<PAGE>
Exhibit 10.5
DISTRIBUTION
AGREEMENT
BY AND BETWEEN
ELASTIC NETWORKS INC.
&
NORTHERN TELECOM INC.
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Agreement No. NTI9801D
Page 2
TABLE OF CONTENTS
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<TABLE>
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PAGE
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<S> <C> <C>
1. SCOPE............................................................... 3
2. TERM, RENEWAL, REPLACEMENT AND EXPIRATION........................... 3
3. EXHIBITS............................................................ 4
4. DISTRIBUTION RIGHTS AND OBLIGATIONS................................. 4
5. RECORD KEEPING...................................................... 8
6. ORDERING............................................................ 8
7. PRICES AND PAYMENTS................................................. 9
8. FORECAST............................................................ 10
9. DELIVERY, TITLE AND ACCEPTANCE...................................... 10
10. WARRANTY............................................................ 12
11. REPAIR AND REPLACEMENT PROCEDURES AND REPAIR SERVICES............... 15
12. PRODUCT SUPPORT AND LIFECYCLES...................................... 17
13. EMERGENCY REPLACEMENT PRODUCTS...................................... 19
14. FORCE MAJEURE....................................................... 19
15. PATENT INFRINGEMENT................................................. 19
16. PROPRIETARY INFORMATION............................................. 21
17. LIABILITY........................................................... 22
18. DEFAULT............................................................. 22
19. SEVERABILITY........................................................ 23
20. NOTICES............................................................. 23
21. SOFTWARE LICENSE AGREEMENT.......................................... 24
22. INSURANCE........................................................... 24
23. END USER AND/OR DISTRIBUTOR REQUIREMENTS............................ 25
24. GOVERNMENT SALES.................................................... 25
25. COMPLIANCE WITH LAWS................................................ 25
26. NORTH AMERICAN FREE TRADE AGREEMENT PROCEDURES...................... 26
27. EXPORT CONTROLS..................................................... 27
28. PUBLICITY........................................................... 27
29. HAZARDOUS MATERIALS................................................. 28
30. GOVERNING LAW....................................................... 29
31. ASSIGNMENT.......................................................... 29
32. WAIVER.............................................................. 29
33. SECTION HEADINGS.................................................... 29
34. ENTIRE AGREEMENT.................................................... 29
35. SURVIVAL............................................................ 30
36. NO THIRD PARTY BENEFICIARIES........................................ 30
</TABLE>
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Agreement No. NTI9801D
Page 3
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT (this "Agreement"), effective as of
September 1, 1998 (the "Effective Date"), is entered into by and between
Northern Telecom, Inc., a Delaware corporation with offices located 5555
Windward Parkway, Suite B, Alpharetta, Georgia 30004, on behalf of itself,
its parent, Northern Telecom Limited and any Affiliates ("collectively Nortel
Networks"); and Elastic Networks, Inc., a Delaware corporation, with offices
located at 6120 Windward Parkway, Alpharetta, Georgia 30005 ("Elastic
Networks").
WHEREAS, Elastic Networks desires to obtain assistance in the sale,
installation, and maintenance of its products consisting of high speed burst
mode ethernet products, as set forth in Exhibit A, and covered by the terms
of this Agreement; and
WHEREAS, Nortel Networks desires to become one of Elastic Networks'
distributors, and to resell and maintain Elastic Networks' Products which are
covered by the terms of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by all Parties hereto, the
Parties hereby agree as follows:
1. SCOPE
1.1 This Agreement sets forth the terms and conditions applicable to:
(i) the sale by Elastic Networks of Products listed in Exhibit A, and
(ii) the purchase by Nortel Networks of such Products for resale by
Nortel Networks to its customers worldwide, either directly or
indirectly through Distributors.
1.2 As of the Effective Date, Exhibit A lists and describes the Products
that are the subject matter of this Agreement. Exhibit A, upon written
request of Nortel Networks and Elastic Networks, may be amended from
time to time to add thereto other products offered for sale by Elastic
Networks, and/or to incorporate herein enhancements or new features
introduced in Products by Elastic Networks. Nortel Networks agrees
that it has no right under this Agreement to resell any product not
contained in a then-effective Exhibit A.
2. TERM, RENEWAL, REPLACEMENT, AND EXPIRATION
2.1 The term of this Agreement shall begin on the Effective Date and shall
expire at midnight, Eastern Standard Time, December 31, 2001 ("Term"),
unless sooner terminated in accordance with the termination provisions
of this Agreement, or renewed as provided below.
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Agreement No. NTI9801D
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2.2 On or before October 1 of the year prior to the last calendar year of an
initial or renewal term, Elastic Networks shall provide notice to Nortel
Networks of Elastic Networks' intention: (1) to renew this Agreement for
an additional three (3) years from the end of the then current term,
with a different agreement (in which case Elastic Networks shall attach
a copy of the new agreement to the notice and Nortel Networks shall have
the right to negotiate with Elastic Networks any new terms and
conditions); or (3) to allow this Agreement, and the distributor
relationship, to expire at the end of the then current term. Failure of
Eastic Networks to provide such notice shall be deemed an election by
Elastic Networks of option (1). If either option (1) or (2) is
unacceptable to Nortel Networks, or if Elastic Networks shall elect
option (3), then the last calendar year of the then current term shall
be considered a "wind-down" or "disengagement" period. Nortel Networks
shall notify Elastic Networks within sixty (60) days of receipt of
Elastic Networks' notice of Elastic Networks' intent to pursue either
option (1) or (2) if either option (1) or (2) is unacceptable to Nortel
Networks.
3. EXHIBITS.
The following Exhibits, attached hereto, are an integral part of this
Agreement and are incorporated herein by reference:
Exhibit A - Products and Commercial List Price
Exhibit B - Product Pricing
Exhibit C - Service and Support
Exhibit D - Definitions
Exhibit E - Software License
Exhibit F - Point of Sale Report
Exhibit G - Training and Certification Program
4. DISTRIBUTIONS RIGHTS AND OBLIGATIONS.
4.1 Elastic Networks hereby grants to Nortel Networks, for use only during
the Term, a non-exclusive right to: (1) purchase Products; (2) retain
the Products for inventory purposes (3) sell Products to End Users
either directly or indirectly through Distributors; over the life of the
Products.
4.2 The relationship of the Parties under this Agreement shall be, and shall
at all times remain, one of independent contractors and not that of
franchiser and franchisee or joint ventures. For the purpose of Software
licensing only, the relationship of principal and agent is established.
All persons furnished by either Party to accomplish the intent of this
Agreement shall be considered solely the furnishing Party's employees or
agents.
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Agreement No. NTI9801D
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4.3 Nortel Networks acknowledges that Elastic Networks has an existing
network of distributors, some or all of which may have authorization to
distribute the Products covered by the terms of this Agreement. Elastic
Networks may appoint additional Elastic Networks Authorized
Distributors, and may itself and/or through any subsidiary, subsidiary
of a parent, representative or agent distribute the Products covered by
this Agreement, in competition with Nortel Networks, irrespective of the
grant of rights to Nortel Networks contained within this Agreement.
4.4 Subject to Section 28 and except as otherwise expressly agreed in
writing, Nortel Networks shall bear all promotional, display and
operating expenses incurred by it with respect to the distribution of
the Products under this Agreement. Nothing contained in this Section 4.4
shall imply any right in Elastic Networks to pre-approve or screen
Nortel Networks' advertising and/or promotional efforts. However,
Elastic Networks shall have the right to prohibit the continued use by
Nortel Networks of specific advertising and/or promotional materials
which Elastic Networks reasonably believes will damage Elastic Networks
reputation. Elastic Networks shall not use Nortel Networks' name,
tradename or trademark in any advertising or promotion without Nortel
Networks' prior written consent.
4.5 Elastic Networks shall provide training for employees and contractors of
Nortel Networks pursuant to the terms and conditions as set forth in
Exhibit G and at the fees set forth in Exhibit A, if applicable.
Training shall be strictly limited to BONDA-FIDE employees or
contractors of Nortel Networks and/or BONDA-FIDE employees of Nortel
Networks' subcontractors as authorized by Elastic Networks. In all cases
in which Nortel Networks wishes Elastic Networks to accept employees of
subcontractors for training, Nortel Networks shall identify such
employees, and Elastic Networks shall invoice Nortel Networks, which
shall be responsible for paying for such training.
4.6 Elastic Networks hereby grants to Nortel Networks, at no cost, the right
to use and copy promotional material, the Product Documentation
furnished hereunder and other material made generally available by
Elastic Networks to its End Users and/or Distributors and to use such
material to further Nortel Networks' Product marketing efforts.
