<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 2000
REGISTRATION NO. 333-31192
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SONOMA SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3669 95-4582073
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
--------------------------
4640 ADMIRALTY WAY, SUITE 600
MARINA DEL REY, CALIFORNIA 90292
(310) 827-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------
GREGORY W. KOSS, CHIEF EXECUTIVE OFFICER
SONOMA SYSTEMS, INC.
4640 ADMIRALTY WAY, SUITE 600
MARINA DEL REY, CALIFORNIA 90292
(310) 827-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
K.C. SCHAAF, ESQ. GREG T. WILLIAMS, ESQ.
MICHAEL E. FLYNN, ESQ. PATTY H. LE, ESQ.
MARK L. SKAIST, ESQ. KANDY L. WILLIAMS, ESQ.
MARC G. ALCSER, ESQ. BROBECK, PHLEGER & HARRISON LLP
STRADLING YOCCA CARLSON & RAUTH, P.C. 38 TECHNOLOGY DRIVE
660 NEWPORT CENTER DRIVE, SUITE 1600 IRVINE, CALIFORNIA 92618
NEWPORT BEACH, CALIFORNIA 92660 (949) 790-6300
(949) 725-4000 (949) 790-6300
</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, please 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,
please check the following box. / /
--------------------------
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 THEREAFTER 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of the common stock being registered hereunder, all of which will be paid
by Sonoma. All of the amounts shown are estimates except for the SEC
registration fee, the Nasdaq National Market application fee and the NASD filing
fee.
<TABLE>
<S> <C>
SEC registration fee....................................... $18,216
NASD filing fee............................................ 30,500
Nasdaq application fee..................................... *
Printing expenses.......................................... *
Legal fees and expenses.................................... *
Accounting fees and expenses............................... *
Blue sky fees and expenses................................. *
Miscellaneous.............................................. *
-------
Total.................................................... $ *
=======
</TABLE>
- ------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(a) As permitted by Delaware law, our certificate of incorporation
eliminates the liability of directors to us or our stockholders for monetary
damages for breach of fiduciary duty as directors, except to the extent
otherwise required by Delaware law.
(b) Our certificate of incorporation provides that we will indemnify each
person who was or is made a party to any proceeding by reason of the fact that
such person is or was a director or officer of the company against all expense,
liability and loss reasonably incurred or suffered by such person in connection
therewith to the fullest extent authorized by Delaware law. Our bylaws provide
for a similar indemnity to our directors and officers to the fullest extent
authorized by Delaware law.
(c) We maintain liability insurance upon our officers and directors.
(d) Our certificate of incorporation also gives us the ability to enter
into indemnification agreements with each of our directors and officers. We have
entered into indemnification agreements with certain of our directors and
officers, which provide for the indemnification of our directors or officers
against any and all expenses, judgments, fines, penalties and amounts paid in
settlement, to the fullest extent permitted by law.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of transactions by us from November 1996 through the
date hereof involving sales of our securities that were not registered under the
Securities Act:
- Since May 30, 1996, we have granted options to purchase an aggregate of
10,463,150 shares of common stock to employees, officers, and consultants
pursuant to our 1996 Stock Option Plan.
- Since May 30, 1996, we issued an aggregate of 466,493 shares of common
stock to employees, officers, and consultants pursuant to the exercise of
stock options granted under our 1996 Stock Option Plan.
- Since November 24, 1999, we have granted options to purchase an aggregate
of 1,125,900 shares of common stock to employees, officers, and
consultants pursuant to our 1999 Stock Option Plan.
- On May 31, 1996, we issued 16,000,000 shares of preferred stock to Retix
in exchange for the transfer to Sonoma of certain assets and liabilities
relating to Retix's former internetworking business.
- On December 15, 1997, we issued 5,987,000 shares of preferred stock and
12,999 shares of common stock to Retix in exchange for the cancellation of
$6,000,000 of debt owed to Retix.
- On January 15, 1998, we issued to Retix 2,363,636 shares of Series A
preferred stock, 1,691,123 shares of Series B convertible preferred stock,
and 3,508,877 shares of Series C convertible preferred stock in exchange
for the cancellation of $2,730,000 of indebtedness owed to Retix and the
cancellation of 21,987,000 shares of preferred stock owned by Retix.
- On January 15, 1998 and on March 13, 1998, we issued an aggregate of
14,299,997 shares of Series C convertible preferred stock, excluding the
3,508,877 shares of Series C convertible preferred stock issued to Retix,
to 5 accredited investors for an aggregate offering price of $9,000,000.
- On July 8, 1998, we issued warrants to purchase 125,587 shares of common
stock to Transamerica Business Credit Corporation and issued warrants to
purchase 31,397 shares of common stock to Priority Capital Resources in
connection with an equipment line of credit.
- On November 12, 1998 and December 14, 1998, we issued an aggregate of
6,199,095 shares of Series D convertible preferred stock to 13 accredited
investors for an aggregate offering price of $10,000,000.
- On November 24, 1999 we issued an aggregate of 2,067,248 shares of
Series E convertible preferred stock to 17 accredited investors for an
aggregate offering price of $7,525,000.
- On February 24, 2000 we issued an aggregate of 2,334,049 shares of
Series E convertible preferred stock to 22 accredited investors for an
aggregate offering price of approximately $8,500,000.
II-2
<PAGE>
- On February 24, 2000, we issued warrants to purchase 6,000,000 shares of
common stock to Nortel Networks Inc. in connection with the OEM Purchase
and Sale Agreement entered into between us and Nortel.
We used the proceeds of these sales for working capital and other general
corporate purposes. We did not employ any underwriters, brokers or finders in
connection with any of the transactions set forth above.
The sales of the securities listed above were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or, with respect to
issuances to employees, Rule 701 promulgated under Section 3(b) of the
Securities Act as transactions by an issuer not involving a public offering or
transactions pursuant to compensatory benefit plans and contracts relating to
compensation as provided under Rule 701. The recipients of securities in each
such transaction represented their intentions 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 the instruments
representing such securities issued in such transactions. All recipients had
adequate access, through their relationships with us, to information about us.
We used the proceeds of the stock sales for working capital and other general
corporate purposes.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
1.1 Form of Underwriting Agreement**
2.1 Agreement and Plan of Reorganization and Merger, dated
, 2000, between Sonoma Systems, Inc. and
Sonoma Systems**
3.1 Certificate of Incorporation of Sonoma Systems, Inc.**
3.3 Bylaws of Sonoma Systems, Inc.**
4.1 Specimen form of stock certificate for Common Stock**
5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation**
10.1 1999 Stock Option Plan, as amended (the "1999 Plan")
10.2 Intentionally Omitted
10.3 1996 Stock Option Plan, as amended (the "1996 Plan")
10.4 Intentionally Omitted
10.5 Form of Indemnification Agreement for Officers and Directors
of Sonoma Systems, Inc.**
10.6 Master Agreement, between Vertel Corporation and Sonoma
Systems (formerly Wireless Solutions), dated May 31, 1996
10.7 Preferred Stock Purchase Agreement, between Sonoma Systems
and Retix, dated December 15, 1997
10.8 Amended and Restated Loan and Security Agreement, between
Sonoma Systems and Silicon Valley Bank, dated November 29,
1999
10.9 OEM Reseller Agreement, between Newbridge Networks
Corporation and Sonoma Systems, dated September 17, 1997, as
amended May 29, 1998 +
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
10.10 Master Loan and Security Agreement, between Transamerica
Business Credit Corporation and Sonoma Systems, dated July
8, 1998, as amended June 7, 1999
10.11 Stock Subscription Warrant No. 1, issued by Sonoma Systems
to Transamerica Business Credit Corporation, dated July 8,
1998
10.12 Stock Subscription Warrant No. 2, issued by Sonoma Systems
to Priority Capital Resources, dated July 8, 1998
10.13 Sublease Agreement, between Olicom, Inc. and Sonoma Systems,
dated December 1, 1998
10.14 Assignment and Assumption of Sublease and Sub-subleases,
among ValueOptions of California, Inc., Vertel Corporation,
and Sonoma Systems, dated June 15, 1999
10.15 Amended and Restated Rights Agreement, dated February 23,
2000, between Sonoma Systems and the Investors named therein
+**
10.16 OEM Product Supply Agreement, dated October 22, 1999,
between Cabletron Systems, Inc. and Sonoma Systems +
10.17 OEM Purchase and Sale Agreement, dated February 10, 2000,
between Nortel Networks Inc. and Sonoma Systems +
10.18 Common Stock Purchase Warrant, dated February 24, 2000,
issued by Sonoma Systems to Nortel Networks Inc. +
10.19 OEM Purchase Agreement, dated May 27, 1998, between Siemens
Aktiengesellschaft and Sonoma Systems Europe Limited +
10.20 OEM Agreement, dated May 18, 1998, between Maker
Communications, Inc. and Sonoma Systems +
10.21 Warrant to purchase Stock, dated November 29, 1999, issued
by Sonoma Systems to Silicon Valley Bank
10.22 2000 Employee Stock Purchase Plan
21.1 Subsidiaries of Sonoma Systems
23.1 Consent of Stradling Yocca Carlson & Rauth, a Professional
Corporation (to be contained in the opinion to be filed as
Exhibit 5.1 hereto)**
23.2 Consent of Deloitte & Touche LLP*
24.1 Power of Attorney (contained on the signature page of this
Registration Statement)*
27.1 Financial Data Schedule*
</TABLE>
- ------------------------
* Previously Filed
** To be filed by amendment.
+ Portions of this exhibit are omitted and are filed seperately with the
Securities and Exchange Commission pursuant to Sonoma's request for
confidential treatment under Rule 406 of the Securities Act of 1933, amended.
(b) Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement 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 the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has 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 by the registrant of expenses
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:
(1) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant 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) That, for the purpose of determining any liability under the Securities
Act, 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 the 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, as amended, the
Registrant has duly caused this Amendment No. 1 registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Marina del Rey, State of California, on the 8th day of March, 2000.
<TABLE>
<S> <C> <C>
SONOMA SYSTEMS, INC.
By: /s/ GREGORY W. KOSS
--------------------------------------
Gregory W. Koss
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
Chief Executive Officer,
/s/ GREGORY W. KOSS* President and Director
- ------------------------------------------- (principal executive March 8, 2000
Gregory W. Koss officer)
Executive Vice President,
Chief Financial Officer
/s/ STEVEN M. WASZAK and Chief Operating
- ------------------------------------------- Officer (principal March 8, 2000
Steven M. Waszak financial and accounting
officer)
/s/ MARK A. FLOYD* Director
- ------------------------------------------- March 8, 2000
Mark A. Floyd
/s/ CLYDE HEINTZELMAN* Director
- ------------------------------------------- March 8, 2000
Clyde A. Heintzelman
/s/ ROBERT A. HOFF* Director
- ------------------------------------------- March 8, 2000
Robert A. Hoff
Director
- ------------------------------------------- March 8, 2000
Robert Jenks
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ ANDREW KAU* Director
- ------------------------------------------- March 8, 2000
Andrew Kau
/s/ WILLIAM JEFFERSON MARSHALL* Director
- ------------------------------------------- March 8, 2000
William Jefferson Marshall
/s/ STEVEN M. WASZAK
*By: --------------------------------------
Steven M. Waszak
(Attorney-in-fact)
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
1.1 Form of Underwriting Agreement**
2.1 Agreement and Plan of Reorganization and Merger, dated
, 2000, between Sonoma Systems, Inc. and
Sonoma Systems**
3.1 Certificate of Incorporation of Sonoma Systems, Inc.**
3.3 Bylaws of Sonoma Systems, Inc.**
4.1 Specimen form of stock certificate for Common Stock**
5.1 Opinion of Stradling Yocca Carlson & Rauth, a Professional
Corporation**
10.1 1999 Stock Option Plan, as amended (the "1999 Plan")
10.2 Intentionally Omitted
10.3 1996 Stock Option Plan, as amended (the "1996 Plan")
10.4 Intentionally Omitted
10.5 Form of Indemnification Agreement for Officers and Directors
of Sonoma Systems, Inc.**
10.6 Master Agreement, between Vertel Corporation and Sonoma
Systems (formerly Wireless Solutions), dated May 31, 1996
10.7 Preferred Stock Purchase Agreement, between Sonoma Systems
and Retix, dated December 15, 1997
10.8 Amended and Restated Loan and Security Agreement, between
Sonoma Systems and Silicon Valley Bank, dated November 29,
1999
10.9 OEM Reseller Agreement, between Newbridge Networks
Corporation and Sonoma Systems, dated September 17, 1997, as
amended May 29, 1998 +
10.10 Master Loan and Security Agreement, between Transamerica
Business Credit Corporation and Sonoma Systems, dated July
8, 1998, as amended June 7, 1999
10.11 Stock Subscription Warrant No. 1, issued by Sonoma Systems
to Transamerica Business Credit Corporation, dated July 8,
1998
10.12 Stock Subscription Warrant No. 2, issued by Sonoma Systems
to Priority Capital Resources, dated July 8, 1998
10.13 Sublease Agreement, between Olicom, Inc. and Sonoma Systems,
dated December 1, 1998
10.14 Assignment and Assumption of Sublease and Sub-subleases,
among ValueOptions of California, Inc., Vertel Corporation,
and Sonoma Systems, dated June 15, 1999
10.15 Amended and Restated Rights Agreement, dated February 23,
2000, between Sonoma Systems and the Investors named therein
+**
10.16 OEM Product Supply Agreement, dated October 22, 1999,
between Cabletron Systems, Inc. and Sonoma Systems +
10.17 OEM Purchase and Sale Agreement, dated February 10, 2000,
between Nortel Networks Inc. and Sonoma Systems +
10.18 Common Stock Purchase Warrant, dated February 24, 2000,
issued by Sonoma Systems to Nortel Networks Inc. +
10.19 OEM Purchase Agreement, dated May 27, 1998, between Siemens
Aktiengesellschaft and Sonoma Systems Europe Limited. +
10.20 OEM Agreement, dated May 18, 1998, between Maker
Communications, Inc. and Sonoma Systems +
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<C> <S>
10.21 Warrant to purchase Stock, dated November 29, 1999, issued
by Sonoma Systems to Silicon Valley Bank
10.22 2000 Employee Stock Purchase Plan
21.1 Subsidiaries of Sonoma Systems
23.1 Consent of Stradling Yocca Carlson & Rauth, a Professional
Corporation (to be contained in the opinion to be filed as
Exhibit 5.1 hereto)**
23.2 Consent of Deloitte & Touche LLP*
24.1 Power of Attorney (contained on the signature page of this
Registration Statement)*
27.1 Financial Data Schedule*
</TABLE>
- ------------------------
* Previously Filed
** To be filed by amendment.
+ Portions of this exhibit are omitted and are filed seperately with the
Securities and Exchange Commission pursuant to Sonoma's request for
confidential treatment under Rule 406 of the Securities Act of 1933, amended.
(b) Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts
II-9
<PAGE>
Effective November 1999,
as amended December 1999
SONOMA SYSTEMS
1999 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are
to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to the Employees
and Consultants of the Company and to promote the success of the Company's
business.
Options granted hereunder may be either Incentive Stock
Options or Nonstatutory Stock Options, at the discretion of the Board and as
reflected in the terms of the written option agreement.
2. DEFINITIONS. As used herein, the following definitions shall
apply:
(a) "ADMINISTRATOR" shall mean the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "APPLICABLE LAWS" shall have the meaning set forth in
Section 4(a) below.
(c) "BOARD" shall mean the Board of Directors of the
Company.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "COMMITTEE" shall mean the Committee appointed by the
Board of Directors in accordance with Section 4(a) of the Plan, if one is
appointed.
(f) "COMMON STOCK" shall mean the Common Stock of the
Company.
(g) "COMPANY" shall mean Sonoma Systems, a California
corporation.
(h) "CONSULTANT" shall mean any person who is engaged by
the Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company
whether compensated for such services or not.
(i) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall
mean the absence of any interruption or termination of service as an Employee
or Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Administrator; provided that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute. For purposes
of this Plan, a change in status from an Employee to a Consultant or from a
Consultant to an Employee will not constitute an interruption of Continuous
Status as an Employee or Consultant.
<PAGE>
(j) "EMPLOYEE" shall mean any person, including officers,
directors and Named Executives, employed by the Company or any Parent or
Subsidiary of the Company. The payment of a director's fee by the Company
shall not be sufficient to constitute "employment" by the Company.
(k) "EXCHANGE ACT" shall mean the Securities Exchange Act
of 1934, as amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on a
national stock exchange or the Nasdaq National Market, its Fair Market Value
shall be the average of the closing sales prices for such stock as quoted on
such exchange or market for the last five trading days before the date of
determination (if for a given day no sales were reported, the closing bid on
that day shall be used), as such prices are reported in THE WALL STREET
JOURNAL or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the
National Association of Securities Dealers, Inc. Automated Quotation System
(but not on the Nasdaq National Market) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the average of the mean between the bid and asked prices for the
Common Stock for the last five days before the date 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.
(m) "INCENTIVE STOCK OPTION" shall mean an Option intended
to qualify as an incentive stock option within the meaning of Section 422 of
the Code.
(n) "NAMED EXECUTIVE" shall mean any individual who, on the
last day of the Company's fiscal year, is the chief executive officer of the
Company (or is acting in such capacity) or among the four highest compensated
officers of the Company (other than the Chief Executive Officer). Such
officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
(o) "NONSTATUTORY STOCK OPTION" shall mean an Option not
intended to qualify as an Incentive Stock Option.
(p) "OPTION" shall mean a stock option granted pursuant to
the Plan.
(q) "OPTIONED STOCK" shall mean the Common Stock subject to
an Option.
(r) "OPTIONEE" shall mean an Employee or Consultant who
receives an Option.
2
<PAGE>
(s) "PARENT" shall mean a "parent corporation", whether now
or hereafter existing, as defined in Section 424(e) of the Code.
(t) "PLAN" shall mean this 1999 Stock Option Plan.
(u) "SHARE" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(v) "SUBSIDIARY" shall mean 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 which may be optioned
and sold under the Plan is 1,500,000 shares of Common Stock. The Shares may
be authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which
were subject thereto shall, unless the Plan shall have been terminated,
become available for future grant under the Plan. Notwithstanding any other
provision of the Plan, shares issued under the Plan and later repurchased by
the Company shall not become available for future grant or sale under the
Plan.
4. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF ADMINISTRATOR.
(i) MULTIPLE ADMINISTRATIVE BODIES. If
permitted by Rule 16b-3 promulgated under the Exchange Act or any successor
rule thereto, as in effect at the time that discretion is being exercised
with respect to the Plan ("RULE 16b-3"), and by the legal requirements
relating to the administration of incentive stock option plans, if any, of
applicable securities laws and the Code (collectively, the "APPLICABLE
LAWS"), the Plan may (but need not) be administered by different
administrative bodies with respect to directors, officers who are not
directors and Employees who are neither directors nor officers.
(ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS. With respect to grants of Options to Employees or Consultants who
are also officers or directors of the Company, the Plan shall be administered
by (A) the Board, if the Board may make grants under the Plan in compliance
with Rule 16b-3 and Section 162(m) of the Code as it applies so as to qualify
grants of Options to Named Executives as performance-based compensation, or
(B) a Committee designated by the Board to make grants under the Plan, which
Committee shall be constituted in such a manner as to permit grants made
under the Plan to comply with Rule 16b-3, to qualify grants of Options to
Named Executives as performance-based compensation under Section 162(m) of
the Code and otherwise so as to satisfy the Applicable Laws.
3
<PAGE>
(iii) ADMINISTRATION WITH RESPECT TO OTHER
PERSONS. With respect to grants of Options to Employees or Consultants who
are neither directors nor officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board,
which Committee shall be constituted in such a manner as to satisfy the
Applicable Laws.
(iv) GENERAL. Once a Committee has been
appointed pursuant to subsection (ii) or (iii) of this Section 4(a), such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of
any Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies (however caused) and remove all members of a Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee appointed under subsection
(ii), to the extent permitted by Rule 16b-3, and to the extent required under
Section 162(m) of the Code to qualify grants of Options to Named Executives
as performance-based compensation.
(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, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the Employees and Consultants
to whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent
Options are granted hereunder;
(iv) to determine the number of shares of
Common Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use
under the Plan;
(vi) to determine the terms and conditions,
not inconsistent with applicable laws and regulations and the terms of the
Plan, of any award granted hereunder (including, but not limited to, the
share price and any restriction or limitation regarding any Option and/or the
shares of Common Stock relating thereto, based in each case on such factors
as the Administrator shall determine, in its sole discretion);
(vii) to determine whether, to what extent and
under what circumstances Common Stock and other amounts payable with respect
to an award under this Plan shall be deferred either automatically or at the
election of the participant (including providing for and determining the
amount, if any, of any deemed earnings on any deferred amount during any
deferral period); and
4
<PAGE>
(viii) 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 shall have declined since the date the Option was
granted;
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options may be granted only to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Stock Options that are exercisable for the first time by
an Optionee during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated
as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock 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 is granted.
(d) The Plan shall not confer upon any Optionee any right
with respect to continuation of employment or consulting relationship with
the Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship
at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 17 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 13 of the
Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated
in the Option Agreement; provided, however, that in the case of an Incentive
Stock Option, the term shall be no more than ten (10) years from the date of
grant thereof or such shorter term as may be provided in the Option
Agreement. However, 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 thereof or such shorter term as may be provided
in the Option Agreement.
5
<PAGE>
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be
issued pursuant to 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
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock 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 per Share exercise price shall
be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the
time of the 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 per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of the grant.
(B) granted to a person who, at the time
of grant of such Option, is a Named Executive of the Company, the per share
Exercise Price shall be no less than 100% of the Fair Market Value on the
date of grant;
(C) granted to any person other than a
Named Executive, the per Share exercise price shall be no less than 85% of
the Fair Market Value per Share on the date of grant.
(iii) In the case of an Option granted on or
after the effective date of registration of any class of equity security of
the Company pursuant to Section 12 of the Exchange Act and prior to six
months after the termination of such registration, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(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) and may consist entirely of
(1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the
case of Shares acquired upon exercise of an Option either have been owned by
the Optionee for more than six months on the date of surrender or were not
acquired, directly or indirectly, from the Company, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price
of the Shares as to which said Option shall be exercised, (5) delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to
6
<PAGE>
the Company the amount of sale or loan proceeds required to pay the exercise
price, (6) delivery of an irrevocable subscription agreement for the Shares
which irrevocably obligates the option holder to take and pay for the Shares
not more than twelve months after the date of delivery of the subscription
agreement, (7) any combination of the foregoing methods of payment, or (8)
such other consideration and method of payment for the issuance of Shares to
the extent permitted under Applicable Laws. 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 at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan; provided, however, that such Option shall become
exercisable at the rate of at least twenty percent (20%) per year over five
(5) years from the date the Option is granted. In the event that any of the
Shares issued upon exercise of an Option should be subject to a right of
repurchase in the Company's favor, such repurchase right shall lapse at the
rate of at least twenty percent (20%) per year over five (5) years from the
date the Option is granted. Notwithstanding the above, in the case of an
option granted to an officer, director or consultant of the Company or any
Parent or Subsidiary of the Company, the option may be fully exercisable, or
the repurchase right may lapse in its entirety, at any time or during any
period established by the Administrator.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance
with the terms of the Option by the person entitled to exercise the Option
and full payment for the Shares with respect to which the Option is exercised
has been received by the Company. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment allowable
under Section 8(b) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, 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 Company shall issue (or cause to be issued)
such stock certificate promptly upon exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 11
of the Plan.
Exercise of an Option in any manner shall result
in a decrease in the number of Shares which thereafter may be 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.
7
<PAGE>
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within three (3) months (or such
other period of time, not exceeding three (3) months in the case of an
Incentive Stock Option or six (6) months in the case of a Nonstatutory Stock
Option, as is determined by the Administrator, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the
Option) after the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that he or she was
entitled to exercise it at the date of such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise such Option (which the
Optionee was entitled to exercise) within the time specified herein, the
Option shall terminate.
(c) DISABILITY OF OPTIONEE.
(i) Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant as a result of his or her total and permanent
disability (within the meaning of Section 22(e)(3) of the Code), Optionee
may, but only within twelve (12) months from the date of such termination
(but in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of a
disability which does not fall within the meaning of total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six (6) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. However, to the extent that such
Optionee fails to exercise an Option which is an Incentive Stock Option
("ISO") (within the meaning of Section 422 of the Code) within three (3)
months of the date of such termination, the Option will not qualify for ISO
treatment under the Code. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within six months (6) from the
date of termination, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an
Optionee:
(i) during the term of the Option who is at
the time of his or her death an Employee or Consultant of the Company and who
shall have been in Continuous Status as an Employee or Consultant since the
date of grant of the Option, the Option may be exercised, at any time within
six (6) months (or such other period of time, not exceeding six months, as is
8
<PAGE>
determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option)
following the date of death (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement),
by the Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living and
remained in Continuous Status as an Employee or Consultant twelve (12) months
(or such other period of time not exceeding twelve (12) months as is
determined in the case of an Incentive Stock Option at the time of grant of
the Option) after the date of death, subject to the limitation set forth in
Section 5(b); or
(ii) within three (3) months (or such other
period of time not exceeding three (3) months as is determined by the
Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of grant of the Option) after the termination
of Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but
in no event later than the date of expiration of the term of such Option as
set forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the date of
termination.
(e) RULE 16b-3. Options granted to persons subject to
Section 16(b) of the Exchange Act 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 of the
Exchange Act with respect to Plan transactions.
(f) EXTENSION OF EXERCISE PERIOD. The Administrator shall
have full power and authority to extend the period of time for which an
option is to remain exercisable following termination of an Optionee's
Continuous Status as an Employee or Consultant from the periods set forth in
Sections 9(b), 9(c) and 9(d) above or in the Option Agreement to such greater
time as the Board shall deem appropriate, PROVIDED, that in no event shall
such option be exercisable later than the date of expiration of the term of
such Option as set forth in the Option Agreement.
10. NON-TRANSFERABILITY OF OPTIONS. The Option 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. The designation
of a beneficiary by an Optionee does not constitute a transfer. An Option may
be exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 10.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the shareholders of the Company, the number of shares
of Common Stock covered by each outstanding Option, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but as
to which no Options have yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, and the price per share of
Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting
9
<PAGE>
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that 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 Administrator, 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.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior
to such proposed action. To the extent it has not been previously exercised,
the Option will terminate immediately prior to the consummation of such
proposed action. In the event of a proposed sale of all or substantially all
of the Company's assets or a merger of the Company with or into another
corporation where the successor corporation issues its securities to the
Company's shareholders, each outstanding Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation
or a parent or subsidiary of such successor corporation, unless the successor
corporation does not agree to assume the Option or to substitute an
equivalent option, in which case such Option shall terminate upon the
consummation of the merger or sale of assets.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the
determination granting such Option or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided that, the following revisions or amendments shall require
approval of the shareholders of the Company in the manner described in
Section 17 of the Plan:
(i) any increase in the number of Shares
subject to the Plan, other than in connection with an adjustment under
Section 11 of the Plan; or
(ii) any change in the designation of the
class of persons eligible to be granted Options.
10
<PAGE>
(b) SHAREHOLDER APPROVAL. If any amendment requiring
shareholder approval under Section 13(a) of the Plan is made subsequent to
the first registration of any class of equity securities by the Company under
Section 12 of the Exchange Act, such shareholder approval shall be solicited
as described in Section 17 of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment
or termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. 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 pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company 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 intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
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.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. SHAREHOLDER APPROVAL.
(a) Continuance of the Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted.
(b) If and in the event that the Company registers any
class of equity securities pursuant to Section 12 of the Exchange Act, any
required approval of the shareholders of the
11
<PAGE>
Company obtained after such registration shall be solicited substantially in
accordance with Section 14(a) of the Exchange Act and the rules and
regulations promulgated thereunder.
(c) If any required approval by the shareholders of the
Plan itself or of any amendment thereto is solicited at any time otherwise
than in the manner described in Section 17(b) hereof, then the Company shall,
at or prior to the first annual meeting of shareholders held subsequent to
the later of (1) the first registration of any class of equity securities of
the Company under Section 12 of the Exchange Act or (2) the granting of an
Option hereunder to an officer or director after such registration, do the
following:
(i) furnish in writing to the holders
entitled to vote for the Plan or amendment substantially the same information
which would be required (if proxies to be voted with respect to approval or
disapproval of the Plan or amendment were then being solicited) by the rules
and regulations in effect under Section 14(a) of the Exchange Act at the time
such information is furnished; and
(ii) file with, or mail for filing to, the
Securities and Exchange Commission four copies of the written information
referred to in subsection (i) hereof not later than the date on which such
information is first sent or given to shareholders.
(d) The Company's failure to comply with subsection (c)
above shall not affect the validity of any options properly granted under the
Plan; provided, however, that any Optionee subject to Section 16 of the
Exchange Act shall comply with any limitations imposed by the Exchange Act
with respect to the exercise of the Option and transfer or other disposition
of the Optioned Stock.
18. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports which are provided to all
shareholders of the Company. The Company shall not be required to provide
such information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
12
<PAGE>
As amended on October 7, 1999
SONOMA SYSTEMS
1996 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options
or Nonstatutory Stock Options, at the discretion of the Board and as
reflected in the terms of the written option agreement.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" shall mean the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "APPLICABLE LAWS" shall have the meaning set forth in
Section 4(a) below.
(c) "BOARD" shall mean the Board of Directors of the Company.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "COMMITTEE" shall mean the Committee appointed by the Board
of Directors in accordance with Section 4(a) of the Plan, if one is appointed.
(f) "COMMON STOCK" shall mean the Common Stock of the Company.
(g) "COMPANY" shall mean Sonoma Systems, a California corporation.
(h) "CONSULTANT" shall mean any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any director of the Company
whether compensated for such services or not.
(i) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" shall mean
the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Administrator; provided that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute. For purposes
of this Plan, a change in status from an Employee to a Consultant or from a
Consultant to an Employee will not constitute an interruption of Continuous
Status as an Employee or Consultant.
<PAGE>
(j) "EMPLOYEE" shall mean any person, including officers,
directors and Named Executives, employed by the Company or any Parent or
Subsidiary of the Company. The payment of a director's fee by the Company
shall not be sufficient to constitute "employment" by the Company.
(k) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on a national stock
exchange or the Nasdaq National Market, its Fair Market Value shall be the
average of the closing sales prices for such stock as quoted on such exchange
or market for the last five trading days before the date of determination (if
for a given day no sales were reported, the closing bid on that day shall be
used), as such prices are reported in THE WALL STREET JOURNAL or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation System (but not
on the Nasdaq National Market) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be
the average of the mean between the bid and asked prices for the Common Stock
for the last five days before the date 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.
(m) "INCENTIVE STOCK OPTION" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(n) "NAMED EXECUTIVE" shall mean any individual who, on the last
day of the Company's fiscal year, is the chief executive officer of the
Company (or is acting in such capacity) or among the four highest compensated
officers of the Company (other than the Chief Executive Officer). Such
officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.
(o) "NONSTATUTORY STOCK OPTION" shall mean an Option not intended
to qualify as an Incentive Stock Option.
(p) "OPTION" shall mean a stock option granted pursuant to the
Plan.
(q) "OPTIONED STOCK" shall mean the Common Stock subject to an
Option.
(r) "OPTIONEE" shall mean an Employee or Consultant who receives
an Option.
2
<PAGE>
(s) "PARENT" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(t) "PLAN" shall mean this 1996 Stock Option Plan.
(u) "SHARE" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(v) "SUBSIDIARY" shall mean 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 which may be optioned and
sold under the Plan is 7,825,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan. Notwithstanding any other provision
of the Plan, shares issued under the Plan and later repurchased by the Company
shall not become available for future grant or sale under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF ADMINISTRATOR.
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
16b-3 promulgated under the Exchange Act or any successor rule thereto, as in
effect at the time that discretion is being exercised with respect to the
Plan ("RULE 16b-3"), and by the legal requirements relating to the
administration of incentive stock option plans, if any, of applicable
securities laws and the Code (collectively, the "APPLICABLE LAWS"), the Plan
may (but need not) be administered by different administrative bodies with
respect to directors, officers who are not directors and Employees who are
neither directors nor officers.
(ii) ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS. With respect to grants of Options to Employees or Consultants who
are also officers or directors of the Company, the Plan shall be administered
by (A) the Board, if the Board may make grants under the Plan in compliance
with Rule 16b-3 and Section 162(m) of the Code as it applies so as to qualify
grants of Options to Named Executives as performance-based compensation, or
(B) a Committee designated by the Board to make grants under the Plan, which
Committee shall be constituted in such a manner as to permit grants made
under the Plan to comply with Rule 16b-3, to qualify grants of Options to
Named Executives as performance-based compensation under Section 162(m) of
the Code and otherwise so as to satisfy the Applicable Laws.
3
<PAGE>
(iii) ADMINISTRATION WITH RESPECT TO OTHER PERSONS. With
respect to grants of Options to Employees or Consultants who are neither
directors nor officers of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall
be constituted in such a manner as to satisfy the Applicable Laws.
(iv) GENERAL. Once a Committee has been appointed
pursuant to subsection (ii) or (iii) of this Section 4(a), such Committee
shall continue to serve in its designated capacity until otherwise directed
by the Board. From time to time the Board may increase the size of any
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill
vacancies (however caused) and remove all members of a Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee appointed under subsection
(ii), to the extent permitted by Rule 16b-3, and to the extent required under
Section 162(m) of the Code to qualify grants of Options to Named Executives
as performance-based compensation.
(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, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the Employees and Consultants to whom
Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to
be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with applicable laws and regulations and the terms of the Plan,
of any award granted hereunder (including, but not limited to, the share
price and any restriction or limitation regarding any Option and/or the
shares of Common Stock relating thereto, based in each case on such factors
as the Administrator shall determine, in its sole discretion);
(vii) to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of
the participant (including providing for and determining the amount, if any,
of any deemed earnings on any deferred amount during any deferral period); and
4
<PAGE>
(viii) 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 shall have declined since the date the Option was
granted;
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. ELIGIBILITY.
(a) Nonstatutory Stock Options may be granted only to Employees
and Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Stock Options that are exercisable for the first time by
an Optionee during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated
as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock 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 is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship
at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 17 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 13 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated
in the Option Agreement; provided, however, that in the case of an Incentive
Stock Option, the term shall be no more than ten (10) years from the date of
grant thereof or such shorter term as may be provided in the Option
Agreement. However, 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 thereof or such shorter term as may be provided
in the Option Agreement.
5
<PAGE>
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued
pursuant to 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
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing morethan ten
percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be noless than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the
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 per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(B) granted to a person who, at the time of grant of
such Option, is a Named Executive of the Company, the per share Exercise Price
shall be no less than 100% of the Fair Market Value on the date of grant;
(C) granted to any person other than a Named Executive,
the per Share exercise price shall be no less than 85% of the Fair Market
Value per Share on the date of grant.
(iii) In the case of an Option granted on or after the
effective date of registration of any class of equity security of the Company
pursuant to Section 12 of the Exchange Act and prior to six months after the
termination of such registration, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.
(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) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to
6
<PAGE>
the Company the amount of sale or loan proceeds required to pay the exercise
price, (6) delivery of an irrevocable subscription agreement for the Shares
which irrevocably obligates the option holder to take and pay for the Shares
not more than twelve months after the date of delivery of the subscription
agreement, (7) any combination of the foregoing methods of payment, or (8)
such other consideration and method of payment for the issuance of Shares to
the extent permitted under Applicable Laws. 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 at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan; provided, however, that such Option shall become
exercisable at the rate of at least twenty percent (20%) per year over five (5)
years from the date the Option is granted. In the event that any of the Shares
issued upon exercise of an Option should be subject to a right of repurchase in
the Company's favor, such repurchase right shall lapse at the rate of at least
twenty percent (20%) per year over five (5) years from the date the Option is
granted. Notwithstanding the above, in the case of an option granted to an
officer, director or consultant of the Company or any Parent or Subsidiary of
the Company, the option may be fully exercisable, or the repurchase right may
lapse in its entirety, at any time or during any period established by the
Administrator.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment allowable
under Section 8(b) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, 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 Company shall issue (or cause to be issued)
such stock certificate promptly upon exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 11
of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be 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.
7
<PAGE>
(b) TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant, such Optionee may, but only within three (3) months (or such other
period of time, not exceeding three (3) months in the case of an Incentive Stock
Option or six (6) months in the case of a Nonstatutory Stock Option, as is
determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option) after the
date of such termination (but in no event later than the date of expiration of
the term of such Option as set forth in the Option Agreement), exercise his or
her Option to the extent that he or she was entitled to exercise it at the date
of such termination. To the extent that the Optionee was not entitled to
exercise the Option at the date of such termination, or if the Optionee does not
exercise such Option (which the Optionee was entitled to exercise) within the
time specified herein, the Option shall terminate.
(c) DISABILITY OF OPTIONEE.
(i) Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of his or her total and permanent disability
(within the meaning of Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of a disability which
does not fall within the meaning of total and permanent disability (as set forth
in Section 22(e)(3) of the Code), Optionee may, but only within six (6) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an
Optionee:
(i) during the term of the Option who is at the
time of his or her death an Employee or Consultant of the Company and who shall
have been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, the Option may be exercised, at any time within six (6)
months (or such other period of time, not exceeding six months, as is
8
<PAGE>
determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option)
following the date of death (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement),
by the Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living and
remained in Continuous Status as an Employee or Consultant twelve (12) months
(or such other period of time not exceeding twelve (12) months as is
determined in the case of an Incentive Stock Option at the time of grant of
the Option) after the date of death, subject to the limitation set forth in
Section 5(b); or
(ii) within three (3) months (or such other period of time
not exceeding three (3) months as is determined by the Administrator, with
such determination in the case of an Incentive Stock Option being made at the
time of grant of the Option) after the termination of Continuous Status as an
Employee or Consultant, the Option may be exercised, at any time within six
(6) months following the date of death (but in no event later than the date
of expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
(e) RULE 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act 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 of the Exchange Act with respect to
Plan transactions.
(f) EXTENSION OF EXERCISE PERIOD. The Administrator shall have
full power and authority to extend the period of time for which an option is to
remain exercisable following termination of an Optionee's Continuous Status as
an Employee or Consultant from the periods set forth in Sections 9(b), 9(c) and
9(d) above or in the Option Agreement to such greater time as the Board shall
deem appropriate, PROVIDED, that in no event shall such option be exercisable
later than the date of expiration of the term of such Option as set forth in the
Option Agreement.
10. NON-TRANSFERABILITY OF OPTIONS. The Option 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. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 10.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, and the price per share of Common
Stock covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting
9
<PAGE>
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that 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 Administrator, 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.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior
to such proposed action. To the extent it has not been previously exercised,
the Option will terminate immediately prior to the consummation of such
proposed action. In the event of a proposed sale of all or substantially all
of the Company's assets or a merger of the Company with or into another
corporation where the successor corporation issues its securities to the
Company's shareholders, each outstanding Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation
or a parent or subsidiary of such successor corporation, unless the successor
corporation does not agree to assume the Option or to substitute an
equivalent option, in which case such Option shall terminate upon the
consummation of the merger or sale of assets.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Administrator makes the
determination granting such Option or such other date as is determined by the
Administrator. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 17 of
the Plan:
(i) any increase in the number of Shares subject to
the Plan, other than in connection with an adjustment under Section 11 of the
Plan; or
(ii) any change in the designation of the class
of persons eligible to be granted Options.
10
<PAGE>
(b) SHAREHOLDER APPROVAL. If any amendment requiring
shareholder approval under Section 13(a) of the Plan is made subsequent to
the first registration of any class of equity securities by the Company under
Section 12 of the Exchange Act, such shareholder approval shall be solicited
as described in Section 17 of the Plan.
(c) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment
or termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. 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 pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company 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 intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation
is required by any of the aforementioned relevant provisions of law.
15. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
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.
16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. SHAREHOLDER APPROVAL.
(a) Continuance of the Plan shall be subject to approval by
the shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted.
(b) If and in the event that the Company registers any class
of equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the
11
<PAGE>
Company obtained after such registration shall be solicited substantially in
accordance with Section 14(a) of the Exchange Act and the rules and
regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan
itself or of any amendment thereto is solicited at any time otherwise than in
the manner described in Section 17(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the later
of (1) the first registration of any class of equity securities of the Company
under Section 12 of the Exchange Act or (2) the granting of an Option hereunder
to an officer or director after such registration, do the following:
(i) furnish in writing to the holders entitled
to vote for the Plan or amendment substantially the same information which would
be required (if proxies to be voted with respect to approval or disapproval of
the Plan or amendment were then being solicited) by the rules and regulations in
effect under Section 14(a) of the Exchange Act at the time such information is
furnished; and
(ii) file with, or mail for filing to, the
Securities and Exchange Commission four copies of the written information
referred to in subsection (i) hereof not later than the date on which such
information is first sent or given to shareholders.
(d) The Company's failure to comply with subsection (c) above
shall not affect the validity of any options properly granted under the Plan;
provided, however, that any Optionee subject to Section 16 of the Exchange Act
shall comply with any limitations imposed by the Exchange Act with respect to
the exercise of the Option and transfer or other disposition of the Optioned
Stock.
18. INFORMATION TO OPTIONEES. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports which are provided to all
shareholders of the Company. The Company shall not be required to provide
such information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
12
<PAGE>
Exhibit 10.6
MASTER AGREEMENT
This Master Agreement (the "AGREEMENT") is made and entered into as of
May 31, 1996 by and among Retix, a California corporation ("RETIX") and
Wireless Solutions, a California corporation ("WIRELESS SOLUTIONS").
RECITALS
A. The parties desire to cause Wireless Solutions to be formed to operate
as a separate entity the wireless communications business presently conducted by
Retix.
B. The parties further wish to set forth the terms and conditions
governing the relationships among them.
NOW, THEREFORE, in consideration of the covenants and agreements contained
in this Agreement and the Other Agreements (as defined below), and other good
and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. DEFINITIONS. The following terms, whenever used in this Agreement,
shall have the following meanings:
1.1 "AFFILIATE" shall mean, with respect to any person, any other
person which, directly or indirectly, controls, is controlled by or is under
common control with, such person. For purposes of this definition, (i)
"CONTROL" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person through
the ownership of voting securities or by contract or otherwise, and (ii)
Wireless Solutions and any corporation which joins with Wireless Solutions in
the filing of a consolidated federal income tax return shall not be deemed to be
Affiliates of Retix or any corporation which joins with Retix in the filing of
a consolidated federal income tax return, and vice versa.
1.2 "CHANGE OF CONTROL" shall mean any consolidation, merger, sale
of assets or combination of Wireless Solutions, whether or not Wireless
Solutions is the surviving entity, other than where shareholders of Wireless
Solutions immediately prior to the closing of such consolidation, merger, sale
of assets or combination own at least a majority of the voting equity securities
of the successor entity immediately following such closing by virtue of voting
equity securities of the successor entity received in connection with such
transaction in exchange for shares or other securities of Wireless Solutions
owned immediately prior to the closing of such transaction.
1.3 "BUSINESS OF WIRELESS SOLUTIONS" shall mean (i) operation of the
worldwide wireless communications business presently conducted within Retix
being transferred to Wireless Solutions and consisting of the development,
manufacture, sale, licensing, maintenance and service of CDPD MD-IS and related
wireless or cellular infrastructure products; (ii) engaging in such other
activities as may be approved by the Board of Directors of Wireless Solutions ;
and (iii) performing all things necessary or incidental to or connected with or
growing
1
<PAGE>
out of the foregoing activities in accordance with the terms and provisions of
this Agreement and the Other Agreements.
1.4 "CLOSING" shall have the meaning set forth in Section 2.3 of
this Agreement.
1.5 "CLOSING DATE" shall mean the date first set forth above, or
such other date as the parties shall mutually agree upon which the Closing shall
occur.
1.6 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.7 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
1.8 "FACILITY" shall mean any property owned, leased, operated or
occupied by the Retix related to or affecting the Transferred Business.
1.9 "GRANT-BACK LICENSE AGREEMENT" shall mean the Grant-Back License
Agreement between Wireless Solutions and Retix dated as of the date of this
Agreement and attached to this Agreement as EXHIBIT A.
1.10 "GOVERNMENTAL ENTITY" shall mean any court, tribunal,
administrative agency, commission, or other governmental authority or
instrumentality.
1.11 "INITIAL PUBLIC OFFERING" shall mean the initial sale of
Wireless Solutions' Common Stock to the public pursuant to an effective
registration statement under the Securities Act of 1933, as amended, with an
aggregate offering price, net of underwriting discounts and commissions, in
excess of $10,000,000, and with an offering price to the public of at least
$5.00 per share.
1.12 "LAWS" shall mean all applicable international, federal, state
and local statutes, ordinances, rules and regulations.
1.13 "LIENS" shall mean mortgages, deeds of trust, pledges, security
interests, charges, liens, leases, licenses, liabilities, assessments,
encumbrances, costs, claims, conditions or restrictions of any nature
whatsoever, direct or indirect, whether accrued, absolute, contingent or
otherwise (including, without limitation any conditional sale or other title
retention agreement and any agreement to give any security interest).
1.14 "LOAN AGREEMENT" shall mean the Loan Agreement between Wireless
Solutions and Retix dated as of the date of this Agreement and attached to this
Agreement as EXHIBIT B.
1.15 KEY EMPLOYEE OPTION AGREEMENT(S)" shall mean any of the Key
Employee Stock Option Agreements between Wireless Solutions and Wireless
Solutions Management in the form attached to this Agreement as EXHIBIT C.
2
<PAGE>
1.16 "WIRELESS SOLUTIONS DISCLOSURE STATEMENT" shall mean the
Disclosure Statement of Wireless Solutions attached to this Agreement as EXHIBIT
D.
1.17 "WIRELESS SOLUTIONS MANAGEMENT" shall mean the principal
executive officers of Wireless Solutions, as determined by the Board of
Directors of Wireless Solutions.
1.18 "OTHER AGREEMENTS" shall mean the Preferred Stock Purchase
Agreement, the Rights Agreement, the Loan Agreement, the Grant-Back License
Agreement, and the Security Agreement.
1.19 "PERMITS" shall mean all applicable licenses, permits,
authorizations, approvals, clearances and consents.
1.20 "PERSON" shall mean any individual, firm, trust, partnership,
joint venture, association, corporation, unincorporated organization, or a
government or any department or agency thereof.
1.21 "PREFERRED STOCK PURCHASE AGREEMENT" shall mean the Preferred
Stock Purchase Agreement between Wireless Solutions and Retix dated as of the
date of this Agreement and attached to this Agreement as EXHIBIT E.
1.22 "PRODUCTS" shall mean the products described on EXHIBIT F to
this Agreement.
1.23 "RETIX DISCLOSURE STATEMENT" shall mean the Disclosure Statement
of Retix attached to this Agreement as EXHIBIT G.
1.24 "RIGHTS AGREEMENT" shall mean the Rights Agreement between
Wireless Solutions and Retix dated as of the date of this Agreement and attached
to this Agreement as EXHIBIT H.
1.25 "SALE OF WIRELESS SOLUTIONS STOCK" shall mean any sale by Retix
of all of the Wireless Solutions securities owned by Retix to any third party,
including Wireless Solutions Management.
1.26 "SECURITY AGREEMENT" shall mean the Security Agreement between
Wireless Solutions and Retix dated as of the date of this Agreement and attached
to this Agreement as EXHIBIT I.
1.27 "TAX" or "TAXES" shall mean any and all taxes or other
liability imposed by any governmental entity or similarly empowered entity,
including without limitation any charge, obligation, assessment or fee for
federal, state, county, city and foreign income, profits, gross receipts,
withholding, payroll, stamp, sales, use, employment, environmental, occupation,
net worth, property, excise, estimated, recapture, ad valorem, custom, duty,
unitary and any other taxes, obligations and assessments of any kind whatsoever
and any withholding obligation for FICA, FUTA, SSI or analogous or similar
state, local and foreign withholding obligation or
3
<PAGE>
employer contribution, together with all interest, penalties and additions to
tax or other assessment imposed with regard thereto; the foregoing shall include
any transferee or secondary liability for any tax and any liability arising as a
result of being a member of any affiliated, consolidated, combined or unitary
group which is required to be included in any Tax return or report as well as
any Tax arising out of a tax sharing agreement, indemnity agreement or any
similar agreement to which one or more of Retix is a party. "TAX" or "TAXES"
shall, however, not include any Taxes arising from operation of Wireless
Solutions or Retix on or after the Closing Date.
1.28 "TRANSFERRED ASSETS" shall mean the assets to be transferred by
Retix to Wireless Solutions as described in EXHIBIT J to this Agreement, which
assets shall specifically exclude any accounts receivable accrued by Retix prior
to the Closing Date in accordance with its historical practices for revenue
recognition but which shall include any maintenance revenue received by Retix
prior to the Closing Date which remains unearned as of the Closing Date.
1.29 "TRANSFERRED BUSINESS" shall mean the worldwide wireless
communications business presently conducted within Retix to be transferred to
Wireless Solutions pursuant to the provisions of this Agreement and consisting
of the development, manufacture, sale, licensing, maintenance and service of
wireless communications products.
1.30 "TRANSFERRED CONTRACTS" shall mean the contracts to be
transferred by Retix to Wireless Solutions as determined by Retix and
Wireless Solutions in good faith.
1.31 "TRANSFERRED LIABILITIES" shall mean the liabilities to be
transferred by Retix to Wireless Solutions as described on EXHIBIT K to this
Agreement.
2. FORMATION OF WIRELESS SOLUTIONS; CLOSING.
2.1 FORMATION OF WIRELESS SOLUTIONS. Upon and subject to the terms
and conditions of this Agreement and in reliance upon the representations,
warranties and agreements contained in this Agreement, Wireless Solutions and
Retix shall at the Closing execute and deliver (or cause to be executed and
delivered) the Other Agreements, all substantially in the respective forms
attached to this Agreement, together with such other documents and funds as may
be necessary or advisable to form Wireless Solutions and effect the transactions
described in this Agreement and the Other Agreements.
2.2 TRANSFER OF ASSETS. Subject to the terms and conditions of this
Agreement and the Other Agreements, at the Closing Retix shall transfer to
Wireless Solutions, and Wireless Solutions shall receive from Retix, all of
Retix's right, title and interest in and to the Transferred Business, including
without limitation the Transferred Assets, the Transferred Contracts, the
Transferred Liabilities and inventory of the Transferred Business (collectively,
the "TRANSFERRED ITEMS"). Retix will deliver to Wireless Solutions possession
of the Transferred Items, and will further deliver to Wireless Solutions proper
instruments sufficient to transfer to Wireless Solutions the rights to the
Transferred Items specified in this Agreement and such other instruments of
transfer as counsel for Wireless Solutions may reasonable deem necessary or
desirable to effect or evidence the transfers contemplated hereby, free and
clear of all mortgages,
4
<PAGE>
pledges, liens, licenses, rights of possession, security interests,
restrictions, encumbrances, charges, title retention, conditional sale or other
security arrangement except for the Transferred Liabilities or as may be
contained in the Transferred Contracts or as provided in this Agreement or in
the Other Agreements. Except for the Transferred Liabilities, Wireless
Solutions is not assuming, and Retix shall remain responsible for and pay on a
timely basis, any liabilities of Retix, whether or not arising from or
associated with the Transferred Business and whether accrued or unaccrued,
contingent or actual, or asserted or unasserted. Retix will promptly pay over
to Wireless Solutions any amounts received in respect of the Transferred
Business following the Closing Date, except for amounts which Retix is expressly
authorized by this Agreement to retain.
2.3 CLOSING. The transactions contemplated by Section 2.1
(the "CLOSING") shall be consummated at the offices of Venture Law Group, A
Professional Corporation, 2800 Sand Hill Road, Menlo Park, California
simultaneous with the execution and delivery of this Agreement and the Other
Agreements, or at such other place and time as the parties may agree, on the
Closing Date.
2.4 TAX TREATMENT. The parties intend that the transactions
contemplated by this Agreement will constitute a tax-free exchange as described
in Section 351 of the Code.
2.5 SALES AND OTHER TAXES. Wireless Solutions shall pay all sales,
use, transfer, excise or other similar taxes, if any, arising out of the
transfer of the Transferred Assets or Transferred Business, or otherwise as a
consequence of the transactions contemplated by this Agreement or the Other
Agreements. The parties shall cooperate with each other to the extent
reasonably requested and legally permitted to minimize the above-described
taxes.
3. REPRESENTATIONS AND WARRANTIES OF RETIX. Except as set forth in the
Retix Disclosure Statement, Retix represents and warrants that:
3.1 EXISTENCE AND RIGHTS. Retix (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, (b) has all corporate power and authority to own or lease its
properties and to carry on the Transferred Business as now being conducted, (c)
possesses all licenses, franchises, rights and privileges necessary to the
conduct of the Transferred Business as now being conducted, and (d) has all
corporate power and authority to carry out this Agreement and the Other
Agreements to which Retix is a party and the transactions contemplated herein
and therein.
3.2 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Other Agreements to which Retix is a party has been, or will
be prior to the Closing, duly authorized by all necessary corporate and other
action and does not require notice to, or the consent or approval of, any
governmental body or other regulatory authority. This Agreement and the Other
Agreements to which Retix is a party have been duly executed or will be at the
Closing, as the case may be, and delivered to Wireless Solutions by Retix. This
Agreement and the Other Agreements to which Retix is a party constitute, or when
executed and delivered will constitute, legal, valid and binding obligations of
Retix, enforceable in accordance with their terms.
5
<PAGE>
3.3 LITIGATION. There is no litigation, investigation, arbitration,
claim, action or other proceeding pending or, to the best of Retix's knowledge,
threatened against or affecting Retix or the Transferred Assets, which if
determined adversely to Retix, would have an adverse effect on the conduct of
the Transferred Business, Wireless Solutions or the Transferred Assets or in
which it is sought to restrain, prohibit or otherwise adversely affect the
ability of Retix to perform any or all of the obligations required of it under
this Agreement or the Other Agreements or the consummation of the transactions
contemplated herein or therein.
3.4 FIXED ASSETS. The fixed assets used in the ordinary course of
the operations of the Transferred Business are in satisfactory operating
condition, reasonable wear and tear excepted and except for such minor defects
as do not substantially interfere with the continued use thereof in the conduct
of normal operations.
3.5 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION OF PROPERTY.
(a) Retix has valid and marketable title to the Transferred
Assets and to all personal property and other assets, tangible or intangible,
required to be used in the conduct of the Transferred Business as it is
currently conducted.
(b) The Transferred Assets are free and clear of all title
defects and Liens, except the following: (i) unperfected mechanics', carriers',
workers' and other similar liens arising after the date of this Agreement in the
ordinary course of business consistent with past practice which are or will be
reflected in the balance sheet as of the Closing Date to be delivered pursuant
to this Agreement; (ii) imperfections of title which do not materially or
unreasonably detract from the value, marketability, financial ability or use of
such items; and (iii) property taxes which are a lien not yet due and payable.
(c) The Transferred Assets are in a condition suitable and
adequate for the conduct of the Transferred Business as such business is
presently being conducted. Retix is not aware of any facts which would prevent
Wireless Solutions from using such assets after the Closing generally in the
manner in which such assets have been used and operated prior to the date of
this Agreement.
3.6 BANKRUPTCY PROCEEDINGS. No petition has been filed by, or to
the best of Retix's knowledge against, Retix for relief under any applicable
bankruptcy, insolvency or similar law; no decree or order for relief has been
entered in respect of Retix, voluntarily or involuntarily, under any such law;
and, no receiver, liquidator, sequestrator, trustee, custodian or other officer
has been appointed with respect to Retix or its assets and liabilities pursuant
to any such law. No warrant of attachment, execution or similar process has
been executed against Retix or any of its assets or properties. Retix has not
made any assignment for the benefit of creditors. The consummation of the
transactions contemplated hereby will not render Retix insolvent or unable to
pay its liabilities as they come due.
6
<PAGE>
3.7 PRODUCTS.
(a) Retix owns, or will own by the Closing Date, or has
sufficient rights to, all rights to make, use and sell the Products. No Product
is subject to any pending or, to the best of Retix's knowledge, any threatened
challenge of infringement of the rights of others, nor to the best of Retix's
knowledge is there any basis for a challenge of infringement of any such rights
of others.
(b) To the best of Retix's knowledge, no party other than Retix
(prior to the Closing) and Wireless Solutions and their respective agents and
representatives (following the Closing) and their permitted licensees possesses
any copy of all or any part of the designs, flow charts, algorithms, schematics
of the Products or source code contained in the Products (except to the extent
it has been licensed from other persons (including other subsidiaries of
Retix)). No person other than Retix owns any right, title or interest in or to
any such Product, except as set forth in the Retix Disclosure Statement.
(c) Wireless Solutions shall not by virtue of any contractual
arrangement between Retix and any third party be obligated to provide to any
such third party any modifications, enhancements or upgrades to the Products or
derivative works thereof, other than pursuant to a Transferred Contract.
3.8 TRADEMARKS, COPYRIGHTS, AND PATENTS.
(a) Retix has provided Wireless Solutions with a true and
complete list describing all of the trademarks, trade names and service and
other marks which are related to the Transferred Business. Except as
contemplated or described in this Agreement or the Other Agreements, Retix owns
all right, title and interest in and to such marks.
(b) Retix has provided Wireless Solutions with a true and
complete list describing all of the patents, patent rights, patent applications,
copyrights and copyright applications relating to the Products. Retix owns all
right, title and interest to, or has sufficient licenses under, all such
patents, patent rights, patent application, copyrights and copyright
applications.
(c) Upon consummation of the transactions contemplated by this
Agreement, Wireless Solutions will have all rights, including without limitation
rights under patents, trademarks, trade secrets, trade rights, trade names, and
copyrights, necessary to operate the Transferred Business in the manner it was
operated prior to the Closing Date. To the best of Retix's knowledge, none of
the rights described in the prior sentence conflict with or infringe on the
proprietary rights of others. There are no outstanding rights, licenses or
grants by Retix relating to the use of any of the same, and none of them is
subject to any pending or, to the best of Retix's knowledge, threatened claim of
infringement of the right of others. Retix has not agreed to indemnify any
person for or against any infringement of any patent, patent right, trademark,
trade secret, trade right, trade name, commercial name, computer software
program, or copyright related to the Transferred Business, other than as part of
its license arrangements with its customers.
7
<PAGE>
3.9 AGREEMENTS LIST. Retix has provided Wireless Solutions with a
list of all contracts, agreements, understandings, licenses, franchises, leases
(written and oral) or other instruments which are both (i) material to the
Transferred Business, and (ii) relate to or affect the Transferred Assets or
under which any portion of the Transferred Assets are used or held or subject,
including without limitation all related supply, in-license, marketing and end-
user agreements, and all related agreements for the testing, modification,
development, trial, license, sale or other use of the Transferred Assets (in
each such case identifying the nature of such agreements).
3.10 NO FINDER'S FEES. Retix is not obligated, either directly or
indirectly, to any person for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement and the Other
Agreements.
3.11 BINDING AGREEMENTS, NO DEFAULT. Each of the Transferred
Contracts is a legal, binding, and enforceable obligation of Retix and, to the
best of Retix's knowledge, the other party(s) thereto, and no party with whom
Retix has an agreement, contract or other instrument relating to or affecting
the Transferred Business is known by Retix to be in default thereunder or to
have breached any material terms or provisions thereof.
3.12 REPRESENTATIONS AND WARRANTIES TRUE AS OF CLOSING DATE. All of
the representatives and warranties of Retix contained herein will be true in all
material respects upon and as of the Closing Date.
4. REPRESENTATIONS AND WARRANTIES OF WIRELESS SOLUTIONS. Except as set
forth in the Wireless Solutions Disclosure Statement, Wireless Solutions
represents and warrants that:
4.1 EXISTENCE AND RIGHTS. Wireless Solutions (a) is a corporation
duly organized, validly existing and in good standing under the laws of State of
California, and (b) has all corporate power and authority to carry out this
Agreement and the Other Agreements to which Wireless Solutions is a party and
the transactions contemplated herein and therein. Wireless Solutions is not
qualified or licensed to do business as a foreign corporation in any state.
Wireless Solutions does not own, directly or indirectly, any equity or other
interest in any other corporation, association, partnership or other business
entity.
4.2 CAPITALIZATION. The authorized capital stock of Wireless
Solutions consists of 20,000,000 shares of Common Stock, par value $0.01 per
share, none of which were issued and outstanding prior to the Closing, and
17,000,000 shares of Preferred Stock, par value $0.01 per share, none of which
were issued and outstanding prior to the Closing. All shares of Wireless
Solutions stock to be issued pursuant to this Agreement and the Other Agreements
have been duly authorized and, upon issuance in accordance with the terms hereof
and thereof, will be validly issued, fully paid and nonassessable. All
securities of Wireless Solutions that will be issued as of the Closing will be
issued in compliance with applicable federal and state securities laws. Except
as provided in the Other Agreements, there are no preemptive rights, voting
agreements, options or warrants or other conversion privileges or rights
presently outstanding to purchase any of the authorized but unissued stock of
Wireless Solutions.
8
<PAGE>
4.3 AUTHORIZATION. The execution, delivery and performance of this
Agreement and the Other Agreements to which Wireless Solutions is a party by
Wireless Solutions has been duly authorized by all necessary corporate and other
action and do not require notice to, or the consent or approval of, any
governmental body or other regulatory authority. This Agreement and the Other
Agreements to which Wireless Solutions is a party are, or when executed and
delivered will be, legal, valid and binding obligations of Wireless Solutions,
enforceable in accordance with their terms.
4.4 LITIGATION. There is no litigation, investigation, arbitration,
claim, action or other proceeding pending or, to the best of Wireless Solutions'
knowledge, threatened against or affecting Wireless Solutions, which if
determined adversely to Wireless Solutions, would have an adverse effect on the
Transferred Assets or in which it is sought to restrain, prohibit or otherwise
adversely affect the ability of any of Wireless Solutions to perform any or all
of the obligations required of it under this Agreement or the Other Agreements
or the consummation of the transactions contemplated herein or therein.
4.5 NO FINDER'S FEES. Wireless Solutions is not obligated, either
directly or indirectly, to any person for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement and the
Other Agreements.
4.6 BANKRUPTCY PROCEEDINGS. No petition has been filed by, or to
the best of Wireless Solutions' knowledge against, Wireless Solutions for relief
under any applicable bankruptcy, insolvency or similar law; no decree or order
for relief has been entered in respect of Wireless Solutions, voluntarily or
involuntarily, under any such law, and, no receiver, liquidator, sequestrator,
trustee, custodian or other officer has been appointed with respect to Wireless
Solutions or its assets and liabilities pursuant to any such law. No warrant of
attachment, execution or similar process has been executed against Wireless
Solutions or any of its assets or properties. Wireless Solutions has not made
any assignment for the benefit of creditors.
4.7 NO FINANCIAL STATEMENTS. Wireless Solutions has not prepared
any balance sheet, income statement, statement of operations, statement of
changes in financial position and shareholders' equity or other financial
statement.
4.8 REPRESENTATIONS AND WARRANTIES TRUE AS OF CLOSING DATE. All of
the representations and warranties of Wireless Solutions contained herein will
be true in all material respects upon and as of the Closing Date.
5. COVENANTS AND AGREEMENTS OF THE PARTIES.
5.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. Retix covenants and
agrees with Wireless Solutions that between the date hereof and the Closing
Date, except as specifically contemplated by this Agreement:
(a) CONDUCT OF BUSINESS. Retix will conduct the Transferred
Business consistent with past practices, including the payment of liabilities.
9
<PAGE>
(b) ACCESS. Retix will permit Wireless Solutions and its
representatives to have reasonable access during normal business hours to the
personnel and facilities of the Transferred Business and the financial, tax,
contractual and organizational records of the Transferred Business. Wireless
Solutions shall treat all information received from Retix pursuant to this
Section 5.1(b) as confidential, except to the extent that any such information
is made available to Wireless Solutions from sources generally available to the
public, and except as required by law. In the event the Closing shall not
occur, Wireless Solutions will promptly return to Retix all documents,
instruments, work papers and other materials submitted by Retix to Wireless
Solutions.
5.2 EXECUTION OF DOCUMENTS AT THE CLOSING. Provided that the
conditions to Closing as specified in Section 6 and Section 7 of this Agreement
have been fulfilled, Retix and Wireless Solutions, respectively, agree to cause
the execution of each of the Other Agreements.
5.3 TRANSFER OF KEY EMPLOYEES. Retix agrees to use its reasonable
efforts to cause all key employees employed in the Transferred Business to
transfer their employment to Wireless Solutions.
5.4 CONSENTS AND APPROVALS. It is the intent of the parties to
consummate the transactions described in this Agreement and the Other Agreements
at the earliest practicable time and Retix agrees to use its reasonable efforts
to obtain, and Wireless Solutions shall cooperate with and assist Retix in
obtaining, all consents, waivers, amendments, modifications, approvals,
authorizations, Permits and licenses which are required to be obtained by Retix
to effectuate this Agreement and the Other Agreements and to transfer the
Transferred Business and the Transferred Assets to Wireless Solutions and to
permit Wireless Solutions to operate the Transferred Business. If any requisite
consent or amendment of a contract or other instrument shall not be obtained,
Retix agrees to cooperate with Wireless Solutions in any reasonable arrangement
designed to provide for Wireless Solutions the benefits under such contract or
other instrument, including enforcement of any and all rights of Retix against
the other party to such contract or instrument arising out of the breach or
cancellation thereof by such other party or otherwise. Retix shall use its
reasonable efforts to obtain all other necessary consents and approvals of other
persons and Governmental Entities in connection with the consummation of the
transactions contemplated under this Agreement and the Other Agreements;
provided, however, that Retix shall not be obligated to: (a) undertake any
additional material financial obligation, dispose of any property, or surrender
any rights, or (b) otherwise consent to any arrangement or undertake any
obligation that would have a material adverse effect on Retix.
5.5 VACATION PAY. The cost of vacation pay due (as of the Closing
Date) to any Retix employees who become employees of Wireless Solutions as of
the Closing shall be shared by Retix and Wireless Solutions equally. Retix
shall fund its portion of such liability by (i) making quarterly payments to
Wireless Solutions within 30 days of the close of each such quarter for such
accrued vacation taken during each of Wireless Solutions' first six fiscal
quarters, and (ii) promptly reimbursing Wireless Solutions for one-half of any
amounts paid by Wireless Solutions to such employees upon termination of their
employment with Wireless Solutions.
10
<PAGE>
5.6 NO INCONSISTENT ACTS. Wireless Solutions covenants and agrees
with Retix that between the date hereof and the Closing Date, except as
contemplated by this Agreement, Wireless Solutions will not perform any act
inconsistent with the representations and warranties of Section 4.
5.7 EMPLOYMENT ELIGIBILITY VERIFICATION. Retix agrees to use its
reasonable efforts to obtain, on behalf of Wireless Solutions, Employment
Eligibility Verification forms (Form I-9) completed by each employee of Retix
who has agreed to become employed in the Transferred Business and copies of any
documentation obtained by Retix to verify the information therein.
5.8 EMPLOYEES.
(a) Retix and Wireless Solutions agree to use their reasonable
efforts to employ the current employees of the Transferred Business, subject to
continued acceptable performance by such employees and the general requirements
of the business.
(b) Retix will use its reasonable efforts, consistent with its
established personnel policies, to encourage employees designated to perform
work for the Transferred Business to transfer to Wireless Solutions.
(c) Wireless Solutions agrees to provide a package of
compensation and benefits to its employees substantially equivalent to such
compensation and benefits currently being offered to the employees of the
Transferred Business by Retix.
5.9 CONFIDENTIALITY. Neither Retix nor Wireless Solutions shall
disclose to any third party other than their lenders, accountants, attorneys or
other advisors or in any way make public the proposed transactions among the
parties which are the subject of this Agreement and the Other Agreements without
the prior written consent of Wireless Solutions or Retix, respectively.
5.10 ASSIGNMENTS. At the Closing, Retix will use its reasonable
efforts to deliver to Wireless Solutions, such other instruments of transfer or
assignment as the parties deem reasonably necessary or advisable so as to vest
title in the Transferred Assets more fully in Wireless Solutions.
5.11 SUBSEQUENT ACTIONS. At any time, and from time to time, after
the Closing Retix shall, promptly upon request by Wireless Solutions execute and
deliver such other instruments of sale, transfer, conveyance, assignment and
confirmation and take such action as Wireless Solutions may reasonably request
in order more effectively to transfer, convey and assign to Wireless Solutions,
or to confirm Wireless Solutions' title to, the Transferred Assets, to put
Wireless Solutions in possession and control thereof, to assist Wireless
Solutions in exercising all rights with respect thereto and otherwise complete
the transactions contemplated hereby. The parties agree to execute documents as
necessary to file with the United States Copyright Office, the United States
Patent Office with respect to, or otherwise to confirm Wireless Solutions' title
in, the Transferred Assets.
11
<PAGE>
5.12 SUBSEQUENT ACCESS. Retix agree to provide access to and copies
of all necessary accounting records, work papers and other documents in
connection with or related to the Transferred Business, as reasonably requested
by Wireless Solutions or the independent auditors of Wireless Solutions. Retix
will consider any reasonable requests for customary representation letters in
connection with any audit.
5.13 COVENANTS REGARDING THE MANAGEMENT AND OPERATION OF WIRELESS
SOLUTIONS.
(a) CAPITALIZATION OF WIRELESS SOLUTIONS. As of the Closing,
Retix will own 17,000,000 shares of Wireless Solutions' Preferred Stock,
representing at least 80% of the outstanding capital stock of Wireless
Solutions. Retix and Wireless Solutions agree that there will be issued or
reserved for future issuance to Wireless Solutions directors, officers,
employees, consultants and other service providers (other than Retix or its
affiliates) an aggregate of fifteen percent (15%) of the aggregate capital stock
of Wireless Solutions on an as-converted basis. After the Closing, the Board of
Directors of Wireless Solutions shall determine those persons to whom shares of
Wireless Solutions' Common Stock (or options to purchase such shares) shall be
issued, whether pursuant to the Key Employee Option Agreements or otherwise,
which determination shall be final and binding.
(b) CORPORATE OBJECTIVES. Retix and Wireless Solutions hereby
acknowledge and agree that Wireless Solutions shall be operated as a for-profit
enterprise with the principal strategic objective of obtaining liquidity for
Wireless Solutions' shareholders through an Initial Public Offering, sale of
Wireless Solutions or other appropriate transaction. Wireless Solutions shall
initially operate on a strategic plan and financial model approved by Retix in
its discretion. After the Closing, Wireless Solutions shall operate on a
strategic plan and financial model approved by Wireless Solutions' Board of
Directors.
(c) TERMINATION. The provisions of this Section 5.13 shall
terminate and be of no further force or effect upon the earliest to occur of (i)
an Initial Public Offering, (ii) a Change of Control, or (iii) a Sale of
Wireless Solutions Stock.
5.14 SHARED ADMINISTRATIVE EXPENSES. Retix will provide certain
administrative and support services to Wireless Solutions for a period to be
mutually agreed upon in good faith. The foregoing services shall be provided by
Retix to Wireless Solutions in a similar manner as such services were provided
by Retix internally to support the Transferred Business prior to the Closing
Date. The foregoing services shall be provided by Retix to Wireless Solutions
at Retix's fully-loaded cost, defined as Retix's out-of-pocket costs of
providing such services (including reasonable allocations of (i) the salaries of
Retix personnel providing such services, and (ii) Retix's overhead costs
associated with providing such services). Any costs and expenses incurred by
one party pursuant to this Section 5.14 (including without limitation taxes,
license fees, insurance fees and costs of professional services), which are
payable in whole or in part by the other party pursuant to this Section 5.14,
will be allocated between the parties as mutually agreed in good faith.
12
<PAGE>
5.15 SUPPORT AND DISCLOSURE. Wireless Solutions Management covenants
and agrees to fully support Retix in its efforts to divest its equity holdings
in Wireless Solutions to the public, a third party or to Wireless Solutions
Management, and to provide full disclosure of all material information requested
by any potential purchasers of such equity holdings, in each case as reasonably
requested by Retix and in compliance with all applicable securities laws.
6. CONDITIONS OF RETIX'S OBLIGATIONS. The obligation of Retix to
consummate and effect this Agreement and the Other Agreements and the
transactions contemplated hereby and thereby shall be subject to the
satisfaction at the Closing of all of the following conditions, any of which may
be waived, in writing, exclusively by Retix:
6.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of Wireless Solutions contained in this Agreement shall be true in
all material respects at and as of the Closing Date, with the same effect as
though made as of such date.
6.2 COVENANTS. Wireless Solutions shall have complied with all
agreements and covenants contained herein to be complied with by Wireless
Solutions prior to or at the Closing Date.
6.3 CLOSING DOCUMENTS. Retix shall have received, in form and
substance satisfactory to Retix and its counsel, each and every closing
document required to be delivered to them by this Agreement and the Other
Agreements, including without limitation, a list of Transferred Contracts as
determined by the parties in good faith.
6.4 CONSENTS AND WAIVERS. Retix shall have obtained any and all
consents, permits, approvals and waivers necessary or appropriate for the
consummation of the transactions contemplated by this Agreement and the Other
Agreements.
6.5 OFFICER'S CERTIFICATE. Wireless Solutions shall have delivered
to Retix a certificate, dated as of the Closing Date and signed by an authorized
officer of Wireless Solutions, to the effect that the conditions specified in
Section 6.1 and Section 6.2 have been satisfied.
6.6 BOARD OF DIRECTORS. The Board of Directors of Wireless
Solutions shall consist of Joe Stephan, Jeffrey Drazan, Neil Hynes, Gilbert P.
Williamson and one vacancy.
7. CONDITIONS OF WIRELESS SOLUTIONS OBLIGATIONS. The obligation of
Wireless Solutions to consummate and effect this Agreement and the Other
Agreements and the transactions contemplated hereby and thereby shall be subject
to the satisfaction at the Closing of all of the following conditions, any of
which may be waived, in writing, exclusively by Wireless Solutions :
13
<PAGE>
7.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties of Retix contained in this Agreement shall be true and correct at and
as of the Closing Date, with the same effect as though made as of such date,
except for changes in the ordinary course of business consistent with past
practices of Retix and other changes consistent with past practices of Retix
which in the aggregate do not have a material adverse effect on the Transferred
Assets, the Transferred Business or Wireless Solutions.
7.2 COVENANTS. Retix shall have complied with all agreements and
covenants contained herein to be complied with by Retix prior to or at the
Closing Date.
7.3 NO MATERIAL ADVERSE CHANGE. From the date of this Agreement,
there shall not have occurred any material adverse change in the business,
financial condition, operations or value of the Transferred Business or the
value of the Transferred Assets.
7.4 ASSET AND CONTRACT ASSIGNMENTS. Retix shall have taken or
agreed to take any and all steps necessary to effectuate the assignment and
transfer to Wireless Solutions of all Transferred Assets and Transferred
Contracts, including but not limited to obtaining any and all necessary consents
or waivers with respect thereto.
7.5 CLOSING DOCUMENTS. Wireless Solutions shall have received, in
form and substance satisfactory to Wireless Solutions and its counsel, each and
every other closing document required to be delivered to them by this Agreement
and the Other Agreements, including without limitation, a list of Transferred
Contracts as determined by the parties in good faith.
7.6 OFFICER'S CERTIFICATE. Retix shall have delivered to Wireless
Solutions a certificate, dated as of the Closing Date and signed by an
authorized officer of Retix, to the effect that the conditions specified in
Section 7.1 and Section 7.2 have been satisfied.
7.7 CONSENTS AND WAIVERS. Wireless Solutions shall have obtained
any and all consents, permits, approvals and waivers necessary or appropriate
for the consummation of the transactions contemplated by this Agreement and the
Other Agreements.
8. TERMINATION.
8.1 AGREEMENT TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned at any time prior to or at the
Closing Date upon ten (10) business days prior notice: (a) by Wireless
Solutions or Retix if there has been a material misrepresentation, breach of
warranty, or breach of covenant by the other in any of their representations,
warranties, or covenants set forth herein which the breaching party or parties
fail to cure within ten (10) business days after receipt of notice thereof; (b)
by Wireless Solutions if the conditions stated in Section 7 have not been
satisfied by the Closing Date; (c) by Retix if the conditions stated in Section
6 have not been satisfied by the Closing Date, or (d) by mutual written
agreement of Wireless Solutions and Retix.
14
<PAGE>
8.2 EFFECT OF TERMINATION. If this Agreement shall be terminated as
provided in Section 8, all obligations of the parties hereunder and under the
Other Agreements shall terminate without liability of any party to any other
party, except that (i) the second and third sentences of Section 5.1(b) of this
Agreement and Section 5.9 of this Agreement shall survive any such termination.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the parties are material, shall be deemed to have been relied upon
by the parties receiving such representations and warranties and shall survive
the Closing. All such representations and warranties shall expire one year
after the Closing.
10. GENERAL PROVISIONS.
10.1 ASSIGNMENT. Except with respect to an assignment to a successor
of all or substantially all of a party's business or assets, this Agreement is
not transferable or assignable without the consent of each of the other party to
this Agreement, and neither party shall have the power or right to assign,
transfer or delegate any of its rights or obligations hereunder. Any assignment
in derogation of the foregoing shall be void.
10.2 AMENDMENTS AND WAIVERS. The waiver, amendment or modification
of any provision of this Agreement or any right, power or remedy hereunder,
whether by agreement of the parties or by custom, course of dealing or trade
practice, shall not be effective unless in writing and signed by the party
against whom enforcement of such waiver, amendment or modification is sought.
No failure or delay by either party in exercising any right, power or remedy
with respect to any of the provisions of this Agreement shall operate as a
waiver of such provisions with respect to such occurrences.
10.3 GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
10.4 SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their reasonable efforts to replace
the provision that is contrary to law with a legal one approximating to the
extent possible the original intent of, and the economic benefits accruing to,
the parties.
10.5 KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
15
<PAGE>
10.6 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 10.1,
their respective successors and assigns.
10.7 COMPLETE AGREEMENT. This Agreement and the Other Agreements and
any schedules, exhibits and documents referred to herein or therein or executed
contemporaneously herewith or therewith constitute the entire agreement among
the parties with respect to the subject matter hereof and thereof. This
Agreement and the Other Agreements supersede all prior written, and all prior
and contemporaneous oral, agreements, representations, warranties, statements,
promises and understandings with respect to the subject matter hereof and
thereof.
10.8 NO THIRD-PARTY BENEFICIARIES. Nothing contained in this
Agreement shall be construed to give any person other than Retix and Wireless
Solutions any legal or equitable right, remedy or claim under or with respect to
this Agreement, the Transferred Assets or the Transferred Business.
10.9 HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
10.10 NOTICES. All notices or other communications which shall
or may be given pursuant to this Agreement shall be in writing, shall be
effective upon receipt, and shall be delivered by Federal Express or a similar
courier, personal delivery, certified or registered mail, or by facsimile
transmission (with confirmation of transmission receipt), addressed as follows
(or as is provided in the future by written notice as provided herein):
If to Wireless Solutions : Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Retix: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
10.11 COUNTERPARTS. This Agreement may be executed in any number
of copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
16
<PAGE>
10.12 LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
10.13 DRAFTING. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.
10.14 TRANSACTION COSTS. Except as otherwise provided herein,
each party shall be responsible for any costs, expenses and claims (including
attorneys' fees and professional and brokers' fees and commissions) arising out
of its negotiation, execution and performance of this Agreement and of the Other
Agreements.
10.15 ATTORNEYS' FEES AND OTHER COSTS. In the event of any
dispute or controversy arising out of this Agreement, the prevailing party shall
be entitled to reimbursement of its costs, including court and mediation,
dispute resolution and/or arbitration costs and attorneys' and expert witnesses'
fees and costs.
[SIGNATURE PAGE FOLLOWS]
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first set forth above.
WIRELESS SOLUTIONS RETIX
By: By:
------------------------- -------------------------
Title: Title:
---------------------- ----------------------
18
<PAGE>
MASTER AGREEMENT EXHIBIT LIST
EXHIBIT A Form of Grant Back License Agreement
EXHIBIT B Form of Loan Agreement
EXHIBIT C Form of Key Employee Option Agreement
EXHIBIT D Wireless Solutions Disclosure Schedule
EXHIBIT E Form of Preferred Stock Purchase Agreement
EXHIBIT F List of Products
EXHIBIT G Retix Disclosure Schedule
EXHIBIT H Form of Rights Agreement
EXHIBIT I Form of Security Agreement
EXHIBIT J List of Transferred Assets
EXHIBIT K List of Transferred Liabilities
19
<PAGE>
EXHIBIT A
GRANT-BACK LICENSE AGREEMENT
This Grant-Back License Agreement (the "AGREEMENT") is made as of May 31,
1996 (the "EFFECTIVE DATE") by and between Retix, a California corporation with
offices at 2401 Colorado Avenue, Santa Monica, CA 90404 ("RETIX"), and Wireless
Solutions, a California corporation with offices at 2401 Colorado Avenue, Santa
Monica, CA 90404 ("WIRELESS SOLUTIONS").
In consideration of the mutual covenants contained herein and for other
good and valuable consideration, receipt of which is hereby acknowledged,
Wireless Solutions and Retix hereby agree as follows:
1. DEFINITIONS.
"LICENSED MATERIALS" shall be each computer program whether in
software, firmware, physical or other form, as well as any other technology or
designs (whether hardware, software, firmware or other form thereof) which, as
of the Closing Date, was either owned by Wireless Solutions or permitted to be
licensed by Wireless Solutions to Retix on the terms provided for herein, in
each case after giving effect to the transfer of assets and other matters
contemplated in the Master Agreement. Such Licensed Materials shall include,
without limitation, those programs and other items specified in EXHIBIT A and
such other rights as the parties may from time to time agree to incorporate into
such Exhibit. The term "LICENSED MATERIAL" shall specifically include
documentation and related materials pertinent to such program, design or other
material and any updated version or portion thereof furnished to Retix by
Wireless Solutions for use in connection with or replacement of a Licensed
Material, and shall specifically exclude future additions, improvements or
modifications thereto unless approved in writing by Wireless Solutions and
Retix.
"MASTER AGREEMENT" shall mean the Master Agreement between Wireless
Solutions and Retix of even date herewith.
"OBJECT FORM" shall mean any machine translated version of the Source
Form suitable for execution by computer equipment, or any intermediate form
derived from Source Form which can be made executable by computer equipment.
"PRODUCTS" shall mean all hardware, software and other products
developed, marketed or sold by Retix or its subsidiaries or affiliates which
contain Licensed Materials and which also contain material added features or
other material distinguishing characteristics from the Licensed Materials
incorporated therein.
"SOURCE FORM" shall mean the source code form on any media of any
Licensed Material in the language as delivered by Wireless Solutions to Retix,
or any translation or modification of such Licensed Material which substantially
preserves its original identity.
20
<PAGE>
2. LICENSE GRANT.
2.1 TECHNOLOGY LICENSE. Wireless Solutions hereby grants to Retix
and its authorized contractors a non-exclusive, non-transferable (except as
provided in Section 8.1) worldwide, perpetual, fully-paid license, with the
right to sublicense, to use, copy, have copied and distribute Licensed Materials
in conjunction with the operation, development, design, manufacture, marketing,
sale or other disposition of the Products.
2.2 USE OF SOURCE FORM FOR DEVELOPMENT. Wireless Solutions hereby
grants to Retix and its authorized contractors a non-exclusive, non-transferable
(except as provided in Section 8.1) worldwide, perpetual, fully-paid license
with the right to sublicense, to use, copy and have copied the Source Form of
Licensed Materials for the purpose of adapting or incorporating such Licensed
Materials for operation in connection with the Products.
2.3 USE OF OBJECT FORM IN PRODUCTS. Wireless Solutions hereby
grants to Retix and its authorized contractors a non-exclusive, non-transferable
(except as provided in Section 8.1), worldwide, perpetual, fully-paid license,
with rights to sublicense as described in Section 2.3, to use, copy, have
copied, and distribute the Object Form of Licensed Materials solely on and in
conjunction with the Products.
2.4 RIGHT TO GRANT SUBLICENSES.
(a) RIGHT TO GRANT OBJECT FORM OR SUBLICENSES.
(i) Wireless Solutions hereby grants Retix a non-exclusive,
non-transferable (except as provided in Section 8.1), worldwide, perpetual,
fully-paid right to grant and to grant to distributors, resellers and other
parties who distribute Products the right to grant sublicenses (not exceeding
the scope of the underlying license) to use, copy and have copied the Object
Form of Licensed Materials solely on and in conjunction with the Products,
provided that (i) such sublicensees agree to be bound by terms and conditions no
less restrictive than those set forth in the End User License Agreement attached
hereto as EXHIBIT B , and (ii) any distributors, resellers and other parties who
distribute Products, to which Retix grants the right to grant sublicenses as
provided above, agree in writing to be bound by all of the restrictions
contained in this Agreement applicable to Retix. Neither Retix nor its
distributors, resellers and other parties who distribute Products shall
distribute the Licensed Materials other than in connection with the marketing
and sale of Products.
(ii) If the Object Form is sublicensed on media or devices separately from
the Products, then Retix shall use appropriate means to provide for the
acceptance of said End User License Agreement by the end user sublicensee and
installation of the Object Form only on Products, which means may include a
customary written shrinkwrap or break-seal document specifying such provisions.
(iii) If the Object Form is sublicensed in the form of firmware in Read
Only Memory (ROM) attached directly to the Products, then said End User License
Agreement, or provisions containing at a minimum those of said End User License
Agreement,
21
<PAGE>
will be made a part of a written agreement between Retix and any purchaser of
Products, or in lieu thereof a customary written shrink wrap or break-seal
document specifying such provisions.
(b) RIGHT TO GRANT SOURCE FORM SUBLICENSES. Wireless Solutions
hereby grants Retix a non-exclusive, non-transferable (except as provided in
Section 8.1), worldwide, perpetual, fully-paid right to grant sublicenses (not
exceeding the scope of the underlying license) to use, copy and have copied the
Source Form of Licensed Materials solely on specific items of Products under the
conditions specified below, provided that such sublicensees agree to be bound by
a source code license agreement permitting the use of the Source Form of
Licensed Materials solely for the purposes outlined below, and having terms no
less restrictive than those specified in Section 5 (Confidentiality):
(i) Source Form is required to be held in escrow by a government
sublicensee; or
(ii) Source Form for any or all of the Licensed Materials is required for
maintenance by a sublicensee.
In addition to those provisions outlined above, Retix agrees that its
Source Form sublicensees specified in clauses (i) and (ii) above shall be bound
by the following additional provisions:
(A) Such Source Form sublicenses shall be used for
maintenance purposes only with no rights to develop or distribute improvements,
adaptations, new versions or derivative works of the Licensed Materials.
(B) Except as expressly provided or permitted in this
Agreement, such Source Form sublicensees shall have no rights to distribute or
otherwise make available Source Form or Object Form to other legal entities
other than affiliates of such Source Form sublicensees.
(C) Such Source Form sublicensees shall use the Source
Form and any Object Form compiled therefrom solely in accordance with the
restrictions set forth on EXHIBIT B (in addition to the other restrictions set
forth herein).
2.5 SUBLICENSES TO GOVERNMENT AGENCIES. Wireless Solutions grants
to Retix a non-exclusive, non-assignable, restricted right to sublicense the
Object Form of Licensed Materials to Government units or agencies, with such
Government units or agencies acquiring only the most limited and restricted
rights, permitted under applicable law, in such Licensed Materials and related
proprietary technical information, data, documentation, and any other forms of
recording and communication. Wireless Solutions grants no subsequent rights to
sublicense such Licensed Materials. If the sublicensee is the United States
Government, the restrictions as set forth in DFARS 227.7202 for military
agencies, and FAR 12.212 for civilian agencies, apply. For purposes of such
regulations, the Contractor/Manufacturer shall be deemed to be Wireless
Solutions. Retix and Wireless Solutions expressly agree to follow all
procedures necessary to secure such limited and restricted rights.
22
<PAGE>
2.6 SUBLICENSE ENFORCEMENT. Retix agrees, upon written request or
prior written approval of Wireless Solutions to perform the duties and enforce
the rights of Wireless Solutions with respect to any sublicense granted by Retix
under this Agreement, to the extent permitted under the terms of such
sublicense.
2.7 RIGHTS TO IMPROVEMENTS. Wireless Solutions agrees to notify
Retix promptly in writing of the existence of and the specifications for any
improvements, enhancements, modifications or amendments to the Licensed
Materials (the "IMPROVEMENTS") that Wireless Solutions does not market as new
products and of any versions to or new versions of the Licensed Materials that
Wireless Solutions markets or new products which it has developed and proposes
to make available to any third party (the "TECHNOLOGIES," and collectively with
the Improvements, the "NEW TECHNOLOGIES"). Until the consummation of Wireless
Solutions' Initial Public Offering (as defined in the Master Agreement),
Wireless Solutions shall make any such New Technologies available for use by
Retix on terms no less favorable than those provided by Wireless Solutions to
its most favored customer and at a rate equal to the greater of Wireless
Solutions' most favored customer discount or a 50% discount off the then-current
Wireless Solutions suggested end-user price for such New Technology, in each
case for Wireless Solutions customers contemporaneously purchasing the Licensed
Materials under similar terms. Following the consummation of Wireless
Solutions' Initial Public Offering, Wireless Solutions shall make any such New
Technologies available for use by Retix on terms no less favorable than those
provided by Wireless Solutions to Equivalent Purchasers (as defined below) of
similar Wireless Solutions products and services. As used in the foregoing
sentence, the term "EQUIVALENT PURCHASERS" shall mean purchasers of Wireless
Solutions products or services who (i) are not affiliated with Wireless
Solutions, and (ii) purchase such products or services on terms that are
substantially equivalent to those applicable to Retix.
2.8 THIRD-PARTY ROYALTIES. No royalties or similar payments are
payable by Retix to Wireless Solutions under this Agreement, except for payments
that may arise under Section 2.7 and except for royalties owed by Wireless
Solutions to third parties with respect to Retix' or Retix' sublicensees' use of
the Licensed Materials (collectively, "THIRD-PARTY ROYALTIES"). At the end of
each calendar quarter, Wireless Solutions shall prepare a quarterly statement
showing the Third Party Royalties actually paid by Wireless Solutions during
such quarter. Within 15 days of its receipt of such quarterly statement, Retix
shall reimburse Wireless Solutions for the Third Party Royalty payments actually
paid as indicated in such statement.
2.9 WARRANTY DISCLAIMER. WIRELESS SOLUTIONS MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, WITH RESPECT TO THE LICENSED MATERIALS OR ANY OTHER
MATERIALS PROVIDED HEREUNDER AND EXPRESSLY DISCLAIMS THE IMPLIED WARRANTIES OR
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.
23
<PAGE>
3. DELIVERABLES. At the Closing pursuant to the Master Agreement
between Wireless Solutions and Retix of even date herewith, Wireless Solutions
shall provide Retix with a copy of all Licensed Materials, including copies of
all computer programs included in the Licensed Materials in Source Form and
Object Form (and including sufficient documentation for a complete technical
understanding of such programs) for Retix's use in accordance with the terms of
this Agreement. Thereafter, during the term of this Agreement, Wireless
Solutions shall provide Retix with prompt written notification of any additions,
improvements or modifications to the Licensed Materials, developed by or for
Wireless Solutions, and shall thereafter promptly deliver to Retix a copy of any
such additions, improvements or modifications which the parties agree should be
included in the Licensed Materials.
4. SUPPORT. Retix shall be solely responsible for supporting and
providing maintenance of all or any part of the Licensed Materials and
documentation as provided to Retix's customers. Wireless Solutions shall have
no obligation to provide any consultation or maintenance support to Retix's
customers with respect to all or any part of the Licensed Materials or other
subject matter of this Agreement.
5. CONFIDENTIALITY.
5.1 CONFIDENTIAL INFORMATION. As used in this Agreement, the term
"Confidential Information" shall mean any information disclosed by one party to
the other pursuant to this Agreement which is in written, graphic, machine
readable or other tangible form and is marked "Confidential", "Proprietary" or
in some other manner to indicate its confidential nature. Confidential
Information may also include oral information disclosed by one party to the
other pursuant to this Agreement, provided that such information is designated
as confidential at the time of disclosure and is reduced to writing by the
disclosing party within a reasonable time (not to exceed thirty (30) days) after
its oral disclosure, and such writing is marked in a manner to indicate its
confidential nature and delivered to the receiving party. Notwithstanding any
failure to so identify it, however, all Licensed Materials to be supplied by
Wireless Solutions hereunder shall constitute Wireless Solutions' Confidential
Information without need for further marking.
5.2 CONFIDENTIALITY. Each party shall treat as confidential all
Confidential Information of the other party, shall not use such Confidential
Information except as set forth herein, and shall use reasonable efforts not to
disclose such Confidential Information to any third party. Without limiting
the foregoing, each of the parties shall use at least the same degree of care
which it uses to prevent the disclosure of its own confidential information of
like importance to prevent the disclosure of Confidential Information disclosed
to it by the other party under this Agreement. Each party shall promptly notify
the other party of any actual or suspected misuse or unauthorized disclosure of
the other party's Confidential Information.
24
<PAGE>
5.3 EXCEPTIONS. Notwithstanding the above, neither party shall have
liability to the other with regard to any Confidential Information of the other
which the receiving party can prove:
(i) was in the public domain at the time it was disclosed or has entered
the public domain through no fault of the receiving party;
(ii) was known to the receiving party, without restriction, at the time of
disclosure, as demonstrated by files in existence at the time of disclosure;
(iii) is disclosed with the prior written approval of the disclosing party;
(iv) was independently developed by the receiving party without any use of
the Confidential Information, as demonstrated by files created at the time of
such independent development;
(v) becomes known to the receiving party, without restriction, from a
source other than the disclosing party without breach of this Agreement by the
receiving party and otherwise not in violation of the disclosing party's rights;
(vi) is disclosed generally to third parties by the disclosing party
without restrictions similar to those contained in this Agreement; or
(vii) is disclosed pursuant to the order or requirement of a court,
administrative agency, or other governmental body; provided, however, that the
receiving party shall provide prompt notice thereof to the disclosing party to
enable the disclosing party to seek a protective order or otherwise prevent or
restrict such disclosure;
provided, that Sections 5.3(ii) and (iv) shall not apply to any Licensed
Materials originally developed by Retix prior to the Effective Date,
subsequently transferred to Wireless Solutions, and then licensed back to Retix
by Wireless Solutions pursuant to this Agreement.
5.4 REMEDIES. Any breach of the restrictions contained in this
Section 5 is a breach of this Agreement which may cause irreparable harm to the
nonbreaching party. Any such breach shall entitle the nonbreaching party to
injunctive relief in addition to all legal remedies.
5.5 PRESERVATION OF NOTICES. Wireless Solutions shall retain title
and copyrights to the Licensed Materials and related materials that are provided
by Wireless Solutions to Retix. Appropriate copyright notices shall be placed
on the materials supplied by Wireless Solutions (or as modified by Wireless
Solutions following the closing contemplated by the Master Agreement) and shall
be embedded in the Source Form and Object Form, of Licensed Materials, and such
notices shall be retained on full or partial copies made by Retix. Retix agrees
to reproduce and include all notices, including but not limited to, any
proprietary notices, copyright notices, and restricted rights legends, appearing
thereon.
25
<PAGE>
6. EXPORT CONTROLS.
6.1 EXPORT CONTROLS IN GENERAL. In exercising its rights under this
Agreement, Retix agrees to comply strictly and fully with all export controls
imposed on the Licensed Materials by any country or organization of nations
within whose jurisdiction Retix operates or does business and with all
applicable international, national regional and local laws including all
relevant commodity control laws and regulations in any transactions involving
Licensed Materials.
6.2 COMPLIANCE WITH EXPORT CONTROLS.
(a) With respect to exportation or re-exportation of any part of
the Licensed Materials, Retix agrees not to export or permit exportation without
first (i) obtaining any required written permission to do so from the United
States Office of Export Administration and any other appropriate governmental
agencies of the United States, or (ii) complying fully and strictly with all
requirements of any general license exempting the exportation from the
requirement for that permission.
(b) Retix agrees to comply with the United States Export
Administration Act of 1979 as amended (the "ACT"), and with the Export
Administration Regulations ("EAR") promulgated from time to time thereunder by
the United States Department of Commerce ("DOC") in connection with the
exercise of its rights hereunder.
(c) Each party agrees to execute any documents reasonably
requested by the other party (including applications for export licenses and
written assurances of non-reexportation) for the purpose of complying with the
Act and EAR. Retix agrees to keep, at a minimum, the following records required
by DOC for all Licensed Materials incorporated within Products shipped under
this Agreement:
(i) Name and complete address of Retix's customer;
(ii) Customer's type of business and industry;
(iii) End use of Product sold; and
(iv) Serial numbers and dates of Product sold.
Retix understands and agrees that Licensed Materials may not be
exported, resold or reexported except in a manner which complies with this
Section and Wireless Solutions shall not under any circumstances be liable to
Retix for any damages whatsoever in the event such export licenses are not
obtained or if any shipment of the Licensed Materials is delayed because of
delays in obtaining such licenses.
26
<PAGE>
7. INDEMNIFICATION AND LIMITATION OF LIABILITY.
(a) Wireless Solutions shall indemnify Retix and hold it harmless
from any loss, claim or damage (including attorney's fees) arising out of
Wireless Solutions' use or possession of the Licensed Materials or related
materials (including, but not limited to, infringement or claims of infringement
of any patents, trademarks, copyrights or other intellectual property rights).
(b) EXCEPT FOR ACTIONS PURSUANT TO SECTIONS 5.1, 5.2, 5.3 AND/OR 5.4,
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOST
PROFITS, LOSS OF USE OR LOST DATA) ARISING FROM OR BASED UPON THIS AGREEMENT OR
ANY BREACH HEREOF, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER OR NOT
SUCH PARTY HAD BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8. GENERAL PROVISIONS.
8.1 ASSIGNMENT. Except with respect to an assignment to a successor
in business or an acquiror of all or substantially all of a party's business or
assets, this Agreement is not transferable or assignable without the consent of
the other party to this Agreement. Any assignment in derogation of the
foregoing shall be void.
8.2 AMENDMENTS AND WAIVERS. The waiver, amendment or modification
of any provision of this Agreement or any right, power or remedy hereunder,
whether by agreement of the parties or by custom, course of dealing or trade
practice, shall not be effective unless in writing and signed by the party
against whom enforcement of such waiver, amendment or modification is sought.
No failure or delay by either party in exercising any right, power or remedy
with respect to any of the provisions of this Agreement shall operate as a
waiver of such provisions with respect to such occurrences.
8.3 GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
8.4 SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their best efforts to replace the
provision that is contrary to law with a legal one approximating to the extent
possible the original intent of, and the economic benefits accruing to, the
parties.
27
<PAGE>
8.5 KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
8.6 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 8.1,
their respective successors and assigns.
8.7 COMPLETE AGREEMENT. This Agreement and any schedules, exhibits
and documents referred to herein or executed contemporaneously herewith
constitute the entire agreement among the parties with respect to the subject
matter hereof. This Agreement supersedes all prior written, and all prior and
contemporaneous oral, agreements, representations, warranties, statements,
promises and understandings with respect to the subject matter hereof.
8.8 HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
8.9 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Wireless Solutions: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Retix: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
8.10 COUNTERPARTS. This Agreement may be executed in any number of
copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
8.11 LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
28
<PAGE>
8.12 DRAFTING. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.
8.13 TRANSACTION COSTS. Except as otherwise provided herein, each
party shall be responsible for any costs, expenses and claims ( including
attorneys' fees and professional and brokers' fees and commissions) arising out
of its negotiation, execution and performance of this Agreement.
8.14 ATTORNEYS' FEES AND OTHER COSTS. In the event of any dispute or
controversy arising out of this Agreement, the prevailing party shall be
entitled to reimbursement of its costs, including court and mediation, dispute
resolution and/or arbitration costs and attorneys' and expert witnesses' fees
and costs.
[SIGNATURE PAGE FOLLOWS]
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
WIRELESS SOLUTIONS RETIX
By: By:
------------------------------ -------------------------
Title: Title:
--------------------------- -----------------------
30
<PAGE>
EXHIBIT A
LICENSED MATERIALS
EXHIBIT B
FORM OF END USER LICENSE AGREEMENT
31
<PAGE>
EXHIBIT B
LOAN AGREEMENT
This Loan Agreement (the "AGREEMENT") dated as of May 31, 1996, is by and
between Retix, a California corporation (the "LENDER") and Wireless Solutions,
a California corporation (the "BORROWER").
1. LOAN.
1.1 Subject to the terms and conditions of this Agreement and in
reliance on the representations and warranties of Borrower set forth herein,
Lender agrees to provide Borrower with a credit line of up to $1,000,000 (the
"CREDIT LINE") to be secured by all of Borrower's assets pursuant to the
Security Agreement between Lender and Borrower of even date herewith (the
"SECURITY AGREEMENT").
1.2 Advances under the Credit Line may be advanced to Borrower in a
single funding or in separate fundings (each such event, a "FUNDING EVENT," and
each date thereof, a "FUNDING DATE"). Borrower shall provide Lender at least
ten (10) business days prior notice of each requested Funding Event. Each
Funding Event shall be evidenced by a promissory note of Borrower in favor of
Lender substantially in the form of EXHIBIT A to this Agreement (each a "NOTE"
and together the "NOTES").
1.3 Subject to the terms and conditions of this Agreement, on or
before May 31, 1999, Borrower may re-borrow amounts repaid under the Credit
Line. Any amounts re-borrowed under the Credit Line shall be evidenced by a
Note, and shall be subject to the terms and conditions of this Agreement,
including the repayment terms set forth in the Note and in Section 3 below. No
loans shall be made to Borrower after May 31, 1999, and any notes outstanding as
of such date shall be repaid by Borrower in accordance with their respective
terms.
1.4 Amounts borrowed or re-borrowed under the Credit Line shall be
used solely and exclusively to fund the Borrower's ongoing operating expenses as
approved by the Borrower's Board of Directors.
2. CONDITIONS PRECEDENT TO FUNDING. The obligation of Lender to make
advances under the Credit Line to Borrower, or any funding thereof, is subject
to the following conditions:
2.1 That Lender shall have received, on or before each Funding Date,
including the first such Funding Date, each of the following, in form and
substance satisfactory to Lender and its counsel, if any: (a) a Note in the
principal amount of the respective funding duly executed by Borrower; and (b) a
certificate of an officer of Borrower that the representations and warranties
contained in this Agreement are true and correct on the Funding
32
<PAGE>
Date and that there is no Event of Default under this Agreement and no event or
condition which, with lapse of time or giving of notice, would become such an
Event of Default;
2.2 That no Event of Default under this Agreement and no event or
condition which would, with the giving of notice or lapse of time or both,
become such an Event of Default under this Agreement shall have occurred and be
continuing on or before each Funding Date; and
2.3 That such Credit Line is, in aggregate amount as well as in the
timing of the respective Funding Event, consistent with Borrower's written
annual operating plan previously approved by its Board of Directors.
3. REPAYMENT OF LOAN.
3.1 REPAYMENT TERMS. Payments of interest must be made in on the
first day of each calendar quarter following the date of each Note. Payments of
principal must also be made on the first day of each calendar quarter following
the date of each Note out of any funds available to Borrower at such time.
Payments of both interest and principal shall also be due immediately upon the
occurrence of certain events as set forth below. Solely for purposes of
illustration, if on the first day of a calendar quarter,
(a) Borrower has (1) an outstanding promissory note in the
principal amount of $250,000 ("NOTE 1"), (2) quarterly interest due on Note 1
in the amount of $3,750, (3) a later dated outstanding promissory note in the
principal amount of $750,000 ("NOTE 2"), (3) quarterly interest due on Note 2
in the amount of $12,000 and (4) a cash balance in its accounts of $2,500,000,
then on such date Borrower must pay to Lender (1) the entire $15,750 in interest
due on Notes 1 and 2, then (2) the entire $250,000 principal balance due on Note
1, then (3) the entire $750,000 principal balance due on Note 2, and
(b) Borrower has (1) an outstanding promissory note in the
principal amount of $250,000 ("NOTE 1"), (2) quarterly interest due on Note 1
in the amount of $3,750, (3) a later dated outstanding promissory note in the
principal amount of $750,000 ("NOTE 2"), (3) quarterly interest due on Note 2
in the amount of $12,000 and (4) a cash balance in its accounts of $500,000,
then on such date Borrower must pay to Lender (1) the entire $15,750 in interest
due on Notes 1 and 2, then (2) the entire $250,000 principal balance due on Note
1, then (3) the entire remaining cash balance in Borrower' accounts ($234,250)
towards the reduction of the principal balance due on Note 2.
3.2 PREPAYMENT. Borrower may prepay the Credit Line, or any portion
thereof, at any time, without prepayment penalty.
3.3 LATE PAYMENT CHARGE. Payments of principal (and of interest to
the extent permitted by law) not made on the due date shall bear interest at a
rate per annum equal to the rate specified in each Note plus two percent (2%),
but not in excess of the maximum rate permitted by law until such unpaid amount
has been paid in full (whether before or after judgment). All interest provided
for in this Section 3.3 shall be payable on demand.
33
<PAGE>
3.4 NON-BUSINESS DAYS. Whenever any payment required under this
Agreement falls due on a day that is not a business day, such payment shall be
made on the next succeeding business day.
3.5 ACCELERATION. At Lender's option, the entire principal amount
and interest due under the Notes shall become immediately due and payable, and
no further amounts may be borrowed or re-borrowed under the Credit Line: (i) if
Borrower sells all or substantially all of its assets, (ii) if Borrower
liquidates, dissolves or consummates any consolidation, merger or other
combination (except a merger, consolidation, sale of assets or other combination
in which the shareholders of Borrower immediately prior to the transaction hold
more than fifty percent (50%) of the outstanding voting securities of the
surviving or purchasing entity by virtue of voting equity securities of the
successor entity received in connection with such transaction in exchange for
shares or other securities of Borrower owned immediately prior to the closing of
such transaction), or (iii) upon the occurrence of any Event of Default (as
defined below). In addition, 50% of the entire principal amount and unpaid
accrued interest under the Notes shall become immediately due and payable, at
Lender's option, if the Borrower consummates any transaction as a result of
which Lender ceases to own at least 50% of the then outstanding capital stock of
Borrower on an as converted to Common Stock basis.
4. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to enter
into this Agreement, Borrower makes the following representations and warranties
which shall survive the execution and delivery of this Agreement and the Notes:
4.1 CORPORATE EXISTENCE AND POWERS. Borrower (a) is a corporation
duly organized, validly existing and in good standing under the laws of State of
California, and (b) has all corporate power and authority to carry out this
Agreement and the transactions contemplated herein. Borrower is not qualified
or licensed to do business as a foreign corporation in any state. Borrower does
not own, directly or indirectly, any equity or other interest in any other
corporation, association, partnership or other business entity.
4.2 CORPORATE AUTHORIZATIONS; BINDING EFFECT. The execution,
delivery and performance by Borrower of this Agreement are within the corporate
authority of Borrower, have been duly authorized by all necessary corporate
proceedings and do not and will not, to the knowledge of Borrower, (i)
contravene, or constitute a default under, any provisions of applicable law or
regulations or of the Articles of Incorporation or Bylaws of Borrower or of any
presently existing material contract, agreement, judgment, order, decree or
other material instrument binding upon Borrower or (ii) result in or require the
creation or imposition of any lien upon or with respect to any material property
now or hereafter owned by Borrower under any presently existing material
contract, agreement or other material instrument binding upon it, other than
that specifically created under this Agreement. To the knowledge of Borrower,
this Agreement constitutes, as of its execution, a legal, valid and binding
agreement enforceable against Borrower in accordance with its terms.
34
<PAGE>
4.3 GOVERNMENTAL AND OTHER CONSENTS NOT REQUIRED. To the knowledge
of Borrower, no license, authorization, consent or approval of any governmental
body, other body or agency is required to be obtained by Borrower in connection
with the execution and delivery of this Agreement, or in connection with the
carrying out by Borrower of its obligations under this Agreement.
4.4 LITIGATION. There is no action, suit or proceeding pending, or
to the knowledge of Borrower, threatened, against or affecting Borrower before
any court or arbitration tribunal or any other governmental department,
administrative agency or instrumentality which, if such action, suit or
proceeding would be determined against Borrower, would affect the ability of
Borrower to perform its obligations under this Agreement. To its knowledge,
Borrower is not in default in any material respect with respect to any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award.
4.5 TITLE TO COLLATERAL. Borrower warrants that Borrower has
acquired good and merchantable title to the Collateral (as defined in the
Security Agreement between Borrower and Lender of even date with this Agreement)
at such time and in such manner as to create a first priority security interest
in the Collateral in favor of Lender (provided and on the condition that Lender
makes timely filings in the proper offices of all UCC-1 financing statements
furnished to it) free and clear of in each instance any other security
interests, liens, claims, encumbrances and rights of others except any lien
created by this Agreement, liens for taxes not yet due and payable and any
security interests which will be discharged at or before the funding
contemplated hereby.
4.6 DISCLOSURE. All information heretofore, herein or hereafter
supplied to Lender by or on behalf of Borrower with respect to the Collateral is
and will be accurate and complete in all material respects.
4.7 RECONFIRMATION OF REPRESENTATIONS AND WARRANTIES. Borrower
shall reconfirm as of each Funding Date that all the aforesaid representations
and warranties remain valid and in full force and effect.
5. COVENANTS OF BORROWER. Borrower covenants that until the payment in
full of the Credit Line and fulfillment of all its obligations under this
Agreement, Borrower shall comply with the following covenants:
5.1 NO SALE. As long as any amount due under this Agreement or
under any Note remains unpaid, Borrower will not sell, assign, transfer,
encumber, lease or otherwise dispose of all, or any part, of its right, title
and interest in any of the Collateral pledged as security for the Credit Line,
except for licenses granted or sales of products by Borrower in the ordinary
course of business, or as set forth in this Agreement.
5.2 MAINTENANCE OF COLLATERAL. Borrower will maintain the
Collateral, or cause the Collateral to be maintained, in good order and
condition, reasonable wear and tear excepted.
35
<PAGE>
5.3 PAYMENT OF TAXES. Borrower will pay when due and before any
interest or penalty is assessed, all taxes, federal, state or local, and all
levies or charges assessed against the Collateral to the appropriate
authorities. Borrower will discharge, or cause to be discharged, all liens,
security interests and encumbrances affecting the Collateral arising therefrom.
5.4 CORPORATE EXISTENCE. Borrower shall preserve and maintain its
existence as a corporation under the laws of the state of its incorporation and
all of its rights, privileges and franchises necessary or desirable in the
normal course of its business.
5.5 FINANCIAL STATEMENTS.
(a) Borrower shall deliver to Lender:
(i) Within 90 days after the end of each fiscal year, an
audited balance sheet as of the end of such fiscal year, and a statement of
income and retained earnings for such fiscal year, and a statement of cash flows
for such fiscal year (each with the accompanying footnotes) all in reasonable
detail;
(ii) Within 45 days after the end of each of the first three
quarters of each fiscal year, Borrower shall provide copies of (A) the unaudited
balance sheet at the end of the interim period ending at the end of such
quarter, and (B) the related consolidated statement of income and changes in
financial position for the portion of the fiscal year ended at the end of such
period; each of the financial statements shall present fairly the consolidated
financial position of Borrower at the end of each such quarter, and the
consolidated results of operations and cash flows for the portion of the fiscal
year ended at the end of such period, all in conformity with generally accepted
accounting principles applied on a basis consistent with the financial
statements referred to in (i) above (except that such quarterly statements will
not contain footnotes);
5.6 NOTICES. Borrower shall give immediate notice to Lender of:
(a) the occurrence of any Event of Default (as defined below)
accompanied by a certificate specifying the nature of such Event of Default, the
circumstances thereof and the action that Borrower has taken or proposes to
take;
(b) any claim, litigation or judicial proceeding which may exist
at any time which, if determined adversely, could have a material adverse effect
on the ability of Borrower to perform its obligations under this Agreement;
(c) any event that materially adversely affects the value of the
Collateral, the ability of Borrower to dispose of any Collateral or the rights
and remedies of Lender in relation thereto, including the levy of any legal
process against any of the Collateral; and
(d) any material adverse change in the composition of the
Collateral.
36
<PAGE>
5.7 NO CONFLICTS. Borrower shall not enter into any agreement that
would materially impair or conflict with Borrower's obligations hereunder
without Lender's prior written consent, which consent shall not be unreasonably
withheld. Borrower shall not permit the inclusion in any material contract to
which its becomes a party of any provisions that could or might in any way
prevent the creation of a security interest in Borrower's rights and interest in
any property included within the definition of the Collateral acquired under
such contracts, except that certain contracts may contain anti-assignment
provisions that could in effect prohibit the creation of a security interest in
such contracts.
6. EVENTS OF DEFAULT. Any of the following events shall constitute an
"EVENT OF DEFAULT" under this Agreement and under the Notes:
6.1 PAYMENTS. Borrower shall fail to make any payment due under
this Agreement or under any Note after the same shall become due and such
failure shall continue for ten days after Borrower receives notice of
non-payment;
6.2 LIENS. Borrower shall suffer the imposition upon the
Collateral or any part thereof of any claim, lien, security interest,
encumbrance or charge which is prior to or on a parity with the security
interest granted under this Agreement, except as contemplated by this
Agreement, and such imposition shall remain undischarged for a period of ten
days after Borrower has actual notice or actual knowledge thereof;
6.3 COVENANTS. Borrower shall fail to perform or observe any
material covenant, condition or agreement to be performed or observed by
Borrower in this Agreement, any Note or in any agreement or certificate of
Borrower furnished to Lender in connection herewith and such failure shall
continue unremedied after occurrence of such failure for a period of ten days
after the earlier of Borrower's actual knowledge of such failure or receipt
of written notice thereof;
6.4 INSOLVENCY. Borrower shall have become insolvent or bankrupt
or admit in writing its inability to pay any of its debts as they mature or
make an assignment for the benefit of creditors, or a receiver or trustee
shall have been appointed with respect to Borrower; PROVIDED , that an Event
of Default shall not have occurred under this Agreement if such action is
opposed by Borrower and is dismissed within sixty days; or
6.5 BANKRUPTCY. Bankruptcy, reorganization arrangement,
insolvency or liquidation proceedings for relief under Title XI of the United
States Code or any bankruptcy law or similar law now or hereafter in force
for the relief of debtors shall be instituted by or against Borrower and,
solely with respect to any proceedings instituted against Borrower by a third
party, Borrower shall fail to dismiss or to stay such proceedings within
sixty (60)days of such institution.
37
<PAGE>
7. SURVIVAL OF REPRESENTATIONS. All representations and warranties made
in this Agreement or in any relevant documents furnished to Lender by Borrower
under this Agreement and executed by its authorized officer or agent shall
survive the execution and delivery of this Agreement and any such relevant
documents furnished to Lender by Borrower and executed by its authorized officer
or agent and shall continue so long as any obligations under this Agreement are
outstanding and unsatisfied.
8. MISCELLANEOUS.
8.1 ASSIGNMENT. Except with respect to an assignment to a successor
of all or substantially all of a party's business or assets, this Agreement is
not transferable or assignable without the consent of each of the other party to
this Agreement, and neither party shall have the power or right to assign,
transfer or delegate any of its rights or obligations hereunder. Any assignment
in derogation of the foregoing shall be void.
8.2 AMENDMENTS AND WAIVERS. The waiver, amendment or modification
of any provision of this Agreement or any right, power or remedy hereunder,
whether by agreement of the parties or by custom, course of dealing or trade
practice, shall not be effective unless in writing and signed by the party
against whom enforcement of such waiver, amendment or modification is sought.
No failure or delay by either party in exercising any right, power or remedy
with respect to any of the provisions of this Agreement shall operate as a
waiver of such provisions with respect to such occurrences.
8.3 GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
8.4 SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their best efforts to replace the
provision that is contrary to law with a legal one approximating to the extent
possible the original intent of, and the economic benefits accruing to, the
parties.
8.5 KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
8.6 BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 8.1,
their respective successors and assigns.
38
<PAGE>
8.7 HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
8.8 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Borrower: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Lender: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
8.9 COUNTERPARTS. This Agreement may be executed in any number of
copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
8.10 LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
8.11 DRAFTING. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.
8.12 TRANSACTION COSTS. Except as otherwise provided herein, each
party shall be responsible for its costs, expenses and claims (including
attorneys' fees and professional and brokers' fees and commissions) arising out
of its negotiation, execution and performance of this Agreement and of the Other
Agreements.
8.13 ATTORNEYS' FEES AND OTHER COSTS. In the event of any dispute or
controversy arising out of this Agreement, the prevailing party shall be
entitled to reimbursement of its costs, including court and mediation, dispute
resolution and/or arbitration costs and attorneys' and expert witnesses' fees
and costs.
39
<PAGE>
8.14 COMPLETE AGREEMENT. This Agreement, together with the exhibits
or schedules to this Agreement, the Notes, and the Security Agreement of even
date to this Agreement, is intended by the parties as a final expression of
their agreement and is intended as a complete statement of the terms and
conditions of the subject matter hereof and thereof.
[SIGNATURE PAGE FOLLOWS]
40
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date and year first above written.
"LENDER"
RETIX
By:
----------------------------
Title:
-------------------------
"BORROWER"
WIRELESS SOLUTIONS
By:
----------------------------
Title: -------------------------
41
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$ ____________ ___________, 199_
FOR VALUE RECEIVED, Wireless Solutions, a California corporation (the
"BORROWER"), hereby promises to pay to the order of Retix, a California
corporation (the "LENDER") the principal sum of ___________________
($___________), together with interest at the lesser of the prime rate as
announced from time to time by First Interstate Bank or the maximum rate
permitted by law per annum, on the unpaid amount owing under this Note for the
period commencing on the date hereof. Payments of interest shall be made in
immediately available funds on the first day of each calendar quarter following
the date of this Note. Payments of principal shall be made in immediately
available funds on the first day of each calendar quarter following the date of
this Note out of any funds available to Borrower at such time in accordance with
the terms of the Loan Agreement dated _____________, 1996 between Borrower and
Lender (the "LOAN AGREEMENT").
All interest and principal due under this Note shall also be due
immediately upon the occurrence of certain events as set forth in the Loan
Agreement. Capitalized terms used in this Note have the respective meanings
assigned to such terms in the Agreement.
Borrower may prepay amounts due under this Note, or any portion thereof, at
any time, without prepayment penalty.
All payments to be made to the Lender under this Note shall be made to
Lender at its principal offices at 2401 Colorado Avenue, Santa Monica,
California 90404 or such other address as Lender may designate in writing.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF CALIFORNIA.
WIRELESS SOLUTIONS
a California corporation
By:
----------------------------------
Title:
-------------------------------
42
<PAGE>
EXHIBIT C
WIRELESS SOLUTIONS
STOCK OPTION AGREEMENT
Wireless Solutions, a California corporation (the "COMPANY"), has granted
to OPTIONEE (the "OPTIONEE"), an option (the "OPTION") to purchase a total of
SHARES shares of Common Stock (the "SHARES"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the 1996 Stock Option Plan (the "PLAN") adopted by the Company,
which is incorporated herein by reference. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings herein.
1. NATURE OF THE OPTION. This Option is intended to qualify as an
Incentive Stock Option as defined in Section 422 of the Code.
2. EXERCISE PRICE. The exercise price is $0.25 for each share of Common
Stock, which price is not less than the fair market value per share of the
Common Stock on the date of grant.
3. EXERCISE OF OPTION. This Option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) VESTING CALCULATIONS.
(1) Initially, this Option shall not be exercisable.
Subject to the other terms and conditions of this Option, on the date (the
"CLIFF VESTING DATE") that is one year after the Vesting Commencement Date (as
set forth on the signature page of this Agreement) this Option shall become
exercisable for a total of 1/3 of the Shares subject to the Option; thereafter,
this Option shall be exercisable cumulatively, to the extent of 1/36th of the
Shares subject to the Option at the end of each month after the Cliff Vesting
Date.
(2) Notwithstanding the foregoing Section 3(i)(a)(1), the
exercisability of this Option shall be accelerated as follows: Upon
consummation of any sale (a "THIRD PARTY SALE") by Retix, a California
corporation ("RETIX") of all of the Company's securities owned by Retix to any
third party other than (i) Wireless Solutions Management (as defined in the
Master Agreement between Retix and the Company dated May ____, 1996 (the "MASTER
AGREEMENT") or any Affiliates thereof (as defined below) or (ii) in the
Company's Initial Public Offering (as defined in the Master Agreement) or in
connection with a distribution of any of the Company's securities owned by Retix
to its shareholders, then in addition to any Shares that are already vested
hereunder, this Option shall become immediately exercisable for an additional
number of Shares equal to the total number of Shares which would otherwise have
become vested over a period of 12 months; PROVIDED, HOWEVER, that at least 1/3
of the Shares originally subject to the Option remain unvested as of the date of
closing of the Third Party Sale. In the
43
<PAGE>
event that less than 1/3 of the Shares originally subject to the Option remain
unvested as of the date of closing of the Third Party Sale, then this Option
shall continue to vest in accordance with the terms of Section 3(i)(a)(1) above,
and the Option shall not be exercisable for any additional Shares as of such
closing date. As used herein, the term "AFFILIATE" shall have the meaning
given in the Securities Act of 1933 and Securities Exchange Act of 1934 and any
rules and regulations promulgated thereunder.
(b) This Option may not be exercised for a fraction of a share.
(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 7, 8 and 9 below, subject to the limitations contained in subsections
3(i)(d) and (e).
(d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 11 below.
(e) In the event that this Option becomes exercisable at a time
or times which, when this Option is aggregated with all other incentive stock
options granted to Optionee by the Company or any Parent or Subsidiary, would
result in Shares having an aggregate fair market value (determined for each
Share as of the date of grant of the option covering such share) in excess of
$100,000 becoming first available for purchase upon exercise of one or more
incentive stock options during any calendar year, the amount in excess of
$100,000 shall be treated as a nonstatutory stock option, pursuant to Section 5
of the Plan.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by
written notice which shall state the election to exercise the Option, the number
of Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price. This Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the exercise price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
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.
4. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, 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 as EXHIBIT A.
44
<PAGE>
5. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check;
(iii) surrender of other shares of Common Stock of the Company
which (A) either have been owned by the Optionee for more than six (6) months on
the date of surrender or were not acquired, directly or indirectly, from the
Company and (B) have a fair market value on the date of surrender equal to the
Exercise Price of the Shares as to which the Option is being exercised; or
(iv) delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price.
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
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("REGULATION G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
7. TERMINATION OF STATUS AS AN EMPLOYEE. In the event of termination of
Optionee's Continuous Status as an Employee, he or she may, but only within two
(2) months after the date of such termination (but in no event later than the
date of expiration of the term of this Option as set forth in Section 11 below),
exercise this Option to the extent that he or she was entitled to exercise it at
the date of such termination. To the extent that he or she was not entitled to
exercise this Option at the date of such termination, or if he or she does not
exercise this Option within the time specified herein, the Option shall
terminate.
45
<PAGE>
8. DISABILITY OF OPTIONEE.
(i) Notwithstanding the provisions of Section 7 above, in the
event of termination of Optionee's Continuous Status as an Employee as a result
of his or her total and permanent disability (as defined in Section 22(e)(3) of
the Code), Optionee may, but only within twelve (12) months from the date of
termination of employment (but in no event later than the date of expiration of
the term of this Option as set forth in Section 11 below), exercise this Option
to the extent he or she was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
(which he or she was entitled to exercise) within the time specified herein, the
Option shall terminate.
(ii) Notwithstanding the provisions of Section 7 above, in the
event of termination of Optionee's Continuous Status as an Employee as a result
of any disability not constituting a total and permanent disability (as defined
in Section 22(e)(3) of the Code), Optionee may, but only within six (6) months
from the date of termination of employment (but in no event later than the date
of expiration of the term of this Option as set forth in Section 11 below),
exercise this Option to the extent he or she was entitled to exercise it at the
date of such termination; provided, however, that if this is an Incentive Stock
Option and Optionee fails to exercise this Incentive Stock Option within three
(3) months from the date of termination of employment, this Option will cease to
qualify as an Incentive Stock Option (as defined in Section 422 of the Code) and
Optionee will be treated for federal income tax purposes as having received
ordinary income at the time of such exercise in an amount generally measured by
the difference between the exercise price for the Shares and the fair market
value of the Shares on the date of exercise. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate.
9. DEATH OF OPTIONEE. In the event of the death of Optionee:
(i) during the term of this Option and while an Employee of the
Company and having been in Continuous Status as an Employee since the date of
grant of the Option, the Option may be exercised, at any time within three (3)
months following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as an Employee twelve (12) months after the date of death, subject to the
limitations contained in Section 3(i)(e) above; or
(ii) within two (2) months after the termination of Optionee's
Continuous Status as an Employee, the Option may be exercised, at any time
within three (3) months following the date of death (but in no event later than
the date of expiration of the term of this Option as set forth in Section 11
below), by Optionee's estate or by a person who acquired the right to exercise
the Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
46
<PAGE>
10. 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.
The designation of a beneficiary does not constitute a transfer. An Option may
be exercised during the lifetime of the Optionee only by the Optionee or a
transferee permitted by this Section. The terms of this Option shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
11. TERM OF OPTION. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
term only in accordance with the Plan and the terms of this Option.
12. EARLY DISPOSITION OF STOCK. Optionee understands that if he or she
disposes of any Shares received under this Option within two (2) years after the
date of this Agreement or within one (1) year after such Shares were transferred
to him or her, he or she will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an amount
generally measured by the difference between the price paid for the Shares and
the lower of the fair market value of the Shares at the date of the exercise or
the fair market value of the Shares at the date of disposition. The amount of
such ordinary income may be measured differently if Optionee is an officer,
director or 10% shareholder of the Company, or if the Shares were subject to a
substantial risk of forfeiture at the time they were transferred to Optionee.
OPTIONEE HEREBY AGREES TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER THE
DATE OF ANY SUCH DISPOSITION. Optionee understands that if he disposes of such
Shares at any time after the expiration of such two-year and one-year holding
periods, any gain on such sale will be taxed as long-term capital gain.
13. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing such offering, Optionee hereby agrees not to sell, make
any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Shares or other securities of the Company (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters; PROVIDED, HOWEVER, that the
Optionee need not so agree unless a majority of the Company's officers and
directors and a majority of the holders of at least 5% of the Company's
outstanding securities also agree to be similarly bound.
[SIGNATURE PAGE FOLLOWS]
47
<PAGE>
DATE OF GRANT: , 1996
-------------
WIRELESS SOLUTIONS
By:
----------------------------------
Title:
-------------------------------
Vesting Commencement Date: VESTINGDATE
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT 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
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT BY THE COMPANY, NOR SHALL IT INTERFERE IN
ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS OR HER
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
OPTIONEE ACKNOWLEDGES THAT THIS OPTION IS THE ONLY OPTION OR OTHER RIGHT TO
BE OFFERED, PROVIDED OR GRANTED TO THE OPTIONEE WITH RESPECT TO THE SECURITIES
OF THE COMPANY OR ANY AFFILIATED ENTITY AND THAT THIS OPTION SUPERSEDES ALL
PRIOR AGREEMENTS, UNDERSTANDINGS OR DISCUSSIONS, WRITTEN OR ORAL, WITH RESPECT
TO THE FOREGOING.
Optionee acknowledges receipt of a copy of the Plan and certain information
related thereto 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 Board upon any questions arising under the Plan.
Dated:
------------------------- -------------------------------------
OPTIONEE, Optionee
48
<PAGE>
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE: OPTIONEE
COMPANY:
SECURITY:
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.
(c) 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
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of exercise of the Option by the Optionee,
such exercise will be exempt from registration under the Securities Act. In the
event the Company later becomes subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter
the securities exempt under Rule 701 may be resold, subject to
49
<PAGE>
the satisfaction of certain of the conditions specified by Rule 144, including
among other things: (1) the sale 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, and the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of exercise of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (1) the resale occurring not less than two years after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (2) the availability of
certain public information about the Company, (3) the sale 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 (4) the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
(d) MARKET STANDOFF AGREEMENT. In connection with the initial
public offering of the Company's securities and upon request of the Company or
the underwriters managing such offering, Optionee hereby agrees not to sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any of the Securities or any other securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters; PROVIDED, HOWEVER,
that the Optionee need not so agree unless a majority of the Company's officers
and directors and a majority of the holders of at least 5% of the Company's
outstanding securities also agree to be similarly bound.
(e) 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 & 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:
--------------------------------------
OPTIONEE
Date:
---------------------------------
50
<PAGE>
EXHIBIT D
WIRELESS SOLUTIONS DISCLOSURE STATEMENT
This Disclosure Statement is made and given pursuant to Section 4 of the
Master Agreement (the "AGREEMENT") by and between Retix and Wireless Solutions.
