<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934.
For the quarterly period ended June 28, 1997
OR
[ ] Transition Report pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934.
For the transition period from____________to____________.
Commission File Number 0-20084
NetFRAME Systems Incorporated
(Exact name of registrant as specified in its charter)
Delaware 77-0081278
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1545 Barber Lane, Milpitas, CA 95035
------------------------------------
(Address of principal executive offices and zip code)
(408) 474-1000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X NO
----- -----
As of August 1, 1997 there were 14,142,414 shares of the registrant's
common stock outstanding.
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NetFRAME Systems Incorporated
FORM 10-Q
June 28, 1997
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations -
Three months and six months ended
June 28, 1997 and June 29, 1996 3
Consolidated Balance Sheets -
June 28, 1997 and December 28, 1996 4
Consolidated Statements of Cash Flows -
Six months ended June 28, 1997 and
June 29, 1996 5
Notes to Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 14
Part II. Other Information
Item 1. Legal Proceedings 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
Index of Exhibits 18
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
NetFRAME Systems Incorporated
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
---------------------- ----------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net revenue $ 6,348 $ 18,810 $ 19,984 $ 38,879
Cost of revenue 6,331 11,315 18,571 22,235
-------- -------- -------- --------
Gross profit 17 7,495 1,413 16,644
Operating expenses:
Research and development 3,999 3,886 8,063 7,544
Selling, general & administrative 9,297 8,778 17,737 17,370
-------- -------- -------- --------
Total operating expenses 13,296 12,664 25,800 24,914
-------- -------- -------- --------
Operating loss (13,279) (5,169) (24,387) (8,270)
Interest and other income, net 226 296 233 633
-------- -------- -------- --------
Loss before income taxes (13,053) (4,873) (24,154) (7,637)
Benefit for income taxes -- -- -- --
-------- -------- -------- --------
Net loss $(13,053) $ (4,873) $(24,154) $ (7,637)
======== ======== ======== ========
Net loss per share $ (0.93) $ (0.36) $ (1.73) $ (0.56)
======== ======== ======== ========
Number of shares used in computing
per share amounts 13,978 13,661 13,952 13,645
======== ======== ======== ========
</TABLE>
See accompanying notes.
3
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NetFRAME Systems Incorporated
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
ASSETS
June 28 Dec. 28
1997 1996
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<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 2,209 $ 14,011
Accounts receivable, net 4,612 14,203
Inventories 8,319 9,741
Other current assets 800 782
-------- --------
Total current assets 15,940 38,737
Property and equipment, net 5,670 9,930
Other assets, net 1,060 1,642
-------- --------
$ 22,670 $ 50,309
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,000 $ --
Accounts payable 5,922 9,236
Accrued compensation and benefits 3,104 4,461
Accrued warranty 1,410 1,721
Deferred revenue 99 2,037
Other accrued liabilities 2,128 1,056
-------- --------
Total current liabilities 14,663 18,511
Commitments and contingencies
Stockholders' equity:
Common stock 14 14
Additional paid-in-capital 73,519 73,156
Accumulated deficit (65,526) (41,372)
-------- --------
Total stockholders' equity 8,007 31,798
-------- --------
$ 22,670 $ 50,309
======== ========
</TABLE>
See accompanying notes.
4
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NetFRAME Systems Incorporated
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
------------------------
June 28, 1997 June 29, 1996
-------- --------
<S> <C> <C>
Cash flows required for operating activities:
Net loss ($24,154) ($ 7,637)
Items not requiring the current use of cash:
Loss on disposal of capital assets 1,511 297
Depreciation and amortization 4,513 3,684
Changes in items affecting operations:
Accounts receivable 9,591 (269)
Inventories (967) 195
Other current assets (18) 436
Accounts payable (3,314) 874
Accrued liabilities (831) (408)
-------- --------
Cash required for operating activites (13,669) (2,828)
Cash flows from investing activities:
Acquisitions of property and equipment (493) (3,939)
Other assets (4) (2,132)
Purchase of available-for-sale securities -- (40,106)
Maturities of available-for-sale securities -- 49,410
-------- --------
Cash generated from (required for) investing activities (497) 3,233
Cash flows from financing activities:
Issuance of common stock, net 363 565
Proceeds from note payable from Micron 2,000 --
-------- --------
Cash generated from financing activities 2,363 565
Net increase (decrease) in cash and cash equivalents (11,802) 970
Cash and cash equivalents at the beginning of the period 14,011 18,340
======== ========
Cash and cash equivalents at the end of the period $ 2,209 $ 19,310
======== ========
Supplemental disclosures:
Cash paid during the period for:
Interest $ 210 --
Income taxes $ 15 $ 10
</TABLE>
See accompanying notes
5
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NetFRAME Systems Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission but do not include all of the information and footnotes
required by generally accepted accounting principles for complete consolidated
financial statements and should, therefore, be read in conjunction with the
Company's audited consolidated financial statements and notes thereto for the
fiscal year ended December 31, 1996 included in the Annual Report on Form 10-K.
The accompanying statements include all normal recurring adjustments which the
Company believes necessary for a fair presentation of the statements. The
interim operating results are not necessarily indicative of the results for the
full year.
2. BASIS OF PRESENTATION
The consolidated financial statements of NetFRAME Systems Incorporated
(the Company) for the six months ended June 28, 1997, have been prepared on a
going concern basis. The Company had approximately $2.2 million of cash and cash
equivalents at June 28, 1997, of which $2.0 million represented amounts borrowed
from Micron Electronics, Inc. (Micron) under the Company's revolving credit
facility (see Note 7). As of July 31, 1997, the Company had borrowed $6.0
million under the credit facility. The Company's net losses for the six months
ended June 28, 1997 totaled approximately $24.2 million. The Company believes
that its ability to continue to operate as a going concern is dependent on the
successful consummation of the merger of the Company with and into Payette
Acquisition Corporation (Payette), a wholly owned subsidiary of Micron, and
continued financial assistance from Micron (See Note 9).
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 28, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Raw materials $2,633 $2,729
Work in process 791 2,673
Finished goods 4,895 4,339
------ ------
$8,319 $9,741
====== ======
</TABLE>
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4. CONTINGENCIES
In the ordinary course of business, various lawsuits and claims are
filed against the Company. While the outcome of these matters is currently not
determinable, management believes that the ultimate resolution of these matters
will not have a material adverse effect on its financial position, results of
operations or cash flows.
5. PROVISION (BENEFIT) FOR INCOME TAXES
The Company provides for income tax expense (or benefit) during interim
reporting periods based upon an estimate of the annual effective tax rate. The
rate of tax (benefit) is less than the federal statutory rate of 35% due to
uncertainty regarding the Company's ability to generate future taxable income as
well as limitations controlling the timing for realization of net operating
losses and tax credits (which may carryforward to partially offset future income
taxes) established by the Statement of Financial Accounting Standards No. 109
(FAS 109), "Accounting for Income Taxes".
6. NET LOSS PER SHARE
Net loss per share is based upon the weighted average number of
outstanding shares of common stock.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 (FAS 128), "Earnings Per Share", which is required to be
adopted on December 31, 1997. At that time, the Company will be required to
change the method currently used to compute earnings per share and to restate
all prior periods. Under the new requirements for calculating primary earnings
per share, the dilutive effect of stock options will be excluded. The Company's
common stock equivalent shares for the six months ended June 28, 1997 and June
29, 1996 were antidilutive and accordingly, the Company does not believe FAS 128
will have a material impact on the calculation of primary or fully diluted
earnings per share.
7. CREDIT FACILITY
In March 1997, the Company obtained an asset based revolving credit
facility with the CIT Group/Business Credit, Inc., Los Angeles, CA (CIT), to
finance eligible accounts receivable and production inventory up to a maximum of
$15.0 million, subject to certain net worth and other financial covenants.
Borrowings under the asset based revolving credit facility with CIT, which by
its terms allowed for termination by CIT on March 26, 2000, accrue interest in
an amount equal to prime plus one-half percent (0.50%). On June 23, 1997, this
credit facility was assigned to Micron (see Note 9) pursuant to which, among
other things, the maximum borrowings provided for thereunder were decreased to
$3.5 million and the date on which Micron may
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terminate the facility, absent certain other conditions, was changed to
September 30, 1997. On July 31, 1997, the maximum borrowings provided for under
the credit facility were increased to $12.0 million. As of July 31, 1997, the
Company had borrowed $6.0 million under the credit facility.
8. CANCELLATION OF LEASE
In May 1997, the Company canceled its lease on one of its principal
administrative, product development, manufacturing and marketing facilities. As
a result, the Company reduced its commitments under this operating lease by
approximately $4.3 million and will receive a termination payment of $272,000
from the landlord. In connection with the cancellation of the operating lease,
the Company recorded a $1.3 million charge related to the write-off of leasehold
improvements.
9. PLAN OF MERGER AGREEMENT
On June 10, 1997, the Company entered into an Agreement and Plan of
Merger with Micron and Payette. In connection with that agreement, Payette made
a tender offer (the Offer) to purchase all of the Company's issued and
outstanding shares of common stock and all associated rights at a price per
share of $1.00 in cash. On July 18, 1997, Payette acquired approximately 62.8%
of the Company's outstanding common stock in connection with the closing of the
Offer. Pursuant to a stockholder meeting to be held in August 1997, the merger
of Payette with and into the Company (the Merger) is expected to be approved and
any shares of the Company's common stock not tendered and purchased pursuant to
the tender offer will be canceled and converted into the right to receive $1.00
per share in cash, subject to appraisal rights. The Company believes that its
ability to continue to operate as a going concern is dependent on the successful
consummation of the Merger and continued financial assistance from Micron.
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NetFRAME Systems Incorporated
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This section contains certain trend analysis and forward-looking statements.
Actual results may differ materially from the results described in such trend
analysis and forward looking statements. Factors that might cause such a
difference include, but are not limited to, those discussed in "Business
Factors".
Results of Operations
Net Revenue and Gross Margin:
<TABLE>
<CAPTION>
Three months ended Six months ended
---------------------- ----------------------
(in thousands) June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net revenue $ 6,348 $18,810 $19,984 $38,879
Domestic sales $ 5,785 $16,810 $17,484 $35,182
Percent of net revenue 91% 89% 87% 90%
Export sales $ 563 $ 2,000 $ 2,500 $ 3,697
Percent of net revenue 9% 11% 13% 10%
Gross margin 0% 40% 7% 43%
</TABLE>
Net revenue for the three and six months ended June 28, 1997 was $6.3
million and $20.0 million, respectively, a 66.3% and 48.6% decrease,
respectively, when compared to the same periods in the prior year. These
decreases were primarily due to lower unit volumes for the Company's server
products, aggressive competitive pricing actions taken by the Company and
customer concerns regarding the Company's financial viability and financial
condition. Export net revenue decreased 72% and 32%, respectively, in absolute
dollars to $563,000 and $2.5 million, respectively, for the three and six months
ended June 28, 1997 from $2.0 million and $3.7 million, respectively, for the
same periods ended June 29, 1996. The Company reduced its international sales
force during the three and six months ended June 28, 1997 and experienced
shipment delays pending secured financing from certain international customers.
This may adversely impact the Company's future export revenues. In the three and
six months ended June 28, 1997, when compared to the corresponding periods of
1996, the Company experienced a higher rate of sales returns. While the Company
has recorded allowances for estimated sales returns and uncollectible accounts,
there can be no assurance that such estimates regarding allowances will be
adequate.
9
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Gross Profit
Gross margins were 0% and 7%, respectively, for the three and six
months of 1997 as compared to 40% and 43%, respectively, for the corresponding
periods in 1996. The decrease in gross margins was primarily due to a lower
level of net revenue, continued pricing competition and increased provisions for
excess and obsolete inventory related to the Company's product transition.