4.7 This Agreement is non-exclusive and, except as specifically provided
otherwise herein, shall not be construed: (1) to require Nortel Networks
to purchase only from Elastic Networks (except to the extent that new
Elastic Networks Products for resale may only be purchased from Elastic
Networks); (2) to require Nortel Networks to purchase any specific
amount of Product from Elastic Networks; (3) to require Elastic Networks
to sell all or any specific proportion of its output to Nortel Networks;
or (4) to require Elastic Networks to refrain from selling all or any
portion of its output to any other entity.
4.8 Nortel Networks hereby accepts appointment as an Elastic Networks
Authorized Distributor and agrees, in accordance with the standards
contained in Sections 4.9,
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Agreement No. NTI9801D
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to devote its commercially reasonable efforts to diligently promote the
distribution of Products pursuant to this Agreement, including, without
limitation, the compensation and quota fulfillment rules for its sales
force with respect to Elastic Networks' Products which are reasonably
comparable when compared to similar sales of Nortel Networks product and
to satisfy the needs of its End Users and/or Distributors.
4.9 Nortel Networks shall:
(a) select and enroll, pursuant to Section 4.5, an adequate number of
it employees and/or contractors engaged in the sale of Products in
Elastic Networks' orientation training course and any other Elastic
Networks training courses as may be specified by Elastic Networks,
in order to provide them with knowledge of the Products and Product
applications. Such training shall be provided by Elastic Networks
as set forth in Exhibit G. Nortel Networks shall, as mutually
agreed to by Nortel Networks and Elastic Networks, continue to
enroll untrained sales employees in such training on an ongoing
basis as appropriate when there are changes in employees engaged in
sales of Products and/or the addition of new Products to Exhibit A;
and
(b) comply with the requirements for the establishment and maintenance
of service standards and response time standards for the Product
as specified in Exhibit C; and
(c) provide Elastic Networks with a monthly point of sale report
("Point of Sale Report"), in the format specified in Exhibit F; and
(d) offer to all of its End Users and/or Distributors a warranty on
Products sold which has the Warranty Period as required in Section
10 and which is substantially as comprehensive as the warranty
extended to Nortel Networks by Elastic Networks upon the same
Products; and
(e) be responsible for that portion of any warranty or other obligation
to any End User and/or Distributor which exceeds, whether in time or
scope, that provided on the applicable Product to Nortel Networks
by Elastic Networks under the terms of this Agreement, and which was
granted to that End User and/or Distributor as a result of the acts
or omissions of Nortel Networks; and
(f) subject to Section 4.12, distribute Products only under the
trademarks and tradenames used by Elastic Networks' or Elastic
Networks' suppliers, as appropriate; and
(g) provide its End Users and/or Distributors Level I and Level II
Product support as defined Exhibit C attached hereto.
4.10 Nortel Networks shall not:
(a) resell to End Users and/or Distributors Products obtained for it own
use under other agreements between Elastic Networks and Nortel
Networks; or
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Agreement No. NTI9801D
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(b) distribute Products at locations at which Nortel Networks is unable
to provide the level of service, if any, required in Exhibit C; or
(c) knowingly distribute damaged or defective Products, or parts
thereof; or
(d) except as noted in any applicable Exhibit with respect to emergency
replacement/repair and routine replacement/repair regarding
repaired or replacement parts, knowingly distribute used Products
without full prior disclosure to the End User and/or Distributor of
the fact of such used condition; or
(e) convert, adjust, alter or modify Product except to the extent that
such action is authorized in writing by Elastic Network; or
(f) remove, alter, disconnect or negate any of the safety features
incorporated into Product; or
(g) distribute any Product which is represented to an End User and/or
Distributor to be new and unused Elastic Networks Product unless it
is assumed by Nortel Network to be, in fact, new and unused because
it was distributed by Elastic Networks to Nortel Networks pursuant
to this Agreement; or
(h) distribute any Software to anyone from whom Nortel Networks has
not received and retained in its files a properly executed
acceptance of the Software License terms and conditions; or
(i) take any action, other than as authorized in this Agreement, which
could reasonably be foreseen to cause an adverse effect upon the
goodwill of Elastic Networks and/or the Products; or
(j) alter, obliterate, cover or remove any trademark, tradename, serial
number, or other identifying marks, characteristics or legends
appearing on any Product (including any associated packaging,
labels, manuals, and/or documentation), without Elastic Networks'
consent; or
(k) use or display any of Elastic Networks' or Elastic Networks'
suppliers' trademarks, tradenames, or copyrights except in
connection with the advertising, promotion or distribution of the
Products and in accordance with the provisions of this Agreement.
4.11 The Parties agree that from time to time Elastic Networks may request
Nortel Networks to assist Elastic Networks in promoting Product
utilizing Nortel Networks' Enterprise Networks Account team. In the
event such assistance and/or direct promotion results in a sale of
Elastic Networks Products, but not a sale of Products directly to Nortel
Networks whereby Nortel Networks would have otherwise expected to earn
on margin on any subsequent resale, Elastic Networks shall pay to Nortel
Networks a fee of two percent (2%) of the total purchase price
("Finder's Fee") of the initial order for such Elastic Networks Products
sold to the end user. Such Finder's Fee may be negotiated from time to
time to the mutual agreement of the Parties.
4.12 If requested by Nortel Networks or Nortel Networks' End User and/or
Distributor, Elastic Networks shall brand Product in accordance with
Nortel Networks' or Nortel Networks' Fund User's and/or Distributor's
branding specifications, such specifications to be mutually agreed. At
the time Nortel Networks or Nortel
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Agreement No. NTI9801D
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Networks' End User and/or Distributor requests Product to be branded,
Exhibit A shall be amended to add thereto such Product, and Exhibit B
shall be amended upon agreement of the Parties to add thereto the prices
and the deliver interval applicable to such branded Product. This
paragraph 4.12 shall also be applicable to Documentation included with
the Products.
4.13 Pursuant to terms and conditions to be agreed upon by the Parties,
Nortel Networks shall have the right to integrate Hardware and Software
into other Nortel Networks products, including Nortel Networks' UE9000
product. Elastic Networks shall work with Nortel Networks to ensure that
any output of interfaces shall be compatible with the Nortel Networks
products in which such Product is being integrated. Nortel Networks
shall have the right to use the Software to integrate the Products into
Nortel Networks products.
5. RECORD KEEPING AND REPORTING
5.1 Nortel Networks shall maintain a record of its distribution of Products
in accordance with Exhibit F, in order to comply with the requirements
imposed upon Elastic Networks by Elastic Networks' suppliers of Software
and for Nortel Networks' and Elastic Networks' protection in the event that
product liability, copyright infringement; trade secret misappropriation;
or intellectual property misuse claims related to the Products should
arise.
5.2 Nortel Networks shall retain a copy of the records specified in Section
5.1 for at least seven (7) years from the date of distribution of the
Product, and such obligation shall survive the termination of this
Agreement. Nortel Networks may, at its option upon termination of this
Agreement, satisfy the requirement to retain such records by delivering
complete and accurate copies of such records to Elastic Networks and
formally assigning to Elastic Networks all of Nortel Networks' rights under
all then effective Software licenses. Elastic Networks shall have limited
right, upon fifteen (15) days written notice to Nortel Networks and without
unduly interfering with Nortel Networks' normal day-to-day operations, to
examine Nortel Networks' records regarding the distribution of such Elastic
Networks or Elastic Networks' supplier generated Software pursuant to the
terms of this Agreement. Nortel Networks' shall cooperate fully with
Elastic Networks or any of its Software suppliers in the defense or
prosecution of any suit in which the existence or non-existence of a
Software License is either an issue or any aspect of such Software License
is in question.
6. ORDERING
6.1 Subject to Section 8.2, all purchases for Products by Nortel Networks
pursuant to this Agreement shall be made by means of Orders, issued from
time to time by Nortel Networks by means of mail, fax or, web, in which
case the procedures for web ordering will be provided by Elastic
Networks to Nortel Networks, specifying (i) the quantity of each Product
that Nortel Networks desires to purchase, and (ii) the Delivery Date
and place or places, requested for delivery.
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Agreement No. NTI9801D
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Elastic Networks shall acknowledge receipt of each Order within two (2)
business days after receipt of Order. Receipt by Elastic Networks of
Nortel Networks' Order shall be deemed to occur on the same business day
that Nortel Networks' Order is sent if forwarded by fax or electronic
transmission and within three (3) business days if sent by mail.
6.2 All Orders issued hereunder by Nortel Networks shall reference this
Agreement and shall be deemed to incorporate and be governed solely by
the terms and conditions set forth in this Agreement. Any term or
condition set forth in any Order or other document submitted that is
inconsistent with this Agreement or Elastic Networks' written acceptance
shall be of no force or effect.