The Section numbers in this Disclosure Statement correspond to the Section
numbers in the Agreement; however, any information disclosed herein under any
Section number shall be deemed to be disclosed and incorporated into any other
Section number under the Agreement where such disclosure would be appropriate.
Any terms used in this Disclosure Statement shall have the meanings defined for
them in the Agreement unless otherwise defined herein.
SECTION 3.11 - BINDING AGREEMENTS
Third party consents to the transactions contemplated by the Master
Agreement are required from certain vendors, distributors, resellers and other
contractors as indicated on lists provided or made available to Wireless
Solutions.
51
<PAGE>
EXHIBIT E
PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of May 31, 1996 by and between Wireless
Solutions, a California corporation (the "COMPANY") and Retix, a California
corporation (the "PURCHASER").
1. AUTHORIZATION AND SALE OF PREFERRED STOCK.
1.1 AUTHORIZATION. The Company will authorize the sale and issuance
of up to 17,000,000 shares of its Preferred Stock, having the rights, privileges
and preferences as set forth in the Amended and Restated Articles of
Incorporation (the "RESTATED ARTICLES") in the form attached to this Agreement
as EXHIBIT A.
1.2 SALE OF PREFERRED. Subject to the terms and conditions of this
Agreement, in exchange for the transfer of the Transferred Assets (subject to
the Transferred Liabilities and Transferred Contracts) as provided in the Master
Agreement between the parties of even date herewith (the "MASTER AGREEMENT"),
the Purchaser agrees to purchase at the Closing (as defined below), and the
Company agrees to sell and issue to the Purchaser, 17,000,000 shares of the
Company's Preferred Stock (the "SHARES" or "PREFERRED") at a price of $1.75
per share.
2. CLOSING DATE; DELIVERY.
2.1 CLOSING DATE. The closing of the purchase and sale of the
Shares under this Agreement shall be held at the offices of Venture Law Group, A
Professional Corporation, 2800 Sand Hill Road, Menlo Park, California
simultaneous with the execution and delivery of this Agreement and the Master
Agreement (the "CLOSING") or at such other time and place upon which the
Company and the Purchaser shall agree (the date of the Closing is hereinafter
referred to as the "CLOSING DATE").
2.2 DELIVERY. At the Closing, the Company will deliver to the
Purchaser a certificate or certificates representing the number of Shares to be
purchased by the Purchaser at such Closing, against delivery to the Company by
the Purchaser of all necessary and appropriate instruments to effect the
transfer of the Transferred Assets, as provided in the Master Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
on EXHIBIT B attached to this Agreement, the Company hereby represents and
warrants to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company
(a) is a corporation duly organized, validly existing and in good standing under
the laws of State of California, and (b) has all corporate power and authority
to carry out this Agreement and the transactions contemplated herein. The
Company is not qualified or licensed to do business as a foreign corporation in
any state. The Company does not own, directly or indirectly, any equity or
other interest in any other corporation, association, partnership or other
business entity. The
52
<PAGE>
Company has furnished Purchaser with copies of its Articles of Incorporation and
Bylaws. Said copies are true, correct and complete and contain all amendments
through the Closing Date.
3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, to
sell and issue the Shares hereunder, to issue the Common Stock issuable upon
conversion of the Shares and to carry out and perform its obligations under the
terms of this Agreement.
3.3 CAPITALIZATION. The authorized capital stock of the Company
consists or will, upon the filing of the Restated Articles, consist of:
20,000,000 shares of Common Stock, none of which are issued and outstanding; and
17,000,000 shares of Preferred Stock, none of which were issued and outstanding
prior to the Closing. All issued and outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved 17,000,000 shares of Preferred Stock for issuance
hereunder, 17,000,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock, 2,800,000 shares for issuance pursuant to the Company's 1996
Stock Option Plan and 200,000 shares for issuance pursuant to the Company's 1996
Directors' Stock Option Plan. The Preferred Stock shall have the rights,
preferences, privileges and restrictions set forth in the Restated Articles.
All securities of the Company to be outstanding immediately following the
Closing will be issued in compliance with applicable federal and state
securities laws. Except as described above, there are no preemptive rights,
options or warrants or other conversion privileges or rights presently
outstanding to purchase any of the authorized but unissued stock of the Company.
The Company is not obligated to repurchase any shares of its capital stock or
any other securities.
3.4 AUTHORIZATION. All corporate action on the part of the Company,
its directors and shareholders (if any) necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, the
authorization, sale, issuance and delivery of the Shares (and the Common Stock
issuable upon conversion of the Shares) and the performance of all of the
Company's obligations under this Agreement has been taken or will be taken prior
to the Closing. This Agreement, when executed and delivered by the Company,
shall constitute a valid and binding obligation of the Company enforceable in
accordance with its terms. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued and will be fully paid and
nonassessable and will have the rights, preferences and privileges described in
the Restated Articles. The shares of Common Stock issuable upon conversion of
the Shares have been duly and validly reserved and, when issued in compliance
with the provisions of this Agreement and the Restated Articles will be validly
issued, fully paid and nonassessable, and the Shares and such Common Stock will
be free of any liens or encumbrances other than those created by or imposed upon
the holders thereof through no action of the Company; provided, however, that
the Shares (and the Common Stock issuable upon conversion thereof) may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein. The Shares are not subject to any preemptive rights or
rights of first refusal, except as set forth in the Rights Agreement in the form
attached hereto as EXHIBIT C (the "RIGHTS AGREEMENT").
53
<PAGE>
3.5 NO FINANCIAL STATEMENTS. The Company has not prepared any
balance sheet, income statement, statement of operations, statement of changes
in financial position and shareholders' equity or other financial statement.
3.6 PATENTS AND OTHER INTANGIBLE ASSETS. Without having conducted
any special infringement or patent search, the Company is unaware of any
infringement of or conflict with the rights of others with respect to any
patents, patent applications, inventions, processes, formulae or copyrights
necessary for the operation of the business of the Company as now conducted and
as proposed to be conducted.
3.7 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of its Articles of Incorporation or
Bylaws, each as amended and in effect on and as of the Closing, or in any
material respect of any material term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
order, statute, rule or regulation applicable to the Company. The execution,
delivery and performance of and compliance with this Agreement, and the issuance
of the Shares and the Common Stock issuable upon conversion of the Shares, have
not resulted and will not result in any material violation of, or conflict with,
or constitute a material default under, or result in the creation of, any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company; and there is no such violation or default which
materially and adversely affects the business of the Company as conducted or as
proposed to be conducted, or any of the Company's properties or assets.
3.8 LITIGATION, ETC. There are no actions, suits, proceedings or
investigations pending against the Company or its properties (nor, to the best
of the Company's knowledge, against officers of the Company) before any court or
governmental agency (nor, to the best of the Company's knowledge, is there any
threat thereof), which, either in any case or in the aggregate, might result in
any material adverse change in the business or financial condition of the
Company or any of its properties or assets, or in any material impairment of the
right or ability of the Company to carry on its business as now conducted or as
proposed to be conducted, or in any material liability on the part of the
Company, and none which questions the validity of this Agreement or any action
taken or to be taken in connection herewith.
3.9 EMPLOYEES. To the best of the Company's knowledge, after
reasonable investigation, no employee or consultant of the Company is in
violation of any term of any employment, employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of any
such person with the Company or any other party because of the nature of the
business conducted or to be conducted by the Company. The Company does not have
any collective bargaining agreements covering any of its employees. The Company
has no employee benefit plans presently in force with respect to profit-sharing,
pensions, stock options, or other stock benefits. The Company is not aware of
any key employee of the Company who has any plans to terminate his or her
employment with the Company.
54
<PAGE>
3.10 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Shares (and the Common Stock issuable upon conversion of the Shares), or the
consummation of any other transaction contemplated by this Agreement, except for
filing of the Restated Articles in the office of the Secretary of State of the
State of California and filing of such notice as required by Section 25102(f) of
the California Corporate Securities Law of 1968, and the compliance with other
applicable blue sky laws.
3.11 OFFERING. Subject to the accuracy of the Purchaser's
representations in Section 5 of this Agreement and in written responses to the
Company's inquiries, the offer, sale and issuance of the Shares to be issued in
conformity with the terms of this Agreement and the issuance of the Common Stock
to be issued upon conversion of the Shares, constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
3.12 BROKERS OR FINDERS; OTHER OFFERS. The Company has not incurred,
and will not incur, directly or indirectly, as a result of any action taken by
the Company, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement.
3.13 DISCLOSURE. To the best of the Company's knowledge, after
reasonable investigation, no representation or warranty of the Company contained
in this Agreement and the Exhibits attached hereto, or any certificate furnished
or to be furnished to the Purchaser at the Closing contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made.
3.14 NO CONFLICT OF INTEREST. The Company is not indebted, directly
or indirectly, to any of its officers or directors or to their respective
spouses or children, in any amount whatsoever other than in connection with
expenses or advances of expenses incurred in the ordinary course of business or
relocation expenses of employees. To the best of the Company's knowledge, none
of said officers or directors, or any members of their immediate families, are
indebted to the Company (other than in connection with purchases of the
Company's stock) or have any direct or indirect ownership interest in any firm
or corporation with which the Company is affiliated or with which the Company
has a business relationship other than the Purchaser, or any firm or corporation
which competes with the Company except that officers, directors and/or
shareholders of the Company may own stock in publicly traded companies which may
compete with the Company. To the best of the Company's knowledge, no officer or
director or any member of their immediate families, is, directly or indirectly,
interested in any material contract with the Company. The Company is not a
guarantor or indemnity of any indebtedness of any other person, firm or
corporation.
55
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
4.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company with respect to the purchase of
the Shares as follows:
(a) EXPERIENCE. Purchaser has substantial experience in
evaluating and investing in private placement transactions so that Purchaser is
capable of evaluating the merits and risks of Purchaser's investment in the
Company. Purchaser, by reason of its business or financial experience or the
business or financial experience of its professional advisors who are
unaffiliated with and who are not compensated by the Company or any affiliate or
selling agent of the Company, directly or indirectly, has the capacity to
protect its own interests in connection with the purchase of the Shares under
this Agreement.
(b) INVESTMENT. Purchaser is acquiring the Shares and the
underlying Common Stock for investment for Purchaser's own account, not as a
nominee or agent, and not with the view to, or for resale in connection with,
any distribution thereof. Purchaser understands that the Shares and the
underlying Common Stock have not been, and will not be, registered under the
Securities Act by reason of a specific exemption therefrom, and that any such
exemption would depend, among other things, upon the bona fide nature of the
investment intent and the accuracy of such Purchaser's representations as
expressed in this Agreement. Purchaser has not been formed for the specific
purpose of acquiring the Shares or the underlying Common Stock.
(c) RULE 144. Purchaser acknowledges that the Shares and the
underlying Common Stock must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company, the resale occurring
not less than two years after a party has purchased and paid for the security to
be sold, the sale being effected through a "BROKER'S TRANSACTION" or in
transactions directly with a "MARKET MAKER" (as provided by Rule 144(f)) and
the number of shares being sold during any three-month period not exceeding
specified limitations.
(d) NO PUBLIC MARKET. Purchaser understands that no public
market now exists for any of the securities issued by the Company, that the
Company has made no assurances that a public market will ever exist for the
Shares or the underlying Common Stock and that, even if such a public market
exists at some future time, the Company may not then be satisfying the current
public information requirements of Rule 144.
(e) ACCESS TO DATA. Purchaser and its representatives have met
with representatives of the Company and thereby have had the opportunity to ask
questions of, and receive answers from, said representatives concerning the
Company and the terms and conditions of this transaction as well as to obtain
any information requested by Purchaser. Any questions
56
<PAGE>
raised by Purchaser or its representatives concerning the transaction have been
answered to the satisfaction of Purchaser and its representatives. Purchaser's
decision to purchase the Shares is based in part on the answers to such
questions as Purchaser and its representatives have raised concerning the
transaction and on its own evaluation of the risks and merits of the purchase
and the Company's proposed business activities.
(f) AUTHORIZATION. This Agreement when executed and delivered
by the Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
(g) BROKERS OR FINDERS. The Company has not incurred, and will
not incur, directly or indirectly, as a result of any action taken by the
Purchaser any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement.
5. CONDITIONS TO CLOSING OF PURCHASER. The Purchaser's obligation to
purchase the Shares at the Closing is, at the option of the Purchaser, subject
to the fulfillment or waiver as of the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 of this Agreement shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date.
5.2 COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Purchaser a certificate of the Company, executed by the President of the
Company, dated the Closing Date, and certifying, among other things, to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement.
5.4 BLUE SKY. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or secured exemptions therefrom, required by
any state for the offer and sale of the Shares and the Common Stock issuable
upon conversion of the Shares.
5.5 ARTICLES OF INCORPORATION. The Restated Articles shall have
been filed with the Secretary of State of the State of California.
5.6 RIGHTS AGREEMENT. The Company shall have entered into the
Rights Agreement.
57
<PAGE>
5.7 SIMULTANEOUS CLOSING. The Closing under the Master Agreement
shall have also occurred simultaneously.
6. CONDITIONS TO CLOSING OF COMPANY. The Company's obligation to sell
and issue the Shares at the Closing is, at the option of the Company, subject to
the fulfillment or waiver of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchaser in
Section 4 of this Agreement shall be true and correct when made, and shall be
true and correct on the Closing Date.
6.2 BLUE SKY. The Company shall have obtained all necessary Blue
Sky law permits and qualifications, or secured exemptions therefrom, required by
any state for the offer and sale of the Shares and the Common Stock issuable
upon conversion of the Shares.
6.3 ARTICLES OF INCORPORATION. The Restated Articles shall have
been filed with the Secretary of State of the State of California.
6.4 COVENANTS. All covenants, agreements and conditions contained
in this Agreement to be performed by the Purchaser on or prior to the Closing
Date shall have been performed or complied with in all material respects.
6.5 SIMULTANEOUS CLOSING. The Closing under the Master Agreement
shall have also occurred simultaneously.
7. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants
and agrees as follows:
7.1 FINANCIAL INFORMATION. The Company will mail the following
reports to the Purchaser for so long as the Purchaser is a holder of any Shares
purchased by such person pursuant to this Agreement (or Common Stock issued upon
conversion of the Shares):
(a) As soon as practicable after the end of each fiscal year,
and in any event within ninety (90) days thereafter, consolidated balance sheets
of the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company.
(b) Contemporaneously with delivery to holders of Common Stock,
a copy of each report of the Company delivered to holders of the Company's
Common Stock.
58
<PAGE>
(c) For so long as the Purchaser is eligible to receive reports
under this Section 7.1, it shall also have the right, at its expense, to discuss
the affairs, finances and accounts of the Company with the Company's officers,
all at such reasonable times and as often as may be reasonably requested;
provided, however, that the Company shall not be obligated to provide any
information that it reasonably considers to be a trade secret or to contain
confidential information.
7.2 ADDITIONAL INFORMATION. As long as a Purchaser (together with
any affiliate of such Purchaser) holds not less than 500,000 Shares (or an
equivalent number of shares consisting of the Shares or Common Stock issued upon
conversion of the Shares), as adjusted for recapitalizations, stock splits,
stock dividends and the like, the Company will mail the following reports to
such Purchaser:
(a) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the Company and in
any event within forty-five (45) days thereafter, a consolidated balance sheet
of the Company and its subsidiaries, if any, as of the end of each such
quarterly period, and consolidated statements of income and consolidated
statements of cash flow of the Company and its subsidiaries for such period and
for the current fiscal year to date, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), all in
reasonable detail.
(b) As soon as practicable after the end of each fiscal month,
and in any event within thirty (30) days thereafter, an unaudited consolidated
balance sheet of the Company as at the end of such month, and unaudited
consolidated statements of income and unaudited consolidated statements of cash
flow for such month and for the current fiscal year to date. Such financial
statements shall be prepared in accordance with generally accepted accounting
principles consistently applied (other than accompanying notes), all in
reasonable detail.
(c) Within 30 days at the end of each fiscal year, an annual
budget, operating or similar plan for the upcoming fiscal year (the "PLAN").
(d) Any material amendments or changes to such Plan promptly
following any such amendments or changes, and in any event within 30 days of the
date thereof.
7.3 TRANSFER OF INFORMATION RIGHTS. The information rights set
forth in Sections 7.1 and 7.2 may be transferred in any nonpublic transfer of
Shares (or Shares of Common Stock issued upon conversion of the Shares),
provided that the Company is given written notice of such transfer, and provided
further that the right to receive the information set forth in Section 7.2 may
only be transferred to a holder of, or affiliated holders who in the aggregate
hold, at least 500,000 Shares (or an equivalent number of Shares consisting of
the Shares or Common Stock issued upon conversion of the Shares, as
appropriately adjusted for stock splits and the like). In the event that the
Company reasonably determines that provision of information to a transferee
pursuant to this Section 7.3 would materially adversely impact its proprietary
position, such information may be edited in the manner necessary to avoid such
impact.
59
<PAGE>
7.4 TERMINATION OF COVENANTS. The covenants set forth in this
Section 7 shall terminate on and be of no further force or effect upon the
earlier of (i) the consummation of the Company's sale of its Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act, immediately subsequent to which the Company
shall be obligated to file annual and quarterly reports with the Commission
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"EXCHANGE ACT") or (ii) the registration by the Company of a class of its
equity securities under Section 12(b) or 12(g) of the Exchange Act.
8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California.
8.2 SURVIVAL. The representations, warranties, covenants and
agreements made in this Agreement shall survive any investigation made by the
Purchaser and the closing of the transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, assigns, heirs, executors and administrators of
the parties to this Agreement; provided, however, that the right of the
Purchaser to purchase the Shares shall not be assignable without the prior
written consent of the Company.
8.4 ENTIRE AGREEMENT, AMENDMENT. This Agreement, the Master
Agreement and the other documents delivered pursuant to this Agreement at the
Closing constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof, and supersede all prior
agreements, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of at least a majority of the Shares (or shares
of Common Stock issued upon conversion of the Shares) may, with the written
consent of the Company, waive, modify or amend on behalf of all holders, any
provisions hereof benefiting such holders, so long as the effect thereof will be
that all such holders will be treated equally.
8.5 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
60
<PAGE>
If to Company: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Purchaser: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
8.6 DELAYS OR OMISSIONS. Except as expressly provided in this
Agreement, no delay or omission to exercise any right, power or remedy accruing
to any holder of any Shares, upon any breach or default of the Company under
this Agreement, shall impair any such right, power or remedy of such holder 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
holder of any breach or default under this Agreement, or any waiver on the part
of any holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
8.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
8.8 EXPENSES. The Company and the Purchaser shall each bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
61
<PAGE>
8.11 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
[SIGNATURE PAGE FOLLOWS]
62
<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" "PURCHASER"
SONOMA SYSTEMS, RETIX,
a California corporation a California corporation
By: /s/ [ILLEGIBLE] By: /s/ [ILLEGIBLE]
------------------------------------- --------------------------
Title: President & CEO Title: President and CEO
---------------------------------- -----------------------
63
<PAGE>
EXHIBIT F
LIST OF PRODUCTS
WIRELESS DATA BUSINESS UNIT
PRODUCT LIST
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS SERVING APPLICATION
CD/SRVG-A1/1 MD-IS Serving Application for SUN $40,000 $10,000 30 days
SPARCstation Models 10 and 20 with
a single processor running Solaris 2.3
CD/SRVG-A1/4 MD-IS Serving Application for SUN $60,000 $15,000 30 days
SPARCstation Models 10 and 20 with
up to 4 processors running Solaris 2.3
CD/SRVG-A2/2 MD-IS Serving Application for SUN $70,000 $17,500 30 days
SPARCserver 1000 with up to 2
processors running Solaris 2.3
CD/SRVG-A2/8 MD-IS Serving Application for SUN $105,000 $26,250 30 days
SPARCserver 1000 with up to 8
processors running Solaris 2.3
CD/SRVG-A3/2 MD-IS Serving Application for SUN $125,000 $31,250 30 days
SPARCcenter 2000 with 2 processors
running Solaris 2.3
CD/SRVG-A3/8 MD-IS Serving Application for SUN $225,000 $56,250 30 days
SPARCcenter 2000 with up to 8
processors running Solaris 2.3
CD/SRVG-A3/16 MD-IS Serving Application for SUN $325,000 $81,250 30 days
SPARCcenter 2000 with up to 16
processors running Solaris 2.3
</TABLE>
64
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS HOME APPLICATION
CD/HOME-A1/1 MD-IS Home Application for SUN $40,000 $10,000 30 days
SPARCstation Models 10 and 20 with
a single processor running Solaris 2.3
CD/HOME-A1/4 MD-IS Home Application for SUN $60,000 $15,000 30 days
SPARCstation Models 10 and 20 with
up to 4 processors running Solaris 2.3
CD/HOME-A2/2 MD-IS Home Application for SUN $70,000 $17,500 30 days
SPARCserver 1000 with up to 2
processors running Solaris 2.3
CD/HOME-A2/8 MD-IS Home Application for SUN $105,000 $26,250 30 days
SPARCserver 1000 with up to 8
processors running Solaris 2.3
CD/HOME-A3/2 MD-IS Home Application for SUN $125,000 $31,250 30 days
SPARCcenter 2000 with 2 processors
running Solaris 2.3
CD/HOME-A3/8 MD-IS Home Application for SUN $225,000 $56,250 30 days
SPARCcenter 2000 with up to 8
processors running Solaris 2.3
CD/HOME-A3/16 MD-IS Home Application for SUN $325,000 $81,250 30 days
SPARCcenter 2000 with up to 16
processors running Solaris 2.3
CD/HOME-E3/8 MD-IS Home Application for Sequent $225,000 $56,250 30 days
Symmetry 5000 Model SE60 with up
to 8 processors running DYNIX/ptx
MD-IS CO-LOCATED SERVING AND
HOME APPLICATION
CD/SVHM-A1/1 MD-IS Serving & Home Application $80,000 $20,000 30 days
for SUN SPARCstation Models 10
and 20 with a single processor
running Solaris 2.3
CD/SVHM-A1/4 MD-IS Serving & Home Application $120,000 $30,000 30 days
for SUN SPARCstation Models 10
and 20 with up to 4 processors
running Solaris 2.3
CD/SVHM-A2/2 MD-IS Serving & Home Application $140,000 $35,000 30 days
for SUN SPARCserver 1000 with up
to 2 processors running Solaris 2.3
CD/SVHM-A2/8 MD-IS Serving & Home Application $210,000 $52,500 30 days
for SUN SPARCserver 1000 with up
to 8 processors running Solaris 2.3
</TABLE>
65
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
CD/SVHM-A3/2 MD-IS Serving & Home Application $250,000 $62,500 30 days
for SUN SPARCcenter 2000 with 2
processors running Solaris 2.3
CD/SVHM-A3/8 MD-IS Serving & Home Application $450,000 $112,500 30 days
for SUN SPARCcenter 2000 with up
to 8 processors running Solaris 2.3
CD/SVHM-A3/16 MD-IS Serving & Home Application $650,000 $162,500 30 days
for SUN SPARCcenter 2000 with up
to 16 processors running Solaris 2.3
ACCOUNTING SERVER APPLICATION
CD/ACTS-A/S Accounting Server Application for a $97,500 $24,375 30 days
single SUN SPARC platform running
Solaris 2.3.
CD/ACTS-A/D Accounting Server Application for a $149,500 $37,375 30 days
single or dual SUN SPARC platform
running Solaris 2.3. Includes an
X.400 MTA.
CD/ACTS-A/M Accounting Server Application for $195,000 $48,750 TBA
multiple SUN SPARC platforms
running Solaris 2.3. Includes an
X.400 MTA.
CUSTOMER ACTIVATION SYSTEM
CD/CASA-A/S Customer Activation System $95,000 $23,750 60 days
Application for a single SUN SPARC
platform running Solaris 2.3.
</TABLE>
66
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
HIGH AVAILABILITY
SYSTEMS
MD-IS HIGH AVAILABILITY SERVING
APPLICATION
CD/SVGH-A1/1 MD-IS High Availability Serving $50,000 $12,500 30 days
Application for SUN SPARCstation
Models 10 and 20 with a single
processor running Solaris 2.3 in a
high availability configuration.
CD/SVGH-A1/4 MD-IS High Availability Serving $75,000 $18,750 30 days
Application for SUN SPARCstation
Models 10 and 20 with up to 4
processors running Solaris 2.3 in a
high availability configuration.
CD/SVGH-A2/2 MD-IS High Availability Serving $87,500 $21,875 30 days
Application for SUN SPARCserver
1000 with up to 2 processors running
Solaris 2.3 in a high availability
configuration.
CD/SVGH-A2/8 MD-IS High Availability Serving $131,250 $32,813 30 days
Application for SUN SPARCserver
1000 with up to 8 processors running
Solaris 2.3 in a high availability
configuration.
CD/SVGH-A3/2 MD-IS High Availability Serving $156,250 $39,063 30 days
Application for SUN SPARCcenter
2000 with 2 processors running
Solaris 2.3 in a high availability
configuration.
CD/SVGH-A3/8 MD-IS High Availability Serving $281,250 $70,313 30 days
Application for SUN SPARCcenter
2000 with up to 8 processors running
Solaris 2.3 in a high availability
configuration.
CD/SVGH-A3/16 MD-IS High Availability Serving $406,250 $101,563 30 days
Application for SUN SPARCcenter
2000 with up to 16 processors
running Solaris 2.3 in a high
availability configuration.
</TABLE>
67
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS HIGH AVAILABILITY HOME
APPLICATION
CD/HOMH-A1/1 MD-IS High Availability Home $50,000 $12,500 30 days
Application for SUN SPARCstation
Models 10 and 20 with a single
processor running Solaris 2.3 in a
high availability configuration.
CD/HOMH-A1/4 MD-IS High Availability Home $75,000 $18,750 30 days
Application for SUN SPARCstation
Models 10 and 20 with up to 4
processors running Solaris 2.3 in a
high availability configuration.
CD/HOMH-A2/2 MD-IS High Availability Home $87,500 $21,875 30 days
Application for SUN SPARCserver
1000 with up to 2 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-A2/8 MD-IS High Availability Home $131,250 $32,813 30 days
Application for SUN SPARCserver
1000 with up to 8 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-A3/2 MD-IS High Availability Home $156,250 $39,063 30 days
Application for SUN SPARCcenter
2000 with 2 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-A3/8 MD-IS High Availability Home $281,250 $70,313 30 days
Application for SUN SPARCcenter
2000 with up to 8 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-A3/16 MD-IS High Availability Home $406,250 $101,563 30 days
Application for SUN SPARCcenter 2000
with up to 16 processors running
Solaris 2.3 in a high availability
configuration.
CD/HOMH-E3/8 MD-IS High Availability Home $281,250 $70,313 30 days
Application for Sequent Symmetry 5000
Model SE60 with up to 8 processors
running DYNIX/ptx in a clustered
configuration.
</TABLE>
68
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS HIGH AVAILABILITY SERVING
AND HOME APPLICATION
CD/SAHH-A1/1 MD-IS High Availability Serving & $100,000 $25,000 30 days
Home Application for SUN
SPARCstation Models 10 and 20 with
a single processor running Solaris 2.3
in a high availability configuration.
CD/SAHH-A1/4 MD-IS High Availability Serving & $150,000 $37,500 30 days
Home Application for SUN
SPARCstation Models 10 and 20
with up to 4 processors running Solaris
2.3 in a high availability configuration.
CD/SAHH-A2/2 MD-IS High Availability Serving & $175,000 $43,750 30 days
Home Application for SUN
SPARCserver 1000 with up to 2
processors running Solaris 2.3 in a
high availability configuration.
CD/SAHH-A2/8 MD-IS High Availability Serving & $262,500 $65,625 30 days
Home Application for SUN
SPARCserver 1000 with up to 8
processors running Solaris 2.3 in a
high availability configuration.
CD/SAHH-A3/2 MD-IS High Availability Serving & $312,500 $78,125 30 days
Home Application for SUN
SPARCcenter 2000 with 2 processors
running Solaris 2.3 in a high
availability configuration.
CD/SAHH-A3/8 MD-IS High Availability Serving & $562,500 $140,625 30 days
Home Application for SUN
SPARCcenter 2000 with up to 8
processors running Solaris 2.3 in a
high availability configuration.
CD/SAHH-A3/16 MD-IS High Availability Serving & $812,500 $203,125 30 days
Home Application for SUN
SPARCcenter 2000 with up to 16
processors running Solaris 2.3 in a
high availability configuration.
</TABLE>
69
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
HIGH AVAILABILITY ACCOUNTING
SERVER APPLICATION
CD/ACTH-A/S High Availability Accounting Server $124,500 $31,125 30 days
Application for a single SUN SPARC
platform running Solaris 2.3 in a high
availability configuration.
CD/ACTH-A/D High Availability Accounting Server $186,500 $46,625 30 days
Application for a single or dual SUN
SPARC platforms running Solaris 2.3
in a high availability configuration.
Includes an X.400 MTA.
CD/ACTH-A/M High Availability Accounting Server $243,500 $60,875 TBA
Application for multiple SUN SPARC
platform running Solaris 2.3 in a high
availability configuration. Includes an
X.400 MTA.
CD/ACTH-E/D High Availability Accounting Server $186,500 $46,625 30 days
Application for a single or dual
SEQUENT SYMMETRY 5000
platform running DYNIX/ptx in a
clustered configuration. Includes an
X.400 MTA.
</TABLE>
70
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
HIGH AVAILABILTY CUSTOMER
ACTIVATION SYSTEM
CD/CASH-A/S High Availability Customer Activation $118,750 $29,688 60 days
System Application for a single SUN
SPARC platform running Solaris 2.3
in a high availability configuration.
M-ES PROTOCOL BUNDLE
CD/MESP- A bundling of the relevant CDPD M- $35,000 $5,250 30 days
SOURCE ES protocols (MDLP, SNDCP, MNLP
and MNRP) in portable source form.
Includes license for RSA encryption
software.
Per Unit Royalty
0 to 50,000 $5.00
50,001 to 100,000 $4.00
100,001 to 200,000 $3.20
200,001 to 500,000 $2.50
500,001 to 1,000,000 $1.75
1,000,000 plus $1.00
</TABLE>
71
<PAGE>
US PRICE LIST - CELLULAR
DIGITAL PACKET DATA (CDPD)
<TABLE>
<CAPTION>
PRODUCT NO. DESCRIPTION LIST PRICE PER ANNUM AVAILABILITY
- ----------- ----------- ---------- MAINTENANCE ------------
-----------
<S> <C> <C> <C> <C>
MD-IS ROUTER HARDWARE
RX7550/SVG Five slot MD-IS Router Chassis for $11,500 $805 30 days
Mobile Serving Function CDPD
applications, with support for
redundant loadsharing power supply
option. Includes chassis and single
400W 110/230V power supply.
RX7550/HOME Five slot MD-IS Router Chassis for $11,500 $805 30 days
Mobile Home Function CDPD
applications, with support for
redundant loadsharing power supply
option. Includes chassis and single
400W 110/230V power supply.
PRX50-1 Redundant Power Supply $2,000 $219 30 days
RMP7705/2-8 Routing Management Processor $4,250 $298 30 days
FP7710/2-8 Forwarding Processor $3,250 $219 30 days
10B5-1 10BASE5 Ethernet Interface Card $600 $53 30 days
10B2-1 10BASE2 Ethernet Interface Card $600 $53 30 days
10BT-1 10BASET Ethernet Interface Card $600 $53 30 days
10BT-12 10BASET 12 Port Hub Interface Card $1,650 $115 30 days
FDDI7715 FDDI Interface Module $10,000 $875 30 days
V35-1 V.35 Interface Card $1,000 $88 30 days
X21-1 X.21 Interface Card $1,000 $88 30 days
RS232-1 RS(232 Interface Card) $1,000 $88 30 days
RX7500M Manual $150 - 30 days
RM7550 Rackmount Kit $150 - 30 days
</TABLE>
72
<PAGE>
EXHIBIT G
RETIX DISCLOSURE STATEMENT
This Disclosure Statement is made and given pursuant to Section 3 of the
Master Agreement (the "AGREEMENT") by and between Retix and Wireless Solutions.
The Section numbers in this Disclosure Statement correspond to the Section
numbers in the Agreement; however, any information disclosed herein under any
Section number shall be deemed to be disclosed and incorporated into any other
Section number under the Agreement where such disclosure would be appropriate.
Any terms used in this Disclosure Statement shall have the meanings defined for
them in the Agreement unless otherwise defined herein.
SECTION 3.11 - BINDING AGREEMENTS
Third party consents to the transactions contemplated by the Master
Agreement are required from certain vendors, distributors, resellers and other
contractors as indicated on lists provided or made available to Wireless
Solutions.
73
<PAGE>
EXHIBIT H
RIGHTS AGREEMENT
This Rights Agreement (the "AGREEMENT") is entered into as of May 31,
1996, by and among Wireless Solutions, a California corporation (the "COMPANY")
and Retix, a California corporation, which is purchasing shares of Preferred
Stock of the Company pursuant to the Preferred Stock Purchase Agreement of even
date herewith (the "PURCHASE AGREEMENT").
In consideration of the mutual promises and covenants hereinafter set
forth, the parties agree as follows:
1. RESTRICTIONS ON TRANSFERABILITY; REGISTRATION RIGHTS.
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"REGISTRABLE SECURITIES" means (i) the Common Stock issuable
upon conversion of the Preferred Shares (the "CONVERSION SHARES") and (ii) any
Common Stock issued or issuable in respect of the Preferred Shares or Conversion
Shares or other securities issued or issuable with respect to the Preferred
Shares or Conversion Shares upon any stock split, stock dividend,
recapitalization or similar event or any Common Stock otherwise issued or
issuable with respect to the Preferred Shares or Conversion Shares; PROVIDED,
HOWEVER, that shares of Common Stock or other securities shall only be treated
as Registrable Securities (1) 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(1) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale, or (2) if
with respect to any Holder all shares of the Company's capital stock then held
by Holder may not be sold in any single three month period without registration
pursuant to Rule 144 promulgated under the Securities Act.
"HOLDER" shall mean any person holding Registrable Securities
and any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.
"PREFERRED SHARES" shall mean an aggregate of 17,000,000 shares
of Preferred Stock issued pursuant to a Preferred Stock Purchase Agreement dated
of even date herewith between the Company and Retix.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
74
<PAGE>
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 of this Agreement.
"RETIX" shall mean Retix, a California corporation, and any of
its successors, transferees or assigns.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SELLING EXPENSES" shall mean all underwriting discounts,
selling commissions and stock transfer taxes applicable to the securities
registered by the Holders and all fees and disbursements of counsel for the
Holders (except as provided by Section 1.9).
"INITIATING HOLDERS" shall mean Retix or any transferees of
Retix under Section 1.14 hereof who in the aggregate are Holders of not less
than fifty percent (50%) of the Registrable Securities.
1.2 RESTRICTIONS. The Preferred Shares and the Conversion Shares
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. The Holders will cause any proposed
purchaser, assignee, transferee or pledgee of the Preferred Shares and the
Conversion Shares to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
1.3 RESTRICTIVE LEGEND. Each certificate representing (i) the
Preferred Shares, (ii) the Conversion Shares and (iii) any other securities
issued in respect of the securities referenced in clauses (i) and (ii) upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 1.4 below)
be stamped or otherwise imprinted with legends in the following form (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER
75
<PAGE>
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS
OF SAID ACT."
Each Holder consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Restricted Securities in
order to implement the restrictions on transfer established in this Section 1.
1.4 NOTICE OF PROPOSED TRANSFERS. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall, and whose legal opinion shall be, reasonably
satisfactory to the Company, addressed to the Company, to the effect that the
proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "NO ACTION" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. The Company will not require such a legal opinion or "NO ACTION"
letter (a) in any transaction in compliance with Rule 144, (b) in any
transaction in which a Holder which is a corporation distributes Restricted
Securities after six (6) months after the purchase thereof solely to its
majority-owned subsidiaries or affiliates for no consideration, or (c) in any
transaction in which a Holder which is a partnership distributes Restricted
Securities after six (6) months after the purchase thereof solely to partners
thereof for no consideration, provided that each transferee agrees in writing to
be subject to the terms of this Section 1.4. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 1.3 above, except that such certificate shall not bear such
restrictive legend if, in the opinion of counsel for such holder and the
Company, such legend is not required in order to establish compliance with any
provisions of the Securities Act.
1.5 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to the Registrable
Securities, the anticipated aggregate offering price, net of underwriting
discounts and commissions, of which would exceed $10,000,000 and the offering
price to the public of which would be at least $5.00 per share, the Company
will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
76
<PAGE>
(ii) as soon as practicable, use its best efforts to effect
such registration, qualification or compliance (including, without limitation,
the execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within thirty (30) days after receipt of such written notice from
the Company; PROVIDED, HOWEVER, that the Company shall not be obligated to
take any action to effect any such registration, qualification or compliance
pursuant to this Section 1.5:
(1) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(2) During the period starting with the date sixty
(60) days prior to the Company's estimated date of filing of, and ending on the
date six (6) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective and that the Company's estimate of the date of filing such
registration statement is made in good faith;
(3) After the Company has effected two (2) such
registrations pursuant to this subparagraph 1.5(a) in any 12 month period, such
registration has been declared or ordered effective and the securities offered
pursuant to such registration have been sold; or
(4) If the Company shall furnish to such Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a single period
not to exceed one hundred-twenty (120) days from the date of receipt of written
request from the Initiating Holders.
Subject to the foregoing clauses (1) through (5) and this paragraph, the
Company shall file a registration statement covering the Registrable Securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Initiating Holders. In the event that the Holders of
Registrable Securities wish to join in the request of the Initiating Holders
made pursuant to this Section 1.5(a), the provisions of Section 1.6 of this
Agreement shall govern the ability of such Holders to join in such request.
77
<PAGE>
(b) UNDERWRITING. In the event that a registration pursuant to
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by a
majority in interest of the Initiating Holders (which managing underwriter shall
be reasonably acceptable to the Company). Notwithstanding any other provision
of this Section 1.5, if the managing underwriter advises the Initiating Holders
in writing that marketing factors require a limitation of the number of shares
to be underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Initiating Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Initiating Holders at the time of
filing the registration statement; the provisions of Section 1.6 shall govern
the ability of the Holders of Registrable Securities not held by the Initiating
Holders to participate. No Registrable Securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of such registration.
1.6 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to
time, the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof;
and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved in such registration, all the Registrable Securities specified in a
written request or requests made within thirty (30) days after receipt of such
written notice from the Company by any Holder, but only to the extent
78
<PAGE>
that such inclusion will not diminish the number of securities included by the
Company or by holders of the Company's securities who have demanded such
registration.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company (or by the
holders who have demanded such registration). Notwithstanding any other
provision of this Section 1.6, if the managing underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the managing underwriter may limit the Registrable Securities to
be included in such registration or exclude them entirely. The Company shall so
advise all Holders and the other holders distributing their securities through
such underwriting pursuant to piggyback registration rights similar to this
Section 1.6, and the number of shares of Registrable Securities and other
securities that may be included in the registration and underwriting shall be
allocated among all Holders and other holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders and other securities held by other holders at the time of filing the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number
of shares allocated to any Holder or other holder to the nearest 100 shares. If
any Holder or other holder disapproves of the terms of any such underwriting, he
or she may elect to withdraw therefrom by written notice to the Company and the
managing underwriter. Any securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration, and shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of the registration statement relating thereto.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7 REGISTRATION ON FORM S-3.
(a) If any Holder requests that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for a public offering
of shares of the Registrable Securities, the reasonably anticipated aggregate
price to the public of which, net of underwriting discounts and commissions,
would exceed $500,000, and the Company is a registrant entitled to use Form S-3
to register the Registrable Securities for such an offering, the Company shall
use its best efforts to cause such Registrable Securities to be registered for
the offering on such form; PROVIDED, HOWEVER, that the Company shall not be
required to effect more than two registrations pursuant to this Section 1.7 in
any twelve (12) month period. The Com-
79
<PAGE>
pany will (i) promptly give written notice of the proposed registration to all
other Holders, and (ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within thirty (30) days after receipt of such written notice from the Company.
The provisions of Section 1.5(b) shall be applicable to each registration
initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 1.7: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act, (ii)
during the period starting with the date sixty (60) days prior to the filing of,
and ending on a date six (6) months following the effective date of, a
registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective, or
(iii) if the Company shall furnish to such Holder a certificate signed by the
president of the Company stating that, in the good faith judgment of the Board
of Directors, it would be seriously detrimental to the Company or its
shareholders for registration statements to be filed in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a single period not to exceed one hundred twenty
(120) days from the receipt of the request to file such registration by such
Holder or Holders.
1.8 SHELF REGISTRATION.
(a) Retix shall be entitled to demand, at any time, that the
Company secure the effectiveness of a "shelf" registration statement under Rule
415 under the Securities Act with the SEC, for the sale by Retix of all of the
Registrable Securities held thereby. Prior to demanding any such registration,
Retix shall first consult with the Company for a period of at least 30 days
otherwise, concerning the need for such registration in light of Retix's ability
to sell freely all of the shares of Common Stock issuable upon conversion of the
Securities in the United States public markets under Rule 144 or otherwise.
(b) Following such consultation, whether to demand such
Registration Statement shall be at the sole discretion of Retix, and the Company
shall take all action necessary to comply with such demand. The Company
represents and warrants that on the date the Registration Statement becomes
effective, the Registration Statement will comply in all material respects with
the applicable requirements of the Securities Act and the rules thereunder; on
the date of its effectiveness the Registration Statement (including any
documents incorporated by
80
<PAGE>
reference therein) will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein not misleading, provided, however, that no
representation is made by the Company with respect to written information
furnished to the Company by or on behalf of Retix specifically for inclusion in
the Registration Statement; and the final prospectus contained in the
Registration Statement, if not filed pursuant to Rule 424(b), will not, and on
the date of any filing pursuant to Rule 424(b), such final prospectus (together
with any supplement thereto) will not, include any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading, provided, however, that no representation is made by the Company
with respect to written information furnished to the Company by or on behalf of
the Retix specifically for inclusion in such prospectus. The Company will
promptly: (A) notify Retix when the Registration Statement is declared
effective; and (B) notify Retix of any stop-order or similar proceeding by the
SEC or any state securities authority.
(c) The Company hereby covenants and agrees that (A) no other
holder of the Company's securities (including convertible securities) other than
transferees of Retix is entitled to or shall be hereafter given the right to
participate in any registration under this Section 1.8 whether by the exercise
of a demand or "piggyback" registration right and (B) no other registration
statement covering any other holder's securities shall be declared effective or
maintained in effect during such time as the Registration Statement shall be
effective.
(d) The Company shall promptly prepare and file with the SEC
such amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such Registration Statement and keep the Registration Statement effective
until all the Registrable Securities have been sold pursuant thereto or until
Retix is able to dispose of its entire remaining ownership interest in the
Registrable Securities in the United States public markets in a single
transaction under Rule 144 without invoking clause (e)(1)(ii) of Rule 144. The
Company shall provide a transfer agent, registrar and CUSIP number with respect
to all securities registered by such Registration Statement.
(e) The Company shall furnish to Retix with respect to the
Registrable Securities registered under the Registration Statement such number
of copies of prospectuses and preliminary prospectuses and supplements in
conformity with the requirements of the Securities Act and such other documents
as Retix may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Shares by Retix.
(f) The Company shall use its best efforts to register or
qualify the Registrable Securities covered by such Registration Statements under
such other securities or blue sky laws of such jurisdictions as Retix shall
reasonably request and do any and all other acts or things which may be
necessary or desirable to enable Retix to consummate the public sale or other
disposition in such jurisdictions, provided that the Company shall not be
required in
81
<PAGE>
connection therewith or as a condition thereto to qualify to do business or file
a general consent to service of process in any such jurisdictions.
(g) In accordance with Section 1.10 below, the Company shall
bear all expenses in connection with the procedures set forth in this Section
1.8 and the registration of the Registrable Securities pursuant to the
Registration Statement, other than broker's commissions or discounts, transfer
taxes, and fees and expenses, if any, of counsel or other advisors to Retix.
1.9 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after
the date of this Agreement, the Company shall not enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities unless (i) such new
registration rights, including standoff obligations, are on a pari passu basis
with those rights of the Holders under this Agreement, or (ii) such new
registration rights, including standoff obligations, are subordinate to the
registration rights granted Holders under this Agreement.
1.10 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration pursuant to Sections 1.5, 1.6 and 1.8 and the
reasonable cost of one special legal counsel to represent all of the Holders
together in any such registration shall be borne by the Company, provided that
the Company shall not be required to pay the Registration Expenses of any
registration proceeding begun pursuant to Section 1.5, the request of which has
been subsequently withdrawn by the Initiating Holders. In such case, the
Holders of Registrable Securities to have been registered shall bear all such
Registration Expenses pro rata on the basis of the number of shares to have been
registered. Notwithstanding the foregoing, however, if at the time of the
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, of which the Company had knowledge at the time of
the request, then the Holders shall not be required to pay any of said
Registration Expenses. Unless otherwise stated, all other Selling Expenses
relating to securities registered on behalf of the Holders and all Registration
Expenses incurred in connection with any registration pursuant to Section 1.7
shall be borne by the Holders of the registered securities included in such
registration pro rata on the basis of the number of shares so registered.
1.11 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
twenty (120) days or until the distribution described in the registration
statement has been completed; and
82
<PAGE>
(b) Furnish to the Holders participating in such registration
and to the underwriters of the securities being registered such reasonable
number of copies of the registration statement, preliminary prospectus, final
prospectus and such other documents as such underwriters may reasonably request
in order to facilitate the public offering of such securities.
1.12 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers
and directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or compliance,
and the Company will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to the Company by an
instrument duly executed by such Holder, controlling person or underwriter and
stated to be specifically for use therein. The indemnity provided under this
Section 1.12(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if the Company has defended such matter and
if such settlement is effected without the Company's consent, which consent
shall not be unreasonably withheld.
(b) Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers, each underwriter, if any, of the Company's
securities covered by such a registration statement, each person who controls
the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state
83
<PAGE>
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, persons, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
(c) Each party entitled to indemnification under this Section
1.12 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1 unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
1.13 INFORMATION BY HOLDER. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.14 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT");
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
84
<PAGE>
(c) So long as a Holder owns any Restricted Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144 (at any
time after ninety (90) days after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as a Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
1.15 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted Holders under Sections 1.5, 1.6, 1.7 and
1.8 may be assigned to a transferee or assignee reasonably acceptable to the
Company in connection with any transfer or assignment of Registrable Securities
by a Holder (together with any affiliate); PROVIDED, that (a) such transfer may
otherwise be effected in accordance with applicable securities laws, (b) notice
of such assignment is given to the Company, and (c) such transferee or assignee
(i) is a wholly-owned subsidiary, constituent partner (including limited
partners), shareholder, parent, child or spouse of such Holder or is Holder's
estate, or (ii) acquires from such Holder the lesser of (a) 50,000 or more
shares of Restricted Securities (as appropriately adjusted for stock splits and
the like) or (b) all of the Restricted Securities then owned by such Holder.
1.16 STANDOFF AGREEMENT. Each Holder agrees in connection with any
registration of the Company's securities that, upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any Registrable Securities (other than those included in
the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration) as may
be requested by the Company or such managing underwriters; PROVIDED, that the
officers and directors of the Company who own stock of the Company also agree to
such restrictions.
1.17 TERMINATION OF RIGHTS. The rights of any particular Holder to
cause the Company to register securities under Sections 1.5, 1.6, 1.7 and 1.8
shall terminate with respect to such Holder following a bona fide firm
underwritten public offering of shares of the Company's Common Stock registered
under the Securities Act (provided the aggregate offering price, net of
underwriting discounts and commissions, exceeds ten million dollars
($10,000,000)) at such time as such Holder is able to dispose of all its
Registrable Securities and other shares of capital stock of the Company then
held or then issuable upon exercise of options or warrants in one three-month
period pursuant to the provisions of Rule 144; PROVIDED, that such Holder holds
Registrable Securities and other shares of capital stock of the Company then
held or then issuable upon exercise of options or warrants constituting less
than 1% of the outstanding voting stock of the Company. The rights to cause the
Company to register securities under Section 1.5, 1.6, 1.7 and 1.8 shall
terminate in any event five (5) years after the closing of the foregoing public
offering.
85
<PAGE>
2. MISCELLANEOUS.
2.1 ASSIGNMENT. Except as otherwise provided in this Agreement, 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 to this
Agreement.
2.2 THIRD PARTIES. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties to this Agreement,
and their respective successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
2.3 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California in the United States of
America.
2.4 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
2.5 NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to the Company: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Retix: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
2.6 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, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
2.7 AMENDMENT AND WAIVER. Any provision of this Agreement may be
amended or waived with the written consent of the Company and the Holders of at
least a majority of the outstanding Registrable Securities. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
Holder of Registrable Securities and the Company. In addition, the Company may
waive performance of any obligation owing to it, as to some or all of the
Holders of Registrable Securities, or agree to accept alternatives to such
performance, without obtaining the consent of any Holder of Registrable
Securities. In the event
86
<PAGE>
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.
2.8 EFFECT OF AMENDMENT OR WAIVER. The Holders and their successors
and assigns acknowledge that by the operation of Section 2.7 of this Agreement
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 any or all rights or increase any or all obligations pursuant to this
Agreement.
2.9 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.
2.10 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 writing. All remedies,
either under this Agreement, or by law or otherwise afforded to any holder,
shall be cumulative and not alternative.
[SIGNATURE PAGE FOLLOWS]
87
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"COMPANY"
WIRELESS SOLUTIONS
By:
------------------------------------
Title:
---------------------------------
HOLDERS:
RETIX
By:
------------------------------------
Title:
---------------------------------
88
<PAGE>
EXHIBIT I
SECURITY AGREEMENT
This Security Agreement (the "AGREEMENT") is made as of May 31, 1996 by
and between Wireless Solutions, a California corporation (the "DEBTOR") in
favor of Retix, a California corporation (the "SECURED PARTY").
RECITALS
The Debtor and the Secured Party are parties to a Loan Agreement of even
date with this Agreement (the "LOAN AGREEMENT") pursuant to which the Secured
Party shall be making a Loan (as defined therein) to the Debtor. The parties
intend that the Debtor's obligations to repay the Loan to the Secured Party be
secured by all of the assets of the Debtor.
NOW, THEREFORE, in consideration of the Loan to be made by the Secured
Party to the Debtor and for other good and valuable consideration, the Debtor
hereby agrees with the Secured Party as follows:
1. DEFINED TERMS. The following terms shall have the following
meanings:
"CODE" means the Uniform Commercial Code as from time to time in
effect in the State of California.
"COLLATERAL" means the property described on EXHIBIT A to this
Agreement.
"EVENT OF DEFAULT" means Debtor's failure to pay or discharge the
Obligations in full in accordance with the terms of the Notes.
"OBLIGATIONS" means the unpaid principal amount of, and interest on,
the Notes and all other obligations and liabilities of the Debtor to the Secured
Party which may arise under the Notes.
"NOTES" means the Debtor's promissory notes issued pursuant to the
Loan Agreement.
2. GRANT OF SECURITY INTEREST. To secure the Debtor's prompt, punctual,
and faithful performance of all and each of the Debtor's Obligations to the
Secured Party, the Debtor hereby grants to the Secured Party a continuing
security interest in-and to the Collateral.
3. COVENANTS. The Debtor covenants and agrees with the Secured Party
that, from and after the date of this Agreement until the Obligations are paid
in full:
(a) OTHER LIENS. Except for the security interest granted hereby,
the Debtor is the owner of the Collateral and will be the owner of the
Collateral hereafter acquired free from any adverse lien, security interest or
encumbrance (other than purchase money security interests
89
<PAGE>
that will be discharged upon Debtor's payment of the purchase price for the
applicable property), and the Debtor will defend the Collateral against the
claims and demands of all persons at any time claiming the same or any interest
therein. No financing statements covering any Collateral or any proceeds
thereof are on file in any public office.
(b) FURTHER DOCUMENTATION. At any time and from time to time, upon
the written request of the Secured Party, and at the sole expense of the Debtor,
the Debtor will promptly and duly execute and deliver such further instruments
and documents and take such further action as the Secured Party may reasonably
request for the purpose of obtaining or preserving the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the liens
created hereby. The Debtor also hereby authorizes the Secured Party to file any
such financing or continuation statement without the signature of the Debtor to
the extent permitted by applicable law. A reproduction of this Agreement shall
be sufficient as a financing statement for filing in any jurisdiction.
(c) INDEMNIFICATION. The Debtor agrees to pay, and to save the
Secured Party harmless from, any and all liabilities, costs and expenses
(including, without limitation, legal fees and expenses) (i) with respect to, or
resulting from, any delay in paying, any and all excise, sales or other taxes
which may be payable or determined to be payable with respect to any of the
Collateral, (ii) with respect to, or resulting from, any delay in complying with
any law, rule, regulation or order of any governmental authority applicable to
any of the Collateral or (iii) in connection with any of the transactions
contemplated by this Agreement.
(d) MAINTENANCE OF RECORDS. The Debtor will keep and maintain at
its own cost and expense satisfactory and complete records of the Collateral.
(e) RIGHT OF INSPECTION. The Secured Party shall at all times have
full and free access during normal business hours, and upon reasonable prior
notice, to all the books, correspondence and records of the Debtor relating to
the Collateral, and the Secured Party or its representatives may examine the
same, take extracts therefrom and make photocopies thereof, and the Debtor
agrees to render to the Secured Party, at the Debtor's cost and expense, such
clerical and other assistance as may be reasonably requested with regard
thereto.
(f) COMPLIANCE WITH LAWS, ETC. The Debtor will comply in all
material respects with all laws, rules, regulations and orders of any
governmental authority applicable to the Collateral or any part thereof or to
the operation of the Debtor's business; provided, however, that the Debtor may
contest any such law, rule, regulation or order in any reasonable manner which
shall not, in the reasonable opinion of the Secured Party, adversely affect the
Secured Party's rights or the priority of its liens on the Collateral.
(g) PAYMENT OF OBLIGATIONS. The Debtor will pay promptly when due
all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no
90
<PAGE>
such charge need be paid if (i) the validity thereof is being contested in good
faith by appropriate proceedings, (ii) such proceedings do not involve any
material danger of the sale, forfeiture or loss of any of the Collateral or any
interest therein and (iii) such charge is adequately reserved against on the
Debtor's books in accordance with generally accepted accounting principles.
(h) LIMITATION ON LIENS ON COLLATERAL. The Debtor will not create,
incur or permit to exist, will defend the Collateral against, and will take such
other action as is necessary to remove, any lien or claim on or to the
Collateral, other than the security interest granted hereunder and the security
interests described in Section 3(a) above, and will defend the right, title and
interest of the Secured Party in and to any of the Collateral against the claims
and demands of all other persons.
(i) LIMITATIONS ON DISPOSITIONS OF COLLATERAL. The Debtor will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt,
offer or contract to do so, provided however that Debtor will be allowed to
grant licenses to its software products and related documentation in the
ordinary course of business and to establish or provide for source code escrows
in connection therewith, and to dispose of any tangible fixed assets of
individual net book value of less than $5,000.
(j) FURTHER IDENTIFICATION OF COLLATERAL. The Debtor will furnish
to the Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Secured Party may reasonably request, all in
reasonable detail.
4. SECURED PARTY'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) POWERS. The Debtor hereby appoints the Secured Party and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Debtor and in the name of the Debtor or in its own name, from
time to time in the Secured Party's discretion so long as an Event of Default
has occurred and is continuing, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all instruments which may be necessary or desirable to accomplish the purposes
of this Agreement, and, without limiting the generality of the foregoing, the
Debtor shall grant the Secured Party the power and right, on behalf of the
Debtor, without notice to or assent by the Debtor, to do the following, so long
as an Event of Default has occurred and is continuing:
(i) to pay or discharge taxes and liens levied or placed on
or threatened against the Collateral;
(ii) to direct any party liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Secured Party or as the Secured Party shall direct;
91
<PAGE>
(iii) to ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become due
at any time in respect of or arising out of any Collateral;
(iv) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
enforce any right in respect of any Collateral;
(v) to defend any suit, action or proceeding brought
against the Debtor with respect to any Collateral;
(vi) to settle, compromise or adjust any suit, action or
proceeding described in subsection;
(v) above and, in connection therewith, to give such
discharges or releases as the Secured Party may deem appropriate;
(vii) to assign any patent right included in the Collateral
of Debtor (along with the goodwill of the business to which any such patent
right pertains), throughout the world for such term or terms, on such
conditions, and in such manner, as the Secured Party shall in its sole
discretion determine; and
(viii) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as fully
and completely as though the Secured Party were the absolute owner thereof for
all purposes, and to do, at the Secured Party's option and the Debtor's expense,
at any time, or from time to time, all acts and things which the Secured Party
deems necessary to protect, preserve or realize upon the Collateral and the
Secured Party's liens thereon and to effect the intent of this Agreement, all as
fully and effectively as the Debtor might do.
The Debtor hereby ratifies all that said attorneys shall lawfully do or cause to
be done by virtue hereof. This power of attorney shall be a power coupled with
an interest and shall be irrevocable.
(b) NO DUTY ON SECURED PARTY'S PART. The powers conferred on the
Secured Party hereunder are solely to protect the Secured Party's interests in
the Collateral and shall not impose any duty upon it to exercise any such
powers. The Secured Party shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers, and neither it nor
any of its officers, directors, employees or agents shall be responsible to the
Debtor for any act or failure to act hereunder, except for its own willful
misconduct or gross negligence.
5. PERFORMANCE BY SECURED PARTY OF DEBTOR'S OBLIGATIONS. If the Debtor
fails to perform or comply with any of its agreements contained herein and the
Secured Party, as provided for by the terms of this Agreement shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the reasonable expenses of the Secured Party incurred in connection
with such performance or compliance shall be payable by the Debtor to the
Secured Party on demand and shall constitute Obligations secured hereby.
92
<PAGE>
6. REMEDIES. If an Event of Default has occurred and is continuing, the
Secured Party may exercise, in addition to all other rights and remedies granted
to it in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the
Secured Party, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Debtor or any other person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Secured Party or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Secured Party shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of the Collateral so sold, free of any right or equity of
redemption in the Debtor, which right or equity is hereby waived or released.
The Secured Party shall apply the net proceeds of any such collection, recovery,
receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the Secured Party hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Secured Party may elect, and only after
such application and after the payment by the Secured Party of any other amount
required by any provision of law, need the Secured Party account for the
surplus, if any, to the Debtor. To the extent permitted by applicable law, the
Debtor waives all claims, damages and demands it may acquire against the Secured
Party arising out of the exercise by the Secured Party of any of its rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 5 days before such sale or other disposition. The Debtor shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Secured Party to collect
such deficiency.
7. LIMITATION ON DUTIES REGARDING PRESENTATION OF COLLATERAL. The
Secured Party's sole duty with respect to the custody, safekeeping and
preservation of the Collateral, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as the Secured Party deals with
similar property for its own account. Neither the Secured Party nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon all or any part of the Collateral or for any delay in
doing so or shall be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Debtor or otherwise.
8. POWERS COUPLED WITH AN INTEREST. All authorizations and agencies
herein contained with respect the Collateral are irrevocable and powers coupled
with an interest.
93
<PAGE>
9. NO WAIVER; CUMULATIVE REMEDIES. The Secured Party shall not by any
act (except by a written instrument pursuant to Section 10(a) hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default under the Notes or in any breach
of any of the terms and conditions hereof. No failure to exercise, nor any
delay in exercising, on the part of the Secured Party, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Secured Party of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Secured Party would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
10. MISCELLANEOUS.
(a) WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS. None of the
terms or provisions of this Agreement may be waived, amended, supplemented or
otherwise modified except by a written instrument executed by the Debtor and the
Secured Party, provided that any provision of this Agreement may be waived by
the Secured Party in a written letter or agreement executed by the Secured Party
or by telex or facsimile transmission from the Secured Party. This Agreement
shall be binding upon the successors and assigns of the Debtor and shall inure
to the benefit of the Secured Party and its successors and assigns.
(b) GOVERNING LAW. The legal relations between the parties shall be
governed by the laws of the State of California, regardless of the choice of law
provisions of California or any other jurisdiction.
(c) SEVERABILITY. In the event any provision of this Agreement or
the application of any such provision shall be held to be prohibited or
unenforceable in any jurisdiction, such provision shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability. The remaining provisions of this Agreement shall remain in
full force and effect, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. The parties shall use their best efforts to replace the
provision that is contrary to law with a legal one approximating to the extent
possible the original intent of, and the economic benefits accruing to, the
parties.
(d) KNOWLEDGE. For purposes of this Agreement, to know or have
knowledge of, or to be aware of or believe, any matter shall mean to know or
have knowledge, be aware or believe, after due inquiry; provided such knowledge,
awareness or belief shall only be imputed to employees of a party at the level
of manager or above, together with such party's officers and directors.
(e) BINDING. This Agreement shall be binding upon and inure to the
benefit of each of the parties and, to the extent permitted by Section 10(a),
their respective successors and assigns.
94
<PAGE>
(f) HEADINGS. Section headings are included solely for convenience,
are not to be considered a part of this Agreement, and are not intended to be
full and accurate descriptions of their contents.
(g) NOTICES. All notices or other communications which shall or may
be given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Debtor: Wireless Solutions
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
If to Secured Party: Retix
2401 Colorado Avenue
Santa Monica, CA 90404
Attn: President
(h) COUNTERPARTS. This Agreement may be executed in any number of
copies, each of which shall be deemed an original and all of which together
shall constitute one and the same instrument.
(i) LANGUAGE INTERPRETATION. In the interpretation of this
Agreement, unless the context otherwise requires, (a) words importing the
singular shall be deemed to import the plural and vice versa, (b) words denoting
gender shall include all genders, (c) references to persons shall include
corporations or other bodies and vice versa, and (d) references to parties,
sections, schedules, paragraphs and exhibits shall mean the parties, sections,
schedules, paragraphs and exhibits of and to this Agreement unless otherwise
indicated by the context.
(j) DRAFTING. This Agreement shall not be construed against any
party by reason of the drafting or preparation thereof.
[SIGNATURE PAGE FOLLOWS]
95
<PAGE>
IN WITNESS WHEREOF, the Debtor and Secured Party have caused this Agreement
to be duly executed and delivered as of the date first above written.
"DEBTOR"
WIRELESS SOLUTIONS,
a California corporation
By:
---------------------------
Title:
-------------------------
"SECURED PARTY"
RETIX, a California corporation
By:
--------------------------
Title:
------------------------
96
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of Debtor in
and to the following:
(a) All goods and equipment now owned or hereafter acquired, including
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Debtor's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and Debtor's
books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Debtor
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Debtor, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Debtor and Debtor's Books relating
to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Debtor's books relating to the foregoing;
(f) All copyrights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor devices, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
97
<PAGE>
EXHIBITS J AND K - TRANSFERRED ASSETS & LIABILITIES
WIRELESS SOLUTIONS, INC.
STATEMENT OF TRANSFERRED ASSETS AND LIABILITIES
AS OF 5/31/96
<TABLE>
<CAPTION>
5/31/96
-------------
<S> <C>
CASH $ --
ACCOUNTS RECEIVABLE, NET OF RESERVES (50,000.00)
OTHER RECEIVABLES --
INVENTORIES --
PREPAID EXPENSES AND OTHER CURRENT ASSETS 5,893.43
INTERCOMPANY RECEIVABLES --
TOTAL CURRENT ASSETS (44,106.57)
MACHINERY AND EQUIPMENT 224,019.63
FURNITURE AND FIXTURES --
BUILDINGS --
LEASEHOLD IMPROVEMENTS --
TOTAL PROPERTY AND EQUIPMENT 224,019.63
ACCUMULATED DEPRECIATION (93,621.75)
NET PROPERTY AND EQUIPMENT 130,397.88
OTHER ASSETS --
TOTAL ASSETS $ 86,291.31
ACCOUNTS PAYABLE $ 48,863.88
ACCRUED WAGES 57,386.00
DEFERRED REVENUE --
OTHER ACCRUED LIABILITIES 1,165.51
INCOME TAXES PAYABLE --
CURRENT PORTION-LTD --
TOTAL CURRENT LIABILITIES 107,415.39
LONG TERM DEBT --
DEFERRED RENT --
TOTAL LIABILITIES $ 107,415.39
</TABLE>
98
<PAGE>
The enclosed unaudited Statements of Transferred Assets and Liabilities of
Retix's wireless data business unit's U.S. operations include all of the
tangible and recorded intangible assets as well as known liabilities recorded as
of May 31, 1996, in all material respects, except as noted below. The enclosed
Statements of Transferred Assets and Liabilities have been prepared in
accordance with past accounting policies and practices of Retix consistently
applied, however, such statement does not contain any footnotes which may be
required to be in conformity with generally accepted accounting principles
("GAAP"). Subsidiary financial records and corresponding detail schedules are
on file at Retix's principal corporate offices and are available via written
communication with the chief accounting officer of Retix. Except as disclosed
below, the enclosed Statements of Transferred Assets and Liabilities reflect the
assets and liabilities transferred from Retix's wireless data business unit to
Wireless Solutions, Inc., as of May 31, 1996 as contemplated by the Master
Agreement:
ACCRUED VACATION - The enclosed Statements of Transferred Assets and
Liabilities excludes liabilities associated with vacation accruals of wireless
data business unit employees as of May 31, 1996 as contemplated by the Master
Agreement.
BONUSES/COMMISSIONS - Bonuses/commissions potentially due under certain
employment contracts and commission plans have been excluded from the enclosed
Statements of Transferred Assets and Liabilities as final determination of
eligibility by such wireless data business unit employees has not occurred as of
May 31, 1996. Any such amounts, if earned, are not expected to be significant.
UNDISCLOSED LIABILITIES - The enclosed Statements of Transferred Assets and
Liabilities reflect accrued and absolute liabilities of Retix's wireless data
business unit as of May 31, 1996. In addition, commitments and other
potentially contingent liabilities which relate to Retix's wireless data
business unit are contemplated to be transferred to Wireless Solutions, Inc., in
accordance with the Master Agreement, and may not be disclosed on the enclosed
Statements of Transferred Assets and Liabilities. Such undisclosed liabilities
include among other items:
OPERATING LEASE commitments for office facilities and equipment used in the
execution of Retix's wireless data business unit business. Such facilities
include approximately 12,000 square feet of the facility at 4640 Admiralty
Way, Marina del Rey, California. Operating leases commitments in
connection with equipment includes photocopiers, postage machines, test
equipment and certain computer equipment.
INTERCOMPANY ACCOUTS - Certain intercompany note and other interco operating
accounts require final reconciliation upon completion of the carve-out of
Retix's wireless data business unit from Retix's consolidated financial
statements and may require adjustments to the enclosed Statements of Transferred
Assets and Liabilities of Wireless Solutions, Inc., as of May 31, 1996.
(continued)
99
<PAGE>
INTELLECTUAL PROPERTY , CONTRACTS AND OTHER INTANGIBLES - As contemplated by the
Master Agreement, all trademarks, trade names, copyrights, technology and other
intangible property as well as contracts (customer and vendor) and capitalized
software development costs that are used in the business of Retix's wireless
data business unit are to be transferred to Wireless Solutions, Inc., subject to
a Grant-Back License Agreement. Such items are not reflected on the enclosed
Statements of Transferred Assets and Liabilities of Retix's wireless data
business unit as of May 31, 1996 and the rights and obligations related to such
transfer to Wireless Solutions, Inc., is addressed elsewhere within the Master
Agreement.
CAPITALIZATION - Wireless Solutions, Inc., is capitalized through the issuance
of 17,000,000 shares of the Company's Preferred Stock at $1.75 per share to
Retix as contemplated by the Master Agreement.
STOCKHOLDER'S NET INVESTMENT - Certain cash and investment accounts require
final reconciliation upon completion of the carve-out of Retix's wireless data
business unit from Retix's consolidated financial statements. Such final
reconciliations may require adjustments to record Retix's investment in the
wireless data division to reflect the historical operating results of the
business unit.
100
<PAGE>
PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of December 15, 1997 by and between Sonoma
Systems, a California corporation (the "COMPANY"), and Retix, a California
corporation (the "PURCHASER").
1. AUTHORIZATION AND SALE OF PREFERRED STOCK.
1.1 AUTHORIZATION. The Company will authorize the sale and issuance of
up to 6,000,000 shares of its Preferred Stock, having the rights, privileges and
preferences as set forth in the Company's Amended and Restated Articles of
Incorporation (the "RESTATED ARTICLES") in the form attached to this Agreement
as EXHIBIT A.
1.2 SALE OF PREFERRED. Subject to the terms and conditions of this
Agreement, in exchange for the cancellation of $6,000,000 in indebtedness of the
Company to the Purchaser (the "INDEBTEDNESS"), the Purchaser agrees to purchase
at the Closing (as defined below), and the Company agrees to sell and issue to
the Purchaser, 6,000,000 shares of the Company's Preferred Stock (the "SHARES"
or "PREFERRED").
2. CLOSING DATE; DELIVERY.
2.1 CLOSING DATE. The closing of the purchase and sale of the Shares
under this Agreement shall be held at the offices of Venture Law Group, A
Professional Corporation, 2800 Sand Hill Road, Menlo Park, California
simultaneous with the execution and delivery of this Agreement (the "CLOSING")
or at such other time and place upon which the Company and the Purchaser shall
agree (the date of the Closing is hereinafter referred to as the "CLOSING
DATE").
2.2 DELIVERY. At the Closing, the Company will deliver to the Purchaser
a certificate or certificates representing the number of Shares to be purchased
by the Purchaser at such Closing, against cancellation of the Indebtedness by
the Purchaser.
2.3 AMENDMENT OF LOAN AGREEMENT. Effective as of the Closing, Section
1.3 of the Loan Agreement between the parties dated May 31, 1996, as amended on
July 31, 1997 (the "LOAN AGREEMENT") shall be amended to read in its entirety as
follows:
"Subject to the terms and conditions of this Agreement, on or
before December 31, 1997, Borrower may re-borrow amounts repaid
under the under the Credit Line shall be evidenced by a Note,
Credit Line up to a maximum of $2,500,000. Any amounts
re-borrowed and shall be subject to the terms and conditions of
this Agreement, including the repayment terms set forth in the
Note and in Section 3 below. No loans shall be made to Borrower
after December 31, 1997, and any Notes outstanding as of such
date shall be repaid by Borrower in accordance with their
respective terms."
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser as follows:
-1-
<PAGE>
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. The Company (a) is
a corporation duly organized, validly existing and in good standing under the
laws of State of California, and (b) has all corporate power and authority to
carry out this Agreement and the transactions contemplated herein. The Company
is not qualified or licensed to do business as a foreign corporation in any
state. The Company does not own, directly or indirectly, any equity or other
interest in any other corporation, association, partnership or other business
entity. The Company has furnished Purchaser with copies of its Articles of
Incorporation and Bylaws. Said copies are true, correct and complete and contain
all amendments through the Closing Date.
3.2 CORPORATE POWER. The Company will have at the Closing Date all
requisite legal and corporate power to execute and deliver this Agreement, to
sell and issue the Shares hereunder, to issue the Common Stock issuable upon
conversion of the Shares and to carry out and perform its obligations under the
terms of this Agreement.
3.3 CAPITALIZATION. The authorized capital stock of the Company
consists, or will upon filing of the Restated Articles consist, of: 26,000,000
shares of Common Stock, 9,719 of which are issued and outstanding; and
22,000,000 shares of Preferred Stock, 16,000,000 of which are issued and
outstanding prior to the Closing. All issued and outstanding shares have been
duly authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved 6,000,000 shares of Preferred Stock for issuance hereunder,
and 22,000,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock. The Company has also reserved 3,800,000 shares of Common Stock
for issuance pursuant to the Company's 1996 Stock Option Plan (the "EMPLOYEE
PLAN"), and 200,000 shares of Common Stock for issuance under the Company's 1996
Directors' Stock Option Plan (the "DIRECTORS' PLAN"). Options to purchase
3,790,281 shares are outstanding under the Employee Plan, and options to
purchase ________ shares are outstanding under the Directors' Plan. The
Preferred Stock shall have the rights, preferences, privileges and restrictions
set forth in the Restated Articles. All securities of the Company to be
outstanding immediately following the Closing will be issued in compliance with
applicable federal and state securities laws. Except as described above, there
are no preemptive rights, options or warrants or other conversion privileges or
rights presently outstanding to purchase any of the authorized but unissued
stock of the Company. The Company is not obligated to repurchase any shares of
its capital stock or any other securities.
3.4 AUTHORIZATION. All corporate action on the part of the Company, its
directors and shareholders (if any) necessary for the authorization, execution,
delivery and performance of this Agreement by the Company, the authorization,
sale, issuance and delivery of the Shares (and the Common Stock issuable upon
conversion of the Shares) and the performance of all of the Company's
obligations under this Agreement has been taken or will be taken prior to the
Closing. This Agreement, when executed and delivered by the Company, shall
constitute a valid and binding obligation of the Company enforceable in
accordance with its terms. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued and will be fully paid and
nonassessable and will have the rights, preferences and privileges described in
the Restated Articles. The shares of Common Stock issuable upon conversion of
the Shares have been duly and validly reserved and, when issued in compliance
with the provisions of this Agreement and the Restated Articles will be validly
issued, fully paid and nonassessable,
-2-
<PAGE>
and the Shares and such Common Stock will be free of any liens or
encumbrances other than those created by or imposed upon the holders thereof
through no action of the Company; provided, however, that the Shares (and the
Common Stock issuable upon conversion thereof) may be subject to restrictions
on transfer under state and/or federal securities laws as set forth herein.
The Shares are not subject to any preemptive rights or rights of first
refusal, except as set forth in the Rights Agreement between the Company and
the Purchaser dated May 31, 1996, as amended by the First Amendment thereto
of even date with this Agreement (the "RIGHTS AMENDMENT").
3.5 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of any term of its Articles of Incorporation or
Bylaws, each as amended and in effect on and as of the Closing, or in any
material respect of any material term or provision of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree,
order, statute, rule or regulation applicable to the Company. The execution,
delivery and performance of and compliance with this Agreement, and the issuance
of the Shares and the Common Stock issuable upon conversion of the Shares, have
not resulted and will not result in any material violation of, or conflict with,
or constitute a material default under, or result in the creation of, any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company; and there is no such violation or default which
materially and adversely affects the business of the Company as conducted or as
proposed to be conducted, or any of the Company's properties or assets.
3.6 GOVERNMENTAL CONSENT, ETC. No consent, approval or authorization of
or designation, declaration or filing with any governmental authority on the
part of the Company is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Shares (and
the Common Stock issuable upon conversion of the Shares), or the consummation of
any other transaction contemplated by this Agreement, except for filing of the
Restated Articles in the office of the Secretary of State of the State of
California and filing of such notice as required by Section 25102(f) of the
California Corporate Securities Law of 1968, and the compliance with other
applicable blue sky laws.
3.7 OFFERING. Subject to the accuracy of the Purchaser's
representations in Section 5 of this Agreement and in written responses to the
Company's inquiries, the offer, sale and issuance of the Shares to be issued in
conformity with the terms of this Agreement and the issuance of the Common Stock
to be issued upon conversion of the Shares, constitute transactions exempt from
the registration requirements of Section 5 of the Securities Act of 1933, as
amended (the "SECURITIES ACT").
3.8 DISCLOSURE. To the best of the Company's knowledge, after
reasonable investigation, no representation or warranty of the Company contained
in this Agreement and the Exhibits attached hereto, or any certificate furnished
or to be furnished to the Purchaser at the Closing contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made.
-3-
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
4.1 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company with respect to the purchase of
the Shares as follows:
(a) EXPERIENCE. Purchaser has substantial experience in evaluating
and investing in private placement transactions so that Purchaser is capable of
evaluating the merits and risks of Purchaser's investment in the Company.
Purchaser, by reason of its business or financial experience or the business or
financial experience of its professional advisors who are unaffiliated with and
who are not compensated by the Company or any affiliate or selling agent of the
Company, directly or indirectly, has the capacity to protect its own interests
in connection with the purchase of the Shares under this Agreement.
(b) INVESTMENT. Purchaser is acquiring the Shares and the
underlying Common Stock for investment for Purchaser's own account, not as a
nominee or agent, and not with the view to, or for resale in connection with,
any distribution thereof. Purchaser understands that the Shares and the
underlying Common Stock have not been, and will not be, registered under the
Securities Act by reason of a specific exemption therefrom, and that any such
exemption would depend, among other things, upon the bona fide nature of the
investment intent and the accuracy of such Purchaser's representations as
expressed in this Agreement. Purchaser has not been formed for the specific
purpose of acquiring the Shares or the underlying Common Stock.
(c) RULE 144. Purchaser acknowledges that the Shares and the
underlying Common Stock must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available.
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company, the resale occurring
not less than one year after a party has purchased and paid for the security to
be sold, the sale being effected through a "broker's transaction" or in
transactions directly with a "market maker" (as provided by Rule 144(f)) and the
number of shares being sold during any three-month period not exceeding
specified limitations.
(d) NO PUBLIC MARKET. Purchaser understands that no public market
now exists for any of the securities issued by the Company, that the Company has
made no assurances that a public market will ever exist for the Shares or the
underlying Common Stock and that, even if such a public market exists at some
future time, the Company may not then be satisfying the current public
information requirements of Rule 144.
(e) ACCESS TO DATA. Purchaser and its representatives have met
with representatives of the Company and thereby have had the opportunity to ask
questions of, and receive answers from, said representatives concerning the
Company and the terms and conditions of this transaction as well as to obtain
any information requested by Purchaser. Any questions
-4-
<PAGE>
raised by Purchaser or its representatives concerning the transaction have
been answered to the satisfaction of Purchaser and its representatives.
Purchaser's decision to purchase the Shares is based in part on the answers
to such questions as Purchaser and its representatives have raised concerning
the transaction and on its own evaluation of the risks and merits of the
purchase and the Company's proposed business activities.
(f) AUTHORIZATION. This Agreement when executed and delivered by
the Purchaser will constitute a valid and legally binding obligation of the
Purchaser, enforceable in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.
(g) BROKERS OR FINDERS. The Company has not incurred, and will not
incur, directly or indirectly, as a result of any action taken by the Purchaser
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement.
5. CONDITIONS TO CLOSING OF PURCHASER. The Purchaser's obligation to
purchase the Shares at the Closing is, at the option of the Purchaser, subject
to the fulfillment or waiver as of the Closing Date of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 of this Agreement shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Shares and the Common Stock issuable upon
conversion of the Shares.
5.4 ARTICLES OF INCORPORATION. The Certificate of Amendment of the
Company's Articles of Incorporation in the form attached hereto as EXHIBIT B
shall have been filed with the Secretary of State of the State of California.
5.5 RIGHTS AMENDMENT. The Company shall have entered into the Rights
Amendment.
6. CONDITIONS TO CLOSING OF COMPANY. The Company's obligation to sell and
issue the Shares at the Closing is, at the option of the Company, subject to the
fulfillment or waiver of the following conditions:
-5-
<PAGE>
6.1 REPRESENTATIONS. The representations made by the Purchaser in
Section 4 of this Agreement shall be true and correct when made, and shall be
true and correct on the Closing Date.
6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured exemptions therefrom, required by any
state for the offer and sale of the Shares and the Common Stock issuable upon
conversion of the Shares.
6.3 ARTICLES OF INCORPORATION. The Certificate of Amendment of the
Company's Articles of Incorporation in the form attached hereto as EXHIBIT B
shall have been filed with the Secretary of State of the State of California.
6.4 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchaser on or prior to the Closing Date
shall have been performed or complied with in all material respects.
7. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
7.1 FINANCIAL INFORMATION. The Company will mail the following reports
to the Purchaser for so long as the Purchaser is a holder of any Shares
purchased by such person pursuant to this Agreement (or Common Stock issued upon
conversion of the Shares):
(a) As soon as practicable after the end of each fiscal year, and
in any event within ninety (90) days thereafter, consolidated balance sheets of
the Company and its subsidiaries, if any, as of the end of such fiscal year, and
consolidated statements of income and consolidated statements of changes in
financial position of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles and setting
forth in each case in comparative form the figures for the previous fiscal year,
all in reasonable detail and audited by independent public accountants of
national standing selected by the Company.
(b) Contemporaneously with delivery to holders of Common Stock, a
copy of each report of the Company delivered to holders of the Company's Common
Stock.
(c) For so long as the Purchaser is eligible to receive reports
under this Section 7.1, it shall also have the right, at its expense, to discuss
the affairs, finances and accounts of the Company with the Company's officers,
all at such reasonable times and as often as may be reasonably requested;
provided, however, that the Company shall not be obligated to provide any
information that it reasonably considers to be a trade secret or to contain
confidential information.
7.2 ADDITIONAL INFORMATION. As long as a Purchaser (together with any
affiliate of such Purchaser) holds not less than 100,000 shares of the Company's
capital stock, as adjusted for recapitalizations, stock splits, stock dividends
and the like, the Company will mail the following reports to such Purchaser:
-6-
<PAGE>
(a) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company and in any
event within forty-five (45) days thereafter, a consolidated balance sheet of
the Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of income and consolidated statements of
cash flow of the Company and its subsidiaries for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles (other than for accompanying notes), all in reasonable
detail.
(b) As soon as practicable after the end of each fiscal month, and
in any event within thirty (30) days thereafter, an unaudited consolidated
balance sheet of the Company as at the end of such month, and unaudited
consolidated statements of income and unaudited consolidated statements of cash
flow for such month and for the current fiscal year to date. Such financial
statements shall be prepared in accordance with generally accepted accounting
principles consistently applied (other than accompanying notes), all in
reasonable detail.
(c) Within 30 days at the end of each fiscal year, an annual
budget, operating or similar plan for the upcoming fiscal year (the "Plan").
(d) Any material amendments or changes to such Plan promptly
following any such amendments or changes, and in any event within 30 days of the
date thereof.
7.3 TRANSFER OF INFORMATION RIGHTS. The information rights set forth in
Sections 7.1 and 7.2 may be transferred in any nonpublic transfer of Shares (or
Shares of Common Stock issued upon conversion of the Shares), provided that the
Company is given written notice of such transfer, and provided further that the
right to receive the information set forth in Section 7.2 may only be
transferred to a holder of, or affiliated holders who in the aggregate hold, at
least 100,000 Shares (or an equivalent number of Shares consisting of the Shares
or Common Stock issued upon conversion of the Shares, as appropriately adjusted
for stock splits and the like). In the event that the Company reasonably
determines that provision of information to a transferee pursuant to this
Section 7.3 would materially adversely impact its proprietary position, such
information may be edited in the manner necessary to avoid such impact.
7.4 TERMINATION OF COVENANTS. The covenants set forth in this Section 7
shall terminate on and be of no further force or effect upon the earlier of (i)
the consummation of the Company's sale of its Common Stock in an underwritten
public offering pursuant to an effective registration statement filed under the
Securities Act, immediately subsequent to which the Company shall be obligated
to file annual and quarterly reports with the Commission pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 (the "EXCHANGE ACT") or (ii) the
registration by the Company of a class of its equity securities under Section
12(b) or 12(g) of the Exchange Act.
8. MISCELLANEOUS.
8.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California.
-7-
<PAGE>
8.2 SURVIVAL. The representations, warranties, covenants and agreements
made in this Agreement shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Agreement, the provisions of this Agreement shall inure to the benefit of, and
be binding upon, the successors, assigns, heirs, executors and administrators of
the parties to this Agreement; provided, however, that the right of the
Purchaser to purchase the Shares shall not be assignable without the prior
written consent of the Company.
8.4 ENTIRE AGREEMENT, AMENDMENT. This Agreement, the Rights Amendment
and the other documents delivered pursuant to this Agreement at the Closing
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof, and supersede all prior
agreements, and no party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought;
provided, however, that holders of at least a majority of the Shares (or shares
of Common Stock issued upon conversion of the Shares) may, with the written
consent of the Company, waive, modify or amend on behalf of all holders, any
provisions hereof benefiting such holders, so long as the effect thereof will be
that all such holders will be treated equally.
8.5 NOTICES. All notices or other communications which shall or may be
given pursuant to this Agreement shall be in writing, shall be effective upon
receipt, and shall be delivered by Federal Express or a similar courier,
personal delivery, certified or registered mail, or by facsimile transmission
(with confirmation of transmission receipt), addressed as follows (or as is
provided in the future by written notice as provided herein):
If to Company: Sonoma Systems
4640 Admiralty Way, Suite 600
Marina Del Rey, CA 90292
Attn: President
If to Purchaser: Retix
4640 Admiralty Way, Suite 600
Marina Del Rey, CA 90292
Attn: President
8.6 DELAYS OR OMISSIONS. Except as expressly provided in this
Agreement, no delay or omission to exercise any right, power or remedy accruing
to any holder of any Shares, upon any breach or default of the Company under
this Agreement, shall impair any such right, power or remedy of such holder 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
-8-
<PAGE>
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any holder of any breach or
default under this Agreement, or any waiver on the part of any holder of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
holder, shall be cumulative and not alternative.
8.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
8.8 EXPENSES. The Company and the Purchaser shall each bear its own
expenses incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby.
8.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.10 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
8.11 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
(SIGNATURE PAGE FOLLOWS)
-9-
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY" "PURCHASER"
SONOMA SYSTEMS, RETIX,
a California corporation a California corporation
By: /s/ Greg Koss By:
----------------------------- -----------------------------
Title: Title:
-------------------------- --------------------------
-10-
<PAGE>
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is dated November
29,1999, between SILICON VALLEY BANK ("Bank"), whose address is 3003 Tasman
Drive, Santa Clara, California 95954 with a loan production office located at
10585 Santa Monica Boulevard, Suite 140, Los Angeles, California 90025 and
SONOMA SYSTEMS ("Borrower"), whose address is 4640 Admiralty Way, Suite 600,
Marina Del Rey, California 90292.
RECITALS
A. Bank and Borrower are parties to that certain QuickStart Loan and
Security Agreement and Schedules attached thereto, dated April 20, 1998, as
amended (collectively, the "Original Agreement").
B. Borrower and Bank desire in this Agreement to set forth their
agreement with respect to a working capital loan and to amend and restate in its
entirety without novation the Original Agreement in accordance with the
provisions herein. This Agreement shall be construed to impart upon Bank a duty
to act reasonably at all times.
AGREEMENT
The parties agree as follows:
1 ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed
following GAAP. Calculations and determinations must be made following GAAP. The
term "financial statements" includes the notes and schedules. The terms
"including" and "includes" always mean "including (or includes) without
limitation," in this or any Loan Document.
2 LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS.
Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line minus the Cash Management Services Sublimit or (B) the
Borrowing Base, minus (ii) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit). Amounts borrowed under
this Section may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instruction from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice give by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
1
<PAGE>
2.1.2 LETTERS OF CREDIT SUBLIMIT.
Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding principal balance of the Advances minus the Cash
Management Sublimit; however, the face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit) may not exceed $500,000.
Each Letter of Credit will have an expiry date of no later than 90 days after
the Revolving Maturity Date, but Borrower's reimbursement obligation will be
secured by cash on terms acceptable to Bank at any time after the Revolving
Maturity Date if the term of this Agreement is not extended by Bank. Borrower
agrees to execute any further documentation in connection with the Letters of
Credit as Bank may reasonably request.
2.1.3 CASH MANAGEMENT SERVICES SUBLIMIT.
Borrower may use up to $300,000 for Bank's Cash Management Services,
which may include, (i) $50,000 for business credit card services; and (ii)
$250,000 for merchant services, direct deposit of payroll, and check cashing
services identified in various cash management services agreements related to
such services (the "Cash Management Services"). Such aggregate credit limit
shall reduce the amount otherwise available to be borrowed under the
Committed Revolving Line, by a factor of 1.25. All amounts Bank pays for any
Cash Management Services will be treated as Advances under the Committed
Revolving Line.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1 and 2.1.2 exceed the
lesser of either (i) the committed Revolving Line or (ii) the Borrowing Base,
Borrower must immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate of 0.75 of 1 percentage point above the
Prime Rate; decreasing, upon occurrence of the Private Placement, to a per annum
rate of 0.25 of 1 percentage point above the Prime Rate. After an Event of
Default, Obligations accrue interest at 5 percent above the rate effective
immediately before the Event of Default. The interest rate increases or
decreases when the Prime Rate changes. Interest is computed on a 360 day year
for the actual number of days elapsed.
(b) Payment. Interest due on the Committed Revolving Line is payable on
the 28th day of each month. Bank may debit any of Borrower's deposit accounts
including Account Number _________________ for principal and interest payments
owing or any amounts Borrower owes Bank. Bank will promptly notify Borrower when
it debits Borrower's accounts. These debits are not a setoff. Payments received
after 12:00 noon Pacific time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.
2.4 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of $7,500
due on the Closing Date;
(b) Unused Portion Fee. A fully earned, non-refundable Unused Portion
Fee in an amount of 1/8% per annum on the available, unused portion of the
Committed Revolving line, due and payable on a quarterly basis in arrears; and
(c) Bank Expenses. All Bank Expenses (including reasonable attorneys'
fees and reasonable expenses) incurred through and after the date of this
Agreement, are payable when due.
2
<PAGE>
3 CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to
the condition precedent that it receive the agreements, documents and fees
it requires.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of
each Credit Extension and no Event of Default may have occurred and be
continuing, or result from the Credit Extension. Each Credit Extension is
Borrower's representation and warranty on that date that the representations
and warranties of Section 5 remain true.
4 CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and
performance of each of Borrower's duties under the Loan Documents. Except for
Permitted Liens, any security interest will be a first priority security
interest in the Collateral. Bank may place a "hold" on any deposit account
pledged as Collateral. If this Agreement is terminated, Bank's lien and
security interest in the Collateral will continue until Borrower fully
satisfies its Obligations.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in
its state of formation and qualified and licensed to do business in, and in
good standing in, any state in which the conduct of its business or its
ownership of property requires that it be qualified, except where the failure
to do so could not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower
is bound. Borrower is not in default under any agreement to which or by which
it is bound in which the default could cause reasonably be expected to cause
a Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except
Permitted Liens. The Accounts are bona fide, existing obligations, and the
service or property has been performed or delivered to the account debtor or
its agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has no notice of any actual or imminent Insolvency
Proceeding of any account debtor whose accounts are an Eligible Account in
any Borrowing Base Certificate. All Inventory is in all material respects of
good and marketable quality, free from material defects. Borrower is the sole
owner of the Intellectual Property, except for non-exclusive licenses granted
to its customers in the ordinary course of
3
<PAGE>
business. Each Patent is valid and enforceable and no part of the
Intellectual Property has been judged invalid or unenforceable, in whole or
in part, and no claim has been made that any part of the Intellectual Property
violates the rights of any third party, except to the extent such claim could
not reasonably be expected to cause a Material Adverse Change.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge of Borrower's Responsible Officers and legal
counsel, threatened by or against Borrower or any Subsidiary in which a
likely adverse decision could reasonably be expected to cause a Material
Adverse Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any Subsidiary,
delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature.
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company" or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock
(under Regulations T and U of the Federal Reserve Board of Governors).
Borrower has complied in all material respects with the Federal Fair Labor
Standards Act. Borrower has not violated any laws, ordinances or rules, the
violation of which could reasonably be expected to cause a Material Adverse
Change. None of Borrower's or any Subsidiary's properties or assets has been
used by Borrower or any Subsidiary or, to the best of Borrower's knowledge,
by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally. Borrower and each
Subsidiary has timely filed all required tax returns and paid, or made
adequate provision to pay, all material taxes, except those being contested
in good faith with adequate reserves under GAAP. Borrower and each Subsidiary
has obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all government
authorities that are necessary to continue its business as currently
conducted, except where the failure to do so could not reasonably be expected
to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in
any certificate or written statement given to Bank (taken together with all
such written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained in the certificates or statements not
misleading. It being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are
not viewed as facts and that actual results during the period or periods
covered by such projections and forecasts may differ from the projected and
forecasted results.
4
<PAGE>
6. AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence
and good standing in its jurisdiction of formation and maintain qualification
in each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a material adverse effect on Borrower's business or
operations. Borrower will comply, and have each Subsidiary comply, with all
laws, ordinances and regulations to which it is subject, noncompliance with
which could have a material adverse effect on Borrower's business or
operations or would reasonably be expected to cause a Material Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no
later than 30 days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's
consolidated operations during the period, in a form and certified by a
Responsible Officer acceptable to Bank; (ii) as soon as available, but no
later than 90 days after the last day of Borrower's fiscal year, audited
consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an
independent certified public accounting firm reasonably acceptable to Bank;
(iii) a prompt report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower
or any Subsidiary of $100,000 or more; (iv) budgets, sales projections,
operating plans or other financial information Bank reasonably requests; and
(v) prompt notice of any material change in the composition of the
Intellectual Property, including any subsequent ownership right of Borrower
in or to any Copyright, Patent or Trademark not shown in any intellectual
property security agreement between Borrower and Bank or knowledge of an
event that materially adversely affects the value of the Intellectual
Property.
(b) Within 20 days after the last day of each month, Borrower will
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer
in the form of Exhibit C, with aged listings of accounts receivable and
accounts payable and inventory reports.
(c) Within 30 days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance Certificate
signed by a Responsible Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Collateral at Borrower's
expense, but the audits will be conducted no more often than every 6 months
unless an Event of Default has occurred and is continuing.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower and its
account debtors will follow Borrower's customary practices as they exist at
execution of this Agreement. Borrower must promptly notify Bank of all
returns, recoveries, disputes and claims, that involve more than $50,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make, timely
payment of all material federal, state, and local taxes or assessments and
will deliver to Bank, on demand, appropriate certificates attesting to the
payment.
6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks
and in amounts, as Bank may reasonably request. Insurance policies will be in
a form, with companies, and in amounts that are
5
<PAGE>
satisfactory to Bank in Bank's reasonable discretion. All property policies
will have a lender's loss payable endorsement showing Bank as an additional
loss payee and all liability policies will show the Bank as an additional
insured and provide that the insurer must give Bank at least 20 days notice
before canceling its policy. At Bank's request, Borrower will deliver
certified copies of policies and evidence of all premium payments. Proceeds
payable under any policy will, at Bank's option, be payable to Bank on
account of the Obligations.
6.6 PRIMARY ACCOUNTS.
Borrower will maintain its primary depository and operating accounts
with Bank.
6.7 FINANCIAL COVENANTS.
Beginning with the earlier to occur of: (i) Borrower's receipt of
$7,000,000 of the Private Placement; or (ii) December 31, 1999, Borrower will
maintain as of the last day of each month:
(i) QUICK RATIO. A ratio of Quick Assets to Current
Liabilities of at least 1.50 to 1.00.
(ii) TANGIBLE NET WORTH. A Tangible Net Worth of at least
$5,000,000.
6.8 REGISTRATION OF INTELLECTUAL PROPERTY RIGHTS.
Borrower will register with the United States Patent and Trademark
Office or the United States Copyright Office its Intellectual Property within 30
days of the date of this Agreement, and additional Intellectual Property rights
developed or acquired including revisions or additions with any product before
the sale or licensing of the product to any third party.
Borrower will (i) protect, defend and maintain the validity and
enforceability of the Intellectual Property and promptly advise Bank in
writing of material infringements and (ii) not allow any Intellectual
Property to be abandoned, forfeited or dedicated to the public without Bank's
written consent.
6.9 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further
action as Bank reasonably requests to perfect or continue Bank's security
interest in the Collateral or to effect the purposes of this Agreement.
7 NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written
consent, which will not be unreasonably withheld:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part
of its business or property, other than Transfers (i) of Inventory in the
ordinary course of business; (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in
the ordinary course of business; or (iii) of worn-out or obsolete Equipment.
7.2 CHNAGE IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any
business other than the businesses currently engaged in by Borrower or
reasonably related thereto or have an material change in its ownership or
management (other than the sale of Borrower's equity securities in a public
offering or to
6
<PAGE>
venture capital investors approved by Bank) of greater than 25%. Borrower
will not, without at least 30 days prior written notice, relocate its chief
executive office or add any new offices or business locations.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) result in a decrease of more than 25% of Tangible Net
Worth. A Subsidiary may merge or consolidate into another Subsidiary or into
Borrower. Notwithstanding the foregoing, provided no Event of Default has
occurred and is continuing, Borrower may reincorporate in the State of
Delaware during the term of this Agreement, provided, however, that Borrower
notifies Bank in writing no less than 10 prior to such reincorporation and
Borrower agrees to execute any and all documents required by Bank to, among
other things, maintain Bank's perfected security interest in the Collateral,
including but not limited to an assumption agreement and a UCC Financing
Statement.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or
permit any Collateral not to be subject to the first priority security
interest granted here, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment
or redeem, retire or purchase any capital stock.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter or permit any material transaction with any
Affiliate except transactions that are in the ordinary course of Borrower's
business, on terms less favorable to Borrower than would be obtained in an
arm's length transaction with a non-affiliated Person.
7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt, or amend any provision in any document
relating to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or
use the proceeds of any Credit Extension for that purpose; fail to meet the
minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with
the Federal Fair Labor Standards Act or violate any other law or regulation,
if the violation could reasonable be expected to have a material adverse
effect on Borrower's business or operations or would reasonably be expected
to cause a Material Adverse Change, or permit any of its Subsidiaries to do
so.
7
<PAGE>
8 EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within 3 days after
their due date. During the additional period the failure to cure the default
is not an Event of Default (but no Credit Extension will be made during the
cure period);
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any
agreement between Borrower and Bank and as to any default under a term,
condition or covenant that can be cured, has not cured the default within 10
days after it occurs, or if the default cannot be cured within 10 days or
cannot be cured after Borrower's attempts within 10 day period, and the default
may be cured within a reasonable time, then Borrower has an additional period
(of not more than 30 days) to attempt to cure the default. During the
additional time, the failure to cure the default is not an Event of Default
(but no Credit Extensions will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
(i) If there occurs a material impairment in the perfection or priority
of the Bank's security interest in the Collateral or in the value of such
Collateral (other than normal depreciation) which is not covered by adequate
insurance or (ii) if the Bank determines, based upon information available to
it and in its reasonable judgment, that there is a reasonable likelihood that
Borrower will fail to comply with one or more of the financial covenants in
Section 6 during the next succeeding financial reporting period.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in 10 days, or if Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of
its business or if a judgment or other claim becomes a Lien on a material
portion of Borrower's assets, or if a notice of lien, levy, or assessment is
filed against any of Borrower's assets by any government agency and not paid
within 10 days after Borrower receives notice. These are not Events of
Default if stayed or if a bond is posted pending contest by Borrower (but no
Credit Extensions will be made during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made
before any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $250,000 or that could cause a Material Adverse Change;
8
<PAGE>
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $250,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied); or
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
9 BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs all Obligations are immediately
due and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit
under this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or
reasonable to protect its security interest in the Collateral. Borrower will
assemble the Collateral if Bank requires and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any Lien which appears to be prior or superior to its
security interest and pay all expenses incurred. Borrower grants Bank a
license to enter and occupy any of its premises, without charge, to exercise
any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower
it holds, or (ii) any amount held by Bank owing to or for the credit or the
account of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral. Bank is granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower's labels, Patents, Copyrights, Mask Works, rights of use of any
name, trade secrets, trade names, Trademarks, service marks, and advertising
matter, or any similar property as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral
and, in connection with Bank's exercise of its rights under this Section,
Borrower's rights under all licenses and all franchise agreements inure to
Bank's benefit; and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's
name on any checks or other forms of payment or security; (ii) sign
Borrower's name on any invoice or bill of lading for any Account or drafts
against account debtors, (iii) make, settle, and adjust all claims under
Borrower's insurance policies; (iv) settle and adjust disputes and claims
about the Accounts directly with account debtors, for amounts and on terms
Bank determines reasonable; and (v) transfer the Collateral into the name of
Bank or a third party
9
<PAGE>
as the Code permits. Bank may exercise the power of attorney to sign
Borrower's name on any documents necessary to perfect or continue the
perfection of any security interest regardless of whether an Event of Default
has occurred. Bank's appointment as Borrower's attorney in fact, and all of
Bank's rights and powers, coupled with an interest, are irrevocable until all
Obligations have been fully repaid and performed and Bank's obligation to
provide Credit Extensions terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any
person owing Borrower money of Bank's security interest in the funds and
verify the amount of the Account. Borrower must collect all payments in trust
for Bank and, if requested by Bank, immediately deliver the payments to Bank
in the form received from the account debtor, with proper endorsements for
deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to
make similar payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and Section 9-207 of
the Code, it is not liable for: (a) the safekeeping of the Collateral; (b)
any loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee,
or other person. Borrower bears all risk of loss, damage or destruction of
the Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank's exercise of one right
or remedy is not an election, and Bank's waiver of any Event of Default is
not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver is effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of
payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.
10 NOTICES
-------
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by
an overnight delivery service, by certified mail, postage prepaid, return
receipt requested, or by telefacsimile to the addresses set forth at the
beginning of this Agreement. A party may change its notice address by giving
the other party written notice.
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
------------------------------------------
California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive
jurisdiction of the State and Federal courts in Los Angeles County,
California.
10
<PAGE>
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS.
THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS
AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12 GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Other than stated in Section 7.3 of this
Agreement, Borrower may not assign this Agreement or any rights under it
without Bank's prior written consent which may be granted or withheld in
Bank's discretion. Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any
part of, or any interest in, Bank's obligations, rights and benefits under
this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: (a) all obligations, demands,
claims, and liabilities asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or Bank
Expenses incurred, or paid by Bank from, following, or consequential to
transactions between Bank and Borrower (including reasonable attorneys fees
and expenses), except for losses caused by Bank's gross negligence or willful
misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other
provision in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by
Borrower and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into
this Agreement and the Loan Documents.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The
obligations of Borrower in Section 12.2 to indemnify Bank will survive until
all statutes of limitations for actions that may be brought against Bank have
run.
11
<PAGE>
12.8 CONFIDENTIALITY
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or
affiliates in connection with their business with Borrower, (ii) to
prospective transferees or purchasers of any interest in the loans, (iii) as
required by law, regulation, subpoena, or other order, (iv) as required in
connection with Bank's examination or audit and (v) as Bank considers
appropriate exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank's possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.
12.9 EFFECT OF AMENDMENT AND RESTATEMENT.
This Agreement is intended to and does completely amend and restate,
without novation, the Original Agreement. All credit extensions or loans
outstanding under the Original Agreement are and shall continue to be
outstanding under this Agreement. All security interests granted under the
Original Agreement are hereby confirmed and ratified and shall continue to
secure all Obligations under this Agreement.
12.10 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of
the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys' fees and other reasonable costs and expenses incurred,
in addition to any other relief to which it may be entitled.
13 DEFINITIONS
13.1 DEFINITIONS
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or
lease of goods (including licensing software and other technology) or
provision of services, all credit insurance, guaranties, other security and
all merchandise returned or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is
under common control with the Person, and each of that Person's senior
executive officers, directors, partners and, for any Person that is a limited
liability company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs
and expenses (including reasonable attorneys' fees and expenses) for
preparing, negotiating, administering, defending and enforcing the Loan
Documents (including appeals or insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including
ledgers, records regarding Borrower's assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs
or any equipment containing the information.
"BORROWING BASE" is (i) 80% of Eligible Accounts plus (ii) the
lesser of 25% of the value of Borrower's Eligible Inventory (valued at the
lower of cost or wholesale fair market value) or $500,000, as determined by
Bank from Borrower's most recent Borrowing Base Certificate; PROVIDED,
HOWEVER, that Bank may lower the percentage of the Borrowing Base after
performing an audit of Borrower's Collateral.
12
<PAGE>
"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"CASH MANAGEMENT SERVICES" are defined in Section 2.1.3.
"CLOSING DATE" is the date of this Agreement.
"CODE" Is the California Uniform Commercial Code.
"COLLATERAL" is the property described on EXHIBIT A.
"COMMITTED REVOLVING LINE" is an Advance of up to $2,000,000.
"CONTINGENT OBLIGATIONS" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an
obligation directly or indirectly guaranteed, endorsed, co-made, discounted
or sold with recourse by that Person, or for which that Person is directly or
indirectly liable; (ii) any obligations for undrawn letters of credit for the
account of that Person; and (iii) all obligations from any interest rate,
currency or commodity swap agreement, interest rate cap or collar agreement,
or other agreement or arrangement designated to protect a Person against
fluctuation in interest rates, currency exchange rate or commodity prices; but
"Contingent Obligation" does not include endorsements in the ordinary course
of business. The amount of a Contingent Obligation is the stated or
determined amount of the primary obligation for which the Contingent
Obligation is made or, if not determinable, the maximum reasonably
anticipated liability for it determined by the person in good faith; but the
amount may not exceed the maximum of the obligations under the guarantee or
other support arrangement.
"COPYRIGHTS" are all copyright rights, applications or registrations and
like protections in each work or authorship or derivative work, whether
published or not (whether or not it is a trade secret) now or later existing,
created, acquired or held.
"CREDIT EXTENSION" is each Advance, Letter of Credit, or any other
extension of credit by Bank for Borrower's benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section
5; BUT Bank may change eligibility standards by giving Borrower notice.
Unless Bank agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have
not been paid within 90 days of invoice date;
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts for the amounts that
exceed that percentage, except for those certain Accounts from Newbridge
Networks, for which the percentage may be 60%; decreasing to 50%
beginning May 1, 2000; further decreasing to 40% beginning August 1,
2000;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
13
<PAGE>
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which
goods are consigned, sales guaranteed, sale or return, sale on
approval, bill and hold, or other terms if account debtor's payment may
be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent;
(j) Accounts in which the account debtor disputes liability or makes any
claim and Bank believes there may be a basis for dispute (but only up to
the disputed or claimed amount), or if the Account Debtor is subject to
an Insolvency Proceeding, or becomes insolvent, or goes out of business;
(k) Accounts for which Bank reasonably determines collection to be
doubtful.
"ELIGIBLE INVENTORY" is Borrower's Inventory located at its principal
place of business (or any location permitted under Section 7.2) that complies
with representations and warranties in Section 5.2, limited to raw materials
and finished goods comprised of Intel chips, standard motherboards, commodity
integrated circuits and RAM chips and chipsets, and will not include used,
returned, obsolete, consigned, work in progress, demonstrative or custom
inventory, supplies, packing or shipping materials.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations
for surety bonds and letters of credit, (b) obligations evidenced by notes,
bonds, debentures or similar instruments, (c) capital lease obligations and
(d) Contingent Obligations.
"INSOLVENCY PROCEEDING" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INTELLECTUAL PROPERTY" is:
(a) Copyrights, Trademarks, Patents, and Mask Works including
amendments, renewals, extensions, and all licenses or other rights to use and
all license fees and royalties from the use;
(b) Any trade secrets and any intellectual property rights in computer
software and computer software products now or later existing, created,
acquired or held;
(c) All design rights which may be available to Borrower now or later
created, acquired or held;
(d) Any claims for damages (past, present or future) for infringement of
any of the rights above, with the right, but not the obligation, to sue and
collect damages for use or infringement of the intellectual property rights
above;
All proceeds and products of the foregoing, including all insurance,
indemnity or warranty payments.
"INVENTORY" is present and future inventory in which Borrower has any
interest, including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished
14
<PAGE>
products intended for sale or lease or to be furnished under a contract of
service, of every kind and description now or later owned by or in the
custody or possession, actual or constructive, of Borrower, including
inventory temporarily out of its custody or possession or in transit and
including returns on any accounts or other proceeds (including insurance
proceeds) from the sale or disposition of any of the foregoing and any
documents of title.
"INVESTMENT" is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"LETTER OF CREDIT" is defined in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes
or guaranties executed by Borrower or Guarantor, and any other present or
future agreement between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, extended or restated.
"MASK WORKS" are all mask works or similar rights available for the
protection of semiconductor chips, now owned or later acquired.
"MATERIAL ADVERSE CHANGE" is defined in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including
interest accruing after Insolvency Proceedings begin and debts, liabilities,
or obligations of Borrower assigned to Bank.
"ORIGINAL AGREEMENT" has the meaning set forth in recital paragraph A.
"PATENTS" are patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any other
Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary course of
business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing Date;
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States or its agency or any State maturing within 1
year from its acquisition, (ii) commercial paper maturing no more than 1 year
after its creation and having the highest rating from either Standard &
Poor's Corporation or Moody's Investors Service, Inc., (iii) Bank's
certificates of deposit issued maturing no more than 1 year after issue; and
(c) Investments in Retix Europe Ltd. and its Subsidiary, Sonoma Systems
Europe, Ltd.
15
<PAGE>
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule or
arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, IF they have no priority
over any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower
or its Subsidiaries incurred for financing the acquisition of the Equipment,
(ii) existing on equipment when acquired, IF the Lien is confined to the
property and improvements and the proceeds of the equipment, or (iii)
Transamerica's Liens on Equipment specifically financed by said entity;
(d) Licenses or sublicenses granted in the ordinary course of Borrower's
business and any interest or title of a licensor or under any license or
sublicense, IF the licenses and sublicenses permit granting Bank a security
interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), BUT any
extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it
is not Bank's lowest rate.
"PRIVATE PLACEMENT" is Borrower's closing of Series E round of equity
financing in a minimum amount of $10,000,000.
"QUICK ASSETS" is, on any date, the Borrower's consolidated,
unrestricted cash, cash equivalents, net billed accounts receivable and
investments with maturities of fewer than 12 months determined according to
GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is November 28, 2000.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank.)
"SUBSIDIARY" is for any Person, or any other business entity of which
more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by the Person or one or more Affiliates
of the Person.
"TANGIBLE NET WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries MINUS, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade service marks and names, Copyrights and research and
16
<PAGE>
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, AND (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP,
be classified as liabilities on Borrower's consolidated balance sheet,
including all Indebtedness, and current portion Subordinated Debt allowed to
be paid, but excluding all other Subordinated Debt.
"TRADEMARKS" are trademark and servicemark rights, registered or not,
applications to register and registrations and like protections, and the entire
goodwill of the business of Assignor connected with the trademarks.
BORROWER:
Sonoma Systems
By: /s/ Steve Waszak
--------------------------------
Title: Executive Vice President
------------------------------
and CFO
BANK:
SILICON VALLEY BANK
By: /s/ [ILLEGIBLE]
----------------------------
Title: A.V.P.
------------------------------
17
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
- --------------------------------------------------------------------------------
Borrower Sonoma Systems Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Commitment Amount: $2,000,000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ___ $____________
2. Additions (please explain on reverse) $____________
3. TOTAL ACCOUNTS RECEIVABLE $____________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $____________
5. Balance of 50% over 90 day accounts $____________
6. Credit balances over 90 days $____________
7. Concentration Limits* $____________
8. Foreign Accounts $____________
9. Governmental Accounts $____________
10. Contra Accounts $
11. Promotion or Demo Accounts $____________
12. Intercompany/Employee Accounts $____________
13. Other (please explain on reverse) $____________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $____________
15. Eligible Accounts (#3 minus #14) $____________
16. LOAN VALUE OF ACCOUNTS (80% of #15) $____________
</TABLE>
*60% for Newbridge Networks, decreasing to 50% beginning 5/1/00 and further
decreasing to 40% beginning 8/1/00
<TABLE>
<S> <C> <C>
INVENTORY
17. Inventory Value as of $
INVENTORY DEDUCTIONS
18. Obsolete Inventory $____________
19. Any Demo Inventory $____________
20. Inventory sold on consignment $____________
21. Inventory with offsetting claims $____________
22. Work in process $
23. Other (please explain on reverse) $____________
24. TOTAL INVENTORY DEDUCTIONS $____________
25. Eligible Inventory (#17 minus #24) $____________
26. LOAN VALUE OF INVENTORY (lesser of 25% of #25
or $500,000) $____________
BALANCES
27. Maximum Loan Amount $____________
28. Total Funds Available [Lesser of #27 or (#16 plus #26)] $____________
29. Present balance owing on Line of Credit $____________
30. Outstanding under Sublimits (LC) $____________
31. RESERVE POSITIONS (#28 minus #29 and #30) $____________
</TABLE>
<PAGE>
CONFIDENTIAL
OEM RESELLER AGREEMENT
THIS RESELLER AGREEMENT made this 17 day of September, 1997
BETWEEN:
NEWBRIDGE NETWORKS CORPORATION, a Canadian corporation, having its
main office at 600 March Road, P.O. Box 13600, Kanata, Ontario,
Canada K2K 2E6
("Newbridge")
AND:
SONOMA SYSTEMS, INC., a California corporation, having its main
office at 4640 Admiralty Way, Marina Del Rey, California, 90292, USA
("Vendor")
WHEREAS Newbridge wishes to distribute certain Vendor products;
AND WHEREAS Vendor wishes to provide such Vendor products to Newbridge, in
accordance with the terms and conditions of this Agreement;
NOW THEREFORE, in consideration of the mutual covenants contained herein, and
for other good and valuable consideration (the receipt and sufficiency of
which are hereby acknowledged) the parties agree as follows:
1. DEFINITIONS
In this Agreement, unless the context otherwise requires:
(a) "Agreement" shall mean this agreement and all attached schedules and
exhibits, as may be amended in accordance with the provisions herein.
(b) "Authorized Areas" shall mean the regions set forth in Schedule "B"
hereto.
(c) "Documentation" shall mean all sales, marketing and technical literature
relating to the Vendor Products, and any updates, modifications and
enhancements made to them.
(d) "Effective Date" shall be the date first written above.
1
<PAGE>
CONFIDENTIAL
(e) "End User" shall mean a person or entity that acquires a Vendor Product
for its own use rather than resale or distribution.
(f) "Transfer Price" shall mean the list price less the discount specified
in Schedule A.
(g) "Vendor Products" shall mean the products listed in Schedule "A" hereto.
2. APPOINTMENT
2.1 APPOINTMENT. Subject to the terms and conditions of this Agreement,
Vendor hereby appoints Newbridge as an independent, non-exclusive, authorized
reseller for the Vendor Products, in the Authorized Areas. Newbridge may
exercise any of its rights hereunder either directly or through its
subsidiaries, affiliates and/or distributors.
2.2 REGIONAL AMENDMENTS. Certain provisions of this Agreement may be
modified for particular regions of the Authorized Areas, as provided in
Schedules E, F and G hereto. In the event of any conflict or inconsistency
between the terms of this Agreement and Schedules E, F and/or G, the terms of
Schedules E, F and/or G shall prevail for such region only. Except as
specifically and to the extent modified by Schedules E, F, and/or G for a
particular region, all of the terms and provisions of the Agreement shall
continue to remain in full force and effect.
3. NEWBRIDGE'S OBLIGATIONS
3.1 MARKETING. Newbridge shall use reasonable commercial efforts to market
the Vendor Products in the Authorized Areas.
3.2 TECHNICAL SUPPORT. Newbridge shall provide the support services for the
Vendor Products to its End Users in the Authorized Areas, as provided in
Schedule D.
3.3 TRADE-MARKS. During the term of this Agreement, Newbridge shall use
Vendor's trade-marks and logos in accordance with Vendor's reasonable written
guidelines, as provided to Newbridge from time to time. End User services for
the Vendor Products may be marketed and sold under any applicable Newbridge
service marks or trademarks without restriction.
3.4 ACCOUNT MANAGER. Newbridge shall assign individuals in the Authorized
Areas who will act as account coordination manager for Vendor and the Vendor
Products.
3.5 FORECASTS. Newbridge shall provide to Vendor upon execution of this
Agreement a non-binding forecast of its estimated requirements for the Vendor
Products, for the initial twelve (12) month period. At the beginning of each
calendar quarter while this Agreement is in effect, Newbridge shall provide
Vendor with an updated non-binding forecast by Vendor Products for the
following twelve (12) months. Such forecasts shall not create any obligations
on the part of Newbridge.
2
<PAGE>
CONFIDENTIAL
3.6 INTERFACE CARD RESTRICTIONS. During the term of this Agreement,
Newbridge agrees with Vendor that it shall not integrate within the Products
any interface cards not approved by Vendor, which approval shall not be
unreasonably withheld or delayed.
4. VENDOR'S OBLIGATIONS
4.1 SUPPLY. Vendor agrees to sell to Newbridge the Vendor Products and spare
parts ordered by Newbridge in accordance with the terms of this Agreement.
4.2 DOCUMENTATION. Vendor shall provide Newbridge with a master copy and a
reasonable number of copies of all Documentation for each Vendor Product.
Vendor shall supply Documentation in both hardcopy format and electronic
format suitable for dissemination by Newbridge via the internet and/or CD
ROM. Vendor grants Newbridge a non-exclusive, royalty-free right and license
to copy, use, modify, translate and otherwise prepare derivative works of the
Documentation and distribute the Documentation and derivative works thereof
to its End Users in the Authorized Areas.
4.3 TECHNICAL SUPPORT. Vendor shall provide the support services to
Newbridge, and Newbridge shall provide support services to its distributors
and End Users, as provided in Schedule D.
4.3.1 REMOTE DIAGNOSTIC TOOLS. In order for Newbridge to perform on-line
trouble shooting of the Vendor Product hardware and software, Vendor
shall supply Newbridge with any remote diagnostic tools and routines
that may be developed for the Vendor Products at no charge.
4.4 TECHNICAL INFORMATION SERVICE. Vendor shall provide to Newbridge a range
of post sales technical information at regular intervals to ensure that
Newbridge has all current and relevant information regarding the Vendor
Products. These shall include, but not be limited to, the latest software and
hardware release notes, product release descriptions, technical tips and
bulletins, problem report bug list, white papers, reports, product change
notices, technical alerts, urgent problem notification and any other
applicable literature. Vendor shall supply information in hardcopy format and
in electronic format suitable for dissemination by Newbridge via the internet
and/or CD ROM.
4.5 SOFTWARE MAINTENANCE. In return for a [*] dollar ($[*]) per quarter
maintenance payment (the "Maintenance Fee") from Newbridge commencing January
1998, Vendor shall provide to Newbridge at no cost all defect correction code
(dot releases, patches, and software problem workarounds) for the Vendor
Product software, and all associated Documentation and technical information.
Vendor grants to Newbridge a royalty-free right and license to distribute
such software and Documentation to Newbridge End Users who have current valid
service agreements with Newbridge. Vendor shall supply software maintenance
release code in electronic format suitable for dissemination by Newbridge via
the internet and CD ROM.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
3
<PAGE>
CONFIDENTIAL
4.6 SOFTWARE UPGRADES. Except for Vendor Products which have significant
new functionality and are priced separately on Vendor's price list, Vendor
shall provide to Newbridge all software feature release upgrades for Vendor
Products. Vendor shall supply software maintenance release code in
electronic format suitable for dissemination by Newbridge via the internet and
CD ROM.
4.7 BETA SOFTWARE EVALUATION SERVICE. Vendor shall provide Newbridge with
copies of all beta software for the Vendor Products, for Newbridge's use and
evaluation.
4.8 TRAINING. Vendor shall provide the following training services to
Newbridge:
(a) INITIAL TRAINING. Vendor shall provide, at its expense and on
its premises, in each Authorized Area, training for up to 15 Newbridge
personnel. If Vendor does not have a suitable facility in an
Authorized Area, training will be provided at Newbridge's facility at
Vendors expense. The courses will train Newbridge personnel on the
functionality of the Vendor Products as well as problem resolution
procedures for the Vendor Products.
(b) SUBSEQUENT TRAINING. Vendor will allow Newbridge to send up to
4 technical representatives from each of the Authorized Areas to
attend, at no cost, scheduled training and information sessions
regarding any new Vendor Product features or releases at Vendor's
premises in each Authorized Area. If Vendor does not have a suitable
facility in an Authorized Area, training will be provided at
Newbridge's facility at Vendor's expense.
(c) TRAINING MATERIALS. Vendor grants to Newbridge a non-exclusive,
royalty-free right and license to copy, modify, use, and distribute
training materials provided by Vendor.
(d) ADDITIONAL TRAINING. Any further training requested by
Newbridge, over and above the obligations stated herein, shall be made
available to Newbridge at Vendor's standard rates.
4.9 QUALITY METRICS. Vendor shall provide to Newbridge written
documentation of the full quality assurance processes for the Vendor
Products. Vendor shall further provide written confirmation of its compliance
regarding the examination process and where applicable, Vendor shall provide
Newbridge with any problems found and their resolution process.
4.10 APPROVALS. Vendor is responsible for obtaining all approvals required
to permit Newbridge to resell the Vendor Products in the Authorized Areas
including, but not limited to, UL, CSA and FCC approvals. Vendor shall bear
all costs associated with such approvals. Where permitted by law, Vendor
shall transfer approvals to Newbridge's name, or shall assist Newbridge in
registering second approvals in Newbridge's name. Any costs associated with
the transfer of approvals or second approvals shall be borne by Newbridge.
4
<PAGE>
CONFIDENTIAL
4.11 CONFIDENTIALITY. Vendor acknowledges that, from time-to-time, it will
be exposed to confidential information and materials regarding Newbridge's
business "Confidential Information"). Confidential Information includes but
is not limited to, information concerning Newbridge's technology, products,
customers and suppliers. Vendor will: (i) use a reasonable standard of care to
protect Confidential Information, (ii) not use Confidential Information
except as expressly permitted by Newbridge, (iii) not disclose Confidential
Information to third parties, and (iv) not reproduce Confidential Information
without Newbridge's prior written consent.
5. PRICE TERMS
5.1 PURCHASE PRICE. Except as provided below, Newbridge shall pay the
Transfer Price for the Vendor Products. The Transfer Price will be no greater
than the Vendor's lowest price to any other customer in comparable
circumstances.
5.2 PRICE INCREASE. The Transfer Price shall not increase during the term
of this Agreement. While Vendor may freely increase the list price for the
Vendor Products, such increase shall not increase the Transfer Price
whatsoever.
5.3 PRICE DECREASE. In the event Vendor decreases the list price for any
Vendor Product, the decrease will apply to all units of such Vendor Product
in Newbridge's inventory. Newbridge's account will be credited in an amount
equal to the difference between the list price at which each such unit in
inventory was delivered to Newbridge, and the new, reduced list price.
5.4 DELIVERY COSTS. All Vendor Products are FCA (Incoterms, 1990) Vendor's
shipping point. Vendor shall use the carrier specified by Newbridge (if any),
and shall charge all delivery costs against the Newbridge account number
authorized by Newbridge on a case-by-case basis.
5.5 TAXES. The prices for the Vendor Products do not include sales taxes or
duties. Newbridge will pay (or reimburse Vendor) all such taxes or duties
designated, levied or based upon this Agreement, except those based on
Vendor's income.
6. ORDERING PROCEDURE, DELIVERY AND PAYMENT TERMS
6.1 PURCHASE ORDERS. Newbridge shall order the Vendor Products by issuance
of a written purchase order ("Purchase Order"). Each Purchase Order shall
include the desired quantity of Vendor Products, a requested ship date, the
method of shipment and the location to which the Vendor Products should be
shipped. Vendor will use best efforts to meet the requested ship date in
Newbridge's Purchase Orders, provided that the lead time on requested ship
dates shall be no less than [*] ([*]) weeks in the first year of the
Agreement, and no less than [*] ([*]) weeks afterwards.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5
<PAGE>
CONFIDENTIAL
6.2 ACCEPTANCE. Vendor shall promptly process Purchase Orders issued by
Newbridge, and shall accept all Purchase Orders made in accordance with this
Agreement. Purchase Orders will be deemed to be accepted, unless written
notice of rejection of a Purchase Order (or part thereof) is made within five
(5) business days of Vendor's receipt of the Purchase Order. Where Vendor
rejects any Purchase Order (or part thereof), it shall provide Newbridge the
reasons for rejection. If Vendor accepts a Purchase Order or part thereof,
Vendor shall provide Newbridge with an acknowledged ship date (the "Ship
Date"). Terms and conditions contained on either parties' pre-printed or
electronic purchase orders and/or order acknowledgements shall not apply.
6.3 RE-SCHEDULING. Newbridge may request the re-scheduling of an order or
any part thereof to a cumulative (for all re-schedules pertaining to that
order) maximum of [*] ([*]) days from the original Ship Date, at no
charge to Newbridge.
6.4 CANCELLATION. Newbridge may, at no charge cancel a Purchase Order (or
part thereof) up to [*] ([*]) days prior to the later of: the original Ship
Date, an alternative Ship Date agreed-to by the parties, or a Ship Date
delayed or rescheduled by Vendor. However, upon request from Vendor,
Newbridge agrees to discuss alternate cancellation rights for Purchase Orders
which greatly exceed forecasted amounts and current "run-rates" for the
Vendor Products in question.
6.5 INVOICING AND PAYMENT. Vendor shall issue an invoice on shipment of the
Vendor Product. Newbridge shall pay all amounts due to Vendor within forty
five (45) days of receipt of a correct invoice from Vendor.
7. TITLE AND SHIPPING
Title without encumbrance, and with risk of loss or damage, to the Vendor
Products shall pass upon delivery to the carrier designated by Newbridge, or
if no carrier is designated by Newbridge, upon transfer to a carrier
reasonably chosen by Vendor.
8. PRODUCT CHANGES
8.1 PRODUCT CHANGES. Vendor must provide ninety (90) days' prior written
notification to Newbridge if it intends to make any changes to any of the
Vendor Products. In no event, however, may such changes adversely affect the
Vendor Products their performance, features or functionality.
8.2 SOFTWARE RELEASE SUPPORT. In consideration for the Maintenance Fee,
Vendor shall support major releases of software for the Vendor Products in
accordance with Schedule D for a two year period. However, Newbridge may, at
no charge, require Vendor to continue to produce and support older versions
of the Vendor Products for specific Newbridge customers, for a reasonable
period of time.
8.3 MANUFACTURING. In no event shall Vendor discontinue the manufacture of
any of the Vendor Products during the term of this Agreement.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
6
<PAGE>
CONFIDENTIAL
8.4 REPAIRS; SPARES. Vendor shall provide at its then-standard prices,
spare parts for and the capability for repairing, the Vendor Products for a
period of not less than [*] ([*]) years from the date of the last shipment of
Vendor Products to Newbridge. If, within the [*] ([*]) year period Vendor
fails to maintain such capability, Vendor shall provide functionally
equivalent products at a cost not to exceed the cost of the spare parts that
would have been required to repair the Vendor Products. Vendor's prices will
be no greater than Vendor's lowest price to any other customer in comparable
circumstances.
8.5 CONTINUING TECHNICAL SUPPORT. Vendor shall continue to provide
technical support services to Newbridge for Vendor Products which have been
manufacturer discontinued, for a period of not less than [*] ([*]) years from
the date of the last shipment of Vendor Products to Newbridge.
9. REPRESENTATIONS AND WARRANTIES
Vendor represents and warrants that:
(a) if has the power and authority, and all rights, licenses and permits
required, to execute this Agreement and to satisfy and perform its
obligations and responsibilities set forth herein;
(b) it will comply with all laws, regulations, reasonable practices and
standards applicable to the obligations assumed by Vendor under this
Agreement.
(c) the Vendor Products will, by the time of sale to Newbridge, have
received all necessary regulatory and/or type approvals, including but
not limited to, UL, FCC and CSA approvals.
(d) it assigns to Newbridge any rights needed by Newbridge to enforce
any third party warranty (express or implied) on the Vendor Products.
Vendor will upon notice from Newbridge use reasonable efforts to enforce
the warranty on behalf of Newbridge.
(e) Vendor will make best efforts to ensure that any Vendor Product
which contains software will not contain "product keys", "expiry codes"
or other codes or devices that may prevent Newbridge or its End Users
from using the software at any time. The software, and the media on
which the software is delivered, will not contain any "computer viruses"
or any other programs that may affect the normal use of the software or
any other software or data;
(f) it will have title to the Vendor Products and/or the right to grant
licenses with respect to them immediately prior to the passing of title
to Newbridge; and
(g) the Vendor Products, their use or distribution will not infringe any
copyright, patent, trade secret, or other proprietary or contractual
right or obligation.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
7
<PAGE>
CONFIDENTIAL
(h) all Vendor Products and software provided or developed under this
Agreement is designed to be used prior to, during, and after the
calendar year 2000 A.D. without error, including but not limited to, any
error relating to date data which represents or references a leap year,
different centuries or more than one century.
10. PRODUCT WARRANTY AND REPAIR PROCEDURE
10.1 PRODUCT WARRANTY. Vendor further warrants to Newbridge that the Vendor
Products (excluding software which can be loaded into such hardware by a
Customer) will be free from defects in material and workmanship and will
function in accordance with the Documentation for a period of [*] ([*])
months from the date of shipment to Newbridge (the "Warranty Period"). Vendor
further warrants that the Vendor Product software will function in accordance
with the published specifications for a period of [*] ([*]) days after
delivery to a Newbridge End User of the Vendor Products. The [*] ([*])
month and [*] ([*]) day warranties shall be collectively referred to as the
"warranty period". During the Warranty Period, Vendor will, at no cost, make
all necessary repairs and replacements to maintain the Vendor Products in the
condition warranted.