Operating Expenses:
<TABLE>
<CAPTION>
Three months ended Six months ended
---------------------- ----------------------
(in thousands) June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Research & development $ 3,999 $ 3,886 $ 8,063 $ 7,544
Percent of net revenue 63% 21% 40% 19%
Selling, general & administrative $ 9,297 $ 8,778 $17,737 $17,370
Percent of net revenue 146% 47% 89% 45%
Total operating expenses $13,296 $12,664 $25,800 $24,914
Percent of net revenue 209% 68% 129% 64%
</TABLE>
Research and Development
Research and development expense increased for both the three and six
months ending June 28, 1997 when compared to the same periods one year ago. The
increase in research and development expense was primarily due to higher
consulting and product prototype expenses incurred in connection with the
Company's introduction of the NF9000 product line.
Selling, General and Administrative
Selling, general and administrative expense increased for the three and
six months ended June 28, 1997 when compared to the same periods in 1996. Such
expenses increased primarily as a result of higher allowances for uncollectible
accounts, as well as costs related to reductions in force effected by the
Company offset primarily by lower commission expense related to lower net
revenue, and lower salaries and headcount related expenses. In addition,
expenses increased in the three months ended June 28, 1997 due to costs related
to the disposal of capital assets. See Note 8 of Notes to Consolidated Financial
Statements.
Interest and Other Income, Net
Interest and other income, net, decreased for the three and six months
ended June 28, 1997 compared to the corresponding periods of 1996 due primarily
to lower interest income earned as a result of lower cash balances. In addition,
the Company incurred financing fees associated with an asset based revolving
credit facility the Company secured in March 1997.
10
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Income Taxes
The Company recorded no provision for income taxes for the three and
six months ended June 28, 1997 and June 29, 1996. For the second quarters and
first six months ended June 28, 1997 and June 29, 1996, the Company recognized
no tax benefit associated with the net operating losses for such periods due to
uncertainty regarding the Company's ability to generate future taxable income.
As a result of the consummation of the Offer, the Company experienced a change
in ownership which may limit its use of its net operating losses in the future.
Business Factors
On June 10, 1997, the Company, Micron and Payette entered into an
Agreement and Plan of Merger (the Merger Agreement) providing, among other
things, for the merger of Payette with and into the Company. Pursuant to the
Merger Agreement, on June 16, 1997 Payette commenced an all cash tender offer
for all of the outstanding shares of Common Stock and related rights of the
Company (the Shares) at a price of $1.00 per share, net to the seller. On July
18, 1997, upon consummation of the Offer, Payette acquired 8,775,554 shares of
the Company's Common Stock, representing approximately 62.8% of the then
outstanding Shares. The Company's stockholders are expected to approve the
Merger at a meeting currently scheduled for August 27, 1997.
The Company has experienced significant reductions in net revenue
during the past six quarters as a result of its inability to respond to
increased demand for Microsoft Windows NT compliant servers and diminished
demand for the Company's older technology which primarily supported the Novell
NetWare platform. The Company also believes that its deteriorating financial
condition raised concerns among customers regarding the Company's financial
viability and financial condition which, in turn, further decreased demand for
its products. On June 8, 1997 the Board of Directors approved the Offer and the
Merger after considering, among other things, the Company's financial condition
and prospects. At its meeting, the Board determined that, in the absence of the
Merger, the funds to be received under a license agreement with Micron entered
into pursuant to the Merger Agreement (License Agreement) and other financial
assistance to be made available to the Company by Micron, the Company would
likely be unable to continue to operate as a going concern. The Company believes
that its future results of operations and financial condition will be dependent,
among other things, on the level of financial and other assistance provided by
Micron to the Company and on the Company's ability to leverage its relationship
with Micron and its affiliates to increase sales and reduce costs.
As a result of the Merger, the management of Micron and the Company
will evaluate whether, and the extent to which, integration, reconfiguration or
other modification of the Company's and Micron's separate businesses is
appropriate following the Merger. There can be no assurance that such
integration, reconfiguration or other modification, if any, will be accomplished
in a timely, efficient and effective manner. The failure to retain key personnel
as a result of the Offer and the Merger could have a material adverse effect on
employee morale and on the Company's business and operating results.
Furthermore, there can be no assurance that the anticipated benefits associated
with the Merger will be realized including but not limited to increased
purchasing power, manufacturing efficiencies, integration of products,
technology and operations, opportunities for broadened product offerings and
economies associated with the provision of certain administrative support
functions by Micron.
The Company began customer shipments of the NF9000 in the fourth
quarter of 1996. While sales of the NF9000 product line are expected to
represent a majority of revenue in 1997, cumulative sales of the line of NF9000
products to date have been limited due to the recent introduction of the NF9000
product line, the Company's efforts to sell existing inventories of its line of
NF8500 products, customer concerns regarding the Company's financial viability
and financial condition and the transition of the Company's value added
resellers ("VARs") to selling
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the newer NF9000 product. Even though the Company is optimistic about the
prospects of its newly announced products, unless the NF9000 products are sold
in sufficient volume, including products developed and released in 1997, the
Company does not anticipate significant revenue growth or a return to
profitability.
The Company generally fills orders shortly after receipt from customers
and, therefore, backlog at the beginning of a fiscal period represents only a
small percentage of the product sales anticipated in that period. Further, a
substantial portion of the Company's net revenue in each quarter generally
results from orders received during the last few weeks of that quarter. The
absence of significant backlog and the concentration of sales at the end of the
quarter impairs the Company's ability to forecast and to control expense,
production and inventory levels. If anticipated shipments in any quarter do not
occur or are delayed, expenditure levels could be disproportionately high, and
the Company's operating results for that quarter would be materially adversely
affected.
The Company operates in a rapidly changing and highly competitive
marketplace and, as a result, believes it is critical to continue to increase
its investment in research and development activities in order to maintain its
competitive position. There can be no assurance that any research or development
efforts will be successfully completed or that future products will be available
on a timely basis or achieve market acceptance. In addition, any delay in the
introduction or shipment of new products by the Company or the introduction or
shipment of new products by the Company's competitors, could have a materially
adverse effect on the Company's operating results. In addition, the Company's
operating results may fluctuate as a result of a number of other factors,
including variation in the size and timing of individual sales, the timing of
introduction and the market acceptance of new and enhanced versions of the
Company's products, the mix of products sold, changes in pricing policies by the
Company, variation in the mix of sales by distribution channel, mix in
international and domestic sales, end users' capital spending cycles, changes in
pricing policies by the Company's competitors or its suppliers and the
availability and cost of key components.
The Company's primary means of distribution is currently through VARs,
system integrators and distributors. The Company currently intends, however, to
increase direct sales efforts and reduce reseller discounts. The Company's
business, financial condition or operating results could be adversely affected
if reduced reseller discounts or increased direct sales activity damages the
Company's relationships with its VARs or reduces VAR efforts to sell the
Company's products. The Company's business, financial condition or operating
results could also be adversely affected if the Company's increased direct sales
efforts are not successful or in the event that the generally weak financial
condition of its VARs and system integrators worsens to the point that it
affects their ability to sell or pay for the Company's products. The Company
recently segregated the number of VARs with which it does business between those
authorized to resell and support all of the Company's products and those limited
to the resale and support of the Company's products prior to the NF9000. The
Company is continuing its evaluation of its distribution channels. Any changes
could result in fluctuations in net revenue, gross margins and/or operating
expenses. The Company cannot at this time determine the ultimate effect of these
or other future distribution channel modification efforts on the Company's
future operating results.
In 1996 and the first half of 1997, the majority of the products sold
by the Company utilized operating systems provided by Novell and Microsoft. Any
problems in the use of these operating systems by end users could adversely
affect the Company's sales. The Company has a source code license and software
distribution agreement with Novell, which expires by its terms on October 24,
1997, pursuant to which the Company is entitled to resell IntraNetware. The
agreement also provides for Novell to share certain technical information with
the Company concerning IntraNetware, which has assisted the Company in the
development and marketing of its products. Novell has no obligation to continue
to provide similar information in the future,
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and if Novell were to stop sharing technical information with the Company or
were to favor competitors, the Company's business could be materially adversely
affected.
The Company's products include certain components that are currently
available only from single sources or limited sources. Any availability
limitations, interruptions in supplies or price increases relative to these
components could materially adversely affect the Company's business, financial
condition and operating results.
Liquidity and Capital Resources
In the first six months of 1996, the Company used $2.8 million of cash
in operating activities which consisted primarily of a net loss of $7.6 million,
offset by $3.7 million in amortization and depreciation and an increase of
$874,000 in accounts payable. The Company used $13.7 million of cash in
operating activities in the six months ended June 28, 1997 which consisted
primarily of a net loss of $24.2 million and a decrease in accounts payable of
$3.3 million, offset in part by a decrease in accounts receivable of $9.6
million and depreciation and amortization expense of $4.5 million.
The Company used cash of $3.9 million in the first six months of 1996
and $493,000 in the six months ended June 28, 1997 in investing activities for
the purchase of capital equipment for internal purposes. The Company currently
plans purchases of capital equipment of approximately $1.5 million for the
remainder of 1997, which will either be purchased or internally-developed
equipment, and will be used for research and development, demonstration purposes
and test equipment. Notwithstanding the Company's current plans, the Company's
ability to purchase capital equipment is currently restricted under the Merger
Agreement. Actual capital expenditures could also materially differ from those
expressed in the preceding forward-looking statement as a result of the Merger
and are dependent on many other factors, including, the level of financial and
other assistance received from Micron, changes in management, the ability of the
Company to achieve its planned revenues and collections to generate the cash
necessary to fund capital expenditures and the continued use of current capital
assets without the need of replacement due to obsolescence, destruction or
technology changes. The Company has no material commitments for the purchase of
capital equipment.
The Company generated cash of $565,000 in the first six months of 1996
in financing activities from the issuance of Common Stock and generated cash of
$2.4 million in the first six months of 1997, primarily from the proceeds of a
note payable to Micron.
At June 28, 1997, the Company had cash and cash equivalents of
approximately $2.2 million, of which $2.0 million represented amounts borrowed
from Micron under the Company's revolving credit facility, discussed below. In
March 1997, the Company obtained an asset based revolving credit facility with
the CIT Group/Business Credit, Inc., Los Angeles, CA, to finance eligible
accounts receivable and production inventory up to a maximum of $15.0 million,
subject to certain net worth and other financial covenants. On June 23, 1997,
this credit facility was assigned to Micron and, in connection with such
assignment, the maximum loan amount was changed to $3.5 million. In July 1997,
the maximum loan amount was increased to $12.0 million. As of July 31, 1997, the
Company had borrowed $6.0 million under the credit facility. See Note 9 of Notes
to Consolidated Financial Statements.
The Company has continued to experience significant operating and net
losses and declining cash balances in the first half of fiscal 1997. The
Company's net losses for the six months ended June 28, 1997 totaled
approximately $24.2 million, or $1.73 per Share, and the Company's working
capital declined from $20.2 million at December 31, 1996 to $1.3 million at June
28, 1997. On June 8, 1997 the Board of Directors approved the Offer and the
Merger after considering, among other things, the Company's financial condition
and prospects. At its meeting, the Board determined that, in the absence of the
Merger, the funds to be received under
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the License Agreement and other financial assistance to be made available to the
Company by Micron, the Company would likely be unable to continue to operate the
Company as a going concern. At such meeting, the Board approved the Offer, the
Merger, the Merger Agreement and the transactions contemplated thereby. The
Company believes that it its ability to continue to operate as a going concern
is dependent on the successful consummation of the Merger and continued
financial assistance from Micron. See Note 9 of Notes to Consolidated Financial
Statements.
PART I. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On June 6, 1996, the Company was named as a defendant in a case brought
by one of its value added resellers, Data Systems Network Corp. (DSN). The
complaint alleges that NetFRAME breached its spare parts agreement as well as
other agreements, interfered with DSN's business and committed fraud through
misrepresentations relative to such agreements. The complaint requests an
unspecified amount in damages, costs, interest and attorneys' fees. In addition,
the Company has filed a counterclaim against DSN for payment of certain overdue
receivables. The Company believes that it has meritoroius defenses and intends
to vigorously defend itself.