6.3 Placement of an Order by Nortel Networks will not bind Elastic Networks
until the Order is accepted in writing by a representative of Elastic
Networks. Elastic Networks shall accept or reject Orders within two (2)
business days of their receipt by Elastic Networks. In the event such
Order is not accepted within such two (2) day period, such Order shall
be deemed rejected.
6.4 Nortel Networks may, at any time, by written notice issued to Elastic
Networks at least thirty (30) days prior to the accepted Delivery Date,
reschedule the delivery of ordered Products, provided such rescheduled
Delivery Date shall not exceed thirty (30) days following the date the
Products were originally scheduled to ship. Delivery of the Products
covered by any individual Order cannot be postponed more than once.
6.5 Nortel Network may cancel all or a portion of an Order accepted by
Elastic Networks by providing Elastic Networks with a written notice of
cancellation and by paying to Elastic Networks a cancellation charge,
if any, (as liquidation damages and not as a penalty) equal to ten
percent (10%) of the purchase price of the canceled portion of the Order
if the date of Elastic Networks' receipt of the cancellation notice is
less than thirty (30) days prior to the date of the scheduled Delivery
Date of the Order.
7. PRICES AND PAYMENTS
7.1 The pricing and volume discounts for each Product shall be as set forth
in Exhibit B of this Agreement. Prices set forth in Exhibit A shall be
firm through December 31, 1998; thereafter, prices may be revised
annually upon providing Nortel Networks sixty (60) days written notice
of such price changes. Such notice shall specify the effective date of
the price change and shall apply to Orders received by Elastic Networks
on or after the effective date of the price change.
7.2 In an effort to provide Nortel Networks the opportunity to competitively
and profitably offer Products in high volume applications, Elastic
Networks may offer to Nortel Networks, when requested by Nortel
Networks, additional discounts on Products set forth in Exhibit A for
Nortel Networks' use in high volume, competitive price proposals.
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Agreement No. NTI9801D
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7.3 Pricing to extend the Warranty Period, as defined in Section 10.1, on
Products shall be made available to Nortel Networks as set forth in
Exhibit C.
7.4 All taxes, import and export duties, if applicable, sales, use,
privilege, value-added, excise or similar taxes, duties or assessments,
shipping, handling, insurance, brokerage and related charged pertaining
to the Products and any other goods and services purchased by Nortel
Networks hereunder, other than taxes computed on the basis of the net
income of Elastic Networks, will be paid by Nortel Networks. These
charges shall appear as separate line items on Nortel Networks' invoice.
7.5 Payment shall be due to Elastic Networks from Nortel Networks forty-five
(45) calendar days following the receipt by Nortel Networks of an
invoice for the Products, which invoice shall be delivered to Nortel
Networks no earlier than the Delivery Date of the Products. All amounts
payable hereunder shall be in U.S. dollars. Any amount not paid when due
will thereafter bear interest until paid at a rate equal to the lesser of
(i) one percent (1%) per annum more than the prime rate established from
time to time by Citibank, N.A., New York, or (ii) the maximum interest
rate allowed by applicable law.
8. FORECAST.
8.1 At or before the beginning of each month during the term of this
Agreement, Nortel Networks shall provide to Elastic Networks a written
forecast of the quantities of each Product to be purchased, if any, from
Elastic Networks by Nortel Networks for delivery in each of the twelve
(12) months immediately following calendar months (each such forecast
hereinafter referred to as a "Forecast"). The issuance of a Forecast
shall not be considered either an Order for nor a commitment on Nortel
Networks' part to order or purchase any Products. In the event that
Nortel Networks reasonably anticipates any material deviance between
the Forecast and Nortel Networks' actual requirement for the Products in
the applicable Forecast period, Nortel Networks will promptly notify
Elastic Networks of any such anticipated material deviance, and Elastic
Networks will use its good faith efforts to meet such actual requirement
of Nortel Networks upon such prompt notice.
8.2 The Parties hereby undertake to discuss, within six (6) months from the
Effective Date of the Agreement, the implementation of a Demand-Pull
Program in which case ordering of Products under Section 6.1 would occur
in the manner set forth in that program and the Agreement revised
accordingly.
9. DELIVERY, TITLE AND ACCEPTANCE.
9.1 Subject to Elastic Networks' acceptance of an Order, as per Section 6,
Elastic Networks shall deliver Products that comply with the
Specifications to the delivery location set forth in Nortel Networks'
accepted Order. Unless otherwise
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Agreement No. NTI9801D
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mutually agreed in writing by the Parties, title and risk of loss or
damage to Products shall pass to Nortel Networks upon delivery to the
loading dock at the installation site or other delivery location specified
by Nortel Networks in its Order. Nortel Networks shall keep such
Products fully insured for the total amount then due Elastic Networks
for such Products. Such delivery shall be made to a carrier or freight
forwarder selected by Elastic Networks unless otherwise specified by
Nortel Networks. Upon receipt of Products, Nortel Networks shall have
ten (10) days to inspect shipment and verify any damage that may have
occurred in delivery or report any mis-shipments to Elastic Networks. In
the event of the foregoing, Nortel Networks shall return Products to
Elastic Networks via the RMA procedure set forth in Section 11. In the
event Nortel Networks fails to notify Elastic Networks of any damage or
mis-shipments within such ten (10) day period, Nortel shall be deemed to
have accepted the shipped Products.
9.2 Through March 31, 1999, standard delivery intervals for forecasted
quantities of Products shall be six (6) weeks from receipt and
acceptance of an Order; thereafter, standard delivery intervals for
forecasted quantities of the Products shall be four (4) weeks from
receipt and acceptance of an Order. Such standard delivery intervals may
be amended by Elastic Networks from time to time with sixty (60) days
prior written notice to Nortel Networks, but shall in no event exceed
six (6) weeks from receipt and acceptance of an Order. Elastic Networks'
only obligation regarding such delivery intervals shall be to meet
Delivery Dates and quantities set forth in an accepted Order. Standard
delivery intervals for unforecasted quantities will be ninety (90) days
following Elastic Networks' receipt and acceptance of an Order for such
unforcasted quantities. If Elastic Networks, prior to acceptance of an
Order, advises Nortel Networks that it cannot meet a Delivery Date shown
in an Order, both Parties may negotiate a revised date prior to
acceptance of the Order by Elastic Networks, and such revised date
shall be shown in Nortel Networks' acceptance of the Order.
9.3 An Order shall be delivered complete except when partial shipments are
expressly specified in the Order or authorized in writing by Nortel
Networks. In the event that Elastic Networks fails to deliver Products
on or before the tenth (10th) business day after the Delivery Date or
any extension thereof granted in writing by Nortel Networks, Nortel
Networks may, as its sole and exclusive remedy, cancel, without charge,
the affected portion thereof by providing to Elastic Networks a written
notice of cancellation. In the event that Nortel Networks does not
cancel such affected portion thereof in accordance with this Section
9.3, then Nortel Networks will be entitled, as its sole and exclusive
remedy for such delayed delivery, to receive the liquidated damages
calculated in accordance with Section 9.4 hereof. Elastic Networks shall
promptly advise Nortel Networks of any anticipated delay in meeting the
Delivery Date specified in any Order and shall cooperate with Nortel
Networks in the implementation by Elastic Networks of any appropriate
action or workaround plans with a view to enable Nortel Networks to
satisfy its End User and/or Distributor requirements.
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9.4 If and to the extent that Elastic Networks fails to meet a Delivery
Date, specified in an Order accepted by Elastic Networks, by a period of
more than fifteen (15) business days through no fault of Nortel Networks
and such failure is not attributable to force majeure as described in
Section 14, Nortel Networks shall be entitled to receive as liquidated
damages, and not as a penalty, an amount equal to one percent (1%) per
week of the purchase price of the applicable Product in an Order for
which Elastic Networks fails to meet the Delivery Date for each week
beyond such fifteen (15) business day period, until actual delivery;
provided that the maximum amount of such liquidated damages due to
Nortel Networks shall in no event exceed five percent (5%) of the
purchase price of such Product in that Order or fifty thousand dollars
($50,000.00), whichever is less. At Nortel's option, Elastic Networks
shall either credit the liquidated damages against the price of the
applicable Order (if not cancelled) or promptly make payment to Nortel.
9.5 Nortel Networks may, from time to time, request expedited delivery
intervals of Product. In such event, Elastic Networks shall accept such
Order and shall make commercially reasonable efforts to deliver Products
by such expedited delivery interval. In the event Elastic Networks fails
to deliver such Products by such expedited delivery interval, Nortel
Networks shall not be entitled to: (1) cancel the Order as set forth in
Section 9.3, or (2) liquidated damages as set forth in Section 9.4.
