfer the Shares (other than to the Participant on termination of the pledge)
without first offering them to the Company pursuant to Section 8.2.
8.8.4 Family Transfers. A Participant may transfer Shares
(including nonvested Shares) to the Participant's spouse; any parent, step-
parent, child, or grandchild of the Participant or of the Participant's spouse;
any other relative of the Participant or of the Participant's spouse approved by
the Board; or any trust for the exclusive benefit of the Participant or of any
such person, without first offering the same to the Company pursuant to Section
8.2. Shares so transferred shall remain subject to the Purchase Agreement and
this Plan. The Right of First Refusal under subsection 8.8.1 shall then arise
when the transferee (as opposed to the Participant) proposes a Transfer in
connection with a creditor's proceeding. The Share Repurchase Right shall arise
when
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<PAGE>
the Participant's employment or other similar relationship terminates,
regardless of whether the Shares have been transferred.
8.9 Assignment of the Right of First Refusal. The Company may assign
the Right of First Refusal to one or more persons as may be selected by the
Board.
8.10 Termination of Right of First Refusal. The Right of First Refusal
shall terminate when a public market exists for the Shares. A public market
shall be deemed to exist if any of the Company's shares of Series D Preferred
Stock have been registered pursuant to Section 5 of the Securities Act of 1933
or Section 12 of the Securities Exchange Act of 1934, and (a) such stock is
listed on a national securities exchange or national market system or (b) such
stock is traded in the over-the-counter market and prices therefor are published
daily for 90 days in a recognized financial journal.
8.11 Legends. Unless a public market exists for the Shares, each
certificate representing the Shares shall bear a legend in form and substance
satisfactory to the Company to the effect that the Shares are subject to the
Right of First Refusal.
9. ADMINISTRATION AND AMENDMENT OF THE PLAN
9.1 Administration.
9.1.1 Members. This Plan shall be administered by the Board
and/or by a duly appointed committee of the Board having such powers as the
Board may delegate to such committee. All references to the Board in this Plan
shall also mean the committee if one has been appointed. Members of the Board or
the Committee who have been granted Shares may vote on any matters affecting the
administration of the Plan or the right to purchase Shares, but no such member
shall act upon the granting of Shares to himself or herself. A member of the
Board or the Committee may be counted in determining the existence of a quorum
at any meeting of the Board or Committee, and may execute any written consent to
the taking of action without a meeting, for any action which is taken with
respect to the granting of the right to purchase Shares to such member.
9.1.2 Rule 16b-3 Compliance. If the Company registers any class
of any equity security pursuant to Section 12 of the Securities Exchange Act of
1934 (the "Exchange Act"), then from the effective date of such registration
until six months after the termination of such registration, the Plan shall be
administered by a Committee of directors which shall consist of not less than
two members, who during the one year before serving as an administrator of the
Plan, have not been granted or awarded equity securities pursuant to the Plan or
any other plan of the Company or any of its Affiliates except as permitted under
Rule 16b-3 under the Exchange Act, which provides that participation in a
formula plan meeting the conditions of Rule 16(b)(3)(c)(2)(ii) or in an ongoing
securities acquisition plan meeting the conditions in Rule 16(b)(3)(d)(2)(i)
shall not disqualify a member of the Committee from serving as an administrator
of the Plan. In addition, an election to receive an annual retainer fee in
either cash or an equivalent amount of securities, or partly in cash and partly
in securities, shall not disqualify a member of the Committee from serving as an
administrator of the Plan.
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<PAGE>
9.1.3 Designation of Ineligible Persons. The Board may from time
to time designate individuals as ineligible to participate in the Plan for a
specified time so that such persons will be eligible to serve as members of the
Committee.
9.2 Rights and Powers. Subject to this Plan and, in the case of a
committee, the specific rights and powers delegated by the Board to such
committee, the Board shall have the authority and discretion to:
(a) determine who shall be a Participant;
(b) determine when Shares can be purchased;
(c) determine the terms and conditions of Purchase Agreements (which terms
and conditions may differ among Agreements);
(d) interpret this Plan;
(e) adopt rules and regulations for implementing this Plan; and
(f) take such other action as is appropriate to the administration of this
Plan.
All decisions, determinations, and interpretations of the Board shall be
final and binding on all Participants.
9.3 Termination; Amendment. The Board may from time to time suspend
this Plan, terminate this Plan, or amend this Plan as it deems desirable,
without further action on the part of the shareholders of the Company. The
approval of the shareholders shall be required, however, to (a) increase the
total number of Shares that may be issued under this Plan (except as otherwise
provided herein); (b) change the description of the persons eligible to be
Participants; or (c) change the minimum exercise price. Except as provided in
Article 10, or in a Purchase Agreement, the suspension, termination, or
amendment of this Plan shall not, without the consent of the Participant, alter
or impair any rights of the Participant under any Purchase Agreement.
9.4 Unilateral Amendments. Notwithstanding any other provision of
this Plan or any Purchase Agreement, and in addition to the powers described in
Section 6.3, the Committee may amend the Plan and any Purchase Agreement,
without the consent of any Participant, to the extent the Committee in the
Committee's sole judgment deems necessary or appropriate to comply with the
requirements for any exemption from the registration and qualification
requirements of state and federal securities laws, or the requirements of any
other law, including without limitation Securities and Exchange Commission Rule
701, California Corporations Code Section 25102(o), and any other rule,
regulation court decision, or interpretation issued in connection with any such
law.
9.5 Requirements of Rule 16b-3. In the event that the Company becomes
subject to Section 16 of the Securities Exchange Act of 1934, this Plan shall be
administered in
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<PAGE>
accordance with Rule 16b-3 promulgated under such Act, or any successor rule.
Unless the Board determines otherwise in a specific case, Shares sold to persons
subject to Section 16(b) of the Securities Exchange Act of 1934 must comply with
Rule 16b-3 and shall contain such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption from Section 16 with
respect to Plan transactions. In addition, to the extent necessary and desirable
to comply with Rule 16b-3 or with Section 422 of the Code (or any other
applicable law or regulation, including the requirements of the NASD or an
established stock exchange), the Company shall obtain shareholder approval of
any Plan amendment in such a manner and to such a degree as required.
10. ADJUSTMENT OF AND CHANGES IN STOCK
10.1 Recapitalizations. If the number of the Company's outstanding
shares of Series D Preferred Stock is changed by any stock dividend, stock
split, reverse stock split, combination, recapitalization, or reclassification,
the number of Shares subject to this Plan and to outstanding Shares, and the
exercise price for such Shares, shall be equitably adjusted as determined by the
Board.
10.2 Liquidation. In the event of the proposed liquidation or
dissolution of the Company, the Company shall notify the Participants at least
10 days before such proposed action is taken. All unexercised Shares shall
terminate immediately before such event.
10.3 Reorganizations in Which the Company Disappears.
10.3.1 Notice of Reorganization. The Company shall give each
holder of Shares at least 10 days prior written notice of (a) a sale of all or
substantially all of the Company's assets, (b) any reorganization, merger, or
consolidation of the Company with any other corporation in which the Company is
not the surviving entity (except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated), or (c) any
other corporate reorganization or business combination in which the beneficial
ownership of 50% or more of the Company's voting securities outstanding is
transferred.
10.4 Reorganizations in Which Company Survives. Upon any other merger
or consolidation of the Company in which there is any adjustment in the Series D
Preferred Stock of the Company outstanding immediately before such merger or
consolidation, there shall be substituted for each Share then subject to this
Plan, the number and kind of shares of stock or other securities or property
into which each outstanding share of Series D Preferred Stock of the Company is
converted by such merger or consolidation.
10.5 Other Changes. Upon any other relevant change in the
capitalization of the Company, the Board may provide for an equitable adjustment
to the number of Shares then subject to this Plan, to any Shares granted under
this Plan, and to the exercise price for such Shares as it deems appropriate.
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<PAGE>
10.6 No Fractional Shares. No right to purchase fractional Shares
shall result from any adjustment in Shares pursuant to this Article 10. Upon any
such adjustment, the nonvested Shares of each Participant shall be rounded down
to the nearest whole Share. Alternatively, in the Company's discretion, the
nonvested Shares of each Participant may be rounded up to the nearest whole
Share. The Company shall give notice of any adjustment to each holder of Shares
that have been so adjusted. Such adjustment (whether or not such notice is
given) shall be effective and binding for all purposes of this Plan.
11. SUSPENSION OF SHARES TO SATISFY SECURITIES LAWS
11.1 Power to Suspend. The Board may suspend the granting of Shares
from time to time if appropriate to satisfy an exemption from registration under
the Securities Act (such as SEC Rule 504) or any state securities law.
11.2 Minimum Period. The minimum period of suspension shall be long
enough to ensure that, under applicable federal or state securities regulations
(such as SEC Rule 502(a)), sales of stock made before the suspension will not be
integrated with sales made after the suspension.
11.3 Maximum Period. The maximum period of suspension shall only be so
long as needed to ensure that, under applicable federal or state securities
regulations (such as SEC Rule 504(b)(2)(i)), sales made before the suspension
will not be aggregated with sales made after the suspension, unless the Board,
in its discretion, determines that such aggregation will not be detrimental to
the best interests of the Company or the Participants.
12. INFORMATION TO PARTICIPANTS
12.1 Copy of Plan. The Company shall provide a copy of the Plan to
each Participant.
12.2 Financial Information Provided. The Company shall provide to each
Participant on a periodic basis (but not less frequently than annually),
financial statements of the Company. The Company may provide other information
regarding the Company as determined by the Board in its discretion.
12.3 Information Confidential. No Participant shall disclose any
confidential information about the Company disclosed to the Participant in his
or her capacity as a holder of Shares. A Participant may, however, disclose such
information to his or her legal and financial advisers in connection with advice
to be rendered by them to the Participant, or to any transferee of the Shares,
but only if the advisor or transferee agrees not to further disclose such
Information or to use the information for the benefit of anyone other than the
Participant, the transferee as a holder of the Shares, or the Company.
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<PAGE>
13. TAX STATUS
The Company does not, by way of this Plan, any document, Purchase
Agreement, or otherwise, represent or warrant to any person, including the
Participants, that the purchase of Shares or the subsequent disposition of
Shares purchased pursuant to this Plan, or any other aspect of this Plan, will
have any particular tax effect.
14. MISCELLANEOUS
14.1 Additional Actions and Documents. Each Participant shall execute
and deliver such further documents and instruments and shall take such other
further actions as may be required or appropriate to carry out the intent and
purposes of this Plan or any Purchase Agreement.
14.2 Successors and Assigns. All obligations imposed upon the
Participants and all rights granted to the Company under this Plan, including
without limitation the provisions of Articles 7 and 8 shall be binding upon each
Participant's heirs, legal representatives, successors, and assigns. This Plan,
and the Purchase Agreement with each Participant, shall be the sole and
exclusive source of any and all rights that a Participant and his or her heirs,
legal representatives, or successors shall have in respect to this Plan or any
Purchase Agreement.
14.3 No Third-Party Beneficiaries. Nothing in this Plan or any
Purchase Agreement shall (a) confer any rights or remedies on any persons other
than the parties and their respective successors and assigns, (b) relieve or
discharge the obligation of any third person to any party, or (c) shall give any
third person any right of subrogation or action against any party.
14.4 Amendments, Waivers, and Consents. Except as provided in this
Plan, no Purchase Agreement shall be amended except in a writing signed by the
Participant and the Company. No waiver or consent shall be binding except in a
writing signed by the party making the waiver or giving the consent. No waiver
of any provision of a Purchase Agreement or consent to any action shall
constitute a waiver of any other provision or consent to any other action,
whether or not similar. No waiver or consent shall constitute a continuing
waiver or consent, except to the extent specifically set forth in writing. For
the protection of all parties, amendments, waivers and consents concerning
Purchase Agreements that are not in writing and signed by the party to be bound
may be enforced only if they are detrimentally relied upon and proved by clear
and convincing evidence. Such evidence may not include the alleged reliance.
14.5 Notice. Any notice, instruction, or communication required or
permitted to be given under this Plan or any Purchase Agreement to any party
shall be in writing (which may include telex, telegram, telecopier, or other
similar form of reproduction followed by a mailed hard copy) and shall be deemed
given when actually received or, if earlier, five days after deposit in the
United States Mail by certified mail, return receipt requested, postage prepaid,
or two days after deposit with a nationally recognized air courier, fees
prepaid, addressed to the principal office or residence of such party as shown
on the books of the Company, or to such other address as such party may request
by written notice. The Company and each Participant shall make an ordinary, good
faith effort to ensure that the person to be given notice actually receives such
notice.
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<PAGE>
14.6 Dispute Resolution.
14.6.1 Notice. A party to a Purchase Agreement who desires money
damages or equitable relief from the other party because of a claim relating to
Shares, this Plan, or a Purchase Agreement shall give written notice to the
other party of the facts constituting the breach or default (a "Dispute
Notice"). This Section 14.6 is intended to cover all aspects of the relationship
between the parties with respect to Shares, this Plan, and any Purchase
Agreement, including any claims based on tort or other theories. Any additional
claims the parties have against each other shall also be subject to this Section
14.6.
14.6.2 Negotiation. For fifteen (15) days following delivery of
a Dispute Notice (the "Negotiation Period") the parties shall negotiate to
resolve the dispute in good faith.
14.6.3 Mediation. After the end of the Negotiation Period,
either party may request non-binding mediation with the assistance of a neutral
mediator from a recognized mediation service. The party requesting the mediation
shall arrange for the mediation services, subject to the approval of the other
party which the other party shall not withhold unreasonably. Mediation shall
take place in San Mateo County, California. Mediation may be scheduled to begin
any time after expiration of the Negotiation Period, but with at least 10 days
notice to all parties. The parties shall participate in the mediation in good
faith and shall devote reasonable time and energy to the mediation so as to
promptly resolve the dispute or conclude that they cannot resolve the dispute.
The party requesting the mediation shall bear the cost of mediation except as
provided elsewhere in this Agreement.
14.6.4 Arbitration. If thirty (30) days after beginning
mediation the parties have not resolved the dispute, either party may submit the
dispute to final and binding arbitration pursuant to the commercial rules of the
American Arbitration Association. The arbitrator(s) shall apply the substantive
law of the State of California to the dispute, and shall have the power to
interpret such law to the extent it is unclear. At the request of any party, the
arbitrators, attorneys, parties to the arbitration, witnesses, experts, court
reporters, or other persons present at the arbitration shall agree in writing to
maintain the strict confidentiality of the arbitration proceedings. At the
election of any party, arbitration shall be conducted by three neutral
arbitrators appointed in accordance with the commercial rules of the American
Arbitration Association if (a) the amount in controversy is greater than $50,000
(exclusive of interest and attorneys' fees), or (b) a party sought to be
enjoined disputes that he or it has engaged in, or asserts that he or it should
be able to engage in, the actions sought to be enjoined. In all other cases, the
matter shall be arbitrated by a single neutral arbitrator. The parties surrender
and waive the right to submit any dispute to a court or jury, or to appeal to a
higher Court. There shall be no arbitration of any claim that would otherwise be
barred by a statute of limitations if the claim were to be brought in a court of
law. The arbitrator shall not have the power to award punitive, consequential,
indirect or special damages.
14.6.5 Arbitrability. The arbitrators shall have the power to
determine what disputes between the parties are the proper subject of
arbitration.
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<PAGE>
14.6.6 Preliminary Remedies. Notwithstanding this Section 14.6, a
party may apply to a court of competent jurisdiction for prejudgment remedies
and emergency relief in the form of a temporary restraining order pending final
determination of a claim through arbitration in accordance with this Section
14.6.
14.6.7 Costs and Attorneys' Fees. If the arbitrator determines that
the actions of a party or its counsel have unreasonably or unnecessarily delayed
the resolution of the matter, the arbitrator may in its discretion require such
party to pay all or part of the cost of the mediation and arbitration
proceedings payable by the other party and may require such party to pay all or
part of the attorneys' fees of the other party. This provision permits an award
of attorneys' fees against a party regardless of which party is the prevailing
party. Otherwise, the parties shall bear their own attorneys' fees and share the
costs of arbitration equally.
14.6.8 Enforcement. The award of the arbitrator shall be enforceable
according to the applicable provisions of the California Code of Civil
Procedure, sections 1280 et seq. A party who fails to participate in a
negotiation, mediation, or arbitration instituted under this Section 14.6, or
who admits to liability and the amount of damage, shall be deemed to have
defaulted. Such default may be entered and enforced in the same manner as a
default in a civil lawsuit.
14.7 Jurisdiction and Venue. Each Participant consents to the personal
jurisdiction of all federal and state courts in the state of the Participant's
employment and the county of the Company's principal place of business, and
agrees that venue shall lie exclusively in the county of the Participant's
employment if the Participant is an Employee or former Employee at the time of
the dispute, or otherwise in the county of the Company's principal place of
business.
14.8 Governing Law. The rights and obligations of the parties shall be
governed by, and this Plan and each Purchase Agreement shall be construed and
enforced in accordance with, the laws of the State of California, excluding its
conflict of laws rules to the extent such rules would apply the law of another
jurisdiction. If any provision is susceptible of more than one interpretation,
it shall be interpreted in a manner consistent with this Plan. If any provision
of this Plan or any Purchase Agreement is found by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions shall
continue to be fully effective.
14.9 Plan Governs. If there is any inconsistency between this Plan and any
documents related to this Plan, including any Purchase Agreement, this Plan
shall govern. Nothing in this Plan shall be construed to constitute, or be
evidence of, any right in favor of any person to receive Shares hereunder or any
obligation on the part of the Company to issue Shares with respect to its Series
D Preferred Stock.
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<PAGE>
CERTIFICATE OF SECRETARY
KNOW ALL BY THESE PRESENTS:
That the undersigned does hereby certify that the undersigned is the Assistant
Secretary of AltiGen Communications, Inc., a corporation duly organized and
existing under and by virtue of the laws of the State of California; that the
above and foregoing 1998 Stock Purchase Plan was duly and regularly adopted as
such by the Board of Directors on ______________ and the shareholders of said
corporation on ________________; and that the above and foregoing 1998 Stock
Purchase Plan is now in full force and effect.
Dated: ____________________, 19___.
---------------------------------------
Gilbert Hu, Assistant Secretary
<PAGE>
EXHIBIT 10.4
ALTIGEN COMMUNICATIONS, INC.
1999 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
--------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as shall
-------------
be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the Board
---------
in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means AltiGen Communications, Inc., a California
-------
corporation.
(h) "Consultant" means any person who is engaged by the Company or
----------
any Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "Director" means a member of the Board of Directors of the
--------
Company.
(j) "Disability" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any
<PAGE>
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
------
(r) "Option Agreement" means a written or electronic agreement
----------------
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(s) "Option Exchange Program" means a program whereby outstanding
-----------------------
Options are exchanged for Options with a lower exercise price.
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<PAGE>
(t) "Optioned Stock" means the Common Stock subject to an Option or a
--------------
Stock Purchase Right.
(u) "Optionee" means the holder of an outstanding Option or Stock
--------
Purchase Right granted under the Plan.
(v) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1999 Stock Plan.
----
(x) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 11 below.
(y) "Service Provider" means an Employee, Director or Consultant.
----------------
(z) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 below.
(aa) "Stock Purchase Right" means a right to purchase Common Stock
--------------------
pursuant to Section 11 below.
(bb) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be subject to option
and sold under the Plan is 2,500,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan, upon
exercise of either an Option or Stock Purchase Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Administrator. The Plan shall be administered by the Board or a
-------------
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
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<PAGE>
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each
such award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, of any Option or
Stock Purchase Right granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right or the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by Optionees to
have Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.
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<PAGE>
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption by the
------------
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 16 of the Plan.
7. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(1) granted to an Employee who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(2) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
-5-
<PAGE>
(ii) In the case of a Nonstatutory Stock Option
(1) granted to a Service Provider who, at the time of
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(2) granted to any other Service Provider, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Except in the case of Options granted to Officers,
Directors and Consultants, Options shall become exercisable at a rate of no less
than 20% per year over five (5) years from the date the Options are granted.
Unless the Administrator provides otherwise, vesting of Options granted
hereunder to Officers and Directors shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such
-6-
<PAGE>
Shares promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement (of at least
ninety (90) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for ninety (90) days
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
(of at least six (6) months) to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent that the Option is
vested on the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
-7-
<PAGE>
10. Non-Transferability of Options and Stock Purchase Rights. The Options
--------------------------------------------------------
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be
entitled to purchase, the price to be paid, and the time within which such
person must accept such offer. The terms of the offer shall comply in all
respects with Section 260.140.42 of Title 10 of the California Code of
Regulations. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines otherwise,
-----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine. Except with respect to Shares purchased by
Officers, Directors and Consultants, the repurchase option shall in no case
lapse at a rate of less than 20% per year over five (5) years from the date of
purchase.
(c) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
12. Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
----------------------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the
-8-
<PAGE>
number of issued shares of Common Stock effected without receipt of
consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option or Stock Purchase Right
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the
-9-
<PAGE>
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator. Notice
of the determination shall be given to each Service Provider to whom an Option
or Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
14. Suspension of Options to Satisfy Securities Laws.
------------------------------------------------
(a) Power to Suspend. The Board may suspend the exercisability of
----------------
outstanding Options from time to time if appropriate to satisfy an exemption
from registration under the Securities Act (such as SEC Rule 504) or any state
securities law.
(b) Minimum Period. The minimum period of suspension shall be long
--------------
enough to ensure that, under applicable federal or state securities regulations
(such as SEC Rule 502(a)), sales of stock made before the suspension will not be
integrated with sales made after the suspension.
(c) Maximum Period. The maximum period of suspension shall only be so
--------------
long as needed to ensure that, under applicable federal or state securities
regulations (such as SEC Rule 504(b)(2)(0)), sales made before the suspension
will not be aggregated with sales made after the suspension, unless the Board,
in its discretion, determines that such aggregation will not be detrimental to
the best interests of the Company or the Optionees.
(d) Option Grants During Suspension. The Company may continue to
-------------------------------
grant Options during a period of suspension, provided that such Options are not
exercisable until after the suspension.
(e) Option Termination During Period of Suspension. If an outstanding
Option terminates during a period of suspension or during the 90-day period
after the suspension, the Optionee shall have until 90 days after the suspension
to exercise the Option, but in no event later than the term of the Option.
(f) Allocation of Exercise Rights Before Suspension. If the Board
-----------------------------------------------
believes that a number of Optionees wish to exercise Options to an extent that
would result in non-compliance with an applicable federal or state securities
exemption, the Board may limit the right to exercise outstanding Options and
allocate such right among the Optionees in a manner that the Board determines to
be fair.
(g) All Options Must Be Suspended. The Board shall not suspend any
-----------------------------
Options granted pursuant to this Plan under this Section unless it suspends all
such outstanding Options.
(h) Advice of Counsel. The Board may rely upon advice of counsel in
-----------------
determining whether to suspend exercisability of the outstanding Options and in
determining the period of suspension. Nothing contained in this Plan requires
the Board to determine the length of the suspension in advance.
-10-
<PAGE>
(i) Sunset Provision. This Article shall be void and of no force and
----------------
effect beginning on the date the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act.
15. Arbitration. At the request of any party, any and all disputes or
-----------
controversies of law, fact, or any kind arising from or relating to the Plan or
any Option Agreement shall be decided by binding arbitration in accordance with
the commercial rules of the American Arbitration Association (except to the
extent such rules are inconsistent with the provisions of this Section). Such
arbitration shall also comply with the California Arbitration Act, except that
discovery will be allowed for a period of up to three months. Such discovery
shall be conducted in accordance with the California Code of Civil Procedure. At
the request of any party, the arbitrators, attorneys, parties to the
arbitration, witnesses, experts, court reporters, or other persons present at
the arbitration shall agree in writing to maintain the strict confidentiality of
the arbitration proceedings. Arbitration shall be conducted by a single, neutral
arbitrator or, at the election of any party, three neutral arbitrators,
appointed in accordance with the commercial rules of the American Arbitration
Association. The award of the arbitrator shall be enforceable according to the
applicable provisions of the California Code of Civil Procedure. Notwithstanding
the foregoing, a party may apply to a court of competent jurisdiction for
emergency relief in the form of a temporary restraining order pending final
determination of a claim through arbitration in accordance with this Section.
The parties shall share the costs of arbitration equally.
16. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder approval
--------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
17. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of an
--------------------------
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present
-11-
<PAGE>
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required.
18. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
19. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Shareholder Approval. The Plan shall be subject to approval by the
--------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
21. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options or Stock Purchase Rights outstanding, and, in the case
of an individual who acquires Shares pursuant to the Plan, during the period
such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.
-12-
<PAGE>
ALTIGEN COMMUNICATIONS, INC.
1999 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
Optionee's Name and Address
The undersigned Optionee has been granted an Option to purchase Common
Stock of the Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Grant Number ___________________________
Date of Grant ___________________________
Vesting Commencement Date ___________________________
Exercise Price per Share $__________________________
Total Number of Shares Granted ___________________________
Total Exercise Price $__________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: ___________________________
Vesting Schedule:
- ----------------
25% of the Shares subject to the Option shall vest twelve (12) months after
the Vesting Commencement Date set forth above and 1/48 of the Shares subject to
the Option shall vest each month thereafter.
-13-
<PAGE>
Termination Period:
------------------
This Option shall be exercisable for ninety (90) days after Optionee ceases
to be a Service Provider. Upon Optionee's death or disability, this Option may
be exercised for such longer period as provided in the Plan. In no event may
Optionee exercise this Option after the Term/Expiration Date as provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant (the "Optionee"), an option (the
"Option") to purchase the number of Shares set forth in the Notice of Grant, at
the exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated herein by reference. Subject to Section 13(c) of the Plan, in the
event of a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. Nevertheless, to the extent that it exceeds
the $100,000 rule of Code Section 422(d), this Option shall be treated as a
Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during its
-----------------
term in accordance with the Vesting Schedule set out in the Notice of Grant and
with the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by delivery
------------------
of an exercise notice in the form attached as Exhibit A (the "Exercise Notice")
which shall state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and such other representations
and agreements as may be required by the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by the aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise complies with Applicable laws. Assuming such
compliance, for income tax purposes the Shares shall be considered transferred
to the Optionee on the date on which the Option is exercised with respect to
such Shares.
3. Optionee's Representations. In the event the Shares have not been
--------------------------
registered under the Securities Act of 1933, as amended, at the time this Option
is exercised, the Optionee shall, if
-14-
<PAGE>
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his or her Investment Representation
Statement in the form attached hereto as Exhibit B.
4. Lock-Up Period. Optionee hereby agrees that, if so requested by the
--------------
Company or any representative of the underwriters (the "Managing Underwriter")
in connection with any registration of the offering of any securities of the
Company under the Securities Act, Optionee shall not sell or otherwise transfer
any Shares or other securities of the Company during the 180-day period (or such
other period as may be requested in writing by the Managing Underwriter and
agreed to in writing by the Company) (the "Market Standoff Period") following
the effective date of a registration statement of the Company filed under the
Securities Act. Such restriction shall apply only to the first registration
statement of the Company to become effective under the Securities Act that
includes securities to be sold on behalf of the Company to the public in an
underwritten public offering under the Securities Act. The Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period.
5. Method of Payment. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless
exercise program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
6. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any Applicable
Law.
7. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
8. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
-15-
<PAGE>
9. Tax Consequences. Set forth below is a brief summary as of the date of
----------------
this Option of some of the federal tax consequences of exercise of this Option
and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A
TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of ISO. If this Option qualifies as an ISO, there will
---------------
be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.
(b) Exercise of ISO Following Disability. If the Optionee ceases to
------------------------------------
be an Employee as a result of a disability that is not a total and permanent
disability as defined in Section 22(e)(3) of the Code, to the extent permitted
on the date of termination, the Optionee must exercise an ISO within three
months of such termination for the ISO to be qualified as an ISO.
(c) Exercise of Nonstatutory Stock Option. There may be a regular
-------------------------------------
federal income tax liability upon the exercise of a Nonstatutory Stock Option.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
Employee or a former Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(d) Disposition of Shares. In the case of an NSO, if Shares are held
---------------------
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal income tax purposes. If Shares purchased under an ISO
are disposed of within one year after exercise or two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (1) the Fair Market Value of the
Shares on the date of exercise, or (2) the sale price of the Shares. Any
additional gain will be taxed as capital gain, short-term or long-term depending
on the period that the ISO Shares were held.
(e) Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in
-16-
<PAGE>
writing of such disposition. Optionee agrees that Optionee may be subject to
income tax withholding by the Company on the compensation income recognized by
the Optionee.
10. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws but not
the choice of law rules of California.
11. No Guarantee of Continued Service. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH
THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
-17-
<PAGE>
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option. Optionee
further agrees to notify the Company upon any change in the residence address
indicated below.
OPTIONEE: AltiGen Communications, Inc.
_______________________________ ________________________________________
Signature By
_______________________________ ________________________________________
Print Name Title
_______________________________
_______________________________
Residence Address
-18-
<PAGE>
EXHIBIT A
---------
1999 STOCK OPTION PLAN
EXERCISE NOTICE
AltiGen Communications, Inc.
47427 Fremont Blvd.
Fremont, CA 94538
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of AltiGen Communications,
Inc. (the "Company") under and pursuant to the 1999 Stock Option Plan (the
"Plan") and the Stock Option Agreement dated ________, ________ (the "Option
Agreement").
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price of the Shares, as set forth in the Option Agreement.
3. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance of the Shares (as evidenced
---------------------
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date of issuance except as provided in Section 12 of the Plan.
5. Company's Right of First Refusal. Before any Shares held by Optionee
--------------------------------
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the
-19-
<PAGE>
Shares (the "Offered Price"), and the Holder shall offer the Shares at the
Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice, that any such sale or
other transfer is effected in accordance with any applicable securities laws and
that the Proposed Transferee agrees in writing that the provisions of this
Section shall continue to apply to the Shares in the hands of such Proposed
Transferee. If the Shares described in the Notice are not transferred to the
Proposed Transferee within such period, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
-20-
<PAGE>
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate as to any Shares upon the first sale of Common Stock of the
Company to the general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
6. Special Transfers.
-----------------
6.1. Creditors' Proceedings. Upon any proposed Transfer of the
--- ----------------------
Shares, defined as to sell, exchange, transfer, pledge or otherwise dispose of
any Shares (whether voluntarily or involuntarily), in connection with any
receivership, bankruptcy, extension, readjustment, stay, composition, or other
creditors' proceeding regarding an Optionee, or the taking of any of the Shares
by legal process (such as levy of execution), the Right of First Refusal shall
expire 60 days after the Company receives a transfer notice from an Optionee;
provided, however, that the Company may not exercise its Right of First Refusal
during the pendency of a bankruptcy proceeding filed under Title 11 of the
United States Code to the extent not permitted to do so by II U.S.C. Section
365. If the Company or its assignee does not exercise the Right of First
Refusal, the Shares may be transferred only pursuant to the proceeding or
transaction that gave rise to the Right of First Refusal. Shares transferred
pursuant to this subsection shall continue to be subject to the provisions of
the Option Agreement and the Plan.
6.2. Dissolution of Marriage. Shares transferred pursuant to a
--- -----------------------
distribution of Shares by an Optionee to his or her spouse as such spouse's
marital, joint, or community property pursuant to a decree of divorce or
property settlement agreement, shall continue to be subject to the provisions of
the Option Agreement and the Plan, and the non employee spouse shall provide the
employee spouse a proxy to vote the Shares so long as the employee remains with
the Company.
6.3. Pledge. An Optionee may pledge Shares to the Company or a bank
--- ------
or other financial institution if the pledge or security agreement under which
the Shares are pledged specifies that the pledgee shall not sell or transfer the
Shares (other than to the Optionee on termination of the pledge) without first
offering them to the Company pursuant to this exercise notice.
7. Escrow. As security for the faithful performance of the Option
------
Agreement, and to ensure the availability of the Shares for delivery upon
exercise of the Right of First Refusal, the Company may require an Optionee to
deposit each certificate representing Shares with the secretary of the Company,
or such other person as the Board may designate ("Escrow Agent"), along with two
stock assignments duly endorsed (with date and number of shares blank). The
Company may require the signatures to be guaranteed by a national bank or a
member of a national Stock Exchange. The Escrow Agent shall then hold the
certificates pursuant to the instructions set forth in this Article and as they
may be modified in any Option Agreement.
7.1. Copies of Notices. The Optionee and the Company shall give the
--- -----------------
Escrow Agent a copy of any transfer notice, notice from the Optionee advising
the Company of its right to purchase the Shares, or any other notice required or
permitted under Section 11 and/or Exhibit A
21
<PAGE>
attached hereto at the same time they deliver such notices to the intended
parties. The Company shall deliver the purchase price of Shares held in escrow
to the Escrow Agent instead of to the holder of the Shares.
7.2. Delivery of Shares and Purchase Price. Promptly upon receipt of
--- -------------------------------------
a notice that the Company or its assignee is exercising the Right of First
Refusal, the Escrow Agent shall (a) date the stock assignments necessary for the
transfer in question, (b) fill in the number of Shares being transferred, and
(c) deliver the same, together with the certificate evidencing the Shares to be
transferred, to the transfer agent of the Company's common stock. The Escrow
Agent shall deliver the purchase price to the Optionee promptly after receiving
it from the Company or its assignee.
7.3. Attorney-in-Fact. Each Optionee, by accepting the Option
--- ----------------
Agreement, irrevocably constitutes and appoints the Escrow Agent as Optionee's
attorney-in-fact and agent to execute all documents necessary or appropriate to
transfer Shares as contemplated in this Article.
7.4. Ownership of the Shares. Each Optionee shall have the full right
--- -----------------------
to vote all Shares held in the escrow and shall receive all distributions with
respect to such Shares for so long as such Optionee is the record owner of the
Shares.
7.5. Release of Certificates. Upon each Optionee's written request.
--- -----------------------
the Escrow Agent shall release the Share certificates and stock assignments with
respect thereto if, and to the extent that, the restrictions on transfer of the
Shares set forth in the Plan.
7.6. Powers and Rights of Escrow Agent.
--- ---------------------------------
7.6.1. Escrow Agent's Reliance. The Escrow Agent shall be
----- -----------------------
obligated only to perform such duties as are specifically set forth in the Plan
and any applicable Option Agreement. The Escrow Agent may rely and shall be
protected in relying or refraining from acting on any instrument the Escrow
Agent reasonably believes to be genuine and to have been signed or presented by
the proper party or parties. The Escrow Agent shall not be personally liable for
any act or omission as Escrow Agent or as attorney-in-fact for Optionee while
acting reasonably and in good faith. Any act or omission pursuant to the advice
of counsel shall be deemed to be reasonable and in good faith.
7.6.2. Third-Party Beneficiary of the Plan. The Escrow Agent is
----- -----------------------------------
an intended third-party beneficiary of the Plan.
7.6.3. Warnings and Court Order. The Escrow Agent is expressly
----- ------------------------
authorized to disregard any and all warnings given by any party to the escrow or
by any other person, other than orders or process of courts or arbitrators
provided for in the Plan or the Option Agreement. The Escrow Agent is expressly
authorized to comply with and obey orders, judgments, or decrees of any court or
the arbitrators provided for in the Plan. The Escrow Agent shall not be liable
to any person by reason of such compliance, notwithstanding any such order,
judgment, or decree being
22
<PAGE>
subsequently reversed, modified, annulled, set aside, vacated, or found to have
been entered without jurisdiction.
7.6.4. Counsel to Escrow Agent. The Escrow Agent may employ legal
----- -----------------------
counsel and such other experts as the Escrow Agent deems necessary in connection
with its duties and may pay such experts reasonable compensation.
7.6.5. Resignation. The Escrow Agent may resign by giving 10
----- -----------
days written notice to the Company.
7.6.6. Further Instructions. If the Escrow Agent reasonably requires
----- --------------------
other or further instruments in connection with the escrow, the Company and the
affected Optionee shall furnish such instructions.
7.6.7. Fees. The Company shall pay all of the Escrow Agent's fees and
----- ----
expenses in such amount as the Company and the Escrow Agent may agree.
8. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
9. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN
THE OPINION OF COMPANY COUNSEL SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL
HELD BY THE ISSUER OR ITS
23
<PAGE>
ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE
ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER.
SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES .
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
10. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
11. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.
12. Governing Law; Severability. This Agreement is governed by the
---------------------------
internal substantive laws but not the choice of law rules, of California.
13. Entire Agreement. The Plan and Option Agreement are incorporated
----------------
herein by reference. This Agreement, the Plan, the Option Agreement and the
Investment Representation Statement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
Submitted by: Accepted by:
AltiGen Communications, Inc.
______________________________ ___________________________________
Signature By
______________________________ ____________________________________
Print Name Its
24
<PAGE>
Address: Address:
- ------- -------
______________________________ 47427 Fremont Blvd.
Fremont, CA 94538
______________________________
________________________________
Date Received
25
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
COMPANY: ALTIGEN COMMUNICATIONS, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company and any other legend required
under applicable state securities laws.
Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the
26
<PAGE>
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the Securities Act. In the
event the Company becomes subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter (or
such longer period as any market stand-off agreement may require) the Securities
exempt under Rule 701 may be resold, subject to the satisfaction of certain of
the conditions specified by Rule 144, including: (1) the resale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, (3) the amount of Securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the Securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than one year after the later of the date the Securities were
sold by the Company or the date the Securities were sold by an affiliate of the
Company, within the meaning of Rule 144; and, in the case of acquisition of the
Securities by an affiliate, or by a non-affiliate who subsequently holds the
Securities less than two years, the satisfaction of the conditions set forth in
sections (1), (2), (3) and (4) of the paragraph immediately above.
(c) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
Signature of Optionee:
_____________________________________
Date:__________________________, ______
27
<PAGE>
Exhibit 10.6
CORNISH & CAREY COMMERCIAL
[LOGO]
ONCOR INTERNATIONAL
================================================================================
S U B L E A S E
================================================================================
Sublandlord: Hitachi America Ltd. Subject 47427 Fremont Boulevard,
Property: Fremont
Subtenant: Phase Metrics, Inc., Date: April 1, 1997
A California Corporation
1. Parties:
This Sublease is made and entered into as of April 1, 1997, by and between
Hitachi America Ltd. ("Sublandlord"), and Phase Metrics, Inc. ("Subtenant"),
under the Master Lease dated July 26, 1995, between Security Capital Industrial
Trust, as "Lessor" and Sublandlord under this Sublease as "Lessee." A copy of
the Master Lease is attached hereto as Attachment I and incorporated herein by
this reference.
2. Provisions Constituting Sublease:
2.1 This Sublease is subject to all of the terms and conditions of the
Master Lease. Subtenant hereby assumes and agrees to perform all of the
obligations of "Lessee" under the Master Lease to the extent said
obligations apply to the Subleased Premises and Subtenant's use of the
Common Areas, except as specifically set forth herein. Sublandlord hereby
agrees to cause Lessor under the Master Lease to perform all of the
obligations of Lessor thereunder to the extent said obligations apply to
the Subleased Premises and Subtenant's use of the Common Areas. Subtenant
shall not commit or permit to be committed on the Subleased Premises or on
any other portion of the Project any act or omission which violates any
term or condition of the Master Lease. Except to the extent waived or
consented to in writing by the other party or parties hereto who are
affected thereby, neither of the parties hereto will, by renegotiation of
the Master Lease, assignment, subletting, default or any other voluntary
action, avoid or seek to avoid the observance or performance of the terms
to be observed or performed hereunder by such party, but will at all times
in good faith assist in carrying out all the terms of this Sublease and in
taking all such action as may be necessary or appropriate to protect the
rights of the other party or parties hereto who are affected thereby
against impairment. If Sublandlord is given the right under the Master
Lease to terminate the Master Lease (e.g., in case of destruction).
Subtenant shall have the right, in its sole discretion, to determine
whether it wishes to have the Master Lease terminated. If Subtenant elects
to have the Master Lease terminated, Subtenant shall terminate this
Sublease, and Sublandlord shall in turn terminate the Master Lease. As long
as Subtenant is not in default of any provision of this Sublease,
Sublandlord shall be obligated to perform all its obligations under the
Master Lease, and Subtenant shall have quiet enjoyment of the Premises
during the term of this Sublease.
Page 1 of 7
<PAGE>
2.2 All of the terms and conditions contained in the Master Lease are
incorporated herein, except as specifically provided below, and the terms
and conditions specifically set forth in this Sublease, shall constitute
the complete terms and conditions of this Sublease, except the following
paragraphs of the Master Lease which shall solely be the obligation of
Sublandlord: 1,,4 (first sentence only), 17, 37(c), Addendum #1, 2,
Exhibit "C".
2.3 This Sublease is subject and subordinate to the Master Lease. Except as
specifically provided in this Sublease, all the terms, covenants and
conditions contained in the Master Lease shall be applicable to this
Sublease with the same force and effect as if Sublandlord were the Landlord
and Subtenant were the Tenant under the Master Lease. In case of any breach
by Subtenant, Sublandlord shall have all the rights against Subtenant as
would be available to Landlord against Tenant if such breach were by Tenant
under the Master Lease.
2.4 Notwithstanding anything contained in this Sublease to the contrary,
the only services or rights to which Subtenant is entitled under this
Sublease are those to which Sublandlord is entitled under the Master Lease
and Subtenant will look to the Master Landlord under the Master Lease for
all such services and rights. If the approval of Landlord is required under
the Master Lease, then Subtenant shall obtain the approval of both
Sublandlord and Master Landlord.
2.5 Subtenant shall neither do nor permit anything to be done which would
cause the Master Lease to be terminated or forfeited by reason of any right
of termination or forfeiture reserved or vested in the Master Landlord
under the Master Lease, and Subtenant shall indemnify and defend
Sublandlord from and against all claims of any kind whatsoever by reason of
any breach or default of Subtenant which caused the Master Lease to be
terminated or forfeited.
3. Subleased Premises and Rent:
3.1 Subleased Premises:
Sublandlord leases to Subtenant and Subtenant leases from Sublandlord the
Subleased Premises upon all of the terms, covenants and conditions
contained in this Sublease. The Subleased Premises consist of approximately
30,400 +/- square feet located at 47427 Fremont Boulevard.
3.2 Rent:
Subtenant shall pay to Sublandlord as Rent for the Subleased Premises the
sum of Twenty-Seven Thousand Fifty-Six and 00/100 Dollars ($27,056.00) per
month, without deductions, offset, prior notice or demand. Rent shall be
payable by Subtenant to Sublandlord in consecutive monthly installments on
or before the first day of each calendar month during the Sublease Term. If
the Sublease commencement date or the termination date of the Sublease
occurs on a date other than the first day or the last day, respectively, of
a calendar month, then the Rent for such partial month shall be prorated
and the prorated Rent shall be payable on the Sublease commencement date or
on
Page 2 of 7
<PAGE>
the first day of the calendar month in which the Sublease termination date
occurs, respectively. Notices for Rent payment: 47475 Fremont Boulevard,
ATTN: Robert Renner, Fremont, CA 94538.
3.3 Security Deposit:
In addition to the Rent specified above, Subtenant shall pay to Sublandlord
an equivalent of one month's rent as a non-interest bearing Security
Deposit. In the event Subtenant has performed all of the terms and
conditions of this Sublease during the term hereof, Sublandlord shall
return to Subtenant, within ten days after Subtenant has vacated the
Subleased Premises, the Security Deposit less any sums due and owing to
Sublandlord. In addition to Security Deposit, Sublessee, upon Sublease
execution, shall prepay first and last months rent. Total prepaid rent plus
deposit equals $81,168.00.
3.4 Subtenant shall pay rent provided under this Sublease and shall pay
all additional rent provided in the Master Lease. Sublandlord shall be
charged for additional rent or other sums pursuant to the provisions of the
Master Lease, including without limitation Articles 6 (Operating Expense
Payments) or 12 (Tenant-Made Alterations and Trade Fixtures), Subtenant
shall be liable for 100% of such additional rent or sums. If Subtenant
shall procure any additional services from the building, such as
alterations or after-hour air conditioning, Subtenant shall pay for same at
the rates charged by the Master Landlord and shall make such payment to
Sublandlord or Master Landlord, as Sublandlord shall direct. Any rent or
other sums payable by Subtenant under this Article shall be additional rent
and collectable as such.
4. Rights of Access and Use:
4.1 Use:
Subtenant shall use the Subleased Premises only for those purposes
permitted in the Master Lease, unless Sublandlord and Master Landlord
consent in writing to other uses prior to the commencement thereof.
5. Sublease Term:
5.1 Sublease Term:
The Sublease Term shall be for the period commencing on April 1, 1997 or
sooner if available, and continuing through October 31, 2000. In no event
shall the Sublease Term extend beyond the Term of the Master Lease.
5.2 Inability to Deliver Possession:
In the event Sublandlord is unable to deliver possession of the Subleased
Premises at the commencement of the term, Sublandlord shall not be liable
for any damage caused thereby, nor shall this Sublease be void or voidable
but Subtenant shall not be liable for Rent until such time as Sublandlord
offers to deliver possession of the Subleased Premises to Subtenant, but
the term hereof
Page 3 of 7
<PAGE>
shall not be extended by such delay. If Subtenant, with Sublandlord's
consent, takes possession prior to commencement of the term, Subtenant
shall do so subject to all the covenants and conditions hereof and shall
pay Rent for the period ending with the commencement of the term at the
same rental as that prescribed for the first month of the term prorated at
the rate of 1/30th thereof per day. In the event Sublandlord has been
unable to deliver possession of the Subleased Premises within 30 days from
the commencement date, Subtenant, at Subtenant's option, may terminate this
Sublease.
6. Notices:
All notices, demands, consents and approvals which may or are required to be
given by either party to the other hereunder shall be given in the manner
provided in the Master Lease, at the addresses shown on the signature page
hereof. Sublandlord shall notify Subtenant of any Event of Default under the
Master Lease, or of any other event of which Sublandlord has actual knowledge
which will impair Subtenant's ability to conduct its normal business at the
Subleased Premises, as soon as reasonably practicable following Sublandlord's
receipt of notice from the Landlord of an Event of Default or actual knowledge
of such impairment. If Sublandlord elects to terminate the Master Lease,
Sublandlord shall so notify Subtenant by giving at least 30 days notice prior to
the effective date of such termination.
7. Compliance With Americans With Disabilities Act:
Subtenant shall be responsible for the installation and cost of any and all
improvements, alterations or other work required on or to the Subleased Premises
or to any other portion of the property and/or building of which the Subleased
Premises are a part, required or reasonably necessary because of; (1)
Subtenant's use of the Subleased Premises or any portion thereof; (2) the use by
a subtenant by reason of assignment or sublease; or (3) both, including any
improvements, alterations or other work required under the Americans With
Disabilities Act of 1990. Compliance with the provisions of this Section 8 shall
be a condition of Sublandlord granting its consent to any assignment or Sublease
of all or a portion of this Sublease and the Subleased Premises described in
this Sublease .
8. Compliance With Nondiscrimination Regulations:
It is understood that it is illegal for Sublandlord to refuse to display or
sublease the Subleased Premises, or to assign, surrender or sell the Master
Lease, to any person because of race, color, religion, national origin, sex,
sexual orientation, marital status or disability.
9. Toxic Contamination Disclosure:
Sublandlord and Subtenant each acknowledge that they have been advised that
numerous federal, state, and/or local laws, ordinances and regulations ("Laws")
affect the existence and removal, storage, disposal, leakage of and
contamination by materials designated as hazardous or toxic ("Toxics.") Many
materials, some utilized in everyday business activities and property
maintenance, are designated as hazardous or toxic.
Page 4 of 7
<PAGE>
Some of the Laws require that Toxics be removed or cleaned up by landowners,
future landowners or former landowners without regard to whether the party
required to pay for "clean up" caused the contamination, owned the property at
the time the contamination occurred or even knew about the contamination. Some
items, such as asbestos or PCBs, which were legal when installed, now are
classified as Toxics, and are subject to removal requirements. Civil lawsuits
for damages resulting from Toxics may be filed by third parties in certain
circumstances.
Sublandlord and Subtenant each acknowledge that Broker has no specific expertise
with respect to environmental assessment or physical condition of the Subleased
Premises, including, but not limited to, matters relating to: (i) problems which
may be posed by the presence or disposal of hazardous or toxic substances on or
from the Subleased Premises, (ii) problems which may be posed by the Subleased
Premises being within the Special Studies Zone as designated under the Alquist-
Priolo Special Studies Zone Act (Earthquake Zones), Section 2621-2630, inclusive
of California Public Resources Code, and (iii) problems which may be posed by
the Subleased Premises being within a HUD Flood Zone as set forth in the U.S.
Department of Housing and Urban Development "Special Flood Zone Area Maps," as
applicable.
Sublandlord and Subtenant each acknowledge that Broker has not made an
independent investigation or determination of the physical or environmental
condition of the Subleased Premises, including, but not limited to, the
existence or nonexistence of any underground tanks, sumps, piping, toxic or
hazardous substances on the Subleased Premises. Subtenant agrees that it will
rely solely upon its own investigation and/or the investigation of professionals
retained by it or Sublandlord, and neither Sublandlord nor Subtenant shall rely
upon Broker to determine the physical and environmental condition of the
Subleased Premises or to determine whether, to what extent or in what manner,
such condition must be disclosed to potential sublessees, assignees, purchasers
or other interested parties.
10. Rent Abatement and Damages to Personal Property:
In the event Sublandlord, pursuant to the terms of the Master Lease, is entitled
to and receives rent abatement, then to the extent such rent abatement affects
the subleased premises, Subtenant shall be entitled to rent abatement in an
amount that the net rentable area of the subleased premises bears to the total
net rentable area of the Master Lease, and only to the extent any such abatement
applies to the sublease term. In addition, any amounts paid or credited to
Sublandlord under the terms of the Master Lease for damage to personal property
shall be credited to Subtenant, subject to the same limitations set forth above.
11. Hazardous, Material Knowledge:
Sublandlord occupied the Premises as Tenant under the Master Lease from October
1, 1995 to the effective date of the Sublease. To the best of Sublandlord's
knowledge, without making an independent inquiry or investigation: (1)
Sublandlord has complied with the Environmental Requirements of Section 30 of
the Master Lease during its occupancy and there are no Hazardous Materials
located in the Premises and (ii) Sublandlord has received no written notice of
any violation of such Environmental
Page 5 of 7
<PAGE>
Requirements. As of the effective date of this Sublease, Subtenant shall be
responsible for complying with the Environmental Requirements. Subtenant shall
provide written notice to Sublandlord and Master Landlord and the owner of the
property, within a reasonable time of its knowledge or reasonable belief, that a
release of Hazardous Materials has occurred or will occur on the property or in
the Premises.
Subtenant shall not assign this lease nor sublet the subleased premises in whole
or in part, and shall not permit Subtenant's interest in this Sublease to be
vested in any third party by operation of law or otherwise.
Tenant represents that it has read and is familiar with the terms of the Master
Lease.
All prior understandings and agreements between the parties are merged within
this Sublease, which alone fully and completely sets forth the understanding of
the parties; and this Sublease may not be changed or terminated orally or in any
manner other than by an agreement in writing signed by both parties. The
covenants and agreements contained in this Sublease shall benefit and bind
Sublandlord and Subtenant and their respective executors, administrators,
successors and assigns.
Page 6 of 7
<PAGE>
Sublandlord: HITACHI AMERICA LTD.
By: /s/ [SIGNATURE ILLEGIBLE]^^ Date: 4-4-97
---------------------------------------- --------------
Subtenant: PHASE METRICS, INC.
By: /s/ R. J. Saunders Date: 4/2/97
---------------------------------------- -------------
R.J. Saunders, Chief Financial Officer
Notices: 10260 Sorrento Valley Road
San Diego, CA 92121
NOTICE TO SUBLANDLORD AND SUBTENANT: CORNISH & CAREY COMMERCIAL, IS NOT
AUTHORIZED TO GIVE LEGAL OR TAX ADVICE; NOTHING CONTAINED IN THIS SUBLEASE OR
ANY DISCUSSIONS BETWEEN CORNISH & CAREY AND SUBLANDLORD AND SUBTENANT SHALL BE
DEEMED TO BE A REPRESENTATION OR RECOMMENDATION BY CORNISH & CAREY COMMERCIAL,
OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL EFFECT OR TAX CONSEQUENCES OF THIS
DOCUMENT OR ANY TRANSACTION RELATING THERETO. ALL PARTIES ARE ENCOURAGED TO
CONSULT WITH THEIR INDEPENDENT FINANCIAL CONSULTANTS AND/OR ATTORNEYS REGARDING
THE TRANSACTION CONTEMPLATED BY THIS PROPOSAL.
Attachment I Master Lease
MASTER LANDLORD CONSENT
The undersigned, Lessor under the Master Lease attached as Attachment I, hereby
consents to the subletting of the Subleased Premises described herein on the
terms and conditions contained in this Sublease. This Consent shall apply only
to this Sublease and shall not be deemed to be a consent to any other Sublease.
Landlord:
By:______________________ Date:____________________________
Page 7 of 7
<PAGE>
EXHIBIT A
47427 FREMONT BOULEVARD
New on the Market - Greaat R&D Space
[Floorplan Appears Here]
30,400 Square Feet Available
<PAGE>
CONSENT BY LANDLORD TO SUBLEASE
-------------------------------
The undersigned, as Landlord under that certain Lease dated July 26, 1995 with
Hitachi America Ltd., a New York Corporation ("Sublandlord") for certain
premises at 47427 Fremont Boulevard, in Fremont CA (the "Prime Lease"), hereby
consents to the entering into of the foregoing Sublease dated April l, 1997
("Sublease") between Sublandlord, as sublessor, and Phase Metrics, Inc., a
California Corporation, as subtenant ("Subtenant"), upon the express
understandings and conditions that:
a. Landlord neither approves nor disapproves the terms, conditions and
agreements contained in the Sublease (all of which shall be
subordinate and subject at all times to the terms, covenants and
conditions of the Prime Lease) and assumes no liability or obligation
of any kind whatsoever on account of anything contained in the
Sublease;
b. By executing this consent, Landlord shall not be deemed to have waived
any rights under the Prime Lease nor shall Landlord be deemed to have
waived Sublandlord's obligations to obtain any required consents under
the Prime Lease (other than consent to the Sublease itself);
c. Notwithstanding anything in the Sublease to the contrary, Sublandlord
shall be and continue to remain liable for the payment of rent and the
full and prompt performance of all of the obligations of Tenant under
and as set forth in the Prime Lease;
d. Sublandlord shall pay Landlord 50% of all excess monthly rent received
per Sublease, with each payment of rent under the Prime Lease.
e. Nothing contained in the Sublease shall be taken or construed to in
any way modify, alter, waive or affect any of the terms, covenants or
conditions contained in the Prime Lease, or be deemed to grant
Subtenant any privity of contract with Landlord, or require Landlord
to accept any payments from Subtenant on behalf of Sublandlord;
f. The Sublease shall be deemed and agreed to be a sublease only and not
an assignment and there shall be no further subletting or assignment
of all or any portion of the premises demised under the Prime Lease
(including the premises demised by the foregoing Sublease) except in
accordance with the terms and conditions of the Prime Lease; and
g. If Landlord terminates the Prime Lease as a result of a default by
Sublandlord thereunder, the Sublease shall automatically terminate
concurrently therewith unless Landlord elects in writing to keep the
Sublease in full force and effect in which case the Sublease shall
become and be deemed to be a direct indenture of lease between
Landlord and Subtenant.
LANDLORD
--------
Security Capital Industrial Trust,
a Maryland Real Estate Investment Trust
By: Ned K. Anderson
--------------------------------
Ned K. Anderson
Title: Senior Vice President
Date: 4/3/97
--------
<PAGE>
EXHIBIT 10.7
[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD SUB-SUBLEASE
(Short-form to be used with post 1995 AIR leases)
1. Parties. This Sub-Sublease, dated, for reference purposes only,
December 11, 1998, is made by and between Phase Metrics Inc. ("Sub-Sublessor")
and Altigen Communications Inc. ("Sub-Sublessee").
2. Premises. Sub-Sublessor hereby sub-subleases to Sub-Sublessee and Sub-
Sublessee hereby sub-subleases from Sub-Sublessor for the term, at the rental,
and upon all of the conditions set forth herein, that certain real property,
including all improvements therein, and commonly known by the street address of
47427 Fremont Boulevard located in the County of Alameda, State of California
and generally described as (describe briefly the nature of the property) a free-
standing office/R&D building of approximately 30,400 square feet located in the
Bayside Business Park. ("Premises").