On April 22, 1997, the Company was named as a defendant in an action
filed in the Circuit Court for Cook County, Illinois in connection with an
alleged agreement whereby Network Reliability Corp. was to have provided certain
marketing and sales services on behalf of the Company. The complaint, which was
later removed to the United States District Court for the Northern District of
Illinois, alleges two courses of action, breach of contract and deceptive trade
practices, arising out of the Company's alleged agreement to pay the plaintiff a
commission on certain orders which the plaintiff would allegedly help obtain for
the Company. The complaint requests $300,000 in actual damages and additional
damages of $1,000,000. There has not been any discovery or motion practice in
the case. The Company believes that it has meritorious defenses and intends to
vigorously defend itself.
In the ordinary course of business, various lawsuits and claims are
filed against the Company. While the outcome of these matters is currently not
determinable, management believes that the ultimate resolution of these matters,
including DSN and Network Reliability Corp., will not have a material adverse
effect on its financial position, results of operations or cash flows.
Item 5. OTHER INFORMATION
On May 21, 1997, the Company and DecisionOne Corporation entered into
an Asset Transfer Agreement whereby the Company sold its spare parts inventory
and assigned technical support contracts for its NF100/300, NF200/400, NF250/450
and NF8400/8500 servers in the United States to DecisionOne Corporation. This
provided the Company with the opportunity to team with a national service
provider in order to improve customer service and the cost efficiency of service
delivery.
Steve Huey resigned as the Company's Vice President of Marketing
effective August 7th, 1997.
15
<PAGE> 16
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
10.29(1) Agreement and Plan of Merger, dated as of June 10,
1997, among Registrant, Micron Electronics, Inc. and
Payette Acquisition Corporation.
10.30(1) Technology License Agreement, dated as of June 10,
1997, between Registrant and Micron Electronics, Inc.
10.31(2) First Amendment to Rights Agreement, dated as of June
10, 1997 between NetFRAME Systems Incorporated and The
First National Bank of Boston.
10.32(1) Executive Bonus Plan adopted by the Board of Directors
on May 2, 1997.
10.33 Amendment No. 1 and Amendment No. 2 to Financing
Agreement among Registrant, CIT and Micron dated June
23, 1997 and July 31, 1997, respectively.
10.34(1) Employment Term Sheet between Micron and Terry
Hartsfield dated June 9, 1997.
10.35(1) Employment Term Sheet between Micron and Bulent
Erbilgin dated June 9, 1997.
10.36(1) Employment Term Sheet between Micron and Robert Puette
dated June 9, 1997.
10.37(1) Employment Term Sheet between Micron and Steve Huey
dated June 10, 1997.
10.38 Asset Purchase Agreement dated as of May 21, 1997
between DecisionOne and Registrant. A list of
schedules to the Asset Purchase Agreement is included
on page (iv) of the Asset Purchase Agreement. The
Registrant hereby agrees to furnish supplementally to
the Securities and Exchange Commission on request a
copy of any omitted schedules to the Asset Purchase
Agreement.
27.1 Financial Data Schedule.
</TABLE>
- ----------
(1) Incorporated by reference to Registrant's Schedule 14D-9 filed
on June 16, 1997. Exhibits 10.29, 10.30, 10.32, 10.34, 10.35,
10.36 and 10.37 were Exhibits (c)(1), (c)(6), (c)(13), (c)(9),
(c)(10), (c)(11) and (c)(12), respectively, in the
aforementioned Schedule 14D-9.
(2) Incorporated by reference to Registrant's Registration
Statement on Form 8-A (Amendment No. 1) filed June 16, 1997.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 28,
1997.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NetFRAME Systems Incorporated
-----------------------------
Registrant
Date August 12, 1997 /s/ Robert L. Puette
-------------------- ---------------------------
Robert L. Puette
President and Chief Executive Officer
(Principal Executive Officer)
Date August 12, 1997 /s/ Dan McCammon
-------------------- ---------------------------
Dan McCammon
Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
17
<PAGE> 18
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
10.29(1) Agreement and Plan of Merger, dated as of June 10, 1997, among
Registrant, Micron Electronics, Inc. and Payette Acquisition
Corporation.
10.30(1) Technology License Agreement, dated as of June 10, 1997, between
Registrant, Micron Electronics, Inc.
10.31(2) First Amendment to Rights Agreement, dated as of June 10, 1997
between NetFRAME Systems Incorporated and The First National Bank
of Boston.
10.32(1) Executive Bonus Plan adopted by the Board of Directors on May 2,
1997.
10.33 Amendment No. 1 and Amendment No. 2 to Financing Agreement among
Registrant, CIT and Micron dated June 23, 1997 and July 31, 1997,
respectively.
10.33(1) Employment Term Sheet between Micron and Terry Hartsfield dated
June 9, 1997.
10.34(1) Employment Term Sheet between Micron and Bulent Erbilgin dated
June 9, 1997.
10.35(1) Employment Term Sheet between Micron and Robert Puette dated June
9, 1997.
10.36(1) Employment Term Sheet between Micron and Steve Huey dated June
10, 1997.
10.38 Asset Purchase Agreement dated as of May 21, 1997 between
DecisionOne and Registrant. A list of schedules to the Asset
Purchase Agreement is included on page (iv) of the Asset Purchase
Agreement. The Registrant hereby agrees to furnish supplementally
to the Securities and Exchange Commission on request a copy of
any omitted schedules to the Asset Purchase Agreement.
27.1 Financial Data Schedule.
</TABLE>
- ----------
(1) Incorporated by reference to Registrant's Schedule 14D-9 filed on June
16, 1997. Exhibits 10.29, 10.30, 10.32, 10.34, 10.35, 10.36 and 10.37
were Exhibits (c)(1), (c)(6), (c)(13), (c)(9), (c)(10), (c)(11) and
(c)(12), respectively, in the aforementioned Schedule 14D-9.
(2) Incorporated by reference to Registrant's Registration Statement on
Form 8-A (Amendment No. 1) filed June 16, 1997.
18
<PAGE> 1
FIRST AMENDMENT
TO
FINANCING AGREEMENT
First Amendment dated as of June 23, 1997 to Financing Agreement (the
"First Amendment"), by and among NetFRAME Systems Incorporated, a Delaware
corporation (the "Company"), and Micron Electronics, Inc., a Minnesota
corporation (the "Lender") and NetFRAME International, Inc., amending certain
provisions of the Financing Agreement dated as of March 27, 1997 (as amended and
in effect from time to time, the "Financing Agreement") by and among the Company
and the Lender (as assignee of the CIT Group/Business Credit, Inc. ("CIT")) and
certain related agreements. Terms not otherwise defined herein which are defined
in the Financing Agreement shall have the same respective meanings as are set
forth therein.
WHEREAS, the Company, the Lender and NetFRAME International
Incorporated, as guarantor, have agreed to modify certain terms and conditions
of the Financing Agreement and other Loan Documents as specifically set forth in
this First Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. AMENDMENT TO SECTION 1 OF THE FINANCING AGREEMENT AND RELATED
AMENDMENTS TO THE FINANCING AGREEMENT AND OTHER LOAN DOCUMENTS. Section 1 of the
Financing Agreement is hereby amended to add a definition of the term "Lender",
defining such term as "Micron Electronics, Inc., a Minnesota corporation." The
Financing Agreement and each other Loan Document are hereby amended by deleting
the term "CITBC" wherever it may appear and substituting in place thereof the
term "Lender."
2. AMENDMENT TO SECTION 1 OF THE FINANCING AGREEMENT. Section 1 of the
Financing Agreement is hereby amended as follows:
(a) the definition therein of the term "Line of Credit" shall
read in its entirety as follows: "LINE OF CREDIT shall mean the aggregate
commitment of Lender to make loans and advances to the Company pursuant to
Section 3 of this Financing Agreement in the aggregate amount of up to
$3,500,000."
(b) the definition therein of the term "Early Termination Fee"
shall read in its entirety as follows: "EARLY TERMINATION FEE" shall mean (a)
mean the Fee Lender is entitled to change the Company in the event the Company
terminates the Line of Credit or this Financing Agreement prior to the date two
(2) years after the Closing Date; and (b) equal such amount as Lender shall have
paid to CIT in connection with the assignment of this Financing Agreement and
the Loan Documents from CIT to Lender.
3. AMENDMENT TO SECTION 3, PARAGRAPH 3.1 OF THE FINANCING AGREEMENT.
Section 3, paragraph 3.1 of the Financing Agreement is hereby amended to read in
its entirety as follows: "Lender agrees, subject to the terms and conditions of
this Financing Agreement from time to
<PAGE> 2
time, and within x) the Availability and y) the Line of Credit, but subject to
Lender's right to make "Overadvances," to make loans and advances to the Company
on a revolving basis (i.e., subject to the limitations set forth herein, the
Company may borrow, repay and re-borrow Revolving Loans). Such loans and
advances to the Company shall be in amounts up to the sum of A) eighty-five
percent (85%) of the outstanding Eligible Accounts Receivable of the Company,
and B) the lesser of (i) forty percent (40%) of the Company's Eligible Inventory
as determined at the lower of cost or market, (ii) eighty percent (80%) of the
orderly liquidation value percentage of the Company's Inventory, as determined
by reference to the most recent inventory appraisal performed by or for the
benefit of Lender, and (iii) five million dollars ($5,000,000) (herein the
"Borrowing Base"). Borower shall be entitled to request loans hereunder in an
aggregate amount equal to two million dollars ($2,000,000) on or before June 30,
1997 and in such amounts and at such times as Borrower and Lender may agree
thereafter. All requests for loans and advances must be received by an officer
of Lender no later than 11:00 a.m. Pacific time of the business day preceding
the day on which such loans and advances are required, and shall be accompanied
by information, in detail satisfactory to Lender, as to the Borrower's intended
use of the proceeds thereof. Borrower hereby agrees to use all amounts loaned to
it hereunder only for the purposes set forth in such information. Should Lender
for any reason honor requests for advances in excess of the limitations set
forth herein, such advances shall be considered "Overadvances" and shall be made
in Lender's sole discretion, subject to any additional terms Lender deems
necessary."
4. AMENDMENT TO SECTION 2, PARAGRAPH 2.2 OF THE FINANCING AGREEMENT.
Section 2, paragraph 2.2 of the Financing Agreement is hereby amended to insert
immediately after sub-paragraph (D) thereof a new sub-paragraph which shall read
as follows: "(E) ABSENCE OF MATERIAL ADVERSE CHANGE - no material adverse change
shall have occurred in the financial condition, business, prospects,
profitability, assets (including without limitation the Collateral) or
operations of the Company and/or the Guarantor (it being expressly understood
and agreed that any material adverse change in the terms, conditions,
assumptions or budgets supplied by the Company and on which Lender based its
decision to execute the Agreement and Plan of Merger dated June 10, 1997 among
the Lender, the Company and Payette Acquisition Corporation, may, in Lender's
reasonable business discretion, be construed by Lender as a material adverse
change)."
5. AMENDMENT TO SECTION 8, PARAGRAPH 8.1(J) OF THE FINANCING AGREEMENT.
Section 8, paragraph 8.1(J) of the Financing Agreement is hereby amended to read
in its entirety as follows: "(J) Upon the occurrence of a default or an Event of
Default under, or the termination of, the Guaranty or the Agreement and Plan of
Reorganization dated June 10, 1997 among the Company, the Lender and Payette
Acquisition Corporation, or upon the occurrence of a Default under the Security
Agreement dated March 27, 1997 executed and delivered by the Guarantor to
CITBC".
6. AMENDMENT TO SECTION 9 OF THE FINANCING AGREEMENT. Section 9 of the
Financing Agreement is hereby amended to read in its entirety as follows:
"Section 9. TERMINATION. Except as otherwise permitted herein, the Company and
Lender may terminate this Financing Agreement and the Line of Credit only as of
the initial or any subsequent Anniversary Date and then only by giving the other
at least sixty (60) days prior written notice of
2
<PAGE> 3
termination. Notwithstanding the foregoing, Lender may terminate this Financing
Agreement and the Line of Credit immediately upon the occurrence of an Event of
Default, provided, however, that if the Event of Default is an event listed in
Paragraph 8.1(a) (b) (c) of Section 8 of this Financing Agreement, Lender may
regard this Financing Agreement and the Line of Credit as terminated and notice
to that effect is not required. In addition, Lender may terminate this Financing
Agreement and the Line of Credit (a) on September 30, 1997 or the last day of
any month thereafter by giving the Company at least five (5) days prior written
notice of termination and (b) if at any time, immediately upon written notice to
the Company, (i) the Company breaches the Agreement Plan of Reorganization dated
July 10, 1997 among the Lender, the Company and Payette Acquisition Computer, as
from time to time amended (the "Merger Agreement"); (ii) Lender is entitled to
terminate the Merger Agreement, or (iii) the Merger Agreement has been
terminated. This Financing Agreement, unless terminated as herein provided,
shall automatically continue from Anniversary Date to Anniversary Date.