10. WARRANTY.
10.1 Elastic Networks warrants that
a) Product shall, at the Delivery Date, be new and free and clear of
all security interest or other lien and other encumbrance;
b) for a period of ninety (90) days from the Delivery Date (such
period being hereinafter referred to as the "Warranty Period"), the
Hardware and the Software shall be free from defects in materials
and workmanship and shall conform to and operate in accordance
with the Specifications;
c) the Software will operate in the environment in which it is
installed, without troubles, due to defects which result from the
failure of the Software to conform to the Specifications;
d) with the exception of any notice which may be provided by Elastic
Networks pursuant to Section 29, the Hardware furnished by Elastic
Networks, as described in this Agreement, is safe for normal use,
is non-toxic, presents no abnormal hazards to persons or their
environment, and may be disposed of as normal refuse without
special precautions;
e) for a period of five (5) years from the Delivery Date, the
occurrence in, or use by, Elastic Networks' products ("Products")
and any software or
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Agreement No. NTI9801D
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systems of Elastic Networks used by Elastic Networks in the supply
of Services or performance of this Agreement in any way, of dates
before, on, or after January 1, 2000 A.D., including dates and leap
years between the twentieth and twenty-first centuries ("Millennial
Dates"), will not adversely affect the Products', software's or
systems' performance. The Products, software and systems will
without error or omission, create, receive, store, process and
output (collectively, "Compute") information related to Millennial
Dates. This warranty includes, without limitation, that the
Products, software and systems will accurately, and without
performance degradation, Compute Millennial Dates, date-dependent
data, date-related interfaces, or other date-related functions
(including, without limitation, calculating, comparing, and
sequencing such functions).
f) it has developed, is the owner of and/or possesses all necessary
rights, including, without limitation, rights in respect of Third
Party Software, to use and to market the Products including the
Product Software required for the operation of the Products;
g) no license or other agreement is or will be violated by the terms
and conditions of this Agreement;
h) it is either the owner or is otherwise in possession of sufficient
licensed rights pertaining to any portion of the Products
(including the Product Hardware and Product Software) in order to
allow it to satisfy all of its obligations hereunder.
i) the warranty provisions contained in this Section 10 shall apply
during and after the Product Warranty Period, except as expressly
set forth in 10 b) and c) above.
10.2 Elastic Networks shall, at its expense, during the Warranty Period,
provide repair or replacement services ("Repair Services") in accordance
with Section 10.3 with respect to Hardware and Software which have failed
to conform to the above warranties. After expiry of the Warranty Period,
Repair Services shall be at prices set forth in Exhibit C.
10.3 In routine warranty service situations, Elastic Networks shall provide
immediate replacement Products upon receipt of the defective Products,
which shall include the RMA number and documentation. Elastic Networks
shall provide repaired Products within ten (10) days from receipt of the
defective Products, which shall include the RMA number and
documentation. Advanced Replacement of Products, as defined in Exhibit
C, shall be made available to Nortel Networks as set forth in Exhibit C,
Section 2.1.1. All Hardware and Software subject to this Section 10.3
shall be functionally equivalent or better than the vintage of the
repaired or replaced units, and must be backward compatible. Hardware
repairs and replacements and Software corrections effected during the
Warranty Period shall be warranted, as above provided, for the remainder
of the Product Warranty
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Agreement No. NTI9801D
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Period or thirty (30) days from the date of shipment, whichever is
longer. Hardware repairs or replacements and Software corrections or
replacements effected after expiry of the Warranty Period shall be
warranted, as described above, for a period of thirty (30) days from the
repair date stenciled or otherwise identified in accordance with Section
11.4 (Repair Procedures).
10.4 This warranty does not apply to items normally consumed in operation,
such as lamps and fuses and to any defect which has been caused by
Nortel and arises from mishandling, misuse, neglect or improper testing
or repair. The warranties set forth in this Section 10 shall not apply
to Third Party Software or Third Party Hardware, provided however that
Elastic Networks shall assign to Nortel Networks the warranty rights
granted to Elastic Networks by the appropriate vendor of such Third
Party Software or Third Party Hardware.
10.5 Notwithstanding the foregoing, Products found to be defective within
thirty (30) days from their initial utilization at Nortel Networks' End
User and/or Distributor site (each such defective Product hereinafter
referred to as a "DOA"), shall be returned to Elastic Networks along
with the RMA documentation. Returned DOA units shall be repaired,
re-furbished, tested and returned, free-of-charge, to Nortel Networks as
new Products. Should the DOA occurrence exceed 0.5% of the units shipped
in any given calendar quarter, Elastic Networks shall perform root cause
analysis and agree with Nortel Networks on a plan to correct the
situation.
10.6 The above warranty shall survive inspection, acceptance and payment. All
transportation charges arising from Nortel Networks' return of any
defective Product to Elastic Networks shall be paid by Nortel Networks.
All transportation charges arising from Elastic Networks' delivery of
the repaired or replacement Product to Nortel Networks shall be paid by
Elastic Networks.
10.7 If Elastic Networks is in default pursuant to Section 18 (Default), then
in addition to Nortel Networks' rights as described in Section 10.2
above, Nortel Networks, where directed by its End User(s) and/or
Distributor(s), reserves the right to repair or replace any defective
Hardware or to correct any defective Software on its own or to arrange
for such repair, replacement or correction by other entities, in which
case the warranties of Elastic Networks shall be null and void in
respect to any such repair, replacement or correction of such Product.
In that event Elastic Networks shall reimburse Nortel Networks for all
reasonable costs and expenses incurred by Nortel Networks in exercising
either right under this Section during the applicable Warranty Period.
Any failure by Elastic Networks to execute its warranty obligation as
contained in this Section 10 and Section 11 shall constitute a material
breach of Elastic Networks' obligations hereunder.
10.8 In the event that (i) there is a breach of the warranty described in
Section 10.1 above with respect to any Products purchased by Nortel
Networks hereunder and (ii) Elastic Networks decides to repair or
replace such defective unit, then Elastic Networks shall (1) provide a
"Unit Failure Analysis" report on each such field returned units and a
"Component Failure Analysis" report, within sixty (60)
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Agreement No. NTI9801D
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calendar days from the date that Elastic Networks receives the defective
unit from Nortel Networks, to Nortel Networks' Repair Manager and Quality
Manager, and (2) upon Nortel Networks' reasonable written request,
Elastic Networks shall perform root cause analysis on each such returned
unit and shall provide a detailed report of such analysis to Nortel
Networks within sixty (60) calendar days of receipt of Nortel Networks'
request.
10.9 In case of a "No Fault Found" ("NFF") in respect of Products returned
where, in the calendar quarter in which the NFF unit is received by
Elastic Networks, the number of NFF units is more than five percent (5%)
of the number of units of the Products delivered in that calendar
quarter or if Nortel Networks requests retesting of Products reasonably
known to Nortel Networks as being in good condition, Nortel Networks
will pay to Elastic Networks a service fee in accordance with Elastic
Networks' then current standard rates therefor and any return
transportation costs.
10.10 Should the Product failures classified by Elastic Networks NFF
represent more than twenty percent (20%) of the Products return rates as
defined in the Specifications, then, in addition to Elastic Networks'
performing a root cause analysis, the Parties shall jointly determine a
corrective action plan and implement such corrective plan of action
within thirty (30) calendar days of this occurrence being reported.
Elastic Networks will update Nortel in writing with the findings of the
root cause analysis as well as with the corrective plan of action.
10.11 THE FOREGOING WARRANTIES AND REMEDIES CONSTITUTE THE ONLY WARRANTIES
WITH RESPECT TO THE PRODUCTS AND ARE NORTEL NETWORKS' SOLE AND
EXCLUSIVE REMEDIES IN THE EVENT SUCH WARRANTIES ARE BREACHED. EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THERE ARE NO OTHER
WARRANTIES, WRITTEN OR ORAL, STATUTORY, EXPRESS, OR IMPLIED, INCLUDING
WITHOUT LIMITATION ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
11. REPAIR AND REPLACEMENT PROCEDURES AND REPAIR SERVICES.
11.1 Repair Services shall be available to Nortel Networks in accordance
with the provisions contained in this Section 11 and shall be
applicable to the provision of Repair Services by Elastic Networks
during and after the Product Warranty Period.
11.2 Prior to returning any defective Products to the Elastic Networks
repair/replacement center, Nortel Networks shall notify Elastic
Networks orally of the defect, if known at that time, and shall request
authorization from Elastic Networks for the return of such Products.
Elastic Networks shall provide Nortel Networks with a Return Material
Authorization ("RMA") number to be prominently displayed on the
shipping container for the defective Products and advise Nortel
Networks of the repair location to which the Products should be
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Agreement No. NTI9801D
Page 16
returned. All transportation charges arising from Nortel Networks'
return of any defective Product to Elastic Networks shall be paid by
Nortel Networks. All transportation charges arising from Elastic
Networks' delivery of the repaired or replacement Product to Nortel
Networks shall be paid by Elastic Networks.