10.2 REPAIR OR REPLACEMENT OPTION. If Vendor is not able to rectify (repair
or replace) a defect in a Vendor Product within the time periods specified in
Schedule C it shall, at Newbridge's option, accept return of the defective
Vendor Products, and refund to Newbridge all amounts paid in respect thereof.
10.3 SUPPORT WARRANTY. Vendor also warrants that the support services shall
be provided by appropriately trained personnel, in a competent and
professional manner. Vendor will exercise a professional standard of care in
performing its obligations under the Agreements and monitoring its
contractors in the performance of the obligations delegated to them.
10.4 REPAIR PROCEDURE. Newbridge agrees to comply with Vendor's standard
repair procedure, as set out in Schedule B attached hereto.
11. DISCLAIMER OF OTHER WARRANTIES
EXCEPT FOR THE WARRANTIES CONTAINED IN THIS AGREEMENT, VENDOR DISCLAIMS ALL
OTHER WARRANTIES ON THE VENDOR PRODUCTS, EXPRESS OR IMPLIED, INCLUDING BUT
NOT LIMITED TO, THE IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
8
<PAGE>
CONFIDENTIAL
12. INFRINGEMENT
12.1 DEFENSE AND INDEMNITY. Vendor will defend Newbridge, its distributors
and End Users against any claim, legal proceeding or demand alleging a Vendor
Product, its distribution or use, infringes any copyright, patent, trade
secret, or any other contractual or proprietary right (a "Claim"); provided
Vendor is notified of the Claim and is given authority to defend it. Vendor
will indemnify and hold Newbridge, its distributors and End Users harmless
from and against all costs, expenses, legal fees, third-party damages,
settlement amounts and other liabilities arising out of or in respect of a
Claim. This obligation will not cover: (i) any claim that arises solely out
of changes made to the Vendor Product at the request of Newbridge to meet
Newbridge's technical specifications; provided however, such claims do not
arise from Vendor's implementation of such specifications; (ii) any claims
that arise solely out of the use of hardware or software supplied by
Newbridge."
12.2 REMEDIES. In the event Newbridge, its distributors or End Users are
enjoined from their use of any of the Vendor Products for any reason, Vendor
will promptly either:
(a) procure for Newbridge and its distributors End Users the right to
continue distributing and using the Vendor Product;
(b) render the Vendor Product non-infringing without materially
diminishing the Vendor Product's performance, functionality or features;
(c) replace the Vendor Product with equivalent non-infringing goods; or
(d) if the provisions of Sections 12.2(a) through 12.2(c) are not
possible, having made best efforts, Vendor will remove the Vendor
Products and refund Newbridge all amounts paid in respect thereof.
12.2 NOT APPLICABLE. Section 13 ("Limitation of Liability") shall not apply
in any respect to Section 12.1.
13. LIMITATION OF LIABILITY
13.1 LIMITATION. EXCEPT FOR SECTION 12.1 ABOVE, NEITHER PARTY, THEIR
EMPLOYEES, AGENTS, OFFICERS OR DIRECTORS SHALL BE LIABLE IN ANY WAY
WHATSOEVER, FOR ANY INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES,
INCLUDING BUT NOT LIMITED TO, LOST PROFITS OR BUSINESS REVENUE, LOST
BUSINESS, FAILURE TO REALIZE EXPECTED SAVINGS, OR OTHER COMMERCIAL OR
ECONOMIC LOSS OF ANY KIND WHATSOEVER, WHETHER OR NOT SUCH DAMAGES ARE
FORESEEABLE OR EITHER PARTY, THEIR EMPLOYEES, AGENTS, OFFICERS OR DIRECTORS
HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR SECTION 12.1
ABOVE, IN NO EVENT SHALL EITHER PARTY'S LIABILITY TO THE OTHER UNDER THIS
AGREEMENT, OR ANY
9
<PAGE>
CONFIDENTIAL
TRANSACTION CONTEMPLATED BY THIS AGREEMENT, EXCEED THE ACTUAL AMOUNT PAID BY
NEWBRIDGE TO VENDOR UNDER THIS AGREEMENT.
13.2 TRUST. The foregoing provisions limiting the liability of Newbridge's
and Vendor's employees, agents, officers and directors shall be deemed to be
trust provisions for the benefit of such employees, officers, directors and
agents and shall be enforceable by such as trust beneficiaries.
14. TERM; RENEWAL
Unless otherwise terminated in accordance with the provisions herein, this
Agreement shall remain in effect for a period of three (3) years from the
Effective Date (the "Initial Term"). Upon expiration of the Initial Term and
each Renewal Term thereafter, this Agreement will be automatically renewed
for an additional one (1) year term ("Renewal Term") unless notice of
non-renewal is given by either party upon sixty (60) days' notice pror to the
expiration of the Initial Term or any Renewal Term.
15. TERMINATION
Either party may terminate this Agreement if:
(a) the other party breaches any material term of this Agreement, and
fails to remedy such breach within [*] ([*]) days of receiving notice
to do so by the non-defaulting party;
(b) any proceeding in bankruptcy, receivership, liquidation or
insolvency is commenced against the other party or its property, and the
same is not dismissed within thirty (30) days; or
(c) the other party makes any assignment for the benefit of its
creditors, becomes insolvent, commits any act of bankruptcy, ceases to
do business as a going concern, or seeks any arrangement or compromise
with its creditors under any statute or otherwise.
16. EFFECT OF TERMINATION OR EXPIRY
In the event that this Agreement is terminated or expires for any reason:
(a) Vendor shall process all Purchase Orders received from Newbridge
prior to the effective date of termination or expiry, and shall accept
all Purchase Orders made in accordance with this Agreement;
(b) Newbridge and its distributors shall be entitled to continue to
distribute any Vendor Products contained in their inventory on the
effective date of termination, or Vendor Products subsequently received
from Vendor;
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
10
<PAGE>
CONFIDENTIAL
(c) Neither party shall, by reason of the termination or expiry of this
Agreement, be liable to the other for compensation, reimbursement or
damages on account of the loss of prospective profits on anticipated
sales, or on account of expenditures, investments, leases or commitments
entered into or made in connection with the business or goodwill of the
other.
(d) Notwithstanding any other provision of this Agreement, no
termination or expiry of this Agreement shall:
(1) affect the rights of End Users to continue to use any Vendor
Products;
(2) affect the rights of End Users to continue to receive technical
support services from Newbridge as may be contracted for prior
to the effective date of termination of the Agreement; or
(3) affect the rights of Newbridge to receive technical support
services from Vendor as described herein, for the duration of
any Customer contracts; and
17. FORCE MAJEURE
Neither party shall be deemed to be in default of any provisions of this
Agreement for any failure in performance resulting from acts or events beyond
its reasonable control, including acts of God. Each party will use its best
efforts to anticipate such failures and to devise means to eliminate or
minimize them. But if a failure continues for more than [*] ([*]) days,
either party may terminate the Agreement immediately upon notice.
18. MISCELLANEOUS
18.1 ASSIGNMENT. Neither party shall assign or transfer any rights or
obligations under this Agreement without the prior written consent of the
other party, which consent shall not be unreasonably withheld or delayed.
18.2 GOVERNING LAW. This Agreement shall be governed by the laws of the
Province of Ontario, Canada (except for its conflict of laws provisions), and
the parties hereby irrevocably submit to the non-exclusive jurisdiction of
the courts located in the Province of Ontario. The parties expressly exclude
from this Agreement all the provisions of the Vienna Convention, 1980 (The
United Nations Convention on Contracts for the International Sale of Goods).
18.3 SEVERABILITY. The provisions of this Agreement shall be deemed
severable. If any provision of this Agreement shall be held unenforceable by
any court of competent jurisdiction, it shall be severed from this Agreement
and the remaining provisions shall remain in full force and effect.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
11
<PAGE>
CONFIDENTIAL
18.4 AMENDMENTS. This Agreement shall not be amended or modified except in
writing signed by the parties hereto. No course of dealing or usage of trade
by or between the parties shall be deemed to effect any such amendment or
modification.
18.5 HEADINGS. All headings and captions contained herein are for
convenience and ease of reference only and are not to be considered in the
construction or interpretation of any provision of this Agreement.
18.6 SECTIONS. Numbered or lettered paragraphs, subparagraphs and schedules
contained in this Agreement refer to sections, subsections and schedules of
this Agreement.
18.7 SURVIVAL. Sections 4.3, 4.11, 7.1, 8.4, 8.5, 9, 10, 11, 12, 13, 15, 16,
and 18 shall survive termination or expiry of this Agreement.
18.8 NOTICES. Any notice required to be sent or given to Newbridge or
Newbridge shall be sent by certified or registered mail, return receipt
requested, addressed as follows:
To Vendor: Sonoma Systems, Inc.
4640 Admiralty Way, Suite 600
Marina Del Rey, CA 90292 USA
Attention: President
Tel. No. 310-828-3400
Fax No. 310-828-2255
To Newbridge: Newbridge Networks Corporation
P.O. Box 13600
600 March Road
Kanata, Ontario K2K 2E6
CANADA
Attention: President
Tel. No. (613) 591-3600
Fax No. (613) 591-0002
with a copy to the Legal Department, at the above address, Fax No. (613)
591-0002.
18.9 WAIVERS. Any consent by any party to, or waiver of, a breach by the
other, whether express or implied, shall not constitute a consent to, or a
waiver of any other, different or subsequent breach.
18.10 RELATIONSHIP. Neither Newbridge nor Vendor shall represent that its
relationship with respect to the other party is other than as an independent
contractor. Nothing in
12
<PAGE>
CONFIDENTIAL
this Agreement shall create in either party any right or authority to incur
any obligations on behalf of, or to bind in any respect, the other party and
nothing in this Agreement shall be construed to create any agency, joint
venture or partnership.
18.11 ENTIRE AGREEMENT; GOVERNING TERMS. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject
matter hereof, and cancels and supersedes any prior understanding and
agreements between the parties relating thereto. There are no
representations, warranties, terms, conditions, undertakings or collateral
agreements, express, implied, statutory or otherwise between the parties,
except as expressly set forth in this Agreement.
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement.
NEWBRIDGE NETWORKS CORPORATION SONOMA SYSTEMS, INC.
ANTHONY LAVIA STEVE M. WASZAK
- ---------------------------------- ----------------------------------
(Print) (Print)
/s/ ANTHONY LAVIA /s/ STEVE M. WASZAK
- ---------------------------------- ----------------------------------
(Signature) (Signature)
V.P. & G.M., ATM NET V.P. FINANCE & CFO
- ---------------------------------- ----------------------------------
(Title) (Title)
13
<PAGE>
CONFIDENTIAL
SCHEDULE A
VENDOR PRODUCTS
<TABLE>
<CAPTION>
TRANSFER
VENDOR PART PRICE
NUMBER DESCRIPTION LIST PRICE DISCOUNT ($USD)
------ ----------- ---------- -------- -----
<S> <C> <C> <C> <C>
8000 SA Sonoma Base Unit, $4,695 [*]% $[*]
(single AC power supply)
8000 DA Sonoma Base Unit, $5,645 [*]% $[*]
(dual AC power supplies)
8000 DD Sonoma Base Unit, $6,895 [*]% $[*]
(dual DC power supplies)
8000 SW-TLX Sonoma TLX Software $2,000 [*]% $[*]
8000 DS3ATM DS3 ATM Card $3,000 [*]% $[*]
8000 E3ATM E3 ATM Card $3,000 [*]% $[*]
8000 OC3ATM-MM OC-3 c/STM-1 ATM Card $4,000 [*]% $[*]
(multi-mode fiber 0-2 KM)
8000 OC3ATM-SM OC-3 c/STM-1 ATM Card $6,000 [*]% $[*]
(single-mode fiber 0-19 KM)
8000 OC3ATM-LR OC-3 c/STM-1 ATM Card $8,000 [*]% $[*]
(single-mode fiber 12-30 KM)
8000 ENET Ethernet Card (10Mbps) $ 300 [*]% $[*]
8000 FAST ENET-1 Fast Ethernet Card $ 750 [*]% $[*]
(10/100 Autosensing)
8000 FAST ENET-4 Four-port Ethernet Card $3,000 [*]% $[*]
(10/100 Autosensing)
8000 TRN Token Ring Card (4/16 Mbps $1,000 [*]% $[*]
auto-sensing)
8000 FDDI-SAS FDDI Single-Attach (SAS) $5,000 [*]% $[*]
Interface Card
8000 FDDI-DAS FDDI Dual-Attach (DAS) $8,000 [*]% $[*]
Interface Card
8000 SBP Spare Blanking Plates $ 50 [*]% $[*]
(package of five)
8000RM-19 19" Rackmount Kit $ 250 [*]% $[*]
8000RM-23 23" Rackmount Kit $ 250 [*]% $[*]
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1
<PAGE>
CONFIDENTIAL
<TABLE>
<S> <C> <C> <C> <C>
8000 SUG Sonoma Access User Guide $ 50 [*]% $[*]
800 SUG-DISK Sonoma Access User Guide on $ 100 [*]% $[*]
Disk (w/HTML files)
</TABLE>
/s/ ANTHONY LAVIA /s/ STEVE M. WASZAK
- --------------------------------- ----------------------------------
NEWBRIDGE VENDOR
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
2
<PAGE>
CONFIDENTIAL
SCHEDULE B
AUTHORIZED AREAS
World-wide, including the following regions defined by Newbridge as:
- - NORTH AND SOUTH AMERICAN (NSA)
- - EUROPE, MIDDLE EAST AND AFRICA (EMA)
- - ASIA PACIFIC REGION, INCLUDING THE FORMER SOVIET UNION (APR)
as such may be amended by Newbridge from time to time.
/s/ ANTHONY LAVIA /s/ STEVE M. WASZAK
- --------------------------------- ----------------------------------
NEWBRIDGE VENDOR
1
<PAGE>
CONFIDENTIAL
SCHEDULE C
REPAIR AND RETURN PROCEDURE
1. REPAIR PROCEDURE AND RETURN AUTHORIZATION
1.1 Vendor has a centralized repair facility for servicing of all Vendor
Products. All requests for return of Vendor Products shall be made to Vendor.
Vendor representatives will obtain all necessary information for processing
the return and shall issue Newbridge a return authorization number within one
(1) working days of receipt of Newbridge's request. No Vendor Product shall
be returned by Newbridge without prior verbal, electronic or written
authorization.
1.2 Vendor will escalate all requests for service of the third-party
equipment to the applicable third-party supplier. Repairs of the third-party
equipment will be completed by the third-party supplier.
1.3 Defective Vendor Products will be returned by Newbridge with the return
authorization number written clearly on the outside of the package, and
shipped prepaid to:
Sonoma Systems, Inc.
4640 Admiralty Way, Suite 600
Marina Del Rey, CA 90292 USA
Attention: Repair Department
2. WARRANTY REPAIRS
2.1 Vendor will either repair or replace defective Vendor Products covered
under warranty within ten (10) working days of its receipt. The warranty
period for repaired or replaced Vendor Products shall be the remainder of the
original warranty or [*] ([*]) days, whichever is greater.
3. OUT-OF-WARRANTY REPAIRS
3.1 Vendor will either repair or replace, at Newbridge's cost, defective
Vendor Products not covered under warranty, within ten (10) working days of
its receipt. Repair charges are available from Vendor's repair facility upon
request. The warranty on serviced Vendor Products is ninety days measured
from date of service. Out-of-warranty repair charges are based upon the
prices in effect at the time of return.
4. ADVANCE REPLACEMENT SERVICE
Vendor agrees to hold a full set of spares for the Vendor Products at the
Vendor's facility in Phoenix Arizona, in order to provide 24 hour advance
replacement services to
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1
<PAGE>
CONFIDENTIAL
Newbridge. This is an emergency service for both in-warranty and
out-of-warranty Products that are not considered "dead on arrival" or an
"infant mortality". Upon request, Vendor will use commercially reasonable
efforts to ship replacement Products, via overnight courier, within one (1)
working day. In such an event, Newbridge shall issue a Purchase Order for the
replacement Products and will pay Vendor's then-current schedule of repair
charges, freight charges and a one hundred and fifty U.S. dollars ($150)
order expedite fee.
/s/ ANTHONY LAVIA /s/ STEVE M. WASZAK
- --------------------------------- ----------------------------------
NEWBRIDGE VENDOR
2
<PAGE>
CONFIDENTIAL
SCHEDULE D
SUPPORT SERVICES
1. SUPPORT LEVELS AND INTERFACE DEFINITIONS
These provisions are to be used by Newbridge and Vendor personnel for the
support level that must be provided for any problem or issue before it can be
escalated to the next defined level.
The activities identified are the minimum required, and may be supplemented
by further actions during the course of the problem investigation in order to
expedite a resolution.
First and Second-Level Support will be provided by Newbridge for Newbridge
End Users who have purchased the products from Newbridge or its business
partners. Third-Level Support will be provided by Vendor to Newbridge and
directly to Newbridge End Users as deemed necessary by Newbridge.
1.1 FIRST-LEVEL NTAC (FRONT OFFICE) SUPPORT. Newbridge will provide front
office TAC support and basic help desk functions to the End User. Typically
this will include initial call handling, call logging, assignment of call
priority (Emergency, High, Medium and Low) and queue placement. This will be
performed by either the Newbridge Technical Assistance Center (NTAC) or the
Newbridge Distributor/Service Agent.
The NTAC is the focal point for all operational activities and is the contact
point between the Customer and Newbridge. NTAC is staffed and operational
seven days a week, twenty-four hours a day, 365 days per year for first-level
front office support.
1.2 FIRST-LEVEL NTAC (BACK OFFICE) SUPPORT. Newbridge will provide initial
product problem diagnostic services for identifying problems and generic
application faults, analysis, and where possible, problem resolution.
1.3 SECOND-LEVEL SUPPORT. Newbridge will provide detailed product problem
analysis, as well as any problem duplication in the NTAC laboratory.
Second-Level Support will provide more detailed problem diagnostic services
for identifying complex problems and application faults that cannot be
resolved by First-Level Back Office Support. Second-Level Support will be
responsible for the application of any maintenance releases or End
User-specific fixes that Vendor Support will provide. Second-Level Support
will also provide interface and escalation to Vendor Third-Level Support as
required.
1.4 THIRD-LEVEL SUPPORT. Vendor will provide Newbridge with 24 hours by 365
days per year access to a senior consultant, based in Vendor's facility, for
product design problem analysis, and to formally escalate the problem as
described in section 2.0 of this Schedule. Typical duties include, providing
reasonable levels of technical assistance to the First- and Second-Level
Support organizations and timely delivery of defect correction code and
associated documentation.
1
<PAGE>
CONFIDENTIAL
1.5 ON-SITE SUPPORT. Vendor will also provide Newbridge with on-site
support if a problem is determined by mutual consent of Vendor and Newbridge
to be a valid design problem and travel is necessary. Vendor will provide for
travel and per diem at no charge to Newbridge. However, Newbridge may also
require Vendor to perform such on-site support, for which Newbridge will pay
in accordance with the current published Vendor Time, Materials and Expense
rates.
1.6 INSTALLATION. Newbridge will arrange for installation services at the
End User site. Newbridge may require Vendor to perform such installation, for
which Newbridge will pay in accordance with the Vendor's current published
Time, Materials and Expense rates.
1.7 VENDOR CONTACTS FOR SERVICES. The parties will notify each other of
their points of contact, for any of the Vendor support services. As well, the
parties will complete and keep up to date Newbridge's "OEM Product Matrix".
The Vendor center in Marina Del Rey currently serves as the focal point for
all Vendor service activities. The Vendor center will be staffed and
operational as described in section 2.0 of this Schedule.
2. PROBLEM ESCALATION
2.1 ESCALATION PROCESS.
(a) Following identification by Newbridge of a problem that cannot be
resolved by the regional First and Second Line support as described
above, Newbridge will record details of the problem (including
diagnostic information) and forward this information to Vendor.
(b) Newbridge will be given a problem report number and will be provided
with regular status and progress updates of Newbridge-escalated
problems. A Newbridge representative will also be entitled to attend (in
person or phone conference) the regular Vendor problem status and review
meetings.
2.2 PROBLEM PRIORITY DEFINITIONS. Four classifications of requests for
information or assistance are defined. In order to classify a request,
Newbridge technical support personnel will confirm with Vendor the impact
of the problem to determine an appropriate classification. Where parties
disagree on the classification of a particular problem, the Vendor and
Newbridge primary technical contacts will undertake to discuss the problem
with a view to reaching a mutually acceptable classification.
2.2.1 EMERGENCY PRIORITY. Problems that have been verified through
formal maintenance channels as problems affecting service, which cause
major functionality to be inoperative and therefore affect the normal
business operations during the normal working day. There is no
acceptable work around. To ensure the fastest possible response,
problems classified as Emergency will be reported via telephone.
2
<PAGE>
CONFIDENTIAL
2.2.2 HIGH PRIORITY. Problems that have been verified through the
formal maintenance channels as problems affecting service which cause
major functionality to be inoperative and therefore affect the normal
business operations during the normal working day. There is an
acceptable work around.
2.2.3 MEDIUM PRIORITY. Problems that have been verified through the
formal maintenance channels as causing particular features or
functionality to be inoperative, but do not affect the normal business
operations during the normal working day. There is no acceptable work
around.
2.2.4 LOW PRIORITY. Problems that have been verified through the
formal maintenance channels as causing particular features or
functionality to be inoperative, but do not affect the normal business
operations during the normal working day. There is an acceptable work
around.
2.3 TIME-SCALE OBJECTIVES. In order for Newbridge to offer support services
to its distributors and End Users, Vendor will use best endeavors to meet the
following response, progress and restore time objectives. If these
time-scales cannot be met, Vendor will immediately notify Newbridge and
Vendor and Newbridge primary technical contacts will undertake to discuss the
problem with a view to reaching a mutually acceptable solution.
2.3.1 RESPONSE TIME. The time from when Newbridge makes a request for
a problem to be escalated and Vendor responds to the request. The
response times are classified as:
- Emergency - One hour, 24 hours a day, 7 days a week
- High - Two hours, during normal business hours
- Medium - One business day
- Low - Two business days
2.3.2 PROGRESS TIME. Newbridge may contact Vendor at any interval for
any problem to solicit update information. The time between Vendor
making the initial response to Newbridge and providing unsolicited
updates, by telephone or fax to the request for information or
assistance are as follows:
- Emergency - One call every business day
- High - One call every two business days
- Medium - One call every working week
- Low - One call every working month
2.3.3 RESTORE TIME. The time between Vendor receiving and accepting
the problem from Newbridge and the delivery of an acceptable work around
(or fix) for the problem:
3
<PAGE>
CONFIDENTIAL
- Emergency - Vendor will use all best efforts and resources at its
disposal to ensure problem is resolved as soon as
possible, but not to exceed twenty four (24) hours
from receiving the problem from Newbridge.
- High - within the next maintenance release, which will be
issued no later than eight weeks after diagnosis.
- Medium - less than 6 months
- Low - less than 6 months
2.3.4 DEFECT FIX TIME. The time between Vendor receiving and accepting
the problem from Newbridge and the delivery of an acceptable, final fix
for the problem:
- Emergency - less than 1 month
- High - less than 3 months or within next maintenance release
whichever is shorter
- Medium - less than 6 months
- Low - less than 12 months
3. SUPPORT FOR THIRD-PARTY EQUIPMENT
3.1 PRODUCTS SUPPORTED. Newbridge will provide support services, as
described in this Schedule, for the Vendor Products, with the exception of
products not manufactured or created by Vendor ("Third Party Equipment").
3.2 SUPPORT FOR THIRD PARTY EQUIPMENT. Support services for Third Party
Equipment will be provided directly by the appropriate third party supplier.
3.3 THIRD PARTY EQUIPMENT PROBLEM ESCALATION. Problems with Third Party
Equipment will be escalated by Vendor to the appropriate third party
supplier. Upon completion of the problem fix, the third party supplier will
provide Vendor with a written report detailing the problem fix and time.
Vendor will be responsible for updating and closing the PTS after a Third
Party Equipment fix.
/s/ ANTHONY LAVIA /s/ STEVE M. WASZAK
- --------------------------------- ----------------------------------
NEWBRIDGE VENDOR
4
<PAGE>
CONFIDENTIAL
SCHEDULE E
REGIONAL AMENDMENT - APR REGION
The following amendments to the OEM Reseller Agreement apply to the APR
region only.
In the event of any conflict or inconsistency between the terms of the OEM
Reseller Agreement and this Schedule E, the terms of this Schedule E shall
prevail. Except as specifically and to the extent modified by this Schedule E
all of the terms and provisions of the OEM Reseller Agreement shall continue
to remain in full force and effect.
NOT APPLICABLE.
1
<PAGE>
CONFIDENTIAL
SCHEDULE F
REGIONAL AMENDMENT - EMA REGION
The following amendments to the OEM Reseller Agreement apply to the EMA
region only.
In the event of any conflict or inconsistency between the terms of the OEM
Reseller Agreement and this Schedule F, the terms of this Schedule F shall
prevail. Except as specifically and to the extent modified by this Schedule F
all of the terms and provisions of the OEM Reseller Agreement shall continue
to remain in full force and effect.
NOT APPLICABLE.
1
<PAGE>
CONFIDENTIAL
SCHEDULE G
REGIONAL AMENDMENT - NSA REGION
The following amendments to the OEM Reseller Agreement apply to the NSA
region only.
In the event of any conflict or inconsistency between the terms of the OEM
Reseller Agreement and this Schedule G, the terms of this Schedule G shall
prevail. Except as specifically and to the extent modified by this Schedule G
all of the terms and provisions of the OEM Reseller Agreement shall continue
to remain in full force and effect.
NOT APPLICABLE.
1
<PAGE>
CONFIDENTIAL
AMENDMENT NO. 1 TO OEM RESELLER AGREEMENT
This Amendment No. 1 (this "Amendment") made as of the 29 day of May, 1998
supplements and amends the terms and conditions of the OEM Reseller Agreement
(the "Reseller Agreement"), dated September 17, 1997, between Sonoma Systems,
Inc. ("Sonoma") and Newbridge Networks Corporation ("Newbridge"). All
capitalised terms used herein, but not defined, shall have the respective
meanings assigned to such terms in the Agreement, as amended.
Sonoma and Newbridge agree as follows:
I. AMENDMENT.
1. Section 1(g) of the Reseller Agreement, Definitions, is hereby amended
and restated to read in its entirety as follows:
"1(g) "Vendor Products" shall mean the items listed in Schedule "A"
hereto, as well the 45020 Network Element Management System descriptors
described in Section 4.12 below."
2. A new section 4.12 is added to the Reseller Agreement, as follows:
"4.12 45020 DESCRIPTORS. Upon completion of Vendor's development of
certain 45020 Network Element Management System descriptors, Vendor
grants Newbridge a non-exclusive, royalty-free, irrevocable and
perpetual license to use, copy, modify and distribute such descriptors."
3. A new section 2.3 is added to the Reseller Agreement, as follows:
"2.3 NEWBRIDGE PRIVATE LABEL.
(a) Notwithstanding anything herein contained to the contrary, Newbridge
will "private label" the Vendor Products, including marketing, licensing
and distributing the Vendor Products: (i) without Vendor trademarks,
tradenames and/or service marks; and (ii) under different trademarks,
tradenames and/or service marks, including without limitation, "36060
MainstreetXpress", or other Newbridge trademarks, tradenames and/or
service marks (collectively the "Marks").
(b) Newbridge shall be responsible for specification of the product and
packaging labels for such private-labeled Vendor Products, including
CLEI codes (collectively the "Labels"). Vendor shall be responsible for
manufacturing of the Labels, and the labelling of the Vendor Products
with them. Vendor shall make no other use of the Labels or Marks. Vendor
shall promptly return to Newbridge or destroy any excess or unused
Labels.
<PAGE>
Page 2
CONFIDENTIAL
(c) Other than the limited right to manufacture the Labels with the
Marks for the benefit of Newbridge in section 2.3(b), Vendor shall have
no right, title, or interest in the Marks or Labels. Any Vendor Products
labeled with the Labels will be for the sole benefit of Newbridge, and
shall not be provided by Vendor to any other person or entity, except
for Siemens AG, under separate agreement.
(d) Newbridge or its subsidiaries shall not consider new affiliations
with entities or introduction of products directly competitive with the
36060 MainstreetXpress in the modular ATM access product area for
exclusive delivery of managed Ethernet, Token Ring and/or FDDI LAN VPN
services over [ILLEGIBLE] T1/E1 IMA, DS-3/E3 and/or OC3-3/STM-1 ATM
interfaces during the term of this Agreement, without providing Vendor
reasonable advance notice and considering, in good faith with Vendor,
the opportunity for 36060 products to full address Newbridge's
requirements within the WAN access products area."
4. A new section 18.12 is added to the Reseller Agreement, as follows:
"18.12 ESCROW.
Vendor agrees to promptly place a copy of the source code for each of
the Vendor Products (as well as all associated documentation and
programmer materials, defect correction code and upgrades) (collectively
the "Escrowed Materials") in escrow with a mutually agreed upon escrow
agent. The parties shall negotiate in good faith the terms and
conditions of the escrow agreement. However, the parties agree that the
escrow agreement shall include the following terms:
(i) Newbridge shall be responsible for the payment of the fees
of the escrow agent.
(ii) Newbridge shall be entitled to receive a copy of the
Escrowed Materials from the escrow agent if:
(1) Vendor breaches any material term of the Reseller
Agreement, and fails to remedy such breach within [*]
([*]) days of receiving written notice to do so by Newbridge;
(2) any proceeding in bankruptcy, receivership, liquidation
or insolvency is commenced against Vendor or its property,
and the same is not dismissed within thirty (30) days; or
(3) Vendor makes any assignment for the benefit of its
creditors, becomes insolvent, commits any act of bankruptcy,
ceases to do business as a going concern, or seeks any
arrangement or compromise with its creditors under any
statute or otherwise.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Page 3
CONFIDENTIAL
(iii) Upon release of the Escrowed Materials from escrow,
Newbridge shall be entitled to use the Escrowed Materials to:
(1) provide maintenance and support (including without
limitation any necessary correction of errors) to its
customers; and
(2) modify the Vendor Products, as required to satisfy
functionality commitments made by Newbridge to existing or
prospective customers prior to the occurrence of the event
described in Section 18.12(a)(ii) which triggered the
release of the Escrowed Materials, which modifications have
been agreed to by Vendor in writing.
However, if the Escrowed Materials were released due to
subsections (ii)(2) or (ii)(3) above, then Newbridge shall also be
granted a non-exclusive, non-transferable, unrestricted license to
use, copy, modify and distribute the Escrowed Materials. In
consideration for such license, Newbridge shall pay Vendor a
royalty of [*] percent ([*]%) of the greater of: (1) the
Transfer Price for such product; or (2) the Average Net Revenue
for each Vendor Product manufactured and distributed under this
Section 18(iii). For purposes of this Agreement, "Average Net
Revenue" shall mean the average price at which Newbridge sells a
particular Vendor Product, less any: (i) duties, (ii) sales,
value-added, and excise taxes, and (ii) returned Vendor Products."
5. Section 18.7 of the Reseller Agreement, SURVIVAL, is hereby amended and
restated to read in its entirety as follows:
"18.7 SURVIVAL. Sections 4.3, 4.11, 4.12, 7.1, 8.4, 8.5, 9, 10, 11,
12, 13, 15 16 and 18 shall survive termination or expiry of this
Agreement."
6. Schedule A to the Reseller Agreement, VENDOR PRODUCTS, is hereby amended
and restated to read in its entirety as set forth in the attached Schedule A.
7. Section 8.1 of the Reseller Agreement, Product Changes, is hereby
amended and restated to read in its entirety as follows:
Vendor shall comply to Newbridge's process for product change control.
Vendor must provide ninety (90) days' prior written notification to Newbridge
if it intends to make any changes to any of the Vendor Products. In no event,
however, may such changes adversely affect the Vendor Products, their
performance, features or functionality.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Page 4
CONFIDENTIAL
II. EFFECT OF AMENDMENT.
In the event of any conflict or inconsistency between the terms of this
Amendment and the Reseller Agreement, the terms of this Amendment shall
prevail. Except as specifically and to the extent modified by this Amendment,
all of the provisions of the Reseller Agreement shall continue to remain
unchanged and in full force and effect.
IN WITNESS WHEREOF the parties have duly executed this Amendment.
SONOMA SYSTEMS CORPORATION NEWBRIDGE NETWORKS CORPORATION
By: /s/ STEVE M. WASZAK By: /s/ CONRAD LEWIS
------------------------------ ------------------------------
Name: STEVE M. WASZAK Name: CONRAD LEWIS
---------------------------- ----------------------------
Title: VP Finance & Operations Title: EVP Marketing &
Chief Financial Officer Business Units
<PAGE>
CONFIDENTIAL
SCHEDULE A
VENDOR PRODUCTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
NNC PART NNC PART NAME SONOMA PART SONOMA MODEL SANOMA NEWBRIDGE NEWBRIDGE
NUMBER NUMBER NUMBER LIST (US) DISCOUNT TRANSFER
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
BASIC SYSTEMS
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
90-5993-11 NRED 110 VAC 1010811-01 SONOMA MLSU SA $4,695 [*]% $[*]
BASIC SYSTEM 115V
- -----------------------------------------------------------------------------------------------------------------------------------
90-5993-11-03 NRED 110 VAC 1010811-01-03 SONOMA MLSU SA $4,695 [*]% $[*]
BASIC SYSTEM 115V (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4616-01 NRED 240 VAC 1010811-02 SONOMA MLSU SA $4,695 [*]% $[*]
BASIC SYSTEM 230V
- -----------------------------------------------------------------------------------------------------------------------------------
90-5994-11 RED AC BASIC 1010812-01 SONOMA MLSU DA $5,645 [*]% $[*]
SYSTEM
- -----------------------------------------------------------------------------------------------------------------------------------
90-5994-11-03 RED AC BASIC 1010812-01-03 SONOMA MLSU DA $5,645 [*]% $[*]
SYSTEM (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-5995-11 RED DC BASIC 1010813-02 SONOMA MLSU DD $5,995 [*]% $[*]
SYSTEM
- -----------------------------------------------------------------------------------------------------------------------------------
90-5995-11-03 RED DC BASIC 1010813-02-03 SONOMA MLSU DD $5,995 [*]% $[*]
SYSTEM (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
LAN ADAPTATION CARDS
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
90-5996-01 10 MBS ETHERNET 1600811-01 8000 ENET $300 [*]% $[*]
CARD
- -----------------------------------------------------------------------------------------------------------------------------------
90-5996-01-03 10 MBS ETHERNET 1600811-01-03 8000 ENET (CLEI) $300 [*]% $[*]
CARD
- -----------------------------------------------------------------------------------------------------------------------------------
90-5996-02 10/100 MBS 1600815-01 8000 FAST ENET-1 $750 [*]% $[*]
ETHERNET CARD
- -----------------------------------------------------------------------------------------------------------------------------------
90-5996-02-03 10/100 MBS 1600815-01-03 8000 FAST ENET-1 $750 [*]% $[*]
ETHERNET CARD (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-5996-03 4 PROT 10/100 MBS 1600817-01 8000 FAST ENET-4 $3,000 [*]% $[*]
ETHERNET CARD
- -----------------------------------------------------------------------------------------------------------------------------------
90-5996-03-03 4 PROT 10/100 MBS 1600817-01-03 8000 FAST ENET-4 $3,000 [*]% $[*]
ETHERNET CARD (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-5997-01 TOKEN RING CARD 1600814-01 8000 TRN $1,000 [*]% $[*]
- -----------------------------------------------------------------------------------------------------------------------------------
90-5997-01-03 TOKEN RING CARD 1600814-01-03 8000 TRN (CLEI) $1,000 [*]% $[*]
- -----------------------------------------------------------------------------------------------------------------------------------
90-5998-01 SAS FDDI CARD 1600818-01 8000 FDDI-SAS $5,000 [*]% $[*]
- -----------------------------------------------------------------------------------------------------------------------------------
90-5998-01-03 SAS FDDI CARD 1600818-01-03 8000 FDDI-SAS (CLEI) $5,000 [*]% $[*]
- -----------------------------------------------------------------------------------------------------------------------------------
90-5998-02 DAS FDDI CARD 1600819-01 8000 FDDI-DAS $8,000 [*]% $[*]
- -----------------------------------------------------------------------------------------------------------------------------------
90-5998-02-03 DAS FDDI CARD 1600819-01-03 8000 FDDI-DAS (CLEI) $8,000 [*]% $[*]
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
ATM TRANSMISSION CARDS
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
90-6001-11 DS-3 ATM CARD 2 1600808-02 ENH DS3 ATM $3000 [*]% $[*]
- -----------------------------------------------------------------------------------------------------------------------------------
90-6001-11-03 DS-3 ATM CARD 2 1600808-02-03 ENH DS3 ATM (CLEI) $3000 [*]% $[*]
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Page 6
CONFIDENTIAL
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
90-5999-11 E3 ATM CARD 2 1600808-03 ENH 3E ATM $3,000 [*]% $[*]
- -----------------------------------------------------------------------------------------------------------------------------------
90-6002-11 OC-3/STM-1 ATM 1600830-02 ENH OC3 ATM SM-IR $6,000 [*]% $[*]
CARD 2
- -----------------------------------------------------------------------------------------------------------------------------------
90-6002-11-03 OC-3/STM-1 ATM 1600830-02-03 ENH OC3 ATM SM-IR $6,000 [*]% $[*]
CARD 2 (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-6002-12 OC-3/STM-1 LR ATM 1600830-03 ENH OC3 ATM SM- $8,000 [*]% $[*]
CARD 2 LR
- -----------------------------------------------------------------------------------------------------------------------------------
90-6002-12-03 OC-3/STM-1 LR ATM 1600830-03-03 ENH OC3 ATM SM- $8,000 [*]% $[*]
CARD 2 LR (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-6002-13 OC-3/STM-1 MMF 1600830-01 ENH 0C3 ATM MM $4,000 [*]% $[*]
ATM CARD 2
- -----------------------------------------------------------------------------------------------------------------------------------
90-6002-13-03 OC-3/STM-1 MMF 1600830-01-03 ENH 0C3 ATM MM $4,000 [*]% $[*]
ATM CARD 2 (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
MISCELLANEOUS
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
90-6003-01 19" RACKMOUNT 1006801-01 8000 RM-19 $250 [*]% $[*]
ADAPTER
- -----------------------------------------------------------------------------------------------------------------------------------
90-6003-01-03 19" RACKMOUNT 1006801-01-03 8000 RM-19 (CLEI) $250 [*]% $[*]
ADAPTER
- -----------------------------------------------------------------------------------------------------------------------------------
90-6003-02 23" RACKMOUNT 1006802-01 8000 RM-23 $250 [*]% $[*]
ADAPTER
- -----------------------------------------------------------------------------------------------------------------------------------
90-6003-02-03 23" RACKMOUNT 1006802-01-03 8000 RM-23 (CLEI) $250 [*]% $[*]
ADAPTER
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
SPARES
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
90-6004-01 BLANKING PLATES 1700716-01 8000 SBP $50 [*]% $[*]
(5 PACK)
- -----------------------------------------------------------------------------------------------------------------------------------
90-6004-01-03 BLANKING PLATES 1700716-01-03 8000 SBP (CLEI) $50 [*]% $[*]
(5 PACK)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4407-01 NREED AC SYS PSU 1222044-00 SINGLE AC POWER $595 [*]% $[*]
SUPPLY
- -----------------------------------------------------------------------------------------------------------------------------------
90-4407-01-03 NREED AC SYS PSU 1222044-00-03 SINGLE AC POWER $595 [*]% $[*]
SUPPLY (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4408-01 RED AC SYS PSU 1505807-01 DUAL AC POWER $3,895 [*]% $[*]
SUPPLY
- -----------------------------------------------------------------------------------------------------------------------------------
90-4408-01-03 RED AC SYS PSU 1505807-01-03 DUAL AC POWER $3,895 [*]% $[*]
SUPPLY (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4409-01 RED DC SYS PSU 1505809-01 DUAL DC POWER $4,395 [*]% $[*]
SUPPLY
- -----------------------------------------------------------------------------------------------------------------------------------
90-4409-01-03 RED DC SYS PSU 1505809-01-03 DUAL DC POWER $4,395 [*]% $[*]
SUPPLY (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4410-01 BASIC SYSTEM 1505801-01 SYSTEM FAN $250 [*]% $[*]
INTAKE FAN ASSEMBLY
- -----------------------------------------------------------------------------------------------------------------------------------
90-4410-01-03 BASIC SYSTEM 1505801-01-03 SYSTEM FAN $250 [*]% $[*]
INTAKE FAN ASSEMBLY (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4411-01 BASIC SYSTEM 1701021-00 CPU FAN ASSEMBLY $250 [*]% $[*]
PROCESSOR FAN
- -----------------------------------------------------------------------------------------------------------------------------------
90-4411-01-03 BASIC SYSTEM 1701021-00-03 CPU FAN ASSEMBLY $250 [*]% $[*]
PROCESSOR FAN (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4412-01 BASIC SYSTEM 1510800-01 INTEL $3,995 [*]% $[*]
MOTHERBOARD MOTHERBOARD
ASSEMBLY
- -----------------------------------------------------------------------------------------------------------------------------------
90-4412-01-03 BASIC SYSTEM 1510800-01-03 INTEL $3,995 [*]% $[*]
MOTHERBOARD MOTHERBOARD
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
Page 7
CONFIDENTIAL
<TABLE>
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSEMBLY (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4413-01 BASIC SYSTEM 1111091-01 8 MB SIMM (2PACK) $400 [*]% $[*]
MEMORY (16 MB)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4413-01-03 BASIC SYSTEM 1111091-01-03 8 MB SIMM (2PACK) $400 [*]% $[*]
MEMORY (16 MB) (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4414-01 CONTROL CARD 1600802-03 SYSTEM CONTROL $2,595 [*]% $[*]
CARD
- -----------------------------------------------------------------------------------------------------------------------------------
90-4414-01-03 CONTROL CARD 1600802-03-03 SYSTEM CONTROL $2,595 [*]% $[*]
CARD (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
90-4415-01 MANAGEMENT 1319296-00 MANAGEMENT $120 [*]% $[*]
CABLES CABLES
- -----------------------------------------------------------------------------------------------------------------------------------
90-4415-01-03 MANAGEMENT 1319296-00-03 MANAGEMENT $120 [*]% $[*]
CABLES CABLES (CLEI)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
36060 APPLICATION SOFTWARE
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
90-6000-20 R 2.0 SYSTEM 1006804-20 R 2.0 NN $2,000 [*]% $[*]
SOFTWARE OPERATIONAL
IMAGE
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
36060 DOCUMENTATION
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
90-6005-20 R 2.0 TECHNICAL 1006816-20 36060 TECH $100 [*]% $[*]
PRACTICES PRACTICES V2.0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CUSTOMER NO. 1148
FIRST AMENDMENT TO MASTER
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT to MASTER LOAN AND SECURITY AGREEMENT (the
"Amendment"), dated as of June 7, 1999, by and between SONOMA SYSTEMS, INC.
(the "Borrower"), a California Corporation, having its principal place of
business and chief executive office at 4640 Admiralty Way, Suite 600, Marina
del Ray, California, 90292, and TRANSAMERICA BUSINESS CREDIT CORPORATION (the
"Lender"), a Delaware Corporation, having its principal office at Riverway II,
West Office Tower, 9399 West Higgins Road, Rosemont, Illinois, 60018.
W I T N E S S E T H
WHEREAS, the Borrower and the Lender are parties to a Master Loan and
Security Agreement, dated as of July 8, 1998 (as amended, the "Loan Agreement";
capitalized terms used herein shall have the meanings assigned to such terms in
the Loan Agreement unless otherwise defined herein); and
WHEREAS, the parties hereto desire to amend the Loan Agreement in the
manner set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the Borrower and Lender hereby agree as follows:
1. AMENDMENT TO LOAN AGREEMENT. Effective as of the date this
Amendment is fully executed by the Lender and Borrower hereof, and subject to
the satisfaction of the Borrower of conditions as determined by Lender, the
Loan Agreement is hereby amended as follows:
(a) Section 3.1, Borrowings, is hereby deleted in its entirety
and the following is inserted in lieu thereof:
SECTION 3.1. BORROWINGS. Each Loan shall be in an amount not less
than $50,000, and in no event shall the sum of the aggregate Loans made exceed
the amount of the Lender's written commitment to the Borrower in effect from
time to time. Notwithstanding anything herein to the contrary, the Lender shall
be obligated to make the initial Loan and each other Loan only after the
Lender, in its sole discretion, determines that the applicable conditions for
borrowing contained in Sections 3.3 and 3.4 are satisfied. The timing and
financial scope of Lender's obligation to make Loans hereunder are limited as
set forth in a commitment letter executed by Lender and Borrower, dated as of
June 12, 1998 and May 21, 1999 and attached hereto as EXHIBITS A AND B
(collectively the "Commitment Letters").
(b) The definitions of "Loan Documents" and "Obligations" are
deleted in their entirety and the following definitions are inserted in lieu
thereof, respectively:
LOAN DOCUMENTS shall mean, collectively, this Agreement, the Notes,
and all other present and future documents, agreements, certificates,
instruments, and opinions delivered by the Borrower under, in connection with
or relating to this Agreement, or any other present or future instrument or
agreement between Lender and Borrower, as each of the same may be amended,
modified, extended, restated or supplemented from time to time.
OBLIGATIONS shall mean and include all loans (including the Loans),
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to Lender of any kind or nature, present or future, whether or not
evidenced by the Note or any note, guaranty or other instrument, whether or not
arising under or in connection with, this Agreement, any other Loan Document or
any other present or future instrument or agreement, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether
absolute or contingent, due or to become due, now due or hereafter arising and
however acquired (including without limitation all loans previously made by
-1-
<PAGE>
Lender to Borrower). The term includes, without limitation, all interest
(including interest accruing on or after an bankruptcy, whether or not an
allowed claim), charges, expenses, commitment, facility, closing and
collateral management fees, letter of credit fees, reasonable attorneys'
fees, taxes and any other sum properly chargeable to Borrower under this
Agreement, the other Loan Documents or any other present or future agreement
between Lender and Borrower.
(c) In Section 3.3, Conditions to Initial Loan, subsection
(v) is hereby deleted in its entirety and the following inserted in lieu
thereof:
(v) a certificate of the Secretary or an Assistant Secretary
of the Borrower ("Secretary's Certificate") certifying (A) that attached to
the Secretary's Certificate is a true, complete, and accurate copy of the
resolutions of the Board of Directors of the Borrower (or a unanimous consent
of directors in lieu thereof) authorizing the execution, delivery, and
performance of this Agreement, the other Loan Documents, and the transactions
contemplated hereby and thereby, and that such resolutions have not been
amended or modified since the date of such certification and are in full
force and effect; (B) the incumbency, names, and true signatures of the
officers of the Borrower authorized to sign the Loan Documents to which it is
a party; (C) that attached to the Secretary's Certificate is a true and
correct copy of the Articles or Certificate of Incorporation of the Company,
as amended, which Articles or Certificate of Incorporation have not been
further modified, repealed or rescinded and are in full force and effect; (D)
that attached to the Secretary's Certificate of the Borrower is a true and
correct copy of the Bylaws, as amended, which Bylaws of the Company have not
been further modified, repealed or rescinded and are in full force and
effect; and (E) that attached to the Secretary's Certificate is a valid
Certificate of Good Standing issued by the Secretary of the State of the
Borrower's state of incorporation; and
2. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants as follows:
(a) Since July 8, 1998, there has occurred no development,
event or change that has had or could reasonably be expected to have a
Material Adverse Effect.
(b) No Default or Event of Default has occurred and is
continuing.
(c) The representations and warranties of such Borrower
contained in Section 4.1 of the Loan Agreement are true and correct in all
material respects on the date hereof as though made on and as the date
hereof, except to the extent that such representation and warranties
expressly relate solely to an earlier date (in which case such
representations and warranties were true and correct on and as of such
earlier date).
(d) This Amendment constitutes the legal, valid and binding
obligation of such Borrower, enforceable against the Borrower in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency and other laws affecting creditors' rights generally and by
general principles of equity.
3. EXPENSES. The Borrower shall pay for all of the reasonable
costs and expenses incurred by the Lender in connection with the transactions
contemplated by the Amendment, including, without limitation, the reasonable
fees and expenses of counsel to the Lender.
4. MISCELLANEOUS.
(a) Except as expressly amended herein, all of the terms and
provisions of the Loan Agreement and the other Loan Documents are ratified
and confirmed in all respects and shall remain in full force and effect.
(b) Upon the effectiveness of this Amendment, all references
in the Loan Documents to the Loan Agreement shall mean the Loan Agreement as
amended by this Amendment and all references in the Loan Agreement to the
"this Agreement", "hereof", "herein", or similar terms, shall mean and refer
to the Loan Agreement as amended by this Amendment.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate an as
amendment to or waiver of any right, power or remedy of the Lender under any
of the Loan Documents, or constitute an amendment or waiver of any provision
of any of the Loan Documents.
-2-
<PAGE>
(d) This Amendment may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of which
shall be an original and all of which shall constitute one and the same
agreement. This Amendment may be executed and delivered by telecopier with
the same force and effect as if the same were a fully executed and delivered
original manual counterpart.
(e) This Amendment shall constitute a Loan Document.
5. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
IN WITNESS WHEREOF, other parties hereto have caused this Amendment to
be duly executed and delivered by their respective duly authorized officers
as of the date first above written.
BORROWER
SONOMA SYSTEMS, INC.
By: /s/ Steve M. Waszak
--------------------------------
Name: Steve M. Waszak
Title: Vice President Finance and CFO
Herunto Duly Authorized
LENDER
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By:
--------------------------------
Name:
Title:
Hereunto Duly Authorized
-3-
<PAGE>
SECRETARY'S CERTIFICATE
I, _________________________, hereby state that I am the duly
elected, acting and qualified Secretary Sonoma Systems, Inc., a California
corporation (the "Company"), and that:
(a) Through a unanimous consent in lieu of a Board of Directors
meeting of the Company, proposed in accordance with its bylaws and the laws
of said State on the ____ day of __________________, 199_, signed by a quorum
for the transaction of business, the following resolutions were duly and
regularly adopted:
RESOLVED, that the form, terms and provisions of all of the
documents and instruments executed by the Company with and/or in favor of
Transamerica Business Credit Corporation (the "Agreements"), and the
transactions contemplated thereby be, and the same are, in all respects
approved, and that the President, each Vice President and each other officer
of the Company (the "Authorized Persons"), or any of them, be, and they
hereby are, authorized, empowered, and directed to execute and deliver the
Agreements and any and all other agreements, documents, instruments and
certificates required or desirable in connection therewith, if necessary or
advisable, with such changes as they may deem in the best interest of the
Company, and their execution and delivery of the Agreements, and all such
other agreements, documents, instruments and certificates, shall be deemed to
be conclusive evidence that the same are in all respects authorized and
approved; and be it further
RESOLVED, that the actions of any Authorized Person heretofore
taken in furtherance of the Agreements be, and hereby are, approved, adopted
and ratified in all respects.
(i) The above resolutions: (a) are not contrary to the Articles or
Certificate of Incorporation or bylaws of the Company and (b)
have not been amended, modified, rescinded or revoked and are in
full force and effect on the date hereof.
(ii) That attached hereto as EXHIBIT A is a true and correct copy of
the Articles or Certificate of Incorporation of the Company, as
amended, which Articles or Certificate of Incorporation have not
been further modified, repealed or rescinded and are in full
force and effect of the date hereof.
(iii) That attached hereto as EXHIBIT B is a true and correct copy of
the Bylaws, as amended, which Bylaws of the Company have not been
further modified, repealed or rescinded and are in full force and
effect of the date hereof.
(iv) That attached hereto as EXHIBIT C is a valid Certificate of
Good Standing issued by the Secretary of the State of the
Company's state of incorporation.
The following persons are duly qualified and acting officers of the Company,
duly elected to the offices set forth opposite their respective names, and the
signature appearing opposite the name of each such officer is his authentic
signature:
Name Office Signature
- ---------------------- ---------------------- ---------------------
- ---------------------- ---------------------- ---------------------
- ---------------------- ---------------------- ---------------------
IN WITNESS WHEREOF, I have executed this Certificate, this ____ day of
___________, 1999.
--------------------------------
Secretary
[CORPORATE SEAL]
-1-
<PAGE>
MASTER LOAN AND SECURITY AGREEMENT
THIS AGREEMENT dated as of July 8, 1998, is made by Sonoma Systems, Inc.
(the "Borrower"), a California corporation having its principal place of
business and chief executive office at 4640 Admiralty Way, Marina del Ray,
California, 90292-6695 in favor of Transamerica Business Credit Corporation, a
Delaware corporation (the "Lender"), having its principal office at Riverway
II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018.
WHEREAS, the Borrower has requested that the Lender make Loans to it
from time to time; and
WHEREAS, the Lender has agreed to make such Loans on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to extend credit, the Borrower hereby agrees with the Lender as
follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings,
and shall be equally applicable to both the singular and plural forms of the
terms defined:
AGREEMENT shall mean this Master Loan and Security Agreement together with
all schedules and exhibits hereto, as amended, supplemented, or otherwise
modified from time to time.
APPLICABLE LAW shall mean the laws of the State of Illinois (or any other
jurisdiction whose laws are mandatorily applicable notwithstanding the
parties' choice of Illinois law) or the laws of the United States of America,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
BUSINESS DAY shall mean any day other than a Saturday, Sunday, or public
holiday or the equivalent for banks in New York City.
CODE shall have the meaning specified in Section 8(d).
COLLATERAL shall have the meaning specified in Section 2.
EFFECTIVE DATE shall mean the date on which all of the conditions specified
in Section 3.3 shall have been satisfied.
EQUIPMENT shall have the meaning specified in Section 2.
EVENT OF DEFAULT shall mean any event specified in Section 7.
FINANCIAL STATEMENTS shall have the meaning specified in Section 6.1.
GAAP shall mean generally accepted accounting principles in the United States
of America, as in effect from time to time.
LOANS shall mean the loans and financial accommodations made by the Lender to
the Borrower in accordance with the terms of this Agreement and the Notes.
LOAN DOCUMENTS shall mean, collectively, this Agreement, the Notes, and all
other documents, agreements,
<PAGE>
certificates, instruments, and opinions executed and delivered in connection
herewith and therewith, as the same may be modified, extended, restated, or
supplemented from time to time.
MATERIAL ADVERSE CHANGE shall mean, with respect to any Person, a material
adverse change in the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person
taken as a whole.
MATERIAL ADVERSE EFFECT shall mean, with respect to any Person, a material
adverse effect on the business, prospects, operations, results of operations,
assets, liabilities, or condition (financial or otherwise) of such Person
taken as a whole.
NOTE shall mean each Promissory Note made by the Borrower in favor of the
Lender, as amended, supplemented, or otherwise modified from time to time.
OBLIGATIONS shall mean all indebtedness, obligations, and liabilities of the
Borrower under the Notes and under this Agreement, whether on account of
principal, interest, indemnities, fees (including, without limitation,
attorneys' fees, remarketing fees, origination fees, collection fees, and all
other professionals' fees), costs, expenses, taxes, or otherwise.
PERMITTED LIENS shall mean such of the following as to which no enforcement,
collection, execution, levy, or foreclosure proceeding shall have been
commenced: (a) liens for taxes, assessments, and other governmental charges
or levies or the claims or demands of landlords, carriers, warehousemen,
mechanics, laborers, materialmen, and other like Persons arising by operation
of law in the ordinary course of business for sums which are not yet due and
payable, or liens which are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves
are maintained to the extent required by GAAP; (b) deposits or pledges to
secure the payment of worker's compensation, unemployment insurance, or other
social security benefits or obligations, public or statutory obligations,
surety or appeal bonds, bid or performance bonds, or other obligations of
a like nature incurred in the ordinary course of business; (c) licenses,
restrictions, or covenants for or on the use of the Equipment which do not
materially impair either the use of the Equipment in the operation of the
business of the Borrower or the value of the Equipment; and (d) attachment or
judgment liens that do not constitute an Event of Default.
PERSON shall mean any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, entity,
party, or government (including any division, agency, or department thereof),
and the successors, heirs, and assigns of each.
SCHEDULE shall mean each Schedule in the form of Schedule A hereto delivered
by the Borrower to the Lender from time to time.
SOLVENT means, with respect to any Person, that as of the date as to which
such Person's solvency is measured:
(a) the fair saleable value of its assets is in excess of the total
amount of its liabilities (including contingent liabilities as valued in
accordance with GAAP) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
TAXES shall have the meaning specified in Section 5.5.
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower
hereby assigns and grants to the Lender a continuing general, first priority
lien on, and security interest in, all the Borrower's right, title, and
interest in and to the collateral described in the next sentence (the
"Collateral") to secure the payment and performance of all the Obligations.
The Collateral consists of all equipment set forth on all the
2
<PAGE>
Schedules delivered from time to time under the terms of this Agreement (the
"Equipment"), together with all present and future additions, parts,
accessories, attachments, substitutions, repairs, improvements, and
replacements thereof or thereto, and any and all proceeds thereof, including,
without limitation, proceeds of insurance and all manuals, blueprints,
know-how, warranties, and records in connection therewith, all rights against
suppliers, warrantors, manufacturers, sellers, or others in connection
therewith, and together with all substitutes for any of the foregoing.
SECTION 3. THE CREDIT FACILITY.
SECTION 3.1. BORROWINGS. Each Loan shall be in an amount not
less than $50,000, and in no event shall the sum of the aggregate Loans made
exceed the amount of the Lender's written commitment to the Borrower in
effect from time to time. Notwithstanding anything herein to the contrary,
the Lender shall be obligated to make the initial Loan and each other Loan
only after the Lender, in its sole discretion, determines that the applicable
conditions for borrowing contained in Sections 3.3 and 3.4 are satisfied. The
timing and financial scope of Lender's obligation to make Loans hereunder are
limited as set forth in a commitment letter executed by Lender and Borrower,
dated as of June 12, 1998 and attached hereto as Exhibit A (the "Commitment
Letter").
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall not
directly or indirectly use any proceeds of the Loans, or cause, assist,
suffer, or permit the use of any proceeds of the Loans, for any purpose other
than for the purchase, acquisition, installation, or upgrading of Equipment
or the reimbursement of the Borrower for its purchase, acquisition,
installation, or upgrading of Equipment.
SECTION 3.3. CONDITIONS TO INITIAL LOAN.
(a) The obligation of the Lender to make the initial Loan is subject
to the Lender's receipt of the following, each dated the date of the initial
Loan or as of an earlier date reasonably acceptable to the Lender, in form
and substance reasonably satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11) listing
all effective Uniform Commercial Code financing statements naming the
Borrower as debtor and all tax lien, judgment, and litigation searches
for the Borrower as the Lender shall deem reasonably necessary or
desirable;
(ii) Uniform Commercial Code financing statements (Form UCC-1)
duly executed by the Borrower (naming the Lender as secured party and the
Borrower as debtor and in form acceptable for filing in all jurisdictions
that the Lender deems reasonably necessary or desirable to perfect the
security interests granted to it hereunder) and, if applicable,
termination statements or other releases duly filed in all jurisdictions
that the Lender reasonably deems necessary or desirable to perfect and
protect the priority of the security interests granted to it hereunder
in the Equipment related to such initial Loan;
(iii) a Note duly executed by the Borrower evidencing the
amount of such Loan;
(iv) certificates of insurance required under Section 5.4 of
this Agreement together with loss payee endorsements for all such
policies naming the Lender as lender loss payee and as an additional
insured;
(v) a copy of the resolutions of the Board of Directors of
the Borrower (or a unanimous consent of directors in lieu thereof)
authorizing the execution, delivery, and performance of this Agreement,
the other Loan Documents, and the transactions contemplated hereby and
thereby, attached to which is a certificate of the Secretary or an
Assistant Secretary of the Borrower certifying (A) that the copy of the
resolutions is true, complete, and accurate, that such resolutions have
not been amended or modified since the date of such certification and
are in full force and effect and (B) the incumbency, names, and true
signatures of the officers of the
3
<PAGE>
Borrower authorized to sign the Loan Documents to which it is a party;
(vi) such other agreements and instruments as the Lender deems
necessary in its good faith business judgment in connection with the
transactions contemplated hereby.
(b) There shall be no pending or, to the knowledge of the Borrower
after due inquiry, threatened litigation, proceeding, inquiry, or other
action (i) seeking an injunction or other restraining order, damages, or
other relief with respect to the transactions contemplated by this Agreement
or the other Loan Documents or thereby or (ii) which affects or could affect
the business, prospects, operations, assets, liabilities, or condition
(financial or otherwise) of the Borrower, except, in the case of clause (ii),
where such litigation, proceeding, inquiry, or other action could not be
expected to have a Material Adverse Effect in the good faith business
judgment of the Lender.
(c) The Borrower shall have paid all fees and expenses required to be
paid by it to the Lender as of such date.
(d) The security interests in the Equipment related to the initial
Loan granted in favor of the Lender under this Agreement shall have been duly
perfected by the Lender and shall constitute first priority liens.
SECTION 3.4. CONDITIONS PRECEDENT TO EACH LOAN. The obligation
of the Lender to make each Loan is subject to the satisfaction of the
following conditions precedent:
(a) the Lender shall have received the documents, agreements, and
instruments set forth in Section 3.3(a)(i) through (v) applicable to such
Loan, each in form and substance reasonably satisfactory to the Lender and
its counsel and each dated the date of such Loan or as of an earlier date
reasonably acceptable to the Lender;
(b) the Lender shall have received a Schedule of the Equipment
related to such Loan, in form and substance reasonably satisfactory to the
Lender and its counsel, and the security interests in such Equipment related
to such Loan granted in favor of the Lender under this Agreement shall have
been duly perfected by the Lender and shall constitute first priority liens;
(c) all representations and warranties contained in this Agreement
and the other Loan Documents shall be true and correct on and as of the date
of such Loan as if then made, other than representations and warranties that
expressly relate solely to an earlier date, in which case they shall have
been true and correct as of such earlier date;
(d) no Event of Default or event which with the giving of notice or
the passage of time, or both, would constitute an Event of Default shall have
occurred and be continuing or would result from the making of the requested
Loan as of the date of such request; and
(e) the Borrower shall be deemed to have hereby reaffirmed and
ratified all security interests, liens, and other encumbrances heretofore
granted by the Borrower to the Lender.
SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
SECTION 4.1 GOOD STANDING; QUALIFIED TO DO BUSINESS. The
Borrower (a) is duly organized, validly existing, and in good standing under
the laws of the State of its organization, (b) has the corporate power and
authority to own its properties and assets and to transact the businesses in
which it is presently, or proposes to be, engaged, and (c) is duly qualified
and authorized to do business and is in good standing in every jurisdiction
in which the failure to be so qualified could have a Material Adverse Effect
on (i) the Borrower, (ii) the Borrower's ability to perform its obligations
under the Loan Documents, or (iii) the rights of the Lender hereunder.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery, and
performance by
4
<PAGE>
the Borrower of each of the Loan Documents to which it is a party are within
the corporate powers of the Borrower, do not contravene the organizational
documents, if any, of the Borrower, and do not (a) to the Borrower's
knowledge violate any law or regulation, or any order or decree of any court
or governmental authority to which the Borrower is subject, (b) conflict with
or result in a breach of, or constitute a default under, any material
indenture, mortgage, or deed of trust or any material lease, agreement, or
other instrument binding on the Borrower or any of its properties, or (c)
require the consent, authorization by, or approval of or notice to or filing
or registration with any governmental authority or other Person. This
Agreement is, and each of the other Loan Documents to which the Borrower is or
will be a party, when delivered hereunder or thereunder, will be, the legal,
valid, and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, or similar laws affecting creditors'
rights generally and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent and
will be Solvent upon the completion of all transactions contemplated to occur
hereunder on the Effective Date (including, without limitation, the Loan to be
made on the Effective Date); to the Borrower's knowledge, the security
interests granted herein constitute the first and only liens on the
Collateral other than Permitted Liens; and the Borrower is the absolute owner
of the Collateral with full right to pledge, sell, consign, transfer, and
create a security interest therein, free and clear of any and all claims or
liens in favor of any other Person other than Permitted Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are
outstanding against the Borrower nor is there now pending or, to the
Borrower's knowledge, threatened any litigation, contested claim, or
governmental proceeding by or against the Borrower except judgments and
pending or threatened litigation, contested claims, and governmental
proceedings which would not, in the aggregate, have a Material Adverse Effect
on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower has not received a
notice of default or, to its knowledge, is not in default under any material
contract, lease, or commitment to which it is a party or by which it is
bound. The Borrower knows of no dispute regarding any contract, lease, or
commitment which could have a Material Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof, each
item of the Collateral is located at the place of business specified in the
applicable Schedule.
SECTION 4.7. NO EVENTS OF DEFAULT. No Event of Default has
occurred and is continuing nor has any event occurred which, with the giving
of notice or the passage of time, or both, would constitute an Event of
Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. To the
Borrower's knowledge, except as permitted herein, none of the Collateral is
subject to contractual obligations that may restrict or inhibit the Lender's
rights or abilities to sell or dispose of the Collateral or any part thereof
after the occurrence of an Event of Default.
SECTION 4.9. PERFECTION AND PRIORITY OF SECURITY INTEREST. This
Agreement creates a valid and, upon completion of all required filings of
financing statements by the Lender, perfected first priority and exclusive
security interest in the Collateral, securing the payment of all the
Obligations.
SECTION 4.10. MODEL AND SERIAL NUMBERS. The Schedules set forth
the true and correct model number and serial number of each item of Equipment
that constitutes Collateral.
SECTION 4.11. ACCURACY AND COMPLETENESS OF INFORMATION. All
data, reports, and information heretofore, contemporaneously, or hereafter
furnished by or on behalf of the Borrower in writing to the Lender for
purposes of or in connection with this Agreement or any other Loan Document,
or any transaction contemplated hereby or thereby, are or will be true and
accurate in all material respects on the date as of which such data, reports,
and information are dated or certified and not incomplete by omitting to
state any material fact
5
<PAGE>
necessary to make such data, reports, and information not misleading at such
time. There are no facts now known to the Borrower which individually or in
the aggregate would reasonably be expected to have a Material Adverse Effect
and which have not been specified herein, in the Financial Statements, or in
any certificate, opinion, or other written statement previously furnished by
the Borrower to the Lender.
SECTION 4.12. PRICE OF EQUIPMENT. To the Borrower's knowledge,
the cost of each item of Equipment does not exceed the fair and usual price
for such type of equipment purchased in like quantity and reflects all
discounts, rebates and allowances for the Equipment (including, without
limitation, discounts for advertising, prompt payment, testing, or other
services) given to the Borrower by the manufacturer, supplier, or any other
person.
SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a) retain its
existence and its current yearly accounting cycle, (b) maintain in full force
and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts, and other rights necessary or desirable to the profitable conduct
of its business unless the failure to do so could not reasonably be expected
to have a Material Adverse Effect on the Borrower, (c) continue in, and limit
its operations to, the same general lines of business as those presently
conducted by it, and (d) comply with all applicable laws and regulations of
any federal, state, or local governmental authority, except for such laws and
regulations the violations of which would not, in the aggregate, have a
Material Adverse Effect on the Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible, and in
any event within five days after the Borrower learns of the following, the
Borrower will give written notice to the Lender of (a) any proceeding
instituted or threatened to be instituted by or against the Borrower in any
federal, state, local, or foreign court or before any commission or other
regulatory body (federal, state, local, or foreign) involving a sum, together
with the sum involved in all other similar proceedings, in excess of $50,000
in the aggregate, (b) any contract that is terminated or amended and which
has had or could reasonably be expected to have a Material Adverse Effect on
the Borrower, (c) the occurrence of any Material Adverse Change with respect
to the Borrower, and (d) the occurrence of any Event of Default or event or
condition which, with notice or lapse of time or both, would constitute an
Event of Default, together with a statement of the action which the Borrower
has taken or proposes to take with respect thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The Borrower will
maintain books and records pertaining to the Collateral in such detail, form,
and scope as the Lender shall require in its commercially reasonable
judgment. The Borrower agrees that the Lender or its agents may enter upon
the Borrower's premises at any time and from time to time upon reasonable
notice and during normal business hours, and at any time upon the occurrence
and continuance of an Event of Default, for the purpose of inspecting the
Collateral and any and all records pertaining thereto.
SECTION 5.4. INSURANCE. The Borrower will maintain insurance on
the Collateral under such policies of insurance, with such insurance
companies, in such amounts, and covering such risks as are at all times
reasonably satisfactory to the Lender. All such policies shall be made
payable to the Lender, in case of loss, under a standard non-contributory
"lender" or "secured party" clause and are to contain such other provisions
as the Lender may reasonably require to protect the Lender's interests in the
Collateral and to any payments to be made under such policies. Certificates
of insurance policies are to be delivered to the Lender, premium prepaid,
with the loss payable endorsement in the Lender's favor, and shall provide
for not less than thirty days' prior written notice to the Lender, of any
alteration or cancellation of coverage. If the Borrower fails to maintain
such insurance, the Lender may arrange for (at the Borrower's expense and
without any responsibility on the Lender's part for) obtaining the insurance.
Unless the Lender shall otherwise agree with the Borrower in writing, the
Lender shall have the sole right, in the name of the Lender or the Borrower,
to file claims under any insurance policies, to receive and give acquittance
for any payments that may be payable thereunder, and to execute any
endorsements, receipts, releases, assignments, reassignments, or other
documents that may be necessary to effect the collection, compromise, or
settlement of any claims under any such insurance policies relating to the
Collateral.
6
<PAGE>
SECTION 5.5. TAXES. The Borrower will pay, when due, all
taxes, assessments, claims, and other charges ("Taxes") lawfully levied or
assessed against the Borrower or the Collateral other than taxes that are
being diligently contested in good faith by the Borrower by appropriate
proceedings promptly instituted and for which an adequate reserve is being
maintained by the Borrower in accordance with GAAP. If any Taxes remain unpaid
after the date fixed for the payment thereof, or if any lien shall be claimed
therefor, then, without notice to the Borrower, but on the Borrower's behalf,
the Lender may pay such Taxes, and the amount thereof shall be included in
the Obligations.
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS;
FEES ON COLLATERAL. The Borrower will defend the Collateral against all
claims and demands of all Persons at any time claiming the same or any
interest therein. The Borrower will not permit any notice creating or
otherwise relating to liens on the Collateral or any portion thereof to exist
or be on file in any public office other than Permitted Liens. The Borrower
shall promptly pay, when payable, all transportation, storage, and
warehousing charges and license fees, registration fees, assessments,
charges, permit fees, and taxes (municipal, state, and federal) which may now
or hereafter be imposed upon the ownership, leasing, renting, possession,
sale, or use of the Collateral, other than taxes on or measured by the
Lender's income and fees, assessments, charges, and taxes which are being
contested in good faith by appropriate proceedings diligently conducted and
with respect to which adequate reserves are maintained to the extent required
by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION, STRUCTURE, OR IDENTITY.
The Borrower will not (a) change the location of its chief executive office
or establish any place of business other than those specified herein or (b)
move or permit the movement of any item of Collateral from the location
specified in the applicable Schedule, except that the Borrower may change its
chief executive office, establish any place of business and keep Collateral
at other locations within the United States provided that the Borrower has
delivered to the Lender (i) prior written notice thereof and (ii) duly
executed financing statements and other agreements and instruments (all in
form and substance reasonably satisfactory to the Lender) necessary or, in
the good faith business judgment of the Lender, desirable to perfect and
maintain in favor of the Lender a first priority security interest in the
Collateral. Notwithstanding anything to the contrary in the immediately
preceding sentence, the Borrower may keep any Collateral consisting of motor
vehicles or rolling stock at any location in the United States provided that
the Lender's security interest in any such Collateral is conspicuously marked
on the certificate of title thereof and the Borrower has complied with the
provisions of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The
Collateral shall be operated by competent, qualified personnel in connection
with the Borrower's business purposes, for the purpose for which the
Collateral was designed and in accordance with applicable operating
instructions, laws, and government regulations, and the Borrower shall use
every reasonable precaution to prevent loss or damage to the Collateral from
fire and other hazards. The Collateral shall not be used or operated for
personal, family, or household purposes. The Borrower shall procure and
maintain in effect all orders, licenses, certificates, permits, approvals,
and consents required by federal, state, or local laws or by any governmental
body, agency, or authority in connection with the delivery, installation,
use, and operation of the Collateral. The Borrower shall keep all of the
Equipment in a satisfactory state of repair and satisfactory operating
condition in accordance with industry standards, and will make all repairs
and replacements when and where necessary and practical. The Borrower will
not waste or destroy the Equipment or any part thereof, and will not be
negligent in the care or use thereof. The Equipment shall not be annexed or
affixed to or become part of any realty without the Lender's prior written
consent.
SECTION 5.9. FURTHER ASSURANCES. The Borrower will, promptly
upon request by the Lender, execute and deliver or use its best efforts to
obtain any document reasonably required by the Lender (including, without
limitation, warehouseman or processor disclaimers, mortgagee waivers,
landlord disclaimers, or subordination agreements with respect to the
Obligations and the Collateral), give any notices, execute any financing
statements, mortgages, or other documents (all in form and substance
reasonably satisfactory to the Lender), mark any chattel paper, deliver any
chattel paper or instruments to the Lender, and take any other actions that
are necessary or, in the good faith business judgment of the Lender,
desirable to permit the Lender to perfect or continue the perfection and the
first priority of the Lender's security interest in the Collateral, to
protect the
7
<PAGE>
Collateral against the rights, claims, or interests of any Persons, or to
effect the purposes of this Agreement. The Borrower hereby authorizes the
Lender to file one or more financing or continuation statements, and
amendments thereto, relating to all or any part of the Collateral without the
signature of the Borrower where permitted by law. A carbon, photographic, or
other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law. To the extent required under this Agreement, the
Borrower will pay all costs incurred in connection with any of the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower will
not in any way hypothecate or create or permit to exist any lien, security
interest, charge, or encumbrance on or other interest in any of the
Collateral, except for the lien and security interest granted hereby and
Permitted Liens which are junior to the lien and security interest of the
Lender, and the Borrower will not sell, transfer, assign, pledge,
collaterally assign, exchange, or otherwise dispose of any of the Collateral.
In the event the Collateral, or any part thereof, is sold, transferred,
assigned, exchanged, or otherwise disposed of in violation of these
provisions, the security interest of the Lender shall continue in such
Collateral or part thereof notwithstanding such sale, transfer, assignment,
exchange, or other disposition, and the Borrower will hold the proceeds
thereof in a separate account for the benefit of the Lender. Following such a
sale, the Borrower will transfer such proceeds to the Lender in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. The Borrower
will not enter into any contractual obligations which could reasonably be
expected to restrict or inhibit the Lender's rights or ability to sell or
otherwise dispose of the Collateral or any part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon reasonable notice
to the Borrower (provided that if an Event of Default has occurred and is
continuing the Lender need not give any notice), the Lender shall have the
right at any time to make any payments and do any other acts the Lender may
deem necessary to protect its security interests in the Collateral,
including, without limitation, the rights to satisfy, purchase, contest, or
compromise any encumbrance, charge, or lien which, in the reasonable judgment
of the Lender, appears to be prior to or superior to the security interests
granted hereunder, and appear in, and defend any action or proceeding
purporting to affect its security interests in, or the value of, any of the
Collateral. The Borrower hereby agrees to reimburse the Lender for all
payments made and expenses incurred under this Agreement including fees,
expenses, and disbursements of attorneys and paralegals (including the
allocated costs of in-house counsel) acting for the Lender, including any of
the foregoing payments under, or acts taken to protect its security interests
in, any of the Collateral, which amounts shall be secured under this
Agreement, and agrees it shall be bound by any payment made or act taken by
the Lender hereunder absent the Lender's gross negligence or willful
misconduct. The Lender shall have no obligation to make any of the foregoing
payments or perform any of the foregoing acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a)
promptly (but in no event later than three Business Days) after its receipt
thereof, deliver to the Lender any documents or certificates of title issued
with respect to any property included in the Collateral, and any promissory
notes, letters of credit or instruments related to or otherwise in connection
with any property included in the Collateral, which in any such case come
into the possession of the Borrower, or shall cause the issuer thereof to
deliver any of the same directly to the Lender, in each case with any
necessary endorsements in favor of the Lender and (b) deliver to the Lender
as soon as available copies of any and all press releases and other similar
communications issued by the Borrower.
SECTION 5.14. SOLVENCY. The Borrower shall be and remain
Solvent at all times.
SECTION 5.15. FUNDAMENTAL CHANGES. The Borrower shall not (a)
amend or modify its name, unless the Borrower delivers to the Lender thirty
days prior to any such proposed amendment or modification written notice of
such amendment or modification and within ten days before such amendment or
modification delivers executed Uniform Commercial Code financing statements
(in form and substance reasonably satisfactory to the Lender) or (b) merge or
consolidate with any other entity without the Lender's prior written consent
which will not be unreasonably withheld; or (c) permit a change, other than a
change which results from the sale of newly issued securities to investors,
in more than 35% of the ownership of any equity interests of the Borrower
without the Lender's prior written consent, which shall not unreasonably be
withheld. In the event that the Lender withholds its consent to a proposed
merger, consolidation or change in ownership, the Borrower shall
8
<PAGE>
have the right to prepay all Obligations without penalty.
SECTION 5.16. ADDITIONAL REQUIREMENTS. The Borrower shall take
all such further actions and exercise all such further documents and
instruments as the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction
in full of all Obligations, the Borrower shall deliver to the Lender the
following financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as
available, but not later than 120 days after the end of each fiscal year of
the Borrower and its consolidated subsidiaries, the consolidated balance
sheet, income statement, and statements of cash flows and shareholders equity
for the Borrower and its consolidated subsidiaries (the "Financial
Statements") for such year, reported on by independent certified public
accountants without an adverse qualification; and
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as
available, but not later than 60 days after the end of each of the first
three fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with
a certification duly executed by a responsible officer of the Borrower that
such Financial Statements have been prepared in accordance with GAAP and are
fairly stated in all material respects (subject to normal year-end audit
adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within two days following
receipt of notice of failure to pay when due any amount required to be paid
by the Borrower under or in connection with any Note and this Agreement;
(b) any representation or warranty made or deemed made by the
Borrower under or in connection with any Loan Document or any Financial
Statement shall prove to have been false or incorrect in any material respect
when made;
(c) the Borrower shall fail to perform or observe (i) any of
the terms, covenants or agreements contained in Sections 5.4, 5.7, 5.10,
5.14, or 5.15 hereof or (ii) any other term, covenant, or agreement
contained in any Loan Document (other than the other Events of Default
specified in this Section 7) and such failure remains unremedied for the
earlier of thirty days from (A) the date on which the Lender has given the
Borrower written notice of such failure and (B) the date on which the
Borrower knew or should have known of such failure;
(d) any material provision of any Loan Document to which the
Borrower is a party shall for any reason cease to be valid and binding on the
Borrower, or the Borrower shall so state;
(e) dissolution, liquidation, winding up, or cessation of the
Borrower's business, failure of the Borrower generally to pay its debts as
they mature, admission in writing by the Borrower of its inability generally
to pay its debts as they mature, or calling of a meeting of the Borrower's
creditors for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
forty-five days following the commencement thereof, or any action by the
Borrower is taken authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by the
Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any
substantial property of the Borrower, or any action by the Borrower
authorizing any such proceeding;
9
<PAGE>
(h) the Borrower shall default in (i) the payment of principal
or interest on any indebtedness in excess of $50,000 (other than the
Obligations) beyond the period of grace, if any, provided in the instrument
or agreement under which such indebtedness was created; or (ii) the
observance or performance of any other agreement or condition relating to any
such indebtedness or contained in any instrument or agreement relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such indebtedness to cause, with the giving of notice if
required, such indebtedness to become due prior to its stated maturity; or
(iii) any loan or other agreement under which the Borrower has received
financing from Transamerica Corporation or any of its affiliates;
(i) the Borrower suffers or sustains a Material Adverse Change;
(j) any tax lien, other than a Permitted Lien, is filed of
record against the Borrower and is not bonded or discharged within five
Business Days;
(k) any judgment which has had or could reasonably be expected
to have a Material Adverse Effect on the Borrower and such judgment shall not
be stayed, vacated, bonded, or discharged within sixty days;
(l) any material covenant, agreement, or obligation, as
determined in the good faith business judgment of the Lender, made by the
Borrower and contained in or evidenced by any of the Loan Documents shall
cease to be enforceable, or shall be determined to be unenforceable, in
accordance with its terms; the Borrower shall deny or disaffirm the
Obligations under any of the Loan Documents or any liens granted in
connection therewith; or any liens granted on any of the Collateral in favor
of the Lender shall be determined to be void, voidable, or invalid, or shall
not be given the priority contemplated by this Agreement; or
(m) more than 35% of the equity interests of the Borrower
become subject to any contractual, judicial, or statutory lien, charge,
security interest, or encumbrance.
SECTION 8. REMEDIES. If any Event of Default shall have occurred
and be continuing:
(a) The Lender may, without prejudice to any of its other
rights under any Loan Document or Applicable Law, declare all Obligations to
be immediately due and payable (except with respect to any Event of Default
set forth in Section 7(f) hereof, in which case all Obligations shall
automatically become immediately due and payable without necessity of any
declaration) without presentment, representation, demand of payment, or
protest, which are hereby expressly waived.
(b) The Lender may take possession of the Collateral and, for
that purpose may enter, with the aid and assistance of any person or persons,
any premises where the Collateral or any part hereof is, or may be placed,
and remove the same.
(c) The obligation of the Lender, if any, to make additional
Loans or financial accommodations of any kind to the Borrower shall
immediately terminate.
(d) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it all the rights and remedies of a
secured party under the applicable Uniform Commercial Code (the "Code")
whether or not the Code applies to the affected Collateral and also may (i)
require the Borrower to, and the Borrower hereby agrees that it will at its
expense and upon request of the Lender forthwith, assemble all or part of the
Collateral as directed by the Lender and make it available to the Lender at a
place to be designated by the Lender that is reasonably convenient to both
parties and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private
sale, at any of the Lender's offices or elsewhere, for cash, on credit, or
for future delivery, and upon such other terms as the Lender may deem
commercially reasonable. The Borrower agrees that to the extent notice of
sale shall be required by law, at least ten days' notice to the Borrower of
the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The
10
<PAGE>
Lender shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Lender may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(e) All cash proceeds received by the Lender in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part
by the Lender against, all or any part of the Obligations in such order as
the Lender shall elect. Any surplus of such cash or cash proceeds held by the
Lender and remaining after the full and final payment of all the Obligations
shall be paid over to the Borrower or to such other Person to which the Lender
may be required under applicable law, or directed by a court of competent
jurisdiction, to make payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. NOTICES. Except as otherwise provided herein,
all notices, approvals, consents, correspondence, or other communications
required or desired to be given hereunder shall be given in writing and shall
be delivered by overnight courier, hand delivery, or certified or registered
mail, postage prepaid, if to the Lender, then to Transamerica Technology
Finance Division, 76 Batterson Park Road, Farmington, Connecticut 06032,
Attention: Assistant Vice President, Lease Administration, with a copy to the
Lender at Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont,
Illinois 60018, Attention: Legal Department, and if to the Borrower, then to
Sonoma Systems, Inc., 4640 Admiralty Way, Suite 600, Marina del Ray,
California 90292-6695, Attention: Chief Financial Officer or such other
address as shall be designated by the Borrower or the Lender to the other
party in accordance herewith. All such notices and correspondence shall be
effective when received.
SECTION 9.2. HEADINGS. The headings in this Agreement are for
purposes of reference only and shall not affect the meaning or construction of
any provision of this Agreement.
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the
right to assign any Note or this Agreement or any interest therein unless the
Lender shall have given the Borrower prior written consent and the Borrower
and its assignee shall have delivered assignment documentation in form and
substance satisfactory to the Lender in its good faith business judgment. The
Lender will not withhold its consent to assignment if the assignee is a
successor in interest of Borrower in connection with a transaction to which
Lender consented pursuant to Section 5.15 hereof or if, in Lender's good
faith business judgment, where the assignment is effectively not made to a
third party. The Lender may assign its rights and delegate its obligations
under any Note or this Agreement.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any amendment
or wavier of any provision of this Agreement and any consent to any departure
by the Borrower from any provision of this Agreement shall be effective only
by a writing signed by the Lender and shall bind and benefit the Borrower and
the Lender and their respective successors and assigns, subject, in the case
of the Borrower, to the first sentence of Section 9.3.
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the
essence in each provision of this Agreement of which time is an element. All
terms not defined herein or in a Note shall have the meaning set forth in the
applicable Code, except where the context otherwise requires. To the extent a
term or provision of this Agreement conflicts with any Note, or any term or
provision thereof, and is not dealt with herein with more specificity, this
Agreement shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Agreement shall not be relevant in determining the meaning of this
Agreement even though the accepting or acquiescing party had knowledge of the
nature of the performance and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the indefeasible payment in full of the
Obligations, (ii) be binding upon the Borrower and its successors and assigns
and (iii) inure,
11
<PAGE>
together with the rights and remedies of the Lender hereunder, to the benefit
of the Lender and its successors, transferees, and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by law,
this Agreement and the rights and powers granted to the Lender hereunder and
under the Loan Documents shall continue to be effective or be reinstated if
at any time any amount received by the Lender in respect of the Obligations
is rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official of the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations,
warranties, and covenants of the Borrower contained herein shall survive the
execution and delivery of this Agreement, and shall terminate only upon the
full and final payment and performance by the Borrower of the Obligations
secured hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to
indemnify and hold harmless the Lender and its directors, officers, agents,
employees, and counsel from and against any and all costs, expenses, claims,
or liability incurred by the Lender or such Person hereunder and under any
other Loan Document or in connection herewith or therewith, unless such claim
or liability shall be due to willful misconduct or gross negligence on the
part of the Lender or such Person.
SECTION 9.10. COUNTERPARTS; TELECOPIED SIGNATURES. This
Agreement may be executed in counterparts, each of which when so executed and
delivered shall be an original, but both of which shall together constitute
one and the same instrument. This Agreement and each of the other Loan
Documents and any notices given in connection herewith or therewith may be
executed and delivered by telecopier or other facsimile transmission all with
the same force and effect as if the same was a fully executed and delivered
original manual counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or
obligation under this Agreement or any Note or any other Loan Document shall
be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality, and enforceability of the remaining provisions or obligations, or
of such provision or obligation in any other jurisdiction, shall not in any
way be affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OF REMEDIES. No delay
or omission of the Lender to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event
of Default. No single or partial exercise by the Lender of any right or
remedy shall preclude any other or further exercise thereof, or preclude any
other right or remedy.
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the Lender
agree that this Agreement, the Schedule hereto, and the Commitment Letter are
the complete and exclusive statement and agreement between the parties with
respect to the subject matter hereof, superseding all proposals and prior
agreements, oral or written, and all other communications between the parties
with respect to the subject matter hereof. Should there exist any
inconsistency between the terms of the Commitment Letter and this Agreement,
the terms of this Agreement shall prevail.
SECTION 9.14. SETOFF. In addition to and not in limitation of
all rights of offset that the Lender may have under Applicable Law, and
whether or not the Lender has made any demand or the Obligations of the
Borrower have matured, the Lender shall have the right to appropriate and
apply to the payment of the Obligations of the Borrower all deposits and
other obligations then or thereafter owing by the Lender to or for the credit
or the account of the Borrower.
SECTION 9.15. WAIVER OF JURY TRIAL. THE BORROWER AND THE
LENDER IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR
12
<PAGE>
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.16. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 9.17. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF
THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES,
IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING, (a) ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED
ON THE GROUNDS OF FORUM NON COVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (b) THE RIGHT TO INTERPOSE ANY NONCOMPULSORY SETOFF,
COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR IT SPECIFIED IN SECTION
9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION, SUBJECT
IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO RIGHTS AND REMEDIES.
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed and delivered by its proper and duly authorized officer as of
the date first set forth above.
SONOMA SYSTEMS, INC.
by: Steve M. Waszak
-------------------------------------
Name: Steve M. Waszak
Title: Vice President Finance &
Operations and Chief Financial
Officer
Federal Tax ID:
95-4582073
Accepted as of the
_____ day of July, 1998
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: _______________________________________________
Name:
Title:
Form 16
13
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
NO. 1
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
SONOMA SYSTEMS, INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: JULY 8, 1998
THIS CERTIFIES THAT for value received, TRANSAMERICA BUSINESS CREDIT
CORPORATION or its registered assigns (hereinafter called the "Holder") is
entitled to purchase from the Company, at any time during the Term of this
Warrant, One Hundred Twenty Five Thousand Five Hundred Eighty Seven (125,587)
shares of Common Stock, $0.01 par value, of the Company, at the Warrant
Price, payable as provided herein. The exercise of this Warrant shall be
subject to the provisions, limitations and restrictions herein contained, and
may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $0.01 par value, as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - shall mean the Securities Act of 1933, as amended, from
time to time.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on July 7, 2003.
WARRANT PRICE - shall mean $1.07 per share, subject to adjustment in
accordance with Section 5 hereof.
WARRANTS - shall mean this Stock Subscription Warrant and any other
warrant or warrants issued in connection with a Commitment Letter dated June
12, 1998 executed by the Company and Transamerica Business Credit Corporation
(the "Commitment Letter") to the original holder of this Warrant, or any
transferees from such original holder or this Holder.
WARRANT SHARES - shall mean shares of Common Stock purchased or
purchasable by the Holder of this Warrant upon the exercise hereof.
<PAGE>
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of
funds to the Company's account, or evidence of any indebtedness of the
Company to the Holder (or any combination of any of the foregoing) in the
amount of the Warrant Price for each share being purchased, and (iii) this
Warrant. Notwithstanding any provisions herein to the contrary, if the
Current Market Price (as defined in Section 5) is greater than the Warrant
Price (at the date of calculation, as set forth below), in lieu of exercising
this Warrant as hereinabove permitted, the Holder may elect to receive shares
of Common Stock equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
office of the Company referred to in Section 12 hereof, together with the
Notice of Exercise, in which event the Company shall issue to the Holder that
number of shares of Common Stock computed using the following formula:
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to the
Holder
WCS equals the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights
represented by this Warrant shall have been so exercised; and, unless this
Warrant has expired, a new Warrant representing the number of shares (except
a remaining fractional share), if any, with respect to which this Warrant
shall not then have been exercised shall also be issued to the Holder hereof
within such time. The person in whose name any certificate for shares of
Common Stock is issued upon exercise of this Warrant shall for all purposes
be deemed to have become the holder of record of such shares on the date on
which the Warrant was surrendered and payment of the Warrant Price and any
applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i)
any applicable state securities laws and (ii) any securities exchange upon
which such Warrant Shares may, at the time of such exercise, be listed) on
- 2 -
<PAGE>
the face thereof unless at the time of exercise such Warrant Shares shall be
registered under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
securities represented thereby) shall also bear such legend unless, in the
opinion of counsel for the holder thereof (which counsel shall be reasonably
satisfactory to counsel for the Company) the securities represented thereby
are not, at such time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees
that all shares of Common Stock that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. The Company further covenants and agrees that
it will pay when due and payable any and all federal and state taxes which
may be payable in respect of the issue of this Warrant or any Common Stock or
certificates therefor issuable upon the exercise of this Warrant. The Company
further covenants and agrees that the Company will at all times have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of Common Stock to provide for the exercise of the rights represented
by this Warrant. The Company further covenants and agrees that if any shares
of capital stock to be reserved for the purpose of the issuance of shares
upon the exercise of this Warrant require registration with or approval of
any governmental authority under any federal or state law before such shares
may be validly issued or delivered upon exercise, then the Company will in
good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be. If and so long as the Common
Stock issuable upon the exercise of this Warrant is listed on any national
securities exchange, the Company will, if permitted by the rules of such
exchange, list and keep listed on such exchange, upon official notice of
issuance, all shares of such Common Stock issuable upon exercise of this
Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Warrant Price as provided in Section 5, the Holder shall thereafter be
entitled to purchase, at the Warrant Price resulting from such adjustment,
the number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment
by the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Price resulting
from such adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable
in shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders
of Common Stock entitled to receive such stock dividend, subdivision or
split-up, the Warrant Price shall be appropriately decreased so that the
number of shares of Common Stock issuable upon the exercise thereof shall be
increased in proportion to such increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following
- 3 -
<PAGE>
the record date for such combination, the Warrant Price shall appropriately
increase so that the number of shares of Common Stock issuable upon the
exercise hereof shall be decreased in proportion to such decrease in
outstanding shares.
(iii) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than
out of earnings or earned surplus or shall distribute to holders of its
Common Stock shares of its capital stock (other than Common Stock), stock or
other securities of other persons, evidences of indebtedness issued by the
Company or other persons, assets (excluding cash dividends and distributions)
or options or rights (excluding options to purchase and rights to subscribe
for Common Stock or other securities of the Company convertible into or
exchangeable for Common Stock), then, in each such case, immediately
following the record date fixed for the determination of the holders of
Common Stock entitled to receive such dividend or distribution, the Warrant
Price in effect thereafter shall be determined by multiplying the Warrant
Price in effect immediately prior to such record date by a fraction of which
the numerator shall be an amount equal to the difference of (x) the Current
Market Price of one share of Common Stock minus (y) the fair market value (as
determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the stock, securities, evidences of indebtedness,
assets, options or rights so distributed in respect of one share of Common
Stock, and of which the denominator shall be such Current Market Price.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(v) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed
to be the average of the daily closing prices for the 15 consecutive business
days ending on the last business day before the day in question (as adjusted
for any stock dividend, split, combination or reclassification that took
effect during such 15 business day period). The closing price for each day
shall be the last reported sales price regular way or, in case no such
reported sales took place on such day, the average of the last reported bid
and asked prices regular way, in either case on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or as reported by Nasdaq (or if the Common Stock is not at the time
listed or admitted for trading on any such exchange or if prices of the
Common Stock are not reported by Nasdaq then such price shall be equal to the
average of the last reported bid and asked prices on such day as reported by
The National Quotation Bureau Incorporated or any similar reputable quotation
and reporting service. If such quotation is not reported by The National
Quotation Bureau Incorporated); provided, however, that if the Common Stock
is not traded in such manner that the quotations referred to in this clause
(v) are available for the period required hereunder, the Current Market Price
shall be determined in good faith by the Board of Directors of the Company
or, if such denomination cannot be made, by a nationally recognized
independent investment banking firm selected by the Board of Directors of the
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(vi) Whenever the Warrant Price shall be adjusted as provided in
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by
mail, first class postage prepaid, to each Holder of this Warrant at its, his
or her address appearing on the Company's records. Where appropriate, such
copy may be given in advance and may be included as part of the notice
required to be mailed under the provisions of subsection (viii) of this
Section 5.
- 4 -
<PAGE>
(vii) Adjustments made pursuant to clauses (i), (ii) and (iii) above
shall be made on the date such dividend, subdivision, split-up, combination
or distribution, as the case may be, is made, and shall become effective at
the opening of business on the business day following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination, or distribution.
(viii) In the event the Company shall propose to take any action of the
types described in clauses (i), (ii), or (iii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(ix) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for
an event, the Company may defer until the occurrence of such event issuing
to the Holder of all or any part of this Warrant which is exercised after
such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the
adjustment required by such event over and above the shares of capital stock
issuable upon such exercise before giving effect to such adjustment event
provided, however, that the Company shall deliver to such Holder a due bill
or other appropriate instrument evidencing such Holder's right to receive
such additional shares upon the occurrence of the event requiring such
adjustment.
SECTION 6 OWNERSHIP.
6.1 OWNERSHIP OF THIS WARRANT. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary until presentation of this Warrant for registration of
transfer as provided in this Section 6.
6.2 TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or
Warrants, of the same tenor as this Warrant but registered in the name of the
transferee or transferees (and in the name of the Holder, if a partial
transfer is effected) shall be made and delivered by the Company upon
surrender of this Warrant duly endorsed, at the office of the Company
referred to in Section 12 hereof. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft or destruction, and, in such
case, of indemnity or security reasonably satisfactory to it, and upon
surrender of this Warrant if mutilated, the Company will make and deliver a
new Warrant of like tenor, in lieu of this Warrant; provided that if the Holder
hereof is an instrumentality of state or local government or an institutional
holder or a nominee for such an instrumentality or institutional holder an
irrevocable agreement of indemnity by such Holder shall be sufficient for all
purposes of this Section 6, and no evidence of loss or theft or destruction
shall be necessary. This Warrant shall be promptly cancelled by the Company
upon the surrender hereof in connection with any transfer or replacement.
Stock transfer taxes (if any) payable in connection with a transfer of this
Warrant, shall be payable by the Holder. Holder will not transfer this Warrant
and the rights hereunder except in compliance with federal and state
securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed
sale of all or substantially all of its assets to another person or entity,
or proposed reorganization or reclassification of the capital stock of the
Company, then, as a condition of such consolidation, merger, sale,
reorganization or reclassification, lawful and adequate provision shall be
made whereby the Holder of the Warrant shall thereafter have the right to
-5-
<PAGE>
receive upon the basis and upon the terms and conditions specified herein, in
lieu of the shares of the Common Stock of the Company immediately theretofore
purchasable hereunder, such shares of stock, securities or assets as may (by
virtue of such consolidation, merger, sale, reorganization or
reclassification) be issued or payable with respect to or in exchange for the
number of shares of such Common Stock purchasable hereunder immediately
before such consolidation, merger, sale, reorganization or reclassification.
In any such case appropriate provision shall be made with respect to the
rights and interests of the Holder of this Warrant to the end that the
provisions hereof shall thereafter be applicable as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of this Warrant.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution
of the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution
to shareholders until the expiration of thirty (30) days from the date of
mailing of the aforesaid notice and, in any case, the Holder hereof may
exercise this Warrant within thirty (30) days from the date of the giving of
such notice, and all rights herein granted not so exercised within such
thirty-day period shall thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of
the Company shall declare any dividend or other distribution on its Common
Stock except out of earned surplus or by way of a stock dividend payable in
shares of its Common Stock, the Company shall mail notice thereof to the
Holder hereof not less than thirty (30) days prior to the record date fixed
for determining shareholders entitled to participate in such dividend or
other distribution, and the Holder hereof shall not participate in such
dividend or other distribution unless this Warrant is exercised prior to such
record date. The provisions of this Section 9 shall not apply to
distributions made in connection with transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for
the provisions of this Section 10, be entitled under the terms hereof to
receive a fractional share upon the complete exercise of this Warrant, the
Company shall, upon the exercise of this Warrant for the largest number of
whole shares then called for, pay a sum in cash equal to the excess of the
value of such fractional share (determined in such reasonable manner as may
be prescribed in good faith by the Board of Directors of the Company) over
the Warrant Price for such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. WILL NOT AMEND CERTIFICATE. The Company will not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.3. WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
-6-
<PAGE>
SECTION 12. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified
or registered mail to, the Holder at Transamerica Technology Finance
Division, 76 Batterson Park Road, Farmington, Connecticut 06032, Attention:
Assistant Vice President, Lease Administration, with a copy to the Lender at
Riverway II, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois
60018, Attention: Legal Department or to such other address as shall have
been furnished to the Company in writing by the Holder. Any notice or other
document required or permitted to be given or delivered to the Company shall
be delivered at, or sent by certified or registered mail to, the Company at
4640 Admiralty Way, Suite 600, Marina del Ray, California, 90292-6695,
Attention: Chief Financial Officer or to such other address as shall have
been furnished in writing to the Holder by the Company. Any notice so
addressed and mailed by registered or certified mail shall be deemed to be
given when so mailed. Any notice so addressed and otherwise delivered shall
be deemed to be given when actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company except upon exercise in accordance with the terms hereof. No
provision hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall given rise to any liability of the Holder
for the Warrant Price hereunder or as a shareholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
SECTION 14. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
SECTION 15. MISCELLANEOUS. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by both parties (or any respective predecessor in interest thereof).
The headings in this Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer this 9th day of July, 1998.
SONOMA SYSTEMS, INC.
[CORPORATE SEAL]
By: /s/ Steve M. Waszak
--------------------------------
Title: Vice President Finance
--------------------------------
Chief Financial Officer
- 7-
<PAGE>
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _______ shares of
Common Stock which the undersigned is entitled to purchase by the terms of
the within Warrant according to the conditions thereof, and herewith
[CHECK ONE] / / makes payment of $ _______ therefor; or
/ / directs the Company to issue _______ shares, and
to withhold ____ shares in lieu of payment of the
Warrant Price, as described in Section 2.1 of
the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and
the initial address of such person to entered on the books of the Company
shall be:
The shares are to be issued in certificates of the following denominations:
_______________________________________
[Type Name of Holder]
By: ________________________________
Title: ________________________________
Dated: _______________________________
-8-
<PAGE>
FORM OF ASSIGNMENT
(ENTIRE)
[TO BE SIGNED ONLY UPON TRANSFER OF ENTIRE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ____________________________________ all rights of
the undersigned under and pursuant to the within Warrant, and the undersigned
does hereby irrevocably constitute and appoint _______________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power of substitution.
_______________________________________
[Type Name of Holder]
By: ________________________________
Title: ________________________________
Dated: _______________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- 9 -
<PAGE>
FORM OF ASSIGNMENT
(PARTIAL)
[TO BE SIGNED ONLY UPON PARTIAL TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ________________________________________ hereby
sells, assigns and transfers unto ____________________________________ (i)
the rights of the undersigned to purchase ________ shares of Common Stock
under and pursuant to the within Warrant, and (ii) on a non-exclusive basis,
all other rights of the undersigned under and pursuant to the within Warrant,
it being understood that the undersigned shall retain, severally (and not
jointly) with the transferee(s) named herein, all rights assigned on such
non-exclusive basis. The undersigned does hereby irrevocably constitute and
appoint _______________________________ Attorney to transfer the said Warrant
on the books of the Company, with full power of substitution.
_______________________________________
[Type Name of Holder]
By: ________________________________
Title: ________________________________
Dated: _______________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- 10 -
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
NO. 2
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
SONOMA SYSTEMS, INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: JULY 8, 1998
THIS CERTIFIES THAT for value received, PRIORITY CAPITAL RESOURCES or
its registered assigns (hereinafter called the "Holder") is entitled to
purchase from the Company, at any time during the Term of this Warrant,
Thirty One Thousand Three Hundred Ninety Seven (31,397) shares of
Common Stock, $0.01 par value, of the Company, at the Warrant Price, payable
as provided herein. The exercise of this Warrant shall be subject to the
provisions, limitations and restrictions herein contained, and may be
exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $0.01 par value, as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - shall mean the Securities Act of 1933, as amended, from
time to time.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on July 7, 2003.
WARRANT PRICE - shall mean $1.07 per share, subject to adjustment in
accordance with Section 5 hereof.
WARRANTS - shall mean this Stock Subscription Warrant and any other
warrant or warrants issued in connection with a Commitment Letter dated June
12, 1998 executed by the Company and Transamerica Business Credit Corporation
(the "Commitment Letter") to the original holder of this Warrant, or any
transferees from such original holder or this Holder.
WARRANT SHARES - shall mean shares of Common Stock purchased or
purchasable by the Holder of this Warrant upon the exercise hereof.
<PAGE>
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of
funds to the Company's account, or evidence of any indebtedness of the
Company to the Holder (or any combination of any of the foregoing) in the
amount of the Warrant Price for each share being purchased, and (iii) this
Warrant. Notwithstanding any provisions herein to the contrary, if the
Current Market Price (as defined in Section 5) is greater than the Warrant
Price (at the date of calculation, as set forth below), in lieu of exercising
this Warrant as hereinabove permitted, the Holder may elect to receive shares
of Common Stock equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
office of the Company referred to in Section 12 hereof, together with the
Notice of Exercise, in which event the Company shall issue to the Holder that
number of shares of Common Stock computed using the following formula:
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to the
Holder
WCS equals the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights
represented by this Warrant shall have been so exercised; and, unless this
Warrant has expired, a new Warrant representing the number of shares (except
a remaining fractional share), if any, with respect to which this Warrant
shall not then have been exercised shall also be issued to the Holder hereof
within such time. The person in whose name any certificate for shares of
Common Stock is issued upon exercise of this Warrant shall for all purposes
be deemed to have become the holder of record of such shares on the date on
which the Warrant was surrendered and payment of the Warrant Price and any
applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on
the next succeeding date on which the stock transfer books are open
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i)
any applicable state securities laws and (ii) any securities exchange upon
which such Warrant Shares may, at the time of such exercise, be listed) on
- 2 -
<PAGE>
the face thereof unless at the time of exercise such Warrant Shares shall be
registered under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
securities represented thereby) shall also bear such legend unless, in the
opinion of counsel for the holder thereof (which counsel shall be reasonably
satisfactory to counsel for the Company) the securities represented thereby
are not, at such time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees
that all shares of Common Stock that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. The Company further covenants and agrees that
it will pay when due and payable any and all federal and state taxes which
may be payable in respect of the issue of this Warrant or any Common Stock or
certificates therefor issuable upon the exercise of this Warrant. The Company
further covenants and agrees that the Company will at all times have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of Common Stock to provide for the exercise of the rights represented
by this Warrant. The Company further covenants and agrees that if any shares
of capital stock to be reserved for the purpose of the issuance of shares
upon the exercise of this Warrant require registration with or approval of
any governmental authority under any federal or state law before such shares
may be validly issued or delivered upon exercise, then the Company will in
good faith and as expeditiously as possible endeavor to secure such
registration or approval, as the case may be. If and so long as the Common
Stock issuable upon the exercise of this Warrant is listed on any national
securities exchange, the Company will, if permitted by the rules of such
exchange, list and keep listed on such exchange, upon official notice of
issuance, all shares of such common Stock issuable upon exercise of this
Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the
Warrant Price as provided in Section 5, the Holder shall thereafter be
entitled to purchase, at the Warrant Price resulting from such adjustment,
the number of shares (calculated to the nearest tenth of a share) obtained by
multiplying the Warrant Price in effect immediately prior to such adjustment
by the number of shares purchasable pursuant hereto immediately prior to such
adjustment and dividing the product thereof by the Warrant Price resulting
from such adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject
to adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock,
then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or
split-up, the Warrant Price shall be appropriately decreased so that the
number of shares of Common Stock issuable upon the exercise hereof shall be
increased in proportion to such increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then following
- 3 -
<PAGE>
the record date for such combination, the Warrant Price shall appropriately
increase so that the number of shares of Common Stock issuable upon the
exercise hereof shall be decreased in proportion to such decrease in
outstanding shares.
(iii) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than
out of earnings or earned surplus or shall distribute to holders of its
Common Stock shares of its capital stock (other than Common Stock), stock or
other securities of other persons, evidences of indebtedness issued by the
Company or other persons, assets (excluding cash dividends and distributions)
or options or rights (excluding options to purchase and rights to subscribe
for Common Stock or other securities of the Company convertible into or
exchangeable for Common Stock), then, in each such case, immediately
following the record date fixed for the determination of the holders of
Common Stock entitled to receive such dividend or distribution, the Warrant
price in effect thereafter shall be determined by multiplying the Warrant Price
in effect immediately prior to such record date by a fraction of which
the numerator shall be an amount equal to the difference of (x) the
Current Market Price of one share of Common Stock minus (y) the fair
market value (as determined by the Board of Directors of the Company,
whose determination shall be conclusive) of the stock, securities,
evidences of indebtedness, assets, options or rights so distributed in
respect of one share of Common Stock, and of which the denominator shall be
such Current Market Price.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(v) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed
to be the average of the daily closing prices for the 15 consecutive business
days ending on the last business day before the day in question (as adjusted
for any stock dividend, split, combination or reclassification that took
effect during such 15 business day period). The closing price for each day
shall be the the last reported sales price regular way or, in case no such
reported sales took place on such day, the average of the last reported bid
and asked prices regular way, in either case on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading or as reported by Nasdaq (or if the Common Stock is not at the time
listed or admitted for trading on any such exchange or if prices of the
Common Stock are not reported by Nasdaq then such price shall be equal to the
average of the last reported bid and asked prices on such day as reported by
The National Quotation Bureau Incorporated or any similar reputable quotation
and reporting service, if such quotation is not reported by The National
Quotation Bureau Incorporated); provided, however, that if the Common Stock
is not traded in such manner that the quotations referred to in this clause
(v) are available for the period required hereunder, the Current Market Price
shall be determined in good faith by the Board of Directors of the Company
or, if such determination cannot be made, by a nationally recognized
independent investment banking firm selected by the Board of Directors of the
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(vi) Whenever the Warrant Price shall be adjusted as provided in
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by
mail, first class postage prepaid, to each Holder of this Warrant at its, his
or her address appearing on the Company's records. Where appropriate, such
copy may be given in advance and may be included as part of the notice
required to be mailed under the provisions of subsection (viii) of this
Section 5.
- 4 -
<PAGE>
(vii) Adjustments made pursuant to clauses (i), (ii) and (iii) above
shall be made on the date such dividend, subdivision, split-up, combination
or distribution, as the case may be, is made, and shall become effective at
the opening of business on the business day next following the record date
for the determination of stockholders entitled to such dividend, subdivision,
split-up, combination or distribution.
(viii) In the event the Company shall propose to take any action of the
types described in clauses (i), (ii), or (iii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(ix) In any case in which the provisions of this Section 5 shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of all or any part of this Warrant which is exercised
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the
adjustment required by such event over and above the shares of capital stock
issuable upon such exercise before giving effect to such adjustment event;
provided, however, that the Company shall deliver to such Holder a due bill
or other appropriate instrument evidencing such Holder's right to receive
such additional shares upon the occurrence of the event requiring such
adjustment.
SECTION 6. OWNERSHIP
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner
hereof (notwithstanding any notations of ownership or writing hereon made by
anyone other than the Company) for all purposes and shall not be affected by
any notice to the contrary until presentation of this Warrant for
registration of transfer as provided in this Section 6.
6.2 TRANSFER AND REPLACEMENT. This warrant and all rights hereunder
are transferable in whole or in part upon the books of the Company by the
Holder hereof in person or by duly authorized attorney, and a new Warrant or
Warrants, of the same tenor as this Warrant but registered in the name of the
transferee or transferees (and in the name of the Holder, if a partial
transfer is effected) shall be made and delivered by the Company upon
surrender of this Warrant duly endorsed, at the office of the Company
referred to in Section 12 hereof. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft or destruction, and, in such
case, of indemnity or security reasonably satisfactory to it, and upon
surrender of this Warrant if mutilated, the Company will make and deliver a
new Warrant of like tenor, in lieu of this Warrant; provided that if the
Holder hereof is an instrumentality of a state or local government or an
institutional holder or a nominee for such an instrumentality or
institutional holder an irrevocable agreement of indemnity by such Holder
shall be sufficient for all purposes of this Section 6, and no evidence of
loss or theft or destruction shall be necessary. This Warrant shall be
promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, shall be payable by the Holder.
Holder will not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed
sale of all or substantially all of its assets to another person or entity,
or any proposed reorganization of reclassification of the capital stock of
the Company, then, as a condition of such consolidation, merger, sale,
reorganization or reclassification, lawful and adequate provision shall be
made whereby the Holder of this Warrant shall thereafter have the right to
- 5 -
<PAGE>
receive upon the basis and upon the terms and conditions specified herein, in
lieu of the shares of the Common Stock of the Company immediately theretofore
purchasable hereunder, such shares of stock, securities or assets as may (by
virtue of such consolidation, merger, sale, reorganization or
reclassification) be issued or payable with respect to or in exchange for the
number of shares of such Common Stock purchasable hereunder immediately
before such consolidation, merger, sale, reorganization or reclassification.
In any such case appropriate provision shall be made with respect to the
rights and interests of the Holder of this Warrant to the end that the
provisions hereof shall thereafter be applicable as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of this Warrant.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution
of the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution
to shareholders until the expiration of thirty (30) days from the date of
mailing of the aforesaid notice and, in any case, the Holder hereof may
exercise this Warrant within thirty (30) days from the date of the giving of
such notice, and all rights herein granted not so exercised within such
thirty-day period shall thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of
the Company shall declare any dividend or other distribution on its Common
Stock except out of earned surplus or by way of a stock dividend payable in
shares of its Common Stock, the Company shall mail notice thereof to the
Holder hereof not less than thirty (30) days prior to the record date fixed
for the determining shareholders entitled to participate in such dividend or
other distribution, and Holder hereof shall not participate in such dividend
or other distribution unless this Warrant is exercised prior to such record
date. The provisions of this Section 9 shall not apply to distributions made
in connection with transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for
the provisions of this Section 10, be entitled under the terms hereof to
receive a fractional share upon the complete exercise of this Warrant, the
Company shall, upon the exercise of this Warrant for the largest number of
whole shares then called for, pay a sum in cash equal to the excess of the
value of such fractional share (determined in such reasonable manner as may
be prescribed in good faith by the Board of Directors of the Company) over
the Warrant Price for such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of the Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1 WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2 WILL NOT AMEND CERTIFICATE. The Company will not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.3 WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or aquisition of all or substantially all of the Company's
assets.
-6-
<PAGE>
SECTION 12. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified
or registered mail to, the Holder at Transamerica Technology Finance
Division, 76 Batterson Park Road, Farmington, Connecticut 06032, Attention:
Assistant Vice President, Lease Administration, with a copy to the Lender at
Riverway Il, West Office Tower, 9399 West Higgins Road, Rosemont, Illinois
60018, Attention: Legal Department or to such other address as shall have
been furnished to the Company in writing by the Holder. Any notice or other
document required or permitted to be given or delivered to the Company shall
be delivered at, or sent by certified or registered mail to, the Company at
4640 Admiralty Way, Suite 600, Marina del Ray, California, 90292-6695,
Attention: Chief Financial Officer or to such other address as shall have
been furnished in writing to the Holder by the Company. Any notice so
addressed and mailed by registered or certified mail shall be deemed to be
given when so mailed. Any notice so addressed and otherwise delivered shall
be deemed to be given when actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company except upon exercise in accordance with the terms hereof. No
provision hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder
for the Warrant Price hereunder or as a shareholder of the Company, whether
such liability is asserted by the Company or by creditors of the Company.
SECTION 14. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF.
SECTION 15. MISCELLANEOUS. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by both parties (or any respective predecessor in interest thereof).
The headings in this Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 9th day of July, 1998.
SONOMA SYSTEMS, INC.
[CORPORATE SEAL]
By: /s/ Steve M. Waszak
--------------------------------
Title: Vice President Finance
Chief Financial Officer
- 7-
<PAGE>
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _______ shares of
Common Stock which the undersigned is entitled to purchase by the terms of
the within Warrant according to the conditions thereof, and herewith
[CHECK ONE] / / makes payment of $ _______ therefor; or
/ / directs the Company to issue _______ shares, and
to withhold ____ shares in lieu of payment of the
Warrant Price, as described in Section 2.1 of
the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and
the initial address of such person to entered on the books of the Company
shall be:
The shares are to be issued in certificates of the following denominations:
_______________________________________
[Type Name of Holder]
By: ________________________________
Title: ________________________________
Dated: _______________________________
-8-
<PAGE>
FORM OF ASSIGNMENT
(ENTIRE)
[TO BE SIGNED ONLY UPON TRANSFER OF ENTIRE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ________________________________________ hereby sells,
assigns and transfers unto ____________________________________ all rights of
the undersigned under and pursuant to the within Warrant, and the undersigned
does hereby irrevocably constitute and appoint _______________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power of substitution.
_______________________________________
[Type Name of Holder]
By: ________________________________
Title: ________________________________
Dated: _______________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- 9 -
<PAGE>
FORM OF ASSIGNMENT
(PARTIAL)
[TO BE SIGNED ONLY UPON PARTIAL TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ________________________________________ hereby
sells, assigns and transfers unto ____________________________________ (i)
all rights of the undersigned to purchase ________ shares of Common Stock
under and pursuant to the within Warrant, and (ii) on a non-exclusive basis,
all other rights of the undersigned under and pursuant to the within Warrant,
it being understood that the undersigned shall retain (and not jointly) with
the transferee(s) named herein, all rights assigned on such non-exclusive
basis. The undersigned does hereby irrevocably constitute and appoint
_______________________________ Attorney to transfer the said Warrant on the
books of the Company, with full power of substitution.
_______________________________________
[Type Name of Holder]
By: ________________________________
Title: ________________________________
Dated: _______________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
- 10 -
<PAGE>
SUBLEASE AGREEMENT
DATE OF THIS SUBLEASE:
INCORPORATION BY REFERENCE: The terms and conditions of this Sublease shall
include various Sections of the Over-Lease, which are
incorporated into this Sublease as if fully set forth,
except that: (i) each reference to the "Premises"
shall be deemed a reference to the "Subleased
Premises"; (ii) each reference to "Landlord" and
"Tenant" shall be deemed a reference to "Over-Tenant"
and "Under-Tenant", respectively (except as expressly
set forth below) and (iii) with respect to work,
services, repairs, restoration, the provision of
insurance or the performance of any other
obligation of Landlord under the Over-Lease,
Over-Tenant shall use diligent good faith efforts
to obtain Landlord's performance of such
obligations on Under-Tenant's behalf.
PARTIES TO THIS Over-Tenant: Olicom, Inc.
SUBLEASE: Address for notices: 1680 North Prospect Drive
Richardson, TX 75081
You, the Under-Tenant: Sonoma Systems, Inc.
Address for notices: 4640 Admiralty Way, 6th Floor
Marina Del Rey, CA 90292-6695
INFORMATION FROM Landlord: Telegraph Properties, Inc.
OVER-LEASE: Address for Notices:
Date of Over-Lease: April 30, 1992 as amended
January 15, 1993 (First
Amendment) and August 27,
1997 (Second Amendment)
Term of Over-Lease: From: July 1, 1992
To: December 31, 2002
A copy of the Over-Lease is attached as an important
part of the Sublease.
SUBLEASE TERM: 1. Beginning: December 1, 1998
Ending: December 31, 2002
PREMISES RENTED 2. Premises with appurtenances of the Over-Lease to be
leased by Over-Tenant of approximately 21,472 sq.
ft., subject to the rent provision contained herein.
USE OF PREMISES: 3. The premises will be used for general office use
with manufacturing, sales, marketing and research and
development. Nothing contained herein is contrary to
the use allowed in the Over-Lease.
RENT: 4. Under-Tenant shall pay to Over-Tenant without
notice, set-off, or deduction of any kind, Annual Base
rent, Annual Estimated Operating Costs and Annual
Improvements Rent, if any, (collectively "Annual
Rent") when and as required to be paid by Over-Tenant
to Landlord under the Over-Lease, applicable to the
Premises. Under-Tenant shall pay Annual Rent in the
required amount, from December 1, 1998 to January 31,
1999, for only 15,000 sq. ft. Effective February 1,
1999 through the end of the term of this Sublease,
Under-Tenant
1
<PAGE>
shall pay Annual Rent for 21,472 sq. ft as and when
required to be paid by Over-Tenant to Landlord under
the Over-Lease.
UTILITIES AND OPERATING
COSTS: 5. Under-Tenant shall be billed by the Over-Tenant for
its share of the monthly utilities and operating costs
of the entire building, and shall pay for such within
twenty (20) days of receipt of an invoice from
Over-Tenant. Failure of Under-Tenant to pay said
invoice within twenty (20) days of receipt of invoice
shall be considered a default under this Sublease, and
Over-Tenant may take the same action for this default
as described for a default within the Overlease.
Under-Tenant shall be billed based upon the space
occupied by it, which has been calculated at
thirty-six (36%) percent.
SECURITY: 6. The security for the Under-Tenant's performance is
NONE
AGREEMENT TO LEASE 7. Over-Tenant sublets the Premises to you, the
AND PAY RENT: Under-Tenant, for the Term. Over-Tenant states that
it has the authority to do so. You, the Under-Tenant
agree to pay the Rent and other charges as required in
the Sub-Lease to the Over-Tenant. You, the
Under-Tenant, agree to do everything required of you
in this Sub-Lease.
NOTICES: 8. Any notice, request or demand ("Notice") permitted
or required to be given by the terms and provisions of
this Sublease, or by any law or government regulation,
either by Over-Tenant to Under-Tenant or by government
regulation, either by Over-tenant to Under-Tenant or
by Under-Tenant to Over-Tenant shall be effective only
if given in writing and personally delivered or, if
not personally delivered, if sent by registered or
certified mail or express mail or overnight express
delivery service to the addresses of the responsive
parties set forth on page 1 hereof. Any such notice,
shall be deemed to have been rendered or given (I) if
sent by registered or certified mail, on the day it is
officially recorded as delivered to or refused by the
intended recipient by return receipt or equivalent,
and in the absence of such record of delivery, the
effective date shall be presumed to have been the
third (3rd) business day after the date when it shall
have been deposited in the mail as provided in this
Section, (II) if sent by express mail or other
overnight mail service carrier, on the date it is
officially recorded by the express mail service
carrier as delivered to the intended recipient or
(III) if delivered personally, or by expedited
messenger service, upon receipt. Any party or other
person, may, by notice as aforesaid, designate a
different address for service of Notice upon it.
SUBJECT TO: 9. The Sublease is subject to the Over-Lease as it
applies to the Premises. It is also subject to any
agreement to which the Over-Lease is subject as it
applies to the Premises. You, the Under-Tenant, state
that you have read and initialed the Over-Lease and
will not violate it in any way.
UNDER-TENANT'S DUTIES AND
RIGHTS: 10. The Over-Lease describes the Landlord's duties.
The Over-Tenant is not obligated to perform the
Landlord's duties. If the Landlord fails to perform,
you, the Under-Tenant, must notify the Over-Tenant of
the Landlord's failure to perform pursuant to the
Over-Lease. Under-Tenant shall indemnify the
Over-tenant of its actual costs incurred, including
reasonable attorney fees, if Under-Tenant stores
hazardous materials on the Premises in violation of
the Over-Lease. If only the Over-Tenant is in default
of the Over-Lease whereas it causes the Under-Tenant
to be actually physically evicted from the Premises by
legal action of the Landlord, the Over-Tenant shall
indemnify the Under-Tenant for its reasonable out of
pocket expenses, limited to: (1) reasonable attorney
fees, (2) the reasonable moving expenses of
Under-Tenant's property from the Premises to a
location within a thirty mile radius of the Premises,
and (3) the reasonable cost difference between the
Annual Rent of the Premises and the
2
<PAGE>
Annual Rent of a similar class building of equal
square footage and amenities for the remaining term
length under this Sublease. If the default of the
Over-Tenant is caused by the Under-Tenant, then the
Over-Tenant shall not be liable for any expenses or
costs attributable to the Landlord taking legal
action thereby evicting the Under-Tenant.
Under-Tenant shall have all the rights available to
it at law or equity, except as specifically set out
herein, in the event of breach of any provisions of
this Sublease by the Over-Tenant.
OVER-TENANT'S DUTIES AND
RIGHTS: 11. Over-Tenant declares, warrants, and covenants that
Over-Tenant shall not be in default of the Over-Lease
as of the beginning of the term of this Sublease.
Over-Tenant shall not enter into any agreements with
Landlord to terminate or amend the Over-Lease.
Over-Lease shall deliver to Under-Tenant copies of all
notices received form Landlord. Over-Tenant is unaware
of any hazardous materials, in violation of the
Over-Lease, on the Subleased Premises. Over-Tenant
shall indemnify the Under-tenant for its actual costs
incurred, including reasonable attorney fees, if
Over-Tenant stores hazardous materials on the Premises
in violation of the Over-Lease, and such violation
causes Under-Tenant to be evicted from the Premises
prior to the end of the term of this Sublease.
Over-Tenant covenants that it has had no notice of any
condemnation action pursuant to an action based upon
eminent domain. In the event the Under-Tenant defaults
under any of the terms, covenants, conditions or
agreements hereunder, Over-Tenant shall have the same
rights and remedies as the Landlord has in the event
of a default under the Over-Lease to the same extent
as if same were specifically set forth herein at
length with the following changes:
PARAGRAPH 9.1.: ten (10) days in line 3 shall be
amended to seven (7) days; thirty (30) days shall be
amended to twenty (20) days in lines 4 and 7; sixty
(60) days in line 13 shall be amended to fifty (50)
days. Over-Tenant shall have all the rights available
to it at law or equity, except as specifically set out
herein, in the event of breach of any provisions of
this Sublease by the Under-Tenant.
ADOPTING THE 12. The provisions of the Over-Lease are part of this
OVER-LEASE AND Sublease. All the provisions of the Over-Lease
EXCEPTIONS: applying to the Over-Tenant are binding on you, the
Under-Tenant, except these:
a) These numbered paragraphs, as described by their
headings, of the Over-Lease shall not apply:
3.1 and 3.1.A-Initial Construction
3.2. and 3.2.A-Preparation of Premises for
Occupancy
4.1.-only second sentence-Rent
8.1. to 8.7.-Rights of Mortgage
10.4-all text after first sentence-Bind and
Inure
10.13
Exhibit D
Exhibit E
Paragraph 9 of the 1st Amendment
Paragraph 10 of the 1st Amendment
Paragraph 4 of the Second Amendment-Tenant
Improvements
Paragraph 7 of the Second Amendment-Extension
Time
Paragraph 8 of the Second Amendment
NO AUTHORITY: 13. You, the Under-Tenant, have no authority to make
any agreement with the Landlord.
SUCCESSORS: 14. Unless otherwise stated, this Sublease is binding
on all parties who lawfully succeed to the rights or
take the place of the Over-Tenant or you, the Under-
3
<PAGE>
Tenant. Examples of this are a successor corporation
as a result of a merger or consolidation, or an heir.
CHANGES: 15. This Sublease can be changed only by an agreement
in writing signed by all parties to this Sublease.
SIGNATURES:
Witnesses: OVER-TENANT: OLICOM, INC.
/s/ [ILLEGIBLE]
- --------------------------------------- -----------------------------------
Director of Finance & Admin.
- --------------------------------------- -----------------------------------
Witnesses: You, the UNDER-TENANT: SONOMA SYSTEMS, INC.
/s/ Steve M. Waszak
- --------------------------------------- -----------------------------------
Vice President, Finance
and Operations
- --------------------------------------- -----------------------------------
Date: December 1, 1998
4
<PAGE>
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease is made this 27th day of August, 1997 by and
between Connecticut General Life Insurance Company, a Connecticut corporation
("Landlord") and Olicom, Inc., a Delaware corporation ("Tenant").
W I T N E S S E T H
WHEREAS, New England Mutual Life Insurance Company, as landlord (the
"Original Landlord") and Crosscom Corporation, as tenant (the "Original
Tenant") entered into that certain lease dated as of April 30, 1992 with
respect to premises located at 450 Donald J. Lynch Boulevard, Marlborough,
Massachusetts (the "Original Lease");
WHEREAS, Landlord is the successor-in-interest to the Original Landlord's
interest as landlord under the Lease and Tenant is the successor-in-interest to
the Original Tenant's interest as tenant under the Lease;
WHEREAS, Landlord and Tenant entered into a First Amendment to Lease dated
January 15, 1999 amending the Original Lease (as so amended, the "Lease");
WHEREAS, Landlord and Tenant wish to extend the term of the Lease and to
otherwise amend the Lease as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree
as follows:
1. Capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Lease.
2. Effective January 1, 1998 (the "Effective Date"), Section 1.1 of the
Lease is hereby amended by substituting the data set forth below for the
corresponding data set forth in the Lease:
LANDLORD'S REPRESENTATIVE: William Bailey
TERM EXPIRATION DATE: December 31, 2002
RENTABLE FLOOR AREA
OF TENANT'S SPACE: 59,675 square feet constituting the Total
Rentable Floor Area of the Building.
<PAGE>
ANNUAL BASE RENT: (a) From January 1, 1998 through December 31, 1999:
$495,302.50; $8.30 (p.r.s.f.); (b) from January 1, 2000
through December 31, 2001: $554,977.50; $9.50
(p.r.s.f.); (c) from January 1, 2002 through December
31, 2002: $614,652.50; $10.30 (p.r.s.f.)
ANNUAL ESTIMATED
OPERATING COSTS: $239,893.50; $4.02 (p.r.s.f.)(exclusive of electricity
and gas charges which shall be paid directly by Tenant)
ANNUAL RENT: The sum of Annual Base Rent, Annual Estimated Operating Costs
and Annual Improvement Rent, if any (subject to the adjustment
set forth in Section 4.1.1), by way of illustration computed
for the period from January 1, 1998 through December 31, 1998
(subject to increase for Annual Improvement Rent, if any) as
follows:
<TABLE>
<S> <C> <C> <C> <C>
$8.30 $4.02 $12.32 59,675 sF $735,196.00
Annual Annual (p.r.s.f.) Annual Rent
Base Rent Estimated
(p.r.s.f.) Operating Costs
(p.r.s.f.)