Notwithstanding the foregoing, the Company may terminate this Financing
Agreement and the Line of Credit prior to any applicable Anniversary Date upon
sixty (60) days' prior written notice to Lender and payment of any applicable
Early Termination Fee. All Obligations shall become due and payable as of any
termination hereunder or under Section 8 hereof and, pending a final accounting,
Lender may withhold any balances in the Company's Revolving Loan Account (unless
supplied with an indemnity satisfactory to Lender) to cover all of the Company's
Obligations, whether absolute or contingent. All of Lender's liens and security
interests shall continue after any termination until all Obligations have been
paid and satisfied in full.
7. AMENDMENT TO SECTION 10, PARAGRAPH 10.6 OF THE FINANCING AGREEMENT.
Section 10, paragraph 10.6 of the Financing Agreement is hereby amended to read
in its entirety as follows: "10.6, Except as otherwise herein provided, any
notice or other communication required hereunder shall be in writing, and shall
be deemed to have been validly served, given or delivered when hand delivered
(by messenger, overnight delivery service or otherwise) or sent by telegram,
telex or telecopy (facsimile), addressed to the party to be notified as follows:
(A) if to Lender, at:
Micron Electronics, Inc.
900 East Karcher Road
Nampa, Idaho 83687
Attn: Chief Financial Officer
Fax: (208) 893-7411
with a copy to:
Fenwick & West LLP
Two Palo Alto Square, Suite 700
Palo Alto, California 94306
Attn: Dennis R. DeBroeck, Esq.
David W. Healy, Esq.
(B) if to the Company at:
3
<PAGE> 4
NetFRAME Systems Incorporated
1545 Barber Lane
Milpitas, CA 95035
Attn: President and Chief Executive Officer
Fax: (408) 474-4048
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attn: Larry W. Sonsini, Esq.
Marty Korman, Esq.
or to such other address as any party may designate for itself by like notice.
8. AMENDMENT TO EXHIBIT A TO FINANCING AGREEMENT. Exhibit A to the
Financing Agreement is hereby amended in its entirety to read as set forth in
Exhibit A hereto.
9. WAIVER. Lender hereby waives any Event of Default existing and
disclosed in writing to Lender as of the date hereof.
10. REPRESENTATIONS AND WARRANTIES. The Company hereby repeats, on and
as of the date hereof, each of the representations and warranties made by it in
Section 5 of the Financing Agreement, and such representations and warranties
remain true as of the date hereof in all material respects (except as disclosed
to Lender prior to the date hereof, and to the extent of changes resulting from
transactions contemplated or permitted by the Financing Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date),
provided, that all references therein to the Financing Agreement shall refer to
such Financing Agreement as amended hereby. In addition, the Company hereby
represents and warrants that the execution and delivery by the Company of this
First Amendment and the performance by the Company of all of its agreements and
obligations under the Financing Agreement as amended hereby are within in the
corporate authority of the Company and has been duly authorized by all necessary
corporate action on the part of the Company.
11. RATIFICATION, ETC. Except as expressly amended hereby, the
Financing Agreement and all documents, instruments and agreements related
thereto, including, but not limited to the Loan Documents, are hereby ratified
and confirmed in all respects and shall continue in full force and effect. The
Financing Agreement and this First Amendment shall be read and construed as a
single agreement. All references in the Financing Agreement or any related
agreement or instrument to the Financing Agreement shall hereafter refer to the
Financing Agreement as amended hereby.
4
<PAGE> 5
12. NO WAIVER. Nothing contained herein constitute a waiver of, impair
or otherwise affect any Obligations, any other obligation of the Borrower or any
rights of the Lender consequent thereon, except as specifically provided in
Section 10.
13. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
14. GOVERNING LAW. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT
REFERENCE TO CONFLICT OF LAWS).
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as a documents under seal as of the date first above written.
NETFRAME SYSTEMS INCORPORATED
By: [Signature]
------------------------------
Title: CFO
---------------------------
MICRON ELECTRONICS, INC.
By: /s/ Erik Oaas
------------------------------
Title:
---------------------------
NETFRAME INTERNATIONAL INCORPORATED
By: [Signature]
------------------------------
Title: President/CEO
---------------------------
5
<PAGE> 6
EXHIBIT A
REVOLVING CREDIT NOTE
$3,500,000 June 23, 1997
FOR VALUE RECEIVED, the undersigned, NETFRAME SYSTEMS INCORPORATED (the
"Company"), hereby absolutely and unconditionally promises to pay to the order
of MICRON ELECTRONICS, INC. (herein "Lender"), with offices located in Nampa,
Idaho, in lawful money of the United States of America and in immediately
available funds, the principal amount of Three Million Five Hundred Thousand
Dollars ($3,500,000), or such other principal amount advanced pursuant to
Section 3, Paragraph 3.1 of the Financing Agreement (as herein defined). Such
Revolving Loan advances shall be repaid on a daily basis as a result of the
application of the proceeds of collections of the Accounts and the making of
additional Revolving Loans as described in Section 3 of the Financing Agreement.
The Revolving Loans may be borrowed, repaid and reborrowed by the Company. A
final balloon payment in an amount equal to the outstanding aggregate balance of
principal and interest remaining unpaid, if any, under this Note as shown on the
books and records of Lender shall be due and payable on the termination of the
Financing Agreement, as set forth in Section 3 thereof.
The Company further absolutely and unconditionally promises to pay to the order
of Lender at said office, interest, in like money, on the unpaid principal
amount owing hereunder from time to time from the date hereof on the dates and
at the rates specified in Section 6 of the Financing Agreement.
If any payment on this Note becomes due and payable on a day other than a
business day, the maturity thereof shall be extended to the next succeeding
business day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is the Promissory Note referred to in the Financing Agreement, dated
as of March 27, 1997, as amended on the date hereof, as the same may be further
amended and restated and in effect from time to time, among the Company and
Lender (the "Financing Agreement"), and is subject to, and entitled to, all of
the terms, provisions and benefits thereof and is subject to optional and
mandatory prepayment, in whole or in part, as provided therein. All capitalized
terms used herein shall have the meaning provided therefor in the Financing
Agreement, unless otherwise defined herein.
The date and amount of the advance(s) made hereunder may be recorded on the grid
page or pages which are attached hereto and hereby made part of this Note or the
separate ledgers maintained by Lender. The aggregate unpaid principal amount of
all advances made pursuant hereto may be set forth in the balance column on said
grid page or such ledgers maintained by Lender. All such advances, whether or
not so recorded, shall be due as part of this Note.
<PAGE> 7
The Company confirms that any amount received by or paid to Lender in connection
with the Financing Agreement and/or any balances standing to its credit on any
of its accounts on Lender's books under the Financing Agreement may in
accordance with the terms of the Financing Agreement be applied in reduction of
this Note, but no balance or amounts shall be deemed to effect payment in whole
or in part of this Note unless Lender shall have actually charged such account
or accounts for the purposes of such reduction or payment of this Note.
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, immediately
due and payable as provided in the Financing Agreement.
NETFRAME SYSTEMS INCORPORATED
By: [Signature]
------------------------------
Title: CFO
---------------------------
2
<PAGE> 8
SECOND AMENDMENT
TO
FINANCING AGREEMENT
Second Amendment (the "Second Amendment") dated as of July 31, 1997 to
Financing Agreement (as amended and in effect from time to time, the "Financing
Agreement"), by and among NetFRAME Systems Incorporated, a Delaware corporation
(the "Company"), Micron Electronics, Inc., a Minnesota corporation (the
"Lender") and NetFRAME International, Inc. (the "Subsidiary"), dated as of March
27, 1997 as amended by the First Amendment dated as of June 23, 1997 (the "First
Amendment"). Terms not otherwise defined herein which are defined in the
Financing Agreement shall have the same respective meanings as are set forth
therein.
WHEREAS, the Company, the Lender and NetFRAME International
Incorporated, as guarantor, have agreed to modify certain terms and conditions
of the Financing Agreement as specifically set forth in this Second Amendment;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. AMENDMENT TO SECTION 1(A) OF THE FINANCING AGREEMENT. Section 1(a)
of the Financing Agreement is hereby amended as follows:
(a) the definition therein of the term "Line of Credit" shall read in
its entirety as follows: "LINE OF CREDIT shall mean the aggregate commitment of
Lender to make loans and advances to the Company pursuant to Section 3 of this
Financing Agreement in the aggregate amount of up to $12,000,000."
2. AMENDMENT TO SECTION 3, PARAGRAPH 3.1 OF THE FINANCING AGREEMENT.
Section 3, paragraph 3.1 of the Financing Agreement is hereby amended to read in
its entirety as follows: "Lender agrees, subject to the terms and conditions of
this Financing Agreement from time to time, and within x) the Availability and
y) the Line of Credit, but subject to Lender's right to make "Overadvances," to
make loans and advances to the Company on a revolving basis (i.e., subject to
the limitations set forth herein, the Company may borrow, repay and re-borrow
Revolving Loans). Such loans and advances to the Company shall be in amounts up
to the sum of A) eighty-five percent (85%) of the outstanding Eligible Accounts
Receivable of the Company, and B) the lesser of (i) forty percent (40%) of the
Company's Eligible Inventory as determined at the lower of cost or market, (ii)
eighty percent (80%) of the orderly liquidation value percentage of the
Company's Inventory, as determined by reference to the most recent inventory
appraisal performed by or for the benefit of Lender, and (iii) twelve million
dollars ($12,000,000) (herein the "Borrowing Base"). Borrower shall be entitled
to request loans hereunder in an aggregate amount equal to two million dollars
($2,000,000) on or before June 30, 1997 and in such amounts and at such times as
Borrower and Lender may agree thereafter. All requests for loans and advances
must be received by an officer of Lender no later than 11:00 a.m. Pacific time
of the business day preceding the day on which such loans and advances are
<PAGE> 9
required, and shall be accompanied by information, in detail satisfactory to
Lender, as to the Borrower's intended use of the proceeds thereof. Borrower
hereby agrees to use all amounts loaned to it hereunder only for the purposes
set forth in such information. Should Lender for any reason honor requests for
advances in excess of the limitations set forth herein, such advances shall be
considered "Overadvances" and shall be made in Lender's sole discretion, subject
to any additional terms Lender deems necessary."
3. AMENDMENT TO EXHIBIT A TO FINANCING AGREEMENT. Exhibit A to the
Financing Agreement is hereby amended in its entirety to read as set forth in
Exhibit A hereto.
4. REPRESENTATIONS AND WARRANTIES. The Company hereby repeats, on and
as of the date hereof, each of the representations and warranties made by it in
Section 5 of the Financing Agreement, and such representations and warranties
remain true as of the date hereof in all material respects (except as disclosed
to Lender prior to the date hereof, and to the extent of changes resulting from
transactions contemplated or permitted by the Financing Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date),
provided, that all references therein to the Financing Agreement shall refer to
such Financing Agreement as amended hereby. In addition, the Company hereby
represents and warrants that the execution and delivery by the Company of this
Second Amendment and the performance by the Company of all of its agreements and
obligations under the Financing Agreement as amended hereby are within in the
corporate authority of the Company and has been duly authorized by all necessary
corporate action on the part of the Company.
5. RATIFICATION, ETC. Except as expressly amended hereby, the Financing
Agreement and all documents, instruments and agreements related thereto,
including, but not limited to the Loan Documents, are hereby ratified and
confirmed in all respects and shall continue in full force and effect. The
Financing Agreement, the First Amendment and this Second Amendment shall be read
and construed as a single agreement. All references in the Financing Agreement
or any related agreement or instrument to the Financing Agreement shall
hereafter refer to the Financing Agreement as amended hereby.