11.3 Nortel Networks shall furnish the following information with any
defective Products returned to Elastic Networks for Repair Service:
i) Nortel Networks' complete address;
ii) quantities and model numbers of Products being delivered for
repair/replacement;
iii) the nature of the defect or failure, if known;
iv) if Product is no longer under warranty, the Order number under which
repairs are to be made (not applicable for DOA units);
v) name(s) and telephone number(s) of Nortel Networks' employee(s)
or other designated persons to contact in case of questions
about the Products;
vi) ship-to address or Nortel Networks' location to which repaired or
replacement Products should be returned;
vii) whether or not returned Product is under warranty.
11.4 Elastic Networks shall date stamp each repaired and returned Product
with the repair date and type of repair "pre fix" as per Bellcore
GR-209 specifications. Hardware repaired by Elastic Networks shall be
stamped in accordance with requirements outlined in Bellcore
TR-NWT-000078. Without limiting the generality of the foregoing, the
stamping shall include the repair date stenciled or otherwise
identified in a permanent manner at a readily visible location on the
Hardware, unless otherwise directed by Nortel Networks.
11.5 Upon Nortel Networks' request, Elastic Networks shall promptly provide
Nortel Networks with the name(s) and telephone number(s) of the
individual(s) to be contacted concerning any questions that may arise
with respect to the Repair Services.
11.6 Elastic Networks shall promptly notify Nortel Networks of returned
Products which are found by Elastic Networks to be beyond repair or
irreplaceable. Products shall only be considered beyond repair or
irreplaceable after agreement of the Parties to that effect. All
Products under warranty which are found to be beyond repair or
irreplaceable, through no fault of Nortel Networks, shall be returned
to Nortel Networks freight pre-paid and properly insured with a
complete refund or credit of the original purchase price.
11.7 OUT OF WARRANTY REPAIR SERVICES. Out of Warranty Repair Services will be
offered by Elastic Networks as part of the Extended Support Services
Program described in Exhibit C.
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Agreement No. NTI9801D
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11.8 Except for the provisions set forth in Section 12.3 relative to
discontinued Products, Elastic Networks shall make such Repair Services
and technical support services available for a minimum period of three
(3) years from the date of last purchase of such Products by Nortel
Networks hereunder. This provision shall survive the expiration of this
Agreement.
12. PRODUCT SUPPORT AND LIFECYCLES
12.1 Elastic Networks shall supply to Nortel Networks, at no additional
charge, at lease one (1) set of electronic copies of Elastic Networks'
Product Documentation for use by Nortel Networks' technicians in
support of the Products, as well as provide Nortel Networks access to
Elastic Networks' web site, Thereafter, Elastic Networks shall continue
to provide updates to such set or sets, as the case may be, of Product
Documentation, at no additional charge to Nortel Networks, during the
Term of this Agreement, as soon as they are available. Elastic Networks
shall give Nortel Networks thirty (30) days prior notice of any changes
to Product Documentation or web site address changes.
12.2 In addition to Elastic Networks' warranty obligations as set forth in
Section 10, Elastic Networks shall provide technical support in
accordance with Exhibit C for the Product supplied hereunder during the
Warranty Period at no charge to Nortel Networks. Thereafter, Nortel
Networks shall pay all fees, if any, for such technical support as set
forth in Exhibit C.
12.3 DISCONTINUED PRODUCTS. From time to time during the term of this
Agreement, Elastic Networks may determine that Products have reached
the end of their useful life. Elastic Networks reserves the right to
discontinued, at its own discretion, any Product that it deems no longer
marketable upon one hundred eighty (180) days written notice to Nortel
Networks. Elastic Networks shall provide Nortel Networks information on
such Product discontinuance simultaneously with its other distributors
of such discontinued Products. During such one hundred eighty (180) day
period, Nortel Networks may place a non-cancellable order for its
requirements or enter into any other mutually satisfactory agreement
with Elastic Networks prior to such discontinuance. This provision
shall survive the expiration of this Agreement. In the event Elastic
Networks elects to discontinue any Products hereunder, Elastic Networks
shall continue to provide Nortel Networks with repair and replacement
service for a minimum period of one (1) year from the discontinuance
date of the Product.
12.4 MODIFIED AND NEW PRODUCTS. From time to time during the term of this
Agreement, Elastic Networks may develop enhancements or changes to any
Products, in which event Elastic Networks shall provide Nortel Networks
written information on such Product enhancements as it does to its
other commercial customers for the Products. In the event such
enhancements or changes affect the form, fit, function, performance or
price to the Products and/or process ("Changes"), Elastic Networks
shall provide Nortel Networks written notification of such Changes
within thirty (30) days of Elastic Networks' internal design
<PAGE>
Agreement No. NTI9801D
Page 18
authorization allowing any such Change. Where, however, in Elastic
Networks' sole opinion, an intrinsic design or manufacturing defect of
the Product(s), including a failure of the Software to operate in the
environment in which it is installed, without troubles, due to defects
which result from failure of the Software to conform to the
Specifications, causes an inoperative, hazardous or unsatisfactory
condition of a nature as to require the introduction in the Products of a
Class A or AC Change, as described in GR-209, Elastic Networks shall
promptly notify Nortel Networks and initiate immediate action to correct
the situation. The Changes which require that a notice be forwarded to
Nortel Networks shall include, without limitation, any proposed Change to
the Products in accordance with the classifications described in
GR-209-CORE ("GR-209"). All Changes proposed outside the spectrum shall
be classified as "O". The interpretation of GR-209 resides with Elastic
Networks.
12.5 RETROFITS. If Elastic Networks shall determine that a need exists to
make either Class A Corrective Retrofits or Class B Corrective
Retrofits, then Elastic Networks shall so notify Nortel Networks within
thirty (30) days of the date of such determination by means of
appropriate documentation. Elastic Networks shall use all commercially
reasonable efforts to develop required Corrective Retrofits and, when
and if such Corrective Retrofits are developed, shall provide
to Nortel Networks without charge, one Corrective Retrofit kit for each
affected item of Product delivered to Nortel Networks pursuant to this
Agreement.
12.5.1 Elastic Networks shall have the option to: (a) request Nortel
Networks to install all Class A Corrective Retrofit kits with
its own personnel, or such personnel as Nortel Networks may
contract: or (b) install all Class A Corrective Retrofit kits
using its own personnel, provided Nortel Networks first:
(1) obtains permission from Nortel Networks' End User and/or
Distributor for Elastic Networks personnel to work on such End
User's and/or Distributor's affected Product during normal
business working hours and at such time as is reasonably
convenient to both Elastic Networks and the End User and/or
Distributor; and (2) when necessary, obtains the such End
User's and/or Distributor's permission to take the affected
Product out of service during the time necessary to install
the Class A Corrective Retrofit kit; and (3) has obtained from
such End User and/or Distributor a written agreement
protecting Elastic Networks against liability for any
incidental, special and/or consequential damages to such End
User and/or Distributor as a result of performance by Elastic
Networks. In the event Elastic Networks elects to have Nortel
Networks install all Class A Corrective Retrofit kits, Elastic
Networks agrees to pay Nortel Networks for all reasonable
deinstallation and installation expenses incurred as a result of
the Class A Corrective Retrofits.
12.5.2 Installation of Class B Corrective Retrofit kits at Nortel
Networks' End User and/or Distributor sites shall be the
responsibility and obligation of Nortel Networks, and the
expense and timing of such retrofits shall be determined
mutually by the Parties on a case by case basis, unless Elastic
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Agreement No. NTI9801D
Page 19
Networks is providing post-warranty maintenance to the
affected Product under contract to Nortel Networks' End User
and/or Distributor, in which case Elastic Networks will
install the Class B Corrective Retrofit kit at Elastic
Networks' expense. If Elastic Networks shall determine that a
need exists to make Regulatory Retrofits, then Elastic Networks
shall notify Nortel Networks by means of appropriate
documentation. When a Regulatory Retrofit kit is developed,
Elastic Networks shall offer, at such price as it may
announce, and on its then standard terms and conditions, to
provide such Regulatory Retrofit kit for all affected Products
delivered to Nortel Networks pursuant to this Agreement.