</TABLE>
TENANT ALLOWANCE: $2.00 per square foot of Rentable Floor Area of
Tenant's Space.
3. Notwithstanding any provision of the Lease to the contrary, Tenant
shall pay all electricity and gas charges for the Building and the Lot
(including the Premises) directly to the utilities providing such services. All
such amounts shall be paid prior to the date the same become due.
4. Notwithstanding any provision of the Lease to the contrary, Tenant
shall be responsible for all improvements to Tenant's Space at Tenant's sole
cost, other than as specifically set forth herein. Landlord shall provide an
allowance for such work equal to the Tenant Allowance, provided, however, that
Tenant may, at Tenant's election, use a portion of the Tenant Allowance to pay
a brokerage fee owing to Whittier Partners in connection with this Second
Amendment to Lease, Tenant acknowledges that Tenant is fully responsible for
such brokerage fee. Upon notice from Tenant to Landlord of the amount of the
brokerage fee, accompanied by a paid invoice therefor, Landlord shall reimburse
to Tenant the amount of the brokerage fee, provided that such brokerage fee
does not exceed the Tenant Allowance. To the
2
<PAGE>
extent that Tenant does not use the Tenant Allowance for the brokerage fee, or
if Tenant does so use the Tenant Allowance and any portion of the Tenant
Allowance is remaining after reimbursement of the brokerage fee, Tenant may
provide notice to Landlord after completion of improvements to Tenant's Space
("Tenant's Completion Notice"), together with invoices therefor, and Landlord
shall thereafter reimburse Tenant in an amount not to exceed the Tenant
Allowance or the remaining balance of the Tenant Allowance, if any. Such
amounts shall be reimbursed by Landlord to Tenant thirty (30) days after the
later of Tenant's Completion Notice or the Effective Date. In Tenant's
Completion Notice, Tenant my request Landlord to pay up to an additional $4.00
per square foot of Rentable Area of Tenant's Space to be used for improvements
to Tenant's space. Such additional amount will be paid to Tenant by Landlord at
Tenant's request and (i) such amount, together with interest thereon at the
rate of ten percent (10%) per annum (the "Improvement Rent"), will be amortized
over the period commencing on the Effective Date and ending on the Term
Expiration Date, (ii) the annual amount of the Improvement Rent shall be added
to the Annual Rent (the "Annual Improvement Rent"), and (iii) the Annual
Improvement Rent shall be deemed to constitute a portion of Annual Rent for all
purposes hereunder.
5. Effective on the Effective Date, Section 4.2 of the Lease is hereby
amended by deleting the first paragraph thereof (beginning with "Tenant's
proportionate share" and ending with "Area of the Building"), the sixth
paragraph thereof (including clauses (a) and (b) thereof) (beginning with
"Operating Cost Escalation" and ending with "Area of the Building" in clause
(b)) and the seventh paragraph thereof (beginning with "If the management fee"
and ending with "100% of operating expenses"), and substituting the following
for said sixth paragraph thereof:
"Operating Cost Escalation" shall be equal to the excess, if any, of
the actual amount of Landlord's Operating Costs as indicated in
Landlord's Statement over the Annual Estimated Operating Costs."
6. Effective on the Effective Date, Section 6.1.6 of the Lease is hereby
amended by inserting the following at the end thereof:
"Notwithstanding the foregoing, upon thirty (30) days prior
written notice to Landlord, Tenant shall be permitted to sublease all
or any portion of the Premises during the Term to a subtenant who will
use the Premises for one or more of the Permitted Uses, provided that
Tenant is not then in default under this Lease, and provided further
that the prior approval of Landlord is obtained, which approval shall
not be unreasonably withheld or delayed. Landlord shall not be deemed
to be unreasonable in withholding its approval if the proposed
sublessee does not have a financial standing reasonably acceptable to
Landlord as evidenced by financial statements in scope and substance
satisfactory to
3
<PAGE>
Landlord and in conformity with generally accepted accounting
principles and, if requested by Landlord, certified by a certified
public accountant reasonably acceptable to Landlord."
7. Tenant shall have the right and option to extend the Term for an
additional period of five (5) years (the "Extension Term") commencing upon
the Term Expiration Date as defined in this Second Amendment to Lease,
provided that (i) Tenant shall give Landlord notice of Tenant's exercise of
such option at least nine (9) months prior to the Term Expiration Date; (ii)
Tenant shall not be in default in any respect at the time of giving such
notice in the performance or observance of any of the terms and provisions of
this Lease on the part of the Tenant to be performed or observed; and (iii)
Tenant shall not have assigned the Lease or sublet any portion of that
Premises, except as permitted without Landlord's consent under Section 6.1.6
hereof. If Tenant is in such default in any respect at the time of that
commencement of the Extension Term, then, at the option of Landlord, in its
sole discretion, exercisable by written notice to Tenant while such default
continues, Tenant's exercise of its right and option to texted the Term shall
be null and void and of no further force and effect, the Term shall be deemed
to have expired on the Term Expiration Date, and the Landlord shall have all
rights afforded to Landlord under the Lease, including, without limitation,
all rights with respect to a holdover by Tenant if Tenant is still in
possession of the Premises.
Prior to the exercise by Tenant of such option, the expression
"Term" shall mean the Term until the Term Expiration Date, and after the
exercise by Tenant of such option, this expression "Term" shall mean the Term
as it has been extended by the Extension Term (subject to the foregoing).
Except as expressly otherwise provided in the following paragraph and except
for the provisions of this Paragraph 6, all the terms, covenants, conditions,
provisions and agreements in the Lease contained shall be applicable to the
Extension Term. If Tenant shall give notice of its exercise of said option to
extend in the manner and within the time period provided aforesaid, the term
shall be extended upon the giving of such notice without the requirement of
any further action on the part of either Landlord or Tenant. If Tenant shall
fail to give timely notice of the exercise of any such option as aforesaid,
Tenant shall have no right to extend the term of this Lease, time being of the
essence of the foregoing provisions.
The Annual Base Rent payable during the Extension Term shall be the
amount being the greater of (i) the Annual Base Rent in effect for the Lease
Year immediately preceding the commencement of the Extension Term or (ii) the
Fair Market Rent for the Premises, as determined below, as of the
commencement of the Extension Term. If for any reason the Annual Base Rent
payable during the Extension Term has not been determined as of the
commencement of the Extension Term, Tenant shall pay
4
<PAGE>
the Annual Base Rent payable during the year immediately preceding the Term
Expiration Date until the Annual Base Rent for the Extension Term is
determined, at which time, an appropriate adjustment, if any, shall be made.
For purposes hereof, the Fair Market Rent shall mean the fair rent
for the Premises as of the commencement of the Extension Term under market
conditions then existing. Fair Market Rent shall be determined by agreement
between Landlord and Tenant, but if Landlord and Tenant are unable to agree
upon the Fair Market Rent at least six (6) months prior to the date upon
which the Fair Market Rent is to take effect, then the Fair Market Rent shall
be determined by appraisal made as hereinafter provided by a board of three
(3) reputable independent commercial real estate consultants, appraisers, or
brokers, each of whom shall have at least ten (10) years of experience in the
Marlborough office rental market and each of whom is hereinafter referred to
as "appraiser". Tenant and Landlord shall each appoint one such appraiser and
the two (2) appraisers so appointed shall appoint the third appraiser. The
cost and expenses of each appraiser appointed separately by Tenant and
Landlord shall be borne by the party who appointed the appraiser. The cost and
expenses of the third appraiser shall be shared equally by Tenant and
Landlord. Landlord and Tenant shall appoint their respective appraisers at
least five (5) months prior to commencement of the period for which Fair
Market Rent is to be determined and shall designate the appraisers so
appointed by notice to the other party. The two appraisers so appointed and
designated shall appoint the third appraiser at least four (4) months prior
to the commencement of such period and shall designate such appraiser by
notice to Landlord and Tenant. The board of three (3) appraisers shall
determine the Fair Market Rent of the space in question as of the
commencement of the period to which the Fair Market Rent shall apply and
shall notify Landlord and Tenant of their determinations at least sixty (60)
days prior to the commencement of such period. If the determinations of the
Fair Market Rent of any two (2) or all three (3) appraisers shall be
identical in amount, said amount shall be deemed to be the Fair Market Rent
of the subject space. If the determinations of all three (3) appraisers shall
be different in the amount, the average of the two (2) values nearest in
amount shall be deemed the Fair Market Rent. The Fair Market Rent of the
subject space determined in accordance with the provisions of this Section
shall be binding and conclusive on Tenant and Landlord.
8. Tenant and Landlord represent and warrant that each has dealt with
no broker in connection with this transaction other than Spaulding and Stye
Colliers Limited Partnership and Whittier Partners and Tenant and Landlord
agree to defend, indemnify and hold the other harmless from and against any
and all cost, expense or liability for any compensation, commissions or
charges claimed by a broker or agent with which such party has had any
dealings other than Spaulding and Stye Colliers Limited Partnership (for
which Landlord shall be responsible) in the case of Tenant and Whittier
Partners (for which Tenant shall be responsible) in the case of Landlord,
with respect to this Second Amendment to Lease.
5
<PAGE>
9. Except as amended hereby, the Lease shall remain modified and in
full force and effect.
10. Notwithstanding the foregoing, in the event that Tenant is in
default of any obligation on the Effective Date, this Second Amendment to
Lease shall at Landlord's option, in its sole discretion, be null and void of
no further force and effect, unless Tenant effects a cure of each such
default within the applicable cure period, if any.
EXECUTED as a sealed instrument on the day and year first written above.
LANDLORD:
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
By: CIGNA Investments, Inc.
By: /s/ James H. Rogers
-----------------------
Its: JAMES H. ROGERS
MANAGING DIRECTOR
TENANT:
OLICOM, INC.
By: /s/ David F. Burkey
-----------------------------
Name: David F. Burkey
Its: Chief Financial Officer
Hereunto duly authorized
6
<PAGE>
FIRST AMENDMENT TO LEASE
This First Amendment to Lease is made the 15 day of January, 1993 by and
between Connecticut General Life Insurance Company, acting through CIGNA
Investments, Inc. ("Landlord") and CrossComm Corporation, a Delaware corporation
("Tenant").
W I T N E S S E T H
WHEREAS, New England Mutual Life Insurance Company, as landlord ("NEL") and
Tenant, as tenant, are parties to that certain Lease dated as of April 30, 1992
regarding premises located at 450 Donald J. Lynch Boulevard, Marlborough,
Massachusetts (the "Lease");
WHEREAS, Landlord is the successor in interest to NEL's interest as
landlord under the Lease;
WHEREAS, Landlord and Tenant now desire to modify the Lease to, among other
matters, extend the term and to add additional space to the premises leased by
Tenant;
NOW, THEREFORE, for good and valuable consideration, the Landlord and
Tenant hereby agree as follows:
1. Capitalized terms used herein and not defined herein shall have the
meaning set forth in the Lease.
2. Section 1.1 of the Lease is hereby amended by deleting the existing
provisions and inserting the following provisions in lieu thereof:
1.1 SUBJECTS REFERRED TO:
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1;
LANDLORD: CIGNA Investments, Inc.
MANAGING AGENT: Spaulding and Slye Company
LANDLORD'S & MANAGING AGENT'S ADDRESS:
c/o Spaulding and Slye Company
25 Burlington Mall Road
Burlington, MA 01803
Attn: Treasurer
LANDLORD'S REPRESENTATIVE: Peter L. Johnson
TENANT: CrossComm Corporation, a Delaware corporation
<PAGE>
TENANT'S ADDRESS (FOR NOTICE AND BILLING):
450 Donald J. Lynch Boulevard, Marlborough, MA 01752
TENANT'S REPRESENTATIVE: Arthur W. Coviello, Jr.
BUILDING ADDRESS:
450 Donald J. Lynch Boulevard, Marlborough, MA, being the parcel more
particularly described on EXHIBIT A (the "Lot"). The building located at
450 Donald J. Lynch Boulevard, Marlborough, MA is referred to herein as the
"Building". "Tenant's Original Space" in said Building is defined as the
area indicated by cross-hatching on the plan attached hereto as EXHIBIT B.
"Tenant's Additional Space" in said Building is the remaining area in the
Building not cross-hatched on EXHIBIT B.
RENTABLE FLOOR AREA OF TENANT'S SPACE: 38,824 square feet, as indicated by
cross-hatching on the plan attached hereto as EXHIBIT B, provided, however, that
on the Additional Premises Term Commencement Date (as hereinafter defined) the
Rentable Floor Area of Tenant's Space shall be 59,675 square feet.
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 59,675 square feet
TENANT'S DESIGN COMPLETION DATE: May 15, 1992
TENANT'S ADDITIONAL PREMISES DESIGN COMPLETION DATE: December 31, 1992
ORIGINAL PREMISES TERM COMMENCEMENT DATE: July 10, 1992
ADDITIONAL PREMISES SCHEDULED TERM COMMENCEMENT DATE: April 1, 1993
TERM EXPIRATION DATE: December 31, 1997
ANNUAL BASE RENT:
With respect to the Original Premises:
From Original Premises
Term Commencement Date
to 6/30/93: $135,884; $3.50 (p.r.s.f.)
From 7/1/93 to 6/30/94: $223,238; $5.75 (p.r.s.f.)
From 7/1/94 to 6/30/95: $242,650; $6.25 (p.r.s.f.)
From 7/1/95 to 6/30/96: $262,062; $6.75 (p.r.s.f.)
From 7/1/96 to 6/30/97: $281,474; $7.25 (p.r.s.f.)
From 7/1/97 to 12/31/97: $223,238; $5.75 (p.r.s.f.)
-2-
<PAGE>
With respect to the Additional Premises:
From Additional Premises
Term Commencement Date
to 6/30/93: $72,978.50; $3.50 (p.r.s.f.)
From 7/1/93 to 6/30/94: $119,893.25; $5.75 (p.r.s.f.)
From 7/1/94 to 6/30/95: $130,318.75; $6.25 (p.r.s.f.)
From 7/1/95 to 6/30/96: $140,744.25; $6.75 (p.r.s.f.)
From 7/1/96 to 6/30/97: $151,169.75; $7.25 (p.r.s.f.)
From 7/1/97 to 12/31/97: $119,893.25; $5.75 (p.r.s.f.)
ANNUAL ESTIMATED OPERATING COSTS:
$343,131.25; $5.75 (p.r.s.f.); which amount includes an Annual
Estimated Electrical Cost of $1.66 p.r.s.f.
ANNUAL RENT:
With respect to the Original Premises:
$359,122; $9.25 (p.r.s.f.) (subject to an annual adjustment as
provided in the definition of Annual Base Rent and the adjustment set forth in
Section 4.1.1), by way of illustration computed for Year 1 as follows:
$3.50 + $5.75 = $9.25
Annual Base Annual Estimated p.r.s.f.
Rent Operating Costs
(p.r.s.f.) (p.r.s.f.)
With respect to the Additional Premises:
$192,871.75; $9.25 (p.r.s.f.) (subject to an annual adjustment as
provided in the definition of Annual Base Rent and the adjustment set forth in
Section 4.1.1), by way of illustration computed for Year 1 as follows:
$3.50 + $5.75 = $9.25
Annual Base Annual Estimated p.r.s.f.
Rent Operating Costs
(p.r.s.f.) (p.r.s.f.)
FIRST FISCAL YEAR FOR TENANT'S PAYING OPERATING COST ESCALATION:
YEAR ENDING December 31, 1992
SECURITY DEPOSIT: None
GUARANTOR: None
TENANT ALLOWANCE: $7.00 per square foot included in the Rentable Floor Area of
Tenant's Space
-3-
<PAGE>
TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD:
Amounts expended by Landlord in excess of the Tenant Allowance.
PERMITTED USES:
General office use, assembly and storage of electrical or electronic
products, and research and development.
PUBLIC LIABILITY INSURANCE: BODILY INJURY: $2,000,000
PROPERTY DAMAGE: $1,000,000
3. Effective as of the Additional Premises Term Commencement Date
(i) the term "Original Premises" shall mean the Tenant's Original Space,
subject to the exclusions set forth in the first paragraph of Section 2.1,
the term "Additional Premises" shall mean the Tenant's Additional Space,
subject to the exclusions set forth in the first paragraph of Section 2.1,
and the term "Premises" shall mean the Original Premises and the Additional
Premises, and (ii) the second paragraph of Section 2.1 of the Lease is
deleted in its entirety and the following paragraph is inserted in lieu
thereof:
Tenant shall have, as appurtenant to the Premises, the right to use all
of the parking spaces and loading docks provided on the Lot.
4. Sections 2.1.1 and 2.1.2 are deleted in their entirety.
5. Section 2.2 is hereby deleted in its entirety and the following
language is inserted in lieu thereof:
With respect to the Original Premises, to have and to hold for a period
(the "Original Premises Term") commencing on the Original Premises Term
Commencement Date and continuing until the Term Expiration Date, unless sooner
terminated as provided in Section 3.2 or 7.1 or in Article IX.
With respect to the Additional Premises, to have and hold for a period
(the "Additional Premises Term") commencing on the earliest of (a) if Landlord
is not obligated to perform construction work, on the Additional Premises
Scheduled Term Commencement Date, or (b) if Landlord is obligated to perform
construction work pursuant to EXHIBIT C-1, on the date on which the Additional
Premises are deemed ready for occupancy as provided in Section 3.2A, and (c) in
all events, the date on which Tenant occupies and operates Tenant's business in
all or any part of the Additional Premises (whichever of said dates is
appropriate being hereafter referred to as the "Additional Premises Term
Commencement Date"), and continuing until the Term Expiration Date, unless
sooner terminated as provided in Section 3.2 or 7.1
-4-
<PAGE>
or in Article IX. The defined term "Term" shall mean the Original Premises Term
and/or the Additional Premises Term, as the context may require.
Promptly after the Additional Premises Term Commencement Date is
ascertained as provided above, Landlord and Tenant shall execute, in recordable
form, a written declaration in the form attached hereto as EXHIBIT D-1 setting
forth the Additional Premises Term Commencement Date.
6. Section 2.2.1 of the Lease is hereby deleted in its entirety.
7. Sections 3.1 and 3.2 shall hereinafter be deemed to refer only to
the construction of leasehold improvements for the Original Premises only.
8. Section 3.1.1 is hereby amended by inserting the words "and on the
exterior of the Building facing Route I-290" after the word "Building"
appearing in the fourth line thereof.
9. Tenant acknowledges that Landlord has completed the leasehold
improvements to the Original Premises required under Sections 3.1 and 3.2 of the
Lease and has paid the entire Tenant Allowance payable with respect to the
Original Premises. Landlord shall construct leasehold improvements to the
Additional Premises in accordance with the following provisions, which shall be
added as Sections 3.1A and 3.2A, respectively, of the Lease:
3.1A INITIAL CONSTRUCTION.
On or before Tenant's Additional Premises Design Completion Date,
Tenant shall provide to Landlord for approval complete sets of construction
drawings and specifications (the "Additional Premises Complete Plans") prepared
at Tenant's expense by Landlord's architect or an architect approved by
Landlord and Landlord's engineer, including but not limited to:
a. Furniture and Equipment Layout Plans;
b. Dimensioned Partition Plans;
c. Dimensioned Electrical and Telephone Outlet Plans;
d. Reflected Ceiling Plans;
e. Door and Hardware Schedules;
f. Room Finish Schedules, including wall, carpet and floor tile
colors;
g. Electrical, mechanical and structural engineering plans; and
h. All necessary construction details and specifications for work
not specified in EXHIBIT C-1.
Landlord and Tenant shall initial the Additional Premises Complete
Plans after the same have been submitted by Tenant and approved by Landlord.
Landlord shall respond to submittal of the Additional Premises Complete Plans
within five business days.
-5-
<PAGE>
All of Tenant's construction, installation of furnishings, and later
changes or additions shall be coordinated with any work being performed by
Landlord in such manner as to maintain harmonious labor relations and not to
damage the Building or Lot or interfere with Building operations. Except for
installation of furnishings and the installation of telephone outlets which must
be performed by the local telephone company at Tenant's direction and expense,
all work described in the Additional Premises Complete Plans (the "Additional
Premises Leasehold Improvements") shall be performed by Landlord's Contractor.
In the event that the aggregate cost of the Additional Premises
Leasehold Improvements based upon bids received by Landlord exceeds the Tenant
Allowance, then at Tenant's option, Tenant shall cause Tenant's Representative,
and Landlord shall cause Landlord's Contractor, to promptly consult with each
other in order to work out modifications to the Additional Premises Complete
Plans to respond to such excess costs. Any delay caused by this process
respecting modifications shall be deemed to be a delay caused by Tenant for
purposes of Section 3.2A.
Tenant shall pay to Landlord as additional rent a sum equal to all
costs incurred by Landlord on account of the Additional Premises Leasehold
Improvements (excluding, however, the Tenant Allowance applicable to the
Additional Premises, but including in the costs so incurred the cost to Landlord
of preparing and reviewing the Additional Premises Complete Plans, of securing
all permits and licenses required for the construction of the Additional
Premises Leasehold Improvements, and of Landlord's Contractor's overhead and
profit equal to 20% of costs of work not covered by the Tenant Allowance),
hereinafter called "Additional Premises Tenant Improvement Reimbursement to
Landlord" or "APTIR". Tenant shall pay to Landlord 50 percent (50%) of the APTIR
prior to Landlord's commencement of construction of the Additional Premises
Leasehold Improvements, and thereafter as construction of the Additional
Premises Leasehold Improvements progresses, on submission by Landlord to Tenant
of a statement on or about the first day of each month showing construction and
design costs incurred. Such statement shall be accompanied by a certificate of
Landlord's Contractor that all payments then due to laborers, materialmen and
subcontractors have been made, less the aggregate amount of prior monthly
progress payments made by Tenant. On the earlier of occupancy or the Additional
Premises Term Commencement Date, Tenant shall pay to Landlord a sum equal to the
unpaid balance of APTIR. In addition to paying APTIR as above provided, Tenant
shall pay an amount equal to all costs incurred by Landlord as a result of any
change orders signed by Tenant and Landlord affecting the Additional Premises
Complete Plans, including the cost to Landlord of Landlord's Contractor's
overhead and profit equal to 20% of those costs exclusive of overhead and
profit. Amounts due and payable on account of such change orders shall be
included in the monthly statements relating to APTIR provided for
-6-
<PAGE>
above, and Tenant shall pay therefor in accordance with each such statement
within 30 days, and in all events by the Additional Term Premises Commencement
Date.
Landlord will not approve any construction, alterations, or additions
requiring unusual expenses to readapt the Additional Premises to normal office
use on lease termination or increasing the cost of construction, insurance or
taxes on the Building or of Landlord's services called for by Section 5.1 unless
Tenant first gives assurances acceptable to Landlord that such readaptation will
be made prior to such termination without expense to Landlord and makes
provisions acceptable to Landlord for payment of such increased cost. Landlord
will also disapprove any alterations or additions requested by Tenant which will
delay completion of the Additional Premises or the Building. All changes and
additions shall be part of the Building except such items as mutually agreed
upon by Landlord and Tenant by writing at the time of approval to be either
removed by Tenant on termination of this Lease or removed or left at Tenant's
election.
3.2A PREPARATION OF PREMISES FOR OCCUPANCY.
If Landlord is obligated to perform construction work pursuant to EXHIBIT
E-1, Landlord agrees to use reasonable efforts to have the Additional
Premises ready for occupancy on or before the Additional Premises Scheduled
Term Commencement Date, which shall, however, be extended for a period equal
to that of any delays due to governmental regulations, unusual scarcity of or
inability to obtain labor or materials, labor difficulties, casualty or other
causes beyond Landlord's reasonable control. The Additional Premises shall
be deemed ready for occupancy on the date on which the Additional Premises
Leasehold Improvements, as specified in EXHIBIT E-1 and in the Additional
Premises Complete Plans, are ready for occupancy as determined by (a)
certification by Landlord's architect with the exception of minor items which
can be fully completed without material interference with Tenant's business,
and (b) issuance of a Certificate of Occupancy or a temporary Certificate of
Occupancy by the appropriate authority of the City of Marlborough; provided,
however, that if Landlord is unable to complete construction due to delay in
Tenant's compliance with the provisions of Section 3.1A of this Lease, then
the Additional Premises shall be deemed ready for occupancy no later than the
Additional Premises Scheduled Term Commencement Date.
Landlord shall permit Tenant access for installing equipment and
furnishings in the Additional Premises prior to the Additional Premises Term
Commencement Date if it can be done without material interference with
completion of the Building or remaining portions of the Additional Premises
Leasehold Improvements.
In the event of Tenant's failure to comply with the provisions of Section
3.1A to submit information or to deliver construction drawings and
specifications which meet Landlord's
-7-
<PAGE>
approval, after 30 days' notice from Landlord, Landlord may, at Landlord's
option, exercisable by notice to Tenant, either (i) terminate this Lease with
respect to the Additional Premises on the date specified in said notice to
Tenant, and upon such termination Landlord shall have all the rights provided in
Article IX of this Lease in the event of Tenant's default, or (ii) assess Tenant
liquidated damages in an amount equal to the Annual Rent with respect to the
Additional Premises divided by 365 for each day such failure continues, which
damages shall be paid to Landlord on the Additional Premises Term Commencement
Date. Notwithstanding the foregoing provisions, if the Additional Premises
are not deemed ready for occupancy within 60 days after the Additional Premises
Scheduled Term Commencement Date for whatever reason, other than Tenant's
default, Tenant may elect to cancel this Lease with respect to the Additional
Premises at any time thereafter while the Additional Premises are not deemed
ready for occupancy by giving notice to the Landlord of such cancellation which
shall be effective when given, it being understood that said election shall be
Tenant's sole remedy at law or in equity for Landlord's failure to have the
Additional Premises ready for occupancy.
10. Section 4.1 of the Lease is hereby amended by inserting the following
provision at the end of the section:
Tenant shall receive a credit against the Annual Rent payable with respect
to the Additional Premises in the amount of $152.63 per day for the period
beginning on the Additional Premises Term Commencement Date and ending on June
30, 1993.
11. Except as amended hereby, the Lease is in all other respects ratified
and confirmed.
EXECUTED as a sealed instrument in two or more counterparts on the day and
year first above written.
LANDLORD
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
BY: CIGNA Investments, Inc.
By: /s/ Robert Fair
---------------------------
Its [ILLEGIBLE]
-8-
<PAGE>
TENANT:
CrossComm Corporation
By: /s/ [ILLEGIBLE]
--------------------------
Its V.P. Financial
Hereunto duly authorized
-9-
<PAGE>
EXHIBIT C-1
-----------
Intentionally Omitted
<PAGE>
EXHIBIT D-1
Form of Second Amendment to Lease
This Second Amendment to Lease, made this______day of
___________________________, 1993 by and between Connecticut General Life
Insurance Company, acting through CIGNA Investments, Inc. ("Landlord") and
CrossComm Corporation, a Delaware corporation ("Tenant").
WITNESSETH:
WHEREAS, New England Mutual Life Insurance Company, as landlord ("NEL") and
Tenant, as tenant, are parties to that certain Lease dated as of April 30, 1992
regarding premises located at 450 Donald J. Lynch Boulevard, Marlborough,
Massachusetts ( the "Original Lease");
WHEREAS, Landlord is the successor in interest to NEL's interest as
landlord under the Lease;
WHEREAS, Landlord and Tenant are parties to a First Amendment to Lease
dated as of January ___, 1993 (the Original Lease, as so amended, is hereinafter
referred to as the "Lease");
WHEREAS, all terms defined in the Lease shall have the same meanings when
referred to herein; and
WHEREAS, Landlord and Tenant agreed to confirm the Additional Premises
Term Commencement Date, pursuant to and in accordance with Article II thereof;
NOW, THEREFORE, for consideration paid by each to the other, Landlord
and Tenant hereby agree that the Additional Premises Term Commencement Date
is ______________________, 1993.
Except as hereby modified and amended, all other terms, provisions,
covenants and conditions of the Lease shall remain unmodified and in full force
and effect.
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Second
Amendment to Lease as a sealed instrument on or as of the day and year first
above written.
WITNESS: LANDLORD:
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
- -------------------------------
BY: CIGNA Investments, Inc.
By:___________________________
Its
TENANT:
CrossComm Corporation
By:____________________________
Its
Hereunto duly authorized
-2-
<PAGE>
EXHIBIT E-1
-----------
Not yet available - to be agreed upon by
Landlord and Tenant at a later date
<PAGE>
Lease
by and between
New England Mutual Life Insurance Company, Landlord
and
CrossComm Corporation, Tenant
450 Donald J. Lynch Boulevard, Marlborough, MA
As of April 30, 1992
<PAGE>
DATE OF LEASE EXECUTION: as of April 30, 1992
(To be completed by Landlord)
ARTICLE I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO:
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Section 1.1:
LANDLORD: New England Mutual Life Insurance Company
MANAGING AGENT: Spaulding and Slye Company
LANDLORD'S & MANAGING AGENT'S ADDRESS:
c/o Spaulding and Slye Company
25 Burlington Mall Road
Burlington, MA 01803
Attn: Treasurer
LANDLORD'S REPRESENTATIVE: Peter L. Johnson
TENANT: CrossComm Corporation, a Delaware corporation
TENANT'S ADDRESS (FOR NOTICE AND BILLING):
Prior to the Commencement Date (as defined in Section 2.2), at 140C Locke
Drive, P. O. Box 699, Marlborough, MA 01752; from and after the
Commencement Date, at the Premises.
TENANT'S REPRESENTATIVE: Arthur W. Coviello, Jr.
BUILDING ADDRESS:
450 Donald J. Lynch Boulevard, Marlborough, MA, being the parcel more
particularly described on EXHIBIT A (the "Lot"). The building located at
450 Donald J. Lynch Boulevard, Marlborough, MA is referred to herein as the
"Building." "Tenant's Space" in said Building is defined as the area
indicated by cross-hatching on the plan attached hereto as EXHIBIT B.
RENTABLE FLOOR AREA OF TENANT'S SPACE: 38,824 square feet, as indicated by
cross-hatching on the plan attached hereto as EXHIBIT B.
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 59,675 square feet
-1-
<PAGE>
TENANT'S DESIGN COMPLETION DATE: May 15, 1992
SCHEDULED TERM COMMENCEMENT DATE: July 1, 1992
TERM EXPIRATION DATE: June 30, 1997
APPROXIMATE TERM: Five Years
ANNUAL BASE RENT: Year 1 of Term: $135,884; $3.50 (p.r.s.f.)
Year 2 of Term: $223,238; $5.75 (p.r.s.f.)
Year 3 of Term: $242,650; $6.25 (p.r.s.f.)
Year 4 of Term: $262,062; $6.75 (p.r.s.f.)
Year 5 of Term: $281,474; $7.25 (p.r.s.f.)
ANNUAL ESTIMATED OPERATING COSTS: $343,131.25; $5.75 (p.r.s.f.); which amount
includes an Annual Estimated Electrical Cost of $1.66 p.r.s.f.
ANNUAL RENT: $359,122; $9.25 (p.r.s.f.) (subject to an annual adjustment as
provided in the definition of Annual Base Rent and the adjustment set forth in
Section 4.1.1.), by way of illustration computed for Year 1 as follows:
$3.50 + $5.75 = $9.25
Annual Base Annual Estimated p.r.s.f.
Rent Operating Costs
(p.r.s.f) (p.r.s.f.)
FIRST FISCAL YEAR FOR TENANT'S PAYING OPERATING COST ESCALATION: YEAR ENDING
December 31, 1992
SECURITY DEPOSIT: None
GUARANTOR: None
TENANT ALLOWANCE: $7.00 per square foot included in the Rentable FLoor Area of
Tenant's Space
TENANT'S IMPROVEMENT REIMBURSEMENT TO LANDLORD:
Amounts expended by Landlord in excess of the Tenant Allowance.
PERMITTED USES:
General office use, assembly and storage of electrical or electronic
products, and research and development.
PUBLIC LIABILITY INSURANCE: BODILY INJURY: $2,000,000
PROPERTY DAMAGE: $1,000,000
-2-
<PAGE>
SPECIAL PROVISIONS:
OPTION TO EXPAND: Tenant has the option to expand pursuant to Section
2.1.1.
RIGHT OF FIRST OFFER TO LEASE: Tenant has the right of first offer to
lease other available space in the Building pursuant to Section 2.1.2.
RIGHT TO TERMINATE: Tenant has the right to terminate pursuant to Section
2.2.1.
1.2 EXHIBITS.
The exhibits listed below in this Section are incorporated in this lease
by reference and are to be construed as part of this Lease:
EXHIBIT A Description of the Lot
EXHIBIT B Plan showing Tenant's Space
EXHIBIT C Intentionally Omitted
EXHIBIT D Form of First Amendment to Lease setting forth the
Commencement Date
EXHIBIT E Specifications of Leasehold Improvements and Tenant
Layout (if applicable)
EXHIBIT F Landlord's Services
EXHIBIT G Rules and Regulations
<TABLE>
<CAPTION>
1.3 TABLE OF CONTENTS PAGE
<S> <C>
ARTICLE II - PREMISES AND TERM.............................................. 6
Section 2.1 Premises................................................... 6
2.1.1 Option to Expand........................................... 6
2.1.2 Right of First Offer to Lease.............................. 7
Section 2.2 Term....................................................... 8
2.2.1 Right to Terminate......................................... 9
ARTICLE III - CONSTRUCTION.................................................. 9
Section 3.1 Initial Construction....................................... 9
3.1.1 Signage.................................................... 11
-3-
<PAGE>
<S> <C>
Section 3.2 Preparation of Premises for Occupancy...................... 12
Section 3.3 General Provisions Applicable to Construction.............. 13
Section 3.4 Representatives............................................ 13
ARTICLE IV - RENT........................................................... 13
Section 4.1 Rent....................................................... 13
Section 4.2 Operating Costs; Escalation................................ 14
Section 4.3 Estimated Escalation Payments.............................. 17
Section 4.4 Change of Fiscal Year...................................... 17
Section 4.5 Payments................................................... 17
Section 4.6 Tenant's Right to Review................................... 17
ARTICLE V - LANDLORD'S COVENANTS............................................ 18
Section 5.1 Landlord's Covenants During the Term....................... 18
5.1.1 Building Services.......................................... 18
5.1.2 Additional Building Services............................... 18
5.1.3 Repairs.................................................... 18
5.1.4 Quiet Enjoyment............................................ 18
5.1.5 Insurance.................................................. 18
5.1.6 Tenant's Costs............................................. 19
Section 5.2 Interruptions.............................................. 19
ARTICLE VI - TENANT'S COVENANTS............................................. 20
Section 6.1 Tenant's Covenants During the Term......................... 20
6.1.1 Tenant's Payments.......................................... 20
6.1.2 Repairs and Yielding Up.................................... 20
6.1.3 Occupancy and Use.......................................... 20
6.1.4 Rules and Regulations...................................... 21
6.1.5 Safety Appliances.......................................... 21
6.1.6 Assignment and Subletting.................................. 21
6.1.7 Indemnity.................................................. 23
6.1.8 (a) Tenant's Liability Insurance........................... 23
(b) Tenant's Worker's Compensation......................... 24
6.1.9 Insurance Policies......................................... 24
6.1.10 Landlord's Right of Entry.................................. 24
6.1.11 Loading.................................................... 24
6.1.12 Landlord's Costs........................................... 24
6.1.13 Tenant's Property.......................................... 25
6.1.14 Labor or Materialmen's Liens............................... 25
6.1.15 Changes or Additions....................................... 25
6.1.16 Holdover................................................... 25
ARTICLE VII - CASUALTY AND TAKING........................................... 26
Section 7.1 Casualty and Taking........................................ 26
Section 7.2 Reservation of Award....................................... 27
</TABLE>
-4-
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII - RIGHTS OF MORTGAGEE................................................ 27
Section 8.1 Priority of Lease...................................... 27
Section 8.2 Rights of Mortgage Holders; Limitation
of Mortgagee's Liability...................... 28
Section 8.3 Mortgagee's Election................................... 28
Section 8.4 No Prepayment of Modification, Etc..................... 28
Section 8.5 No Release or Termination.............................. 29
Section 8.6 Continuing Offer....................................... 29
Section 8.7 Mortgagee's Approval................................... 30
ARTICLE IX - DEFAULT.............................................................. 30
Section 9.1 Events of Default...................................... 30
Section 9.2 Tenant's Obligations after Termination................. 31
ARTICLE X - MISCELLANEOUS......................................................... 32
Section 10.1 Notice of Lease........................................ 32
Section 10.2 Intentionally Omitted.................................. 32
Section 10.3 Notices from One Party to the Other.................... 32
Section 10.4 Bind and Inure......................................... 32
Section 10.5 No Surrender........................................... 33
Section 10.6 No waiver, Etc......................................... 33
Section 10.7 No Accord and Satisfaction............................. 33
Section 10.8 Cumulative Remedies.................................... 34
Section 10.9 Landlord's Right to Cure............................... 34
Section 10.10 Estoppel Certificate................................... 34
Section 10.11 Waiver of Subrogation.................................. 35
Section 10.12 Acts of God............................................ 35
Section 10.13 Brokerage.............................................. 35
Section 10.14 Submission Not an Offer................................ 35
Section 10.15 Applicable Law and Construction........................ 36
</TABLE>
-5-
<PAGE>
ARTICLE II
PREMISES AND TERM
2.1 PREMISES.
Subject to and with the benefit of the provisions of this Lease, Landlord
hereby leases to Tenant, and Tenant hereby leases from Landlord, Tenant's Space
in the Building, excluding exterior faces of exterior walls, the common
facilities area and building other parts of the Building. Tenant's Space, with
such exclusions, is hereinafter referred to as the "Premises".
Tenant shall have, as appurtenant to the Premises, the right to use in
common with others entitled thereto: (a) the common facilities included in the
building or on the Lot, including 210 parking spaces in the parking area, on an
unreserved, first-come, first-served basis, to the extent and in the location
from time to time designated by Landlord, and (b) the building service fixtures
and equipment serving the premises. Landlord grants to Tenant the exclusive use
of (i) the existing tailboard loading dock which includes two loading bays and
is adjacent to the Premises, all as more particularly shown on EXHIBIT B, and
(ii) 30 reserved parking spaces designated by Landlord and located near the
entrance to Tenant's Space. Landlord is not responsible for monitoring use of
said loading dock or for monitoring occupancy of the reserved parking spaces and
Tenant shall be responsible for any signage on such loading dock and such
parking spaces designating reservation to Tenant.
Landlord reserves the right from time to time, without unreasonable
interference with Tenant's use, (A) to install, repair, replace, use maintain
and relocate for service to the Premises and to other parts of the Building or
either, building service fixtures and equipment wherever located in the Building
and (B) to alter or relocate any common facilities, provided that in all events
substitutions are substantially equivalent.
2.1.1 OPTION TO EXPAND.
Subject to the terms and conditions hereof, Tenant shall have the
option, exercisable by notice ("Tenant's Notice") to Landlord given on or before
the first anniversary of the Commencement Date, time being of the essence, to
add space to the Tenant's Space, the size and location of such to be determined
by Landlord in its sole discretion provided that such space is approximately
5,000 rentable square feet and contiguous to the Premises. The Rentable Floor
Area of Tenants Space shall be adjusted accordingly and, with respect to such
added space, (a) Tenant's Design Completion Date shall be the date three weeks
after the date Tenant's Notice is given to Landlord, (b) the
-6-
<PAGE>
Scheduled Term Commencement Date shall be the date seven weeks after the date
Tenant's Notice is given to Landlord, (c) the Tenant Allowance shall be equal to
the product of (i) $7.00 times a fraction, the numerator of which is equal to
the number of full months remaining in the Term after the Scheduled Term
Commencement Date as determined in clause (b) above and the denominator of which
is equal to 60, and (ii) the number of rentable square feet of additional space
leased to Tenant pursuant to this Section 2.1.1, and (d) the Annual Base Rent
shall be the same on a per square foot basis as that from time to time in effect
for the initial Tenant's Space.
2.1.2 RIGHT OF FIRST OFFER TO LEASE.
Subject to the terms and conditions hereof, and subsequent to the
commencement Date, Landlord hereby grants to Tenant a right of first offer to
lease (the "Offer Right") some or all of the Space in the Building not included
within the Premises (the "Offer Space"), if any Offer Space becomes available
for occupancy before the date which is 18 months after the Commencement Date. If
Landlord desires to lease any portion of the Offer Space, Landlord shall first
give Tenant notice of the specific terms and conditions, including rent, upon
which Landlord desires to lease such offer Space (the "Proposed Terms"). Tenant
shall have five business days subsequent to receipt by Tenant of such notice
from Landlord in which to exercise, by notice to Landlord, Tenant's right to
lease the Offer Space on the Proposed Terms. Upon Tenant's exercise of its right
to lease any such Offer Space, Tenant's right o terminate this Lease pursuant to
Section 2.2.1 shall be null and void and of no further force and effect.
In the event Tenant does not accept the offer on the Proposed Terms
within said five-business-day period, Landlord shall be free to lease such Offer
Space to any third party on terms which are not materially more favorable than
the Proposed Terms (as determined by Landlord in good faith) without having to
offer such space to Tenant. notwithstanding the foregoing, Tenant's right to
accept any offer hereunder and to lease any Offer Space is subject to the
additional conditions precedent that at the time Tenant exercises its right to
lease any such Offer Space commences: (a) Tenant shall not be in default under
any of the terms of this Lease; and (b) Tenant shall not have sublet any portion
of the Premises or assigned this Lease to other than an affiliate of Tenant (as
defined in Section 6.1.6). Time is of the essence with respect to this Section
2.1.2.
If Tenant fails to exercise its right of first offer to lease as provided
above, Tenant shall deliver to Landlord within five days after landlord's
request therefor a certificate in recordable form stating that Tenant has not
exercised its right of first
-7-
<PAGE>
offer with respect to the Offer Space. Any person dealing with the Building
may, without further inquiry, conclusively rely upon a representation in a
certificate of Landlord as to whether or not the provisions of this
Section 2.1.2 have been satisfied.
If Tenant exercises its right of first offer to lease Offer Space as
provided above, Landlord shall provide a Tenant Allowance, in lieu of any
tenant allowance provided in the Proposed Terms, equal to the product of (i)
$7.00 times a fraction, the numerator of which is equal to the number of full
months remaining in the Term (including extensions, if any) after the
Scheduled Term Commencement Date for such Offer Space (but in no event shall
the numerator exceed 60) and the denominator of which is equal to 60, and
(ii) the number of rentable square feet in such Offer Space leased to Tenant
pursuant to this Section 2.1.2.
This Agreement shall not apply to (A) the sale or conveyance of the
Building or the Lot (or both), or (B) to the granting of a mortgage on the
Building or Lot (or both) or the foreclosure of or the granting of a deed in
lieu of foreclosure of any such mortgage; nor shall the Building or Lot, if
so sold, conveyed, foreclosed upon or conveyed by deed in lieu of foreclosure
thereafter be subject to the rights of first offer granted in this Lease.
Tenant hereby acknowledges and agrees that Landlord's failure to notify
Tenant of the availability of any Offer Space shall not relieve Tenant of any
of its obligations under this Lease.
2.2 TERM.
To have and to hold for a period (the "Term") commencing on the earliest
of (a) if Landlord is not obligated to perform construction work, on the
Scheduled Term Commencement Date, or (b) if Landlord is obligated to perform
construction work pursuant to EXHIBIT C, on the date on which the Premises
are deemed ready for occupancy as provided in Section 3.2, and (c) in all
events, the date on which Tenant occupies and operates Tenant's business in
all or any part of the Premises (whichever of said dates is appropriate being
hereafter referred to as the "Commencement Date"), and continuing until the
Term Expiration Date, unless sooner terminated as provided in Section 3.2 or
7.1 or in Article IX.
Promptly after the Commencement Date is ascertained as provided above,
Landlord and Tenant shall execute, in recordable form, a written declaration
in the form attached hereto as EXHIBIT D setting forth the Commencement Date.
-8-
<PAGE>
2.2.1 RIGHT TO TERMINATE.
Subject to the terms and conditions hereof, Tenant shall have the
right, exercisable by notice to Landlord given on or before the date which is
two years and three months after the Commencement Date, to terminate this
Lease effective as of the third anniversary of the Commencement Date.
Notwithstanding the foregoing, Tenant's right to terminate this Lease is
subject to the additional conditions precedent that: (a) at the time Tenant
exercises its right to terminate and at the effective date of such
termination, (i) Tenant shall not be in default under any of the terms of
this Lease and (ii) Tenant shall not have exercised its right to lease any
Offer Space pursuant to Section 2.1.2; and (b) at the time Tenant exercises
its right to terminate, (i) Tenant shall pay to Landlord the amount equal to
the product of (A) $5.30 and (B) the number of square feet of the Rentable
Floor Area of Tenant's Space and (ii) Tenant shall execute, in recordable
form, and deliver to Landlord a written declaration setting forth the
expiration date of this Lease as the third anniversary of the Commencement
Date. Time is of the essence with respect to this Section 2.2.1.
Any person dealing with the Building may, without further inquiry,
conclusively rely upon a representation in a certificate of Landlord as to
whether or not the provisions of this Section 2.2.1 have been satisfied.
Upon Tenant's exercise of its right to lease any Offer Space pursuant
to Section 2.1.2, Tenant's right to terminate this Lease pursuant to this
Section 2.2.1 shall be null and void and of no further force and effect.
ARTICLE III
CONSTRUCTION
3.1 INITIAL CONSTRUCTION.
On or before Tenant's Design Completion Date, Tenant shall provide to
Landlord for approval complete sets of construction drawings and
specifications (the "Complete Plans") prepared at Tenant's expense by
Landlord's architect or an architect approved by Landlord and Landlord's
engineer, including but not limited to:
a. Furniture and Equipment Layout Plans;
b. Dimensioned Partition Plans;
c. Dimensioned Electrical and Telephone Outlet Plans;
d. Reflected Ceiling Plans;
-9-
<PAGE>
e. Door and Hardware Schedules;
f. Room Finish Schedules, including wall, carpet and floor tile colors;
g. Electrical, mechanical and structural engineering plans; and
h. All necessary construction details and specifications for work not
specified in EXHIBIT C.
Landlord and Tenant shall initial the Complete Plans after the same have
been submitted by Tenant and approved by Landlord. Landlord shall respond to
submittal of the Complete Plans within five business days.
All of Tenant's construction, installation of furnishings, and later
changes or additions shall be coordinated with any work being performed by
Landlord in such manner as to maintain harmonious labor relations and not to
damage the Building or Lot or interfere with Building operations. Except for
installation of furnishings and the installation of telephone outlets which
must be performed by the local telephone company at Tenant's direction and
expense, all work described in the Complete Plans (the "Leasehold
Improvements") shall be performed by Landlord's general contractor, Spaulding
and Slye Construction Company, Incorporated ("Landlord's Contractor"). The
demising wall may, in Landlord's sole discretion, be of a temporary nature
(provided that the wall be sufficient to maintain room temperature).
In the event that the aggregate cost of the Leasehold Improvements based
upon bids received by Landlord exceeds the Tenant Allowance, then at Tenant's
option, Tenant shall cause Tenant's Representative, and Landlord shall cause
Landlord's Contractor, to promptly consult with each other in order to work
out modifications to the Complete Plans to respond to such excess costs. Any
delay caused by this process respecting modifications shall be deemed to be a
delay caused by Tenant for purposes of Section 3.2.
Tenant shall pay to Landlord as additional rent a sum equal to all costs
incurred by Landlord on account of the Leasehold Improvements (excluding,
however, the Tenant Allowance, but including in the costs so incurred the
cost to Landlord of preparing and reviewing the Complete Plans, of securing
all permits and licenses required for the construction of the Leasehold
Improvements, and of Landlord's Contractor's overhead and profit equal to 20%
of costs of work not covered by the Tenant Allowance), hereinafter called
"Tenant Improvement Reimbursement to Landlord" or "TIR". Tenant shall pay to
Landlord 50 percent (50%) of the TIR prior to Landlord's commencement of
construction of the Leasehold Improvements, and thereafter as construction of
the Leasehold Improvements progresses, on submission by Landlord to Tenant of
a statement on or about the first day of each month showing construction and
design costs incurred. Such statement
-10-
<PAGE>
shall be accompanied by a certificate of Landlord's Contractor that all
payments then due to laborers, materialmen and subcontractors have been made,
less the aggregate amount of prior monthly progress payments made by Tenant.
On the earlier of occupancy or the Commencement Date, Tenant shall pay to
Landlord a sum equal to the unpaid balance of TIR. In addition to paying TIR
as above provided, Tenant shall pay an amount equal to all costs incurred by
Landlord as a result of any change orders signed by Tenant and Landlord
affecting the Complete Plans, including the cost to Landlord of Landlord's
Contractor's overhead and profit equal to 20% of those costs exclusive of
overhead and profit. Amounts due and payable on account of such change orders
shall be included in the monthly statements relating to TIR provided for
above, and Tenant shall pay therefor in accordance with each such statement
within 30 days, and in all events by the Commencement Date.
Landlord shall, at its expense and prior to the Commencement Date, replace
the water-stained ceiling tiles in the Premises, repair the hole in the rug in
the Premises in a manner mutually agreeable to Landlord and Tenant, spot clean
the rug in the Premises where mutually agreed upon by Landlord and Tenant, and
paint the exterior decorative columns at the entrance to the Building.
Landlord will not approve any construction, alterations, or additions
requiring unusual expense to readapt the Premises to normal office use on
lease termination or increasing the cost of construction, insurance or taxes
on the Building or of Landlord's services called for by Section 5.1 unless
Tenant first gives assurances acceptable to Landlord that such readaptation
will be made prior to such termination without expense to Landlord and makes
provisions acceptable to Landlord for payment of such increased cost.
Landlord will also disapprove any alterations or additions requested by
Tenant which will delay completion of the Premises or the Building. All
changes and additions shall be part of the Building except such items as
mutually agreed upon by Landlord and Tenant by writing at the time of
approval to be either removed by Tenant on termination of this Lease or
removed or left at Tenant's election.
3.1.1 SIGNAGE.
Subject to the limitations of applicable law and subject to any existing
park covenants, Tenant shall be permitted to install and maintain, at its sole
cost and expense, a monument sign at the driveway entrance to the Building;
provided, however, that the location, size, style, design, quality and
installation method of such signage must be reviewed and approved in writing by
Landlord prior to installation. Tenant shall secure all permits necessary for
the installation of such signage at its sole cost and expense.
-11-
<PAGE>
3.2 PREPARATION OF PREMISES FOR OCCUPANCY.
If Landlord is obligated to perform construction work pursuant to EXHIBIT
E, Landlord agrees to use reasonable efforts to have the Premises ready for
occupancy on or before the Scheduled Term Commencement Date, which shall,
however, be extended for a period equal to that of any delays due to
governmental regulations, unusual scarcity of or inability to obtain labor or
materials, labor difficulties, casualty or other causes beyond Landlord's
reasonable control. The Premises shall be deemed ready for occupancy on the date
on which the Leasehold Improvements, as specified in EXHIBIT E and in the
Complete Plans, are ready for occupancy as determined by (a) certification by
Landlord's architect with the exception of minor items which can be fully
completed without material interference with Tenant's business, and (b) issuance
of a Certificate of Occupancy or a temporary Certificate of Occupancy by the
appropriate authority of the City of Marlborough; provided, however that if
Landlord is unable to complete construction due to delay in Tenant's compliance
with the provisions of Section 3.1 of this Lease, then the Premises shall be
deemed ready for occupancy no later than the Scheduled Term Commencement Date.
Landlord shall permit Tenant access for installing equipment and
furnishings in the Premises prior to the Term if it can be done without material
interference with completion of the Building or remaining portions of the
Leasehold Improvements.
In the event of Tenant's failure to comply with the provisions of Section
3.1 to submit information or to deliver construction drawings and specifications
which meet Landlord's approval, after 30 days' notice from Landlord, Landlord
may, at Landlord's option, exercisable by notice to Tenant, either (i) terminate
this Lease on the date specified in said notice to Tenant, and upon such
termination Landlord shall have all the rights provided in Article IX of this
Lease in the event of Tenant's default, or (ii) assess Tenant liquidated damages
in an amount equal to the Annual Rent divided by 365 days for each day such
failure continues, which damages shall be paid to Landlord on the Commencement
Date. Notwithstanding the foregoing provisions, if the Premises are not deemed
ready for occupancy within 60 days after the Scheduled Term Commencement Date
for whatever reason, other than Tenant's default, Tenant may elect to cancel
this Lease at any time thereafter while the Premises are not deemed ready for
occupancy by giving notice to Landlord of such cancellation which shall be
effective when given, it being understood that said election shall be Tenant's
sole remedy at law or in equity for Landlord's failure to have the Premises
ready for occupancy.
-12-
<PAGE>
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION.
All construction work required or permitted by this Lease, whether by
Landlord or by Tenant, shall be done in a good and workmanlike manner and in
compliance with all applicable laws and all lawful ordinances, regulations and
orders of governmental authority and insurers of the Building. Either party may
inspect the work of the other at reasonable times and promptly shall give notice
of observed defects. Landlord's obligations under Sections 3.1 and 3.2 shall be
deemed to have been performed when Tenant commences to occupy any portion of the
Premises for the Permitted Uses except for items which are incomplete or do not
conform with the requirements of Sections 3.1 and 3.2 and as to which Tenant
shall in either case have given written notice to Landlord prior to such
commencement. If Tenant shall not have commenced to occupy the Premises for the
Permitted Uses within 30 days after they are deemed ready for occupancy as
provided in Section 3.2, a certificate of completion by a licensed architect or
registered engineer shall be conclusive evidence that Landlord has performed all
such obligations except for items stated in such certificate to be incomplete or
not in conformity with such requirements.
3.4 REPRESENTATIVES.
Each party authorizes the other to rely in connection with their respective
rights and obligations under this Article III upon approval and other actions on
the party's behalf by Landlord's Representative in the case of Landlord or
Tenant's Representative in the case of Tenant or by any person designated in
substitution or addition by notice to the party relying.
ARTICLE IV
RENT
4.1 RENT.
Tenant agrees to pay rent to Landlord without any offset or reduction
whatever (except as made in accordance with the express provisions of this
Lease), equal to 1/12th of the Annual Rent in equal installments in advance
on the first day of each calendar month included in the Term; and for any
portion of a calendar month at the beginning or end of the Term, at the
proportionate rate payable for such portion, in advance. Notwithstanding the
foregoing, in the event Tenant actually incurs costs to H. K. Properties
under Tenant's current lease at 140C Locke Drive, Marlborough, Massachusetts,
as a result of the current lease term under such lease extending beyond the
Commencement Date, then Tenant shall receive a credit for such actual costs
incurred, up to $75,000, to be applied against the next ensuing payments of
Annual Base Rent.
-13-
<PAGE>
4.2 OPERATING COSTS; ESCALATION.
Tenant's proportionate share of the Annual Estimated Operating Costs
shall be determined by multiplying Annual Estimated Operating Costs by a
fraction, the numerator of which is the Rentable Floor Area of Tenant's
Space, and the denominator of which is the Total Rentable Floor Area of the
Building.
With respect to the First Fiscal Year for Tenant's Paying Operating Cost
Escalation, or fraction thereof, and any fiscal year or fraction thereof
thereafter, Tenant shall pay to Landlord, as additional rent, Operating Cost
Escalation (as defined below), if any, on or before the thirtieth day
following receipt by Tenant of Landlord's Statement (as defined below). As
soon as practicable after the end of each Fiscal Year ending during the Term
and after Lease termination, Landlord shall render a statement ("Landlord's
Statement") in reasonable detail and according to usual accounting practices
certified by Landlord and showing for the preceding Fiscal Year or fraction
thereof, as the case may be, Landlord's Operating Costs,
EXCLUDING: the interest and amortization on mortgages for the Building
and Lot or leasehold interests therein; the cost of special services rendered
to tenants (including Tenant) for which a special charge is made; advertising
or promotional fees, leasing commissions and accounting and legal fees
associated with this Lease, except as are incurred in connection with the
normal operation of the Building; and renovation costs associated with
leases with other tenants of the Building,
BUT INCLUDING, without limitation: real estate taxes on the Building and
Lot; installments and interest on assessments for public betterments or
public improvements provided the same are apportioned equally over the
longest period permitted by law; expenses of any proceedings for abatement of
taxes and assessments with respect to any fiscal year or fraction of a fiscal
year; premiums for insurance; fees payable to third parties for financial
audits of Landlord's Operating Costs; compensation and all fringe benefits,
worker's compensation insurance premiums and payroll taxes paid by Landlord
to, for or with respect to all persons engaged in the operating, maintaining,
or cleaning of the Building and Lot; all utility charges not billed directly
to tenants by Landlord or the utility; payments to independent contractors
under service contracts for cleaning, operating, managing, maintaining and
repairing the Building and Lot (which payments may be to affiliates of
Landlord provided the same are at reasonable rates consistent with the type
of occupancy); interest on working capital borrowed by Landlord for
reasonably unanticipated prepaid operating costs; if the Building shares
common areas of facilities with another building or buildings, the Building's
pro rata share (as reasonably determined by Landlord)
-14-
<PAGE>
of the cost of landscaping, street lighting, security (if required in
Landlord's judgment), cleaning, operating, managing (including the cost of
the management office for such buildings and facilities), maintaining,
repairing and snow plowing such common areas and facilities; fixed and
additional rent payable under any ground lease of the Lot; and all other
reasonable and necessary expenses paid in connection with the cleaning,
operating, managing, maintaining and repairing of the Building and Lot, or
either, and properly chargeable against income, it being agreed that if
Landlord installs a new or replacement capital item for the purpose of
reducing Landlord's Operating Costs, the cost thereof as reasonably amortized
by Landlord, with interest on the unamortized amount at the average prime
commercial rate in effect from time to time at the three largest national
banks in Boston, Massachusetts (the "Average Rate") if Landlord does not
obtain outside financing, or if Landlord obtains outside financing therefor
at the lesser of the rate actually paid by Landlord or the Average Rate,
shall be included in Landllord's Operating Costs.
"Operating Costs Escalation" shall be equal to the difference, if any,
between:
(a) the product of Landlord's Operating Costs as indicated in
Landlord's Statement and fraction, the numerator of which shall be the
Rentable Floor Area of Tenant's Space and the denominator of which shall be
the Total Rentable Floor Area of the Building, and
(b) the product of the Annual Estimated Operating Costs and a fraction,
the numerator of which shall be the Rentable Floor Area of Tenant's Space and
the denominator of which shall be the Total Rentable Floor Area of the
Building.
If the management fee is reduced by reason of a tenant's default in the
payment of Annual Rent or additional rent, Landlord shall reduced the Annual
Estimated Operating Costs by the amount of such reduction in the management
fee. In case of special services which are not rendered to all areas on a
comparable basis, the proportion allocable to the Premises shall be the same
proportion which the Rentable Floor Area of Tenant's Space bears to the total
rentable floor area to which such service is so rendered (such latter area to
be determined in the same manner as the Total Rentable Floor Area of the
Building). Regardless of the actual percentage of occupancy of the Building,
for the purpose of determining Landlord's Operating Costs, the operating
expenses will be extrapolated on a line item basis as though the Building
were 100% occupied, but not in a manner to enable Landlord to collect more
than 100% of operating expenses.
The term "real estate taxes" as used above shall mean all taxes of every
kind and nature assessed by any governmental authoirity on the Lot, the
Building and improvements, or both,
-15-
<PAGE>
which the Landlord shall become obligated to pay because of or in connection
with the ownership, leasing and operation of the Lot, the Building and
improvements, or both, subject to the following: There shall be excluded
from such taxes all income taxes, excess profits taxes, excise taxes,
franchise taxes,and estate, succession, inheritance and transfer taxes,
provided, however, that if at any time during the Term the present system of
ad valorem taxation of real property shall be changed so that in lieu of the
whole or any part of the ad valorem tax on real property, there shall be
assessed on Landlord a capital levy or other tax on the gross rents received
with respect to the Lot, Building and improvements, or both, or a federal,
state, county, municipalm or other local income, franchise, excise or similar
tax assessment, levy or charge (distinct from any now in effect) measured by
or based, in whole or in part, upon any such gross rents, then any and all of
such taxes, assessments, levies or charges, to the extent so measured or
based, shall be deemed to be included within the term "real estate taxes."
Notwithstanding the preceding paragraph, if Landlord shall fail to seek
an abatement of real estate taxes, and if Tenant shall deem itself aggrieved
by an amount of any such real estate taxes, Tenant may, upon prior notice to
Landlord, seek an abatement of such taxes by the commencement and diligent
prosecution of appropriate proceedings at Tenant's sole cost and expense. To
the extent required by law, such proceedings may be maintained in the name of
Landlord, and to the extent so required, Landlord agrees to execute such
applications and other documents as may reasonably be required to effectuate
the foregoing. Tenant shall not thereafter discontinue any abatement
proceedings begun by it without first giving Landlord prior notice of its
intent to do so and reasonable opportunity to be substituted in such
proceedings. Tenant shall reimburse Landlord for, and indemnify and hold
Landlord harmless from and against, all loss, cost or expenses arising in
connection with such abatement proceedings, including, without limitation,
reasonable legal fees and expenses, and other administrative costs and
expenses.
Notwithstanding any other provision of this Section 4.2, if the Term
expires or is terminated as of a date other than the last day of a fiscal
year, then for such fraction of a fiscal year at the end of the Term,
Tenant's last payment to Landlord under this Section 4.2 shall be made on the
basis of Landlord's best estimate of the items otherwise includable in
Landlord's Statement and shall be made on or before the later of (i) 10 days
after Landlord delivers such estimate to Tenant or (ii) the last day of the
Term, with an appropriate payment or refund to be made upon submission of
Landlord's Statement.
-16-
<PAGE>
4.3 ESTIMATED ESCALATION PAYMENTS.
If, with respect to any fiscal year or fraction thereof during the Term,
Landlord estimates that Tenant shall be obligated to pay Operating Cost
Escalation, then Tenant shall pay, as additional rent, on the first day of each
month of such fiscal year and each ensuing fiscal year thereafter, Estimated
Monthly Escalation Payments equal to 1/12th of the estimated Operating Cost
Escalation for the respective fiscal year, with an appropriate additional
payment or refund to be made within 30 days after Landlord's Statement is
delivered to Tenant. Landlord may adjust such Estimated Monthly Escalation
Payment from time to time and at any time during a fiscal year, and Tenant
shall pay, as additional rent, on the first day of each month following receipt
of Landlord's notice thereof, the adjusted Estimated Monthly Escalation Payment.
4.4 CHANGE OF FISCAL YEAR.
Landlord shall have the right from time to time to change the periods of
accounting under Section 4.2 to any annual period other than a fiscal year, and
upon any such change all items referred to in this Section 4.4 shall be
appropriately apportioned. In all Landlord's Statements rendered under this
Section 4.4, amounts for periods partially within and partially without the
accounting periods shall be appropriately apportioned, and any items which are
not determinable at the time of a Landlord's Statement shall be included
therein on the basis of Landlord's estimate, and with respect thereto Landlord
shall render promptly after determination a supplemental Landlord's Statement,
and appropriate adjustment shall be made according thereto. All Landlord's
Statements shall be prepared on an accrual basis of accounting.
4.5 PAYMENTS.
All payments of Annual Rent and additional rent shall be made to Managing
Agent, or to such other person as Landlord may from time to time designate. If
any installment of Annual Rent or additional rent or on account of leasehold
improvements is paid more than five days after the due date thereof, at
Landlord's election, ti shall bear interest at a rate equal to the average
prime commercial rate from time to time established by the three largest
national banks in Boston, Massachusetts plus 4% per annum from such due date,
which interest shall be immediately due and payable as further additional rent.
4.6 TENANT'S RIGHT TO REVIEW.
Tenant shall have the right, upon reasonable prior notice, to examine
Landlord's books and records with respect to the items in the Landlord's
Statement during normal business hours at Landlord's offices where such books
and records are maintained
-17-
<PAGE>
within 180 days following the delivery by Landlord to Tenant of such statement
or, in lieu thereof, at Landlord's sole option, Landlord will provide an audit
prepared by an independent public accountant. Within the aforesaid 180-day
period, Tenant may file written exception to any items of expense; provided,
however, that nothing herein shall be deemed to afford Tenant any right to
withhold any disputed payment claimed by Landlord to be due form Tenant to
Landlord, and Tenant shall promptly make all such payments as aforesaid. All
information and calculations set forth in the Landlord's Statement shall be
binding upon Tenant and no longer subject to challenge or dispute following the
aforesaid 180-day period unless and to the extent Tenant shall have timely
disputed the same and such dispute shall not have been resolved.
ARTICLE V
LANDLORD'S COVENANTS
5.1 LANDLORD'S COVENANTS DURING THE TERM.
Landlord covenants during the term:
5.1.1 Building Services - To furnish, through Landlord's employees or
independent contractors, the services listed in EXHIBIT F;
5.1.2 Additional Building Services - To furnish, through Landlord's
employees or independent contractors, reasonable additional Building operation
services upon reasonable advance request of Tenant at equitable rates from time
to time established by Landlord to be paid by Tenant;
5.1.3 Repairs - Except as otherwise provided in Article VII, to
make such repairs to the roof, HVAC systems, exterior walls, floor slabs,
other structural components and common facilities of the Building as may be
necessary to keep them in serviceable condition;
5.1.4 Quiet Enjoyment - That Landlord has the right to make this Lease
ant that Tenant on paying the rent and performing its obligations hereunder
shall peacefully and quietly have, hold and enjoy the Premises throughout the
Term without any manner of hindrance or molestation from Landlord or anyone
claiming under Landlord, subject however to all the terms and provisions hereof;
5.1.5 Insurance - To maintain casualty insurance for the Building
against loss or damage by fire, lightning, windstorm, tornado, hail and such
other further and additional hazards of whatever kind or nature as are now or
hereafter may be covered by standard extended coverage "all risk" endorsements,
which policy
-18-
<PAGE>
shall contain a "replacement cost endorsement" and an "agreed value
endorsement" in such amounts as Landlord may consider reasonably appropriate;
Landlord shall have no obligation to insure Tenant's personal property or
chattels, including, without limitation, Tenant's trade fixtures; and
5.1.6 Tenant's Costs - To pay all costs and fees incurred by Tenant in
connection with the successful enforcement by Tenant of any obligations of
Landlord under this Lease.
5.2 INTERRUPTIONS.
Landlord shall not be liable to Tenant for any compensation or reduction
of rent by reason of inconvenience or annoyance or for loss of business arising
from power losses or shortages or from the necessity of Landlord's entering the
Premises for any of the purposes in this Lease authorized, or for repairing the
Premises or any portion of the Building or Lot, provided that Landlord shall
use reasonable efforts to avoid necessary inconvenience to Tenant by reason
thereof. In case Landlord is prevented or delayed from making any repairs,
alterations or improvements, or furnishing any service or performing any other
covenant or duty to be performed on Landlord's part, by reason of any cause
beyond Landlord's reasonable control, Landlord shall not be liable to Tenant
therefor, nor, except as expressly otherwise provided in Article VII, shall
Tenant be entitled to any abatement or reduction of rent by reason thereof, nor
shall the same give rise to a claim in Tenant's favor that such failure
constitutes actual or constructive total or partial, eviction from the Premises.
Landlord reserves the right to stop any service or utility system when
necessary by reason of accident or emergency or until necessary repairs have
been completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant be reason thereof.
Notwithstanding anything herein to the contrary, in the event that any
service or utility system is interrupted and such interruption interferes
materially with the use and occupation of the Premises by Tenant and such
interruption continues due to Landlord's negligence for 30 consecutive days,
Tenant shall be entitled, after notice to Landlord, to make the necessary
repairs and to be reimbursed by Landlord for the reasonable costs incurred in
connection with making such necessary repairs; provided, however, that nothing
herein shall be deemed to afford Tenant any right to offset such costs against
rent.
-19-
<PAGE>
Landlord also reserves the right to institute such policies, programs
and measures as may be necessary, required or expedient for the conservation
or preservation of energy or energy services or as may be necessary or
required to comply with applicable codes, rules, regulations or standards.
ARTICLE VI
TENANT'S COVENANTS
6.1 TENANT'S COVENANTS DURING THE TERM.
Tenant covenants during the Term and such further time as Tenant
occupies any part of the Premises:
6.1.1 Tenant's Payments - To pay when due (a) all Annual Rent and
additional rent, (b) all taxes which may be imposed on Tenant's personal
property in the Premises (including, without limitation, Tenant's fixtures
and equipment) regardless to whomever assessed, (c) all charges by public
utilities for telephone and other utility services (including service
inspections therefor) rendered to the Premises not otherwise required
hereunder to be furnished by Landlord without charge, and (d) as additional
rent, all charges to Landlord for services rendered pursuant to Section 5.1.2
hereof.
6.1.2 Repairs and Yielding Up - Except as otherwise provided in Article
VII and Section 5.1.3, to keep the Premises in good order, repair and
condition, reasonable wear and tear and casualty and taking only excepted; and
at the expiration or termination of this Lease peaceably to yield up the
Premises and all changes and additions therein in such order, repair and
condition, first removing all goods and effects of Tenant and any items, the
removal of which is required by agreement or specified herein to be removed
at Tenant's election and which Tenant elects to remove, and repairing all
damage caused by such removal and restoring the Premises and leaving them
clean and neat.
6.1.3 Occupancy and Use - Continuously from the Commencement Date, to
use and occupy the Premises only for the Permitted Uses; not to injure or
deface the Premises, Building, or Lot; and not to permit in the Premises any
use thereof which is improper, offensive, contrary to law or ordinances, or
liable to create a nuisance or to invalidate or increase the premiums for any
insurance on the Building or its contents or liable to render necessary any
alteration or addition to the Building; not to dump, flush, or in any way
introduce any hazardous substances or any other toxic substances into the
septic, sewage or other waste disposal system serving the Premises, the
Building or the Lot; not
-20-
<PAGE>
to generate, store or dispose of hazardous substances in or on the Premises,
the Building or the Lot or dispose of hazardous substances from the
Premises, the Building or the Lot to any other location without the prior
written consent of Landlord and then only in compliance with the Resource
Conversation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et
seq., and all other applicable laws, ordinances and regulations; to notify
Landlord of any incident which would require the filing of a notice under
applicable federal, state, or local law; not to store hazardous substances on
the Premises without first submitting to Landlord a list of all such
hazardous substances and all permits required therefor and thereafter
providing to Landlord on an annual basis Tenant's certification that all such
permits have been renewed with copies of such renewed permits; and to comply
with the orders and regulations of all governmental authorities with respect
to zoning, building, fire, health and other codes, regulations, ordinances
or laws applicable to the Premises. "Hazardous substances" as used in this
paragraph shall mean "hazardous substances" as defined in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 and regulation adopted pursuant to said Act.
Landlord hereby represents that, to its knowledge without further
inquiry, the Premises, the Building and the Lot are free of hazardous
substances.
6.1.4 Rules and Regulations - To comply with the Rules and Regulations
set forth in EXHIBIT G and all other reasonable Rules and Regulations
hereafter made by Landlord, or which Tenant has been given notice, for he
care and use of the Building and Lot and their facilities and approaches, it
being understood that Landlord shall not be liable to Tenant for the failure
of other tenants of the Building to conform to such Rules and Regulations.
6.1.5 Safety Appliances - To keep the Premises equipped with all safety
appliances required by law or ordinance or any other regulation of any public
authority because of any use made by Tenant and to procure all licenses and
permits so required because of such use and, if requested by Landlord, to do
any work so required because of such use, it being understood that the
foregoing provisions shall not be construed to broaden in any way Tenant's
Permitted Uses.
6.1.6 Assignment and Subletting - Not without the prior written consent
of Landlord to assign this Lease, to make any sublease, or to permit
occupancy of the Premises or any part thereof by anyone other than Tenant,
voluntarily or by operation of law (it being understood that in no event
shall Landlord consent to any such assignment, sublease or occupancy if the
same is on terms more favorable to the successor occupant than to the then
occupant); as additional rent, to reimburse Landlord promptly for reasonable
legal and other expenses incurred by Landlord in
-21-
<PAGE>
connection with any request by Tenant for consent to assignment or subletting;
no assignment or subletting shall affect the continuing primary liability of
Tenant (which, following assignment, shall be joint and several with the
assignee); no consent to any of the foregoing in a specific instance shall
operate as a waiver in any subsequent instance. Landlord's consent to any
proposed assignment of subletting is required both as to the terms and
conditions thereof, and as to the creditworthiness of the proposed assignee
or subtenant and the consistency of the proposed assignee's or subtenant's
business with other uses and tenants in the Building. Landlord's consent to
assignment or subletting by Tenant shall not be unreasonably withheld,
provided that Tenant is not the in default under this Lease and such assignee
or subtenant pays therefor the greater of the Annual Rent and additional rent
then payable hereunder, or the then fair market rent for the Premises; and
provided further that Landlord shall not be deemed unreasonable for
withholding its consent to any assignment or subletting the arrangements for
which are to be made through any broker other than Landlord or its
affiliates. In the event that any assignee or subtenant pays to rent than
payable hereunder, or pro rata portion thereof on a square footage basis for
any portion of the Premises, Tenant shall promptly pay said excess to
Landlord as and when received by Tenant.
If, at any time during the Term of this Lease, Tenant is:
(i) a corporation or a trust (whether or not having shares of
beneficial interest) and there shall occur any change in the identity of any
of the persons then having power to participate in the election or
appointment of the directors, trustees or other persons exercising like
functions and managing the affairs of Tenant; or
(ii) a partnership or association or otherwise not a natural
person (and is not a corporation or a trust) and there shall occur any change
in the identity of any of the persons who then are members of such
partnership or association or who comprise Tenant;
Tenant shall so notify Landlord and Landlord may terminate this Lease by
notice to Tenant given within 90 days thereafter if, in Landlord's reasonable
judgment, the credit of Tenant is thereby impaired. This paragraph shall not
apply if the initial Tenant named herein is a corporation and the
outstanding voting stock thereof is listed on a recognized securities
exchange.
Notwithstanding the foregoing, upon prior notice to Landlord, without
the prior written consent of Landlord, Tenant shall be able to assign this
Lease or sublease the whole or a portion of the Premises to an affiliate or
Tenant (as defined below)
-22-
<PAGE>
provided that (a) no such assignment or subletting shall affect the continuing
primary liability of Tenant and, following such assignment or subletting,
Tenant shall be jointly and severally liable with the assignee or subleasee for
all obligations under this Lease, (b) the creditworthiness of the proposed
assignee or sublessee is substantially the same as that of Tenant, (c) the
identity and character of the business of the assignee or sublessee and uses
proposed by such assignee or sublessee are consistent with the Permitted Uses,
and (d) Tenant is not then in default under this Lease. The term "affiliate of
Tenant" for purposes of this Lease shall mean any entity controlling, controlled
by or under common control with Tenant or any successor of Tenant by merger,
consolidation or acquisition of substantially all of the assets of Tenant.
6.1.7 Indemnity - To defend, with counsel approved by Landlord, all actions
against Landlord, any partner, trustee, stockholder, officer, director, employee
or beneficiary of Landlord, holders of mortgages secured by the Premises or the
Building and Lot and any other party having an interest in the Premises
("Indemnified Parties") with respect to, and to pay, protect, indemnify and save
harmless, to the extent permitted by law, all Indemnified Parties from and
against, any and all liabilities, losses, damages, costs, expenses (including
reasonable attorneys' fees and expenses), causes of action, suits, claims,
demands or judgments of any nature (a) to which any Indemnified Party is
subject because of its estate or interest in the Premises, or (b) arising from
(i) injury to or death of any person, or damage to or loss of property, on the
Premises or on adjoining sidewalks, streets or ways, or connected with the use,
condition or occupancy of any thereof unless caused by the negligence of the
respective Indemnified Party or any person or entity for whose conduct the
respective Indemnified Party is responsible, (ii) violation of this Lease, or
(iii) any act, fault, omission, or other misconduct of Tenant or its agents,
contractors, licensees, sublessees or invitees.
6.1.8 (a) Tenant's Liability Insurance - To maintain public liability
insurance on the Premises indemnifying Landlord and Tenant against all claims
and demands for (i) injury to or death of any person or damage to or loss of
property, on the Premises or adjoining walks, streets or ways, or connected with
the use, condition or occupancy of any thereof unless caused by the negligence
of Landlord or its servants or agents, (ii) violation of this Lease, or (iii)
any act, fault or omission, or other misconduct of Tenant or its agents,
contractors, licensees, sublessees or invitees, in amounts which shall, at the
beginning of the Term, be at least equal to the limits set forth in Section 1.1,
and from time to time during the Term, shall be for such higher limits, if any,
as are customarily carried in the area in which the Premises are located on
property similar to the Premises
-23-
<PAGE>
and used for similar purposes, and shall be written on the "Occurrence Basis"
and include Host Liquor liability insurance, and to furnish Landlord with
certificates thereof.
(b) Tenant's Worker's Compensation Insurance - To keep all of Tenant's
employees working in the Premises covered by worker's compensation insurance
in statutory amounts and to furnish Landlord with certificates thereof.
6.1.9 Insurance Policies - All policies for insurance required under
Section 6.1.8 shall be obtained from responsible companies qualified to do
business in the state in which the Premises are located and in good standing
therein, which companies and the amount of insurance allocated thereto shall
be subject to Landlord's approval. Tenant agrees to furnish Landlord with
certificates of all such insurance which Tenant is obligated to obtain
pursuant to Section 6.1.8 prior to the beginning of the Term and with each
renewal policy at least 30 days prior to the expiration of the policy it
renews. Each such policy shall prohibit cancellation and reduction of
coverage without at least 30 days' prior written notice to Landlord.
6.1.10 Landlord's Right of Entry - To permit Landlord and Landlord's
agents entry: to examine the Premises at reasonable times and to make repairs
or replacements; to remove, at Tenant's expense, any changes, additions,
signs, curtains, blinds, shades, awnings, aerials, flagpoles, or the like not
consented to in writing; and to show the Premises to prospective tenants
during the 12 months preceding expiration of the Term and to prospective
purchasers and mortgagees at all reasonable times.
6.1.11 Loading - Not to place Tenant's Property, as defined in Section
6.1.13, upon the Premises so as to exceed a rate of 50 pounds of live load per
square foot and not to move any safe, vault or other heavy equipment in, about
or out of the Premises except in such manner and at such times as Landlord
shall in each instance approve; Tenant's business machines and mechanical
equipment which cause vibration or noise that may be transmitted to the Building
structure or to any other leased space in the Building shall be placed and
maintained by Tenant in settings of cork, rubber, spring, or other types of
vibration eliminators sufficient to eliminate such vibration or noise.
6.1.12 Landlord's Costs - In case Landlord shall be made party to any
litigation commenced by or against Tenant or by or against any parties in
possession of the Premises or any part thereof claiming under Tenant, to pay, as
additional rent, all costs, including but not limited to reasonable counsel
fees, incurred by or imposed upon Landlord in connection with such litigation,
unless such costs and fees were incurred by Landlord in connection with the
successful enforcement by Tenant of any obligations of Landlord under this
Lease; and, as additional rent,
-24-
<PAGE>
also to pay all such costs and fees incurred by Landlord in connection with the
successful enforcement by Landlord of any obligations of Tenant under this
Lease.
6.1.13 Tenant's Property - All the furnishings, fixtures, equipment,
effects and property of every kind, nature and description of Tenant and of all
persons claiming by, through or under Tenant which, during the continuance of
this Lease or any occupancy of the Premises by Tenant or anyone claiming under
Tenant, may be on the Premises or elsewhere in the Building or on the Lot shall
be at the sole risk and hazard of Tenant, and if the whole or any part thereof
shall be destroyed or damaged by fire, water or otherwise, or by the leakage or
bursting of water pipes, steam pipes, or other pipes, by theft, or from any
other cause, no part of said loss or damage is to be charged to or to be borne
by Landlord unless due to the negligence of Landlord.
6.1.14 Labor or Materialmen's Liens - To pay promptly when due the entire
cost of any work done on the Premises by Tenant, its agents, employees, or
independent contractors; not to cause or permit any liens for labor or materials
performed or furnished in connection therewith to attach to the Premises; and
immediately to discharge any such liens which may so attach.
6.1.15 Changes or Additions - Not to make any changes or additions to the
Premises without Landlord's prior written consent (which consent shall not be
unreasonably withheld or delayed), provided that Tenant shall reimburse Landlord
for all costs incurred by Landlord in reviewing Tenant's proposed changes or
additions, and provided further that, in order to protect the functional
integrity of the Building, all such changes and additions shall be performed by
contractors selected from a list of approved contractors prepared by Landlord
from time to time.
6.1.16 Holdover - To pay to Landlord the greater of twice (a) the then fair
market rent as conclusively determined by Landlord or (b) the total of the
Annual Rent and additional rent then applicable for each month or portion
thereof Tenant shall retain possession of the Premises or any part thereof after
the termination of this Lease, whether by lapse of time or otherwise, and also
to pay all damages sustained by Landlord on account thereof; the provisions of
this subsection shall not operate as a waiver by Landlord of the right of
re-entry provided in this Lease.
-25-
<PAGE>
ARTICLE VII
CASUALTY AND TAKING
7.1 CASUALTY AND TAKING.
In case during the Term all or any substantial part of the Premises,
Building, or Lot or any one or more of them, are damaged materially by fire or
any other cause or by action of public or other authority in consequence thereof
or are taken by eminent domain or Landlord receives compensable damage by reason
of anything lawfully done in pursuance of public or other authority, this Lease
shall terminate at Landlord's election, which may be made, notwithstanding
Landlord's entire interest may have been divested, by notice to Tenant within 30
days after the occurrence of the event giving rise to the election to terminate,
which notice shall specify the effective date of termination which shall be not
less than 30 nor more than 60 days after the date of notice of such termination.
If in any such case the Premises are rendered unfit for use and occupation and
the Lease is not so terminated, Landlord shall use due diligence to put the
Premises, or, in case of a taking, what may remain thereof (excluding any items
installed or paid for by Tenant which Tenant may be required or permitted to
remove) into proper condition for use and occupation to the extent permitted by
the net award of insurance or damages available to Landlord, and a just
proportion of the Annual Rent and additional rent according to the nature and
extent of the injury shall be abated until the Premises or such remainder shall
have been put by Landlord in such condition; and in case of a taking which
permanently reduces the area of the Premises, a just proportion of the Annual
Rent and additional rent shall be abated for the remainder of the Term and an
appropriate adjustment shall be made to the Annual Estimated Operating Expenses.
Notwithstanding the foregoing, if such damage (a) cannot, in Landlord's
reasonable opinion asserted in a notice delivered within 30 days of such
casualty ("Landlord's Notice"), be fully repaired within six months after
Landlord's Notice, or (b) is not in fact repaired within six months after
Landlord's Notice (plus up to an additional 30 days required by reason of causes
beyond Landlord's control), Tenant shall have the right, by written notice to
Landlord given within 30 days after Landlord's Notice, or, as the case may be,
within 30 days after the expiration of said six-month construction period (as so
extended) if the repairs are not then completed to terminate this Lease,
effective as of the date of such casualty as if that date were the date set
forth in this Lease for the expiration of the Term; provided, however, that
Tenant's failure to provided Landlord with such notice within said 30-day period
shall waive Tenant's right to terminate under this Section 7.1; and provided,
further, that Tenant shall have no right to terminate if the casualty which
damaged the Premises or
-26-
<PAGE>
Building was caused solely by the negligence of Tenant, its agents, employees,
invitees, licensees, subtenants or assignees or any combination of such parties.
7.2 RESERVATION OF AWARD.
Landlord reserves to itself any and all rights to receive awards made
for damages to the Premises, Building or Lot and the leasehold hereby created,
or any one or more of them, accruing by reason of exercise of eminent domain or
by reason of anything lawfully done in pursuance of public or other authority.
Tenant hereby releases and assigns to Landlord all Tenant's rights to such
awards, and covenants to deliver such further assignments and assurances thereof
as Landlord may from time to time request, and hereby irrevocably designates and
appoints Landlord its attorney-in-fact to execute and deliver in Tenants's name
and behalf all such further assignments thereof. It is agreed and understood,
however, that Landlord does not reserve to itself, and Tenant does not assign to
Landlord, any damages payable for (a) movable trade fixtures installed by Tenant
or anybody claiming under Tenant, at its own expense or (b) relocation expenses
recoverable by Tenant from such authority in a separate action.
ARTICLE VIII
RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE.
This Lease is and shall continue to be subject and subordinate to any
presently existing mortgage or deed of trust of record covering the Lot or
Building or both (the "mortgaged premises"). The holder of any such presently
existing mortgage or deed of trust shall have the election to subordinate the
same to the rights and interests of Tenant under this Lease exercisable by
filing with the appropriate recording office a notice of such election,
whereupon the Tenant's rights and interests hereunder shall have priority over
such mortgage or deed of trust.
Unless the option provided for in the next following sentence shall be
exercised, this Lease shall be superior to and shall not be subordinate to, any
mortgage, deed of trust or other voluntary lien hereafter placed on the
mortgaged premises. The holder of any such mortgage, deed of trust or other
voluntary lien shall have the option to subordinate this Lease to the same,
provided that such holder enters into an agreement with Tenant by the terms of
which the holder will agree to recognize the rights of Tenant under this Lease
and to accept Tenant as tenant of the Premises under the terms and conditions of
this Lease in the event of acquisition of title by such holder through
foreclosure proceedings or otherwise and Tenant will agree to recognize the
-27-
<PAGE>
holder of such mortgage as Landlord in such event, which agreement shall be made
to expressly bind and inure to the benefit of the successors and assigns of
Tenant and of the holder and upon anyone purchasing the mortgaged premises at
any foreclosure sale. Any such mortgage to which this Lease shall be
subordinated may contain such terms, provisions and conditions as the holder
deems usual or customary.
8.2 RIGHTS OF MORTGAGE HOLDERS; LIMITATION OF MORTGAGEE'S LIABILITY.
The word "mortgage" as used herein includes mortgages, deeds of trust
or other similar instruments evidencing other voluntary liens or encumbrances,
and modifications, consolidations, extensions, renewals, replacements and
substitutes thereof. The word "holder" shall mean a mortgagee, and any
subsequent holder or holders of a mortgage. Until the holder of a mortgage shall
enter and take possession of the Premises for the purpose of foreclosure such
holder shall have only such rights of Landlord as are necessary to preserve the
integrity of this Lease as security. Upon entry and taking possession of the
Premises for the purpose of foreclosure, such holder shall have all the rights
of Landlord. Notwithstanding any other provision of this Lease to the contrary
including without limitation Section 10.4, no such holder of a mortgage shall be
liable, either as mortgagee or as assignee, to perform, or be liable, either as
mortgagee or as assignee, to perform, or be liable in damages for failure to
perform any of the obligations of Landlord unless and until such holder shall
enter and take possession of the Premises for the purpose of foreclosure, and
such holder shall not in any event be liable to perform or for failure to
perform the obligations of Landlord under Section 3.1. Upon entry for the
purpose of foreclosure such holder shall be liable to perform all of the
obligations of Landlord (except for the obligations under Section 3.1), subject
to and with the benefit of the provisions of Section 10.4, provided that a
discontinuance of any foreclosure proceeding shall be deemed a conveyance under
said provisions to the owner of the equity of the Premises.
8.3 MORTGAGEE'S ELECTION.
Notwithstanding any other provision to the contrary contained in this
Lease, if prior to substantial completion of Landlord's obligations under
Article III, any holder of a first mortgage on the mortgaged premises enters and
takes possessions thereof for the purpose of foreclosing the mortgage, such
holder may elect, by written notice given to the Tenant and Landlord at any time
within 90 days after such entry and taking of possession, not to perform
Landlord's obligations under Article III, and in such event such holder and all
persons claiming under it shall be relieved of all obligations to
perform, and all liability for failure to perform, said Landlord's obligations
under Article III, and Tenant may
-28-
<PAGE>
terminate this Lease and all its obligations hereunder by written notice to
Landlord and such holder given within 30 days after the day on which such holder
shall have given its notice as aforesaid.
8.4 NO PREPAYMENT OR MODIFICATION, ETC.
Tenant shall not pay Annual Rent, additional rent, or any other charge more
than 10 days prior to the due date thereof. No prepayment of Annual Rent,
additional rent or other charge, no assignment of this Lease (except as
permitted by Section 6.1.6 to an affiliate of Tenant (as defined in Section
6.1.6)) and no agreement to modify so as to reduce the rent, change the Term,
or otherwise materially change the rights of Landlord under this Lease, or to
relieve Tenant of any obligations or liability under this Lease, shall be
valid unless consented to in writing by Landlord's mortgagees of record, if
any.
8.5 NO RELEASE OR TERMINATION.
No act or failure to act on the part of Landlord which would entitle
Tenant under the terms of this Lease, or by law, to be relieved of Tenant's
obligations hereunder or to terminate this Lease, shall result in a release
or termination of such obligations or a termination of this Lease unless (a)
Tenant shall have first given written notice of Landlord's act or failure to
act to Landlord's mortgagees of record, if any, specifying the act or failure
to act on the part of Landlord which could or would give basis to Tenant's
rights and (b) such mortgagees, after receipt of such notice, have failed or
refused to correct or cure the condition complained of within a reasonable
time thereafter, but nothing contained in this Section 8.5 shall be deemed to
impose any obligation on any such mortgagee to correct or cure any such
condition. "Reasonable time" as used above in this section shall mean 30 days
or such longer period as may be necessary to complete such correction or cure
if such condition is determined to exist and shall include additional
reasonable time to obtain possession of the mortgaged premises, if the
mortgagee elects to do so.
8.6 CONTINUING OFFER.
The covenants and agreements contained in this Lease with respect to the
rights, powers and benefits of a mortgagee (particularly, without limitation
thereby, the covenants and agreements contained in this Article VIII) constitute
a continuing offer to any person, corporation or other entity, which by
accepting or requiring an assignment of this Lease or by entry or foreclosure
assumes the obligations herein set forth with respect to such mortgagee; such
mortgagee is hereby constituted a party to this Lease as an obligee hereunder to
the same extent as though its name were written hereon as such; and such
mortgagee shall be entitled to enforce such provisions in its own name. Tenant
-29-
<PAGE>
agrees on request of Landlord to execute and deliver from time to time any
agreement which may reasonably be deemed necessary to implement the provisions
of this Article VIII.
8.7 MORTGAGEE'S APPROVAL.
Landlord's obligation to perform its covenants and agreements hereunder is
subject to the condition precedent that this Lease be approved by the holder of
any mortgage of which the Premises are a part and by the issuer of any
commitment to make a mortgage loan which is in effect on the date hereof. Unless
landlord gives Tenant written notice within 30 business days after the date
hereof that such holder or issuer, or both, disapprove of this Lease, then this
condition shall be deemed to have been satisfied or waived and the provisions of
this Section 8.7 shall be of no further force or effect.
ARTICLE IX
DEFAULT
9.1 EVENTS OF DEFAULT.
If any default by Tenant continues after notice, in case of Annual Rent,
additional rent, Tenant Improvement Reimbursement or any other monetary
obligation to Landlord for more than 10 days, or in any other case for more than
30 days and such additional time, if any, as is reasonably necessary to cure the
default if the default is of such a nature that it cannot reasonably be cured in
30 days and Tenant diligently endeavors to cure such default; or if the Tenant
becomes insolvent, fails to pay its debts as they fall due, files a petition
under any chapter of the U.S. Bankruptcy Code, 11 U.S.C. 101 et seq., as it may
be amended (or any similar petition under any insolvency law of any
jurisdiction), or if such petition is filed against Tenant and such petition is
not dismissed within 60 days of such filing; or if Tenant proposes any
dissolution, liquidation, composition, financial reorganization or
recapitalization with creditors, makes an assignment or truest motrgage for
benefit of creditors, or if a receiver, trustee, custodian or similar agent is
appointed or takes possession with respect to any property of Tenant; or if the
leasehold hereby created is taken on execution or other process of law in any
action against Tenant; then, and in any such case, Landlord and the agents and
servants of Landlord may, in addition to and not in derogation of any remedies
for any preceding breach of covenant, immediately or at any time thereafter
while such default continues and without further notice, at Landlord's election,
do any one or more of the following: (a) give Tenant written notice stating that
the Lease is terminated, effective upon the giving of such notice or upon a date
stated in such notice, as Landlord may elect, in which event the Lease shall be
-30-
<PAGE>
irrevocably extinguished and terminated as stated in such notice without any
further action, or (b) with or without process of law, in a lawful manner enter
and repossess the Premises as of Landlord's former estate, and expel Tenant and
those claiming through or under Tenant, and remove its and their effects,
without being guilty of trespass, in which event the Lease shall be irrevocably
extinguished and terminated at the time of such entry, or (c) pursue any other
rights or remedies permitted by law. Any such termination of the Lease shall be
without prejudice to any remedies which might otherwise be used for arrears of
rent or prior breach of covenant, and in the event of such termination Tenant
shall remain liable under this Lease as hereinafter provided. Tenant hereby
waives all statutory rights (including, without limitation, rights of
redemption, if any) to the extent such rights may be lawfully waived, and
Landlord, without notice to Tenant, may store Tenant's effects and those of any
person claiming through or under Tenant at the expense and risk of Tenant and,
if Landlord so elects, may sell such effects at public auction or private sale
and apply the net proceeds to the payment of all sums due to Landlord from
Tenant, if any, and pay over the balance, if any, to Tenant.
9.2 TENANT'S OBLIGATIONS AFTER TERMINATION.
In the event that this Lease is terminated under any of the provisions
contained in Section 9.1 or shall be otherwise terminated for breach of any
obligation of Tenant, Tenant covenants to pay forthwith to Landlord, as
compensation, the excess of the total rent reserved for the residue of the Term
over the rental value of the Premises for said residue of the Term. In
calculating the rent reserved, there shall be included, in addition to the
Annual Rent and all additional rent, the value of all other consideration agreed
to be paid or performed by Tenant for said residue. Tenant further covenants as
an additional and cumulative obligation after any such ending to pay punctually
to Landlord all the sums and perform all the obligations which Tenant covenants
in this Lease to pay and to perform in the same manner and to the same extent
and at the same time as if this Lease had not been terminated. In calculating
the amounts to be paid by Tenant under the next foregoing covenant, Tenant shall
be credited with any amount paid to Landlord as compensation as provided in the
first sentence of this Section 9.2 and also with the net proceeds of any rents
obtained by Landlord by reletting the Premises, after deducting all Landlord's
expenses in connection with such reletting, including, without implied
limitation, all repossession costs, brokerage commissions, fees for legal
services and expenses of preparing the Premises for such reletting, it being
agreed by Tenant that Landlord may (a) relet the Premises or any part or parts
thereof for a term or terms which may at Landlord's option be equal to or less
than or exceed the period which would otherwise have constituted the balance of
the term and may grant such concessions and free rent as Landlord in its sole
-31-
<PAGE>
judgment considers advisable or necessary to relet the same and (b) make such
alterations, repairs and decorations in the Premises as Landlord in its sole
judgment considers advisable or necessary to relet the same, and no action of
Landlord in accordance with the foregoing or failure to relet or to collect
rent under reletting shall operate or be construed to release or reduce
Tenant's liability as aforesaid.
Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater, equal to, or less than the amount of the loss or damages
referred to above.
ARTICLE X
MISCELLANEOUS
10.1 NOTICE OF LEASE.
Upon request of either party, both parties shall execute and deliver,
after the Term begins, a short form of this Lease in form appropriate for
recording or registration, and if this Lease is terminated before the Term
expires, an instrument is such form acknowledging the date of termination.
10.2 INTENTIONALLY OMITTED.
10.3 NOTICES FROM ONE PARTY TO THE OTHER.
All notices required or permitted hereunder shall be in writing and
addressed, if to the Tenant, at Tenant's Address or such other address as Tenant
shall have last designated by notice in writing to Landlord and, if to Landlord,
at Landlord's Address or such other address as Landlord shall have last
designated by notice in writing to Tenant. Any notice shall have been deemed
duly given if mailed to such address postage prepaid, registered or certified
mail, return receipt requested, when deposited with the U.S. Postal Service or
if delivered to such address by hand, when so delivered.
10.4 BIND AND INURE.
The obligations of this Lease shall run with the land, and this Lease
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Landlord named herein and
each successive owner of the Premises shall be liable only for the obligations
accruing during
-32-
<PAGE>
the period of its ownership. The obligations of Landlord shall be binding
upon the assets of Landlord which comprise the Premises but not upon other
assets of Landlord. No individual partner, trustee, stockholder, officer,
director, employee or beneficiary of Landlord shall be personally liable
under this Lease and Tenant shall look solely to Landlord's interest in the
Premises in pursuit of its remedies upon an event of default hereunder, and
the general assets of the individual partners, trustees, stockholders,
officers, employees or beneficiaries of Landlord shall not be subject to
levy, execution or other enforcement procedure for the satisfaction of the
remedies of Tenant.
10.5 NO SURRENDER.
The delivery of keys to any employee of Landlord or to Landlord's agent
or any employee thereof shall not operate as a termination of this Lease or a
surrender of the Premises.
10.6 NO WAIVER, ETC.
The failure of Landlord or of Tenant to seek redress for violation of, or
to insist upon the strict performance of any covenant or condition of this
Lease or, with respect to such failure of Landlord, any of the Rules and
Regulations referred to in Section 6.1.4, whether heretofore or hereafter
adopted by Landlord, shall not be deemed a waiver of such violation nor prevent
a subsequent act, which would have originally constituted a violation, from
having all the force and effect of an original violation, nor shall the failure
of Landlord to enforce any of said Rules and Regulations against any other
tenant in the Building be deemed a waiver of any such Rules or Regulations. The
receipt by Landlord of Annual Rent or additional rent with knowledge of the
breach of any covenant of this Lease shall not be deemed a waiver of such breach
by Landlord, unless such waiver by in writing and signed by Landlord. No consent
or waiver, express or implied, by Landlord or Tenant to or of any breach of any
agreement or duty shall be construed as a waiver or consent to or of any other
breach of the same or any other agreement or duty.
10.7 NO ACCORD AND SATISFACTION.
No acceptance by Landlord of a lesser sum than the Annual Rent and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed as
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.
-33-
<PAGE>
10.8 CUMULATIVE REMEDIES.
The specific remedies to which Landlord may resort under the terms of
this Lease are cumulative and are not intended to be exclusive of any other
remedies or means of redress to which it may be lawfully entitled in case of any
breach or threatened breach by Tenant of any provisions of this Lease. In
addition to the other remedies provided in this Lease, Landlord shall be
entitled to the restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions or provisions of this
Lease or to a decree compelling specific performance of any such covenants,
conditions or provisions.
10.9 LANDLORD'S RIGHT TO CURE.
If Tenant shall at any time default in the performance of any obligation
under this Lease, Landlord shall have the right, but shall not be obligated, to
enter upon the Premises and to perform such obligation, notwithstanding the fact
that no specific provision for such substituted performance by Landlord is made
in this Lease with respect to such default. In performing such obligation,
Landlord may make any payment of money or perform any other act. All sums so
paid by Landlord (together with interest at the rate of 4% per annum in excess
of the then average prime commercial rate of interest being charged by the three
largest national banks in Boston, Massachusetts) and all necessary incidental
costs and expenses in connection with the performance of any such act by
Landlord, shall be deemed to be additional rent under this Lease and shall be
payable to Landlord immediately on demand. Landlord may exercise the foregoing
rights without waiving any other of its rights or releasing Tenant from any of
its obligations under this Lease.
10.10 ESTOPPEL CERTIFICATE.
Tenant agrees, from time to time, upon not less than 15 days' prior
written request by Landlord, to execute, acknowledge and deliver to Landlord
a statement in writing certifying that this Lease is unmodified and in full
force and effect; that Tenant has no defenses, offsets or counterclaims
against its obligations to pay the Annual Rent and additional rent and to
perform its other covenants under this Lease; that there are no uncured
defaults of Landlord or Tenant under this Lease (or, if there have been
modifications, that this Lease is in full force and effect as modified and
stating the modifications, and, if there are any defenses, offsets,
counterclaims, or defaults, setting them forth in reasonable detail); and the
dates to which the Annual Rent, additional rent and other charges have been
paid. Any such statement delivered pursuant to this Section 10.10 shall be in a
-34-
<PAGE>
form reasonably acceptance to and may be relied upon by any prospective
purchaser or mortgagee of premises which include the Premises or any prospective
assignee of any such mortgagee.
10.11 WAIVER OF SUBROGATION.
Any insurance carried by either party with respect to the Premises and
property therein or occurrences thereon shall include a clause or endorsement
denying to the insurer rights of subrogation against the other party to the
extent rights have been waived by the insured prior to occurrences of injury or
loss. Each party, notwithstanding any provisions of this Lease to the contrary,
hereby waives any rights of recovery against the other for injury or loss due to
hazards covered by insurance containing such clause or endorsement to the extent
of the indemnification received thereunder.
10.12 ACTS OF GOD.
In any case where either party hereto is required to do any act, delays
caused by or resulting from Acts of God, war, civil commotion, fire, flood or
other casualty, labor difficulties, shortages of labor, materials or equipment,
government regulations, usually severe weather, or other causes beyond such
party's reasonable control shall not be counted in determining the time during
which work shall be completed, whether such time be designated by a fixed date,
a fixed time or a "reasonable time", and such time shall be deemed to be
extended by the period of such delay.
10.13 BROKERAGE.
Each of Landlord and Tenant represents and warrants to the other that
it has dealt with no broker in connection with this transaction other than
spaulding and Slye Company and The Codman Company and each agrees to defend,
with counsel approved by the other, indemnify and save the other harmless from
and against any and all cost, expense or liability for any compensation,
commissions or charges claimed by a broker and in breach of its foregoing
representation and warranty.
10.14 SUBMISSION NOT AN OFFER.
The Submission of a draft of this Lease or a summary of some or all of
its provisions does not constitute an offer to Lease or demise the Premises, it
being understood and agreed that neither Landlord nor Tenant shall be legally
bound with respect to the leasing of the Premises unless and until this Lease
has been executed by both Landlord and Tenant and a fully executed copy has been
delivered to each of them.
-35-
<PAGE>
10.15 APPLICABLE LAW AND CONSTRUCTION.
This Lease shall be governed by and construed in accordance with the
laws of the state in which the Premises are located. If any term, covenant,
condition or provision of this Lease or the application thereof to any person or
circumstances shall be declared invalid or unenforceable by the final ruling of
a court of competent jurisdiction having final review, the remaining terms,
covenants, conditions and provisions of this Lease and their application to
persons or circumstances shall no be affected thereby and shall continue to be
enforced and recognized as valid agreements of the parties, and in the place of
such invalid or unenforceable provision, there shall be substituted a like, but
valid and enforceable provision which comports to the finding of the aforesaid
court and most nearly accomplishes the original intention of the parties.
There are no oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions hereof may
be waived or modified, only by instruments in writing executed by Landlord and
Tenant.
The titles of the several Articles and Sections contained herein are
for convenience only and shall not be considered in construing this Lease.
Unless repugnant to the context, the words "Landlord" and "Tenant"
appearing in this Lease shall be construed to mean those named above and their
respective heirs, executors, administrators,
-36-
<PAGE>
successors and assigns, and those claiming through or under them respectively.
If there be more than one tenant, the obligations imposed by this Lease upon
Tenant shall be joint and several.
EXECUTED as a sealed instrument in two or more counterparts on the day
and year first above written.
LANDLORD:
NEW ENGLAND MUTUAL LIFE INSURANCE
COMPANY
By: Copley Real Estate Advisors,
Inc., its duly authorized asset
manager and advisor
By: Michael H. Harrity
---------------------------
Name: MICHAEL H. HARRITY
---------------------
Title: VICE PRESIDENT
--------------------
A copy of Landlord's corporate
authorization for such execution is
attached hereto.
TENANT:
CROSSCOMM CORPORATION
By: [ILLEGIBLE]
----------------------------
Name: [ILLEGIBLE]
--------------------------
(please print or type)
Title: V. P. Finance
-------------------------
(please print or type)
A copy of Tennant's corporate
authorization for such execution is
attached hereto.
-37-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS)
)ss.
COUNTY OF SUFFOLK )
On May 13, 1992, before me, the undersigned, a Notary Public in and for
said Commonwealth, personally appeared Michael H. Harrity, personally known
to me to be the person who executed the within instrument as Vice President
of Copley Real Estate Advisors, Inc., a Massachusetts Corporation, as duly
authorized asset manager and advisor to New England Mutual Life Insurance
Company, a Massachusetts corporation, the corporation therein named, pursuant
to its bylaws or a resolution of its board of directors, and acknowledged to
me that Copley Real Estate Advisors, Inc. executed the within instrument on
behalf of New England Mutual Life Insurance Company as its free act and deed.
WITNESS my hand a official seal.
/s/ Linda J. Barove
------------------------------------------
Notary Public in and for said Commonwealth
LINDA J. BAROVE, Notary Public
My Commission Expires Sept. 2, 1994
<PAGE>
EXHIBIT A
----------
Lot 8
A parcel of land on Donald J. Lynch Boulevard located in Marlborough,
Middlesex County, Commonwealth of Massachusetts, shown as Lot 8 on a plan
entitled "Plan of Land Marlborough, Mass." dated April 7, 1986, prepared by
GLM Engineering Consultants, Inc., recorded with the Middlesex South Registry
of Deeds on May 12, 1986 as Plan No. 601 of 1986 (the "Plan"), and bounded
and described as follows:
NORTHERLY: by Donald J. Lynch Boulevard, 603.56 feet;
NORTHERLY: by Donald J. Lynch Boulevard by a curved line
with a radius of 940.00 feet, a distance of
124.11 feet;
NORTHEASTERLY: by Parcel A as shown on said plan, 84.73 feet;
NORTHEASTERLY: by said Parcel A by a curved line with a
radius of 130.00 feet, a distance of 127.78
feet;
EASTERLY: by said Parcel A, 20.00 feet;
NORTHERLY: by said Parcel A by a curved line with a
radius of 150.00 feet, a distance of 78.54
feet;
NORTHEASTERLY: by said Parcel A, 120.92 feet;
SOUTHEASTERLY: by Interstate Route 290 by a curved line with
a radius of 8630.00 feet, a distance of 105.85
feet;
SOUTHEASTERLY: by Interstate Route 290, 785.87 feet; and
SOUTHWESTERLY: by Lot 9 as shown on said plan, 398.59 feet.
Containing 6.79 acres according to said plan.
The above described premises include a parcel of registered land shown
as "Lot 11" on Land Court Plan No. 3652-I filed with the Land Court
Engineer's office in Boston, Massachusetts.
<PAGE>
Together with the right to use the adjacent portion of the adjoining
Parcel A shown as "Access & Utility Easement" on a plan entitled "Plan of
Land Marlborough, Mass." dated July 22, 1986, prepared by GLM Engineering
Consultants, Inc., recorded with said Deeds as Plan No. 1064 of 1986, and
that portion of the adjoining Lot 9 shown as "Access & Utility Easement" on a
plan entitled "Plan of Land, Marlborough, Mass." dated April 7, 1986,
prepared by GLM Engineering Consultants, Inc., recorded with the Middlesex
South Registry of Deeds on May 12, 1986 as Plan No. 602 of 1986, for purposes
of access, ingress and egress as may from time to time be necessary. Said
easements shall be in the locations designated by Landlord from time to time.
A-2
<PAGE>
EXHIBIT C
---------
Intentionally Omitted.
----------------------
C-1
<PAGE>
EXHIBIT D
Form Of First Amendment To Lease
THIS FIRST AMENDMENT TO LEASE, made this _____ day of _________, 1992 by
and between NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY ("Landlord"), and
CROSSCOMM CORPORATION, a Delaware corporation ("Tenant").
WITNESSETH:
THAT, WHEREAS, Landlord and Tenant did enter into that certain Lease dated
_____________________, 1992, for the demise of the Premises described therein
(hereinafter the "Lease"); and
WHEREAS, all terms defined in the Lease shall have the same meanings when
referred to herein; and
WHEREAS, Landlord and Tenant agreed to confirm the Commencement Date of the
Lease, pursuant to and in accordance with Article II thereof;
NOW, THEREFORE, for consideration paid by each to the other, Landlord and
Tenant hereby agree that the Commencement Date of the Lease shall be
______________________________.
EXCEPT as hereby modified and amended, all other terms, provisions,
covenants and conditions of the Lease shall remain unmodified and in full force
and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment
to Lease as a sealed instrument on or as of the day and year first above
written.
WITNESS: LANDLORD:
NEW ENGLAND MUTUAL LIFE INSURANCE
COMPANY
By: Copley Real Estate Advisors,
Inc., its duly authorized asset
manager and advisor
________________________________ By:________________________________
Name:___________________________
Title:__________________________
D-1
<PAGE>
WITNESS: TENANT:
CROSSCOMM CORPORATION
_________________________________ By:_____________________________________
Name:________________________________
Title:_______________________________
D-2
<PAGE>
EXHIBIT E
---------
Leasehold Improvements as specified in the approved Complete Plans (not
available on the date hereof).
<PAGE>
EXHIBIT F
LANDLORD'S SERVICES
I. CLEANING
A. General
1. All cleaning work will be performed between 8 a.m. and 12
midnight, Monday through Friday, unless otherwise necessary for
stripping, waxing, etc.
2. Abnormal waste removal (e.g., computer installation paper, bulk
packaging, wood or cardboard crates, refuse from cafeteria
operation, etc.) shall be Tenant's responsibility.
B. Daily Operations (5 times per week)
1. Tenant Areas
a. Empty and clean all waste receptacles; wash receptacles as
necessary.
b. Vacuum all rugs and carpeted areas.
c. Empty, damp-wipe and dry all ashtrays.
2. Lavatories
a. Sweep and wash floors with disinfectant.
b. Wash both sides of toilets seats with disinfectant.
c. Wash all mirrors, basins, bowls, urinals.
d. Spot clean toilet partitions.
e. Empty and disinfect sanitary napkin disposal receptacles.
f. Refill toilet tissue, towel, soap, and sanitary napkin
dispensers.
3. Public Areas
a. Wipe down entrance doors and clean glass (interior and
exterior).
b. Vacuum elevator carpets and wipe down doors and walls.
c. Clean water coolers.
C. Operations as Needed (but not less than every other day)
1. Tenant and Public Areas
a. Buff all resilient floor areas.
D. Weekly Operations
1. Tenant Areas, Lavatories, Public Areas
a. Hand-dust and wipe clean all horizontal surfaces with
treated cloths to include furniture, office equipment,
window sills, door ledges, chair rails, baseboards,
convector tops, etc., within normal reach.
b. Remove finger marks from private entrance doors, light
switches, and doorways.
c. Sweep all stairways.
E. Monthly Operations
1. Tenant and Public Areas
a. Thoroughly vacuum seat cushions on chairs, sofas, etc.
b. Vacuum and dust grillwork.
2. Lavatories
a. Wash down interior walls and toilet partitions.
F. As Required and Weather Permitting
1. Entire Building
a. Clean inside of all windows.
b. Clean outside of all windows.
G. Yearly
1. Tenant and Public Areas
a. Strip and wax all resilient tile floor areas.
II. HEATING, VENTILATING, AND AIR CONDITIONING
1. Heating, ventilating, and air conditioning as required to provide
reasonably comfortable temperatures for normal business day
occupancy (excepting holidays); Monday through Friday from 8:00
a.m. to 5:00 p.m. and Saturday from 8:00 a.m. to 1:00 p.m.
2. Maintenance of any additional or special air conditioning
equipment and the associated operating cost will be at Tenant's
expense.
F-1
<PAGE>
III. WATER
Hot water for lavatory purposes and cold water for drinking, lavatory and
toilet purposes.
IV. ELEVATORS (if Building is Elevatored)
Elevators for the use of all tenants and the general public for access
to and from all floors of the Building. Programming of elevators
(including, but not limited to, service elevators) shall be as
Landlord from time to time determines best for the Building as a
whole.
V. RELAMPING OF LIGHT FIXTURES
Tenant will reimburse Landlord for the cost of lamps, ballasts and
starters and the cost of replacing same within the Premises.
VI. CAFETERIA AND VENDING INSTALLATIONS
1. Any space to be used primarily for lunchroom or cafeteria
operation shall be Tenant's responsibility to keep clean and
sanitary, it being understood that Landlord's approval of such
use much be first obtained in writing.
2. Vending machines or refreshment service installations by Tenant
must be approved by Landlord in writing and shall be restricted
in use to employees and business callers. All cleaning
necessitated by such installations shall be at Tenant's expense.
VII. ELECTRICITY
A. Landlord, at Landlord's expense, shall furnish electrical energy
required for lighting, electrical facilities, equipment, machinery,
fixtures, and appliances used in or for the benefit of Tenant's Space,
in accordance with the provisions of the lease of which this Exhibit
is part.
B. Tenant shall not, without prior written notice to Landlord in each
instance, connect to the Building electric distribution system any
fixtures, appliances or equipment other than normal office machines
such as desk-top calculators and typewriters, or any fixtures,
appliances or equipment which Tenant on a regular basis operates
beyond normal building operating hours. In the event of any such
connection, Tenant agrees to an increase in the ANNUAL ESTIMATED
ELECTRICAL COST TO TENANT'S SPACE and a corresponding increase in
Annual Rent by an amount which will reflect the cost to Landlord of
the additional electrical service to be furnished by Landlord, such
increase to be effective as of the date of any such installation.
If Landlord and Tenant cannot agree thereon, such amount shall be
such amount shall be conclusively determined by a reputable
independent electrical engineer or consulting firm to be selected
by Landlord and paid equally by both parties, and the cost to
Landlord will be included in Landlord's Operating Costs provided in
Section 4.2 hereof.
C. Tenant's use of electrical energy in Tenant's Space shall not at any
time exceed the capacity of any of the electrical conductors or
equipment in or otherwise serving Tenant's Space. In order to insure
that such capacity is not exceeded and to avert possible adverse
effect upon the Building electric service, Tenant shall not, without
prior written notice to Landlord in each instance, connect to the
Building electric distribution system any fixtures, appliances or
equipment which operate on a voltage in excess of 120 volts nominal or
make any alteration or addition to the electric system of Tenant's
Space. Unless Landlord shall reasonably object to the connection of
any such fixtures, appliances or equipment, all additional risers or
other equipment required therefor shall be provided by Landlord, and
the cost thereof shall be paid by Tenant upon Landlord's demand. In
the event of any such connection, Tenant agrees to an increase in the
ANNUAL ESTIMATED ELECTRICAL COST TO TENANT'S SPACE and a corresponding
in Annual Rent by an amount which will reflect the cost to Landlord of
the additional service to be furnished by Landlord, such increase to
be effective as of the date of any such connection. If Landlord and
Tenant cannot agree thereon, such amount shall be conclusively
determined by a reputable independent electrical engineer or
consulting firm to be selected by Landlord and paid equally by both
parties, and the cost to Landlord will be included in Landlord's
Operating Costs provided in Section 4.2 hereof.
D. If at any time after the date of this Lease, the rates at which
Landlord purchases electrical energy from the public utility supplying
electric service to the Building, or any charges incurred or taxes
payable by Landlord in connection therewith, shall be increased or
decreased, the Annual Rent and ANNUAL ESTIMATED ELECTRICAL COST TO
TENANT'S SPACE shall be increased or decreased, as the case may be, by
an amount equal to the estimated increase or decrease, as the case may
be, in Landlord's cost of furnishing the electricity referred to in
Paragraph A above as a result of such increase or decrease in rates,
charges, or taxes. If Landlord and Tenant cannot agree thereon, such
amount shall be conclusively determined by a reputable independent
electrical engineer or consulting firm to be selected by Landlord
F-2
<PAGE>
and paid equally by both parties, and the cost to Landlord will be included
in Landlord's Operating Costs as provided in Section 4.2 hereof. Any such
increase or decrease shall be effective as of the date of the increase or
decrease in such rate, charges, or taxes.
E. Landlord may, at any time, elect to discontinue the furnishing of
electrical energy. In the event of any such election by Landlord: (1)
Landlord agrees to give reasonable advance notice of any such
discontinuance to Tenant; (2) Landlord agrees to permit Tenant to
receive electrical service directly from the public utility supplying
service to the Building and to permit the existing feeders, risers,
wiring and other electrical facilities serving Tenant's Space to be used by
Tenant and/or such public utility for such purpose to the extent they are
suitable and safely capable; (3) Landlord agrees to pay such charges and
costs, if any, as such public utility may impose in connection with the
installation of Tenant's meters and to make or, at such public utility's
election, to pay for such other installations as such public utility may
require, as a condition of providing comparable electrical service to
Tenant; (4) the Annual Rent shall be equitably decreased to reflect
such discontinuance by an amount equal to the ANNUAL ESTIMATED ELECTRICAL
COST TO TENANT'S SPACE then in effect; and (5) Tenant shall thereafter
pay, directly to the utility furnishing the same, all charges for
electrical services to the Premises.
F. Whenever the Annual Rent is increased or decreased pursuant to any of the
foregoing paragraphs of this Article, the parties agree, upon request of
either, to execute and deliver each to the other an amendment to this
Lease confirming such increase or decrease.
F-3
<PAGE>
EXHIBIT G
RULES AND REGULATIONS
1. The entrances, lobbies, passages, corridors, elevators, halls, courts,
sidewalks, vestibules, and stairways shall not be encumbered or
obstructed by Tenant, Tenant's agents, servants, employees, licensees or
visitors or used by them for any purposes other than ingress or egress to
and from the Premises.
2. The moving in or out of all safes, freight, furniture, or bulky matter of
any description shall take place during the hours which Landlord may
determine from time to time. Landlord reserves the right to inspect all
freight and bulky matter to be brought into the Building and to exclude
from the Building all freight and bulky matter which violates any of
these Rules and Regulations or the Lease of which these Rules and
Regulations are a part. Landlord reserves the right to have Landlord's
structural engineer review Tenant's floor loads on the Premises at
Tenant's expense.
3. Tenant, or the employees, agents, servants, visitors or licensees of
Tenant shall not at any time place, lease or discard any rubbish, paper,
articles, or objects of any kind whatsoever outside the doors of the
Premises or in the corridors or passageways of the Building. No animals
or birds shall be brought or kept in or about the Building. Bicycles
shall not be permitted in the Building.
4. Tenant shall not place objects against glass partitions or doors or
windows or adjacent to any common space which would be unsightly from the
Building corridors or from the exterior of the Building and will promptly
remove the same upon notice from Landlord.
5. Tenant shall not make noises, cause disturbances, create vibrations,
odors or noxious fumes or use or operate any electric or electrical
devices or other devices that emit sound waves or are dangerous to other
tenants and occupants of the Building or that would interfere with the
operation of any device or equipment or radio or television broadcasting
or reception from or within the Building or elsewhere, or with the
operation of roads or highways in the vicinity of the Building, and shall
not place or install any projections, antennae, aerials, or similar
devices inside or outside of the Premises, without the prior written
approval of Landlord.
G-1
<PAGE>
6. Tenant may not (without Landlord's approval therefor, which approval will
be signified on Tenant's Plans submitted pursuant to the Lease) and
Tenant shall not permit or suffer anyone to: (a) cook in the Premises;
(b) place vending or dispensing machines of any kind in or about the
Premises; (c) at any time sell, purchase or give away, or permit the
sale, purchase, or gift of food in any form.
7. Tenant shall not: (a) use the Premises for lodging, manufacturing or for
any immoral or illegal purposes; (b) use the Premises to engage in the
manufacture or sale of, or permit the use of spirituous, fermented,
intoxicating or alcoholic beverages on the Premises; (c) use the Premises
to engage in the manufacture or sale of, or permit the use of, any
illegal drugs on the Premises.
8. No awning or other projections shall be attached to the outside walls or
windows. No curtains, blinds, shades, screens or signs other than those
furnished by Landlord shall be attached to, hung in, or used in connection
with any window or door of the Premises without prior written consent of
Landlord.
9. No signs, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside or
inside of the Premises if visible from outside of the Premises. Interior
signs on doors shall be painted or affixed for Tenant by Landlord or by sign
painters first approved by Landlord at the expense of Tenant and shall be of
a size, color and style acceptable to Landlord.
10. Tenant shall not use the name of the Building or use pictures or
illustrations of the Building in advertising or other publicity without
prior written consent of Landlord. Landlord shall have the right to
prohibit any advertising by Tenant which, in Landlord's opinion, tends to
impair the reputation of the Building or its desirability for offices,
and, upon written notice from Landlord, Tenant will refrain from or
discontinue such advertising.
11. Door keys for doors in the Premises will be furnished at the Commencement
of the Lease by Landlord. Tenant shall not affix additional locks on
doors and shall purchase duplicate keys only from Landlord and will
provide to Landlord the means of opening of safes, cabinets, or vaults
left on the Premises. In the event of the loss of any keys so furnished
by Landlord, Tenant shall pay to Landlord the cost thereof.
G-2
<PAGE>
12. Tenant shall cooperate and participate in all security programs
affecting the Building. Subject to Landlord's consent, Tenant may
install, at Tenant's sole cost and expense, a security system for the
Premises; Tenant shall coordinate such measures with Landlord to assure
Landlord's access to the Premises and the Building, to assure reasonable
access to that portion of the Building not occupied by Tenant, and to
assure integration with base building systems and requirements in an
appropriate way.
13. Tenant assumes full responsibility for protecting its space from theft,
robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed and secured.
14. Tenant shall not make any room-to-room canvass to solicit business from
other tenants in the Building, and shall not exhibit, sell or offer to
sell, use, rent or exchange any item or services in or from the Premises
unless ordinarily embraced within Tenant's use of the Premises as specified
in its Lease. Canvassing, soliciting and peddling in the Building are
prohibited and Tenant shall cooperate to prevent the same. Peddlers,
solicitors and beggars shall be reported to the Management Office.
15. Tenant shall not mark, paint, drill into, or in any way deface any part
of the Building or Premises. No boring, driving of nails, or screws,
cutting or stringing of wires shall be permitted, except with the prior
written consent of Landlord, and as Landlord may direct. Tenant shall
not install any resilient tile or similar floor covering in the Premises
except with the prior written approval of Landlord. The use of cement or
other similar adhesive material is expressly prohibited.
16. Tenant shall not waste electricity or water and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building's
heating and air conditioning and shall refrain from attempting to adjust
controls. Tenant shall keep corridor doors closed except when being used
for access.
17. The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances shall be thrown therein.
G-3
<PAGE>
ASSIGNMENT AND ASSUMPTION OF SUBLEASE AND SUB-SUBLEASES
THIS ASSIGNMENT AND ASSUMPTION OF SUBLEASE AND SUB-SUBLEASES
("Assignment") is made as of June 15, 1999 by and among ValueOptions of
California, Inc., a California corporation ("Sublessor"), Vertel Corporation,
a California corporation ("Assignor"), and Sonoma Systems, Inc., a California
corporation ("Assignee"), with respect to the following facts, intentions and
understandings:
A. Marina Airport Buildings, Ltd., a California limited
partnership, as Landlord ("Master Lessor"), and Sublessor, under its former
name of American PsychManagement of California, Inc., as Tenant, entered into
a written lease dated as of April 2, 1993, as amended ("Master Lease"),
attached hereto as EXHIBIT A and incorporated by reference herein, with
respect to those premises commonly known as Suites 500 and 600 (collectively,
"Premises") of that certain building located at 4640 Admiralty Way, Marina
Del Rey, California 90292 ("Building").
B. Sublessor, under its former name of Value Behavioral Health of
California, Inc., and Assignor, under the name of its predecessor in
interest, Retix, a California corporation, entered into a written sublease
dated as of May 29, 1996 ("Sublease"), attached hereto as EXHIBIT B and
incorporated by reference herein pursuant to which Assignor, as sublessee,
subleased the Premises from Sublessor.
C. Assignor, under the name of its predecessor in interest, Retix,
as Sub-Sublessor, entered the following sub-subleases with respect to the
Premises: (i) a sub-sublease, dated as of August 22, 1997, with TSN, L.L.C.,
a California limited liability company, for a portion of the Premises located
on the fifth floor of the Building ("TSN Sub-Sublease"); (ii) a sub-sublease,
dated as of December 23, 1997, with Creative Channel Services, Inc., a
California corporation, for a portion of the Premises located on the fifth
floor of the Building ("CCS Sub-Sublease"); and (iii) a sub-sublease, dated
as of December 28, 1997, with Assignee for the portion of the Premises
comprising the sixth floor of the Building ("Sonoma Sub-Sublease"). The TSN
Sub-Sublease, CCS Sub-Sublease and Sonoma Sub-Sublease hereinafter sometimes
collectively shall be referred to as the "Sub-Subleases". The Sub-Subleases
are attached hereto as EXHIBIT C and incorporated by reference herein.
D. As of the Effective Date, defined below, (i) Assignor desires to
assign all of its right, title, interest and obligations under the Sublease
and the Sub-Subleases to Assignee, and Assignee desires to assume all of
Assignor's rights and obligations under the Sublease and the Sub-Subleases;
and (ii) Assignee desires to exercise the option to extend the term of the
Sublease as set forth in Paragraph 19 of the Sublease.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
<PAGE>
1. ASSIGNMENT; MERGER OF INTERESTS: As of August 1, 1999 (the
"Effective Date"), Assignor grants, transfers, assigns and sets over to
Assignee all of Assignor's right, title, interest and obligations of whatever
kind or nature in and to the TSN Sub-Sublease and the CCS Sub-Sublease. Also
as of the Effective Date, the interests of Assignee as sub-sublessee under the
Sonoma Sub-Sublease and as assignee of Assignor's interest as sub-sublessor
under the Sonoma Sub-Sublease shall be deemed merged, and the Sonoma
Sub-Sublease shall be null and void and of no further force or effect.
2. ACCEPTANCE AND ASSUMPTION. As of the Effective Date, Assignee
accepts the foregoing assignment of the Sublease and the TSN and CCS
Sub-Subleases, acknowledges the merger of interests with respect to the Sonoma
Sub-Sublease and assumes the rights and obligations of whatever kind or nature
of Assignor under the Sublease, the TSN Sub-Sublease and the CCS
Sub-Sublease. Assignee hereby expressly assumes and agrees to perform and
fulfill all the terms and obligations to be performed by the "Subtenant"
under the Sublease (including, but not limited to, any obligations related to
the payment of rent and the surrender of the Premises upon the termination or
expiration of the Sublease), and by the "Sub-Sublessor" under the TSN and CCS
Sub-Subleases.
3. REPRESENTATIONS AND WARRANTIES: Assignor represents and warrants
to Assignee as of the date hereof and as of the Effective Date: (i) the
Master Lease, the Sublease and the Sub-Subleases attached hereto as EXHIBITS
A, B and C are true, correct and complete copies of the documents, and there
has been no amendment or modification of the documents except as expressly
set forth therein; (ii) the Sublease represents the entire agreement of
Sublessor and Assignor with respect to the sublease of the Premises, and
there are no oral understandings or other agreements with respect thereto,
except as set forth in the Sublease; (iii) Assignor has made no prior or
inconsistent assignment, encumbrance or other transfer of the Sublease or the
Sub-Subleases, or any interest therein, or of the Premises, or any portion
thereof, except as set forth therein; and (iv) to the best of Assignor's
knowledge, there is no default on the part of either party to the Sublease,
nor on the part of any party to the Sub-Subleases except for (A) the failure
of TSN to pay rent due under the TSN Sub-Sublease for the months of April,
May and June, 1999 and (B) the apparent use of the TSN Sub-Sublease premises
by Sunterra Golf, both situations about which Assignee is fully aware, nor is
there any other condition which, with the passage of time or the giving of
notice, or both, would constitute a default thereunder.
4. OBLIGATIONS OF ASSIGNOR AND ASSIGNEE: Assignor shall perform all
obligations of the "Subtenant" under the Sublease and of the "Sub-Sublessor"
under the Sub-Subleases through and including the day before the Effective
Date of the Assignment, and Assignee shall perform all obligations of the
"Subtenant" under the Sublease and of the "Sub-Sublessor" under the TSN and
CCS Sub-Subleases from and after the Effective Date.
5. INDEMNITIES: Assignor shall indemnify, defend, protect and hold
harmless Assignee from any and all damages, liabilities, claims, judgments,
actions, reasonable attorneys' fees, consultants' fees, costs and expenses
arising under or in connection with any breach by Assignor of any of its
obligations under the terms of the Sublease or the Sub-Subleases occurring
prior to the Effective Date, or any misrepresentation made by Assignor
herein. Assignee shall indemnify,
<PAGE>
defend, protect and hold harmless Assignor from any and all damages,
liabilities, claims, judgments, actions reasonable attorneys' fees,
consultants' fees, costs and expenses arising under or in connection with any
breach by Assignee of any of its obligations under the terms of the Sublease
or the TSN and CCS Sub-Subleases occurring from or after the Effective Date.