6. NO WAIVER. Nothing contained herein constitute a waiver of, impair
or otherwise affect any Obligations, any other obligation of the Borrower or any
rights of the Lender consequent thereon.
7. COUNTERPARTS. This Second Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.
8. GOVERNING LAW. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT
REFERENCE TO CONFLICT OF LAWS).
2
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as a documents under seal as of the date first above written.
NETFRAME SYSTEMS INCORPORATED
By: [Signature]
------------------------------
Title: CFO
---------------------------
MICRON ELECTRONICS, INC.
By: /s/ Erik Oaas
------------------------------
Title:
---------------------------
NETFRAME INTERNATIONAL INCORPORATED
By: D. Everett
------------------------------
Title: Secretary
---------------------------
3
<PAGE> 11
RATIFICATION OF GUARANTY
The undersigned guarantor hereby acknowledges and consents to the
foregoing Second Amendment as of July 29, 1997, and agrees that the Guarantee
dated as of March 27, 1997 from the undersigned Guarantor remains in full force
and effect for the benefit of Lender, and the Guarantor confirms and ratifies
all of its obligations thereunder.
NETFRAME INTERNATIONAL INCORPORATED
By: D. Everett
------------------------------
Title: Secretary
---------------------------
4
<PAGE> 12
EXHIBIT A
REVOLVING CREDIT NOTE
$12,000,000 July 29, 1997
FOR VALUE RECEIVED, the undersigned, NETFRAME SYSTEMS INCORPORATED (the
"Company"), hereby absolutely and unconditionally promises to pay to the order
of MICRON ELECTRONICS, INC. (herein "Lender"), with offices located in Nampa,
Idaho, in lawful money of the United States of America and in immediately
available funds, the principal amount of Twelve Million Dollars ($12,000,000),
or such other principal amount advanced pursuant to Section 3, Paragraph 3.1 of
the Financing Agreement (as herein defined). Such Revolving Loan advances shall
be repaid on a daily basis as a result of the application of the proceeds of
collections of the Accounts and the making of additional Revolving Loans as
described in Section 3 of the Financing Agreement. The Revolving Loans may be
borrowed, repaid and reborrowed by the Company. A final balloon payment in an
amount equal to the outstanding aggregate balance of principal and interest
remaining unpaid, if any, under this Note as shown on the books and records of
Lender shall be due and payable on the termination of the Financing Agreement,
as set forth in Section 3 thereof.
The Company further absolutely and unconditionally promises to pay to the order
of Lender at said office, interest, in like money, on the unpaid principal
amount owing hereunder from time to time from the date hereof on the dates and
at the rates specified in Section 6 of the Financing Agreement.
If any payment on this Note becomes due and payable on a day other than a
business day, the maturity thereof shall be extended to the next succeeding
business day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
This Note is the Promissory Note referred to in the Financing Agreement, dated
as of March 27, 1997, as amended on the date hereof, as the same may be further
amended and restated and in effect from time to time, among the Company and
Lender (the "Financing Agreement"), and is subject to, and entitled to, all of
the terms, provisions and benefits thereof and is subject to optional and
mandatory prepayment, in whole or in part, as provided therein. All capitalized
terms used herein shall have the meaning provided therefor in the Financing
Agreement, unless otherwise defined herein.
The date and amount of the advance(s) made hereunder may be recorded on the grid
page or pages which are attached hereto and hereby made part of this Note or the
separate ledgers maintained by Lender. The aggregate unpaid principal amount of
all advances made pursuant hereto may be set forth in the balance column on said
grid page or such ledgers maintained by Lender. All such advances, whether or
not so recorded, shall be due as part of this Note.
<PAGE> 13
The Company confirms that any amount received by or paid to Lender in connection
with the Financing Agreement and/or any balances standing to its credit on any
of its accounts on Lender's books under the Financing Agreement may in
accordance with the terms of the Financing Agreement be applied in reduction of
this Note, but no balance or amounts shall be deemed to effect payment in whole
or in part of this Note unless Lender shall have actually charged such account
or accounts for the purposes of such reduction or payment of this Note.
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Note may become, or be declared to be, immediately
due and payable as provided in the Financing Agreement.
NETFRAME SYSTEMS INCORPORATED
By: [Signature]
------------------------------
Title: CFO
---------------------------
2
<PAGE> 1
Exhibit 10.38
ASSET PURCHASE AGREEMENT
BETWEEN
DECISION ONE CORPORATION
AND
NETFRAME SYSTEMS INCORPORATED
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I: PURCHASE AND SALE OF ASSETS..............................................1
1.1 Assets Subject to Sale.............................................1
1.2 Assignments of Contracts; Consents.................................2
1.3 No Liabilities Assumed.............................................2
ARTICLE II: PURCHASE PRICE..........................................................2
2.1 Assumption of Liabilities..........................................2
2.2 Purchase Price.....................................................2
ARTICLE III: THE CLOSING............................................................4
3.1 Time and Place of Closing..........................................4
3.2 Deliverables at the Closing........................................4
3.3 Further Assurances.................................................5
3.4 Possession and Control.............................................5
3.5 Effectiveness of Transactions......................................6
ARTICLE IV: SELLER'S REPRESENTATIONS AND WARRANTIES.................................6
4.1 Organization and Standing..........................................6
4.2 Power and Authority................................................6
4.3 Authorization......................................................6
4.4 Binding Agreement..................................................6
4.5 No Breach or Violation.............................................6
4.6 Title to Personal Property.........................................7
4.7 Rights Under Customer Contracts....................................7
4.8 Litigation.........................................................8
4.9 Customers..........................................................8
4.10 Employee Benefit/ERISA Plans.......................................8
4.11 Assets Needed for Business.........................................8
4.12 Insurance..........................................................8
4.13 Consents and Approval..............................................9
4.14 Tax Matters........................................................9
4.15 Environmental Health and Safety Matters............................9
4.16 Validity of Patents/Trademarks/Copyrights..........................9
4.17 WARN Act Compliance...............................................10
4.18 Spare Parts Inventory.............................................10
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE V: BUYER REPRESENTATIONS AND WARRANTIES....................................10
5.1 Power and Authority...............................................10
5.2 Organization and Standing of Buyer................................10
5.3 Power and Authority...............................................10
5.4 Authorization.....................................................10
5.5 Binding Agreement.................................................10
ARTICLE VI: INFORMATION AND RECORDS CONCERNING BUSINESS............................11
6.1 Access to Information and Records Before Closing..................11
ARTICLE VII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING..............................11
7.1 Conduct of Business Pending Closing...............................11
7.2 Pursuit of Third-Party Consents or Approvals......................11
7.3 Confidentiality...................................................11
ARTICLE VIII: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS..........................11
8.1 Representations and Warranties....................................11
8.2 Performance of Covenants..........................................12
8.3 Delivery of Closing Certificate...................................12
8.4 No Material Changes...............................................12
ARTICLE IX: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS...........................12
9.1 Representations and Warranties....................................12
9.2 Performance of Covenants..........................................12
9.3 Delivery of Closing Certificate...................................12
ARTICLE X: OBLIGATIONS OF PARTIES AFTER CLOSING....................................12
10.1 Seller's Indemnity................................................12
10.2 Buyer's Indemnity.................................................13
10.3 Survival of Indemnities...........................................13
10.4 Orderly Transition................................................13
10.5 Seller's Employees................................................13
10.6 Covenant Not-To-Compete...........................................14
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
10.8 Filings With Sales Tax Authorities................................14
10.9 Settlement of Accounts Payable by Seller..........................14
10.10 Publicity.........................................................15
10.11 Bulk Sales Act Indemnity..........................................15
10.12 Enforcement of Restrictive Covenants Against Employees............15
10.13 License of Technology.............................................15
10.14 Spare Parts Inventory Level.......................................16
10.15 Technical Support/Consulting Services by Seller...................16
10.16 Clarify Software and Database.....................................16
10.17 Exclusive Warranty Provider; Sale of Spare Parts..................16
10.18 Accounts Receivable Payment.......................................17
10.19 Transition Period.................................................17
10.20 Erosion Caused by Product Replacement.............................17
ARTICLE XI: TERMINATION............................................................17
11.1 Termination.......................................................17
11.2 Effect of Termination.............................................17
ARTICLE XII: MISCELLANEOUS PROVISIONS..............................................18
12.1 Survival of Representations and Warranties........................18
12.2 Costs and Expenses................................................18
12.3 Finders...........................................................18
12.4 Assignment........................................................18
12.5 Effect and Construction of this Agreement.........................18
12.6 Cooperation.......................................................18
12.7 Notice............................................................18
12.8 Waiver, Discharge, Etc............................................19
12.9 Rights of Persons Not Parties.....................................19
12.10 Governing Law/Jurisdiction........................................19
</TABLE>
-iii-
<PAGE> 5
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<S> <C>
Schedule 1.1(b)(i) - Fixed Assets
Schedule 1.1(b)(iv) - All Agreements to be Assigned to Buyer
Schedule 1.1(b)(v) - Spare Parts Inventory
Schedule 4.6(c) - Liens on Assets
Schedule 4.7(d) - Prepaid Contracts
Schedule 4.9 - Customers Ceasing to do Business
Schedule 4.16 - Seller's Patents, Trademarks and Copyrights
Schedule 10.5 - List of Persons to be Employed by Buyer
Schedule 10.17(a) - Seller's Equipment with Remaining Warranty Period and Warranty Rates
Exhibit A - Form of Assignment Agreement
Exhibit B - Form of Bill of Sale
Exhibit C - Form of Seller's Standard Agreement
Exhibit D - Deviations From Seller's Form of Standard Agreement
Exhibit E - Form of Opinion of Seller's Counsel
Exhibit F - Form of Seller's Covenant-Not-To-Compete
Exhibit G - Form of Transition Agreement
Officers Certificate
</TABLE>
-iv-
<PAGE> 6
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement") made this 21st day of May, 1997,
between DecisionOne Corporation, a Delaware corporation with its principal place
of business at 50 East Swedesford Road, Frazer, Pennsylvania 19355 ("Buyer"),
and NetFRAME Systems Incorporated, a Delaware corporation with its principal
place of business at 1545 Barber Lane, Milpitas, California 95035 ("Seller").
BACKGROUND
WHEREAS, Seller is engaged in the business of providing in the United
States and Canada telephone technical support, spare parts exchange and repair
services and training and educational services to end-user and reseller
customers who own or resell multi-processor servers manufactured by Seller which
include Seller's model numbers NF 100/300, NF 200, NF 250/450, NF 400 and NF
8400/8500 (collectively the "Series 8500 Products") (Seller's telephone
technical support spare parts exchange and repair, and educational business for
the Series 8500 Products in the United States and Canada is hereinafter referred
to as the "Service Business"); and
WHEREAS, Buyer desires to purchase, and Seller desires to sell, all of
the assets of Seller used in the Service Business on the terms and subject to
the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and representations and warranties herein contained,
Seller and Buyer intending to be legally bound, agree as follows:
<PAGE> 7
ARTICLE I: PURCHASE AND SALE OF ASSETS
1.1 Assets Subject to Sale.
(a) Subject to the terms and conditions of this Agreement, at
the closing referred to in Section 3.1 hereof (the "Closing"), Seller shall
sell, convey, assign, transfer and deliver to Buyer, and Buyer shall purchase,
acquire and accept from Seller, Seller's assets and properties (of every kind,
nature and description, personal, tangible or intangible and wherever situated,
whether or not carried on Seller's books) used solely or primarily in connection
with the Service Business as described in Section 1.1(b) below.
(b) The Assets primarily used in the Service Business shall
include (i) all items of machinery, equipment, test equipment, and computers,
listed on Schedule 1.1(b)(i) hereto, (ii) the transferable licenses, permits,
approvals and authorizations by governmental authorities related to the
operation of the Service Business, (iii) all records, as referred to in Section
3.2(a), pertaining to the Assets or the Service Business, (iv) all telephone
support, spare parts exchange and spare parts repair agreements listed in
Schedule 1.1(b)(iv) hereto (the "Customer Contracts"), and (v) all Service
Business spare parts inventory listed on Schedule 1.1(b)(v) hereto (the "Spare
Parts Inventory").