13. EMERGENCY REPLACEMENT PRODUCTS.
In emergency situations threatening continuity of service, Elastic
Networks will use its good faith efforts to ship Nortel Networks or its
End Users and/or Distributors emergency replacement Products within
twenty-four (24) hours of Nortel Networks' request, which may be
conveyed to Elastic Networks by telephone or facsimile. All Products
supplied under this Section shall be functionally equivalent to or
better than the vintage of the replaced Products. Emergency replacement
Products shall be shipped via next day service. Elastic Networks shall
provide emergency replacement of Products to Nortel Networks at no charge
during the Warranty Period. For Products replaced out of the Warranty
Period, Elastic Networks' provision of emergency replacement shall be as
set forth in this Section 13 and such replacement Products shall be
subject to fees as set forth in Exhibit C, if any.
14. FORCE MAJEURE.
If the performance of any obligation under this Agreement or an Order
is interfered with by reason of any circumstances beyond the reasonable
control of the Party affected, including, without limitation, fire,
explosion, power failure, acts of God, war, revolution, civil
commotion, delays of the other Party in the performance of any of its
obligations hereunder, delays of subcontractors, or delays of suppliers
in providing to Elastic Networks the materials required for the
manufacturing of the Products, unavailability of sources of energy,
acts of the public enemy, or any law, order, regulation, ordinance or
requirement of any government or legal body, and labor difficulties,
including without limitation, strikes, slowdowns, picketing or
boycotts; then the Party affected shall be excused from such
performance for a period equal to the delay resulting from any such
causes and such additional period as may be reasonably necessary to
allow the Party to resume its obligations, (and the other Party shall
likewise be excused from performance of its obligations to the extent
such Party's obligations relate to the performance which was interfered
with). The Party so affected shall make reasonable efforts to remove
such causes of nonperformance; provided, however, in the context of
labor difficulties, that a Party shall not be obligated to accede to
any demands being made by employees or other personnel.
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Agreement No. NTI9801D
Page 20
15. PATENT INFRINGEMENT.
15.1 Elastic Networks will defend at its expense all claims, proceedings
and/or suits brought against Nortel Networks, its End User and/or
Distributors alleging that the use, copying, licensing, sublicensing,
sale and/or distribution of any Products, excluding Third Party
Hardware and/or Third Party Software, delivered hereunder infringes or
violates any patent, copyright, trade secret or other intellectual
property right in any country where Nortel Networks resells the
Products (herein "Infringement Claim"). Elastic Networks shall pay all
litigation costs, reasonable attorney's fees, settlement payments and
any damages awarded or resulting from any such suit, claim or
proceeding. With respect to Third Party Hardware and/or Third Party
Software, Elastic Networks shall assign any rights with respect to
infringement of any patent, copyright, trade secret or other
intellectual property right in any country where Nortel Networks
resells the Products granted to Elastic Networks by the supplier of
such Third Party Hardware and/or Third Party Software. In the event
a Product becomes the subject of an Infringement Claim outside of
North America, Elastic Networks shall have the right to ask Nortel
Networks to cease all sales of such Product in such country, and
Elastic Networks will not be liable for any subsequent sales in such
country in the event Nortel Networks continues to sell such infringing
Product.
15.2 The Party entitled to defense pursuant to Section 15.1 shall promptly
advise the Party required to provide such defense of the applicable suit,
claim, or proceeding and shall cooperate with such Party in the defense
or settlement thereof. The Party required to provide such defense shall
have sole control of the defense of the applicable suit, claim, or
proceeding and of all negotiations for its settlement or compromise.
15.3 Upon providing Nortel Networks with notice of a potential or actual
infringement claim, Elastic Networks may (or in the case of an
injunction, shall), at Elastic Networks' option, either procure a right
to use, replace or modify, or require the return of the affected
Product for a refund of its depreciated cost based on a seven (7) year
straight-line process of accounting.
15.4 The obligations of Elastic Networks hereunder with respect to any suit,
claim, or proceeding described in Section 15.1 shall not apply with
respect to Products which are (a) manufactured or supplied by Elastic
Networks in accordance with any design or any special instruction
furnished by Nortel Networks, (b) used by Nortel Networks in a manner
or for a purpose not contemplated by this Agreement, (c) used by Nortel
Networks in combination with other products not provided by Elastic
Networks, including, without limitation, any software developed solely
by Nortel Networks through the permitted use of Products furnished
hereunder, provided the infringement arises from such combination or the
use thereof. Nortel Networks shall indemnify and hold Elastic Networks
harmless against any loss, cost, expense, damage, settlement or other
liability, including, but not limited to, attorneys' fees,
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Agreement No. NTI9801D
Page 21
which may be incurred by Elastic Networks with respect to any suit,
claim, or proceeding described in this Section 15.4.
15.5 The provisions of Sections 15.1 through 15.4 state the entire liability
of Elastic Networks and its suppliers and the exclusive remedy of
Nortel Networks with respect to any suits, claims, or proceedings of
the nature described in Section 15.1. Elastic Networks' total
cumulative liability, pursuant to Sections 15.1 shall for each
infringement claim not exceed one hundred percent (100%) of the total
aggregate purchase price of the Product(s) purchased under the
Agreement and giving rise to such claim.
15.6 Each Party's respective obligations pursuant to this Section shall
survive any termination of this Agreement.
16. PROPRIETARY INFORMATION.
16.1 DISCLOSURE OF PROPRIETARY INFORMATION
It is expected that the Parties will disclose to each other certain
business, marketing, technical, scientific or other information of any
Party, including, without limitation, Specifications and Software
which, at the time of disclosure, is designated as proprietary (or like
designation), is disclosed in circumstances of confidence, or would be
understood by the Parties, exercising reasonable business judgment, to
be confidential information ("Proprietary Information") and each Party
recognizes the value and importance of the protection of the other's
Proprietary Information. Except as permitted otherwise by law, the
Receiving Party shall keep confidential Proprietary Information of the
Disclosing Party using the same degree of care that it uses to
safeguard its own Proprietary Information of a similar nature, but not
less than reasonable care, and shall not disclose Proprietary
Information of the Disclosing Party, to any but its own employees with
a need to know the Proprietary Information in furtherance of the
purposes of this Agreement. With respect to Software, this obligation
may be expanded, amplified or modified by the terms of the Software
License; in the event of a conflict between a Software License and this
Section 16, the Software License shall control.
16.2 APPLICATION OF RESTRICTION
The restrictions of this article shall not apply: (1) to Proprietary
Information which enters the public domain without fault of the
Receiving Party; or (2) to Proprietary Information which the Receiving
Party can prove was rightfully in its possession prior to disclosure
from the Disclosing Party; or (3) to Proprietary Information which is
independently developed by the Receiving Party; or (4) if such
restrictions would prevent required compliance with applicable law,
applicable governmental regulation, or an order of a court of
competent jurisdiction. A Receiving Party invoking exception (4)
above shall use all commercially reasonable efforts to notify the
Disclosing Party of any intended disclosure as far in advance of the
date of required compliance as is practicable
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Agreement No. NTI9801D
Page 22
and shall not make such disclosure in advance of the date of required
compliance, so that the Disclosing Party may have an opportunity to take
such steps as it deems appropriate to defend its interests; provided,
however, that in the event the Receiving Party invokes exception (4)
above and the Proprietary Information is that of a Elastic Networks
supplier, such notification shall be made to Elastic Networks.
16.3 SURVIVAL OF RESTRICTION
The Parties' confidentiality obligations shall survive the termination
of this Agreement, regardless of the cause, and shall extend to the
earlier of such times as Proprietary Information and/or Software
enters the public domain through no fault of either Party, or ten (10)
years following the expiration or termination of this Agreement.
16.4 The Parties acknowledge and agree that a breach of this Agreement may
result in irreparable and continuing harm to the Disclosing Party for
which there may be no adequate remedy at law. In the event of a breach
or a threatened or intended breach of this Agreement by the Receiving
Party, the Disclosing Party shall be entitled to seek, preliminary
injunctions unilaterally with twenty-four (24) hour notice, and final
injunctions with notice, enjoining and restraining such breach, or
threatened or intended breach, and to such other rights and remedies as
are available at law or in equity to the Disclosing Party except as
expressly set forth herein.
17. LIABILITY.
17.1 Nortel Networks shall obtain a contract with each End User and/or
Distributor that includes both warranty and general contractual
disclaimers of any Elastic Networks' liability for incidental and
consequential damages of that End User and/or Distributor. Any such
contract should not identify Elastic Networks by name but rather as
the "manufacturer" or "supplier" of the Products distributed.
17.2 Each Party shall indemnify and save the other Party harmless from any
liability or claim (including, without limitation, the costs and
reasonable attorneys' fees in connection therewith) that may be made
by anyone relating to personal injury, including death to persons, or
damage to tangible property which results from product liability or
from the negligence and/or willful misconduct of the indemnifying
Party, its employees or agents in the performance of this Agreement.