3. Term.
3.1 Term. The term of this Sub-Sublease shall be for twenty one and
one-half (21.5) months commencing on January 15, 1999 and ending on October 31,
2000 unless sooner terminated pursuant to any provision hereof.
3.2 Delay in Commencement. Sub-Sublessor agrees to use its best
commercially reasonable efforts to deliver possession of the Premises by the
commencement date. If, despite said efforts, Sub-Sublessor is unable to deliver
possession as agreed, the rights and obligations of Sub-Sublessor and Sub-
Sublessee shall be as set forth in Paragraph 5.2 of the Sublease Agreement (as
modified by Paragraph 7.3 of this Sub-Sublease).
4. Rent.
4.1 Base Rent. Sub-Sublessee shall pay to Sub-Sublessor as Base Rent
for the Premises equal monthly payments of $27,056.00 in advance, on the first
day of each month of the term hereof. Sub-Sublessee shall pay Sub-Sublessor upon
the execution hereof $13,528.00 as Base Rent for January 15, 1999 through
January 31, 1999 Base Rent for any period during the term hereof which is for
less than one month shall be a pro rata portion of the monthly installment.
4.2 Rent Defined. All monetary obligations of Sub-Sublessee to Sub-
Sublessor under the terms of this Sub-Sublease (except for the Security Deposit)
are deemed to be rent ("Rent"). Rent shall be payable in lawful money of the
United States to Sub-Sublessor at the address stated herein or to such other
persons or at such other places as Sub-Sublessor may designate in writing.
5. Security Deposit. Sub-Sublessee shall deposit with Sub-Sublessor upon
execution hereof $ 27,056.00 as security for Sub-Sublessee's faithful
performance of Sub-Sublessee's obligations hereunder. The rights and obligations
of Sub-Sublessor and Sub-Sublessee as to said Security Deposit shall be as set
forth in Paragraph 5 of the Master Lease (as modified by Paragraph 7.3 of this
Sub-Sublease).
6. Use.
6.1 Agreed Use. The Premises shall be used and occupied only for
general sales, R&D, shipping & receiving, and any and all legally related uses
and for no other purpose.
6.2 Compliance. Sub-Sublessor warrants that the improvements on the
Premises comply with all applicable covenants or restrictions of record and
applicable building codes, regulations and ordinances ("Applicable
Requirements") in effect on the commencement date. Said warranty does not apply
to the use to which Sub-Sublessee will put the Premises or to any alterations or
utility installations made or to be made by Sub-Sublessee. NOTE: Sub-Sublessee
is responsible for determining whether or not the zoning is appropriate for its
intended use, and acknowledges that past uses of the Premises may no longer be
allowed.
6.3 Acceptance of Premises and SubLessee. Sub-Sublessee acknowledges
that:
(a) it has been advised by Brokers to satisfy itself with
respect to the condition of the Premises (including but not limited to the
electrical, HVAC and fire sprinkler systems, security, environmental aspects,
and compliance with Applicable Requirements), and their suitability for Sub-
Sublessee's intended use,
(b) Sub-Sublessee has made such investigation as it deems
necessary with reference to such matters and assumes all responsibility therefor
as the same relate to its occupancy of the Premises, and
(c) neither Sub-Sublessor, Sub-Sublessor's agents, nor any
Broker has made any oral or written representations or warranties with respect
to said matters other than as set forth in this Sub-Sublease.
In addition, Sub-Sublessor acknowledges that:
(a) Broker has made no representations, promises or warranties
concerning Sub-Sublessee's ability to honor the Sub-Sublease or suitability to
occupy the Premises, and
(b) it is Sub-Sublessor's sole responsibility to investigate the
financial capability and/or suitability of all proposed tenants.
7. Master Lease
7.1 Sub-Sublessor is the lessee of the Premises by virtue of a lease,
hereinafter the "Master Lease" and also a "Sublease", both copies of which are
attached hereto marked Exhibit 1, wherein Security Capital Industrial Trust is
the Landlord and Hitachi America, Ltd., a New York corporation, is Lessee (dated
July 26, 1995) and Exhibit 2 wherein Hitachi America, Ltd. is Sublandlord and
Phase Metrics Inc. is Subtenant dated April 1, 1997.
7.2 This Sub-Sublease is and shall be at all times subject and
subordinate to the Master Lease and Sublease.
7.3 The terms, conditions and respective obligations of Sub-Sublessor
and Sub-Sublessee to each other under this Sub-Sublease shall be the terms and
conditions of the Master Lease and Sublease except for those provisions of the
Master Lease and Sublease which are directly contradicted by this Sub-Sublease
in which event the terms of this Sub-Sublease document shall control over the
Master Lease and Sublease. Therefore, for the purposes of this, Sub-Sublease,
wherever in the Master Lease and Sublease the word "Lessor or SubLessor" is used
it shall be deemed to mean the Sub-Sublessor herein and wherever in the Master
Lease and Sublease the word "Lessee or SubLessee" is used it shall be deemed to
mean the Sub-Sublessee herein.
7.4 During the term of this Sub-Sublease and for all periods
subsequent for obligations which have arisen prior to the termination of this
Sub-Sublease, Sub-Sublessee does hereby expressly assume and agree to perform
and comply with, for the benefit of Sub-Sublessor, SubLessor and Master Lessor,
each and every obligation of Sub-Sublessor, and SubLessor under the Master Lease
and Sublease except for the following paragraphs which are excluded
Page 1 of 3
REVISED
<PAGE>
therefrom: Master Lease 36, 37c; Addendum - 1, 2; Exhibit C; and Sublease - 3.3,
5.1
7.5 The obligations that Sub-Sublessee has assumed under paragraph 7.4
hereof are hereinafter referred to as the "Sub-Sublessee's Assumed Obligations".
The obligations that Sub-Sublessee has not assumed under paragraph 7.4 hereof
are hereinafter referred to as the "Sub-Sublessor's Remaining Obligations".
7.6 Sub-Sublessee shall hold Sub-Sublessor free and harmless from all
liability, judgments, costs, damages, claims or demands, including reasonable
attorneys' fees, arising out of Sub-Sublessee's failure to comply with or
perform Sub-Sublessee's Assumed Obligations.
7.7 Sub-Sublessor agrees to maintain the Master Lease and Sublease
during the entire term of this Sub-Sublease, subject, however, to any earlier
termination of the Master Lease and Sublease without the fault of the Sub-
Sublessor, and to comply with or perform Sub-Sublessor's Remaining Obligations
and to hold Sub-Sublessee free and harmless from all liability, judgments,
costs, damages, claims or demands arising out of Sub-Sublessor's failure to
comply with or perform Sub-Sublessor's Remaining Obligations.
7.8 Sub-Sublessor represents to Sub-Sublessee that the Master Lease
and Sublease is are in full force and effect and that no default exists on the
part of any Party to the Master Lease and Sublease.
8. Assignment of Sub-Sublease and Default.
8.1 Sub-Sublessor hereby assigns and transfers to Master Lessor and
SubLessor the Sub-Sublessor's interest in this Sub-Sublease, subject however to
the provisions of Paragraph 8.2 hereof.
8.2 Master Lessor and SubLessor, by executing this document, agrees
that until a Default shall occur in the performance of Sub-Sublessors
Obligations under the Master Lease and Sublease, that Sub-Sublessor may receive,
collect and enjoy the Rent accruing under this Sub-Sublease. However, if Sub-
Sublessor shall Default in the performance of its obligations to Master Lessor
or SubLessor then Master Lessor and SubLessor may, at Its option, receive and
collect, directly from Sub-Sublessee, all Rent owing and to be owed under this
Sub-Sublease. Master Lessor shall not, by reason of this assignment of the Sub-
Sublease nor by reason of the collection of the Rent from the Sub-Sublessee, be
deemed liable to Sub-Sublessee for any failure of the Sub-Sublessor to perform
and comply with Sub-Sublessor's Remaining Obligations.
8.3 Sub-Sublessor hereby irrevocably authorizes and directs Sub-
Sublessee upon receipt of any written notice from the Master Lessor or SubLessor
stating that a Default exists in the performance of Sub-Sublessor's obligations
under the Master Lease and Sublease, to pay to Master Lessor or SubLessor the
Rent due and to become clue under the Sub-Sublease. Sub-Sublessor agrees that
Sub-Sublessee shall have the right to rely upon any such statement and request
from Master Lessor or SubLessor, and that Sub-Sublessee shall pay such Rent to
Master Lessor and SubLessor without any obligation or right to inquire as to
whether such Default exists and notwithstanding any notice from or claim from
Sub-Sublessor to the contrary and Sub-Sublessor shall have no right or claim
against Sub-Sublessee for any such Rent so paid by Sub-Sublessee.
8.4 No changes or modifications shall be made to this Sub-Sublease
without the consent of Master Lessor and SubLessor.
9. Consent of Master Lessor and SubLessor.
9.1 In the event that the Master Lease and Sublease requires that Sub-
Sublessor obtain the consent of Master Lessor and SubLessor to any subletting by
Sub-Sublessor then, this Sub-Sublease shall not be effective unless, within ten
days of the date hereof, Master Lessor and SubLessor signs this Sub-Sublease
thereby giving its consent to this Sub-Subletting.
9.2 In the event that the obligations of the Sub-Sublessor under the
Master Lease and Sublease have been guaranteed by third parties then neither
this Sub-Sublease, nor the Master Lessor's or SubLessor's consent, shall be
effective unless, within 10 days of the date hereof, said guarantors sign this
Sub-Sublease thereby giving their consent to this Sub-Sublease.
9.3 In the event that Master Lessor or SubLessor does give such
consent then:
(a) Such consent shall not release Sub-Sublessor of its
obligations or alter the primary liability of Sub-Sublessor to pay the Rent and
perform and comply with all of the obligations of Sub-Sublessor to be performed
under the Master Lease or Sublease.
(b) The acceptance of Rent by Master Lessor or SubLessor from
Sub-Sublessee or anyone else liable under the Master Lease and Sublease shall
not be deemed a waiver by Master Lessor or SubLessor of any provisions of the
Master Lease and Sublease.
(c) The consent to this Sub-Sublease shall not constitute a
consent to any subsequent subletting or assignment.
(d) In the event of any Default of Sub-Sublessor under the Master
Lease and Sublease, Master Lessor or SubLessor may proceed directly against Sub-
Sublessor, any guarantors or anyone else liable under the Master Lease and
Sublease or this Sub-Sublease without first exhausting Master Lessor's or
SubLessor's remedies against any other person or entity liable thereon to Master
Lessor or SubLessor.
(e) Master Lessor or SubLessor may consent to subsequent
sublettings and assignments of the Master Lease and Sublease or this Sub-
Sublease or any amendments or modifications thereto without notifying Sub-
Sublessor or any one else liable under the Master Lease and Sublease and without
obtaining their consent and such action shall not relieve such persons from
liability.
(f) In the event that Sub-Sublessor shall Default in its
obligations under the Master Lease and Sublease, then Master Lessor or
SubLessor, at its option and without being obligated to do so, may require Sub-
Sublessee to attorn to Master Lessor or SubLessor in which event Master Lessor
or SubLessor shall undertake the obligations of Sub-Sublessor under this Sub-
Sublease from the time of the exercise of said option to termination of this
Sub-Sublease but Master Lessor or SubLessor shall not be liable for any prepaid
Rent nor any Security Deposit paid by Sub-Sublessee, nor shall Master Lessor or
SubLessor be liable for any other Defaults of the Sub-Sublessor under the Sub-
Sublease.
9.4 The signatures of the Master Lessor and SubLessor and any
Guarantors of Sub-Sublessor at the end of this document shall constitute their
consent to the terms of this Sub-Sublease.
9.5 Master Lessor and SubLessor acknowledges that, to the best of
Master Lessor's and SubLessor's knowledge, no Default presently exists under the
Master Lease and Sublease of obligations to be performed by Sub-Sublessor and
that the Master Lease and Sublease is in full force and effect.
9.6 In the event that Sub-Sublessor Defaults under its obligations to
be performed under the Master Lease and Sublease by Sub-Sublessor, Master Lessor
and SubLessor agrees to deliver to Sub-Sublessee a copy of any such notice of
default. Sub-Sublessee shall have the right to cure any Default of Sub-Sublessor
described in any notice of default within ten days after service of such notice
of default on Sub-Sublessee. If such Default is cured by Sub-Sublessee then Sub-
Sublessee shall have the right of reimbursement and offset from and against Sub-
Sublessor.
10. Brokers Fee.
10.1 Upon execution hereof by all parties, Sub-Sublessor shall pay to
Grubb & Ellis Company a licensed real estate broker, ("Broker"), a fee as set
forth in a separate agreement between Sub-Sublessor and Broker, or in the event
there is no such separate agreement, the sum of $per separate agreement for
brokerage services rendered by Broker to Sub-Sublessor in this transaction.
10.2 Sub-Sublessor agrees that if Sub-Sublessee exercises any option or
right of first refusal as granted by Sub-Sublessor herein, or any option or
right substantially similar thereto, either to extend the term of this Sub-
Sublease, to renew this Sub-Sublease, to purchase the Premises, or to lease or
purchase adjacent property which Sub-Sublessor may own or in which Sub-Sublessor
has an Interest, then Sub-Sublessor shall pay to Broker a fee in accordance with
the schedule of Broker in effect at the time of the execution of this Sub-
Sublease. Notwithstanding the foregoing, Sub-Sublessor's obligation under this
Paragraph 10.2 is limited to a transaction in which Sub-Sublessor is acting as a
Sub-Sublessor, lessor or seller.
10.3 Master Lessor and Sub-Lessor agrees that if Sub-Sublessee shall
exercise any option or right of first refusal granted to Sub-Sublessee by Master
Lessor or SubLessor in connection with this Sub-Sublease, or any option or right
substantially similar thereto, either to extend or renew the Master Lease and
Sublease, to purchase the Premises or any part thereof, or to lease or purchase
adjacent property which Master Lessor or SubLessor may own or in which Master
Lessor or SubLessor has an interest, or if Broker is the procuring cause of any
other lease or sale entered into between Sub-Sublessee and Master Lessor or
SubLessor pertaining to the Premises, any part thereof, or any adjacent property
which Master Lessor or SubLessor owns or in which it has an interest, then as to
any of said transactions, Master Lessor and SubLessor shall pay to Broker a fee,
in cash, in accordance with the schedule of Broker in effect at the time of the
execution of this Sub-Sublease.
10.4 Any fee due from Sub-Sublessor or Master Lessor or SubLessor
hereunder shall be due and payable upon the exercise of any option to extend or
renew, upon the execution of any new lease, or, in the event of a purchase, at
the close of escrow.
10.5 Any transferee of Sub-Sublessor's interest in this Sub-Sublease,
or of Master Lessor's or SubLessor's interest in the Master Lease and Sublease,
by accepting an assignment thereof, shall be deemed to have assumed the
respective obligations of Sub-Sublessor or Master Lessor under this Paragraph
10. Broker shall be deemed to be a third-party beneficiary of this paragraph 10.
11. Attorney's Fees. If any party or the Broker named herein brings an
action to enforce the terms hereof or to declare rights hereunder, the
prevailing party in any such action, on trial and appeal, shall be entitled to
his reasonable attorney's fees to be paid by the losing party as fixed by the
Court.
12. Additional Provisions. [if there are no additional provisions, draw a
line from this point to the next printed word after the space left here. If
there are additional provisions place the same here.]
13. For purpose of the sub-sublease, when the Sublease and the Master Lease
(collectively "The Documents") refer to Landlord, Tenant, Subtenant or
Sublandlord
Page 2 of 3
REVISED
<PAGE>
- --------------------------------------------------------------------------------
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
- ---------
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY REAL ESTATE BROKER AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS SUBLEASE OR THE
TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS SUBLEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE
PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE STRUCTURAL
INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY
OF THE PREMISES FOR SUBLESSEE'S INTENDED USE.
WARNING: IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
- -------
CERTAIN PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO COMPLY WITH THE
LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.
- --------------------------------------------------------------------------------
Executed at:____________________________ ___________________________________
on:_____________________________________ By /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Address:________________________________ By VP-Finance & CFO
---------------------------------
"Sub-Sublessor" (Corporate Seal)
Executed at: 45635 Northport Loop East ___________________________________
----------------------------
on: 12/30/98 By /s/ Gilbert Hu
------------------------------------- ---------------------------------
Address: Fremont, CA By President & CEO
-------------------------------- --------------------------------
"Sub-Sublessee" (Corporate Seal)
GILBERT HU
Executed at:____________________________ ___________________________________
on:_____________________________________ By_________________________________
Address:________________________________ By_________________________________
"Master Lessor" (Corporate Seal)
___________________________________
By_________________________________
By_________________________________
"Sub-Lessor" (Corporate Seal)
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilizing the
most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 South Flower
St., Suite 600, Los Angeles, CA 90017. (213) 687-8777.
Page 3 of 3
REVISED
<PAGE>
CONSENT BY SUBLANDLORD TO SUB-SUBLEASE
--------------------------------------
The undersigned as Sublandlord under that certain Sublease dated April 1, 1997
between Hitachi America Ltd., a New York corporation ("Sublandlord") and Phase
Metrics, Inc., a California corporation ("Subsublandlord") for certain premises
at 47427 Fremont Boulevard, in Fremont CA (the "Sublease"), hereby consents to
the entering into of the foregoing Subsublease dated December 11, 1998
("Subsublease") between Subsublandlord, as subsublessor, and Altigen
Communications Inc., as subsubtenant, upon the express understandings and
conditions that:
a. Sublandlord neither approves nor disapproves the terms, conditions and
agreements contained in the Subsublease (all of which shall be subordinate
and subject at all times to the terms, covenants and conditions of the
Sublease and that certain Master Lease dated July 26, 1995, between
Security Capital Industrial Trust, as lessor, and Sublandlord, as lessee)
and assumes no liability or obligation of any kind whatsoever on account of
anything contained in the Subsublease;
b. By executing this consent, Sublandlord shall not be deemed to have waived
any rights under the Sublease or Master Lease nor shall Sublandlord be
deemed to have waived Subsublandlord's obligations to obtain any required
consents under the Sublease and Master Lease (other than consent by
Sublandlord to the Subsublease itself);
c. Notwithstanding anything in the Subsublease to the contrary, Subsublandlord
shall be and continue to remain liable for the payment of rent and the full
prompt performance of all of the obligations of Tenant under and as set
forth in the Sublease and Master Lease;
d. Subsublandlord shall pay Sublandlord 50% of all excess monthly rent
received per the Subsublease, with each payment of rent under the Sublease;
e. Nothing contained in the Subsublease shall be taken or construed to in any
way modify, alter, waive or affect any of the terms, covenants or
conditions contained in the Sublease or the Master Lease, or be deemed to
grant Subsubtenant any privity of contract with Landlord or Sublandlord, or
require Landlord or Sublandlord to accept any payments from Subsubtenant on
behalf of Subsublandlord;
4
<PAGE>
f. The Subsublease shall be deemed and agreed to be a sublease only and not an
assignment and there shall be no further subletting or assignment of all or
any portion of the premises demised under the Sublease or the Master Lease
(including the premises demised by the foregoing Subsublease) except in
accordance with the terms and conditions of the Sublease and the Master
Lease; and
g. If Landlord terminates the Master Lease as a result of a default by
Sublandlord thereunder, or if Sublandlord terminates the Sublease as a
result of a default by Subsublandlord thereunder, then the Subsublease
shall automatically terminate concurrently therewith unless Landlord or
sublandlord elects in writing to keep the Subsublease in full force and
effect in which case the Subsublease shall become and be deemed to be a
direct indenture of lease or sublease, as applicable, between Landlord or
Sublandlord, as applicable, and Subsubtenant.
SUBLANDLORD: HITACHI AMERICA, LTD.,
a New York corporation
By: /s/ Motomitsu Sadayasu
-----------------------------------
Motomitsu Sadayasu
General Manager- Computer Division
5
<PAGE>
CONSENT BY LANDLORD TO SUBLEASE
-------------------------------
The undersigned, as Landlord under that certain Lease dated July 26, 1995
with Hitachi America, Ltd., a New York corporation ("Sublandlord") for certain
premises at 47427 Fremont Boulevard in Fremont, CA (the "Prime Lease"), hereby
consents to the entering into of the foregoing Sublease dated December 11, 1998
("Sublease") between sub-Sublanlord, phase Metrics, Inc., a California
Corporation as sublessor, and Altigen Communication Inc., a California
Corporation, as subtenant ("Subtenant"), upon the express understandings and
conditions that:
a. Landlord neither approves nor disapproves the terms, conditions and
agreements contained in the Sublease (all of which shall be
subordinate and subject at all times to the terms, covenants and
conditions of the Prime Lease) and assumes no liability or
obligation of any kind whatsoever on account of anything contained
in the sublease;
b. By executing this consent, Landlord shall not be deemed to have
waived any rights under the Prime Lease nor shall Landlord be deemed
to have waived Sublandlord's obligations to obtain any required
consents under the Prime Lease (other than consent to the Sublease
itself);
c. Notwithstanding anything in the Sublease to the contrary,
Sublandlord shall be and continue to remain liable for the payment
of rent and the full and prompt performance of all of the
obligations of Tenant under and as set forth in the Prime Lease;
d. Nothing contained in the Sublease shall be taken or construed to in
any way modify, alter, waive or affect any of the terms, covenants
or conditions contained in the Prime Lease, or be deemed to grant
Subtenant any privity of contract with Landlord, or require Landlord
to accept any payments from Subtenant on behalf of Sublandlord;
e. The Sublease shall be deemed and agreed to be a sublease only and
not an assignment and there shall be no further subletting or
assignment of all or any portion of the premises demised under the
Prime lease (including the premises demised by the foregoing
Sublease) except in accordance with the terms and conditions of the
Prime lease; and
f. If Landlord terminates the Prime Lease as a result of a default by
Sublandlord thereunder, the Sublease shall automatically terminate
concurrently therewith unless Landlord elects in writing to keep the
Sublease in full force and effect in which case the sublease shall
become and be deemed to be a direct indenture of lease between
Landlord and Subtenant.
LANDLORD
--------
ProLogis Trust, a Maryland Real Estate
Investment Trust
By: /s/ Ned K. Anderson
------------------------------------
Ned K. Anderson
Title: Managing Director
Dated: 1/6/99
--------
<PAGE>
EXHIBIT 10.8
AltiGen Communications, Inc.
DEALER AGREEMENT
This Agreement is entered into as of this 9-9-96 ("Effective Date") by
-------
and between AltiGen Communications, Inc. ("AltiGen"), having its principal place
of business at 47801 Fremont Blvd., Fremont, California 94538 and TELECO
------
("Dealer") having its principal place of business at 430 Woodruff #300
-----------------
Greenville, SC 29607-3462.
- --------------------------
Recitals
--------
Whereas, AltiGen wishes to sell and Dealer wishes to purchase for resale to its
customers, who may in fact be Resellers and VARs, data and telecommunication
equipment ("Products"), all in accordance with the terms and conditions
hereinafter set forth in this Agreement.
In consideration of the covenants in this Agreement, AltiGen and Dealer agree as
follows:
Appointment
-----------
1. AltiGen appoints Dealer as a non-exclusive Dealer of certain AltiGen
Products listed in Exhibit C, in the service area shown in Exhibit B. This
appointment is non-transferable unless permission is received in writing
from AltiGen. Permission will not be unreasonably withheld.
Dealer Obligations
------------------
1. Dealer must purchase AltiGen Products based on price and discount schedules
listed in Addendum dated 9-9-96.
2. Dealer must employ at least one AltiGen Certified Technician at all times.
3. Dealer must employ at least three AltiGen Trained Sales Representatives at
all times.
4. Dealer must comply with the terms and conditions stated in AltiGen's Credit
Policy as shown in Exhibit D.
5. Dealer must purchase a minimum of one demonstration system and maintain a
spare parts supply in accordance with AltiGen's Return and Repair Policy
as stated in Exhibit E. This Policy will be established in the future.
6. Dealer must provide four (4) hour emergency service to its customers.
Standard service response time should be twenty four (24) hours, or the
next business day.
1
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE
OMITTED PORTIONS.
<PAGE>
AltiGen Obligations
-------------------
l. AltiGen agrees to make its Products listed in Exhibit C available to the
Dealer under the Terms and Conditions of this Agreement shown as Exhibit A.
2. AltiGen agrees to schedule and provide technical and sales training at
reasonable times during the year. These programs are shown as Exhibit F.
3. Technical support will be provided by AltiGen via telephone [*]. Field
support is also available on a time and materials basis. Rates will be
provided at a later date.
4. AltiGen agrees to provide reasonable sales support and marketing materials
depending on the Dealer's sales volume.
Schedule of Exhibits
--------------------
A Terms and Conditions
B Service Areas
C Products Included in this Agreement and Dealer Price List
D Credit Policy
E Return and Repair Policy
F Training Programs
AGREED
Dealer AltiGen
Teleco Inc. AltiGen Communications, Inc.
- -------------------------- ------------------------------
430 Woodruff Rd. 47801 Fremont Blvd.
- -------------------------- ------------------------------
Greenville, S.C. 29607 Fremont, CA 94538
- -------------------------- ------------------------------
William M. Rogers Craig Murray
- -------------------------- ------------------------------
By By
PRES/C.E.O. Director, North America Sales
- -------------------------- ------------------------------
Title Title
/s/ William M. Rogers /s/ Craig Murray
- -------------------------- ----------------------------
Signature Signature
9-9-96 9-9-96
- -------------------------- ----------------------------
Date Date
2
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Exhibit A
TERMS AND CONDITIONS
1. The Dealer Agreement does not appoint Dealer as an agent of AltiGen. The
Dealer is an independent contractor. AltiGen will not be liable for any
obligations of the Dealer, its agents, employees or independent
contractors.
2. AltiGen reserves the right to modify, discontinue, add or change any
Product listed on Exhibit C. Support will be continued for a period of 90
days after notification.
3. Dealer shall sell AltiGen Products to end users located only in their
service area. Dealer is prohibited from selling AltiGen Products to other
Dealers or end users who intend to use the Products in countries other than
the United States or its possessions.
4. Dealer is not authorized to make any end user warranties on behalf of
AltiGen. Dealer shall indemnify and hold AltiGen harmless from any costs
associated with additional or extended warranties made by Dealer.
5. Dealer will limit its representations concerning AltiGen Products to those
found in AltiGen's written specifications.
6. Dealer is forbidden from stating or implying that AltiGen Products provide
immunity from fraudulent intrusion (Toll Fraud). Dealer must use this
language on all sales materials and contracts involving AltiGen Products.
7. Dealer shall provide AltiGen with sales forecasts by Product on a quarterly
basis.
8. Dealer shall process all warranty and non-warranty service claims according
to the Return and Repair Policy as stated in Exhibit E. This Policy will be
provided at a later date.
9. Dealer shall insure AltiGen Products from the point of receipt by the
Dealer until final acceptance by the end user. The insurance shall include
fire, theft, casualty and public liability. The amount of insurance will be
mutually agreed upon and a copy will be provided to AltiGen upon request.
10. Dealer agrees to indemnify and hold AltiGen harmless from all costs or
liabilities of AltiGen as a result of a material breach of this contract by
the Dealer.
11. This Agreement will be in effect for one (1) year from the Effective Date.
This Agreement will automatically renew for successive one (1) year
periods, unless terminated by mutual agreement of the parties or in
accordance with the terms of this Agreement.
3
<PAGE>
This Agreement may be canceled at any time without cause, by either party
upon ninety (90) days written notice to the other party.
Either party may terminate this Agreement for material breach of the terms
and conditions by giving written notice to the defaulting party and
allowing a thirty (30) day period to cure the breach. Either party may
terminate this Agreement immediately upon written notice if the other party
ceases to do business for any reason or becomes subject to any bankruptcy,
insolvency, liquidation or other similar proceedings. AltiGen
Communications shall have the first Right of Refusal to purchase the Dealer
if for sale.
Upon termination of this Agreement for breach, AltiGen, at its option, may
cancel all unfilled orders.
If AltiGen cancels this Agreement without cause, AltiGen shall repurchase
from Dealer, at Dealer's option, all Products in Dealer's inventory on the
effective date of cancellation, provided AltiGen verifies that a) the
Products were shipped by AltiGen to Dealer within the previous six (6)
months and b) the Products are in their original shipping containers and
have not been altered, damaged or used. The repurchase price shall be the
price actually paid by Dealer less any prior credits. Upon termination,
Dealer agrees to ship the repurchased Products to AltiGen's plant, freight
prepaid. Any Demonstration System will be included under these terms.
The Dealer, upon termination or cancellation of this Agreement for any
reason, agrees to discontinue all advertising of or reference to the
Products.
Except as specifically set forth, neither party shall be liable to the
other for damages in any form by reason of the termination or cancellation
of this Agreement in accordance with the provision set forth above.
12. Termination of this Agreement shall make neither party liable for claims
against the other as a result of lost sales, expenses incurred or
investments made in connection with the creation of this Agreement.
13. Dealer shall purchase AltiGen Products at the price set forth on the Dealer
Price List.
List Prices are subject to change at any time, provided Dealer is given
thirty (30) days written notice of any [*]. Outstanding bids by the
Dealer will be accepted under the old pricing for a period of up to [*].
Copies must be provided to AltiGen upon receipt of the notice of a price
change.
In the event of a [*] for any of the Products, AltiGen will extend to the
Dealer the price in effect at the time the Dealer's order is acknowledged
by AltiGen.
4
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
In the event of a [*] for any of the Products, the [*] will apply to such
Products which are shipped by AltiGen to Dealer on or after the effective
date of the [*].
In the event of a [*] on any of the Products, Dealer may apply for credit
on those units of Products: a) which were shipped by AltiGen to Dealer no
more than [*] prior to the effective date of the [*] and [*] in Dealer's
inventory on the effective date of the [*] or b) which were in transit
between AltiGen and Dealer on the effective date of the [*].
The amount of the credit on any unit shall be equal [*].
14. In the advertising and sale of the Products, Dealer will use AltiGen's
regular trade names and trademarks ("Trademarks"). For this purpose,
AltiGen grants Dealer a non-exclusive, royalty free, limited license to use
the AltiGen Trademarks, provided that Dealer displays the symbol "TM"
adjacent to each use of a Trademark the first time a Trademark is used, or
displays such other symbols and notices as may be prescribed by AltiGen.
Dealer acknowledges and agrees that AltiGen is the exclusive owner of the
Trademarks. The use of the Trademarks by Dealer does not convey to Dealer
any right, title or interest in or to the Trademarks. Dealer may not
register any Trademark in any jurisdiction unless such registration is made
on behalf and for the benefit of AltiGen and is expressly approved by
AltiGen in advance and in writing.
15. Dealer will pay all sales, use, excise and property taxes on AltiGen
Products shipped to the Dealer.
16. All Product orders must be submitted on a Dealer's purchase order form. All
orders must be signed by an authorized representative of the Dealer. Orders
may be faxed, but receipt must be acknowledged by AltiGen's Sales Order
Processing Department.
17. AltiGen will attempt to ship all Products by the requested date and means
requested by the Dealer (at the Dealer's cost).
18. Shipment of the Products will be F.O.B. AltiGen's facilities. Dealer shall
bear all freight costs and the risk of loss passes to the Dealer upon
delivery to the carrier. Title to the Product, however, shall not pass
until AltiGen has been paid in full.
19. AltiGen warrants its Products for a period of one year from the date of
delivery. AltiGen warrants its Products to be free from defects in material
and workmanship. The Products will comply with the specifications as set
forth in the Product Description manual and the
5
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Installation and Maintenance manual. The customers' sole remedy for breach
of this Limited Warranty is to have the defective parts repaired or
replaced at AltiGen's option. This warranty is not transferable and does
not apply to Products damaged by misuse, normal wear and accidents. It also
does not apply where recommended maintenance programs have not been
followed.
20. The foregoing warranties exclude all other warranties express or implied.
No warranty is made regarding protection against unauthorized access to
network services including: long distance, international, 800 and 900. In
addition, no warranty is made regarding unauthorized use of voice mail,
auto attendant or DISA to access network services.
21. AltiGen shall not under any circumstances be liable to any person for any
special, incidental, indirect or consequential damages, including and
without limitation to, damages resulting from use or malfunction of the
Products, loss of profits or revenues or costs of replacement goods, even
if AltiGen is informed in advance of the possibility of such damages.
22. In no event will AltiGen be liable for loss of time, profits, revenue or
anticipated savings in connection with the purchase of our Products.
23. Dealers sole remedy with respect to non-conformity shall be a replacement
of the defective unit or a refund of the purchase price paid.
24. This Agreement can only be modified by a written amendment signed and dated
by both parties.
25. The Dealer cannot sell, transfer, assign, pledge or dispose any of the
rights granted by the Dealer Agreement, except under terms previously
stated in this agreement.
26. All notices and communications regarding this Agreement shall be in
writing.
27. The terms of this Agreement shall be held in strict confidence by both
parties.
28. Neither party shall be held liable for an inability to perform to the terms
of this Agreement as a result of any Force Majeure.
6
<PAGE>
Exhibit B
SERVICE AREA
Dealer shall sell AltiGen Products to customers who intend to use the Products
in the United States.
7
<PAGE>
Exhibit C
DEALER PRICE LIST
Effective [*]
Quantum Platform
----------------
(Dealer to provide system server)
<TABLE>
<CAPTION>
Part Number Description Dealer Price Reference Page
- ----------- ----------- ------------ --------------
<S> <C> <C> <C>
ALTI-CTIKIT CTI starter kit, 4 trunks & 8 extensions with AltiWare system 11
software and telephony power supply.
1-3 Kits Per Order [*]
4-6 Kits Per Order [*]
7-9 Kits Per Order [*]
10-49 Kits Per Order [*]
50-499 Kits Per Order [*]
</TABLE>
Computer Telephony Server
-------------------------
(Complete turnkey systems ready for Quantum boards)
<TABLE>
<CAPTION>
Part Number Description Dealer Price Reference Page
- ----------- ----------- ------------ --------------
<S> <C> <C> <C>
ALTX-SYS1000 Telephony Server, 4 slots industrial rack mountable chassis [*] 11
with Windows NT workstation OS, AltiWare, and telephony
power supply.
AMS-400S Telephony Server, 4 slots full tower chassis with Windows NT [*] 11
workstation OS, AltiWare, and telephony power supply.
AMS-400SR Telephony Server, 4 slots full tower chassis with redundant [*] 12
power supply, Windows NT workstation OS, AltiWare, and
telephony power supply.
AMS-800I Telephony Server, 8 slots industrial rack mountable chassis [*] 12
with Windows NT workstation OS, AltiWare, and telephony
power supply.
AMS-800IR Telephony Server, 8 slots industrial rack mountable chassis [*] 12
with redundant power supply, Windows NT workstation OS,
AltiWare, and telephony power supply.
AMS-800S Telephony Server, 8 slots super tower chassis with Windows [*] 13
NT workstation OS, AltiWare, and telephony power supply.
AMS-800SR Telephony Server, 8 slots super tower chassis with redundant [*] 13
power supply, Windows NT workstation OS, AltiWare, and
telephony power supply.
</TABLE>
8
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Quantum Boards
--------------
<TABLE>
<CAPTION>
Part Number Description Dealer Price Reference Page
- ----------- ----------- ------------ --------------
<S> <C> <C> <C>
ALTI-AM0408U Quantum Platform, 4 trunks & 8 extensions. 13
1-3 Boards per order [*]
4-6 Boards per order [*]
7-9 Boards per order [*]
10-49 Boards per order [*]
50-499 Boards per order [*]
ALTI-AM0804U Quantum Platform, 8 trunks & 4 extensions. 13
1-3 Boards per order [*]
4-6 Boards per order [*]
7-9 Boards per order [*]
10-49 Boards per order [*]
50-499 Boards per order [*]
ALTX-AM0012U Quantum Platform, 12 extensions. 14
1-3 Boards per order [*]
4-6 Boards per order [*]
7-9 Boards per order [*]
10-49 Boards per order [*]
50-499 Boards per order [*]
</TABLE>
9
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Peripherals
-----------
<TABLE>
<CAPTION>
Part Number Description Dealer Price Reference Page
- ----------- ----------- ------------ --------------
<S> <C> <C> <C>
ALTI-MTRI4 14" high resolution monitor [*]
PHN-M8009-GY Single-line executive telephone with message waiting [*]
PHN-M8314-GY Single-line executive speaker telephone with message waiting [*]
PHN-C9075-PG Single-line telephone with message waiting & Tap button [*]
PHN-C3709-01 Single-line telephone with message waiting [*]
PHN-C3879-01 Single-line telephone with 12 programmable buttons and [*]
message waiting
PHN-C3979-01 Single-line speaker telephone with message waiting [*]
PHL-PCIET-01 3Com PCI Ethernet adapter, 10 BaseT [*]
PWS-T8050-01 Tellabs T8050 telephony power supply [*]
PWS-C2D1A-01 Bay size telephony power converter [*]
PWS-PC250-01 Server power supply with internal AC outlay (250 Watts) [*]
PWS-PC300-01 Server power supply with internal AC outlay (300 Watts) [*]
PWS-PC400-01 Server power supply with internal AC outlay (400 Watts) [*]
SFW-PSWEB-01 Web site server software [*]
SFW-AWSFD-01 AltiWare system software on floppy diskettes [*]
SFW-WINNT-01 Windows NT Software 3.51 - workstation [*]
SFW-RMC01-01 Remote system maintenance - client [*]
SFW-RMS01-01 Remote system maintenance- server [*]
CBL-25M50-01 DB25 to 50-pin Telco cable, Male to Male [*]
CBL-MVIP6-01 MVIP cable with 6 connectors [*]
DOC-RFG01-04 4 User Pocket Reference Guides [*]
DOC-ICM01-01 Installation Configuration & Maintenance Manual [*]
MSC-PANEL-02 12 Port Connection Panel with 50-pin F Telco connector [*]
</TABLE>
10
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Detail Components List
----------------------
ALTI-CTIKIT
Quantum board with 4 trunks & 8 extensions
Telephony power supply and cable
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-SYS1000
Industrial rack mountable chassis, 4 Quantum board capacity
Pentium 100 MHz CPU
1.2 GB Hard Disk
32 MB DRAM
CD ROM
3.5" floppy drive
Windows NT workstation software
AltiWare system software
Telephony power supply
MVIP cable
Keyboard
Mouse
Installation Configuration & Maintenance Manual
AMS-400S
Full tower server chassis, 4 Quantum board capacity
Pentium 100 MHz CPU
1.2 GB Hard Disk
32 MB DRAM
CD ROM
3.5" floppy drive
Windows NT workstation software
AltiWare system software
Telephony power supply
MVIP cable
Keyboard
Mouse
Installation Configuration & Maintenance Manual
11
<PAGE>
AMS-400SR
Full tower server chassis, 4 Quantum board capacity
Redundant, hot swappable power supply
Pentium 100 MHz CPU
1.2 GB Hard Disk
32 MB DRAM
CD ROM
3.5" floppy drive
Windows NT workstation software
AltiWare system software
Telephony power supply
MVIP cable
Keyboard
Mouse
Installation Configuration & Maintenance Manual
AMS-800I
Industrial rack mountable chassis, 8 Quantum board capacity
300W power supply
Pentium 120 MHz CPU
1.2 GB Hard Disk
32 MB DRAM
CD ROM
3.5" floppy drive
Windows NT workstation software
AltiWare system software
Telephony power supply
MVIP cable
Keyboard
Mouse
Installation Configuration & Maintenance Manual
AMS-800IR
Industrial rack mountable chassis, 8 Quantum board capacity
300W redundant, hot swappable power supply
Pentium 120 MHz CPU
1.2 GB Hard Disk
32 MB DRAM
CD ROM
3.5" floppy drive
Windows NT workstation software
AltiWare system software
Telephony power supply
MVIP cable
Keyboard
Mouse
Installation Configuration & Maintenance Manual
12
<PAGE>
AMS-800S
Super tower server chassis, 8 Quantum board capacity and 9 peripheral bays
300W power supply
Pentium 120 MHz CPU
1.2 GB Hard Disk
32 MB DRAM
CD ROM
3.5" floppy drive
Windows NT workstation software
AltiWare system software
Telephony power supply
MVIP cable
Keyboard
Mouse
Installation Configuration & Maintenance Manual
AMS-800SR
Super tower server chassis, 8 Quantum board capacity and 9 peripheral bays
300W redundant, hot swappable power supply
Pentium 120 MHz CPU
1.2 GB Hard Disk
32 MB DRAM
CD ROM
3.5" floppy drive
Windows NT workstation software
AltiWare system software
Telephony power supply
MVIP cable
Keyboard
Mouse
Installation Configuration & Maintenance Manual
ALTI-AM0408U
Quantum board with 4 trunks & 8 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
8 User Pocket Reference Guides
Quick Installation Guide
ALTI-AM0804U
Quantum board with 8 trunks & 4 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
4 User Pocket Reference Guides
Quick Installation Guide
ALTI-AM0012U
13
<PAGE>
Quantum board with 12 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
12 User Pocket Reference Guides
Quick Installation Guide
14
<PAGE>
Exhibit D
CREDIT POLICY
1. An approved credit application is required for every Dealer.
2. Payment terms for buyers with approved credit
A. [*] discount if the outstanding balance is paid within [*] of invoice
date
B. Net paid in [*].
3. Delinquent Accounts
A. Any account over [*] past due from invoice date will result in a
Dealer's status review and collection actions taken against the Dealer.
B. Returned checks are subject to a [*] processing charge and may result in
the review of the Dealer's status.
C. Delinquent balances are subject to a finance charge of [*] from the
invoice date.
15
[*] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE MOTTED PORTIONS.
<PAGE>
Exhibit E
RETURN AND REPAIR POLICY
1. The only location authorized to repair AltiGen Products is 47801 Fremont
Blvd., Fremont, CA 94538
2. Equipment warranties will be voided if unauthorized repairs are made.
3. The process for returns and repairs is stated in the Installation
Configuration and Maintenance Manual provided to Dealer.
16
<PAGE>
Exhibit F
ALTIGEN TRAINING MODULES
<TABLE>
<CAPTION>
module # title duration audience
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
800-100-000100 Market Opportunities 1 hour all Sales except Major
Accounts
- -------------------------------------------------------------------------------------------------------------------------------
800-200-000100 Basic Telephony 1 hour VARs, Retail & Major
Accounts
- -------------------------------------------------------------------------------------------------------------------------------
800-200-000200 Basic Data Networking 1 hour Interconnects, Major
Accounts
- -------------------------------------------------------------------------------------------------------------------------------
800-300-000100 AltiServ Functionality & Features Overview 2 hours all
- -------------------------------------------------------------------------------------------------------------------------------
800-400-000100 Installation & Maintenance (I&M) 4 hours
- -------------------------------------------------------------------------------------------------------------------------------
Hardware Installation & Expansion 1 hour all I&M
- -------------------------------------------------------------------------------------------------------------------------------
System Configuration & Administration 1 hour all I&M
- -------------------------------------------------------------------------------------------------------------------------------
Technical Exercises 2 hours all I&M
- -------------------------------------------------------------------------------------------------------------------------------
800-400-000200 Helpful Hints 1 hour all I&M
- -------------------------------------------------------------------------------------------------------------------------------
800-500-000200 Sales Training & AltiServ Benefits 4 hours all Sales
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
AltiGen Obligations
-------------------
l. AltiGen agrees to make its Products listed in Exhibit C available to the
Dealer under the Terms and Conditions of this Agreement shown as Exhibit A.
2. AltiGen agrees to schedule and provide technical and sales training at
reasonable times during the year. These programs are shown as Exhibit F.
3. Technical support will be provided by AltiGen via telephone twenty four
(24) hours a day, seven (7) days a week. Field support is also available on
a time and materials basis. Rates will be provided at a later date.
4. AltiGen agrees to provide reasonable sales support and marketing materials
depending on the Dealer's sales volume.
Schedule of Exhibits
--------------------
A Terms and Conditions
B Service Areas
C Products Included in this Agreement and Dealer Price List
D Credit Policy
E Return and Repair Policy
F Training Programs
AGREED
Dealer AltiGen
Teleco Inc. AltiGen Communications, Inc.
- -------------------------- ------------------------------
430 Woodruff Rd. 47801 Fremont Blvd.
- -------------------------- ------------------------------
Greenville, S.C. 29607 Fremont, CA 94538
- -------------------------- ------------------------------
William M. Rogers Craig Murray
- -------------------------- ------------------------------
By By
PRES/C.E.O. Director, North America Sales
- -------------------------- ------------------------------
Title Title
/s/ William M. Rogers /s/ Craig Murray
- -------------------------- ----------------------------
Signature Signature
9-9-96 9-9-96
- -------------------------- ----------------------------
Date Date
18
<PAGE>
[LETTERHEAD OF ALTIGEN COMMUNICATIONS, INC.]
ADDENDUM TO THE DEALER AGREEMENT BETWEEN
ALTIGEN COMMUNICATIONS, INC. AND TELECO
It is TELECOs' intent to purchase Quantum Boards and Software to be installed in
a TELECO Chassis and sold to its dealers as a TELECO product. In order to
purchase the Quantum units at a most favorable price of [*] it is TELECOs'
intent to purchase a minimum of [*].
TELECO agrees to establish the primary sales and technical support to its
dealers. AltiGen agrees to train the TELECO Sales and Technical teams assigned
to the above. AltiGen also agrees to provide the necessary second level of
technical support should the TELECO team be unable to resolve a problem.
Agreed /s/ William M. Rogers Agreed /s/ Craig Murray
------------------------- -------------------------
William M. Rogers, President Craig Murray, Director
TELECO AltiGen Communications, Inc.
Date 9-9-96 Date 9-9-96
------------- --------------
19
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Exhibit 10.9
AltiGen Communications, Inc.
DISTRIBUTOR AGREEMENT
THIS DISTRIBUTOR AGREEMENT ("Agreement") is made and entered into as of
this _____ day of April, 1997 (the "Effective Date") by and between ALTIGEN
COMMUNICATIONS, INC., with principal offices at 45635 Northport Loop East,
California 94538 ("AltiGen") and Kanematsu; Semiconductor Corporation, a
Japanese corporation, with principal offices at 6-1, Shintomi l-chome, Chuo-
ku, Tokyo 104, Japan ("Distributor").
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. DEFINITIONS
1.1 End User means a licensee who acquires Products for Internal Use
(rather than distribution or resale) in accordance with the terms of an
End-User License Agreement substantially in the form of the End-User
License Agreement attached hereto as Exhibit A (the "End-User Agreement").
1.2 Internal Use means use for purposes which do not directly produce
revenue for the End User. "Internal Use" does not include timesharing.
1.3. Intellectual Property means any patent, copyright, trade name, trade
mark, trade secret, know-how, mask work or any other intellectual property
right or proprietary information or technology, whether registered or
unregistered.
1.4. Product means software program packages and physical computer
hardware, including (1) a program code, in object code form only, on
diskette(s) or CD-ROM (the "Program"); (2) physical computer hardware
including computer boards, computer power supply, computer cables (the "PC
Hardware"); (3) instruction booklets and other information prepared for
End-Users concerning the use of the program and computer hardware
("Documentation"); (4) an End-User Agreement. The Products include only
those listed by title and functional description on the "Product and Price
List" attached hereto as Exhibit B.
1.5. Purchase Objectives means the minimum quantity of each Product which
Distributor commits to purchase quarterly during the term of this
Agreement, as mutually agreed upon and set forth in Exhibit C attached
hereto.
1.6. Territory means [*]. In the event Distributor achieves design-in of
the Product into any customer's system in the Territory and such customer
decides to purchase such Products outside of the Territory, AltiGen shall
pay to Distributor a commission agreed upon between AltiGen and Distributor
on a case by case basis.
1
[*]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
1.7 Assigned Customers means customers assigned to Distributor, as listed
in the Exhibit E attached hereto
2. GRANT OF DISTRIBUTION RIGHT
Subject to the terms and conditions set forth in this Agreement, AltiGen
hereby grants to Distributor a non-exclusive, non-transferable right to (a)
market and distribute the Products to original equipment manufacturers, system
integrators and Dealers located in the Territory. and (b) use the Products for
those purposes set forth in the Agreement. Distributor shall not, directly or
indirectly, solicit sales of the Products outside of the Territory without the
prior written consent of AltiGen. AltiGen retains the right to sell the Products
directly to other parties in the Territory, including, by way of illustration
but not limitation, distributors, original equipment manufacturers and End
Users. Distributor shall have no right to modify the Product or Documentation
without the prior written approval of AltiGen. Distributor agrees not to (a)
reverse engineer, de-compile, disassemble or otherwise reduce the Product to
human-perceivable form, or to encourage or assist third parties in doing so or
(b) distribute the Product by rental or lease. All rights not expressly granted
herein are retained by AltiGen. Distributor shall have no right to make copies
from a golden master or grant End Users the right to make copies from a golden
master absent further agreement between AltiGen and the Distributor.
3. OWNERSHIP
Except as specified in this Agreement, AltiGen does not grant to
Distributor any rights in or to any Intellectual Property related to the Product
or to any materials furnished hereunder. The Intellectual Property embodied in
the Product, all modifications thereto, and all Documentation thereof, are
proprietary to AltiGen, and AltiGen retains all right, title and interest in and
to such Intellectual Property.
4. PRICES AND PAYMENTS
4.1. Prices. Distributor shall pay AltiGen, for each Product and upgrade,
the Distributor list price for the Product as set forth on Exhibit B.
Both the AltiGen standard list price and the Distributor's discount
levels are subject to change by AltiGen from time to time in its sole
discretion upon [*] written notice to Distributor. Orders requesting
delivery after receipt of notice of a price or discount change will be
charged at the new price or discount level.
4.2. Distributor Pricing. Distributor is free to determine its own resale
prices for the Products..Although AltiGen may publish suggested list
prices, these are suggestions only and are not binding in any way.
4.3. Payment. Upon approval of credit by AltiGen, payment for additional
orders shall be due and payable within [*] following shipment. Invoices
not paid when due shall accrue interest on an annual basis from the date
due until paid of [*] on any outstanding balance, or the maximum legal
rate allowed by law, whichever is less. All Products ordered in excess of
any credit limit shall be paid for in acceptable currency in
2
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
advance of shipment, by a letter of credit drawn upon a bank acceptable to
AltiGen. a bank cashier's check, or a bank wire transfer AltiGen reserves
the right to vary, change, or limit the amount or duration of credit to be
allowed to Distributor, either generally or with respect to a particular
order. In the event AltiGen does not extend credit to Distributor, payment
for all purchases hereunder shall be made in advance of shipment or,
AltiGen's option, C.O.D.
4.4. Distributor Price Protection. AltiGen shall notify Distributor of the
effective date of a price decrease for any of the Products covered herein.
Inventory acquired by Distributor from AltiGen less than [*] before the
effective date of the price decrease and not yet sold or under a contract
for sale will be granted price protection as set forth herein. [*] To
obtain price protection, within [*] of receipt of AltiGen's notice of the
price decrease, Distributor shall provide to AltiGen a written inventory
report showing by part number the quantity of each AltiGen Product in the
Distributor's inventory as of the effective date of the price decrease.
Price protection will not be granted in the case of a temporary price
decrease or special promotion.
5. STOCK ROTATION
5.1. Inventory Balancing. Provided that Distributor issues a simultaneous
offsetting purchase order, Distributor may, once during each quarter,
return for credit Product purchased in excess of the quarterly Purchase
Objectives for up to a maximum of [*] dollar sales invoiced by AltiGen
during the immediately preceding quarter. The credit issued for the
returned inventory will be based on the [*] at which the Products were
available to Distributor during the period commencing with the date on
which the Product was purchased and ending on the date the Product was
returned., and may be used on a dollar-for-dollar basis solely to purchase
additional Product pursuant to the offsetting purchase order. The right to
balance inventory granted herein must be exercised by the last day of the
second month of the quarter. Distributor shall submit a request for
authorization to return Product for inventory balancing which shall state
the quantity of Product to be returned. Upon receipt of such request,
AltiGen shall issue a return of materials authorization number. Inventory
returned under this section must be accompanied by a return of materials
authorization number assigned by AltiGen and (i) in merchantable condition,
in its factory-sealed packaging, or (ii) if the returned Product is
returned because defective by virtue of being in breach of the warranty
provided for in the End-User Agreement, returned with the entire contents
of such Product package. All Products returned under this subsection (5.1)
shall be returned within thirty (30) days of the date of issuance of the
return of materials authorization number. Distributor shall pay for the
shipping of returned Products to AltiGen and AltiGen shall pay for the
shipping of replacement Product sent to Distributor.
5.2. Product Refresh. AltiGen may, at its sole discretion, modify the
Products. For purposes of this Agreement, AltiGen shall have sole
discretion as to whether a Product is deemed to be a new version of an
existing Product to be provided to Distributor under the
3
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
terms of this Agreement or a new Product requiring execution of an appendix
to this Agreement prior to distribution. Once a new version of a Product
covered by this Agreement begins shipping, Distributor shall have thirty
(30) days from the first AltiGen shipment date of the new version to
Distributor, or from written notification by AltiGen of the new version,
whichever is later, (i) to submit an offsetting purchase order for an equal
dollar-for-dollar value of the new version of the Product and (ii) to
return Product from the prior release from Distributor's inventory that was
shipped by AltiGen to Distributor within the previous ninety.(90) days.
Such returns shall be shipped at Distributor's expense. Returned Product
will be exchanged by AltiGen on a dollar for dollar basis, proportional
with any price increase or decrease, with the new version of the Product
and shipped to Distributor at AltiGen's expense. Product returned under
this provision must be in merchantable condition and in its original
factory-sealed packaging. The right to refresh Product under this
subsection (5.2) shall be in addition to Distributor's inventory-balancing
right under subsection (5.1) above.
5.3. Product Discontinuation. AltiGen shall provide Distributor with one
hundred eighty (180) days written notice prior to AltiGen's discontinuation
of any Product. Upon receipt of such notice, Distributor shall have the
right to return all discontinued Products purchased within sixty (60) days
after the notice of discontinuation for a credit to Distributor's account
of the Product's purchase price less any discounts or credits previously
received. Credits granted hereunder can only be used for future purchases
of Products. The right to return discontinued Product under this subsection
(5.3) shall be in addition to Distributor's inventory-balancing right under
subsection (5.1) above.
5.4. Distributor Financial Condition. Distributor represents and warrants
that it is and at all times during the term of this Agreement shall remain
in good financial condition, solvent and able to pay its bills when due.
Distributor further represents and warrants that it has and at all times
during the term of this Agreement shall retain the ability to order and pay
for all Product Distributor is obliged to purchase under Section 7.2 below.
From time to time, on reasonable notice by AltiGen, Distributor shall
furnish financial statements as necessary to determine Distributor's
financial condition.
5.5. Taxes. Prices calculated in accordance with Exhibit B are exclusive
of all applicable taxes. Distributor agrees to pay all taxes associated
with the marketing, distribution and delivery of the Products ordered,
including but not limited to sales, use, excise, added value and similar
taxes and all customs, duties or governmental impositions, but excluding
taxes on AltiGen's net income. Any tax or duty AltiGen may be required to
collect or pay upon the marketing or delivery of the Products shall be paid
by Distributor and such sums shall be due and payable to AltiGen upon
delivery. If claiming a tax exemption, Distributor must provide AltiGen
with valid tax exemption certificates at the time of invoicing.
6. PRODUCT CHANGES
AltiGen shall have the right, in its sole discretion, without liability to
Distributor, to (a) change the Products available on the Product List, (b)
change the design, or discontinue developing, producing, licensing or
distributing any of the Products covered by this
4
<PAGE>
Agreement and (c) announce new Products to which the terms and conditions of
this Agreement do not apply The parties agree that additional Products may be
added to the Agreement by execution of an appendix to this Agreement setting
forth any special terms, conditions, modifications or deletions necessary for
the additional Products Additional Products shall be deemed to be added to this
Agreement to the extent AltiGen accepts an, purchase orders for Products not
otherwise listed on the Product List
7. ORDERS
7.1. Procedure. All orders for Products placed by Distributor shall be in
writing.