(c) The sale, conveyance, assignment, transfer and delivery of
the Assets hereunder shall be made free and clear of all liens and encumbrances,
and of all obligations and liabilities of Seller, except as stated in the
Assignment Agreement referred to in Section 3.2(a)(ii).
1.2 Assignments of Contracts; Consents.
Seller shall promptly apply for or otherwise seek and use its best
efforts to obtain all authorizations, consents, waivers and approvals
as may be required in connection with the assignment of the agreements,
contracts, commitments, licenses, permits and other rights to be
assigned hereunder, and shall provide Buyer with copies of all such
authorizations, consents, waivers and approvals promptly after they
have been obtained. To the extent that the assignment of any agreement,
or other right shall require the consent of any other party thereto,
this Agreement shall not constitute an agreement to assign the same if
an attempted assignment would constitute a breach thereof. In the event
that any agreement, or other right, property or asset of Seller cannot
be effectively transferred to Buyer without the consent of a third
party, and if at the Closing Buyer shall waive its right to receive
such consent, Seller shall thereafter be obligated to use its best
efforts to assure Buyer of the benefits of such agreement, other right,
property or asset.
2
<PAGE> 8
1.3 No Liabilities Assumed.
The parties hereto expressly agree that Buyer assumes no past, or
future liabilities, obligations or debts of any kind of Seller's
pursuant to, or as a result of the execution of this Agreement and
Buyer's purchase of the Assets, except for those obligations assumed by
Buyer pursuant to the Assignment Agreement in the form attached hereto
as Exhibit A.
ARTICLE II: PURCHASE PRICE
2.1 Assumption of Liabilities. Subject to the terms and conditions of this
Agreement, in reliance on Seller's representations, warranties and
agreements contained herein, and in consideration of, and as partial
payment for, the sale, conveyance, assignment, transfer and delivery of
the Assets provided for in Section 1.1 and the covenant not-to-compete
referred to in Section 10.6 Buyer shall execute and deliver to Seller
on the Closing Date an instrument of assignment substantially in the
form of Exhibit A hereto, providing for the assumption by Buyer of
certain liabilities and obligations of Seller (the "Assignment
Agreement").
2.2 Purchase Price.
The aggregate purchase price (the "Purchase Price") for the Assets
being sold hereunder is $1,900,000. The aggregate purchase price shall
be payable by Buyer to Seller as follows:
(a) Purchase Price
<TABLE>
<S> <C>
Total Estimated Purchase Price $1,900,000
Less Down Payment -
a. Deferred Revenue as of Closing
(Prepaids) $1,620,638*
----------
</TABLE>
- --------
* This amount is only an estimate. After Closing the parties shall work
together to arrive at a mutually agreeable final calculation of the amount
of deferred revenue with such determination to be made within the thirty
(30) days following the Closing.
3
<PAGE> 9
(b) Payments after Closing. The remaining balance of $279,362
(estimate only, subject to adjustment based on final
calculation of deferred revenue under Section 2.2(a)) shall be
payable by Buyer to Seller, or Seller to Buyer as the case may
be, ninety (90) days after Closing, less any adjustments
calculated in accordance with Section 2.2(c).
(c) Adjustments to Purchase Price. In the event (i) Seller fails
to obtain any necessary written consent of any customer under
a Customer Contract to the assignment to Buyer of its Customer
Contract, (ii) any Customer Contracts listed in Schedule
1.1(b)(iv) are cancelled prior to the Closing or notice of
cancellation for any customer listed in Schedule 1.1(b)(iv) is
received during the thirty (30) day period following the
Closing, (the Customer Contracts referred to in subsection
(c)(i) and (c)(ii) are hereinafter collectively referred to as
the "Cancelled Customer Contracts") or (iii) Buyer enters into
new Customer Contracts after the Closing in connection with
Buyer's operation of the Service Business (the "New Customer
Contracts"), the cash payment due to Seller under Section
2.2(b) shall be recalculated as follows:
(i) The Purchase Price shall be recalculated (the
"Recalculated Purchase Price") by (A) reducing the
Purchase Price by an amount equal to the monthly
revenues attributable to the Cancelled Customer
Contracts multiplied by 6.0 and then (B) increasing
the Purchase Price by an amount equal to the monthly
revenues attributable to the New Customer Contracts
multiplied by 6.0; and
(ii) The deferred revenue amount set forth in Section
2.2(a), as finally determined by Seller and Buyer
within the thirty (30) day period following the
Closing, shall be reduced (the "Recalculated Deferred
Revenue") by the amount of the remaining deferred
revenue, if any, attributable to the Cancelled
Customer Contracts; and
(iii) The cash payment due to Seller under Section 2.2(b)
shall equal the amount of the Recalculated Purchase
Price minus the Recalculated Deferred Revenue.
4
<PAGE> 10
ARTICLE III: THE CLOSING
3.1 Time and Place of Closing.
The closing ("Closing") shall be held on May 20, 1997 (the "Closing
Date") and shall be conducted at the offices of Buyer at Frazer,
Pennsylvania, or if the parties agree, through the exchange of signed
documents by facsimile with originals to follow by overnight delivery.
3.2 Deliverables at the Closing.
At the Closing:
(a) Seller shall deliver to Buyer:
(i) Bill of Sale, executed by Seller in the form attached
hereto as Exhibit B, conveying to Buyer good and
marketable title to the Assets as described in
Section 1.1 hereof free and clear of all claims,
liens and encumbrances;
(ii) Assignment Agreement executed by Seller in the form
attached hereto as Exhibit A relating to all of the
agreements listed in Schedule 1.1(b)(iv) hereof;
(iii) the opinion of Seller's counsel, Wilson Sonsini
Goodrich & Rosati, Esquire, in the form attached
hereto as Exhibit E;
(iv) the closing certificate of Seller called for by
Section 8.3;
(v) a copy of Seller's Board of Directors' resolutions
authorizing the sale of the Assets pursuant to this
Agreement;
(vi) a copy of Seller's Certificate of Incorporation and
all amendments thereto, certified by the Secretary of
State of Delaware and Good Standing Certificates
dated prior to the Closing for the States of
California and Delaware;
(vii) Seller's Incumbency Certificate;
(viii) Consents of all customers required under the Customer
Contracts and all other persons or entities who are
parties to any other contracts and License Agreements
to be assigned to Buyer under the Assignment
Agreement;
(ix) Documents evidencing the satisfaction of all
judgments and liens entered against Seller relating
to the Assets;
5
<PAGE> 11
(x) such other instruments or documents as Buyer shall
deem necessary or appropriate to vest in Buyer good
and marketable title to the Assets free and clear of
all claims, liens and encumbrances, including without
limitation UCC-3 Release and Termination Statements;
(xi) Seller's executed original counterparts of all
agreements, contracts, commitments, licenses, permits
and written evidence of rights that are to be
assigned to or assumed by Buyer hereunder, with such
assignments thereof and consents to be assignment
thereof as may be necessary to vest in Buyer the full
benefit of such agreements, contracts, commitments,
licenses, permits and rights;
(xii) The originals of all customer files, contracts,
accounts payable and accounts receivable records used
in the operation of the Service Business or
pertaining to the Assets or to the Service Business
(other than as set forth in Schedule 1.1(a) hereto)
(the same being hereinafter referred to collectively,
as the "Records"), wherever located, and regardless
of whether in the possession of, or owned by Seller.
All other computer or hard copy records relating to
the Service Business will be made available to Buyer
at reasonable times for any reasonable business
purpose for a period of five years after the Closing
Date;
(xiii) The Covenant-Not-To-Compete required by Section 10.6
signed by Seller; and
(xiv) The Transition Agreement required by section 10.19
signed by Seller.
At the Closing:
(b) Buyer shall deliver to Seller:
(i) The Assignment Agreement executed by Buyer in the
form attached hereto as Exhibit A relating to the
agreements to be assigned to Buyer;
(ii) the closing certificate of Buyer called for by
Section 9.3 hereof;
(iii) The payment of the amounts to be paid by Buyer at
Closing as set forth in Article II.
6
<PAGE> 12
(iv) The Transition Agreement required by Section 10.19
signed by Seller.
3.3 Further Assurances.
Following the Closing, at the request of Buyer, Seller shall from time
to time without further consideration, execute and deliver such
instruments of transfer, conveyance and assignment in addition to those
delivered pursuant to Section 3.2, and take all such other action as
may be deemed necessary or appropriate by Buyer to more effectively
convey, assign and transfer to and vest in Buyer good and marketable
title to the Assets free and clear of all claims, liens and
encumbrances, and to put Buyer in possession of the Assets.
3.4 Possession and Control.
Simultaneously with the deliveries provided for in Section 3.2, Seller
shall take all such steps as may be requisite to put Buyer in actual
possession and operating control of the Assets and the Service Business
effective 12:01 A.M. May 24, 1997 (the "Effective Time").
3.5 Effectiveness of Transactions.
All transactions, deliveries and payments to take place at the Closing
shall be deemed to take place simultaneously, and no transaction,
delivery of any opinion, certificate, consent or other document, or
payment shall be deemed made unless all transactions, deliveries and
payments at the Closing are completed.
ARTICLE IV: SELLER'S REPRESENTATIONS AND WARRANTIES
In order to induce Buyer to enter into this Agreement, Seller represents and
warrants to and agree with Buyer as follows:
4.1 Organization and Standing.
Seller is a corporation validly existing and in good standing under the
laws of the State of Delaware. Seller has the corporate power and
authority to own the Assets and to conduct its business as presently
being conducted by it. Seller is qualified to do business as a foreign
corporation and is in good standing in all jurisdictions in which the
nature of its properties and the conduct of its business require it to
be so qualified.
7
<PAGE> 13
4.2 Power and Authority.
Seller has the corporate power and authority to execute, deliver and
perform this Agreement and to execute, deliver and perform the
agreements, documents and instruments required to be delivered to Buyer
at Closing (collectively, the "Transaction Documents").
4.3 Authorization.
The execution and delivery of this Agreement and the Transaction
Documents by Seller and the performance by Seller of its obligations
hereunder and thereunder have been duly and validly authorized by all
corporate action necessary including the approval of the Board of
Directors of Seller.
4.4 Binding Agreement.
This Agreement has been duly executed and delivered by Seller. This
Agreement is, and when executed and delivered at the Closing each of
the Transaction Documents shall be, the legal, valid, and binding
obligations of Seller, enforceable against Seller in accordance with
its respective terms, subject only to bankruptcy or similar laws
affecting the rights of creditors generally.
4.5 No Breach or Violation.
Neither the execution and delivery of this Agreement or the Transaction
Documents nor the performance of Seller's obligations hereunder or
thereunder will result in:
(i) a default or any event that, with notice or lapse of time or
both would be a default, breach or violation of its
Certificate of Incorporation or bylaws, or any lease,
contract, indenture or other agreement to which Seller is a
party,
(ii) an event that would permit any party to terminate any
agreement relating to the Service Business; or
(iii) the creation or imposition of any lien, charge or encumbrance
on any of the Assets.
4.6 Title to Personal Property.
(a) Seller will convey to Buyer at Closing good and marketable
title to the equipment, inventory, materials, supplies,
fixtures, and other tangible personal property of every kind
included in the Assets (hereinafter
8
<PAGE> 14
"Tangible Personal Property"), free and clear of all
mortgages, security interests, liens, charges, pledges, and
encumbrances of any kind.
(b) The Tangible Personal Property to be conveyed to Buyer
hereunder is generally in good operating condition and repair,
ordinary wear and tear excepted.
(c) Seller has not (i) subjected the Assets or the Customer
Contracts to be assigned to Buyer hereunder to any lien,
pledge, mortgage, security interest, conditional sales
contract or other encumbrance of any nature whatsoever (other
than liens, if any, of current taxes not yet due and payable);
or (ii) entered into any transaction affecting the Tangible
Personal Property other than in the ordinary course of
business.