6. EXERCISE OF OPTION TO EXTEND; SURRENDER. As of the later of the
dates upon which (i) Sublessor has executed this Assignment and (ii) Master
Lessor has consented to this Assignment, Assignee shall be deemed, pursuant
to Paragraph 19 of the Sublease, to timely have exercised its option to extend
the term of the Sublease for an additional period of forty-seven (47) months,
with such extension term commencing on November 1, 1999 and expiring on
September 30, 2003 ("Extension Term"). Rent payable by Assignee for the
extended term of the Sublease shall be as set forth in Paragraph 19 of the
Sublease. Notwithstanding anything to the contrary contained in the Sublease
or the Master Lease, upon the expiration or earlier termination of the
Extension Term, Assignee shall surrender the Premises to Sublessor in its
condition as of the Effective Date, normal wear and tear excepted, and in
broom clean condition, and Assignee shall have no obligation to restore the
Premises to its condition as of the Early Entry Date (as defined in Paragraph
32 of the Sublease).
7. CONSENT BY SUBLESSOR; RELEASE; CONDITIONS.
A. CONSENT. Sublessor hereby consents to the assignment of the
Sublease and Sub-Subleases to Assignee, and to Assignee's assumption of the
Sublease and the Sub-Subleases and Assignor's obligations thereunder; and
acknowledges, subject to obtaining Master Lessor's consent to this
Assignment, Assignee's exercise of the option to extend the term of the
Sublease pursuant to Paragraph 19 thereof. Sublessor agrees not to exercise
any right of partial termination it may have under the Sublease with respect
to either the fifth or sixth floors comprising the Premises.
B. RELEASE OF ASSIGNOR. Sublessor also hereby forever releases
Assignor from each and every obligation of "Subtenant" arising under or in
connection with the Sublease, or of "Sub-Sublessor" arising under or in
connection with the Sub-Subleases, from and after the Effective Date,
including, without limitation, any obligation of "Subtenant" under the
Sublease or of "Sub-Sublessor" under the Sub-Subleases arising during the
Extension Term. Sublessor expressly waives the provisions of California Civil
Code 1542 with respect to the release of Assignor from and after the
Effective Date, which provides:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor
at the time of executing the release, which if known by
him must have materially affected his settlement with
the debtor."
/s/ RWB
______________________________
Sublessor's Initials
<PAGE>
C. CONSIDERATION. In consideration of its consent to the
Assignment and its release of Assignor from and after the Effective Date,
Sublessor hereby conditions its consent and release upon its receipt of the
following:
(i) SECURITY DEPOSIT. Sublessor acknowledges that it holds a
security deposit ("Assignor's Security Deposit") from Assignor, pursuant to
Paragraph 9 of the Sublease, in the amount of $47,684.40. On the Effective
Date, Assignee shall deliver to Sublessor, in cash, a replacement security
deposit ("Assignee's Security Deposit") in the amount of $47,684.40.
Sublessor shall return the Assignor's Security Deposit to Assignor within
five (5) business days after receipt from Assignee of the Assignee's Security
Deposit.
(ii) LETTER OF CREDIT. Also on the Effective Date, Assignee
shall deliver to Sublessor an unconditional, irrevocable letter of credit
("LC") in favor of Sublessor in the amount of $200,000.00 from a bank or
other financial institution and in a form reasonably acceptable to Sublessor.
If at any time during the term of the Sublease, as extended, any item
constituting rent under the Sublease, or any other sum payable by Assignee to
Sublessor thereunder, shall be overdue and unpaid, beyond applicable notice
and cure periods, then Sublessor may, at its sole option, draw down or make a
claim or demand for draw against the LC (or, at the election of Sublessor,
against the Assignee's Security Deposit), an amount equal to the overdue and
unpaid amount, together with Sublessor's actual and reasonable expenses
incurred in connection with the default, and apply such sum to payment of
such overdue rent or other sum. The LC shall provide that any draw thereunder
shall be accompanied by a certificate of an officer of Sublessor stating that
Assignee is in default under the Sublease beyond applicable notice and cure
periods, if any, and that Sublessor or its authorized agent is entitled to
draw down on the LC the amount requested pursuant to the terms of the
Sublease. If all or any portion of the LC is drawn down by Sublessor to pay
overdue rent or other sums due and payable by Assignee, then Assignee shall,
within ten (10) days after the receipt of written demand from Sublessor,
promptly remit to Sublessor a sufficient amount in cash or an additional
letter of credit to restore Sublessor's security to the original amount of
the LC. If all or any portion of the Assignee's Security Deposit is charged
against by Sublessor to pay overdue rent or other sums due and payable by
Assignee, then Assignee shall, within ten (10) days after receipt of written
demand from Sublessor, promptly remit to Sublessor a sufficient amount in
cash to restore the Assignee's Security Deposit to the original amount
thereof. Any failure on the part of Assignee to restore the LC or the
Assignee's Security Deposit as set forth in this Paragraph shall constitute a
default by Assignee pursuant to the Sublease.
Notwithstanding anything to the contrary contained in this Paragraph, if
Assignee has not been in default, beyond applicable notice and cure periods,
under the Sublease for the first twelve (12) months following the Effective
Date, the LC shall be returned by Sublessor to Assignee not later than five
(5) business days after the last day of such twelve (12)-month period, and
Assignee's obligation to provide the LC shall be terminated as of such date
and of no further force or effect.
8. MASTER LESSOR'S CONSENT. The Assignment contemplated herein shall
be subject to obtaining the prior written consent of the Master Lessor. If
Master Lessor fails or refuses to
<PAGE>
consent to this Assignment, the exercise of the option to extend the term of
the Sublease pursuant to Paragraph 6 above shall be null and void and of no
further force or effect.
9. MISCELLANEOUS. Each person signing this Assignment warrants that he
or she is authorized to do so, and by so doing binds the entity which he or
she represents to perform the obligations set forth herein. This Assignment
sets forth the entire agreement of the parties with respect to the subject
matter set forth herein. No party other than the signatories hereto may rely
on, or enforce, the provisions of this Agreement. If any party commences an
action or proceeding to enforce the obligations set forth herein, the
prevailing party in any such action or proceeding will be entitled to recover
reasonably attorneys' fees and costs from the other party or parties, as
applicable. This Assignment shall be binding upon and inure to the benefit of
the parties hereto and their successors, heirs and assigns. This Assignment
shall be governed by and construed in accordance with the laws of the State
of California. This Assignment may be executed in counterparts and, when
assembled, the counterparts shall be considered a single instrument.
10. ATTORNEYS' FEES. Assignor and Assignee shall share equally all
attorneys' fees incurred in connection with this Assignment.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Assignment and
Assumption of Sublease and Sub-Subleases as of the date first written above.
ASSIGNOR:
VERTEL CORPORATION,
a California corporation
By: /s/ [illegible]
------------------------------------
Its: V.P. Finance & C.F.O.
------------------------------------
ASSIGNEE:
SONOMA SYSTEMS, INC.,
a California corporation
By: /s/ Steve M. Waszak
------------------------------------
Its: Vice President, Finance & Operations CFO
------------------------------------
SUBLESSOR:
VALUEOPTIONS OF CALIFORNIA, INC.,
a California corporation
By: /s/ [illegible]
------------------------------------
Its: VP
------------------------------------
<PAGE>
Exhibit B
SUBLEASE AGREEMENT
SUBLEASE AGREEMENT
THIS SUBLEASE ("Sublease"), dated as of the ___ day of May, 1996 for
reference purposes only, between Value Behavioral Health of California, Inc., a
California corporation, formerly known as American PsychManagement of
California, Inc., having an office at 340 Golden Shore Avenue, Long Beach,
California 90802 ("Sublessor"), and Retix, a California corporation having an
office prior to the Commencement Date at 2401 Colorado Avenue, Santa Monica,
California 90404 ("Subtenant").
W I T N E S E T H:
1. DEMISE AND TERM. Sublessor hereby leases to Subtenant, and Subtenant
hereby hires from Sublessor, in the building known as 4640 Admiralty Way, Marina
Del Rey, California 90292 (the "Building"), Suites 500 and 600 as shown hatched
on the plan attached hereto as Exhibit A (the "Subleased Premises"), containing
approximately 30,180 rentable square feet, which Subleased Premises are leased
under the Main Lease (as hereinafter defined) to Sublessor. The term of this
Sublease shall be for the period commencing on the later of (a) the date that
the consents referred to in Section 26(a) of this Sublease has been obtained and
(b) July 1, 1996 (the "Commencement Date"), and ending on October 31, 1999,
unless sooner terminated as herein provided. Notwithstanding the foregoing, if
the Commencement Date does not occur on or before August 1, 1996, this Sublease
shall be voidable by either party hereto, and in such event neither Sublessor
nor Sublessee shall be liable for any resulting damage, cost or expense, and
Sublessor promptly shall return to Subtenant all sums paid by Subtenant (as
described in Paragraph 26(b) hereof) to Sublessor in connection with Subtenant's
execution hereof. Within five (5) business days following the Commencement Date,
Sublessor and Subtenant will mutually agree as to computation of actual rentable
square footage for the Subleased Premises.
2. SUBORDINATE TO MAIN LEASE. This Sublease is and shall be subject and
subordinate to the office space lease dated as of April 2, 1993, as amended
(such lease, as so amended, herein called the "Main Lease") between Marina
Airport Buildings, Ltd., a California limited partnership, as landlord, and
Sublessor (under its former name of American PsychManagement of California,
Inc.), as tenant, and to the matters to which the Main Lease is or shall be
subject and subordinate.
3. INCORPORATION BY REFERENCE. The terms, covenants and conditions of the
Main Lease are incorporated herein by reference so that, except to the extent
that they are inapplicable or modified by the provisions of this Sublease for
the purpose of incorporation by reference, each and every term, covenant and
condition of the Main Lease binding or inuring to the benefit of the landlord
thereunder shall, in respect of this Sublease, bind or inure to the benefit of
Sublessor, and each and every term, covenant and condition of the Main Lease
binding or inuring to the benefit of the tenant thereunder shall, in respect of
this Sublease, bind or inure to the benefit of Subtenant, with the same force
and effect as if such terms, covenants and conditions were completely set fort
in this Sublease, and as if the words "Landlord" and "Tenant," or words of
similar import, wherever the same appear in the Main Lease, were construed to
mean, respectively, "Sublessor" and "Subtenant" in this Sublease, and as if the
word "Premises," or words of similar import, wherever the same appear in the
Main Lease, were construed to mean "Subleased Premises" in this Sublease, and as
if the word "Lease," or words of similar import, wherever the same appear in the
Main Lease, were construed to mean this "Sublease." Subtenant shall not be
required to pay any rent or additional rent due
1
<PAGE>
under the Main Lease, except that Subtenant shall pay for any special services
or requirements of Subtenant, including, without limitation, overtime air
conditioning, extra cleaning, extra elevator use, and extra water use. Subtenant
shall have the right to request such special services or requirements of
Subtenant, including, without limitation, overtime air conditioning, extra
cleaning, extra elevator use, and extra water use. Subtenant shall have the
right to request such special services or requirements directly from the
landlord under the Main Lease. The time limits contained in the Main Lease for
the giving of notices, making of demands or performing of any act, condition or
covenant on the part of the tenant thereunder, or for the exercise by the tenant
thereunder of any right, remedy or option, are changed for the purposes of
incorporation herein by reference by shortening the same in each instance by two
(2) days, so that in each instance (other than for the times of performance set
forth in Article 36 of the Main Lease) Subtenant shall have two (2) days less
time to observe or perform hereunder than Sublessor has as the tenant under the
Main Lease. Notwithstanding the foregoing, the following articles or sections of
the Main Lease shall be deemed deleted for the purpose of incorporation by
reference in this Sublease: Sections 1(a), (b), (e), (f), (h), (i) and (k);
Article 2; the words "together with any monthly installments of "Operating
Expense Rent" and "Capital Expenditure Rent" in Section 3.1; the first and
fourth sentences of Section 4.1; the last sentence of Section 5.1; Article 6;
Article 7; the first sentence of Section 12.1; the words "provided, however,
that Tenant shall not be required to demolish or remove any Leasehold
Improvements" in Section 12.2; Article 17; Article 25; the first sentence of
Section 34.1; the words "Seven Hundred Forty-One Thousand Nine Hundred
Twenty-Two and 26/100 Dollars ($741,922.26), calculated as set forth on Exhibit
A-1" in Section 36.1 (which words shall be replaced with "Three Hundred Thousand
Dollars ($300,00.00)"); Section 36.2; all but the first sentence of Section
36.4; Sections 36.7 (c); Sections 36.9 through 36.12; Article 37; Article 38;
Article 39; Addendum to Article 3 Section 3.8; Addendum to Article 34; Exhibit
A-1; Broker Registration Agreement; Addendum No. 2, Article 45; and Addendum No.
2, Addendum to Article 1, Sections 1.2 (a) and (c). Also notwithstanding the
foregoing, Sublessor shall not exercise any right to terminate granted to tenant
pursuant to the Main Lease without first having obtained the prior written
consent of Subtenant, which may be withheld in its sole discretion. Also
notwithstanding the foregoing, with respect to Section 36.3, Sublessor shall
approve or disapprove Subtenant's Drawings (as defined therein) within four (4)
business days after receipt thereof from Subtenant. Any non-liability, release,
indemnity or hold harmless provision in the Main Lease for the benefit of the
landlord under the Main Lease, that is incorporated herein by reference, shall
be deemed to inure to the benefit of Sublessor and the landlord under the Main
Lease, for the purpose of incorporation by reference in this Sublease. Any right
of the landlord under the Main Lease of access or inspection and any right of
the landlord under the Main Lease to do work in the premises under the Main
Lease or in the Building and any right of the landlord under the Main Lease in
respect of rules and regulations shall be deemed to inure to the benefit of
Sublessor and the landlord under the Main Lease, for the purpose of
incorporation by reference in this Sublease. If any of the express provisions of
this Sublease shall conflict with any of the provisions incorporated by
reference, such conflict shall be resolved in every instance in favor of the
express provisions of this Sublease.
4. PERFORMANCE BY SUBLESSOR. Any obligation of Sublessor which is
contained in this Sublease by the incorporation by reference of the provisions
of the Main Lease shall be observed or performed by Sublessor using reasonable
efforts to cause the landlord under the Main Lease to observe and/or perform the
same, and Sublessor shall have a reasonable time to enforce its rights to cause
such observance or performance. Sublessor shall not be required to furnish,
supply or install anything under any article of the Main Lease. Subtenant shall
not in any event have any rights in respect of the Subleased Premises greater
than Sublessor's rights under the Main Lease, and notwithstanding any provision
to the contrary, as to obligations that pertain to the Subleased Premises and
are contained in this Sublease by the incorporation by reference of the
provisions of the Main Lease, Sublessor shall not be required to make any
payment or
2
<PAGE>
perform any obligation, and Sublessor shall have no liability to Subtenant for
any matter whatsoever, except for Sublessor's obligation to pay the rent and
additional rent due under the Main Lease and for Sublessor's obligation to use
reasonable efforts, upon request of Subtenant, to cause the landlord under the
Main Lease to observe and/or perform its obligations under the Main Lease. If
Sublessor fails, after using reasonable efforts, to cause the landlord under the
Main Lease to observe and/or perform its obligation under the Main Lease,
Subtenant shall have the right, upon notice to Sublessor, to bring an action in
Sublessor's name, to accomplish such purpose. Sublessor shall not be responsible
for any failure or interruption, for any reason whatsoever, of the services or
facilities that may be appurtenant to or supplied at the Building by the
landlord under the Main Lease or otherwise, including, without limitation, heat,
air conditioning, water, electricity, elevator service and cleaning service, if
any; and no failure to furnish, or interruption of, any such services or
facilities shall give rise to any liability on the part of Sublessor except to
the extent caused by Sublessor's failure to use reasonable efforts to cause
landlord to perform such obligations under the Main Lease.
5. NO BREACH OF MAIN LEASE. Subtenant and Sublessor shall not do or
permit to be done any act or thing which may constitute a breach or violation of
any term, covenant or condition of the Main Lease by the tenant thereunder,
whether or not such act or thing is permitted under the provisions of this
Sublease. Sublessor shall perform its obligations under the Main Lease except to
the extent Subtenant is obligated herein to perform same.
6. NO PRIVITY OF ESTATE. Nothing containing in this Sublease shall be
construed to create privity or estate or of contract between Subtenant and the
landlord under the Main Lease.
7. INDEMNITY. Subtenant shall indemnify, protect, defend with counsel
reasonably acceptable to Sublessor and hold harmless Sublessor and the landlord
under the Main Lease from and against all losses, costs, damages, expenses and
liabilities, including, without limitation, reasonable attorneys' fees, which
Sublessor may incur or pay out by reason of (a) any accidents, damages or
injuries to persons or property occurring in, on or about the Subleased
Premises, (b) any breach or default hereunder on Subtenant's part, (c) the
enforcement of Sublessor's rights under this Section or any other section of
this Sublease, (d) any work done after the date hereof in or to the Subleased
Premises except if done by Sublessor, (e) the negligence or willful misconduct
on the part of Subtenant and/or its officers, employees, agents, contractors
and/or invitees, or any person claiming through or under Subtenant, (f) with
respect to Sublessor only, any action brought by Subtenant against the landlord
under the Main Lease pursuant to Sections 4 and 15 of this Sublease, or (g) the
existence of any hazardous substances (as defined in the Main Lease) which are
proven to have been present in or about the Subleased Premises only after the
Early Entry Date (as defined below) which resulted from Subtenant's storage, use
or disposal of hazardous substances in or about the Subleased Premises, or the
storage, use or disposal of Subtenant's agents, employees, contractors or
invitees.
Sublessor shall indemnify, protect, defend with counsel reasonably
acceptable to Subtenant and hold harmless Subtenant from and against all losses,
costs, damages, expenses and liabilities, including without limitation,
reasonable attorney's fees, which Subtenant may incur or pay out by reason of
(a) any accidents, damages or injuries to persons or property occurring in, on
or about the Subleased Premises if the same shall have been caused by
Sublessor's negligence or willful misconduct, or that of its agents, employees,
contractors or invitees, (b) any breach or default hereunder or under the Main
Lease on Sublessor's part, (c) the enforcement of Subtenant's rights under this
Section or any other section of this Sublease, (d) any negligence or willful
misconduct on the part of Sublessor and/or its officers, employees, agents or
contractors, or (e) the
3
<PAGE>
existence of any hazardous substances which are proven to have been present in
or about the Subleased Premises on the Early Entry Date which resulted from
Sublessor's storage, use or disposal of hazardous substances in or about the
Subleased Premises, or the storage, use or disposal of Sublessor's agents,
employees, contractors or invitees.
8. BASIC RENT. From and after the Commencement Date, Subtenant shall pay
without deduction or offset, monthly basic rent ("Basic Rent") in the following
amounts:
<TABLE>
<CAPTION>
MONTH BASIC RENT
----- ----------
<S> <C>
1-6 No Base Rent
7-28 $47,684.40
29-40 $53,116.80
</TABLE>
Basic Rent shall be payable in advance on the first day of each month
during the term of this Sublease, except that the Basic Rent for the seventh
month of the term has been paid on the execution of this Sublease. Basic Rent
and all other amounts payable by Subtenant to Sublessor under the provisions of
this Sublease (such amounts other than Basic Rent being herein called the
"Operating Expenses") shall be paid when due (within five (5) business days
after receipt of demand as to Operating Expenses but without notice as to Basic
Rent). Sublessor shall have the same rights and remedies for the non-payment of
Operating Expenses as for the non-payment of Basic Rent. Basic Rent and
Operating Expenses shall be paid to Sublessor in lawful money of the United
States at the address of Sublessor set forth at the head of this Sublease or to
such other person and/or at such other address as Sublessor may from time to
time designate by notice to Subtenant. No payment by Subtenant or receipt by
Sublessor of any lesser amount than the amount stipulated to be paid hereunder
shall be deemed other than on account of the earliest stipulated Basic Rent or
Operating Expenses; nor shall any endorsement or statement on any check or
letter be deemed an accord and satisfaction, and Sublessor may accept any check
or payment without prejudice to Sublessor's right to recover the balance due or
to pursue any other remedy available to Sublessor. Any provision in the Main
Lease referring to basic rent or operating expenses incorporated herein by
reference shall be deemed to refer to the Basic Rent and Operating Expenses due
under this Sublease.
9. SECURITY DEPOSIT. Concurrently with the execution of this Sublease,
Subtenant shall deposit with Sublessor the amount of $47,684.40 (the "Security
Deposit"). Sublessor shall not be required to pay interest on the Security
Deposit or keep the Security Deposit separate from its general funds. Upon any
Default by Subtenant, Sublessor may use the Security Deposit to the extent
necessary to make good any arrears of sums payable by Subtenant under this
Sublease, or to compensate Sublessor for any damage, injury, expense or
liability caused by Subtenant's Default. If any portion of the Security Deposit
is so used or applied, Sublessor shall, within ten (10) days after receipt of
written demand therefor, deposit a certified or bank cashier's check with
Sublessor in an amount sufficient to restore the Security Deposit to its amount
immediately preceding such use or application of funds and Subtenant's failure
to do so shall be a Default under this Sublease. The balance of the Security
Deposit remaining at the end of the Sublease Term shall be returned after all of
Subtenant's obligations have been fulfilled.
10. OPERATING EXPENSES. Commencing on the first day of the January, 1997,
Subtenant shall pay to Sublessor within five (5) business days after receipt of
demand any amounts that are payable by Sublessor to the landlord under the Main
Lease in respect to the Subleased Premises pursuant to the
4
<PAGE>
provisions thereof in respect of (a) "Tax Rent" (as defined in the Main Lease)
in excess of the annual amount payable therefor by Sublessor for the calendar
year 1996, and (b) "Operating Expense Rent" (as defined in the Main Lease) in
excess of the annual amount payable therefor by Sublessor for the calendar year
1996. Subtenant shall not be obligated to pay any Tax Rent due to increases in
Property Taxes of more than 102% per annum (compounded) over the Property Taxes
for the 1996 calendar year.
11. USE. Subtenant shall use and occupy the Subleased Premises for general
office purposes and any other legally permitted non-retail uses compatible with
a first class office building. Subtenant shall use the Subleased Premises for no
other purposes without the consent of Sublessor.
12. CONDITION OF SUBLEASED PREMISES; USE OF FACILITIES. Subtenant is
leasing the Subleased Premises "as is." In making and executing this Sublease,
Subtenant has relied solely on such investigations, examinations and inspections
as Subtenant has chosen to make or has made. Subtenant shall have the right to
use the workstations located in the Subleased Premises at no charge during the
term hereof. Subtenant acknowledges that Sublessor has afforded Subtenant the
opportunity for full and complete investigations, examinations, and inspections.
Any improvements to be made by Subtenant pursuant to this Sublease shall be the
sole responsibility of Subtenant, subject only to Sublessor's obligation to pay
an allowance for tenant improvements of up to $300,000.00 (the "Allowance").
Sublessor shall make monthly disbursements of the Allowance on a progress
payment basis within 10 days after a disbursement request is submitted by
Subtenant, which submittal shall include lien releases and other back up
information as Sublessor shall reasonably require. Notwithstanding anything to
the contrary contained in this Lease, Sublessor shall not be obligated to make
monthly disbursements to Subtenant until ten (10) days after Subtenant has paid
the Cancellation Fee pursuant to Paragraph 31 hereof. In addition, if Subtenant
fails to pay the Cancellation Fee when and as required, Sublessor shall have the
right to offset the Allowance against the Cancellation Fee. Sublessor shall have
the right to inspect the progress of construction in order to insure that the
claimed progress has in fact occurred, provided that Sublessor shall not
unreasonably interfere with work then being performed by Subtenant. Subject to
the foregoing regarding Subtenant's failure to pay the Cancellation Fee, any
unused Allowance shall be applied against rent next coming due.
13. CONSENTS AND APPROVALS. In any instance when Sublessor's consent or
approval is required under this Sublease, Sublessor's refusal to consent to or
approve any matter or thing shall be deemed reasonable if, INTER ALIA, such
consent or approval has not been obtained from the landlord under the Main
Lease. Otherwise, Sublessor's consent or approval as required under this
Sublease shall not be unreasonably withheld or delayed, except with respect to
any use of the Subleased Premises which is not a permitted use.
14. NOTICES. All notices, consents, approvals, demands and requests which
are required or desired to be given by either party to the other hereunder shall
be in writing and shall be either (a) personally delivered or (b) sent by United
States postal service, return receipt requested and postage prepaid or (c) by
nationally recognized overnight courier. Notices, consents, approvals, demands
and requests which are served upon Sublessor or Subtenant in the manner provided
herein shall be deemed to have been given or served for all purposes hereunder
(i) on the date of delivery if personally delivered or sent by courier service
or (ii) on the date on which such notice, consent, approval, demand or request
shall have been mailed if mailed as aforesaid. All notices, consents, approvals,
demands and requests given to Sublessor shall be addressed to Sublessor at the
address for Sublessor set forth above, Attention: ________________, or at such
other place
5
<PAGE>
as Sublessor may from time to time designate in a notice given in accordance
with the provisions of this Section. All notices, consents, approvals, demands
and requests given to subtenant shall be addressed to Subtenant at the Subleased
Premises, Attention: Chief Financial Officer, or at such other place as
Subtenant may from time to time designate in a notice given in accordance with
the provisions of this Section. All notices to landlord shall be addressed to
landlord as set forth in the Main Lease.
15. TERMINATION OF MAIN LEASE. If for any reason the term of the Main
Lease shall terminate prior to the expiration date of this Sublease, this
Sublease shall thereupon be terminated and Sublessor shall not be liable to
Subtenant by reason thereof unless said termination shall have been effected
because of the breach or default of Sublessor under the Main Lease or this
Sublease. If the landlord under the Main Lease wrongfully terminates or attempts
to wrongfully terminate the Main Lease, Sublessor shall cooperate with Subtenant
to keep the Main Lease in full force and effect. Such cooperation shall include
permitting Subtenant to bring or defend an action or proceeding in Sublessor's
name (but at Subtenant's expense) in connection with such termination or
attempted termination.
16. INSURANCE. Subtenant shall maintain throughout the term of this
Sublease the insurance required under the Main Lease. All insurance maintained
by Subtenant shall name Sublessor and the landlord under the Main Lease as
additional insureds. Subtenant shall deliver to Sublessor and the landlord under
the Main Lease certificates of insurance issued by the carriers or their duly
authorized agents prior to the Commencement Date. Subtenant shall procure and
pay for renewals of such insurance from time to time before the expiration
thereof, and Subtenant shall deliver to Sublessor and the landlord under the
Main Lease such renewal policies or certificates at least ten (10) days before
the expiration of any existing policy. All such policies shall meet the
requirements in the Main Lease and shall be issued by companies of recognized
responsibility licensed to do business in the State of California and all such
policies shall contain a provision whereby the same cannot be cancelled or
modified unless Sublessor and the landlord under the Main Lease are given at
least 20 days' prior written notice by certified or registered mail of such
cancellation or modification.
17. ESTOPPEL CERTIFICATES. Subtenant and Sublessor shall, within ten (10)
business days after receipt of each and every request by the other party hereto,
execute, acknowledge and deliver to the party that made the request a statement
in writing (a) certifying that this Sublease is unmodified and in full force and
effect (or if there have been modifications, that the same is in full force and
effect as modified and stating the modifications), (b) specifying the dates to
which the Basic Rent and Operating Expenses (as defined in the Main Lease) have
been paid, (c) stating whether or not, to the best knowledge of the party
signing same, Sublessor or Subtenant is in default in performance or observance
of its obligations under this Sublease, and, if so, specifying each such
default, (d) stating whether or not, to the best knowledge of the party signing
same, any event has occurred which with the giving of notice or passage of time,
or both, would constitute a default by Sublessor or Subtenant under this
Sublease, and, if so specifying each such event, and (e) stating whether
Subtenant has exercised any option(s) to extend the term of this Sublease, and,
if so, specifying each such extension.
Any such statement delivered pursuant to this Section may be relied upon by any
prospective assignee or transferee of the leasehold estate under the Main Lease
or the subleasehold estate under this Sublease.
18. ALTERATIONS. Subtenant shall not make, cause or permit the making
of any alterations, addition, change, replacement, or installation in or to
the Subleased Premises without obtaining the prior
6
<PAGE>
consent of the Sublessor (which shall not be unreasonably withheld or delayed)
and Subtenant will be required to obtain the consent of the landlord under the
Main Lease in each instance if required under the Main Lease.
19. OPTION TO EXTEND. Provided Subtenant is not in default of any term or
condition of this Lease as of the commencement of the renewal term, Subtenant
shall have one option to renew the term of the Lease for one additional
forty-seven (47)- month term, on the same terms and conditions of this Sublease,
except that the Base Rent shall be adjusted to equal:
<TABLE>
<CAPTION>
Extension Term Months
<S> <C>
1-8 $53,116.80
9-47 $46,477.20
</TABLE>
Such option shall be exercised (if at all) by Subtenant giving Sublessor at
least 120 days' prior irrevocable written notice.
If Subtenant does not exercise its option to extend, Subtenant shall be
required to restore the Subleased Premises to their condition existing on the
Early Entry Date, unless Sublessor indicates otherwise in writing not later than
the last day of the thirtieth (30th) month of the Term. Any restoration by
Subtenant shall be completed not later than October 31, 1999. Subtenant shall
not be required to remove any alterations or improvements installed in the
Subleased Premises by Sublessor prior to the Early Entry Date.
20. RIGHT TO CURE SUBTENANT'S DEFAULTS. If Subtenant shall at any time
fail to make any payment or perform any other obligation of Subtenant hereunder,
then Sublessor shall have the right, but not the obligation, after 10 days'
notice to Subtenant, or without notice to Subtenant in the case of any
emergency, and without waiving or releasing Subtenant from any obligations of
Subtenant hereunder, to make such payment or perform such other obligation of
Subtenant in such manner and to such extent as Sublessor shall deem necessary,
and in exercising any such right, to pay any incidental costs and expenses,
employ attorneys, and incur and pay reasonable attorneys' fees. Subtenant shall
pay to Sublessor within five (5) days after receipt of demand all sums so paid
by Sublessor and all incidental costs and expenses of Sublessor in connection
therewith, together with interest thereon at the rate of one and one-half
percent per calendar month or any part thereof or the then maximum lawful
interest rate, whichever shall be less, from the date of the making of such
expenditures.
21. BROKERAGE. Subtenant and Sublessor each represents to the other that
it dealt with no broker or other person in bringing about this Sublease other
than Wolf Commercial Brokerage and The Kaufman Group (collectively, "Brokers"),
and each party hereto shall pay, and shall indemnity, defend and hold harmless,
the other party from and against, any loss, liability, damage, cost and expense
(including, without limitation, reasonable attorneys' fees) in connection with
(a) any claims made by any other broker or other person for a brokerage
commission, finder's fee, or similar compensation, by reason of or in connection
with this Sublease if such other broker or other person claims to have had
dealings with the indemnifying party and/or (b) the enforcement of the
indemnified party's rights under this Section. Sublessor shall pay the Brokers'
commissions in connection with this Sublease pursuant to separate agreements.
7
<PAGE>
22. ARBITRATION. In the event of a dispute under this Sublease or any
exhibit hereto (except as to Basic Rent, unless such dispute involves Basic Rent
as a corollary to such dispute), either party may, but shall not be required to,
refer such dispute to arbitration. Such arbitration shall be conducted in
accordance with the procedures specified in the Main Lease, which are hereby
incorporated herein by reference.
23. NO WAIVER. The failure of Sublessor or Subtenant to insist in any one
or more cases upon the strict performance or observance of any obligation of
Subtenant or Sublessor hereunder or to exercise any right or option contained
herein shall not be construed as a waiver or relinquishment for the future of
any such obligation of Subtenant or Sublessor or any right or option of
Sublessor or Subtenant. Sublessor's receipt and acceptance of Basic Rent or
Operating Expenses, or Sublessor's acceptance of performance of any other
obligation by Subtenant, with knowledge of Subtenant's breach of any provision
of this Sublease, shall not be deemed a waiver of such breach. No waiver by
Sublessor or Subtenant of any term, covenant or condition of this Sublease shall
be deemed to have been made unless expressed in writing and signed by Sublessor
or Subtenant, as the case may be.
24. COMPLETE AGREEMENT. There are no representations, warranties,
agreements, arrangements or understandings, oral or written, between the parties
or their representatives relating to the subject matter of this Sublease which
are not fully expressed in this Sublease. This Sublease cannot be changed or
terminated orally or in any manner other than by a written agreement executed by
both parties.
25. SUCCESSORS AND ASSIGNS. The provisions of this Sublease, except as
herein otherwise specifically provided, shall extend to, bind and inure to the
benefit of the parties hereto and their respective personal representatives,
heirs, successors and permitted assigns. In the event of any assignment or
transfer of Sublessor's interest in the leasehold estate under the Main Lease,
the transferor or assignor, as the vase may be, shall be and hereby is entirely
relieved and freed of all obligations under this Sublease arising after the date
of such assignment or transfer. No such assignment by Sublessor shall be
effective unless and until the transferee assumes in writing all of Sublessor's
obligations under this Sublease.
26. THIRD PARTY CONSENTS. (a) This Sublease shall have no effect until the
landlord under the Main Lease shall have given its written consent hereto. If
the landlord under the Main Lease does not give its consent to this Sublease for
any reason whatsoever on or before thirty (30) days after the date of execution
hereof by Sublessor, then either party may cancel this Sublease by notice given
to the other party.
(b) If this Sublease is cancelled pursuant to Section 26(a) of this
Sublease, (i) this Sublease shall be deemed null and void and of no effect, (ii)
if Subtenant is then in possession of all or any part of the Subleased Premises,
Subtenant shall (x) immediately quit and surrender to Sublessor the Subleased
Premises and (y) remove all of its property and repair all damage caused by such
removal and (z) restore the Subleased Premises to the condition in which they
were prior to the installation of the items so removed, and (iii) Sublessor
shall promptly return to Subtenant the Security Deposit, the amount paid by
Subtenant upon the execution of this Sublease for the payment of the first full
monthly installment of Basic Rent and the Cancellation Charge required pursuant
to Paragraph 31 hereof.
8
<PAGE>
27. NO THIRD PARTY BENEFICIARY. None of the provisions of this Sublease
shall be construed to accrue to the benefit of, or be enforceable by, any third
party, other than the landlord under the Main Lease.
28. INTERPRETATION. Irrespective of the place of execution or performance,
this Sublease shall be governed by and construed in accordance with the laws of
the State of California. If any provision of this Sublease or the application
thereof to any person or circumstances shall, for any reason and to any extent,
be invalid or unenforceable, the remainder of this Sublease and the application
of that provision to other persons or circumstances shall not be affected but
rather shall be enforced to the extent permitted by law. The captions, headings
and titles, if any, in this Sublease are solely for convenience or reference and
shall not affect its interpretation. This Sublease shall be construed without
regard to any presumption or other rule requiring construction against the party
causing this Sublease to be drafted. If any words or phrases in this Sublease
shall have been stricken out or otherwise eliminated, whether or not any other
words or words or phrases so stricken out or otherwise eliminated. Each
covenant, agreement, obligation or separate and independent covenant of the
party bound by, undertaking or making same, not dependent on any other provision
of this Sublease unless otherwise expressly provided. All terms and words used
in this Sublease shall mean a natural person or persons, a partnership, a
corporation or any other form of business or legal association or entity.
29. MOVING ALLOWANCE. Upon the Commencement Date, Sublessor shall pay to
Subtenant as a moving allowance the sum of $31,689.00
30. REPRESENTATIONS. Sublessor represents and warrants that:
(a) the Main Lease consists of the instruments listed on EXHIBIT B,
copies of which are attached hereto, and is in full force and effect, has not
been further modified or amended, and, to the best knowledge of Sublessor, there
exists under the Main Lease no default or event of default, nor has there
occurred any event which, with the giving of notice or passage of time or both,
could constitute such a default or event of default;
(b) to the best knowledge of Sublessor, there is no pending
termination of the Main Lease. Sublessor will notify Subtenant promptly if it
becomes aware of any impending termination of the Main Lease;
(c) there are no pending or threatened actions, suits or proceedings
before any court or administrative agency against Sublessor or, to the best of
Sublessor's knowledge, against landlord or third parties which could, in the
aggregate, adversely affect the Subleased Premises or any part thereof or the
ability of landlord to perform its obligations under the Main Lease or of
Sublessor to perform its obligations under this Sublease, and Sublessor is not
aware of any facts which might result in any such actions, suits or proceedings;
and
(d) Sublessor has not received any written notice from any insurance
company of any defects or inadequacies in the Subleased Premises or any part
thereof which could adversely affect the insurability of the Subleased Premises
or the premiums for the insurance thereof.
9
<PAGE>
31. CANCELLATION CHARGE. Not later than June 29, 1996, Subtenant shall pay
to Sublessor by check the sum of $200,000.00 (the "Cancellation Fee") in
consideration of the shortened term of this Sublease. In no event, however,
shall Subtenant have the right to cancel this Sublease except as expressly
provided in Sections 1 and 26(a) hereof.
32. EARLY ENTRY. Notwithstanding anything to the contrary contained in
this Sublease, immediately upon Sublessor's execution of this Sublease ("Early
Entry Date"), Sublessor shall deliver the Subleased Premises to Subtenant for
the purpose of constructing the tenant improvements referred to in Paragraph 12
hereof. Such early entry shall be subject to all of the terms and conditions of
this Sublease except for the obligation to pay Basic Rent and Operating
Expenses.
33. ASBESTOS. To the best of Sublessor's actual knowledge, there is no ACM
(as defined in the Main Lease) in the Subleased Premises. If, however, in
constructing the tenant improvements, Sublessee shall find ACM within the
Subleased Premises, Sublessee shall stop all work and notify Sublessor and
landlord of the discovery, and permit landlord's contractors, pursuant to
Exhibit D of the Main Lease, to handle the ACM, which shall occur at no cost to
Sublessee. If, solely as a result of the discovery and treatment of ACM, the
tenant improvements are not completed by July 1, 1996, then, for each day of
delay in completing the tenant improvements beyond July 1, 1996, Subtenant shall
receive one (1) day of rent abatement.
35. AMENDMENT OR MODIFICATION. Sublessor and landlord shall not amend or
modify the Main Lease in any way so as to materially or adversely affect
Subtenant or its interest hereunder or in the Subleased Premises, materially
increase Subtenant's obligations hereunder or materially restrict Subtenant's
rights hereunder, without the prior written consent of Subtenant, which shall
not be unreasonably withheld or delayed.
36. QUIET ENJOYMENT; RIGHT TO CURE. Subtenant shall peacefully have, hold
and enjoy the Subleased Premises, subject to the terms and conditions of this
Sublease, provided that Subtenant pays all Basic Rent and Operating Expenses and
performs all of Subtenant's covenants and agreements contained herein. In the
event, however, that Sublessor defaults in the performance or observance of any
of Sublessor's obligations hereunder or under the Main Lease, then Subtenant
shall give Sublessor notice specifying in what manner Sublessor has defaulted,
and if such default shall not be cured by Sublessor within thirty (30) days
thereafter (except that if such default cannot be cured within said thirty
(30)-day period, this period shall be extended for an additional reasonable
time, provided that Sublessor commences to cure such default within such thirty
(30)-day period and proceeds diligently thereafter to effect such cure as
quickly as possible), then, upon the passage of five (5) business days after the
date of a second written notice from Subtenant of the default, if Sublessor has
failed to so cure, in addition, Subtenant shall be entitled, at Subtenant's
option, to cure such default and promptly collect from Sublessor Subtenant's
reasonable expenses in so doing (including, without limitation, reasonable
attorneys' fees and court costs). Subtenant shall not be required, however, to
wait the entire cure period described herein if earlier action is required to
comply with the Main Lease or with any applicable governmental law, regulation
or order. Sublessor shall provide copies to Subtenant of all notices received
from landlord pursuant to the Main Lease.
37. AUTHORIZATION TO DIRECT SUBLEASE PAYMENTS. Sublessor hereby
acknowledges that Sublessor's failure to pay all Basic Monthly Rent, Operating
Expense Rent, Tax Rent and Capital Expense Rent and other sums owing by
Sublessor to landlord under the Main Lease will cause Subtenant to incur
10
<PAGE>
damages, costs and expenses not contemplated by this Sublease, especially in
those cases where Subtenant has paid sums to Sublessor hereunder which
correspond in whole or in part to the amounts owing by Sublessor to landlord
under the Main Lease. Accordingly, Subtenant shall have the right to pay all
rent and other sums owing by Subtenant to Sublessor hereunder for those items
which also are owed by Sublessor to landlord under the Main Lease directly to
landlord on the following terms and conditions:
A. Subtenant reasonably believes that Sublessor has failed to make any
payment required to be made by Sublessor to landlord under the Main Lease and
Sublessor fails to provide adequate proof of payment within two (2) business
days after Subtenant's written demand requesting such proof.
B. Subtenant shall not prepay any amounts owing by Subtenant without
the consent of Sublessor.
C. Subtenant shall provide to Sublessor concurrently with any payment
to landlord reasonable evidence of such payment.
D. If Sublessor notifies Subtenant that it disputes any amount
demanded by landlord, Subtenant shall not make any such payment to landlord
unless landlord has provided a three-day notice to pay such amount or forfeit
the Main Lease.
Any sums paid directly by Subtenant to landlord in accordance with this
Paragraph shall be credited toward the amounts payable by Subtenant to Sublessor
under this Sublease.
38. TERMINATION OF MAIN LEASE BY SUBLESSOR. Sublessor shall not
voluntarily terminate the Main Lease during the Term unless and until landlord
has agreed in writing to continue this Sublease in full force and effect as a
direct lease between landlord and Subtenant upon and subject to all of the
terms, covenants and conditions of this Sublease for the balance of the Term
hereof. If landlord so consents, Subtenant shall attorn to landlord in
connection with any such voluntary termination and shall execute an attornment
agreement in such form as may reasonably be requested by landlord; provided,
however, that the attornment agreement does not materially adversely affect the
use by Subtenant of the Subleased Premises in accordance with the terms of this
Sublease, materially increase Subtenant's obligations under this Sublease or
materially decrease Subtenant's rights under this Sublease. If this Sublease
terminates as a result of Sublessor's default under the Main Lease, then, so
long as Subtenant is not then in default beyond any applicable cure period under
the terms of this Sublease, this Sublease shall continue in full force and
effect as a direct lease between Subtenant and landlord, upon and subject to all
of the terms, covenants and conditions of the Sublease for the balance of the
Term hereof. In such event, Subtenant shall attorn to landlord as set forth in
this Paragraph.
39. WAIVER OF SUBROGATION. Landlord expressly agrees that the provisions
of Section 18.4 of the Main Lease regarding waiver of rights of subrogation
shall be extended to and be between landlord and Subtenant.
40. COUNTERPARTS. This Sublease may be executed in counterparts, each of
which, when taken together as a whole, shall constitute one (1) original
document.
IN WITNESS WHEREOF, Sublessor and Subtenant have hereunto executed this
Sublease as of the day and year first above written.
11
<PAGE>
VALUE BEHAVIORAL HEALTH OF CALIFORNIA, INC.,
a California corporation
By:
------------------------------------
RETIX,
a California corporation
By:
------------------------------------
Title:
---------------------------------
12
<PAGE>
CONSENT TO ASSIGNMENT
This Consent to Assignment is by and among Marina Airport Buildings,
Ltd., a California limited partnership ("Landlord"), ValueOptions of
California, Inc., a California corporation ("Sublessor"), Vertel Corporation,
a California corporation ("Assignor") and Sonoma Systems, Inc., a California
corporation ("Assignee"), with reference to that certain Lease dated as of
April 2, 1993, as amended, by and between Landlord, and Sublessor as Tenant
under its former name of American PsychManagement of California, Inc.,
concerning Suites 500 and 600 ("Premises"), located at 4640 Admiralty Way,
Marina del Rey, California, (hereinafter referred to as the "Master Lease".)
- -------------------------------------------------------------------------------
RECITALS
WHEREAS, Sublessor, under its former name of Value Behavioral Health of
California, Inc., and Assignor, under the name of its predecessor in
interest, Retix, a California corporation, entered into a written sublease
dated as of May 29, 1996 ("Sublease"), pursuant to which Assignor subleased
the Premises from Sublessor:
WHEREAS, Assignor, under the name of its predecessor in interest, Retix,
as Sublessor, entered the following sub-leases with respect to the Premises:
(i) a sub-sublease, dated as of August 22, 1997, with TSN, L.L.C., a
California limited liability company, for a portion of the Premises located
on the fifth floor of the Building ("TSN Sub-Sublease"); (ii) a sub-sublease,
dated as of December 23, 1997, with Creative Channel Services, Inc., a
California corporation, for a portion of the Premises located on the fifth
floor of the Building ("CCS Sub-Sublease"); and (iii) a sub-sublease, dated
as of December 28, 1997, with Assignee for the portion of the Premises
comprising the sixth floor of the Building ("Sonoma Sub-Sublease"). The TSN
Sub-Sublease, CCS Sub-Sublease and Sonoma Sub-Sublease hereinafter sometimes
collectively shall be referred to as the "Sub-Subleases".
WHEREAS, Assignor has requested that Landlord consent to the
assignment of the Sublease and Sub-Subleases to Assignee, and to Assignee's
assumption of the Sublease and Sub-Subleases from Assignor, upon the terms
contained in that certain Assignment and Assumption of Sublease and
Sub-Subleases dated as June 15, 1999 ("Assignment"), a copy of which is
attached hereto and by this reference made a part hereof; and
WHEREAS, Landlord will consent to such assignment upon the express terms
and conditions hereinafter set forth;
NOW, THEREFORE, THE PARTIES AGREE:
1. Landlord, hereby consents to Assignor's assignment of the Sublease
and Sub-Subleases to Assignee, and to Assignee's assumption of the Sublease
and Sub-Subleases from Assignor, effective as of August 1, 1999 ("Effective
Date") upon the terms and conditions contained herein.
2. This Consent shall not, in any manner, be construed as a
modification or waiver of any term, condition, covenant or provision of the
Master Lease or a consent to such assignment other than upon the terms
contained in the attached Assignment.
3. This Consent shall not be deemed to be a consent to any subsequent
assignment of the Master Lease or the Sublease, or to a further subletting of
the Premises.
4. This Consent shall not in any manner serve to release or discharge
Sublessor from any obligations, liabilities or duties under the terms of the
Master Lease.
5. Assignee, by executing this Consent, agrees that as of the
Effective Date, Assignee shall be fully and completely bound by each and
every term of the Master Lease to the extent such provision is incorporated
into the Sublease. Any breach of the Sublease by Assignee from and after the
Effective Date shall likewise constitute a breach of the Master Lease to the
extent such provision is incorporated into the Sublease, and shall entitle
Landlord to avail itself of any remedy set out in the Master Lease or
otherwise available at law to Landlord.
6. Assignee, by the execution of this Consent, acknowledges that
Assignee has examined and is familiar with all of the terms, provisions and
conditions of the Sublease and the provisions of the Master Lease
incorporated by reference therein.
7. Sublessor and Assignee acknowledge and agree that from and after
the Effective Date, in accordance with the Master Lease, in the event of a
default by Sublessor, Landlord has the right, power and authority, but not
the obligation, to collect rents due Sublessor from Assignee and apply said
rents toward any and all amounts due Landlord, upon written notice to
Sublessor and Assignee.
<PAGE>
8. It is covenanted and agreed that Landlord shall not be liable under
any circumstances for any brokerage commission or other charge or expense in
connection with the Assignment, and that Sublessor, Assignor and Assignee
shall indemnify and hold Landlord harmless from all damages, costs and
expenses, including reasonable attorneys' fees, resulting from any claims
that may be asserted against Landlord by any broker, agent, finder, person or
entity who claims a right to compensation with respect to the Assignment.
9. Sublessor and Assignee agree that to the extent any terms,
conditions, covenants or provisions of the Sublease are contrary to any
terms, covenants or provisions of the Master Lease to the extent those
provisions are incorporated into the Sublease, as of the Effective Date, as
between Sublessor and Assignee only, the contrary terms, conditions and
provisions of the Sublease shall control, and as between Landlord, Sublessor
and Assignee, the contrary terms, conditions, covenants and provisions of the
Master Lease shall govern. Nothing in this Consent shall be deemed to modify
the terms and conditions of the Assignment as among Assignor, Assignee and
Sublessor, however.
10. Sublessor and Assignee are hereby informed that the Building,
Common Areas or Premises may contain fireproofing or other components
consisting of Asbestos Containing Materials ("ACM"), as more specifically set
forth in Exhibit "B", attached hereto. Pursuant to California Health and
Safety Code sections 25915, et seq., Assignee is also required to provide
such notice to Assignee's employees or contractors working within the
Building, and to subtenants, assignees, or new employees of Assignee within
fifteen (15) days of their commencing work in the Building. This provision
shall not be construed to limit Sublessor's or Assignee's duties under common
law or statute, and Sublessor and Assignee shall be required to comply with
the entirety of California Health and Safety Code sections 25915, et seq., or
any other similar applicable provision throughout the Term.
11. Landlord acknowledges that Assignor's predecessor-in-interest,
Retix, installed, with the Landlord's and Sublessor's prior written consent,
certain Alterations in the Premises. Landlord acknowledges that Landlord did
not, pursuant to Article 14.3 of the Master Lease, notify Retix, Assignor or
Sublessor in writing at the time the Landlord consented to the Alterations
that Retix or its successors in interest would be required to remove the
Alterations at the end of the Term, and Landlord acknowledges further,
notwithstanding anything to the contrary contained in the Master Lease or the
Sublease, that neither Sublessor nor Assignor nor Assignee shall have any
obligation to remove any Alterations from the Premises performed to date upon
the expiration or earlier termination of the Sublease. Nothing in the
foregoing sentence shall be deemed to relieve any party hereto of the
obligation to obtain Landlord's consent to future Alterations, or to limit
Landlord's right to require removal of any future Alteration pursuant to
Article 14 of the Master Lease.
12. Landlord expressly agrees, from and after the Effective Date, to
forever release Assignor from each and every obligation of "Subtenant"
arising under or in connection with the Sublease, or of "Sub-Sublessor,
arising under or in connection with the Sub-Subleases, including, without
limitation, any obligation of "Subtenant" under the Sublease or of
"Sub-Sublessor" under the Sub-Subleases, arising during the Extension Term as
defined in the Assignment.
[SIGNATURES APPEAR ON NEXT PAGE]
<PAGE>
WHEREUPON, THE PARTIES HERETO HAVE EXECUTED THIS CONSENT
AS OF THE DATE SET FORTH ABOVE
SUBLESSOR:
VALUEOPTIONS OF CALIFORNIA, INC.,
A CALIFORNIA CORPORATION
BY: /s/ [illegible]
-----------------------------------
ITS: VP
-----------------------------------
ASSIGNOR:
VERTEL CORPORATION,
A CALIFORNIA CORPORATION
BY: /s/ [illegible]
-----------------------------------
ITS: V.P. Finance & C.F.O.
-----------------------------------
ASSIGNEE:
SONOMA SYSTEMS, INC.
A CALIFORNIA CORPORATION
BY: /s/ Steve M. Waszak
-----------------------------------
ITS: Vice President Finance & Operations
-----------------------------------
CFO
LANDLORD:
MARINA AIRPORT BUILDINGS, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP,
BY: /s/ [illegible]
-----------------------------------
ITS: GENERAL PARTNER
<PAGE>
EXHIBIT "B"
NOTIFICATION OF ASBESTOS CONTAINING MATERIALS ("ACM")
4640 ADMIRALTY WAY, MARINA DEL REY, CALIFORNIA
This will serve to notify Assignee, its subtenants, employees and
contractors working in the Building that an Asbestos Building Materials
Survey Report has been received by Landlord that confirms the presence of ACM
in the Building.
Airborne asbestos levels in buildings are much lower than those in
industrial work places where serious health effects such as lung cancer and
asbestosis have been observed. However, it is important for employees to
follow proper work practices to minimize the potential for disturbing ACM.
In the office areas of the Building, ACM is enclosed above the ceiling.
Normal activities may be carried on without potential of disturbing ACM.
Certain occasional activities, such as telephone installation, computer cable
installation, electrical work, air conditioning maintenance, as well as many
space remodeling tasks require entry into the ceiling plenum, and should only
be performed by Landlord's authorized personnel who have been properly
trained in procedures for working around ACM. All other unauthorized persons
should refrain from removing ceiling tiles or performing work in the
above-ceiling space.
In other locations where ACM may be present, such as fire evacuation
stairways and the sprayed on acoustical ceiling in the main lobby, the ACM is
generally out of reach and thus unlikely to be damaged or disturbed. If you
find ACM that has been damaged, report it to your supervisor or Landlord's
Building Management. Do not disturb damaged asbestos material or debris.
Landlord has developed procedures and trained and equipped our maintenance
employees to safely remedy such a condition.
ACM pose no threat to your health unless fibers become airborne due to
material aging, deterioration or as the result of some damage. Asbestos
conditions may vary, and where ACM were identified in the building surveys
they were generally in good condition, enclosed, encapsulated or of a type
not likely to release fibers unless disturbed. Specific locations where ACM
have been found are listed below.
Any employee may review the Asbestos Material Survey Report, results of
bulk sampling or air monitoring conducted in this building. All asbestos
related data is available during normal business hours at Landlord's Building
Management Office.
<TABLE>
<CAPTION>
LOCATION TYPE OF ACM
<S> <C>
Floor 1 Fireproofing, Acoustic Ceiling
Floor 3 Fireproofing
Floor 4 Fireproofing
Floor 7 Fireproofing
Floor 9 Fireproofing, with all accessible ACM Removed
Penthouse Boiler Brick
Asbestos Type Chrysotile
Fireproofing 1% to 10% ACM Content
Boiler Brick 11% to 50% ACM Content
Acoustic Ceiling 1% to 10% ACM Content
</TABLE>
<PAGE>
CONFIDENTIAL
[LOGO]
CABLETRON OEM PRODUCT SUPPLY AGREEMENT
The terms contained herein, along with the attachments and exhibits
constitute an "Agreement" made this 22nd day of October 1999 (the "Effective
Date") between Cabletron Systems, Inc., a Delaware corporation with its
principal place of business at 35 Industrial Way, Rochester, New Hampshire,
U.S.A., and its subsidiaries (collectively "Cabletron") and Sonoma Systems, a
California corporation, with its principle place of business at 4640
Admiralty Way #600, Marina del Rey, California, U.S.A. ("Supplier").
1. DEFINITIONS:
1.1. END USER shall mean the ultimate customer that purchases Products for its
internal use from Cabletron or a Reseller.
1.2. BUSINESS DAYS shall mean week days excluding the United States holidays
of Martin Luther King Day, Presidents' Day, Memorial Day, Labor Day,
Columbus Day and Thanksgiving Day and the days of January 1st, July 4th
and December 25th when those days are on or are celebrated on weekdays.
1.3. EXHIBITS - The Exhibits to this Agreement are:
Exhibit A Products & Prices
Exhibit B Re-branding Specifications
Exhibit C Product Specifications
Exhibit D Technical Support Guidelines
Exhibit E Software License Terms
1.4. INTELLECTUAL PROPERTY RIGHTS shall mean all patents, copyrights,
trademarks, mask works and other intellectual property rights relating to
a Product.
1.5. LEAP YEAR shall mean a calendar year that is evenly divisible by 4. If
the year is evenly divisible by 100 (known as a century year), it is not
a leap year. However, if the century year is evenly divisible by 400,
then it is a leap year.
1.6. LICENSED SOFTWARE shall mean Supplier software, together with related
documentation and media that is supplied separately and/or incorporated
within a Hardware Product.
1.7. CABLETRON BRANDS shall mean the trademarks, tradenames, brands or other
product designations that are owned or licensed by Cabletron and under
which Cabletron will resell Products.
1.8. ORDERS shall mean purchase orders for Products submitted to Supplier by
Cabletron under the terms of this Agreement.
1.9. PARTIES shall mean Supplier and Cabletron.
1.10. PRODUCTS shall mean the re-branded Supplier hardware products and
Licensed Software that are eligible for purchase and resale by Cabletron,
listed on Exhibit A to this Agreement, and introduced by Supplier during
any term of this Agreement that enhances or is the functional replacement
for any Product.
1.11. PRODUCT SPECIFICATIONS shall mean Supplier's published specifications for
the Supplier product current on date Supplier accepts Cabletron's Order,
the re-branding specifications set forth in Exhibit B and any additional
specifications agreed to by the Parties in writing.
1.12. RESELLERS shall mean entities authorized by Cabletron to resell Products.
1.13. RETURN MATERIAL AUTHORIZATION OR "RMA" shall have the meaning set forth
in Section 8.3.
1.14. SOFTWARE shall mean Licensed Software and software (firmware)
incorporated in hardware Products.
1.15. SOFTWARE UPDATES shall mean corrective patches, fixes, error and other
corrections not constituting new versions of Software.
1.16. SOFTWARE UPGRADES shall mean new versions of Software with enhanced
features or performance characteristics.
1.17. TERRITORY - Unless otherwise specified or agreed by the Parties, the
Territory is worldwide.
1.18. WARRANTY PERIOD - Unless otherwise specified by agreed by the Parties,
the Warranty Period shall be the shorter of [*] ([*]) months from the
date the
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- -------------------------------------------------------------------------------
Cabletron Proprietary Information Page 1
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
Product is delivered to the End User or [*] ([*]) months from the
date the Product is shipped to Cabletron.
1.19. YEAR 2000 COMPLIANT shall mean, with respect to information technology,
that the information technology, where applicable, accurately processes
date/time data (including, but not limited to, calculating, comparing,
and sequencing), from, into, and between the twentieth and twenty-first
centuries, and the years 1999 and 2000 and Leap Year calculations, to the
extent that other information technology, used in combination with the
information technology being acquired, properly exchanges date/time data
with it. This Year 2000 Compliant definition is based on the definition
set forth in the U.S. Government's Federal Acquisition Regulation (FAR),
Subpart 39.002.
2. RELATIONSHIP:
2.1. APPOINTMENT - Supplier appoints Cabletron as a non-exclusive OEM reseller
of the Supplier products to be resold under Cabletron Brands to End Users
under the terms of this Agreement. The Products eligible for purchase and
resale or license by Cabletron under this Agreement are listed on Exhibit
A.
Cabletron and Sonoma have agreed to a non-binding revenue forecast of
[*] dollars ($[*]) per year for the initial term. Cabletron is not
obligated to place any order under the terms of this Agreement to satisfy
the above referenced revenue forecast. All Cabletron purchases placed in
accordance with the terms of the July 13, 1999, Letter of Intent shall
be applied to the above referenced revenue forecast.
2.2. RELATIONSHIP REVIEWS - Supplier and Cabletron will conduct reviews of
their relationship and performance under this Agreement at least twice
during each year following the Effective Date. These reviews will
consider, among other things, new products, Product Specifications, and
Cabletron's Product forecasts, purchases and payments under this
Agreement.
In the event Cabletron wishes to further sublicense the Products,
Supplier agrees to negotiate in good faith an amendment to this
Agreement.
2.3. CHANNEL CONFLICT MITIGATION - In order to ensure that Supplier's and
Cabletron's sales forces do not work at cross-purposes, and to reward
cooperative pursuit of sales opportunities between Supplier and
Cabletron, Supplier agrees that for any Product sold by Cabletron
pursuant to this Agreement, Supplier's sales force in the territory in
which the Product is sold shall be compensated fully through ordinary
commission and revenue retirement for such Product sale, as though it had
been made by Supplier's sales force.
3. SUPPLIER'S INVENTORY COMMITMENT:
3.1. INVENTORY - Supplier shall at all times hold in inventory an amount of
each Product sufficient to satisfy an order by Cabletron equal to the
then-current next month's forecast of expected Product demand. Supplier
shall in particular keep on hand a sufficient supply of Products or parts
thereof identified by Cabletron as "long lead-time" materials to meet
Cabletron's orders for such Products or parts, and upon request shall at
all times hold in inventory an amount of such Products or parts equal to
twice the then-current next month's forecast of expected demand.
3.2. CABLETRON FORECASTS - Cabletron shall provide to Supplier during the
first week of each calendar month a forecast of its expected demand for
Products for the six-month period beginning thirty days following the
forecast. Each updated forecast shall not exceed 125% of the previously
submitted forecast during the initial 60 day period without Supplier's
consent. Supplier shall use its best efforts to accommodate Cabletron's
forecasts exceeding said 125% increase. Such forecast shall create no
obligation on Cabletron's part to submit a firm order for Products.
Cabletron shall provide Supplier such forecast coincident with execution
of this Agreement.
4. PRODUCTS AND PRICING:
4.1. PRODUCTS - Products shall mean the re-branded Supplier hardware products
and Licensed Software that are eligible for purchase and resale by
Cabletron, listed on Exhibit A to this Agreement, and includes any
product introduced by Supplier during any term of this Agreement that
enhances or is the functional replacement for any Product. All Products
shall be manufactured by Supplier using new components and other
materials.
4.2. NEW PRODUCTS - New products may be added to Exhibit A and become Products
by written agreement of the Parties
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- -------------------------------------------------------------------------------
Cabletron Proprietary Information Page 2
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
4.3. WITHDRAWAL OF PRODUCTS - Supplier may cease production and withdraw any
Product from Exhibit A, provided Supplier gives Cabletron a written
"Product Withdrawal Notice" at least [*] ([*]) days prior to the
effective date of the withdrawal. Cabletron may, within [*] ([*])
days after receipt of a Product Withdrawal Notice, submit a single,
non-cancelable "Last Buy" Order for the affected Product for delivery
within the subsequent [*] ([*]) months. Sonoma Systems shall not be
obligated to accept any Last Buy Orders which exceeds [*] percent
([*]%) of the product units that Cabletron ordered during the [*] ([*])
month period prior to the date of the relevant Product Withdrawal Notice.
4.4. RIGHT TO MANUFACTURE - If Sonoma:
(a) implements a Product withdrawal without making available a functionally
equivalent or superior product, on similar commercial terms, that is required
by Cabletron to support expansion of networks deployed by its
customers/end-users in which Products are already in use;
(b) is consistently or unreasonably unable or unwilling to deliver to
Cabletron the quantities of Contractual Products forecasted and ordered by
Cabletron as provided for in this Agreement and accepted by Sonoma as
provided for in this Agreement within [*] ([*]) days of the delivery dates
set out in section 5 of this Agreement;
(c) ceases or is unwilling, without a cause attributable to wrongful acts of
Cabletron under this agreement, to provide commercially adequate support or
maintenance for the products in accordance with the terms and conditions of
this Agreement;
(d) is sold and its successor is (i) a Direct Competitor of Cabletron and
(ii) does not provide Cabletron with acknowledgement that it continues to be
bound by, and shall duly and punctually perform, all of the provisions of
this Agreement. "Direct Competitor" shall mean an individual, partnership,
limited partnership, corporation, company, trust, unincorporated
organization, governmental unit or agency or any political subdivision
thereof or any other entity whatsoever (other than Cabletron) that engages in
the sale of principally the same or similar hardware products required for
the local area network and wide area network applications, parts, related
software, documentation and/or related products manufactured, produced and/or
distributed by Cabletron or its affiliates;
(e) ceases doing business as a going concern; has a receiver, administrator
or manager of its property, assets or undertakings appointed in such
circumstances as would substantially affect Cabletron's continuing supply or
use of the Product in accordance with this Agreement; takes advantage of the
insolvency laws of any jurisdiction; makes an assignment in bankruptcy or is
adjudicated a bankrupt; makes a general assignment for the benefits of its
creditors; is ordered by any court of competent jurisdiction to be wound up;
or become insolvent or makes a sale in bulk of a substantial portion of its
assets;
Provided that Supplier has not terminated this Agreement due to default or
cause of Cabletron and an event described above (at (a) through (e)) has
occurred, then:
Cabletron may place purchase orders for Products directly with Supplier's
manufacturer. Supplier shall direct such manufacturer to accept such purchase
orders and provide the Products to Cabletron, or Supplier will, upon request
from Cabletron, grant the rights to manufacture Product(s) to Cabletron.
Cabletron shall have the right to sublicense this grant to a third party
manufacturer. Supplier shall provide such other manufacturer with
all-necessary rights, information and materials (but not tooling or
machinery) in order to permit them to manufacture the Product(s) within their
own manufacturing facilities. Such information includes, by example and not
by way of limitation: (i) manufacturing drawings and specifications of raw
materials and components comprising such parts; (ii) manufacturing drawings
and specifications covering special tooling and the operation thereof; (iii)
a detailed list of all commercially available parts and components purchased
by Seller on the open market disclosing the part number, name and location of
the supplier, and price lists for the purchase thereof; and (iv) one (1)
complete copy of the then current source or binary code used in the
preparation of any Software licensed or otherwise acquired by Cabletron from
Supplier hereunder. Such manufacturer will enter into appropriate
confidentiality agreements with its employees, contractors/suppliers and
Cabletron. Supplier shall assist Cabletron in obtaining any required
assignment of rights to Third Party Technology in the Product(s).
No transfer fee or other amounts would be payable for Product(s) so
manufactured and distributed. Instead, Cabletron will be responsible for
payment of any royalties required for the use of third party technology and
pay Supplier a royalty of [*] percent ([*]%) of the Transfer Price for such
Product under this Agreement in the event either condition (a), (b), (c) or
(e) occur. In the event condition (d) occurs, Cabletron shall pay Supplier a
royalty of [*] percent ([*]%) of the Transfer Price. "Transfer Price" shall
mean the current price paid for Products by Cabletron prior to invoking this
section 4.4 and more fully described in Exhibit A.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- -------------------------------------------------------------------------------
Cabletron Proprietary Information Page 3
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
The royalty in respect of each Product shall become due and payable upon
manufacture of each Product and shall be invoiced no later than the end of
each calendar quarter. Cabletron shall provide Supplier with written
evidence, and reasonable access periodically to inspect relevant records, on
a monthly basis of the number of Products it manufactures for the period over
which it exercises the Right to Manufacture.
Cabletron's right to manufacture under this section 4.4 shall terminate in
the event that:
(a) Cabletron breaches any material term of this Agreement and fails to
remedy such breach within [*] ([*]) days of receiving notice to do so by
Supplier; or
(b) this Agreement terminates for any reason, except that if Cabletron has
exercised it right to manufacture under this section 4.4, it shall be
entitled to continue to exercise such right to manufacture for a period of
[*] ([*]) years from the date of termination.
4.5. Supplier will use its best efforts to mitigate the impact of any
modification on Cabletron, including consideration of changes to the
modification and allowing Cabletron to make a final purchase of the
unmodified Products, provided that the final Order for unmodified
Products shall be placed at least thirty (30) days prior to the effective
date of the modification for delivery within ninety (90) days.
4.6. DOCUMENTATION AND MATERIALS - Supplier agrees to provide hard and
electronic copies of all specifications, user instructions, manuals and
other documentation for Products ("User Documentation") and all
instructions, manuals and other documentation relating to the
installation, operation and maintenance of Products ("Maintenance
Documentation") to Cabletron without charge. In addition to supplier's
obligations specified in Exhibit B, Cabletron shall have the right to
use, modify, translate, reproduce and distribute User Documentation and
Maintenance Documentation in connection with Cabletron's use, marketing,
resale, distribution and support of Products.
4.7. EXPORT LICENSING - Supplier will provide all necessary assistance in
order that Cabletron may obtain export license approval for the Products
from any and all relevant governmental entities, upon Cabletron's request
and at no additional charge.
4.8. PRICES - During the first year after the Effective Date, Cabletron may
purchase Products at prices no greater than those described in Exhibit A
to this Agreement. All dollar amounts referred to in this Agreement are
United States dollars.
4.9. MOST FAVORED CUSTOMER PRICING - Supplier agrees that should it agree to
supply any Product or product substantially equivalent to any Product to
any competitor of Cabletron at a prices less than the relevant prices
established by this Agreement taking into consideration all other
meaningful purchase contracted terms (i.e.: quantities, maintenance and
support, license grants, Right to Manufacture, etc). Supplier shall
reduce the price under this Agreement to the lower level as of the date
that Supplier agreed to offer the lower price to the third party. The
lower price shall apply to all Orders not delivered as of that date and
all subsequent Orders for the affected Product.
4.10. PRICE CHANGES - Upon the written request of Cabletron, Parties shall meet
within ten (10) Business Days of the request, to consider and negotiate
in good faith requested changes in Product prices. Additionally, the
Parties shall review Product pricing no less frequently than every six
(6) months in order to assure compliance with the terms of this
Agreement, including specifically this Article 4.
4.11. PRICE DECREASES - In the event Supplier determines to lower the price of
a Product, the price decrease shall apply to Orders for the Products not
delivered as of the effective date of the decrease and all subsequent
Orders for the affected Product.
4.12. PRICE TERMS - Prices for all Products are F.O.B. Supplier's Origin with
Cabletron responsible for all costs of transportation, insurance, taxes,
customs duties, landing, storage and handling fees, and documents or
certificates required for exportation or importation.
4.13. QUALITY ASSURANCE AND FIRST ARTICLE AND FACILITY INSPECTION - Products
shall be manufactured by or for Supplier in facilities that meet EN ISO
9001 or EN ISO 9002 standards. Supplier agrees to allow Cabletron to
review and inspect, during regular business hours and following
reasonable notice to Supplier, Supplier's manufacturing facilities and
quality control procedures, both prior to first Product deliveries and
periodically thereafter for quality control and assurance purposes.
Supplier will provide Cabletron upon request and reasonable notice with
copies of its quality control test documents for each Product for
Cabletron's review. Supplier will provide Cabletron with [*]
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- -----------------------------------------------------------------------------
Cabletron Proprietary Information Page 4
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
([*]) units of each Product ("First Articles"), without charge, for
inspection and testing to verify the Product's workmanship and
conformance to its functional specifications and any test specifications
set forth in Exhibit C to this Agreement. Cabletron shall retain these
units for use by the Support Service Group. Within thirty (30) days after
its receipt of each First Article, Cabletron shall either: (i) provide
Supplier written notice of approval for volume shipment; or (ii) return
the First Articles and provide Supplier with a detailed failure report.
In the event of a failure, Supplier will use commercially reasonable
effort to correct any problems found and provide Cabletron with an
upgraded First Articles for inspection and testing pursuant to this
Section. After Cabletron has approved volume shipment, any Product
failure shall be dealt with pursuant to the terms of Article 8 of this
Agreement. All Products delivered to Cabletron under this Agreement shall
achieve Cabletron's quality standards. In the event that any such
Products fail to meet said quality standards, or that Supplier's physical
facilities, quality control procedures, or are determined by Cabletron in
good faith to be insufficient to insure consistent acceptable Product
quality, Supplier agrees to modify or correct the Products, facilities,
or procedures to meet said quality standards, and shall provide to
Cabletron for its review documentation setting forth the corrective
action to be implemented in order to bring the Products within
Cabletron's quality standards. In the event that Supplier fails to effect
a correction within thirty (30) days, Cabletron may terminate this
Agreement and cancel all then-outstanding orders for Products without
liability.
5. ORDERING & SHIPMENT:
5.1. PURCHASE ORDERS - All Product Orders from Cabletron shall be dated and
reference the contract number of this Agreement. No additional or
different terms on the face or reverse side of any purchase order, or in
any written communications from Cabletron shall supersede or amend the
terms of this Agreement, unless such terms are agreed upon in advance,
set forth in writing and signed by an authorized representative of each
Party.
5.2. ISSUANCE AND ACCEPTANCE - Each Order shall contain: (i) a complete list
of the Products to be purchased specifying quantity, type, description
and price; (ii) shipment and delivery instructions; and (iii) any special
terms and conditions agreed to in writing by the Parties. Supplier agrees
to receive Orders placed by Cabletron via electronic document transfer,
facsimile, or hard copy only, and Supplier agrees to acknowledge the
Order's receipt within twenty-four (24) hours of Cabletron placing the
Order and in the same manner in which the Order was received. Verbal or
telephone orders must be followed promptly by one of the transmission
means described above. The Supplier must accept all Orders that are
within Cabletron's most recent forecast.
5.3. RIGHT TO CANCEL OR RESCHEDULE - Cabletron may cancel any Order or
reschedule the date of the shipment of any Order without penalty provided
that Supplier receives written notice at least [*] ([*]) Business Days
prior to the scheduled shipment date, except that Cabletron shall not
cancel any Order in the last [*] ([*]) days of Supplier's fiscal
quarter. Cabletron may postpone any Order placed in the last [*] ([*])
days of Sonoma's fiscal quarter and the Parties will make every effort to
reallocate such Products to other Cabletron Orders.
5.4. DELIVERY SCHEDULE - Cabletron shall receive good title, and Supplier
shall deliver all Products free and clear of all liens, encumbrances and
claims. Supplier will use its best efforts to deliver all Products on the
Product delivery date specified in Cabletron's Order. Supplier's standard
delivery date shall be fifteen (15) days after Supplier acknowledges
receipt of Cabletron's Order ("Standard Delivery Date"). If Supplier is
unable to deliver Products within [*] ([*]) Business Days of the Standard
Delivery Date, Supplier shall be responsible for payment of any express
delivery charges required to deliver the Product by the fastest available
method of delivery. If Supplier fails to deliver Products within [*]
([*]) Business Days of the Standard Delivery Date, except by reasons of
Force Majeure, Cabletron may, at is sole option, either (i) cancel the
Order or (ii) accept delivery and receive a credit equal to [*]
percent ([*]%) of the value of the Order, or in the event Cabletron
instructs Supplier to make a partial shipment [*] percent ([*]%) of
the value of the unshipped portion of the Order, each business day
Supplier fails to deliver the Order on the Standard Delivery Date, up to
a maximum of [*] percent ([*]%).
5.5. PARTIAL SHIPMENTS AND ALLOCATIONS - Supplier shall not make partial
shipments without Cabletron's express written consent. When Products or
component parts are in short supply, or on an industry wide allocation,
Supplier will allocate its
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- ----------------------------------------------------------------------------
Cabletron Proprietary Information Page 5
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
available inventory and make deliveries on an equitable basis.
5.6. CARRIER & RISK OF LOSS - Products will be shipped by the carrier
designated in writing by Cabletron. In the absence of specific shipping
instructions from Cabletron, Supplier may designate the carrier. Title to
Products and risk of loss shall pass to Cabletron upon Supplier's
delivery to the designated carrier.
5.7. PACKING - Unless otherwise provided in the Product Specification,
Products shipped by Supplier will be packed and packaged according to
Supplier's then current packaging methods for comparable products.
6. SOFTWARE LICENSE TERMS:
6.1. LICENSE GRANT - Supplier hereby grants Cabletron a nontransferable,
nonexclusive license to use and distribute Software solely for use by End
Users in and in connection with their use of Products.
6.2. PROTECTION OF SOFTWARE - Cabletron agrees not to modify, decompile or
disassemble Software except as expressly permitted by applicable law and
agrees not to lend, rent, lease, sublicense, or otherwise transfer
Software in any form to any person except in accordance with this
Agreement. Cabletron will use commercially reasonable efforts to protect
Software and any copies or portions thereof from unauthorized
reproduction, publication, disclosure or distribution.
6.3. DISTRIBUTION OF SOFTWARE PRODUCT - Licensed Software may only be
distributed subject to appropriate End-User software license terms and
conditions. Cabletron shall distribute and shall use commercially
reasonable efforts to require Resellers to distribute a Software license
agreement substantially in the form of the Exhibit E with every copy of
Licensed Software distributed under this Agreement.
7. PAYMENT:
7.1. PAYMENT TERMS - Supplier's payment terms are net forty-five (45) days
from the date of Supplier's invoice. Cabletron shall promptly pay all
invoices and amounts due and maintain satisfactory credit arrangements
with Supplier. All payments shall be made in United States dollars.
8. WARRANTY TERMS:
8.1. PRODUCT WARRANTY - Supplier warrants that Products purchased under this
Agreement: (i) comply with all applicable federal, state, and local laws,
rules, regulations and codes; (ii) are free of defects in materials and
workmanship and will conform to the Product Specifications applicable as
of the date of Cabletron's Order throughout the Warranty Period; and
(iii) are Year 2000 Compliant. Software Upgrades and updates released by
the Supplier during the relevant Products Warranty Period shall be
available to Cabletron for license to the End User without charge.
8.2. REPAIR OR REPLACEMENT - Supplier shall repair or replace, at Supplier's
expense, all Products that fail to meet the applicable Product
Specifications or other requirements of the foregoing warranty during the
Warranty Period. Supplier shall at all times keep on hand spare or
replacement Products and parts in amounts sufficient to repair fully or
to replace Cabletron's Product forecast for that month as referenced in
Paragraph 3.2 of this Agreement.
8.3. RETURN, REPAIR OR REPLACEMENT PROCEDURES - Products shall be returned for
repair or replacement as follows:
8.3.1. Cabletron shall pay all transportation charges for Products returned
to Supplier under these product warranty terms. Supplier will pay
all transportation charges back to Cabletron or End User.
8.3.2. The return of all Products shall be controlled under a Return
Material Authorization ("RMA") system maintained by Supplier.
Cabletron must obtain an RMA number prior to returning any Products
to Supplier and supply Supplier with the following information: (a)
End User identification; (b) Product serial number; and (c)
information relating to the failure, including product configuration
and other failure details.
8.3.3. Returned Products will be packaged and shipped to Supplier using
packing materials sufficient to prevent either accidental opening of
the carton or damage to the Product resulting from normal handling
during shipment. Supplier will pay shipping costs and bear the risk
of loss of returning repaired or replaced Products to Cabletron.
8.3.4. If it is not possible to repair or rework the returned Products
within ten (10) Business
- ----------------------------------------------------------------------------
Cabletron Proprietary Information Page 6
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
Days, a replacement Product will be shipped to Cabletron without
cost.
8.4. EPIDEMIC FAILURES - At any time after Cabletron's acceptance of First
Articles and the commencement of volume shipments of a Product, Cabletron
may, at its option, inspect and test purchased Products to confirm that
they meet the applicable Product warranty. With regard to any Product, in
the event that inspection and testing, whether alone or in conjunction
with related warranty claims, indicates that the same defect impacting a
Product's functionality has occurred in more than [*] percent ([*]%) of
the Products manufactured within a one (1) month period, or in more than
[*] percent ([*]%) of the Products manufactured within a two (2) month
period, the defect shall be considered an "Epidemic Failure." In the
event that either Party has evidence of an Epidemic Failure, Supplier
shall promptly (i) correct the cause on all Products having an Epidemic
Failure to be shipped thereafter, and (ii) repair or replace all Products
having an Epidemic Failure shipped within the previous [*] ([*]) years,
or alternatively pay Cabletron its costs of remedying such noncompliance.
8.5. WARRANTY DISCLAIMER - EXCEPT AS EXPRESSLY PROVIDED HEREIN, NO OTHER
WARRANTY, EXPRESS OR IMPLIED SHALL APPLY. SUPPLIER SPECIFICALLY DISCLAIMS
ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.
9. SERVICE:
9.1. END USER SUPPORT - Cabletron shall provide all first and second level End
User customer support for Products, as defined below, in the same manner
Cabletron provides similar support for other products. Supplier will
provide third level support, according to the Technical Support
Guidelines set forth in Exhibit D. As used herein: (i) First Level
Support shall mean services responsive to the End User's initial
notification that a suspected problem exists with the Product, including
call logging, validation, determining whether a solution is given in User
Documentation or Maintenance Documentation, and a review of known
resolutions for the reported problem; (ii) Second Level Support shall
mean First Level Support plus services performed in order to attempt to
reproduce the suspected problem and correct it by means of work-around,
or in determining that the problem cannot be reproduced; and (iii) Third
Level Support shall mean services provided to the End User to resolve
problems that are determined to be or to be likely to be the result of
one or more design or manufacturing defects or interaction between the
Product and other materials, and that cannot be resolved by the End User.
During the first twelve (12) months following shipment, this Support as
well as Software Updates/Upgrades at Section 8.1 and items in Section 9.2
will be provided based on a support fee of [*] percent ([*]%) of the
Transfer Price for all Products shipped to Cabletron. Subsequent to the
initial twelve (12) month period following shipment, Supplier shall
provide End User Support and Software Updates/Upgrades based on an annual
support fee of [*] percent ([*]%) of the Transfer Price, only for those
Products subject to a Cabletron support and maintenance agreement.
Cabletron shall provide Supplier on a quarterly basis with the number of
Products subject to a Cabletron support and maintenance agreement. The
fee will be invoiced quarterly in advance effective January 1, 2000. In
the event on-site support is required to resolve Customer problems,
Supplier shall bare its costs of travel and related expenses and such
on-site service shall be at no additional charge.
9.2. TECHNICAL INFORMATION AND TRAINING - Supplier will provide, without
charge, technical information and training upon request for Cabletron
employees with regard to each Product to allow Cabletron and its
employees to become familiar with the Products, market the Products, and
provide Level One and Level Two Support. All training shall take place at
Cabletron's designated facility. Supplier shall provide initial Technical
Training for up to four (4) Product and post sales Training classes, each
for North America (East and West coast), Europe and PACRIM for up to
fifteen (15) students per class. Four (4) additional classes will be
scheduled within the following six (6) month period. Supplier shall
provide up to four (4) initial Technical Training classes for each future
Product release at no additional charge. Supplier shall offer additional
Technical Training classes at Supplier's standard rates, as more fully
described in Exhibit A. Supplier shall provide all of the equipment
necessary to complete its training obligations under this section 9.2.
Any equipment necessary to provide Technical Training not described in
this section 9.2 shall be the responsibility of Cabletron.
9.3. ADDITIONAL SUPPORT - Supplier shall negotiate in good faith to provide
Cabletron with additional maintenance services and support not covered
under this Agreement pursuant to a separate
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- ----------------------------------------------------------------------------
Cabletron Proprietary Information Page 7
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
agreement between the Parties upon Cabletron's request.
9.4. SUPPORT PLAN - Within sixty (60) days of the execution of this Agreement,
the parties will develop a "Support Plan," meaning a plan addressing, but
not limited to, procedures for handling support calls, problem
escalation, problem information exchange, and management of repair
services. Separate Support Plans may be implemented for support services,
training, and presales technical support.
9.5. NON-WARRANTY REPAIR - Non-warranty repair services for Products may be
provided by Supplier at a designated Supplier facility on a time and
materials basis under Supplier's then standard prices, terms and
conditions.
9.6. POST WARRANTY SERVICE AGREEMENTS - At Cabletron's request, Supplier may
agree to offer post-warranty service agreements for Products to End Users
on terms and conditions comparable to those in service agreements
Supplier provides on comparable Supplier branded products.
10. INTELLECTUAL PROPERTY:
10.1. OWNERSHIP - Unless expressly stated, nothing in this Agreement shall
grant Cabletron a license to use or any other right, title or interest in
any Supplier Intellectual Property Right, and all such Intellectual
Property Rights shall remain the exclusive property of Supplier.
11. DURATION AND TERMINATION:
11.1. TERM - The initial term of this Agreement shall be the two (2) year
period commencing on the Effective Date and terminating on the date
exactly two (2) years after the Effective Date unless earlier terminated
pursuant to the terms of this Agreement. This Agreement shall
automatically renew for additional one (1) year periods upon the same
terms and conditions as set forth herein unless, within not less than
thirty (30) days prior to the expiration of the then current term, either
party should notify the other of its intent not to so renew.
11.2. TERMINATION FOR CAUSE - This Agreement may be terminated upon the
occurrence of any of the following events: (i) by Supplier, immediately
upon written notice, should Cabletron fail to pay any sums due hereunder
within [*] ([*]) days of the due date thereof; or (ii) by either Party
should the other Party commit a material breach of any obligation under
this Agreement not specifically set out in this Section or any other
Agreement between the parties and fail to cure such material breach
within [*] ([*]) days after written notice to the defaulting party
(hereinafter the "Default Notice"); or (iii) by either Party,
immediately, upon the insolvency of the other party, the appointment of a
liquidator, receiver, administrative receiver or administrator for the
other party, or an assignment by the other party for the benefit of
creditors.
11.3. TERMINATION FOR CONVENIENCE - After the second anniversary of the
Effective Date, either Party may terminate this Agreement for any reason
unless Agreement is in process of Termination for Cause pursuant to 11.2
above, by providing the other Party with at least [*] ([*]) days prior
written notice.
11.4. EFFECTS OF TERMINATION - Upon any termination of this Agreement,
Cabletron shall: (i) refrain from submitting additional Product Orders;
(ii) promptly pay for any Products which Cabletron has received but has
not yet paid Supplier; and (iii) at its option, offer Supplier the
ability to repurchase at the original invoice price all or any portion of
the Products in Cabletron's inventory.
11.5. LIMITS OF LIABILITY FOR TERMINATION - In the event this Agreement is
terminated, NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR COMPENSATION,
REIMBURSEMENT OR DAMAGES ON ACCOUNT OF THE LOSS OF PROSPECTIVE PROFITS OR
ANTICIPATED SALES, OR ON ACCOUNT OF EXPENDITURES, INVESTMENTS, LEASES OR
COMMITMENTS IN CONNECTION WITH THE BUSINESS OR GOOD WILL OF SUPPLIER OR
CABLETRON, OR FOR ANY OTHER REASON RELATING TO OR ARISING FROM SUCH
TERMINATION.
11.6. POST TERMINATION AND WITHDRAWAL OF PRODUCT SUPPORT - The termination of
this Agreement or Withdrawal of Product per 4.3/4.4, shall not relieve
Supplier of its Warranty obligations under Article 8 of this Agreement
with regard to Products sold by Cabletron to End Users prior to the date
of termination or for Withdrawal of Product obligations per 4.3/4.4, and
Supplier shall continue to provide the technical support at the annual
support fee described in Article 9 of this Agreement for [*] ([*]) years
following the date of termination. Subsequent to such [*] ([*]) year
period, Supplier agrees upon Cabletron's request, to offer post-service
agreements for Products on
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- ----------------------------------------------------------------------------
Cabletron Proprietary Information Page 8
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
terms and conditions comparable to those in service agreements Supplier
provides on comparable Supplier branded products.
12. CONFIDENTIAL AND PROPRIETARY INFORMATION:
12.1. DISCLOSURE OF INFORMATION - It is expected that Supplier and Cabletron
may each disclose to the other proprietary or confidential information.
For purposes of the following, the Party disclosing the Confidential
Information is the "Discloser" and the Party receiving the Confidential
Information is the "Recipient".
12.2. CONFIDENTIAL INFORMATION - "Confidential Information" shall mean any and
all information of the Discloser that is not generally known by others
with whom it competes or does business, and any and all information,
publicly known in whole or in part or not, which, if disclosed would
assist in competition against Discloser. Confidential Information
includes without limitation such information relating to: (i) the
technical specifications of the Products; (ii) the development, research,
testing, marketing and financial activities of the Discloser; (iii) the
identity and special needs of the customers or suppliers of the
Discloser; and (iv) the people and organizations with whom the Discloser
has business relationships and those relationships.
12.3. OWNERSHIP AND NON-DISCLOSURE - All Confidential Information acquired by
Recipient or its employees or agents shall remain Discloser's exclusive
property, and Recipient shall use its best efforts (which in any event
shall not be less than the efforts Recipient takes to ensure the
confidentiality of its own proprietary and other confidential
information) to keep, and have its employees and agents keep, any and all
such information and data confidential, and shall not copy or publish or
disclose it to others, or authorize its employees, or agents or anyone
else to copy, publish, or disclose it to others, without Discloser's
prior written approval, and shall return such information and data to
Discloser at its request. Recipient shall only use any Confidential
Information in connection with its performance under this Agreement.
12.4. EXCEPTION - The confidentiality provisions in this Section will not apply
to information which is or which becomes generally known to the public by
publication or by any means other than a breach of duty by a Party to
this Agreement.
12.5. DISCLOSURE TO AGENT - Cabletron may disclose Supplier Confidential
Information to third-party agents working under Cabletron's direction,
provided that the agent executes an appropriate non-disclosure agreement
with Cabletron that prohibits further disclosure of Supplier Confidential
Information.
12.6. POST TERMINATION - Except to the extent necessary to fulfill ongoing
product support obligations or as otherwise provided herein, upon
termination or expiration, Cabletron shall deliver to Supplier all
material furnished by Supplier and pertaining to Products, which is then
in the possession of Cabletron, and shall not retain copies of the same.
Except as provided herein, upon termination or expiration, Supplier shall
deliver to Cabletron all material furnished by Cabletron, which is deemed
confidential hereunder.
13. INDEMNIFICATIONS:
13.1. INDEMNIFICATION BY SUPPLIER - Supplier shall defend, at Supplier's
expense, any claim brought against Cabletron, its employees, agents,
Resellers or End Users (a "Claim Defendant") alleging that any Product
acquired or licensed under this Agreement infringes any patent,
copyright, trademark, mask work right or comparable right (hereinafter a
"Claim"). Supplier shall pay all costs and damages awarded or agreed to
in settlement, provided that the Claim Defendant gave Supplier prompt
written notice of the Claim, reasonable assistance and sole authority to
defend or settle the Claim. Supplier shall obtain for the Claim
Defendant, the right to continue using the Product, replace or modify the
Product so it becomes non-infringing. If such remedies are not reasonably
available, Supplier shall refund to Cabletron the price paid for the
Product and Cabletron shall return the Product to Supplier. Depending on
the period of time for which Cabletron has used the Product, the amount
of the refund will be depreciated by an equal amount over the lifetime of
the Product, as mutually agreed to by both parties.
Supplier shall not be liable to Cabletron for any claim infringement
pursuant to this section 13.1 if such claim is based on:
(a) Combination of the Products with other products or devices not
supplied to Cabletron by Supplier; or
- ----------------------------------------------------------------------------
Cabletron Proprietary Information Page 9
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
(b) Modifications made to the Products by someone other than Supplier.
13.2. INDEMNIFICATION BY CABLETRON - Cabletron shall hold Supplier harmless
from and defend, at Cabletron's expense, any claim brought against
Supplier alleging that any Cabletron Brand infringes the trademark, trade
name or any other intellectual property right of a third party (a "Brand
Claim"). Cabletron shall pay all costs and damages awarded or agreed to
in settlement, provided that the Supplier gave Cabletron prompt written
notice of the Brand Claim, reasonable assistance and sole authority to
defend or settle the Brand Claim.
13.3. PRODUCTS LIABILITY - Supplier shall defend, at its expense, any claim
brought against Cabletron, its employees, agents, Resellers or End Users
("Claim Defendant") that arise out of or result from injuries or death to
persons or physical damage to property arising out of the use of the
Products, including claims that the Products were defective or were not
safe for their intended use, whether such Products or the parts thereof
were furnished by Supplier or its subcontractors ("Products Liability
Claim"), provided that the Claim Defendant gave Supplier prompt written
notice of the Products Liability Claim, reasonable assistance and sole
authority to defend or settle the Products Liability Claim. Supplier
shall carry and maintain general and products liability insurance
coverage in an amount no less than [*] dollars ($[*]) applicable to
the Supplier's obligation under this section. Supplier shall not be
liable to Cabletron for any Products Liability Claim if such claim is
based on modifications made to the Products by someone other than
Supplier or by Cabletron at Supplier's instructions.
14. LIMITATION OF LIABILITY:
14.1. LIMITATION OF LIABILITY - IN NO EVENT SHALL EITHER PARTY OR THEIR
AFFILIATES, OFFICERS, DIRECTORS, AGENTS, OR EMPLOYEES BE LIABLE TO THE
OTHER PARTY OR END USERS FOR ANY INDIRECT, INCIDENTAL, OR CONSEQUENTIAL
DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF DATA OR PROFITS OR
ATTORNEY'S FEES, WHETHER CLAIMED BY REASON OF BREACH OF WARRANTY, IN TORT
OR OTHERWISE, AND WITHOUT REGARD TO THE FORM OF ACTION IN WHICH SUCH
CLAIM IS MADE. IN ANY EVENT, CABLETRON'S LIABILITY SHALL BE LIMITED TO
[*] UNITED STATES DOLLARS ($[*]) OR THE EQUIVALENT IN FOREIGN CURRENCY.
SUPPLIER'S LIABILITY SHALL BE LIMITED TO THE GREATER OF: (i) THE AMOUNT
ACTUALLY PAID BY CABLETRON TO SUPPLIER UNDER THIS AGREEMENT; OR [*]
UNITED STATES DOLLARS ($[*]).
15. DISPUTE RESOLUTION:
15.1. CONSULTATION AND REVIEW - The Parties shall make good faith efforts to
resolve all disputes arising under this Agreement through consultations.
If consultations are unsuccessful in resolving any dispute, either Party
may request a senior management review. Within ten (10) Business Days of
any such request, designated vice presidents of Supplier and Cabletron
will meet in a mutually acceptable fashion to exchange relevant
information and attempt to resolve the dispute.
16. GENERAL TERMS:
16.1. IMPORT AND EXPORT - Certain Products may be subject to export or import
control laws and regulations of the U.S. government and other
governments. Cabletron assures that Cabletron and Resellers will comply
with those regulations at their expense whenever they export or re-export
controlled products or technical data obtained from Supplier or any
product produced directly from the controlled technical data. Cabletron
shall hold harmless and indemnify Supplier from any damages, including
attorneys' fees, and any government sanctions resulting to Supplier from
a breach of this Section.
16.2. ASSIGNMENT - Cabletron or Supplier may assign this Agreement to any
person or entity that acquires substantially all of the stock of
Cabletron or the assets of Cabletron or Supplier, respectively, or any of
its applicable major division, unit, or subsidiary provided that such
acquiring person or entity a) acknowledges that it continues to be bound
by and shall duly perform all of the provisions and b) is not a direct
competitor of the non-assigning party.
16.3. CONFIDENTIALITY OF AGREEMENT - The Parties acknowledge and agree that the
terms of this Agreement are confidential, and, except as may be required
by law or in response to valid judicial or administrative process, may
not be provided or disclosed to third parties without the other Party's
consent.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- -----------------------------------------------------------------------------
Cabletron Proprietary Information Page 10
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
16.4. WAIVER AND SEVERABILITY - A Party's failure to enforce any provision
of this Agreement shall not be deemed a waiver of that or any other
provision of this Agreement. If any provision of this Agreement has
been declared illegal, invalid or unenforceable, the provision shall be
construed to be enforceable to the maximum extent permitted and, if not,
shall be deemed deleted from this Agreement, provided that if such
construction or deletion substantially alters the commercial basis of
this Agreement, the Parties shall negotiate in good faith to amend the
provisions of this Agreement to give effect to their original intent.
16.5. FORCE MAJEURE - Neither Party shall be liable for any damages or
penalties for delay in performing its obligations under this when such
delay is due to the elements, acts of God, acts of the other Party, acts
of civil or military authority, fires, or floods, epidemics, quarantine
restrictions, war, riots, strikes, lockouts or other labor disputes,
delays in transportation, delays in delivery by vendors, or any other
causes, without limitation, which are beyond the reasonable control of
the delayed Party.
16.6. SURVIVAL - Appropriate provisions of this Agreement, including but not
limited to the following, shall survive the expiration or termination of
this Agreement: Definitions; Right To Manufacture (in the event
Cabletron has exercised it Right to Manufacture prior to the date of
termination); Ordering and Shipment; Software License Terms; Payment;
Warranty Terms; Service, Intellectual Property; Duration and
Termination; Confidential and Proprietary Information; Indemnifications;
Limitation of Liability; and General Terms.
16.7. LAWS -This Agreement and all Orders shall be governed by the laws of the
State of New Hampshire, U.S.A., regardless of the laws that might
otherwise govern under applicable conflicts and choice of laws
principles. The courts of New Hampshire shall have jurisdiction
concerning all matters pertaining to this Agreement. To the extent not
prohibited by applicable law that cannot be waived, and provided with
regard to clause (c) of this sentence that any suit, action or other
proceeding arising out of, based upon, or relating to this Agreement or
the construction, negotiation or performance of this Agreement (an
"Action") in question is pending in one of the state and federal courts
located in New Hampshire (collectively, the "Courts"), each party
waives, and agrees not to assert in any Action: (a) ANY RIGHT TO TRIAL
BY JURY IN RESPECT OF ANY ISSUE OR CLAIM THAT MAY ARISE IN THE ACTION;
(b) any claim or defense that this Agreement or this relationship is
governed by or is subject to any alleged fiduciary duty or any alleged
implied covenant of good faith and fair dealing; and (c) any claim or
defense that the Court in question does not have personal jurisdiction,
may not attach or permit execution upon each party's property, or is an
improper venue or an inconvenient forum. Any Action against Cabletron
must be brought within [*] ([*]) months after the cause of action
arises.
16.8. RELATIONSHIP OF THE PARTIES - Except as expressly provided in this
Agreement, neither Party shall hold itself out as, the representative,
agent, commission-sales agent, franchisee or employee of the other Party
for any purpose. This Agreement creates no relationship of joint
venture, franchise or partnership, and neither Party has any right or
authority to assume or to create any obligation or responsibility on
behalf of the other Party.
16.9. ENTIRE AGREEMENT - This Agreement, its Exhibits and attachments,
including all documents which are incorporated by reference, constitute
the entire and only understanding between the Parties. Unless otherwise
provided herein, no modifications to this Agreement shall be binding on
either Party unless made in writing and signed by duly authorized
representatives of both Parties. In the event of any conflict between
this Agreement, and any Addendum, Exhibits, or other attachments, the
terms of this Agreement shall govern.
16.10. NOTICES - Where electronic communication is available, Supplier and
Cabletron may communicate with each other by electronic means. Supplier
and Cabletron agree that when electronic communications are used, they
are the equivalent of written and signed documents except for Notices
given under this Agreement which if transmitted electronically, shall
also be sent via facsimile transmission (with a copy by U.S. mail or
overnight courier (signature required)). Notices shall be deemed
effective upon receipt or refusal to accept delivery. Routine business
communications shall not be deemed to be Notices. All such notices shall
be in English and addressed as follows:
If to Cabletron:
Cabletron Systems, Inc.
35 Industrial Way
Rochester, New Hampshire, USA 03867
Attention: Product Marketing
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 11
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
Facsimile Number: ________________
With a copy to:
Cabletron Systems, Inc.
35 Industrial Way
Rochester, New Hampshire, USA 03867
Attention: Legal Department
Facsimile Number: 603-337-3295
If to Supplier:
Sonoma Systems
4640 Admiralty Way #600
Marina del Rey, CA 90292-6695
Attention: Chief Financial Officer
Facsimile Number 310-305-2525
With a copy to President & Chief Executive Officer
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives.
CABLETRON SYSTEMS, INC. SONOMA SYSTEMS
By: /s/ Eric Jaeger By: /s/ Steve M. Waszak
--------------------------------- --------------------------------
Name: Eric Jaeger Name: Steve M. Waszak
Title: Executive Vice President of Title Vice President Finance and
Corporate Affairs Operations and Chief
Financial Officer
Date: ________________________________ Date: ______________________________
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 12
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
CABLETRON OEM PRODUCT SALES AGREEMENT
EXHIBIT A - PRODUCTS AND PRICES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA SYSTEMS PART DESCRIPTION SONOMA CABLETRON PRICE TO MAINTENANCE
NUMBER LIST DISCOUNT CABLETRON PRICE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SONOMA ACCESS BASE UNITS
- ----------------------------------------------------------------------------------------------------------------------------------
8000 SA PII Sonoma Access Pentium II Base Unit, with
switchable 110/240 VAC power supply for Multi-
media applications $4,695 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
8000 DA PII Sonoma Access Pentium II Base Unit, with dual
switchable 110/240 VAC power supply for Multi-
media applications $5,645 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
8000 DD PII Sonoma Access Pentium II Base Unit, with dual -
48VDC power supplies for Multi-media
applications $5,995 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS SOFTWARE
- ----------------------------------------------------------------------------------------------------------------------------------
8000 SW-TLX-4 SONOMA ACCESS TLX-TM- software, V4.0, high-
performance real-time operating system, SNMP
agent, Web DCS, and SLIP management
software. V4 supports CES, Quad T1/E1 UNI and
new Token Ring card. $2,000 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMAVIEW SonomaVIEW Element Management Package $1,995 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS WAN CARDS (INCLUDES DRIVER
SOFTWARE LICENSE AND CERTIFICATION)
- ----------------------------------------------------------------------------------------------------------------------------------
ATM IMA DS1 4 port T1 ATM Inverse Multiplexing card (RJ-45) $6,500 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
ATM IMA E1 4 port E1 ATM Inverse Multiplexing card (RJ-45) $6,500 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
ATM IMA DS1-8 8 port T1 ATM Inverse Multiplexing card (RJ-45) $9,500 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
ATM IMA E1-8 8 port E1 ATM Inverse Multiplexing card (RJ-45) $9,500 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
ENH DS3 ATM DS3 GCRA compliant ATM Card, with two BNC
connectors, compliant with DSX-3 specifications $3,000 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
ENH E3 ATM E3 GCRA compliant ATM Card, with two BNC
connectors $3,000 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
ENH OC3 ATM MM OC-3c/STM-1 GCRA compliant ATM Multimode
Card, with fiber optic SC connector (0-2Km) $4,000 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
ENH OC3ATM SM-IR OC-3c/STM-1 GCRA compliant ATM Single Mode
Card, with fiber optic ST connector (0-19Km) $6,000 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
ENH OC3ATM SM-LR OC-3c/STM-1 GCRA ATM Long-Reach Single
Mode Card, with fiber optic ST connector (12-
30Km) $8,000 [*]% off list $[*] $[*]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 13
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA SYSTEMS DESCRIPTION SONOMA CABLETRON PRICE TO MAINTENANCE
PART NUMBER LIST DISCOUNT CABLETRON PRICE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SONOMA ACCESS LAN CARDS (INCLUDES DRIVER
SOFTWARE LICENSE AND CERTIFICATION)
- ----------------------------------------------------------------------------------------------------------------------------------
8000 FAST ENET-1 Fast Ethernet Card (10/100Mbps auto-sensing) $750 [*]% off list $[*] $[*]
with RJ-45 connector (UTP).
- ----------------------------------------------------------------------------------------------------------------------------------
8000 FAST ENET-4 Four-Port Fast Ethernet Card (10/100Mbps auto- $3,000 [*]% off list $[*] $[*]
sensing), with RJ-45 connectors
- ----------------------------------------------------------------------------------------------------------------------------------
8000 TRN 2 High Performance Token Ring Card (4/16Mbps $1,200 [*]% off list $[*] $[*]
auto-sensing), with DB-9 and RJ-45 connectors.
- ----------------------------------------------------------------------------------------------------------------------------------
8000 FDDI-SAS FDDI Single-Attach (SAS) Interface Card, with $5,000 [*]% off list $[*] $[*]
multimode fiber optic SC connector
- ----------------------------------------------------------------------------------------------------------------------------------
8000 FDDI-DAS FDDI Dual-Attach (DAS) Interface Card, with two $8,000 [*]% off list $[*] $[*]
multimode fiber optic SC connectors
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS MULTISERVICE CARDS (INCLUDES
ATM UPLINK, DRIVER SOFTWARE LICENSE AND
CERTIFICATION)
- ----------------------------------------------------------------------------------------------------------------------------------
T1 CES IMA Card set with four T1/E1 Circuit Emulation ports $11,000 [*]% off list $[*] $[*]
(RJ-45) and four T1 ATM IMA uplink ports (RJ45).
Requires 3 slots.
- ----------------------------------------------------------------------------------------------------------------------------------
E1 CES IMA Card set with four T1/E1 Circuit Emulation ports $11,000 [*]% off list $[*] $[*]
(RJ-45) and four E1 ATM IMA uplink ports (RJ-
45). Requires 3 slots.
- ----------------------------------------------------------------------------------------------------------------------------------
T1 CES IMA-8 Card set with four T1/E1 Circuit Emulation ports $14,500 [*]% off list $[*] $[*]
(RJ-45) and eight T1 ATM IMA uplink ports
(RJ45). REQUIRES 3 SLOTS.
- ----------------------------------------------------------------------------------------------------------------------------------
E1 CES IMA-8 Card set with four T1/E1 Circuit Emulation ports $14,500 [*]% off list $[*] $[*]
(RJ-45) and eight E1 ATM IMA uplink ports (RJ-
45). Requires 3 slots.
- ----------------------------------------------------------------------------------------------------------------------------------
CES DS3 Card set with four T1/E1 Circuit Emulation ports $7,500 [*]% off list $[*] $[*]
(RJ-45) and one DS3 ATM uplink with BNC
connectors. Requires 2 slots.
- ----------------------------------------------------------------------------------------------------------------------------------
CES E3 Card set with four T1/E1 Circuit Emulation ports $7,500 [*]% off list $[*] $[*]
(RJ-45) and one E3 ATM uplink with two BNC
connectors. Requires 2 slots.
- ----------------------------------------------------------------------------------------------------------------------------------
CES MM OC3 Card set with four T1/E1 Circuit Emulation ports $8,500 [*]% off list $[*] $[*]
(RJ-45) and one OC-3c/STM-1 ATM uplink with
fiber optic SC connector (0-2Km). Requires 2
slots.
- ----------------------------------------------------------------------------------------------------------------------------------
CES SM IR OC3 Card set with four T1/E1 Circuit Emulation ports $10,500 [*]% off list $[*] $[*]
(RJ-45) and one OC-3c/STM-1 ATM uplink with
fiber optic ST connector (0-19Km). Requires 2
slots.
- ----------------------------------------------------------------------------------------------------------------------------------
CES SM LR OC3 Card set with four T1/E1 Circuit Emulation ports $12,500 [*]% off list $[*] $[*]
(RJ-45) and one OC-3c/STM-1 ATM uplink with
fiber optic ST connector (12-30Km). Requires 2
slots.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 14
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA SYSTEMS SONOMA CABLETRON PRICE TO MAINTENANCE
PART NUMBER DESCRIPTION LIST DISCOUNT CABLETRON PRICE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SONOMA ACCESS USER DOCUMENTATION:
- ----------------------------------------------------------------------------------------------------------------------------------
HW IG Sonoma Access/Integrator Hardware Installation $100 [*]% off $[*]
User Guide list
- ----------------------------------------------------------------------------------------------------------------------------------
SUG-CRAFT Sonoma Access/Integrator Craft User Guide $100 [*]% off $[*]
includes Craft user Interface and Hardware list
Section
- ----------------------------------------------------------------------------------------------------------------------------------
QS CRAFT Sonoma Access Quick Start Guide for Craft $15 [*]% off $[*]
Interface list
- ----------------------------------------------------------------------------------------------------------------------------------
SI-QS-CRAFT Sonoma Integrator Quick Start Guide for Craft $15 [*]% off $[*]
Interface Users list
- ----------------------------------------------------------------------------------------------------------------------------------
SV UG SonomaView Element Management User Guide $100 [*]% off $[*]
for Access and Integrator list
- ----------------------------------------------------------------------------------------------------------------------------------
SI-QS-SV Sonoma Integrator Quick Start Guide for $15 [*]% off $[*]
SonomaView EMS list
- ----------------------------------------------------------------------------------------------------------------------------------
SUG Craft IG-DISK Sonoma Access/Integrator Craft User Guide and $50 [*]% off $[*]
Hardware Installation Guide on 3.5-inch diskettes list
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS ACCESSORIES:
- ----------------------------------------------------------------------------------------------------------------------------------
CABLE MGMT Cable Management option for PII Chassis. $200 [*]% off $[*] N/A
Consists of front bezel attachment with cable list
clamps
- ----------------------------------------------------------------------------------------------------------------------------------
8000 SBP Spare Blanking Plates (package of five) $50 [*]% off $[*] N/A
list
- ----------------------------------------------------------------------------------------------------------------------------------
PII RM-19 19" Rackmount kit for Phase II chassis $250 [*]% off $[*] N/A
list
- ----------------------------------------------------------------------------------------------------------------------------------
PII RM-23 23" Rackmount kit for Phase II chassis $250 [*]% off $[*] N/A
list
- ----------------------------------------------------------------------------------------------------------------------------------
PII SAC TRAY PII Single A/C power supply and fan tray assembly $795 [*]% off $[*] $[*]
(switch selectable for 110 or 240 VAC) list
- ----------------------------------------------------------------------------------------------------------------------------------
PII DAC TRAY PII Dual A/C power supply and fan tray assembly $1,595 [*]% off $[*] $[*]
(switch selectable for 110 or 240 VAC) list
- ----------------------------------------------------------------------------------------------------------------------------------
PII DDC TRAY PII Dual D/C power supply and fan tray assembly $2,495 [*]% off $[*] $[*]
(-48 VDC) list
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA INTEGRATOR BASE UNITS
- ----------------------------------------------------------------------------------------------------------------------------------
SI MSBRANCH SONOMA INTEGRATOR Multiservice Branch Access $7,500 [*]% off $[*] $[*]
Device, with autosensing 110/240 VAC power list
supply. Includes (4) T1/E1 ports and (1) 10/100
M Ethernet port
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA INTEGRATOR SOFTWARE
- ----------------------------------------------------------------------------------------------------------------------------------
SI SW UNI SONOMA INTEGRATOR software, V1.0. Support for $500 [*]% off $[*] $[*]
T1/E1 UNI, CES, SNMP agent, SonomaView list
Quick Start, and SLIP management software,
diskettes with user documentation
- ----------------------------------------------------------------------------------------------------------------------------------
SI SW IMA SONOMA INTEGRATOR software, V1.0. Support for $1,500 [*]% off $[*] $[*]
T1/E1 IMA, CES, SNMP agent, SonomaView list
Quick Start, and SLIP management software,
diskettes with user documentation
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
SONOMA SYSTEMS SERVICE OPTIONS*
- ----------------------------------------------------------------------------------------------------------------------------------
REPAIR Repair for items not covered by warranty [*]% of list N/A [*]% of list N/A
price price
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 15
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
TRAIN-6 Training for up to 6 students. Consists of a two- $3,000 [*]% off $[*] per N/A
day session, which takes place at a location per day list day plus
agreed to by Sonoma Systems and the plus travel travel and
Customer. All equipment and space to be and out of out of
provided by the Customer. pocket pocket
costs costs
- ----------------------------------------------------------------------------------------------------------------------------------
TRAIN-12 Training for up to 7-12 students. Consists of a $5,000 [*]% off $[*] per N/A
two-day session, which takes place at a location per day list day plus
agreed to by Sonoma Systems and the plus travel travel and
Customer. All equipment and space to be and out of out of
provided by the Customer. pocket pocket
costs costs
- ----------------------------------------------------------------------------------------------------------------------------------
INSTALL Installation provided by Sonoma Systems. The $1,500 [*]% off $[*] per N/A
minimum rate is one day, billed in 1/4 day per day list day plus
increments. There is an additional travel time fee plus travel travel and
of $75 per hour. and out of out of
pocket pocket
costs; costs;
variable variable
travel and travel and
expenses expenses
- ----------------------------------------------------------------------------------------------------------------------------------
CONSULT Sonoma Systems technical consulting service. $150 per [*]% off $[*] per N/A
The hourly support price for consulting is $150/hr. hour; list hour;
For onsite services, Travel and Expense charge Variable Variable
may apply. travel and travel and
expenses expenses
may apply may apply
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Initial Product Training shall be free of charge.
Training classes shall be at a [*]% discount off Supplier's list price. All
travel and related expenses shall be born by Supplier.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 16
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
CABLETRON OEM PRODUCT SALES AGREEMENT
EXHIBIT B - PRODUCT RE-BRANDING SPECIFICATIONS
PART I - AGREED MODIFICATIONS
1. CUSTOMIZATION TO BE PERFORMED BY SUPPLIER:
1.1 HARDWARE - Supplier will produce a new design of the front-panel and
back-panel labels with Cabletron's color, logo and product names for all
Products. Supplier will modify the product chassis (front, side, top and back
panel) and lid components to a Cabletron specified color.
Supplier will produce customized versions of all externally visible hardware
modules which will include their respective Cabletron model numbers clearly
visible when mounted in a standard rack configuration.
Supplier will provide Cabletron with the documentation which specifies the
mechanical dimensions and label design of all Products so that they can be
reviewed by Cabletron and returned to Supplier with exact specification of
color codes, logo, label design style and any other layout information (the
"CUSTOMER Specification"). From the CUSTOMER Specification, Supplier will
produce a new set of production documentation to be used in the manufacture
of the Products purchased by Cabletron pursuant hereto. This documentation
must be approved by Cabletron in writing before production of Products for
Cabletron can begin.
With respect to the changes by Cabletron changing the labeling of the company
name and product numbers on the front and back of the Products to be
delivered to Cabletron or its customers, such Products must be registered by
Supplier on behalf of Cabletron under the safety approval files at UL, CSA,
and CE Mark before changes in such labeling can be made. Supplier will also
obtain EMC certificates/reports (FCC, and CE Mark) for the OEM version of the
Products on behalf of Cabletron.
1.2 SWITCH SOFTWARE - Supplier will modify the Access and Integrator software
images to recognize a special main board ID that will enable the display of
Cabletron's company name and copyrights on the serial console, if necessary.
Supplier will modify the software identification and naming on the interface
modules. The modification of software items will be carried out from a
written specification (Exhibit B-Part II) of changes supplied by Cabletron to
Supplier detailing how menus and text strings should be changed. This
specification will then be the acceptance criteria to be used by Cabletron
when receiving the first and subsequent software releases from Supplier.
Production test software will be modified to program the board ID and special
MAC base address if necessary according to specifications from Cabletron.
1.3 DOCUMENTATION - Supplier will modify all identified user manuals
according to Cabletron specifications and supply these to Cabletron in
electronic format. The files will by default be saved in Framemaker format.
Cabletron Systems will review and approve these documents for acceptability
according to Cabletron standards. Supplier will maintain configuration
control of all customized manual versions.
1.4 MANAGEMENT SOFTWARE -- Supplier will modify the SonomaView Element
Management System software for Cabletron to be renamed "SmartSwitch 1500
Element Management System" (outlined in Exhibit C-part II). Windows screen
bitmaps of switch views are to be reviewed by Cabletron and modified by
Supplier. Supplier will maintain the customized software and any future
updates. Sonoma will also modify the SonomaView QuickStart software utility
and relabel this product as the "SmartSwitch 1500 QuickStart" utility.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 17
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
2. CUSTOMIZATION TO BE PERFORMED BY CABLETRON:
2.1 HARDWARE - None.
2.2 DEVICE SOFTWARE - None.
2.3 DOCUMENTATION - Cabletron will include a copyright notice in distributed
manuals, which shall comply with applicable copyright law and identify the
owner as Cabletron "and others." Cabletron shall include a U.S. government
restricted rights notice in all user manuals. This will be provided to
Supplier for inclusion into product manuals.
2.4 MANAGEMENT SOFTWARE -None. Cabletron reserves the right to develop on its
own, network management software which supports the product.
3. CABLETRON SYSTEMS REQUIREMENTS - In the event Cabletron's System
requirements require that at any term of this Exhibit be modified, Supplier
agrees to comply with such requested modifications
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 18
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
EXHIBIT B - PRODUCT RE-BRANDING SPECIFICATIONS
PART II - CUSTOMIZATION REQUIREMENTS
Customization Requirements
Cabletron Systems
SmartSwitch 1500 ATM Integrated Access Devices
Revision 1
SONOMA SYSTEMS PRODUCTS REQUIRED:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DESCRIPTION SONOMA CABLETRON PART
SYSTEMS PART NUMBER
NUMBER
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
SONOMA ACCESS BASE UNITS
- --------------------------------------------------------------------------------------------------------
Sonoma Access Pentium II Base Unit, with 8000 SA PII 1A200-SA
switchable 110/240 VAC power supply for Multi-
media applications
- --------------------------------------------------------------------------------------------------------
Sonoma Access Pentium II Base Unit, with 8000 DA PII 1A200-DA
dual switchable 110/240 VAC power supply for Multi-
media applications
- --------------------------------------------------------------------------------------------------------
Sonoma Access Pentium II Base Unit, with dual - 8000 DD PII 1A200-DD
48VDC power supplies for Multi-media applications
- --------------------------------------------------------------------------------------------------------
SONOMA ACCESS SOFTWARE
- --------------------------------------------------------------------------------------------------------
SONOMA ACCESS TLX-TM- software, V4.0, high- 8000 SW-TLX-4 1A200-SW-TLX-4
performance real-time operating system, SNMP
agent, Web DCS, and SLIP management software.
V4 supports CES, Quad T1/E1 UNI and new Token
Ring card.
- --------------------------------------------------------------------------------------------------------
SonomaVIEW Element Management Package SONOMAVIEW 1A-SW-EMS
- --------------------------------------------------------------------------------------------------------
SONOMA ACCESS WAN CARDS (INCLUDES DRIVER
SOFTWARE LICENSE AND CERTIFICATION)
- --------------------------------------------------------------------------------------------------------
4 port T1 ATM Inverse Multiplexing card (RJ-45) ATM IMA DS1 1A-IMA-82-4
- --------------------------------------------------------------------------------------------------------
4 port E1 ATM Inverse Multiplexing card (RJ-45) ATM IMA E1 1A-IMA-92-4
- --------------------------------------------------------------------------------------------------------
8 port T1 ATM Inverse Multiplexing card (RJ-45) ATM IMA DS1-8 1A-IMA-82-8
- --------------------------------------------------------------------------------------------------------
8 port E1 ATM Inverse Multiplexing card (RJ-45) ATM IMA E1-8 1A-IMA-92-8
- --------------------------------------------------------------------------------------------------------
DS3 GCRA compliant ATM Card, with two BNC ENH DS3 ATM 1A-ATM-67-1
connectors, compliant with DSX-3 specifications
- --------------------------------------------------------------------------------------------------------
E3 GCRA compliant ATM Card, with two BNC connectors ENH E3 ATM 1A-ATM-77-1
- --------------------------------------------------------------------------------------------------------
OC-3c/STM-1 GCRA compliant ATM Multimode ENH OC3 ATM MM 1A-ATM-21-1
Card, with fiber optic SC connector (0-2Km)
- --------------------------------------------------------------------------------------------------------
OC-3c/STM-1 GCRA compliant ATM Single Mode ENH OC3ATM SM-IR 1A-ATM-29-1-IR
Card, with fiber optic ST connector (0-19Km)
- --------------------------------------------------------------------------------------------------------
OC-3c/STM-1 GCRA ATM Long-Reach Single Mode ENH OC3ATM SM-LR 1A-ATM-29-1-LR
Card, with fiber optic ST connector (12-30Km)
- --------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 19
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
DESCRIPTION SONOMA CABLETRON PART
SYSTEMS PART NUMBER
NUMBER
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
SONOMA ACCESS LAN CARDS (INCLUDES DRIVER
SOFTWARE LICENSE AND CERTIFICATION)
- --------------------------------------------------------------------------------------------------------
Fast Ethernet Card (10/100Mbps auto-sensing) with 8000 FAST ENET-1 1A-100TX-1
RJ-45 connector (UTP).
- --------------------------------------------------------------------------------------------------------
Four-Port Fast Ethernet Card (10/100Mbps auto- 8000 FAST ENET-4 1A-100TX-4
sensing), with RJ-45 connectors
- --------------------------------------------------------------------------------------------------------
High Performance Token Ring Card (4/16Mbps auto- 8000 TRN 2 1A-HPTR-1
sensing), with DB-9 and RJ-45 connectors.
- --------------------------------------------------------------------------------------------------------
FDDI Single-Attach (SAS) Interface Card, with 8000 FDDI-SAS 1A-FDDI-SAS
multimode fiber optic SC connector
- --------------------------------------------------------------------------------------------------------
FDDI Dual-Attach (DAS) Interface Card, with two 8000 FDDI-DAS 1A-FDDI-DAS
multimode fiber optic SC connectors
- --------------------------------------------------------------------------------------------------------
SONOMA ACCESS MULTISERVICE CARDS (INCLUDES
ATM UPLINK, DRIVER SOFTWARE LICENSE AND
CERTIFICATION)
- --------------------------------------------------------------------------------------------------------
Card set with four T1/E1 Circuit Emulation ports (RJ- T1 CES IMA 1A-CESIMA-82-4
45) and four T1 ATM IMA uplink ports (RJ45).
Requires 3 slots.
- --------------------------------------------------------------------------------------------------------
Card set with four T1/E1 Circuit Emulation ports (RJ- E1 CES IMA 1A-CESIMA-92-4
45) and four E1 ATM IMA uplink ports (RJ-45).
Requires 3 slots.
- --------------------------------------------------------------------------------------------------------
Card set with four T1/E1 Circuit Emulation ports (RJ- T1 CES IMA-8 1A-CESIMA-82-8
45) and eight T1 ATM IMA uplink ports (RJ45).
REQUIRES 3 SLOTS.
- --------------------------------------------------------------------------------------------------------
Card set with four T1/E1 Circuit Emulation ports (RJ- E1 CES IMA-8 1A-CESIMA-92-8
45) and eight E1 ATM IMA uplink ports (RJ-45).
Requires 3 slots.
- --------------------------------------------------------------------------------------------------------
Card set with four T1/E1 Circuit Emulation ports (RJ- CES DS3 1A-CES-67-1
45) and one DS3 ATM uplink with BNC connectors.
Requires 2 slots.
- --------------------------------------------------------------------------------------------------------
Card set with four T1/E1 Circuit Emulation ports (RJ- CES E3 1A-CES-77-1
45) and one E3 ATM uplink with two BNC connectors.
Requires 2 slots.
- --------------------------------------------------------------------------------------------------------
Card set with four T1/E1 Circuit Emulation ports (RJ- CES MM OC3 1A-CES-21-1
45) and one OC-3c/STM-1 ATM uplink with fiber
optic SC connector (0-2Km). Requires 2 slots.
- --------------------------------------------------------------------------------------------------------
Card set with four T1/E1 Circuit Emulation ports (RJ- CES SM IR OC3 1A-CES-29-1-IR
45) and one OC-3c/STM-1 ATM uplink with fiber
optic ST connector (0-19Km). Requires 2 slots.
- --------------------------------------------------------------------------------------------------------
Card set with four T1/E1 Circuit Emulation ports (RJ- CES SM LR OC3 1A-CES-29-1-LR
45) and one OC-3c/STM-1 ATM uplink with fiber
optic ST connector (12-30Km). Requires 2 slots.
- --------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 20
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SONOMA CABLETRON PART
DESCRIPTION SYSTEMS PART NUMBER
NUMBER
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
SONOMA ACCESS USER DOCUMENTATION:
- ----------------------------------------------------------------------------------------------------
Sonoma Access/Integrator Hardware Installation User Guide HW IG 1A-UG-4
- ----------------------------------------------------------------------------------------------------
Sonoma Access/Integrator Craft User Guide includes Craft SUG-CRAFT 1A-UG-Craft
user Interface and Hardware Section
- ----------------------------------------------------------------------------------------------------
Sonoma Access Quick Start Guide for Craft Interface Users QS-CRAFT 1A200-QSCRAFT
- ----------------------------------------------------------------------------------------------------
Sonoma Integrator Quick Start Guide for Craft Interface SI-QS-Craft 1A100-QSCRAFT
Users
- ----------------------------------------------------------------------------------------------------
SonomaView Element Management User Guide for Access and SV UG 1A-UG-EMS
Integrator
- ----------------------------------------------------------------------------------------------------
Sonoma Integrator Quick Start Guide for SonomaView EMS SI-QS-SV 1A100-QS-EMS
- ----------------------------------------------------------------------------------------------------
Sonoma Access/Integrator Craft User Guide and Hardware SUG-Craft IG-DISK 1A-UG-DISK-4
Installation Guide on 3.5-inch diskettes
- ----------------------------------------------------------------------------------------------------
SONOMA ACCESS ACCESSORIES:
- ----------------------------------------------------------------------------------------------------
Cable Management option for PII Chassis. Consists of front CABLE MGMT 1A200-CBLMGMT
bezel attachment with cable clamps
- ----------------------------------------------------------------------------------------------------
Spare Blanking Plates (package of five) 8000 SBP 1A200-SBP
- ----------------------------------------------------------------------------------------------------
19" Rackmount kit for Phase II chassis PII RM-19 1A200-RM-19
- ----------------------------------------------------------------------------------------------------
23" Rackmount kit for Phase II chassis PII RM-23 1A200-RM-23
- ----------------------------------------------------------------------------------------------------
PII Single A/C power supply and fan tray assembly (switch PII SAC TRAY 1A200-SAC-TRAY
selectable for 110 or 240 VAC)
- ----------------------------------------------------------------------------------------------------
PII Dual A/C power supply and fan tray assembly (switch PII DAC TRAY 1A200-DAC-TRAY
selectable for 110 or 240 VAC)
- ----------------------------------------------------------------------------------------------------
PII Dual D/C power supply and fan tray assembly PII DDC TRAY 1A200-DDC-TRAY
(-48 VDC)
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 21
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
SONOMA CABLETRON PART
DESCRIPTION SYSTEMS PART NUMBER
NUMBER
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
SONOMA INTEGRATOR BASE UNITS
- ----------------------------------------------------------------------------------------------------
SONOMA INTEGRATOR Multiservice Branch Access Device, with SI MSBRANCH 1A100-SA
autosensing 110/240 VAC power supply. Includes (4) T1/E1
ports and (1) 10/100 M Ethernet port
- ----------------------------------------------------------------------------------------------------
SONOMA INTEGRATOR SOFTWARE
- ----------------------------------------------------------------------------------------------------
SONOMA INTEGRATOR software, V1.0. Support for T1/E1 UNI, SI SW UNI 1A100-SW-UNI-1
CES, SNMP agent, SonomaView Quick Start, and SLIP
management software, diskettes with user documentation
- ----------------------------------------------------------------------------------------------------
SONOMA INTEGRATOR software, V1.0. Support for T1/E1 IMA, SI SW IMA 1A100-SW-IMA-2
CES, SNMP agent, SonomaView Quick Start, and SLIP
management software, diskettes with user documentation
- ----------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 22
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
CABLETRON VERSIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
CABLETRON PART MODEL NAME DESCRIPTION
NO.
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SMARTSWITCH 1500 COMPACT BASE UNIT
- -----------------------------------------------------------------------------------------------------------------
1A100-SA SmartSwitch 1500 SmartSwitch 1500 Compact System with autosensing 110/240 VAC power
Compact System supply. Includes (4) T1/E1 ports and (1) 10/100 M Ethernet port
- -----------------------------------------------------------------------------------------------------------------
SMARTSWITCH 1500 COMPACT SOFTWARE
- -----------------------------------------------------------------------------------------------------------------
1A100-SW-UNI-1 SmartSwitch 1500 SmartSwitch 1500 Compact System software, V1.0. Support for T1/E1 UNI,
Compact Firmware CES, SNMP agent, SmartSwitch 1500 Quick Start, and SLIP management
software, diskettes with user documentation
- -----------------------------------------------------------------------------------------------------------------
1A100-SW-IMA-2 SmartSwitch 1500 SmartSwitch 1500 Compact System software, V2.0. Support for T1/E1 IMA,
Compact Firmware CES, SNMP agent, SmartSwitch 1500 Quick Start, and SLIP
management software, diskettes with user documentation
- -----------------------------------------------------------------------------------------------------------------
SMARTSWITCH 1500 MODULAR BASE UNITS
- -----------------------------------------------------------------------------------------------------------------
1A200-SA SmartSwitch 1500 SmartSwitch 1500 Modular Base Unit, Single 110/240 VAC autosensing power
Modular System supply
- -----------------------------------------------------------------------------------------------------------------
1A200-DA SmartSwitch 1500 SmartSwitch 1500 Modular Base Unit, Dual 110/240 VAC autosensing power
Modular System supply
- -----------------------------------------------------------------------------------------------------------------
1A200-DD SmartSwitch 1500 SmartSwitch 1500 Modular Base Unit, Dual -48VDC power supplies
Modular System
- -----------------------------------------------------------------------------------------------------------------
SMARTSWITCH 1500 MODULAR SOFTWARE
- -----------------------------------------------------------------------------------------------------------------
1A200-SW-TLX-4 SmartSwitch 1500 SmartSwitch 1500 Modular Firmware, V4.0, high-performance real-time
Modular Firmware operating system, SNMP agent, Web DCS, and SLIP management software.
V4 supports CES, Quad T1/E1 UNI and new Token Ring card.