7.2. Acceptance of Orders. All orders for Products by Distributor shall be
subject to acceptance by AltiGen and shall not be binding on AltiGen until
the earlier of written confirmation or shipment, and, in the case of
acceptance by shipment, only as to the portion of the order actually
shipped.
7.3. Controlling Terms. The terms and conditions of this Agreement and of
the applicable AltiGen order confirmation pursuant to Section 7.2
("Acceptance of Orders") above, shall apply to each order accepted or
shipped by AltiGen hereunder. Any terms or conditions appearing on the face
or reverse side of any purchase order, acknowledgment, or confirmation
other than confirmation pursuant to Section 7.2 above that are different
from or in addition to those required hereunder shall not be binding on the
parties, even if signed and returned, unless both parties hereto expressly
agree in a separate writing to be bound by such separate or additional
terms and conditions.
7.4. AltiGen Order Cancellation. AltiGen reserves the right to cancel or
suspend any orders placed by Distributor and accepted by AltiGen, or to
refuse or delay shipment thereof, if Distributor (a) fails to make any
payment as provided herein or in any invoice, (b) fails to meet credit or
financial requirements established by AltiGen, or (c) otherwise fails to
comply with the terms and conditions of this Agreement.
7.5. Distributor Order Cancellation. Orders accepted by AltiGen may be
canceled without penalty if written notice of cancellation is given to
AltiGen and the notice is received by AltiGen at least [*] prior to the
scheduled shipment date. Orders canceled less than [*] prior to the
scheduled shipment date will be subject to a cancellation payment of [*]
of the invoice value of the canceled order. In no event may Distributor
cancel any order or any portion of an order after shipment.
7.6. Product Availability. AltiGen will use reasonable efforts to fill
orders for Products and meet requests for shipment dates subject to Product
availability and AltiGen production and supply schedules. Should orders for
Products exceed AltiGen's available inventory, AltiGen will allocate its
available inventory and make deliveries on a basis AltiGen deems equitable,
in its sole discretion, and without liability to Distributor on account of
the method of allocation chosen or its implementation.
7.7. Obligation to Ship in Presence of Breach. Even where AltiGen accepts
a purchase order, AltiGen shall not be obligated to ship Products if
Distributor is in arrears on
5
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
payments owing to AltiGen or otherwise in breach of the Agreement at the
time of the scheduled shipment.
7.8. Delivery. AltiGen will ship Products F.O.B. origin. Distributor may
change the designated locations by providing AltiGen with written notice of
such change, and the notice is received by AltiGen at least fifteen (15)
days prior to the estimated shipment dates The right to change a designated
location does not include any right to drop ship to customer sites.
8. DISTRIBUTOR OBLIGATIONS
8.1. Packaging. Distributor shall distribute either (i) unopened boxes of
Product or (ii) AltiGen products integrated within the chassis of a
computer "server."
8.2. Authorized Distributor Program. AltiGen has instituted an AltiGen
Authorized Distributor Program. Distributor agrees to market the Products
in compliance with AltiGen's Authorized Distributor Program.
8.3. Business Plan. Within ninety (90) days of the Effective Date,
Distributor shall provide to AltiGen a business plan setting forth
Distributor's plans for promoting the Products. Distributor agrees to
provide an updated business plan in accordance with the schedule for
updating such as specified by AltiGen. At least twice each year, AltiGen
may conduct reviews to evaluate Distributor's performance under such
business plan.
8.4. Purchase Objectives; Inventory. Distributor and AltiGen shall agree
upon quarterly Purchase Objectives. The initial Purchase Objectives are
stated in Exhibit C. Distributor acknowledges that AltiGen may terminate
the Agreement for failure to order and pay for the quantity of Product set
forth in the Purchase Objectives each and every quarter. As a part of
meeting its Purchase Objectives, Distributor shall maintain an inventory of
Products and warehousing facilities sufficient to serve adequately the
demands of Dealers on a reasonably timely basis. If such inventory equals
or exceeds the quantity of Products necessary to meet reasonably
anticipated demands of Dealers for a period of at least 60 days,
Distributor shall be deemed to have fulfilled its inventory requirements
hereunder (as distinct from its Purchase Objectives).
8.5. Point of Sale Reports. During the term of this Agreement, Distributor
shall provide to AltiGen a monthly report containing the following
information: (i) the submitter account number, (ii) the destination
company's (Dealers') name, (iii) the "ship to" address, zip code and area
code and (iv) the part number of the Products shipped. Such report, with
respect to a calendar month, shall be delivered to AltiGen no later than
the fifteenth (15th) day of the following calendar month.
8.6. End User Satisfaction. Distributor agrees that the Products marketed
under this Agreement are technically complex and require high-quality,
individualized pre-marketing and post-marketing support. This support is
necessary to achieve and maintain high End User satisfaction. Therefore,
Distributor agrees that high End User satisfaction is a
6
<PAGE>
condition of distribution authorization by AltiGen. The distribution
channels established by AltiGen, and the obligations placed on
Distributors, exist to ensure high End User satisfaction. Distributor
agrees to market the Products only in accordance with this Agreement and
not to market the Products by mail order In addition, in order to assure
high End User satisfaction, Distributor agrees to
(a) report to AltiGen promptly and in writing all suspected and
actual problems with any Product;
(b) maintain a shipment report identifying for each End User, the
Products sold, the date of sale, and each Product's serial number;
(c) retain all shipment reports for five years after the date of
sale, and assist AltiGen, upon request, in tracing a Product to a
End User, in order to distribute critical Product information,
locate a Product for safety reasons, or discover unauthorized
marketing or infringing acts;
(d) conduct business in a manner which reflects favorably at all
times on the Products, goodwill and reputation of AltiGen;
(e) avoid deceptive, misleading or unethical practices which are or
might be detrimental to AltiGen or its Products;
(f) refrain from making any false or misleading representations with
regard to AltiGen or its Products; and
(g) refrain from making any representations, warranties or
guarantees to customers or to the trade with respect to the
specifications, features or capabilities of the Products that are
inconsistent with the literature distributed by AltiGen.
8.7. Promotional Efforts. Distributor shall use its reasonable best
efforts to market and distribute the Products to original equipment
manufacturers, system integrators and Dealers in the Territory. Distributor
may advertise the Products in advertising media of Distributor's choice,
provided that the primary audience or circulation is located in the
Territory. Distributor shall make full use of all promotional material
supplied by AltiGen and make available literature and other information
that AltiGen requires to be transmitted to such End Users. In all
advertising and promotion of the Products, Distributor shall comply with
AltiGen's standard cooperative advertising policies as specified from time
to time by AltiGen.
8.8. Demonstration System. Distributor shall maintain a demonstration
system capable of supporting the most technically advanced Products.
Distributor shall use such demonstration system both to facilitate its
ability to fulfill its End User support obligations, and to support its
sales efforts.
8.9. Training. To assist Distributor with the distribution and support of
Products, AltiGen or its vendors may provide training to certain
Distributor employees for any new Product release during the term of this
Agreement, upon AltiGen's reasonable request, and Distributor shall use
reasonable best efforts to have Distributor's inside and outside sales
force present for such training sessions. AltiGen may make training
available to other Distributor personnel at an additional charge to be
agreed upon by the parties.
7
<PAGE>
8.10. Distributor Personnel. Distributor shall train and maintain a
sufficient number of capable technical and sales personnel to serve the
demands of End Users for the Products, for service and support of the
Products, call on all End Users with reasonable frequency and answer
promptly all End User inquiries or requests for information regarding the
Products. Distributor and its staff shall develop and maintain sufficient
knowledge of the industry, the Products, and competitive offerings
(including specifications, features, and functions) so as to be able to
demonstrate and support the Products for End Users. Distributor shall
provide all End Users with technical support and other assistance
appropriate for the promotion, marketing, and distribution of the Products.
Distributor shall attend AltiGen's distribution meetings.
9. SUPPORT
AltiGen shall make the sales support described in Exhibit D hereto
available to Distributor (but not its End Users) during the term of this
Agreement. AltiGen may provide End Users with support and maintenance under
a separate agreement.
10. TRADEMARKS AND CONFIDENTIAL INFORMATION
10.1. Trademarks. AltiGen shall have and retain sole ownership of
AltiGen's logo, trade names and trademarks ("Trademarks"), including the
goodwill pertaining thereto. AltiGen hereby grants to Distributor the right
to use and display the Trademarks solely in connection with and solely to
the extent reasonably necessary for the marketing, distribution, and
support of the Products within the Territory in accordance with the terms
and conditions of this Agreement. Distributor shall not do or suffer to be
done any act or thing that would impair AltiGen's rights in its Trademarks
or damage the reputation for quality inherent in the Trademarks. AltiGen
has the right to take all action which it deems necessary to ensure that
the advertising and promotional materials related to the Products utilized
by Distributor are consistent with the reputation and prestige of the
Trademarks. Distributor shall market, distribute, and support the Products
only under the Trademarks, and not any other trademark or logo. Distributor
shall not use the Trademarks or any other trademarks or trade names of
AltiGen or any word, symbol, or design confusingly similar thereto, as part
of its corporate name, or as part of the name of any product of
Distributor. Distributor shall not (i) remove, alter or overprint the
Products copyright notices, trademarks, and logos, or packaging, (ii)
attach any additional trademarks to the Products without AltiGen's prior
written consent or (iii) affix any of the Trademarks to any non-AltiGen
products. Distributor agrees that any goodwill which accrues because of
Distributor's use of the Trademarks shall become AltiGen's property.
Distributor further agrees not to contest AltiGen's Trademarks or
tradenames, or to make application for registration of any AltiGen
Trademarks or tradenames.
10.2. Confidential Information. During the term of this Agreement, and for
a period of three (3) years thereafter, Distributor will maintain in
confidence any confidential or proprietary information of AltiGen disclosed
to it by AltiGen including, without limitation, any information regarding
scientific, engineering, manufacturing, marketing, business plan, financial
or personnel matter relating to AltiGen, whether in oral, written, graphic
or electronic form ("Confidential Information"). All Confidential
Information must be
8
<PAGE>
conspicuously marked "CONFIDENTIAL" or, if orally disclosed, reduced to
writing within fifteen (15) days after disclosure and marked "CONFIDENTIAL"
Distributor will not use, disclose or grant use of such Confidential
Information except as expressly authorized by AltiGen To the extent that
disclosure is authorized by AltiGen, Distributor will obtain prior
agreement from its employees, agents or consultants to whom disclosure is
to be made to hold in confidence and not make use of such information for
any purpose other than those permitted by AltiGen. Distributor will use at
least the same standard of care as it uses to protect its own Confidential
Information to ensure that such employees, agents or consultants do not
disclose or make any unauthorized use of such Confidential Information.
Distributor will promptly notify AltiGen upon discovery, of any
unauthorized use or disclosure of the Confidential Information.
10.3. Exceptions. The obligations of confidentiality contained in Section
10.2 will not apply to the extent that it can be established by Distributor
by competent proof that such Confidential Information:
(a) was already known to Distributor, other than under an
obligation of confidentiality, at the time of disclosure by
AltiGen,
(b) was generally available to the public or otherwise part of the
public domain at the time of its disclosure to Distributor;
(c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any
act or omission of Distributor in breach of this Agreement;
(d) was disclosed to Distributor, other than under an obligation
of confidentiality, by a third party who had no obligation to the
disclosing party not to disclose such information to others.
11. INDEMNIFICATION
11.1. AltiGen Indemnity. Subject to the limitations set forth herein
below, AltiGen shall defend Distributor with respect to any claim, suit or
proceeding brought against Distributor to the extent it is based upon a
claim that any Product sold pursuant to this Agreement infringes upon any
U.S. patent, U.S. trademark, U.S. copyright or U.S. trade secret of any
third party; provided, however, that Distributor (i) promptly notifies
AltiGen in writing of such claim, suit or proceeding; (ii) gives AltiGen
the right to control and direct investigation, preparation, defense and
settlement of any claim, suit or proceeding; and (iii) gives assistance and
full cooperation for the defense of same, and, further provided, that
AltiGen's liability with respect to portions of Products provided by or
licensed from third parties will be limited to the extent AltiGen is
indemnified by such third parties. AltiGen shall pay any resulting damages,
costs and expenses finally awarded to a third party, but AltiGen shall not
be liable for such amounts, or for settlements incurred by Distributor,
without AltiGen's prior written authorization. If a Product is, or in
AltiGen's opinion might be, held to infringe as set forth above, AltiGen
may, at its option, replace or modify such Product so as to avoid
infringement, or procure the right for Distributor to continue the use and
resale of such Product. If neither of such alternatives is, in AltiGen's
opinion, reasonably possible, the infringing Product shall be returned to
AltiGen, and AltiGen's sole liability, in addition to its obligation to
reimburse any awarded damages,
9
<PAGE>
costs and expenses set forth above, shall be to refund the purchase price
paid for such Products by Distributor
11.2. Exclusions. The provisions of the foregoing indemnity shall not
apply with respect to any instances of alleged infringement based upon or
arising out of the use of such Products in any manner for which the
Products were not designed, or for use of Products other than the uses and
distributions designated by AltiGen, for use of any Product that has been
modified by Distributor or any third party without written consent of
AltiGen, or for use of any Product in connection with or in combination
with any equipment, devices or software that have not been supplied by
AltiGen. Notwithstanding any other provisions hereof, the foregoing
indemnity shall not apply with respect to any infringement based on
Distributor's activities occurring subsequent to its receipt of notice of
any claimed infringement unless AltiGen shall have given Distributor
written permission to continue to market and distribute the allegedly
infringing Product.
11.3. Entire Liability and Limitation. THE FOREGOING SECTIONS 11.1 AND
11.2 STATE THE SOLE AND EXCLUSIVE REMEDY OF DISTRIBUTOR AND THE ENTIRE
LIABILITY AND OBLIGATION OF ALTIGEN WITH RESPECT TO INFRINGEMENT OR CLAIMS
OF INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADE SECRET OR OTHER
INTELLECTUAL PROPERTY RIGHT BY THE PRODUCTS OR ANY PART THEREOF. IN NO
EVENT SHALL ALTIGEN'S LIABILITY UNDER SECTION 11.1 FOR INDEMNITY OF
DISTRIBUTOR WITH RESPECT TO INFRINGEMENT OF A PATENT, COPYRIGHT, TRADEMARK
OR TRADE SECRET EXCEED THE AMOUNTS PAID TO ALTIGEN BY DISTRIBUTOR UNDER
THIS AGREEMENT IN THE PREVIOUS CALENDAR YEAR FOR THE PRODUCTS DISTRIBUTED
BY DISTRIBUTOR PURSUANT TO THIS AGREEMENT.
11.4. Indemnity by Distributor. DISTRIBUTOR AGREES TO INDEMNIFY AND HOLD
ALTIGEN HARMLESS FROM ANY CLAIMS, SUITS, PROCEEDINGS, LOSSES, LIABILITIES,
DAMAGES, COSTS AND EXPENSES (INCLUSIVE OF ALTIGEN'S REASONABLE ATTORNEYS'
FEES) MADE AGAINST OR INCURRED BY ALTIGEN AS A RESULT OF NEGLIGENCE,
MISREPRESENTATION, OR ERROR OR OMISSION ON THE PART OF DISTRIBUTOR OR
REPRESENTATIVE OF DISTRIBUTOR. DISTRIBUTOR SHALL BE SOLELY RESPONSIBLE FOR,
AND SHALL INDEMNIFY AND HOLD ALTIGEN HARMLESS FROM, ANY CLAIMS, WARRANTIES
OR REPRESENTATIONS MADE BY DISTRIBUTOR OR DISTRIBUTOR'S EMPLOYEES OR AGENTS
WHICH DIFFER FROM THE WARRANTY PROVIDED BY ALTIGEN IN ITS END USER
AGREEMENT.
12. WARRANTY
12.1. AltiGen Warranty. AltiGen warrants the Products TO END USERS ONLY
pursuant to the terms and conditions of the End-User Agreement and no
warranty is extended to the Distributor.
10
<PAGE>
12.2. Limitations and Disclaimer EXCEPT FOR THE EXPRESS WARRANTY SET FORTH
IN THE END USER AGREEMENT, ALTIGEN EXPRESSLY DISCLAIMS ALL WARRANTIES
EXPRESSED OR IMPLIED RELATING TO THE PRODUCTS, AND FURTHER EXPRESSLY
EXCLUDES ANY WARRANTY OF NON-INFRINGEMENT, FITNESS FOR A PARTICULAR PURPOSE
OR MERCHANTABILITY NO PERSON IS AUTHORIZED TO MAKE ANY OTHER WARRANTY OR
REPRESENTATION CONCERNING THE PERFORMANCE OF THE PRODUCTS OTHER THAN AS
PROVIDED IN THE END USER AGREEMENT. DISTRIBUTOR SHALL MAKE NO OTHER
WARRANTY, EXPRESS OR IMPLIED, ON BEHALF OF ALTIGEN.
12.3. Distributor's Warranty. Distributor hereby represents and warrants
to AltiGen that neither this Agreement (or any term hereof) nor the
performance of or exercise of rights under this Agreement, is restricted
by, contrary to, in conflict with, ineffective under, requires registration
or approval or tax withholding under, or affects AltiGen's intellectual
property rights (or the duration thereof) under, or will require any
compulsory licensing under, any law or regulation of any organization,
country, group of countries or political or governmental entity to which
Distributor is subject.
13. LIMITATION ON LIABILITY
13.1. Waiver of Consequential Damages. IN NO EVENT WILL ALTIGEN BE LIABLE
TO DISTRIBUTOR OR ANY THIRD PARTY FOR ANY INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION ANY LOSS OF INCOME,
LOSS OF PROFITS OR LOSS OF DATA, EVEN IF ALTIGEN HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE GRANT
OF THE LICENSE HEREUNDER.
13.2. Limitation of Liability. ALTIGEN'S TOTAL LIABILITY TO DISTRIBUTOR OR
ANY THIRD PARTY HEREUNDER SHALL NOT EXCEED THE AMOUNT PAID FOR THE PRODUCTS
DURING THE TWELVE MONTH PERIOD IMMEDIATELY PRECEDING THE DATE ON WHICH THE
CLAIM GIVING RISE TO SUCH LIABILITY AROSE.
13.3. Third Party Claims. AltiGen shall not be liable for any claim by
Distributor based on any third party claim, except as stated in Section 11
of the Agreement.
14. TERM AND TERMINATION
14.1. Term. Subject to the provisions of Sections 14.2 and 14.3 below,
this Agreement is valid for a term of one year and shall be renewed
automatically for additional one year terms provided that each party shall
have the right to terminate this Agreement for convenience upon ninety (90)
days written notice prior to the end of the initial term or any subsequent
term of the Agreement.
11
<PAGE>
14.2. Termination for Cause. AltiGen may terminate the Agreement for cause
if Distributor fails to meet its payment obligations under the Agreement
and such failure continues for ten (10) days following receipt of written
notice from AltiGen. In addition, either party may terminate this Agreement
for cause upon thirty (30) days written notice to the other party if such
other party materially breaches this Agreement and such material breach is
not cured within the thirty (30) day period following delivery of notice.
Either party shall have the right to terminate this Agreement immediately
in the event the other party terminates its business, or becomes subject to
any bankruptcy or insolvency proceeding under Federal or State statute, and
such petition is not dismissed within sixty (60) days.
14.3. Effect of Termination. For a period of sixty (60) days following
termination of this Agreement, Distributor may distribute any Products in
Distributor's possession at the time of termination, provided, however,
that if AltiGen has terminated the Agreement pursuant to Section 14.2,
Distributor's right to distribute the Products shall immediately terminate.
Following any permitted distribution, Distributor shall return to AltiGen
or, at AltiGen's request, destroy the copies of the Products and
Documentation then in its possession. In addition, Distributor shall be
entitled to retain one (1) copy of the Product following termination solely
for the purposes of providing support to End Users. AltiGen shall apply the
value of any returned Products to any outstanding credit balance in
Distributor's account. The termination of this Agreement shall not act to
terminate the licenses granted to End Users pursuant to this Agreement.
14.4. Acceleration of Payment. Upon termination of the Agreement by
AltiGen for cause, the due dates of all outstanding invoices for Products
will automatically be accelerated so that they become due and payable on
the effective date of termination, even if longer terms had been provided
previously. All orders or portions of orders remaining un-shipped as of the
effective date of such termination shall automatically be canceled.
15. MISCELLANEOUS
15.1. Nonexclusivity. AltiGen retains the right to market, distribute, and
support the Products in the Territory directly to or through any person or
entity on any terms deemed desirable by AltiGen in its sole discretion.
15.2. Modification and Amendment. Except with respect to Exhibit B hereof,
this Agreement may be modified or amended only in writing by the consent of
both parties.
15.3. Survival. Sections 10.2, 10.3, 11, 12, 14.3, 14.4 and 15 shall
survive termination of this Agreement for three (3) years.
15.4. Governing Law and Arbitration. This Agreement is made in accordance
with and shall be governed and construed under the laws of the State of
California, as applied to agreements executed and performed entirely in
California by California residents. Any controversy or claim arising out of
or related to this Agreement, or the breach thereof, shall be finally
settled by arbitration. If AltiGen applies for arbitration, then the matter
shall be decided by the Japan Commercial Arbitration Association, under its
Commercial
12
<PAGE>
Arbitration Rules in Tokyo, Japan. If Distributor applies for arbitration,
then the matter shall be decided by the American Arbitration Association,
under its Commercial Arbitration Rules in Sunnyvale, California. Each party
hereto is bound by an arbitration award rendered Judgment upon any award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
15.5 Toll Fraud. Distributor is forbidden from stating or implying that
AltiGen Products provide immunity from fraudulent intrusion (Toll Fraud).
Distributor must use this language on all sales materials and contract
involving AltiGen Products.
15.6. Notices. All notices, demands, or consents required or permitted
under this Agreement shall be in writing and shall be delivered personally
or sent by a national overnight courier service or by registered or
certified, return receipt requested mail to the other party at the
addresses first set forth above. All notices, demands, or consents shall be
deemed effective upon personal delivery or seven (7) days following
dispatch via first class mail or three (3) business day following deposit
with any national overnight courier service in accordance with this
section.
15.7. No Partnership of Joint Venture. No agency, employment, partnership,
joint venture, or other joint relationship is created hereby, it being
understood that Distributor and AltiGen are independent contractors vis-a-
vis one another and that neither has any authority to bind the other in any
respect whatsoever.
15.8. Force Majeure. Neither party shall be deemed to be in default of or
to have breached any provision of this Agreement as a result of any delay,
failure in performance, or interruption of service resulting directly or
indirectly from acts of God, acts of civil or military authority, civil
disturbance, war, strikes or other labor disputes, fires, transportation
contingencies, laws, regulations, acts or orders of any government agency
or official thereof, other catastrophes or any other circumstances beyond
the party's reasonable control.
15.9. Export Control. The parties acknowledge that the Products may be
subject to the export control laws of the United States of America,
including the U.S. Bureau of Export Administration regulations, and hereby
agree to obey any and all such laws. The parties agree to comply with the
U.S. Foreign Corrupt Practices Act of 1977, as amended, and with all
applicable foreign laws relating to the use, importation, licensing or
distribution of the Products.
15.10. Assignment. Neither party may assign this Agreement or any of its
rights, duties or obligations under this Agreement to any third party
without the other party's prior written consent, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, either party may
assign its rights and delegate its obligations under this Agreement without
the consent of the other party to a purchaser of all or substantially all
of its voting stock or capital assets or to an entity with which such party
merges or is consolidated.
15.11. Severability and Waiver. In the event any provision of this
Agreement is held to be invalid or unenforceable, the valid or enforceable
portion thereof and the remaining
13
<PAGE>
provisions of this Agreement will remain in full force and effect. Any
waiver (express or implied) by any party of any default or breach of this
Agreement shall not constitute a waiver of any other or subsequent default
or breach.
15.12. Entire Agreement. This Agreement and all Exhibits referred to
herein embody the entire understanding of the parties with respect to the
subject matter hereof and shall supersede all previous communications,
representations or understandings, either oral or written, between the
parties relating to the subject matter hereof.
15.13 Headings. The section headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define, limit,
construe or describe the scope or intent of any such section nor in any way
affect this Agreement.
15.14. Parties Advised by Counsel. This Agreement has been negotiated
between unrelated parties who are sophisticated and knowledgeable in the
matters contained in this Agreement and who have acted in their own self
interest. In addition, each party has been represented by legal counsel.
The provisions of this Agreement shall be interpreted in a reasonable
manner to effect the purpose of the parties, and this Agreement shall not
be interpreted or construed against any party to this Agreement because
that party or any attorney or representative for that party drafted this
Agreement or participated in the drafting of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
including the Exhibits hereto, and incorporated herein by reference, as of the
date first written above.
ALTIGEN DISTRIBUTOR
/s/ Gilbert Hu /s/ Masaharu Shinya
- -------------------------------- --------------------------------
Signed Signed
Gilbert Hu Masaharu Shinya
- -------------------------------- --------------------------------
Print Name Print Name
President President
- -------------------------------- --------------------------------
Title Title
4/21/97 4/21/97
- -------------------------------- --------------------------------
Date Date
14
<PAGE>
EXHIBIT A
ALTIGEN COMMUNICATIONS, INC. - END USER AGREEMENT
NOTICE -- READ THIS BEFORE OPENING THIS PACKAGE, INSTALLING THE PC
HARDWARE OR USING THE SOFTWARE
OPENING THIS PACKAGE, INSTALLING THE PC HARDWARE OR USING THE SOFTWARE INDICATES
YOUR ACCEPTANCE OF THESE TERMS AND CONDITIONS. READ ALL OF THE TERMS AND
CONDITIONS OF THIS LICENSE AGREEMENT PRIOR TO OPENING THIS PACKAGE OR USING THE
SOFTWARE. IF YOU DO NOT ACCEPT THESE TERMS, YOU MUST RETURN THIS PACKAGE
UNOPENED WITHIN FIVE (5) DAYS OF OBTAINING THE PACKAGE, WITH YOUR RECEIPT, AND
YOUR MONEY WILL BE RETURNED.
* * * *
PLEASE NOTE THAT YOU MAY NOT USE, COPY, MODIFY OR TRANSFER THE PROGRAM, THE PC
HARDWARE OR DOCUMENTATION OR ANY COPY, EXCEPT AS EXPRESSLY PROVIDED 1N THIS
AGREEMENT.
LICENSE. This software program (the "Program") and the documentation (the
- -------
"Documentation") are licensed, not sold, to you. The term "Program" shall also
include any updates of the Program licensed to you by AltiGen. Subject to the
terms of this agreement, you have a non-exclusive and nontransferable right to
use the Program, Personal Computer Card (the "PC Hardware") and Documentation.
You agree to use your best efforts to prevent and protect the contents of the
Program, the PC Hardware and Documentation from unauthorized disclosure or use.
AltiGen and its licensors reserve all rights not expressly granted to you.
AltiGen's licensors are the intended third party beneficiaries of this agreement
and have the express right to rely upon and directly enforce the terms set forth
herein.
LIMITATIONS ON USE. You may not rent, lease, sell or otherwise transfer or
- ------------------
distribute copies of the Program, the PC Hardware or Documentation to others.
You may not modify or translate the Program, the PC Hardware or the
Documentation without the prior written consent of AltiGen. You may not reverse
assemble, reverse compile or otherwise attempt to create the source code from
the Program or the PC Hardware. You may not use AltiGen's name or refer to
AltiGen directly or indirectly in any papers, articles, advertisements, sales
presentations, news releases or releases to any third party without the prior
written approval of AltiGen for each such use. You may not release the results
of any performance or functional evaluation of any Program to any third party
without prior written approval of AltiGen for each such release.
BACKUP AND TRANSFER. You may make one copy of the Program for backup purposes if
- -------------------
AltiGen's copyright notice is included. You may not sublicense, assign,
delegate, rent, lease, time-share or otherwise transfer this license or any of
the related rights or obligations for any reason. Any attempt to make any such
sublicense, assignment, delegation or other transfer by you shall be void. You
may physically transfer the Program from one computer to another provided that
you do not retain any copies of the Program, including any copies stored on a
computer.
15
<PAGE>
COPYRIGHT AND PATENT. The Program, the PC Hardware and related Documentation are
- --------------------
copyrighted and patented by AltiGen and its licensors. You may make one copy of
the Documentation and print one copy of any on-line documentation or other
materials provided to you in electronic form. Any and all other copies of the
-------------------------------
Program and any copy of the Documentation made by you are in violation of this
- ------------------------------------------------------------------------------
license.
- --------
OWNERSHIP. You agree that the Program and Documentation belong to AltiGen and
- ---------
its licensors. You agree that you neither own nor hereby acquire any claim or
right of ownership to the Program and Documentation or to any related patents,
copyrights, trademarks or other intellectual property. You own only the magnetic
or other physical media (including PC Hardware) on which the Program and related
Documentation are recorded or fixed. AltiGen and its licensors retain all right,
title and interest in and to the Documentation and all copies and the Program
recorded on the original media and all subsequent copies of the Program at all
times, regardless of the form or media in or on which the original or other
copies may subsequently exist. This license is not a sale of the original or any
subsequent copy. All content accessed through the Program is the property of the
applicable content owner and may be protected by applicable copyright law. This
license gives you no rights to such content.
TERM AND TERMINATION. This license is effective until terminated. You may
- --------------------
terminate this license at any time by destroying the Program and Documentation
and the permitted backup copy. This license automatically terminates if you fail
to comply with its terms and conditions. You agree that, upon such termination,
you will either destroy (or permanently erase) all copies of the Program and
Documentation, or return the original Program and Documentation to AltiGen,
together with any other material (PC Hardware) you have received from AltiGen in
connection with the Program.
LIMITED WARRANTY. AltiGen warrants the media on which the Program is furnished
- ------------------
to be free from defects in materials and workmanship under normal use for 30
days from the date that you obtain the Program. AltiGen warrants the PC Hardware
for a period of one year from the date of consumer purchase to be free from
defects in materials and workmanship. EXCEPT FOR THIS LIMITED WARRANTY, ALTIGEN
AND ITS LICENSORS PROVIDE THE PROGRAM, THE PC HARDWARE AND THE DOCUMENTATION "AS
IS" WITHOUT WARRANTY OF ANY KIND EITHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING
BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
Some states do not allow the exclusion of implied warranties, so the above
exclusion may not apply to you. This warranty gives you specific legal rights
and you may also have other rights which vary from state to state.
LIMITATION OF REMEDIES. AltiGen and its licensors' entire liability and your
- ----------------------
exclusive remedy in connection with the Program, the PC Hardware and the
Documentation shall be that you are entitled to return the defective media
containing the Program together with the PC Hardware and Documentation to the
merchant. At the option of the merchant, you may receive replacement media
containing the Program, the PC Hardware and Documentation that conforms with the
limited warranty or a refund of the amount paid by you. IN NO EVENT WILL ALTIGEN
OR ITS
16
<PAGE>
LICENSORS BE LIABLE FOR ANY INDIRECT DAMAGES OR OTHER RELIEF ARISING OUT OF YOUR
USE OR INABILITY TO USE THE PROGRAM INCLUDING. BY WAY OF ILLUSTRATION AND NOT
LIMITATION, LOST PROFITS, LOST BUSINESS OR LOST OPPORTUNITY, OR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING LEGAL FEES, ARISING
OUT OF SUCH USE OR INABILITY TO USE THE PROGRAM, EVEN IF ALTIGEN, ITS LICENSORS
OR AN AUTHORIZED ALTIGEN DISTRIBUTOR, DISTRIBUTOR OR SUPPLIER HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY.
Some states do not allow the exclusion or limitation of incidental or
consequential damages so the above limitation or exclusion may not apply to you.
This license will be governed by the laws of the State of California as applied
to transactions taking place wholly within California between California
residents.
U.S. GOVERNMENT END USERS. The Program is a "commercial item," as that term is
- -------------------------
defined at 48 C.F.R. 2.101 (Oct. 1995), consisting of "commercial computer
software" and "commercial computer software documentation," as such terms are
used in. 48 C.F.R. 12.212 (Sept. 1995). Consistent with 48 C.F.R. 12.212 and 48
C.F.R. 227.7202-1 through 227.7202-4 (June 1995), all U.S. Government End Users
acquire the Program with only those rights set forth herein.
Rev 3.0 2/12/97
17
<PAGE>
Exhibit B
ALTIGEN DISTRIBUTOR PRICE LIST
Release 3.5
Starter Kits
------------
<TABLE>
<CAPTION>
Part Number Description Price
- ----------- ----------- -----
<S> <C> <C>
ALTI-CTIKIT-3.5 CTI starter kit. 4 trunks & 8 extensions with AltiWare system software and external [*]
telephony power supply.
ALTI-CTI8400-3.5 CTI starter kit. 8 trunks & 4 extensions with AltiWare system software and external [*]
telephony power supply.
ALTI-CTI4850-3.5 CTI starter kit. 4 trunks & 8 extensions with AltiWare system software and [*]
connector cable for Tellabs model T8050 internal telephony power supply.
ALTI-CTI8450-3.5 CTI starter kit. 8 trunks & 4 extensions with AltiWare system software and [*]
connector cable for Tellabs model T8050 internal telephony power supply.
ALTI-DMK4890-3.5 Demo CTI starter kit, 4 trunks & 8 extensions with AltiWare system software, [*]
external telephony power supply and Not For Resale stickers.
</TABLE>
Add-On Quantum Boards
---------------------
AltiWare is bundled with starter kits only, not with individual add-on Quantum
boards. Therefore, add-on Quantum boards are only sold with starter kits to
increase the capacity, of new systems, or as add-on boards to increase the
capacity of existing systems.
<TABLE>
<CAPTION>
Part Number Description Price
- ----------- ----------- -----
<S> <C> <C>
ALTI-CD0408U Quantum Platform, 4 trunks & 8 extensions. [*]
ALTI-CD0804U Quantum Platform, 8 trunks & 4 extensions. [*]
ALTI-CD0012U Quantum Platform. 12 extensions. [*]
</TABLE>
Peripherals
-----------
<TABLE>
<CAPTION>
Part Number Description Price
- ----------- ----------- -----
<S> <C> <C>
CBL-25M50-01 DB25 to 50-pin Telco cable. Male to Male [*]
CBL-MVIP6-01 MVIP cable with 6 connectors [*]
DOC-RFG01-04 4 User Pocket Reference Guides [*]
</TABLE>
18
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY WITH
THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
DOC-ICM01-01 Installation Configuration & Maintenance Manual [*]
MSC-PANEL-02 12 Port Connection Panel with 50-pin F Telco connector [*]
ALTI-P4890 AltiGen External Telephony Power Supply and connector cables [*]
</TABLE>
Detail Components List
----------------------
ALTI-CTIKIT-3.5
Quantum board with 4 trunks & 8 extensions
External telephony power supply and cable
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-CTI8400-3.5
Quantum board with 8 trunks & 4 extensions
External telephony power supply and cable
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-CTI4850-3.5
Quantum board with 4 trunks & 8 extensions
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Connector cable for Tellabs model T8050 internal telephony power supply
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-CTI8450-3.5
Quantum board with 8 trunks & 4 extensions
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
19
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
MVIP cable
Connector cable for Tellabs model T8050 internal telephony power supply
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-DMK4890-3.5
Quantum board with 4 trunks & 8 extensions
External telephony power supply and cable
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-CD0408U
Quantum board with 4 trunks & 8 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
8 User Pocket Reference Guides
Quick Installation Guide
ALTI-CD0804U
Quantum board with 8 trunks & 4 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
4 User Pocket Reference Guides
Quick Installation Guide
ALTI-CD0012U
Quantum board with 12 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
12 User Pocket Reference Guides
Quick Installation Guide
ALTI-P4890
External Telephony Power Supply (-48v & 90Vac)
Cable Assembly Kit
AC Power Cable (6')
Bridge Cable Din-Din (24")
PC Slot End Cable wit 4 Connectors (32")
20
<PAGE>
Modification of Distributor Agreement
THIS MODIFICATION AGREEMENT is made and entered into as of this 13 day of May,
----
1997 by and between AltiGen Communications, Inc. ("AltiGen") and Kanematsu
Semiconductor Corporation ("Distributor").
Under the provisions of Subsection 15.2 of Distributor Agreement between AltiGen
and KSC executed on April 21, 1997, the parties agree to modify its Subsection
1.7 as follows:
"1.7 Assigned Customers, as listed in the Exhibit E attached hereto, means
customers to whom Distributor mainly promote the sale of Products. AltiGen will
acknowledge and respect such assignment."
IN WITNESS WHEREOF, the parties hereto have duly executed this Modification
Agreement as of the date first written above.
ALTIGEN DISTRIBUTOR
/s/ Gilbert Hu /s/ Masaharu Shinya
- -------------------------------- --------------------------------
Signed Signed
Gilbert Hu Masaharu Shinya
- -------------------------------- --------------------------------
Print Name Print Name
President President
- -------------------------------- --------------------------------
Title Title
5/13/97 5/13/97
- -------------------------------- --------------------------------
Date Date
21
<PAGE>
Exhibit 10.10
DISTRIBUTION AGREEMENT
BETWEEN
TECH DATA PRODUCT MANAGEMENT, INC.
AND
ALTIGEN COMMUNICATIONS, INC.
[*]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT, dated as of this 21st day of July, 1997, is
---- ---- --
between TECH DATA PRODUCT MANAGEMENT, INC., a Florida corporation ( "Tech
Data"), with its principal corporate address at 5350 Tech Data Drive,
Clearwater, Florida 34620 and ALTIGEN COMMUNICATIONS, INC., a California
corporation ("Vendor" or "AltiGen"), with its principal corporate address at:
45635 Northport Loop East, Fremont, California 94538
RECITALS
A. Tech Data desires to purchase certain Products from AltiGen from time to
time and AltiGen desires to sell certain Products to Tech Data in accordance
with the terms and conditions set forth in this Agreement.
B. AltiGen desires to appoint Tech Data as its non-exclusive distributor to
market Products within the Territory (as hereinafter defined) and Tech Data
accepts such appointment on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Recitals, the mutual covenants
contained in this Agreement and other good and valuable consideration, Tech Data
and AltiGen hereby agree as follows:
ARTICLE I.
----------
DEFINITIONS, APPOINTMENT AND TERM OF AGREEMENT
----------------------------------------------
1.1 Definitions. The following definitions shall apply to this Agreement.
-----------
(a) "Customers" of Tech Data shall include dealers, resellers, value added
resellers, mail order resellers and other entities that acquire the
Products from Tech Data.
(b) "DOA" shall mean Product, or any portion thereof, which fails to
operate properly on initial "burn in", boot, or use, as applicable.
(c) "Documentation" shall mean user manuals, training materials, Product
descriptions and specifications, brochures, technical manuals, license
agreements, supporting materials and other printed information relating to
the Products, whether distributed in print, electronic, or video format.
(d) "Effective Date" shall mean the date on which this Agreement is signed
and dated by a duly authorized representative of Tech Data.
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<PAGE>
(e) "End Users" mean licensees who acquire Products for internal use
(rather than distribution or resale) in accordance with the terms of an
End-User License Agreement substantially in the form of the End-User
License Agreement attached hereto as Exhibit A )the "End-User Agreement").
(f) "Non-Saleable Products" shall mean any Product that has been returned
to Tech Data by its Customers that has had the outside shrink wrapping or
other packaging seal broken; any components of the original package are
missing, damaged or modified; or is otherwise not fit for resale.
(g) "Products" shall mean, individually or collectively as appropriate,
hardware, licensed software, Documentation, supplies, accessories, and
other commodities related to any of the foregoing produced by AltiGen, as
more particularly described in Schedule 1.1(g) attached hereto.
(h) "Return Credit" shall mean a credit to Tech Data in an amount equal to
the price paid by Tech Data for Products less any price protection credits
but not including any early payment or prepayment discounts.
(i) "Services" means any warranty, maintenance, advertising, marketing or
technical support and any other services performed or to be performed by
AltiGen.
(j) "Territory" shall mean the United States, its territories and
possessions, and Canada.
(k) "Intellectual Property" means any patent, copyright, trade name, trade
mark, trade know-how, mask work or any other intellectual property right or
proprietary technology, whether registered or unregistered.
1.2 Term of Agreement. The term of this Agreement shall commence on the
-----------------
Effective Date and, unless terminated by either party as set forth in this
Agreement, shall remain in full force and effect for a term of one (1)
year, and will be automatically renewed for successive one (1) year terms
unless prior written notification of termination is delivered by one of the
parties in accordance with the notice provision of this Agreement.
1.3 Appointment as Distributor. AltiGen hereby grants to Tech Data the non-
--------------------------
exclusive right to distribute Products during the term of this Agreement to
customers located within the Territory. This license includes the right to
order, possess and distribute the Products to Customers and to provide the
Products to Customers for use on demonstration units. AltiGen and Tech Data
acknowledge and agree that the license to use the Product is solely between
AltiGen and the End User and is governed by the terms of the AltiGen
standard use license enclosed with the
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Product. This Agreement does not grant AltiGen or Tech Data an exclusive
right to purchase or sell Products and shall not prevent either party from
developing or acquiring other vendors or customers or competing Products.
Tech Data will use commercially reasonable efforts to promote sales of the
Products. AltiGen agrees that Tech Data may obtain Products in accordance
with this Agreement for resale to Customers by its parent, affiliates and
wholly owned subsidiaries of Tech Data within the territory. Said parent,
affiliates and wholly owned subsidiaries of Tech Data shall be entitled to
order Products directly from AltiGen pursuant to this Agreement.
Tech Data shall not, directly or indirectly, solicit sales of the Products
outside of the Territory without the prior written consent of AltiGen and
will endeavor to assist AltiGen to ensure that Tech Data's Customers only
sell within the Territory. Tech Data shall have no right to modify the
Product or Documentation without the prior written approval of AltiGen.
Tech Data agrees not to (a) reverse engineer, decompile, disassemble or
otherwise reduce the Product to human-perceivable form, or to encourage or
assist third parties in doing so, or (b) distribute the Product by rental
or lease. All rights not expressly granted herein are retained by AltiGen.
Tech Data shall have no right to grant a Customer the right to make copies
from a golden master absent further agreement between AltiGen and Tech
Data.
1.4 Ownership. Except as specified in this Agreement, AltiGen does not
grant to Tech Data any rights in or to any Intellectual Property related to
the Product or to any materials furnished hereunder. The Intellectual
Property embodied in the Product, all modifications thereto, and all
Documentation thereof, are proprietary to AltiGen. and AltiGen retains all
right, title and interest in and to such Intellectual Property.
ARTICLE II. PURCHASE ORDERS
---------------------------
2.1 Issuance and Acceptance of Purchase Order.
------------------------------------------
(a) This Agreement shall not obligate Tech Data to purchase any Products or
Services except as specifically set forth in a written purchase order.
(b) Tech Data may issue to AltiGen one or more purchase orders identifying
the Products Tech Data desires to purchase from AltiGen. Notwithstanding
any preprinted terms or conditions on Tech Data's purchase orders, the
terms and conditions of this Agreement shall apply to and govern all
purchase orders accepted or shipped by AltiGen hereunder, except that
purchase orders may include other terms and conditions which am consistent
with the terms and conditions of this Agreement, or which are mutually
agreed to in writing by Tech
4
<PAGE>
Data and AltiGen in a separate written agreement. Purchase orders will be
placed by Tech Data by fax or electronically transferred.
(c) If AltiGen intends to reject a purchase order, it shall use
commercially reasonable efforts to notify Tech Data in writing within
five (5) days of the date of the purchase order that AltiGen does not
accept the purchase order. All orders for Products by Tech Data shall
be subject to acceptance by AltiGen and shall not be binding on AltiGen
until the earlier of written confirmation or shipment, and, in the
case of acceptance by shipment, only as to the portion of the order
actually shipped.
(d) Even where AltiGen accepts a purchase order, AltiGen shall not be
obligated to ship Products if Tech Data is in arrears on undisputed
payments owing to AltiGen or otherwise in breach of the Agreement at the
time of the scheduled shipment.
2.2 Purchase Order Alterations or Cancellations. Prior to shipment of Products
-------------------------------------------
AltiGen shall accept alterations or cancellation to a purchase order in
order to: (i) change a location for delivery, (ii) modify the quantity or
type of Products to be delivered or (iii) correct typographical or clerical
errors. Tech Data may not cancel purchase orders less than fifteen (15)
days prior to the schedule shipment date.
2.3 Evaluation or Demonstration Purchase Orders. AltiGen shall provide to Tech
-------------------------------------------
Data a reasonable number, as mutually agreed upon, of demonstration or
evaluation Products at no charge.
2.4 Product Shortages. If for any reason AltiGen's production is not on
-----------------
schedule, AltiGen may allocate available inventory to Tech Data and make
shipments based upon a fair and reasonable percentage allocation among
AltiGen's customers. Such allocations shall not impact the calculation of
performance rebates.
ARTICLE III. DELIVERY AND
-------------------------
ACCEPTANCE OF PRODUCTS
----------------------
3.1 Acceptance of Products. Tech Data shall, after a reasonable time to
----------------------
inspect each shipment, to confirm that the quantity and type of Product
conform to the relevant purchase order and that none of the exterior
Product packaging has been damaged, accept Product (the "Acceptance Date")
if the Products and all necessary documentation delivered to Tech Data are
in accordance with the purchase order. Tech Data shall be deemed to have
accepted that portion of the shipment which conforms in quantity and type
with the purchase order, unless AltiGen receives written notice of
rejection within thirty (30) days of shipment. Any Products not ordered
or not otherwise in accordance with the purchase order (e.g. mis-shipments,
overshipments) may be returned to AltiGen at AltiGen's expense (including
without limitation costs of shipment or storage). AltiGen shall refund to
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<PAGE>
Tech Data within ten (10) business days following notice thereof, and
receipt of the returned Product, whichever is later, all monies paid in
respect to such rejected and returned Products. Tech Data shall not be
required to accept partial shipment unless Tech Data agrees prior to
shipment.
3.2 Title and Risk of Loss. FOB Destination. Title and risk of loss or damage
----------------------
to Products shall pass to Tech Data at the time the Products are delivered
to Tech Data's warehouse. AltiGen and Tech Data agree that no title or
ownership of the proprietary rights to any software code is transferred by
virtue of this Agreement notwithstanding the use of terms such as
"purchase", "sales" or the like within this Agreement. AltiGen retains all
ownership rights and title to any software code within the Products.
3.3 Transportation of Products. AltiGen shall deliver the Products clearly
--------------------------
marked on the Product package with serial number (if applicable) Product
description and machine readable bar code (employing UPC or other industry
standard bar code) to Tech Data at the location shown and on the delivery
date set forth in the applicable purchase order or as otherwise agreed upon
by the parties. Charges for transportation of the Products shall be paid by
Tech Data. AltiGen shall use only those common carriers preapproved by Tech
Data or listed in Tech Data's published routing instructions, unless prior
written approval of Tech Data is received.
ARTICLE IV. RETURNS
-------------------
4.1 Inventory Adjustment. Once per calendar quarter, AltiGen agrees to accept
--------------------
return of overstocked Products as determined by Tech Data, in Tech Data's
reasonable discretion provided such returns do not exceed [*] the value of
Tech Data's purchases for the prior quarter. Tech Data agrees to provide an
offsetting purchase order of equal or greater dollar value of the returned
Product, except that such offsetting order requirement will be waived by
AltiGen in the event Tech Data's inventory exceeds a [*] supply. Shipments
of Product being returned shall be new, unused and in sealed cartons. Tech
Data shall submit an RMA request to AltiGen in accordance with Section 8.9
hereof and shall specify the RMA number on the Product being returned.
Vendor shall credit Tech Data's account in the amount of the Return Credit.
Tech Data shall bear all costs of shipping and risk of loss for Products
returned to AltiGen for inventory adjustment.
4.2 Defective Products/Dead on Arrival (DOA). Tech Data shall have the right
----------------------------------------
to return to AltiGen for Return Credit any DOA Product that is returned to
Tech Data within ninety (90) days after the initial delivery date to the
End User to the extent such Product fails to perform in accordance with
AltiGen's Product warranty. Tech
6
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Data shall submit an RMA request to AltiGen in accordance with Section 8.9
hereof and shall specify the RMA number on the Product being returned. All
Product returned under this Section 4.2 shall be returned within sixty (60)
days of the date of issuance of the RMA number. The credit issued for the
returned Products will be based on the Products' purchase price, less any
discounts or credits previously received. AltiGen shall bear all costs of
shipping and risk of loss of DOA and in-warranty Products to AltiGen's
location and back to Tech Data or Tech Data's Customer.
4.3 Obsolete or Outdated Product. Tech Data shall have the right to return for
----------------------------
Return Credit, without limitation as to the dollar amount, all Products
that become obsolete or AltiGen discontinues or are removed from AltiGen's
current price list; provided Tech Data returns such Products within ninety
(90) days after Tech Data receives written notice from AltiGen that such
Products am obsolete, superseded by a newer version, discontinued or are
removed from AltiGen's price list.
4.4 Miscellaneous Returns.
----------------------
(a) Bad Box. Tech Data shall have the right to return to AltiGen for Return
-------
Credit Products which have boxes that are or become damaged.
(b) Non-Saleable. Tech Data shall have the right to return to AltiGen for
------------
Return Credit Non-Saleable Products.
4.5 Condition Precedent to Returns. As a condition precedent to returning
------------------------------
Products, Tech Data shall request and AltiGen shall issue a Return Material
Authorization Number (RMA) in accordance with and subject to Section 8.9 of
this Agreement.
ARTICLE V. PAYMENT TO VENDOR
----------------------------
5.1 Charges, Prices and Fees for Products. Charges, prices, quantities and
-------------------------------------
discounts, if any, for Products shall be determined as set forth in
Schedule 1.1 (g), or as otherwise mutually agreed upon by the parties in
writing, and may be confirmed at the time of order. In no event shall
charges exceed AltiGen's then current established charges. Neither Tech
Data nor its Customers shall be bound by any of AltiGen's suggested prices
and all shall be completely free to determine it resale pricing.
5.2 Payment. Except as otherwise set forth in this Agreement, any undisputed
-------
sum due to AltiGen pursuant to this Agreement shall be payable as follows:
[*] after the invoice receipt. AltiGen shall invoice Tech Data no earlier
than the applicable shipping date for the Products covered by such invoice.
Products which are shipped from outside the United States, shall not be
invoiced to Tech
7
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Data prior to the Products being placed on a common carrier within the
United States for final delivery to Tech Data. The due date for payment
shall be extended during any time the parties have a bona fide dispute
concerning such payment, but only to the extent of the disputed amounts.
Notwithstanding anything herein to the contrary, for the initial order
only, payment terms shall be [*] and Tech Data may return any of the
Products delivered under the initial order for Return Credit.
Notwithstanding anything contained in the Agreement or in any other
agreements between Tech Data and AltiGen, including AltiGen's invoices,
Tech Data has the right to delay payment for any Products ordered or
received by Tech Data until Tech Data's sale of the Products.
5.3 Invoices. A "correct" invoice shall contain (i) AltiGen's name and
--------
invoice date, (ii)a reference to the purchase order or other authorizing
document, (iii) separate descriptions, unit prices and quantities of the
Products actually delivered, (iv) credits (if applicable), (v) shipping
charges (if applicable) (vi) name (where applicable), title, phone number
and complete mailing address as to where payment is to be sent, and (vii)
other substantiating documentation or information as may reasonably be
required by Tech Data from time to time. Notwithstanding any pre-printed
terms or conditions on AltiGen s invoices, the terms and conditions of this
Agreement shall apply to and govern all invoices issued by AltiGen
hereunder, except that invoices may include other terms and conditions
which are consistent with the terms and conditions of this Agreement, or
which are mutually agreed to in writing by Tech Data and AltiGen.
5.4 Taxes. Tech Data shall be responsible for franchise taxes, sales or use
-----
taxes or shall provide AltiGen with an appropriate exemption certificate.
AltiGen shall be responsible for all other taxes, assessments, permits and
fees, however designated which are levied upon this Agreement or the
Products, except for taxes based upon Tech Data's income. No taxes of any
type shall be added to invoices without the prior written approval of Tech
Data.
5.5 Fair Pricing and Terms. AltiGen represents that the prices charged and the
----------------------
terms offered to Tech Data are and will be at least as beneficial to Tech
Data as those charged or offered by AltiGen to any of its other
distributors distributing the same Products in the Territory. If AltiGen
offers price discounts, payment discounts, promotional discounts or other
special prices to its other distributors or customers, Tech Data shall also
be entitled to participate and receive notice of the same no later than
other distributors or customers.
5.6 Price Adjustments.
------------------
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WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
(a) Price Increases. AltiGen shall have the right to increase prices from
---------------
time to time, upon written notice to Tech Data not less than [*] prior to
the effective date of such increase. All orders placed prior to the
effective date of the increase, for shipment within [*] after the
effective date, shall be invoiced by AltiGen at the lower price.
(b) Price Decreases. AltiGen shall have the right to decrease prices from
---------------
time to time. AltiGen shall provide written notice to Tech Data not less
than [*] prior to the effective date of such decrease. AltiGen shall grant
to Tech Data, its parent, affiliates and subsidiaries and Tech Data's
Customers a price credit for the [*] Tech Data shall, within [*] after
receiving written notice of the effective date of the price decrease,
provide a list of all Products by part number and quantity for which they
claim a credit. Within [*] of the effective date of the price decrease,
Tech Data will provide a list of all Products for which its Customers claim
a credit. AltiGen shall have the right to a reasonable audit at AltiGen's
expense. Price protection will not be granted in the case of a temporary
price decrease of special promotion.
9
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
5.7 Advertising.
------------
(a) Cooperative Advertising. AltiGen offers MDF for advertising, or other
-----------------------
promotional programs or incentives to Tech Data as it offers to its other
distributors or customers as mutually agreed upon. Tech Data shall have the
right, at Tech Data's option, to participate in such programs. (b)
Advertising Support. AltiGen shall provide at no charge to Tech Data and
-------------------
the Customers of Tech Data, marketing support, and reasonable quantities of
advertising materials to be used in connection with the resale of Products
as are currently offered or that may be offered by AltiGen. Tech Data
reserves the right to charge AltiGen for advertising, marketing and
training services.
5.8 Distributor Obligations
-----------------------
(a) Tech Data shall maintain an inventory of Products and warehousing
facilities sufficient to serve adequately the demands of its Customers on a
reasonably timely basis.
(b) Tech Data agrees to provide AltiGen quarterly, a non-binding forecast
of the next four quarter's sell-through as mutually agreed by the parties.
(c) Reseller Program. AltiGen intends to institute an AltiGen Reseller
Program. Tech Data agrees to market the Products in compliance with
AltiGen's Reseller Program when the parties agree such programs and
procedures are effective at promoting sales. Reseller program shall not
modify or amend any terms and conditions of this Agreement.
(d) a. To assist Tech Data with the distribution and support of Products,
-
AltiGen may provide training to Tech Data for any new Product release
during the term of this Agreement, upon AltiGen's reasonable request and at
Tech Data's facility, and Tech Data shall use commercially reasonable
efforts to have its inside and outside sales force present for such
training in accordance with Tech Data's training programs. Tech Data
reserves the right to charge AltiGen for such training upon prior notice.
(e) Tech Data shall maintain a sufficient number of capable technical and
sales personnel to serve the demands of Customers for the Products, for
service and support of the Products, and answer promptly all Customer
inquiries or requests for information regarding the products. Tech Data and
its staff shall develop and maintain sufficient knowledge of the industry,
the Products, and competitive offerings (including specifications,
features, and functions) so as to be able to promote and support the Sale
of the Products. Tech Data shall provide all Customers with technical
support and other assistance appropriate for the promotion, marketing, and
distribution of the Products.
(f) Point of Sale Reports. During the term of this Agreement, Tech Data
---------------------
shall provide to AltiGen a monthly report on Tech Data's BBS system
containing the following information:(i) the submitter account number, (ii)
the "ship to" Customer
10
<PAGE>
name and address, (iii) the part number of the Products shipped, quantity
and extended cost (cost times quantity), unit cost (Tech Data's cost at
quantity one). Such reports shall be made available by the fifteenth (15)
day of the following calendar month. In addition, a monthly inventory
report will be provided on a paper format once a month.
(g) Within ninety (90) days of the Effective Date, AltiGen and Tech Data
will implement a marketing plan outlying all marketing activities in
promoting AltiGen Products. All marketing activities will be reviewed and
updated on a quarterly basis.