4.7 Rights Under Customer Contracts.
(a) Seller has the power and absolute right to transfer and assign
to Buyer, without restriction, all of its right, title and
interest in the Customer Contracts, and the revenue stream
generated thereby. Such assignment will be effective as
against the other parties to such assigned Customer Contracts
without the consent of such parties. Each Customer Contract
which is so assigned will have not been previously terminated
or modified or have had any obligations of the other party
thereto waived. Each Customer Contract will have been validly
executed by the other party thereto and will constitute a
legally binding and effective agreement enforceable in
accordance with its terms.
(b) All of the written agreements pursuant to which Seller
provides service to customers of the Service Business are in
the form of the standard agreements set forth in Exhibit C and
have no modification or other change that: (i) alters the
standard terms and conditions as set forth in the agreement in
Exhibit C; or (ii) increases in any way the liability of the
party obligated to perform the maintenance services
thereunder, except as set forth in Exhibit D.
(c) Seller will transfer and assign to Buyer at Closing all of its
right, title and interest in and to the Customer Contracts
free and clear of all security interests, liens, charges,
pledges, set-offs or encumbrances of any kind.
(d) There is not any material breach or material default by either
Seller, or to the best of Seller's knowledge, any customer in
the observance or performance of any term of any Customer
Contract to be assigned to Buyer. No payments or charges due
under any of the Customer Contracts have been prepaid, except
as set forth in Schedule 4.7(d).
9
<PAGE> 15
(e) Seller has not:
(i) incurred any liabilities or failed to perform when
due any liabilities, the failure of which would cause
any actual risk or risk of loss to it of its rights
under any of the Customer Contracts;
(ii) assigned or transferred its interests in any of the
Customer Contracts;
(iii) subjected to any lien, pledge, mortgage, security
interest, conditional sales contract or other
encumbrance of any nature whatsoever (other than
liens, if any, of current taxes not yet due and
payable) any of the Customer Contracts except as set
forth on Schedule 4.6(c).
(f) Seller has no knowledge of any fact or circumstance which
renders or could render the Customer Contracts less valuable
than such Customer Contracts are purported to be.
4.8 Litigation.
As relates to and affects the Service Business or the Assets (i) there
is no suit, action, arbitration, or legal, administrative, or other
proceeding, or governmental investigation pending or threatened against
Seller; (ii) Seller is not in default with respect to any order, writ,
injunction, or decrees of any federal, state, local or foreign court,
department, agency, or instrumentality, and (iii) Seller is not
presently engaged in any legal action to recover monies due to them or
damages sustained by it.
4.9 Customers.
(a) The customer list set forth in Schedule 1.1(b)(iv) is the complete
and accurate list of all of its customers having contracts with the
Service Business as of the date of this Agreement.
(b) Except as indicated in Schedule 4.9, Seller has no information nor
are they aware of any facts indicating that any of the customers of the
Service Business intend to cease doing business with it or materially
adversely alter the amount of business they are presently doing with
it. In addition, each contract with the customers listed in Schedule
1.1(b)(iv) has a minimum non-cancelable term of thirty (30) days.
10
<PAGE> 16
4.10 Employee Benefit/ERISA Plans.
Seller represents and warrants that it has complied with, and currently
is in compliance with, all of its lawful obligations relating to any
employee benefit/ERISA plans, stock options or ownership plans,
severance, vacation or other plan operated for or on behalf of its
employees employed in the Service Business, and that Seller shall
retain full responsibility for any act or omission to act regarding any
such employee benefit/ERISA plan it has offered or maintained and for
legal compliance requirements.
4.11 Assets Needed for Business.
Seller is conveying and transferring to Buyer hereunder the Assets
needed by Buyer to continue the Service Business.
4.12 Insurance.
The Assets are adequately insured and Seller will continue to carry its
existing insurance policies relating to the Service Business until the
Closing Date.
4.13 Consents and Approval.
All necessary consents and approvals of any persons or entities to the
transactions contemplated by this Agreement, or otherwise pertaining to
it, have been, or will be obtained by Seller prior to the Closing.
4.14 Tax Matters.
(a) For purposes of this Section "Taxes" shall mean any federal, state
or local tax or charge by a taxing authority in respect of income,
gross receipts, sales, use, franchise, and payroll taxes. As relates to
the Service Business, Seller has (i) duly and timely filed all returns
in respect of Taxes and each such return is true, complete and
accurate; (ii) paid all Taxes shown to have become due pursuant to such
returns; and (iii) paid, or made adequate provision in its financial
statements for, any other Taxes (whether or not such Taxes are being
contested).
(b) Seller has satisfied all federal, state, local and foreign
withholding tax requirements including but not limited to income,
social security and employment tax withholding for employees of the
Service Business.
4.15 Environmental Health and Safety Matters.
(i) Seller is in compliance with all federal, state and local laws,
ordinances, rules, regulations, orders, judgments, decrees or permits
relating to industrial
11
<PAGE> 17
hygiene, human health and the environment relating to its operation of
the Service Business.
(ii) No employee of Seller in the Service Business has been harmed or
alleged any harm by job-site exposure to Hazardous Materials (defined
to mean any hazardous, toxic or polluting materials, substances or
wastes, exposure to which is prohibited, limited or regulated by any
governmental authority). Seller has not received from any governmental
authority or third party any requests for information, notices of
claim, demand letters, or other notification that, in connection with
the conduct of the Service Business, Seller is or will be potentially
responsible with respect to any investigation or clean-up of Hazardous
Materials released at any sites or any other claim or demand arising
out of any release of any Hazardous Materials.
(iii) There are no Hazardous Materials which are a part of or
constitute the Assets.
4.16 Validity of Patents/Trademarks/Copyrights.
All the patents, trademarks, trade names and registered copyrights
owned by Seller and used in the Service Business are listed on Schedule
4.16 hereto and are valid and in good standing. Seller is not
infringing any patent, trademark, trade name, copyright (or any
application or registration respecting any thereof) and has not
misappropriated, and is not using in the conduct of the Service
Business, any discovery, improvement, process, formula, know-how, trade
secret, documentation, software, manual, diagnostic, data, plan,
specification, drawing or the like to which it does not have a
proprietary right or which infringes the proprietary rights of another
person, firm, corporation or business entity.
4.17 WARN Act Compliance.
To the extent this clause applies to the transaction contemplated by
this Agreement, Seller has provided a notice to its employees in
compliance with the Worker Adjustment and Retraining Notification Act
("WARN Act") (29 U.S.C.A. Sec. 2101 et seq.) Seller will pay all
amounts that may be or become due to such employees under the WARN Act
and Seller's severance policy, except that Seller shall not be
responsible for any such amounts that become due after the Closing
solely as a result of Buyer's termination after the Closing of the
employment of those employees listed on Schedule 10.5 who become
employees of Buyer.
4.18 Spare Parts Inventory.
The Spare Parts Inventory is in good condition and repair, and of a
good and useable quality and quantity sufficient for the Buyer to
conduct the Service
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Business in a manner consistent with past practice. Since January 1,
1997, Seller has continued to purchase or manufacture a quality and
quantity of spare parts inventory as is consistent with the prior
practices of Seller and to maintain and otherwise invest in such spare
parts inventory in a manner consistent with past practices and shall
continue all such practices up to the Closing.
ARTICLE V: BUYER REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller as follows:
5.1 Power and Authority.
Buyer has the power and authority to execute, deliver and perform this
Agreement.
5.2 Organization and Standing of Buyer.
Buyer is a corporation validly existing and in good standing under the
laws of the State of Delaware. Buyer has the power and authority to own
the Assets it is purchasing and to conduct the Service Business it is
acquiring. Buyer is qualified to do business as a foreign corporation
in all jurisdictions in which the nature of the properties and the
conduct of the Service Business being acquired require it to be so
qualified.
5.3 Power and Authority.
Buyer has the corporate power and authority to execute, deliver, and
perform this Agreement and the Assignment Agreement to be delivered by
Buyer at the Closing.
5.4 Authorization.
The execution and delivery by Buyer of this Agreement and the
performance of its obligations hereunder have been duly and validly
authorized by the board of directors of Buyer.
5.5 Binding Agreement.
This Agreement has been duly executed and delivered by Buyer. This
Agreement is, and the Assignment Agreement when executed and delivered
at the Closing hereunder will be, the legal, valid and binding
obligations of Buyer enforceable against Buyer in accordance with its
terms, subject only to bankruptcy or similar laws affecting the rights
of creditors generally and principles governing the availability of
specific performance.
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ARTICLE VI: INFORMATION AND RECORDS CONCERNING BUSINESS
6.1 Access to Information and Records Before Closing.
Buyer may, prior to the Closing Date, at reasonable times and on
reasonable notice to Seller, make, or cause to be made, such further
investigation of the operation and properties of the Service Business
and its financial and legal condition as Buyer deems necessary or
advisable to more fully familiarize itself with such properties and
other matters and Seller agrees to cooperate with Buyer in this regard
and made its employees available to Buyer for this purpose.
ARTICLE VII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
7.1 Conduct of Business Pending Closing.
Between the date of this Agreement and the Effective Time, Seller will
conduct the Service Business solely in the ordinary course of business
consistent with past practice, maintain its corporate existence, and
not merge or consolidate with or into any other entity, or permit any
other entity to merge or consolidate with or into it. Seller will use
its best efforts to ensure the preservation of its present
relationships with customers, suppliers and other having business
relationships with the Service Business.
7.2 Pursuit of Third-Party Consents or Approvals.
Prior to Closing, Seller shall obtain all consents or approvals of
customers and other third parties necessary for the lawful transfer of
Assets and assignment of the Customer Contracts and all other licenses
or agreements to be assigned by Seller to Buyer. Buyer shall cooperate
with Seller in obtaining all such consents or approvals.
7.3 Confidentiality.
Buyer agrees that, unless and until the Closing has been consummated,
Buyer and its officers, directors, and other representatives will hold
in strict confidence, and will not use to the detriment of Seller any
data or information obtained in connection with this transaction or
Agreement with respect to the Service Business, except insofar as such
data or information may be required by law to be disclosed. If the
transaction contemplated by this Agreement is not consummated, Buyer
will return to Seller all such data or
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information that was made available to Buyer in connection with this
transaction as Seller may reasonably request, and will hold all such
data or information, including Seller's customer list, in strict
confidence and will not use any such information to the detriment of
Seller.
ARTICLE VIII: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Unless waived by Buyer, the obligation of Buyer to consummate the transactions
contemplated hereunder is subject to the fulfillment, prior to or at the
Closing, of each of the following conditions:
8.1 Representations and Warranties.
The representations and warranties of Seller contained in this
Agreement, the Transaction Documents, or in any Exhibit, list,
certificate or document delivered pursuant to the provisions hereof or
made available to Buyer shall be true and correct in all material
respects at and as of the Closing Date as though such representations
and warranties were made at and as of such time.
8.2 Performance of Covenants.
Seller shall have performed or complied with its agreements and
covenants required by this Agreement and the Transaction Documents to
be performed or complied with by it prior to or at the Closing.
8.3 Delivery of Closing Certificate.
Seller shall have delivered to Buyer a certificate dated the Closing
Date and signed by its President stating that the conditions set forth
in Sections 8.1 and 8.2 have been satisfied.
8.4 No Material Changes.
During the period from the execution date of this Agreement to the
Closing Date, there shall not have been any material adverse change in
the financial condition or the results of operations of the Service
Business, and Seller shall not have sustained any material loss or
damage to the Assets, whether or not insured, that materially affects
its ability to conduct the Service Business.
ARTICLE IX: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Unless waived by Seller, the obligation of Seller to consummate the transactions
contemplated hereunder is subject to the fulfillment, prior to or at the
Closing, of each of the following conditions:
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9.1 Representations and Warranties.
The representations and warranties of Buyer in this Agreement, the
Transaction Documents, or on any Exhibit, list, certificate or document
delivered pursuant to the provisions hereof shall be true and correct
in all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time.
9.2 Performance of Covenants.
Buyer shall have performed or complied with each of its agreements and
covenants required by this Agreement and the Transaction Documents to
be performed or complied with by it prior to or at the Closing.
9.3 Delivery of Closing Certificate.
Buyer shall have delivered to Seller a certificate dated the Closing
Date signed by an authorized representative stating that the conditions
set forth in Sections 9.1 and 9.2 have been satisfied.