- -----------------------------------------------------------------------------------------------------------------
SMARTSWITCH 1500 NETWORK MANAGEMENT
- -----------------------------------------------------------------------------------------------------------------
1A-SW-EMS SmartSwitch 1500 EMS SmartSwitch 1500 Element Management Package
- -----------------------------------------------------------------------------------------------------------------
SMARTSWITCH 1500 MODULAR WAN CARDS
(INCLUDES DRIVER SOFTWARE LICENSE AND CERTIFICATION)
- -----------------------------------------------------------------------------------------------------------------
1A-IMA-82-4 SmartSwitch 1500 IOM SmartSwitch 1500 Modular 4 port T1 ATM Inverse Multiplexing card (RJ-45)
- -----------------------------------------------------------------------------------------------------------------
1A-IMA-92-4 SmartSwitch 1500 IOM SmartSwitch 1500 Modular 4 port E1 ATM Inverse Multiplexing card (RJ-45)
- -----------------------------------------------------------------------------------------------------------------
1A-IMA-82-8 SmartSwitch 1500 IOM SmartSwitch 1500 Modular 8 port T1 ATM Inverse Multiplexing card (RJ-45)
- -----------------------------------------------------------------------------------------------------------------
1A-IMA-92-8 SmartSwitch 1500 IOM SmartSwitch 1500 Modular 8 port E1 ATM Inverse Multiplexing card (RJ-45)
- -----------------------------------------------------------------------------------------------------------------
1A-ATM-67-2 SmartSwitch 1500 IOM SmartSwitch 1500 Modular DS3 GCRA compliant ATM Card, with two BNC
connectors, compliant with DSX-3 specifications
- -----------------------------------------------------------------------------------------------------------------
1A-ATM-77-2 SmartSwitch 1500 IOM SmartSwitch 1500 Modular E3 GCRA compliant ATM Card, with two BNC
connectors
- -----------------------------------------------------------------------------------------------------------------
1A-ATM-21-1 SmartSwitch 1500 IOM SmartSwitch 1500 Modular OC-3c/STM-1 GCRA compliant ATM Multimode Card,
with fiber optic SC connector (0-2Km)
- -----------------------------------------------------------------------------------------------------------------
1A-ATM-29-1-IR SmartSwitch 1500 IOM SmartSwitch 1500 Modular OC-3c/STM-1 GCRA compliant ATM Single Mode Card,
with fiber optic ST connector (0-19Km)
- -----------------------------------------------------------------------------------------------------------------
1A-ATM-29-1-LR SmartSwitch 1500 IOM SmartSwitch 1500 Modular OC-3c/STM-1 GCRA ATM Long-Reach Single Mode
Card, with fiber optic ST connector (12-30Km)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 23
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
CABLETRON PART
NO. MODEL NAME DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SMARTSWITCH 1500 MODULAR LAN CARDS
(INCLUDES DRIVER SOFTWARE LICENSE AND CERTIFICATION)
- -----------------------------------------------------------------------------------------------------------------------------
1A-100TX-1 SmartSwitch 1500 IOM SmartSwitch 1500 Modular Fast Ethernet Card (10/100Mbps
auto-sensing) with RJ-45 connector (UTP).
- -----------------------------------------------------------------------------------------------------------------------------
1A-100TX-4 SmartSwitch 1500 IOM SmartSwitch 1500 Modular Four-Port Fast Ethernet Card (10/100Mbps
auto-sensing), with RJ-45 connectors
- -----------------------------------------------------------------------------------------------------------------------------
1A-HPTR-1 SmartSwitch 1500 IOM SmartSwitch 1500 Modular High Performance Token Ring Card
(4/16Mbps auto-sensing), with DB-9 and RJ-45 connectors.
- -----------------------------------------------------------------------------------------------------------------------------
1A-FDDI-SAS SmartSwitch 1500 IOM SmartSwitch 1500 Modular FDDI Single-Attach (SAS) Interface Card,
with multimode fiber optic SC connector
- -----------------------------------------------------------------------------------------------------------------------------
1A-FDDI-DAS SmartSwitch 1500 IOM SmartSwitch 1500 Modular FDDI Dual-Attach (DAS) Interface Card,
with two multimode fiber optic SC connectors
- -----------------------------------------------------------------------------------------------------------------------------
SMARTSWITCH 1500 MODULAR MULTISERVICE CARDS
(INCLUDES ATM UPLINK, DRIVER SOFTWARE LICENSE AND CERTIFICATION)
- -----------------------------------------------------------------------------------------------------------------------------
1A-CESIMA-82-4 SmartSwitch 1500 IOM SmartSwitch 1500 Modular Card set with four T1/E1
Circuit Emulation ports (RJ-45) and four T1 ATM IMA uplink
ports (RJ45). Requires 3 slots.
- -----------------------------------------------------------------------------------------------------------------------------
1A-CESIMA-92-4 SmartSwitch 1500 IOM SmartSwitch 1500 Modular Card set with four T1/E1 Circuit Emulation
ports (RJ-45) and four E1 ATM IMA uplink ports (RJ-45). Requires 3 slots.
- -----------------------------------------------------------------------------------------------------------------------------
1A-CESIMA-82-8 SmartSwitch 1500 IOM SmartSwitch 1500 Modular Card set with four T1/E1 Circuit Emulation
ports (RJ-45) and eight T1 ATM IMA uplink ports (RJ45). REQUIRES 3 SLOTS.
- -----------------------------------------------------------------------------------------------------------------------------
1A-CESIMA-92-8 SmartSwitch 1500 IOM SmartSwitch 1500 Modular Card set with four T1/E1 Circuit Emulation
ports (RJ-45) and eight E1 ATM IMA uplink ports (RJ-45). Requires 3 slots.
- -----------------------------------------------------------------------------------------------------------------------------
1A-CES-67-1 SmartSwitch 1500 IOM SmartSwitch 1500 Modular Card set with four T1/E1 Circuit Emulation
ports (RJ-45) and one DS3 ATM uplink with BNC connectors. Requires 2 slots.
- -----------------------------------------------------------------------------------------------------------------------------
1A-CES-77-1 SmartSwitch 1500 IOM SmartSwitch 1500 Modular Card set with four T1/E1 Circuit Emulation
ports (RJ-45) and one E3 ATM uplink with two BNC connectors. Requires 2 slots.
- -----------------------------------------------------------------------------------------------------------------------------
1A-CES-21-1 SmartSwitch 1500 IOM SmartSwitch 1500 Modular Card set with four T1/E1 Circuit Emulation
ports (RJ-45) and one OC-3c/STM-1 ATM uplink with fiber optic SC
connector (0-2Km). Requires 2 slots.
- -----------------------------------------------------------------------------------------------------------------------------
1A-CES-29-1-IR SmartSwitch 1500 IOM SmartSwitch 1500 Modular Card set with four T1/E1 Circuit
Emulation ports (RJ-45) and one OC-3c/STM-1 ATM uplink with fiber
optic ST connector (0-19Km). Requires 2 slots.
- -----------------------------------------------------------------------------------------------------------------------------
1A-CES-29-1-LR SmartSwitch 1500 IOM SmartSwitch 1500 Modular Card set with four T1/E1 Circuit
Emulation ports (RJ-45) and one OC-3c/STM-1 ATM uplink with fiber
optic ST connector (12-30Km). Requires 2 slots.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 24
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
CABLETRON PART
NO. MODEL NAME DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SMARTSWITCH 1500 USER DOCUMENTATION
- -----------------------------------------------------------------------------------------------------------------------------
1A-UG-4 SmartSwitch 1500 User SmartSwitch 1500 Modular and Compact Hardware Installation User
Guide Guide
- -----------------------------------------------------------------------------------------------------------------------------
1A-UG-Craft SmartSwitch 1500 User SmartSwitch 1500 Modular and Compact Craft User Guide
Guide
- -----------------------------------------------------------------------------------------------------------------------------
1A200-QSCRAFT SmartSwitch 1500 Modular SmartSwitch 1500 Modular Base Unit V3/V4 Quick Start Guide for
Craft Quick Start Guide Craft Interface Users
- -----------------------------------------------------------------------------------------------------------------------------
1A100 QSCRAFT SmartSwitch 1500 Compact Sonoma Integrator Quick Start Guide for Craft Interface
Craft Quick Start Guide
- -----------------------------------------------------------------------------------------------------------------------------
1A-UG-EMS SmartSwitch 1500 EMS User SmartSwitch 1500 Compact and Modular Element Management User Guide
Guide
- -----------------------------------------------------------------------------------------------------------------------------
1A100-QS-EMS SmartSwitch 1500 Compact SmartSwitch 1500 Compact Quick Start Guide for EMS
EMS Quickstart Guide
- -----------------------------------------------------------------------------------------------------------------------------
1A-UG-DISK SmartSwitch 1500 User SmartSwitch 1500 Craft User Guide and Hardware Installation Guide
Guide - Softcopy on 3.5-inch diskettes
- -----------------------------------------------------------------------------------------------------------------------------
SMARTSWITCH 1500 MODULAR ACCESSORIES
- -----------------------------------------------------------------------------------------------------------------------------
1A200-CBLMGMT SmartSwitch 1500 Modular SmartSwitch 1500 Modular Cable Management option. Consists of
Accessories front bezel attachment with cable clamps
- -----------------------------------------------------------------------------------------------------------------------------
1A200-SBP SmartSwitch 1500 Modular SmartSwitch 1500 Modular Spare Blanking Plates (package of five)
Accessories
- -----------------------------------------------------------------------------------------------------------------------------
1A200-RM-19 SmartSwitch 1500 Modular SmartSwitch 1500 Modular 19" Rackmount kit
Accessories
- -----------------------------------------------------------------------------------------------------------------------------
1A200-RM-23 SmartSwitch 1500 Modular SmartSwitch 1500 Modular 23" Rackmount kit
Accessories
- -----------------------------------------------------------------------------------------------------------------------------
1A200-SAC-TRAY SmartSwitch 1500 SmartSwitch 1500 Modular Single A/C power supply and
Modular Accessories fan tray assembly (switch selectable for 110 or 240 VAC)
- -----------------------------------------------------------------------------------------------------------------------------
1A200-DAC-TRAY SmartSwitch 1500 SmartSwitch 1500 Modular Dual A/C power supply and fan tray
Modular Accessories assembly (switch selectable for 110 or 240 VAC)
- -----------------------------------------------------------------------------------------------------------------------------
1A200-DDC-TRAY SmartSwitch 1500 Modular SmartSwitch 1500 Modular Dual D/C power supply and fan tray
Accessories assembly (-48 VDC)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 25
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
HARDWARE LABELS, BAR CODES AND PAINT/COLORS
Supplier will comply with the following standards for product packaging,
appearance and finish:
- - STD0039 - Supplier Products Packaging and Bar Code Identification
Requirements
- - STD0032 - Appearance Spec for Fabricated Sheet Metal Components
- - STD0033 - Product Finish and Color Standard
Supplier will supply the following for Cabletron Engineering review and
mark-up:
- - Colors on chassis (paint chip including texture)
- - Design style and color on Front-panel labels for base box and modules
- - Assembly drawings
- - Sheet metal drawings
- - Label drawings including all regulatory information
- - Packout drawings
- - All documents that will be shipped with the product
- - Multi-level BOMs on all products
- - AML Info on all parts with specifications
FIRMWARE/MIBS/LOCAL MANAGEMENT SCREENS
Supplier agrees to customize the following according to Cabletron
specifications: All references to proprietary Supplier brands, trademarks, or
part numbers (e.g. "Sonoma Systems", "Access", "Integrator", or "8000 ENET")
that may appear in the product's craft interface, and MIBs will be replaced
by corresponding Cabletron replacement names and part numbers. Such
references will be further detailed in a subsequent amendment to this
agreement which provides exact text string and MIB values, as well as MIB
filename specifications. This amendment will be completed within fourteen
(14) days of the original signing of this agreement.
TEST SOFTWARE
- Production Test software will be modified:
- To program board-ID to according to OEM Customer
- To program special Node-id (Base MAC address) according to OEM customer
requirements.
Cabletron will provide Supplier with a range of addresses if necessary. The MAC
addresses programmed into the device will be reflected on the exterior of the
device.
- To scan special main-board and box bar-code labels as specified by OEM
customer.
- To implement any special test requirements in addition to
"normal" test flow.
NETWORK MANAGEMENT SOFTWARE
Supplier will supply a customized version of the "SonomaView Element
Management System" re-labeled as "SmartSwitch 1500 Element Management
System." Supplier also agrees to supply a customized version of the
"SonomaView QuickStart" application re-labeled as the "SmartSwitch 1500
QuickStart" application. All references to proprietary Supplier brands,
trademarks, or part numbers (e.g. "Sonoma Systems", "Access", "Integrator",
or "8000 ENET") that may appear in the product will be replaced by
corresponding Cabletron replacement names and part numbers. Such references
will be further detailed in a subsequent amendment to this agreement which
provides exact text and graphics specifications. This amendment will be
completed within fourteen (14) days of the original signing of this agreement.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 26
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
REGULATORY APPROVALS
- - Supplier agrees to file and obtain the "GS" Mark through Dekra.
- - Supplier agrees to modify the current regulatory labels, replacing the
Sonoma Name, Logo, and Model Number with Cabletron supplied replacements.
Cabletron will provide a modified template of the regulatory label for
Supplier to use for this purpose.
- - Sonoma shall file all regulatory documentation associated with the above
regulatory label change. This includes North American and European Safety,
EMC, and Telecommunication requirements.
- - Supplier to promptly notify Cabletron of any change to a Product which
affects regulatory approval or requires re-testing.
DOCUMENTATION
Development of OEM versions of all hardware and software product user
manuals, quick guides, and reference guides will be provided by Supplier.
Cabletron Systems will provide the standard boilerplate disclaimer
information and warranty card to be included in the manuals by Supplier. All
documentation for Hardware and Software shall be submitted for Cabletron
Systems' review and mark-up. Supplier will make changes to all current and
future product documentation to reflect the Cabletron Systems name, logo,
copy rights and part numbers.
Manuals include:
1A-UG - Sonoma Access/Integrator Hardware Installation
User Guide
1A-UG-Craft - Sonoma Access/Integrator Craft User Guide
1A200-QSCRAFT - Sonoma Access Quick Start Guide for Craft
Interface Users
1A100-QSCRAFT - Sonoma Integrator Quick Start Guide for Craft
Interface Users
1A-UG-EMS - SonomaView EMS User Guide for the Access and
Integrator
1A-100-QA-EMS - SonomaView EMS Quick Start Guide for SonomaView
Interface
1A-UG-DISK - Sonoma Access/Integrator Craft User Guide and
Hardware Installation Guide on 3.5-inch diskettes
DISKETTE LABELS FOR DEVICE IMAGE AND NETWORK MANAGEMENT SOFTWARE AND MANUALS -
Supplier will supply a customized version of the various diskette labels for
the Product image files, MIB files, network management software, and
documentation. The modified labeling specifications will be further detailed
in a subsequent amendment to this agreement which provides exact text and
graphics specifications for the labels. This amendment will be completed
within fourteen (14) days of the original signing of this agreement.
PACKAGING
Will comply to the following Cabletron standard supplied to Supplier
- - STD0039 - Supplier Product Packaging and Bar Code Identification
Requirements
- - Plain brown cardboard shipping box with applicable international shipping
symbols (e.g. fragile, stacking height), but no company logos or other
markings
- - Shipping label applied to the outside of the box, customized as per
Cabletron Systems standard
- - Supplier will send samples of the box and shipping label to Cabletron
Systems for review and approval Other items included in box are: US power
cord, installation and user guide, Image/MIB CD or diskettes, any included
Network Management CD/diskettes and manual, firmware release notes,
Cabletron Warranty, power cord safety document, rack mount ears/screws,
console cable
CABLETRON SYSTEMS REQUIREMENTS
In the event Cabletron's system requirements require that at any term of this
Exhibit be modified, Supplier agrees to comply with such requested
modifications.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 27
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
CABLETRON OEM PRODUCT SALES AGREEMENT
EXHIBIT C - PRODUCT SPECIFICATIONS
1 INTRODUCTION
1.1 PURPOSE - The purpose of this exhibit is to define the general QA
provisions for Supplier as a Product supplier to Cabletron.
1.2 SCOPE - The scope of this exhibit is to define requirement and control for
- - Quality system for production
- - First article qualification
- - Acceptable quality level
- - Inspection and testing standards
- - Inspection and testing procedures
- - RMA procedures and controls
- - Product traceability
- - Corrective action system
- - Market (end customer) complaint system
2 QA PROVISIONS
2.1 QUALITY SYSTEM FOR PRODUCTION
It is required that all products marketed by Cabletron are manufactured under a
quality system in accordance with the international standard EN ISO 9002 (or EN
ISO 9001).
Supplier must supply a valid certificate to Cabletron QA for documentation of
the above requirement and a statement that all products under this Cabletron
Agreement will be produced at the certified manufacturing facility.
2.2 FIRST ARTICLE QUALIFICATION
Cabletron will perform a 100% qualification of the first production lot shipped
to Cabletron.
The verification will be based on a 100% visual inspection for verification
of workmanship quality and a 100% functional test for verification of the
functional specification. The requirements for visual and functional quality
are specified in the section 2.4 below.
A first article qualification report (FAQ) will be prepared by Cabletron and
the report will be returned to Supplier for indication of the results and, if
required, request for corrective action.
The approval for volume shipment will be granted based on Cabletron QA approval
of the first article lot.
Supplier may be requested for additional regulatory and/or technical
documentation for Cabletron to conclude the FAQ evaluation.
2.3 ACCEPTABLE QUALITY LEVEL
Cabletron shall inspect incoming Products according to the following AQL values
for major/minor errors: 0.25/1.0.
The inspection and testing shall be performed in accordance with MIL-STD 105E,
General Inspection Level 2, using single sampling plans for Normal, Reduced or
Tightened inspection as applicable. Based on the outcome of the inspection and
test Cabletron shall accept or reject the product lot in question.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 28
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
If the lot is rejected under Tightened inspection and based on the rejection
statistics, resulting in a Discontinuation, Cabletron will Discontinue
inspection of the Product and require documented corrective actions initiated
from Supplier in order to resume inspection using Tightened inspection sample
plans.
2.4 INSPECTION AND TESTING STANDARDS
QA inspection performed by Cabletron will be covering both a visual and
functional audit of received product lots.
The visual inspection will be performed in accordance with the following
international industry standards:
- - IPC-A-610, "Acceptability of Electronic Assemblies", latest version.
- - IPC-A-600, "Acceptability of Printed Boards", latest version.
The products are considered as class 2 products ("Dedicated Service Electronics
products") when using the IPC specifications.
Functional test will be performed with test software and test set-up as used
and specified by either Cabletron or Supplier.
If the test set-up and test software is specified by Cabletron then Supplier
shall provide Cabletron with a detailed test set-up specification and test
software for Cabletron review and acceptance, prior to first shipment of
products.
Cabletron shall, in good faith, review and comment the test set-up and test
software for adequacy and completeness prior to acceptance.
Cabletron reserves the right to perform, or contract a third party to
perform, a source inspection of Supplier's manufacturing facilities upon a
fourteen (14) day notice to Supplier. The inspection will not take place
during the last week of Supplier's financial quarter.
2.5 INSPECTION AND TESTING PROCEDURES
Functional defects identified by Cabletron according to the requirement
standards mentioned above shall be considered as major defects. Visual
defects classified by the IPC standards as "non-conforming defects" shall be
considered as major defects. "Non-conforming process indicators" shall be
considered as minor defects.
If a Product-lot is rejected during inspection, Cabletron must in agreement
with Supplier, select one (1) of the following alternatives for handling of
the rejected lots:
(A): Cabletron returns the entire rejected lot to Supplier at no cost to
Cabletron. Supplier must replace the rejected lot within no more than thirty
(30) days from the date of the rejection notified by letter or telefax.
Furthermore, Supplier will reimburse freight and duty charges as applicable
paid by Cabletron for the transportation of the rejected lot.
(B): Representatives from Supplier must perform 100% inspection and test of
all Products in the rejected lot. The testing will take place at Supplier
premises utilizing, if necessary, Sonoma's test equipment at no expense to
Cabletron Systems. All Products failing this test will be returned at
Supplier's expense to Supplier for fault analysis and corrective actions.
Supplier must replace the rejected Products within no more than thirty (30)
days from the date of rejection.
(C): Representatives from Cabletron will perform 100% inspection and test of
all Products in the rejected lot and will charge Supplier for the screening
time used. All Products failing this test will be returned at Supplier'
expense to Supplier for fault analysis and corrective actions. Supplier must
replace the rejected Products within no more than thirty (30) days from the
date of rejection.
As one of the three alternatives has been completed, the rejected lot shall
undergo a re-inspection. Cabletron, will at his own discretion, determine
whether re-inspection shall include all types or classes of defects or just
the particular types or classes of defects which caused initial rejection.
Re-inspection will be performed using the sample plans used for the
proceeding inspection of the rejected lot.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 29
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
2.6 RETURN MATERIAL AUTHORIZATION PROCEDURES
All returned Products shall be controlled under a Return Material
Authorization (RMA) system maintained by Supplier. Cabletron shall obtain an
RMA-number prior to returning any products to Supplier. Supplier shall
provide a complete failure analysis within ten (10) business days.
Cabletron must supply the following RMA information to Supplier
Customer identification
Serial number of the product
Failure information (system setup, failure details, etc.)
Products must be packaged and shipped to Supplier using packing materials
sufficient to prevent either accidental opening of the carton or damage to
the equipment resulting from normal handling during shipment. Cabletron is
responsible for shipping charges to Supplier except as set forth in section
2.5. Supplier will pay shipping costs and bear the risk of loss of sending
such repaired or replacement equipment back to Cabletron.
Upon receiving the RMA products at Supplier, a credit note must be issued to
Cabletron. If it is not possible to repair/rework the RMA products within five
(5) working days, a replacement shipment must be returned to Cabletron without
any cost related to Cabletron.
Supplier must report the test, debug and repair/rework results to Cabletron as
soon as these data have been collected.
2.7 PRODUCT TRACEABILITY - Supplier shall adhere to the product traceability
requirements of Cabletron described below.
Production: Supplier shall establish an internal system to allow traceability
of all units (marked by unique serial number) to specific production lots (or
batches). This will allow Cabletron to trace all units from one (1)
production lot based on one (1) defective unit returned from a customer.
Materials: Supplier shall have established an internal system to allow
traceability from production lots to material lots used in that production lot.
This will allow traceability of specific defective materials reported from a
customer or identified elsewhere.
Shipment: Supplier shall include production lot and serial number documentation
with all shipments to Cabletron. Individual shipments shall be divided by
production lot and thus enable Cabletron to segregate Supplier production lots
warehouse wise. All shipments received at Cabletron will be identified by a
unique Cabletron batch number.
2.8 CORRECTIVE ACTION SYSTEM
Supplier shall have a corrective action system established in order to handle
request from Cabletron in regard to e.g. production quality, test problems, RMA
products or other related quality problems related to the product. The
corrective actions should be taken within the time frames specified below
depending on the severity of the issue.
Severity/Category 1 - 48 hours
Severity/Category 2 - 5 days
Severity/Category 3 - 10 days
Supplier shall allocate adequate resources to handle this task. The names of
the contact persons available to Supplier are listed in Exhibit D of this
Agreement.
2.9 MARKET (CUSTOMER) COMPLAINTS
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 30
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
In cases of customer complaints from the market, Cabletron request that
Supplier allocates resources (i.e. a contact person) in order to initiate
root cause analysis and to implement corrective actions, if required, in
consultation and cooperation with Cabletron.
Cabletron will be responsible for all contact with the customer. Cabletron
will be responsible for all corrective actions and related tasks to be
performed in that regard.
2.10 ENGINEERING CHANGE ORDER (ECO) CONTROL
All products will be under strict ECO control by Cabletron Systems.
Supplier must submit all proposed ECOs and Product deviations to Cabletron
for review and approval.
Cabletron will either approve or deny all submitted ECOs in writing within
fourteen (14) days from the date of receipt of all materials associated with
the ECO.
Supplier may not implement any ECO or deviation to the affected Product(s)
unless it receives written approval from Cabletron Systems.
In case of a mandatory ECO to the rebranded Product, it is Supplier's
responsibility to initiate, organize and perform any necessary product call
backs from the field. It is also Supplier's responsibility to perform all
rework necessary on all affected units in stock or called back.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 31
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
CABLETRON OEM PRODUCT SALES AGREEMENT
EXHIBIT D - TECHNICAL SUPPORT GUIDELINES
NATURE OF TECHNICAL SUPPORT - During the term of this Agreement, Supplier
will assist Cabletron in the identification and resolution of Product
performance problems and errors. Supplier's technical support shall be Level
3 Support to Cabletron in connection with its support of its Resellers and
End Users. Level 1 Support and Level 2 Support shall be the sole and
exclusive responsibility of Cabletron and its Resellers. Level 3 Support
shall be provided by Supplier only to engineering personnel designated by
Cabletron who are trained in the technical operation of the Product.
Supplier's support will be provided in accordance with the following
guidelines:
1. TECHNICAL SUPPORT
1.1 AVAILABILITY - Supplier shall provide non-emergency Level 3 Support via
telephone, facsimile and electronic during the hours of 8:00 AM to 8:00
PM EST, Monday through Friday. In addition, Supplier agrees to provide
emergency technical support via telephone, facsimile, or pager access
twenty-four hours (24) per day, seven (7) days per week.
1.2 RESPONSE - Cabletron shall use reasonable efforts to attempt to resolve
End User support requirements for the Products. If Cabletron cannot
successfully resolve an issue within a reasonable period of time,
Supplier's technical support staff will provide assistance. Supplier will
provide an initial response to all Cabletron support requests within two
(2) hours, and Cabletron and Supplier will mutually agree, in good faith,
what additional information or documentation will be required for
resolution of the problem. Supplier will provide a problem report form for
Cabletron's use in reporting problems.
2. ERROR CORRECTION
2.1. ERROR DEFINITIONS - "Error" means a reproducible that causes a Product not
to function substantially in conformance with its specifications. Errors
are classified as follows:
Category 1: End User's network segment or management application is down
or experiencing a consistent, measurable performance impact with no
immediate resolution available.
Category 2: End User is experiencing intermittent failure, performance
degradation, or functionality of network or management applications.
Category 3: Issues that do not affect customer's normal network or
management application operation or questions concerning Product
functionality or usage.
2.2. NON-EMERGENCY TECHNICAL SUPPORT - For End User or Reseller problems not
deemed by Cabletron to be an emergency, Supplier will use its best efforts
to address and resolve the problems as quickly as practicable during
business hours. If a particular problem is not resolved within two (2)
Business Days following the initial call to Supplier, technical support
managers and engineers for each Party, will discuss and work in good faith
to devise and implement a satisfactory resolution. Problems regarded as
non-emergencies include: (i) installation and operation problems, i.e.
routine questions that can be resolved by following documentation; and
(ii) deviations from documentation, omissions and known workarounds, i.e.
problems that cannot be resolved by following the documentation or result
from reasonable misinterpretation of the documentation.
2.3. EMERGENCY TECHNICAL SUPPORT - Supplier acknowledges that Category 1 and
Category 2 Errors should be resolved quickly. During the applicable
Warranty Period, Supplier shall replace any defective Products or correct
Errors promptly following receipt of notice from Cabletron, not to exceed
the following:
- Supplier shall provide an initial response to Errors reported by
Cabletron during business hours within two (2) hours and Cabletron and
Supplier shall promptly agree in good faith to any additional
information and documentation that may be required to permit Supplier
to resolve such errors. The error correction period begins after
Cabletron has enough information to profile the error and can recreate
the error or has access to a facility where the error can be
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 32
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
recreated.
- Supplier shall use its best efforts to resolve Category 1 Errors
within two (2) working days of receipt of notice of such Error.
- Supplier shall use its best efforts to resolve Category 2 Errors
within five (5) working days of receipt of notice of such Error.
- Supplier shall use its best efforts to resolve Category 3 Errors
within fifteen (15) working days of receipt of notice of such Error.
The prescribed Error correction periods above may be extended by
agreement of the Parties, e.g., if resolution of problem requires
hardware certification or test, or if resolution represents significant
risk to the primary Product functions.
2.4. SUPPORT REPORTS AND EVALUATION - Supplier shall provide a reporting
mechanism by which Cabletron will regularly receive a detailed list of the
status of all Errors reported and resolved, including a list of
workarounds and bug-fixes. At least once during each calendar quarter,
the Parties shall hold management-level meetings to discuss improvements
in support.
3. TECHNICAL SUPPORT HOTLINE
Cabletron shall make all requests for technical support to the following
hotline telephone or facsimile number, or via the Internet to the address
indicated:
Supplier Technical Hotline contacts as follows:
Telephone No. __________________________
Facsimile No. ___________________________
Electronic Mail: _______________________@_________________________
Designated Senior Support Manager:__________________________________
Supplier may change contact telephone numbers, facsimile numbers, or Internet
addresses on ten days' notice.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 33
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
CABLETRON OEM PRODUCT SALES AGREEMENT
EXHIBIT E - SOFTWARE LICENSE TERMS
Cabletron will grant You a non-transferable, nonexclusive license to use the
enclosed software (the "Licensed Software") and the accompanying
documentation (the Licensed Software, the media embodying the Licensed
Software, and the documentation are referred to in this Agreement as the
"Licensed Materials") on one single computer if You agree to the following
terms and conditions:
1. TERM
This Agreement is effective from the date on which You open the package
containing the Licensed Materials. You may terminate the Agreement at any
time by destroying the Licensed Materials, together with all copies,
modifications and merged portions in any form. The Agreement and your license
to use the Licensed Materials will also terminate if You fail to comply with
any term or condition herein.
2. LICENSE
The license granted to You by Cabletron when You open this sealed package
authorizes You to use the Licensed Software on any one, single computer only,
or any replacement for that computer. A separate license, under a separate
Software License Agreement, is required for any other computer on which You
or another individual or employee intend to use the Licensed Software. YOU
MAY NOT USE, COPY, OR MODIFY THE LICENSED MATERIALS IN WHOLE, OR IN PART,
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT.
3. OWNERSHIP
The Licensed Materials are the sole and exclusive property of Cabletron
and/or its software suppliers. By paying the fee required for this license
and by opening this sealed package, You do not become the owner of the
licensed materials, but are entitled to use them according to the terms of
this Agreement.
4. RESTRICTION AGAINST TRANSFER
You may not sublicense, assign, share, sell, rent, lease, or otherwise
transfer your individual right to use the Licensed Materials.
5. RESTRICTION AGAINST COPYING OR MODIFYING LICENSED MATERIALS
The Licensed Materials are proprietary to and copyrighted by Cabletron and/or
its software suppliers.
Except as expressly permitted in this Agreement, You may not copy or
otherwise reproduce the Licensed Materials.
In no event does the limited copying or reproduction permitted under this
Agreement include the right to decompile, disassemble, electronically
transfer, or reverse engineer the Licensed Software, or to translate the
Licensed Software into another computer language.
The media embodying the Licensed Software may be copied by You, in whole or
in part, into printed or machine readable form, in sufficient numbers for use
by You for backup, or archive purposes, or to replace a worn or defective
copy. However, You agree not to have more than two (2) copies of the Licensed
Software in whole or in part, including the original media, in your
possession for said purposes without Cabletron's prior written consent. You
may not copy or reproduce the documentation. You agree to maintain
appropriate records of the location of the original media and all copies of
the Licensed Software, in whole or in part, made by You.
You may modify the machine readable form of the Licensed Software for your
own use, or merge the Licensed Software into other program material to form
an updated work for your own use, but on termination of this Agreement, You
are required to completely remove the Licensed Software from any such updated
work. Any portion of the Licensed Software included in
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 34
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
any such updated work shall be used only on a single computer and shall
remain subject to the terms and conditions of this Agreement.
You agree to include any copyright notice set forth on the label of the media
embodying the Licensed Software on any copy of the Licensed Software in any
form, in whole or in part, or on any modification of the Licensed Software or
any updated work containing the Licensed Software or any part thereof.
6. PROTECTION AND SECURITY
You agree not to deliver or otherwise make available the Licensed Materials
or any part thereof, including without limitation the object/ source code of
the Licensed Software, to any party other than Cabletron or its employees,
except for purposes specifically related to your use of the Licensed Software
on a single computer, without the prior written consent of Cabletron. You
agree to use your best efforts and take all reasonable steps to safeguard the
Licensed Materials to ensure that no unauthorized person shall have access
thereto and that no unauthorized copy, publication, disclosure, or
distribution, in whole or in part, in any form shall be made, and You agree
to notify Cabletron of any unauthorized use thereof.
You acknowledge that the Licensed Materials contain valuable confidential
information and trade secrets, and that unauthorized use, copying and/ or
disclosure thereof are harmful to Cabletron and/ or its software suppliers.
You agree that in the event of a breach of this Agreement, Cabletron shall be
entitled to monetary damages and its reasonable attorneys' fees and costs in
enforcing this Agreement, and injunctive relief to restrain such breach.
7. LIMITED WARRANTY AND LIMITATION OF LIABILITY
(For the purposes of this Section 7, Cabletron Systems, Inc. and its software
suppliers and licensors are collectively referred to as "Cabletron".) The
only warranty Cabletron makes to You in connection with this license of the
Licensed Materials is that the media on which the Licensed Software is
recorded will be replaced without charge, if Cabletron in good faith
determines that the media and proof of payment of the license fee are
returned to Cabletron or the dealer from whom it was obtained within ninety
(90) days of the date of payment of the license fee.
Cabletron has tested its software with current virus checking technologies.
However, because no anti- virus system is 100% reliable, we strongly caution
You to write protect and then verify that the Licensed Software, prior to
installing it, is virus-free with an anti-virus system in which You have
confidence.
Cabletron makes no representations or warranties to the effect that the
Licensed Software is virus- free. CABLETRON MAKES NO WARRANTY OR
REPRESENTATION, EXPRESSED OR IMPLIED, WITH RESPECT TO THE LICENSED SOFTWARE,
AND IT IS LICENSED "AS IS". THE WARRANTY AND REMEDY PROVIDED ABOVE ARE
EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES, INCLUDING IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WHICH ARE EXPRESSLY
DISCLAIMED, AND STATEMENTS OR REPRESENTATIONS MADE BY ANY OTHER PERSON OR
FIRM ARE VOID. ONLY TO THE EXTENT SUCH EXCLUSION OF IMPLIED WARRANTY(IES) IS
NOT PERMITTED BY LAW, THE DURATION OF ANY IMPLIED WARRANTY(IES) IS LIMITED TO
THE DURATION OF THE WARRANTY SET FORTH ABOVE. YOU ASSUME ALL RISK AS TO THE
QUALITY, FUNCTION, AND PERFORMANCE OF THE LICENSED MATERIALS. IN NO EVENT
WILL CABLETRON OR ANY OTHER PARTY WHO HAS BEEN INVOLVED IN THE CREATION,
PRODUCTION, OR DELIVERY OF THE LICENSED MATERIALS BE LIABLE FOR SPECIAL,
DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES TO ANY PARTY, INCLUDING
LOSS OF DATA OR PROFITS OR INABILITY TO USE THE LICENSED MATERIALS, EVEN IF
CABLETRON OR SUCH OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. IN NO EVENT SHALL CABLETRON OR SUCH OTHER PARTY'S LIABILITY FOR ANY
DAMAGES OR LOSS TO YOU OR ANY OTHER PARTY EXCEED THE LICENSE FEE YOU PAID FOR
THE LICENSED MATERIALS.
Some states do not allow limitations on how long an implied warranty lasts
and some states do not allow the exclusion or limitation of incidental or
consequential damages, so the above limitation and 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.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 35
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
8. EXPORT LAW ASSURANCES
You agree and certify that neither the Licensed Materials, nor any other
technical data you received from Cabletron, nor the direct product thereof,
will be exported outside the United States except as authorized and as
permitted by the laws and regulations of the United States. If the Licensed
Materials have been rightfully obtained by You outside of the United States,
You agree that You will not re-export the Licensed Materials nor any other
technical data received from Cabletron, nor the direct product thereof,
except as permitted by the laws and regulations of the United States and the
laws and regulations of the jurisdiction in which You obtained the Licensed
Materials.
9. U.S. GOVERNMENT RESTRICTED RIGHTS
The enclosed product (a) was developed solely at private expense; (b)
contains "restricted computer software" submitted with restricted rights in
accordance with Section 52227-19(a) through (d) of the Commercial Computer
Software-Restricted Rights Clause and its successors, and (c) in all respects
is proprietary data belonging to Cabletron and/or its suppliers.
For Department of Defense units, the product is licensed with "Restricted
Rights" as defined in the DoD Supplement to the Federal Acquisition
Regulations, Section 52.227-7013(c)(1)(ii) and its successors, and use,
duplication, and disclosure by the Government is subject to restrictions as
set forth in subparagraph (c)(1)(ii) of the Rights in Technical Data and
Computer Software clause at 252.227.7013.
10. GENERAL
If any provision of this Agreement is determined to be invalid or
unenforceable under any applicable law, it shall be deemed omitted and the
remaining provisions shall continue in full force and effect. Cabletron's
waiver of any right shall not constitute waiver of that right in future. This
Agreement is to be governed by and constructed in accordance with the laws of
the State of New Hampshire. Any notice or other communication to be sent to
Cabletron must be mailed by certified mail to the following address:
CABLETRON SYSTEMS, INC., P. O. Box 5005, Rochester, New Hampshire 03867-5005,
Attention: Manager, Service Contracts
This Agreement constitutes the entire understanding between the parties with
respect to the subject matter hereof, and all prior agreements,
representations, statements and undertakings, oral or written, are hereby
expressly superseded and canceled. Should You have any questions regarding
this Agreement, You may contact Cabletron at the address set forth above.
Copyright September, 1995 Cabletron Systems, Inc.
- ------------------------------------------------------------------------------
Cabletron Proprietary Information Page 36
OEM Product Supply Agreement (Rev. Date 10/28/99)
Contract Number 99-OEMB-0622-1040
<PAGE>
CONFIDENTIAL
- -------------------------------------------------------------------------------
OEM
PURCHASE AND SALE
AGREEMENT
BY AND BETWEEN
NORTEL NETWORKS INC.
&
SONOMA SYSTEMS
- -------------------------------------------------------------------------------
<PAGE>
CONFIDENTIAL
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. DEFINITIONS....................................................................................1
2. SCOPE..........................................................................................2
3. EXHIBITS.......................................................................................3
4. NORTEL NETWORK'S PRODUCT QUALIFICATION AND
ACCEPTANCE PROGRAM.............................................................................3
5. PRODUCT AND PROCESS CHANGES....................................................................4
6. QUALITY CONTROL AND RELIABILITY REQUIREMENTS,
SUPPLY MANAGEMENT AND NORTEL NETWORK'S
AUDITING RIGHTS................................................................................6
7. INTENTIONALLY DELETED..........................................................................7
8. ORDERING.......................................................................................7
9. DELIVERY.......................................................................................8
10. PRICES AND PAYMENTS............................................................................9
11. TITLE AND RISK OF LOSS.........................................................................10
12. INSPECTION.....................................................................................10
13. WARRANTY.......................................................................................10
14. REPAIR PROCEDURES..............................................................................12
15. REPAIR SERVICES................................................................................13
16. CONTINUING AVAILABILITY OF TECHNICAL ASSISTANCE,
REPAIR SERVICES, MAINTENANCE, REPLACEMENT
AND REPAIR PARTS...............................................................................15
17. TECHNICAL ASSISTANCE AND MARKETING SUPPORT.....................................................15
18. DOCUMENTATION..................................................................................16
19. CONFIDENTIAL INFORMATION.......................................................................16
20. INTELLECTUAL PROPERTY RIGHT INFRINGEMENT.......................................................17
21. HAZARDOUS MATERIALS............................................................................18
22. INDEMNITY......................................................................................18
23. COMPLIANCE WITH LAWS...........................................................................19
24. CONSEQUENTIAL DAMAGES..........................................................................19
25. INSURANCE......................................................................................19
26. FORCE MAJEURE..................................................................................19
27. TERM...........................................................................................20
28. TERMINATION AND CONTINUING RIGHTS..............................................................20
29. NOTICES........................................................................................21
30. MANUFACTURING ESCROW AND CONTINGENT LICENSE....................................................21
31. GOVERNING LAW..................................................................................21
32. GENERAL........................................................................................21
</TABLE>
<PAGE>
CONFIDENTIAL
EXHIBITS
<TABLE>
<S> <C>
Exhibit A - Product Lists, Part I and Part II, Prices, Discounts, Availability Dates and FCA Delivery Locations
Exhibit B - Specifications and Acceptance Program
Exhibit C - Demand-Pull Program
Exhibit D - Repair Services Rates, FCA Repair Locations and Technical Assistance Rates
Exhibit E - Procedures for Orders utilizing EDI and TDI
Exhibit F - Monthly Reports
Exhibit G - Change Notification
Exhibit H - Technical Assistance
Exhibit I - RUS Debarment Certificate
Exhibit J - INTENTIONALLY DELETED
Exhibit K - Marketing Support
Exhibit L - Trade Agreement - Procedures
Exhibit M - Notices
Exhibit N - Escrow Terms and Conditions and Escrow Agreement
</TABLE>
<PAGE>
CONFIDENTIAL
OEM PURCHASE AND SALE AGREEMENT
This OEM Purchase and Sale Agreement ("Agreement") entered into by and between
NORTEL NETWORKS INC., a Delaware corporation with offices located at 2375B
North Glenville, Richardson, Texas, 75082, (hereinafter referred to as "NORTEL
NETWORKS") and SONOMA SYSTEMS, a California corporation with offices located at
4640 Admiralty Way, Suite 600, Marina del Rey, CA 90292 (hereinafter referred
to as "SUPPLIER").
WITNESSETH that the Parties hereto hereby agree as follows:
1. DEFINITIONS
1.1 As used herein:
a) "ARO" means after receipt of a Purchase Order or Release.
b) "BLANKET PURCHASE ORDER" means a Purchase Order which does not set
forth a Delivery Date.
c) "BUSINESS DAY" means any day other than a Saturday, Sunday, a
non-working day or statutory holiday observed in the jurisdiction where
a right is to be exercised or an obligation to be executed hereunder.
d) INTENTIONALLY DELETED.
e) "DELIVERY DATE" means the date specified in a Purchase Order or a
Release when the Products are to be delivered to the FCA Delivery
Location except in the event Nortel Networks elects to take delivery of
such Products at Supplier's loading dock, in which case the Delivery
Date shall be the date Nortel Networks takes delivery of such Products
at Supplier's loading dock.
f) "DEMAND-PULL PROGRAM" means Nortel Networks' ordering process which may
be established by Nortel Networks pursuant to Section 8 (Ordering) and
Exhibit C.
g) "DOCUMENTATION" means the documentation as described in Section 18.
h) "EDI" means the electronic data interchange procedures established in
Exhibit E.
i) "EFFECTIVE DATE" means February 9, 2000.
j) "EXHIBIT" means any Exhibit listed in Section 3 hereof.
k) "FCA DELIVERY LOCATIONS" means FCA delivery locations listed in Exhibit
A Part III or as specified in the applicable Order or Release.
l) "FCA REPAIR LOCATIONS" means Supplier's FCA repair locations listed in
Exhibit D, Part II.
m) "FREE CARRIER" and "FCA" have the meaning set forth in the
International Chamber of Commerce document, "INCOTERMS 1990".
n) "HARDWARE" means the hardware components of the Products and any set of
programs in machine-executable code whether residing in fixed coded
instructions resident in read-only memory or equivalent devices forming
part of hardware and sometimes known as firmware or whether residing in
any other form of memory device such as `flash memory'.
o) "PARTY" means Nortel Networks or Supplier and "PARTIES" means Nortel
Networks and Supplier.
p) "PRICES" means the prices applicable to the Products and Repair
Services determined in accordance with Section 10 (Prices and Payments)
hereof, Exhibit A, Part I and Part II and Exhibit D.
q) "PROCESS" means a set of inter-related resources and activities which
transform inputs into outputs; resources may include personnel,
finance, facilities, equipment, techniques and methods.
r) "PRODUCT" means any one of the products comprising Hardware and
Software components, listed in the Product List attached hereto as
Exhibit A, Part I, as such Exhibit A, Part I may be modified, from time
to time, in accordance herewith or by agreement of the Parties and
"PRODUCTS" means some or all Products.
<PAGE>
CONFIDENTIAL
Whenever the term "PRODUCT" is used in this Agreement with respect to
any Supplier product, such term designates any such product listed in
Exhibit A, Part II not yet accepted by Nortel Networks in accordance
with Section 4 (Nortel Networks' Product Qualification and Acceptance
Process) and "PRODUCTS" means some or all products.
s) "PURCHASE ORDER" means any purchase order issued (by any means of
transmission) or output of an electronic "paperless" process, initiated
by Nortel Networks, in respect of the Products or products and accepted
pursuant to Section 8 (Ordering).
t) "RELEASE" means a verbal release confirmed in writing within two (2)
Business Days, the document issued (by any means of transmission) or
output of an electronic "paperless" process, initiated by Nortel
Networks, pursuant to a Blanket Purchase Order by which the Delivery
Date for such Blanket Purchase Order or portion(s) thereof is
requested.
u) "REPAIR DATE" means the date on which the repair of a Product is
completed as stamped on the Products in accordance with Section 14.4.
v) "REPAIR SERVICES" means in the case of Hardware, the upgrade, the
repair or replacement of defective Hardware and in the case of
Software, the update, the correction or replacement of defective
Software as set forth in Section 15 (Repair Services) to be performed
during and after the applicable Product Warranty Period.
w) "SOFTWARE" means any set of programs in machine readable object code,
residing in memories or diskettes or other media for application in or
with the Products, which provides basic logic, operating instructions,
user-related application instructions and network management
information as well as associated Software documentation.
x) "SPECIFICATIONS" means the technical specifications and the other
requirements listed, described or referred to in Exhibit B, Part I,
including acceptance test specifications, which are required to be met
by the Products and the Documentation.
y) "SUBSIDIARY" means a corporation in which Nortel Networks effectively
owns or controls, and continues to own or control, directly or
indirectly, more than fifty percent (50%) of the voting stock or
shares.
z) "TERM" has the meaning ascribed to such term in Section 27 (Term) of
this Agreement.
aa) "$" OR "DOLLARS" means lawful money of the United States of America
except as otherwise expressly set forth herein.
1.2 Any reference in this Agreement to another agreement shall mean such
other agreement as executed by the Parties thereto and all amendments
thereto, unless otherwise explicitly stated.
2. SCOPE
2.1 From time to time Nortel Networks may request Supplier to sell the
Products to Nortel Networks and Supplier agrees to sell such Products
to Nortel Networks. The sale of Products by Supplier and the purchase
of Products by Nortel Networks shall be in accordance with the terms of
this Agreement and Exhibits thereto. The terms and conditions of this
Agreement shall also apply in their entirety to products purchased by
Nortel Networks from Supplier during the ninety (90) day period prior
to the Effective Date.
2.2 Nortel Networks shall have the right to request Supplier to customize
any Product, product or Documentation and Supplier, upon Nortel
Networks' request undertakes to so customize any such Product, product
or Documentation. Customization requirements, if any, shall be
incorporated in the Specifications and the sale and purchase of any
customized Product, product or Documentation shall be in accordance
with the terms and conditions of this Agreement and Exhibits thereto.
At the time any customized Product, product or Documentation is
incorporated in this Agreement, Exhibit A, Part II and Exhibit B shall
be amended to add thereto the prices and the availability date and the
acceptance program applicable to such customized Product, product or
Documentation. This Section is also applicable to Documentation
included with the Products and products. If Supplier receives an order
for product documentation from a customer of Nortel Networks, to the
extent Supplier has customized any documentation so ordered for Nortel
Networks, Supplier shall furnish such customer with the customized
documentation and not Supplier's documentation.
If requested by Nortel Networks, the Products will incorporate Nortel
Networks' branding requirements, in accordance with the Specifications
to include, as mutually agreed and without limitation, Nortel Networks'
name, trademark and logotype, Nortel Networks' color, Nortel Networks'
part number as per Specifications, Nortel Networks' bar-codes and/or
CLEI codes, Nortel Networks' technical handbook (standard gray color
binder) with each Product, packing material with Nortel Networks'
logotype and Nortel Networks' box bar coding, applicable to each
shipment. In respect of Supplier's obligations under this Section 2.2,
Nortel Networks shall pay Supplier a one-time fee of [*] dollars
($[*]). Supplier may invoice this amount to Nortel Networks no earlier
than March 15, 2000.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 2
<PAGE>
CONFIDENTIAL
2.3 Supplier hereby grants to Nortel Networks' the non-exclusive worldwide
right to distribute and sell Products, directly or indirectly,
including the right to sublicense for use the Software for the life of
the Products. Any sublicensing of Software by Nortel Networks' in
accordance with the foregoing will be pursuant to terms and conditions
consistent with terms and conditions which govern the licensing of
Nortel Networks' software used for the operation of Nortel Networks'
products comparable to the Products. Supplier hereby grants to Nortel
Networks the non-exclusive worldwide royalty-free right to use the
during the life of the Products, Software in connection with its
support, including without limitation network management undertaken by
Nortel Networks, and evaluation of the Products. With respect to
Products used by Nortel Networks internally during the Term, Supplier
shall provide Nortel Networks the same support is as given to the
Products during the Warranty Period. Supplier shall provide for Nortel
Networks use in accordance with the terms of this Section 2.3, all
patches, modifications and upgrades to the Software as such become
available during the Term.
2.4 Nortel Networks and Supplier may from time to time, by mutual
agreement, modify the Product Lists contained in Exhibit A, to add
thereto other products offered for sale by Supplier, and/or to
incorporate therein enhancements or new features introduced in Products
by Supplier. Supplier shall advise Nortel Networks during scheduled
Product marketing reviews and offer and make available to Nortel
Networks for incorporation in this Agreement, any new product or
Product enhancement or new feature that Supplier makes generally
available. Such notification shall be made by Supplier to Nortel
Networks within seven (7) calendar days of the Supplier's internal
design authorization allowing any such new product, enhancement or
feature. If Nortel Networks accepts Supplier's offer, the actual
incorporation in this Agreement of any such new product or any Product
enhancement or new feature will take place only after it complies with
Nortel Networks' acceptance requirements under Section 4 (Nortel
Networks' Product Qualification and Acceptance Process). At the time
any new product or Product enhancement or new feature is incorporated
in this Agreement, Exhibit A, Part II and Exhibit B shall be amended to
add thereto the prices and the availability date and the acceptance
program applicable to such new product or Product enhancement or new
feature.
2.5 Nothing in this Agreement shall be interpreted or construed to limit
either Party's right to perform or to continue to perform its own
independent research, development, manufacturing or marketing of any
type of products or systems even if such research, development,
manufacturing or marketing pertains to technology or products similar
to the Products or products.
2.6 Supplier accepts and acknowledges that Nortel Networks may request it
to sell Products to Nortel Networks Companies and in such event this Agreement
shall be deemed to extend to and for the benefit of Nortel Networks Companies.
Such Nortel Networks Companies shall be entitled to exercise on their own
behalf Nortel Networks' rights in respect of the purchase of Products pursuant
to this Agreement including, without limitation, the right to place Purchase
Orders together with the rights which accrue in respect of the Products or in
respect of the ordering or delivery of such Products. For the purposes of
giving effect to the above, where a Nortel Networks Company purchases Products
pursuant to this Agreement, where the context so admits, references to Nortel
Networks shall be deemed to be to the relevant Nortel Networks Company which is
ordering and/or purchasing Products in accordance with the terms of this
Agreement. Each Blanket Purchase Order, Release and Purchase Order shall create
rights and obligations solely between Supplier and the Nortel Networks Company
which issues the Blanket Purchase Order, the Release and the Purchase Order.
For the purpose of this Agreement, "Nortel Networks Company" shall mean
individually or collectively: (i) a Manufacturing Licensee (i.e. a third party
which enters into an agreement with a Nortel Networks Company to (1)
manufacture in modified or unmodified form, a Nortel Networks product
incorporating the Product, and (2) lease, sell, sublicense or otherwise
distribute (directly or indirectly through distributors such Nortel Networks
product under Nortel Networks' or the Manufacturing Licensee's own brand name;
and/or (ii) a joint venture, which is a cooperative enterprise formed between a
Nortel Networks Company and one or more other autonomous entities to address
more effectively certain mutual business interests and opportunities; and (iii)
a corporation or other legal entity other than a Subsidiary in which a Nortel
Networks Company, directly or indirectly owns or controls, and continues to own
or control, twenty percent (20%) or more of the voting stock or shares, or
other control mechanism; and/or (iv) a Subsidiary. Without prejudice to the
foregoing provisions, Supplier shall not sell Products to Nortel Networks
Companies without having first obtained the written consent of Nortel Networks'
Brand Management. The date of Nortel Networks' Management's consent shall be
deemed to be the date of the Purchase Order for the purposes of Section 8
(Ordering).
3. EXHIBITS
3.1 The following Exhibits, attached hereto, are an integral part of this
Agreement and are incorporated herein by reference:
<TABLE>
<S> <C>
Exhibit A - Product Lists, Part I and Part II, Prices, Discounts, Availability Dates and FCA Delivery Locations
Exhibit B - Specifications and Acceptance Program
Exhibit C - Demand-Pull Program
Exhibit D - Repair Services Rates, FCA Repair Locations and Technical Assistance Rates
Exhibit E - Procedures for Orders utilizing EDI and TDI
Exhibit F - Monthly Reports
Exhibit G - Change Notification
Page 3
<PAGE>
CONFIDENTIAL
Exhibit H - Technical Assistance
Exhibit I - RUS Debarment Certificate
Exhibit J - INTENTIONALLY DELETED
Exhibit K - Marketing Support
Exhibit L - North America Free Trade Agreements - Procedures
Exhibit M - Notices
Exhibit N - Escrow Terms and Conditions and Escrow Agreement.
</TABLE>
3.2 Any amendment to any Exhibit shall be in the form of a revised Exhibit
duly dated and signed by authorized representatives of the Parties.
4. NORTEL NETWORKS' PRODUCT QUALIFICATION AND ACCEPTANCE PROGRAM
4.1 Supplier undertakes to supply Products which comply with the
Specifications. Except as otherwise set forth herein, prior to being
purchased by Nortel Networks, the products listed in Exhibit A, Part II
will undergo a program of evaluation, qualification and acceptance by
Nortel Networks ("ACCEPTANCE PROGRAM") to verify their compliance with
the Specifications. Products listed in Exhibit A, Part I have been
accepted by Nortel Networks in accordance with this Section 4. The
Acceptance Program will be conducted in accordance with Exhibit B, Part
II.
4.2 It is acknowledged by Supplier that circumstances may arise where
Nortel Networks will desire to purchase one or more products as are
listed in Exhibit A, Part II, prior to acceptance thereof in accordance
with this Section 4. Such circumstances will be examined in good faith
by the Parties on a case-by-case basis. In the event Supplier accepts
to sell any one of the products, Nortel Networks will issue Purchase
Order(s) covering same and the provisions of Section 4.6 shall be
applicable to such Purchase Order(s). If products are ordered pursuant
to this Section 4.2, such products shall be treated as Products for all
purposes of this Agreement. Supplier shall not unreasonably refuse to
accept Nortel Networks' Purchase Orders covering products.
Specifications applicable to products ordered pursuant to this Section
4.2 shall be the specifications set forth in Exhibit B, part I of this
Agreement.
4.3 Acceptance by Nortel Networks of the products will take place upon
successful completion by Nortel Networks of its Acceptance Program
provided that the products comply with the Specifications. Nortel
Networks will notify Supplier in writing of its acceptance of the
products within three (3) Business Days from successful completion of
its Acceptance Program.
4.4 In the event that in the course of the carrying out of the Acceptance
Program, Nortel Networks determines that the products fail to comply
with the Specifications, Nortel Networks will promptly notify Supplier
in writing of such failure, with reasonable detail, and upon receipt of
such notice, Supplier will, at its expense, take prompt and effective
action to correct the notified deficiencies by the applicable
Acceptance Date, as such term is hereafter defined. Product acceptance
dates shall be agreed upon by the Parties on a case-by-case basis, any
such date to be, in any event, no later than twelve (12) weeks after
the product availability date specified in Exhibit A, Part II for each
product (herein referred to as "ACCEPTANCE DATE"), or extensions
thereof, if any, granted in writing by Nortel Networks. In such case,
acceptance of the products will take place upon verification by Nortel
Networks that the notified deficiencies have been corrected, and
accepted products shall become Products hereunder and be deemed to be
included in Exhibit A, Part I.
4.5 In the event that acceptance of the products does not take place on or
before the Acceptance Date or extensions thereof, if any, granted in
writing by Nortel Networks, or in the event Nortel Networks, acting
reasonably, does not expect that acceptance will take place on the
Acceptance Date or extensions thereof, if any, granted in writing by
Nortel Networks , Nortel Networks may, in addition to any other
remedies hereunder, at law or in equity, recover all costs and charges
it has incurred as a result of the products not being accepted by the
Acceptance Date, including, without limitation as to the nature of such
costs and expenses, laboratory testing cancellation charges. In
addition Nortel Networks may, upon notice to Supplier to that effect,
request that a design review be held between Supplier's and Nortel
Networks' engineers in order to determine how far away the products
actually are from acceptance.
4.6 In the event Supplier has accepted Nortel Networks' Purchase Order(s)
for products pursuant to Section 4.2 hereof, Nortel Networks may, in
addition to its rights under Section 4.5 hereof, request that Supplier
provide, and in such event, Supplier will provide as a temporary
solution, functionally equivalent equipment acceptable to Nortel
Networks' customer(s). Once the products have passed acceptance,
Supplier shall, at its own cost, replace the functionally equivalent
equipment with the Products, and shall invoice Nortel Networks for the
price of Products only, once the Products have been delivered to Nortel
Networks' customer(s). Nortel Networks shall not be responsible for the
cost of the equipment sent as an alternate and temporary solution.
4.7 Supplier represents and warrants that it has identified and will use
its best efforts to continue to identify to Nortel Networks any sole
source/critical components incorporated into the Products.
Page 4
<PAGE>
CONFIDENTIAL
4.8 Acceptance of the Products by Nortel Networks under this Section 4
shall not relieve Supplier from its obligations to manufacture,
deliver, repair and support the Products in accordance with this
Agreement.
5. PRODUCT AND PROCESS CHANGES
5.1 Supplier shall notify Nortel Networks in writing of all proposed
modifications and changes that affect form, fit, function, performance
or Price (herein "CHANGE(S)") to the Products and/or Processes. Such
notification shall be made by Supplier to Nortel Networks within seven
(7) calendar days of the Supplier's internal design authorization
allowing any such Change except in the cases contemplated in Section
5.6, in which case Supplier shall promptly so 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 (herein
"GR-209"). All Changes proposed outside the spectrum of GR-209 shall be
classified as "O". Supplier shall comply with GR-209 except to the
extent expressly set forth in this Section 5. The interpretation of
GR-209 resides with Nortel Networks. Supplier's Change notifications
(herein "CHANGE NOTIFICATIONS") shall be in the form and content of
Exhibit G. The Parties will work together to address any known
deviations from GR-209.
5.2 Supplier's written Change Notifications shall be numbered in a single
sequential numbering scheme and shall include the information specified
in GR-209 including the following: a detailed list of the Products
and/or Processes affected and associated Changes that must be
implemented in conjunction with or prior to the notified Change, the
compatibility of the Change with the Products and/or Processes
currently deployed, a detailed description of the reason for the
Change, the effect on the Products and/or Processes once the Change is
implemented and the procedure of implementation. In addition, a
detailed description of the Change, the consequences if the Change is
not implemented and the planned implementation date of the Change shall
be included in the Change Notification. Supplier will propose a
disposition plan for Nortel Networks' and its customers' stockrooms.
Nortel Networks will notify Supplier of the type and quantity of
Products it requires for the implementation of the Change and location
where such Products should be delivered.
5.3 Nortel Networks reserves the right to request reasonable test data
associated with any Product Changes. Furthermore, in the event Nortel
Networks determines it is necessary to verify the Change prior to
acceptance, Supplier shall supply, on loan and without charge,
sufficient production level quality Products for such verification, or
offer some other alternative arrangement, satisfactory to Nortel
Networks, for such verification.
5.4 If Nortel Networks disagrees with any classification issued by
Supplier, Supplier shall present evidence in writing, within a period
of five (5) calendar days from Nortel Networks' request therefor, that
such a classification is justified. If Nortel Networks still disagrees
with the justification, Supplier shall negotiate in good faith with
Nortel Networks until a final resolution is mutually agreed upon by the
Parties within thirty (30) calendar days from the date of Supplier's
Change Notification. In the event that thirty (30) calendar days after
the date of Supplier's Change Notification, the Parties still disagree
on the Change classification, Nortel Networks' reasonable determination
shall prevail and be final.
5.5 Supplier shall not implement a Change such as those contemplated above
without the prior written consent of Nortel Networks, which consent may
not be unreasonably withheld. Should Nortel Networks fail to respond
within a period of forty (40) calendar days from the date it has
received a notice forwarded by Supplier under this Section 5, then
Supplier shall have the right to implement such Change.
5.6 In addition to Supplier's warranty obligations contained in Section 13
(Warranty) and without diminishing Supplier's obligations under this
Section 5 and Sections 6 (Quality Control and Reliability Requirements,
Supply Management and Nortel Networks' Auditing Rights) and 15 (Repair
Services), in the event that, during the Product Warranty Period or the
Term, whichever is longer, 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 the 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 Product(s)
of a Class A or AC Change, as described in GR-209, Supplier shall, as
expeditiously as possible, at its expense, generate a Class A or AC
Change, as applicable, to eliminate the defect, and supply such Change,
at no charge, for installation by Nortel Networks at reasonable costs,
at Supplier's expense, in all defective units of the Product(s), both
installed and stocked, in accordance with a retrofit program negotiated
by Nortel Networks with its customers. A retrofit program is a program
that allows Nortel Networks to install the Change in all of Nortel
Networks' stockrooms and customer locations within a period not to
exceed one hundred and eighty (180) calendar days from the date such
inoperative, hazardous or unsatisfactory condition first occurs. In the
course of negotiations of the retrofit program with its customers,
Nortel Networks shall consult closely with Supplier with a view to
endeavor to achieve the twofold objective of customers' satisfaction
and minimization of retrofit costs to Supplier.
Supplier shall provide, at its expense, seed stock units to support a
retrofit project completion within said one hundred and eighty (180)
days in quantities determined in accordance with the following
formulae: The one hundred and eighty (180) day period begins when all
the details of the retrofit program are determined by Nortel Networks.
Page 5
<PAGE>
CONFIDENTIAL
Seed Stock Units = Material Cycle Time (Weeks) x Repair and Return Rate
Repair and Return Rate = Number of units to be retrofitted
--------------------------------------------
Change Completion Date - Implementation Date
5.7 Nortel Networks shall provide to Supplier Nortel Networks' Product
Engineering Code, the release number of the Product and the CLEI code
of the Product, if required, for each Product Change under this Section
5. At Nortel Networks' request, this information shall be placed on the
Products by Supplier in accordance with the Specifications.
5.8 From acceptance of the Products by Nortel Networks in accordance with
Section 4 (Nortel Networks' Product Qualification and Acceptance
Process), Supplier shall provide Nortel Networks with a field baseline
report which will include: part number, Current Revision Level, New
Revision Level, Reason for Change, Parts affected by Change, Old and
New Revision of PCB, if applicable. This report will be updated
whenever a Change is generated by Supplier which affects form, fit,
function, performance or Price of the Products. Supplier will use its
best efforts to produce these updates within seven (7) Business Days of
each Change date.
5.9 Throughout the Term, Supplier shall requalify the Products once every
twelve (12) month period in accordance with Bellcore Standard
TR-NWT-000418, Issue 2 (Draft 3) September 1992. The parties will work
together to address any known deviations from such standard.
5.10 Change notices relating to Product Changes should be sent to Nortel
Networks' System Engineering department and Change notices relating to
Process Changes should be sent to Nortel Networks' Quality Department.
Supplier's designated point of contact shall be responsible for the
obligations described in this Section 5.
6. QUALITY CONTROL AND RELIABILITY REQUIREMENTS, SUPPLY MANAGEMENT AND
NORTEL NETWORKS' AUDITING RIGHTS
6.1 ISO 9001 CERTIFICATION
6.1.1 Supplier represents and warrants that on the Effective Date, its
Product and component manufacturers and suppliers have received ISO
9002 certification. Supplier undertakes to ensure that such parties
maintain ISO 9002 certification in effect throughout the Term including
in respect of such parties quality control systems and Supplier's
failure to ensure that such parties maintain ISO 9002 certification
shall constitute a material breach by Supplier of its obligations
hereunder.
6.1.2 In the event any of Supplier's Product and component manufacturers and
suppliers receive any notice of non-conformance to ISO from the ISO
registrars, Supplier shall immediately advise Nortel Networks and
forthwith provide Nortel Networks with (i) the list and details of the
non-conformance and (ii) the detailed plan submitted to the ISO
registrars by such party including timelines and goals to achieve
compliance with ISO 9002.
6.1.3 By March 15, 2000, Supplier shall submit to Nortel Networks sufficient
documentation for Nortel Networks to review Supplier's internal quality
control systems, and the parties shall work together to effect such
changes thereto as Nortel Networks may reasonably request.
6.2 QUALITY CONTROL AND RELIABILITY REQUIREMENTS
6.2.1 All Products delivered by Supplier shall comply with the Specifications
including those quality and reliability target metrics set out therein,
such metrics to include, without limitation, Mean Time Between Failure
("MTBF"), Return Rate ("RR") and Supplier Product Quality Level
("SPQL"). In the event Nortel Networks proposes any changes or
additions to such quality and reliability target metrics, Supplier
shall not unreasonably refuse to agree or delay compliance with such
changes.
6.2.2 Products furnished hereunder by Supplier shall be tested and inspected
by Supplier prior to shipment in accordance with testing and inspection
procedures as approved by Nortel Networks. Supplier agrees to perform
all quality control functions to ensure compliance of the Products with
the Specifications and conformance with good commercial practice.
Supplier warrants that all Products furnished hereunder shall meet all
criteria set forth in the Specifications. Detailed inspection records
are to be maintained by Supplier and made available to Nortel Networks
upon request.
6.2.3 Supplier shall provide Nortel Networks with a monthly report covering
the items shown in Exhibit F and any other items reasonably required by
Nortel Networks in a format acceptable to Nortel Networks .
6.2.4 Supplier shall, within seven (7) calendar days of becoming aware of any
such event, report to Nortel Networks by Technical Bulletin any
potential, suspected or actual (i) defect in design and/or
manufacturing of the Products, (ii) malfunction of the Products or of
products similar to the Products, (iii) failure of the Products to
conform to the Specifications or (iv) uses of the
Page 6
<PAGE>
CONFIDENTIAL
Products in combination with other product(s) or services which cause
or have the potential of causing disruption in the services provided
by end-users using the Products.
6.3 SUPPLY MANAGEMENT
6.3.1 Nortel Networks may, from time to time, identify in a notice to
Supplier those components and materials used in the manufacture of
Products which are subject to this Section 6.3. From the date of Nortel
Networks' notice to Supplier, all components and materials so
identified by Nortel Networks, and the vendors of such components and
materials, shall be approved by Nortel Networks and Supplier shall only
use such approved components and materials procured from such approved
vendors in its manufacture of the Products hereunder. Upon signature of
this Agreement Supplier shall provide Nortel Networks with a list of
its sole source and critical lead time suppliers so that Nortel
Networks may approve such suppliers under this Section 6.3.1. In the
event a supplier is found to be unacceptable to Nortel Networks,
Supplier and Nortel Networks shall work together to find a substitute
vendor as soon as possible, without unnecessarily disrupting supply of
the Products. In addition, in order to decrease the cost of components
to Supplier, from time to time Nortel Networks may elect to to procure
for Supplier the right to purchase Product components directly from
Nortel Networks suppliers and at the prices and on the terms offered to
Nortel. Supplier shall pass all cost savings realized pursuant to this
Section 6.3.1 to Nortel Networks in the form of decreased Product
Prices.
6.3.2 In the event Nortel Networks determines that components, materials
and/or vendors are no longer approved for use in the manufacture of
Products and so advises Supplier, Supplier shall approve all substitute
vendors and perform the qualification of all substitute components and
materials to ensure that Products incorporating such components and
materials comply with the Specifications. The selection of any
substitute approved vendors by Supplier is subject to Nortel Networks'
audit to assess the acceptability and establish the credibility of such
vendors. Supplier and Nortel Networks shall work together to find a
substitute vendor as soon as possible, without unnecessarily disrupting
the supply of Products.
6.3.3 Supplier's supply management Processes and records are subject to audit
by Nortel Networks, to assess their efficiency and ensure corrective
and preventive actions are taken internally by Supplier or externally
with the approved vendors. Nortel Networks' audit of suppliers approved
by Supplier, other than those recognized by Nortel Networks' Integrated
Electronic Data Base ("IEDB") and Nortel Networks' Divisional Component
Database ("DCD"), and of the Processes and records for non-conforming
components and materials, may be held within thirty (30) calendar days
of evidence of receiving non-conforming Products from Supplier.
6.4 NORTEL NETWORKS' INSPECTION RIGHTS
6.4.1 Nortel Networks may inspect or test, at all reasonable times and at
Supplier's locations, any Products covered by this Agreement. Supplier
shall provide at no additional cost such facilities, labor, data,
specifications, manuals and information as are reasonably required to
allow Nortel Networks to perform a full range of quality assurance
functions without unduly interfering with Supplier's normal day-to-day
operations. Inspection of Products may be performed in whole or in part
prior to final assembly and/or completion of manufacturing or repair
Processes.
6.4.2 In addition to, and without restricting, Nortel Networks' auditing and
inspection rights described in this Section 6, Nortel Networks shall
have the right to visit Supplier's manufacturing location(s) for the
purpose of inspecting any of the Processes, upon fifteen (15) Business
Days' written notice. Nortel Networks shall request inspection no more
frequently than required by good commercial practices.
6.4.3 Nortel Networks shall keep Supplier informed as to any problems
encountered with the Products and Processes and to communicate promptly
to Supplier any and all modifications or improvements to the Products
and Processes suggested by any customer, employee or agent, as Nortel
Networks considers appropriate.
6.4.4 Any exercise of, or failure by Nortel Networks to inspect Products,
Processes and Supplier's manufacturing locations as set forth in this
Section 6 and Section 12 (Acceptance or Rejection) shall not
constitute, or be construed as acceptance of the Products and Processes
by Nortel Networks or as relieving Supplier from its obligation to
furnish all Products in strict compliance with this Agreement,
including the Specifications, and the applicable Blanket Purchase
Order, Release or Purchase Order.
7. INTENTIONALLY DELETED.
8. ORDERING
8.1 Products will be purchased, if the parties mutually agree to institute
the Demand-Pull Program, through Blanket Purchase Orders and Releases
under the Demand-Pull Program or, absent mutual agreement to enter into
such Demand-Pull Program, Nortel Networks may purchase Products through
Purchase Orders with a schedule of delivery, which may be issued by
Nortel Networks, from time to time, in accordance with this Agreement.
The Parties acknowledge that such Blanket Purchase Orders, Releases and
Purchase Orders shall be transmitted by EDI as described in Exhibit E.
Nortel Networks shall, on the first business day of each
Page 7
<PAGE>
CONFIDENTIAL
month (and as may be updated from time to time by Nortel Networks)
during the Term, provide Supplier with a twelve (12) month rolling
forecast ("Forecast") of its Product requirements, if any.
8.2 Notwithstanding that a Blanket Purchase Order, a Release or a Purchase
Order issued in respect of Products does not refer to this Agreement,
any such Blanket Purchase Order, Release or Purchase Order issued by
Nortel Networks during the Term shall be deemed to have been issued
pursuant to this Agreement and shall be deemed to incorporate and be
governed solely by the terms and conditions set forth in this Agreement
unless the Parties expressly agree in writing to the contrary. Any
printed terms and conditions contained in any Blanket Purchase Order,
Release or Purchase Order or in any Supplier's acknowledgment, invoice
or other documentation shall be deemed deleted and of no force or
effect. Any additional typed and/or written terms and conditions
contained in any Purchase Order or Release and any Supplier's
acknowledgment, invoice or other documentation shall be for
administrative purposes only, i.e. to identify the types and quantities
of Products to be supplied, line item Prices and total Price, delivery
schedule, and other similar ordering data, all in accordance with the
provisions of this Agreement.
8.3 Nortel Networks shall not be obligated to purchase any quantities of
Products hereunder, except and only to the extent required in order to
satisfy its obligations to purchase Products pursuant to the
Demand-Pull Program, if any, as expressly set forth in Exhibit C.
Supplier acknowledges that no minimum line item value or minimum order
values shall apply to Blanket Purchase Orders, Releases or Purchase
Orders issued hereunder.
8.4 Supplier undertakes to accept any Blanket Purchase Orders and Releases
or Purchase Orders issued hereunder by Nortel Networks and Nortel
Networks Companies, provided that such Blanket Purchase Orders and
Releases or Purchase Orders are consistent with this Agreement.
Supplier shall acknowledge receipt of each Blanket Purchase Order,
Release or Purchase Order within two (2) Business Days ARO.
8.5 Any change to the original Purchase Order or Release initiated by
Nortel Networks after Supplier's acknowledgment and any resulting
adjustments to prices, schedule and/or other requirements of the
Purchase Order or Release shall be negotiated and mutually agreed upon
and subsequently detailed in a written change to the Purchase Order or
Release ("CHANGE ORDER"), referencing the original Purchase Order or
Release and executed by authorized representatives of Nortel Networks
and Supplier. In the event that the Change Order affects work already
performed, the adjustment of the Purchase Order or Release price shall
include reasonable charges incurred by Supplier related to such work.
No such changes shall be performed until a Change Order has been
executed by Supplier and Nortel Networks as described above.
8.6 The Blanket Purchase Orders, Releases, or Purchase Orders shall:
a) reference the number of Nortel Networks' Blanket Purchase
Order, Release or Purchase Order issued for the Products;
b) include a signature of an authorized employee of Nortel
Networks (to be provided by Nortel Networks );
c) have the correct Product and options description (including
item numbers and part numbers if shown for that item in the
Product list);
d) have the correct Price in accordance with Exhibit A of this
Agreement or any amendments hereto;
e) specify the exact quantity of Products to be delivered;
f) provide tax status for each "ship-to" location including the
exemption certificate number if tax exempt;
g) have firm delivery schedules and a firm Delivery Date (where
applicable) for each shipment;
h) specify the FCA Delivery Location, "ship to" and the Nortel
Networks location where the invoice shall be rendered for
payment;
i) specify the method of shipment including the names of carrier
and broker, if applicable; and
j) specify special shipping and transportation instructions, if
any.
9. DELIVERY
9.1 Products shall be delivered as follows:
a) Products ordered pursuant to the Demand-Pull Program shall be
delivered by Supplier FCA Delivery Location set forth in the
Release within a delivery lead time not to exceed twenty-four
(24) hours from Nortel Networks' Release(s).
b) Subject to Section 9.1.1 below, Products not ordered pursuant to
the Demand-Pull Program shall be delivered by Supplier FCA
Delivery Location set forth in the Purchase Order, within a
delivery lead time not to exceed [*] ([*]) weeks ARO.
No partial shipment shall be made without Nortel Networks' prior
written consent.
9.1.1 For Products not ordered pursuant to the Demand-Pull Program, in the
event Nortel Networks orders Products in excess of one hundred and
fifty percent (150%) of the amount forecasted in the calendar month
prior to the calendar month in which the Purchase Order is received,
then the delivery lead time shall not exceed [*] ([*]) weeks ARO for
the excess portion of the Purchase Order.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 8
<PAGE>
CONFIDENTIAL
9.2 Supplier shall package the Products in accordance with Nortel Networks'
standard packing and external marking practices in compliance with the
standards listed in Schedule B, Part III and the Specifications
together with any modification reasonably requested by Nortel Networks
with respect to size and external markings.
9.3 Supplier shall mark each Product listed in Exhibit A with the
Supplier's model number and where practical, the description of the
Product and the revision level. Each Product shall be marked, as
outlined in Specifications, set forth in Exhibit B, Part III. When
requested by Nortel Networks, Product shall include Nortel Networks'
logotype.
9.4 In the event that Supplier fails to deliver Products by the Delivery
Date or extension thereof granted in writing by Nortel Networks, if
any, Nortel Networks may, in addition to any other right available to
it hereunder, including under Section 9.5 (Liquidated Damages), cancel,
without charge or liability, the affected Purchase Order and/or Release
or applicable portion thereof. Supplier shall promptly advise Nortel
Networks of any anticipated delay in meeting the Delivery Date
specified in any Purchase Order or Release and shall cooperate with
Nortel Networks in the implementation by Supplier of any appropriate
action or workaround plans with a view to enable Nortel Networks to
satisfy its customer requirements. Without limiting the generality of
the foregoing or otherwise affecting Nortel Networks' rights, in the
event a Nortel Networks customer cancels one or more orders for
Products as a result of Supplier's delay in the delivery of Products of
more than five (5) calendar days, Nortel Networks shall have the right
to cancel, without charge or liability, the Purchase Order and/or
Release issued to Supplier in respect of Nortel Networks' customer
cancelled order(s).
9.5 In the event Supplier fails to meet a Delivery Date by a period of more
than [*] ([*]) calendar days through no fault of Nortel Networks and
such failure is not attributable to force majeure as described in
Section 26 (Force Majeure), Supplier shall pay to Nortel Networks, as
fixed and liquidated damages, and not as a penalty, an amount equal to
[*] percent ([*]%) per calendar day, up to [*] percent ([*]%), of
the total Price of the affected Purchase Order or Release. At Nortel
Networks' option, Supplier shall either credit the liquidated damages
against the Price of the applicable Purchase Order or Release (if not
cancelled) or promptly make payment to Nortel Networks.
9.6 Nortel Networks may at any time for its convenience and without cause,
reschedule the Delivery Date of ordered Products no more than once,
provided such rescheduled Delivery Date shall not exceed ninety (90)
Business Days from the date the Products were originally scheduled to
be delivered.
9.7 Nortel Networks may at any time for its convenience and without cause,
cancel, in whole or in part, any Purchase Order placed hereunder for
Products. In the event of such cancellation, Supplier will undertake
all commercially reasonable efforts to minimize the economic effects of
such cancellation, including without limitations, utilizing the
cancelled portion of the Purchase Order to fulfill existing commitments
to Nortel Networks or other purchasers of Supplier products. Solely to
the extent Supplier is otherwise unable to ameliorate the effects of
such cancellation as set forth above, Supplier may invoice Nortel
Networks for an amount equal to [*] percent ([*]%) of the cancelled
portion of the Purchase Order. This Section 9.7 is solely applicable to
Products not purchased pursuant to the Demand-Pull Program;
cancellation of Purchase Orders pursuant to the Demand-Pull Program
shall be in accordance with the terms of Exhibit C.
10. PRICES AND PAYMENTS
10.1 Except as specifically provided herein, all charges incurred by
Supplier in performing its obligations hereunder shall be paid by
Supplier and shall not be subject to reimbursement by Nortel Networks.
10.2 Prices applicable to Blanket Purchase Orders, Releases and Purchase
Orders for Products and Repair Services issued hereunder shall be,
subject to the provisions of this Section 10, the Prices as set forth
in Exhibit A. Prices shall be firm throughout the Term except for cost
reductions and volume discounts. Nortel Networks shall promptly
reimburse Supplier, upon invoice, or shall pay directly, if so
requested by Supplier, all taxes and charges imposed by any federal,
state, or local governmental or taxing authority, relating to the
purchase, ownership, possession, use, operation or relocation of
Products purchased, excluding, however, all taxes computed upon the net
income of Supplier.
10.3 Product Prices are: (a) FCA Supplier's shipping location within the
continental United States; (b) stated and payable in US currency; (c)
include packing, import duties and customs charges; (d) exclude all
applicable federal, state and local taxes.
10.4 Supplier represents and warrants that, except for Supplier's existing
direct customers as of the Effective Date, the Prices charged to Nortel
Networks for Products and Repair Services supplied hereunder are and
will continue to be at least [*] percent ([*]%) lower than the prices
that Supplier charges directly to Nortel Networks existing or
internally identified customers for the Products or Supplier's dealers
or value-added resellers, at a particular time, for the same Products
and Repair Services or for products or services interchangeable with,
or similar to, the Products and Repair Services. For comparison
purposes, Supplier shall aggregate purchases of Products by all Nortel
Networks Companies.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 9
<PAGE>
CONFIDENTIAL
10.5 Supplier further represents and warrants that the Prices charged to
Nortel Networks for Products and Repair Services supplied hereunder are
and will continue to be as low as those charged by Supplier, at a
particular time, to any other party with whom Supplier has entered into
an OEM or distribution agreement (or similar contractual arrangement),
for the same Products and Repair Services or for products or services
interchangeable with, or equivalent to, the Products and Repair
Services, in the same year and in similar quantities. For comparison
purposes, Supplier shall aggregate purchases of Products by all Nortel
Networks Companies.
10.6 To the extent that Supplier's records may be relevant in determining
whether Supplier is complying with the requirements of this Agreement,
Nortel Networks shall have the right, through independent Certified
Professional Accountants acceptable to both Parties, to examine and
audit, at most on a quarterly basis, during normal business hours, such
records as may, under recognized accounting practices, contain
information bearing upon the prices applicable to the providing of
repair services similar to, or interchangeable with, the Repair
Services to any other party or the sale of the same Products or
products similar to, or interchangeable with, the Products to any other
party, such records to be kept clear and accurate and in a form and
content sufficient and adequate to permit audit as aforesaid. Nortel
Networks shall retain such inspection and audit rights for so long as
it will be procuring Products and Repair Services from Supplier.
10.7 Supplier shall promptly notify and extend to Nortel Networks any
reductions made by Supplier in its published list prices and any
increases in discounts for Products. Such price reductions and
increased discounts shall apply to Blanket Purchase Orders, Releases
and Purchase Orders received by Supplier on or after the effective date
of the price reduction. Any price decreases will be immediately applied
to any Blanket Purchase Orders, Releases or Purchase Orders received
and acknowledged but not delivered by Supplier.
10.8 In an effort to provide Nortel Networks the opportunity to
competitively and profitably offer Products in high volume
applications, Supplier shall offer to Nortel Networks, as agreed upon
by the Parties, additional discounts on Products set forth in Exhibit A
for Nortel Networks' use in high volume, competitive price proposals.
10.9 Payment shall be due to Supplier 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.
10.10 Invoices for Products delivered hereunder and for any other amounts
which may be payable hereunder shall be forwarded directly to the
following address (unless Nortel Networks designates, in writing,
another address):
NORTEL NETWORKS
P.O. Box 80510
Nashville, Tennessee
37208-0510 USA
Attention: Accounts Payable Dept.
1-800-684-2228
11. TITLE AND RISK OF LOSS
11.1 Title to the Products (excluding Software) and risk of loss of and
damage to the Products will pass to Nortel Networks upon delivery FCA
Delivery Location specified by Nortel Networks in accordance with
Section 9 (Delivery) provided that under Section 13.6 (Warranty), 14.2
and 14.7 (Repair Procedures), risk of loss of or damage to the
replacement Products will pass to Nortel Networks upon the delivery
thereof at a Nortel Networks designated destination.
12. INSPECTION
12.1 Nortel Networks reserves the right to accept or reject Products ordered
hereunder after the delivery of such Products to Nortel Networks'
facility or, as the case may be, to a Nortel Networks customer's site.
Products shall be deemed accepted by Nortel Networks unless Nortel
Networks notifies Supplier that such Products are rejected and provides
the reasons for such rejection within thirty (30) Business Days after
Nortel Networks' receipt thereof at its facilities or, when the
Products are received at a Nortel Networks customer's site, as the case
may be.
12.2 If any Products are found not to be in substantial conformance with
this Agreement, including the Specifications, applicable Purchase Order
or Release, and/or fail to meet any of the acceptance criteria
specified in the applicable Specifications, and/or in the event an
excessive failure rate (as defined in the Specifications) is observed
by Nortel Networks with respect to Products contained in a
lot/shipment, Nortel Networks shall have the right, notwithstanding the
warranty provisions contained in this Agreement, to reject the same and
cancel the affected Purchase Order or Release, or, at its option,
require that such Products be
Page 10
<PAGE>
CONFIDENTIAL
replaced or repaired within ten (10) Business Days at Supplier's risk
and expense (including shipping charges). Any notice of rejection
issued by Nortel Networks under this Section 12.2 will include a
reasonable description of the deficiencies.
12.3 Payment or acceptance by Nortel Networks shall not be deemed to
constitute a waiver of the rights which Nortel Networks may have
resulting from Supplier's delivery of faulty or defective Products.
13. WARRANTY
13.1 Supplier 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 [*] ([*]) months from the Delivery Date, in
the event the Products are delivered to a Nortel Networks
customer facility, and otherwise for a period of [*] ([*])
months from the Delivery Date, such period being hereinafter
referred to as the "PRODUCT 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
Supplier pursuant to Section 21 (Hazardous Materials), the
Hardware furnished by Supplier, 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) all Products provided pursuant to this Agreement, when used in
accordance with the Specifications and Documentation, as well
as all and any software, systems or tools of Supplier used by
it in the supply of Product and/or Services or performance of
this Agreement in any way, shall (1) process date and time
related data without causing any processing interruptions,
abnormal terminations, or changes in performance
characteristics, and (2) shall process and manipulate all date
and time related functions correctly. Without limiting the
generality of the foregoing, all Products and in all and any
software, systems or tools of Supplier used by it in the
supply of Product and/or Services or performance provided
pursuant to this Agreement shall:
i) correctly handle date and time related data before,
during and after January 1, 2000, including but not
limited to accepting date and time input, providing
date and time output, and performing ongoing
operations on dates and times and portions of dates
and times including, but not limited to, calculating,
comparing and sequencing of dates and times (in both
forward and backward operations spanning century
boundaries);
ii) correctly handle leap year calculations (including but
not limited to identification of leap years, interval
calculations, (in both forward and backward operations
spanning century boundaries), day-in-year
calculations, day-of-the-week calculations, and
week-of-the-year calculations);
iii) correctly handle all two digit date and time related
input in a manner that resolves ambiguity as to
century in a disclosed, defined and predetermined
manner; and
iv) correctly store and provide output of all date and
time data in a manner that is unambiguous as to
century;
Supplier shall immediately notify Nortel Networks of any and
all date or time-related bugs, errors or deficiencies in the
Products and in all and any software, systems or tools of
Supplier used by it in the supply of Product and/or Services
or performance of this Agreement in any way. For the purpose
of problem resolution, any such date or time-related bugs,
errors or deficiencies shall be deemed (as established by the
appropriate license or support agreement) to be bugs, errors
or deficiencies of the highest priority level, and shall be
resolved according to the procedures provided for such
priority level;
any provisions of this Agreement that tend to limit or
eliminate the liability of Supplier shall have no application
with respect to the year 2000 compliance warranty set out
above;
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, as contemplated hereunder;
g) no license or other agreement is or will be violated by the
terms and conditions of this Agreement;
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 11
<PAGE>
CONFIDENTIAL
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) without limiting the generality of the foregoing provisions,
Supplier represents and warrants that it has the authority to
enter into this Agreement and has obtained all rights and
waivers necessary to sell Products to Nortel Networks and to
grant the rights granted hereunder. Supplier represents and
warrants that the Products and the exercise of the rights
granted in this Agreement do not infringe any third-party
patent, copyright, trademark, trade secret or other
intellectual property right.
The warranty provisions contained in this Section 13.1 shall apply
during and after the Product Warranty Period, except as expressly set
forth in 13.1 b) and c) above.
13.2 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 Networks and arises from mishandling, misuse, neglect or
improper testing or repair.
13.3 Supplier shall, at its expense, during the Product Warranty Period,
provide Repair Services in accordance with Section 15 (Repair Services)
in respect of Hardware and Software which have failed to conform to
above warranties.
13.4 All Hardware or Software supplied under Section 15 (Repair Services)
pursuant to Supplier's warranty obligations under this Section 13,
shall be functionally equal or better than the vintage of the replaced
units and must be backward compatible and meet the minimum field
baseline.
13.5 Hardware repairs or replacements and Software corrections effected
during the Product Warranty Period shall be warranted, as above
provided, for the remainder of the Product Warranty Period or for
[*] ([*]) days from the Repair Date, whichever is longer. Hardware
repairs or replacements and Software corrections or replacements
effected after expiry of the Product Warranty Period shall be
warranted, as above provided, for a period of [*] ([*]) days from the
Repair Date stenciled or otherwise identified in accordance with
Section 14.4 (Repair Procedures). All transportation and other expenses
arising from shipping the non-conforming Products to, and the repaired
or replacement Products from, Supplier shall be paid in accordance with
Section 14.2 or 14.7, as appropriate.
13.6 Above warranty shall survive inspection, acceptance and payment. In the
event Supplier does not so perform under the warranty provisions for
repair or replacement in accordance with this Section, then upon Nortel
Networks' request, and in addition to any other right available to
Nortel Networks hereunder, Supplier shall: (a) refund to Nortel
Networks the Price of such Products; and (b) be entitled to the return
of such Products. All transportation and other expenses arising from
shipping the non-conforming Products to, and the repaired or
replacement Products from, the Delivery Location shall be paid by
Supplier.
13.7 In addition to Nortel Networks' rights as described in Section 13.3
above, in the event Supplier is in breach of its obligations regarding
repair or support of Hardware or Software hereunder, Nortel Networks
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 that event
Supplier shall reimburse Nortel Networks for all reasonable costs and
expenses incurred by Nortel Networks in exercising either right under
this Section during the applicable Product Warranty Period.
13.8 Any material failure by Supplier to execute its warranty obligations as
contained in this Section 13 and Section 15 (Repair Services) shall
constitute a material breach of Supplier's obligations hereunder.
13.9 EXCEPT FOR THE EXPRESS WARRANTIES STATED IN THIS AGREEMENT, SUPPLIER
DISCLAIMS ALL WARRANTIES ON PRODUCTS FURNISHED UNDER THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, ALL IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
14. REPAIR PROCEDURES
14.1 This Section 14 shall be applicable to the providing of Repair Services
described in Section 15 by Supplier during and after the Product
Warranty Period.
14.2 a) Prior to returning any defective Products to the FCA Repair
Location, Nortel Networks will notify Supplier orally of the
defect, if known at that time, and will request authorization
from Supplier for the return of such Products. Upon such
request, Supplier 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 FCA Repair Location to which
the Products should be returned.
b) In all cases covered in Section 15 (Repair Services), Nortel
Networks shall then ship such Products to Supplier, freight
prepaid and properly insured. Nortel Networks shall prepare
proper export documentation as per Supplier's instructions,
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 12
<PAGE>
CONFIDENTIAL
evidencing Nortel Networks' ownership of the Products and
shall comply with the requirements set forth in Exhibit L
(NAFTA).
14.3 Nortel Networks shall furnish the following information with Products
returned to Supplier for Repair Services:
i) Nortel Networks' or the Nortel Networks Company's name and
complete address;
ii) quantities and model numbers of Products being delivered for
repair;
iii) the nature of the defect or failure, if known;
iv) Purchase Order number under which repairs are to be made, if
Product is no longer under warranty;
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 Products are under warranty.
14.4 Supplier shall date stamp each repaired and returned Product with the
Repair Date and type of repair "pre fix" as per Bellcore GR-209
specifications and Specifications described in Exhibit B. Hardware
repaired by Supplier 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.
14.5 Supplier shall promptly provide a written notice to 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, and if required, specify any special packing of
Products which might be necessary to provide adequate in-transit
protection from transportation damage.
14.6 Once Products have been repaired or replaced by Supplier, Supplier
shall reissue to Nortel Networks an invoice for such repaired or
replacement Products and the charges applicable to the providing of
Repair Services, if any, as set forth in Exhibit D. Supplier's invoice
shall contain the following:
i) Nortel Networks' Purchase Order number for these Repair
Services;
ii) a detailed description of the Repair Services provided by
Supplier and the need therefor;
iii) quantities and model numbers of Products repaired and
associated repair charges;
iv) applicable sales or excise taxes;
v) total amount payable;
vi) address to which payment should be made.
14.7 The repaired or replacement Products shall be delivered by Supplier to
the destination specified by Nortel Networks, freight prepaid and
properly insured. Supplier shall prepare proper export documentation as
per Nortel Networks' instructions, evidencing Nortel Networks'
ownership of the Products and shall comply with the requirements set
forth in Exhibit L (NAFTA).
14.8 Supplier shall promptly notify Nortel Networks of returned Products
which are found by Supplier to be beyond repair. Products shall only be
considered beyond repair after agreement of the Parties to that effect.
All Products which are found to be beyond repair shall be returned to
Nortel Networks if Nortel Networks so requests.
14.9 Nothing in this Agreement shall be construed as giving Supplier an
exclusive privilege to repair any Products covered under this
Agreement, provided however, that during the Term, if Supplier is not
in material breach of this Agreement, Nortel Networks shall afford
Supplier the first opportunity to provide the technical support
services to be provided by Supplier hereunder.
15. REPAIR SERVICES
15.1 Repair Services shall be available to Nortel Networks in accordance
with the provisions contained in this Section 15 and in Section 14
(Repair Procedures).
15.2 This Section 15 shall be applicable to the providing of Repair Services
by Supplier during and after the Product Warranty Period.
15.3 To order Repair Services after expiry of the applicable Product
Warranty Period, Nortel Networks shall issue a Purchase Order and such
Purchase Order shall contain the description of the requested Repair
Services.
15.4 Repair Services shall be provided by Supplier at no charge to Nortel
Networks during the Product Warranty Period. After expiry of the
Product Warranty Period, Repair Services shall be at prices set forth
in Exhibit D (Repair Services and Technical Assistance Rates) unless
otherwise set forth in this Section 15 or unless covered by Section 5
(Product and Process Changes).
15.5 LIKE-FOR-LIKE REPAIR SERVICES
Page 13
<PAGE>
CONFIDENTIAL
15.5.1 Supplier shall hold at its expense a quantity of spares at the module
level ("SPARE BUFFER"), such quantity to be determined and agreed to by
the Parties on the basis of the volume of Products delivered hereunder
and the applicable Mean Time Between Failure ("MTBF") rates. In any
event, the Spare Buffer to be held by Supplier shall be sufficient to
enable immediate replacement of Products by Nortel Networks to its
customers in all cases of failure which do not fall in the category of
a retrofit. Supplier's obligations under this Section 15.5.1 do not
cover spares which may be required by Nortel Networks for Product
retrofits or upgrades.
15.5.2 Nortel Networks will at its option provide customers with one of the
following replacement services:
i) replacement of Products from the Spare Buffer after the
receipt of defective Products; or
ii) in exceptional cases, replacement of the Products from the
Spare Buffer on a "Phone-in" advance replacement basis within
[*] ([*]) business [*]. The defective Products are generally
returned to Nortel Networks by end-user customers within sixty
(60) calendar days. Supplier may invoice Nortel Networks at
the Prices set forth in Exhibit A for Products not returned to
Supplier within such period
Supplier will maintain sufficient Products in the Spare Buffer to
accommodate both replacement services.
Supplier will immediately replenish the Spare Buffer with Product
replacements that are functionally equal or better than the vintage of
the replaced Products, are backward compatible and meet the minimum
field baseline, or with new Products, at Supplier's option.
In cases of "catastrophic" failure, Supplier shall divert manufacturing
output for replacement of faulty modules. Supplier must use its best
efforts not to affect the delivery schedule of new Products but should
delays in delivery occur, they shall not constitute a breach of this
Agreement.
15.5.3 Products returned to Supplier for Repair Services shall be shipped by
Nortel Networks freight and insurance prepaid
15.5.4 Supplier shall track any defective Product by its unique serial number
throughout the repair process and provide a failure analysis report as
set forth in Exhibit F.
15.6 SAME-FOR-SAME REPAIR SERVICES
The following procedures will apply:
a) Products returned to Supplier for Repair Services shall be
shipped by Nortel Networks freight and insurance prepaid.
b) Supplier shall track any defective Product by its unique
serial number throughout the repair process.
c) Supplier shall return, after having repaired and updated the
Products to the minimum field baseline, the exact same
Products having the same serial number. If the serial number
has to change for any reason, Supplier shall, on the `repair
tag' originally provided by Nortel Networks, document the
following information: old serial number, new serial number
and reason(s) for change.
d) Supplier shall return any repaired Products with the `repair
tag' that was originally provided by Nortel Networks with the
defective Products. Supplier shall provide all post-repair
information as required on the `repair tag'.
e) Supplier shall complete the Same-for-Same process within [*]
([*]) calendar days of having received the defective Product.
15.7 FAST CYCLE FAILURE ANALYSIS
15.7.1 Supplier shall perform a Fast Cycle Failure Analysis ("FCFA") at no
cost to Nortel Networks on Products which have caused any service
interruption in the field or as may otherwise be reasonably requested
by Nortel Networks. Nortel Networks will request a separate RMA number
for each Product returned for a FCFA. A FCFA shall be performed by
Supplier in accordance with the following additional requirements:
a) FCFA shall include a detailed root cause analysis, using
engineering tools such as Environment Stress Screening ("ESS")
and any other tools which may be required to determine the
cause of the failure.
b) Supplier shall track any defective Product by its unique
serial number throughout the repair process.
c) Supplier shall return, after having repaired and updated the
Products to the minimum field baseline, the exact same
Products having the same serial number. If the serial number
has to change for any reason, Supplier shall, on the `repair
tag' originally provided by Nortel Networks, document the
following information: old serial number, new serial number
and reason(s) for change. This information will also be
documented in the FCFA report. The Products shall not be
"upgraded" to other than the actual unit release vintage until
root cause analysis is completed and the Products successfully
pass the complete test cycle. The Products shall not be
repaired without completion of the FCFA activity.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 14
<PAGE>
CONFIDENTIAL
d) Supplier shall return the repaired Products with a written
report documenting all findings as a result of the FCFA.
e) Supplier shall complete the FCFA process within [*] ([*])
calendar days of having received the defective Products.
Nortel Networks shall provide all available technical
information to allow Supplier to understand the circumstances
and environmental conditions that led to the failure of the
Products.
f) Supplier shall inform Nortel Networks of the return Product
shipping information as soon as it is available. The shipping
information will include, date shipped, carrier, waybill
number and any other information that will help Nortel
Networks expedite the return of the Products.
g) In the event that the results of the FCFA indicate
deficiencies with the Product Hardware or Software, then
Supplier will modify the Products to eliminate such
deficiencies. Such modifications will be implemented in
accordance with Section 5 (Product and Process Changes).
15.8 Products found defective within the first [*] ([*]) calendar days
from their initial utilization at customer site, (referred to as `Dead
On Arrival' ("DOA") or Early Life Failure ("ELF") shall be returned to
Supplier along with the RMA documentation. Returned DOA/ELF Products
shall, at no charge to Nortel Networks, be tested through full
functional tests and ESS in order to provide a root cause analysis,
then repaired, re-furbished, upgraded to the latest version or release,
stamped with the Repair Date and returned to Nortel Networks as new
Products. Should the DOA/ELF occurrence represent more than
[*] ([*]) of the Products RR as defined in the Specifications, then
Supplier shall, in addition to performing root cause analysis,
implement a corrective plan of action within [*] ([*]) calendar days
of this occurrence being reported. Supplier will update Nortel Networks
in writing with the findings of the root cause analysis as well as with
the corrective plan of action.
15.9 In case of a No Fault Found ("NFF") in respect of Products returned or
if Nortel Networks requests re-testing of Products reasonably known to
Nortel Networks as being in good condition, Supplier shall invoice
Nortel Networks at the Prices specified in Exhibit D for their full
functional tests and ESS and such Products shall be returned to Nortel
Networks after the tests are completed, freight collect using Nortel
Networks' designated carrier. Test turnaround time shall not exceed
[*] ([*]) calendar days from the date the Product is received at
Supplier facilities and a Purchase Order number has been received from
Nortel Networks.
15.10 Should the Product failures classified by Supplier as NFF represent
more than [*] percent ([*]%) of the Products RR as defined in the
Specifications, then Supplier shall, in addition to performing a root
cause analysis, implement a corrective plan of action within [*]
([*]) calendar days of this occurrence being reported. Supplier will
update Nortel Networks in writing with the findings of the root cause
analysis as well as with the corrective plan of action.
15.11 In the event the Product RRs are higher than the rates set forth in the
Specifications, Supplier shall reimburse Nortel Networks for extra
costs it has incurred.
15.12 EMERGENCY REPLACEMENT PRODUCTS
In emergency situations threatening continuity of service or Nortel
Networks end-user's in-service date, Supplier shall, at Nortel
Networks' option, deliver to Nortel Networks or its end-users emergency
replacement Products within [*] ([*]) hours of Nortel Networks'
request, which may be conveyed to Supplier by telephone or facsimile.
All Products supplied under this Section shall be functionally equal or
better than the vintage of the replaced units and must be backward
compatible and meet the minimum field baseline. Emergency replacement
Products shall be delivered via next day service and, for Products not
under warranty, invoiced at rates then current for Products. Nortel
Networks agrees to pay such invoices within [*] ([*]) calendar
days, with no penalty for delays in payment. In addition to above
[*] ([*]) hour emergency replacement service, Supplier shall
make available to Nortel Networks at a price premium specified in
Exhibit D, a 24 hours a day /7 days a week emergency replacement
service for cases where Nortel Networks cannot deliver from its
emergency stock. Under this service, Supplier will ship new units to
the destination designated by Nortel Networks, freight collect using
Nortel Networks' designated carrier or alternate method agreed between
the Parties, within the same day, for requests made by 1:00 p.m. PST
and the next business day for requests made after 1:00 p.m. PST, of
Nortel Networks' verbal request, such verbal request to be confirmed by
Nortel Networks in writing and transmitted by facsimile or other means
of communications, prior to shipment of the units by Supplier. In the
case of shipment outside of the United States, Supplier shall prepare
proper export documentation as per Nortel Networks' instructions,
evidencing Nortel Networks' ownership of the Product; customs clearance
and duty fees (as applicable) shall be the responsibility of Nortel
Networks. This emergency service shall be available to Nortel Networks
through the following Supplier's emergency telephone number:
1-800-469-4701.
16. CONTINUING AVAILABILITY OF TECHNICAL ASSISTANCE, REPAIR SERVICES,
MAINTENANCE, REPLACEMENT AND REPAIR PARTS
16.1 Supplier shall not discontinue the production or sale of any Product
without having first obtained Nortel Networks' consent in writing, such
consent not to be unreasonably withheld. In no event shall the Products
be discontinued until after the expiry of a period of [*] ([*])
months, or such other period as may be agreed upon by the Parties, from
Nortel Networks' written consent
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 15
<PAGE>
CONFIDENTIAL
and Supplier shall accept all Releases and Purchase Orders submitted
by Nortel Networks within such period for any such affected Products,
regardless of quantity.
16.2 During, and for a period of [*] ([*]) years after the expiry or
termination of this Agreement, Supplier agrees to provide Repair
Services on all Products ordered hereunder and to offer for sale to
Nortel Networks, functionally equivalent maintenance, replacement and
repair parts as may be necessary for the continued maintenance of the
Products, including discontinued Products.
16.3 Supplier, upon supply discontinuance notices from its suppliers, of any
sole source/critical components incorporated into the Products, shall
notify Nortel Networks immediately upon receipt of such notice.
Supplier shall endeavor to have its suppliers provide notices [*] ([*])
[*] in advance of discontinuance. Supplier and Nortel Networks shall
determine the quantity of such components to be ordered as last time
buy to cover for Nortel Networks' spare parts requirements. Supplier
and Nortel Networks will determine the quantity of such components to
be ordered as last time buy to cover for spare maintenance, replacement
and repair parts requirements as described in Section 15 (Repair
Services). Furthermore, should the unavailability of a component
require Supplier to develop a replacement product, Supplier will
jointly decide with Nortel Networks on last time buys for such
component to ensure continuity of supply until the replacement product
is approved by Nortel Networks and ready to be manufactured. The
provisions contained in this Section 16.3 shall be applicable for a
period of [*] ([*]) years after the expiry or termination of this
Agreement.
16.4 During, and for a period of [*] ([*]) years after the expiry or
termination of this Agreement, Supplier agrees to provide technical
assistance in accordance with Section 17 (Technical Assistance and
Marketing Support) and Exhibit D hereof.
17. TECHNICAL ASSISTANCE AND MARKETING SUPPORT
17.1 Technical assistance consists of those services described in this
Section and in Exhibit H.
17.2 Product training shall be provided by Supplier to Nortel Networks as
set forth in Exhibit H.
17.3 In addition, Supplier shall provide Nortel Networks with Product
training documentation and related information material as set forth in
Exhibit H, Part III.
17.4 All technical assistance rendered during the Product Warranty Period
shall be provided to Nortel Networks at no charge or as specified in
Exhibits D OR H. For technical service not specified as free of charge,
Supplier's current rates applicable to technical assistance are those
set forth in Exhibit D. Any technical assistance which Supplier shall
provide to Nortel Networks or its customers shall be pursuant to a
written request from Nortel Networks' designated personnel, or such
other individual that Nortel Networks may from time to time designate.
The availability or performance of technical assistance under this
Section 17, shall not be construed as altering or affecting Supplier's
other obligations under this Agreement, including under Sections 6
(Quality Control and Reliability Requirements, Supply Management and
Nortel Networks' Audit Rights), 13 (Warranty) and 5 (Product and
Process Changes).
17.5 Supplier shall provide technical assistance as set forth in Exhibit H
in order to facilitate the providing by Nortel Networks of technical
assistance to its customers.
17.6 `First line' technical assistance shall be provided to Nortel Networks
customers as described in Exhibit H.
17.7 Supplier's failure to provide technical assistance pursuant to good
commercial practices as required under this Section 17 shall constitute
a material breach of Supplier's obligations hereunder.
17.8 In order to assist Nortel Networks in its Product related marketing
activities, Supplier shall provide Nortel Networks with marketing
support in accordance with Exhibit K.
18. DOCUMENTATION
18.1 The Product Documentation shall be developed by Supplier in accordance
with the Specifications, and be made suitable for Nortel Networks'
customers by including Nortel Networks -specific items such as
warranty, logos, Product names and drawings. A hard copy and an
electronic version of the documentation marked "Draft" shall be
provided to Nortel Networks for review. After two (2) weeks, Nortel
Networks shall return the draft documentation with comments. These
comments shall be integrated by Supplier into the Documentation. An
ordering section shall be provided by Nortel Networks to Supplier in
both the hard and electronic form for inclusion by Supplier into the
Documentation. The Documentation shall be ready for release to
customers by the end of the corresponding Acceptance Program. Updated
versions of the ordering section shall be provided by Nortel Networks
as the product line(s) develop(s) and new configurations pass the
Acceptance Program.
18.2 Supplier shall provide, at no charge to Nortel Networks, for each
Product delivered one (1) set of the following Product Documentation in
accordance with the Specifications: all Product descriptions, planning
guides, operations manuals, installation
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 16
<PAGE>
CONFIDENTIAL
manuals, and maintenance manuals normally provided by Supplier to
customers to facilitate their installation, use, and maintenance of
the Products.
18.3 Supplier shall supply to Nortel Networks, at no additional charge, hard
and electronic copies of Supplier's Product Documentation (i.e.,
manuals, application notes and sales collateral) and any technical
assistance reasonably required by Nortel Networks to adapt such
Documentation to Nortel Networks' standard format. Supplier shall also
continue to provide to Nortel Networks, at no additional charge, during
the Term of this Agreement any updates to Supplier's Product
Documentation, as soon as they are available.
18.4 Supplier hereby grants to Nortel Networks, at no cost, the right to
use, copy, modify and translate promotional material, the Product
Documentation furnished hereunder and other material made generally
available by Supplier to its end-users and to use such material to
further Nortel Networks' Product marketing efforts.
18.5 Any modifications to the Product Documentation shall be notified to
Nortel Networks by Supplier as described in Section 5 (Product and
Process Changes).
19. CONFIDENTIAL INFORMATION
19.1 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 confidential (or
like designation), is disclosed in circumstances of confidence, or
would be understood by the Parties, exercising reasonable business
judgment, to be confidential information ("CONFIDENTIAL INFORMATION")
and each Party recognizes the value and importance of the protection of
the other's Confidential Information. All Confidential Information
owned or controlled by one Party and disclosed to the other Party shall
remain solely the property and a trade secret of the disclosing Party,
and its confidentiality shall be maintained and protected by the other
Party with the same degree of care used to protect its own proprietary
and confidential information of a similar nature, but no less than
reasonable care, to prevent the unauthorized use, dissemination or
publication of the Confidential Information. Except to the extent
required or expressly permitted by this Agreement, both Parties agree
not to duplicate or use in any manner the other's Confidential
Information or to disclose it to any of their employees not having a
need to know for the purposes of this Agreement or to any third party.
The receiving Party's employees having a need to know the Confidential
Information for the purpose of this Agreement may receive disclosure of
the Confidential Information provided such employees are bound by
confidentiality obligations no less stringent than those set forth in
this Section 19. The confidentiality provisions contained herein shall
survive the expiration or termination of this Agreement for a period of
ten (10) years. It is acknowledged by the Parties that a Party intended
to be the recipient of the Confidential Information will, prior to the
disclosure by the other Party, be afforded an opportunity to accept or
to decline receiving such Confidential Information and the
confidentiality undertakings set forth herein shall not apply in
respect of information disclosed after a Party has elected not to
receive such information.
19.2 Confidential Information shall not include information which:
a) now is, or hereafter becomes, available to the public through
no act or omission of the receiving Party; or
b) is documented as being known by the receiving Party prior to
its disclosure by the other Party; or
c) is independently developed by the receiving Party by persons
who have not had access to the Confidential Information and
without recourse to any Confidential Information received
under this Agreement and is so documented; or
d) is lawfully obtained by the receiving Party from a third party
or parties without breach of confidentiality obligations or is
disclosed hereafter to the receiving Party by a third party
who did not acquire the information directly or indirectly
from the disclosing Party; or
e) is disclosed in response to a valid order of a court or other
governmental body or any political subdivision thereof, but
only to the extent and for the purpose of such order and only
if the receiving Party, to the extent possible, first notifies
the disclosing Party, of such order and permits and reasonably
assists it in seeking an appropriate protective order.
19.3 Nothing in this Agreement shall be interpreted or construed to limit
either Party's right to perform or to continue to perform its own
independent research, development, manufacturing or marketing of any
type of Products or systems even if such research, development,
manufacturing or marketing pertains to technology or products similar
to the Products.
19.4 Prior to the publication or use by a Party hereto of any advertising,
sales promotions, press releases or other publicity matters relating to
the Products or this Agreement in which the name or logo of the other
Party is mentioned or language from which the connection of said name
can be reasonably inferred or implied, each Party shall obtain, except
as expressly provided below, the prior written consent of the other
Party. Terms, conditions and general information of this Agreement
shall be held in confidence by both Parties and only disclosed as may
be agreed to by both Parties or as may be required to meet securities
disclosure or export permit requirements. 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 that, upon prior
written notice to the other, and otherwise in accordance with this
Agreement, either Party may disclose only such information about this
Page 17
<PAGE>
CONFIDENTIAL
Agreement as is necessary for public securities disclosure or export
permit requirements without the prior written consent of the other.
Prior to filing this Agreement, or any portion thereof, with any state
or federal governmental entity or any political subdivision thereof,
the filing Party shall (i) notify the other Party and (ii) with the
reasonable cooperation of the other Party, seek the maximum extent of
confidential treatment allowable by applicable law with respect to this
Agreement.
19.5 Notwithstanding any provision contained herein, Nortel Networks shall
retain all right, title and interest in and to that part of the
Specifications and Documentation (including Nortel Networks'
Confidential Information) solely created by Nortel Networks, if any,
the Nortel Networks' corporate name, trademarks, logos, color and part
number (as referred to or described in the Specifications) and all
trademarks, copyrights, trade secrets and other proprietary rights
related thereto.
19.6 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 receiving Party hereby consents to the granting of, and the
disclosing Party shall be entitled to seek, preliminary injunctions
unilaterally without 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.
20. INTELLECTUAL PROPERTY RIGHT INFRINGEMENT
20.1 Supplier shall defend and indemnify Nortel Networks and Nortel Networks
Companies (including their directors, officers, employees and agents)
against any and all claims brought against Nortel Networks (including,
without limitation, claims by third parties, distributors, Nortel
Networks Companies, end users and contractors against Nortel Networks),
and shall hold Nortel Networks and Nortel Networks Companies harmless
from all corresponding damages, liabilities, settlements, costs and
expenses (including attorney's fees) arising out of any claim that the
use, copying, licensing, sublicensing, sale and/or distribution of any
Product delivered hereunder or the exercise of any of the rights
granted in this Agreement infringes any third-party patent, copyright,
trademark, trade secret or other intellectual property right ("herein
"INFRINGEMENT CLAIM"). Nortel Networks shall give Supplier prompt
notice of, and authority to defend or settle, any such Infringement
Claim and shall give, at Supplier's expense, reasonable information and
assistance. Supplier will notify Nortel Networks if Supplier is subject
to any enquiry, allegation, claim or lawsuit in respect of patent,
copyright, trade secret or other intellectual property right
infringement regarding any Product delivered hereunder or any part
thereof.
20.2 When notified of an action or motion that seeks to restrict the use,
copying, licensing, sublicensing, sale and/or distribution of any
Product delivered hereunder or the exercise of any of the rights
granted hereunder, Supplier may, (and in the case of a judgment, order
or injunction that restricts the use, copying, licensing, sublicensing,
sale and/or distribution of any Product delivered hereunder or the
exercise of any of the rights granted hereunder, shall), at its option
and expense, (a) obtain the right for Nortel Networks , Nortel Networks
Companies, distributors, end users and contractors to use, copy,
license, sublicense sell and/or distribute any Product delivered
hereunder or exercise any of the rights granted hereunder, (b)
substitute other functionally equivalent product that does not
infringe, or (c) modify such Product so that it no longer infringes.
20.3 The indemnity obligations under the foregoing provisions shall survive
the termination or expiration of this Agreement.
20.4 The foregoing indemnification obligations shall not be applicable in
the event the Infringement Claim arises solely from:
(a) compliance of the Product with Nortel Networks' designs; or
(b) modification by Nortel Networks of the Product; or
(c) use of the Product by Nortel Networks in combination with
other products not provided by Supplier provided the
infringement arises from such combination and such combination
was not authorized by or known to Supplier.
In the cases specified above in this Section 20.4, Nortel Networks
shall defend and indemnify Supplier (including their directors,
officers, employees and agents) against any and all claims brought
against Supplier and shall hold Supplier harmless from all
corresponding damages, liabilities, settlements, costs and expenses
(including attorney's fees) arising out of any such claim. Supplier
shall give Nortel Networks prompt notice of, and authority to defend or
settle, any such claim and shall give, at Nortel Networks expense,
reasonable information and assistance.
20.5 Nothing contained in this Agreement shall be deemed to grant, either
directly or indirectly or by implication, any license under any patents
or patent applications of Supplier, except that Nortel Networks shall
have the normal non-exclusive, royalty-free license to use that which
is implied, or otherwise arises by operation of law, in the use,
copying, licensing, sublicensing, sale and/or distribution of the
Products.
Page 18
<PAGE>
CONFIDENTIAL
21. HAZARDOUS MATERIALS
21.1 Supplier 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 21.1, 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.
21.2 Supplier 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, Supplier shall also identify such other
hazardous and/or toxic substances as Nortel Networks may specify.
21.3 Supplier hereby warrants to Nortel Networks that, with the exception of
the notice referred to above, the Products furnished by Supplier, 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.
21.4 Supplier 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
Supplier, whether such recall or prohibition is directed by Supplier,
or occurs under compulsion of law. Nortel Networks shall cooperate with
Supplier to facilitate and minimize the expense of any recall or
prohibition against use of the Products directed by Supplier or under
compulsion of law.
21.5 Supplier 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 21.1 or any amendment to said statutes by reason
of Nortel Networks' acquisition, use, sale or disposal of the Products
furnished by Supplier.
22. INDEMNITY
22.1 GENERAL
22.1.1 Notwithstanding Section 24.1 of this Agreement, each Party shall
indemnify and save harmless as "INDEMNITEES" the other and its
employees, officers and directors from and against any and all fines,
penalties, losses, costs, damages, injuries, claims, expenses or
liabilities as a result of injury to, or death of, any person, or
damage to, or loss or destruction of, any property, arising out of, or
resulting from, or in connection with, this Agreement or the
performance of this Agreement and caused by the negligence or willful
misconduct of the indemnifying Party or a contractor or an agent of the
indemnifying Party or an employee of any one of them (hereinafter
individually and collectively "LIABILITIES").
22.1.2 Upon request of an Indemnitee, the other Party shall, at no cost or
expense to such Indemnitee, defend or settle any suit or other legal
proceeding asserting a claim for Liabilities, and the other Party shall
pay any reasonable costs and attorneys' fees that may be incurred by
such Indemnitee in connection with any such claim, proceeding or suit.
22.1.3 The Indemnitee shall as soon as practicable notify the other Party of
the assertion of any such claim of which the Indemnitee is aware and
the other Party shall (a) keep the Indemnitee subject to any such claim
fully informed as to the progress of such defense, and (b) afford such
Indemnitee, each at its own expense, an opportunity to participate
fully with the other Party in the defense or settlement of any such
claim, but the other Party shall have sole control of any such
settlement or defense.
22.2 PRODUCT LIABILITY
22.2.1 In addition to, and without limiting the generality of, the provisions
contained in Section 22.1, Supplier shall indemnify and save harmless,
except in the excepted cases set forth in Section 20.4 above, Nortel
Networks and its customers from and against any and all losses, costs,
damages and liabilities (including, without limitation, reasonable
attorneys' fees) and amounts agreed upon in settlement or awarded in
connection with any claim, suit or proceeding which arises from any
injury or death to persons or loss of or damage to property and which
is caused by a Product.
22.2.2 Upon request of Nortel Networks, Supplier shall, at no cost or expense
to Nortel Networks, defend or settle any suit or other legal proceeding
asserting a claim, suit or proceeding described in Section 22.2.1, and
Supplier shall pay any reasonable costs and attorneys' fees that may be
incurred by Nortel Networks and its customers in connection with any
such claim, proceeding or suit.
Page 19
<PAGE>
CONFIDENTIAL
22.2.3 Nortel Networks shall as soon as practicable notify Supplier of the
assertion of any such claim, proceeding or suit of which Nortel
Networks is aware and Supplier shall (a) keep Nortel Networks fully
informed as to the progress of such defense, and (b) afford Nortel
Networks, each at its own expense, an opportunity to participate fully
with Supplier in the defense or settlement of any such claim,
proceeding or suit, but Supplier shall have sole control of any such
settlement or defense.
23. COMPLIANCE WITH LAWS
23.1 At no additional charge to Nortel Networks, Supplier represents and
warrants that it complies with and shall continue to comply with and
has obtained and will continue to maintain in effect all licenses and
permits required by, and Products shall be in conformance with, all
applicable laws and governmental orders and regulations in effect in
Canada and the United States at the time of the Delivery Date
applicable thereto.
24. CONSEQUENTIAL DAMAGES
24.1 Except in the event of a breach of Section 19 hereof, neither Party
shall be liable pursuant to this Agreement for any incidental
consequential, multiple or other indirect damages or for any damages
for loss of profits or revenues even if such Party has been advised of
the possibility of such damages, except that (a) Supplier shall pay,
without limitation, all litigation costs, reasonable attorneys' fees,
settlement payments and any damages awarded resulting from any suit,
claim or proceeding as set forth in Section 20 (Intellectual Property
Right Infringement) and (b) Supplier shall hold Nortel Networks and
Nortel Networks Companies harmless from any damages Nortel Networks and
the Nortel Networks Companies have incurred as a result of Supplier's
breach of the warranty set forth in Section 13.1 i).
25. INSURANCE
25.1 Supplier shall procure and maintain in full force and effect during the
period that this Agreement is in effect and for a period of [*] ([*])
years thereafter, with an insurance company a Comprehensive General
Liability insurance policy with third party liability coverage
protecting Nortel Networks and Nortel Networks Companies against any
loss, liability or expense due to bodily injury, death or property
damage arising out of this Agreement or Products delivered hereunder,
to the extent such loss, liability or expense is not due to the
negligence of Nortel Networks and any Nortel Networks Company. Such
policy shall have a combined single limit of a minimum of [*]
Dollars ($[*]), shall provide coverage worldwide and shall not
be restricted to occurrences in the country of insurer of Supplier.
Nortel Networks and Nortel Networks Companies shall be additional
insureds under such insurance policy.
25.2 Nortel Networks may upon sixty (60) calendar days written notice
increase the foregoing minimum amount in order to comply with Nortel
Networks' obligations to any customer of any Products provided any such
increase shall not exceed an amount equal to one hundred percent (100%)
of the applicable minimum amounts and shall be subject to the
availability of such insurance.
25.3 Such policy shall be endorsed to be primary insurance and shall provide
that it will not be cancelled or altered without at least thirty (30)
calendar days prior written notice to Nortel Networks. Not later than
ten (10) calendar days following the execution of this Agreement,
Supplier shall furnish Nortel Networks with a certificate of such
insurance and evidence that the premiums therefor have been paid.
Maintenance of such insurance and the performance by Supplier of its
obligations under this Section 25 shall not relieve Supplier of
liability under the indemnity provisions set forth in this Agreement.
26. FORCE MAJEURE
26.1 If the performance of any obligation under this Agreement or a Release
or Purchase 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, 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 event any such cause of
nonperformance extends for more than [*] ([*]) calendar days, Nortel
Networks shall have the right, without obligation or liability, to
cancel any Release or Purchase Order affected by such cause.
26.2 Either Party shall notify the other Party in writing within ten (10)
calendar days after becoming aware of the occurrence of any force
majeure event which may cause any delay or failure on the part of such
Party to perform its obligations hereunder.
27. TERM
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 20
<PAGE>
CONFIDENTIAL
27.1 This Agreement shall become effective on the Effective Date and shall
remain in effect for a period of thirty six (36) months and will be
automatically renewed for successive twelve (12) month period(s) unless
one Party gives to the other Party a ninety (90) calendar day notice to
the effect that this Agreement will not be renewed, all such period(s)
being referred to herein as "TERM", unless and until terminated in
accordance with this Agreement.
28. TERMINATION AND CONTINUING RIGHTS
28.1 The Agreement may be terminated upon notice by one Party, at its sole
discretion, in the event the other Party is affected by any one of the
following events:
a) the institution by one Party of insolvency, receivership or
bankruptcy proceedings or any other material proceedings for
the settlement of its debts, including, without limitation, a
reorganization, a compromise, an arrangement or assignment for
the benefit of its creditors; the institution of such
proceedings against a Party which such Party has failed to
resolve in its favor within twenty (20) calendar days after
appropriate services of process; a Party making a general
assignment for the benefit of creditors; or a Party's
dissolution or ceasing to do business in the normal course; or
b) has a substantial part of its assets seized; or
c) assigns the Agreement or any part thereof in violation of
Section 32.4 (Assignment);
the affected Party is obliged to immediately give notice to the other
of the occurrence of any such event.
28.2 The Agreement and/or any Purchase Order or Release may be terminated,
in whole or in part, by Nortel Networks, upon written notice to
Supplier, in the event another party acquires a controlling interest in
Supplier (controlling not necessarily requiring greater than 50%) or a
majority equity participation in Supplier, without a prior written
guarantee from such party to Nortel Networks that such party will
continue to abide by the terms of this Agreement.
28.3 The Agreement and/or any Purchase Order or Release may be terminated,
in whole or in part by either Party, upon a [*] ([*]) calendar day
written notice, in the event the other Party fails to execute any one
of its material obligations hereunder and fails to remedy the default
within said period of [*] ([*]) calendar days.
28.4 Above termination rights shall be in addition to other termination
rights contained herein, including under Section 9 (Delivery), and
shall be without prejudice to the rights or claims one Party may have
against the other with respect to the performance, nonperformance, or
breach of such Party's obligations hereunder, and shall not operate so
as to extinguish any rights or obligations which arose prior to the
date of termination, and each Party shall have the right to pursue each
and every available remedy at law and in equity, including, without
limitation, withholding payments of any amount owed by Nortel Networks
to Supplier pending resolution of any claims made by Nortel Networks in
good faith against Supplier.
28.5 In the event this Agreement is terminated by Supplier for default by
Nortel Networks or for any other reason hereunder, Nortel Networks and
its customers shall thereafter retain such rights, as may be necessary
in order to allow Nortel Networks and its customers to provide Product
support and maintenance to their end-user customers, provided however
the Products, in respect of which support and maintenance services will
be provided, have been paid for by Nortel Networks.
28.6 This Agreement may be terminated upon agreement of the Parties to that
effect.
28.7 Notwithstanding any termination or expiry of this Agreement, any
provisions of this Agreement which by their nature are intended to
survive, including but not limited to the provisions of Sections 1
(Definitions), 5 (Product and Process Changes), 7 (Proprietary
Components), 10 (Prices and Payments), 13 (Warranty), 16 (Continuing
Availability of Technical Assistance, Repair Services, Maintenance,
Replacement and Repair Parts), 19 (Confidential Information), 20
(Intellectual Property Right Infringement), 22 (Indemnity), 24
(Consequential Damages), 25 (Insurance) 28 (Termination and Continuing
Rights), 30 (Manufacturing Escrow and Contingent License) and all
consequent rights, obligations and liabilities, shall survive the
termination or expiry of this Agreement.
29. NOTICES
29.1 Any and all notices or other information to be given by one of the
Parties to the other hereunder shall be sent by registered or certified
mail, postage prepaid, return receipt requested or by confirmed fax or
hand delivery to the other Party at the addresses set forth in Exhibit
M.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 21
<PAGE>
CONFIDENTIAL
29.2 Notices given pursuant to Section 29.1 shall be deemed to have been
received five (5) Business Days after mailing if given by mail, and one
business day after sending if given by telecopy and upon delivery if
given by hand.
29.3 Either Party may change its address at any time by giving fifteen (15)
Business Days prior written notice to the other Party as provided
above.
30. MANUFACTURING ESCROW AND CONTINGENT LICENSE
30.1 To ensure uninterrupted availability of the Product Hardware and
Product Software and their ongoing maintenance and support, including
Repair Services, by March 15, 2000, Nortel Networks and Supplier shall
enter into an escrow agreement ("ESCROW AGREEMENT") with a mutually
agreeable escrow agent ("ESCROW AGENT").
30.2 The Escrow Agreement shall be in a form and content reasonably
acceptable to the Parties hereto and shall contain, as a minimum and
without limitation, the terms and conditions set forth in Exhibit N and
shall, when executed by all the Parties, be annexed hereto as part of
Exhibit N.
31. GOVERNING LAW
31.1 The validity, construction, interpretation and performance of this
Agreement and the rights and obligations of the Parties and any
purchase made hereunder shall be governed by the courts and laws of
Texas except for its rules with respect to the conflict of laws. The
application of the U.N. Convention on Contracts for the International
Sale of Goods is specifically excluded from this Agreement.
32. GENERAL
32.1 SEVERABILITY
If any of the provisions of this Agreement shall be adjudged invalid or
unenforceable, such invalidity or unenforceability shall not invalidate
or render this Agreement unenforceable, but rather this Agreement shall
be construed as if not containing the particular invalid or
unenforceable provision or provisions, and the rights and obligations
of the Parties shall be construed and enforced accordingly, provided
that, in the event either Nortel Networks or Supplier would not have
entered into this Agreement without such provision, that Party shall
have the right to terminate this Agreement upon written notice to the
other Party.
32.2 TRADE AGREEMENT - PROCEDURES
Supplier shall assist Nortel Networks in performing all administrative
actions required to qualify Products for preferential treatment under
the rules of any applicable trade pursuant to the procedures set out in
Exhibit L.
32.3 DEBARMENT CERTIFICATE
At no additional charge to Nortel Networks, Supplier shall comply with
any applicable import requirements and with any third party
requirements specifically set forth herein or any document referenced
herein. In addition, Supplier shall promptly, upon written request of
Nortel Networks, provide a properly executed certificate in the form
attached as Exhibit I (as such form may be modified from time to time
by the United States Rural Utilities Service) and in accordance with
the requirements specified therein with respect to any Products
furnished by Supplier and which Nortel Networks provides to a customer
which requires Nortel Networks to provide a similar certificate.
Products and services furnished by Supplier shall be in conformance
with all applicable laws and governmental orders and regulations in
effect at the time of shipment thereof or the performance of such
services, including, without limitation, the following United States
laws and regulations: Veterans Readjustment Assistance Act of 1972,
Rehabilitation Act of 1973, and the clauses set forth in Federal
Acquisition Regulation (subject to "Supplier," "Subcontractor" and
"Contract" used in such clauses meaning Nortel Networks , Supplier and
Agreement, respectively) 52.219-8, 52.219-9, 52.219-13, 52.220-4,
52.2221, 52.222-4, 52.222-20, 52.222-26, [subparagraphs b(l)-b(ll)],
52.222-35 and 52.222-36.
32.4 ASSIGNMENT
Neither Party shall assign or otherwise transfer all or any part of
this Agreement or any rights or payments to be made hereunder, or any
interest herein, without the prior written consent of the other Party,
not to be unreasonably withheld, except that Nortel Networks may assign
or subcontract any of its rights or obligations hereunder to any Nortel
Networks Subsidiary with the reasonable commercial capacity to fulfill
the terms of this Agreement. Any assignee of this Agreement shall be
bound to all of the terms and conditions hereof.