18. DEFAULT.
18.1 In the event of any material breach of this Agreement or an Order by
either Party which shall continue for thirty (30) or more days after
written notice of such breach, including a reasonably detailed
statement of the nature of such breach, shall have been given to the
breaching Party by the aggrieved Party, the aggrieved Party may then
terminate this Agreement by providing to the breaching Party a
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Agreement No. NTI9801D
Page 23
written notice of termination at any time prior to any such material
breach having been cured by the breaching Party.
18.2 Either Party may terminate this Agreement in the event the other Party
becomes insolvent or bankrupt, makes a general assignment for the
benefit of, or enters into any arrangement with, creditors, files a
voluntary petition under any bankruptcy, insolvency, or similar law,
or has proceedings under any such laws or proceedings seeking
appointment of a receiver, trustee or liquidator instituted against it
which are not terminated within thirty (30) days of their commencement.
18.3 EXCEPT AS PROVIDED IN SECTIONS 15, 16 AND 17, IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR ANY INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OF
ANY NATURE WHATSOEVER FOR ANY BREACH OF THIS AGREEMENT OR OTHERWISE,
INCLUDING LOSS OF PROFIT, LOSS OF DATA OR INTERRUPTION OF BUSINESS
WHETHER SUCH DAMAGES ARE LABELED IN TORT, CONTRACT OR INDEMNITY EVEN IF
DISTRIBUTOR HAS BEEN ADVISED OF SUCH DAMAGES. THIS LIMITATION SHALL
SURVIVE ANY TERMINATION OF THIS AGREEMENT.
18.4 Any action for breach of this Agreement or to enforce any right
hereunder shall be commenced with one (1) year after the cause of
action accrues or it shall be deemed waived and barred.
19. SEVERABILITY.
In the event that any of the terms of this Agreement become or are
declared to be illegal by any Court of competent jurisdiction, such
term(s) shall be null and void and shall be deemed deleted from this
Agreement. All remaining terms of this Agreement shall remain in full
force and effect. Notwithstanding the foregoing, if this paragraph
becomes applicable and, as a result, the value of this Agreement is
substantially impaired for either Party, then the affected Party may
terminate this Agreement by written notice to the other.
20. NOTICES.
Any and all notices, requests, instructions and other communications
required or permitted to be given hereunder may be delivered personally
or by nationally recognized overnight courier service or may be sent by
mail, by telex or by facsimile transmission, at the respective address
or transmission numbers set forth below, and shall be effective (a) in
the case of personal delivery, telex or facsimile transmission, when
received; (b) in the case of mail, upon the earlier of actual receipt
or three (3) business days after deposit in the United States Postal
Service, first class certified or registered mail; and (3) in the case
of nationally recognized overnight courier service, one business day
after delivery to such courier service together with all appropriate
fees or charges for such delivery. The Parties may change their
respective addresses and transmission numbers by written notice to
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Agreement No. NTI9801D
Page 24
the other parties, sent as provided in this Section 20. All
communications must be in writing and addressed as follows:
To Elastic Networks: Elastic Networks
6120 Windward Parkway, Suite 100
Alpharetta, GA 30005
Attention: CFO
Facsimile No.: (678) 297-3100
To Nortel Networks: Northern Telecom Inc.
5555 Windward Parkway, Suite B
Alpharetta, Georgia 30004
Attention: VP Finance
Facsimile No.: (770) 708-4971
21. SOFTWARE LICENSE AGREEMENT.
21. Upon payment of the applicable right to use fees or Software License
fees as set forth in Exhibit B, if any, Nortel Networks is hereby
granted a non-exclusive, paid-up license to use the object code version
of the Software furnished, and subject to the provisions of the
Software License contained in Exhibit E, as applicable, which Nortel
Networks hereby agrees to be bound to. Nortel Networks is further
granted the right to assign this license and sublicense the rights
herein granted, to any End User and/or Distributor who purchases
Product with licensed Software and all such sublicenses shall be under
sublicenses agreements containing terms no less stringent than those
contained in Nortel Networks' standard software license agreement.
Nortel Networks hereby agrees that should it materially change its
standard software license agreement, Nortel Networks shall use its best
efforts to notify Elastic Networks of the change prior to the licensing
of the Software. Nortel Networks is granted no title or ownership
rights to the Software. Such rights shall remain in Elastic Networks or
Elastic Networks' suppliers as appropriate.
21.2 Nortel Networks shall use all commercially reasonable efforts to ensure
that each Nortel Networks End User and/or Distributor complies with all
of the requirements of the Software License. If Nortel Networks becomes
aware of an End User and/or Distributor breaching the Elastic Networks
Software License, then Nortel Networks shall promptly advise Elastic
Networks in writing of the identity of such End User and/or Distributor
and the nature of the breach. Nortel Networks shall cooperate, in any
commercially reasonable manner requested, at the expense of Elastic
Networks and/or Elastic Networks' suppliers, in any legal action or
potential legal action by them against the Nortel Networks End User
and/or Distributor in material breach, related to that breach. Nortel
Networks shall indemnify and hold Elastic Networks harmless from any
claims, demands or damages if Nortel Networks violates any provisions
of this section.
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Agreement No. NTI9801D
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22. INSURANCE
Nortel Networks shall maintain, during the term of this Agreement, all
insurance and/or bonds required by any applicable law, including but
not limited to: (1) workers' compensation insurance as prescribed by
the laws of all states and/or provinces in which work pursuant to this
Agreement is performed; (2) employer's liability insurance with limits
of at least $5 million per occurrence; (3) comprehensive general
liability insurance (including products liability coverage, contractual
liability, advertising liability, and comprehensive automobile
liability coverage) with each coverage having limits of at least $5
million per occurrence. Nortel Networks shall furnish certificates or
other adequate proof of such insurance to the other upon written
request. Proof of a program of self-insurance acceptable to the
requesting Party (which acceptance shall not be unreasonably withheld)
shall satisfy any such request.
23. END USER AND/OR DISTRIBUTOR REQUIREMENTS.
Elastic Networks, through its sale of Products to Nortel Networks
hereunder, does not consent to be bound by any requirements or
conditions of any of Nortel Networks' End Users and/or Distributors
including, without limitation any federal, state or local law or
regulation concerning contracts with the governmental authorities or
with the terms and conditions in any prime or subcontract unless
Elastic Networks has agreed to said law, regulation, requirement, term
or condition explicitly in writing. In no event will Elastic Networks
agree to provide cost or pricing data as defined in Federal Acquisition
Regulation (FAR) Part 15.804 to either Nortel Networks or its End User
and/or Distributor. Nortel Networks shall not represent to its End
Users and/or Distributors or others that the prices charged to it by
Elastic Networks are based upon Elastic Networks' cost or pricing data
or that Elastic Networks' prices to Nortel Networks are based upon
established catalog or market prices as defined in FAR Part
15.804-1(b)(2).
24. GOVERNMENT SALES.
24.1 Nortel Networks will not distribute the Products to the United States
Federal Government either directly or indirectly, or through the
General Services Administration ("GSA"). Elastic Networks does not
accept any flowdown provisions including but not limited to United
States Government Federal Acquisition Regulations ("FARs"), Defense
FARs, or NASA FARs notwithstanding existence of such provisions on
Nortel Networks' Orders or supplementary documentation or Elastic
Networks' acceptance of such Orders or documentation.
24.2 This Agreement shall not be construed by Nortel Networks as a
representation that Elastic Networks will furnish supplies needed by
Nortel Networks to fulfill
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Agreement No. NTI9801D
Page 26
any of Nortel Networks' GSA, California Multiple Award Schedules (CMAS),
or similar contract obligations under any schedule contract.
25. COMPLIANCE WITH LAWS.
At its own expense, each Party will comply with all applicable laws and
governmental orders and regulations in connection with such Party's
performance of this Agreement.
26. NORTH AMERICAN FREE TRADE AGREEMENT PROCEDURES.
26.1 Elastic Networks and Nortel Networks will work together in good faith
and take all reasonably necessary administrative actions required to
qualify Products for preferential treatment under the rules of any
applicable trade treaty among Canada, U.S.A. and Mexico, including,
without limitation, the North American Free Trade Agreement ("NAFTA").
If a Product qualifies under NAFTA, Elastic Networks, with Nortel
Networks' assistance, will use its good faith efforts to (i) prepare
and distribute a NAFTA Exporter's Certificate of Origin according to
Sections 26.2 and 26.3 below, whichever applies, and any other
documents required, and (ii) respond to NAFTA Exporter's Certificate of
Origin questionnaires and assist Nortel Networks in resolving any
Product eligibility issues.
26.2 If a NAFTA Exporter's Certificate of Origin is prepared for each
shipment, Elastic Networks will (a) retain the original NAFTA
Exporter's Certificate of Origin in Elastic Networks' files with
appropriate backup documentation, (b) attach a copy of the NAFTA
Exporter's Certificate of Origin to the customs/shipping documents for
the qualifying Product, and (c) mark these customs/shipping documents
with the legend: "Copy of the North American Free Trade Certificate of
Origin attached."