ARTICLE VI. WARRANTIES,
-----------------------
INDEMNITIES AND OTHER OBLIGATIONS OF VENDOR
-------------------------------------------
6.1 Warranty.
---------
(a) AltiGen hereby represents and warrants that AltiGen has all right,
title, ownership interest and marketing rights necessary to provide the
Products to Tech Data. AltiGen further represents and warrants that it has
not entered into any agreements or commitments which are inconsistent with
or in conflict with the rights granted to Tech Data in this Agreement; the
Products are new and shall be free and clear of all liens and encumbrances;
Tech Data and its Customers and End Users shall be entitled to use the
Products without disturbance; the Products do and will conform to all
codes, laws or regulations; and the Products conform in all respects to the
Product warranties specifically set forth in the End-User License
Agreement. AltiGen warrants the Products to end users only pursuant to the
terms and conditions of the End User Agreement, provided, however, Tech
Data shall be entitled to rely on the End User Warranty for purposes of
returns of Product and indemnities. Tech Data shall have no authority to
alter or extend any of the warranties or other agreements of AltiGen
expressly contained or referred to in this Agreement without prior approval
of AltiGen. AltiGen has made express warranties in this Agreement and in
Documentation, promotional and advertising materials. EXCEPT AS SET FORTH
HEREIN OR THEREIN, VENDOR DISCLAIMS ALL WARRANTIES WITH REGARD TO THE
PRODUCTS, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THIS SECTION SHALL
SURVIVE TERMINATION OR EXPIRATION OF THIS AGREEMENT.
(b) Tech Data's Warranty. Tech Data hereby represents and warrants to
AltiGen that neither this Agreement (or any term hereof) nor the
performance of or exercise of rights under this Agreement, is restricted
by, contrary to, in conflict with, requires registration or approval under
any law or regulation of the United States.
11
<PAGE>
6.2 Proprietary Rights Indemnification. AltiGen hereby represents and warrants
----------------------------------
that the Products and the sale and use of the Products do not infringe upon
any United States or Canadian copyright, patent, trademark, trade secret or
other proprietary or intellectual property right of any third party, and
that there are no suits or proceedings, pending or threatened, alleging any
such infringement. Tech Data's sole and exclusive remedy for any breach of
this representation and warranty shall be to claim the indemnification
provided in this Section 6.2. AltiGen shall indemnify and hold Tech Data,
Tech Data's parent, affiliates and subsidiaries and their respective,
officers directors, employees and agents harmless from and against any and
all actions, claims, losses, damages, liabilities, awards, costs and
expenses, which they or any of them incur or become obligated to pay
resulting from or arising out of any claim that Products infringe any
United States or property right of any third party. Tech Data shall (i)
notify AltiGen in writing of any such suit or proceeding filed against Tech
Data; (ii) give AltiGen the right to control and direct investigation,
preparation, defense and settlement of any claim, suit or proceeding; and
(iii) give reasonable assistance and cooperation for the defense of same,
Tech Data shall have the right, but not the obligation, to participate in
the defense of any such suit or proceeding at Tech Data's expense. AltiGen
shall pay any resulting damages, costs and expenses finally awarded to a
third party, but AltiGen shall not be liable for such amounts, or for
settlements incurred by Tech Data without AltiGen's prior written
authorization. If a Product is, or in AltiGen's opinion might be, held to
infringe as set forth above, AltiGen may, at its option, replace or modify
such Product so as to avoid infringement, or procure the right for Tech
Data, its Customers, and End-Users to continue the use and resale of such
Product. If neither of such alternatives is, in AltiGen's opinion,
reasonably possible, the infringing Product shall be returned to AltiGen,
and at AltiGen's sole liability, in addition to its obligation to reimburse
any awarded damages, costs and expenses set forth above, shall be to refund
the purchase price paid for such Products by Distributor. The provisions of
the foregoing indemnity shall not apply with respect to any instances of
alleged infringement based upon or arising out of the use of such Products
(i) in any manner for which the products were not designed, or for use
other than the uses and distributions designated by AltiGen, (ii) which
have been modified by Distributor or any third party, (iii) in connection
with or in combination with any equipment, devices or software not intended
for use with the Products, or (iv) subsequent to Tech Data's receipt of
notice of any claimed infringement unless AltiGen has given Tech Data
written permission to continue distribution of the allegedly infringing
Product. AltiGen's obligations under this Section 6.2 shall survive
termination or expiration of this Agreement.
6.3 Indemnification.
----------------
(a) Vendor. AltiGen shall be solely responsible for the design,
------
development, supply, production and performance of the Products. AltiGen
agrees to indemnify
12
<PAGE>
and hold Tech Data, its parent, affiliates and subsidiaries and their
officers directors and employees harmless from and against any and all
claims, damages, costs, expenses (including, but not limited to, reasonable
attorneys' fees and costs) or liabilities that may result, in whole or in
part, from any warranty or Product liability claim, or for claims for
violation of any of the warranties contained in Section 6.1 this Agreement.
(b) Exclusions. The provisions of the foregoing indemnity shall not apply
with respect to any instances of alleged infringement based upon or arising
out of the use of such Products in any manner for which the Products were
not designed, or for use of Products other than the uses and distributions
designated by AItiGen, for use of any Product that has been modified by
Tech Data or any third party, or for use of any Product in connection with
or in combination with any equipment, devices or software that have not
been supplied by AltiGen. Notwithstanding any other provisions hereof, the
foregoing indemnity shall not apply with respect to any infringement based
on Tech Data's activity occurring subsequent to its receipt of notice of
any claimed infringement unless AltiGen shall have given Tech Data written
permission to continue to market and distribute the allegedly infringing
Product.
(c) Tech Data. Tech Data agrees to indemnify and hold AltiGen, its
---------
officers, directors and employees harmless from and against any and all
claims, damages, costs, expenses (including, but not limited to, reasonable
attorneys' fees and costs) or liabilities that may result, in whole or in
part, from Tech Data's gross negligence or willful misconduct in the
distribution of the Products pursuant to this Agreement, or for
representations or warranties made by Tech Data related to the Products in
excess of the warranties of AltiGen.
6.4 Insurance.
----------
(a) The parties shall be responsible for providing Workers' Compensation
insurance in the statutory amounts required by the applicable state laws.
(b) Without in any way limiting AltiGen's indemnification obligation as set
forth in this Agreement, AltiGen shall maintain Commercial General
Liability or Comprehensive General Liability Insurance in such amounts as
is reasonable and standard for the industry. Either policy form should
contain the following coverages: Personal and Advertising Injury, Broad
Form Property Damage, Products and Completed Operations, Contractual
Liability, employees as Insured and Fire Legal Liability.
(c) AltiGen will provide evidence of the existence of insurance coverages
referred to in this Section 6.4 by certificates of insurance which should
also provide for at least thirty (30) days notice of cancellation, non-
renewal or material change of
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<PAGE>
coverage to Tech Data. The certificates of insurance shall name Tech Data
Product Management, Inc., its parent, affiliates and subsidiaries as
additional insureds for the limited purpose of claims arising pursuant to
this Agreement.
6.5 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
-----------------------
PURSUANT TO THIS AGREEMENT OR AMOUNTS REPRESENTING INDIRECT, SPECIAL,
INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OF THE OTHER PARTY ARISING
FROM THE PERFORMANCE OR BREACH OF ANY TERMS OF THIS AGREEMENT. ALTIGEN'S
TOTAL LIABILITY TO TECH DATA HEREUNDER, EXCEPT FOR LIABILITY ARISING UNDER
SECTION 6.2 OR FOR PERSONAL INJURY OR PROPERTY DAMAGE CLAIMS BY THIRD
PARTIES, SHALL NOT EXCEED THE AMOUNT PAID BY TECH DATA TO ALTIGEN FOR THE
PRODUCTS DURING THE TERM OF THIS AGREEMENT, EXCEPT THAT TECH DATA SHALL BE
LIABLE FOR ALL AMOUNTS DUE UNDER FULFILLED PURCHASE ORDERS.
6.6 ECCN/Export. AltiGen agrees to provide Tech Data, upon signing this
-----------
Agreement and at any time thereafter that AltiGen modifies or adds Products
distributed or to be distributed by Tech Data, with the Export Control
Classification Number (ECCN) for each of AltiGen's Products, and
information as to whether or not any of such Products are classified under
the U.S. Munitions List.
6.7 Financial Statements. AltiGen agrees that for the term of this Agreement,
--------------------
AltiGen shall provide financial statements annually and semi annually as
follows:
(a) Within one hundred and twenty (120) days after the end of AltiGen's
fiscal year audited financial statements for the fiscal year prepared by an
independent certified public accountant.
(b) Within sixty (60) days after the end of AltiGen's second fiscal
quarter, semi-annual unaudited financial statements, prepared by AltiGen's
authorized representative.
Such financial statements shall include profit and loss statement, balance
sheets and such other publicly available accounting data as may be
requested by Tech Data and be acknowledged by AltiGen's authorized
representative in writing as true and correct.
In addition, AltiGen shall provide other financial information upon
reasonable request by Tech Data.
6.8 Vendor Reports. AltiGen shall, if requested, render monthly reports to
--------------
Tech Data setting forth the separate Products, dollars invoiced for each
Product, and total
14
<PAGE>
dollars invoiced to Tech Data for the month, and such other information as
Tech Data may reasonably request.
6.9 Trademark Usage. AltiGen shall have and retain sole ownership of AltiGen's
---------------
logo, trade names and trademarks ("Trademarks"), including the goodwill
pertaining thereto. AltiGen hereby grants to Tech Data the right to use and
display the Trademarks solely in condition with and solely to the extend
reasonably necessary for the marketing, distribution, and support of the
Products within the Territory in accordance with the terms and conditions
of this Agreement. Tech Data shall not do or suffer to be done any act or
thing that would impair AltiGen's rights in tits Trademarks or damage the
reputation for quality inherent in the Trademarks. AltiGen has the right to
take all action which it deems necessary to ensure that the advertising and
promotional materials related to the products utilized by Tech Data are
consistent with the reputation and prestige of the Trademarks. Tech Data
shall market, distribute, and support the Products only under the
Trademarks, and not nay other trademark or logo. Tech Data shall not use
the Trademarks or any other trademarks or trade names of AltiGen or any
word, symbol, or design confusingly similar thereto, as part of its
corporate name. The Data shall not (I) remove, alter or overprint the
Products' copyright notices, trademarks, and Logos, or packaging, (ii)
attach any additional trademarks to the Products without AltiGen's prior
written consent or (iii) affix any of the Trademarks to any non-AltiGen
products. Tech Data agrees that any goodwill which accrues because of Tech
Data's use of the Trademarks shall become AltiGen's property. Tech Data
further agrees not to contest AltiGen's Trademarks or tradenames, or to
make application for registration of any AltiGen Trademarks or tradenames.
ARTICLE VII. TERMINATION; EXPIRATION
------------------------------------
7.1 Termination.
------------
(a) Termination With or Without Cause. Either party may terminate this
---------------------------------
Agreement, without cause, upon giving the other party thirty (30) days
prior written notice. In the event that either party materially or
repeatedly defaults in the performance of any of its duties or obligations
set forth in this Agreement, and such default is not substantially cured
within thirty (30) days after written notice is given to the defaulting
party specifying the default, then the party not in default may, by giving
written notice thereof to the defaulting party, terminate this Agreement or
the applicable purchase order relating to such default as of the date
specified in such notice of termination.
(b) Termination for Insolvency or Bankruptcy. Either party may immediately
----------- ----------------------------
terminate this Agreement and any purchase orders by giving written notice
to the
15
<PAGE>
other party in the event of (i) the liquidation or insolvency of the other
party, (ii) the appointment of a receiver or similar officer for the other
party, (iii) an assignment by the other party for the benefit of all or
substantially all of its creditors, (iv) entry by the other party into an
agreement for the composition, extension, or readjustment of all or
substantially all of its obligations, or (v) the filing of a petition in
bankruptcy by or against a party under any bankruptcy or debtors' law for
its relief or reorganization which is not dismissed within ninety (90)
days.
7.2 Rights Upon Termination or Expiration.
(a) Termination or expiration of this Agreement shall not affect AltiGen's
right to be paid for undisputed invoices for Products already shipped and
accepted by Tech Data or Tech Data's rights to any credits or payments owed
or accrued to the date of termination or expiration. Tech Data's rights to
credits upon termination or expiration shall include credits against which
Tech Data would, but for termination or expiration, be required under this
Agreement to apply to future purchases.
(b) AltiGen shall accept purchase orders from Tech Data for additional
Products which Tech Data is contractually obligated to furnish to its
Customers and does not have in its inventory upon the termination or
expiration of this Agreement; provided Tech Data notifies AltiGen of any
and all such transactions in writing within sixty (60) days following the
termination or expiration date.
(c) Upon termination or expiration of this Agreement, Tech Data shall
discontinue holding itself out as a distributor of the Products.
7.3 Repurchase of Products Upon Termination or Expiration. AltiGen agrees to
-----------------------------------------------------
repurchase all Products which remain in Tech Data's inventory on the
effective date of termination of this Agreement for any reason within 60
days or which are returned to Tech Data within one hundred and twenty (120)
days) following the date of termination or expiration. AltiGen will
repurchase such Products at the original purchase price, less any
deductions for price protection. The repurchase price shall not be reduced
by any deductions or offsets for early pay or prepay discounts. Such
returns shall not reduce or offset any co-op payments or obligations owed
to Tech Data. Within sixty (60) days following the effective date of
termination or expiration, Tech Data shall return to AltiGen for repurchase
all Product held in Tech Data's inventory as of the effective date of
termination or expiration. Additional returns shall be sent at reasonable
intervals thereafter, provided all returns of Product by Tech Data under
this Section 7.3 shall be shipped within one hundred twenty (120) days
following the effective date of termination or expiration. AltiGen will
issue an RMA to Tech Data for all such Products; provided, however, that
AltiGen shall accept returned Products in accordance with this Section
absent an RMA if AltiGen fails to issue said RMA within five (5) business
days of Tech Data's request. Tech Data agrees to ship the
16
<PAGE>
Product to AltiGen within 60 days of the RMA request. AltiGen shall credit
any outstanding balances owed to Tech Data. If such credit exceeds amounts
due from Tech Data, AltiGen shall remit in the form of a check to Tech Data
the excess within ten (10) business days of receipt of the Product.
Customized Products shall not be eligible for repurchase pursuant to this
Section.
7.4 Survival of Terms. Termination or expiration of this Agreement for any
-----------------
reason shall not release either party from any liabilities or obligations
set forth in this Agreement which (i) the parties have expressly agreed
shall survive any such termination or expiration, or (ii) remain to be
performed or by their nature would be intended to be applicable following
any such termination or expiration. The termination or expiration of this
Agreement shall not affect any of AltiGen's warranties, indemnification
obligations or obligations relating to returns, co-op advertising payments,
credits or any other matters set forth in this Agreement that should
survive termination or expiration in order to carry out their intended
purpose, all of which shall survive the termination or expiration of this
Agreement.
17
<PAGE>
ARTICLE VIII. MISCELLANEOUS
---------------------------
8.1 Binding Nature, Assignment, and Subcontracting. This Agreement shall be
----------------------------------------------
binding on the parties and their respective successors and assigns. Neither
party shall have the power to assign this Agreement without the prior
written consent of the other party.
8.2 Counterparts. This Agreement may be executed in several counterparts, all
------------
of which taken together shall constitute one single agreement between the
parties.
8.3 Headings. The Article and Section headings used in this Agreement are for
--------
reference and convenience only and shall not affect the interpretation of
this Agreement.
8.4 Relationship of Parties. Tech Data is performing pursuant to this Agreement
-----------------------
only as an independent contractor. Nothing set forth in this Agreement
shall be construed to create the relationship of principal and agent
between Tech Data and AltiGen. Neither party shall act or represent itself,
directly or by implication, as an agent of the other party.
8.5 Confidentiality. Each party acknowledges that in the course of
---------------
performance of its obligations pursuant to this Agreement, it may obtain
certain information specifically marked as confidential or proprietary.
Each party hereby agrees that all such information communicated to it by
the other party, its parent, affiliates, subsidiaries, or Customers,
whether before or after the Effective Date, shall be and was received in
strict confidence, shall be used only for purposes of this Agreement, and
shall not be disclosed without the prior written consent of the other
party, except as may be necessary by reason of legal, accounting or
regulatory requirements beyond either party's reasonable control. The
provisions of this Section shall survive termination or expiration of this
Agreement for any reason for a period of one (1) year after said
termination or expiration.
8.6 Arbitration. Any disputes arising under this Agreement shall be submitted
-----------
to arbitration in accordance with such rules as the parties jointly agree.
If the parties are unable to agree on arbitration procedures, arbitration
shall be conducted in Pinellas County, Florida, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. Any
such award shall be final and binding upon both parties.
8.7 Notices. Wherever one party is required or permitted to give notice to the
-------
other party pursuant to this Agreement, such notice shall be deemed given
when actually delivered by hand, by telecopier (if and when immediately
confirmed in writing by any of the other means provided herein ensuring
acknowledgment of
18
<PAGE>
receipt thereof for purposes of providing notice of default or
termination), via overnight courier, or when mailed by registered or
certified mail, return receipt requested, postage prepaid, and addressed as
follows:
In the Case of AltiGen: In the Case of Tech Data:
----------------------- -------------------------
AltiGen Communications, Inc. Tech Data Product Management, Inc.
45635 Northport Loop East 5350 Tech Data Drive
Fremont, CA 94538 Clearwater, FL 34620
Attn: Michele Shannon Attn: Tamra Muir
Vice President of Sales Vice President-Marketing Operations
cc: Contracts Administration
Either party may from time to time change its address for notification
purposes by giving the other party written notice of the new address and
the date upon which it will become effective.
8.8 Force Majeure. The term "Force Majeure" shall be defined to include fires
-------------
or other casualties or accidents, acts of God, severe weather conditions,
strikes or labor disputes, war or other violence, or any law, order,
proclamation, regulation, ordinance, demand or requirement of any
governmental agency.
(a) A party whose performance is prevented, restricted or interfered with
by reason of a Force Majeure condition shall be excused from such
performance to the extent of such Force Majeure condition so long as such
party provides the other party with prompt written notice describing the
Force Majeure condition and immediately continues performance until and to
the extent such causes are removed.
(b) If, due to a Force Majeure condition, the scheduled time of delivery or
performance is or will be delayed for more than ninety (90) days after the
scheduled date, the party not relying upon the Force Majeure condition may
terminate, without liability to the other party, any purchase order or
portion thereof coveting the delayed Products.
8.9 Return Material Authorization Numbers. For all returns in accordance with
-------------------------------------
this Agreement, AltiGen shall issue an RMA to Tech Data within two (2)
business days of Tech Data's request; however, if the RMA is not received
by Tech Data within two (2) business days, AltiGen shall accept returned
Products absent an RMA.
8.10 Credits to Tech Data. In the event any provision of this Agreement or any
--------------------
other agreement between Tech Data and AltiGen requires that AltiGen grant
credits to Tech Data's account, and such credits are not received within
thirty (30) days, all such credits shall become effective immediately upon
notice to AltiGen. In such
19
<PAGE>
event, Tech Data shall be entitled to deduct any such credits from the next
monies owed to AltiGen. In the event credits exceed any balances owed by
Tech Data to AltiGen, AltiGen shall, upon request from Tech Data, issue a
check payable to Tech Data within ten (10) days of such notice. Credits
owed to Tech Data shall not be reduced by early payment or prepayment
discounts. Tech Data shall have the right to set off against any amounts
due to AltiGen under this Agreement or any invoices issued by AltiGen
related to this Agreement any and all amounts due to Tech Data from
AltiGen, whether or not arising under this Agreement.
8.11 Severability. If, but only to the extent that, any provision of this
------------
Agreement is declared or found to be illegal, unenforceable or void, then
both parties shall be relieved of all obligations arising under such
provision, it being the intent and agreement of the parties that this
Agreement shall be deemed amended by modifying such provision to the extent
necessary to make it legal and enforceable while preserving its intent.
8.12 Waiver. A waiver by either of the parties of any covenants, conditions or
------
agreements to be performed by the other party or any breach thereof shall
not be construed to be a waiver of any succeeding breach thereof or of any
other covenant, condition or agreement herein contained.
8.13 Remedies. All remedies set forth in this Agreement shall be cumulative and
--------
in addition to and not in lieu of any other remedies available to either
party at law, in equity or otherwise, and may be enforced concurrently or
from time to time.
8.14 Entire Agreement. This Agreement, including any Exhibits and documents
----------------
referred to in this Agreement or attached hereto, constitutes the entire
and exclusive statement of Agreement between the parties with respect to
its subject matter and there are no oral or written representations,
understandings or agreements relating to this Agreement which are not fully
expressed herein. The parties agree that unless otherwise agreed to in
writing by the party intended to be bound, the terms and conditions of this
Agreement shall prevail over any contrary terms in any purchase order,
sales acknowledgment, confirmation or any other document issued by either
party affecting the purchase or sale of Products hereunder.
8.15 Governing Law. This Agreement shall have Florida as its situs and shall be
-------------
governed by and construed in accordance with the laws of the State of
Florida, without reference to choice of laws. The parties agree that this
Agreement excludes the application of the 1980 United Nations Convention on
Contracts for the International Sale of Goods, if otherwise applicable.
8.16 Software Licenses. Whenever the Products described in this Agreement shall
-----------------
include software licenses, AltiGen hereby grants to Tech Data a non-
exclusive
20
<PAGE>
right to market, demonstrate and distribute the software to Customers of
Tech Data. Tech Data acknowledges that no title or ownership of the
proprietary rights, to any software is transferred by virtue of this
Agreement notwithstanding the use of terms such as purchase, sale or the
like within this Agreement.
21
<PAGE>
8.17 Time of Performance. Time is hereby expressly made of the essence with
-------------------
respect to each and every term and condition of this Agreement.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
signed and delivered by its duly authorized officer or representative as of the
Effective Date.
ALTIGEN COMMUNICATIONS, INC. TECH DATA PRODUCT MANAGEMENT, INC.
By: /s/ Michelle Shannon By: /s/ Peggy Caldwell
-------------------------- -------------------------------------
Printed Name:Michelle Shannon Printed Name: PEGGY K. CALDWELL
----------------
Title: VP of Sales Title: Senior Vice President, Marketing
----------------------
Date: 7/3/97 Date: 7/21/97
------------------------ ----------------------------------
22
<PAGE>
Schedule 1.1 (g)
ALTIGEN DISTRIBUTOR PRICE LIST
3.5 Release
Starter Kits
------------
Part Number Description Price
- ----------- ----------- -----
ALTI-CTIKIT-3.5 CTI starter kit, CID Board, 4 trunks & 8 extensions with [*]
AltiWare system software and external telephony power
supply.
ALTI-CTI8400-3.5 CTI starter kit, CID Board, 8 trunks & 4 extensions with [*]
AltiWare system software and external telephony power
supply.
ALTI-CTI4850.3.5 CTI starter kit, CID Board, 4 trunks & 8 extensions with [*]
AltiWare system software and connector cable for Tellabs
model T8050 internal telephony power supply.
ALTI-CTX8450-3.5 CTI starter kit, CID Board, 8 trunks & 4 extensions with [*]
AltiWare system software and connector cable for Tellabs
model T8050 internal telephony power supply.
ALTX-DMK4890-3.5 Demo CTI starter kit, CID Board, 4 trunks & 8 extensions [*]
with AltiWare system software, external telephony power
supply and Not For Resale stickers.
Add-On Quantum Boards
---------------------
AltiWare is bundled with starter kits only, not with individual add-on Quantum
boards. Therefore, add-on Quantum boards are only sold with starter kits to
increase the capacity of new systems, or as add-on boards to increase the
capacity of existing systems.
Part Number Description Price
- ---- ------ ----------- -----
ALTI-CD0408U CID Quantum Platform, 4 trunks & 8 extensions. [*]
ALTI-CD0804U CID Quantum Platform, 8 trunks & 4 extensions. [*]
ALTI-CD0012U CID Quantum Platform, 12 extensions. [*]
ALTI-DID 0408U DID Quantum Platform, 4 DID trunks & 8 extensions. [*]
Peripherals
-----------
Part Number Description Price
- ----------- ----------- -----
CBL-25M50-01 DB25 to 50-pin Telco cable, Male to Male [*]
CBL-MVIP6-01 MVIP cable with 6 connectors [*]
DOC-RFG01-04 4 User Pocket Reference Guides [*]
DOC-ICM01-01 Installation Configuration & Maintenance Manual [*]
MSC-PANEL-02 12 Port Connection Panel with 50-pin F Telco connector [*]
ALTI-P4890 AltiGen External Telephony Power Supply and connector [*]
cables
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Detail Components List
----------------------
ALTI-CTIKIT-3.5
CID Quantum board with 4 trunks & 8 extensions
External telephony power supply and cable
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-CTI8400-3.5
CID Quantum board with 8 trunks & 4 extensions
External telephony power supply and cable
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-CTI4850-3.5
CID Quantum board with 4 trunks & 8 extensions
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Connector cable for Tellabs model T8050 internal telephony power supply
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-CTI8450-3.5
CID Quantum board with 8 minks & 4 extensions
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Connector cable for Tellabs model T8050 internal telephony power supply
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
ALTI-DMK4890-3.5
CID Quantum board with 4 trunks & 8 extensions
External telephony power supply and cable
AltiWare system software
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
MVIP cable
Installation Configuration & Maintenance Manual
8 User Pocket Reference Guides
<PAGE>
ALTI-CD0408U
CID Quantum board with 4 trunks & 8 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
8 User Pocket Reference Guides
Quick installation Guide
ALTI- CD0804U
CID Quantum board with 8 trunks & 4 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
4 User Pocket Reference Guides
Quick Installation Guide
ALTI-CD0012U
CID Quantum board with 12 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
12 User Pocket Reference Guides
Quick Installation Guide
ALTI-DID040SU
DID Quantum board with 4 trunks & 8 extensions
DB25-50 pin male Telco cable
12 ports connection panel with 50 pin female Telco connector
8 User Pocket Reference Guides
Quick Installation Guide
ALTI-P4890
External Telephony Power Supply (-48v & 90Vac)
Cable Assembly Kit
AC Power Cable (6')
Bridge Cable Din-Din (24")
PC Slot End Cable wit 4 Connectors (32")
<PAGE>
ALTIGEN END USER PRICE GUIDELINE
-INTERNAL USE ONLY-
Release 3.5
Starter Kits
------------
Part Number Description Price
- ----------- ----------- -----
ALTI-CTIKIT-3.5 CTI starter kit, CID Board, 4 trunks & 8 extensions with [*]
AltiWare system software and external telephony power
supply.
ALTI-CTI8400-3.5 CTI starter kit, CID Board, 8 trunks & 4 extensions with [*]
AltiWare system software and external telephony power
supply.
Add-On Quantum Boards
---------------------
AltiWare is bundled with starter kits only, not with individual add-on Quantum
boards. Therefore, add-on Quantum boards are only sold with starter kits to
increase the capacity of new systems, or as add-on boards to increase the
capacity of existing systems.
Part Number Description Price
- ----------- ----------- -----
ALTI-CD0408U CID Quantum Platform, 4 trunks & 8 extensions. [*]
ALTI-CD0804U CID Quantum Platform, 8 trunks & 4 extension. [*]
ALTI-CD0012U CID Quantum Platform, 12 extensions. [*]
ALTI-DID0408U DID Quantum Platform, 4 trunks & 8 extensions. [*]
Peripherals
-----------
Part Number Description Price
- ----------- ----------- -----
CBL-25M50-01 DB25 to 50-pin Telco cable, Male to Male [*]
CBL-MVIP6-01 MVIP cable with 6 connectors [*]
DOC-RFG01-04 4 User Pocket Reference Guides [*]
DOC-ICM01-01 Installation Configuration & Maintenance Manual [*]
MSC-PANEL-02 12 Port Connection Panel with 50-pin F Telco connector [*]
ALTI-P4890 AltiGen External Telephony Power Supply and connector [*]
cabin
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT A
ALTIGEN COMMUNICATIONS, INC. - END USER AGREEMENT
NOTICE - READ THIS BEFORE OPENING THIS PACKAGE, INSTALLING THE PC HARDWARE OR
USING THE SOFTWARE
OPENING THIS PACKAGE, INSTALLING THE PC HARDWARE OR USING THE SOFTWARE INDICATES
YOUR ACCEPTANCE OF THESE TERMS AND CONDITIONS. READ ALL OF THE TERMS AND
CONDITIONS OF THIS LICENSE AGREEMENT PRIOR TO OPENING THIS PACKAGE OR USING THE
SOFTWARE. IF YOU DO NOT ACCEPT THESE TERMS, YOU MUST RETURN THIS PACKAGE
UNOPENED WITHIN FIVE (5) DAYS OF OBTAINING THE PACKAGE, WITH YOUR RECEIPT, AND
YOUR MONEY WILL BE RETURNED.
* * * *
PLEASE NOTE THAT YOU MAY NOT USE, COPY, MODIFY OR TRANSFER THE PROGRAM, THE PC
HARDWARE OR DOCUMENTATION OR ANY COPY, EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT.
LICENSE. This software program (the "Program") and the documentation (the
- -------
"Documentation") are licensed, not sold, to you. The term "Program" shall also
include any updates of the Program licensed to you by AltiGen Subject to the
terms of agreement, you have a non-exclusive and nontransferable right to use
the Program, Personal Computer Card (the "PC Hardware") and Documentation. You
agree to use your best efforts to prevent and protect the contents of the
Program, the PC Hardware and Documentation from unauthorized disclosure or use.
AltiGen and its licensors reserve all rights not expressly granted to you.
AltiGen's licensors are the intended third party beneficiaries of this agreement
and have the express right to rely upon and directly enforce the terms set forth
herein.
LIMITATIONS ON USE. You may not rent, lease, sell or otherwise transfer or
- ------------------
distribute copies of the Program, the PC Hardware or Documentation to others.
You may not modify or translate the Program, the PC Hardware or the
Documentation without the prior written consent of AltiGen You may not reverse
assemble, reverse compile or otherwise attempt to create the source code from
the Program or the PC Hardware. You may not use AltiGen's name or refer to
AltiGen directly or indirectly in any papers, articles, advertisements, sales
presentations, news releases or releases to any third party without the prior
written approval of AltiGen for each such use. You may not release the results
of any performance or functional evaluation of any Program to any third party
without prior written approval of AltiGen for each such release.
BACKUP AND TRANSFER. You may make one copy of the Program for backup purposes if
- -------------------
AltiGen's copyright notice is included. You may not sublicense, assign,
delegate, rent, lease, time-share or otherwise transfer this license or any of
the related rights or obligations for any reason. Any attempt to make any such
sublicense, assignment, delegation or other transfer by you shall be void. You
may physically transfer the Program from one computer to another provided that
you do not retain any copies of the Program, including any copies stored on a
computer.
COPYRIGHT AND PATENT. The Program the PC Hardware and related Documentation are
- --------------------
copyrighted and patented by AltiGen and its licensors. You may make one copy of
the Documentation and print one copy of any on-line documentation or other
materials provided to you in electronic form. Any and all other copies of the
-------------------------------
Program and any copy of the Documentation made by you are in violation of this
- ------------------------------------------------------------------------------
license.
- --------
OWNERSHIP You agree that the Program and Documentation belong to AltiGen and
- ----------
its licensors. You agree that you neither own nor hereby acquire any claim or
right of ownership to the Program and Documentation or to any related patents,
copyrights, trademarks or other intellectual property. You own only the magnetic
or other physical media (including PC Hardware) on which the Program and related
Documentation are recorded or fixed. AltiGen and its licensors retain all right,
title and interest in and to the Documentation and all copies and the Program
recorded on the original media and all subsequent copies of the Program at all
times, regardless of the form or media in or on which the original or other
copies may subsequently exist. This license is not a sale of the original or any
subsequent copy. All content accessed through the Program is the property of the
applicable content owner and may be protected by applicable copyright law. This
license gives you no rights to such content.
TERM AND TERMINATION. This license is effective until terminated. You may
- --------------------
terminate this license at any time by destroying the Program and Documentation
and the permitted backup copy. This license automatically terminates if you fail
to comply with its terms and conditions. You agree that, upon such termination,
you will either destroy (or permanently erase) all
Pg.12
<PAGE>
copies of the Program and Documentation, or return the original Program and
Documentation to AltiGen, together with any other material (PC Hardware) you
have received from AltiGen in connection with the Program.
LIMITED WARRANTY. AltiGen warrants the media on which the Program is furnished
- ----------------
to be free from defects in materials and workmanship under normal use for 30
days from the date that you obtain the Program. AltiGen warrants the PC Hardware
for a period of one year from the date of consumer purchase to be free from
defects in materials and workmanship. EXCEPT FOR THIS LIMITED WARRANTY, ALTIGEN
AND ITS LICENSORS PROVIDE THE PROGRAM, THE PC HARDWARE AND THE DOCUMENTATION "AS
IS" WITHOUT WARRANTY OF ANY KIND EITHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING
BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
Some states do not allow the exclusion of implied warranties, so the above
exclusion may not apply to you. This warranty gives you specific legal rights
and you may also have other rights which vary from state to state.
LIMITATION OF REMEDIES. AltiGen and its licensor entire liability and your
- ----------------------
exclusive remedy in connection with the Program, the PC Hardware and the
Documentation shall be that you are entitled to return the defective media
containing the Program together with the PC Hardware and Documentation to the
merchant. At the option of the merchant, you may receive replacement media
containing the Program, the PC Hardware and Documentation that conforms with the
limited warranty or a refund of the amount paid by you. IN NO EVENT WILL ALTIGEN
OR ITS LICENSOR BE LIABLE FOR ANY INDIRECT DAMAGES OR OTHER RELIEF ARISING OUT
OF YOUR USE OR INABILITY TO USE THE PROGRAM INCLUDING, BY WAY OF ILLUSTRATION
AND NOT LIMITATION, LOST PROFITS, LOST BUSINESS OR LOST OPPORTUNITY, OR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING LEGAL FEES,
ARISING OUT OF SUCH USE OR INABILITY TO USE THE PROGRAM, EVEN IF ALTIGEN, ITS
LICENSOR OR AN AUTHORIZED ALTIGEN DEALER, DISTRIBUTOR OR SUPPLIER. HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY.
Some states do not allow the exclusion or limitation of incidental or
consequential damages so the above limitation or exclusion may not apply to you.
This license will be governed by the laws of the State of California as applied
to transactions taking place wholly within California between California
residents.
U.S GOVERNMENT END USERS. The Program is a "commercial item," as that term is
- ------------------------
defined at 48 C.F.R. 2.101 (Oct. 1995), consisting of "commercial computer
software "and "commercial computer software documentation," as such terms are
used in 48 C.F.R. 12.212 (Sept. 1995). Consistent with 48 C.F.R. 12.212 and 48
C.F.R. 227.7202-1 through 227.7202.4 (June 1995), all U.S. Government End Users
acquire the Program with only those rights set forth herein.
Pg.13
<PAGE>
ALTIGEN COMMUNICATIONS INC.
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT ("Agreement") is made and entered into as of
this 3/rd/ day of November, 1997 (the "Effective Date") by and between ALTIGEN
--------
COMMUNICATIONS INC., a California corporation, with principal offices at 45635
Northport Loop East, Fremont, CA 94538 ("AltiGen") and TerraComSortium, a
Florida company, with principal offices at 4056 Estepona Ave Suite l-E 1, Miami,
FL 33178 ("Distributor") both jointly referred to herein as "The Parties."
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. DEFINITIONS
1.1 Dealer means any individual or entity which acquires the Products for
the express purpose of resale to others, whether such resale is of the
Product as a stand-alone product, as bundled and sold with other software
or hardware products, as integrated with other software or hardware
products or as sold with associated services.
1.2 End User means a licensee who acquires Products for Internal Use
(rather than distribution or resale) in accordance with the terms of an
End-User License Agreement substantially in the form of the End-User
License Agreement attached hereto as Exhibit A (the "End-User Agreement").
1.3 Internal Use means use for purposes which do not directly produce
revenue for the End User. "Internal Use" does not include timesharing.
1.4 Intellectual Property means any patent, copyright, trade name, trade
mark, trade secret, know-how, mask work or any other intellectual property
right or proprietary information or technology, whether registered or
unregistered.
1.5 Product means software program packages and physical computer hardware,
including (1) a program code, in object code form only, on diskette(s) or
CD-ROM (the "Program"); (2) physical computer hardware including computer
boards, computer power supply, computer cables (the "PC Hardware"); (3)
instruction booklets and other information prepared for End-Users
concerning the use of the program and computer hardware ("Documentation");
(4) an End-User Agreement. The Products include only those listed by title
and functional description on the "Product and Price List" attached hereto
as Exhibit B.
1.6 Purchase Objectives means the minimum quantity of each Product which
Distributor commits to purchase quarterly during the term of this
Agreement, as mutually agreed upon and set forth in Exhibit C attached
hereto.
1.7 Territory means [*] AltiGen and TerraComSortium agree that expansion to
additional [*] markets will be possible with AltiGen and TerraComSortium's
ability and desire to support such expansion. Expansion will be conducted
on a case by case, country by country basis, and
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each expansion agreement of AltiGen and TerraComSortium shall be added
hereto as individual Addendum.
1.8 Grant of Distribution Right Subject to the terms and conditions set
forth in this Agreement, AltiGen Communications hereby grants to
Distributor a non-exclusive, non-transferable right to (a) market and
distribute the Products solely to Dealers located in the Territory and (b)
use the Products for those purposes set forth in the Agreement. Distributor
shall not, directly or indirectly, solicit sales of the Products outside of
the Territory without the prior written consent of AltiGen Communications.
AltiGen Communications retains the right to sell the Products directly to
other parties in the Territory, including, by way of illustration but not
limitation, distributors, Dealers, and original equipment manufacturers.
AltiGen Communications will conduct its business while ensuring that
business and technical support to Distributor shall be at least
commensurate to such support AltiGen Communications provides for all
Distributors meeting equivalent Purchase Objectives. AltiGen Communications
will conduct its business while ensuring that reasonable protection is
given to Distributor's ability and opportunity to perform and execute the
Business Plan as stipulated in Section 6.3 herein. Distributor shall have
no right to modify the Product or Documentation without the prior written
approval of AltiGen Communications. Distributor agrees not to (a) reverse
engineer, decompile, disassemble or otherwise reduce the Product to human-
perceivable form, or to encourage or assist third parties in doing so or
(b) distribute the Product by rental or lease. All rights not expressly
granted herein are retained by AltiGen Communications. Distributor shall
have no right to grant a Dealer the right to make copies from a golden
master absent further agreement between AltiGen Communications and the
Distributor.
2. OWNERSHIP
Except as specified in this Agreement, AltiGen Communications does not
grant to the Distributor any rights in or to any Intellectual Property related
to the Product or to any materials furnished hereunder. The Intellectual
Property embodied in the Product, all modifications thereto, and all
Documentation thereof, are proprietary to AltiGen Communications, and AltiGen
Communications retains all right, title and interest in and to such Intellectual
Property.
3. PRICES AND PAYMENTS
3.1 Prices. Distributor shall pay AltiGen Communications, for each Product and
upgrade, the Distributor list price for the Product as set forth on Exhibit B.
Both the AltiGen Communications standard list price and the Distributor's
discount levels are subject to change by AltiGen Communications from time to
time in its sole discretion upon thirty (30) days written notice to
Distributor. Orders requesting delivery after receipt of notice of a price or
discount change will be charged at the new price or discount level.
3.2 Distributor Pricing. Distributor is free to determine its own resale
prices for the Products. Although AltiGen Communications may publish suggested
list prices, these are suggestions only and are not binding in any way.
3.3 Dealer Pricing. Distributor shall inform each of its Dealers that it is
free to determine its own retail prices and that, although AltiGen
Communications may publish suggested retail price lists, they are suggestions
only and are not binding in any way.
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3.4 Initial Order. Within [*] of the Effective Date, Distributor shall deliver
to AltiGen Communications a purchase order for an aggregate price of [*]
3.5 Payment. Upon approval of credit by AltiGen Communications, payment for
additional orders shall be due and payable within [*] following receipt of
invoice or on such terms as may be otherwise specified in AltiGen
Communications' invoice. Invoices not paid when due shall accrue interest on
an annual basis from the date due until paid of [*] on any outstanding
balance, or the maximum legal rate allowed by law, whichever is less. All
Products ordered in excess of any credit limit shall be paid for in acceptable
currency in advance of shipment, by a letter of credit drawn upon a bank
acceptable to AltiGen Communications, a bank cashier's check, or a bank wire
transfer. AltiGen Communications reserves the right to vary, change, or limit
the amount or duration of credit to be allowed to Distributor, either
generally or with respect to a particular order. In the event AltiGen
Communications does not extend credit to Distributor, payment for all
purchases hereunder shall be made in advance of shipment or, at AltiGen
Communications' option, C.O.D.
3.6 Price Protection.
(a) Distributor Price Protection. AltiGen Communications shall notify
Distributor of the effective date of a [*] for any of the Products covered
herein. Inventory acquired by Distributor from AltiGen Communications less
than [*] before the effective date of the [*] and not yet sold or under a
contract for sale will be granted price protection as set forth herein. [*]
To obtain price protection, within [*] of receipt of AltiGen Communications'
notice of the [*] Distributor shall provide to AltiGen Communications a
written inventory report showing by part number the quantity of each AltiGen
Communications Product in the Distributor's inventory as of the effective date
of the [*]. Price protection will not be grained in the case of a temporary
[*] or special promotion.
(b) Dealer Price Protection. To obtain price protection for its Dealers,
Distributor (i)shall provide to AltiGen Communications a written shipment
report showing by part number the quantity of each AltiGen Communications
Product shipped to a Dealer less than [*] before the effective date of this
[*], including the identity of each Dealer, the Products sold, and the date
of shipment and (ii) shall provide, or require its Dealers to provide, a
written Dealer inventory report showing by part number the quantity of each
AltiGen Communications Product in Dealer's inventory as of the effective date
of the [*]. If Distributor provides such reports to AltiGen Communications
within [*] of Distributor's receipt of AltiGen Communications notice of a [*]
AltiGen Communications shall credit [*]
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3.7 Stock Rotation.
(a) Inventory Balancing. Provided that the Distributor issue a simultaneous
offsetting "purchase order, Distributor may, once during each quarter, return
for credit Product purchased in excess of the quarterly Purchase Objectives
for up to a maximum of [*] dollar sales invoiced by AltiGen Communications
during the immediately preceding quarter. The credit issued for the returned
inventory will be based on the [*] at which the Products were available to
Distributor during the period commencing with the date on which the Product
was purchased and ending on the date the Product was returned, and may be used
on a dollar-for-dollar basis solely to purchase additional Product pursuant to
the offsetting purchase order. The right to balance inventory granted herein
must be exercised by the last day of the second month of the quarter.
Distributor shall submit a request for authorization to return Product for
inventory balancing which shall state the quantity of Product to be returned.
Upon receipt of such request, AltiGen Communications shall issue a return of
materials authorization number. Inventory returned under this section must be
accompanied by a return of materials authorization number assigned by AltiGen
Communications and (i) in merchantable condition, in its factory-sealed
packaging, or (ii)if the returned Product is returned because defective by
virtue of being in breach of the warranty provided for in the End User
Agreement, returned with the entire contents of such Product package. All
Product returned under this subsection (a) shall be returned within thirty
(30) days of the date of issuance of the return of materials authorization
number. Distributor shall pay for the shipping of returned Products to AltiGen
Communications and AltiGen Communications shall pay for the shipping of
replacement Product sent to Distributor.
(b) Product Refresh. AltiGen Communications may, at its sole discretion,
modify the Products. For purposes of this Agreement, AltiGen Communications
shall have sole discretion as to whether a Product is deemed to be a new
version of an existing Product to be provided to Distributor under the terms
of this Agreement or a new product requiring execution of an appendix to this
Agreement prior to distribution. Once a new version of a Product covered by
this Agreement begins shipping, Distributor shall have thirty (30) days from
the first AltiGen Communications shipment date of the new version to
Distributor, or from written notification by AltiGen Communications of the new
version, whichever is later, (i) to submit an offsetting purchase order for an
equal dollar-for-dollar value of the new version of the Product and (ii) to
return Product from the prior release from Distributor's inventory that was
shipped by AltiGen Communications to Distributor within the previous ninety
(90) days. Such returns shall be shipped at Distributor's expense. Returned
Product will be exchanged by AltiGen Communications on a dollar for dollar
basis, proportional with any price increase or decrease, with the new version
of the Product and shipped to Distributor at AltiGen Communications expense.
Product returned under this provision must be in merchantable condition and in
its original factory-sealed packaging. The right to refresh Product under this
subsection (b) shall be in addition to Distributor's inventory-balancing right
under subsection (a) above.
(c) Product Discontinuation. AltiGen Communications shall provide Distributor
with thirty (30) days written notice prior to AltiGen Communications'
discontinuation of any Product.
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Upon receipt of such notice, Distributor shall have the right to return all
discontinued Products purchased within sixty (60) days of the notice of
discontinuation for a credit to Distributor's account of the Product's
purchase price less any discounts or credits previously received. Credits
granted hereunder can only be used for future purchases of Products. The right
to return discontinued Product under this subsection (c) shall be in addition
to Distributor's inventory-balancing right under subsection (a) above.
3.8 Distributor Financial Condition. Distributor represents and warrants that
it is and at all times during the term of this Agreement shall remain in good
financial condition, solvent and able to pay its bills when due. Distributor
further represents and warrants that it has and at all times during the term
of this Agreement shall retain the ability to order and pay for all Product
Distributor is obliged to purchase under Section 7.2 below. From time to time,
on reasonable notice by AltiGen Communications, Distributor shall furnish
financial reports as necessary, to determine Distributor's financial
condition.
3.9 Taxes. Prices calculated in accordance with Exhibit B are exclusive of all
applicable taxes. Distributor agrees to pay all taxes associated with the
marketing, distribution and delivery of the Products ordered, including but
not limited to sales, use, excise, added value and similar taxes and all
customs, duties or governmental impositions, but excluding taxes on AltiGen
Communications' net income. Any tax or duty AltiGen Communications may be
required to collect or pay upon the marketing or delivery of the Products
shall be paid by Distributor and such sums shall be due and payable to AltiGen
Communications upon delivery. If claiming a tax exemption, Distributor must
provide AltiGen Communications with valid tax exemption certificates at the
time of invoicing.
4. PRODUCT CHANGES
AltiGen Communications shall have the right, in its sole discretion,
without liability to Distributor, to (a)change the Products available on the
Product List, (b) change the design, or discontinue developing, producing,
licensing or distributing any of the Products covered by this Agreement, and (e)
announce new products to which the terms and conditions of this Agreement do not
apply. The parties agree that additional Products may be added to the Agreement
by Execution of an appendix to this Agreement setting forth any special terms,
conditions, modifications or deletions necessary for the additional Products.
Additional Products shall be deemed to be added to this Agreement to the extent
AltiGen Communications accepts any purchase orders for Products not otherwise
listed on the Product List.
5. ORDERS
5.1 Procedure. All orders for Products placed by Distributor shall be in
writing, or if placed orally, shall be confirmed in writing within ten (l 0)
business days after such oral order.
5.2 Acceptance of Orders. All orders for Products by Distributor shall be
subject to acceptance by AltiGen Communications and shall not be binding on
AltiGen Communications until the earlier of written confirmation or shipment,
and, in the ease of acceptance by shipment, only as to the portion of the
order actually shipped.
5.3 Controlling Terms. The terms and conditions of this Agreement and of the
applicable AltiGen Communications order confirmation pursuant to Section 6.2
("Acceptance of Orders") above, shall apply to each order accepted or shipped
by AltiGen Communications hereunder.
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Any terms or conditions appearing on the face or reverse side of any purchase
order, acknowledgment, or confirmation other than confirmation pursuant to
Section 6.2 above that are different from or in addition to those required
hereunder shall not be binding on the parties, even if signed and returned,
unless both parties hereto expressly agree in a separate writing to be bound
by such separate or additional terms and conditions.
5.4 AltiGen Communications Order Cancellation. AltiGen Communications reserves
the right to cancel or suspend any orders placed by Distributor and accepted
by AltiGen Communications, or to refuse or delay shipment thereof, if
Distributor (a) fails to make any payment as provided herein or in any
invoice, (b) fails to meet credit or financial requirements established by
AltiGen Communications, or (c) otherwise fails to comply with the terms and
conditions of this Agreement
5.5 Distributor Order Cancellation. Orders accepted by AltiGen Communications
may be canceled without penalty if written notice of cancellation is given to
AltiGen Communications and the notice is received by AltiGen Communications at
least [*] prior to the scheduled shipment date. Orders canceled less than [*]
prior to the scheduled shipment date will be subject to a cancellation payment
of [*] of the invoice value of the canceled order. In no event may
Distributor cancel any order or any portion of an order after shipment.
5.6 Product Availability. AltiGen Communications will use reasonable efforts
to fill orders for Products and meet requests for shipment dates subject to
Product availability and AltiGen Communications production and supply
schedules. Should orders for Products exceed AltiGen Communications' available
inventory, AltiGen Communications will allocate its available inventory and
make deliveries on a basis AltiGen Communications deems equitable, in its sole
discretion, and without liability to Distributor on account of the method of
allocation chosen or its implementation. AltiGen Communications shall not be
liable to Distributor or any third party for any damages due to AltiGen
Communications' failure to fill any orders or for any delay in delivery or
error in filing any orders for any reason whatsoever.
5.7 Obligation to Ship in Presence of Breach. Even where AltiGen
Communications accepts a purchase order, AltiGen Communications shall not be
obligated to ship Products if Distributor is in arrears on payments owing to
AltiGen Communications or otherwise in breach of the Agreement at the time of
the scheduled shipment.
5.8 Delivery. AltiGen Communications will ship Products FOB Destination,
unless otherwise agreed in writing, to Distributor's designated location or
freight forwarder via ground transport. Distributor may change the designated
locations by providing AltiGen Communications with written notice of such
change, and the notice is received by AltiGen Communications at least fifteen
(15) days prior to the estimated shipment dates. AltiGen Communications will
select a carrier to transport Products to the point identified in Section 6.9
which will be paid for by TerraComSortium. AltiGen Communications shall select
the mode of shipment and the carrier unless Distributor designates a carrier
at the time an order is placed.
5.9 Risk of Loss. In the case of shipments to shipping destinations within the
United States, title to the Products, exclusive of the rights retained under
the Agreement in trademarks, patents, copyrights, trade names, trade secrets
and intellectual property, and all risk of loss or
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damage for any Product shall pass to Distributor upon delivery, by AltiGen
Communications to the freight carrier regardless of whether AltiGen
Communications or the Distributor has designated the carrier.
[In the case of shipments to shipping designations outside the United
States, Distributor and AltiGen Communications expressly agree that
beneficial and legal title to, ownership of, right to possession of,
control over, and risks of loss and damage to, the products shall remain
with AltiGen Communications until the shipment physically arrives at the
port of entry in the importing country (or at a bonded warehouse within the
jurisdictional boundaries of Mexico and Panama if Distributor requests
shipment to those countries). The time of payment, whether before or after
shipment, the place or medium of payment, the method of shipment, the
manner of consignment, whether to AltiGen Communications, or its agent, to
Distributor or Distributor's agent, or any agent for both, or any document
in relation to any sale under the Agreement, shall in no way limit or
modify the right of AltiGen Communications as the legal and beneficial
owner of the products, its right to control and its right to possession of
such goods until they physically arrive at the port of entry of the
importing country (or at a bonded warehouse within the jurisdictional
boundaries of Mexico and Panama if Distributor requests shipment to those
countries). It is expressly understood that the foregoing shall not be
construed to mean that AltiGen Communications has merely retained bare
legal title for security purposes, but rather retains legal title and full
beneficial ownership until the shipment arrives at the port of entry in the
country of destination (or at a bonded warehouse within the jurisdictional
boundaries of Canada or Mexico if Distributor requests shipment to those
countries.) If Distributor insures the shipment, insurance policies will
protect the interest of AltiGen Communications as the legal owner of the
merchandise until title transfers as set forth above.]
5.10 Security Interest. In the event that AltiGen Communications extends
credit to the Distributor for Product purchases, Distributor grants AltiGen
Communications, as security for Distributor's obligations hereunder, a
purchase money security interest in (i) the Products to be acquired from
AltiGen Communications under the Agreement or any extension of the Agreement
and (ii) the proceeds of such Products. Upon AltiGen Communications' request,
Distributor agrees to execute and cause to be filed all instruments or
documents (including without limitation financing statements) necessary to
perfect any such security interest and further agree that, in any event,
AltiGen Communications may file a copy of the Agreement as a financing
statement for such purpose.
6. DISTRIBUTION OBLIGATIONS
6.1 Dealer License Agreements. For each Dealer to which Distributor
distributes or markets Products, Distributor shall execute a Dealer license
agreement ("Dealer License Agreement") that contains terms and conditions
consistent with the provisions of this Agreement, that is at least as
restrictive as this Agreement and that requires the Dealer to cause each copy
of the Product distributed to End-Users by such Dealer to be subject to an
End-User Agreement. Upon AltiGen Communications request, from time to time
Distributor shall provide to AltiGen Communications a copy of the then current
version of the Dealer License Agreement.
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6.2 Authorized Dealer Program. AltiGen Communications has instituted a AltiGen
Communications Authorized Dealer Program. Distributor agrees to market the
Products in compliance with AltiGen's Authorized Dealer Program.
6.3 Business Plan. Within ninety (90) days of the Effective Date, Distributor
shall provide to AltiGen Communications a business plan setting forth
Distributor's plans for promoting the Products. Distributor agrees to provide
an updated business plan in accordance with the schedule for updating such as
specified by AltiGen Communications. At least twice each year, AltiGen
Communications may conduct reviews to evaluate Distributor's performance under
such business plan Distributor acknowledges that AltiGen Communications may
terminate the Agreement for Distributor's failure to fulfill the performance
objectives set forth in the business plan.
6.4 Purchase Objectives; Inventory. Distributor and AltiGen Communications
shall agree upon quarterly Purchase Objectives. The initial Purchase
Objectives are stated in Exhibit C. Distributor acknowledges that AltiGen
Communications may terminate the Agreement for failure to order and pay for
the quantity of Product set forth in the Purchase Objectives each and every
quarter. During the first two quarters of this contract, AltiGen shall make
reasonable business judgments and allowances, taking into proper consideration
business conditions affecting AltiGen's and Distributor's ability to fulfill
said Purchase Objectives. It is understood that such conditions include but
are not limited to, manufacturing and product release issues such as type
approvals, distributor's sales and technical support organization learning
process, business ramp up and Product Market introduction constraints and
competitive factors. These are reasonable business variables which will result
in Distributor both exceeding or being short of such Purchase Objectives. As a
part of meeting its Purchase Objectives, Distributor shall maintain an
inventory of Products and warehousing facilities sufficient to serve
adequately the demands of Dealers on a reasonably timely basis. If such
inventory equals or exceeds the quantity of Products necessary to meet
reasonably anticipated demands of Dealers for a period of at least 30 days,
Distributor shall be deemed to have fulfilled its inventory requirements
hereunder (as distinct from its Purchase Objectives).
6.5 Point of Sale Reports. During the term of this Agreement, Distributor
shall provide to AltiGen Communications a monthly report in EDI format
containing the following information: (i) the submitter account number,
(ii)the destination company's (Dealer's) name, (iii)the "ship to" destination
zip code and (iv)the part number of the Products shipped. Such report, with
respect to a calendar month, shall be delivered to AltiGen Communications no
later than the tenth (10th) day of the following calendar month.
AltiGen shall use the information contained in the Reports solely for the
purpose of (a) implementing AltiGen's revenue recognition policies as
required by AltiGen's auditors, (b) evaluating the effectiveness of
AltiGen's internal sales and marketing programs, and (c) other internal
purposes.
During and after the term of the Agreement, for so long as
Distributor/Dealer is in the business of reselling or servicing AltiGen's
products, AltiGen shall not, without Distributor/Dealer's prior written
permission, (a) disclose any of the information contained in the Reports to
other distributors, dealers, or persons who compete with
Distributor/Dealer; or Co) use any of the
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information contained in the Reports for AltiGen's own account to solicit
Distributor/Dealer's customers.