Page 22
<PAGE>
CONFIDENTIAL
32.5 WAIVER
Except as specifically provided for in a waiver signed by duly
authorized representatives of Nortel Networks and Supplier, failure by
either Party at any time to require performance by the other Party or
to claim a breach of or to enforce any provision of this Agreement
shall not be construed as affecting any subsequent breach or the right
to require performance with respect thereto or to claim a breach with
respect thereto and shall not constitute a waiver of such provisions or
the right of such Party to enforce each and every provision.
32.6 INDEPENDENT CONTRACTORS
Nortel Networks and Supplier are independent contractors in all
relationships and actions under and contemplated by this Agreement.
This Agreement shall not be construed to create or to authorize the
creation of any employment, partnership or agency relation, or to
authorize Nortel Networks or Supplier to enter into or make any
commitment, agreement, representation or warranty binding on the other,
or to allow one Party to accept service of any legal process addressed
to, or intended for, the other Party. Nothing contained in this
Agreement shall limit, in any manner, Nortel Networks' right to enter
into other agreements with other parties.
32.7 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.
32.8 ENTIRE AGREEMENT
This Agreement, including Exhibits A through N attached hereto,
comprises all the terms, conditions and agreements of the Parties
hereto with respect to the subject matter herein, and save as expressly
provided herein, may not be altered or amended except in writing signed
by authorized representatives of each Party hereto. This Agreement
cancels and supersedes all prior agreements and communications on the
said subject matter. This Agreement may not be varied except through a
document agreed to and signed by both Parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day
and year last written below.
SONOMA SYSTEMS NORTEL NETWORKS, INC.
By: /s/ Daniel E. Gottleib By: /s/ Drew O. Goodwin
---------------------------- ---------------------------------
(Signature) (Signature)
Name: Daniel E. Gottleib Name: Drew O. Goodwin
------------------------- ------------------------------
(Print) (Print)
Title: Vice President Title: Vice President, [ILLEGIBLE] Networks
------------------------ -----------------------------
Date: Feb 10, 2000 Date: February 10, 2000
------------------------- ------------------------------
Page 23
<PAGE>
CONFIDENTIAL
EXHIBIT A
PRODUCT LISTS, PART I AND PART II, PRICES, DISCOUNTS,
AVAILABILITY DATES AND FCA DELIVERY LOCATIONS
PART I: PRODUCT LIST: ACCEPTED PRODUCTS, PRICES AND DISCOUNTS
PART II: PRODUCT LIST: NON-ACCEPTED PRODUCTS, PRICES, DISCOUNTS AND
AVAILABILITY DATES
The prices set forth herein shall apply to all Purchase Orders or
Releases and are effective as of February 4, 2000, and shall apply
regardless of whether or not the product is accepted pursuant to Section
4 of the Agreement. Prices are based upon aggregate shipments of products
to Nortel Networks Companies per calendar year. Purchase Orders and
Releases shall be priced at the designated Nortel price, which represents
[*] percent ([*]%) off the given List Price. Volume discounts shall
apply in accordance with the table below. If shipments of products exceed
[*] ([*]) units in any calendar year, Supplier shall issue
Nortel Networks a credit equal to the incremental discount from list
price multiplied by the incremental number of shipped products qualifying
for such additional discount. Subject to verification by Nortel Networks,
Supplier shall indicate the product credit to Nortel Networks, if any,
within thirty (30) days after the end of the calendar year. Nortel
Networks may utilize the product credit by indicating the amount of such
credit to be used on a Purchase Order or Release. Any product credits
remaining at the end of the Term shall be refunded in US dollars in the
form of a wire transfer within ninety (90) days after the expiration of
the Term.
<TABLE>
<CAPTION>
----------------------------- --------------------------
Quantity Discount from List (%)
----------------------------- --------------------------
<S> <C>
0 - [*] units [*]%
----------------------------- --------------------------
[*] - [*] units [*]%
----------------------------- --------------------------
Greater than [*] units [*]%
----------------------------- --------------------------
</TABLE>
PRODUCT CODES, PRICING AND AVAILABILITY:
<TABLE>
<CAPTION>
PRODUCT ID DESCRIPTION LIST NORTEL
PRICE PRICE AVAIL.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SONOMA ACCESS BASE UNITS
8000 SA PII SONOMA ACCESS Pentium II Base Unit, with switchable 110/240 VAC power $4695 $[*] 2/4/00
supply for Multi-media applications
8000 DA PII SONOMA ACCESS Pentium II Base Unit, with dual switchable 110/240 VAC $5645 $[*] 2/4/00
power supply for Multi-media applications
8000 DD PII SONOMA ACCESS Pentium II Base Unit, with dual -48VDC power supplies $5995 $[*] 2/4/00
for Multi-media applications
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS SOFTWARE
8000 SW-TLX-4 SONOMA ACCESS TLX-TM- software, V4, high-performance real-time operating $2000 $[*] 2/4/00
system, SNMP agent, Web DCS, and SLIP management software. V4
supports IMA, IP forwarding, CES, FR (Serial Card) and 8000 TRN 2.
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA SYSTEMS NETWORK MANAGEMENT SOFTWARE
HP Openview Basic Package Free utility that can be downloaded from the Sonoma Systems extranet Free N/A N/A
site from Support/All Files/MIBs. Filename: OVBASIC.TAR.Z
SONOMAVIEW SonomaVIEW Element Management Package $1995 $[*] 2/4/00
Sonoma VIEW Demo The SonomaVIEW Demo application is available from Sonoma extranet website. Free N/A 2/4/00
Application This is a full feature application which expires after
thirty (30) days of
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
<TABLE>
<S> <C> <C> <C> <C>
installation.
SV UG SV User Guide includes both SA/SI navigation/configuration-HARDCOPY $100 $[*] 2/4/00
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS WAN CARDS
(INCLUDES DRIVER SOFTWARE LICENSE AND CERTIFICATION)
ATM DS1-4 4 port T1 ATM UNI card (RJ-45) (1 slot) $4000 $[*] 2/4/00
****REQUIRES V4 SOFTWARE*****
ATM E1-4 4 port E1 ATM UNI card (RJ-45) (1 slot) $4000 $[*] 2/4/00
****REQUIRES V4 SOFTWARE*****
ATM IMA DS1 4 port T1 ATM Inverse Multiplexing card (RJ-45) (2 slots) $6500 $[*] 2/4/00
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
****T1 UNI OR IMA CAPABILITY SUPPORTED WITH V4 SOFTWARE*****
ATM IMA E1 4 port E1 ATM Inverse Multiplexing card (RJ-45) (2 slots) $6500 $[*] 2/4/00
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
****E1 UNI OR IMA CAPABILITY SUPPORTED WITH V4 SOFTWARE*****
ATM IMA DS1-8 8 port T1 ATM Inverse Multiplexing card (RJ-45) (2 slots) $9500 $[*] 2/4/00
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
****T1 UNI OR IMA CAPABILITY SUPPORTED WITH V4 SOFTWARE*****
ATM IMA E1-8 8 port E1 ATM Inverse Multiplexing card (RJ-45) (2 slots) $9500 $[*] 2/4/00
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
****E1 UNI OR IMA CAPABILITY SUPPORTED WITH V4 SOFTWARE*****
- -----------------------------------------------------------------------------------------------------------------------------------
LIST NORTEL
PRODUCT ID DESCRIPTION PRICE PRICE AVAIL.
ENH DS3 ATM DS3 GCRA compliant ATM Card, with two BNC connectors, compliant with $3000 $[*] 2/4/00
DSX-3 specifications.
*****ATM UPLINK SUPPORT FOR DATA ONLY APPLICATIONS)****
ENH E3 ATM E3 GCRA compliant ATM Card, with two BNC connectors $3000 $[*] 2/4/00
*****ATM UPLINK SUPPORT FOR DATA ONLY APPLICATIONS)****
ENH OC3 ATM MM OC-3c/STM-1 GCRA compliant ATM Multimode Card, with fiber optic SC $4000 $[*] 2/4/00
connector (0-2Km)
*****ATM UPLINK SUPPORT FOR DATA ONLY APPLICATIONS)****
ENH OC3 ATM SM-IR OC-3c/STM-1 GCRA compliant ATM Single Mode Card, with fiber optic ST $6000 $[*] 2/4/00
connector (0-19Km)
*****ATM UPLINK SUPPORT FOR DATA ONLY APPLICATIONS)****
ENH OC3 ATM SM-LR OC-3c/STM-1 GCRA ATM Long-Reach Single Mode Card, with fiber optic ST $8000 $[*] 2/4/00
connector (12-30Km)
*****ATM UPLINK SUPPORT FOR DATA ONLY APPLICATIONS)****
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS LAN CARDS
(INCLUDES DRIVER SOFTWARE LICENSE AND CERTIFICATION)
8000 FAST ENET-1 Fast Ethernet Card (10/100Mbps autosensing) with RJ-45 connector (UTP). $750 $[*] 2/4/00
8000 FAST ENET-4 Four-Port Fast Ethernet Card (10/100Mbps autosensing), with RJ-45 $3000 $[*] 2/4/00
connectors
8000 TRN-2 High Performance Token Ring Card (4/16Mbps autosensing), with DB-9 and $1200 $[*] 2/4/00
RJ-45 connectors.
8000 FDDI-SAS FDDI Single-Attach (SAS) Interface Card, with multimode fiber optic SC $5000 $[*] 2/4/00
connector
8000 FDDI-DAS FDDI Dual-Attach (DAS) Interface Card, with two multimode fiber optic $8000 $[*] 2/4/00
SC connectors
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS MULTISERVICE CARDS
(INCLUDES ATM UPLINK, DRIVER SOFTWARE LICENSE AND CERTIFICATION)
CES T1 IMA Card set with four T1/E1 Circuit Emulation ports (RJ-45) and four T1 $11000 $[*] 2/4/00
ATM IMA uplink ports (RJ45). REQUIRES 3 SLOTS.
REQUIRES V4.X OR GREATER. -USING V4.X OR GREATER
SOFTWARE THE ATM UPLINKS ARE SOFTWARE CONFIGURABLE
FOR EITHER IMA OR UNI
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 2
<PAGE>
CONFIDENTIAL
<TABLE>
<S> <C> <C> <C> <C>
CES E1 IMA Card set with four T1/E1 Circuit Emulation ports (RJ-45) and four E1 $11000 $[*] 2/4/00
ATM IMA uplink ports (RJ-45). Requires 3 slots.
REQUIRES V4.X OR GREATER. -USING V4.X OR GREATER
SOFTWARE THE ATM UPLINKS ARE SOFTWARE CONFIGURABLE
FOR EITHER IMA OR UNI
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
CES T1 IMA-8 Card set with four T1/E1 Circuit Emulation ports (RJ-45) and eight T1 $14500 $[*] 2/4/00
ATM IMA uplink ports (RJ45). REQUIRES 3 SLOTS.
REQUIRES V4.X OR GREATER. -USING V4.X OR GREATER
SOFTWARE THE ATM UPLINKS ARE SOFTWARE CONFIGURABLE
FOR EITHER IMA OR UNI
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
CES E1 IMA-8 Card set with four T1/E1 Circuit Emulation ports (RJ-45) and eight E1 $14500 $[*] 2/4/00
ATM IMA uplink ports (RJ-45). Requires 3 slots.
REQUIRES V4.X OR GREATER. -USING V4.X OR GREATER
SOFTWARE THE ATM UPLINKS ARE SOFTWARE CONFIGURABLE
FOR EITHER IMA OR UNI
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
- -----------------------------------------------------------------------------------------------------------------------------------
PRODUCT ID DESCRIPTION PRICE CAT AVAIL.
CES DS3 Card set with four T1/E1 Circuit Emulation ports (RJ-45) and one DS3 $7500 $[*] 2/4/00
ATM uplink with BNC connectors. REQUIRES 2 SLOTS. REQUIRES V4.X OR
GREATER.
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
CES E3 Card set with four T1/E1 Circuit Emulation ports (RJ-45) and one E3 $7500 $[*] 2/4/00
ATM uplink with two BNC connectors. REQUIRES 2 SLOTS. REQUIRES V4.X
OR GREATER.
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
CES MM OC3 Card set with four T1/E1 Circuit Emulation ports (RJ-45) and one $8500 $[*] 2/4/00
OC-3c/STM-1 ATM uplink with fiber optic SC connector (0-2Km).
REQUIRES 2 SLOTS. REQUIRES V4.X OR GREATER.
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
CES SM IR OC3 Card set with four T1/E1 Circuit Emulation ports (RJ-45) and one $10500 $[*] 2/4/00
OC-3c/STM-1 ATM uplink with fiber optic ST connector (0-19Km).
REQUIRES 2 SLOTS. REQUIRES V4.X OR GREATER.
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
CES SM LR OC3 Card set with four T1/E1 Circuit Emulation ports (RJ-45) and one $12500 $[*] 2/4/00
OC-3c/STM-1 ATM uplink with fiber optic ST connector (12-30Km).
REQUIRES 2 SLOTS. REQUIRES V4.X OR GREATER.
**** ATM UPLINK SUPPORTS DATA AND VOICE APPLICATIONS****
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS FRAME RELAY CARDS
(INCLUDES DRIVER SOFTWARE LICENSE AND CERTIFICATION)
FR UIO 2 port Universal Serial (RS232, V.35, X.21, RS442/449) for Frame Relay $4500 $[*] 2/4/00
- -----------------------------------------------------------------------------------------------------------------------------------
FRAME RELAY CABLES
(ALSO USED ON SONOMA INTEGRATOR MODELS THAT INCLUDE FRAME RELAY)
RS-232-DCE RS232/EIA530, DCE CBL, 6 FT, DB-25 FEMALE-Provides a DCE interface $225 $[*] 2/4/00
which provides both TXC/RXC to the connecting DTE device.
RS-232-DTE RS232/EIA530, DTE CBL, 6 FT, DB-25 MALE-Provides a DTE interface $225 $[*] 2/4/00
which accepts both TXC/RXC from the connecting DCE device.
V.35-DCE FRAME RELAY V.35, DCE CBL, 6 FT, 34 PIN FEMALE-Provides a DCE $250 $[*] 2/4/00
interface which provides both TXC/RXC to the connecting DTE device.
V.35-DTE FRAME RELAY V.35, DTE CBL, 6 FT, 34 PIN MALE-Provides a DTE interface $250 $[*] 2/4/00
which accepts both TXC/RXC from the connecting DCE device.
X.21-DCE FRAME RELAY X.21 DCE CBL, 6 FT, DB-15 FEMALE-Provides a DCE interface $150 $[*] 2/4/00
which provides both TXC/RXC to the connecting DTE device.
X.21-DTE FRAME RELAY X.21 DTE CBL, 6 FT, DB-15 MALE-Provides a DTE interface $150 $[*] 2/4/00
which accepts both TXC/RXC from the connecting DCE device.
RS442/449-DCE FRAME RELAY RS442/449 DCE CBL, 6 FT, DB-37 FEMALE-Provides a DCE $225 $[*] 2/4/00
interface which provides both TXC/RXC to the connecting DTE device.
RS442/449-DTE FRAME RELAY DTE CBL, RS442/449, 6 FT, DB-37 MALE-Provides a DTE $225 $[*] 2/4/00
interface which accepts both TXC/RXC from the connecting DCE device.
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 3
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
LIST NORTEL
PRODUCT ID DESCRIPTION PRICE PRICE AVAIL.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SONOMA ACCESS SYSTEM OPTIONS:
CABLE MGMT Cable Management option for PII Chassis. Consists of front bezel $200 $[*] 2/4/00
attachment with cable clamps
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS USER DOCUMENTATION:
8000 SUG V4 Sonoma Access V4 User Guide $100 $[*] 2/4/00
QS-WEBDCS V3 Sonoma ACCESS V3 / V4 Quick Start Guide for WebDCS Users $15 $[*] 2/4/00
QS-CRAFT V3 Sonoma ACCESS V3/V4 Quick Start Guide for Craft Interface Users $15 $[*] 2/4/00
8000 SUG-DISK V4 Sonoma ACCESS V4 User Guide and HTML Help Files on 3.5-inch diskettes $50 $[*] 2/4/00
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA ACCESS ACCESSORIES:
PII RM-19 19" Rackmount kit for Phase II chassis $250 $[*] 2/4/00
PII RM-23 23" Rackmount kit for Phase II chassis $250 $[*] 2/4/00
PII SAC TRAY PII Single A/C power supply and fan tray assembly (switch selectable $795 $[*] 2/4/00
for 110 or 240 VAC)
PII DAC TRAY PII Dual A/C power supply and fan tray assembly (switch selectable for $1595 $[*] 2/4/00
110 or 240 VAC)
PII DDC TRAY PII Dual D/C power supply and fan tray assembly (-48 VDC) $2495 $[*] 2/4/00
</TABLE>
PRODUCT CODES, PRICING AND AVAILABILITY:
<TABLE>
<CAPTION>
PRODUCT ID DESCRIPTION LIST PRICE NORTEL
PRICE AVAIL.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SONOMA INTEGRATOR BASE UNITS
SI 1110 SONOMA INTEGRATOR Multiservice Branch Access Device, with $9000 $[*] 2/4/00
autosensing 110/240 VAC power supply. Includes (4) T1/E1 ports
and (1) 10/100 M Ethernet port
*****PRICE INCLUDES SOFTWARE PACKAGE*****
SI 1120 SONOMA INTEGRATOR Multiservice Branch Access Device, with $9500 $[*] 2/4/00
auto-sensing 110/240 VAC power supply. Includes (4) T1/E1 ports
and (2) 10/100 M Ethernet port
*****PRICE INCLUDES SOFTWARE PACKAGE*****
SI 1121 Sonoma INTEGRATOR Multiservice Branch Access Device, with $8500 $[*] 3/31/00
autosensing 110/240 VAC power supply. Includes (2) T1/E1 ports
and (2) 10/100 M Ethernet ports.
*****PRICE INCLUDES SOFTWARE PACKAGE*****
SI 1119 Sonoma INTEGRATOR Multiservice Branch Access Device, with $9500 $[*] 3/31/00
autosensing 110/240 VAC power supply. Includes (4)
T1/E1 ports, (1) 10/100 M Ethernet port, and 2
Frame Relay Universal Serial ports. (Frame Relay
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 4
<PAGE>
CONFIDENTIAL
<TABLE>
<S> <C> <C> <C> <C>
cable purchased separately.)
**FRAME RELAY CABLE PURCHASED SEPARATELY, SEE SONOMA ACCESS FRAME
RELAY CABLES FOR SELECTION**
*****PRICE INCLUDES SOFTWARE PACKAGE*****
SI 1312 Sonoma INTEGRATOR Multiservice Branch Access Device, with $9250 $[*] 3/31/00
autosensing 110/240/VAC power supply. Includes (1) DS3 ATM uplink
port and (1) 10/100 M Ethernet port
*****PRICE INCLUDES SOFTWARE PACKAGE*****
SI 1313 Sonoma INTEGRATOR Multiservice Branch Access Device, with $9250 $[*] 3/31/00
autosensing 110/240 VAC power supply. Includes (1) E3 ATM uplink
port and (1) 10/100 M Ethernet port
*****PRICE INCLUDES SOFTWARE PACKAGE*****
SI 1320 Sonoma INTEGRATOR Multiservice Branch Access Device, with $10,000 $[*] 3/31/00
autosensing 110/240 VAC power supply. Includes (2) T1/E1 ports,
(2) 10/100 M Ethernet ports and (1) DS3 ATM uplink
*****PRICE INCLUDES SOFTWARE PACKAGE*****
SI 1321 Sonoma INTEGRATOR Multiservice Branch Access Device, with $10,000 $[*] 3/31/00
autosensing 110/240 VAC power supply. Includes (2) T1/E1 ports,
(2) 10/100 M Ethernet ports and (1) E3 ATM uplink
*****PRICE INCLUDES SOFTWARE PACKAGE*****
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA INTEGRATOR SOFTWARE
SI SW V1 SONOMA INTEGRATOR software, V1.0. Supports Features & Functions $1500 $[*] 2/4/00
of models SI 1110 and SI 1120. Support for T1/E1
UNI or IMA, CES, SNMP agent, Installation Wizard,
and SLIP management software, diskettes with user
documentation
****INCLUDED AT NO CHARGE WITH PURCHASE OF ANY INTEGRATOR MODEL.
USE THIS PRODUCT ID IF ORDERING SOFTWARE SEPARATELY FOR FIELD
UPGRADES*****
SI SW V2 Sonoma INTEGRATOR software V2.0. Supports all features and $1500 $[*] 2/4/00
functions included in INTEGRATOR V1.0 (SI SW V1) and supports all
Sonoma INTEGRATOR models.
****INCLUDED AT NO CHARGE WITH PURCHASE OF ANY INTEGRATOR MODEL.
USE THIS PRODUCT ID IF ORDERING SOFTWARE SEPARATELY FOR FIELD
UPGRADES*****
- -----------------------------------------------------------------------------------------------------------------------------------
SONOMA INTEGRATOR USER DOCUMENTATION
SI QS CRAFT SI Quick Start Guide for Craft Interface-HARDCOPY $15 $[*] 2/4/00
SI QS SI Install Wizard Quick Start Guide-HARDCOPY $15 $[*] 2/4/00
SUG CRAFT Includes both SA/SI Craft UI for SI/V1.0 and SA/V4 -HARDCOPY $100 $[*] 2/4/00
HW IG-2 H/W Install guide for SI 1120-HARDCOPY $50 $[*] 2/4/00
HW IG-1 H/W Install guide for SI 1110-HARDCOPY $50 $[*] 2/4/00
</TABLE>
PART III: FCA DELIVERY LOCATIONS
NASHVILLE, TN
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 5
<PAGE>
CONFIDENTIAL
EXHIBIT B
SPECIFICATIONS AND ACCEPTANCE PROGRAM
PART I: SPECIFICATIONS
1. Document Identification:
<TABLE>
=================================================== ================================================
<CAPTION>
Document identification Description and specific provisions
=================================================== ================================================
<S> <C>
Requirement Specifications Document Code: NT______ [to be inserted upon
(RS), in effect from time to time. completion of NT document]
FUNCTIONAL: Date: Latest version signed and dated by
-Release Functional Specification for Sonoma the Parties.
Access Version 4.
-Release Functional Specification for Sonoma
Integrator Version 1.
-Functional Specification Sonoma View - HP
OpenView - Advanced Package.
USER GUIDES:
- Sonoma Access & Sonoma Integrator Craft
User Interface.
- Sonoma Access Hardware Installation Guide.
- Sonoma Integrator Hardware Installation
Guide
- SonomaView User Guide
RELEASE NOTES:
-Product Release Notes Sonoma Access Version 4.1.
-Product Release Notes Sonoma Integrator Version
1.0.
Product Release Notes SonomaView Version 1.0.
--------------------------------------------------- ------------------------------------------------
</TABLE>
2. Certification
Supplier shall use due diligence to pursue the certifications for all
countries as listed below, and as may be requested by Nortel pending
future business as soon as new or modified designs have passed Supplier's
production release milestone, and this without prejudice to Nortel
Networks' Acceptance Program outlined in Exhibit B, Part II. Supplier and
Nortel Networks shall arrange for joint submission to the regulatory
bodies and Nortel Networks shall repay to Supplier the additional costs
incurred through the joint submissions. All Changes to existing designs
that could invalidate any one of the certifications shall be discussed
between Supplier and Nortel Networks as part of the Change Notification
procedure even if they do not require a production release.
The list of required certifications is as follows:
CEMark
ETSI
UK Type Approval
UL / CSA / EN safety
FCC parts 15 and 101
<PAGE>
CONFIDENTIAL
Should other certifications be required, they shall be discussed between
Supplier and Nortel Networks. Supplier shall use its best efforts in
supporting Nortel Networks' regulatory activities.
SUPPORT GROUPS: Supplier's ________ group
Nortel Networks OEM Integrity group in _____________
Nortel Networks Product Integrity group in __________
PART II: PRODUCT ACCEPTANCE PROGRAM
1. In order to verify that the products or modified Products meet the
applicable Specifications as referenced in Part I above and any other
reasonable criteria as determined by Nortel Networks, Nortel Networks
will undertake an Acceptance Program covering verification and product
integrity testing. Nortel Networks may, at it's option, perform one or
more of the following for acceptance:
i) review Supplier's test reports;
ii) access 3rd party test data from Supplier;
iii) obtain products for testing at Nortel's
facility;
iv) obtain products for testing at Supplier's
facility.
2. Supplier shall loan to Nortel Networks, at no charge to Nortel Networks,
the products necessary to perform the Acceptance Program and shall
provide support to the Nortel Networks group during the testing. Such
support includes diligence in replacing failed products, availability of
technically knowledgeable individuals to discuss testing results and
teaming of at least one Supplier individual with the Nortel Networks
testing group for all tests to occur on Supplier's premises. Nortel
Networks shall endeavor to limit as much as possible the products needed
for the acceptance in terms of number of product(s) and duration of the
loan by taking into consideration design commonalties with already
accepted Products.
3. As a minimum, each new design shall be tested by Nortel Networks at its'
discretion.
4. Primeships:
Nortel Networks ________ group in __________________ is prime for the
verification testing; Supplier's Engineering department in Marlborough,
MA is prime for supporting Nortel Networks' Acceptance Program.
PART III: PRODUCT MARKING
1. Serial number: bar-coded serial number on rear of unit.
2. Manufacturing date stamp: Supplier stamps date on rear of unit.
3. Supplier's model number rear or bottom of unit on ejector tab/latch of
faceplate.
4. Bellcore CLEI code, bar-coded (Code 128) and alpha numeric
(TR-STS-000383) to be placed on the ________ of the Products.
5. Supplier's PEC code will also be placed on _________.
6. Repair Date stamp: Bellcore TR-NWT-000078 (issue 3, December 1991),
section 12.2. The location code for Supplier ("LL") is ___. This will be
rubber stamped by Supplier ______ in ______ ink.
7. Product marking and packaging requirements pursuant to this Agreement:
a) Nortel Networks Corporate Standard CS152.50 on product integrity;
b) Bellcore GR-CORE-1421 and TR-NWT-000063;
c) Nortel Networks Corporate Standard 157.0 and Bellcore TR-NWT-870
on ESD protection;
d) Nortel Networks Quality System Procedure EXCESDO1.STL.
Supplier shall package the Products for shipment in accordance with
Bellcore's GR-CORE-1421, TR-NWT-000063 and TR-NWT-870 standard packing
practices, with any modifications specified by Nortel Networks and agreed
to by Supplier, related to the size and external markings (including
branding) of the boxes. Supplier shall be responsible for any damage to
Products including damage caused by packing noncompliant with Bellcore
requirements.
Page 2
<PAGE>
CONFIDENTIAL
8. Cables: [ENTER WHAT WILL BE MARKED ON CABLES, IF APPLICABLE.]
9. [ENTER ANY OTHER REQUIRED MARKING.]
Page 3
<PAGE>
CONFIDENTIAL
EXHIBIT C
DEMAND-PULL PROGRAM
1. SCOPE
1.1 This Exhibit C sets forth the terms and conditions applicable to the
ordering of Products pursuant to the Demand-Pull Program.
2. NORTEL NETWORKS' RESPONSIBILITIES
2.1 Nortel Networks shall, on the first business day of each month (and as
may be updated from time to time by Nortel Networks) during the Term,
provide Supplier with a twelve (12) month rolling forecast ("Forecast")
of its Product requirements, if any. Concurrently with its presentation
of the first Forecast to Supplier, Nortel Networks shall issue a
Blanket Purchase Order for the quantity of Products shown for six
months of such Forecast which Blanket Purchase Order shall be updated
as required. Releases for Products covered by a Blanket Purchase Order
issued under this Section will be issued in accordance with Nortel
Networks' designated purchasing department representative's weekly
demands.
2.2 Attachment A sets forth the applicable Product stocking requirements
stated on a Target Finished Goods ("TARGET FG") and Target Work-In
Process (modules, dies components and parts) ("TARGET WIP") basis,
(collectively referred to as "TARGET PRODUCTS TOTAL STOCK"). The Target
Products Total Stock will be jointly established by the Parties in
writing based on the run rate and agreed upon number of weeks, as
referred to in Section 3.2 hereof, taking into consideration the
Supplier's Products manufacturing lead time as well as the unique
component purchasing lead time, all as stated in Attachments A and B
hereof. The Target Products Total Stock shall be jointly monitored and
may be revised by agreement of the Parties in writing as fluctuations
in the run rate so require and Attachment A updated accordingly. The
Forecasts shall be used by the Supplier for planning purposes only, and
Nortel Networks shall not be obligated to purchase any Products covered
by Forecasts and Blanket Purchase Orders issued by Nortel Networks
except as expressly set forth in the immediately following paragraph.
2.3 Nortel Networks' obligation to purchase Products under this Agreement
or otherwise shall be limited to the purchase of the Target Products
Total Stock as shown in Attachment A as revised from time to time in
accordance with Section 2.2 hereof as well as for associated quantities
of unique components inside of the lead times specified in Attachment
B.
2.4 If the Target Finished Goods is inactive for more than ninety (90)
days, the Parties shall negotiate towards reaching a mutually
acceptable agreement in respect of the disposition of the Target
Products Total Stock or portion thereof.
2.5 It is acknowledged by the Parties that although Products have been
included in Attachment A, any such Products may, from time to time at
Nortel Networks' option, be purchased by Nortel Networks otherwise than
pursuant to the Demand-Pull Program and in such event, Nortel Networks
will issue Purchase Orders for its requirements for such Products.
3. THE SUPPLIER'S RESPONSIBILITIES
3.1 Supplier shall manufacture the Target Products Total Stock in
accordance with the run rate as set forth in Attachment A which may be
revised as provided hereunder but shall only deliver Products per
latest written instruction from Nortel Networks.
3.2 Supplier shall maintain Target FG and Target WIP quantities
representing a maximum of four (4) and eight (8) weeks, respectively,
of the run rate set forth in Attachment A which may be revised as
provided hereunder.
3.3 Supplier's manufacturing operations and processes shall be established
and maintained throughout the Term so as to ensure that Supplier's
manufacturing capacity may be increased from the then applicable Target
Product Total Stock, by [*] percent ([*]%) within one (1) month, and
by [*] percent ([*]%) within two (2) months from Nortel Networks'
written notice to Supplier that the applicable Target Product Total
Stock is increased.
3.4 Products ordered pursuant to the Demand-Pull Program shall be delivered
FCA Delivery Location, within twenty-four (24) hours from Nortel
Networks' Release(s) communicated to Supplier via facsimile.
3.5 Supplier shall provide to Nortel Networks' designated Purchasing
Department representative a weekly report of Supplier's Actual Products
Total Stock status.
<PAGE>
CONFIDENTIAL
4. CANCELLATION OF THE DEMAND-PULL PROGRAM
4.1 Nortel Networks may terminate the Demand-Pull Program in whole or in
part by means of a written notice to that effect, forwarded to Supplier
at least thirty (30) days in advance. Should the Demand-Pull Program be
terminated, the applicable Blanket Purchase Order will be closed after
disposition of the Target Product Total Stock in accordance with this
Section 4. Should the Demand-Pull Program be terminated the applicable
delivery lead time to the Product affected by the termination will be
agreed upon by the Parties but shall in no event exceed two (2) weeks
ARO.
4.2 Nortel Networks' obligation to purchase under this Agreement shall be
that stated in Section 2.3 hereof.
4.3 Nortel Networks' obligation to purchase under this Agreement shall be
reduced by the amount of Products that can be purchased by Purchase
Orders or that may be purchased by other customers of Supplier. In
addition, Supplier shall use all reasonable endeavors to minimize any
such costs by, inter alia, returning components to suppliers or
reducing cancellation costs to suppliers, and such savings will be
passed on to Nortel Networks.
Page 2
<PAGE>
CONFIDENTIAL
ATTACHMENT A
WEEK: ________
<TABLE>
- --------------------------------------------------------------------------------------------------------
<CAPTION>
RUN TARGET TARGET ACTUAL ACTUAL LEAD
CPC NO. DESCRIPTION RATE FG STK WIP FG STK WIP TIME
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
NORTEL NETWORKS ______________________________
APPROVAL:
DATE:_____________
ADTRON APPROVAL: ______________________________
DATE:___________________
Page 3
<PAGE>
CONFIDENTIAL
ATTACHMENT B
Page 4
<PAGE>
CONFIDENTIAL
EXHIBIT D
REPAIR SERVICES RATES, FCA REPAIR LOCATIONS AND TECHNICAL ASSISTANCE RATES
I. TECHNICAL ASSISTANCE RATES
1. TRAINING
a) SEE BELOW.
2. TECHNICAL ASSISTANCE RATES FOR LEVEL 1 AND LEVEL 2 SUPPORT AS SET
FORTH IN EXHIBIT H WHEN PURCHASED TOGETHER:
a) [*] Dollars ($[*]) per quarter, paid quarterly in advance
plus:
b) For aggregate unit shipments greater than [*] units, [*]%
of Price; or
c) For aggregate unit shipments greater than [*] units, [*]%
of Price; or
d) For aggregate unit shipments greater than [*] units,
[*]% of Price.
3. TECHNICAL ASSISTANCE RATES FOR LEVEL 1 SUPPORT WHEN ONLY LEVEL 1
IS PURCHASED:
a) [*] Dollars ($[*]) per quarter, paid quarterly in advance
plus:
b) For aggregate unit shipments greater than [*] units, [*]%
of Price.
4. TECHNICAL ASSISTANCE RATES FOR LEVEL 2 SUPPORT WHEN ONLY LEVEL 2
IS PURCHASED:
a) [*] Dollars ($[*]) per quarter, paid quarterly in advance
plus:
b) For aggregate unit shipments greater than [*] units,
[*]% of Price; or
c) For aggregate unit shipments greater than [*] units, [*]%
of Price; or
d) For aggregate unit shipments greater than [*] units,
[*]% of Price.
5. POST TERM TECHNICAL ASSISTANCE (COMPRISED OF LEVEL 2 AND LEVEL 3
SUPPORT) RATE:
a) [*] PERCENT OF PRICE OF INSTALLED BASE.
II. FCA REPAIR LOCATIONS
a) Marina del Rey, CA 90292
III. REPAIR SERVICES RATES
1. EMERGENCY REPLACEMENT SERVICE: IN ACCORDANCE WITH SECTION 15.12.
2. VERIFICATION OR CERTIFICATION TEST
Nortel Networks may return a Product for operational verification
tests for a charge to be mutually agreed between the parties.
3. OUT OF WARRANTY REPAIRS
[*] percent ([*]%) of list price; repaired units to be returned
within ten (10) calendar days of receipt.
4. OTHER SERVICES
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 5
<PAGE>
CONFIDENTIAL
<TABLE>
<CAPTION>
Product Code Description
PRICES
<S> <C> <C>
TRAIN-6 Training for up to 6 students. Consists of a three-day session, which takes place $[*] per day, plus
at a location agreed to by Sonoma Systems and the Customer. All equipment travel and out-of-pocket
and space to be provided by the Customer. expenses
TRAIN-12 Training for 7-12 students. Consists of a three-day session, which takes place at $[*] per day, plus
a location agreed to by Sonoma Systems and the Customer. All equipment and travel and out-of-pocket
space to be provided by the Customer. ( Requires Two Instructors). expenses
INSTALL Installation provided by Sonoma Systems. The minimum rate is one day, billed $[*] per day, plus travel
in 1/4 day increments. There is an additional travel time fee of $[*] per hour. and out-of-pocket
expenses
CONSULT Sonoma Systems technical consulting service. The hourly support price for $[*] per hour; Variable
consulting is $[*]/hr. For onsite services, Travel & Expense charges may apply. travel & expenses may
Customer P.O. should include a "not to exceed" value. apply
</TABLE>
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Page 6
<PAGE>
CONFIDENTIAL
EXHIBIT E
PROCEDURES FOR ORDERS UTILIZING EDI AND TDI
(Rev NAESGA_970321)
PART I
ELECTRONIC DATA INTERCHANGE ("EDI") TRANSMISSION
This Part I of Exhibit E contemplates EDI transmissions of information and
Purchase Orders, Blanket Purchase Orders, Transaction Set 850 Releases or
EDIFACT 2.0 P.O. Releases (collectively, in this Exhibit E, "Orders"),
acknowledgments and invoices. The EDI transactions shall be governed by the
Agreement, as modified by this Part I of Exhibit E. This Part I of Exhibit E
shall not apply to Orders delivered solely in hard copy document form.
EDI transactions shall be made through a third-party computer network with
which the Nortel Networks Companies and Supplier have a services agreement
("Network"). EDI transactions shall be made in accordance with the version of
either 1) the American National Standards Institute ("ANSI") Business Data
Interchange Standards ANSI X12, or 2) Electronic Data Interchange for
Administration, Commerce and Transportation Issue No. 2.0 ("EDIFACT"), which
each Nortel Networks Company then utilizes, inclusive of transaction sets or
comparable EDIFACT electronic messages, data dictionary, data elements and
transmission control. Each party shall be responsible for its respective costs
incurred in sending and receiving EDI transmissions.
Supplier shall access at least once on each business day the Network to
determine whether it has received any Orders (ANSI X12, Transaction Set 850 or
EDIFACT 2.0 ORDERS). A functional Acknowledgment of Receipt of Transmission
(ANSI X12, Transaction Set 997) or an EDIFACT functional Acknowledgment Receipt
of P.O. Message shall be transmitted immediately upon receipt of an EDI Order.
A full Transaction Acknowledgment (ANSI X12, Transaction Set 855 or EDIFACT 2.0
ORDSP) shall be transmitted by Supplier within two (2) Business Days after
transmittal of the functional Acknowledgment of Receipt of Transmission. Each
Order shall contain and each full Transaction Acknowledgment shall confirm the
price, quantity, Product description by part number, FCA Delivery Location,
location to which the invoice shall be rendered for payment, method of
shipment, Delivery Date.
To reschedule, cancel or otherwise change an Order, a Nortel Networks Company
shall transmit a Purchase Order Change (ANSI X12, Transaction Set 860 or
EDIFACT 2.0 ORDCHG) and Supplier shall transmit a Purchase Order Change
Acknowledgment (ANSI X12, Transaction Set 865 or EDIFACT 2.0 ORDSP) to the
appropriate Nortel Networks Company within two (2) Business Days after receipt
by Supplier of the Purchase Order Change.
Any forecast information shall be sent using ANSI X12, Transaction Set 830 with
a quantity status code of "D" shown in the applicable time period field or
EDIFACT 2.0 DELFOR with a delivery plan status indicator of 4. A Transaction
Set 830 Release (ANSI X12, Transaction Set 830 with a quantity status code of
"C" shown in the applicable time period field on such Transaction Set) or
EDIFACT 2.0 DELFOR with a delivery plan status indicator of 1 shall be
transmitted by a Nortel Networks Company to confirm a Delivery Date for
specific quantities of Products covered by a Blanket Purchase Order, where that
Nortel Networks Company requires Supplier to send an Advanced Shipment Notice
(ANSI X12, Transaction Set 856 or EDIFACT 2.0 DESADV) prior to shipment. Upon
receipt of such Transaction Set 830 Release or EDIFACT 2.0 DELFOR, Supplier
shall transmit to the Nortel Networks Company such Advanced Shipment Notice not
less than the number of days agreed upon between the FCA Delivery Location and
Supplier prior to shipment of the quantity of Products covered by such
Transaction Set 830 Release or EDIFACT 2.0 DELFOR.
Each Nortel Networks Company ordering under this Agreement shall access the
Network at least once on each Business Day to determine whether it has received
any "Invoices" (ANSI X12, Transaction Set 810 or EDIFACT 2.0 INVOIC). A
functional Acknowledgment of Receipt of Transmission (ANSI X12, Transaction Set
997 or comparable EDIFACT 2.0 electronic message) shall be transmitted
immediately upon receipt of an Invoice.
A Nortel Networks Company shall not have any liability to Supplier for Orders
or Invoices erroneously transmitted to or received by Supplier due to the
malfunction of or a defect in the Network or other causes beyond a Nortel
Networks Company's reasonable control. If Supplier receives a distorted EDI
transmission, Supplier shall immediately contact the Network to reject the
distorted transmission and request that such transmission be resent. If
Supplier receives an Order by EDI transmission stating a quantity and/or price
significantly higher or lower than the typical quantity and/or Price shown on
Orders issued by that Nortel Networks Company ordering location, Supplier shall
immediately contact such ordering location to confirm the accuracy of the
electronically transmitted Order.
<PAGE>
CONFIDENTIAL
Each Party shall adopt as its signature an electronic identification consisting
of symbol(s) or code(s) which shall be affixed to or contained in each document
transmitted by such Party ("Signatures"). Each Party agrees that its Signature
shall be sufficient to verify that such Party originated and authorized such
document. Each Party shall use reasonable efforts to not disclose the Signature
of the other Party to any unauthorized third party.
Any document properly transmitted pursuant to this Part I of Exhibit E shall be
deemed to be a "writing" or "in writing", and any such document when
containing, or to which there is affixed, a Signature ("Signed Documents")
shall be deemed for all purposes (a) to have been duly authorized and executed
and (b) to constitute an "original" when printed from electronic files or
records established and maintained in the normal course of business. The
Parties agree not to contest the validity or enforceability of Signed Documents
under the provisions of any applicable law relating to whether certain
agreements are to be in writing or signed by the Party to be bound thereby.
Signed Documents, if introduced as evidence on paper in any judicial,
arbitration, mediation or administrative proceedings, shall be admissible as
between the Parties to the same extent and under the same conditions as other
business records originated and maintained in documentary form.
PART II
TECHNICAL DATA INTERCHANGE ("TDI") TRANSMISSION
This Part II of Exhibit E contemplates the electronic transmission of various
types of data files, including but not limited to engineering and material
specifications, drawings, computer-aided designs ("CADs"), models, plot and
flat files ("Technical Data Interchange" or "TDI"). The TDI transmissions
between each Nortel Networks Company and Supplier shall be governed by the
Agreement and this Part II of Exhibit E.
TDI transmissions shall be made through a third-party computer network with
which each of the Nortel Networks Companies and Supplier have a services
agreement ("Network"). Each Party shall be responsible for its respective costs
incurred in sending and receiving TDI transmissions.
Supplier shall access the Network at least once on each Business Day to
determine whether it has received any TDI transmissions.
Supplier acknowledges and agrees that a Nortel Networks Company shall not have
any liability for TDI transmissions erroneously transmitted to or received by
Supplier due to a malfunction of or a defect in the Network or other causes
beyond a Nortel Networks Company's reasonable control. If Supplier receives a
distorted TDI transmission, Supplier shall immediately contact the Network to
reject the distorted transmission and request that such transmission be resent.
Supplier shall comply with such security precautions and rules as may be
initiated by the Network to protect TDI transmissions from unauthorized access.
Supplier shall treat each TDI transmission as confidential information under
the applicable provisions of the Agreement.
Each Party shall adopt as its signature an electronic identification consisting
of symbol(s) or code(s) which shall be affixed to or contained in each document
transmitted by such Party ("Signature"). Each Party agrees that its Signature
shall be sufficient to verify that such Party originated such document. Each
Party shall use reasonable efforts to not disclose the Signature of the other
Party to any unauthorized third party.
Page 2
<PAGE>
CONFIDENTIAL
EXHIBIT F
MONTHLY REPORTS
1. Supplier will, upon Nortel's request, provide monthly reports in the
following areas:
a) Repair and Return;
b) Baseline Report;
c) General Business.
2. Supplier shall provide a Unit Failure Analysis report on all field
returned Products and a Component Failure Analysis report on a monthly
basis to Nortel Networks' Repair Manager, to Nortel Networks' Quality
Manager and to Nortel Networks' Product Brand Manager. This report which
will be issued no later than three (3) Business Days after the start of
every month shall contain the following information:
a) The number of Products delivered to Nortel Networks (on a per PEC
level) in previous month.
b) The number of Products returned to Supplier (on a per PEC level)
in previous month.
c) The number of Products delivered to Nortel Networks (on a per PEC
level) year to date.
d) The number of Products returned to Supplier (on a per PEC level)
year to date.
e) The number of Products delivered to Nortel Networks (on a per PEC
level) to date.
f) The number of Products returned to Supplier (on a per PEC level)
to date.
g) Number of replacement devices of current month per PEC code.
h) Number of replacement devices cumulative per PEC code.
i) Post Repair Information on a per unit basis returned to Supplier
for repair under the "like-for-like" program for the previous
month to include the following information:
- Symptoms of replacement devices per unit;
- Cumulative In-service time (in months) per PEC code;
- Annualized replacement rate per PEC code.
j) Trend chart in time of replacement rate value (RpR)
k) Actual MTBF measurement. Actual annualized MTBF will be calculated
from the cumulative replacement rate recorded monthly. Based on
results, additional requirements can be determined upon agreement
of both Parties.
l) On Time service level for 1) Repair and Return 2) Retrofit 3) FCFA
4) RMA.
For all occurrences of Product failure in the field, analysis results,
corrective actions and implementation plan have to be included in the
monthly report.
3. From the date the Products will have successfully passed the Acceptance
Program in accordance with Section 4 of the Agreement, Supplier shall
provide to Nortel Networks' Repair Manager, to Nortel Networks' Quality
Manager and to Nortel Networks' Product Brand Manager a monthly "Minimum
Field Baseline" report indicating the minimum applicable release level
(number) for the in-service operation of the Products and a "New Product
Shipped Baseline". The reports shall provide the details of specific
Product releases for each applicable Software load. The reports shall
contain aforementioned information for all current and previous releases
of the Products, and clearly indicate for both Hardware and Software:
a) backward and forward compatibility;
b) upgradability from any release to any other release;
c) the current Product releases.
4. From the date the Products will have successfully passed the Acceptance
Program in accordance with Section 4 of the Agreement, Supplier shall
provide to Nortel Networks' Product Brand Manager a monthly "General
Business" report which includes the following information:
a) Number of Products (on a per PEC level) delivered to Nortel
Networks in the previous month.
b) Total business in dollars on a per PEC level delivered to Nortel
Networks in the previous month.
c) Number of Products (on a per PEC level) delivered year to date to
Nortel Networks.
d) Total business in dollars on a per PEC level delivered year to
date to Nortel Networks.
e) Number of Products (on a per PEC level) delivered to date to
Nortel Networks.
f) Total business in dollars on a per PEC level delivered to date to
Nortel Networks.
g) Total number of shipments that were missed or delivered short by
Supplier in the previous month.
h) Price in effect on a per PEC level in the previous and current
months.
i) Prices paid for Nortel Networks proprietary components in the last
month.
j) Total number of PRS and CSR raised in the previous month against
the Products and a summary of each problem.
k) Total number of calls received from the Nortel Networks Customer
Service center in the previous month.
5. In addition to the above, Nortel Networks may, from time to time, request
that Supplier provides detailed Unit Failure Analysis and Component
Failure Analysis reports.
<PAGE>
CONFIDENTIAL
EXHIBIT G
CHANGE NOTIFICATION
(Example)
Page 1 of 2
<TABLE>
<S><C>
- --------------------------------------------------------------------------------
1. SUPPLIER INFORMATION: |2. PRODUCT CHANGE NOTICE:
| 1997xxxx
| ISSUE: 01
- ------------------------------------------------|-------------------------------
3. ISSUE DATE: |4. PRODUCT IDENTIFICATION:
| MAJOR SYSTEM:
| SUB SYSTEM :
| HWARE: ? FWARE: ? SWARE: ? PLUGIN: ?
- ---------------------|----------------------------------------------------------
5. NEW PROD RLSE |7. NEW CLEI CODE |6. OLD PROD RLSE |8. OLD CLEI CODE
NTxxxxxx tbd | tbd | NTxxxxxx xx | xxxxxxxxx
- ---------------------|-----------------|--------------------|-------------------
9. ASSOCIATED PRODUCTS OR CHANGES AFFECTED:
- --------------------------------------------------------------------------------
10. DRAWING NUMBER: |11. CHANGE CLASSIFICATION:
ADxxxxxx | A/AC/B.......
- ----------------------------------------------|---------------------------------
12. CLASSIFICATION SUBSTANTIATION:
- --------------------------------------------------------------------------------
13. REASON FOR CHANGE:
- --------------------------------------------------------------------------------
14. DESCRIPTION OF CHANGE:
VERIFICATION PROCEDURES:
BACKOUT PROCEDURES:
- --------------------------------------------------------------------------------
15. EFFECT OF CHANGE:
Enhanced features and easier installability.
SAFETY HAZARD: ? FIRE HAZARD : ? SRVC AFFCTG: ? TRANS AFFCTG: ?
MNTNCE AFFCTG: ? RELIA AFFCTG: ? POWR AFFCTG: ? TRAF AFFCTG: ?
- --------------------------------------------------------------------------------
16. MATERIAL AFFECTED:
- --------------------------------------------------------------------------------
17. DOCUMENTATION AFFECTED:
- --------------------------------------------------------------------------------
<PAGE>
CONFIDENTIAL
Page 2 of 2
- --------------------------------------------------------------------------------
18. IMPLEMENTATION DATE: |19. CHANGE COMPLETION DATE:
MM/DD/YY | N/A
- --------------------------------------------------------------------------------
20. MODIFICATION LOCATION:
N/A
TRIALED: N (Field Lab Na)
- --------------------------------------------------------------------------------
21. INSTALLATION HOURS AND MATERIAL COST:
HOURS: N/A
COST : N/A
- --------------------------------------------------------------------------------
22. LOCATION AND QUANTITY OF EQUIPMENT:
N/A
- --------------------------------------------------------------------------------
23. ATTACHMENTS:
None
- --------------------------------------------------------------------------------
24. COMMENTS:
</TABLE>
Page 2
<PAGE>
CONFIDENTIAL
EXHIBIT H
TECHNICAL ASSISTANCE
I. TECHNICAL ASSISTANCE BY SUPPLIER/NORTEL NETWORKS
1. It shall be Nortel Networks' responsibility and cost if Nortel Networks
elects to provide `first line' (Level 1) technical assistance and support
to its customers. However, Nortel Networks may purchase Level 1 Support
for its customers from Supplier at the prices set forth in Exhibit D.
Level 1 Support shall consist of the following:
LEVEL 1 SUPPORT:
a) Telephone Service Desk
b) On site support
c) Corrective action and logging
d) Product alarm knowledge
e) Escalate and report problems
f) Communication junction to allow Supplier access to customers' sites
g) Log and track problems on Nortel Networks CSR database
h) Isolate subsystem faults
i) Product temporary system solutions
j) Software upgrade loads distribution to customers
k) Local spares holding
l) Manage return of defective units to Supplier
m) Telephone Technical Support in accordance with Section III,
Paragraph 5(a) of this Exhibit.
I. LEVEL 2 SUPPORT
If requested by Nortel Networks, Supplier shall provide, to Nortel
Networks and to Nortel Networks' customers, twenty-four (24) hours a
day, seven (7) days a week, "Second line" (Level 2) technical
assistance which will include the services listed below. Nortel
Networks may purchase Level 2 Support from Supplier at the price set
forth in Exhibit D.
LEVEL 2 SUPPORT:
a) Provide assistance at the request of Nortel Networks
b) Provide Supplier technical support contacts (24 hours a day in
accordance with Section III, Paragraph 5(b) of this Exhibit
c) Log and track problems using Nortel Networks' PRS system
d) Perform in-house simulation and testing
e) Provide remote modem access to Nortel Networks' Technical Service
center
f) Deliver Software upgrades and Software builds to Nortel Networks'
distribution center
g) Perform escalation and reporting to Nortel Networks
h) Provide Emergency Site Support (at customer/Nortel Networks site)
III. OTHER TECHNICAL ASSISTANCE BY SUPPLIER
1. Supplier shall at no cost to Nortel Networks, provide Product training
information and Documentation During the Term of the Agreement,
Supplier shall provide to Nortel Networks, at no charge to Nortel
Networks, provided that such training is held at Nortel Networks'
facility, four (4) three (3) day training programs for no more than six
(6) Nortel Networks technicians per session and training documentation
on Products such that Nortel Networks' personnel shall be enabled to
train other Nortel Networks personnel and customers. Supplier warrants
and shall justify to Nortel Networks that personnel assigned to do the
training is qualified to do so. Trainees travel, accommodation, and per
diem expenses will be covered by Nortel Networks.
<PAGE>
CONFIDENTIAL
2. As Nortel Networks accepts additional Products under this Agreement,
Supplier shall provide to Nortel Networks' personnel, at no charge to
Nortel Networks, and at times and places designated by Supplier, training
and training documentation on such additional Products such that Nortel
Networks' personnel shall be able to train other Nortel Networks
personnel and customers.
3. Any additional training which Nortel Networks may require from Supplier
for its own benefit or for the benefit of its customers shall be
requested by Nortel Networks, and carried out by Supplier, at times and
places and in accordance with prices as agreed upon between Nortel
Networks and Supplier at the time such training is requested by Nortel
Networks.
4. Supplier shall provide to the designated personnel of Nortel Networks the
technical assistance set out in this Exhibit H in respect of each Product
manufactured and supplied by Supplier
a) at prices set forth in Exhibit D for the Term;
b) after the Term, the technical assistance shall be subject to the
provisions of Section 16 [CONTINUING AVAILABILITY OF REPAIR
SERVICES] of this Agreement and shall be at the prices set forth
in Exhibit D.
5. Telephone access to qualified Supplier's technical personnel shall be
supplied in accordance with the following structure:
a) NON-URGENT TECHNICAL SUPPORT (AT NO CHARGE DURING THE TERM): Pager
service will be available Monday to Friday between the hours of
8:00 a.m. and 8:00 p.m. EST (The waiting period for qualified
technical assistance shall not exceed thirty (30) minutes). At all
other times, voice-mail service shall be available at the same
number. The telephone number to reach Supplier's non-urgent
technical support personnel at all times will be provided by
Supplier.
b) URGENT TECHNICAL SUPPORT (SUPPLIED AS PART OF LEVEL 2 SUPPORT):
Pager service will be available twenty-four (24) hours a day,
seven (7) days a week. The telephone number to reach Supplier's
emergency support personnel at all times will be provided by
Supplier. The waiting period for qualified technical assistance
shall not exceed twenty (20) minutes. Supplier's technical
assistance personnel shall be equipped with mobile or cellular
phones at all times.
Supplier shall advise Nortel Networks of any telephone number change for
this service at least thirty (30) calendar days prior to the change.
6. During the Term, Supplier shall provide to Nortel Networks at no charge
the following technical assistance ("Level 3 Support) which shall consist
of the following services:
LEVEL 3 SUPPORT:
a) Isolate subsystem and design faults (in-house)
b) Perform Root Cause Analysis
c) Provide Spare Buffer
d) Maintain Emergency Spares holding (at Supplier's premises)
e) Update Engineering Changes (ECs) on PAS
f) Provide design authority support interfaces
g) Analyze and resolve design problems (Hardware and Software)
h) Prepare patches and modifications
i) Incorporate patches into new builds, test perform sanity checks
and deliver the builds and Hardware to Nortel Networks'
distribution center
j) Provide Product temporary solutions
k) In-house simulation
l) Database problem solution
m) Third party product support
n)
7. Notwithstanding any provision set forth in this Exhibit H and/or the
Agreement, Supplier will provide on-site support and assistance at no
cost to Nortel Networks in the following cases:
a) Where Nortel Networks is unable to resolve a problem through
normal maintenance activities and technical support is provided
remotely by Supplier.
b) Where Nortel Networks is able to resolve a problem but cannot
determine the root cause of the problem.
c) Where a problem with the Product leads a customer to specifically
request technical presence.
<PAGE>
CONFIDENTIAL
d) Where a problem with the Product exists in the field and
Supplier's presence is requested by Nortel Networks Senior
Management.
However, Nortel Networks will reimburse Supplier for its actual and
reasonable expenses according to the technical assistance rates as set
forth in Exhibit D in cases where the problem which initiated the
requirement for the on-site support is attributed to reasons that are not
related to a fault or deficiency in the Products.
8. Any other technical support which Supplier shall provide to Nortel
Networks or its customers shall be pursuant to a written request from
Nortel Networks' designated personnel, or such other individual
designated, from time to time, by Nortel Networks. Such support shall be
at prices set forth in Exhibit D and on terms and conditions agreed upon
by the Parties.
9. Technical assistance support will be provided remotely to Nortel Networks
and/or to the customer in conjunction with Nortel Networks, but not by
Supplier alone (unless authorized in writing to do so by Nortel
Networks).
10. Supplier will provide Nortel Networks with a template of required
information to be supplied by Nortel Networks when referring a problem
for resolution.
11. Supplier will document all known problems and deficiency (service reports
[SR] referred by Nortel Networks and discovered by development) with the
Products in Nortel Networks' PRS database.
12. Supplier will provide Pager Response Time and Mobilization based on the
Problem Classification as prescribed in the following table.
<TABLE>
==================================================================================================
<CAPTION>
PROBLEM CLASSIFICATION* PAGER RESPONSE TIME MOBILIZATION
--------------------------------------------------------------------------------------------------
<S> <C> <C>
E1 & E2 20 minutes First available flight
--------------------------------------------------------------------------------------------------
E3 & E4 N/A Next working day
--------------------------------------------------------------------------------------------------
Non service affecting N/A Scheduled
==================================================================================================
</TABLE>
*Problem Classifications are as defined below:
The turnaround times for response and closure of SRs are summarized
below.
<TABLE>
--------------------------------------------------------------------------------------------------
<CAPTION>
SR PRIORITY SR RESPONSE SR CLOSURE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
E1/E2 WORK UNTIL CLOSED WORK UNTIL CLOSED
--------------------------------------------------------------------------------------------------
E3/E4 30 CALENDAR DAYS 45 CALENDAR DAYS
--------------------------------------------------------------------------------------------------
MJ 14 CALENDAR DAYS 30 CALENDAR DAYS
--------------------------------------------------------------------------------------------------
MN 42 CALENDAR DAYS 180 CALENDAR DAYS
--------------------------------------------------------------------------------------------------
</TABLE>
The progress of the SR resolution is continually updated in the CSDS
database. Information concerning the SR is exchanged between the
Technical Services representative and the customer until an acceptable
solution is achieved.
13. Supplier will provide support consistent with the Problem Classification
Definitions as defined below. Target resolution date is from the date the
PRS is referred to Supplier.
14. Problem Classification:
E1 EMERGENCY OUTAGE/SYSTEM FAIL
- Resolution Objective = Immediate and continuous
(on a 24-hour-a-day basis)
- Escalation = Technical Support Manager
(1 hour)
Technical Support Director
(24 hours)
- Updates to Nortel Networks = Daily (or as agreed with customer)
- Written report at point of closure to E3
E2 POTENTIAL TRAFFIC DEGRADATION OR OUTAGE
- Resolution Objective = Immediate and continuous
- Escalation = Technical Support Manager
<PAGE>
CONFIDENTIAL
(1 hour)
Technical Support Director
(24 hours)
- Updates to Nortel Networks = Daily (or as agreed with customer)
- Written report at point of closure to E3
E3 E1 FOLLOW-UP (OPENED INTERNALLY)
- Target Resolution = 14 calendar days
- Updates to Nortel Networks = weekly
E4 E2 FOLLOW-UP (OPENED INTERNALLY)
- Target Resolution = 14 calendar days
- Updates to Nortel Networks = weekly
MJ MAJOR-SERIOUS SERVICE AFFECTING INCIDENT OR OPERATIONAL IMPACT
- Immediate Objective = Fix/workaround within 4 hours
- Escalation = Technical Support Manager
(4 hours)
Technical Support Director
(24 hours)
- Target Resolution = 30 calendar days
- Updates to Nortel Networks = weekly
MN MINOR NON-SERVICE AFFECTING QUERY OR SERVICE REQUEST
- Procedural Deficiencies
- Documentation Flaws
- Operational Product Improvement
13. The following will be the PRIORITY LEVEL DEFINITIONS.
E1 EMERGENCY OUTAGE/SYSTEM FAIL
- System or Major System Inoperative
- Major Loss of Service
- (Escalation into Nortel Networks and customer management)
E2 POTENTIAL TRAFFIC DEGRADATION OR OUTAGE
- Potential/Partial Loss of Service
- Management System Down/Unavailable
- Loss of Redundancy/Redundant System
E3 E1 FOLLOW-UP (NOT RAISED BY CUSTOMER)
- An E3 is opened after closure of an E1
- Root Cause Analysis (RCA) performed
E4 E2 FOLLOW-UP (NOT RAISED BY CUSTOMER)
- An E4 is opened after closure of an E2
- Root Cause Analysis (RCA) performed
MJ MAJOR-SERIOUS SERVICE AFFECTING INCIDENT OR OPERATIONAL IMPACT
- Traffic errors
- Hardware or Software lockups/unusable
- Any fault that prevents traffic from being put into service
MN MINOR OPERATIONAL IMPACT
- Procedural Deficiencies
- Documentation Flaws
- Operational Product Improvement.
<PAGE>
CONFIDENTIAL
EXHIBIT I
RUS
DEBARMENT CERTIFICATE
S A M P L E
- --------------------------------------------------------------------------------
CERTIFICATION REGARDING DEBARMENT, SUSPENSION, INELIGIBILITY AND VOLUNTARY
EXCLUSION - LOWER TIER COVERED TRANSACTIONS
- --------------------------------------------------------------------------------
This certification is required by the regulations implementing Executive Order
12549, Debarment and Suspension, 7 CFR Part 3017, Section 3017.510,
Participants' responsibilities. The regulations were published as Part IV of
the January 30, 1989, FEDERAL REGISTER (pages 4722-4733).
(BEFORE COMPLETING CERTIFICATION, READ INSTRUCTIONS ON REVERSE)
(1) The prospective lower tier participant certifies, by submission of this
proposal, that neither it nor its principals is presently debarred,
suspended, proposed for debarment, declared ineligible, or voluntarily
excluded from participation in this transaction by any Federal
department or agency.
(2) Where the prospective lower tier participant is unable to certify to
any of the statements in this certification, such prospective
participant shall attach an explanation to this proposal.
________________________________________________________________________________
Organization Name PR/Award Number or Project Name
________________________________________________________________________________
Name and Title of Authorized Representative
________________________________________________________________________________
Signature Date
________________________________________________________________________________
<PAGE>
CONFIDENTIAL
INSTRUCTIONS FOR CERTIFICATION
1. By signing and submitting this form, the prospective lower tier
participant is providing the certification set out on the reverse side
in accordance with these instructions.
2. The certification in this clause is a material representation of fact
upon which reliance was placed when this transaction was entered into.
If it is later determined that the prospective lower tier participant
knowingly rendered an erroneous certification, in addition to other
remedies available to the Federal Government, the department or agency
with which this transaction originated may pursue available remedies,
including suspension and/or debarment.
3. The prospective lower tier participant shall provide immediate written
notice to the person to which this proposal is submitted if at any time
the prospective lower tier participant learns that its certification
was erroneous when submitted or has become erroneous by reason of
changed circumstances.
4. The terms "covered transaction", "debarred", "suspended", "ineligible",
"lower tier covered transaction", "participant", "person", "primary
covered transaction", "principal", "proposal", and "voluntarily
excluded", as used in this clause, have the meanings set out in the
Definitions and Coverage sections of rules implementing Executive Order
12549. You may contact the person to which this proposal is submitted
for assistance in obtaining a copy of those regulations.
5. The prospective lower tier participant agrees by submitting this form
that, should the proposed covered transaction be entered into, it shall
not knowingly enter into any lower tier covered transaction with a
person who is debarred, suspended, declared ineligible, or voluntarily
excluded from participation in this covered transaction, unless
authorized by the department or agency with which this transaction
originated.
6. The prospective lower tier participant further agrees by submitting
this form that it will include this clause titled "Certification
Regarding Debarment, Suspension, Ineligibility and Voluntary Exclusion
- Lower Tier Covered Transactions", without modification, in all lower
tier covered transactions and in all solicitations for lower tier
covered transactions.
7. A participant in a covered transaction may rely upon a certification of
a prospective participant in a lower tier covered transaction that it
is not debarred, suspended, ineligible, or voluntarily excluded from
the covered transaction, unless it knows that the certification is
erroneous. A participant may decide the method and frequency by which
it determines the eligibility of its principals. Each participant may,
but is not required to, check the Non-procurement List.
8. Nothing contained in the foregoing shall be construed to require
establishment of a system of records in order to render in good faith
the certification required by this clause. The knowledge and
information of a participant is not required to exceed that which is
normally possessed by a prudent person in the ordinary course of
business dealings.
9. Except for transactions authorized under paragraph 5 of these
instructions, if a participant in a covered transaction knowingly
enters into a lower tier covered transaction with a person who is
suspended, debarred, ineligible, or voluntarily excluded from
participation in this transaction, in addition to other remedies
available to the Federal Government, the department or agency with
which this transaction originated may pursue available remedies,
including suspension and/or debarment.
<PAGE>
CONFIDENTIAL
EXHIBIT J
INTENTIONALLY DELETED
<PAGE>
CONFIDENTIAL
EXHIBIT K
MARKETING SUPPORT
Nortel Networks may, at its option, request Supplier to provide the following
marketing support at no cost:
1. Supplier will assist Nortel Networks in providing point-by-point
responses to RFQs (Request for Quotations) and RFIs (Request for
Information) with respect to the Products.
2. Supplier will review and provide feedback on promotional material.
3. Supplier will make available non-operational demo units which have the
same "Look" as the final Products.
4. For a period of six (6) months after the Effective Date, Supplier will,
upon request of Nortel Networks, make joint sales presentations to
potential and existing customers of Nortel Networks.
5. Subject to the confidentiality provisions of the Agreement, Nortel
Networks and Supplier will mutually agree to a jointly-prepared press
release to be delivered over the business wire by Nortel Networks; Such
press release will describe the nature and scope of the Nortel Networks
- Supplier relationship.
6. With Nortel Networks prior written approval and subject to the
confidentiality provisions of the Agreement, Supplier may include a
summary of Nortel Networks information on its website to include Nortel
Networks logo, descriptions of the Nortel Networks-Supplier
relationship, complementary products and customers.
7. Supplier may be invited to participate in Nortel Networks events to
include tradeshows, industry forums, sponsored customer events,
training events and partner pavilions. SONOMA may invite NORTEL to
participate in SONOMA events to include tradeshows, industry forums,
sponsored customer events, training events and partner pavilions.
8. NORTEL NETWORKS agrees to display SONOMA/rebranded product at industry
tradeshows where they have a booth presence and such display is
appropriate.
9. Nortel Networks, with input and assistance from SONOMA, will create
customer collateral and sales tools on any rebranded/resell products,
to include, but not be limited to, datasheets, brochures,
presentations, application notes, white papers and customer profiles.
<PAGE>
CONFIDENTIAL
EXHIBIT L
TRADE AGREEMENT - PROCEDURES
1.1 Supplier shall perform all administrative actions required to qualify
Products and maintain qualification for preferential treatment under
the rules of any applicable trade treaty between Canada, USA and
Mexico, and any other applicable trade agreements including, without
limitation, the North American Free Trade Agreement ("NAFTA"). If a
Product qualifies under any one of these agreements, Supplier shall
prepare and distribute an Exporter's Certificate of Origin according to
Sections 1.2 and 1.3 below, whichever applies, and any other documents
required. Supplier shall respond to the relevant trade agreement's
Exporter's Certificate of Origin questionnaires and assist each Nortel
Networks Company in resolving any Product eligibility issues. Supplier
alone shall bear responsibility for all penalties and costs resulting
from the relevant trade agreement's Exporter's Certificate of Origin
subsequently being determined to be invalid.
1.2 If a relevant trade agreement's Exporter's Certificate of Origin is
prepared for each shipment, Supplier shall (a) retain the original
relevant trade agreement's Exporter's Certificate of Origin in
Supplier's files with appropriate backup documentation, (b) attach a
copy of the 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 relevant trade
agreement's Exporter's Certificate of Origin attached."
1.3 If a blanket relevant trade agreement's Exporter's Certificate of
Origin is prepared, Supplier shall: (a) retain the original relevant
trade agreement's Exporter's Certificate of Origin in Supplier's files
with appropriate backup documentation, (b) mark the customs/shipping
documents for the qualifying Product with the legend: "Copy of blanket
relevant trade agreement's Exporter's Certificate of Origin on file at
Nortel Networks customs offices in Milton, Ontario (Canada) and in
Tonawanda, NY (USA)," and (c) mail copies of the blanket relevant trade
agreement's Exporter's Certificate of Origin to the following offices:
Canada: USA:
Nortel Networks Corporation Nortel Networks Inc.
Dept. 1560 77 Oriskany Drive
901 Steeles Avenue Tonawanda, NY, 14150
Milton, Ontario, Canada L9T 4B6 USA
<PAGE>
CONFIDENTIAL
EXHIBIT M
NOTICES
SUPPLIER : Sonoma Systems
4640 Admiralty Way, Suite 600
Marina del Rey, CA 90292
Attention: Contracts Manager/Chief Financial
Officer
Facsimile No: 310 305 2510
NORTEL NETWORKS: Nortel Networks Corporation
8200 Dixie Road, Suite 100
Brampton, Ontario
Canada L6T 5P6
Attention: Vice-President and Deputy General
Counsel
Facsimile No: (905) 863-8425
and: Nortel Networks Inc.
2375B North Glenville
Richardson, TX
75082
Attention: Senior Manager, OEM Product Management
Facsimile No: (972) 684 3920
<PAGE>
CONFIDENTIAL
EXHIBIT N
ESCROW TERMS AND CONDITIONS AND
ESCROW AGREEMENT
1. ESCROW TERMS AND CONDITIONS
1.1 To ensure uninterrupted availability of the Hardware and Software and
their ongoing maintenance and support, by March 15, 2000, Nortel
Networks and Supplier shall enter into an escrow agreement ("ESCROW
AGREEMENT") with a mutually agreeable escrow agent ("ESCROW AGENT").
The Escrow Agreement shall be in a form and content reasonably
acceptable to the Parties hereto and shall contain, as a minimum and
without limitation, the terms and conditions set forth in this Article
1 and shall, when executed by all the Parties, be annexed hereto.
1.2 The Escrow Agreement shall provide, inter alia, for the deposit into
escrow with the Escrow Agent, within twenty (20) calendar days of its
execution, for storage at such Escrow Agent's premises, of all the
Hardware Technical Information (as such term is defined in Article
1.12) and all Software Source Code (as such term is defined in Article
1.13) as are available and as are used by Supplier (or its
subcontractors) for the manufacturing of Hardware and the creation of
the Software and as are reasonably acceptable in form and content to
Nortel Networks (the "ESCROW MATERIALS").
1.3 Supplier shall update the Escrow Materials as each new release of
Hardware Technical Information and Software Source Code are created.
Costs for updating and management of the Escrow Materials shall be for
the account of Supplier. Supplier will use due care in ensuring the
completeness and accuracy of the Escrow Materials provided. The Escrow
Agent fee shall be paid by Nortel Networks.
Immediately following the Release Date (as such term is defined in
Article 1.6), at the request of Nortel Networks, Supplier shall either
verify to Nortel Networks that the Escrow Materials is the most recent
version of the Hardware Technical Information and Software Source Code
then being used in Supplier's and its subcontractors' factories in
their day-to-day operations, or promptly furnish to Nortel Networks
such most recent version of the Hardware Technical Information and
Software Source Code.
1.4 Escrow Materials shall remain under seal and unopened unless and until
Nortel Networks is entitled to exercise its rights under the Escrow
Agreement. Supplier shall be entitled to examine the Escrow Materials
at the Escrow Agent's location at any time during normal business
hours.
1.5 Supplier will provide to Nortel Networks, prior to the deposit of the
relevant Escrow Materials pursuant to Article 1.2 above, such technical
assistance, at an agreed upon location, as it reasonably requires to
allow competent technical employee(s) of Nortel Networks to understand
the Escrow Materials and to establish the sufficiency of its content.
All documentation and other material created in the course of such
technical assistance shall form part of Escrow Materials. Nortel
Networks, at its option and expense, may request that the completeness
and accuracy of any Escrow Materials be verified by the Escrow Agent or
another party reasonably acceptable to the Parties. Such verification
may be requested once per Escrow Materials deposit to the Escrow Agent.
Supplier may in its discretion and at its expense designate a
representative to be present at the verification.
1.6 The Escrow Agreement shall provide that the Escrow Agent will release
the Escrow Materials to Nortel Networks on a release date ("RELEASE
DATE") which is five (5) calendar days after the date of Nortel
Networks' written request for the release of the required Escrow
Materials accompanied by a declaration from a senior representative of
Nortel Networks stating the particulars of the reasons for its request
and confirm that copy of such request and declaration have been
delivered to Supplier.
1.7 Subject to the provisions contained in Article 1.8, Supplier hereby
grants to Nortel Networks a [*] worldwide license ("LICENSE") for a
three (3) year period commencing as of the Release Date covering:
(a) the non-exclusive right to use, and to sublicense the use to
one or more subcontractors of, the Patent Rights as described
in Article 1.11; and/or
(b) the non-exclusive right to use and modify Escrow Materials to
manufacture or have manufactured the Products; and/or
(c) the non-exclusive right to use, and to sublicense the use to
one or more subcontractors of, the Escrow Materials to
maintain, support and repair the Hardware and to diagnose and
correct errors in, and to generally support and maintain, the
Software; and
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
(d) the right to, directly or indirectly, sell and support the
Products including those modified hereunder.
1.8 A License shall solely be obtained by Nortel Networks hereunder,
(a) subject to the terms and conditions contained in this Article
1, and
(b) upon the occurrence of any one of the Release Conditions
described in Article 1.9 as identified in Nortel Networks'
request pursuant to Article 1.6, and
(c) effective only from the Release Date, giving effect to the
release from escrow of the Escrow Materials, and
(d) solely for the purpose of supplying and supporting Products
to: (i) existing Nortel Networks customers as of the Release
Date and (ii) customers to whom Nortel Networks has offered to
sell the Products in response to an RFP or RFQ prior to the
Release Date.
The aforesaid rights shall include the right to communicate relevant
portion of the Escrow Materials to subcontractors for the purpose of
the exercise of the rights granted to Nortel Networks herein provided,
however, that the recipients of the Escrow Materials be advised by
Nortel Networks at the time, or before such communication, that
proprietary information is being communicated and that such information
is to be kept confidential and not used except as permitted hereunder
and such recipients shall enter into a non-disclosure agreement with
Nortel Networks .
The Parties recognize that Nortel Networks, in the exercise of its
rights hereunder, may make improvements, developments, inventions,
changes or innovations related to Escrow Materials (hereinafter called
"IMPROVEMENTS"). Nortel Networks shall have sole ownership of all
rights in and to the information and intellectual property rights
comprising Improvements.
The Parties acknowledge that Supplier shall have sole ownership of all
rights in and to the information and intellectual property comprising
Escrow Materials.
1.9 The following shall be the release conditions ("RELEASE CONDITIONS") in
order for Nortel Networks to have access to the Escrow Materials and to
exercise the License granted hereunder:
(a) the institution by Supplier of insolvency, receivership or
bankruptcy proceedings or any other material proceedings for
the settlement of its debts, including, without limitation, a
reorganization, a compromise, an arrangement or assignment for
the benefit of its creditors; or the institution of such
proceedings against Supplier, in the event any of the
foregoing has not been settled, terminated or dismissed, as
the case may be, in Supplier's favor within twenty (20)
calendar days after the commencement of any of the foregoing;
or
(b) Supplier's dissolution or ceasing to do business in the normal
course and such event has not been cured, or a plan for the
cure thereof has not been implemented, to the reasonable
satisfaction of Nortel Networks within sixty (60) days of
notice thereof from Nortel Networks; or
(c) if a new owner of Supplier refuses to honor the terms of this
Agreement as it relates to the manufacture, delivery or
support of the Products for Nortel Networks and such event has
not been cured, or a plan for the cure thereof has not been
implemented, to the reasonable satisfaction of Nortel Networks
within sixty (60) days of notice thereof from Nortel Networks;
or
(d) a Change made to the Products in breach of Supplier's
obligations as set forth in Section 5 of the Agreement
(Product and Process Change) and such event has not been
cured, or a plan for the cure thereof has not been
implemented, to the reasonable satisfaction of Nortel Networks
within sixty (60) days of notice thereof from Nortel Networks;
or
(e) Supplier's material failure to comply with the provisions of
Section 6.1.1 of the Agreement (ISO 9001 Certification); or
(f) Supplier's continuing material breach of the terms and
conditions of this Agreement related to Product: (i) delivery,
including without limitation delivery of Product in
conformance with the Specifications, (ii) repair or (iii)
technical assistance and such material breach has not been
cured, or a plan for the cure thereof has not been
implemented, to the reasonable satisfaction of Nortel Networks
within sixty (60) days of notice thereof from Nortel Networks.
1.10 During the period of six (6) months immediately following the Release
Date, Supplier shall make available to Nortel Networks, reasonable
technical assistance to facilitate the exercise of the rights granted
under the License.
<PAGE>
CONFIDENTIAL
Supplier shall be paid, in return for such services and visits,
standard fees based on reasonable rates which Supplier establishes from
time to time for such services and visits for the location from which
the assistance is being provided, plus reasonable travel and living
expenses incurred by Supplier personnel for such visits. Such fees
shall be paid to Supplier by Nortel Networks within thirty (30)
calendar days of invoicing therefor.
1.11 The License granted under Articles 1.7 and 1.8 hereof shall include the
worldwide non-exclusive license under the patents and patent rights
(herein collectively called "PATENT RIGHTS") of Supplier related to the
Products, existing as of the Release Date or issued or granted or
acquired during the term of this License; all patent licenses herein
granted shall commence on the Release Date or when letters patent are
issued or granted if subsequent hereto, and provided this License is
not terminated pursuant to this Agreement, shall continue for the
shortest of the entire term of the respective Patent Rights under which
they are granted or are in force, or for that part of such terms for
which Supplier has the right to grant such licenses, or the duration of
the License.
1.12 For the purpose of this Article 1, "HARDWARE TECHNICAL INFORMATION"
means that technical information necessary for the manufacture of
Hardware, including without limitation, all design, technical,
manufacturing information (including manufacturing processes, drawings
and specifications including circuit schematics) of assemblies,
sub-assemblies and parts, sole source and other components and ASICs
(including the part number, name and location of the supplier)
associated test requirements and lists of associated manufacturing
tools and test equipment as well as repair and maintenance
specifications and test procedures, as are used by Supplier for the
manufacturing of Products.
1.13 For the purpose of this Article 1, "SOFTWARE SOURCE CODE" means the
Software items comprised in the Products in source code form including
all subsequent updates and enhancements thereto as follows: (a) one
copy of the source code of said Software items in machine readable and
printed forms, (b) a list of all commercially available development
tools, editors and compilers necessary to make use of source code of
said Software items (including name and location of supplier) and
copies of any of the foregoing items which are proprietary to Supplier,
and (c) the documentation describing the source code of said Software
items which is required to assemble, test, support, customize and
evolve the Products.
1.14 The Parties acknowledge that the Escrow Materials are 'intellectual
property' within the purview of Section 101 (56) of the United States
Bankruptcy Code 11 U.S.C. 101-1330 and that the Escrow Agreement is an
agreement supplementary to this Agreement under Section 365 (n) of such
Code and that both the Escrow Agreement and the Agreement shall be
governed by Section 365 (n) of such Code in the event Supplier applies
for bankruptcy relief.
1.15 The License shall terminate in the event that Nortel Networks breaches
any material term of the License and such breach is not cured, or a
plan implemented for the cure of such breach, to the reasonable
satisfaction of Supplier, within sixty (60) days of receipt of notice
thereof by Nortel Networks.
1.16 The Escrow Agreement shall terminate at the end of the Term.
ESCROW AGREEMENT
A copy of the Escrow Agreement shall be inserted here once it is executed by all
Parties, as stipulated in Section 30 of the Agreement.
<PAGE>
CONFIDENTIAL
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL (WHICH MAY BE
COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR
TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SAID ACT.
THE SECURITIES EVIDENCED HEREBY ARE SUBJECT TO THE RESTRICTIONS SET FORTH IN AN
AMENDED AND RESTATED RIGHTS AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN
SECURITYHOLDERS OF THE COMPANY (A COPY OF WHICH MAY BE OBTAINED FROM THE
COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SECURITIES THE PERSON ACCEPTING
SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SAID AGREEMENT.
Warrant No. 4 Number of Shares: 6,000,000
(subject to adjustment)
Date of Issuance: February 24, 2000
SONOMA SYSTEMS
COMMON STOCK PURCHASE WARRANT
(Void after February 24, 2005)
Sonoma Systems, a California corporation (the "Company"), for value
received, hereby certifies that Nortel Networks Inc., or its registered assigns
(the "Registered Holder"), is entitled, subject to the terms and conditions set
forth below, to purchase from the Company, at any time or from time to time on
or after the date of issuance and on or before 5:00 p.m. (San Francisco time) on
February 24, 2005, up to 6,000,000 shares of Common Stock, $.01 par value per
share, of the Company, at a purchase price of $4.00 per share. The shares
purchasable upon exercise of this Warrant, and the purchase price per share,
each as adjusted from time to time pursuant to the provisions of this Warrant,
are hereinafter referred to as the "Warrant Shares" and the "Purchase Price,"
respectively.
1. EXERCISE.
(a) This Warrant may be exercised by the Registered Holder, in
whole or in part and at any time or from time to time (in each case subject to
provisions of subsections 1(e) through 1(h) below), by surrendering this
Warrant, with the purchase form appended hereto as EXHIBIT I duly executed by
the Registered Holder or by the Registered Holder's duly authorized attorney, at
the principal office of the Company, accompanied by payment in full, in lawful
<PAGE>
CONFIDENTIAL
money of the United States, of the Purchase Price payable in respect of the
number of Warrant Shares purchased upon such exercise.
(b) The Registered Holder may, at its option, elect to pay
some or all of the Purchase Price payable upon an exercise of this Warrant by
canceling a portion of this Warrant exercisable for such number of Warrant
Shares as is determined by dividing (i) the total Purchase Price so payable in
respect of the number of Warrant Shares being purchased upon such exercise by
(ii) the excess of the Fair Market Value per share of Common Stock (as defined
below) as of the Exercise Date (as defined in subsection 1(c) below) over the
Purchase Price per share. If the Registered Holder wishes to exercise this
Warrant pursuant to this method of payment with respect to the maximum number of
Warrant Shares for which this Warrant is then exercisable that are purchasable
pursuant to this method, then the number of such Warrant Shares so purchasable
shall be equal to the total number of Warrant Shares for which this Warrant is
exercisable as of the Exercise Date, minus the product obtained by multiplying
(x) the total number of Warrant Shares for which this Warrant is exercisable as
of such date by (y) a fraction, the numerator of which shall be the Purchase
Price per share and the denominator of which shall be the Fair Market Value per
share of Common Stock as of the Exercise Date. The Fair Market Value per share
of Common Stock shall be determined as follows:
(i) If the Common Stock is listed on a national
securities exchange, the Nasdaq National Market or another nationally recognized
trading system as of the Exercise Date, the Fair Market Value per share of
Common Stock shall be deemed to be the average of the high and low reported sale
prices per share of Common Stock thereon on the trading day immediately
preceding the Exercise Date (provided that if no such price is reported on such
day, the Fair Market Value per share of Common Stock shall be determined
pursuant to clause (ii) of this subsection 1(b)).
(ii) If the Common Stock is not listed on a national
securities exchange, the Nasdaq National Market or another nationally recognized
trading system as of the Exercise Date, the Fair Market Value per share of
Common Stock shall be deemed to be the amount most recently determined by the
Board of Directors to represent the fair market value per share of the Common
Stock (including without limitation a determination for purposes of granting
Common Stock options or issuing Common Stock under an employee benefit plan of
the Company); and, upon request of the Registered Holder, the Board of Directors
(or a representative thereof) shall promptly notify the Registered Holder of the
Fair Market Value per share of Common Stock. Notwithstanding the foregoing, if
the Board of Directors has not made such a determination within the three-month
period prior to the Exercise Date, then (A) the Board of Directors shall make a
determination of the Fair Market Value per share of the Common Stock within 15
days of a request by the Registered Holder that it do so, and (B) the exercise
of this Warrant pursuant to this subsection 1(b) shall be delayed until such
determination is made.
(c) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in subsection
1(a) above (the "Exercise Date"). At such time, the person or persons in whose
name or names any certificates for Warrant Shares shall be
-2-
<PAGE>
CONFIDENTIAL
issuable upon such exercise as provided in subsection 1(d) below shall be
deemed to have become the holder or holders of record of the Warrant Shares
represented by such certificates.
(d) As soon as practicable after the exercise of this Warrant
in whole or in part, and in any event within 10 days (or, if a determination by
the Company's independent auditors is necessary in connection with such exercise
pursuant to clause (ii) of subsection 1(g) below, then 20 days) thereafter (or,
if any determination by the Company's independent auditors made pursuant to
subsection 1(g) below is challenged by the Registered Holder in accordance with
the provisions of subsection 1(h) below, then within 10 days after conclusion of
the procedures specified in such subsection 1(h)), the Company, at its expense,
will cause to be issued in the name of, and delivered to, the Registered Holder,
or as such Registered Holder may direct:
(i) a certificate or certificates for the number of
full Warrant Shares to which the Registered Holder shall be entitled upon such
exercise plus, in lieu of any fractional share to which the Registered Holder
would otherwise be entitled, cash in an amount determined pursuant to Section 3
hereof; and
(ii) in case such exercise is in part only, a new
warrant or warrants (dated the date hereof) of like tenor, calling in the
aggregate on the face or faces thereof for the number of Warrant Shares equal
(without giving effect to any adjustment therein) to the number of such shares
called for on the face of this Warrant minus the sum of (a) the number of such
shares purchased by the Registered Holder upon such exercise plus (b) the number
of Warrant Shares (if any) covered by the portion of this Warrant cancelled in
payment of the Purchase Price payable upon such exercise pursuant to subsection
1(b) above.
(e) Notwithstanding the foregoing, this Warrant shall become
exercisable as follows:
(i) with respect to 1,500,000 Warrant Shares (the
"First Tranche Warrant Shares"), on the Original Issue Date (as defined in
subsection 2(a) below); and
(ii) with respect to the remaining 4,500,000 Warrant
Shares, on the fifth (5th) anniversary of the Original Issue Date, unless the
exercisability of such remaining Warrant Shares is accelerated pursuant to
subsection 1(f) below.
(f) Exercisability of the remaining Warrant Shares referenced
in clause (ii) of subsection 1(e) above shall be accelerated as follows:
(i) if the Company recognizes (such recognition, the
"Second Tranche Acceleration Event"), with respect to any period commencing on
January 1, 2000 and ending on or prior to December 31, 2000, revenues of
$28,000,000 or more, an additional 2,000,000 Warrant Shares (the "Second Tranche
Warrant Shares") shall become exercisable as of the date of occurrence of the
Second Tranche Acceleration Event (subject to the provisions of subsections 1(g)
through 1(i) below);
-3-
<PAGE>
CONFIDENTIAL
(ii) if the Company receives (such receipt, the
"Third Tranche Acceleration Event"), during any period commencing on January 1,
2000 and ending on or prior to December 31, 2000, purchase orders for the
Company's products and/or services in the aggregate amount of $35,000,000 or
more, an additional 1,000,000 Warrant Shares (the "Third Tranche Warrant
Shares") shall become exercisable as of the date of occurrence of the Third
Tranche Acceleration Event (subject to the provisions of subsections 1(g)
through 1(i) below);
(iii) if the Company recognizes, with respect to any
period commencing on January 1, 2000 and ending on or prior to December 31,
2000, revenues of $35,000,000 or more, one (1) additional Warrant Share shall
become exercisable, as of the date of recognition by the Company of such
revenues, for each $10.00 of such revenues in excess of $35,000,000 so
recognized by the Company (subject to the provisions of subsections 1(g) through
1(i) below), provided that exercisability of not more than 1,500,000 Warrant
Shares (the "Fourth Tranche Warrant Shares") may be accelerated pursuant to this
clause (iii); and
(iv) notwithstanding the foregoing provisions of
subsection 1(e) and this subsection 1(f), if a Change in Control Event (as
defined below) occurs with respect to the Company prior to the earlier of (A)
the date of termination of the OEM Purchase and Sale Agreement, dated as of
February 10, 2000, between the Company and Nortel Networks Inc. (the "OEM
Agreement") or (B) the date (the "IPO Date") of the closing of the Company's
first underwritten firm commitment public offering of the Company's Common Stock
for sale to the public pursuant to a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), then, effective as of the date
of such Change in Control Event, (x) all of the Third Tranche Warrant Shares and
the Fourth Tranche Warrant Shares shall, to the extent they have not become
exercisable hereunder prior to such date, become exercisable in full regardless
of the satisfaction (or lack thereof) of the conditions set forth in clauses
(ii) and (iii), respectively, of this subsection 1(f), and (y) if such Change in
Control Event is a Special Change in Control Event, then, in addition to the
acceleration of exercisability of the Third Tranche Warrant Shares and the
Second Tranche Warrant Shares pursuant to clause (iv)(x) of this subsection
1(f), 500,000 of the Second Tranche Warrant Shares shall, to the extent they
have not become exercisable hereunder prior to such date, become exercisable
regardless of the satisfaction (or lack thereof) of the conditions set forth in
clause (i) of this subsection 1(f), and the number of Second Tranche Warrant
Shares the acceleration of exercisability of which remains subject to the
satisfaction of the conditions set forth in clause (i) of this subsection 1(f)
shall be reduced to 1,500,000.
(g) Any determination of whether the Second Tranche
Acceleration Event or the Third Tranche Acceleration Event has occurred, and any
determination of whether (and to what extent) exercisability of the Fourth
Tranche Warrant Shares has been accelerated hereunder shall, subject to the
provisions of subsection 1(h) below, be made by the Company's independent
auditors (and the Company shall cause such auditors to make such determination
at the Company's expense), (i) as promptly as reasonably practicable upon a
request for such determination by the Registered Holder, (ii) not later than 10
days after any Exercise Date in the event that the corresponding exercise of
this Warrant purports to exercise the same with respect to any Second Tranche
Warrant Shares, Third Tranche Warrant Shares or Fourth Tranche
-4-
<PAGE>
CONFIDENTIAL
Warrant Shares which have not been determined to have become exercisable in
accordance with this subsection 1(g) or by operation of clause (iv) of
subsection 1(f) above, and (iii) in any event, not later than 10 days after
the audited annual financial statements of the Company for the year ended
December 31, 2000 are made available by the Company's auditors, in final
form, to the Company and/or any of the Company's stockholders. To the extent
relevant to the determination of whether exercisability of any of the Warrant
Shares has been accelerated pursuant to subsection 1(f) above, all
determinations of "revenue" shall be made in accordance with generally
accepted accounting principles consistently applied.
(h) In the event that the Registered Holder disagrees with any
determination made by the Company's auditors pursuant to subsection 1(g) above,
the Registered Holder may, by written notice to the Company given not later than
15 days after the date on which such determination of the Company's auditors was
furnished in writing to the Registered Holder, require that such determination
be audited by an independent accounting firm of national reputation mutually
acceptable to the Company and the Registered Holder (or, if the Company and the
Registered Holder are unable to agree on the identity of such accounting firm
within 10 days, then such firm shall be selected jointly, within another 10 days
thereafter, by the individuals then serving as primary client contacts for the
Company and the Registered Holder at the independent accounting firm or firms
then serving as the auditors for the Company and the Registered Holder,
respectively). Each of the Company and the Registered Holder shall cooperate in
full with such audit and shall use their respective commercially reasonable
efforts to cause such audit to be completed as promptly as practicable. The cost
of such audit shall be borne by the Company unless such audit does not result in
a determination that exercisability of any of the Warrant Shares shall be
accelerated under subsection 1(f) above (in which case the cost of such audit
shall be borne by the Registered Holder), and the conclusions of such audit
shall be final and binding on all parties absent manifest error.
(i) For the purposes of this Warrant:
(i) "Change in Control Event" with respect to the
Company means:
(A) the acquisition by an individual, entity
or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership of any capital stock of the Company if, after such
acquisition, such Person beneficially owns (within the meaning of Rule 13d-3
promulgated under the Exchange Act) more than 50% of either (x) the
then-outstanding shares of Common Stock of the Company (the "Outstanding Company
Common Stock") or (y) the combined voting power of the then-outstanding
securities of the Company generally entitled to vote (the "Outstanding Company
Voting Securities"); provided, however, that for purposes of this paragraph (A),
no acquisition by any corporation or other entity pursuant to a Business
Combination (as defined below) which complies with clauses (x) and (y) of
paragraph (B) of this definition shall constitute a Change in Control Event; or
-5-
<PAGE>
CONFIDENTIAL
(B) the consummation of a merger,
consolidation, reorganization, recapitalization or statutory share exchange
involving the Company or a sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), unless, immediately
following such Business Combination, each of the following two conditions is
satisfied: (x) all or substantially all of the individuals and entities who were
the beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
securities generally entitled to vote, respectively, of the resulting or
acquiring corporation in such Business Combination (which shall include, without
limitation, a corporation which as a result of such transaction owns the Company
or substantially all of the Company's assets either directly or through one or
more subsidiaries) (such resulting or acquiring corporation is referred to
herein as the "Acquiring Corporation") in substantially the same proportions as
their ownership of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, respectively, immediately prior to such Business Combination
(it being understood that for purposes of the determination of whether or not
such voting power of the then-outstanding securities are owned, directly or
indirectly, in substantially the same proportions as the ownership of
Outstanding Company Common Stock and Outstanding Company Voting Securities,
respectively, any securities transferred pursuant to transfers by a security
holder which is a corporation to a wholly-owned subsidiary of such corporation
or by a security holder which is a closely-held partnership pro rata to the
partners of such partnership or the retired partners of such partnership or to
the estates of any such partners or retired partners or by a security holder
which is a closely-held limited liability company pro rata to the members of
such limited liability company or the retired members of such limited liability
company or to the estates of any such members or retired members, shall be
deemed to be owned in the same proportion as such securities were owned by the
transferring security holder in each such case), and (y) no Person (excluding
the Acquiring Corporation or any employee benefit plan (or related trust)
maintained or sponsored by the Company or by the Acquiring Corporation)
beneficially owns, directly or indirectly, more than 50% of the then-outstanding
shares of common stock of the Acquiring Corporation, or of the combined voting
power of the then-outstanding securities of such corporation generally entitled
to vote (except to the extent that such ownership existed prior to the Business
Combination);
(ii) "Special Change in Control Event" means any
Change in Control Event as a result of which (or in connection with which)
any Person that is a direct competitor of Nortel Networks Inc. or any of its
subsidiaries or Affiliates (as defined below) (including, without limitation,
[*], [*] (including [*]), [*] (including [*], [*], and [*]), [*], [*], [*],
[*] and [*], and their respective subsidiaries, Affiliates and successor
entities (and the subsidiaries and Affiliates of any such successor
entities)), acquires beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% of any of (A) the
Outstanding Company Common Stock, (B) the Outstanding Company Voting
Securities, or (C) with respect to any Change in Control Event described in
clause (B) of the definition of "Change in Control Event" above, the then-
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
-6-
<PAGE>
CONFIDENTIAL
outstanding shares of common stock or the combined voting power of the
then-outstanding securities generally entitled to vote, respectively, of the
Acquiring Corporation; and
(iii) "Affiliate" means, with respect to any
specified Person, (A) any Person that directly or indirectly controls, is
controlled by, or is under common control with such specified Person, or (B) any
Person that is a member of the immediate family of the specified Person.
2. ADJUSTMENTS.
(a) DILUTING ISSUANCES.
(i) DEFINITIONS. For purposes of this Section 2, the
following definitions shall apply:
(A) "OPTION" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities.
(B) "ORIGINAL ISSUE DATE" shall mean the
date on which this Warrant (or any predecessor warrant) was first issued.
(C) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock, but excluding Options.
(D) "ADDITIONAL SHARES OF COMMON STOCK"
shall mean all shares of Common Stock issued (or, pursuant to subsection
2(a)(iii) below, deemed to be issued) by the Company after the Original Issue
Date, other than:
(I) shares of Common Stock issued upon
conversion of shares of Series B
Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock or
Series E Preferred Stock (as such terms
are defined in the Amended and Restated
Articles of Incorporation of the Company
as in effect as of the Original Issue
Date (the "Restated Articles"))
(including Series B Preferred Stock,
Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred
Stock issued upon exercise of warrants
then outstanding);
(II) shares of Common Stock issued or issuable
by reason of a dividend, stock split,
split-up or other distribution on shares
of Common Stock that are covered by
subsections 2(b) or 2(c) below;
(III) shares of Common Stock issued or issuable
to officers or employees of, or
consultants to, the Company pursuant
-7-
<PAGE>
CONFIDENTIAL
to a stock grant, option plan or purchase
plan or other employee stock incentive
program approved by the Board of Directors
of the Company;
(IV) shares of Common Stock issued or issuable
upon conversion of Convertible Securities
outstanding prior to the Original Issue
Date; or
(V) up to 2,335,194 shares of the Company's
Series E Preferred Stock.
(ii) NO ADJUSTMENT OF PURCHASE PRICE. No adjustments
to the Purchase Price shall be made unless the consideration per share
(determined pursuant to subsection 2(a)(v)) for an Additional Share of Common
Stock issued or deemed to be issued by the Company is less than the lesser of
(i) the Purchase Price on the Original Issue Date or (ii) the Purchase Price in
effect immediately prior to the issue of such Additional Shares.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL
SHARES OF COMMON STOCK. If the Company at any time or from time to time after
the Original Issue Date shall issue any Options (excluding Options covered by
subsection 2(a)(i)(D)(III) above) or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares of Common Stock (as set forth in the instrument relating thereto
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to subsection 2(a)(v) hereof)
of such Additional Shares of Common Stock would be less than the Purchase Price
in effect on the date of and immediately prior to such issue, or such record
date, as the case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Purchase
Price shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion or
exchange of such Convertible Securities;
(B) If such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase or decrease in the consideration payable to the Company, then upon
the exercise, conversion or exchange thereof, the Purchase Price computed upon
the original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities;
-8-
<PAGE>
CONFIDENTIAL
(C) Upon the expiration or termination of
any such unexercised Option, the Purchase Price shall be readjusted, and the
Additional Shares of Common Stock deemed issued as the result of the original
issue of such Option shall not be deemed issued for the purposes of any
subsequent adjustment of the Purchase Price;
(D) In the event of any change in the number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
any such Option or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Purchase Price then in
effect shall forthwith be readjusted to such Purchase Price as would have
obtained had the adjustment which was made upon the issuance of such Option or
Convertible Security not exercised, converted or exchanged prior to such change
been made upon the basis of such change; and
(E) No readjustment pursuant to clause (B)
or (D) above shall have the effect of increasing the Purchase Price to an amount
which exceeds the lower of (i) the Purchase Price on the original adjustment
date, or (ii) the Purchase Price that would have resulted from any issuances of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date.
In the event the Company, after the Original Issue Date, amends the
terms or reduces the exercise prices of any such Options or Convertible
Securities (whether such Options or Convertible Securities were outstanding on
the Original Issue Date or were issued after the Original Issue Date), then such
Options or Convertible Securities, as so amended, shall be deemed to have been
issued after the Original Issue Date and the provisions of this subsection
2(a)(iii) shall apply.
(iv) ADJUSTMENT OF PURCHASE PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event the Company shall, at any time
after the Original Issue Date, issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
subsection 2(a)(iii)), without consideration or for a consideration per share
less than the Purchase Price in effect immediately prior to such issue, then and
in such event, such Purchase Price shall be reduced, concurrently with such
issue, to a price (calculated to the nearest cent) determined by multiplying
such Purchase Price by a fraction, (A) the numerator of which shall be (1) the
number of shares of Common Stock outstanding immediately prior to such issue
plus (2) the number of shares of Common Stock which the aggregate consideration
received or to be received by the Company for the total number of Additional
Shares of Common Stock so issued would purchase at such Purchase Price; and (B)
the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of such Additional
Shares of Common Stock so issued.
(v) DETERMINATION OF CONSIDERATION. For purposes of
this subsection 2(a), the consideration received by the Company for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration shall:
-9-
<PAGE>
CONFIDENTIAL
(I) insofar as it consists of cash, be
computed at the aggregate of cash
received by the Company, excluding
amounts paid or payable for accrued
interest;
(II) insofar as it consists of property
other than cash, be computed at the
fair market value thereof at the
time of such issue, as determined in
good faith by the Board of
Directors; and
(III) in the event Additional Shares of
Common Stock are issued together
with other shares or securities or
other assets of the Company for
consideration which covers both, be
the proportion of such consideration
so received, computed as provided in
clauses (I) and (II) above, as
determined in good faith by the
Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares of Common
Stock deemed to have been issued pursuant to subsection 2(a)(iii), relating to
Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any,
received or receivable by the Company as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Company upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of
Common Stock (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) MULTIPLE CLOSING DATES. In the event the Company
shall issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Preferred Stock (excluding
shares of Series E Preferred Stock), and such issuance dates occur within a
period of no more than 120 days, then, upon the final such issuance, the
Purchase Price shall be readjusted to give effect to all such issuances as if
they occurred on the date of the final such issuance (and without giving effect
to any adjustments as a result of such prior issuances within such period).
(b) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Purchase Price then in
effect immediately before that subdivision shall be proportionately decreased.
If the Company shall at any time or from time to time after the
-10-
<PAGE>
CONFIDENTIAL
Original Issue Date combine the outstanding shares of Common Stock, the
Purchase Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(c) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time, or from time to time after the Original Issue
Date shall make or issue, or fix a record date for the determination of holders
of Common Stock entitled to receive, a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Purchase
Price then in effect immediately before such event shall be decreased as of the
time of such issuance or, in the event such a record date shall have been fixed,
as of the close of business on such record date, by multiplying the Purchase
Price then in effect by a fraction:
(1) the numerator of which shall be the total number
of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on
such record date, and
(2) the denominator of which shall be the total
number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of
Common Stock issuable in payment of such dividend or
distribution;
provided, however, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Purchase Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Purchase Price shall be adjusted
pursuant to this paragraph as of the time of actual payment of such dividends or
distributions.
(d) ADJUSTMENT IN NUMBER OF WARRANT SHARES. When any
adjustment is required to be made in the Purchase Price pursuant to subsections
2(a), 2(b) or 2(c), the number of Warrant Shares purchasable upon the exercise
of this Warrant shall be changed to the number determined by dividing (i) an
amount equal to the number of shares issuable upon the exercise of this Warrant
immediately prior to such adjustment, multiplied by the Purchase Price in effect
immediately prior to such adjustment, by (ii) the Purchase Price in effect
immediately after such adjustment (and, without limiting generality of the
foregoing, the number of the First Tranche Warrant Shares, the Second Tranche
Warrant Shares, the Third Tranche Warrant Shares and the Fourth Tranche Warrant
Shares, as well as the number of Warrant Shares subject to the accelerated
exercisability provisions of clause (iv) of subsection 1(f) above, shall be
similarly adjusted).
(e) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time or from time to time after the Original Issue Date
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Company (other than shares of Common Stock) or in cash or
other property (other than cash out of earnings or earned surplus, determined in
accordance with generally accepted accounting principles), then and in each such
-11-
<PAGE>
CONFIDENTIAL
event provision shall be made so that the Registered Holder shall receive upon
exercise hereof, in addition to the number of shares of Common Stock issuable
hereunder, the kind and amount of securities of the Company and/or cash and
other property which the Registered Holder would have been entitled to receive
had this Warrant been exercised into Common Stock on the date of such event and
had the Registered Holder thereafter, during the period from the date of such
event to and including the Exercise Date, retained any such securities
receivable, giving application to all adjustments called for during such period
under this Section 2 with respect to the rights of the Registered Holder.
(f) ADJUSTMENT FOR MERGERS OR REORGANIZATIONS, ETC. If there
shall occur any reorganization, recapitalization, consolidation or merger
involving the Company in which the Common Stock is converted into or exchanged
for securities, cash or other property (other than a transaction covered by
subsections 2(b), 2(c) or 2(e)), then, following any such reorganization,
recapitalization, consolidation or merger, the Registered Holder shall receive
upon exercise hereof the kind and amount of securities, cash or other property
which the Registered Holder would have been entitled to receive if, immediately
prior to such reorganization, recapitalization, consolidation or merger, the
Registered Holder had held the number of shares of Common Stock subject to this
Warrant. Notwithstanding the foregoing sentence, if (x) there shall occur any
reorganization, recapitalization, consolidation or merger involving the Company
in which the Common Stock is converted into or exchanged for anything other than
solely equity securities, and (y) the common stock of the acquiring or surviving
company is publicly traded, then, as part of any such reorganization,
recapitalization, consolidation or merger, (i) the Registered Holder shall have
the right thereafter to receive upon the exercise hereof such number of shares
of common stock of the acquiring or surviving company as is determined by
multiplying (A) the number of shares of Common Stock then subject to this
Warrant by (B) a fraction, the numerator of which is the Fair Market Value per
share of Common Stock as of the effective date of such transaction, as
determined pursuant to subsection 1(b), and the denominator of which is the fair
market value per share of common stock of the acquiring or surviving company as
of the effective date of such transaction, as determined in good faith by the
Board of Directors of the Company (using the principles set forth in subsection
1(b) to the extent applicable), and (ii) the exercise price per share of common
stock of the acquiring or surviving company shall be the Purchase Price divided
by the fraction referred to in clause (B) above. In any such case, appropriate
adjustment (as determined in good faith by the Board of Directors of the
Company) shall be made in the application of the provisions set forth herein
with respect to the rights and interests thereafter of the Registered Holder, to
the end that the provisions set forth in this Section 2 (including provisions
with respect to changes in and other adjustments of the Purchase Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
securities, cash or other property thereafter deliverable upon the exercise of
this Warrant.
(g) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Purchase Price pursuant to this Section 2, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Registered Holder a
certificate setting forth such adjustment or readjustment (including the kind
and amount of securities, cash or other property for which this Warrant shall be
exercisable and the Purchase Price) and showing in detail the facts upon which
such adjustment or readjustment is based. The Company shall, upon the written
request at any time of
-12-
<PAGE>
CONFIDENTIAL
the Registered Holder, furnish or cause to be furnished to the Registered
Holder a certificate setting forth (i) the Purchase Price then in effect and
(ii) the number of shares of Common Stock and the amount, if any, of other
securities, cash or property which then would be received upon the exercise
of this Warrant.
3. FRACTIONAL SHARES. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make an
adjustment therefor in cash on the basis of the Fair Market Value per share of
Common Stock, as determined pursuant to subsection 1(b) above.
4. REQUIREMENTS FOR TRANSFER.
Subject to the provisions of any other written agreement to which
the Company and the Registered Holder are parties or by which they are bound,
this Warrant and the Registered Holder's rights hereunder may be sold,
exchanged, pledged or otherwise transferred in whole (but not in part), and
the Warrant Shares may be sold, exchanged, pledged or otherwise transferred
in whole or in part, in each case to any person or entity.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company hereby represents and warrants to, and covenants with, the Registered
Holder that, as of the Original Issue Date:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure so
to qualify would have a material adverse effect on the Company's business or
properties.
(b) CAPITALIZATION. As of immediately prior to the initial
issuance of this Warrant on the Original Issue Date (the "Closing"), the
authorized capital of the Company consists of:
(i) 32,562,731 shares of Preferred Stock, 2,363,636
shares of which have been designated Series A Preferred Stock, all of which will
be issued and outstanding immediately prior to the Closing, 1,691,123 shares of
which have been designated Series B Preferred Stock, all of which will be issued
and outstanding immediately prior to the Closing, 17,808,877 shares of which
have been designated Series C Preferred Stock, all of which will be issued and
outstanding immediately prior to the Closing, 6,199,095 shares of which have
been designated Series D Preferred Stock, all of which will be issued and
outstanding immediately prior to Closing, and 4,500,000 shares of which have
been designated Series E Preferred Stock, 2,067,248 of which are issued and
outstanding immediately prior to the Closing. The rights, privileges and
preferences of the Preferred Stock are as stated in the Restated Articles. All
of the outstanding shares of Preferred Stock have been duly authorized, fully
paid and nonassessable and issued in compliance with all applicable federal and
state securities laws.
-13-
<PAGE>
CONFIDENTIAL
(ii) 55,000,000 shares of Common Stock, 499,491
shares of which will be issued and outstanding immediately prior to the Closing.
All of the outstanding shares of Common Stock have been duly authorized, fully
paid and are nonassessable and issued in compliance with all applicable federal
and state securities laws.
(iii) The Company has reserved 7,825,000 shares of
Common Stock for issuance to officers, directors, employees and consultants of
the Company pursuant to its 1996 Stock Option Plan duly adopted by the Board of
Directors and approved by the Company shareholders (the "1996 STOCK PLAN"). Of
such reserved shares of Common Stock, 466,493 shares have been issued upon
exercise of options previously granted, options to purchase 7,259,500 shares
have been granted and are currently outstanding, and 99,007 shares of Common
Stock remain available for issuance to officers, directors, employees and
consultants pursuant to the 1996 Stock Plan.
(iv) The Company has reserved 1,500,000 shares of
Common Stock for issuance to officers, directors, employees and consultants
of the Company pursuant to its 1999 Stock Option Plan duly adopted by the
Board of Directors and approved by the Company shareholders (the "1999 STOCK
PLAN"). Of such reserved shares of Common Stock, no shares have been issued
upon exercise of options previously granted, options to purchase 1,473,400
shares have been granted and are currently outstanding, and 26,600 shares of
Common Stock remain available for issuance to officers, directors, employees
and consultants pursuant to the 1999 Stock Plan.
(v) Except for outstanding options issued pursuant to
the 1996 Stock Plan and the 1999 Stock Plan, and except for outstanding warrants
to acquire up to 178,962 shares of Common Stock, there are no outstanding
options, warrants, rights (including conversion or preemptive rights and rights
of first refusal or similar rights) or agreements, orally or in writing, for the
purchase or acquisition from the Company, either directly or indirectly, of any
shares of its capital stock. Except as set forth in the Amended and Restated
Rights Agreement, dated as of the Original Issue Date, among the Company and the
investors set forth on EXHIBIT A attached thereto (the "Rights Agreement"), the
Company has not granted any registration rights to any Person with respect to
any of the Company's securities.
(c) AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, issuance, execution and delivery of this Warrant, the Rights
Agreement and the OEM Agreement (collectively, the "Agreements"), the
performance of all obligations of the Company hereunder and thereunder and the
authorization, issuance (or reservation for issuance), sale and delivery of the
Warrant Shares issuable upon exercise of this Warrant (together, the
"Securities") have been taken or will be taken prior to each Closing, and the
Agreements, when executed and delivered by the Company, shall constitute valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of
general application affecting enforcement of creditors' rights generally, as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, or (ii) to the
-14-
<PAGE>
CONFIDENTIAL
extent the indemnification provisions contained in the Rights Agreement may
be limited by applicable federal or state securities laws.
(d) VALID ISSUANCE OF SECURITIES. This Warrant is duly and
validly issued and free of restrictions on transfer other than restrictions on
transfer under this Warrant, the Rights Agreement and applicable state and
federal securities laws. Based in part upon the representations of the
Registered Holder in this Warrant and subject to the provisions of subsection
5(e) below, this Warrant is issued in compliance with all applicable federal and
state securities laws. The Warrant Shares issuable upon exercise of this Warrant
have been duly and validly reserved for issuance, and upon issuance in
accordance with the terms hereof, shall be duly and validly issued, fully paid
and nonassessable and free of restrictions on transfer other than restrictions
on transfer under this Warrant, the Rights Agreement and applicable federal and
state securities laws, and will be issued in compliance with all applicable
federal and state securities laws.
(e) GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Warrant, except for filings pursuant to Section 25102(f) of
the California Corporate Securities Law of 1968, as amended, and the rules
thereunder, other applicable state securities laws and Regulation D of the
Securities Act.
(f) NONCONTRAVENTION; LITIGATION. The execution, delivery and
performance of the Agreements and the consummation of the transactions
contemplated hereby and thereby will not (i) result in any violation of or
default under, or otherwise conflict with, the Restated Articles or the Bylaws
of the Company (as in effect at the Closing or as of any issuance of Warrant
Shares hereunder) or any instrument, judgment, order, writ, decree or contract
to which the Company is a party or by which it is bound or, to the Company's
knowledge, of any provision of federal, local or foreign statute, rule or
regulation applicable to the Company, or (ii) constitute, with or without
passage of time or giving of notice, either a violation of or default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event which results in the creation of any lien, charge or encumbrance upon any
assets of the Company. There is no action, suit, proceeding or investigation
pending or, to the Company's knowledge, currently threatened against the Company
or with respect to the Company's officers or directors, that questions the
validity of the Agreements or the right of the Company to enter into them, or to
consummate the transactions contemplated hereby or thereby, nor is the Company
aware that there is any basis for the foregoing.
6. REPRESENTATIONS AND WARRANTIES OF THE REGISTERED HOLDER. The
Registered Holder hereby represents and warrants to the Company that, as of the
Original Issue Date:
(a) PURCHASE ENTIRELY FOR OWN ACCOUNT. This Warrant is being
acquired by the Registered Holder for investment for the Registered Holder's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and the Registered Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the same. The Registered Holder does not presently have any contract,
undertaking, agreement
-15-
<PAGE>
CONFIDENTIAL
or arrangement with any person to sell, transfer or grant participations to
such person or to any third person, with respect to any of the Securities.
The Registered Holder has not been formed for the specific purpose of
acquiring the Securities.
(b) DISCLOSURE OF INFORMATION. The Registered Holder has had
the opportunity to perform due diligence and ask questions of the Company's
management in connection with transactions contemplated hereby.
(c) RESTRICTED SECURITIES. The Registered Holder understands
that the Securities have not been, and will not be, registered under the
Securities Act, by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Registered
Holder's representations as expressed herein. The Registered Holder understands
that the Securities are "restricted securities" under applicable U.S. federal
and state securities laws and that, pursuant to these laws, the Registered
Holder must hold the Securities indefinitely unless they are registered with the
Securities and Exchange Commission (the "SEC") and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. The Registered Holder acknowledges that the Company
has no obligation to register or qualify the Securities for resale except as may
be set forth in a separate written agreement to which the Company and the
Registered Holder are parties or by which they are bound. The Registered Holder
further acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Securities,
and requirements relating to the Company which are outside of the Registered
Holder's control and which the Company is under no obligation and may not be
able to satisfy.
(d) NO PUBLIC MARKET. The Registered Holder understands that
no public market now exists for any of the securities issued by the Company, and
that the Company has made no assurances that a public market will ever exist for
the Securities.
(e) ACCREDITED INVESTOR. The Registered Holder is an
accredited investor as defined in Rule 501(a) of Regulation D promulgated under
the Securities Act.
7. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through any reorganization, 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 of this Warrant,
but will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the holder of this Warrant against impairment.
8. NOTICES OF RECORD DATE, ETC. In the event:
(a) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable upon the
exercise of this Warrant) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right; or
-16-
<PAGE>
CONFIDENTIAL
(b) of any capital reorganization of the Company, any
reclassification of the Common Stock of the Company, any consolidation or merger
of the Company with or into another corporation (other than a consolidation or
merger in which the Company is the surviving entity and its Common Stock is not
converted into or exchanged for any other securities or property), or any
transfer of all or substantially all of the assets of the Company; or
(c) of the voluntary or involuntary dissolution, liquidation
or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to
the Registered Holder a notice specifying, as the case may be, (i) the record
date for such dividend, distribution or right, and the amount and character
of such dividend, distribution or right, or (ii) the effective date on which
such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Common Stock (or such
other stock or securities at the time deliverable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
thirty (30) days prior to the record date or effective date for the event
specified in such notice.
9. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the exercise of this Warrant,
such number of Warrant Shares and other securities, cash and/or property, as
from time to time shall be issuable upon the exercise of this Warrant.
10. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder,
properly endorsed, to the Company at the principal office of the Company, the
Company will, subject to the provisions of Section 4 hereof, issue and deliver
to or upon the order of such Holder, at the Company's expense, a new Warrant or
Warrants of like tenor, in the name of the Registered Holder or as the
Registered Holder (upon payment by the Registered Holder of any applicable
transfer taxes) may direct, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock (or other securities, cash
and/or property) then issuable upon exercise of this Warrant.
11. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant, the Company will issue, in lieu thereof, a new Warrant of like
tenor.
12. TRANSFERS, ETC.
(a) The Company will maintain a register containing the name
and address of the Registered Holder of this Warrant. The Registered Holder may
change its or his address as shown on the warrant register by written notice to
the Company requesting such change.
-17-
<PAGE>
CONFIDENTIAL
(b) Subject to the provisions of Section 4 hereof, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant with a properly executed assignment (in the form of
EXHIBIT II hereto) at the principal office of the Company.
(c) Until any transfer of this Warrant is made in the warrant
register, the Company may treat the Registered Holder as the absolute owner
hereof for all purposes.
13. MAILING OF NOTICES, ETC. All notices and other communications from
the Company to the Registered Holder shall be mailed by first-class certified or
registered mail, postage prepaid, to the address last furnished to the Company
in writing by the Registered Holder. All notices and other communications from
the Registered Holder or in connection herewith to the Company shall be mailed
by first-class certified or registered mail, postage prepaid, to the Company at
its principal office set forth below. If the Company should at any time change
the location of its principal office to a place other than as set forth below,
it shall give prompt written notice to the Registered Holder and thereafter all
references in this Warrant to the location of its principal office at the
particular time shall be as so specified in such notice.
14. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder shall not have or exercise any rights by virtue hereof as a
stockholder of the Company. Notwithstanding the foregoing, in the event (i) the
Company effects a split of the Common Stock by means of a stock dividend and the
Purchase Price of and the number of Warrant Shares are adjusted as of the date
of the distribution of the dividend (rather than as of the record date for such
dividend), and (ii) the Registered Holder exercises this Warrant between the
record date and the distribution date for such stock dividend, the Registered
Holder shall be entitled to receive, on the distribution date, the stock
dividend with respect to the shares of Common Stock acquired upon such exercise,
notwithstanding the fact that such shares were not outstanding as of the close
of business on the record date for such stock dividend.
15. CHANGE OR WAIVER. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against which enforcement
of the change or waiver is sought.
16. SECTION HEADINGS. The section headings in this Warrant are for the
convenience of the parties and in no way alter, modify, amend, limit or restrict
the contractual obligations of the parties.
17. GOVERNING LAW. This Warrant will be governed by and construed in
accordance with the internal laws of the State of California (without reference
to the conflicts of law provisions thereof).
-18-
<PAGE>
CONFIDENTIAL
EXECUTED as of the Date of Issuance indicated above.
SONOMA SYSTEMS
By: /s/ Steven M. Waszak
---------------------------------
[CORPORATE SEAL] Title: Chief Financial Officer
------------------------------
Address (Principal Office):
4640 Admiralty Way, Suite 600
Marina del Rey, CA 90292
ATTEST:
_________________________
-19-
<PAGE>
CONFIDENTIAL
EXHIBIT I
PURCHASE FORM
To:_________________ Dated:____________
The undersigned, pursuant to the provisions set forth in the attached
Warrant (No. ___), hereby irrevocably elects to purchase (CHECK APPLICABLE BOX):
/ / _____ shares of the Common Stock covered by such Warrant; or
/ / the maximum number of shares of Common Stock for which such
Warrant is presently exercisable pursuant to the cashless
exercise procedure set forth in Section 1(b).
The undersigned herewith makes payment of the full purchase price for
such shares at the price per share provided for in such Warrant, which is
$________. Such payment takes the form of (CHECK APPLICABLE BOX OR BOXES):
/ / $______ in lawful money of the United States; and/or
/ / the cancellation of such portion of the attached Warrant as
is exercisable for a total of _____ Warrant Shares (using a
Fair Market Value of $_____ per share for purposes of this
calculation); and/or
/ / the cancellation of such number of Warrant Shares as is
necessary, in accordance with the formula set forth in Section
1(b), to exercise such Warrant with respect to the maximum
number of Warrant Shares for which such Warrant is presently
exercisable that are purchasable pursuant to the cashless
exercise procedure set forth in Section 1(b).
Signature: ________________________
Address: __________________________
__________________________
-20-
<PAGE>
CONFIDENTIAL
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No. ____) with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
Dated:________________ Signature:________________________________
-21-
<PAGE>
CONFIDENTIAL
- --------------------------------------------------------------------------------
OEM PURCHASE AGREEMENT
between
SONOMA [LOGO]
SYSTEMS
&
SIEMENS
- --------------------------------------------------------------------------------
<PAGE>
CONFIDENTIAL
OEM PURCHASE AGREEMENT
between
Sonoma Systems Europe Limited
51 Eastcheap, London EC3M 1JP,
United Kingdom
- hereinafter referred to as "Sonoma" -
and
Siemens Aktiengesellschaft, Berlin and Munchen, Hofmannstrasse 51,
81359 Munchen,
Federal Republic of Germany
- hereinafter referred to as "Siemens" -
Sonoma and Siemens being the "Parties" hereto.
<PAGE>
-2-
CONFIDENTIAL
TABLE OF CONTENTS
Article 1 Definitions
Article 2 Scope of this Agreement
Article 3 Grant of Rights
Article 4 Documentation
Article 5 Indication of Source
Article 6 Purchase Orders
Article 7 Cancellation
Article 8 Forecast
Article 9 Delivery Times/Emergency Orders
Article 10 Delivery of Contractual Products/Late Deliveries
Article 11 Changes to Contractual Products
Article 12 New Products
Article 13 Prices and Terms of Payment
Article 14 Quality Assurance
Article 15 Testing
Article 16 Warranty
Article 17 Technical Approval by Authorities
Article 18 Software Maintenance
Article 19 Spare parts
Article 20 Technical Cooperation
Article 21 Product Planning
Article 22 Patents and Copyrights
Article 23 Product Liability
Article 24 Limitation of Liability
Article 25 Consequential Damages
Article 26 Confidentiality
Article 27 Force Majeure
Article 28 Emergency Manfacturing Rights
Article 29 Term and Termination
Article 30 Provisions after Termination of the Agreement
Article 31 Arbitration
Article 32 Substantive Law
Article 33 Export Regulations
Article 34 Assignment
Article 35 Miscellaneous
Annex 1 Description of Contractual Products
Annex 2 Specifications of Contractual Products
Annex 3 Description of Documentation
Annex 4 Pricing and Discounts
Annex 5 Software Correction Procedure
Annex 6 Maintenance
Annex 7 Intentionally left blank
Annex 8 Emergency Stock
<PAGE>
-3-
CONFIDENTIAL
WHEREAS Sonoma is a manufacturer of hardware and software products.
WHEREAS Siemens desires to market certain products of Sonoma as part of
Siemens' own product range.
WHEREAS the parties have agreed that they shall, as soon as possible
following the date of this Agreement, negotiate the basis on which Sonoma may
develop and license Network Management Integration Software for the
Contractual Products, subject to Siemens supplying to Sonoma such technical
and other proprietary information as Sonoma shall require for this purpose.
Once the parties agree said terms the Network Management Integration Software
shall constitute a part of the Contractual Products and shall be supplied as
provided for under this Agreement.
NOW THEREFORE the Parties hereto agree as follows:
ARTICLE 1 - DEFINITIONS
1.1 "Contractual Products" means the hardware and software products
(including components or portions thereof) listed in Annex 1 as
modified or upgraded from time to time by Sonoma. The specifications
of the Contractual Products are set forth in Annex 2.
1.2 "Documentation" means the complete documentation related to the
Contractual Products, as set forth in more detail in Annex 3 as
modified or amended from time to time by Sonoma. Said Documentation,
shall be provided, if available, in electronic media (e.g. CD-ROM)
1.3 "Emergency Orders" shall have the meaning as per Article 9.1 and 9.3.
1.4 "End User License" means the terms and conditions on which the
Software is to be licensed by Siemens or its Subsidiary Companies to
its customers in compliance with the provisions of this Agreement.
1.5 "Software" means the software programs listed in Annex 1 in machine
readable format which run on the hardware of the Contractual Products.
1.6 "Source Code" means the Software in a human readable, well-known
commonly used programming language, and shall include flow charts,
program-
<PAGE>
-4-
CONFIDENTIAL
mer's notes, information regarding programmer's tools, as well as
test programs and test documentation.
1.7 "Subsidiary Company" means any company which is owned or controlled
directly or indirectly by a Party hereto as to fifty percent (50%) or
more of the issued share capital and/or voting rights.
ARTICLE 2 - SCOPE OF THIS AGREEMENT
This Agreement shall govern the terms and conditions under which Siemens
shall purchase, and Sonoma shall supply Siemens with Contractual Products and
relevant Documentation and provide the services in accordance with the terms
and conditions of this Agreement.
ARTICLE 3 - GRANT OF RIGHTS
3.1 HARDWARE OF CONTRACTUAL PRODUCTS
Siemens shall have the non-exclusive, non-assignable,
non-transferable right to market or have marketed through its
Subsidiary Companies and other sales outlets the hardware of
Contractual Products under any trade name or trade mark it may choose
throughout the world, except for trade names or trade marks belonging
to Sonoma.
The term "market" shall comprise sale, lease and other forms of
disposal.
3.2 SOFTWARE
3.2.1 Sonoma hereby grants to Siemens the following non-exclusive,
non-assignable, non-transferable, worldwide (and perpetual) licenses:
(a) a license to use the Software in connection with the
installation, commissioning, testing and operation of such
quantities of Contractual Products; as Siemens purchases from
Sonoma.
(b) a license to sublicense the Software to its Subsidiary
Companies and other sales outlets and to the end-user-customers
of Contractual Products
<PAGE>
-5-
CONFIDENTIAL
only in such quantity as purchased from Sonoma.
(c) a license to allow Siemens' Subsidiary Companies and other
sales outlets the right to sublicense the Software to their
end-user customers of Contractual Products only in such
quantity as purchased from Sonoma.
(d) a license to copy, or have copied, the Software for
incorporation into the hardware of Contractual Products
marketed in accordance with Section 3.1 above;
(e) In the event Siemens customers require a deposit of the
Source Code in Escrow pursuant to a license agreement between
Siemens and the customer, Sonoma shall provide a copy of the
Source Code to the Escrow Agent to comply with Siemens
customer's requirements.
3.2.2 In addition to the rights granted under Section 3.2.1 above Siemens
and its Subsidiary Companies and other sales outlets shall have the
right to entitle the end-user customers to transfer the Software
licenses granted to them in connection with a transfer of the
Hardware subject to the terms of the End User Licence.
3.2.3 Siemens acknowledges that the Software, the Documentation and the
Source Code contain valuable confidential and proprietary information
and trade secrets of Sonoma or its licensors which have not been
published or otherwise placed in the public domain.
3.2.4 The ownership in the Software shall remain with Sonoma or its
licensors.
3.2.5 When copying Software, Siemens shall reproduce all alphanumeric
identification characters and copyright legends of Sonoma or its
licensors.
3.2.6 The End user Licences shall provide adequate protection for Sonoma's
intellectual property rights in the Contractual Products and shall
otherwise be in accordance with this Agreement.
3.3 Siemens agrees that it shall:
<PAGE>
-6-
CONFIDENTIAL
(a) not and shall procure that any Subsidiary Companies shall not
separate the hardware and software elements of the Contractual
Products; and
(b) Provide in its contracts with its customers a provision to the
effect that its customers shall not separate the hardware and
software elements of the Contractual Products.
3.4 The CSI Client Software for the Contractual Products, when
developed, shall be supplied directly to Siemens by Sonoma. The
parties shall negotiate in good faith the terms on which Sonoma shall
licence the CSI Client Software to Siemens. Once the parties agree
said terms the CSI Client Software shall constitute a part of the
Contractual Products and shall be supplied as provided for under this
Agreement.
ARTICLE 4 - DOCUMENTATION
4.1 Sonoma shall, upon execution of this Agreement, provide to Siemens a
complete set of Documentation free of charge.
4.2 All Documentation shall comply with the latest technical standards
of the Contractual Product in question and shall be updated
accordingly in case of modifications. Sonoma shall provide Siemens
without delay and free of charge all updates regarding the
Documentation. This obligation shall apply for such time as Sonoma
is providing support to Siemens in accordance with Annex 6.
4.3 Siemens shall be entitled to copy, modify, translate and use
Sonoma's Documentation. Siemens may attach to such Documentation
its own copyright notices and supply any copied, modified or
translated Documentation to end-users, Subsidiary Companies and other
resellers. Where Siemens is entitled to allow sublicensing, it may
sublicense the rights set forth in this paragraph to its resellers
and sublicensees.
ARTICLE 5 - INDICATION OF SOURCE
Notwithstanding Sonoma's right to include its own copyright notices in the
Software, the Contractual Products and/or the Documentation shall not bear
any trademark or other identifying name or symbol pertaining to Sonoma.