26.3 If a blanket NAFTA Exporter's Certificate of Origin is prepared,
Elastic Networks will (a) retain the original NAFTA Exporter's
Certificate of Origin in Elastic Networks' files with appropriate
backup documentation, (b) mark the customs/shipping documents for the
qualifying product with the legend: "Copy of blanket NAFTA Exporter's
Certificate of Origin on file at Elastic Networks' customs offices" and
(c) mail copies of the blanket NAFTA Exporter's Certificate of Origin
to the following offices:
<PAGE>
Agreement No. NTI9801D
Page 27
Canada: USA:
Northern Telecom Limited Northern Telecom Inc.
Dept. 1560 77 Oriskany Drive
901 Steeles Avenue Tonawanda, NY, 14150
Milton, Ontario, Canada L9T 4B6 USA
27. EXPORT CONTROLS.
27.1 Nortel Networks hereby acknowledges that the Products and technical
data supplied by Elastic Networks hereunder are subject to export
controls under the laws and regulations of the United States, including
the Export Administration Regulations ("EAR"). Nortel Networks shall
comply with such United States export control laws and regulations
applicable to all Elastic Networks Products and technical data
(including software, processes and services), and, without limiting the
generality of this Section, agrees to obtain all licenses, permits or
approvals required by any government. Elastic Networks and Nortel
Networks each agree to provide the other such information and
assistance as may reasonably be required by the other in connection
with securing such licenses, approvals, and permits, and to take timely
action to obtain all required import and export documents.
27.2 Nortel Networks hereby certifies that none of the Products or technical
data supplied by Elastic Networks under this Agreement will be
knowingly sold or otherwise transferred to a US embargoed destination,
or made available for use by or for, any military End User and/or
Distributor, or in any military end-use located in or operating under
the authority of any country identified in Country Group D1 under
Supplement No. 1 to Part 740 of the EAR (The current restricted lists
are available on Elastic Networks Connection Online) without a U.S.
license. Nortel Networks also certifies that none of the products or
technical data supplied by Elastic Networks under this Agreement will
be sold or otherwise transferred to, or made available for use by or
for, any entity that is engaged in the design, development,
production, stockpiling or use of nuclear, biological or chemical
weapons or missiles. Nortel Networks' obligation under this Section 27
shall survive the expiration or termination of this Agreement for any
reason whatsoever.
28. PUBLICITY.
Prior to the publication or use by a Party hereto of any advertising,
sale promotions, press releases or other publicity matters relating to
the Product or this Agreement in which the names or logo of the other
Party is mentioned or can be reasonably inferred, the Party shall
obtain the consent of the other Party. Such consent shall not be
unreasonably withheld. Terms, conditions and general terms of this
Agreement shall be held in confidence by both Parties and only disclosed
<PAGE>
Agreement No. NTI9801D
Page 28
as may be agreed to by both Parties or as may be required to meet
securities disclosure or export permit requirements or as may be
otherwise required by applicable law. Neither Party shall make public
statements or issue publicity or media releases with regard to this
Agreement or the relationship between the Parties without the prior
written approval of the other Party, except as may be otherwise
required by law or stock exchange regulations. Notwithstanding any
provisions hereof to the contrary, terms, conditions and general terms
of this Agreement may be disclosed by Elastic Networks to a third party
who is a potential investor of Elastic Networks, whether in debt or in
equity, or who is a potential purchaser of all, or substantially all,
of Elastic Networks' assets or stock, so long as such third party
agrees in writing to keep such information in confidence and to use
such information solely for purposes of evaluating the business and
financial condition of Elastic Networks.
29. HAZARDOUS MATERIALS
29.1 Elastic Networks shall identify and list in a notice forwarded to
Nortel Networks all of the hazardous or toxic materials which may be
contained in the products prior to shipping the Products. For the
purposes of this Section 29.1, the hazardous and/or toxic materials
shall be those identified or described by characteristics in the
regulations promulgated under all applicable laws, rules and
regulations of any applicable governmental entity including, without
limitation, the following: the Toxic Substances Control Act, Resource
Conservation and Recovery Act of 1976, Hazardous Materials
Transportation Act, Occupational Safety and Health Act of 1970,
Comprehensive Environmental Response, Compensation and Liability Act of
1980, Consumer Product Safety Act, Radiation Control for Health and
Safety Act of 1968, Clean Air Act, and Clean Water Act.
29.2 Elastic Networks shall periodically, but no less than annually, review
the pertinent regulations and the materials contained in the Products
and update the lists of hazardous and/or toxic materials accordingly.
Upon request by Nortel Networks, Elastic Networks shall also identify
such other hazardous and/or toxic substances as Nortel Networks may
specify.
29.3 Elastic Networks hereby warrants to Nortel Networks that, with the
exception of the notice referred to above, the Products furnished by
Elastic Networks, as described in this Agreement, are safe for normal
use, are non-toxic, present no abnormal hazards to persons or their
environment, and may be disposed of as normal refuse without special
precautions.
29.4 Elastic Networks shall indemnify Nortel Networks for any expenses
(including the cost of substitute materials, less accumulated
depreciation) that Nortel Networks may incur by reason of the recall or
prohibition against continued use or disposal of the Products furnished
by Elastic Networks, whether such recall or prohibition is directed by
Elastic Networks, or occurs under compulsion of law. Nortel Networks
shall cooperate with Elastic Networks to facilitate and minimize
<PAGE>
Agreement No. NTI9801D
Page 29
the expense of any recall or prohibition against use of the Products
directed by Elastic Networks or under compulsion of law.
29.5 Elastic Networks shall indemnify, defend and hold harmless Nortel
Networks from any claims, demands, suits, judgments, liabilities, costs
and expenses (including, without limitation, reasonable attorneys'
fees) which Nortel Networks may incur under any of the laws, rules and
regulations referred to in Section 29.1 or any amendment to said
statutes by reason of Nortel Networks' acquisition, use, sale or
disposal of the Products furnished by Elastic Networks.
30. GOVERNING LAW.
The construction, interpretation and performance of the Agreement shall
be governed by the laws of the State of Georgia, except for its rules
with respect to the conflict of laws.
31. ASSIGNMENT.
Except that Nortel Networks may assign to an affiliate or subsidiary of
Northern Telecom Limited, neither Party may assign or transfer this
Agreement or any rights hereunder without the prior written consent of
the other Party; provided that Elastic Networks may assign or transfer
this Agreement or any rights hereunder to a third Party without Nortel
Networks' prior written consent if such assignment or transfer is
ancillary or related to a sale, lease or exchange of a majority of
Elastic Networks' assets or the merger or acquisition of Elastic
Networks which has substantially the same effect.
32. WAIVER.
Except as specifically provided for in a waiver signed by duly
authorized representatives of Nortel Networks and Elastic Networks,
failure by either Party at any time to require performance by the other
Party or to claim a breach of any provision of this Agreement shall not
be construed as affecting any subsequent breach of the right to require
performance with respect thereto or to claim a breach with respect
thereto.
33. SECTION HEADINGS.
Section headings are inserted herein for convenience only and shall not
affect the meaning or interpretation of this Agreement or any provision
hereof.
34. ENTIRE AGREEMENT.
This Agreement, including each Exhibit attached hereto, comprises all
the terms, conditions and agreements of the Parties hereto and
supercedes all prior agreements with respect to the subject matter
herein. Save as expressly provided
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Agreement No. NTI9801D
Page 30
herein, this Agreement, including any Exhibit, may not be altered or
amended except in writing signed by authorized representatives of each
Party hereto.
35. SURVIVAL.
Any terms of this Agreement, which by their nature are intended to
survive including but not limited to Sections 5, 7, 10, 11, 12.3, 15,
16, 17, 18, 19, 21 and 27 shall survive the termination or expiration
of this Agreement.
36. NO THIRD PARTY BENEFICIARIES.
Nothing in this Agreement is intended or will be construed to give any
party, other than the Parties hereto, any legal or equitable right,
remedy, or claim under or in respect of this Agreement or any provision
contained herein.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
day and year last written below.
ELASTIC NETWORKS, INC. NORTHERN TELECOM INC.
By: /s/ Phillip Griffith By: /s/ Donald J. Richmond
------------------------------- ----------------------------
(Signature) (Signature)
Name: PHILLIP GRIFFITH Name: DONALD J. RICHMOND
---------------------------- -------------------------
(Print) (Print)
Title: VP SALES/MARKETING Title: VP&GM ACCESS NETWORKS
--------------------------- -------------------------
Date: 12/14/98 Date: 12/11/98
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