6.6 Customer Satisfaction. Distributor agrees that the Products marketed under
this Agreement are technically complex and require high-quality,
individualized pre-marketing and post-marketing support. This support is
necessary to achieve and maintain high customer satisfaction. Therefore,
Distributor agrees that high customer satisfaction is a condition of
distribution authorization by AltiGen Communications. The distribution
channels established by AltiGen Communications, and the obligations placed on
distributors, exist to ensure high customer satisfaction. Distributor agrees
to market the Products only in accordance with this Agreement. In addition, in
order to assure high customer satisfaction, Distributor agrees to:
. report to AltiGen Communications promptly and in writing all
suspected and actual problems with any Product;
. maintain a shipment report identifying for each Dealer, the
Products sold, the date of sale, and each Product's serial
number;
. retain all shipment reports for five years after the date of
sale, and assist AltiGen Communications, upon request, in tracing
a Product to a Dealer, in order to distribute critical Product
information, locate a Product for safety reasons, or discover
unauthorized marketing or infringing acts;
. conduct business in a manner which reflects favorably at all
times on the Products, goodwill and reputation of AltiGen
Communications;
. avoid deceptive, misleading or unethical practices which are or
might be detrimental to AltiGen Communications or its products;
. refrain from making any false or misleading representations with
regard to AltiGen Communications or its products; and
. refrain from making any representations, warranties or guarantees
to customers or to the trade with respect to the specifications,
features or capabilities of the Products that are inconsistent
with the literature distributed by AltiGen Communications.
Promotional Efforts. Distributor shall use its best efforts to market and
distribute the Products to Dealers in the Territory. Distributor may advertise
the Products in advertising media of Distributors choice, provided that the
primary audience or circulation is located in the Territory. Distributor shall
make full use of all promotional material supplied by AltiGen Communications and
make available literature and other information that AltiGen Communications
requires to be transmitted to such Dealers. In all advertising and promotion of
the Products, Distributor shall comply with AltiGen Communications standard
cooperative advertising policies as specified from time to time by AltiGen
Communications The current Cooperative Advertising Policies are added hereto as
an attachment titled "ALTIGEN COMMUNICATIONS MDF MARKETING FUND PROGRAM
GUIDELINES FOR THE AMERICAS DISTRIBUTOR."
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6.7 Demonstration System. Distributor shall maintain a demonstration system
capable of supporting the most technically advanced Products Distributor shall
use such demonstration system both to facilitate its ability to fulfill its
Dealer support obligations, and to support its sales efforts.
6.8 Training. To assist Distributor with the distribution and support of
Products AltiGen Communications may provide training to Distributor for any
new Product release during the term of this Agreement, upon AltiGen
Communications reasonable request and at Distributor's facility, and
Distributor shall use best efforts to have Distributor's inside and outside
sales force present for such training sessions.
6.9 Distributor Personnel. Distributor shall train and maintain a sufficient
number of capable technical and sales personnel to serve the demands of
Dealers for the Products, for service and support of the Products, call on all
Dealers with reasonable frequency and answer promptly all Dealer inquiries or
requests for information regarding the Products. Distributor and its staff
shall develop and maintain sufficient knowledge of the industry, the Products,
and competitive offerings (including specifications, features, and functions)
so as to be able to demonstrate and support the Products for Dealers.
Distributor shall provide all Dealers with technical support and other
assistance appropriate for the promotion, marketing, and distribution of the
Products. Distributor shall attend AltiGen Communications distribution
meetings.
7. SUPPORT AND MAINTENANCE
AltiGen Communications shall provide Distributor (but not its Dealers, and
not End Users which purchase from such Dealers) with the support and-maintenance
described in Exhibit D hereto free of charge during the term of this Agreement.
AltiGen Communications may provide Dealers and End Users with support and
maintenance under a separate agreement.
8. TRADEMARKS AND CONFIDENTIAL INFORMATION
8.1 Trademarks. AltiGen Communications shall have and retain sole ownership of
AltiGen's logo, trade names and trademarks ("Trademarks"), including the
goodwill pertaining thereto. AltiGen Communications hereby grants to
Distributor the right to use and display the Trademarks solely in connection
with and solely to the extent reasonably necessary for the marketing,
distribution, and support of the Products within the Territory in accordance
with the terms and conditions of this Agreement. Distributor shall not do or
suffer to be done any act or thing that would impair AltiGen's rights in its
Trademarks or damage the reputation for quality inherent in the Trademarks.
AltiGen's has the right to take all action which it deems necessary to ensure
that the advertising and promotional materials related to the Products
utilized by Distributor are consistent with the reputation and prestige of the
Trademarks. Distributor shall market, distribute, and support the Products
only under the Trademarks, and not any other trademark or logo. Distributor
shall not use the Trademarks or any other trademarks or trade names of AltiGen
Communications or any word, symbol, or design confusingly similar thereto, as
part of its corporate name, or as part of the name of any product of
Distributor. Distributor shall not (i) remove, alter or overprint the
Products' copyright notices, trademarks, and logos, or packaging, (ii)attach
any additional trademarks to the Products without AltiGen's prior written
consent or (iii)affix any of the Trademarks to any non-AltiGen Communications
products. Distributor agrees that any goodwill which accrues because of
Distributor's use of the
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Trademarks shall become AltiGen's property Distributor further agrees not to
contest AltiGen's Trademarks or tradenames, or to make application for
registration of any AltiGen Communications Trademarks or tradenames.
8.2 Confidential Information. During the term of this Agreement, and for a
period of three (3) years thereafter, The Parties will maintain in confidence
any confidential or proprietary information of The Parties disclosed to one
another including, without limitation, any information regarding scientific,
engineering, manufacturing, marketing, business plan, financial or personnel
matter relating to The Parties, whether in oral, written, graphic or
electronic form ("Confidential Information"). The Parties will not use,
disclose or grant use of such Confidential Information except as expressly
authorized by The Parties. To the extent that disclosure is authorized by The
Parties, The Parties will obtain prior agreement from their employees, agents
or consultants to whom disclosure is to be made to hold in confidence and not
make use of such information for any purpose other than those permitted by The
Parties. The Parties will use at least the same standard of care as they use
to protect its own Confidential Information to ensure that such employees,
agents or consultants do not disclose or make any unauthorized use of such
Confidential Information. The Parties will promptly notify each other upon
discovery of any unauthorized use or disclosure of the Confidential
Information.
8.3 Exceptions. The obligations of confidentiality contained in Section 9.2
will not apply to the extent that it can be established by The Parties by
competent proof that such Confidential Information:
(a) was already known to The Parties, other than under an obligation of
confidentiality, at the time of disclosure by The Parties;
(b) was generally available to the public or otherwise part of the public
domain at the time of its disclosure to The Parties;
(c) became generally available to the public or otherwise part of the public
domain after its disclosure and other than through any act or omission of The
Parties in breach of this Agreement;
(d) was disclosed to The Parties, other than under an obligation of
confidentiality, by a third party who had no obligation to the disclosing
party not to disclose such information to others.
9. INDEMNIFICATION
9.1 AltiGen Communications Indemnity. Subject to the limitations set forth
herein below, AltiGen Communications shall defend Distributor with respect to
any claim, suit or proceeding brought against Distributor to the extent it is
based upon a claim that any Product sold pursuant to this Agreement infringes
upon any U.S. patent, U.S. trademark, U.S. copyright or U.S. trade secret of
any third party; provided, however, that Distributor (i)promptly notifies
AltiGen Communications in writing of such claim, suit or proceeding; (ii)
gives AltiGen Communications the right to control and direct investigation,
preparation, defense and settlement of any claim, suit or proceeding; and
(iii)gives assistance and full cooperation for the defense of same, and,
further provided, that AltiGen's liability with respect to portions of
Products provided by or licensed from third parties will be limited to the
extent AltiGen Communications is indemnified by such third parties. AltiGen
Communications shall pay any resulting damages, costs and expenses finally
awarded to a third party, but AltiGen Communications shall not be liable for
11
<PAGE>
such amounts, or for settlements incurred by Distributor, without AltiGen's
prior written authorization. If a Product is, or in AltiGen's opinion might
be, held to infringe as set forth above, AltiGen Communications may, at its
option, replace or modify such Product so as to avoid infringement, or procure
the right for Distributor to continue the use and resale of such Product If
neither of such alternatives is, in AltiGen's opinion, reasonably possible,
the infringing Product shall be returned to AltiGen Communications, and
AltiGen's sole liability, in addition to its obligation to reimburse any
awarded damages, costs and expenses set forth above, shall be to refund the
purchase price paid for such Products by Distributor.
9.2 Exclusions. The provisions of the foregoing indemnity shall not apply with
respect to any instances of alleged infringement based upon or arising out of
the use of such Products in any manner for which the Products were not
designed, or for use of Products other than the uses and distributions
designated by AltiGen Communications, for use of any Product that has been
modified by Distributor or any third party, or for use of any Product in
connection with or in combination with any equipment, devices or software that
have not been supplied by AltiGen Communications. Notwithstanding any other
provisions hereof, the foregoing indemnity shall not apply with respect to any
infringement based on Distributor's activities occurring subsequent to its
receipt of notice of any claimed infringement unless AltiGen Communications
shall have given Distributor written permission to continue to market and
distribute the allegedly infringing Product.
9.3 Entire Liability and Limitation. THE FOREGOING SECTIONS 10.1 AND 10.2
STATE THE SOLE AND EXCLUSIVE REMEDY OF DISTRIBUTOR AND THE ENTIRE LIABILITY
AND OBLIGATION OF ALTIGEN COMMUNICATIONS WITH RESPECT TO INFRINGEMENT OR
CLAIMS OF INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADE SECRET OR OTHER
INTELLECTUAL PROPERTY RIGHT BY THE PRODUCTS OR ANY PART THEREOF. IN NO EVENT
SHALL ALTIGEN'S LIABILITY UNDER SECTION 10.1 FOR INDEMNITY OF DISTRIBUTOR WITH
RESPECT TO INFRINGEMENT OF A PATENT, COPYRIGHT, TRADEMARK OR TRADE SECRET
EXCEED THE AMOUNTS PAID TO ALTIGEN COMMUNICATIONS BY DISTRIBUTOR UNDER THIS
AGREEMENT IN THE PREVIOUS CALENDAR YEAR FOR THE PRODUCTS DISTRIBUTED BY
DISTRIBUTOR PURSUANT TO THIS AGREEMENT.
9.4 Indemnity by Distributor. DISTRIBUTOR AGREES TO INDEMNIFY AND HOLD ALTIGEN
COMMUNICATIONS HARMLESS FROM ANY CLAIMS, SUITS, PROCEEDINGS, LOSSES,
LIABILITIES, DAMAGES, COSTS AND EXPENSES (INCLUSIVE OF ALTIGEN'S REASONABLE
ATTORNEYS' FEES) MADE AGAINST OR INCURRED BY ALTIGEN COMMUNICATIONS AS A
RESULT OF NEGLIGENCE, MISREPRESENTATION, OR ERROR OR OMISSION ON THE PART OF
DISTRIBUTOR OR REPRESENTATIVE OF DISTRIBUTOR. DISTRIBUTOR SHALL BE SOLELY
RESPONSIBLE FOR, AND SHALL INDEMNIFY AND HOLD ALTIGEN COMMUNICATIONS HARMLESS
FROM, ANY CLAIMS, WARRANTIES OR REPRESENTATIONS MADE BY DISTRIBUTOR OR
DISTRIBUTOR'S EMPLOYEES OR AGENTS WHICH DIFFER FROM THE WARRANTY PROVIDED BY
ALTIGEN COMMUNICATIONS IN ITS END USER AGREEMENT.
12
<PAGE>
10. WARRANTY
10.1 AltiGen Communications Warranty AltiGen Communications warrants the
Products TO END USERS ONLY pursuant to the terms and conditions of the End
User Agreement and no warranty is extended to the Distributor.
10.2 Limitations and Disclaimer. EXCEPT FOR THE EXPRESS WARRANTY SET FORTH IN
THE END USER AGREEMENT, ALTIGEN COMMUNICATIONS EXPRESSLY DISCLAIMS ALL
WARRANTIES EXPRESSED OR IMPLIED RELATING TO THE PRODUCTS, AND FUROR EXPRESSLY
EXCLUDES ANY WARRANTY OF NON-INFRINGEMENT, FITNESS FOR A PARTICULAR PURPOSE
OR MERCHANTABILITY.
10.3 NO PERSON IS AUTHORIZED TO MAKE ANY OTHER WARRANTY OR REPRESENTATION
CONCERNING THE PERFORMANCE OF THE PRODUCTS OTHER THAN AS PROVIDED IN THE END
USER AGREEMENT. DISTRIBUTOR SHALL MAKE NO OTHER WARRANTY, EXPRESS OR IMPLIED,
ON BEHALF OF ALTIGEN COMMUNICATIONS.
10.4 Distributor's Warranty. Distributor hereby represents and warrants to
AltiGen Communications that neither this Agreement (or any term hereof) nor
the performance of or exercise of rights under this Agreement, is restricted
by, contrary to, in conflict with, ineffective under, requires registration or
approval or tax withholding under, or affects AltiGen's intellectual property
rights (or the duration thereof) under, or will require any compulsory
licensing under, any law or regulation of any organization, country, group of
countries or political or governmental entity to which Distributor is subject.
11. LIMITATION ON LIABILITY
11.1 Waiver of Consequential Damages. IN NO EVENT WILL ALTIGEN COMMUNICATIONS
BE LIABLE TO DISTRIBUTOR OR ANY THIRD PARTY FOR ANY INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION ANY LOSS OF INCOME, LOSS
OF PROFITS OR LOSS OF DATA, EVEN IF ALTIGEN COMMUNICATIONS HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE
GRANT OF THE LICENSE HEREUNDER.
11.2 Limitation of Liability. ALTIGEN'S TOTAL LIABILITY TO DISTRIBUTOR OR ANY
THIRD PARTY HEREUNDER SHALL NOT EXCEED THE AMOUNT PAID FOR THE PRODUCTS DURING
THE TWELVE MONTH PERIOD IMMEDIATELY PRECEDING THE DATE ON WHICH THE CLAIM
GIVING RISE TO SUCH LIABILITY AROSE.
11.3 Third Party Claims. AltiGen Communications shall not be liable for any
claim by Distributor based on any third party claim, except as stated in
Section 10 of the Agreement.
13
<PAGE>
12. TERM AND TERMINATION
12.1 Term. Subject to the provisions of Sections 13.2 and 13.3 below, this
Agreement is valid for a term of one year and shall be renewed automatically
for additional one year terms provided that each party shall have the right to
terminate this Agreement for convenience upon ninety (90) days written notice
prior to the end of the initial term or any subsequent term of the Agreement.
12.2 Termination for Cause. AltiGen Communications may terminate the Agreement
for cause if Distributor fails to meet its payment obligations under the
Agreement and such failure continues for ten (10) days following receipt of
written notice from AltiGen Communications. In addition, either party may
terminate this Agreement for cause upon thirty (30) days written notice to the
other party if such other party materially breaches this Agreement and such
material breach is not cured within the thirty (30) day period following
delivery of notice. Either party shall have the right to terminate this
Agreement immediately in the event the other party terminates its business, or
becomes subject to any bankruptcy or insolvency proceeding under Federal or
State statute, and such petition is not dismissed within sixty (60) days.
12.3 Effect of Termination. For a period of sixty (60) days following
termination of this Agreement, Distributor may distribute any Products in
Distributors possession at the time of termination, provided, however, that if
AltiGen Communications has terminated the Agreement pursuant to Section 13.2,
Distributor's right to distribute the Products shall immediately terminate.
Following any permitted distribution, Distributor shall return to AltiGen
Communications or, at AltiGen's request, destroy the copies of the Products
and Documentation then in its possession. In addition, Distributor shall be
entitled to retain one (1) copy of the Product following termination solely
for the purposes of providing support to Dealers and End Users. AltiGen
Communications shall apply the value of any returned Products to any
outstanding credit balance in Distributor's account, but shall not otherwise
be required to refund Distributor for the value of the returned Products. The
termination of this Agreement shall not act to terminate the licenses granted
to Dealers or End Users pursuant to this Agreement.
12.4 Acceleration of Payment. Upon termination of the Agreement by AltiGen
Communications for cause, the due dates of all outstanding invoices for
Products will automatically be accelerated so that they become due and payable
on the effective date of termination, even if longer terms had been provided
previously. All orders or portions of orders remaining un-shipped as of the
effective date of such termination shall automatically be canceled.
13. MISCELLANEOUS
13.1 Nonexclusivity. AltiGen Communications retains the right to market,
distribute, and support the Products in the Territory directly to or through
any person or entity on any terms deemed desirable by AltiGen Communications
in its sole discretion. AltiGen Communications will refer at least an
equitable share or Dealer inquiries and applications from within Distributor
Territory for Distributor evaluation and recruitment if consistent with
Distributor Business Plan and deemed in the best interest of The Parties.
13.2 Modification and Amendment. Except with respect to Exhibit B hereof, this
Agreement may be modified or amended only in writing by the consent of both
parties.
14
<PAGE>
13.3 Survival. Sections 7.6, 9.2, 9.3, 10, 11, 12, 13.3, 13.4 and 14 shall
survive termination of this Agreement for three (3) years.
13.4 Governing Law. This Agreement is made in accordance with and shall be
governed and construed under the laws of the State of California, as
applied to agreements executed and performed entirely in California by
California residents. Distributor agrees to submit to the jurisdiction of
the Northern District of California, San Jose Division, or the Santa Clara
County Superior Court, as appropriate, and hereby waives any objections to
the jurisdiction and venue of such courts.
14.5 Toll Fraud. Dealer is forbidden from stating or implying that AltiGen
Products provide immunity from fraudulent intrusion (Toll Fraud). Dealer
must use this language on all sales materials and contract involving
AltiGen Products.
14.6 Notices. All notices, demands, or consents required or permitted under
this Agreement shall be in writing and shall be delivered personally or
sent by a national overnight courier service or by registered or certified,
return receipt requested mail to the other party at the addresses first set
forth above. All notices, demands, or consents shall be deemed effective
upon personal delivery or three (3) days following dispatch via first class
mail or one (1) business day following deposit with any national overnight
courier service in accordance with this section.
14.7 No Partnership of Joint Venture. No agency, employment, partnership,
joint venture, or other joint relationship is created hereby, it being
understood that Distributor and AltiGen Communications are independent
contractors vis-a-vis one another and that neither has any authority to
bind the other in any respect whatsoever.
14.8 Force Majeure. Neither party shell be deemed to be in default of or to
have breached any provision of this Agreement as a result of any delay,
failure in performance, or interruption of service resulting directly or
indirectly from acts of God, acts of civil or military authority, civil
disturbance, war, strikes or other labor disputes, fires, transportation
contingencies, laws, regulations, acts or orders of any government agency
or official thereof, other catastrophes or any other circumstances beyond
the party's reasonable control.
14.9 Export Control. The parties acknowledge that the Products may be subject
to the export control laws of the United States of America, including the
U.S. Bureau of Export Administration regulations, and hereby agree to obey
any and all such laws. The parties agree to comply with the U.S. Foreign
Corrupt Practices Act of 1977, as amended, and with all applicable foreign
laws relating to the use, importation, licensing or distribution of the
Products.
14.10 Assignment. Neither party may assign this Agreement or any of its
rights, duties or obligations under this Agreement to any third party
without the other party's prior written consent, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, either party may
assign its rights and delegate its obligations under this Agreement without
the consent of the other party to a purchaser of all or substantially all
of its voting stock or capital assets or to an entity with which such party
merges or is consolidated.
15
<PAGE>
14.11 Severability and Waiver. In the event any provision of this Agreement is
held to be invalid or unenforceable, the valid or enforceable portion
thereof and the remaining provisions of this Agreement will remain in full
force and effect. Any waiver (express or implied) by any party of any
default or breach of this Agreement shall not constitute a waiver of any
other or subsequent default or breach.
14.12 Entire Agreement. This Agreement and all Exhibits referred to herein
embody the entire understanding of the parties with respect to the subject
matter hereof and shall supersede all previous communications,
representations or understandings, either oral or written, between the
parties relating to the subject matter hereof.
14.13 Headings. The section headings appearing in this Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of any such section nor in any way affect this
Agreement.
14.14 Parties Advised by Counsel. This Agreement has been negotiated between
unrelated parties who are sophisticated and knowledgeable in the matters
contained in this Agreement and who have acted in their own self interest.
In addition, each party has been represented by legal counsel. The
provisions of this Agreement shall be interpreted in a reasonable manner to
effect the purpose of the parties, and this Agreement shall not be
interpreted or construed against any party to this Agreement because that
party or any attorney or representative for that party drafted this
Agreement or participated in the drafting of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement,
including the Exhibits hereto, and incorporated herein by reference, as of the
date first above written above.
ALTIGEN DISTRIBUTOR
By: /s/ Michele Shinnein By: /s/ Cesar Audrade
------------------------- ------------------------
Name: Michele Shinnein Name: CESAR C. AUDRADE
---------------------- ----------------------
Title: VP of Sales Title: CEO
---------------------- ---------------------
16
<PAGE>
EXHIBIT A
ALTIGEN(R), INC. END USER AGREEMENT
NOTICE - READ THIS BEFORE OPENING THIS PACKAGE, INSTALLING THE PC HARDWARE OR
USING THE SOFTWARE
OPENING THIS PACKAGE, INSTALLING THE PC HARDWARE OR USING THE SOFTWARE
INDICATES YOUR ACCEPTANCE OF THESE TERMS AND CONDITIONS. READ ALL OF THE TERMS
AND CONDITIONS OF THIS LICENSE AGREEMENT PRIOR TO OPENING THIS PACKAGE OR USING
THE SOFTWARE. IF YOU DO NOT ACCEPT THESE TERMS, YOU MUST RETURN THIS PACKAGE
WITHIN 5 DAYS OF OBTAINING THE PACKAGE, WITH YOUR RECEIPT, AND YOUR MONEY WILL
BE READ.
* * * *
PLEASE NOTE THAT YOU MAY NOT USE, COPY, MODIFY OR TRANSFER THE PROGRAM, THE
PC HARDWARE OR DOCUMENTATION OR ANY COPY, EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT.
LICENSE. This software program (the "Program") and the documentation (the
-------
"Documentation") are licensed, not sold, to you. The term "Program" shall also
include any updates of the Program licensed to you by AltiGen. Subject to the
terms of this agreement, you have a non-exclusive and nontransferable right to
use the Program, Personal Computer Card (the "PC Hardware") and Documentation.
You agree to use your best efforts to prevent and protect the contents of the
Program, the PC Hardware and Documentation from unauthorized disclosure or use.
AltiGen and its licensors reserve all rights not expressly granted to you.
AltiGen's licensors are the intended third party beneficiaries of this agreement
and have the express right to rely upon and directly enforce the terms set forth
hereto.
LIMITATIONS ON USE. You may not rent, lease, sell or otherwise transfer or
------------------
distribute copies of the Program, the PC Hardware or Documentation to others.
You may not modify or translate the Program, the PC Hardware or the
Documentation without the prior written consent of AltiGen. You may not reverse
assemble, reverse compile or otherwise attempt to create the source code from
the Program or the PC Hardware. You may not use AltiGen's name or refer to
AltiGen directly or indirectly in any papers, articles, advertisements, sales
presentations, news releases or releases to any third party without the prior
written approval of AltiGen for each such use. You may not release the results
of any performance or functional evaluation of any Program to any third party
without prior written approval of AltiGen for each such release.
BACKUP AND TRANSFER. You may make one copy of the Program for backup
-------------------
purposes if AltiGen's copyright notice is included. You may not sublicense,
assign, delegate, rent, lease, time-share or otherwise transfer this license or
any of the related rights or obligations for any reason. Any attempt to make any
such sublicense, assignment, delegation or other transfer by you shall be void.
You may physically transfer the Program from one computer to another provided
that you do not retain any copies of the Program, including any copies stored on
a computer.
COPYRIGHT. The Program, the PC Hardware and related Documentation are
---------
copyrighted by AltiGen and its licensors. You may make one copy of the
Documentation and print one copy of any on-line documentation or other materials
provided to you in electronic form. Any and all other copies of the Program and
-------------------------------------------
any copy of the Documentation made by you are in violation of this license.
- --------------------------------------------------------------------------
17
<PAGE>
OWNERSHIP. You agree that the Program and Documentation belong to AltiGen
---------
and its licensors. You agree that you neither own nor hereby acquire any claim
or right of ownership to the Program and Documentation or to any related
patents, copyrights, trademarks or other intellectual property. You own only the
magnetic or other physical media (including Personal Computer Card) on which the
Program and related Documentation are recorded or fixed. AltiGen and its
licensors retain all right, title and interest m and to the Documentation and
all copies and the Program recorded on the original media and all subsequent
copies of the Program at all times, regardless of the form or media in or on
which the original or other copies may subsequently exist. This license is not a
sale of the original or any subsequent copy. All content accessed through the
Program is the property of the applicable content owner and may be protected by
applicable copyright law. This license gives you no rights to such content.
TERM AND TERMINATION. This license is effective until terminated. You may
--------------------
terminate this license at any time by destroying the Program and Documentation
and the permitted backup copy. This license automatically terminates if you fail
to Comply with its terms and conditions. You agree that, upon such termination,
you will either destroy (or permanently erase) all copies of the Program and
Documentation, or return the original Program and Documentation to AltiGen,
together with any other material (PC Hardware) you have received from AltiGen in
connection with the Program.
LIMITED WARRANTY. AltiGen warrants the media on which the Program is
----------------
furnished to be free from defects in materials and workmanship under normal use
for 30 days from the date that you obtain the Program. AltiGen warrants the PC
Hardware for a period of one year from the date of consumer purchase to be free
from defects in materials and workmanship. EXCEPT FOR THIS LIMITED WARRANTY,
ALTIGEN AND ITS LICENSORS PROVIDE THE PROGRAM, THE PC HARDWARE AND THE
DOCUMENTATION `AS IS' WITHOUT WARRANTY OF ANY KIND EXPRESS, IMPLIED OR
STATUTORY, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Some states do not allow the exclusion of implied warranties, so the above
exclusion may not apply to you. This warranty gives you specific legal rights
and you may also have other rights which vary from state to state.
LIMITATION OF REMEDIES. AltiGen and its licensors' entire liability, and
----------------------
your exclusive remedy in connection with the Program, the PC Hardware and the
Documentation shall be that you are entitled to return the defective media
containing the Program together with the PC Hardware and Documentation to the
merchant. At the option of the merchant, you may receive replacement media
containing the Program, the PC Hardware and Documentation that conforms with the
limited warranty or a refund of the amount paid by you. IN NO EVENT WILL ALTIGEN
OR ITS LICENSORS BE LIABLE FOR ANY INDIRECT DAMAGES OR OTHER RELIEF ARISING OUT
OF YOUR USE OR INABILITY TO USE THE PROGRAM INCLUDING, BY WAY OF ILLUSTRATION
AND NOT LIMITATION, LOST PROFITS, LOST BUSINESS OR LOST OPPORTUNITY, OR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING LEGAL FEES,
ARISING OUT OF SUCH USE OR INABILITY TO USE THE PROGRAM, EVEN IF ALTIGEN, ITS
LICENSORS OR AN AUTHORIZED ALTIGEN DEALER, DISTRIBUTOR OR SUPPLIER HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY.
Some states do not allow the exclusion or limitation of incidental or
consequential damages so the above limitation or exclusion may not apply to you.
This license will be governed by the laws of the State of California as
applied to transactions taking place wholly within California between California
residents.
U.S. GOVERNMENT END USERS. The Program is a "commercial item," as that term
---------------------------
is defined at 48 C.F.R. 2. 101 (Oct. 1995), consisting of "commercial computer
software" and "commercial computer software documentation," as such terms are
used in 48 C.F.R. 12.212 (Sept. 1995). Consistent with 48 C.F.R. 12.212 and 48
C.F.R. 227.7202-1 through 227.7202-4 (June 1995), all U.S. Government End Users
acquire the Program with only those rights set forth herein.
18
<PAGE>
EXHIBIT B
PRODUCT LIST
and
ALTIGEN DISTRIBUTOR PRICE LIST
3.51 Release
Starter Kits
------------
Part Number Description Price
- ----------- ----------- -----
ALTI-CTIKIT-3.5 CTI starter kit, CID Board, 4 trunks & 8 extensions with [*]
AltiWare system software and external telephony power
supply.
ALTI-CTI8400-3.5 CTI starter kit, CID Board, 8 trunks & 4 extensions with [*]
AltiWare system software and external telephony power
supply.
ALTI-CTI4850-3.5 CTI starter kit, CID Board, 4 trunks & 8 extensions with [*]
AltiWare system software and connector cable for Tellabs
model T8050 internal telephony power supply.
ALTI-CTI8450-3.5 CTI starter kit, CID Board, 8 trunks & 4 extensions with [*]
AltiWare system software and connector cable for Tellabs
model T8050 internal telephony power supply.
ALTI-DMK4890-3.5 Demo CTI starter kit. CID Board. 4 trunks & 8 extensions [*]
with AltiWare system software, external telephony power
supply and Not For Resale stickers.
1
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Add-On Quantum Boards
---------------------
AltiWare is bundled with starter kits only, not with individual add-on Quantum
boards. Therefore, add-on Quantum boards are only mid with starter kits to
increase the capacity of new systems, or as add-on boards to increase the
capacity of existing systems.
Part Number Description Price
- ----------- ----------- -----
ALTI-CD0408U CID Quantum Platform, 4 trunks & 8 extensions. [*]
ALTI-CD0804U CID Quantum Platform, 8 thinks & 4 extensions. [*]
ALTI-CD0012U CID Quantum Platform, 12 extensions. [*]
ALTI-DID 0408U DID Quantum Platform, 4 DID minks & 8 extensions. [*]
Peripherals
-----------
Part Number Description Price
- ----------- ----------- -----
CBL-25M50-01 DB25 to 50-pro Telco cable, Male to Male [*]
CBL-MVIP6-01 MVIP cable with 6 connectors [*]
DOC-RFG01-04 4 User Pocket Reference Guides [*]
DOC-ICM01-01 Installation Configuration & Maintenance Manual [*]
MSC-PANEL-02 12 Port Connection Panel with 50-pin F Telco connector [*]
2
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT C
PURCHASE OBJECTIVES
AltiGen operates on a fiscal calendar.
Q1 Q2
Oct., Nov., Dec. Jan., Feb., March
_______28_________________ _____________38___________
(Qty. of systems per month*) (Qty. of systems per month*)
Q3 Q4
April, May, June July, Aug, Sept.
_______47_________________ _____________76___________
(Qty. of systems per month*) (Qty. of systems per month*)
TOTAL FOR 1998:
_______189________________
A system is both hardware and software necessary to provide an end-user a
complete phone system based the number of users the customer has.
1
<PAGE>
EXHIBIT D
SUPPORT AND MAINTENANCE
AltiGen Communications will provide the following maintenance services:
Telephone Support. Telephone support from [*]
Email support. Email support available at "[email protected]" or a
special address to be established for Distributor support. AltiGen
Communications will respond to email [*]
Training. AltiGen Communications may provide in-depth Product training to
Distributor from time-to-time and Distributor will use its best efforts to have
appropriate support personnel attend such training sessions to the extent such
training will assist Distributor in better supporting the channel.
Website. AltiGen will provide product information and technical tips at
www.altigen.com.
1
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
Exhibit 10.12
OEM Private Label License Agreement
This Original Equipment Manufacturer (OEM) License Agreement (the Agreement)
is entered into on this __________ day of ________-___________,1998 (the
Effective Date) between Renaissance Network Technology Corporation a
California Corporation with principal offices at 708 Blossom Hill Road, Suite
172, Los Gatos, CA 95032 (the Licensor) and AltiGen Communications Corporation
with principal offices at 45635 Northpoint Loop East, Fremont, CA 94538 (the
Licensee).
WHEREAS, Licensor has proprietary hardware and software for the interface of
Windows NT servers to ISDN networks.
WHEREAS, Licensee develops and markets communications servers and certain
applications for those servers.
WHEREAS, Renaissance Network Technology wishes to grant to Licensee and Licensee
desires to obtain certain license rights to manufacture and to distribute
Licensor's hardware and software described below in accordance with the terms
and conditions of this Agreement.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants and
promises contained herein, the Parties agree to the following terms and
conditions, which set forth the rights, duties, and obligations of the parties.
1 Definitions
For the purpose of this Agreement, the following terms shall have the following
meanings:
1.1 Attachment(s) are the attachments and exhibits to this Agreement which are
attached hereto and incorporated herein.
1.2 Confidential Information means any information disclosed by one party (the
Disclosing Party) to the other party (the Receiving Party), which, if in
written, graphic, machine readable or other tangible form is marked as
"Confidential" or "Proprietary", or which, if disclosed orally or by
demonstration, is identified at the time of disclosure as confidential and
such information is reduced to writing and delivered to the Receiving Party
within thirty (30) days of such disclosure.
1.3 Distributor means any third party which acquires possession of the
Licensor's Licensed Products from the Licensee without becoming an
[1]
[*]=CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
End User and distributes such products to an End User or to another
Distributor.
1.4 Derivative Work means a revision, modification, condensation or expansion
of the Hardware Product design or the Software, which if prepared without
the consent of Renaissance Network Technology, would be a copyright or
trade secret infringement.
1.5 Documentation means any user manuals, technical manuals, reference manuals,
drawings, schematics, software listings, test scripts, installation guides,
requirements specifications or portions thereof, which are delivered by the
Licensor to the Licensee.
1.6 End User is any third party licensed by Licensee or a Distributor to use,
but not further distribute, the Licensed Products.
1.7 Hardware means computer systems or printed circuit cards for use in a
computer system or any components supplied by the Licensor under this
Agreement or manufactured by the Licensee under this OEM License. These are
identified in Attachment A.
1.8 Initial Manufacturing License Quantity means the quantity of hardware
components to be manufactured and shipped by AltiGen for which royalty fees
have been pre-paid. This quantity will be determined at the time that
actual accumulated royalties owed exceeds the pre-paid license fees.
1.9 Licensed Product means the Hardware and Software licensed for manufacture
and distribution by Licensee from the Licensor under this Agreement.
1.10 Licensee Acceptance Tests are activities conducted by the Licensee and/or
their Distributors for determination of licensed product stability and
conformance to requirements. These tests include explicit formal testing
and product characterization (e.g. homolugation testing), in-house and
field trial testing (e.g. Alpha/Beta testing) and the first 180 days
following the conclusion of field trial testing (e.g. the first 180 days
after product release).
1.11 Manufacturing Contractors are business entities that the Licensee
contracts with to manufacture, test and/or produce the Licensed Hardware
Products.
[2]
<PAGE>
1.12 Manufacturing License refers to the license granted under this Agreement
to the Licensee to manufacture the Licensed Hardware Products either
directly or through Manufacturing Contractors.
1.13 Manufacturing Specifications means the detailed drawings, schematics,
test procedures, bills of materials, operation lists and other
Documentation provided to the Licensee to enable the manufacture of the
Licensed Hardware Products.
1.14 Product Defects means one or more reproducible deviations in Licensor's
products from the applicable specifications shown in the Documentation.
1.15 Quarterly Royalty Reports means the information supplied by the Licensee
to the Licensor reflecting the royalties owed due to Hardware products
shipped during the preceding three months. This information will include
quantity and price of product shipped, and a breakdown of associated
manufacturing costs (i.e. component costs, cost of outside services for PCB
fabrication/assembly/test/rework, and costs of scrapped material).
1.16 Software means computer programs supplied by the Licensor under this
Agreement for integration with products distributed by Licensee under this
OEM License. These are identified in Attachment A.
2 Grant of Licenses and Rights
2.1 License
2.1.1 License. Subject to the terms and conditions of this Agreement,
Renaissance Network Technology Corporation hereby grants and Licensee
accepts, a non-exclusive, non-transferable license to (i) manufacture,
without change to the design, the Licensed Hardware Products indicated
in Attachment A unless explicitly noted in Attachment A as an exception
to this clause, (ii) use and reproduce, without change, the Licensed
Software Products (in executable form only) and (iii) distribute by
sublicense these Licensed Products to Distributors and End Users only
in conjunction with a product of the Licensee. Licensee may grant its
authorized Distributors the right to distribute Licensed Products to
other Distributors and to End Users.
2.1.2 Source Code Restrictions. Licensee agrees not to decompile, reverse
engineer, disassemble or otherwise attempt to determine source code for
the executable code of the Licensed Software Products or to create any
Derivative Works based upon the Licensed Products or
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Documentation, and agrees not to permit or authorize anyone else to do
so.
2.1.3 Documentation License. Subject to the terms and conditions of this
Agreement, Licensor hereby grants and Licensee hereby accepts, a non-
exclusive, non-transferable license to use and reproduce the
Documentation and to distribute same solely in conjunction with the
Licensed Products. Such distribution may only be to Manufacturing
Contractors, Distributors or End Users. Any such distribution shall
contain the restriction that the Documentation may not be subsequently
reproduced. The licensee is permitted to translate the above
Documentation for distribution to international customers.
2.1.4 Use of Manufacturing Contractors.
2.1.4.1 Manufacturing Contractors Agreement. Licensee shall procure from each
of its Manufacturing Contractors an executed copy of a Contract for
Work (Manufacturing Contractors' Agreement) sufficient to ensure that
such Manufacturing Contractors are required to comply with the
relevant terms of this Agreement.
2.1.4.2 Enforcement of Manufacturing Contractors' Agreements. Licensee shall
use commercially reasonable efforts to enforce each Manufacturing
Contractors' Agreement, with at least the same degree of diligence
used in enforcing similar agreements covering others, which in any
event shall be sufficient to adequately enforce such agreements.
Licensee shall use commercially reasonable efforts to protect
Licensor's copyright, shall notify Licensor of any breach of material
obligation under a Manufacturing Contractors' Agreement affecting
Licensed Products, and will cooperate with Licensor in any legal
action to prevent or stop unauthorized use, reproduction or
distribution of the Licensed Products or the relevant technology.
2.2 Export Controls. None of the Software or Hardware technology or information
underlying the technology may be downloaded or otherwise exported or re-
exported (i) into any countries to which the United States has embargoed
goods; or (ii) to anyone on the U.S. Treasury Department's list of
Specifically Designated Nationals or the U.S. Commerce Department's Table
of Denial Orders.
3 Purchase of Licensed Products
3.1 Sale of Hardware Products. In addition to granting the Manufacturing
License detailed in paragraph 2.1.1 above, Licensor will sell to the
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Licensee quantities of the Hardware Products requested by the Licensee.
Such products will be ordered by the Licensee via purchase order or other
valid document as indicated by the Licensee from time to time.
3.2 Terms of Sale. The sale of these products will be consistent with the
terms and conditions of this OEM License Agreement and the Licensee will
treat purchased Hardware Products in the same manner as Products
manufactured under this Agreement. The price, delivery and other terms of
sale for completed Hardware Products sold to Licensee not detailed in this
Agreement will be those then in effect by Licensor with its other
customers.
3.3 Quantity of Products Sold. Products sold to the Licensee will not be
counted as a part of the Initial Manufacturing License Quantity.
4 Marketing
4.1 Non-exclusivity. Licensee understands that Licensor may enter into
arrangements similar to this Agreement with third parties.
4.2 Public Announcements and Promotional Material. Renaissance Network
Technology and AltiGen Communications Corporation shall cooperate with each
other so that each Party may issue a press release concerning this
Agreement, provided that each Party must approve any press release prior to
its release. Licensor shall cooperate with Licensee in its development of
the initial marketing and sales materials used to promote the distribution
of the Licensed Products.
4.3 Terms Relating to Distribution.
4.3.1 General Restrictions on Distribution. Licensee agrees to comply with and
shall require its Distributors to comply with all applicable laws, rules,
and regulations to preclude the acquisition of unlimited rights to
technical data, Software and Documentation provided with the Licensed
Products to any governmental agency, and ensure the inclusion of the
appropriate "Restricted Rights" or "Limited Rights" notices required by
U.S. Government Agencies.
4.3.2 Distributor License Agreement. Licensee shall procure from each of its
Distributors an executed copy of a distribution license (Distributor
License Agreement) sufficient to ensure that such Distributors are
required to comply with the relevant terms of this Agreement.
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4.3.3 End User License Agreements. Licensee and its Distributors shall
distribute the Licensed Products to End Users only under the terms of,
and shall ensure that the Licensed Products are subject to applicable
End User License Agreements with terms at least as restrictive as those
of, this Agreement.
4.4 Enforcement of Sublicense Agreements. Licensee and its Distributors shall
use commercially reasonable efforts to enforce each Distributor License
Agreement and End User License Agreement, whichever may be relevant, with
at least the same degree of diligence used in enforcing similar agreements
covering others, which in any event shall be sufficient to adequately
enforce such agreements. Licensee shall use commercially reasonable efforts
to protect Licensor's copyright, shall notify Licensor of any breach of
material obligation under a Distributor License Agreement or an End User
License Agreement affecting Licensed Products, and will cooperate with
Licensor in any legal action to prevent or stop unauthorized use,
reproduction or distribution of the Licensed Products or the relevant
technology.
5 Fees and Payment
5.1 Prepaid License Fees. Licensee will pay to Renaissance Network Technology
non-refundable royalty license fees (License Fees) as specified in
Attachment A.
5.2 Royalties. In addition, upon the exhaustion of the Initial Manufacturing
License Quantity as described in section 1.8, Licensee shall pay to
Licensor the per board royalties indicated in Attachment A for each
Hardware Product shipped. Such Royalties will be due and payable [*]
following the end of the quarter in which the boards were shipped. Each
payment shall be accompanied by a Quarterly Royalty Report as described
in paragraph 5.5 below.
5.3 Service and Technical Support Fees. Licensor will transfer to Licensee
manufacturing skills and know-how sufficient to allow Licensee to
manufacture Licensed Hardware Products. The cost of such support will be
borne by the Licensor except that Licensee agrees to pay for all travel to
sites out of the State of California made at their request for such
support, and all expenses for support after completion of the Licensee
Acceptance Test.
5.4 Payment and Taxes
5.4.1 Payments. All payments shall be made in United States dollars at
Licensor's address indicated in this Agreement or at such other
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[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
address as Licensor may from time to time indicate by proper notice
hereunder.
5.4.2 Taxes. All fees and royalties are exclusive of all taxes, duties or
levies, however designated or computed. Licensee shall be responsible
for and pay all taxes based on the transfer, use, distribution of
Licensed Products, or the program storage media, or upon payments due
under this Agreement including, but not limited to, sales, use or value-
added taxes, duties, withholding taxes and other assessments now or
hereafter imposed on or in connection with this Agreement or with any
sublicense granted hereunder, exclusive of taxes based upon Licensor's
net income. In lieu thereof, Licensee shall provide to Licensor a tax
or other levy exemption certificate acceptable to the taxing or other
levying authority.
5.5 Quarterly Royalty Reports. Licensee and its Distributors shall maintain
accurate records of End Users, including the name and address of each End
User and any further information as Licensor may from time to time
reasonably request. Licensee shall report to Licensor within thirty (30)
calendar days after the end of each quarter (i.e. on or before 1/30, 4/30,
7/30 and 10/30), the type and number of Hardware Products shipped in the
prior three months and their associated prices and costs as described in
section 1.15.
5.6 Audit of Records. Licensee shall keep full, true and accurate records
containing all data reasonably required for verification of the amounts to
be paid, and the quantity of Licensed Products manufactured and
distributed. Licensor shall have the right, during normal business hours
upon at least five (5) business days' prior notice, to audit and analyze
the relevant records of Licensee to verify compliance with the provisions
of this Agreement. The audit shall be conducted at Licensor's expense
unless there is inadequate record keeping or the results of such audit
establish that inaccuracies in the monthly reports have resulted in
underpayment of royalties to Licensor of more than five percent (5%) of the
amount actually due in any month, in which case the Licensee will bear the
cost of the audit. In any case any underpayment must be rectified within
thirty (30) calendar days.
6 Deliverables, Updates and Technical Support
6.1 Deliverables. The Deliverables under this Agreement include the
Manufacturing Specifications and other documentation necessary for Licensee
to build and test the Licensed Hardware and the Documentation and object
code modules necessary for the Licensee to integrate the Licensed Software
into its products.
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6.2 Updates. Licensor will provide Licensee with updates in the form of new
Manufacturing Specifications for hardware revision levels, and software
versions and releases, from time to time without charge for the Licensed
Products listed on Attachment A of this Agreement.
6.3 Technical Support.
6.3.1 Product Defects. Licensor will use its best efforts to repair any
Product Defects as defined in paragraph 1.14. Licensee agrees to
provide Licensor with a written product defect report and evidence of
the Defect. Licensor agrees to notify Licensee, within thirty (30)
calendar days of delivery of documented evidence by the Licensee of any
Product Defects that it does not intend to repair.
6.3.2 General Support. General support for technical issues other than fixing
Product Defects and assisting with product integration prior to
completion of Licensee Acceptance Test will be available from the
Licensor at its then prevailing rates for support.
7 Trademarks
7.1 License to Use. Not Applicable.
8 Proprietary Rights
8.1 Proprietary Rights. Title to and ownership of all copies of the Licensed
Software, Manufacturing Specifications and the Documentation whether in
machine readable or printed form, and including, without limitation,
Derivative Works, compilations or collective works thereof and all related
technical know-how and all rights therein (including without limitation
rights in patents, copyrights and trade secrets applicable thereto), are
and shall remain the exclusive property of Renaissance Network Technology
and its suppliers. Licensee shall not take any action to jeopardize, limit
or interfere in any manner with Licensor's ownership of and rights with
respect to the Licenses Products and Documentation. Licensee shall have
only those rights on of to the Licensed Products and Documentation granted
pursuant to this Agreement.
8.2 Proprietary Notices. Not Applicable.
9 Confidential information and Disclosure
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9.1 The Receiving Party agrees to retain the Confidential Information in
confidence for a period of five (5) years from the date of receipt of the
Confidential Information and shall use reasonable care not to disclose the
received Confidential Information to any party by using the same degree of
care as the Receiving Party employs with respect to its own information of
like importance.
9.2 Notwithstanding any other provisions of this Agreement, each Party
acknowledges that Confidential Information shall not include any
information which: (a) is not clearly marked at the time of disclosure as
being Confidential or Proprietary or if orally disclosed is not confirmed
in writing as confidential within ten (10) days of disclosure; (b) is or
becomes publicly known through no wrongful act on the Receiving Party's
part; (c) is already known to the Receiving Party at the time of
disclosure; (d) is rightfully received by the Receiving Party from a third
party without breach of this Agreement; (e) is independently developed by
the Receiving Party without breach of this Agreement; (f) is furnished to a
third party by the Disclosing Party without a similar restriction on the
third party's rights; (g) is explicitly approved for release by written
authorization of the Disclosing Party; or (h) is disclosed pursuant to the
lawful requirement or request of a Government Agency or disclosure is
permitted by operation of law, provided that the Party making the
disclosure has given prior notice to the other Party and has made a
reasonable attempt to obtain a protective order limiting the use of the
information so disclosed.
9.3 Each party agrees to return to the disclosing party upon written request,
the writings containing Confidential Information referred to in paragraph
1.2 of this Agreement except that one copy of same may be retained for
archival purposes only if requested by the receiving party.
9.4 Nothing contained in this agreement shall be construed as granting or
conferring any rights by license or otherwise, expressly implied, or
otherwise, for any patents, copyrights, trademarks, know-how or other
proprietary rights of either party acquired prior to or after the date of
this Agreement.
9.5 Remedies. If a Party breaches any of its obligations with respect to
confidentiality or the use of Confidential Information hereunder, the
relevant Disclosing Party shall be entitled to seek equitable relief to
protect its interest therein, including but not limited to injunctive
relief, as well as monetary damages.
10 Warranties
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<PAGE>
10.1 Limited Warranty. Subject to the limits set forth in this Agreement,
Licensor warrants only to Licensee that the Licensed Products when properly
adapted, integrated, installed and used will conform to the mutually agreed
upon requirements specifications. Licensor's warranty and obligation shall
extend to completion of the final phase of the Licensee's Acceptance Test.
All warranty claims not made in writing or not received by Licensor within
the Warranty Period specified above shall be deemed waived. Licensor
warranty and obligation is solely for the benefit of the Licensee, who has
no authority to extend this warranty to any other person or entity.
Licensor makes no warranty that all failures or errors will be corrected.
10.2 Exclusive Warranty. The express warranty set forth in paragraph 10.1
constitutes the only warranty with respect to the Licensed Products.
Licensor makes no other representation or warranty of any king whether
express or implied (either in fact or by operation of law) with respect to
the Licensed Products. Licensor expressly disclaims all warranties of
merchantability or fitness for a particular purpose. Licensor does not
warrant, for example, that the Licensed Products will be secure or
uninterrupted. There is also no implied warranty of non-infringement; the
sole remedy for infringement is provided in Section 11.
10.3 Defects not Covered by Warranties. If Licensor's ability to perform
warranty services is affected thereby, Licensor shall have no obligations
under the warranty provisions set forth in Section 10.1 (a) in the event
Licensee incorporates, integrates, attaches or otherwise engages any
attachment, feature, program or device to the Licensed Products, or any
part thereof; (b) if any nonconformance is caused by accident,
transportation, neglector misuse, alteration, modification or enhancement
of the Licensed Products by the Licensee; or (c) if Licensee fails to
provide a suitable installation environment, uses the Licensed Products for
other than their intended purpose, or on any systems other than the
specified hardware platform, or Licensee uses defective media to duplicate
or distribute the Licensed Software.
10.4 Exclusive Remedy. If Licensee finds what it believes to be errors or a
failure of the Licensed Products to meet specifications which significantly
affects performance, and provides Licensor with a written report during the
Warranty Period, Licensor will use reasonable efforts to correct promptly,
at no charge to the Licensee, any such errors or failures. This is the
Licensee's sole and exclusive remedy for any express or implied warranties
hereunder.
11 Indemnification
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11.1 Renaissance Network Technology shall defend any action brought against
Licensee to the extent it is based on a claim that reproduction or
distribution by Licensee of the Licensed Products furnished hereunder
within the scope of the license granted hereunder directly infringes any
valid U.S. or foreign patent, Copyright, trademark or trade secret.
Licensor will pay resulting costs, damages and legal fees finally awarded
against Licensee in such action which are attributable to such claim
provided that the Licensee (a) promptly (within twenty days) notifies
Licensor in writing of any such claim and Licensor has sole control of the
defense and all related settlement negotiations, and (b) cooperates with
Licensor at Licensor's expense, in defending or setting such claim.
11.2 Should a Renaissance Network Technology product become, or be likely to
become in Licensor's opinion, the subject of infringement of such
copyright, patent, trademark or trade secret, Licensor may procure for
Licensee (i) the right to continue using the same or (ii) replace or modify
it to make it non-infringing. Licensor shall have no liability for and
Licensee shall indemnify and hold harmless from and against any claim based
upon: (a) use of other than the current, unaltered version of the Licensed
Product, unless the infringing portion is also in the then current,
unaltered release; (b) use, operation or combination of the Licensed
Products with non-Licensor equipment, programs or documentation if such
infringement would have been avoided but for the use, operation or
combination; (c) Licensee's or its agents activities after Licensor has
notified Licensee that Licensor believes that such activities may result in
such infringement; (d) compliance with Licensee's designs, specifications
or instructions; (e) any modifications or marking of the Licensed Products
not specifically authorized in writing by the Licensor; (f) Licensee's use
of any trademarks not specifically authorized by Licensor; or (g) third
party software. The foregoing states the entire liability of Licensor and
the exclusive remedy of Licensee with respect to infringement of
copyrights, patents, trademarks and trade secrets.
12 Limitation of Liability
In no event shall Renaissance Network Technology or its suppliers be liable
for any loss of profits, loss of business, loss or use of data,
interruption of business or for indirect, special, incidental or
consequential damages of any kind, even if Renaissance Network Technology
has been advised of the possibility of such damages (and notwithstanding
any failure of essential purpose of any limited remedy), or for any claim
against Licensee by any third party, except as provided in the section
entitled "Indemnification". In no event will Licensor or its suppliers be
liable for (a) any representation or warranty made to any
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third party by Licensee, any agent of the Licensee or Distributor; (b)
failure of the Licensed Products to perform as specified herein except as,
and the extent, otherwise expressly provided herein; (c) failure of the
Licensed Products to provide security; or (d) any use of the Licensed
Products or the Documentation or the results or information obtained or
decisions made by End Users of the Licensed Products or the Documentation.
The remedies provided herein are the Licensee's sole and exclusive
remedies. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY,
LICENSOR'S ENTIRE LIABILITY TO LICENSEE FOR DAMAGES CONCERNING PERFORMANCE
OR NON- PERFORMANCE BY LICENSOR OR IN ANY WAY RELATED TO THE SUBJECT MATTER
OF THIS AGREEMENT, AND REGARDLESS OF WHETHER THE CLAIM FOR SUCH DAMAGES IS
BASED IN CONTRACT OR IN TORT, SHALL NOT EXCEED THE AMOUNT RECEIVED BY THE
LICENSOR FROM THE LICENSEE FOR THE LICENSED PRODUCTS GIVING RISE TO SUCH
CLAIM.
13 Term of Agreement
13.1 Term. The term of this Agreement shall be five (5) years from the
Effective Date.
13.2 Termination for Default. If either Party defaults in any of its
obligations under this Agreement, the non-defaulting Party, at its option
shall have the right to terminate the Agreement by written notice unless,
within thirty (30) days after the written notice of such default, the
defaulting Party remedies the default, or, in the case of default which
cannot with due diligence be cured within a period of thirty (30) calendar
days, the defaulting Party institutes within that period steps necessary to
remedy the default and thereafter diligently prosecutes the same to
completion.
13.3 Bankruptcy. Either Party shall have the right to terminate this Agreement
if the other Party ceases to do business in the normal course, becomes or
is declared bankrupt or insolvent, is the subject of any proceeding
relating to its liquidation or insolvency which is not dismissed within
ninety (90) calendar days, or makes an assignment for the benefit of its
creditors.
13.4 Source Documentation Escrow. Licensor will make available periodic
hardware and software source code baselines to the Licensee's escrow agent
for backup archival. In the event that the Agreement is terminated because
the Licensor ceases to do business, the Licensee has the right to access
and modify this source base to correct product defects in support of the
installed customer base. In this case, the
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modified source code modules and the resulting work products will be solely
owned by the Licensee. Nonexclusive access to the original source material
will be available equally to all Licensees. If the Licensor ceases to do
business prior to completion of the Licensee Acceptance Test, the Licensee
may use this documentation to complete the development of the product. In
this case, sole ownership of the resulting work products will then revert
to the Licensee.
13.5 Effect on Rights
13.5.1 Termination of this Agreement by either Party shall not act as a
waiver of any breach of this Agreement and shall not act as a release of
either Party from any liability for breach of such Party's obligations
under this Agreement.
13.5.2 Except as specified in Sections 13.5 and 13.6 below, upon termination
of this Agreement, all licenses for Licensor's Licensed Products and
Documentation granted under this Agreement shall terminate.
13.5.3 Except where otherwise specified, the rights and remedies granted to a
Party under this Agreement are cumulative and in addition to, and not
in lieu of, any other rights or remedies which the Party may possess
at law or in equity, including without limitation rights or remedies
under applicable patent, copyright, trade secrets, or proprietary
rights laws, rules or regulations.
13.6 Effect on Termination. Within thirty (30) calendar days after termination
of this Agreement, Licensee shall either deliver to Licensor or destroy all
copies of the Licensed Software and Documentation an the drawings,
schematics and Documentation relating to the Licensed Hardware (except as
provided for in Section 13.6) mad any other materials provided by Licensor
to Licensee hereunder in its possession or under its control, and shall
furnish to Licensor an affidavit signed by an officer of the Licensee
certifying that, to the best of its knowledge, such delivery or destruction
has been fully and completely effected. Notwithstanding the foregoing, and
provided Licensee fulfills, its obligations specified in this Agreement
with respect to such items, Licensee may continue to use and retain copies
of the Licensed Software and related Documentation, to the extent, but only
to the extent necessary to support and maintain Licensed Software Products
rightfully distributed to End Users by Licensee prior to the termination of
this Agreement.