Siemens shall have the right, to affix, or demand Sonoma subject to Siemens'
agreement to pay Sonoma's full costs
<PAGE>
-7-
CONFIDENTIAL
and expenses in doing so (such costs to be agreed in advance by Siemens), to
affix to the Contractual Products and/or the Documentation, any trademarks,
symbols or part numbers as Siemens may direct.
ARTICLE 6 - PURCHASE ORDERS
6.1 The scope of Sonoma's supply and Siemens' purchase obligation shall
depend on the Purchase Orders placed by Siemens in writing and
accepted by Sonoma.
6.2 Siemens' Purchase Orders shall include the following:
- date of issuance,
- purchase order number
- description of specific Contractual Products (including Siemens'
part numbers) and/or Documentation
- quantity of Contractual Products to be delivered
- price
- requested date(s) of delivery
- delivery address, including any customer delivery address, where
relevant
- shipping instructions and destination
- reference to this Agreement.
- Sonoma part number
6.3 Sonoma shall confirm the receipt of a Purchase Order by fax within
three working days and shall accept the Purchase Order within one
week after receipt.
6.4 Sonoma may reject a Purchase Order for the latest version of the
Contractual Products or the preceding version, within one week after
receipt only to the extent it exceeds the forecasts as per Article 8
or is otherwise not in conformance with the terms and conditions of
this Agreement.
6.5 Acceptance or rejection of a Purchase Order must be sent by fax
followed by letter and must be addressed to: Siemens AG/Public
Communication
<PAGE>
-8-
CONFIDENTIAL
Networks Group, BU BN KGC, Mrs. Dudek - Lindner, Fax: +89 722 27027.
6.6 Within one week after receipt of an order Sonoma shall confirm or
reject the order in accordance with the foregoing.
<PAGE>
-9-
CONFIDENTIAL
ARTICLE 7 - CANCELLATION
7.1 Siemens shall have the right, pursuant to art.9.2, to postpone
delivery on one occasion per Purchase Order for up to [*] calendar
days from scheduled delivery thereafter, any further reschedule
would be deemed a cancellation).
7.2 Orders may not be cancelled within [*] ([*]) days of the original
scheduled delivery date. Orders may be cancelled at any time prior to
[*] ([*]) days of the original scheduled date.
7.3 In the event Siemens cancels an order prior to [*] ([*]) days of
the original scheduled delivery date, Siemens shall agree to
reimburse Sonoma for demonstrated out of pocket costs, including
without limitation purchased parts; provided that Sonoma shall in all
cases look to mitigate these out of pocket expenses e.g. by otherwise
reselling the purchase parts. This shall be the sole liability for
Siemens of a cancellation of a purchase order.
7.4 In the event that Siemens cancels an order less than [*] ([*])
days before the scheduled delivery date or following the events
describe in Article 7.1, Sonoma shall have the right to invoice
Siemens for the full value of the cancelled order.
ARTICLE 8 - FORECAST
On a quarterly basis, Siemens shall provide Sonoma with a non-binding
forecast incl. quotation and proposals of its requirements of Contractual
Products for the following twelve months period. These forecasts are intended
for planning purposes only and shall not be considered as firm commitments to
purchase.
ARTICLE 9 - DELIVERY TIMES/EMERGENCY ORDERS
9.1 Delivery times for Contractual Products shall be:
- Complete units of Contractual Products: [*] weeks.
- Spare Parts: [*] weeks.
- Emergency Orders [*] hours
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-10-
CONFIDENTIAL
after receipt of order by Sonoma except that Sonoma may increase
such delivery times in the event that any Purchase Order exceeds the
forecasts to be provided under Article 8, such increases to be agreed
with Siemens.
Delivery times for repaired parts of Contractual Products shall be 2
weeks after receipt of faulty parts.
9.2 Siemens may postpone the agreed delivery dates on one occasion per
Purchase Order up to [*] calendar days without incurring any
liability, however, Sonoma shall be notified of such postponement not
later than [*] calendar days prior to the agreed delivery dates.
9.3 Furthermore, Siemens shall be entitled to place Emergency Orders for
minor quantities by giving notice per fax.
9.4 Sonoma agrees to maintain an Emergency Stock of product as set out
in Annex 8 in order to meet its obligations relating to Emergency
Orders in this Articles 9.
In the event the Emergency Stock is insufficient to meet the
required quantities resulting under articles 9, 15 and 16, Sonoma
shall use its best efforts to expedite the required product.
This Article however shall not serve to limit Siemens Emergency
Manufacturing Rights in Article 28.
ARTICLE 10 - DELIVERY OF CONTRACTUAL PRODUCTS/LATE DELIVERIES
10.1 Delivery shall be effected according to FCA Incoterms 1990.
10.2 Sonoma shall place identification numbers on all parts of the
Contractual Products for inventory record keeping purposes. Sonoma
shall shall keep records of its shipments and the related
identification numbers. The identification numbering system shall
convey to Siemens the parts identification and the functional and
correction level of the respective part.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-11-
CONFIDENTIAL
10.3 Each delivery shall be accompanied by appropriate shipping papers.
All shipping documents and/or invoices must include the Purchase
Order number and the identification numbers of the shipped Contractual
Products.
10.4 Sonoma shall make directdeliveries to customers of Siemens only upon
prior written instruction by Siemens.
10.5 The dispatch data (flight number, airwaybill number) of all
deliveries shall be notified to Siemens by Sonoma by fax prior to
shipment.
By written notice, Siemens may from time to time indicate to Sonoma
a specific carrier or carriers or means of transportation or routing,
and Sonoma shall comply with such directions. If Siemens fails to
indicate a specific carrier, Sonoma shall arrange appropriate
transportation.
10.6 Risk of loss or damage shall pass according to FCA, Incoterms 1990.
Title shall pass with handing over the Contractual Products to the
freight carrier.
10.7 In the event of Sonoma's delay in delivery of Contractual Products,
more than [*] days beyond the times set forth in Section 9.1 above,
except by reasons of Force Majeure, Siemens shall be entitled to a
payment in the amount of [*]% ([*] percent) of the purchase
price for each calendar day the Contractual Products are delayed up
to a maximum amount of [*]% ([*] percent).
In the event the delay exceeds [*], Siemens shall, in addition
to the aforestated rights, be entitled to cancel the order wholly or
in part without incurring any liability.
Article 10.7 sets out Sonoma's entire liability and Siemens' sole
remedy for delays in delivery of Contractual Products under this
Agreement.
10.8 Should circumstances arise that may result in a delayed delivery by
Sonoma, Sonoma shall promptly notify Siemens of such circumstances.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-12-
CONFIDENTIAL
ARTICLE 11 - CHANGES TO CONTRACTUAL PRODUCTS
11.1 Sonoma is entitled to make non-substantial changes to the
Contractual Products at any time without notice to Siemens provided
that any such changes do not affect their compliance with the
requirements stated in Article 17 and do not affect their form,
fitness, functions, safety, reliability, performance and/or
maintainability detailed in the specifications set forth in Annex 2
of this Agreement.
11.2 To the extent that any changes which Sonoma wishes to make to the
Contractual Products will substantially affect their form, fitness,
functions, safety, reliability, performance and/or maintainability,
Sonoma shall inform Siemens of any such changes in writing as soon as
possible and at least three (3) months prior to the first delivery of
modified Contractual Products, provided, however, that unless
otherwise agreed, Contractual Products must not be changed insofar as
binding orders are already placed.
11.3 Siemens is entitled to request changes to the Contractual Products,
e.g., relating to the improvement, reliability or serviceability of
the Contractual Products. The Parties shall implement the procedure
set out in Article 11.6 and discuss in good faith and agree in
writing upon the terms, conditions and costs for such changes.
Changes of Contractual Products due to customer fault reports showing
epidemic or systematic failures shall be provided by Sonoma subject
to the terms of the Contractual Product warranty or the support
services, as applicable.
11.4 Changes to Contractual Products which are necessary due to customer
requirements shall be implemented by Sonoma subject to terms and
conditions to be mutually agreed upon except that Sonoma may refuse
to make such changes where it has reasonable technical grounds for
doing so.
11.5 Regarding substantial changes as per this Article 11, Sonoma shall
at its own expense, and upon Siemens' request, submit to Siemens free
of charge two (2) samples of the modified Contractual Products. If
Siemens requests additional samples Sonoma will provide such samples
at the normal discounted price set out in Annex 4. The costs of
delivery of the sample Contractual Products shall be borne by Siemens.
<PAGE>
-13-
CONFIDENTIAL
11.6 The Product Change Procedure for changes to be made to the
Contractual Products under Article 11.3 shall be as follows:
Siemens may at any time during the term hereof submit to Sonoma a
change request and Sonoma shall respond in good faith to such request
within 14 days from receipt of such request setting out the cost and
time requirements of the implementation of such request or providing
an explanation of the technical reasons why it is not able to make
such changes.
11.7 Any implementation work may be performed by Sonoma on account of
Siemens only after Siemens' acceptance of Sonoma's offer.
ARTICLE 12 - NEW PRODUCTS
12.1 If during the term of this Agreement, Sonoma intends to introduce a
product replacing Contractual Products or designed or fit to
supersede the Contractual Products, Sonoma shall inform Siemens
thereof as soon as possible, but in any event not less than three (3)
months prior to such introduction, and shall transmit to Siemens the
specifications of such new products. Upon Siemens request Sonoma
shall provide test samples of such new products in accordance with
Article 11.5 above.
12.2 Siemens agrees that it shall implement new releases of the software
for the Contractual Products within six months of such new releases
becoming available. Sonoma shall supply the current version of the
Contractual Products and the version released before the current
version but shall have no obligation to continue to supply earlier
versions.
12.3 This Agreement shall not be deemed to grant to Siemens any rights in
any new or other supplier products unless such products are added to
Annex 1 by agreement of the parties in writing.
ARTICLE 13 - PRICES AND TERMS OF PAYMENT
13.1 Prices and discounts for the Contractual Products are set out in
Annex 4 to this Agreement in USD and include appropriate packaging
suitable for airfreight.
<PAGE>
-14-
CONFIDENTIAL
13.2 The prices for spare parts and support are set out in Annex 4.
13.3 The prices stated in Annex 4 hereto are fixed for a period of six
months after the effective date of this Agreement. The Parties shall
thereafter meet every six (6) months to discuss the appropriateness
of price reductions, whereby due consideration shall be given to
changes in market conditions, currency fluctuations and/or costs.
Spare part prices shall reflect the manufacturing costs of the
respective parts plus reasonable margins.
Payment of all sums payable by Siemens under this Agreement shall be
effected in USD and shall be due thirty days after receipt of the
respective invoice.
13.5 In the event that Siemens does not render undisputed payments for
any sums due under this Agreement at the due dates thereof, Sonoma
shall be entitled, upon request to interest on such delayed payments
at an interest rate of [*]% ([*] per cent) above the discount rate of
the Deutsche Bundesbank in Frankfurt prevailing at the time of delay.
ARTICLE 14 - QUALITY ASSURANCE
14.1 GENERAL INSPECTION SYSTEM
If Siemens or any customer so request with reasonable notice they
shall be entitled from time to time to review, at Sonoma's premises
in the United States, Sonoma's quality and inspection system.
14.2 FACTORY INSPECTION TEST OF CONTRACTUAL PRODUCTS
If Siemens or any of its customers request to perform a factory
inspection, such inspection will be performed as Sonoma's premises in
the United States prior to delivery of the respective Contractual
Products. The time, place and procedure of the factory inspections
will be agreed upon between the Parties reasonably in advance. All
expenses accruing in connection with the factory inspection shall be
borne by Sonoma, except for the travel, lodging and living expenses
incurred by the participants of Siemens or its customers.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-15-
CONFIDENTIAL
14.3 The parties agree that for the purpose of calculating delivery times
under this Agreement, any delays caused by any such inspection shall
not go to calculate such delivery times.
ARTICLE 15 - TESTING
15.1 Siemens may purchase and Sonoma shall provide Siemens with a supply
of Contractual Products for testing purposes subject to the
provisions of this Article.
15.2 Contractual Products supplied for testing shall be charged by Sonoma
at an increased discount rate as set out in Annex 4
15.3 Siemens may order a maximum of 8 Contractual Products per quarter for
testing purposes as defined above.
15.4 Delivery of Contractual Products for testing purposes shall be
effected as set out in Article 10.
ARTICLE 16 - WARRANTY
16.1 The warranty period for the hardware elements of the Contractual
Products shall be [*] ([*]) months from delivery of the Contractual
Products and the warranty period for the Software shall be [*] from
delivery.
16.2 HARDWARE
16.2.1 Sonoma warrants, subject to the conditions below, that it will have
on the date of delivery title to the hardware of the Contractual
Products free and clear of any security interest, lien or
encumbrances and that the hardware of the Contractual Products is
newly manufactured, contains new parts, complies with the
requirements stated in Article 18, conforms with the specifications
attached hereto in Annex 2 and is and shall remain for the warranty
period free from defects inmaterial and workmanship.
16.2.2 If Contractual Products supplied by Sonoma hereunder fail to conform
with this warranty Siemens may return the respective Contractual
Products as set out below and Sonoma shall at Siemens' option (1)
repair or replace any defective Contractual Product at no cost to
Siemens or (2) refund the purchase price for the defective Contractual
Product. All replaced spare parts
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-16-
CONFIDENTIAL
shall become the property of Sonoma.
16.2.3 Warranty repair service may be obtained by delivering the defective
Contractual Product to Sonoma's designated repair depot within the
warranty period and providing proof of purchase date and a written
description of the problem or failure. Siemens agrees to prepay
shipping charges and assume the risk of loss or damage in transit.
If the Contractual product is damaged as a result of Siemens' failure
to package the Contractual Products in the original packaging or its
equivalent this may void the warranty. If the Contractual Product is
damaged in transit, Siemens must file a claim with the carrier. Sonoma
will pay shipping charges for returning the Contractual Product to
Siemens. Upon return of such repaired Contractual Product, the
warranty will continue to apply for the remaining unexpired warranty.
16.2.4 To return an item for repair, the Sonoma Customer Support Department
must be contacted to obtain a return material authorization number
(RMA) and the Sonoma Customer Support Department shall provide such
RMA promptly to Siemens and if such number is provided the RMA will
be used for the return of the Contractual Product.
16.3 SOFTWARE
16.3.1 Furthermore Sonoma warrants that the Software conforms with the
specifications set forth in Annex 2, that Sonoma is entitled to
license or sublicense the Software in accordance with the terms of
this Agreement and that the Software delivered is free and clear of
any security interest, lien or encumberances.
16.3.2 If any Software including firmware supplied by Sonoma hereunder
fails to conform to the warranty and such failure is reproducible
Sonoma shall correct such failure in accordance with the procedures
in Annex 5.
16.3.3 Sonoma warrants that the contractual products are Year 2000
compliant. Year 2000 compliant shall mean that neither performance
nor functionality is affected by dates prior to, during and after the
Year 2000
16.4 Sonoma shall have no obligation under the warranty provisions where
damage results from a cause other than defect or malfunction, including
<PAGE>
-17-
CONFIDENTIAL
where the Contractual Product is not properly installed, or is
neglected, or where damage is caused by accident, unreasonable use
or unauthorised servicing, or modification of the Contractual Product
or any part of it.
16.5 The provisions set out above shall constitute Sonoma's only
obligation and Siemens' sole remedy for breach of the warranties
relating to damaged or defective Contractual Products.
16.6 Except as expressly provided in this Agreement, Sonoma gives no
warranty and hereby excludes any warranty, term or condition of any
kind, whether express, implied, arising under statute or otherwise.
16.8 DOCUMENTATION
16.8.1 Sonoma warrants that the Documentation provided to Siemens hereunder
is and always shall be up to date and Sonoma shall exercise its best
efforts to be complete, and technically correct as possible and can
be used for the purposes set forth in this Agreement and that Sonoma
is entitled to grant the rights under Documentation in accordance
with the terms of this Agreement.
16.8.2 If Documentation supplied by Sonoma hereunder fails to conform with
this warranty, the faulty Documentation will be corrected promptly by
Sonoma.
ARTICLE 17 - TECHNICAL APPROVAL BY AUTHORITIES
17.1 For the purposes of this Article 17 the "Approval Authorities" shall
mean the body or bodies having responsibility for approving the
Contractual Products for connection to communications networks in any
country.
17.2 The Contractual Products delivered by Sonoma shall comply with the
requirements of the Approval Authorities for the following standards:
N-America (CSA, UL, FCC), Europe (CE).
On Siemens' request Sonoma shall modify the Contractual Products to
become compliant also with the requirements of the Approval
Authorities in other countries identified by Siemens. The details of
such modifications including but not limited to which party shall
bear the costs associated will be agreed between the parties on a
case by case basis.
<PAGE>
-18-
CONFIDENTIAL
ARTICLE 18 - SOFTWARE MAINTENANCE
During the period of the Software warranty, Sonoma shall provide to Siemens
Software maintenance service in accordance with the terms and conditions of
Annex 6 attached hereto. Thereafter, and for a period of not less than two
(2) years after the last delivery of Contractual Products by Siemens to its
customers, Sonoma shall offer to provide to Siemens such Software maintenance
service for the fees set forth in Annex 4. This obligation shall survive
termination of this Agreement.
ARTICLE 19 - SPARE PARTS
19.1 Prior to the first delivery of Contractual Products, Sonoma shall
make available to Siemens a detailed spare parts list containing the
spare part numbers, prices, etc. This list will be revised and
updated by Sonoma in regular time intervals, at least every 6 months.
19.2 In case Sonoma fails without due cause for a period of more than
[*] ([*]) days after receipt of Siemens' order to provide Siemens
with spare parts, Sonoma shall grant to Siemens the rights pursuant
to the terms and conditions of Article 28 (Emergency Manufacturing
Rights).
ARTICLE 20 - TECHNICAL COOPERATION
20.1 SALES ASSISTANCE
(a) Upon Siemens' request Sonoma shall assist Siemens and its
Subsidiary Companies in its negotiations with their customers.
Upon Siemens' request and upon reasonable notice technical
experts of Sonoma shall participate in meetings with their
actual or potential customers. In its request Siements shall
explain the nature of the technical questions to be addressed
and Sonoma shall make available a sufficiently qualified expert.
(b) Sonoma shall also assist Siemens and its Subsidiary Companies
in performing inhouse network integration and system tests for
Contractual Products. Upon Siemens' request Sonoma shall
delegate a reasonable number of experts to Siemens' test beds
who shall assist Siemens in carrying out such tests. Sonoma
shall provide Siemens with proposals for test procedures and
shall assist Siemens in analysing all problems
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-19-
CONFIDENTIAL
occuring during such tests.
(c) Furthermore Sonoma shall assist Siemens and its Subsidiary
Companies in connection with the performance of acceptance
tests by their customers. Upon Siemens' request Sonoma shall
provide Siemens with proposals for test procedures, and
technical experts of Sonoma shall participate in the
performance of the acceptance tests by these customers and
shall assist in analysing all problems occuring during such
tests.
(d) All reasonable travel and lodging expenses incurred by Sonoma
in connection with the assistance provided in accordance with
(i), (ii) and (iii) above shall be borne by Siemens. If
assistance as per Section 20.1 exceeds 15 man/days per quarter,
Siemens shall pay Sonoma a daily fee of [*], - ([*]) per
additional man/day.
20.2 TRAINING FOR INSTALLATION AND SUPPORT
(a) Upon Siemens' request Sonoma shall train experts of Siemens
and its Subsidiary Companies in the installation, testing,
commissioning, operation, repairs and maintenance of Contractual
Products. Such training will be given for each Contractual
Product. Sonoma's trainers shall provide Siemens' trainees with
adequate training materials, such materials being part of the
Documentation. The details of such training, e.g. date, duration,
number of trainees, etc. will be agreed upon on a case by case
basis reasonably in advance. In any event the training shall
commence not later than 3 weeks after Siemens' request.
(b) All reasonable travel and lodging expenses incurred by Sonoma
in connection with the training under (i) above shall be borne
by Siemens. The training will be supplied at no cost by Sonoma.
However in the future prices will be negotiated if training
requirements become excessive.
20.3 TRAINING MATERIALS
Sonoma shall provide to Siemens a set of reproducible training
materials, including such materials as usually utilized by Sonoma
when instructing its own customers (e.g. Video clips). Such training
materials shall be in English and if available also in German.
Siemens shall be entitled to copy, modify and translate such training
materials and to attach to any copy its own copyright
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-20-
CONFIDENTIAL
notices. Siemens and its Subsidiary Companies and other sales outlets
may utilize any copy of Sonoma's training materials for performing
own training courses for their own customers.
ARTICLE 21 - PRODUCT PLANNING
21.1 Product planning meetings will be held if necessary.
21.2 The product planning meeting will discuss all relevant issues
related to the Contractual Products such as, but not limited to:
(a) Product availability schedules of new products or modifications of
Contractual Products required by the market, whereby the Parties
intent to achieve a product evolution giving due regard to the
interdependencies of the Contractual Products with the evolution of
the Siemens products.
(b) Provide a forum for Siemens to present ideas for product
enhancements required by the market.
21.3 Each of the parties shall nominate a product manager who shall be
primarily responsible for monitoring the supply of the Contractual
Products and who shall act as the first port of call for the other
party in the event of any problem, query or dispute relating to the
matters arising under this Agreement.
<PAGE>
-21-
CONFIDENTIAL
ARTICLE 22 - PATENTS AND COPYRIGHTS
22.1 Siemens shall inform Sonoma without undue delay if a third party
brings a claim regarding the infringement of its protective rights
(e.g., patent, trademark, copyright, mask work, trade secret or
other similar rights) in connection with Contractual Products.
22.2 Sonoma shall defend Siemens and hold Siemens harmless against any
suit, claim, damages, or proceeding brought against it alleging that
any use of the Contractual Products infringes any Worldwide patent,
copyright or trade mark or any trade secrets of any third parties
provided that Siemens:
(a) promptly notifies Sonoma in writing of any such suit, claim
or proceeding;
(b) allows Sonoma to defend, settle or otherwise dispose of
such suit or proceeding and at its expense to direct the defense
of such suit, claim, or proceeding;
(c) gives Sonoma sole authority, full information and
assistance as Sonoma reasonably requests to defend such suit,
claim or proceeding; and
(d) does not enter into any settlement of any such suit, claim
or proceeding without Sonoma' prior written consent.
22.3 In the event of any third party claim, Sonoma may, at its cost:
(a) acquire from the third party entitled to dispose of the
respective protective rights, the right of use required for the
purposes of this Agreement; or
(b) replace such infringing Contractual Products or parts thereof
by non-infringing ones complying with the specifications; or
(c) if (a) and (b) are not economically feasible, to take back
such Contractual Products, the use of which is prevented due to
the infringement, and to reimburse to Siemens the cost of such
Contractual Products [less
<PAGE>
-22-
CONFIDENTIAL
depreciation at 10 per cent of the US list price for each
year or part year from delivery of the Contractual Products].
22.4 Sonoma will have no liability in case of the infringement of a
protective right which results from modifications made by Siemens to
Contractual Products, or from the combination of Contractual Products
with other products not delivered by Sonoma.
22.5 The provisions set out above state Sonoma's entire liability and
Siemens' entire remedy for any claim that the Contractual Products
infringe the intellectual property rights of a third party.
ARTICLE 23 - PRODUCT LIABILITY
Sonoma shall indemnify and hold Siemens or its Subsidiary Companies harmless
against any claims, damages, costs and expenses due to product liability in
connection with, or resulting from, Sonoma's products excluding, however,
liability resulting from changes or modifications of Contractual Products as
carried out by Siemens.
ARTICLE 24 - LIMITATION OF LIABILITY
24.1 Subject to Article 24.2 and except in respect of supplier's
obligations pursuant to Article 22, in no event whatsoever,
regardless of the form or cause of action whether in contract or
tort, (including negligence) or the number of claims asserted, and
whether in respect of a breach or default in the nature of a breach
of condition or fundamental term or a fundamental breach or as a
result of negligence shall either party, its employees, directors,
officers and/or agents have any liability In excess of $[*] per
event arising out of or in connection with this Agreement.
24.2 In no event shall a party's total aggregate liability to the other
party in any consecutive 12 month period commencing on the date of
this Agreement, (a "Contractual Year") arising out of or in
connection with this Agreement whether arising in tort (including
negligence), contract, by statute, regulation or otherwise be
greater than the greater of $[*] or the total amount paid by Siemens
to Sonoma in the Contractual Year preceding the Contractual Year in
which the
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-23-
CONFIDENTIAL
other party's claim arises.
24.3 Siemens, subject to 24.2, agrees to indemnify and keep Sonoma
harmless from any claims or damages inclusive of Sonoma's
professional fees made against Sonoma as a result of negligence or
misrepresentation of Siemens of any of its subsidiary companies in
relation to the Contractual Product.
ARTICLE 25 - CONSEQUENTIAL DAMAGES
Except for Siemens obligations to pay Sonoma for the purchase of Contractual
Products ordered by Siemens, as provided within this Agreement, neither
party, its employees, agents, officers or directors shall be liable to the
other in any way whatsoever, whether as a result of a claim or action in
contract or in tort or otherwise for any indirect, special, punitive or
consequential damages, including but not limited to lost profits, lost
business revenues, lost business, failure to realize expected savings or
other commercial or economic loss of any kind whatsoever, whether or not such
damages are foreseeable, and whether or not the party, its employees, agents,
officers or directors have been advised of the possibility of such damages,
except that Sonoma shall be liable for such losses to Siemens in the event
that Siemens is held liable to its customers subject always to the limits set
out in Article 24.
ARTICLE 26 - CONFIDENTIALITY
Both Siemens and Sonoma undertake to keep confidential with respect to third
parties with the same degree of care with which they treat and protect their
own proprietary information (but not less than reasonable care), any
information indicated as confidential (including but not limited to the
Software and Source Code), furnished and transmitted by one Party to the
other under this Agreement. Verbal disclosures shall be deemed confidential
only if summarized in writing and designated as confidential by the
disclosing party within 30 days. Further, the Parties shall not use the
other's information for any purpose other than in furtherance of the purposes
of this Agreement. This applies both during the term of this Agreement and
for a period of five (5) years thereafter, with the exception that both
Siemens and Sonoma may disclose such information to their respective
Subsidiary Companies, agents, consultants and customers, but solely in
furtherance of the purposes of this Agreement, and only if these third
parties agree to substantially similar confidentiality provisions.
<PAGE>
-24-
CONFIDENTIAL
Any information which:
- - is known to or in the possession of the receiving Party prior to
transmission by the disclosing party;
- - becomes available to the receiving Party from a source other than the
disclosing Party or is in or passes into the public domain other than by
breach of this Agreement;
- - is developed independently by the receiving Party;
- - is normally disclosed to customers or disclosure of which is authorized
by the disclosing Party;
- - is required to be disclosed by a governmental body,
shall not be subject to this confidentiality provision.
ARTICLE 27 - FORCE MAJEURE
Neither Party to this Agreement shall be held responsible for the performance
of any obligations under this Agreement provided such performance is hindered
or prevented by any circumstances of Force Majeure which are deemed to
include war, riot, strike, lock-out, flood, or other natural catastrophes or
national or local Government regulations and provided the Party frustrated
notifies the other Party without delay in writing at the beginning and end of
any such circumstances. The Party frustrated shall use every endeavour to
minimize the hindrance or prevention of such fulfilment. Upon the ending of
such circumstance, the frustrated Party shall without delay resume the
fulfilment of its obligations including any obligations, the performance of
which was interrupted thereby.
ARTICLE 28 - EMERGENCY MANUFACTURING RIGHTS
28.1 If Sonoma:
(a) ceases or is unwilling, without a cause attributable to
wrongfull acts of Siemens under this agreement, to provide
commercially adequate
<PAGE>
-25-
CONFIDENTIAL
support or maintenance for the Software in accordance with the
terms and conditions of this Agreement.
(b) is consistently or unreasonably unable or unwilling to
deliver to Siemens the quantities of Contractual Products and/or
spare parts forecasted and ordered by Siemens as provided for in
this Agreement and not rejected by Sonoma as provided for in this
Agreement subject to the limitations and conditions set out in
this Agreement within [*] ([*]) days of the delivery dates set
out in section 9 of this Agreement;
(c) ceases doing business as a going concern,
(d) has a receiver, administrator or manager of its property,
assets or undertakings appointed in such circumstances as would
substantially affect Siemens' continuing use of the Software in
accordance with this Agreement;
(e) takes advantage of the insolvency laws of any jurisdiction;
(f) makes an assignment in bankruptcy or is adjudicated a bankrupt;
(g) makes a general assignment for the benefits of its creditors;
(h) is ordered by any court of competent jurisdiction to be
wound up; or
(i) become insolvent or makes a sale in bulk of a substantial
portion of its assets;
(hereinafter "Event of Default" and collectively referred to as
"Events of Default")
then Sonoma hereby grants to Siemens the non-exclusive right to
manufacture or to have manufactured the Contractual Products and
spare parts (the "Emergency Manufacturing Right").
28.2 Siemens shall enter into confidentiality agreements with any
subcontractors or
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-26-
CONFIDENTIAL
other person it engages to manufacture Contractual Products under
this Article 28 and such agreements shall impose on such
subcontractors or other persons confidentiality obligations no less
onerous than those set out in Article 26 of this Agreement.
28.3 In the case of an Event of Default, Siemens shall be entitled to
carry on Emergency Manufacturing Rights only until the Event of
Default no longer exists and only to the extent necessary to meet
Siemens' requirements during the period of the Event of Default.
28.4 To ensure that Siemens will have the ability to manufacture, or have
manufactured, upon the event of one or more of the aforementioned
Events of Default, Sonoma shall, within ten (10) days of receipt of
written notice of the Events of Default and Siemens notice of its'
intension to proceed with Emergency Manufacturing:
- deliver to Siemens a reproducible set of the complete
manufacturing and testing documentation and the source and object
code of the Software with respect to the Contractual Products,
such documentation to be in the English language and thereafter,
with the first acceptance of each modified Contractual Product,
deliver to Siemens the updated version thereof;
- deliver to Siemens with respect to the Contractual Products
technical assistance by training Siemens' experts and explaining
the above mentioned documentation without charge;
- identify Sonoma's suppliers of parts and components and
authorize Siemens to purchase parts and components directly from
said suppliers;
- provide to Siemens information regarding special tools required
for the manufacture of Contractual Products, and offer to sell
such tools to Siemens for reasonable compensation and to the
extent Sonoma is not using or planning to use such tools.
- Siemens shall maintain the information at its premises and shall
make use of such information provided hereunder only if at least
one of the foregoing preconditions is met. Upon notice to Siemens
by Sonoma and as soon as Sonoma no longer is default, Siemens
shall discontinue the
<PAGE>
-27-
CONFIDENTIAL
manufacture of the Products.
- Sonoma shall use reasonable efforts to procure for Siemens, any
necessary assignment or licence of rights to third party
technology in the Contractual Products on reasonable terms and
conditions. Siemens shall be responsible for payment of any
royalties for use by Siemens of third party technology.
If Siemens considers invoking Emergency Manufacturing Rights
under this Agreement information regarding any and all third party
technologies and their respective royalties will be provided to
Siemens by Sonoma.
28.5 In the event that Siemens exercises the Emergency Manufacturing
Right, Siemens shall pay to Sonoma a royalty of [*] per cent of the
discounted US list price set out in Annex 4 from time to time for
each Contractual Product which it manufactures.
28.6 The royalty in respect of each Contractual Product shall become due
and payable upon manufacture of each Contractual Product and shall be
invoiced and paid no later than the end of each calendar month
commencing at the end of the month following the last delivery of a
Contractual Product by Sonoma.
28.7 Siemens shall provide Sonoma with written evidence on a monthly
basis of the number of Contractual Products it manufactures for the
period over which it exercises the Emergency Manufacturing Right.
28.8 Siemens shall allow Sonoma or its agents or representatives
reasonable access during Siemens' normal business hours to and to copy
relevant records of Siemens to enable Sonoma to ascertain whether the
royalty payments made are accurate. In the event that such exercise
discloses a shortfall in royalties due to Sonoma, Siemens shall
remedy such shortfall forthwith on demand from Sonoma.
28.9 The Emergency Manufacturing Right shall terminate in the event that
this Agreement terminates for whatever reason except that Siemens
shall be entitled to continue to exercise the Emergency Manufacturing
Right for such period as Sonoma would have been obliged under this
Agreement to provide Contractual Products under Article 30.2.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-28-
CONFIDENTIAL
ARTICLE 29 - TERM AND TERMINATION
29.1 This Agreement shall enter into force upon being signed by both
Parties and shall continue in effect for a period of five (5) years
unless this Agreement is extended by written agreement prior to its
expiration.
29.2 This Agreement may by written notice be forthwith terminated by a
Party having such right as herein provided - and save of any other
rights such Party may have - upon the occurrence of either one or
more of the following events stated below:
- by either Party in the event that the other Party voluntarily
files a petition in bankruptcy or has such a petition
involuntarily filed against it (which petition is not discharged
within thirty (30) days after filing), or is placed in an
insolvency proceeding, or if an order is issued appointing a
receiver or trustee or a levy or attachment is made against a
substantial portion of its assets which order shall not be
vacated, or set aside within thirty (30) days from date of
issuance, or if any assignment for the benefit of its creditors
is made;
- by either Party in the event that the other has failed in the
performance of any material contractual obligation herein
contained, provided that such default is not remedied to the
other Party's reasonable satisfaction within [*] ([*]) days
after written notice to the other Party specifying the nature of
such default and requiring remedy of the same;
- by Sonoma in the event that Siemens fails to make payment of any
sums which have become due to it under this Agreement within [*]
days of being required by Sonoma to make such payment;
- by Sonoma in the event that Siemens or any of its Subsidiary
Companies is in breach of the terms on which the Contractual
Products are licensed.
29.3 In addition to its rights set out above, Sonoma may suspend the
delivery of Contractual Products in the event that Siemens has failed
to make payment of any sums due to it under this Agreement.
29.4 This Agreement may be terminated by written mutual consent of the
parties.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-29-
CONFIDENTIAL
ARTICLE 30 - PROVISIONS AFTER TERMINATION OF THE AGREEMENT
30.1 Provided the contract was not terminated by Sonoma due to default
of Siemens, after termination of this Agreement, Sonoma shall
continue to supply to Siemens Contractual Products according to the
terms of this Agreement to such extent as required by Siemens to
fulfill a contractual commitment which Siemens has undertaken prior
to termination of this Agreement, provided that Siemens notifies
Sonoma in writing within thirty (30) days of the effective date of
termination of this Agreement of the complete nature and extent of
any such contractual commitments.
30.2 Provided the contract was not terminated by Sonoma due to default of
Siemens, for a period of [*] ([*]) years after termination of this
Agreement, Sonoma shall supply to Siemens, in accordance with the
terms and conditions in effect at the time of termination of the
Agreement, Contractual Products required by Siemens for the expansion
of the existing systems in which Contractual Products are already
used. If Sonoma wishes to discontinue the manufacture of Contractual
Products before the end of said [*]-year-period after termination or
expiration of this Agreement, Sonoma shall notify Siemens thereof and
thereafter, Siemens shall be entitled to exercise the Emergency
Manufacturing Right in accordance with the provisions of Article 28.
30.3 After termination of this Agreement, Sonoma shall be obliged to
supply spare parts to Siemens for a period of [*] ([*]) years after
the last delivery by Sonoma to a customer of products identical or
similar to the Contractual Products. Such supply shall be in
accordance with the terms and conditions in effect at the time of
termination of this Agreement.
ARTICLE 31 - ARBITRATION
31.1 All disputes arising out of or in connection with the present
Agreement, including any question regarding its existence, validity
or termination, shall be finally settled under the Rules of
Arbitration of the International Chamber of Commerce, Paris, by
three arbitrators in accordance with the said Rules.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-30-
CONFIDENTIAL
31.2 Each party shall nominate one arbitrator for confirmation by the
competent authority under the applicable Rules (Appointing
Authority). Both arbitrators shall agree on the third arbitrator
within 30 days. Should the two arbitrators fail, within the above
time-limit, to reach agreement on the third arbitrator, such third
arbitrator shall be appointed by the Appointing Authority. If there
are two or more defendants, any nomination of an arbitrator by or on
behalf of such defendants must be by joint agreement between them.
If such defendants fail, within the time-limit fixed by the
Appointing Authority, to agree on such joint nomination, the
proceedings against each of them must be separated.
31.3 The seat of arbitration shall be Zurich. The procedural law of this
seat shall apply where the Rules are silent.
31.4 The language to be used in the arbitration proceeding shall be
English.
ARTICLE 32 - SUBSTANTIVE LAW
All disputes shall be settled in accordance with the provisions of this
Agreement and all other agreements regarding its performance, otherwise in
accordance with the substantive law in force in Switzerland without reference
to other laws. The application of the United Nations Convention on Contracts
for the International Sale of Goods of April 11, 1980 shall be excluded.
ARTICLE 33 - EXPORT REGULATIONS
Sonoma shall not be obliged to perform deliveries, orders and other
obligations under this Agreement if that performance is hindered by the
applicable export laws and regulations of the Federal Republic of Germany,
the United States of America or other countries.
With respect to those Contractual Products which include materials or
technology originating from the United States of America, which Sonoma will
identify in the individual delivery documents, Siemens agrees that it will
comply with all export laws and regulations of the United States of America.
<PAGE>
-31-
CONFIDENTIAL
In the event that Siemens intends to export Contractual Products subject to a
export restriction, Siemens will inform Sonoma accordingly and Sonoma will
use its best efforts to obtain any necessary re-export licenses from the
authorities governing Sonoma.
ARTICLE 34 - ASSIGNMENT
This Agreement may not be assigned by Sonoma without the express written
consent of Siemens (which shall not be unreasonably withheld) except that
Sonoma may assign its rights under this Agreement or transfer its obligations
to an affiliate or to a successor of all or substantially all of Sonoma's
business to which this Agreement relates.
ARTICLE 35 - MISCELLANEOUS
35.1 For the orders placed by Siemens under this Agreement, no other
conditions than those specified herein shall be applicable. All
changes and amendments to this Agreement must be in a writing
executed by both parties to be valid. This requirement of written
form can only be waived by a writing executed by both parties
specifically stating an intent to amend this Agreement.
35.2 Communications between Sonoma and Siemens shall be given in writing,
by post or by telefax, to the following addresses of the Parties or
to such other addresses as communicated by the Party concerned in
writing to the other Party:
If to Sonoma, to:
Sonoma Systems Europe Ltd
.....................................
Att.: Managing Director.......................
60 Priestley Road,......................................
Guildford...............................
Surrey
GU2 5SE
UK...................................
Fax: 0/0044 1483 300333
Tel: 0/0044 1483 300600
<PAGE>
-32-
CONFIDENTIAL
With a copy to:
Sonoma Systems Inc.
4640 Admiralty Way
600 Marina del Rey
CA USA 90292
For the attention of: Vice President Finance
If to Siemens, to:
Siemens AG
Att.: Mr. Joachim Meier
VP, Finance and Business Administration
Hofmannstrabe 51
D-81359 Munchen
Federal Republic of Germany
Tel.: +49 89 722 48914
Fax: +49 89 722 35141
35.3 No right or interest in this Agreement shall be assigned or
transferred to any third party by either Sonoma or Siemens without
first obtaining written consent from the other Party (such consent
not to be unreasonably withheld or delayed). This article shall not
restrict Sonoma's ability to assign its receivables from Siemens to a
bona fide banking instituion under terms of an operating line of
credit. However Sonoma shall provide that Siemens' rights to offset
against any claims of Siemens against Sonoma shall not be affected by
such assignment.
35.4 If any provision contained in this Agreement is or becomes
ineffective or is held to be invalid by a competent authority or
court having final jurisdiction thereover, all other provisions of
this Agreement shall remain in full force and effect and there shall
be substituted for the said invalid provision a valid provision
having an economic effect as similar as possible to the original
provision.
35.5 This Agreement constitutes the entire understanding and agreement
between the Parties hereto with respect to the Contractual Products
and shall super-
<PAGE>
-33-
CONFIDENTIAL
sede and cancel all previous agreements, negotiations and
commitments, either oral or written.
35.6 The Annexes which are attached hereto and which constitute a part
hereof are:
Annex 1 Description of Contractual Products
Annex 2 Specifications of Contractual Products
Annex 3 Description of Documentation
Annex 4 Prices and Discounts
Annex 5 Software Correction Procedure
Annex 6 Maintenance
Annex 7 Intentionally left blank
Annex 8 Emergency Stock
<PAGE>
-34-
CONFIDENTIAL
London, 27/5/98 Munchen, 05/27/98
------------------------------ -------------------------
Sonoma Systems Europe Limited Siemens Aktiengesellschaft
[ILLEGIBLE]
- ------------------------------------- ---------------------------------
/s/ Steven M. Waszak
- ------------------------------------- ---------------------------------
Steven M. Waszak [ILLEGIBLE]
- ------------------------------------- ---------------------------------
<PAGE>
-35-
CONFIDENTIAL
ANNEX 1
DESCRIPTIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PRODUCT ID DESCRIPTION
<S> <C>
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
8000 SA SONOMA ACCESS Base Unit, with single AC power supply
(Switch-selectable for 115VAC and 230VAC)
- -------------------------------------------------------------------------------------------------------
8000 DA SONOMA ACCESS Base Unit, with dual AC power supplies
(Switch-selectable for 115VAC and 230VAC)
- -------------------------------------------------------------------------------------------------------
8000 DD SONOMA ACCESS Base Unit, with dual -48VDC power supplies
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
8000 SW-TLX-2.0 SONOMA ACCESS Transparent LAN eXtender-TM- (TLX) software V2.0,
SONOMA ACCESS high-performance real-time operating system, SNMP
agent, Web DMS, and SLIP management software
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
ATM DS1 T1 ATM Card, with one RJ-45 connector
- -------------------------------------------------------------------------------------------------------
ATM E1 E1 ATM Card, with one RJ-45 connector
- -------------------------------------------------------------------------------------------------------
8000 DS3ATM DS3 ATM Card, with two BNC connectors, compliant with DSX-3
specifications
- -------------------------------------------------------------------------------------------------------
8000 E3ATM E3 ATM Card, with two BNC connectors
- -------------------------------------------------------------------------------------------------------
8000 OC3ATM-MM OC-3c/STM-1 ATM Multimode Card, with fiber optic SC connector (0-2Km)
- -------------------------------------------------------------------------------------------------------
8000 OC3ATM-SM OC-3c/STM-1 ATM Single Mode Card, with fiber optic SC connector (0-
19Km)
- -------------------------------------------------------------------------------------------------------
8000 OC3ATM-LR OC-3c/STM-1 ATM Long-Reach Single Mode Card, with fiber optic SC
connector (12-30Km)
- -------------------------------------------------------------------------------------------------------
ENH DS3 ATM DS3 GCRA compliant ATM Card, with two BNC connectors, compliant with
DSX-3 specifications
- -------------------------------------------------------------------------------------------------------
ENH E3 ATM E3 GCRA compliant ATM Card, with two BNC connectors
- -------------------------------------------------------------------------------------------------------
ENH OC3 ATM MM OC-3c/STM-1 GCRA compliant ATM Multimode Card, with fiber optic SC
connector (0-2Km)
- -------------------------------------------------------------------------------------------------------
ENH OC3ATM SM-IR OC-3c/STM-1 GCRA compliant ATM Single Mode Card, with fiber optic ST
connector (0-19Km)
- -------------------------------------------------------------------------------------------------------
ENH OC3ATM SM-LR OC-3c/STM-1 GCRA ATM Long-Reach Single Mode Card, with fiber optic
ST connector (12-30Km)
- -------------------------------------------------------------------------------------------------------
8000 ENET Ethernet Card (10Mbps), with AUI, RJ-45 and BNC connectors
- -------------------------------------------------------------------------------------------------------
8000 FAST ENET-1 Fast Ethernet Card (10/100Mbps auto-sensing) with RJ-45 connector
(UTP).
- -------------------------------------------------------------------------------------------------------
8000 FAST ENET-4 Four-Port Fast Ethernet Card (10/100Mbps auto-sensing), with RJ-45
connectors
- -------------------------------------------------------------------------------------------------------
8000 TRN Token Ring Card (4/16Mbps auto-sensing), with DB-9 and RJ-45
connectors
- -------------------------------------------------------------------------------------------------------
8000 FDDI-SAS FDDI Single-Attach (SAS) Interface Card, with multimode fiber optic SC
connector
- -------------------------------------------------------------------------------------------------------
8000 FDDI-DAS FDDI Dual-Attach (DAS) Interface Card, with two multimode fiber optic SC
connectors
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
8000 SBP Spare Blanking Plates (package of five)
- -------------------------------------------------------------------------------------------------------
8000 RM-19 Rackmount Kit for 19-inch equipment rack
- -------------------------------------------------------------------------------------------------------
8000 RM-23 Rackmount Kit for 23-inch equipment rack
- -------------------------------------------------------------------------------------------------------
8000 SUG V2.0 SONOMA ACCESS User Guide
- -------------------------------------------------------------------------------------------------------
8000 SUG-DISK V2.0 SONOMA ACCESS User Guide and HTML Help Files on 3.5-inch diskettes
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
8000 AC PWR Non-Redundant AC Power Supply
- -------------------------------------------------------------------------------------------------------
8000 DUAL AC PWR Redundant AC Power Supply
- -------------------------------------------------------------------------------------------------------
<PAGE>
-36-
CONFIDENTIAL
- -------------------------------------------------------------------------------------------------------
8000 DUAL DC PWR Redundant DC Power Supply
- -------------------------------------------------------------------------------------------------------
8000 FAN System Intake Fan
- -------------------------------------------------------------------------------------------------------
8000 CPU FAN System Processor Fan
- -------------------------------------------------------------------------------------------------------
8000 MB ASSY System Motherboard
- -------------------------------------------------------------------------------------------------------
32 MEG UPG System Memory (32Mb Upgrade)
- -------------------------------------------------------------------------------------------------------
SYSTEM STATUS System Control Card
CARD
- -------------------------------------------------------------------------------------------------------
CABLE/CONNECTOR Management Cables
ASSEMBLY
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
SS-UK-Support Customer Technical Support Centre access Monday to Friday 8 AM
to 5 PM UK Local Time.
- -------------------------------------------------------------------------------------------------------
SS-UK-Update Software Update Support Service - Customer must have a valid
Support Contract in place.
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-37-
CONFIDENTIAL
ANNEX 2
SONOMA ACCESS SPECIFICATIONS
- ------------------------------------------------------------------------------
HARDWARE
- ------------------------------------------------------------------------------
SIZE (H x W x D): 6.5 x 16.4 x 16.7 inches
16.6 x 41.7 x 42.5 cm
WEIGHT: 28 pounds; 12.7 Kg
MOUNTING: Table top or rack-mounted operation
TEMPERATURE: 0 to 50C (32 to 122F) operating,
- -25 to 85C (-13 to 185F) storage
HUMIDITY: 10% TO 90%, non-condensing
POWER: 250W (853 BTU/hour). Three power
supply options, including single and
redundant versions for AC input, and
a redundant version for -48VDC input,
with separate power entry
SAFETY: UL1950, EN60950, TUV GS Mark,
C-UL 22.2 No. 950
EMISSIONS: FCC Class A, EN 55022 Class B
COMPATIBILITY: EN 50082-1, CE Mark
SOFTWARE
- --------
MANAGEMENT:
/ / Self diagnostic
/ / SNMP Agent: Supports RFC 1213 (MIB II), RFC
1286 (Bridge MIB), and Sonoma ACCESS device-specific MIB
extensions. Supports GET, SET, GET NEXT and TRAP
instructions
/ / Web DCS (Device Configuration System) supports
summary information and default configuration for
plug-and-play installation and configuration
/ / DHCP (Dynamic Host Configuration Protocol)
enables Sonoma ACCESS to automatically acquire its IP
management address from a DHCP server
for plug and work operation
/ / SLIP: Standard TCP/IP connection via the serial
management port, for out-of-band SNMP or web
DCS access, via a standard async modem
VIRTUAL NETWORKS:
Up to 16 virtual networks, including any combination of
subscriber LAN ports and up to 1024 ATM virtual
circuits
ATM virtual circuits can use one or more virtual paths
RATE QUEUES:
Bandwidth groups for setting maximum throughput on
ATM virtual circuits
ATM INTERFACE:
RFC 1483. AAL 5. Compatible with all switches
supporting UNI 3.0 or 3.1
ERROR CHECKING:
Detects and blocks all types of errored frames,
on all LAN ports.
FRAME FILTERING:
Full wire-speed filtering of inbound frames. Automatic
forwarding to appropriate port, based on self-learned
destination address. Inclusive or exclusive filters can be
used for additional levels of security. Learns and filters
up to 16,535 addresses. Separate, secure databases
are maintained for each subscriber's virtual network
PROTOCOLS:
All protocols handled transparently
SPANNING TREE:
IEEE 802.1 compliant. Separate spanning tree domain
for each virtual network
- ------------------------------------------------------------------------------
ORDERING INFORMATION
- ------------------------------------------------------------------------------
EACH SONOMA ACCESS BASE UNIT SHIPS WITH THE FOLLOWING:
/ / Intel 200Mhz Pentium processor, with 16MB DRAM
/ / Single AC or redundant AC or DC power supplies
/ / System Status Card
/ / Pre-loaded software
/ / Sonoma ACCESS Quick-Start Guide
BASE UNITS:
- ------------------------------------------------------------------------------
8000 SA Sonoma ACCESS Base Unit, with single AC
power supply (switch-selectable for 115VAC
or 230VAC)
8000 DA Sonoma ACCESS Base Unit, with dual AC
power supplies (auto sense for 115VAC or 230VAC)
8000 DD Sonoma ACCESS Base Unit, with dual -48VDC
power supplies
SOFTWARE:
- ------------------------------------------------------------------------------
8000 SW-TLX Sonoma Transparent LAN eXtender-TM-
(TLX) software, Sonoma high-performance
real-time operating system, SNMP agent,
and Web DCS
INTERFACE CARDS:
- ------------------------------------------------------------------------------
8000 DS3ATM DS3 ATM Card, with two BNC connectors,
compliant with DSX-3 specifications
8000 E3ATM E3 ATM Card, with two BNC connectors
8000 OC3ATM-MM OC-3c/STM-1 ATM Multimode Card, with
fiber optic SC connector (0-2Km)
8000 OC3ATM-SM OC-3c/STM-1 ATM Single Mode Card,
with fiber optic SC connector (0-19Km)
8000 OC3ATM-LR OC-3c/STM-1 ATM Long-Reach Single
Mode Card, with fiber optic SC connector
(12-30Km)
8000 ENET Ethernet Card (10Mbps), with AUI, RJ-45,
and BNC connectors
8000 FAST ENET-1 Fast Ethernet Card (10/100Mbps auto-
sensing), with RJ-45 connector (UTP) and
DB-9 connector (STP)
8000 FAST ENET-4 Four-Port
Fast Ethernet Card (10/100Mbps
auto-sensing), with RJ-45 connectors
8000 TRN Token Ring Card (4/16Mbps auto-sensing),
with DB-9 and RJ-45 connectors
8000 FDDI-SAS FDDI Single-Attach (SAS) Interface Card,
with multimode fiber optic SC connector
8000 FDDI-DAS FDDI Dual-Attach (DAS) Interface Card,
with two multimode fiber optic SC connectors
ACCESSORIES:
- ------------------------------------------------------------------------------
8000 SBP Spare Blanking Plates (package of five)
8000 RM-19 Rackmount Kit for 19-inch equipment rack
8000 RM-23 Rackmount Kit for 23-inch equipment rack
8000 SUG Sonoma ACCESS User Guide
8000 SUG-DISK Sonoma ACCESS User Guide and HTML
Help Files on 3.5-inch diskettes
- ------------------------------------------------------------------------------
CONTACTS
- ------------------------------------------------------------------------------
SONOMA SYSTEMS CORPORATE OFFICE
4640 Admiralty Way, Marina del Rey, CA 90292 USA
Telephone: 310-827-8000 Fax: 310-305-2525
Inquiry at http://www.sonoma-systems.com
SONOMA SYSTEMS EUROPEAN OFFICE
60 Priestley Road, The Surrey Research Park,
Guildford GU2 5SE UK
Telephone: +44 1483 300600 Fax: +44 1483 300333
[lOGO]
<PAGE>
-38-
CONFIDENTIAL
ANNEX 3
Description of Documentation
1. Sales and Technical Presentations and Product Release Bulletins
2. Sonoma Access
- user guide - soft and hard
- quickstart guide - hard
- DCS help files - soft
- MIB files - soft
- software release notes - soft and hard
<PAGE>
-39-
CONFIDENTIAL
ANNEX 4
PRICING AND DISCOUNTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
PRODUCT ID US LIST PRICE SIEMENS
DISCOUNTED
PRICE*
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<S> <C> <C>
8000 SA $4695 $[*]
- -------------------------------------------------------------------------------
8000 DA $5645 $[*]
- -------------------------------------------------------------------------------
8000 DD $5995 $[*]
- -------------------------------------------------------------------------------
8000 SW-TLX-2.0 $2000 $[*]
- -------------------------------------------------------------------------------
ATM DS1 $3000 $[*]
- -------------------------------------------------------------------------------
ATM E1 $3000 $[*]
- -------------------------------------------------------------------------------
8000 DS3ATM $3000 $[*]
- -------------------------------------------------------------------------------
8000 E3ATM $3000 $[*]
- -------------------------------------------------------------------------------
8000 OC3ATM-MM $4000 $[*]
- -------------------------------------------------------------------------------
8000 OC3ATM-SM $6000 $[*]
- -------------------------------------------------------------------------------
8000 OC3ATM-LR $8000 $[*]
- -------------------------------------------------------------------------------
ENH DS3 ATM $3000 $[*]
- -------------------------------------------------------------------------------
ENH E3 ATM $3000 $[*]
- -------------------------------------------------------------------------------
ENH OC3 ATM MM $4000 $[*]
- -------------------------------------------------------------------------------
ENH OC3ATM SM-IR $6000 $[*]
- -------------------------------------------------------------------------------
ENH OC3ATM SM-LR $8000 $[*]
- -------------------------------------------------------------------------------
8000 ENET $300 $[*]
- -------------------------------------------------------------------------------
8000 FAST ENET-1 $750 $[*]
- -------------------------------------------------------------------------------
8000 FAST ENET-4 $3000 $[*]
- -------------------------------------------------------------------------------
8000 TRN $1000 $[*]
- -------------------------------------------------------------------------------
8000 FDDI-SAS $5000 $[*]
- -------------------------------------------------------------------------------
8000 FDDI-DAS $8000 $[*]
- -------------------------------------------------------------------------------
8000 SBP $50 $[*]
- -------------------------------------------------------------------------------
8000 RM-19 $250 $[*]
- -------------------------------------------------------------------------------
8000 RM-23 $250 $[*]
- -------------------------------------------------------------------------------
8000 SUG V2.0 $100 $[*]
- -------------------------------------------------------------------------------
8000 SUG-DISK V2.0 $50 $[*]
- -------------------------------------------------------------------------------
8000 AC PWR $595 $[*]
- -------------------------------------------------------------------------------
8000 DUAL AC PWR $3895 $[*]
- -------------------------------------------------------------------------------
8000 DUAL DC PWR $4395 $[*]
- -------------------------------------------------------------------------------
8000 FAN $250 $[*]
- -------------------------------------------------------------------------------
8000 CPU FAN $250 $[*]
- -------------------------------------------------------------------------------
8 MEG SIMM $400 $[*]
- -------------------------------------------------------------------------------
32 MEG UPG $400 $[*]
- -------------------------------------------------------------------------------
SYSTEM STATUS CARD 2595 [*]
- -------------------------------------------------------------------------------
CABLE/CONNECTOR 120 [*]
ASSEMBLY
- -------------------------------------------------------------------------------
8000 MB ASSY 3995 $[*]
- -------------------------------------------------------------------------------
SS-UK-Support $[*] pa**
- -------------------------------------------------------------------------------
SS-UK-Update [*]% Unit List price
pa**
- -------------------------------------------------------------------------------
Products for Testing Purposes As above [*]% off the US
as per article 15 list prices
- -------------------------------------------------------------------------------
</TABLE>
* Significant Orders - In the event of that Siemens receives a customer order
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-40-
CONFIDENTIAL
which it considers to be significant, Siemens may request that Sonoma
increases the discounts set out above. Sonoma shall consider whether or
not to apply additional discounts to such orders and if so, the level of
any such additional discounts.
** Support Fees - Support fees shall comprise the following elements:
(a) USD [*] annual fee payable yearly. The first payment shall become
due and payable on the date of this Agreement and subsequent payments
shall become due and payable on each anniversary of this Agreement; and
(b) [*] per cent of the US list price for each of the Contractual
Products supplied by Sonoma from time to time. The first payment for UK
Support & Updates for Contractual Products supplied from the date of
this Agreement shall become due and payable on 1 January 1999.
Subsequent payments for all Contractual Products which have been
supplied under this Agreement from time to time shall become due and
payable on each anniversary of this date, and shall be invoiced quarterly
in advance.
(c) The support fees shall be payable for the period of this Agreement and
thereafter for so long as Sonoma is obliged under this Agreement to
continue to provide support.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-41-
CONFIDENTIAL
ANNEX 5
Software Correction Procedures
1.) Siemens has a priority system which reports priorities from (P1)
through (P4) where (P1) represents the highest priority, defined as
follows:
(a) A "P1" problem exists if as a result of execution of the Software,
a user's system is: (i) inoperative; or (ii) experiencing severe
intermittent problems; or (iii) unsafe; or (iv) experiencing a unique
problem which is the equivalent of the foregoing.
(b) A "P2" problem exists if as a result of execution of the Software,
a user's system is: (i) experiencing a critical degradation of
performance or function; or (ii) experiencing significant intermittent
problems; or (iii) experiencing a unique problem which is the
equivalent of the foregoing.
(c) A "P3" problem exists if, as a result of execution of the Software,
a user's system is: (i) experiencing a non-critical degradation of
performance or function; or (ii) experiencing minor intermittent
problems.
(d) A "P4" problem exists if a user's system is operational and: (i)
is experiencing a problem which has been bypassed and is under evaluation;
or (ii) if there is a problem with Documentation.
2.) When Siemens advises Sonoma that a P1-P4 problem exists, Sonoma shall
use its reasonable endeavours to provide a fix or a workaround for such
problem within the time periods set forth below:
P1 - 1 to 3 calendar days;
P2 - 4 to 6 calendar days;
P3 and P4 - within the period of the next regularly scheduled Sonoma
system maintenance release, not to exceed one hundred and
eighty (180) days after notification.
3.) Together with each Software patch Sonoma shall provide the following
information:
- reference to the fault notification
- name of the Software which is corrected
- name/number of the patch
- procedure for incorporation of the patch into the Software
- dependencies (NOT INDEPENDENCIES) of the patch with respect to
other software, hardware, firmware, other patches
<PAGE>
-42-
CONFIDENTIAL
- reference to successful test of the patch.
4.) Sonoma's Software patches must be in a form which can be installed
without interruption of the operation of the Contractual Products. If
the Contractual Product is operated from a remote operation and
maintenance facility the patches must be in a form which can be
installed from the OEM facility.
5.) Upon Siemens' request Sonoma shall make available a list which shows
all available patches.
<PAGE>
-43-
CONFIDENTIAL
ANNEX 6
SOFTWARE MAINTENANCE SERVICE
In consideration of Siemens payment to Sonoma of the service and support fees
set forth in Annex 4, Sonoma agrees to render support services to Siemens.
1. SUPPORT HOTLINE
1.1. Telephone consultation
Sonoma will provide direct support of Siemens' trained and certified
personnel in the form of phone and related (e-mail, fax, etc.) support
during Siemens' regular business hours.
1.2. A technical support hotline to Sonoma's (location) offices support staff
shall be available during Siemens regular UK business hours (from 08.30
to 17.30).
2. UPDATES
2.1. Sonoma will provide maintenance support for Software during the period a
maintenance agreement is in effect. Sonoma will notify Siemens of, and
Sonoma will send to Siemens, all available software releases related to
the Software. These potentially could include, but are not necessarily
limited to, maintenance releases, corrections, modifications and
changes or work-arounds.
2.2. During the period a maintenance and support agreement is in effect,
support shall be provided for (in addition to the current version of
the Software) the next previous version of Software for 24 months after
a subsequent version of the Software is released by Siemens or Siemens'
Subsidiary Companies to its customers.
4. CODE FIXES
4.1. Sonoma will deliver solutions for all P1 through P4 code problems in
accordance with Section 3.0 of this Annex 6.
5. DOCUMENTATION
5.1 Sonoma will provide to Siemens the documentation required to describe
technical solutions and/or work arounds for P1 through P4 software
problems at the same time Sonoma provides the software resolving such
software problems.
<PAGE>
-44-
CONFIDENTIAL
ANNEX 8
EMERGENCY STOCK
Subject to payment by Siemens of the carrying charge referred to below, Sonoma
agrees to maintain a complete set of spares of the Sonoma equipment that
Siemens has sold and installed at its customer sites.
The initial stock will consist of one (1) unit of each of the contractual units.
Based on periodic reviews, the quantities of emergency stock will be revised
based on mutual agreement by both parties.
Siemens shall pay to Sonoma a monthly carrying charge of one per cent of the
discounted list price for each of the spares or Contractual Products retained by
Sonoma as emergency stock. Sonoma shall invoice such amount to Siemens in
advance and such payments shall become due 30 days from the date of Sonoma's
invoice.
<PAGE>
CONFIDENTIAL
MAKER COMMUNICATIONS, INC.
OEM AGREEMENT
This OEM Agreement, including all Exhibits attached hereto, ("Agreement") is
made as of May 18, 1998, ("Effective Date") is by and between MAKER
COMMUNICATIONS, INC. ("MAKER"), a Delaware corporation with a place of
business at 73 Mount Wayte Avenue, Framingham, MA 01702, and SONOMA SYSTEMS,
INC., a California corporation, with a place of business at 4640 Admiralty
Way, Suite 600, Marina del Rey, CA 90292-6695 ("CUSTOMER").
WHEREAS, CUSTOMER desires to purchase the MAKER Products specified herein and
MAKER agrees to provide the Products to CUSTOMER subject to this Agreement.
NOW THEREFORE, in consideration of the mutual promises and conditions in this
Agreement, the parties hereby agree as follows:
DEFINITIONS:
"Products" shall mean MAKER's semiconductor devices, including Documentation,
set forth in Exhibit A which is attached hereto.
"Documentation" shall mean all associated MAKER documentation, in whole or in
part, in printed or electronic from provided with the Products.
1. TERM: Unless terminated earlier, the initial term of this Agreement
shall be for a period of two (2) years from the Effective Date and shall
renew thereafter for one (1) additional one (1) year term unless either party
notifies the other at least sixty (60)days prior to expiration of the
then-current term of its intent not to renew the Agreement.
2. PURCHASE OF PRODUCTS: Subject to CUSTOMER's compliance with the
material terms of this Agreement, MAKER agrees to sell to CUSTOMER the
Products specified in Exhibit A. CUSTOMER agrees to provide MAKER with a
written purchase order for all purchases. Additional Products may be added to
this Agreement by written amendment. To the extent required by Subcontractors
and Distributors, Maker shall allow CUSTOMER, Subcontractors and Distributor's
to purchase Products under this Agreement, provided: (i) CUSTOMER provides
Maker with prior written notice of the effective date of all such purchased
and the names and addresses of the eligible Subcontractors and Distributors,
(ii) all such Subcontractors and Distributor's agree in writing to be bound by
the terms and conditions of this Agreement, (iii) all such Subcontractors and
Distributors specify on each order that they are ordering the Products
subject to this Agreement and solely on behalf of CUSTOMER, and (iv) all such
Subcontractors and Distributors, prior to delivering any Products, provide
Maker, in writing, with the name of each customer who will be receiving the
Products. Products purchased by such Subcontractors and Distributors for the
benefit of CUSTOMER shall be governed by and considered to be under this
Agreement. All quantitates of the Products purchased by Subcontractors and
Distributors shall accrue against CUSTOMER'S Estimated Quantities on the
Forecasts.
3. PRICES: CUSTOMER shall pay MAKER for the Products according to the
pricing schedule in Exhibit B, a copy of which is attached hereto. Prices are
exclusive of all federal, state, municipal and all other governmental
exercise, sales, use, and similar taxes, duties, or tariffs. CUSTOMER agrees
to pay all such taxes, duties, and tariffs. CUSTOMER must provide MAKER with
written certification for any claim of tax or other exemption prior to
shipment of CUSTOMER's order. If MAKER is required to pay additional taxes,
CUSTOMER shall immediately reimburse and hold MAKER harmless for all such
taxes.
FINAL
<PAGE>
CONFIDENTIAL
4. PAYMENT TERMS: Payment is due net thirty (30) days from the date of
MAKER's shipment. Payment shall being U.S. dollars. Based on CUSTOMER's credit
standing, MAKER may require alternative payment terms or withhold the
shipment of Products. Purchase orders shall be used for invoicing purposes
only and shall be governed solely by the terms and conditions of this
Agreement. MAKER is granted a security interest in the Products and their
proceeds and retains a right of possession in the Products until such time as
CUSTOMER has paid for such Products in full. CUSTOMER agrees to cooperate and
execute all documents that are necessary for MAKER to perfect a security
interest in the Products.
5. SHIPMENTS: Prices are F.O.B. MAKER. CUSTOMER is responsible for all
shipping, handling, insurance costs and any fees, taxes and duties. Unless
previously agreed to by MAKER, Products shall be shipped in MAKER'S standard
packaging.
6. PURCHASE ORDERS: CUSTOMER shall submit written purchase orders
("P.O.") to MAKER for each purchase. Each P.O. shall include: (i) name and
MAKER part number of each Product ordered, (ii) quantity of each Product
ordered, (iii) price of each Product, (iv) requested delivery date, and (v)
shipping instructions. All P.O.'s are subject to MAKER's acceptance. MAKER
agrees to notify CUSTOMER within five (5) days of receipt of a P.O. if it has
not be accepted by MAKER.
7. FORECASTS: CUSTOMER shall provide MAKER with written non-binding
forecasts for each Product by the last business day of each calendar month
for the nest rolling twelve (12) month period.
8. CHANGES AND CANCELLATIONS: CUSTOMER may cancel or reschedule shipments
of standard (non-custom) Products, subject to the following table, by
providing MAKER with a written notice for all such cancellation or reschedule.
The number of days specified in the table are the number of working days
after MAKER's receipt of such written notice for cancellation or reschedule.
Cancellation or rescheduling of custom orders or custom product is not
permitted.
<TABLE>
<CAPTION>
Number of days before Cancellation Charges Reschedule Option
Scheduled delivery (% of original Release)
<S> <C> <C>
[*] [*]% Not allowed
[*] [*]% New delivery date must be written within 90
days of the original delivery date. Maximum
of two (2) reschedules per line item.
[*] [*]% Unlimited reschedules
</TABLE>
9. DELIVERY AND ACCEPTANCE: Delivery schedules for the Products are
subject to MAKER's then-current lead times and Product availability. MAKER
will make reasonable efforts to meet delivery dates quoted or acknowledged,
but shall in no event be liable for failure to meet any such date(s). MAKER
shall have the right to deliver Products up to five (5) days prior to any
agreed upon delivery date. MAKER reserves the right to make deliveries in
installments and any invoice or purchase order shall be severable as to any
such installments with prior notification given by MAKER to CUSTOMER or
CUSTOMER's Subcontractors or Distributors. Delay in delivery or default of
any installment shall not relieve CUSTOMER of its obligation to accept and pay
for remaining installments. CUSTOMER shall accept or reject each shipment
within five (5) days of delivery. All Products shall be deemed accepted by
CUSTOMER, unless CUSTOMER provides MAKER with written notice of rejection,
specifying the reason, within five (5) days of delivery of the Products to
CUSTOMER. CUSTOMER also agrees within five (5) days of receipt of any
delivery to notify Maker of any known or obvious discrepancies in any
shipment. Defective Products shall be subject to MAKER's warranty.
FINAL
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
10. RETURN POLICY: CUSTOMER must obtain a MAKER Return Material
Authorization ("RMA") prior to returning any Products returned to MAKER.
Products returned to Maker without an RMA will not be accepted by MAKER and
will be returned to CUSTOMER at CUSTOMER's sole risk and expense. Customer
shall be responsible for all shipping, handling, and insurance costs for all
Products returned to MAKER.
11. CUSTOMER DEFAULT: IF CUSTOMER is in breach on any provision of this
Agreement and fails to cure such breach within [*] ([*]) days, then all of
CUSTOMER's payment obligations to MAKER shall immediately become due and
payable, and MAKER may, with thirty (30) days notice, (i) decline to make
further shipments, (ii) terminate Customer's unfilled order(s), and/or (iii)
recall and retake possession of Products in transit, without affecting any of
MAKER's other rights ore remedies. Continued shipment by MAKER following
CUSTOMER's default shall not constitute a waiver nor shall it relieve the
CUSTOMER of any its obligations herein.
12. MAKER DEFAULT: Any order for Products may be cancelled, in whole or in
part, due to MAKER's failure to delivery Products in accordance with this
Agreement, provided that such cancellation shall be effective only upon
MAKER's failure to correct such failure to deliver within [*] ([*]) days of
CUSTOMER's written notice of cancellation. In no event shall MAKER be liable
for increased manufacturing costs, cost of labor, requalification, delay loss
of profits, good-will, or any incidental or consequential damages.
13. DISCONTINUANCE OF PRODUCTS: MAKER reserves the right to discontinue
or withdraw any Products. MAKER agrees to provide CUSTOMER with six (6)
months prior written notice of such discontinuance or withdrawal of Products.
CUSTOMER shall have the right to make the last-time purchase of such
discontinued or withdrawn Products, provided CUSTOMER accepts delivery of all
such Products within twelve (12) months from the date of MAKER's notice of
discontinuance or withdrawal.
14. COPYRIGHTS, TRADEMARKS AND NOTICES: CUSTOMER shall not remove or
obscure any MAKER or MAKER's supplier's markings, logos, colors or other
insignia which are affixed to the Product at the time of MAKER's shipment.
CUSTOMER shall reproduce and include MAKER's copyright and/or other
intellectual property right notice and U.S. Government Restricted Rights
legend at least once on a label affixed to the Software media and on the
Documentation of every copy of the Product, including partial copies. Only
Product licensed from MAKER shall bear MAKER's markings, logos or other
insignia.
15. LIMITED WARRANTY: Unless otherwise specified in Exhibit A, for a
period of twelve (12) months from the date of delivery, MAKER warrants that
unaltered Products will conform to MAKER's published specifications and
shall be free from defects in workmanship and materials, provided that
CUSTOMER returns all nonconforming Products by a method of shipment approved
by MAKER, obtains an RMA, Products are received by MAKER in good condition,
without their markings altered, defaced, or removed, and accompanied with a
written description of the defect(s). The foregoing warranty does not apply
to any Products which have been subject to alteration, misuse (including
static discharge), neglect, accident or modifications or which have been
soldered or altered during assembly and are not capable of being tested by
MAKER under its normal test compatible with all equipment and/or software
configurations. MAKER's sole and exclusive liability and CUSTOMER's sole and
exclusive remedy shall be, at Maker's option, to repair, replace, or refund
the purchase price paid by COMPANY fore the defective Products. THE PRODUCTS
ARE NOT DESIGNED, INTENDED, OR AUTHORIZED FOR USE AS COMPONENTS IN LIFE
SUPPORT PRODUCTS OR SYSTEMS. EXCEPT AS PROVIDE DIN THIS SECTION, MAKER MAKES
NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND ALL
OTHER WARRANTIES ARISING OUT OF OR IN CONNECTION WITH THE SALE, RESALE,
AND/OR PURCHASE OF THE PRODUCTS, OR THE USE,
FINAL
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
REPAIR OR PERFORMANCE THEREOF, OR ANY COURSE OF DEALING OR COURSE OF
PERFORMANCE UNDER ANY AGREEMENT BETWEEN CUSTOMER AND MAKER.
16. LIMITATION OF LIABILITY
16.1 No default shall be caused by and MAKER shall not be responsible to
CUSTOMER for any loss, damages, or penalty resulting from any delay or
failure to perform the obligations of MAKER herein that are due to any cause
beyond MAKER's control. Nor shall MAKER be liable to CUSTOMER for any
delay(s) or failure(s) to perform its obligations due to the scarcity of the
basic elements needed to produce compounds, chemicals, micro electronic parts
(or similar materials) or because of any governmental restriction whatsoever
upon the possession or distribution of such basic elements. Anticipated
delivery dates shall be deemed extended for a period of time equal to the
time lost due to any such delay excusable under this Section 16.
16.2 IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR
INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION,
LOSS OF INCOME, DATA, USE OR INFORMATION, EVEN IF A PARTY HAS BEEN ADVISED OF
THE POSSIBILITY OF SUCH DAMAGES.
16.3 IN NO EVENT SHALL THE LIABILITY OF MAKER EXCEED [*] DOLLARS ($[*]) OR
THE AMOUNT PAID FOR THE PRODUCT OR SERVICE GIVING RISE TO THE CLAIM,
WHICHEVER IS GREATER.
17. INFRINGEMENT INDEMNITY: MAKER will, subject to Section 16 above,
defined CUSTOMER against a claim that the Product infringes a valid United
States, Canadian, European Union, or Japanese patent or copyright. MAKER will
pay resulting costs, damages and reasonable attorney's fees finally awarded
against CUSTOMER or agreed to in any settlement provided that (a) CUSTOMER
promptly notifies MAKER in writing of any such claim, (b) MAKER has sole
control of the defense and all related settlement negotiations, and (c)
CUSTOMER cooperates in the defense and furnishes all related evidence in or
under its control. If such a claim has occurred, or in MAKER's opinion is
likely to occur, CUSTOMER shall immediately discontinue all use, manufacture
and distribution of the Product and permit MAKER, at MAKER's option and
expense, to (a) procure for CUSTOMER the right to continue using such
product, (b) replace or modify the Product so it becomes non-infringing, or
(c) refund the amount paid to MAKER for the infringing Product. MAKER shall
have no liability for any claim based upon (a) the combination, operation, or
use of the Product with equipment, data, or software not furnished by MAKER if
such infringement could have been avoided through the use of other equipment,
data or software or by the avoidance of use with equipment, data or software
not provided by MAKER, (b) modifications to the Product not made by MAKER or
made by MAKER in compliance with CUSTOMER's designs, specifications or
instructions, or (c) a version of the Product other than the currently
released version. This Section 17 sets forth MAKER's entire liability and sole
obligation and CUSTOMER's exclusive remedy in the event of any claim of
intellectual property infringement.
18. CUSTOMER INDEMNITY: CUSTOMER shall indemnify MAKER and hold MAKER
harmless against any claim, suit, award of damages, and cost made against
MAKER by a judgment or any amount in settlement or compromise thereof agreed
to by both parties herein insofar as the same is based on CUSTOMER's use,
sale, or distribution of the Products.
19. CONFIDENTIAL INFORMATION: "Confidential Information" means any
information of a sensitive or proprietary nature possessed, obtained or
developed for the disclosing party. Such information includes but is not
limited to, pre-release information relating to Products, product designs,
marketing plans, customer lists, sales forecasts, prices, policies practices
and the terms of this Agreement. All Confidential Information must be labeled
"Confidential" or the substantial equivalent thereof or, if disclosed orally,
shall be summarized in writing to the receiving party within thirty (30) days
of disclosure. The receiving party shall treat all
FINAL
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
during the warranty period. Software which does not substantially conform to
the MAKER user documentation may be returned for, at MAKER's option, repair
or replacement during the warranty period. If MAKER is unable to replace
defective media or if MAKER is unable to repair or replace the Software which
does not substantially conform to the MAKER user documentation within a
reasonable time, MAKER will (at its option) either replace the Software with
functionally similar programs or refund the license fee LICENSEE paid for the
Software. MAKER does not warrant that the Software is error-free, will
operate without interruption or is compatible with all equipment and software
configurations. This warranty does not cover any Software which has been
subjected to damage or abuse or has been altered or changed in any way. MAKER
is not responsible for problems caused by computer hardware or computer
application or operating systems. EXCEPT AS PROVIDED IN THIS SECTION 5, MAKER
MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE,
ITS MERCHANTABILITY OR ITS FITNESS FOR A PARTICULAR PURPOSE. REPAIR,
REPLACEMENT OR REFUND (AT THE OPTION OF MAKER) IS THE EXCLUSIVE REMEDY IF
THERE IS A DEFECT OR THE PRODUCT DOES NOT SUBSTANTIALLY CONFORM TO THE USER
DOCUMENTATION.
6. LIMITATION OF LIABILITY:
IN NO EVENT SHALL EITHER MAKER OR LICENSEE BE LIABLE FOR ANY INDIRECT,
CONSEQUENTIAL OR INCIDENTAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES
FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, OR LOSS OF BUSINESS
INFORMATION) ARISING OUT OF THE USE OR INABILITY TO USE THE SOFTWARE, EVEN IF
THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO CASE
SHALL MAKER'S AGGREGATE LIABILITY, WHETHER IN CONTRACT, TORT OR OTHERWISE,
EXCEED THE AMOUNT OF LICENSE FEES PAID BY LICENSEE FOR THE SOFTWARE GIVING
RISE TO THE CLAIM.
7. INFRINGEMENT INDEMNITY:
MAKER will, subject to Section 6, defend LICENSEE against a claim that the
Software infringes a valid United States, Canadian, European Union, or
Japanese patent or copyright. MAKER will pay resulting costs, damages and
reasonable attorneys' fees finally awarded against LICENSEE or agreed to in
any settlement, provided that (a) LICENSEE promptly notifies MAKER in writing
of any such claim, (b) MAKER has sole control of the defense and all related
settlement negotiations, and (c) LICENSEE cooperates in the defense and
furnishes all related evidence in or under its control. If such a claim has
occurred, or in MAKER's opinion is likely to occur, at MAKER's option and
expense, MAKER agrees to (a) procure for LICENSEE the right to continue using
such Software, (b) replace or modify the Software so it becomes
non-infringing or (c) refund the license fee LICENSEE paid for the infringing
Software. MAKER shall have no liability for any claim based upon (a) the
combination, operation, or use of the Software with equipment, data, or
software not furnished by MAKER, (b) modifications to the Software not made
by MAKER and/or (c) a version of the Software other than the currently
released version of the Software. This Section 7 sets forth MAKER's entire
liability and sole obligation and LICENSEE's exclusive remedy in the event of
any claim of intellectual property infringement.
8. MAINTENANCE AND SUPPORT:
8.1 With the exception of LinkMaker for which Maintenance, Support, and
Enhancements is not available, for a period of thirty (30) days from the
delivery of the Software, MAKER will provide Maintenance for the Software
free of charge ("Initial Maintenance"). "Maintenance" consists of Support for
and Enhancements to the Software. "Support" means reasonable telephone and
e-mail support for the Software during the hours of
<PAGE>
CONFIDENTIAL
9:00 a.m. to 6:00 p.m. U.S. Eastern Standard Time, on MAKER's regular
business days. MAKER will use reasonable efforts to respond to a request for
Support within twenty-four (24) hours. "Enhancement" shall mean a new version
of the Software that is commercially released by MAKER to its Maintenance
customers. LICENSEE agrees and acknowledges that (i) MAKER is under no
obligation to create, develop, or release any Enhancements, (ii) all
Enhancements shall be subject to this Agreement and (iii) MAKER may develop
or market new or different products which use all or part of the Software and
which shall not constitute an Enhancement.
8.2 LICENSEE may purchase Maintenance for a twelve (12) month period
("Maintenance Period") by paying MAKER the "Annual Maintenance Fee" described
in the Schedules. The Annual Maintenance Fee specified in the Schedules shall
be valid for twenty four (24) months from the Effective Date of this
Agreement. Thereafter, the Annual Maintenance Fee shall be at MAKER's
then-current rate, unless otherwise agreed to in writing. There shall be no
refunds or credits if Maintenance is terminated prior to the end of any
Maintenance Period, unless such termination is a result of MAKER's breach of
its Maintenance obligations. MAKER is under no obligation to offer or provide
Maintenance: (i) if LICENSEE fails to notify MAKER in writing of its
intention to purchase Maintenance, (ii) if LICENSEE fails to pay the Annual
Maintenance Fee within thirty (30) days of the beginning of each Maintenance
Period, or (iii) for any version of the Software other than the most current
version and the one version prior to the most current release.
9. UPDATES:
During the term of this Agreement, MAKER will provide or make available to
LICENSEE, free of charge, any updates to the Software, but not LinkMaker,
which MAKER generally makes available to its licensees. "Update" means
program logic and documentation change to correct an error or defect and to
maintain the operational quality of the Software. Updates do not include
Enhancements or any additions or improvements to the features, functionality or
performance of the Software.
10. NOTICES:
Any notices or reports required by this Agreement to be given by one party to
the other party shall be made in writing to that party at the address shown
below or any other address that may be designated in writing from time to
time by the party. All notices to be given by either party to the other under
this Agreement shall be deemed given upon receipt, in the case of (i)
personal delivery, (ii) facsimile transmission (if, followed-up with a
written notice sent via mail), or (iii) on the third day following deposit in
the mail if the notice is sent by prepaid certified mail, return receipt
requested.
Notice to MAKER: Notice to LICENSEE:
---------------- -------------------
Maker Communications, Inc. Sonoma Systems, Inc.
73 Mount Wayte Avenue 4640 Admiralty Way
Framingham, MA 01702 Suite 600
Attn: President Marina del Rey, CA 90292-6695
Attn: VICE PRESIDENT OF FINANCE
11. GENERAL TERMS:
11.1 This Agreement is the complete and exclusive agreement between MAKER
and LICENSEE regarding this subject matter and supersedes all agreements and
all communications, whether written or oral, between the parties.
<PAGE>
CONFIDENTIAL
11.2 This Agreement may only be amended, changed, or revised by a written
agreement between MAKER and LICENSEE. A waiver of any violation or failure to
enforce any provisions of this Agreement shall not constitute a waiver of any
rights with respect to this Agreement.
11.3 All terms and conditions of this Agreement are severable. If any term
or provision, or any portion thereof, of this Agreement is held to be invalid,
illegal or unenforceable, the remaining portions shall not be affected.
11.4 Section heading are intended for convenience only and shall not be
used in the interpretation of this Agreement.
11.5 The validity, construction, interpretation, and performance of this
Agreement shall be governed and construed by the laws of the Commonwealth of
Massachusetts, without regard to conflicts of law and choice of law rules. Any
suit or cause of action with respect to this Agreement may only be brought in
the Commonwealth of Massachusetts. English shall be governing language of this
Agreement.
11.6 LICENSEE agrees that any breach of this Agreement will cause MAKER
irreparable harm and that the damage will be difficult to determine and that
money damages alone will not be an adequate remedy. Therefore, MAKER shall have
the right to seek injunctive relief against any breach or threatened breach of
this Agreement.
11.7 If either party commences any action or proceeding to enforce this
Agreement or any right arising under this Agreement, the prevailing party
shall be entitled to recover from the other party the actual attorneys' fees,
costs and expenses (and all related fees, costs and expenses) incurred by it
in connection with such action or proceeding and in connection with the
enforcement of any judgment thereby obtained.
11.8 During the term of this Agreement and for a period of twelve (12)
months thereafter, LICENSEE shall permit MAKER or MAKER's authorized
representative, upon reasonable notice and during LICENSEE's normal business
hours, to inspect and audit LICENSEE's books and records relating to this
Agreement. In the event such audit determines that a discrepancy exists, and
the result of such discrepancy is that LICENSEE has paid at least [*]% less
than it is obligated to pay (either in the aggregate or with respect to any
particular period), LICENSEE shall immediately pay the excess amount of
royalties due and the cost of such audit. In the event of a discrepancy of
less than [*]% of what LICENSEE is obligated to pay, then MAKER shall bear the
cost of such audit, and the parties shall make adjustments, if any,
reflecting the results of such audit.
11.9 LICENSEE shall not transfer or assign any of its rights, or delegate
any of its obligations under this Agreement without MAKER's prior written
consent, which shall not be unreasonably withheld, except that LICENSEE may so
assign this Agreement, but only in its entirety, without MAKER's prior consent
to an acquiring or surviving entity to the business of LICENSEE by merger,
purchase or transfer of all or substantially all of LICENSEE's assets that the
acquiring party agrees in writing to be bound by this Agreement. This agreement
shall be binding on and inure to benefit of MAKER and LICENSEE and their
respective successors and (to the extent specified in any assignment)
assigns.
11.10 Software described or referenced in this Agreement are commercial
computer software programs developed at private expense. If LICENSEE is
acquiring the Software on behalf of any unit or agency of the U.S. Government,
the following shall apply: (a) For units of the Department of Defense:
RESTRICTED RIGHTS LEGEND: Use, duplication or disclosure by the Government is
subject to restrictions as set forth in subparagraph (c)(1)(ii) of the Rights
in Technical Data Clause at DFARS 252.227-7013. (b) For any other unit or
agency: The Government's rights in the software and its documentation will be
as defined in Clause 52.227-
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
19(c)(2) of the FAR. Contractor/manufacturer is Maker Communications, Inc., 73
Mount Wayte Avenue, Framingham, MA 01702.
11.11 LICENSEE shall comply with all applicable provisions of the Export
Administration Regulations of the United States Department of Commerce and all
similar laws and regulations. Upon written request from MAKER, LICENSEE shall
provide MAKER with all documentation and data necessary or desirable in
monitoring such compliance. LICENSEE agrees to defend, indemnify and hold MAKER
harmless against any liability arising from the failure of LICENSEE or
LICENSEE's customers to comply with such regulations.
IN WITNESS WHEREOF, the parties have executed this Agreement, inclusive of the
attached Exhibits, to be executed by their duly authorized representatives as
of the Effective Date.
MAKER COMMUNICATIONS, INC. SONOMA SYSTEMS, INC.
By: /s/ [ILLEGIBLE] By: /s/ Steve Waszak
------------------------ --------------------------
Name: Michael [ILLEGIBLE] Name: Steve Waszak
---------------------- ------------------------
Title: Vice President & CFO Title: Vice President Finance
--------------------- -----------------------
<PAGE>
CONFIDENTIAL
EXHIBIT A
SOFTWARE SCHEDULES
SOFTWARE DESCRIPTION
One copy of MAKER's "CIRCUIT SERVICES-5 AAL5 SAR MODULE" firmware
program in binary form ("Software") developed for use in connection with
MAKER's MXT3010 semiconductor device ("Device"), and MAKER's current
documentation therefor.
PERMITTED USES:
LICENSEE may make a reasonable number of copies of the Circuit
Services-5 AAL5 SAR Module firmware program for use solely in connection
with LICENSEE's "Access" or "Access Plus" product lines. Except for the
limited sublicensing rights specified below, LICENSEE may only use the
Software, as set forth in Section 1 of this Agreement, for its internal
use solely in connection with the Device. Subject to the royalty fee
specified below, if any, LICENSEE may reproduce and sublicense the
Software to LICENSEE's customers and LICENSEE's resellers/distributors
may sublicense the Software to their customers, for such customers
internal use only, provided (i) the Software is used solely in
connection with the Device (ii) the Device is integrated with LICENSEE's
product, (iii) LICENSEE includes MAKER's and/or its suppliers'
copyrights and all other proprietary legends on each copy, and (iv)
LICENSEE includes an end user software license agreement containing
terms and conditions substantially similar to those set forth in this
Agreement or MAKER's Software License Agreement, a copy of which is
attached hereto as Exhibit B. LICENSEE shall not sublicense or
distribute the Software as a standalone product. No other sublicense or
distribution rights are granted under this Agreement.
LICENSE FEES AND ROYALTIES:
License Fee: [*]
Royalties: [*]
MAINTENANCE AND SUPPORT FEES:
Annual Maintenance and Support for CircuitService-5 Binary Kit is:
$[*] per year.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
SOFTWARE DESCRIPTION
One copy of MAKER's "CIRCUIT SERVICES-1 AAL1 SDT MODULE" firmware
program in binary form ("Software") developed for use in connection with
MAKER's MXT3010 semiconductor device ("Device"), and MAKER's current
documentation therefor.
PERMITTED USES:
LICENSEE may make a reasonable number of copies of the Circuit
Services-1 AAL1 SDT Module firmware program for use solely in connection
with LICENSEE's "Access" or "Access Plus" product lines. Except for the
limited sublicensing rights specified below, LICENSEE may only use the
Software, as set forth in Section 1 of this Agreement, for its internal
use solely in connection with the Device. Subject to the royalty fee
specified below, if any, LICENSEE may reproduce and sublicense the
Software to LICENSEE's customers and LICENSEE's resellers/distributors
may sublicense the Software to their customers for such customers
internal use only, provided (i) the Software is used solely in
connection with the Device (ii) the Device is integrated with LICENSEE's
product, (iii) LICENSEE includes MAKER's and/or its suppliers'
copyrights and all other proprietary legends on each copy, and (iv)
LICENSEE includes an end user software license agreement containing
terms and conditions substantially similar to those set forth in this
Agreement or MAKER's Software License Agreement, a copy of which is
attached hereto as Exhibit B. LICENSEE shall not sublicense or
distribute the Software as a standalone product. No other sublicense or
distribution rights are granted under this Agreement.
LICENSE FEES AND ROYALTIES:
License Fee: [*]
Royalties: Royalties of $[*] per Module are bundled into the price of
the Module.
MAINTENANCE AND SUPPORT FEES:
Annual Maintenance and Support for CircuitService-1 Binary Kit is:
$[*] per year.
SOFTWARE DESCRIPTION
One (1) copy of MAKER's "LINKMAKER", software program in source code
form, ("Software") developed for use in connection with MAKER's MXT3010
semiconductor device ("Device"), and MAKER's current documentation
therefor.
LINKMAKER WARRANTY:
LINKMAKER IS PROVIDED "AS IS". MAKER MAKES NO WARRANTY (i) WITH RESPECT
TO, AND LICENSEE ACCEPTS SOLE RESPONSIBILITY FOR, THE SELECTION OF THE
SOFTWARE TO ACHIEVE LICENSEE'S INTENDED RESULTS, THE INSTALLATION AND
USE OF THE SOFTWARE, ANY RESULTS OBTAINED FROM SUCH USE, AND THE
SELECTION, USE OF AND RESULTS OBTAINED FROM ANY OTHER PROGRAM,
PROGRAMMING EQUIPMENT OR SERVICES OPERATED OR APPLIED IN CONNECTION WITH
THE SOFTWARE, (ii) THAT THE SOFTWARE WILL MEET LICENSEE'S TECHNICAL OR
OTHER REQUIREMENTS, (iii) THAT THE OPERATION OF THE SOFTWARE WILL BE
UNINTERRUPTED OR ERROR-FREE, (iv) THAT ANY OR ALL SOFTWARE DEFECTS WILL
BE CORRECTED, OR (V)
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
EXPRESS OR IMPLIED, WITH RESPECT TO THE SOFTWARE, ITS MERCHANTABILITY OR ITS
FITNESS FOR A PARTICULAR PURPOSE. MAKER DOES NOT WARRANT THAT THE SOFTWARE IS
ERROR FREE, WILL OPERATE WITHOUT INTERRUPTION OR IS COMPATIBLE WITH OTHER
HARDWARE OR SOFTWARE.
PERMITTED USES:
Except for the limited sublicensing rights specified below, LICENSEE may only
use the Software, as set forth in this Agreement, for its internal use solely
in connection with LICENSEE's "Access" or "Access Plus" product lines. To
the minimum extent required for use with the Device, LICENSEE may modify the
source code portions of the Software, including the documentation, to create
Derivative Works. Subject to the royalty fee specified below, if any,
LICENSEE may reproduce and sublicense the Derivative Works, in binary form
only, to LICENSEE's customers and LICENSEE's resellers/distributors may
sublicense the Derivative Works to their customers for such customers
internal use only, provided (i) the Software is used solely in connection
with the Device (ii) the Device is integrated with LICENSEE's product, (iii)
LICENSEE includes MAKER's and/or its suppliers' copyrights and all other
proprietary legends on each copy, and (iv) LICENSEE includes an end user
software license agreement containing terms and conditions substantially
similar to those set forth in this Agreement or MAKER's Software License
Agreement, a copy of which is attached hereto as Exhibit B. LICENSEE shall
not sublicense or distribute the Software as a standalone product. No other
sublicense or distribution rights are granted under this Agreement. LICENSEE
agrees and acknowledges that all right, title and interest in and to all
Derivative Works is and shall remain at all times with MAKER. Except as
specified in this Agreement, MAKER grants LICENSEE no other rights with
respect to any Derivative Works. LICENSEE shall include the following MAKER
copyright notice, including the applicable year(s) of the copyright, on all
Derivative Works, "Copyright-C- Maker Communications, Inc. 199_ All Rights
Reserved". Upon request from MAKER, LICENSEE shall provide MAKER with a copy
of all Derivative Works, including without limitation, any and all updates,
enhancements, patches, new versions and documentation, in both source code
and binary code form.
LICENSE FEES AND ROYALTIES:
License Fee: $[*] (per license)
Royalties: [*]
MAINTENANCE AND SUPPORT FEES:
Maintenance and Support is not available for LinkMaker.
* CERTAIN CONFIDENTIAL INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
CONFIDENTIAL
EXHIBIT B
MAKER COMMUNICATIONS, INC.
SOFTWARE LICENSE AGREEMENT
THIS IS A LEGAL AGREEMENT BETWEEN YOU AND MAKER COMMUNICATIONS, INC.
("MAKER"). READ THESE TERMS AND CONDITIONS CAREFULLY BEFORE OPENING THE
MEDIA PACKAGE. IF YOU DO NOT AGREE WITH THE TERMS AND CONDITIONS OF THIS
AGREEMENT, YOU SHOULD PROMPTLY AND IN ANY EVENT WITHIN THIRTY (30) DAYS OF
RECEIPT OF THE SOFTWARE, RETURN THE SOFTWARE UNOPENED, AND THE LICENSE FEE
YOU PAID FOR THE SOFTWARE WILL BE REFUNDED.
1. LICENSE GRANT:
1.1 MAKER grants you, subject to the terms and conditions of this
Agreement and payment of the applicable license fee, a non-transferable,
non-exclusive, license to use the enclosed MAKER software program and/or
portions thereof and the accompanying documentation (the "Software") as
follows:
1.2 You may (a) use the Software for your own internal use on a single
user client computer, but not a server, solely in conjunction with
MAKER's semiconductor devices, (b) transfer the Software from one of
your computers to another provided that it is used on only one computer
at a time, and that you remove any copies of the Software from the
computer from which it is being transferred, and (c) make one (1) copy
of the Software solely for backup or archival purposes provided you
reproduce and include all Software copyright and other proprietary
legends.
1.3 You may NOT (a) assign or transfer the Software or your rights or
obligations under this Agreement without the prior written consent of
MAKER, (b) distribute copies of the Software, in whole or in part, (c)
copy the hard copy documentation portion of the Software, (d) rent,
lease or otherwise transfer your rights to the Software, (e) translate,
reverse engineer, decompile or disassemble or otherwise alter the
Software (except to the extent, when required by law, and then only to
the minimum extent required by law) or (f) distribute (directly or
indirectly) any copies of the Software, or any direct product thereof,
to any country, entity, or destination prohibited by the United States
Government.
2. OWNERSHIP OF SOFTWARE AND DOCUMENTATION: The Software, including but
not limited to, any run-time program is and shall remain owned by MAKER
and/or its suppliers and is protected by United States copyright laws
and international treaty provisions. It is an express condition of this
Agreement that title to, ownership of, and all rights in patents,
copyrights, trade secrets and any other intellectual property rights in
the Software and any copy or part thereof is and shall remain in MAKER
and/or its suppliers.
3. TERM: This Agreement remains effective until terminated. You may
terminate it at any time by destroying the Software. This Agreement
shall automatically terminate without notice if you fail to comply with
any term or condition of this Agreement. Upon termination for any
reason, you shall promptly destroy the Software and all copies or
portions thereof in any form.
4. LIMITED WARRANTY: The Software is provided "AS IS". MAKER makes no
warranty (i) with respect to, and you accept sole responsibility for,
the selection of the Software to achieve your intended results, the
installation and use of the Software, any results obtained from such
use, and the selection, use of and results obtained from any other
program, programming equipment or services operated or applied in
connection with the Software, (ii) that the Software will meet your
technical or other requirements, (iii) that the operation of the
Software will be uninterrupted or error-free, (iv) that all Software
defects will be corrected, or (V) EXPRESS OR IMPLIED, WITH RESPECT TO
THE SOFTWARE, ITS MERCHANTABILITY OR ITS FITNESS FOR A PARTICULAR
PURPOSE. MAKER DOES NOT WARRANT THAT THE SOFTWARE IS ERROR FREE, WILL
OPERATE WITHOUT INTERRUPTION OR IS COMPATIBLE WITH OTHER HARDWARE OR
SOFTWARE.
5. INFRINGEMENT INDEMNITY: MAKER will, subject to Section 6 below, defend
you against a claim that the Software infringes a valid United States
patent or copyright. MAKER will pay resulting costs, damages, and
reasonable attorneys' fees finally awarded against you or agreed to in
any settlement, provided that (a) you promptly notify MAKER in writing
of any such claim, (b) MAKER has sole control of the defense and all
related settlement negotiations, and (c) you cooperate in the defense
and furnish all related evidence in or under your control. If such a
claim has occurred, or in MAKER's opinion is likely to occur, at MAKER's
option and expense, MAKER agrees to (a) procure for you the right to
continue using such Software, (b) replace or modify the Software so it
becomes non-infringing or (c) refund the license fee you paid for the
infringing Software. MAKER shall have no liability for any claim based
upon (a) the combination, operation, or use of the Software with
equipment, data, or software not furnished by MAKER, (b) modifications
to the Software not made by MAKER and/or (c) a version of the Software
other than the currently released version of the Software. This Section
5 sets forth MAKER's entire liability and sole obligation and your
exclusive remedy in the event of any claim of intellectual property
infringement.
6. LIMITATION OF LIABILITY: YOU SHALL NOT USE THE SOFTWARE IN ANY CASE
WHERE SIGNIFICANT DAMAGE OR INJURY TO PERSON, PROPERTY OR BUSINESS MAY
OCCUR IF ANY ERROR OCCURS. YOU EXPRESSLY ASSUME ALL RISK FOR SUCH USE.
IN NO EVENT SHALL MAKER BE LIABLE FOR INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, LOSS OF INCOME,
DATA, USE OR INFORMATION, ARISING FROM BREACH OF WARRANTY, BREACH OF
CONTRACT, NEGLIGENCE OR ANY OTHER LEGAL THEORY, EVEN IF MAKER HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL THE
LIABILITY OF MAKER EXCEED ONE THOUSAND DOLLARS ($1,000). For personal,
family or household use of the Software, some jurisdictions do not allow
the exclusion or limitation of incidental or consequential damages or
limitations on how long an implied warranty lasts so the limitation or
exclusions set forth above may not apply to you.
7. U.S. GOVERNMENT RESTRICTED RIGHTS: The Software described or referenced
in this Agreement are commercial computer software programs developed at
private expense. Use, duplication, and disclosure of the Software and
derivative works thereof to and by the United States Government are
subject to the provisions of the license agreement contained with or in
the software product as prescribed by the applicable provisions of the
DOD FAR supplement or similar regulations of the U.S. Federal agencies
applicable to the delivery of commercial software including the
restrictions set forth in FAR 52.22719(c)(2). The contractor/manufacturer
of the Software is: MAKER COMMUNICATIONS, Inc., 73 Mount Wayte Avenue,
Framingham, MA, USA 01702
8. GENERAL TERMS: You agree to comply with all applicable laws and
regulations, including, without limitation, U.S. export and re-export
laws and regulations. The validity construction and performance of this
Agreement are governed by the laws of the Commonwealth of Massachusetts,
USA and suit or arbitration with respect to this Agreement may be
brought only in the Commonwealth of Massachusetts, USA If you have any
questions concerning this Agreement, you may contact MAKER at MAKER
COMMUNICATIONS, Inc., 73 Mount Wayte Avenue, Framingham, MA, USA 01702.
YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT, UNDERSTAND IT AND AGREE TO
BE BOUND BY ITS TERMS AND CONDITIONS. YOU FURTHER AGREE THAT IT IS THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN YOU AND MAKER AND
SUPERSEDES ANY EARLIER PROPOSAL OR PRIOR ARRANGEMENT, WHETHER ORAL OR
WRITTEN, OR ANY OTHER COMMUNICATIONS BETWEEN YOU AND MAKER RELATIVE TO THE
SUBJECT MATTER OF THIS AGREEMENT. ANY MODIFICATIONS, CHANGES OR REVISIONS TO
THIS AGREEMENT MUST BE IN WRITING AND SIGNED BY DULY AUTHORIZED
REPRESENTATIVES OF EACH PARTY.
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: SONOMA SYSTEMS, A CALIFORNIA CORPORATION
Number of Shares: 21,978 (SUBJECT TO THE PROVISION SET BELOW)
Class of Stock: SERIES E PREFERRED
Initial Exercise Price: $3.64 PER SHARE (SUBJECT TO THE PROVISION SET BELOW)
Issue Date: NOVEMBER 29, 1999
Expiration Date: NOVEMBER 29, 2004
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the
provisions and upon the terms and conditions set forth in this Warrant.
Notwithstanding the foregoing, if the Company fails to either (i) receive
$7,000,000 of the Private Placement (as such term is described in the Amended
and Restated Loan and Security Agreement of every date between the Company
and Holder) on or before December 31, 1999, or (ii) close the Private
Placement on or before March 31, 2000, the Number of Shares shall be 36,199
and the Initial Exercise Price shall be $2.21 per Share.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as
specified in Section 1.1, Holder may from time to time convert this Warrant, in
whole or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise issuable
upon exercise of this Warrant minus the aggregate Warrant Price of such Shares
by (b) the fair market value of one Share. The fair market value of the Shares
shall be determined pursuant to Section 1.4.
1.3 INTENTIONALLY OMITTED
1.4 FAIR MARKET VALUE. If the Shares are traded in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking firm to undertake such valuation. If the valuation of such
investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall be
paid by Holder.
<PAGE>
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
1.7 REPURCHASE ON SALE, MERGER, OR CONSOLIDATION OF THE COMPANY.
1.7.1 "ACQUISITION". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. ASSUMPTION OF WARRANT. Upon the closing of any
Acquisition the successor entity shall assume the obligations of this Warrant,
and this Warrant shall be exercisable for the same securities, cash, and
property as would be payable for the Shares issuable upon exercise of the
unexercised portion of this Warrant as if such Shares were outstanding on the
record date for the Acquisition and subsequent closing. The Warrant Price shall
be adjusted accordingly.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company (i) declares or
pays a dividend on its common stock (or the Shares if the Shares are securities
other than common stock) payable in common stock, or other securities, or (ii)
subdivides the outstanding common stock into a greater amount of common stock,
or, if the Shares are securities other than common stock, subdivides the Shares
in a transaction that increases the amount of common stock into which the Shares
are convertible, then upon exercise of this Warrant, for each Share acquired,
Holder shall receive, without cost to Holder, the total number and kind of
securities to which Holder would have been entitled had Holder owned the Shares
of record as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding shares
are combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased.
2
<PAGE>
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time in the manner
set forth on Exhibit A in the event of Diluting issuances (as defined on Exhibit
A).
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its
Articles of Incorporation or through a reorganization, 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 under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the Company
takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder an amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents
and warrants to the Holder as follows:
(a) The Initial Warrant Price referenced on the first page of
this Warrant is not greater than (i) the price per share at which the Shares
were issued in the Series E round of equity financing in an arms-length
transaction in which at least $500,000 of the Shares were sold and (ii) the fair
market value of the Shares as of the date of this Warrant.
(b) All shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(c) The Capitalization table attached hereto is true and
correct.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time
(a) to declare any dividend or distribution upon its common stock, whether in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (c) to effect any reclassification or recapitalization of common
stock; (d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event, the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend, distribution, or subscription rights
(and specifying the date on which the holders of
3
<PAGE>
common stock will be entitled thereto) or for determining rights to vote, if
any, in respect of the matters referred to in (c) and (d) above; (2) in the case
of the matters referred to in (c) and (d) above at least 20 days prior written
notice of the date when the same will take place (and specifying the date on
which the holders of common stock will be entitled to exchange their common
stock for securities or other property deliverable upon the occurrence of such
event); and (3) in the case of the matter referred to in (e) above, the same
notice as is given to the holders of such registration rights.
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within 90 days after the end of each fiscal
year of the Company, the annual audited financial statements of the Company
certified by independent public accountants of recognized standing and (c) such
other financial statements required under and in accordance with any loan
documents between Holder and the Company (or if there are no such requirements
[or if the subject loan(s) no longer are outstanding]), then within 45 days
after the end of each of the first three quarters of each fiscal year, the
Company's quarterly, unaudited financial statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The
Company agrees that the Shares or, if the Shares are convertible into common
stock of the Company, such common stock, shall be subject to the registration
rights set forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 TERM. This Warrant is exercisable, in whole or in part, at any
time and from time to time on or before the Expiration Date set forth above.
4.2 LEGENDS. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any)
shall be imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR
AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and
the Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c). Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.3
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) at any time to Silicon Valley Bancshares
or The Silicon Valley Bank Foundation, or to any other transferee by giving the
Company notice of the portion of the Warrant being transferred setting forth the
name, address and taxpayer identification number of the transferee and
surrendering this Warrant to the Company for reissuance to the transferee(s)
(and Holder if applicable). Unless the Company is filing financial information
with the SEC
4
<PAGE>
pursuant to the Securities Exchange Act of 1934, the Company shall have the
right to refuse to transfer any portion of this Warrant to any person who
directly competes with the Company.
4.5 NOTICES. All notices and other communications from the Company
to the Holder, or vice versa, shall be deemed delivered and effective when
given personally or mailed by first-class registered or certified mail, at such
address as may have been furnished to the Company or the Holder, as the case may
be, in writing by the Company or such holder from time to time. All notices to
be provided under this Warrant shall be sent to the following address:
Silicon Valley Bank
Attn: Treasury Department HG100
3003 Tesman Drive
Santa Clara, CA 95054
4.6 WAIVER. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the
parties concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other party all
costs incurred in such dispute, including reasonable attorneys' fees.
4.8 GOVERNING LAW. This Warrant shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
Sonoma Systems
By: /s/ [ILLEGIBLE]
----------------------------------
Name: [ILLEGIBLE]
--------------------------------
(Print)
Title: Chief Financial Officer, Secretary,
Assistant Treasurer or Assistant
Secretary
5
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ______ shares of the
Common/Preferred Series ____ [Strike one] Stock of Sonoma Systems pursuant to
the terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
or
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This
conversion is exercised with respect to _______________ of the Shares covered by
the Warrant.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
------------------------------
(Name)
------------------------------
------------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
----------------------------------
(Signature)
- --------------------
(Date)
<PAGE>
EXHIBIT A
ANTI-DILUTION PROVISIONS
(FOR PREFERRED STOCK WARRANTS WITH EXISTING ANTI-DILUTION PROTECTION)
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, then the number of shares of common stock issuable upon
conversion of the Shares shall be adjusted in accordance with those provisions
(the "Provisions") of the Company's Articles (Certificate) of Incorporation
which apply to Diluting issuances.
The Company agrees that the Provisions, as in effect on the issue Date,
shall be deemed to remain in full force and effect during the term of the
Warrant notwithstanding any subsequent amendment, waiver or termination thereof
by the Company's shareholders.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting issuance.
<PAGE>
EXHIBIT A
ANTI-DILUTION PROVISIONS
(FOR PREFERRED STOCK OR COMMON STOCK WARRANTS WHERE
ANTI-DILUTION PROTECTION IS INADEQUATE OR NON-EXISTENT)
In the event of the issuance (a "Diluting Issuance") by the Company, after
the Issue Date of the Warrant, of securities at a price per share less than the
Warrant Price, or, if the Shares are common stock, less than the then conversion
price of the Company's Series ___ Preferred Stock, then the number of shares of
common stock issuable upon conversion of the Shares, or if the Shares are common
stock, the number of Shares issuable upon exercise of the Warrant, shall be
adjusted as a result of Diluting issuances in accordance with the Holder's
standard form of Anti-Dilution Agreement in effect on the Issue Date.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
<PAGE>
SONOMA SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
This EMPLOYEE STOCK PURCHASE PLAN (the "Plan") is hereby established by
Sonoma Systems, Inc., a Delaware corporation (the "Company"), effective
_________ ___, 2000.
ARTICLE I
PURPOSE OF THE PLAN
1.1 PURPOSE. The Company has determined that it is in its the best
interest to provide incentives to attract and retain employees and to increase
employee morale by providing a program through which employees of the Company,
and of such of the Company's subsidiaries as the Company's Board of Directors
(the "Board") may from time to time designate (each a "Designated Subsidiary",
and collectively, "Designated Subsidiaries"), may acquire a proprietary interest
in the Company through the purchase of shares of the common stock of the Company
("Company Stock"). The Plan is hereby established by the Company to permit
employees to subscribe for and purchase directly from the Company shares of the
Company Stock at a discount from the market price, and to pay the purchase price
in installments by payroll deductions. The Plan is intended to qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended from time to time (the "Code"). The provisions of the Plan are
to be construed in a matter consistent with the requirements of Section 423 of
the Code. The Plan is not intended to be an employee benefit plan under the
Employee Retirement Income Security Act of 1974, and therefore is not required
to comply with that Act.
ARTICLE II
DEFINITIONS
2.1 COMPENSATION. "Compensation" means the amount indicated on the Form
W-2, including any elective deferrals with respect to a plan of the Company
qualified under either Section 125 or Section 401(a) of the Code, issued to an
employee by the Company.
2.2 EMPLOYEE. "Employee" means each person currently employed by the
Company or any of its Designated Subsidiaries, any portion of whose income is
subject to withholding of income tax or for whom Social Security retirement
contributions are made by the Company or any Designated Subsidiary.
2.3 EFFECTIVE DATE. "Effective Date" means the effective date of the
Company's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission (the "SEC") in connection with the Company's initial public
offering.
2.4 5% OWNER. "5% Owner" means an Employee who, immediately after the
grant of any rights under the Plan, would own Company Stock or hold outstanding
options to purchase Company Stock possessing 5% or more of the total combined
voting power of all classes of stock of the Company. For purposes of this
Section, the ownership attribution rules of Section 424(d) of the Code shall
apply and stock which the Employee may purchase under outstanding options shall
be treated as stock owned by the Employee.
<PAGE>
2.5 GRANT DATE. "Grant Date" means the first day of each Offering Period
(January 1 and July 1) under the Plan. In the first Plan Year only, the initial
Grant Date shall be the Effective Date.
2.6 PARTICIPANT. "Participant" means an Employee who has satisfied the
eligibility requirements of Section 3.1 and has become a participant in the Plan
in accordance with Section 3.2.
2.7 PLAN YEAR. "Plan Year" means the twelve consecutive month period ending
on December 31.
2.8 OFFERING PERIOD. "Offering Period" means the six-month periods from
January 1 through June 30 and July 1 through December 31 of each Plan Year.
However, the first Offering Period shall commence on the Effective Date and
shall end on December 31, 2001.
2.9 PURCHASE DATE. "Purchase Date" means the last day of each Offering
Period (June 30 or December 31). However, within the first Offering Period there
shall be four (4) Purchase Dates occurring on June 30, 2000, December 31, 2000,
June 20, 2001 and December 31, 2001.
ARTICLE III
ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY. Each Employee of the Company, or any Designated
Subsidiary, who, on the Grant Date, is customarily engaged on a
regularly-scheduled basis of more than 20 hours per week for more than five
months per calendar year and who has been employed for at least 90 days (or, for
the initial Offering Period only, such Employees who are employed on the
Effective Date) in the rendition of personal services to the Company, or any
Designated Subsidiary, may become a Participant in the Plan on the Grant Date
coincident with or next following his satisfaction of such requirements of
employment with the Company or any Designated Subsidiary.
3.2 PARTICIPATION. An Employee who has satisfied the eligibility
requirements of Section 3.1 may become a Participant in the Plan upon his
completion and delivery to the Secretary of the Company of a Subscription
Agreement provided by the Company (the "Subscription Agreement") authorizing
payroll deductions. Payroll deductions for a Participant shall commence on the
Grant Date coincident with or next following the filing of the Participant's
Subscription Agreement and shall remain in effect until revoked by the
Participant by the filing of a notice of withdrawal from the Plan under Article
VIII or by the filing of a new Subscription Agreement providing for a change in
the Participant's payroll deduction rate under Section 5.2.
3.3 SPECIAL RULES. Under no circumstances shall:
(a) A 5% Owner be granted a right to purchase Company Stock under
the Plan;
(b) A Participant be entitled to purchase Company Stock under the
Plan which, when aggregated with all other employee stock purchase plans of the
Company, exceed an amount equal to the Aggregate Maximum. "Aggregate Maximum"
means an amount equal to $25,000 worth of Company Stock (determined using the
fair market value of such Company Stock at each applicable Grant Date) during
each Plan Year; or
2
<PAGE>
(c) The number of shares of Company Stock purchasable by a
Participant on any Purchase Date exceed 5,000 shares, subject to periodic
adjustments under Section 10.4.
ARTICLE IV
OFFERING PERIODS
4.1 OFFERING PERIODS. The initial grant of the right to purchase Company
Stock under the Plan shall occur on the Effective Date. Thereafter, the Plan
shall provide for Offering Periods commencing on each Grant Date and terminating
on the next following Purchase Date, except that the first Offering Period shall
have four (4) Purchase Dates and shall end on December 31, 2001. The Board shall
have the power to change the Offering Periods without stockholder approval.
ARTICLE V
PAYROLL DEDUCTIONS
5.1 PARTICIPANT ELECTION. Upon completion of the Subscription Agreement,
each Participant shall designate the amount of payroll deductions to be made
from his paycheck to purchase Company Stock under the Plan. The amount of
payroll deductions shall be designated in whole percentages of Compensation, not
to exceed 15%. The amount so designated upon the Subscription Agreement shall be
effective as of the next Grant Date and shall continue until terminated or
altered in accordance with Section 5.2 below.
5.2 CHANGES IN ELECTION. A Participant may terminate participation in the
Plan at any time prior to the close of an Offering Period as provided in Article
8. A Participant may decrease or increase the rate of payroll deductions one
time during any Offering Period by completing and delivering to the Secretary of
the Company a new Subscription Agreement setting forth the desired change at
least 15 days prior to the end of the Offering Period. A Participant may also
terminate payroll deductions and have accumulated deductions for the Offering
Period applied to the purchase of Company Stock as of the next Purchase Date by
completing and delivering to the Secretary a new Subscription Agreement setting
forth the desired change. Any change under this Section shall become effective
on the next payroll period (to the extent practical under the Company's payroll
practices) following the delivery of the new Subscription Agreement.
5.3 PARTICIPANT ACCOUNTS. The Company shall establish and maintain a
separate account ("Account") for each Participant. The amount of each
Participant's payroll deductions shall be credited to his Account. Other than
through payroll deductions, an Employee may not make any other payments into his
Account. No interest will be paid or allowed on amounts credited to a
Participant's Account. All payroll deductions received by the Company under the
Plan are general corporate assets of the Company and may be used by the Company
for any corporate purpose. The Company is not obligated to segregate such
payroll deductions.
ARTICLE VI
GRANT OF PURCHASE RIGHTS
6.1 RIGHT TO PURCHASE SHARES. On each Grant Date, each Participant shall be
granted a right to purchase at the price determined under Section 6.2 that
number of shares and partial shares of Company Stock that can be purchased with
the amounts held in his Account, subject to the limits set forth in Section
3.3(c). If there are amounts held in a Participant's
3
<PAGE>
Account that are not used to purchase Company Stock, such amounts shall remain
in the Participant's Account and shall be eligible to purchase Company Stock on
any subsequent Purchase Date.
6.2 PURCHASE PRICE. The purchase price for any Offering Period shall be the
lesser of:
(a) 85% of the Fair Market Value of Company Stock on the Grant
Date; or
(b) 85% of the Fair Market Value of Company Stock on the Purchase
Date.
6.3 FAIR MARKET VALUE. "Fair Market Value" for the initial Grant Date
(which is the Effective Date) shall be the initial price to the public as set
forth in the final prospectus included within the registration statement on Form
S-1 filed with the SEC for the initial public offering of the Company's common
stock. For any subsequent date thereafter, "Fair Market Value" shall mean the
value of one share of Company Stock, determined as follows:
(a) If the Company Stock is then listed or admitted to trading on
the Nasdaq National Market System or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the closing sale price on the date of
valuation on the Nasdaq National Market System or principal stock exchange on
which the Company Stock is then listed or admitted to trading, or, if no closing
sale price is quoted or no sale takes place on such day, then the Fair Market
Value shall be the closing sale price of the Company Stock on the Nasdaq
National Market System or such exchange on the next preceding day on which a
sale occurred.
(b) If the Company Stock is not then listed or admitted to trading
on the Nasdaq National Market System or a stock exchange which reports closing
sale prices, the Fair Market Value shall be the average of the closing bid and
asked prices of the Company Stock in the over-the-counter market on the date of
valuation. If no sales take place on such day, then the fair market value shall
be the average of the closing bid and asked prices on the next preceding day on
which sales occurred.
(c) If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Board or any
committee appointed by the Board in good faith using any reasonable method of
valuation, which determination shall be conclusive and binding on all interested
parties.
ARTICLE VII
PURCHASE OF STOCK
7.1 PURCHASE OF COMPANY STOCK. Absent an election by the Participant to
terminate and have his Account returned, on each Purchase Date, the Plan shall
purchase on behalf of each Participant the maximum number of whole shares of
Company Stock at the purchase price determined under Section 6.2 above as can be
purchased with the amounts held in each Participant's Account. In the event that
there are amounts held in a Participant's Account that are not used to purchase
Company Stock, all such amounts shall be held in the Participant's Account and
carried forward to the next Offering Period, or to the next Purchase Date within
the first Offering Period, if any.
4
<PAGE>
7.2 DELIVERY OF COMPANY STOCK.
(a) Company Stock acquired under the Plan may either be issued
directly to Participants or may be issued to a contract administrator
("Administrator") engaged by the Company to administer the Plan under Article
IX. If the Company Stock is issued in the name of the Administrator, all Company
Stock so issued ("Plan Held Stock") shall be held in the name of the
Administrator for the benefit of the Plan. The Administrator shall maintain
accounts for the benefit of the Participants which shall reflect each
Participant's interest in the Plan Held Stock. Such accounts shall reflect the
number of shares of Company Stock that are being held by the Administrator for
the benefit of each Participant.
(b) Any Participant may elect to have the Company Stock purchased
under the Plan from his Account be issued directly to the Participant. Any
election under this paragraph shall be on the forms provided by the Company and
shall be issued in accordance with paragraph (c) below.
(c) In the event that Company Stock under the Plan is issued
directly to a Participant, the Company will deliver to each Participant a stock
certificate or certificates issued in his name for the number of shares of
Company Stock purchased as soon as practicable after the Purchase Date. Where
Company Stock is issued under this paragraph, only full shares of stock will be
issued to a Participant. The time of issuance and delivery of shares may be
postponed for such period as may be necessary to comply with the registration
requirements under the Securities Act of 1933, as amended, the listing
requirements of any securities exchange on which the Company Stock may then be
listed, or the requirements under other laws or regulations applicable to the
issuance or sale of such shares.
ARTICLE VIII
WITHDRAWAL
8.1 IN SERVICE WITHDRAWALS. At any time prior to the Purchase Date of an
Offering Period, any Participant may withdraw the amounts held in his Account by
executing and delivering to the Secretary for the Company written notice of
withdrawal on the form provided by the Company. In such a case, the entire
balance of the Participant's Account shall be paid to the Participant, without
interest, as soon as is practicable. Upon such notification, the Participant
shall cease to participate in the Plan for the remainder of the Offering Period,
and for the immediately following Offering Period in which the notice is given.
Any Employee who has withdrawn under this Section shall be excluded from
participation in the Plan for the remainder of the Offering Period and for the
immediately following Offering Period, but may then be reinstated as a
Participant for a subsequent Offering Period by executing and delivering a new
Subscription Agreement to the Secretary of the Company.
8.2 TERMINATION OF EMPLOYMENT.
(a) In the event that a Participant's employment with the Company
terminates for any reason, the Participant shall cease to participate in the
Plan on the date of termination. As soon as is practical following the date of
termination, the entire balance of the Participant's Account shall be paid to
the Participant or his beneficiary, without interest.
(b) A Participant may file a written designation of a beneficiary
who is to receive any shares of Company Stock purchased under the Plan or any
cash from the Participant's Account in the event of his death subsequent to a
Purchase Date, but prior to
5
<PAGE>
delivery of such shares and cash. In addition, a Participant may file a written
designation of a beneficiary who is to receive any cash from the Participant's
Account under the Plan in the event of his death prior to a Purchase Date under
paragraph (a) above.
(c) Any beneficiary designation under paragraph (b) above may be
changed by the Participant at any time by written notice. In the event of the
death of a Participant, the Committee may rely upon the most recent beneficiary
designation it has on file as being the appropriate beneficiary. In the event of
the death of a Participant where no valid beneficiary designation exists or the
beneficiary has predeceased the Participant, the Committee shall deliver any
cash or shares of Company Stock to the executor or administrator of the estate
of the Participant, or if no such executor or administrator has been appointed
to the knowledge of the Committee, the Committee, in its sole discretion, may
deliver such shares of Company Stock or cash to the spouse or any one or more
dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Committee, then to such other person as the Committee
may designate.
ARTICLE IX
PLAN ADMINISTRATION
9.1 PLAN ADMINISTRATION.
(a) Authority to control and manage the operation and
administration of the Plan shall be vested in the Board or a committee
("Committee") thereof. As used herein, the term "Administrator" means the Board
or, with respect to any matter as to which responsibility has been delegated to
the Committee, the term Administrator shall mean the Committee. The
Administrator shall have all powers necessary to supervise the administration of
the Plan and control its operations.
(b) In addition to any powers and authority conferred upon the
Administrator elsewhere in the Plan or by law, the Administrator shall have the
following powers and authority:
(i) To designate agents to carry out responsibilities
relating to the Plan;
(ii) To administer, interpret, construe and apply
this Plan and to answer all questions which may arise or which may be raised
under this Plan by a Participant, his beneficiary or any other person
whatsoever;
(iii) To establish rules and procedures from time to
time for the conduct of its business and for the administration and effectuation
of its responsibilities under the Plan; and
(iv) To perform or cause to be performed such further
acts as it may deem to be necessary, appropriate, or convenient for the
operation of the Plan.
(c) Any action taken in good faith by the Board or Committee in
the exercise of authority conferred upon it by this Plan shall be conclusive and
binding upon a Participant and his beneficiaries. All discretionary powers
conferred upon the Board or Committee shall be absolute.
6
<PAGE>
9.2 LIMITATION ON LIABILITY. No Employee of the Company nor member of the
Board or Committee shall be subject to any liability with respect to his duties
under the Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board or
Committee, and any other Employee of the Company with duties under the Plan who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed proceeding, whether civil, criminal, administrative, or
investigative, by reason of the person's conduct in the performance of his
duties under the Plan.
ARTICLE X
COMPANY STOCK
10.1 LIMITATIONS ON PURCHASE OF SHARES. The maximum number of shares of
Company Stock that shall be made available for sale under the Plan shall be
_____________ shares, subject to adjustment under Section 10.4 below. The shares
of Company Stock to be sold to Participants under the Plan will be issued by the
Company. If the total number of shares of Company Stock that would otherwise be
issuable pursuant to rights granted pursuant to Section 6.1 of the Plan at the
Purchase Date exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available in as
uniform and equitable manner as is practicable. In such event, the Company shall
give written notice of such reduction of the number of shares to each
Participant affected thereby and any unused payroll deductions shall be returned
to such Participant if necessary.
10.2 VOTING COMPANY STOCK. The Participant will have no interest or voting
right in shares to be purchased under Section 6.1 of the Plan until such shares
have been purchased.
10.3 REGISTRATION OF COMPANY STOCK. Shares to be delivered to a Participant
under the Plan will be registered in the name of the Participant unless
designated otherwise by the Participant.
10.4 CHANGES IN CAPITALIZATION OF THE COMPANY. Subject to any required
action by the stockholders of the Company, the number of shares of Company Stock
covered by each right under the Plan which has not yet been exercised and the
number of shares of Company Stock which have been authorized for issuance under
the Plan but have not yet been placed under rights or which have been returned
to the Plan upon the cancellation of a right, as well as the Purchase Price per
share of Company Stock covered by each right under the Plan which has not yet
been exercised, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Company Stock resulting from a stock split,
stock dividend, spin-off, reorganization, recapitalization, merger,
consolidation, exchange of shares or the like. Such adjustment shall be made by
the Board of Directors for the Company, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issue 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 Company
Stock subject to any right granted hereunder.
10.5 MERGER OF COMPANY. In the event that the Company at any time proposes
to merge into, consolidate with or enter into any other reorganization pursuant
to which the Company is not the surviving entity (including the sale of
substantially all of its assets or a "reverse" merger in which the Company is
the surviving entity), the Plan shall terminate, unless provision is made in
writing in connection with such transaction for the continuance of the Plan and
for the assumption of rights theretofore granted, or the substitution for such
rights of new rights covering the shares of a successor corporation, with
appropriate adjustments as to
7
<PAGE>
number and kind of shares and prices, in which event the Plan and the rights
theretofore granted or the new rights substituted therefor, shall continue in
the manner and under the terms so provided. If such provision is not made in
such transaction for the continuance of the Plan and the assumption of rights
theretofore granted or the substitution for such rights of new rights covering
the shares of a successor corporation, then the Board of Directors or its
committee shall cause written notice of the proposed transaction to be given to
the persons holding rights not less than 10 days prior to the anticipated
effective date of the proposed transaction, and, concurrent with the effective
date of the proposed transaction, such rights shall be exercised automatically
in accordance with Section 7.1 as if such effective date were a Purchase Date of
the applicable Offering Period unless a Participant withdraws from the Plan as
provided in Section 8.1.
ARTICLE XI
MISCELLANEOUS MATTERS
11.1 AMENDMENT AND TERMINATION. The Plan shall terminate on the ten year
anniversary of the Effective Date. Since future conditions affecting the Company
cannot be anticipated or foreseen, the Company reserves the right to amend,
modify, or terminate the Plan at any time. Upon termination of the Plan, all
benefits shall become payable immediately. Notwithstanding the foregoing, no
such amendment or termination shall affect rights previously granted, nor may an
amendment make any change in any right previously granted which adversely
affects the rights of any Participant. In addition, no amendment may be made
without prior approval of the stockholders of the Company if such amendment
would:
(a) Increase the number of shares of Company Stock that may be
issued under the Plan;
(b) Materially modify the requirements as to eligibility for
participation in the Plan; or
(c) Materially increase the benefits which accrue to Participants
under the Plan.
11.2 STOCKHOLDER APPROVAL. Continuance of the Plan and the effectiveness of
any right granted hereunder shall be subject to approval by the stockholders of
the Company, within twelve months before or after the date the Plan is adopted
by the Board.
11.3 BENEFITS NOT ALIENABLE. Benefits under the Plan may not be assigned or
alienated, whether voluntarily or involuntarily. Any attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance with
Article VIII.
11.4 TRANSFERABILITY. Neither payroll deductions credited to a Participant's
Account, nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution, or as provided in Section 8.2 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from the Offering Period in accordance with Article VIII hereof.
8
<PAGE>
11.5 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a voluntary
undertaking on the part of the Company and shall not be deemed to constitute a
contract between the Company and any Employee or to be consideration for, or an
inducement to, or a condition of, the employment of any Employee. Nothing
contained in the Plan shall be deemed to give the right to any Employee to be
retained in the employ of the Company or to interfere with the right of the
Company to discharge any Employee at any time.
11.6 GOVERNING LAW. To the extent not preempted by Federal law, all legal
questions pertaining to the Plan shall be determined in accordance with the laws
of the State of Delaware.
11.7 NON-BUSINESS DAYS. When any act under the Plan is required to be
performed on a day that falls on a Saturday, Sunday or legal holiday, that act
shall be performed on the next succeeding day which is not a Saturday, Sunday or
legal holiday. Notwithstanding the above, Fair Market Value shall be determined
in accordance with Section 6.3.
11.8 COMPLIANCE WITH SECURITIES LAWS. Notwithstanding any provision of the
Plan, the Committee shall administer the Plan in such a way to ensure that the
Plan at all times complies with any requirements of Federal Securities Laws. For
example, affiliates may be required to make irrevocable elections in accordance
with the rules set forth under Section 16b-3 of the Securities Exchange Act of
1934.
9
<PAGE>
EXHIBIT 21.1
Subsidiaries of Sonoma Systems:
Retix Europe, Ltd.
Sonoma Systems Europe, Ltd.
Sonoma Ltd.