13.7 Continuing Obligations
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13.7.1 Payment of Accrued Fees and Royalties. Within thirty (30) calendar
days of the termination of this Agreement, Licensee shall pay to
Licensor all sums then due and owing. Any other such sums shall
subsequently be promptly paid as they become due and owing.
13.7.2 Continuance of Sublicenses. Notwithstanding the termination of this
Agreement, all End User sublicenses which have been properly granted by
Licensee and Distributors pursuant to this Agreement prior to its
termination will survive.
13.7.3 Other Continuing Obligations. The respective rights and obligations of
Licensor and Licensee under the provisions of Paragraphs 2.1.2, 2.2,
4.3.1, 4.4 and Sections 5, 7, 8, 9, 11, 12, and 14 shall survive
termination of this Agreement.
14 Arbitration of Disputes
14.1 Arbitration of Disputes
14.1.1 Any controversy, dispute or claim arising out of, in connection, with,
or in relation to the interpretation, performance or breach of this
Agreement, including any claim based on contract, tort or statute,
shall be settled, at the request of either Party, by arbitration
conducted in the State of California, or such other location
upon(which the Parties shall mutually agree, before and in accordance
with the then-existing Rules of Commercial Arbitration of the American
Arbitration Association (the AAA), and judgment upon any award
rendered by the arbitrator may be entered by any State or Federal
court having jurisdiction thereof.
14.1.2 The Parties hereby consent to the jurisdiction of an arbitration panel
and of the courts located in and venue in, the State of California, with
respect to any dispute arising under this Agreement.
14.1.3 Any controversy concerning whether a dispute is an arbitrable dispute
hereunder shall be determined by one of the arbitrators selected in
accordance with section 1 4.3 below.
14.1.4 The Parties intend that this agreement to arbitrate be valid,
specifically enforceable and irrevocable.
14.2 Initiation of Arbitration. A Party may initiate arbitration hereunder by
filing a written demand for arbitration with the other Party and with the
AAA. Arbitration hereunder shall be conducted on a timely, expedited basis.
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14.3 Selection of the Arbitrator. Any arbitration shall be held before a
single arbitrator, who shall be selected in accordance with the procedures
of the AAA, and shall be a member of the Large Complex Case Panel with
significant intellectual property and manufacturing experience. If the,
Parties are unable to agree on a single arbitrator, then each of the
Parties will select a single arbitrator and such arbitrators will select a
third arbitrator. Such arbitration shall then be held before the panel of
three arbitrators.
14.4 Awards. The arbitrator(s) may, in their discretion, award to the
prevailing Party in any proceeding commenced hereunder, and the court shall
include in its judgment for the prevailing Party in any claim arising
hereunder, the prevailing Party's costs and expenses (including expert
witness expenses and reasonable attorney's fees) of investigating,
preparing and presenting such arbitration claim or cause of action.
15 General Provisions
15.1 Notices. Any notice, request, demand or other communication required or
permitted hereunder shall be in writing and shall be deemed to be properly
given upon the earlier of (a) the actual receipt by the addressee or (b)
five (5) business days after deposit in the U.S. mail, postage prepaid,
when mailed by registered or Certified U.S. mail, return receipt requested,
or two (2) business days after being sent via private industry courier to
the respective Parties at the addresses set forth above or to such other
person or address as the Parties may from time to time designate in a
writing delivered pursuant to this paragraph 15.1. Notices to Licensor
and Licensee shall be attention to: Legal Department.
15.2 Waiver and Amendment. The waiver by either Party of a breach of or a
default under any provision of this Agreement, shall not be construed as a
waiver of any subsequent breach of the same or any other provision of the
Agreement, nor shall any delay or omission on the part of either Party to
exercise or avail itself of any right or remedy that it has or may have
hereunder operate as a waiver of any right or remedy. No amendment or
modification of any provision of this Agreement shall be effective unless
in writing and signed by a duly authorized signatory of both Licensor and
Licensee.
15.3 Assignment. This Agreement and the licenses granted hereunder are to a
specific legal entity, not including corporate subsidiaries or affiliates
of the Licensee, and are not assignable by Licensee, nor are the
obligations imposed on the Licensee delegable. Any attempt to
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sublicense (except as expressly permitted herein) assign or transfer any of
the rights, duties or obligations of the Licensee in derogation hereof
shall be null and void.
15.4 Relationship of the Parties. No agency, partnership, joint venture, or
employment is created as a result of this Agreement and neither Licensee
nor its agents have any authority of any kind to bind Renaissance Network
Technology in any respect whatsoever.
15.5 Severability. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision
of this Agreement is invalid or unenforceable, but that by limiting such
provision it would become valid and enforceable, then such provision shall
be deemed to be written, construed, and enforced as so limited.
15.6 Force Majeure. Either Party shall be excused from any delay or failure in
performance hereunder, except the payment of monies by the Licensee to the
Licensor, caused by reason of any occurrence or contingency beyond its
reasonable control. The obligations and rights of the Party so excused
shall be extended on a day-to-day basis for the period of time equal to the
underlying cause of the delay. The Party experiencing such cause or delay
shall immediately notify the other Party of the circumstances which may
prevent its performance hereunder, and shall use its best efforts to
alleviate the effects of such cause or delay.
15.7 Entire Agreement. This Agreement, including the Attachments hereto,
constitutes the entire agreement between the Parties concerning the subject
matter hereof and supercedes all proposals or prior agreements, whether
oral or written, and all communications between the Parties relating to the
subject matter of this Agreement. The terms and conditions of this
Agreement shall prevail, notwithstanding any variance with any purchase
order or other written instrument submitted by the Licensee whether
formally rejected by the Licensor or not.
15.8 Governing Law. This Agreement shall be governed by the laws of the State
of California, without regard to that State's choice of laws.
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AUTHORIZED SIGNATURES
AltiGen Communications Corp. Renaissance Network Technology Corp.
/s/ Gilbert Hu /s/ G. Nicholas Tuttle
- --------------------------------- ---------------------------------
Gilbert Hu, President & CEO G. Nicholas Tuttle, President & CEO
5/28/98
- --------------- ---------------
Date Date
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Attachment A
Licensed Products
Hardware
The Products licensed under this agreement will be:
. Multifunction Resource Card (MRC) with one 4-channel BRI ISDN interface
daughter card (BRI I/F EDB). This product will conform to the ISDN "S/T"
interface standard.
. Multifunction Resource Card (MRC) with one 4-channel BRI ISDN interface
daughter card with an integrated NT-1 device (BRI I/F w DSU SDB). This
product will conform to the ISDN "U" interface standard. A waiver to the
restriction on design changes described in section 2.1.1 will be granted
for the development of the BRI I/F w DSU EDB by the licensee. Technical
support for transfer of design technology and design assistance are not
covered by this agreement. A separate Professional Services Agreement will
detail the terms and conditions of this project.
The Renaissance Network Technology's Multifunction Resource Cards provided under
this Agreement will be used by AltiGen only for ISDN connectivity, and AltiGen
agrees to protect this usage under its contract with its customers.
Software
1. On-board Firmware (Motorola 860 code)
2. Microsoft NT Driver
3. Service Provider Module, conforming to AltiGen's Service Provider Interface
(SPI)
4. Manufacturing Test Routines
[18]
<PAGE>
Royalties
- ---------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Products Royalty
- -------------------------------------------------------------------------------
<S> <C>
4-channel BRI Interface
(assumes external DSU) [*]
- -------------------------------------------------------------------------------
4-channel BRI Interface with
Built-in DSU [*]
- -------------------------------------------------------------------------------
Software (items 1-4 above) [*]
- -------------------------------------------------------------------------------
</TABLE>
Pre-Paid Licenses
- -----------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Products Royalty
- -------------------------------------------------------------------------------
<S> <C>
[*] [*]
- -------------------------------------------------------------------------------
[*] [*]
- -------------------------------------------------------------------------------
</TABLE>
[*]
[*]
[19]
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
<PAGE>
EXHIBIT 10.13
June 2, 1998
AltiGen Communications, Inc.
45635 Northport Loop East
Fremont, California 94538
Subject: SERVICES AGREEMENT BETWEEN SUMITRONICS, INC. AND ALTIGEN
--------------------------------------------------------
COMMUNICATIONS, INC.
--------------------
This is to confirm a mutual agreement, made between Sumitronics, Inc, 2900
Patrick Henry Drive, Santa Clara, California 95054 ("STX") and AltiGen
Communications, Inc., 45635 Northport Loop East, Fremont, California 94538
("AltiGen"), with regard to services to be rendered by STX (such services are
specified in Paragraph 1.), and remuneration (specified in Paragraph 2.),
therefore to be paid by AltiGen. The basis of this agreement is the introduction
of Nitsuko Corporation, 2-6-1 Kitamikata, Takatsu-ku, Kawasaki, 213 Japan
("Nitsuko") by STX, to AltiGen.
1. Description of Services ("Services")
- ---------------------------------------
STX, hereby agrees that it shall dutifully, faithfully, diligently and to the
best of its ability, render the following strategic business development
services:
a. To coordinate, facilitate and establish a Memorandum of Understanding ("MOU")
between Nitsuko and AltiGen.
b. In followance to the establishment of finalized MOU, to coordinate,
facilitate and establish Joint Development and Original Equipment Manufacturer
("OEM") Agreements ("Agreements") between Nitsuko and AltiGen.
c. To render such other services relating to the MOU and Agreements, as may be
agreed upon by and between AltiGen and STX.
2. Remuneration
- ---------------
AltiGen shall pay STX for the Services described in Paragraph 1., and in
acknowledgement of STX's introduction to Nitsuko, as follows:
US$57,000
------------------------------------------------------------
To be paid in full upon the signing of the Joint Development
------------------------------------------------------------
Agreement and receipt of initial 50% development payment
------------------------------------------------------------
From Nitsuko to AltiGen.
------------------------------------------------------------
------------------------------------------------------------
<PAGE>
SERVICES AGREEMENT BETWEEN STX AND ALTIGEN: Page Two
AGREED AND ACCEPTED BY:
- -----------------------
FOR: AltiGen Communications, Inc. FOR: Sumitronics, Inc.
By: /s/ Gilbert Hu By: /s/ Takehiko Kimoto
----------------------------- ----------------------------------
Gilbert Hu, President & CEO Takehiko Kimoto, President & CEO
Date: 6/2/98 Date: 6/2/98
--------------------------- --------------------------------
<PAGE>
Exhibit 10.13
-----
Subject: Commission Agreement between AltiGen
Communications, Inc. and Sumitronics Inc.
This is to confirm a mutual agreement, made between AltiGen Communications,
Inc., 47427 Fremont Blvd., Fremont, California ("AltiGen") and Sumitronics Inc.,
2900 Patrick Henry Drive, Santa Clara, California ("STX"), with regard to a
commission to be paid by AltiGen to STX based on products ordered and shipped by
STX on behalf of Nitsuko Corporation for the Primary Territory of Japan.
Commission will be paid for STX's assistance with the formation of the MOU,
Joint Development Agreement and OEM Agreement (outlined in the Services
Agreement) between AltiGen and Nitsuko, and for work related to the coordination
of product shipments from STX to Japan.
1. Commission Rate
a. Triton Board 3%
b. Quantum Board 5%
c. ISDN BRI Board (T/U) 5%
d. Commission on any enhancements or upgrades of the aforementioned
boards will remain at the respective set rate above.
e. Commission for any additional or new products will be subject to a 5%
commission.
2. The above commission rates will go into effect when the OEM product is
officially accepted by Nitsuko, and will apply until the total mount paid by
AltiGen to STX reaches US$250,000; this amount will include the US$57,000
commission already paid by AltiGen to STX under the Services Agreement.
3. AltiGen will consider the continuance of a commission to STX after the
US$250,000 cap has been reached. This topic will be re-addressed when total
commissions paid to STX by AltiGen reaches US$200,000.
Agreed and Accepted By:
For AltiGen Communications, Inc. For Sumitronics, Inc.
By: /s/ Gilbert Hu By: /s/ Yasuyuki Abe
---------------------- ----------------------
Gilbert Hu Yasuyuki Abe
President & CEO President & CEO
Date: 3.18.99 Date: 3-30-99
-------------------- --------------------
<PAGE>
EXHIBIT 10.14
[LOGO OF ALTIGEN APPEARS HERE]
[LETTERHEAD OF ALTIGEN APPEARS HERE]
ALTIGEN COMMUNICATIONS INC.
DISTRIBUTION AGREEMENT
This Distribution Agreement ("Agreement") is made and entered into as
of this 12th day of June, 1998 (the "Effective Date") by and between Altigen
Communications Inc., a California corporation, with principal offices at 45635
Northport Loop East, Fremont, CA 94538 ("AltiGen") and INGRAM MICRO INC., a
Delaware corporation, with principal offices at 1600 E. St. Andrew Place, Santa
Ana, CA 92705 ("Distributor,") both jointly referred to herein as "The
Parties".
1. Definitions
1.1 Dealer means any individual or entity which acquires the Products
for the express purpose of resale to others, whether such resale is of
the Product as a stand-alone product, as bundled and sold with other
software or hardware products, as integrated with other software or
hardware products or as sold with associated services.
1.2 End User means a licensee who acquires Products for Internal Use
(rather than distribution or resale) in accordance with the terms of an
End-User License Agreement substantially in the form of the End-User
License Agreement attached hereto as Exhibit A (the "End-User
Agreement").
1.3 Internal Use means use for purposes which do not directly produce
revenue for the End User. "Internal Use" does not include timesharing.
1.4 Intellectual Property means any patent, copyright, trade name,
trade mark, trade secret, know-how, mask work or any other intellectual
property right or proprietary information or technology, whether
registered or unregistered.
1.5 Product means software program packages and physical computer
hardware, including (1) a program code, in object code form only, on
diskette(s) or CD-ROM (the "Program"); (2) physical computer hardware
including computer boards, computer power supply, computer cables (the
"PC Hardware"); (3) instruction booklets and other information prepared
for End-Users concerning the use of the program and computer hardware
("Documentation"); (4) an End-User Agreement. The Products include only
those listed by title and functional description on the "Product and
Price List" attached hereto as Exhibit B.
1.6 Purchase Objectives means the minimum quantity of each Product
which Distributor commits to purchase quarterly during the term of this
Agreement, as mutually agreed upon and set forth in Exhibit C attached
hereto. These quarterly purchase objectives are to serve as goals and a
means to track progress but are non-binding.
1.7 Territory shall be described in Exhibit E.
1
<PAGE>
1.8 Grant of Distribution Right Subject to the terms and conditions set
forth in this Agreement, AltiGen hereby grants to Distributor a
non-exclusive, non-transferable right to (a) market and distribute the
Products solely to Dealers located in the Territory as stated in
Exhibit E and (b) use the Products for those purposes set forth in the
Agreement. Distributor shall not, knowingly directly or indirectly,
solicit sales of the Products outside of the Territory without the
prior written consent of AltiGen. AltiGen retains the right to sell the
Products directly to other parties in the Territory, including, by way
of illustration but not limitation, distributors, Dealers, and original
equipment manufacturers. Distributor shall have no right to modify the
Product or Documentation without the prior written approval of AltiGen.
Distributor agrees not to (a) reverse engineer, decompile, disassemble
or otherwise reduce the Product to human-perceivable form, or to
knowingly encourage or assist third parties in doing so or (b)
distribute the Product by rental or lease to end users. All rights not
expressly granted herein are retained by AltiGen. Distributor shall
have no right to grant a Dealer the right to make copies from a golden
master absent further agreement between AltiGen and the Distributor.
2. Ownership
Except as specified in this agreement, AltiGen does not grant to the
distributor any rights in or to any intellectual property related to
the product or to any materials furnished hereunder. The intellectual
property embodied in the product all modifications thereto, and all
documentation thereof, are proprietary to AltiGen, and AltiGen retains
all right, title and interest in and to such intellectual property.
3. Prices and Payments
3.1 Prices. Distributor shall pay AltiGen, for each Product and
upgrade, the list price for the Product as set forth on Exhibit B, less
any Distributor discount listed in Exhibit B. Both the AltiGen standard
list price and the Distributor's discount levels are subject to change
by AltiGen from time to time in its sole discretion upon thirty (30)
days written notice to Distributor. Orders requesting delivery after
the thirtieth (30) day of written notice of price or discount change
will be charged at the new price or discount level.
3.2 Distributor Pricing. Distributor is free to determine its own
resale prices for the Products. Although AltiGen may publish suggested
list prices, these are suggestions only and are not binding in any way.
However, Distributor agrees that any discounts it may offer (from
suggested applicable list prices that may be published by AltiGen)
shall be commercially reasonable and consistent with industry practices
providing Distributor commercially reasonable margins for its resale
activities with respect to the Products.
3.3 Dealer Pricing. Distributor shall inform each of its Dealers that
it is free to determine its own retail prices and that, although
AltiGen may publish suggested retail price lists, they are suggestions
only and are not binding in any way.
3.4 Initial Order. Within (Redated) of the Effective Date, Distributor
shall deliver to AltiGen a purchase order for an (Redated)
2
<PAGE>
3.5 Payment. Upon approval of credit by AltiGen, payment for additional
orders shall be due and payable within (Redated) following receipt of
invoice or on such terms as may be otherwise specified in AltiGen
invoice. Invoices or any undisputed invoice not paid when due can
accrue interest on an annual basis from the date due until paid of
(Redated) on any outstanding balance, or the maximum legal rate allowed
by law, whichever is less. All Products ordered in excess of any credit
limit shall be paid for as agreed upon by AltiGen and Distributor.
These terms and conditions will be communicated in writing within
forty-eight hours to Distributor to resolve or accept currency in
advance of shipment, by a letter of credit drawn upon a bank acceptable
to AltiGen and Distributor, a bank cashier's check, or a bank wire
transfer. AltiGen reserves the right to vary, change, or limit the
amount or duration of credit to be allowed to Distributor, either
generally or with respect to a particular order. In the event AltiGen
does not extend credit to Distributor, payment for all purchases
hereunder shall be made in advance of shipment or, at AltiGen' option,
C.O.D. If Distributor fails to meet its payment obligations under the
Agreement and such failure continues for (Redated) following receipt of
written notice from AltiGen this Agreement will or may be terminated
which is described in section 12.2 of this Agreement.
(a) Right to Withhold. Notwithstanding any other provision in this
Agreement to the contrary, Distributor shall not be deemed in default
if it withholds any specific amount to AltiGen because of a legitimate
dispute between the parties as to that specific amount pending the
timely resolution of the disputed amount.
3.6 Price Protection.
(a) Distributor Price Protection. AltiGen shall notify Distributor of
the effective date of a (Redated) for any of the Products covered
herein. All inventory acquired by Distributor from AltiGen prior to the
effective date of the (Redated) and not yet sold or under a contract
for sale will be granted price protection as set forth herein. This
will also include any product order accepted by AltiGen that has not
shipped, all product in transit from AltiGen to Distributor's warehouse
and product in transit between Distributor's warehouses during the less
than (Redated) period before the effective date of the (Redated) and
not yet sold or under a contract for sale will be granted price
protection as set forth herein. (Redated) To obtain price protection,
within (Redated) of receipt of AltiGen' notice of the (Redated)
Distributor shall provide to AltiGen a written inventory report showing
by part number the quantity of each AltiGen Product in the
Distributor's inventory as of the effective date of the (Redated) Price
protection will not be granted in the case of a temporary (Redated) or
special promotion.
(b) Dealer Price Protection. On a case by case basis, AltiGen will
grant price protection for Distributor's dealers at AltiGen's
discretion. To obtain price protection for its Dealers, Distributor (i)
shall provide to AltiGen a written shipment report showing by part
number the quantity of each AltiGen Product shipped to a Dealer less
than (Redated) before the effective date of this (Redated) including
the
3
<PAGE>
identity of each Dealer, the Products sold, and the date of shipment
and (ii) shall provide, or require its Dealers to provide, a written
Dealer inventory report showing by part number the quantity of each
AltiGen Product in Dealer's inventory as of the effective date of the
(Redated). If Distributor provides such reports to AltiGen within
(Redated) of Distributor's receipt of AltiGen' notice of a price
decrease, AltiGen shall credit the Distributor's account for the
difference between the invoice price charged to Distributor and the
reduced price for those copies shipped by Distributor to its Dealers
less than (Redated) before the effective date of the (Redated) and not
yet sold or under contract for sale. (Redated)
3.7 Stock Rotation.
(a) Inventory Balancing. Provided that the Distributor issues a
simultaneous offsetting purchase order, Distributor may, once during
each quarter, return for credit Product purchased for up to a maximum
of (Redated) dollar sales invoiced by AltiGen during the immediately
preceding quarter. The credit issued for the returned inventory will be
based on the (Redated) at which the Products were available to
Distributor during the period commencing with the date on which the
Product was purchased and ending on the date the Product was returned,
and may be used on a dollar-for-dollar basis solely to purchase
additional Product pursuant to the offsetting purchase order. The right
to balance inventory granted herein must be exercised by the last day
of the second month of the quarter. Distributor shall submit a request
for authorization to return Product for inventory balancing which shall
state the quantity of Product to be returned. Upon receipt of such
request, AltiGen shall issue a Return of Materials Authorization (RMA)
number no later than 1 week after the request is acknowledged by
AltiGen, Inc. Inventory returned under this section must be accompanied
by a return of materials authorization number assigned by AltiGen and
(i) in merchantable condition, in its-factory-sealed packaging. -All
Product returned under this subsection (a) shall be returned within
thirty (30) days of the date of issuance of the return of materials
authorization number. AltiGen shall pay for the shipping of returned
Products to AltiGen and Distributor shall pay for the shipping of
replacement Product sent to Distributor.
(b) Defective Product/Dead on Arrival (DOA). Distributor may return any
product to AltiGen that its customer finds defective as detailed in the
End User Agreement described in Exhibit A. Inventory returned under
this section must be accompanied by a return of materials authorization
number assigned by AltiGen. All Product returned under this section
shall be returned within thirty (30) days of the date of issuance of
the return of materials authorization number, and if the returned
Product is returned because defective by virtue of being in breach of
the warranty provided for in the End User Agreement, returned with the
entire contents of such Product package. The credit issued for the
returned products will be based on the Products purchase price, less
any discounts or credits previously received. AltiGen shall pay for the
shipping of returned Products to AltiGen and for the shipping of
replacement Product sent to Distributor. AltiGen will specify account
number and carrier at time of RMA issuance.
4
<PAGE>
(c) Product Refresh. AltiGen may, at its sole discretion, modify the
Products. For purposes of this Agreement, AltiGen shall have sole
discretion as to whether a Product is deemed to be a new version of an
existing Product to be provided to Distributor under the terms of this
Agreement or a new product requiring execution of an appendix to this
Agreement prior to distribution. Once a new version of a Product
covered by this Agreement begins shipping, Distributor shall have
thirty (30) days from the first AltiGen shipment date of the new
version to Distributor, or from written notification by AltiGen of the
new version, whichever is later, (i) to submit an offsetting purchase
order for an equal dollar-for-dollar value of the new version of the
Product and (ii) to return Product from the prior release from
Distributor's inventory that was shipped by AltiGen to Distributor
within the previous ninety (90) days. Such returns shall be shipped at
AltiGen expense using AltiGen Communication's account number and
carrier which will be specified at time of RMA issuance, and the
offsetting Purchase Order shipment will be paid for by Distributor as
described in section 5.7 and 5.8 of this agreement. Returned Product
will be exchanged by AltiGen on a dollar for dollar basis, proportional
with any price increase or decrease, with the new version of the
Product and shipped to Distributor at AltiGen expense. Product returned
under this provision must be in merchantable condition and in its
original factory-sealed packaging. The right to refresh Product under
this subsection (b) shall be in addition to Distributor's inventory
balancing right under subsection (a) above.
(d) Product Discontinuation. AltiGen shall provide Distributor with
thirty (30) days written notice prior to AltiGen' discontinuation of
any Product. Upon receipt of such notice, Distributor shall have the
right to return all discontinued Products purchased within sixty (60)
days of the notice of discontinuation for a credit to Distributor's
account of the Product's purchase price less any discounts or credits
previously received. The rights to return discontinued Product under
this subsection (d) shall be in addition to Distributor's inventory
balancing right under subsection (a) above.
3.8 Distributor Financial Condition. Distributor represents and
warrants that it is and at all times during the term of this Agreement
shall remain in good financial condition, solvent and able to pay its
bills when due. Distributor further represents and warrants that it has
and at all times during the term of this Agreement shall retain the
ability to order and pay for all Product purchased. From time to time,
on reasonable notice from AltiGen, Distributor shall furnish Annual
Reports, 10K and 10Q reports.
3.9 Taxes. Prices calculated in accordance with Exhibit B are exclusive
of all applicable taxes. Distributor agrees to pay all taxes associated
with the marketing, distribution and delivery of the Products ordered,
including but not limited to sales, use, excise, added value and
similar taxes and all customs, duties or governmental impositions, but
excluding taxes on AltiGen' net income. Any tax or duty AltiGen may be
required to collect or pay upon the marketing or delivery of the
Products shall be paid by Distributor and such sums shall be due and
payable to AltiGen upon delivery. If claiming a tax exemption,
Distributor must provide AltiGen with valid tax exemption certificates
at the time of invoicing.
5
<PAGE>
4. PRODUCT CHANGES
AltiGen shall have the right, in its sole discretion, without liability
to Distributor, with written thirty (30) day notice, to (a) change the
Products available on the Product List, (b) change the design, or
discontinue developing, producing, licensing or distributing any of the
Products covered by this Agreement, and (c) announce new products to
which the terms and conditions of this Agreement do not apply. The
parties agree that additional Products may be added to the Agreement by
execution of an appendix to this Agreement setting forth any special
terms, conditions, modifications or deletions necessary for the
additional Products. Additional Products shall be deemed to be added to
this Agreement to the extent AltiGen accepts any purchase orders for
Products not otherwise listed on the Product List.
5. ORDERS
5.1 Procedure. All orders for Products placed by Distributor shall be
in writing, or if placed orally, shall be confirmed in writing within
ten (10) business days after such oral order.
5.2 Acceptance of Orders. All orders for Products by Distributor shall
be subject to acceptance by AltiGen and shall not be binding on AltiGen
until the earlier of written confirmation or shipment and, in the case
of acceptance by shipment, only as to the portion of the order actually
shipped. If a rejection is not provided within (5) days of written
receipt of the order, it shall be deemed accepted.
5.3 Controlling Terms. The terms and conditions of this Agreement and
of the applicable AltiGen order confirmation pursuant to Section 5.2
("Acceptance of Orders") above, shall apply to each order accepted or
shipped by AltiGen hereunder. Any terms or conditions appearing on the
face or reverse side of any purchase order, acknowledgment, or
confirmation other than confirmation pursuant to Section 5.2 above that
are different from or in addition to those required hereunder shall not
be binding on the parties, even if signed and returned, unless both
parties hereto expressly agree in a separate writing to be bound by
such separate or additional terms and conditions.
5.4 AltiGen Order Cancellation & Obligation to Ship in Presence of
Breach. Even where AltiGen accepts a purchase order, AltiGen reserves
the right to cancel or suspend any orders placed by Distributor and
accepted by AltiGen, or to refuse or delay shipment thereof, at the
time of scheduled shipment if Distributor (a) fails to make any payment
as provided herein or in any invoice, (b) fails to meet credit or
financial requirements established by AltiGen, or (c) otherwise fails
to comply with the terms and conditions of this Agreement. If
Distributor has a legitimate dispute of an invoice under section 3.5b,
orders will not be held or canceled as a result.
5.5 Distributor Order Cancellation. Orders accepted by AltiGen may be
canceled without penalty if written notice of cancellation is given to
AltiGen and the notice is received by AltiGen at least (Redated) prior
to the scheduled shipment date. Orders canceled less than (Redated)
prior to the scheduled shipment date will be subject to a cancellation
payment of (Redated) of the invoice value of the canceled order. In no
event may Distributor cancel any order or any portion of an order after
shipment.
6
<PAGE>
5.6 Product Availability. AltiGen will use reasonable efforts to fill
orders for Products and meet requests for shipment dates subject to
Product availability and AltiGen production and supply schedules.
Should orders for Products exceed AltiGen' available inventory, AltiGen
will allocate its available inventory and make deliveries on a basis
AltiGen deems equitable, in its sole discretion, and without liability
to Distributor on account of the method of allocation chosen or its
implementation. AltiGen shall not be liable to Distributor or any third
party for any damages due to AltiGen' failure to fill any orders or for
any delay in delivery or error in filing any orders for any reason
whatsoever.
(a) Distributor requires concurrent with the execution of this
Agreement Export Administration Regulations product classification and
supporting documentation: Certificate of Origin (General Use and/or
NAFTA), Export Commodity Control Number's; (ECCN's), General License
and/or Individual Validated License information and Schedule
"B"/Harmonized Numbers. This applies when distribution rights granted
under Section 1.7 are outside the United States for the initial
Product/s and when additions or changes to these Products occurs.
(b) Product Marking AltiGen will clearly mark each unit of Product with
the Product name and computer compatibility. Such packaging will also
bear a machine-readable bar code identifier scannable in standard
Uniform Product Code (UPC) format. The bar code must identify the
Product as specified by the Uniform Code Council (UCC). If the AltiGen
or Distributor customers' require serial number tracking the serial
number must be clearly marked and bar coded on the outside of the
individual selling unit. The bar code shall fully comply with all
conditions regarding standard product labeling set forth in Exhibit B
in the then-current Distributor Guide to Bar Code: The Product Label.
------------------------------------
AltiGen may be assessed a reasonable per unit charge for all Product
not in conformance herewith.
5.7 Delivery. AltiGen will ship Products FOB Destination, unless
otherwise agreed in writing, to Distributor's North American designated
location or freight forwarder via ground transport. Distributor may
change the designated locations by providing AltiGen with written
notice of such change, and the notice is received by AltiGen at least
fifteen (15) days prior to the estimated shipment dates. AltiGen shall
ship all Product in accordance with instructions specified in
Distributor's AltiGen Routing Guide attached hereto as Exhibit F.
AltiGen shall, to the extent possible, assist Distributor in making
claims with carriers in the event of loss or damage in transit.
5.8 Risk of Loss. In the case of shipments to shipping destinations
within the United States, exclusive of the rights retained under the
Agreement in trademarks, patents, copyrights, trade names, trade
secrets and intellectual property, and all risk of loss or damage for
any Product shall pass to Distributor upon delivery by AltiGen to the
freight carrier regardless of whether AltiGen or the Distributor has
designated the carrier. Title to the Products will be passed to the
Distributor once sold to dealer or paid for by Distributor which ever
occurs first.
[In the case of shipments to shipping designations outside the
United States, Distributor and AltiGen expressly agree that
beneficial and legal title to, ownership of, right to possession
of, control over, and risks of
7
<PAGE>
loss and damage to, the products shall remain with AltiGen
until the shipment physically arrives at the port of entry in
the importing country (or at a bonded warehouse within the
jurisdictional boundaries of Canada or Mexico if Distributor
requests shipment to those countries). The time of payment,
whether before or after shipment, the place or medium of
payment, the method of shipment, the manner of consignment,
whether to AltiGen, or its agent, to Distributor or
Distributor's agent, or any agent for both, or any document in
relation to any sale under the Agreement, shall in no way
limit or modify the right of AltiGen as the legal and
beneficial owner of the products, its right to control and its
right to possession of such goods until they physically arrive
at the port of entry of the importing country (or at a bonded
warehouse within the jurisdictional boundaries of Canada or
Mexico if Distributor requests shipment to those countries).
It is expressly understood that the foregoing shall not be
construed to mean that AltiGen has merely retained bare legal
title for security purposes, but rather retains legal title
and full beneficial ownership until the shipment arrives at
the port of entry in the country of destination (or at a
bonded warehouse within the jurisdictional boundaries of
Canada or Mexico if Distributor requests shipment to those
countries.) If Distributor insures the shipment, insurance
policies will protect the interest of AltiGen as the legal
owner of the merchandise until title transfers as set forth
above.]
6. DISTRIBUTIONS OBLIGATIONS
6.1 Distributor Distribution. Distributor shall distribute or market
Product: (i) solely to resellers approved by AltiGen under its
Authorized Dealer Program, (ii) subject to an End-user License
Agreement, (iii) subject to Distributor's standard terms and conditions
of sale to it's resellers which do not alter or contradict this
Agreement, and (iv) in the form received from AltiGen. Distributor
shall neither add to nor remove any documentation included by AltiGen
with the Product.
6.2 Authorized Dealer Program. AltiGen has instituted an AltiGen
Authorized Dealer Program. Distributor agrees to market the Products in
compliance with AltiGen's Authorized Dealer Program.
6.3 Business Plan. Within ninety (90) days of the Effective Date of the
contract, Distributor and AltiGen will co-author a business plan
setting forth Distributor's plans for promoting the Products, which
will be reviewed semi-annually, at which time objectives and
performance will be evaluated. Distributor agrees to provide an updated
business plan in accordance with the schedule for updating such as
specified by AltiGen.
6.4 Purchase Objectives; Inventory. Distributor and AltiGen shall agree
upon quarterly Purchase Objectives. The initial Purchase Objectives are
stated in Exhibit C with on-going purchase and business objectives
described in the business plan outlined in 6.3. Distributor shall
warehouse and order to meet market demand and will deliver to resellers
in a timely manner. Distributor will inventory 30 days of product in
each of its named warehouses or as deemed by market conditions.
8
<PAGE>
65. Point of Sale and Inventory Reports. During the term of this Agreement,
Distributor will provide AltiGen standard sales-out and inventory reports via
its electronic Bulletin Board. Distributor is on a 4-4-5 week calendar schedule
starting with January 5, 1998. Each report will be ready on the 1/st/ Tuesday of
the new month. This report will include the following: (i) - State and zip code:
(ii) - Products purchased in this month's reporting, including returns; (iii)
- - Current distributor's inventory on a weekly basis, reflecting the previous
Friday's close of business inventory; (iv) - Six month trailing history of
product sold by region; (v) - List of Distributor's open purchase orders. Such
report, with respect to a calendar month, shall be posted. Distributor shall
also provide non-standard reporting data including reseller name and address
subject to the terms and conditions of a separate Proprietary Information Non-
Disclosure Agreement attached hereto as Exhibit G.
6.6 Customer Satisfaction. Distributor agrees that the Products marketed under
this Agreement are technically complex and require high-quality, individualized
pre-marketing and post-marketing support. This support is necessary to achieve
and maintain high customer satisfaction. Therefore, Distributor agrees that high
customer satisfaction is a condition of distribution authorization by AltiGen.
The distribution channels established by AltiGen, and the obligations placed on
distributors, exist to ensure high customer satisfaction. Distributor agrees to
market the Products only in accordance with this Agreement. In addition, in
order to assure high customer satisfaction, Distributor agrees to:
. Report to AltiGen promptly and in writing all suspected and actual
problems with any product.
. maintain a shipment report identifying for each Dealer, the Products
sold, the date of sale, and each Product's serial number;
. Retain all shipment reports for five years after the date of sale, and
assist AltiGen, upon request, in tracing a Product to a Dealer, in
order to distribute critical Product information, locate a Product for
safety reasons, or discover unauthorized marketing or infringing acts;
. Conduct business in a manner which reflects favorably at all times on
the Products, goodwill and reputation of AltiGen.
. Avoid deceptive, misleading or unethical practices, which are or might
be detrimental to AltiGen or its products.
. Refrain from making any false or misleading representations with
regard to AltiGen or its products; and
. Refrain from making any representations, warranties or guarantees to
customers or to the trade with respect to the specifications, features
or capabilities of the Products that are inconsistent with the
literature distributed by AltiGen.
6.7 Promotional Efforts. Distributor shall use its best efforts to market and
distribute the Products to Dealers in the Territory. Distributor may advertise
the
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Products in advertising media of Distributor's choice, provided that
the primary audience or circulation is located in the Territory.
Distributor shall make full use of all promotional material supplied by
AltiGen and make available literature and other information that
AltiGen requires to be transmitted to such Dealers. In all advertising
and promotion of the Products, Distributor shall comply with AltiGen
standard cooperative advertising policies as specified from time to
time by AltiGen.
6.8 Demonstration System. Distributor shall maintain a demonstration
system capable of supporting the most technically advanced Products.
Distributor shall use such demonstration system both to facilitate its
ability to fulfill its Dealer support obligations, and to support its
sales efforts.
6.9 Distributor Personnel. AltiGen will provide mutually agreed upon
levels of training for Distributor's sales and technical personnel.
Distributor shall train and maintain a sufficient number of capable
technical and sales personnel to serve the demands of Dealers for the
Products, for service and support of the Products, call on all Dealers
with reasonable frequency and answer promptly all Dealer inquiries or
requests for information regarding the Products. Distributor and its
staff shall develop and maintain sufficient knowledge of the industry,
the Products, and competitive offerings (including specifications,
features, and functions) so as to be able to demonstrate and support
the Products for Dealers. Distributor shall provide all Dealers with
technical support and other assistance appropriate for the promotion,
marketing, and distribution of the Products. Distributor shall attend
AltiGen distribution meetings.
7. Support and Maintenance
AltiGen shall provide Distributor (but not its Dealers, and not End
Users which purchase from such Dealers) with the support and maintenance
described in Exhibit D hereto free of charge during the term of this Agreement.
AltiGen may provide Dealers and End Users with support and maintenance under a
separate agreement. In order to have a high degree of customer satisfaction and
technical expertise Distributor and AltiGen will have to perform on-site
training for Distributor's Technical Support personnel. This will be coordinated
at a later date.
8. Trademarks and Confidential Information
8.1 Trademarks. AltiGen shall have and retain sole ownership of
AltiGen's logo, trade names and trademarks ("Trademarks"), including
the goodwill pertaining thereto. AltiGen hereby grants to Distributor
the right to use and display the Trademarks solely in connection with
and solely to the extent reasonably necessary for the marketing,
distribution, and support of the Products within the Territory in
accordance with the terms and conditions of this Agreement. Distributor
shall not do or suffer to be done any act or thing that would impair
AltiGen's rights in its Trademarks or damage the reputation for quality
inherent in the Trademarks. AltiGen's has the right to take all action
which it deems necessary to ensure that the advertising and promotional
materials related to the Products utilized by Distributor are
consistent with the reputation and prestige of the Trademarks.
Distributor shall market, distribute, and support the Products only
under the Trademarks, and not any other trademark or logo. Distributor
shall not use the Trademarks or any other trademarks or trade names of
AltiGen or any word, symbol, or design confusingly
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<PAGE>
similar thereto, as part of its corporate name, or as part of the name
of any product of Distributor. Distributor shall not (i) remove, alter
or overprint the Products' copyright notices, trademarks, and logos, or
packaging, (ii) attach any additional trademarks to the Products
without AltiGen's prior written consent or (iii) affix any of the
Trademarks to any non-AltiGen products. Distributor agrees that any
goodwill which accrues because of Distributor's use of the Trademarks
shall become AltiGen's property. Distributor further agrees not to
contest AltiGen's Trademarks or tradenames, or to make application for
registration of any AltiGen Trademarks or tradenames.
8.2 Confidential Information. During the term of this Agreement, and
for a period of three (3) years thereafter, The Parties will maintain
in confidence any confidential or proprietary information of The
Parties disclosed to one another including, without limitation, any
information regarding scientific, engineering, manufacturing,
marketing, business plan, financial or personnel matter relating to The
Parties, whether in oral, written, graphic or electronic form
("Confidential Information"). The Parties will not use, disclose or
grant use of such Confidential Information except as expressly
authorized by The Parties. To the extent that disclosure is authorized
by The Parties, The Parties will obtain prior agreement from their
employees, agents or consultants to whom disclosure is to be made to
hold in confidence and not make use of such information for any purpose
other than those permitted by The Parties. The Parties will use at
least the same standard of care as they use to protect its own
Confidential Information to ensure that such employees, agents or
consultants do not disclose or make any unauthorized use of such
Confidential Information. The Parties will promptly notify each other
upon discovery of any unauthorized use or disclosure of the
Confidential Information.
8.3 Exceptions. The obligations of confidentiality contained in
Section 8.2 will not apply to the extent that it can be established by
Distributor by competent proof that such Confidential Information:
(a) was already known to the parties, other than under an
obligation of confidentiality, at the time of disclosure;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the
parties;
(c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than
through any act or omission of the parties in breach of
this Agreement;
(d) was disclosed to the parties, other than under an
obligation of confidentiality, by a third party who had no
obligation to the disclosing party not to disclose such
information to others.
9. Indemnification
9.1 AltiGen Infringement Indemnity. Subject to the limitations set
forth herein below, AltiGen shall defend Distributor with respect to
any claim, suit or proceeding brought against Distributor to the extent
it is based upon a claim that any Product sold pursuant to this
Agreement infringes upon any U.S. patent, U.S. trademark, U.S.
copyright or U.S. trade secret of any third party; provided, however,
that Distributor
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(i) promptly notifies AltiGen in writing of such claim, suit or
proceeding; (ii) gives AltiGen the right to control and direct
investigation, preparation, defense and settlement of any claim, suit
or proceeding; and (iii) gives assistance and full cooperation for the
defense of same, and, further provided, that AltiGen's liability with
respect to portions of Products provided by or licensed from third
parties will be limited to the extent AltiGen is indemnified by such
third parties. AltiGen shall pay any resulting damages, costs and
expenses finally awarded to a third party, but AltiGen shall not be
liable for such amounts, or for settlements incurred by Distributor,
without AltiGen's prior written authorization. If a Product is, or in
AltiGen's opinion might be, held to infringe as set forth above.
AltiGen may, at its option, replace or modify such Product so as to
avoid infringement, or procure the right for Distributor to continue
the use and resale of such Product. If neither of such alternatives is,
in AltiGen's opinion, reasonably possible, the infringing Product shall
be returned to AltiGen, and AltiGen's sole liability, in addition to
its obligation to reimburse any awarded damages, costs and expenses set
forth above, shall be to refund the purchase price paid for such
Products by Distributor.
9.2 Exclusions. The provisions of the indemnity provided in Section
9.1 (with respect to infringement) shall not apply with respect to any
instances of alleged infringement based upon or arising out of the use
of such Products in any manner for which the Products were not
designed, or for use of Products other than the uses and distributions
designated by AltiGen, for use of any Product that has been modified by
Distributor or any third party, or for use of any Product in connection
with or in combination with any equipment, devices or software that
have not been supplied by AltiGen. Notwithstanding any other provisions
hereof, the foregoing indemnity shall not apply with respect to any
infringement based on Distributor's activities occurring subsequent to
its receipt of notice of any claimed infringement unless AltiGen shall
have given Distributor written permission to continue to market and
distribute the allegedly infringing Product.
9.3 Entire Liability and Limitation. THE FOREGOING SECTIONS 10.1 AND
10.2 STATE THE SOLE AND EXCLUSIVE REMEDY OF DISTRIBUTOR AND THE ENTIRE
LIABILITY AND OBLIGATION OF ALTIGEN WITH RESPECT TO INFRINGEMENT OR
CLAIMS OF INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADE SECRET OR OTHER
INTELLECTUAL PROPERTY RIGHT BY THE PRODUCTS OR ANY PART THEREOF.
9.4 Product Defect Indemnity: Subject to the limitations set forth
herein below, AltiGen shall defend Distributor with respect to any
claim, suit or proceeding brought against Distributor to the extent it
is based upon a claim that any property damage, personal or bodily
injury or other damage has resulted from a defect in the Products;
provided, however, that Distributor (i) promptly notifies AltiGen in
writing of such claim, suit or proceeding; (ii) gives AltiGen the right
to control and direct investigation, preparation, defense and
settlement of any claim, suit or proceeding; and (iii) gives assistance
and full cooperation for the defense of same, and, further provided,
that AltiGen's liability with respect to portions of Products provided
by or licensed from third parties will be limited to the extent AltiGen
is indemnified by such third parties. AltiGen shall pay any resulting
damages, costs and expenses finally
12
<PAGE>
awarded to a third party, but AltiGen shall not be liable for such
amounts, or settlements incurred by Distributor, without AltiGen's
prior written authorization.
9.5 Indemnity by Distributor. DISTRIBUTOR AGREES TO INDEMNITY AND
HOLD ALTIGEN HARMLESS FROM ANY CLAIMS, SUITS, PROCEEDINGS, LOSSES,
LIABILITIES, DAMAGES, COSTS AND EXPENSES (INCLUSIVE OF ALTIGEN'S
REASONABLE ATTORNEYS' FEES) MADE AGAINST OR INCURRED BY ALTIGEN AS A
RESULT OF NEGLIGENCE, MISREPRESENTATION, OR ERROR OR OMISSION ON THE
PART OF DISTRIBUTOR OR REPRESENTATIVE OF DISTRIBUTOR. DISTRIBUTOR SHALL
BE SOLELY RESPONSIBLE FOR, AND SHALL INDEMNIFY AND HOLD ALTIGEN
HARMLESS FROM, ANY CLAIMS, WARRANTIES OR REPRESENTATIONS MADE BY
DISTRIBUTOR OR DISTRIBUTOR'S EMPLOYEES OR AGENTS WHICH DIFFER FROM THE
WARRANTY PROVIDED BY ALTIGEN IN ITS END USER AGREEMENT.
9.6 Mutual Indemnity Regarding Personal Injury and Other Damages.
Each party shall indemnify and hold the other harmless from and against
any and all claims, actions, damages, demands, liabilities, costs and
expenses, including reasonable attorney's fees and expenses, resulting
from any act or omission of the acting party or its employees or agents
under this Agreement that causes or results in property damage,
personal injury or death.
10. Warranty
10.1 AltiGen Warranty. AltiGen warrants the Products TO END-USERS ONLY
pursuant to the terms and conditions of the End User Agreement,
provide, however, Distributor shall be entitled to rely on the End User
Warranty for purposes of returns of Product and indemnities a copy of
which is attached to this Agreement as Exhibit A. In addition AltiGen
warrants the following:
(a) It has good transferable title to the products
(b) There are no suits or proceedings pending or threatened
which allege any infringement by the Products of any
patents, copyrights, trademarks, trade secrets or any other
intellectual property rights of a third party Product sales
to Distributor do not in any way constitute violation of any
law, ordinance, rule or regulation in the distribution
territory
(c) The Products will properly (a) record, store process,
calculate or present calendar dates falling on or after (and
if applicable, spans of time including) January 1, 2000 as a
result of the occurrence, or use of data consisting of such
dates and (b) calculate any information dependent on or
relating to dates on or after January 1, 2000 in the same
manner, and with the same functionality, data integrity and
performance, as such Product records, stores, processes,
calculates and presents calendar dates on or before December
31, 1999, or information dependent on or relating to such
dates
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<PAGE>
(d) The Products have been or will be at the time of
shipment certified as a Class B computing device as required
by the rules of the U.S.A. Federal Communications Commission
(e) AltiGen will not label any of its products as being
"Made in America", "Made in USA," or with similar wording,
unless substantially all components of such Products are in
fact made in the United States of America
10.2 Limitations and Disclaimer. EXCEPT FOR THE EXPRESS WARRANTIES SET
FORTH IN SECTION 10.1 ABOVE, ALTIGEN EXPRESSLY DISCLAIMS ALL WARRANTIES
EXPRESSED OR IMPLIED RELATING TO THE PRODUCTS, AND FURTHER EXPRESSLY
EXCLUDES ANY WARRANTY OF NON-INFRINGEMENT, FITNESS FOR A PARTICULAR
PURPOSE OR MERCHANTABILITY.
10.3 NO PERSON IS AUTHORIZED TO MAKE ANY OTHER WARRANTY OR
REPRESENTATION CONCERNING THE PERFORMANCE OF THE PRODUCTS OTHER THAN AS
PROVIDED IN THE END USER AGREEMENT. DISTRIBUTOR SHALL MAKE NO OTHER
WARRANTY, EXPRESS OR IMPLIED, ON BEHALF OF ALTIGEN.
10.4 Distributor's Warranty. Distributor hereby represents and
warrants to AltiGen that neither this Agreement (or any term hereof)
nor the performance of or exercise of rights under this Agreement, is
restricted by, contrary to, in conflict with, ineffective under,
requires registration or approval or tax withholding under, or affects
AltiGen's intellectual property rights (or the duration thereof) under,
or will require any compulsory licensing under, any law or regulation
of any organization, country, group of countries or political or
governmental entity to which Distributor is subject.
11. Limitation on Liability
11.1 Limitation of Liability. OTHER THAN AS PROVIDED IN SECTION 9
ABOVE THE TOTAL LIABILITY OF EITHER PARTY TO THE OTHER HEREUNDER SHALL
NOT EXCEED (REDATED)
11.2 Waiver of Consequential Damages. IN NO EVENT WILL ALTIGEN OR
DISTRIBUTOR BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION ANY LOSS OF INCOME,
LOSS OF PROFITS OR LOSS OF DATA, EVEN IF ALTIGEN HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH
THE GRANT OF THE LICENSE HEREUNDER.
11.3 Third Party Claims. AltiGen shall not be liable for any claim by
Distributor based on any third party claim, except as stated in Section
10 of the Agreement.
12. Term and Termination
12.1 Term. Subject to the provisions of Sections 13.2 and 13.3 below,
this Agreement is valid for a term of one year and shall be renewed
automatically for
14
<PAGE>
additional one year terms provided that each party shall have the right
to terminate this Agreement for convenience upon ninety (90) days
written notice prior to the end of the initial term or any subsequent
term of the Agreement.
12.2 Termination for Cause. Either party may terminate this
Agreement for cause upon thirty (30) days written notice to the other
party if such other party materially breaches this Agreement and such
material breach is not cured within the thirty (30) day period
following delivery of notice. Either party shall have the right to
terminate this Agreement immediately in the event the other party
terminates its business, or becomes subject to any bankruptcy or
insolvency proceeding under Federal or State statute, and such petition
is not dismissed within sixty (60) days.
12.3 Effect of Termination. For a period of sixty (60) days
following termination of this Agreement, Distributor may distribute any
Products in Distributor's possession at the time of termination or at
it's option return any product in inventory, provided, however, that if
AltiGen has terminated the Agreement pursuant to Section 12.2,
Distributor's right to distribute the Products shall immediately
terminate. Following any permitted distribution, Distributor shall
return to AltiGen or, at AltiGen's request, destroy the copies of the
Products and Documentation then in its possession. In addition,
Distributor shall be entitled to retain one (1) copy of the Product
following termination solely for the purposes of providing support to
Dealers and End Users. AltiGen shall apply the value of any returned
Products to any outstanding credit balance in Distributor's account.
The termination of this Agreement shall not act to terminate the
licenses granted to Dealers or End Users pursuant to this Agreement.
(i) For a ninety day (90) period after termination, Distributor may
send back inventory received from its resellers to AltiGen. Product
returned under this provision must be in merchantable condition and in
its original factory-sealed packaging.
12.4 Payment upon Termination. Upon termination of the Agreement by
AltiGen for cause, the due dates of all outstanding invoices for
Products will become due and payable thirty (30) days from date of
termination minus returns received, even if longer terms had been
provided previously. After the ninety - (90) day period a final true-up
of inventory and monies will take place. If AltiGen owes Distributor
monies, AltiGen will issue a check to Distributor. All orders or
portions of orders remaining un-shipped as of the effective date of
such termination shall automatically be canceled.
13. Miscellaneous
13.1 Nonexclusivity. AltiGen retains the right to market,
distribute, and support the Products in the Territory directly to
or through any person or entity on any terms deemed desirable by
AltiGen in its sole discretion. Any discounts extended to other
like distributors that exceed the discount schedule (see Exhibit
"B") in effect at the time between AltiGen and Distributor shall
also be extended to distributor.
13.2 Modification and Amendment. Except with respect to Exhibit B
hereof, this Agreement may be modified or amended only in writing
by the consent of both parties.
13.3 Survival. Sections 5.8, 8, 9, 10,11, 12.3, 12.4, 13 shall
survive termination of this Agreement for three (3) years.
15
<PAGE>
13.4 Governing Law. This Agreement is made in accordance with and
shall be governed and construed under the laws of the State of
California, as applied to agreements executed and performed
entirely in California by California residents.
13.5 Toll Fraud. Dealer is forbidden from stating or implying that
AltiGen Products provide immunity from fraudulent intrusion (Toll
Fraud). Dealer must use this language on all sales materials and
contract involving AltiGen Products.
13.6 Notices. All notices, demands, or consents required or
permitted under this Agreement shall be in writing and shall be
delivered personally or sent by a national overnight courier
service or by registered or certified, return receipt requested
mail to the other party at the addresses first set forth above.
All notices, demands, or consents shall be deemed effective upon
personal delivery or five (5) days following dispatch via first
class mail or day three (3) following deposit with any national
overnight courier service in accordance with this section.
13.7 No Partnership of Joint Venture. No agency, employment,
partnership, joint venture, or other joint relationship is
created hereby, it being understood that Distributor and AltiGen
are independent contractors vis-a-vis one another and that
neither has any authority to bind the other in any respect
whatsoever.
13.8 Force Majeure. Neither party shall be deemed to be in default
of or to have breached any provision of this Agreement as a
result of any delay, failure in performance, or interruption of
service resulting directly or indirectly from acts of God, acts
of civil or military authority, civil disturbance, war, strikes
or other labor disputes, fires, transportation contingencies,
laws, regulations, acts or orders of any government agency or
official thereof, other catastrophes or any other circumstances
beyond the party's reasonable control.
13.9 Export Control. The parties acknowledge that the Products may
be subject to the export control laws of the United States of
America, including the U.S. Bureau of Export Administration
regulations, and hereby agree to obey any and all such laws. The
parties agree to comply with the U.S. Foreign Corrupt Practices
Act of 1977, as amended, and with all applicable foreign laws
relating to the use, importation, licensing or distribution of
the Products.
13.10 Assignment. Neither party may assign this Agreement or any of
its rights, duties or obligations under this Agreement to any
third party without the other party's prior written consent,
which consent shall not be unreasonably withheld. Notwithstanding
the foregoing, either party may assign its rights and delegate
its obligations under this Agreement without the consent of the
other party to a purchaser of all or substantially all of its
voting stock or capital assets or to an entity with which such
party merges or is consolidated.
13.11 Severability and Waiver. In the event any provision of this
Agreement is held to be invalid or unenforceable, the valid or
enforceable portion thereof and the remaining provisions of this
Agreement will remain in full force and effect. Any waiver
(express or implied) by any party of any default or breach of
this
16
<PAGE>
Agreement shall not constitute a waiver of any other or
subsequent default or breach.
13.12 Entire Agreement. This Agreement and all Exhibits referred to
herein embody the entire understanding of the parties with
respect to the subject matter hereof and shall supersede all
previous communications, representations or understandings,
either oral or written, between the parties relating to the
subject matter hereof.
13.13 Headings. The section headings appearing in this Agreement are
inserted only as a matter of convenience and in no way define,
limit, construe or describe the scope or intent of any such
section nor in any way affect this Agreement.
13.14 Parties Advised by Counsel. This Agreement has been negotiated
between unrelated parties who are sophisticated and knowledgeable
in the matters contained in this Agreement and who have acted in
their own self interest. In addition, each party has been
represented by legal counsel. The provisions of this Agreement
shall be interpreted in a reasonable manner to effect the purpose
of the parties, and this Agreement shall not be interpreted or
construed against any party to this Agreement because that party
or any attorney or representative for that party drafted this
Agreement or participated in the drafting of this Agreement.
13.15 Insurance AltiGen shall carry insurance coverage product
liability/completed operations of (redated) primary each
occurrence and (redated) within ten (10) days of full execution
of this Agreement, AltiGen shall provide Distributor with a
Certificate of Insurance. This Certificate of Insurance must
include: (i) a broad form endorsement naming Distributor as an
additional insured, and (ii) a mandatory thirty (30) day notice
to Distributor of insurance cancellation.
17
<PAGE>
In Witness Whereof, the parties hereto have duly executed this Agreement,
including the Exhibits hereto, and incorporated herein by reference, as of the
date first above written above.
ALTIGEN INC. INGRAM MICRO INC.
By: /s/ Michele Shannon By: /s/ Michael Walkey
------------------------------ -------------------------------
Name: Michele Shannon Name: Michael Walkey
---------------------------- ------------------------------
Title: Vice President of Sales Title: Vice President - Purchasing
--------------------------- -----------------------------
EXHIBIT
A - END USER AGREEMENT
B - PRODUCT LIST AND DISCOUNT SCHEDULE
C - PURCHASING OBJECTIVES
D - SUPPORT AND MAINTENANCE
E - TERRITORIES
F - INGRAM VENDOR ROUTING GUIDE
G - PROPRIETARY INFORMATION NON-DISCLOSURE AGREEMENT
18
<PAGE>
EXHIBIT A
ALTIGEN(R), INC. - END USER AGREEMENT
NOTICE - READ THIS BEFORE OPENING THIS PACKAGE, INSTALLING THE PC HARDWARE
OR USING THE SOFTWARE
OPENING THIS PACKAGE, INSTALLING THE PC HARDWARE OR USING THE SOFTWARE
INDICATES YOUR ACCEPTANCE OF THESE TERMS AND CONDITIONS. READ ALL OF THE TERMS
AND CONDITIONS OF THIS LICENSE AGREEMENT PRIOR TO OPENING THIS PACKAGE OR USING
THE SOFTWARE. IF YOU DO NOT ACCEPT THESE TERMS, YOU MUST RETURN THIS PACKAGE
WITHIN 5 DAYS OF OBTAINING THE PACKAGE, WITH YOUR RECEIPT, AND YOUR MONEY WILL
BE RETURNED.
* * * *
PLEASE NOTE THAT YOU MAY NOT USE, COPY, MODIFY OR TRANSFER THE PROGRAM, THE
PC HARDWARE OR DOCUMENTATION OR ANY COPY, EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT.
LICENSE. This software program (the "Program") and the documentation (the
-------
"Documentation") are licensed, not sold, to you. The term "Program" shall also
include any updates of the Program licensed to you by AltiGen. Subject to the
terms of this agreement, you have a non-exclusive and nontransferable right to
use the Program, Personal Computer Card (the "PC Hardware") and Documentation.
You agree to use your best efforts to prevent and protect the contents of the
Program, the PC Hardware and Documentation from unauthorized disclosure or use.
AltiGen and its licensors reserve all rights not expressly granted to you.
AltiGen's licensors are the intended third party beneficiaries of this agreement
and have the express right to rely upon and directly enforce the terms set forth
herein.
LIMITATIONS ON USE. You may not rent, lease, sell or otherwise transfer or
------------------
distribute copies of the Program, the PC Hardware or Documentation to others.
You may not modify or translate the Program, the PC Hardware or the
Documentation without the prior written consent of AltiGen. You may not reverse
assemble, reverse compile or otherwise attempt to create the source code from
the Program or the PC Hardware. You may not use AltiGen's name or refer to
AltiGen directly or indirectly in any papers, articles, advertisements, sales
presentations, news releases or releases to any third party without the prior
written approval of AltiGen for each such use. You may not release the results
of any performance or functional evaluation of any Program to any third party
without prior written approval of AltiGen for each such release.
BACKUP AND TRANSFER. You may make one copy of the Program for backup
-------------------
purposes if AltiGen's copyright notice is included. You may not sublicense,
assign, delegate, rent, lease, time-share or otherwise transfer this license or
any of the related rights or obligations for any reason. Any attempt to make any
such sublicense, assignment, delegation or other transfer by you shall be void.
You may physically transfer the Program from one computer to another provided
that you do not retain any copies of the Program, including any copies stored on
a computer.
TOLL FRAUD. Although this software provides passwords and blocking options
----------
for controlling telephone use, the software does not provide a security system
that would prevent unauthorized use. AltiGen does not warrant that the software
will prevent, or can prevent, unauthorized and/or unlawful use. AltiGen will
have no responsibility and will not be liable for any unauthorized or unlawful
use, including without limitation long distance charges, criminal or civil
liabilities, or damages.
COPYRIGHT. The Program, the PC Hardware and related Documentation are
---------
copyrighted by AltiGen and its licensors. You may make one copy of the
Documentation and print one copy of any on-line documentation or other materials
provided to you in electronic form. Any and all other copies of the Program and
-------------------------------------------
any copy of the Documentation made by you are in violation of this license.
- --------------------------------------------------------------------------
19
<PAGE>
OWNERSHIP. You agree that the Program and Documentation belong to
---------
AltiGen and its licensors. You agree that you neither own nor hereby acquire any
claim or right of ownership to the Program and Documentation or to any related
patents, copyrights, trademarks or other intellectual property. You own only the
magnetic or other physical media (including Personal Computer Card) on which the
Program and related Documentation are recorded or fixed. AltiGen and its
licensors retain all right, title and interest in and to the Documentation and
all copies and the Program recorded on the original media and all subsequent
copies of the Program at all times, regardless of the form or media in or on
which the original or other copies may subsequently exist. This license is not a
sale of the original or any subsequent copy. All content accessed through the
Program is the property of the applicable content owner and may be protected by
applicable copyright law. This license gives you no rights to such content.
TERM AND TERMINATION. This license is effective until terminated. You
--------------------
may terminate this license at any time by destroying the Program and
Documentation and the permitted backup copy. This license automatically
terminates if you fail to comply with its terms and conditions. You agree that,
upon such termination, you will either destroy (or permanently erase) all copies
of the Program and Documentation, or return the original Program and
Documentation to AltiGen, together with any other material (PC Hardware) you
have received from AltiGen in connection with the Program.
LIMITED WARRANTY. AltiGen warrants the media on which the Program is
----------------
furnished to be free from defects in materials and workmanship under normal use
for 30 days from the date that you obtain the Program. AltiGen warrants the PC
Hardware for a period of one year from the date of consumer purchase to be free
from defects in materials and workmanship. EXCEPT FOR THIS LIMITED WARRANTY,
ALTIGEN AND ITS LICENSORS PROVIDE THE PROGRAM, THE PC HARDWARE AND THE
DOCUMENTATION "AS IS" WITHOUT WARRANTY OF ANY KIND EITHER EXPRESS, IMPLIED OR
STATUTORY, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
Some states do not allow the exclusion of implied warranties, so the
above exclusion may not apply to you. This warranty gives you specific legal
rights and you may also have other rights which vary from state to state.
LIMITATION OF REMEDIES. AltiGen and its licensors' entire liability and
----------------------
your exclusive remedy in connection with the Program, the PC Hardware and the
Documentation shall be that you are entitled to return the defective media
containing the Program together with the PC Hardware and Documentation to the
merchant. At the option of the merchant, you may receive replacement media
containing the Program, the PC Hardware and Documentation that conforms with the
limited warranty or a refund of the amount paid by you. IN NO EVENT WILL ALTIGEN
OR ITS LICENSORS BE LIABLE FOR ANY INDIRECT DAMAGES OR OTHER RELIEF ARISING OUT
OF YOUR USE OR INABILITY TO USE THE PROGRAM INCLUDING, BY WAY OF ILLUSTRATION
AND NOT LIMITATION, LOST PROFITS, LOST BUSINESS OR LOST OPPORTUNITY, OR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING LEGAL FEES,
ARISING OUT OF SUCH USE OR INABILITY TO USE THE PROGRAM, EVEN IF ALTIGEN, ITS
LICENSORS OR AN AUTHORIZED ALTIGEN DEALER, DISTRIBUTOR OR SUPPLIER HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, OR FOR ANY CLAIM BY ANY OTHER PARTY.
Some states do not allow the exclusion or limitation of incidental or
consequential damages so the above limitation or exclusion may not apply to you.
This license will be governed by the laws of the State of California as
applied to transactions taking place wholly within California between California
residents.
U.S. GOVERNMENT END USERS. The Program is a "commercial item," as that
-------------------------
term is defined at 48 C.F.R. 2.101 (Oct. 1995), consisting of "commercial
computer software" and "commercial computer software documentation," as such
terms are used in 48 C.F.R. 12.212 (Sept. 1995). Consistent with 48 C.F.R.
12.212 and 48 C.F.R. 227.7202-1 through 227.7202-4 (June 1995), all U.S.
Government End Users acquire the Program with only those rights set forth
herein.
20
<PAGE>
Exhibit B
PRODUCT LIST
and
DISCOUNT SCHEDULE
Quantum Boards
<TABLE>
<CAPTION>
Part Number Description Price
----------- ----------- -----
<S> <C> <C>
ALTI-CD0408UD CID Quantum Platform, 4 trunks & 8 extensions. Rev. D (Redated)
ALTI-CD0804UD CID Quantum Platform, 8 trunks & 4 extensions. Rev. D (Redated)
ALTI-CD0012UD CID Quantum Platform, 12 extensions. Rev. D (Redated)
ALTI-DID 0408UD DID Quantum Platform, 4 DID trunks & 8 extensions. Rev. D (Redated)
Demo
Part Number Description Price
----------- ----------- -----
ALTI-DMK4860 NFR CTI Demo Kit with AltiWare 2.1 Open Edition Software, AltiWare (Redated)
Console 2.1, Rev. D. CID Quantum board with 4 trunks & 8 extensions
and on-board power supply.
Software
Part Number Description Price
----------- ----------- -----
Alti-SS351E AltiWare 3.51A System Software (Redated)
Alti-OED210E AltiWare Open Edition 2.1 Software (Redated)
Alti-OAC210E AltiConsole 2.1 Operator Console Software (Redated)
Peripherals
Part Number Description Price
----------- ----------- -----
CBL-25M50-01 DB25 to 50-pin Telco cable, Male to Male (Redated)
CBL-MVIP6-01 MVIP cable with 6 connectors (Redated)
DOC-RFG01-04 4 User Pocket Reference Guides (Redated)
DOC-ICM01-01 Installation Configuration & Maintenance Manual (Redated)
MSC-PANEL-02 12 Port Connection Panel with 50-pin F Telco connector (Redated)
</TABLE>
1
<PAGE>
Exhibit C
Purchase Objectives
AltiGen operates on a fiscal calendar.
Q1 Q2
Oct., Nov., Dec. Jan., Feb., March
_______N/A_________________ _______N/A_________________
(Qty. of boards per quarter) (Qty. of boards per quarter)
Q3 Q4
April, May, June July, Aug, Sept.
_______N/A_________________ _______400_________________
(Qty. of boards per quarter) (Qty. of boards per quarter)
TOTAL FOR 1998:
_______400__________
1
<PAGE>
Exhibit D
SUPPORT AND MAINTENANCE
AltiGen will provide the following maintenance services:
Telephone Support. Telephone support from (Redated).
Email support. Email support available at "[email protected]" or a
special address to be established for Distributor support. AltiGen will respond
to email within (Redated)
Training. AltiGen may provide in-depth Product training to Distributor
from time-to-time and Distributor will use its best efforts to have appropriate
support personnel attend such training sessions to the extent such training will
assist Distributor in better supporting the channel.
Website. AltiGen will provide product information and technical tips at
www.altigen.com.
- ---------------
1
<PAGE>
Exhibit E
TERRITORIES
All Territories and possessions in:
. (Redated)
. (Redated)
2
<PAGE>
Exhibit F
VENDOR ROUTING GUIDE
[LOGO APPEARS HERE]
<PAGE>
INGRAM
MICRO URGENT DOCUMENT: PLEASE READ IMMEDIATELY
----------------------------------------
TO: INGRAM MICRO VENDORS
FROM: TOM WRIGHT - SR. DIRECTOR OF LOGISTICS & TRANSPORTATION
SUBJECT: VENDOR ROUTING GUIDE
This guide was prepared to provide you with a comprehensive freight policy and
to assist you in better understanding the transportation needs of Ingram Micro.
This guide is for shipments originating in the U.S. and shipping to Ingram Micro
Distribution Centers located in the U.S. and/or our Fremont, CA Consolidation
Center. The instructions in this guide supersede any previous routing
instructions written or oral. If an unauthorized carrier is used, Ingram Micro
reserves the right to debit the vendor for costs incurred through noncompliance
with these instructions. There is a 60 day grace period associated with any
changes you must make to comply with this guide.
In this guide you will see information that applies to any Ingram Micro
shipment, information that applies to shipments moving to our Consolidation
Center in Fremont, CA, information that applies to shipments moving to our
distribution centers, information that applies to packaging specification, and
information that applies to shipping document requirements.
Information that applies to any Ingram Micro shipments:
. If you currently pay freight, we would urge you to consider using our
selected carriers. By using these carriers you will experience reduced
cycle times because of our electronic commerce arrangements with the
carriers. The carriers we have selected have some of the lowest claims
ratios in the industry. Finally, we believe these carriers are best
able to service Ingram Micro freight based on their understanding of
our unique operating requirements.
. Freight Routing Instructions (when Ingram Micro pays freight):
All ground shipments must be shipped "FREIGHT COLLECT"
Do not ship COD for freight or product. Shipments will be refused.
Do not insure or declare value on any shipment unless previously
authorized by Ingram Micro Traffic (contact information on page
5).
All shipments must be in closed vehicles. Do not tender shipments
to any carrier utilizing flat bed or stake bed trucks.
The vendor will be responsible for all air freight shipments
unless otherwise permitted by Ingram Micro Traffic.
. Shipments between 1 and 150 pounds are considered a small parcel
shipment. We request that our vendors keep small shipments to a
minimum. We understand that there is a need to ship small shipments as
a result of backorders and special orders. When it is necessary to ship
small orders and it is not possible to consolidate into an LTL
shipment, please use RPS Collect.
. Drop shipments
When Ingram Micro is responsible for paying freight and you are
shipping directly to an Ingram Micro customer. Send all shipments THIRD
PARTY BILL TO INGRAM MICRO.
. Hazardous Materials/Dangerous Goods
Shipments of goods falling under the definition of Title 49CFR as
hazardous materials will not be accepted by Ingram Micro. Please notify
--------
Ingram Micro Traffic if such material is ordered.
. International Shipments
Call (714) 566-1000 extension 2284 for International freight
routing assistance.
1
<PAGE>
Shipments moving directly to Ingram Micro's Consolidation Center - Fremont, CA:
. The purchase order numbers will begin with 52.
. When you have a shipment for the Consolidation Center call
(800) 388-3722 between 6am - 6pm PDT Monday - Friday.
. Please have the following information ready at the time of call:
1. Vendor name
2. Ship from address
3. Pieces, weight, and number of pallets
4. Contact name and phone number
5. Ready time of product and hours of operation of shipping dock
. Small package orders to the Consolidation Center should always be in
full case quantity. If you cannot ship product in full case quantity
please back order the full case shortage amount.
Shipments moving directly to Ingram Micro Distribution Centers:
. The P.O. numbers will begin with 10 (Fullerton, CA), 17 (Miami, FL), 20
(Carrollton, TX), 26 (Fullerton or Santa Ana, CA), 30 (Memphis or
Millington, TN), 40 (Carol Stream, IL), 42 (Buffalo Grove, IL), 45
(Buffalo Grove, IL), 50 (Fremont, CA), 70 (Clarkston, GA), and/or 80
(Harrisburg, PA).
. If the shipment is between 150 and 10,000 pounds:
Watkins Motor Lines is the primary LTL carrier and ABF is the secondary
LTL carrier. For intrastate shipments refer to the chart below. For
interstate shipments refer to routing matrix on page three.
. If the shipment is 10,000 pounds or greater or equivalent to a
full trailer load:
Call (800) 388-3722 or (510) 249-9130 and ask for dispatch.
. Intrastate Shipments:
Shipments weighing between 150 and 10,000 pounds in states where Ingram
Micro distribution centers are located use the following carriers:
California WestEx
Florida & Georgia Southeastern Freight Lines
Tennessee & Texas Saia Motor Freight
Illinois K & R Express
Pennsylvania New Penn
2
<PAGE>
Routine Matrix
--------------
If any of the carriers contained in this routing matrix is unacceptable or you
need routing assistance call Ingram Micro Traffic Department before shipping
product.
SHIP TO DESTINATION
SHIP
FROM
ORIGIN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
CA FL TX TN IL GA PA
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AL Watkins ABF Watkins ABF Watkins ABF Watkins
- --------------------------------------------------------------------------------------------------------------------------
AR Watkins Watkins ABF ABF Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
AZ WestEx Watkins Watkins Watkins Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
CA WestEx Watkins Watkins Watkins Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
CO Reddaway Watkins Watkins Watkins Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
CT Watkins Watkins Watkins Watkins Watkins Watkins New Penn
- --------------------------------------------------------------------------------------------------------------------------
DC Watkins Watkins Watkins Watkins Watkins Watkins ABF
- --------------------------------------------------------------------------------------------------------------------------
DE Watkins Watkins Watkins Watkins Watkins Watkins ABF
- --------------------------------------------------------------------------------------------------------------------------
FL Watkins Southeastern Watkins Watkins Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
GA Watkins Southeastern Watkins ABF Watkins Southeastern Watkins
- --------------------------------------------------------------------------------------------------------------------------
IA ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
ID ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
IL Watkins Watkins Watkins Watkins K&R Express Watkins ABF
- --------------------------------------------------------------------------------------------------------------------------
IN Watkins Watkins Watkins Watkins ABF Watkins ABF
- --------------------------------------------------------------------------------------------------------------------------
KS ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
KY Watkins Watkins Watkins ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
LA Watkins Watkins ABF Watkins ABF Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
MA Watkins Watkins Watkins Watkins Watkins Watkins New Penn
- --------------------------------------------------------------------------------------------------------------------------
MD Watkins Watkins Watkins Watkins Watkins Watkins New Penn
- --------------------------------------------------------------------------------------------------------------------------
ME ABF ABF ABF ABF ABF ABF New Penn
- --------------------------------------------------------------------------------------------------------------------------
MI Watkins Watkins Watkins Watkins ABF Watkins ABF
- --------------------------------------------------------------------------------------------------------------------------
MN Watkins Watkins Watkins Watkins K&R Express Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
MO Watkins Watkins Watkins ABF ABF Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
MS Watkins ABF ABF ABF Watkins ABF Watkins
- --------------------------------------------------------------------------------------------------------------------------
MT ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
NC Watkins ABF Watkins ABF Watkins ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
ND ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
NE ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
NH Watkins Watkins Watkins Watkins Watkins Watkins ABF
- --------------------------------------------------------------------------------------------------------------------------
NJ Watkins Watkins Watkins Watkins Watkins Watkins New Penn
- --------------------------------------------------------------------------------------------------------------------------
NM WestEx ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
NV WestEx Watkins Watkins Watkins Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
NY Watkins Watkins Watkins Watkins ABF Watkins New Penn
- --------------------------------------------------------------------------------------------------------------------------
OH Watkins Watkins Watkins Watkins ABF Watkins ABF
- --------------------------------------------------------------------------------------------------------------------------
OK Watkins Watkins ABF Watkins Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
OR Reddaway Watkins Watkins Watkins Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
PA Watkins Watkins Watkins Watkins ABF Watkins New Penn
- --------------------------------------------------------------------------------------------------------------------------
RI Watkins Watkins Watkins Watkins Watkins Watkins ABF
- --------------------------------------------------------------------------------------------------------------------------
SC Watkins ABF Watkins ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
SD ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
TN Watkins Watkins Watkins Saia Watkins ABF Watkins
- --------------------------------------------------------------------------------------------------------------------------
TX Watkins Watkins Saia Watkins Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
UT Reddaway ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
VA Watkins Watkins Watkins Southeastern Watkins ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
VT ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
WA Reddaway Watkins Watkins Watkins Watkins Watkins Watkins
- --------------------------------------------------------------------------------------------------------------------------
WV ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
WI Watkins Watkins Watkins Watkins ABF Watkins ABF
- --------------------------------------------------------------------------------------------------------------------------
WY ABF ABF ABF ABF ABF ABF ABF
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
ATTACHMENT B
TYPICAL INTERLOCKING CARTON PATTERNS FOR SOFTWARE MASTERPACK
AND HARDWARE SHIPMENTS
[CARTON PATTERNS APPEARS HERE]
<PAGE>
ORIGINAL - NOT NEGOTIABLE ATTACHMENT D
BOL NBR. 123456 SAMPLE
DATE: 9-1-94
TERMS
CARRIER ABF FREIGHT SYSTEMS, INC.
SEC 7
PU DATE 9-1-94 PU TIME
SHIPPER CONSIGNEE
ABCD CORP. INGRAM MICRO INC.
962 Blossom Road, #A 41490 Boyce Road, #A
Yuma, CA 66999 Fremont, CA 94538
BILL TO OR REMIT TO ISSUING OFFICE OR AGENT
INGRAM MICRO INC.
1759 Wehrle Drive
Williamsville, NY 14221-7887
- --------------------------------------------------------------------------------
GENERAL COMMENTS
P.0. #50-833451
#50-036683
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PIECES skid H DESCRIPTION WEIGHT RATE CHARGES CLASS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
72 9 3.0 Computer Software 1700
109 5 4.1 Computer Software 2600
- ------------------------------------------------------------------------------------------------------------------------------------
REMIT C.O.D C.O.D FEE
TO
COD AMT: $ PREPAID [_] $
COLLECT [_]
ADDRESS
</TABLE>
[ILLEGIBLE]
<PAGE>
ATTACHMENT C
ABCD Corporation
962 Blossom Ave. Packing Slip #123589
Yuma, CA 66699 Sales Order #
Invoice #
Ship to: Ingram Micro Inc. Bill To: Ingram Micro Inc.
41490 Boyce Rd., #A 1759 Wehrle Dr.
Fremont, CA 94538 Williamsville, NY 14221
PO# 50-12345 Bill of Lading #12334455
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Qty. Ord Qty B.O. Qty Ship Description Case # Lbs Cost
Pack Cartons
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
24 0 24 123456 Laser 1 24 50
Printer
Mdl #PK1234
50 10 40 2 20 20
123459 Dot Matrix
Printer
60 0 60 2 30 75
Print Works
Software
Mdl #PK1325
- ---------------------------------------------------------------------------------------------------------------------------
Totals 134 10 124 5 74 145
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
CONTACT INFORMATION
-------------------
<TABLE>
<CAPTION>
INGRAM MICRO LTL CARRIERS SMALL PACKAGE
<S> <C> <C>
West Coast Traffic ABF RPS
1600 E St. Andrew Place 3801 Old Greenwood Road (888) 422-5423 extension 8007
Santa Ana, CA 92705 Fort Smith, AR 72903 they will answer Caliber Systems
(714) 566-1000 Customer Service - (800) 367-2237 Web Site: www.shiprps.com
EXT: 2217, 4432, 5750, & 2284 Web Site: www.abfs.com
East Coast Traffic K & R Express
1759 Wehrle Drive 15 W 480 Frontage Road
Williamsville, NY 14221-7887 Hindsdale, IL 60521
(716) 633-3600 (708) 323-3230
EXT: 6752, 6764, 6761, & 6722
New Penn
P.O. Box 360
Lebanon, PA 17042
(716) 633-5131
Saia Motor Freight
11555 Medlock Bridge Road
Duluth, GA 30155
(800) 765-7242
Southeastern Freight Lines
3655 Windsor Park Drive
Suwanee, GA 30174
(800) 282-3274
USF Reddaway
P.O. Box 1035
Clackamas, OR 97015
(800) 395-1360
Watkins Motor Lines
1144 West Griffin Road
Lakeland, FL 33804-5002
(800) 329-9703 8am to 8pm EST
Web Site: www.watkins.com
WestEx
2929 North 44/th/ Street, Suite 410
Phoenix, AZ 85018-7242
(800) 851-2851 - Janet Brant
</TABLE>
5
<PAGE>
EXHIBIT G
---------
PROPRIETARY INFORMATION
NON-DISCLOSURE AGREEMENT
This Agreement is made this 16 day of June, 1998 by and between Ingram
Micro Inc., a Delaware corporation with its principal place of business at 1600
East St. Andrew Place, Santa Ana, California 92705 ("Ingram"), ALTIGEN INC., a
California corporation, with principal offices at 45635 Northport Loop East,
Fremont, CA 94538 ("AltiGen")
WHEREAS Ingram has compiled and organized certain information relating to
its sales which is proprietary and confidential, and such information includes,
but is not limited to the "Point of Sale (POS) Report" ("Proprietary
Information"); and
WHEREAS Ingram agrees to disclose Proprietary Information to AltiGen for
the limited purpose set out herein; and
WHEREAS AltiGen desires to inspect and use such Proprietary Information for
the purposes of calculating sales commissions and monitoring marketing programs
only;
NOW, THEREFORE, in consideration of the mutual promises set out herein, the
parties hereby agree as follows:
1. AltiGen agrees not to communicate, disclose, or otherwise make
available all or any part of the Proprietary Information to any third
party, including, but not limited to AltiGen's parent, subsidiaries, or
affiliated companies.
2. AltiGen agrees not to use, or permit others to use, the Proprietary
Information, other than for the purpose(s) stated above. AltiGen agrees to
make no more than five (5) copies of the Proprietary Information unless
otherwise agreed in writing between the parties; and AltiGen agrees to
limit distribution of and access to the Proprietary Information to those of
AltiGen's personnel who require access to Proprietary Information for the
foregoing purpose. AltiGen agrees not to solicit, or sell Product to any
customer or dealer listed in the Proprietary Information that requests to
purchase product from Ingram Micro.
3. The term of this Agreement, unless terminated in accordance with
paragraph 7 shall be concurrent with the term of that mutual Distribution
Agreement between Ingram Micro Inc. and AltiGen Inc. dated June 15, 1998,
incorporated by reference as if fully set forth herein.
<PAGE>
4. AltiGen and Ingram mutually agree that all copies of the Proprietary
Information and all written descriptions, extractions, or summaries
thereof, whether made by AltiGen or Ingram, shall be the property of
Ingram, and shall, upon expiration of this Agreement or Ingram's request,
be immediately returned to Ingram.
5. AltiGen and Ingram mutually agree that Ingram's public disclosure of
the Proprietary Information, except pursuant to a confidential disclosure
agreement, to any party will release AltiGen from the obligation of
confidentiality with respect to that portion of the Proprietary Information
actually disclosed by Ingram.
6. AltiGen acknowledges the damage which Ingram may suffer in the event
of AltiGen's breach of obligations set forth herein. AltiGen agrees to and
shall indemnify Ingram from and compensate Ingram for any and all damage or
injury, including legal fees and costs incurred by Ingram because of
AltiGen's misuse of any Proprietary Information or incurred by Ingram in
enforcing its rights hereunder. This provision shall survive the expiration
or earlier termination of this Agreement for a period of one (1) year.
7. Upon termination of this Agreement by either party for any reason,
AltiGen shall return all Proprietary Information to Ingram within thirty
(30) days, irrespective of format. For purposes of enforcing this
provision, AltiGen's return obligation shall survive the termination of
this Agreement.
8. The rights, promises, duties, and obligations set out herein, and the
validity, interpretation, performance, and legal effect of the whole
Agreement shall be governed and determined by the laws of the State of
California. In the event that any provision is found invalid or
unenforceable pursuant to statutory or judicial decree, such provision
shall be construed only to the maximum extent permitted by law, and the
remainder of the Agreement shall be valid and enforceable in accordance
with its terms.
INGRAM MICRO INC. ALTIGEN NAME
By: /s/ Michael Walkey By: /s/ Michele Shannon
------------------- ---------------------------
Name: Michael Walkey Name: Michele Shannon
----------------- -------------------------
Title: VP Purchasing Title: Vice President of Sales
---------------- ------------------------
Date: 7/21/98 Date: 6/16/98
---------------- -------------------------
<PAGE>
RADISYS
Exhibit 10.15
Contract Purchase Agreement
between
AltiGen Communications, Inc. & RadiSys Corp.
This Contract Purchase Agreement, effective July 31, 1998, between AltiGen
Communications, Inc. ("AltiGen"), a U.S corporation with its principal business
located at 45635 Northport Loop East, Fremont, CA 94538, and RadiSys Corporation
("RadiSys"), a U.S. corporation with its principal business located at 5445 NE
Dawson Creek Drive, Hillsboro, Oregon 97124. The parties hereby agree as
follows:
1. Intent
This agreement outlines the essential terms and conditions of the Development &
Purchase agreement being entered into by both parties. It specifies the terms
and conditions under which the algorithms will be tested, validated and
supported. This contract will remain in full force and effect until it is
superseded by another formal contract.
2. Specifications
Under this Agreement, RadiSys agrees to supply and support bit exact
implementation of TTU G.723.1 (both bit rates) and G.165 echo canceller.
3. Scope
AltiGen will be granted the right to purchase and integrate RadiSys' telecom
algorithms based on the Texas Instruments ("TI") C6x Digital Signal Processor
("DSP"). AltiGen is granted rights to integrate RadiSys' algorithms in
AltiGens's products. AltiGen holds selling rights on a non-exclusive basis,
domestic & international, of these integrated products. AltiGen does not have
any rights to sell RadiSys' algorithms as standalone components or products.
4. Product Quality and Manufacturing Standards
RadiSys' normal high level of product reliability and quality apply, as well as
its standard terms and conditions. RadiSys is certified to ISO 9001, the most
comprehensive of the ISO 9000 standards, and RadiSys' certification covers the
entire company and all products. It is RadiSys' goal to deliver a product which,
due to reliability and quality standards, can be directly assembled into
AltiGen's end product. AltiGen agrees to notify RadiSys, no later than 30 days
after receipt, of any product which fails AltiGen's incoming inspection.
Page 1 of 5
<PAGE>
RadiSys.
5. Purchase of Products
5.1 Pricing
AltiGen will issue a Purchase Order ("P.O.") immediately to RadiSys for
the software license and telecom algorithms (as outlined in Attachment
A). The P.O. will be for the amount of $135,000. The P.O. payments will
be in the form of milestone completion dates as outlined in Attachment A.
5.2 Terms of Payment
Terms of payment are net 30 days. All other milestones and payments will
be adhered to as outlined in Attachment A, or agreed to in writing by
both parties. See Attachment A, for product pricing, support and royalty
charges. All sales are subject to the prior approval of RadiSys' Credit
Department.
5.3 Deliverables and Lead Time
RadiSys will do its best to meet the schedule as outlined in Attachment
A. If RadiSys is unable to meet the deadlines due to any reasons, AltiGen
will be informed accordingly and RadiSys will work in good faith with
AltiGen to redefine the schedule. RadiSys, under no circumstances, is
liable for any consequential damages. RadiSys will also develop and make
available additional algorithms that AltiGen deems necessary for their
Phase 2 development.
6. Warranty & Support
30 days warranty after delivery of a production release of G.723.1 and G.165 EC
object code. See Attachment A, payment milestone 4, and Product Software License
Agreement for further details.
7. Mutual Non-Disclosure
In association with this Agreement, both companies agree to ensure the
confidentiality of information shared between them. The obligation of
confidentiality shall survive the termination of this Agreement for a period of
three years.
8. Patent Identification
RadiSys will defend or settle any suit or proceeding brought against AltiGen
based upon a claim that any product furnished hereunder or part thereof, alone
and not in combination with any with any other product, constitutes an
infringement of any United States patent or copyright, provided that: (1)
RadiSys is notified promptly in writing of such claim; (2) RadiSys controls the
defense or settlement of the claim; and (3) AltiGen cooperates reasonably, and
gives all necessary authority, information and assistance (at RadiSys' expense).
RadiSys will pay all damages and costs finally awarded against AltiGen, but
RadiSys will not be responsible for any costs, expenses or compromise incurred
or made by AltiGen without RadiSys' prior written consent. If the use of such
product is permanently enjoined, RadiSys will, in its sole discretion and at its
own expense, procure for AltiGen the right to continue using said product,
replace same with a non-infringing product, modify it so that it becomes non-
infringing, or, if RadiSys is unable to reasonably do any of the above, RadiSys
will credit AltiGen the sum paid to RadiSys by AltiGen for the infringing
product less any depreciation and accept its return.
Page 2 of 5
<PAGE>
RadiSys.
AltiGen will be responsible for all royalties and patents to the respective
patent holders on the algorithms that AltiGen will be purchasing from RadiSys.
9. Limitation of Liability
With the exception of its obligations to AltiGen, under Section 9 hereof; in no
event will RadiSys be liable for any loss of profits, loss of use, incidental,
consequential or special damages irrespective of whether RadiSys has advance
notice of the possibility of such damages; and in no event will RadiSys' total
liability to AltiGen exceed the sum paid to RadiSys by AltiGen for the product
sold hereunder.
10. Force Majeure
RadiSys will not be liable for any failure to perform due to unforeseen
circumstances or causes beyond RadiSys' reasonable control, including, but not
limited to, acts of God, war, riot, embargoes, acts of civil or military
authorities, fire, flood, accident, strikes, inability to secure
transportation, facilities, fuel energy, labor or materials.
11. Termination
This Agreement may be terminated by either party upon the breach of any of the
terms of this Agreement by the other party. Such termination requires 30 days
written notice by the non-breaching party. The breaching party shall have the
opportunity to remedy the breach within this 30 day period. If the breach is not
remedied then the Agreement may be terminated by the non-breaching party and
both parties agree to resolve any outstanding financial, business or delivery
obligations, as well as any outstanding invoices or purchase costs.
12. Assignment
This Agreement may not be assigned by RadiSys or AltiGen to any other party
without the prior written consent of the corresponding concern (AltiGen or
RadiSys), which consent shall not be unreasonably withheld.
13. Independent Contractors
The relationship between AltiGen and RadiSys is that of independent contractors.
This Agreement does not establish a joint venture, agency or partnership between
the parties, nor does it create an employer-employee relationship.
14. Announcements (Press or Public)
The parties agree that the existence of the relationship between them may not be
announced to the press or to the public, unless approved by both parties in
writing. AltiGen and RadiSys will both comply with their executed mutual non-
disclosure agreement accordingly.
Page 3 of 5
<PAGE>
RadiSys.
15. Entire Agreement
This Agreement may be modified at any time by written notification and the
approval of both parties by an officer of each. This Agreement and its
associated attachments constitute the entire understanding between the two
parties with respect to the subject matter hereof.
In Witness Thereof, the parties have executed this Agreement in duplicate as of
the day and year written below:
RadiSys Corporation Altigen Communications, Inc.
/s/ Arif Kareem /s/ Shirley Sun
- ----------------------------- -------------------------
Authorized Signature Authorized Signature
Arif Kareem Shirley Sun
- ----------------------------- -------------------------
Name Name
Vice President Telecom Dir. Director of IP Telephony
- ----------------------------- -------------------------
Title Title
7/31/98 July 31, 1998
- ----------------------------- -------------------------
Date Date
Page 4 of 5
<PAGE>
RadiSys.
Attachment A
Phase I -- Licenses, Royalties & Support (object code only)
- ------- ------------------------------------------------
<TABLE>
<CAPTION>
Item List Price Includes
- ---- ---------- --------
<S> <C> <C>
C6x-G.165-OBJ $ 25,000 Object code license for 32 ms. echo canceller
C6x-G.723.1-OBJ $ 45,000 Object code license for optimized G.723.1 vocoder
Royalty $ 55,000 Life-time buy-out object-code royalty payment for G.723.1 &
EC
Support $ 10,500 90 day free support ARO, 2 year support & maintenance
List Total $ 135,000
</TABLE>
<TABLE>
<CAPTION>
Payment Milestone Schedule Amount With The Delivery Of
- ----------------- -------- ------ --------------------
<S> <C> <C> <C>
1. Start of Project 07/31/98 - Receipt of P.O.
2. Delivery 1 08/15/98 - G.165 EC & Intermediate version of G.723.1
3. Payment 1 08/30/98 $70,000 30 days After Receipt of Order
4. Delivery 2 09/18/98 - Production release of G.723.1 vocoder
5. Payment 2 11/30/98 $10,500 2-year support (First 90 day free)
6. Payment 3 12/15/98 $55,000 unlimited object code target copies for G.723.1 &
EC
</TABLE>
Other Terms and Conditions:
1. For prototypes, RadiSys will offer an intermediate development license for
G.723.1 algorithm. This non-optimized intermediate version of G.723.1 is for
single channel only.
2. RadiSys' support includes support for TI's C6202 DSP.
3. AltiGen will be responsible for all royalties and patents to the respective
patent holders on the algorithms that AltiGen will be purchasing from RadiSys.
4. No run-time license lable for G.723.1 or G.165 EC needs to be affixed on the
AltiGen's product since unlimited run-time license for G.723.1 and G.165 EC
described above is granted to AltiGen by RadiSys. This overrides the lable
affixing description paragraph in the G.723.1 Run-Time Software License
Agreement and G.165 EC Run-Time Software License Agreement.
Page 4 of 5
<PAGE>
Exhibit 10.16
SOFTWARE LICENSE AND
BINARY DISTRIBUTION AGREEMENT
between
LUCENT TECHNOLOGIES INC.
and
ALTIGEN COMMUNICATIONS, INC.
Effective as of Sept. 23, 1998
--------
<PAGE>
SOFTWARE LICENSE AND
BINARY DISTRIBUTION AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. RIGHT TO USE LICENSED SOFTWARE...................................... 1
1.1. Grant of Rights.................................................. 1
1.2. LICENSEE's Obligations........................................... 1
1.3. Furnishing of LICENSED SOFTWARE.................................. 1
1.4. Ownership........................................................ 1
1.5. U.S. Export Control.............................................. 1
1.6. Support.......................................................... 1
2. LUCENT SOURCE CODE.................................................. 1
2.1. Source Code Agreement............................................ 1
2.2. Grant-Back of LICENSEE MODIFICATIONS............................. 1
3. FEES AND PAYMENTS................................................ 1
3.1. Fees............................................................. 1
3.2. Payments......................................................... 1
3.3. Taxes............................................................ 1
4. DURATION AND TERMINATION............................................ 1
4.1. Duration......................................................... 1
4.2. Termination for Breach........................................... 1
4.3. Survival......................................................... 1
5. WARRANTY AND INDEMNIFICATION........................................ 5
5.1. Warranty......................................................... 5
5.2. Indemnification.................................................. 5
6. MISCELLANEOUS PROVISIONS............................................ 6
6.1. Agreement Prevails............................................... 6
6.2. Nothing Construed................................................ 6
6.3. Confidentiality.................................................. 6
6.4. Publicity........................................................ 7
6.5. Nonassignability................................................. 7
6.6. Patents.......................................................... 7
6.7. Addresses........................................................ 8
6.8. Integration...................................................... 9
6.9. Dispute Resolution............................................... 9
</TABLE>
Definitions Appendix
Software Schedule
Exhibit A
Exhibit B
<PAGE>
SOFTWARE LICENSE AND
BINARY DISTRIBUTION AGREEMENT
Effective as of Sept. 23, 1998 ("Effective Date"), LUCENT TECHNOLOGIES INC., a
Delaware corporation ("LUCENT"), having an office at 600 Mountain Avenue, Murray
Hill, New Jersey 07974, and ALTIGEN COMMUNICATIONS, INC, a California
corporation, ("LICENSEE")*, having an office at 45635 Northport Loop East,
Fremont, CA 94538 agree as follows:
1. RIGHT TO USE LICENSED SOFTWARE
1.1. Grant of Rights
Subject to receipt by LUCENT of the fee(s) specified in the Software Schedule
attached hereto and made a part of this Agreement, LUCENT grants to LICENSEE a
personal, nontransferable and nonexclusive right to use, display, reproduce,
market and sell, lease or otherwise distribute or transfer copies of LICENSED
SOFTWARE as part of CUSTOMER SOFTWARE.
1.2. LICENSEE's Obligations
1.2.1. LICENSEE shall not modify, disassemble or reverse compile LICENSED
SOFTWARE.
1.2.2. LICENSEE shall not sell, lease or otherwise distribute or transfer
LICENSED SOFTWARE as a standalone software program or as a
component or components of a software program the chief
marketability and functionality of which is the LICENSED SOFTWARE.
1.2.3. LICENSEE shall provide LUCENT with two (2) copies of each release
of CUSTOMER SOFTWARE, including related documentation and
packaging.
1.2.4. LICENSEE shall obtain written, "break-the-seal" or other type of
agreement from LICENSEE's customers, before or at the time of
furnishing each copy of CUSTOMER SOFTWARE. LICENSEE may use its
standard end-user License Agreement, substantially in the form
attached hereto as Exhibit A, to satisfy its obligations under this
Section 1.2.4.
1.2.5. Each portion of CUSTOMER SOFTWARE shall include all copyright,
trademark and other notices appearing on or in LICENSED SOFTWARE.
1.3. Furnishing of LICENSED SOFTWARE
_____________
* Terms in capital letters which are defined in the Definitions Appendix shall
have the meanings specified therein.
<PAGE>
Within a reasonable time after receipt by LUCENT of the fee(s) due on execution
of this Agreement, as set forth in the attached Software Schedule, LUCENT shall
furnish to LICENSEE the LICENSED SOFTWARE, together with the appropriate
documentation and other information and materials relating to such LICENSED
SOFTWARE, as set forth in such Software Schedule.
1.4. Ownership
No ownership interest in LICENSED SOFTWARE or other information or documentation
provided under this Agreement is transferred to LICENSEE.
1.5. U.S. Export Control
LICENSEE acknowledges that any products, software, and technical information
(including, but not limited to, services and training) provided under this
Agreement are subject to U.S. export laws and regulations and any use or
transfer of such products, software, and technical information must be
authorized under those regulations. LICENSEE agrees that it will not use,
distribute, transfer, or transmit the products, software, or technical
information (even if incorporated into other products) except in compliance with
U.S. export regulations. If requested by LUCENT, LICENSEE also agrees to sign
written assurances and other export-related documents as may be required to
comply with U.S. export regulations.
1.6. Support
1.6.1. During the ninety (90) day period following delivery of LICENSED
SOFTWARE to LICENSEE, LUCENT will use commercially reasonable
efforts to correct any Errors. For purposes of this Section 1.6,
"Error" means any instance where LICENSED SOFTWARE does not
substantially conform to its published specifications.
1.6.2. During the thirty (30) day period following delivery of LICENSED
SOFTWARE to LICENSEE, LUCENT will furnish consultative support to
LICENSEE to assist in the integration of LICENSED SOFTWARE with
LICENSEE's software. Such support shall not exceed forty (40) hours
of telephone consultation. LUCENT will furnish such telephone
support during regular business hours (8:00 a.m. to 5:00 p.m. U.S.
Eastern Time, excluding weekends and holidays). The telephone
number for such support will be furnished to LICENSEE.
1.6.3. LUCENT will provide support as set forth in this Section 1.6 at no
additional charge and only if LICENSEE has not previously executed
an elemedia PX3230S H.323 Protocol Stack Software Developer License
Agreement. If LICENSEE requests additional support, LUCENT will, at
its sole discretion, and for the first full year, and for a fee
specified in the Software Schedule, deliver to LICENSEE any and all
updates, error corrections, modifications, and improvements to
LICENSED SOFTWARE, which shall collectively be deemed LICENSED
SOFTWARE for the purposes of this Agreement, no later than when
such updates, error corrections, modifications, and improvements
are generally released to
<PAGE>
licensees.
2. LUCENT SOURCE CODE
2.1. Source Code Agreement
LUCENT agrees to make certain source code for the LICENSED SOFTWARE available to
LICENSEE, along with related documentation and information, subject to the terms
and conditions of the Limited Source Code License Agreement set forth in
attached Exhibit B. LICENSEE agrees to accept and use such LUCENT source code
software and related documentation and information solely in accordance with the
terms and conditions set forth in Exhibit B.
2.2. Grant-Back of LICENSEE MODIFICATIONS
LICENSEE will deliver to LUCENT a copy of the RTP Protocol Stack source code
materials for any and all LICENSEE MODIFICATIONS and for LICENSEE SOFTWARE.
LICENSEE grants to LUCENT a worldwide, perpetual, royalty-free, non-exclusive,
license to develop, port, modify, edit, format, translate, create derivative
works based on or otherwise use, change and/or support and maintain
modifications and, at LUCENT's discretion, to incorporate and distribute
LICENSEE MODIFICATIONS and such modifications and extensions thereto into future
releases of such LICENSED SOFTWARE or other LUCENT software products. LICENSEE
grants to LUCENT and its subsidiaries a nonexclusive, world-wide, royalty-free,
license to use, modify, reproduce, distribute, sublicense and prepare derivative
works from LICENSEE MODIFICATIONS under any intellectual property rights owned
or controlled by LICENSEE, including, but not limited to copyright, trade secret
and patent rights. The patent license shall extend solely to LICENSEE
MODIFICATIONS. The license shall extend also to any modifications and extensions
of LICENSEE MODIFICATIONS to the extent that the claims of any LICENSEE patent
infringed by such modifications or extensions are used by the original LICENSEE
MODIFICATIONS furnished to LUCENT. This same license for LICENSEE MODIFICATIONS
also extends from LICENSEE to third parties who are licensed to use LUCENT
software products in which LICENSEE MODIFICATIONS, or any portion thereof, are
embedded or contained.
3. FEES AND PAYMENTS
3.1. Fees
For the rights granted under this Agreement, LICENSEE shall pay to LUCENT, in
the manner specified in Section 3.2, the fee(s) set forth in the Software
Schedule. All such fees are in United States dollars.
3.2. Payments
Promptly upon execution of this Agreement by both parties, LICENSEE shall pay to
LUCENT all fees, if any, specified in the Software Schedule as due upon
execution of this Agreement.
3.3. Taxes
<PAGE>
LICENSEE shall pay any tax, duty, levy, customs fee, or similar charge
("taxes"), including interest and penalties thereon, however designated, imposed
as a result of the operation or existence of this Agreement, including taxes
which LICENSEE is required to withhold or deduct from payments to LUCENT, except
(i) net income taxes imposed upon LUCENT by any governmental entity within the
United States (the fifty (50) states and the District of Columbia), and (ii) net
income taxes imposed upon LUCENT by jurisdictions outside the United States
which are allowable as a credit against the United States Federal income tax of
LUCENT or any of its SUBSIDIARIES. In order for the exception in (ii) to be
effective, LICENSEE must furnish to LUCENT evidence sufficient to satisfy the
United States taxing authorities that such taxes have been paid. Such evidence
must be furnished to LUCENT within thirty (30) days of issuance by the local
taxing authority.
4. DURATION AND TERMINATION
4.1. Duration
The term of this Agreement shall commence on the Effective Date and, unless
terminated earlier in accordance with Section 4.2, shall continue for a period
of four (4) years. This Agreement shall automatically renew for consecutive one
(1) year terms, unless earlier terminated pursuant to Section 4.2. In addition,
LICENSEE has the right to terminate this agreement without notice and without
cause. LUCENT has the right to terminate this agreement if the LICENSEE fails to
fulfill one or more obligations under this agreement (see Section 4.2). Upon any
termination, LICENSEE shall immediately discontinue use of and return or destroy
all copies of LICENSED SOFTWARE in its possession. LICENSEE shall certify such
destruction in writing to LUCENT within thirty (30) days. In the event of
termination LUCENT shall have no obligation to refund any amounts paid it
pursuant to Section 3.1. Agreements entered into by LICENSEE with its customers
under Section 1.2.4. prior to the date of termination of this Agreement shall
remain in effect for the term of such agreements with LICENSEE's customers.
4.2. Termination for Breach
If LICENSEE fails to fulfill one or more of its obligations under this
Agreement, LUCENT may, upon its election and in addition to any other remedies
that it may have, at any time terminate all the rights granted by it hereunder
by not less than two (2) months' written notice to LICENSEE specifying any such
breach, unless within the period of such notice all breaches specified therein
shall have been remedied. Upon such termination LICENSEE shall immediately
discontinue use of and return or destroy all copies of LICENSED SOFTWARE and
immediately discontinue distribution and use of and destroy all copies of
CUSTOMER SOFTWARE in its possession. LICENSEE shall certify such destruction in
writing to LUCENT within thirty (30) days. In the event of termination LUCENT
shall have no obligation to refund any amounts paid it pursuant to Section 3.1.
Agreements entered into by LICENSEE with its customers under Section 1.2.4.
prior to the date of termination of this Agreement shall remain in effect for
the term of such agreements with LICENSEE's customers.
4.3. Survival
<PAGE>
The obligations of LICENSEE under Sections 1.5., 5. and 6.3. shall survive and
continue after expiration or termination of this Agreement.
5. WARRANTY AND INDEMNIFICATION
5.1. Warranty
SUBJECT TO SECTION 5.2.1., LUCENT AND OTHER DEVELOPERS MAKE NO OTHER
REPRESENTATIONS OR WARRANTIES, EXPRESSLY OR IMPLIEDLY. BY WAY OF EXAMPLE BUT NOT
OF LIMITATION, LUCENT AND OTHER DEVELOPERS MAKE NO REPRESENTATIONS OR WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF THE OTHER PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES EXCEPT AS PART OF INDEMNIFICATION
OBLIGATIONS UNDER SECTION 5.2.1.
5.2. Indemnification
5.2.1. LUCENT represents that it has sufficient right, title, and interest
in the LICENSED SOFTWARE in the unmodified form provided to
LICENSEE hereunder to enter into this Agreement and to grant the
licenses granted hereunder. LUCENT agrees to defend, at its
expense, any suit against LICENSEE based upon a claim that LUCENT
does not have sufficient right, title, and interest in the LICENSED
SOFTWARE to make this Agreement and to grant the licenses granted
hereunder, or that the LICENSED SOFTWARE infringes a United States
trademark or copyright (insofar as such infringement relates to the
documentation for or the code of the LICENSED SOFTWARE ), and to
pay any settlement, or any damages finally awarded after appeal
(including costs and attorney fees, if any, awarded as part of the
final judgment) in any such suit. Regardless of the number of third
party suits, the total liability of LUCENT shall not exceed the sum
of all payments actually made by LICENSEE to LUCENT under this
Agreement.
5.2.2. LUCENT's obligations under Section 5.2.1. shall not be effective
unless (i) LUCENT is notified in writing of any notice of claim or
of threatened or actual suit and (ii) LUCENT is given full control
of the defense and/or settlement, together with full cooperation by
LICENSEE at LUCENT's expense, including the provision of all
relevant information available to LICENSEE, with respect to such
defense and/or settlement of the same.
5.2.3. Following written notification of a claim of a threatened or actual
suit, LUCENT may at its own expense and in addition to LUCENT's
obligations in Section 5.2.1. (i) procure for LICENSEE the right to
continue to market, use, and have others use the alleged infringing
LICENSED SOFTWARE; or (ii) make it non-infringing; or (iii)
terminate the license for such LICENSED SOFTWARE and refund all the
fees (subject to five year straight line depreciation) received
from LICENSEE for such LICENSED SOFTWARE. If LUCENT elects to
replace or modify such LICENSED
<PAGE>
SOFTWARE, such replacement shall meet substantially the
specifications for such LICENSED SOFTWARE.
5.2.4. LUCENT shall have no liability for any claim alleging patent
infringement whatsoever; or for copyright infringement based on
LICENSEE's or an end user's (i) continued use after notification of
infringement of other than the then current release of the LICENSED
SOFTWARE received from LUCENT if such claim would have been avoided
by use of the then current release so long as that release was made
available to LICENSEE and end users without additional charge, (ii)
use of LICENSED SOFTWARE other than in the unmodified form provided
to LICENSEE hereunder and in accordance with the rights granted
under this Agreement, or (ii) combination of LICENSED SOFTWARE with
LICENSEE MODIFICATIONS or any other software or product not
delivered by LUCENT hereunder.
6. MISCELLANEOUS PROVISIONS
6.1. Agreement Prevails
This Agreement shall prevail notwithstanding any conflicting terms or legends
which may appear on or in LICENSED SOFTWARE or any other items furnished by
LUCENT to LICENSEE under this Agreement.
6.2. Nothing Construed
Nothing contained herein shall be construed as:
(i) conferring by implication, estoppel or otherwise, any license or right
to use any name, trade name, trademark, service mark, symbol or any
other identification or any abbreviation, contraction or simulation
thereof; or
(ii) an obligation upon LUCENT or any of its SUBSIDIARIES to furnish any
person, including LICENSEE, any assistance of any kind whatsoever
except as set forth in Section 1.6., or any information or
documentation other than items to be furnished pursuant to Section
1.3.
6.3. Confidentiality
6.3.1. Any information in written or other tangible form furnished by
LUCENT to LICENSEE or by LICENSEE to LUCENT pursuant to this
Agreement and identified as proprietary to the disclosing party
shall remain the property of the disclosing party. Unless otherwise
agreed in writing, such information: (i) shall be treated in
confidence and used only for the purposes of performing obligations
or exercising rights granted under this Agreement; (ii) shall not
be reproduced or copied in whole or in part, except as necessary
for use as authorized in this Agreement; and (iii) shall, together
with any copies thereof, be returned, be destroyed, or if recorded
on an erasable storage medium, be erased when no longer needed or
this Agreement terminates, whichever occurs first.
<PAGE>
6.3.2. LICENSEE's and LUCENT's obligations under this Section 6.3. shall
not apply to any information that:
(i) is or becomes available without restriction to the general
public by acts not attributable to the receiving party or
its employees,
(ii) was rightfully in the receiving party's possession without
limitation on disclosure before disclosure hereunder to the
receiving party, or
(iii) which is independently developed by the receiving party or
is rightfully disclosed to the receiving party by a third
party without restrictions on disclosure.
6.4. Publicity
6.4.1. LICENSEE agrees that it will not, without the prior written
permission of LUCENT,:
6.4.1.1. use in advertising, publicity, packaging, labeling or
otherwise any trade name, trademark, trade device,
service mark, symbol or any other identification or any
abbreviation, contraction or simulation thereof owned by
LUCENT or any of its SUBSIDIARIES or used by LUCENT or
any of its SUBSIDIARIES to identify any of its or their
products or services; or
6.4.1.2. represent, directly or indirectly, that any product or
service of LICENSEE is a product or service of LUCENT or
any of its SUBSIDIARIES or is made in accordance with or
utilizes any information or documentation of LUCENT or
any of its SUBSIDIARIES.
6.5. Nonassignability
The parties hereto have entered into this Agreement in contemplation of personal
performance by LICENSEE and intend that the rights granted to LICENSEE hereunder
not extend to other entities without LUCENT's express written consent.
Accordingly, neither this Agreement nor any of LICENSEE's rights hereunder shall
be assignable or transferable (in insolvency proceedings or otherwise) without
such consent. Such consent shall not be unreasonably withheld.
6.6. Patents
6.6.1 The grant of rights specified in Section 1.1. includes, and the
fees payable under Section 3.1. are in part for, a grant by LUCENT
to LICENSEE, SUBLICENSEES and end users of CUSTOMER SOFTWARE of the
right to use LICENSED SOFTWARE which right to use includes immunity
from suit for infringement of those patents, if any, which LUCENT
has the right to license and to the extent that LUCENT has that
right as of the Effective
<PAGE>
Date of this Agreement and which, but for this grant of immunity,
(a) are infringed by the furnishing or use of LICENSED SOFTWARE in
the form furnished by LICENSEE, or patents (b)are necessarily and
unavoidably infringed by the execution of the LICENSED SOFTWARE as
furnished by LICENSEE to license as of the Effective Date of this
Agreement. If the last of any such patents expires during the term
of this Agreement, and if LICENSEE so requests, then LUCENT agrees
to reconsider, if appropriate, the fees payable subsequent to the
expiration of the last of any such patents. Such grant of immunity
from suit shall not extend (i) to any LICENSEE CUSTOMER or
SUBLICENSEE modifications of the LICENSED SOFTWARE as furnished by
LICENSEE to the extent that the claims of any patent are infringed
by such modifications or (ii) to the use of LICENSED SOFTWARE with
other software or hardware products.
6.6.2 Except for the immunities granted under Section 6.6.1, it is
recognized that third parties may have patents or other
intellectual property rights that might be infringed by LICENSEE's
exercise of the rights granted under Section 1.1. of this
Agreement, and LUCENT makes no representations or warranties with
respect thereto. It shall be LICENSEE's sole responsibility to
determine the existence and applicability of patents and other
intellectual property rights of third parties and to secure any
necessary license with respect thereto.
6.6.3 Nothing contained herein shall be construed as conferring by
implication, estoppel or otherwise any license or right under any
existing or later issued patent directed to the combination of
LICENSED SOFTWARE with any other software or hardware program.
6.6.4 The immunities granted pursuant to Section 6.6.1 shall be effective
only for so long as LICENSEE is in compliance with its obligations
under this Agreement.
6.7. Addresses
6.7.1. Any notice or other communication hereunder shall be sufficiently
given to LICENSEE when sent by certified mail addressed to Shirley
Sun (or, if no address is otherwise specified, to LICENSEE's office
above specified), or to LUCENT when sent by certified mail
addressed to Senior Contract Administrator, Lucent Technologies
Inc., 150 Allen Road, Post Office Box 1995, Liberty Corner, New
Jersey 07938. Changes in such addresses may be specified by written
notice.
6.7.2. Payments by LICENSEE shall be made to LUCENT at Nations Bank,
Lucent Technologies Intellectual Property, P.O. Box 2770078,
Atlanta, Georgia 30384-7087. Alternatively, payments to LUCENT may
be made by bank wire transfers to LUCENT's account: Lucent
Technologies Intellectual Property, Account No. 3750657331, at
Nations Bank, Routing
<PAGE>
No. 111000012, 6000 Felwood Road, College Park, Georgia 30349. Changes
in such address or account may be specified by written notice.
6.8. Integration
This Agreement sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges all prior discussions between
them. Neither of the parties shall be bound by any warranties, understandings or
representations with respect to such subject matter other than as expressly
provided herein, in prior written agreements, or in a writing executed with or
subsequent to the execution of this Agreement by an authorized representative of
the party to be bound thereby.
6.9. Dispute Resolution
6.9.1. Any controversy or claim, whether based on contract, tort, strict
liability, fraud, misrepresentation, or any other legal theory,
related directly or indirectly to this Agreement (the "Dispute")
shall be resolved solely in accordance with the terms of this
Section, except as reserved in this Section. LUCENT reserves the
right to seek an injunction or other equitable relief in court to
prevent or stop a breach of its intellectual property rights or
disclosure of confidential information in violation of this
Agreement.
6.9.2. If the Dispute cannot be settled by good faith negotiation
between the parties, including escalation to higher executives on
both sides, then LUCENT and LICENSEE will submit the Dispute to
non-binding mediation. If complete agreement cannot be reached
within thirty (30) days of submission to mediation, any remaining
issues will be resolved by binding arbitration in accordance with
Sections 6.9.3 and 6.9.4 below. The Federal Arbitration Act, 9
U.S.C. Sections 1 to 15, not state law, will govern the
arbitrability of all Disputes.
6.9.3. Prior to the selection of arbitrators, each party will notify the
other whether it intends to require a three arbitrator panel. If
either party elects a three party arbitrator panel, or if the
parties are unable to agree on a neutral arbitrator, each party
will appoint a party arbitrator, and the party arbitrators will
in turn select the neutral arbitrator in accordance with the
applicable arbitrator selection rules and procedures of the
selected ADR firm or the AAA. If neither party requires a three
party panel, the arbitration shall be conducted solely by the
neutral arbitrator. The neutral arbitrator shall, unless
otherwise agreed, be an attorney knowledgeable in the computer
software field and in commercial matters. The arbitrator's
decision and award will be final and binding and may be entered
in any court with jurisdiction. The arbitrator will not have
authority to limit, expand or otherwise modify the terms of this
Agreement. The place of the arbitration shall be New Jersey
unless otherwise agreed by the parties. Each party consents to
the jurisdiction of the arbitration in New Jersey. The arbitrator
will not be empowered to determine issues of arbitrability nor to
award exemplary or punitive damages. On motion, the arbitrator
may determine to offer limited discovery, but in determining
whether to
<PAGE>
permit discovery shall balance the benefit of the requested
discovery against the burden on the party against whom discovery
is sought.
6.9.4. The mediation and, if necessary, the arbitration, will be
conducted under the then current rules of the alternate dispute
resolution (ADR) firm selected by the parties, or if the parties
are unable to agree on an ADR firm, the parties will conduct the
mediation and, if necessary, the arbitration, under the then
current rules and supervision of the American Arbitration
Association (AAA). Each party will bear its own attorneys' fees
associated with the mediation and, if necessary, the arbitration.
The parties will pay all other costs and expenses of the
mediation/arbitration as the rules of the selected ADR firm
provide. The parties and their representatives shall hold the
existence, content and result of the mediation and arbitration in
confidence, except as required by law.
6.10. Choice of Law
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New Jersey, excluding its choice of laws rules and
excluding the United Nations Convention on Contracts for the International Sale
of Goods.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
in duplicate originals by its duly authorized representatives on the respective
dates entered below.
LUCENT TECHNOLOGIES INC. ALTIGEN COMMUNICATIONS, INC.
By: /s/ Joe Mele By: /s/ Shirley Sun
----------------------- -----------------------------
Joe Mele Name: Shirley Sun
---------------------------
President - elemedia
Title: Director of IP Telephony
--------------------------
Date: 9/25/97 Date: Sept 23, 1998
--------------------- ---------------------------
THIS AGREEMENT DOES NOT BIND OR OBLIGATE EITHER PARTY
IN ANY MANNER UNLESS DULY EXECUTED BY AUTHORIZED
REPRESENTATIVES OF BOTH PARTIES
<PAGE>
DEFINITIONS APPENDIX
CPU means central processing unit.
COMPUTER PROGRAM means any object-code instruction or plurality of such
instructions for controlling the operation of a CPU.
CUSTOMER SOFTWARE means software that is completed in marketable form by
LICENSEE and is offered by LICENSEE to its customers in conjunction with or
containing LICENSED SOFTWARE.
LICENSED SOFTWARE means the COMPUTER PROGRAMS identified in the Software
Schedule and as furnished to LICENSEE under this Agreement.
LICENSEE MODIFICATIONS means any modifications, changes, extensions or
enhancements of the LICENSED SOFTWARE which are developed by or for LICENSEE.
LICENSEE SOFTWARE means software that contains LICENSEE MODIFICATIONS and all or
any part of LICENSED SOFTWARE.
SUBSIDIARY of a company means a corporation or other legal entity (i) the
majority of whose shares or other securities entitled to vote for election of
directors (or other managing authority) is now or hereafter controlled by such
company either directly or indirectly; or (ii) which does not have outstanding
shares or securities but the majority of whose ownership interest representing
the right to manage such corporation or other legal entity is now or hereafter
owned and controlled by such company either directly or indirectly; but any such
corporation or other legal entity shall be deemed to be a SUBSIDIARY of such
company only as long as such control or ownership and control exists.
<PAGE>
Software Schedule
-----------------
LICENSED SOFTWARE
LICENSED SOFTWARE furnished to LICENSEE under this Agreement shall be:
elemedia/TM /PX3230S H.323 Protocol Stack Software Module computer program
software Release 2.0, in object code form, for the following platform(s):
Operating System Platform
---------------- --------
Windows 95/NT Pentium
including all related documentation.
Although designed only for the platforms indicated above, the license granted
under this Agreement does not limit LICENSEE providing the LICENSED SOFTWARE for
other compatible platforms, provided that LUCENT does not warrant the
performance of any LICENSED SOFTWARE on any platform other than the one(s)
indicated above.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Feature Details
- -----------------------------------------------------------------------------------------------
<S> <C>
Q.931 sub-stack Supports all mandatory Q.93:1 messages
H.245 sub-stack Supports the following Signaling Entities:
[_] Master Slave Determination
[_] Capability Exchange
[_] Open Logical Channels
[_] Close Logical Channels and others as required
RAS sub-stack for Terminal Supports all mandatory and optional messages
(Tx and Rx) as specified in table 19/H.255.0
RTP/RTCP Supports header validity checks, statistic logging, Sender
Reports, Reception Reports, and a system time-to-media time
utility
Object Oriented Design C++ Implementation
API Documentation HTML format
ASN.1 Tables No compiler required
- -----------------------------------------------------------------------------------------------
</TABLE>
FEE(S)
A one-time right to use fee of Sixty Thousand Dollars ($60,000.00), exclusive of
any and all taxes, shall be due and payable by LICENSEE to LUCENT upon execution
of this Agreement.
<PAGE>
If LICENSEE has purchased an elemedia PX3230S H.323 Protocol Stack Software
Developer License Agreement from LUCENT, and LICENSEE is in compliance with the
terms of such Agreement, LICENSEE may apply the Twenty-five Thousand Dollar
License fee for the Developer License Agreement towards the fees specified in
this Software Schedule.
ADDITIONAL PLATFORMS
Additional platforms for the above LICENSED SOFTWARE will be provided to
LICENSEE, when commercially available from LUCENT, for a one-time fee of Twenty
Thousand Dollars ($20,000) per platform or at LUCENT's then prevailing fees,
whichever is less.
LICENSED SOFTWARE MAINTENANCE/SUPPORT
After the ninety (90) day period following delivery of the LICENSED SOFTWARE to
LICENSEE, product maintenance and support will be available from LUCENT during
the remaining term of this Agreement, at LICENSEE's option, for commercially
available LICENSED SOFTWARE products at a fee per platform of $20,000 for the
first year following such 90 day period. The terms, conditions and prices for
future product maintenance and support will be negotiated by the parties in good
faith
Such maintenance and support to LICENSEE will include correction of errors and
the provision of updates and upgrades of LICENSED SOFTWARE.
<PAGE>
EXHIBIT A
_________________END-USER LICENSE AGREEMENT
[ To Be Provided By _________________]
<PAGE>
EXHIBIT B
LIMITED SOURCE CODE LICENSE AGREEMENT
This Limited Source Code License Agreement ("License") is made and entered
into effective Sept. 23 1998 ("Effective Date") by and between LUCENT
TECHNOLOGIES INC. ("LUCENT"), having an office at 600 Mountain Avenue, Murray
Hill, New Jersey 07974, and ALTIGEN COMMUNICATIONS, INC. ("COMPANY"), having an
office at 45635 Northport Loop East, Fremont, CA 94538.
WHEREAS, LUCENT is the developer of certain elemedia(TM) PX3230S H.323 RTP
software; and
WHEREAS, COMPANY desires to obtain limited access to such elemedia(TM)
PX3230S H.323 RTP software in source code form solely for purposes of
development and maintenance activities in support of its rights under the
Software License and Binary Distribution agreement dated Sept. 23, 1998, between
COMPANY and LUCENT (the "Binary Distribution Agreement") .
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth below, LUCENT and COMPANY agree as follows:
1.0 DEFINITIONS
1.1 "CPU" means central processing unit.
1.2 "Computer Program" means any instruction or instructions, in source-code or
object-code format, for controlling the operation of a CPU.
1.3 "Designated CPU" means any CPU listed as such in Schedule 1 to this
License. If a Designated CPU is identified as a server, and a number of
subtending client CPUs is specified, then that number of client CPUs
(whether or not simultaneous) shall be deemed to be Designated CPUs, and
only to the extent such client CPUs continue to be subtending to the
designated server.
1.4 "Licensed Software" shall mean the LICENSED SOFTWARE as defined in the
Binary Distribution Agreement.
1.5 "Source Software" means the Computer Programs, information used or
interpreted by such Computer Programs, and documentation relating to the
use of such Computer Programs identified in Schedule 1 attached to and made
a part of this License, including any updates and enhancements thereto
which LUCENT may subsequently furnish to COMPANY under this License.
2.0 SCOPE OF THE AGREEMENT
2.1 LUCENT agrees to make Source Software available to COMPANY under this
License solely for use on the Designated CPUs and solely for purposes of
the COMPANY Activities set forth in this License.
2.2 The terms and conditions of this License will apply to the Source Software
supplied herewith and derivatives obtained therefrom, including any copies.
<PAGE>
2.3 COMPANY understands and acknowledges that the Source Software may contain
expiration routines which will disable the Source Software at the
expiration of this License.
3.0 GRANT OF RIGHTS AND LIMITATIONS ON RIGHTS
3.1 Subject to receipt of the license fee(s) set forth in attached Schedule 1
and compliance with the terms and conditions of this License, LUCENT hereby
grants COMPANY a personal, nontransferable and nonexclusive limited license
to use, in the country designated as COMPANY's address in the first
paragraph of this License, the Source Software solely to develop, port,
modify, edit, format, translate or otherwise use, modify and/or support and
maintain Licensed Software in support of its rights under the Binary
Distribution Agreement ("COMPANY Activities") and solely for or with
respect to the COMPANY Platform(s)identified as such in Schedule 1.
Additional COMPANY Platform(s) may be added to Schedule 1 upon mutual
written agreement of the parties from time to time during the term of this
License.
3.2 COMPANY shall not use the Source Software for any development, other than
as expressly set forth in this License, or for any other commercial or
production purposes for itself or for third parties. Source Software
provided hereunder shall be used solely on or in conjunction with the
Designated CPUs. COMPANY shall have no right to sublicense, disseminate or
distribute Licensed Software or any modifications, enhancements or
derivative works thereof in source code form. COMPANY agrees to preserve
and reproduce all copyright, trademark and other notices appearing in the
Source Software delivered by LUCENT hereunder.
3.3 All patents, inventions (whether or not patentable), copyrights, trade
secrets, trademarks and other intellectual property rights in Source
Software are and shall remain the exclusive property of LUCENT.
3.4 COMPANY shall permit access to Source Software only by its employees having
a need to know for performing the COMPANY Activities, and shall not permit
access to Source Software or any part thereof by any third parties.
3.5 A single back-up CPU may be used as a substitute for a Designated CPU
without notice to LUCENT solely during any time when such Designated CPU is
inoperative because it is malfunctioning or undergoing repair, maintenance
or other modification.
3.6 COMPANY may at any time notify LUCENT in writing of any changes, such as
replacements or additions, that COMPANY wishes to make to the Designated
CPUs for Source Software. Changes shall become effective upon mutual
written agreement of the parties.
3.7 On LUCENT's request, COMPANY shall furnish to LUCENT a statement, certified
by an authorized representative of COMPANY, listing the location, type and
serial number of all Designated CPUs hereunder and stating that the use by
COMPANY of Source Software subject to this License has been reviewed and
that Source Software is being used solely on Designated CPUs (or
temporarily on back-up CPUs) for such Source Software in full compliance
with the provisions of this License.
3.8 Except as expressly set forth herein, no right is granted by this License
for the use of Source Software directly or indirectly for others, such as
but not limited to use in a time- sharing service or a service-bureau
operation, or for any use whatsoever of Source Software by others.
<PAGE>
4.0 DELIVERABLES
LUCENT will furnish to COMPANY, promptly upon execution of this License,
one copy of the Source Software in the form identified in Schedule 1.
5.0 FEEDBACK
5.1 COMPANY will provide LUCENT with reports on the operation of the Source
Software and any changes, modifications or derivative works proposed or
suggested by COMPANY to the Source Software during the term of this License
("Feedback"). LUCENT shall have unrestricted rights to use such Feedback at
its discretion including, but not limited to the incorporation of suggested
changes or modifications into LUCENT software and the right to assign,
license or to otherwise transfer to third parties the software so changed
or modified without obligation or recourse to COMPANY. COMPANY grants and
assigns to LUCENT and its licensees all rights and licenses as are
necessary to incorporate Feedback into LUCENT software and/or other LUCENT
products and to distribute and otherwise commercially exploit such software
and/or other LUCENT products without payment or accounting to COMPANY.
5.2 COMPANY shall not disclose the results of its use (including any tests or
benchmarking) of the Source Software to any third party without LUCENT's
prior written approval.
6.0 EXPORT
COMPANY agrees that it will not, without the prior written consent of
LUCENT, export, directly or indirectly, Source Software covered by this
License to any country outside the countries designated as COMPANY's
address in the SCHEDULE 1. COMPANY also agrees that it will obtain any and
all necessary export licenses for any such export or for any disclosure of
Source Software to a foreign national.
7.0 TERM
7.1 The term of this License shall extend from the Effective Date hereof and,
unless terminated earlier as provided herein, shall expire on the
expiration or termination of the Binary Distribution Agreement.
7.2 COMPANY may terminate its rights under this License at any time by written
notice to LUCENT certifying that COMPANY has discontinued use of and has
returned all copies of Source Software and any part thereof to LUCENT. If
COMPANY fails to fulfill one or more of its obligations under this License,
LUCENT may, upon its election and in addition to any other remedies that it
may have, at any time terminate all the rights granted by it hereunder by
not less than thirty (30) days written notice to COMPANY specifying any
such breach, unless within the period of such notice all breaches specified
therein shall have been remedied.
7.3 Upon expiration or termination of this License, COMPANY shall immediately
discontinue use of and return all copies of Source Software in whatever
form and any part thereof to LUCENT and such return shall be certified in
writing by COMPANY.
8.0 MISCELLANEOUS PROVISIONS
<PAGE>
8.1 This License shall prevail notwithstanding any conflicting terms or legends
which may appear in or on Source Software.
8.2 Source Software is furnished by LUCENT "AS IS" without warranties, express
or implied. BY WAY OF EXAMPLE BUT NOT OF LIMITATION, LUCENT AND OTHER
DEVELOPERS MAKE NO REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR PURPOSE, OR THAT THE USE OF ANY SOFTWARE PRODUCT
WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK OR OTHER INTELLECTUAL
PROPERTY RIGHT. LUCENT AND OTHER DEVELOPERS SHALL NOT BE HELD TO ANY
LIABILITY WITH RESPECT TO ANY CLAIM BY COMPANY, OR A THIRD PARTY ON ACCOUNT
OF, OR ARISING FROM, ACCESS TO OR THE USE OF LICENSED SOFTWARE. EXCEPT FOR
SECTIONS 8.5 and 8.9, NEITHER PARTY SHALL HAVE ANY LIABILITY FOR ANY
INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT
LIMITED TO RELIANCE, COVER, OR LOSS OF ANTICIPATED PROFITS, EVEN IF THE
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8.3 No right is granted herein to use any identifying mark (such as, but not
limited to, trade names, trademarks, trade devices, service marks or
symbols, and abbreviations, contractions or simulations thereof) owned by,
or used to identify any product or service of, LUCENT or a corporate
affiliate thereof. COMPANY agrees that it will not, without the prior
written permission of LUCENT, (i) use any such identifying mark in
advertising, publicity, packaging, labeling or in any other manner to
identify any of its products or services or (ii) represent, directly or
indirectly, that any product or service of COMPANY is a product or service
of LUCENT or such an affiliate or is made in accordance with or utilizes
any information or documentation of LUCENT or such an affiliate.
8.4 Neither the execution of this License nor anything in it or in any Source
Software shall be construed as an obligation upon LUCENT or any other
developer to furnish any person, including COMPANY, any assistance of any
kind whatsoever, or any information or documentation other than the Source
Software to be furnished by LUCENT.
8.5 COMPANY agrees that it shall hold all parts of the Source Software subject
to this License in confidence for LUCENT. COMPANY further agrees that it
shall not make any disclosure of any or all of such Source Software
(including methods or concepts utilized therein) to anyone, except to
employees of COMPANY to whom such disclosure is necessary to the use for
which rights are granted hereunder. COMPANY shall appropriately notify each
employee to whom any such disclosure is made that such disclosure is made
in confidence and shall be kept in confidence by such employee. If
information relating to a Source Software subject to this License at any
time becomes available without restriction to the general public by acts
not attributable to COMPANY, COMPANY's obligations under this section shall
not apply to such information after such time. COMPANY acknowledges that
disclosure of information in violation of this Section 8.5 will cause
irreparable harm to LUCENT and that in such case LUCENT shall have the
right to seek injunctive or other preliminary relief.
8.6 All obligations of COMPANY, its employees and contractors under this
License which relate to confidentiality or which limit use of Source
Software shall survive and continue after any termination of rights under
this License.
<PAGE>
8.7 COMPANY agrees that it will not use Source Software subject to this License
except as authorized herein and that it will not make, have made or permit
to be made any copies of such Source Software except for use on Designated
CPUs for such Source Software (including backup and archival copies
necessary in connection with such use). Each such copy shall contain any
copyright notice, proprietary notice or notice giving credit to another
developer, which appears on or in the Source Software being copied.
8.8 Neither this License nor any rights hereunder, in whole or in part, shall
be assignable or otherwise transferable by COMPANY and any purported
assignment or transfer shall be null and void.
8.9 Nothing in this License grants to COMPANY the right to sell, lease or
otherwise transfer or dispose of a Source Software in whole or in part.
8.10 Any statement, notice, request or other communication shall be deemed to be
sufficiently given to the addressee and any delivery hereunder deemed made
when sent by certified mail addressed to COMPANY or LUCENT, as appropriate,
at their respective offices specified in this License. Each party to this
License may change an address relating to it by written notice to the other
party.
8.11 LUCENT hereby grants COMPANY an immunity from suit under LUCENT's present
patents as of the Effective Date of this License solely with respect to
COMPANY's use of the Source Software in accordance with the rights granted
to COMPANY under this License.
8.12 It is recognized that third parties may have patents that might be
infringed by COMPANY's use of the Source Software and LUCENT makes no
representations or warranties with respect thereto. It shall be COMPANY's
sole responsibility to determine the existence and applicability of patents
of third parties and to secure any necessary rights with respect thereto.
8.13 The construction and performance of this License shall be governed by the
law of the State of New York, excluding its choice of law rules and
excluding the United Nations Convention for the International Sale of
Goods.
8.14 This License, including Schedule 1 attached hereto, sets forth the entire
agreement and understanding between the parties as to the subject matter
hereof and merges all prior discussions between them, and neither of the
parties shall be bound by any conditions, definitions, warranties,
understandings or representations with respect to such subject matter other
than as expressly provided herein or as duly set forth on or subsequent to
the date of acceptance hereof in writing and signed by a proper and duly
authorized representative of the party to be bound thereby. No provision
appearing on any document originated by COMPANY shall be applicable unless
such provision is expressly accepted in writing by an authorized
representative of LUCENT.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
in duplicate originals by its duly authorized representatives on the respective
dates entered below.
LUCENT TECHNOLOGIES INC. ALTIGEN COMMUNICATIONS, INC.
By: /s/ Joe Mele By: /s/ Shirley Sun
-------------------------- -----------------------------------
Joe Mele Name: Shirley Sun
---------------------------------
President - elemedia
Title: Director of IP Telephony
--------------------------------
Date: 9/15/98 Date: Sept 23, 1998
------------------------ ---------------------------------
THIS LICENSE DOES NOT BIND OR OBLIGATE EITHER PARTY
IN ANY MANNER UNLESS DULY EXECUTED BY AUTHORIZED
REPRESENTATIVES OF BOTH PARTIES
<PAGE>
LIMITED SOURCE CODE
LICENSE AGREEMENT
SCHEDULE 1
----------
COMPANY Address:
1) Fremont, California, United States of America
2) Shanghai, China
Source Software:
elemedia(TM) PX3230S H.323 RTP Software Module computer program software Release
2.0, in source code form, for the following platform(s);
COMPANY Platform(s):
COMPANY Platform(s) for purposes of the rights granted to COMPANY under
this License shall mean:
-------------------------------------------
OS PLATFORM HW PLATFORM
-------------------------------------------
Windows 95/NT Pentium
-------------------------------------------
n/a TI C6x DSP
-------------------------------------------
*Specific to COMPANY porting the Source Software to the TI C6x DSP and
providing such derivative works back to LUCENT.
Additional COMPANY Platform(s) may be added to Schedule 1 upon mutual
written agreement of the parties from time to time during the term of this
License.
COMPANY's Designated CPUs On Which Source Software Will Be Used By COMPANY (if
used on a server, identify number of subtending CPUs):
Identification # Location
---------------- --------
92-320-4299 Fremont, CA, USA
--------------------------- ----------------------------
Shanghai, China
--------------------------- ----------------------------
--------------------------- ----------------------------
. USE OF SOURCE SOFTWARE IS LIMITED TO THESE DESIGNATED CPUs .
<PAGE>
License Fee:
A one-time right to use fee of Fifteen Thousand Dollars ($15,000.00), exclusive
of any and all taxes, shall be due and payable by LICENSEE to LUCENT upon
execution of this Agreement.
LICENSED SOURCE SOFTWARE MAINTENANCE/SUPPORT
After the ninety (90) day period following delivery of the Source Software to
LICENSEE, product maintenance and support will be available from LUCENT during
the remaining term of this Agreement, at LICENSEE's option, for commercially
available Source Software products at a fee per platform of $5,000 for the first
year following such 90 day period. The terms, conditions and prices for future
product maintenance and support will be negotiated by the parties in good faith
Such maintenance and support to LICENSEE will include correction of errors and
the provision of updates and upgrades of Source Software.
<PAGE>
AMENDMENT NO. 1
TO
SOFTWARE LICENSE AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC.
AND
ALTIGEN COMMUNICATIONS, INC.
Effective as of September 23, 1998
THIS AMENDMENT is made on the 14th day of December, 1998, by and between LUCENT
TECHNOLOGIES INC., a Delaware corporation ("LUCENT"), having an office at 600
Mountain Avenue, Murray Hill, New Jersey 07974 and ALTIGEN COMMUNICATIONS, INC.,
a California corporation, ("LICENSEE"), having an office at 45635 Northport Loop
East, Fremont, CA 94538.
WHEREAS, the parties have entered into a SOFTWARE LICENSE AGREEMENT (the
"License Agreement") dated September 23, 1998; and
WHEREAS, the parties now desire to modify and amend certain terms of the License
Agreement and to enter into this Amendment to record and give effect thereto:
IT IS, THEREFORE, AGREED by and between the parties to hereby amend the License
Agreement as follows:
1. INTERPRETATION
Except as otherwise provided in this Amendment, all terms and references
which are defined or construed in the License Agreement, and which are not
separately defined or construed in this Amendment, shall have the same
meaning and construction in this Amendment as in the License Agreement. The
headings in this Amendment are inserted for convenience only and shall be
ignored in construing this Amendment.
2. GRANT-BACK OF LICENSEE MODIFICATIONS
<PAGE>
The "Grant-Back of LICENSEE MODIFICATIONS, Section 2.2" of the Software
License Agreement shall be modified as follows:
2.2 Grant-Back of LICENSEE MODIFICATIONS
Subject to LUCENT's ownership of all right, title and interest in the
underlying LICENSED SOFTWARE, LICENSEE shall own all right, title and
interest in and to LICENSEE MODIFICATIONS and CUSTOMER SOFTWARE. LICENSEE
agrees that for any LICENSEE MODIFICATIONS that comprise solely bug fixes
of LICENSED SOFTWARE (i.e., not LICENSEE MODIFICATIONS related directly to
porting, localization or integration of LICENSED SOFTWARE with CUSTOMER
SOFTWARE). LICENSEE shall deliver to LUCENT a copy of source code and
available documentation for all such LICENSEE MODIFICATIONS.
LICENSEE grants to LUCENT a worldwide, perpetual, royalty-free, non-
exclusive, license to develop, port, modify, edit, format, translate,
create derivative works based on or otherwise use, change and/or support
and maintain modifications and, at LUCENT's discretion, to incorporate and
distribute LICENSEE MODIFICATIONS and such modifications and extensions
thereto into future releases of such LICENSED SOFTWARE or other LUCENT
software products. LICENSEE grants to LUCENT and its subsidiaries a
nonexclusive, world-wide, royalty-free, license to use, modify, reproduce,
distribute, sublicense and prepare derivative works from LICENSEE
MODIFICATIONS under any intellectual property rights owned or controlled by
LICENSEE, including, but not limited to copyright, trade secret and patent
rights. The patent license shall extend solely to LICENSEE MODIFICATIONS.
The license shall extend also to any modifications and extensions of
LICENSEE MODIFICATIONS to the extent that the claims of any LICENSEE patent
infringed by such modifications or extensions are used by the original
LICENSEE MODIFICATIONS furnished to LUCENT. This same license for LICENSEE
MODIFICATIONS furnished to LUCENT. This same license for LICENSEE
MODIFICATIONS also extends from LICENSEE to third parties who are licensed
to use LUCENT software products in which LICENSEE MODIFICATIONS, or any
portion thereof, are embedded or contained.
LUCENT accepts all LICENSEE MODIFICATIONS delivered hereunder on an "AS IS"
basis.
3. EXHIBIT B; LIMITED SOURCE CODE LICENSE AGREEMENT
The "SCHEDULE 1, of EXHIBIT B; LIMITED SOURCE CODE LICENSE AGREEMENT" shall
be modified to include the following additional provisions:
Source Software shall also include the elemedia PX3230S H.323 Protocol
Stack Software Release 2.2a, in source code, form for the following
platforms---
1) Windows 95/NT Pentium
4. LICENSE FEE
<PAGE>
For the additional rights grated in this Amendment, LICENSEE agrees to pay
LUCENT a one-time, nonrefundable right to use fee of Twenty Thousand
Dollars ($20,000.00), exclusive of any and all taxes, and shall be due and
payable upon execution of this Amendment.
Except for those changes expressly set forth above, all other terms and
conditions of the License Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed
in duplicate originals by its duly authorized representatives on the respective
dates entered below.
LUCENT TECHNOLOGIES INC. ALTIGEN COMMUNICATIONS, INC.
By: ____________________________ By: /s/ Shirley Sun
-------------------------------------
Joe Meie Name: Shirley Sun
-----------------------------------
President - elemedia
Title: Director of IP Telephony
----------------------------------
Date: __________________________ Date: Dec. 21, 1998
-----------------------------------
THIS AMENDMENT DOES NOT BIND OR OBLIGATE EITHER PARTY
IN ANY MANNER UNLESS DULY EXECUTED BY AUTHORIZED
REPRESENTATIVES OF BOTH PARTIES
<PAGE>
PRODUCT MAINTENANCE SUPPORT - SUPPLEMENTAL AGREEMENT
TO THE elemedia PX3230S H.323 PROTOCOL STACK SOFTWARE
AGREEMENT BETWEEN LUCENT TECHNOLOGIES INC. AND
ALTIGEN COMMUNICATIONS, INC.
1.0 Product Maintenance Support
(a) Annual product maintenance support for LICENSED SOFTWARE will be
furnished subject to the fee specified in Section 2.0 of this
Supplemental Agreement and in accordance with the payment terms of the
referenced Agreement for the period of January 1, 1999 to December 31,
1999.
(b) LUCENT will furnish Support Services in accordance with the attached
Support Services documentation. Telephone support will be furnished
only For the then-current version of the LICENSED SOFTWARE (such
support for the previous version will be discontinued ninety (90) days
after a new version is delivered to LICENSEE).
(c) Product maintenance updates to LICENSED SOFTWARE may include
enhancements and/or revisions to correct known problems. Appropriate
documentation will be included with updates. One copy of each update
will be furnished to LICENSEE.
(d) LUCENT may discontinue furnishing support for LICENSED SOFTWARE upon
one (1) year's written notice to LICENSEE.
2.0 Product Maintenance Support Fee
(a) For the furnishing of support during the term of this Supplemental
Agreement, as specified in Section 1.0, LICENSEE shall pay to LUCENT a
fee of $25,000.00 per 12 month period. Such fee shall be payable
within ten (10) days business from the date of execution of this
Supplemental Agreement and annual anniversary thereof for subsequent
years.
(b) If LICENSEE reinstates the furnishing of support following a lapse of
such prior support, LICENSEE shall pay all prior fees due for the time
period support was not furnished, plus an additional reinstatement fee
to be specified by LUCENT.
IN WITNESS WHEREOF, each of the parties has caused this attachment to be
Executed in duplicate originals by it duly authorized representatives on the
respective dates entered below.
LUCENT TECHNOLOGIES INC. LICENSEE: Altigen Communications, Inc.
----------------------------
By: /s/ Joe Mele By: /s/ Shirley Sun
---------------------- ----------------------------------
Joe Mele Name: Shirley Sun
--------------------------------
President - elemedia
Title: Director of IP Telephony
-------------------------------
Date: 12/11/98 Date: Dec. 3, 1998
-------------------- --------------------------------
<PAGE>
elemedia Customer Support Services Agreement
--------------------------------------------
Unless otherwise agreed to in writing by Lucent Technologies Inc., Customer
SUPPORT SERVICES shall only be available for the current elemedia generic
software release available at the time of the CONTRACT PERIOD.
CUSTOMER SUPPORT CONTACTS
- -------------------------
Web Site Support: Customer Support through elemedia's WebSite is available by
- ----------------
accessing the following elemedia URL:
http://www.elemedia.com/support
-------------------------------
When you access the elemedia Customer Support web page, you will be prompted for
your UserID and Password. Your UserID is your email address. The Password has
been assigned to you by elemedia.
Reporting of Trouble Tickets through elemedia Web Site will be received twenty-
four (24) hours a day, seven (7) days a week. Standard Response Time for a
Trouble reported via Web Site is provided during NORMAL BUSINESS HOURS of the
next business day. This shall mean the (9) hour period between 8:00AM and 5:00PM
Eastern Standard Time, Monday through Friday, excluding MAJOR HOLIDAYS.
Major Holidays shall mean the following nationally recognized days:
- --------------
New Year's Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day and the Friday following
Christmas Day
Should your Trouble Ticket require Priority Assistance, please report your
Trouble by calling the elemedia Toll-Free Hotline. You will be contacted by
elemedia Customer Response within one hour.
elemedia Toll-Free Hotline Support: Customer support for elemedia products is
- ----------------------------------
available via the elemedia Toll-Free Hotline by calling:
888-673-2063
Hotline Support is available twenty-four (24) hours a day, seven (7) days a
week. An initial response to all Trouble Reports via the elemedia Hotline will
be received within one hour.
Standard Response time for Hotline Trouble Reports is provided during NORMAL
BUSINESS HOURS unless otherwise contracted by LICENSEE. Support outside of
NORMAL BUSINESS HOURS will be a chargeable service.
<PAGE>
STANDARD AND PRIORITY TROUBLE REPORTS
- -------------------------------------
LUCENT (elemedia) shall provide technical assistance from LUCENT's CUSTOMER
ENGINEER at no additional charge during NORMAL BUSINESS HOURS.
A. LUCENT will provide an initial response to all Trouble Reports made by
Customer via the elemedia HOT LINE number within one (1) hour. The Customer
Contact will be by telephone. For Customer Trouble Reports made via the
elemedia Web Site, the response will occur within one (1) business day and
sent to the inquirer's e-mail address.
B. LUCENT will provide support for Priority Trouble Reports outside NORMAL
BUSINESS HOURS only at LICENSEE's express request, chargeable at a rate of
$300 per hour.
C. The minimum charge per call, outside the NORMAL BUSINESS HOURS, will equal
one (1) hour of SUPPORT SERVICES. After the first hour, charges will be
billed on a minimum of fifteen (15) minute interval basis.
D. Charges will begin at the time the LUCENT's CUSTOMER ENGINEER establishes
direct contact with LICENSEE. Investigative time is in addition to
telephone contact, and will be considered in determining the total time
spent.
LICENSEE RESPONSIBILITIES
- -------------------------
LICENSEE responsibilities are:
A. PROVIDING INFORMATION TO THE HOT-LINE SERVICE:
(1) Identification of the condition and its isolation to a particular
component of the system.
(2) Collection of all available supporting documentation from the
system for inclusion in the TRACKING REPORT.
(3) Determination that there are no outstanding conforming program
fixes in LICENSEE's possession which correct the condition; and
(4) The LICENSEE's personnel shall provide the following information:
a) Caller's name, Company, and location
b) Call-back telephone number
c) System name and SITE
d) Licensed Software, Operating System, and Versions
e) Nature of the problem, situation or question
f) Caller's alternate contact
g) Description and history of the problem and efforts to solve
it by LICENSEE
h) Reported Severity Level
Page 2
<PAGE>
B. PROBLEM DIAGNOSIS MATERIALS AND EQUIPMENT - If LICENSEE reports a
condition, LICENSEE will be responsible for providing adequate support
material to enable the diagnosis of the condition.
C. LICENSED SOFTWARE STATUS - LICENSED SOFTWARE at LICENSEE's SITE must
contain no source code modifications other than those from LUCENT, and
must contain current applications of LICENSED SOFTWARE UPDATES
received by LICENSEE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Severity Title and Explanation Standard Notification Mechanism &
Level Required Time to Respond
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 Fatal Error - No useful work can Voice or pager; before the end of business day, or if
be done received after normal business hours at the beginning
of the next business day
- ---------------------------------------------------------------------------------------------------------
2 Severe Impact - Functionality Voice or pager; before the end of business day, or if
disabled, Errors which result in received after normal business hours at the beginning
a lack of application of the next business day
functionality or cause
intermittent system failure.
- ---------------------------------------------------------------------------------------------------------
3 Degraded Operations - Errors Voice or pager; next business day.
causing malfunctions of
non-critical functions; product
is usable. Including degraded
system performance
- ---------------------------------------------------------------------------------------------------------
4 Workaround Option - Does not To Be Determined
affect user's operations;
product is usable.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
SUPPORT SERVICE EXCLUSIONS
- --------------------------
Unless expressly agreed to by LUCENT, SUPPORT SERVICES to be provided under this
agreement do not include:
A. Performing PREVENTATIVE MAINTENANCE (to be performed by the LICENSEE);
B. Supporting work external to the covered LICENSED SOFTWARE;
C. Service which is impractical for LUCENT to render because of changes not
authorized by LUCENT in the LICENSED SOFTWARE, or when LUCENT was not
consulted prior to LICENSEE's changes to the LICENSED SOFTWARE designated
processor, hardware configuration, or the environment in which the LICENSED
SOFTWARE operates;
Page 3
<PAGE>
D. Modifications or replacement of LICENSED SOFTWARE, repair of damage, or
increase in SUPPORT SERVICES time caused by:
1) LICENSEE's use of the LICENSED SOFTWARE in a manner not in accordance
with its specifications, operating instructions, or license-to-use;
2) Modifications, maintenance, or repair not authorized by LUCENT;
3) The conversion from one LUCENT SOFTWARE release to another, or the
failure of LICENSEE to apply previously applicable modifications and
corrections received by LICENSEE.
- --------------------------------------------------------------------------------
elemedia is a Registered Trademark of Lucent Technologies Inc. All rights
reserved.
Page 4
<PAGE>
EXHIBIT 10.17
CONSULTING AND DEVELOPMENT
AGREEMENT
1. Agreement
This is an agreement, effective 10/27/98, between AltiGen Communications, Inc.
("ALTIGEN") and Sollecon, Inc., a Delaware Corporation ("SOLLECON"), both
referred in this Agreement as the "PARTIES".
2. Background
SOLLECON is in the business of designing and creating computer software,
providing consulting services in this particular area and custom software
development for the clients. ALTIGEN desires to retain the services of SOLLECON
to advise and consult for the design and development of software in accordance
with the specifications set forth in Exhibit A - Software Development
Specifications (the "SPECIFICATIONS"). SOLLECON is willing to render such
services and the parties agree as follows:
3. The Project
SOLLECON agrees to perform for ALTIGEN services and make all reasonable efforts
to design and develop computer software in accordance with the SPECIFICATIONS
(the "PROJECT").
4. Rate of Payment
ALTIGEN agrees to pay SOLLECON for services in accordance with the SOLLECON's
standard hourly rates as specified in the Exhibit B - Rate of Pay (the "RATES")
plus all charges for travel and materials purchased specifically for the
PROJECT, including all sales and use taxes on equipment and services provided by
SOLLECON.
5. Invoicing
All work is to be done on an accrued charge basis. SOLLECON will invoice ALTIGEN
bi-weekly for all accrued charges, and those invoices shall be payable within
fifteen (15) days after the invoice date. Invoices shall include the hours
worked, the hourly rate, and a brief description of the services rendered and
work done. A late payment charge of two percent (2%) per month shall apply to
all overdue invoices. SOLLECON shall be under no obligation to continue work
when the account is overdue.
6. Independent Contractor Status
SOLLECON is an independent contractor and developer, so neither SOLLECON nor
SOLLECON's staff is, or shall be deemed to be employed by ALTIGEN. Both PARTIES
agree that working relations should be organized in a way to be fully qualified
as of Independent Contractor and Developer with relation to the Section 1706 of
1986 Tax Reform Act as amended and according to the Part IV of the IRS SERVICE
MANUAL dated 5/6/86.
7. Traveling
For travel necessary in connection with the PROJECT outside the Bay Area, a
special hourly rate will be applied, calculated as half (1/2) of the normal
RATES for every hour spent outside the Bay Area plus the normal hourly RATES for
the actual time used for the PROJECT. Prior written consent by both PARTIES
shall be required for all travel outside the Continental United States.
<PAGE>
8. Work Terms
The Project shall be done by the personnel selected by SOLLECON and approved in
advance by ALTIGEN. All such personnel, if any, shall be directly supervised by
SOLLECON, which reserves the right to determine the method, manner and means by
which the PROJECT is done, including the choice of place, equipment, available
time allocation, subject to ALTIGEN's normal business hours and security
requirements. SOLLECON shall not be required to devote its full time and/or
staff to the PROJECT and it is acknowledged that SOLLECON has other clients and
offers services and products to the general public. Except to the extent that
work on the PROJECT must be performed on or with the ALTIGEN's current computers
or software, all materials used shall be provided by SOLLECON.
9. Additional Work
After receipt of a work order which adds to the PROJECT, SOLLECON may, at its
discretion, take reasonable action and expend reasonable amounts of time and
money, or bring additional staff, subject to provisions of Section 8 of this
Agreement, based on such order. ALTIGEN agrees to pay SOLLECON for such action
and expenditure using normal RATES.
10. Employees
Both PARTIES hereto agree that, while performing services and providing
development under this Agreement, and for a period of six (6) months following
the termination of this Agreement, neither PARTY will solicit or offer
employment to the other PARTY's employees or staff engaged in any efforts under
this Agreement, except with the other PARTY's prior written approval.
11. Use of Work Product
Except as specifically set forth in writing and signed by both PARTIES, SOLLECON
shall have all copyright and patent rights with respect to all materials
developed under this Agreement, and ALTIGEN is hereby granted a Non-exclusive
license to use and employ such materials within the ALTIGEN's business. Such
grant of the license shall occur only after the full payment, as set forth in
Section 5, is received by SOLLECON.
12. Termination by ALTIGEN
The PROJECT shall be carried out in phases and according to a timetable as set
forth in the SPECIFICATIONS. ALTIGEN shall have the right, by written notice, to
terminate the PROJECT at the end of any phase. If ALTIGEN terminates at any
other time, SOLLECON will make reasonable efforts to reassign scheduled labor to
other projects, but to extent that SOLLECON is unable to do so, ALTIGEN shall be
responsible for scheduled labor charges until such reassignment can be made, but
in no event for a period longer than fifteen (15) days from the day of the
notice of termination. Upon termination, ALTIGEN agrees to pay SOLLECON for all
accrued PROJECT charges including any non-cancelable commitments for equipment,
services, materials and travel.
13. Termination by SOLLECON
SOLLECON shall have the right, by written notice, to terminate the PROJECT if
the ALTIGEN's account is overdue as set forth in Section 5 of this Agreement.
Upon completion of work authorized under any work order for one or more phases,
ALTIGEN shall have thirty (30) days to authorize the next subsequent phase or
phases. If no such authorization is received by SOLLECON within such thirty (30)
day period, the PROJECT shall be deemed to be terminated. If within any thirty
(30) day period the amount of billable time accrued is less than twenty (20)
hours, the SOLLECON shall have the right to terminate the PROJECT by written
notice, provided, in the event ALTIGEN shall within such thirty (30) day period
place sufficient work orders with SOLLECON to bring the total for the previous
and next thirty (30) days to the minimum amounts set forth above, such notice
shall be of no effect.
<PAGE>
14. Conflict of Interest
SOLLECON warrants that it is under no obligation to any other entity whereby
conflicts of interest are or may be created by entering into this Agreement.
SOLLECON agrees that it will not, during the term of this Agreement and six (6)
months following the termination of this Agreement, perform services or develop
products for direct competitors of ALTIGEN listed in the Exhibit C - Direct
Competitors.
15. Proprietary Information
In the event either PARTY discloses information, of any sort whatever, to the
other that it considers to be secret or proprietary ("PROPRIETARY INFORMATION"),
the receiving PARTY agrees to make reasonable efforts, for a period of one (1)
year after the completion of all work under this Agreement, to maintain the
PROPRIETARY INFORMATION in confidence and to treat the PROPRIETARY INFORMATION
with at least the same degree of care and safeguards that it takes with its own
proprietary information. PROPRIETARY INFORMATION shall be used by the receiving
PARTY only in connection with this Agreement and shall be disclosed only to
employees as reasonably necessary for the performance under this Agreement.
PROPRIETARY INFORMATION shall be limited to information disclosed in writing and
suitably marked as "Confidential" or "Proprietary", or if disclosed orally,
reduced to writing and delivered, appropriately marked, to the receiving PARTY
within twenty (20) days. PROPRIETARY INFORMATION shall not be deemed to include
any information that:
(a) is in or becomes in the public domain without violation of this Agreement by
the receiving PARTY; or
(b) is already in the possession of the receiving PARTY, as evidenced by written
documents, prior to the disclosure thereof by the other PARTY; or
(c) is rightfully received from a third entity having no obligation to the
disclosing PARTY and without violation of this Agreement by the receiving PARTY.
The provisions of this Section 15 shall survive any termination of this
Agreement.
16. Disputes
All claims and disputes that arise between the PARTIES in connection with this
Agreement, which have not been resolved by good faith negotiations between the
PARTIES, shall be submitted to binding arbitration by the American Arbitration
Association, to be determined and resolved by said Association under its rules
and procedures then in effect, and the PARTIES agree to share equally the costs
of said arbitration. The arbitrators shall have no power to modify any of the
terms of this Agreement or attached exhibits. Any award rendered in such
arbitration may be enforced by either PARTY in either the courts of State of
California or in a United States District Court of the same State, to whose
jurisdiction each PARTY irrevocably agrees to submit.
LIMITED WARRANTY
17. Warranties and Liability
SOLLECON warrants to ALTIGEN that the material, data, programs and services to
be delivered or rendered hereunder, will be of the kind and quality designated
and made according to SPECIFICATIONS and will be performed by qualified
personnel. SOLLECON makes no other warranties, whether written, oral or implied,
including without limitation warranty of fitness for purpose of merchantability.
In no event shall SOLLECON be liable for special or consequential damages,
either in contract or tort, whether or not the possibility of such damages has
been disclosed to SOLLECON in advance or could have been reasonably foreseen by
SOLLECON, and in the event this limitation of damages is held unenforceable then
the Parties
<PAGE>
agree that by reason of the difficulty foreseeing possible damages all liability
to ALTIGEN shall be limited to Five Hundred dollars ($500.00) as liquidated
damages and not as a penalty.
18. Complete Agreement
This Agreement contains the entire Agreement between the PARTIES with respect to
the matters covered herein. No other agreements, representations, warranties or
other matters, oral or written, shall be deemed to bind the PARTIES with respect
to the subject of this Agreement. This Agreement shall be attached to, or
otherwise made part of, each work order issued by ALTIGEN to SOLLECON and shall
be in lieu of all printed terms on the face or reverse of the work order.
19. Applicable Law
SOLLECON shall comply with all applicable laws during work on the PROJECT but
shall be held harmless for violation of any governmental procurement regulation
to which it may be subject but to which reference is not made in SPECIFICATIONS.
This Agreement shall be construed in accordance with the laws of the State of
California.
20. Assignment
This Agreement may not be assigned by either PARTY without the prior written
consent of the other PARTY.
21. Notices
(i) Notices to SOLLECON should be sent to:
P.O. Box 390725
Mountain View, CA 94039-0725
(ii) Notices to ALTIGEN should be sent to:
AltiGen Communications, Inc.
45635 Northport Loop East
Fremont, CA 94538
22. Execution
Each individual executing this Agreement on behalf of the PARTY to this
Agreement represents and personally warrants that he or she has authority to
enter into this Agreement on behalf of such PARTY and that Agreement is binding
on such PARTY.
AltiGen Communications, Inc. Sollecon, Inc., a Delaware Corporation
By /s/ Signature Illegible^^11/06/98 By /s/ Signature Illegible^^ 11/06/98
--------------------------------- ----------------------------------
Title Director of Digital Engr. Title President/CEO
------------------------------- -----------------------------
23. Any software or firmware owned by AltiGen as code base shall remain
exclusive property of AltiGen and Sollecon shall have no rights to reuse it in
it's further designs.
<PAGE>
Exhibit A - Software Development Specifications
Exhibit B - Rate of Pay
$150/hour
Exhibit C - Direct Competitors
Dialogic
Netphone Inc.
Vertical
Shoreline Telecom
<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement is entered into as of April 6 , 1999, by and
------
between AltiGen Communications, Inc., a California corporation (the "Company"),
and Tricia Chu (the "Employee").
WHEREAS, the Company desires to receive Employee's continued services, and
Employee desires to continue providing services to the Company;
NOW, THEREFORE, in consideration of the foregoing recital and the
respective covenants and agreements of the parties contained in this document,
the Company and Employee agree as follows:
1. At-Will Employment. Subject to the provisions of Paragraph 3
------------------
(Compensation), Employee's employment with the Company is for an unspecified
duration and constitutes "at-will" employment. This employment relationship may
be terminated at any time, with or without good cause or for any or no cause, at
the option either of the Company or Employee, with or without notice.
2. Confidential Information.
-------------------------
(a) Company Information. Employee agrees at all times during the term
-------------------
of her employment and thereafter, to hold in strictest confidence, and not to
use, except for the benefit of the Company, or to disclose to any person, firm
or corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. Employee understands that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers, markets,
software, developments, inventions, processes, formulas, technology, designs,
drawings, engineering, hardware configuration information, marketing, finances
or other business information disclosed to Employee by the Company either
directly or indirectly in writing, orally or by drawings or observation of parts
or equipment. Confidential Information does not include any of the foregoing
items which has become publicly known and made generally available through no
wrongful act of Employee or of others who were under confidentiality obligations
as to the item or items involved.
(b) Former Employer Information. Employee agrees that she will not,
---------------------------
during her employment with the Company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent employer or
other person or entity and that she will not bring onto the premises of the
Company any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by such employer,
person or entity.
(c) Third Party Information. Employee recognizes that the Company has
-----------------------
received and in the future will receive from third parties their confidential or
proprietary information
<PAGE>
subject to a duty on the Company's part to maintain the confidentiality of such
information and to use it only for certain limited purposes. Employee agrees to
hold all such confidential or proprietary information in the strictest
confidence and not to disclose it to any person, firm or corporation or to use
it except as necessary in carrying out her work for the Company consistent with
the Company's agreement with such third party.
3. Compensation. In consideration for her services to the Company,
------------
Employee shall be entitled to receive compensation including without limitation:
(i) a base salary to be negotiated and agreed upon: and (ii) stock options
granted in conformity with the Company's stock option plan(s) and with
applicable laws.
(a) Vesting. Any options granted to Employee in consideration for her
-------
services may be subject to a vesting schedule to be determined by the Board of
Directors of the Company pursuant to the Company's stock option plan(s) and with
applicable laws.
(b) Acceleration of Vesting Schedule. In the event that Employee is
--------------------------------
terminated by the Company without Cause, the vesting schedule for any and all
unexercised stock options granted to, and then held by, Employee shall
accelerate and, in such event, all such options shall be immediately vested, and
will be immediately exercisable by Employee, subject to the terms and conditions
of the Company's stock option plan(s), Employee's stock option agreement(s) and
applicable laws.
(c) Cause. For purposes of this Section 3, "Cause" shall mean any one
-----
or more of the following: (i) Employee's conviction by, or entry of a plea of
guilty or nolo contendre in, a court of competent and final jurisdiction for any
crime which constitutes a felony in the jurisdiction involved; (ii) Employee's
willful breaching in any material respect the terms of this or any
confidentiality or proprietary information agreement between Employee and the
Company: or (iii) a material and willful breach of a federal or state law or
regulation applicable to the business of the Company. No act, or failure to act,
by Employee shall be considered "willful" unless committed without a good faith,
reasonable belief that the act or omission was in the Company's best interest.
No compensation or benefits will be paid or provided to Employee under this
Agreement on account of a termination for Cause, or for periods following the
date when such a termination of employment is effective. In the event of
termination for Cause, Employee's rights under any applicable benefit plans
shall be determined under the provisions of those plans.
4. Board Approval. No part of this Agreement shall be effective or
--------------
binding upon the Parties unless and until approved or ratified by a majority of
the directors of the Board of Directors of the Company.
5. Successors. The Company will require any successor (whether direct or
----------
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
<PAGE>
6. Arbitration. Any dispute or controversy arising under or in connection
-----------
with this Agreement shall be settled exclusively by arbitration in San Jose,
California, in accordance with the rules of the American Arbitration Association
then in effect by an arbitrator selected by both parties within 10 days after
either party has notified the other in writing that it desires a dispute between
them to be settled by arbitration. In the event the parties cannot agree on such
arbitrator within such 10-day period, each party shall select an arbitrator and
inform the other party in writing of such arbitrator's name and address within 5
days after the end of such 10-day period and the two arbitrators so selected
shall select a third arbitrator within 15 days thereafter; provided, however,
that in the event of a failure by either party to select an arbitrator and
notify the other party of such selection within the time period provided above,
the arbitrator selected by the other party shall be the sole arbitrator of the
dispute. Each party shall pay its own expenses associated with such arbitration,
including the expense of any arbitrator selected by such party and the Company
will pay the expenses of the jointly selected arbitrator. The decision of the
arbitrator or a majority of the panel of arbitrators shall be binding upon the
parties and judgment in accordance with that decision may be entered in any
court having jurisdiction thereover. Punitive damages shall not be awarded.
7. Absence of Conflict. The Employee represents and warrants that her
-------------------
employment by the Company as described herein shall not conflict with and will
not be constrained by any prior employment or consulting agreement or
relationship.
8. Assignment. This Agreement and all rights under this Agreement shall be
----------
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees, successors and assigns.
This Agreement is personal in nature, and neither of the parties to this
Agreement shall, without the written consent of the other, assign or transfer
this Agreement or any right or obligation under this Agreement to any other
person or entity; except that the Company may assign this Agreement to any of
its affiliates or wholly-owned subsidiaries, provided, that such assignment will
--------
not relieve the Company of its obligations hereunder. If Employee should die
while any amounts are still payable to Employee hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to Employee devisee, legatee, or other designee or, if there be
no such designee, to the Employee's estate.
9. Integration. This Agreement represents the entire agreement and
-----------
understanding between the parties as to the subject matter hereof and supersede
all prior or contemporaneous agreements whether written or oral. No waiver,
alteration, or modification of any of the provisions of this Agreement shall be
binding unless in writing and signed by duly authorized representatives of the
parties hereto.
10. Waiver. Failure or delay on the part of either party hereto to enforce
------
any right, power, or privilege hereunder shall not be deemed to constitute a
waiver thereof. Additionally, a waiver by either party or a breach of any
promise hereof by the other party shall not operate as or be construed to
constitute a waiver of any subsequent waiver by such other party.
<PAGE>
11. Severability. Whenever possible, each provision of this Agreement will
------------
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Headings. The headings of the paragraphs contained in this Agreement
--------
are for reference purposes only and shall not in any way affect the meaning or
interpretation of any provision of this Agreement.
13. Applicable Law. This Agreement shall be governed by and construed in
--------------
accordance with the internal substantive laws, and not the choice of law rules,
of the State of California.
14. Counterparts. This Agreement may be executed in one or more
------------
counterparts, none of which need contain the signature of more than one party
hereto, and each of which shall be deemed to be an original, and all of which
together shall constitute a single agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Title: President and CEO
------------------------------
EMPLOYEE
/s/ Tricia Chu
------------------------------------
Tricia Chu
<PAGE>
EXHIBIT 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
San Jose, California
June 4, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ALTIGEN
COMMUNICATIONS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> SEP-30-1999 SEP-30-1998
<PERIOD-START> OCT-01-1998 OCT-01-1997
<PERIOD-END> MAR-31-1999 SEP-30-1998
<CASH> 4,243 8,057
<SECURITIES> 0 0
<RECEIVABLES> 1,600 1,323
<ALLOWANCES> (266) (133)
<INVENTORY> 1,707 1,294
<CURRENT-ASSETS> 7,663 10,716
<PP&E> 1,255 824
<DEPRECIATION> (397) (271)
<TOTAL-ASSETS> 8,521 11,269
<CURRENT-LIABILITIES> 2,420 2,019
<BONDS> 0 0
0 0
18,882 18,882
<COMMON> 2,152 186
<OTHER-SE> (14,933) (9,818)
<TOTAL-LIABILITY-AND-EQUITY> 8,521 11,269
<SALES> 2,356 3,890
<TOTAL-REVENUES> 2,356 3,890
<CGS> 1,223 2,520
<TOTAL-COSTS> 1,223 2,520
<OTHER-EXPENSES> 4,625 5,411
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (199) (246)
<INCOME-PRETAX> (3,293) (3,795)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,293) (3,795)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,293) (3,795)
<EPS-BASIC> (1.91) (2.75)
<EPS-DILUTED> (1.91) (2.75)
</TABLE>