ARTICLE X: OBLIGATIONS OF PARTIES AFTER CLOSING
10.1 Seller's Indemnity.
Seller shall indemnify, defend and hold harmless Buyer against, and in
respect of, any and all claims, demands, losses, costs, expenses,
obligations, liabilities, and damages, including interest, penalties,
and reasonable attorneys' fees, that it may incur or suffer, which
arise, result from, or in any way relate to any breach of, or failure
by Seller to perform, any of their representations, warranties,
commitments, covenants, or agreements in this Agreement, in the
Transaction Documents, or in any certificate, Exhibit, or other
instrument furnished or to be furnished by Seller under this Agreement.
In addition and without limitation, the foregoing indemnification shall
apply in all respects to any claim founded upon an event relating to
the Service Business which occurred on or prior to the Effective Time
including without limitation, the repayment of pro rata refunds to a
customer who cancels its Customer Contract after Closing and request a
refund of amounts prepaid by such customer prior to Closing.
Buyer shall promptly notify Seller of the existence of any claim,
demand, or other matter to which Seller's indemnification obligations
would apply, and shall give Seller a reasonable opportunity to defend
the same at their own expense and with counsel of their own selection;
provided that Buyer shall at all times also have the right to fully
participate in the defense at its own
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expense. If Seller within a reasonable time after this notice, fail to
defend, Buyer shall have the right, but not the obligation, to
undertake the defense of, and to compromise or settle (exercising
reasonable business judgment), the claim or other matter on behalf, for
the account, and at the risk, of Seller.
10.2 Buyer's Indemnity.
Buyer shall indemnify, defend and hold harmless Seller against, and in
respect of, any and all claims, demands, losses, costs, expenses,
obligations, liabilities and damages, including interest, penalties and
reasonable attorneys' fees, that they may incur or suffer, which arise,
result from, or in any way relate to any breach of, Buyer's
representations, warranties, commitments or covenants, or failure by
Buyer to perform, any of its obligations hereunder or under the
Assignment Agreement.
Seller shall promptly notify Buyer of the existence of any claim,
demand, or other matter to which Buyer's indemnification obligations
would apply, and shall give Buyer a reasonable opportunity to defend
the same at Buyer's own expense and with counsel of Buyer's own
selection; provided that Seller shall at all times also have the right
to fully participate in the defense at their own expense. If Buyer
shall, within a reasonable time after this notice, fail to defend,
Seller shall have the right, but not the obligation, to undertake the
defense of, and to compromise or settle (exercising reasonable business
judgment), the claim or other matter on behalf, for the account, and at
the risk, of Buyer.
10.3 Survival of Indemnities.
No claim for indemnification shall be made pursuant to this Article X
more than two (2) years after the Closing Date.
10.4 Orderly Transition.
After the Closing, Seller will cooperate with and assist Buyer to
effect a smooth and orderly transition of the Service Business and the
Assets conveyed hereunder.
10.5 Seller's Employees.
From and after the Closing, Buyer may offer, but shall be under no
obligation, to employ certain of Seller's full-time employees. A list
of these employees and their current salaries is set forth on the
attached Schedule 10.5. Seller shall retain responsibility for any
current employees not offered employment with Buyer after the Closing,
or who are offered such employment and do not accept, and agrees to
comply with all applicable state and federal laws regarding the
termination of the employment of such individuals including but
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not limited to obligations arising under the Consolidated Omnibus
Budget Reconciliation Act of 1985.
Seller further agrees that any earned or accrued vacation and sick time
pay owing to those employees set forth on Schedule 10.5 shall be
reconciled with such employees at or prior to the time of the Closing
Date and shall be the full and sole responsibility of Seller. The
parties expressly agree that Buyer assumes no obligation to pay or
carry over such earned or accrued vacation or sick time to or for the
employees. Seller agrees to be fully and solely responsible for any
claim for severance payments made against it or Buyer by the employees
of the Service Business, whether those employees are offered employment
by Buyer or not, resulting from the transaction contemplated by this
Agreement. Seller hereby acknowledges, represents and warrants to Buyer
that Seller shall remain solely responsible and liable for the
performance of its obligations to its employees engaged in the Service
Business under all collective bargaining agreements, employee benefit
plans, employment agreements and policies and procedures which grant or
create employee rights, and that Buyer has not agreed with Seller to
assume, and will not assume any such obligations of Seller.
10.6 Covenant Not-To-Compete.
Seller agrees as part of the inducement for Buyer to enter into this
Agreement, to execute and deliver to Buyer at the Closing a Covenant
Not-to-Compete substantially in the form of Exhibit F hereto.
10.7 Use of Seller's Name.
Seller represents and warrants that after the Closing (i) it will not
use the name "NetFRAME" or any similar name in connection with the
offering of any computer maintenance services in competition with the
Service Business, and (ii) it will not grant the rights to own or use
such name or any similar name to any third party in connection with any
computer maintenance business in competition with the Service Business.
Seller agrees that in the event any third party attempts to use or
establish legal or equitable rights in the name "NetFRAME" after the
Closing (except as otherwise permitted under the last paragraph of this
Section 10.7), Seller will exercise all reasonable efforts, including
the institution of legal or equitable action, to cause such third party
to cease and desist in such use or to prevent such third party from
establishing any legal or equitable rights.
In the event Seller fails to exercise all reasonable efforts to prevent
the unauthorized use of the name "NetFRAME", Buyer shall have the right
to undertake all such reasonable efforts, including the institution of
legal or equitable action, at the expense of Seller.
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Seller hereby grants Buyer the right to refer to the name "NetFRAME" in
its communications with customers or the public for a period of ninety
(90) days following the Closing.
Notwithstanding anything above to the contrary, it is understood and
agreed that Seller shall not be in violation of this Section 10.7 in
the event any reseller of Seller's 8500 Products uses or refers to the
name "NetFRAME"; it being further understood, however, that Seller
shall request its resellers not to do so.
10.8 Filings With Sales Tax Authorities.
Seller agrees that, in connection with the consummation of the
transactions contemplated by this Agreement, it shall timely file all
reports and returns as may be required to be filed by it with sales tax
authorities in all states in which it conducts business on the Closing
Date.
10.9 Settlement of Accounts Payable by Seller.
Seller agrees that promptly after the Closing Date it will, or will
cause, all of its accounts payable relating to the Service Business to
be paid or settled in the ordinary course of business, except for
accounts payable which Seller is contesting as a result of good faith
disputes.
10.10 Publicity.
Buyer and Seller will consult with each other before issuing any press
release or otherwise making any public statement or disclosure with
respect to the transactions contemplated herein (including, without
limitation, disclosure of the purchase price, parties or other terms of
such transactions), and neither Buyer nor Seller shall issue any such
press release or make any such statement or disclosure without the
approval of the other, except that no such approval shall be required
for disclosures (i) in conjunction with any securities filing or
shareholder communication, or (ii) to the attorneys and accountants
representing Buyer or Seller in connection with the transactions
proposed hereunder.
10.11 Bulk Sales Act Indemnity.
Seller agrees to indemnify and hold Buyer harmless for and against all
damages, liabilities and costs of any kind suffered or incurred by
Buyer as a result of Seller's failure to comply with the requirements
of any applicable Bulk Sales Act.
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10.12 Enforcement of Restrictive Covenants Against Employees.
The parties acknowledge and agree that Seller has agreed to assign to
Buyer pursuant to the Assignment Agreement, among other things, the
rights of Seller to enforce restrictive covenants entered into between
Seller and employees of the Service Business who are not employed by
Buyer after the Closing (the "Former Employees"). Seller agrees to
assist Buyer in the enforcement of such restrictive covenants against
the Former Employees, or to institute legal proceedings in Seller's
name against the Former Employees to enforce such restrictive
covenants, if requested by Buyer.
10.13 License of Technology.
Seller hereby grants to Buyer an exclusive (other than (i) for Seller's
own use solely in connection with Seller's business outside the United
States (ii) Licenses granted prior to the date hereof by Seller to
resellers of Seller's 8500 Products and (iii) Licenses granted prior to
the date hereof by Seller to customers of Seller who perform
self-maintenance on Seller's 8500 Products), perpetual, irrevocable,
royalty-free license to utilize, in the United States and solely in
connection with the provision of warranty, maintenance, spare parts
repair and technical support services in the United States, all
schematics, manuals, engineering documentation and work papers,
diagnostics, microcode software and documentation required for the
performance of maintenance, spare parts repair and technical support
relating to the Series 8500 Products including without limitation the
equipment covered under the Customer Contracts (all such items being
herein referred to as "Documentation"). The parties intend the
aforementioned license to be a technology license within the meaning of
the federal bankruptcy laws. In addition, Seller shall promptly provide
Buyer will all newly-developed, updated, revised or modified
Documentation and all such Documentation shall be included in, and
subject to, the terms and conditions of the license granted above.
Also, Buyer may sublicense its rights under such license to third
parties who perform such services on behalf of Buyer.
Seller agrees that it shall not grant any License, or otherwise
transfer, any rights to a third party which are inconsistent with, or
conflict with, the License granted to Buyer hereunder.
10.14 Spare Parts Inventory Level.
If the Spare Parts Inventory delivered by Seller to Buyer on the
Closing Date is less than the quantity listed on Schedule 1.1(b)(v)
hereto, then Seller shall deliver the missing quantity of spare parts
to Buyer within thirty (30) days after Closing.
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10.15 Technical Support/Consulting Services by Seller.
For a period of six (6) months following the Closing (the "Support
Period"), Seller shall make available at no charge and as needed to
Buyer technical support services from Seller's escalation call center
employees located at Milpitas, California. Such services shall be made
available twenty-four (24) hours per day, seven (7) days a week. In
addition, Seller agrees that during the Support Period Buyer may use at
no charge the services of Seller's employee John Hammond for
engineering support services, or if John Hammond is unavailable,
another person having comparable experience and expertise. Furthermore,
Seller shall provide to Buyer at no charge during the Support Period
one hundred (100) hours of consulting services by employees of Seller
regarding the processes, techniques, methods, tools etc. used in the
repair of the Spare Parts Inventory.
10.16 Clarify Software and Database.
After the Closing, Seller shall permit Buyer to have unlimited use of
10 seats (Licenses) for the Clarify Software utilized in the Service
Business at no charge for as long as needed by Buyer in connection with
Buyer's operation of the Service Business. Also, Seller will allow
Buyer after the Closing to have access to Seller's database and
knowledge base (e.g. history of technical support problems with regard
to the Series 8500 Products) on the Clarify software as needed by Buyer
until such time as Buyer converts such database information to Buyer's
computer systems and for a period of one hundred twenty (120) days
thereafter. In addition, at the time of Closing, Seller shall deliver
to Buyer a complete copy of such database and shall provide Buyer at no
charge with an updated database at the end of each calendar quarter
following the Closing and a final update at the time Buyer converts
such database information to Buyer's computer systems.
10.17 Exclusive Warranty Provider; Sale of Spare Parts.
(a) For a period of five (5) years after the Closing Date (the
"Five Year Term"), Seller agrees that Buyer shall be Seller's
exclusive provider of warranty, extended warranty, telephone
technical support services and educational and training
services in the United States for the Series 8500 Products
sold by Seller during the Five Year Term, or sold by Seller
prior to the Closing which have a remaining warranty period as
set forth on Schedule 10.17(a) attached hereto as may be
amended upon the mutual agreement of the parties. As
compensation for providing such service, Seller shall pay to
Buyer the fee set forth in Schedule 10.17(a) hereto.
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Notwithstanding the foregoing, it is understood and agreed
that the provision of such services by resellers of Series
8500 Products shall not constitute a breach of this Section
10.17 by Seller, provided Seller does not directly, or
indirectly, assist or support resellers in providing such
services unless mutually agreed by Seller and Buyer in
writing.
(b) During the two (2) year period after the Closing, if requested
by Buyer, Seller shall sell to Buyer spare parts for the
Series 8500 Products which are necessary for Buyer to perform
its obligations under this Agreement at a price equal to
Seller's then standard cost.
10.18 Accounts Receivable Payment.
If either party (or any affiliate thereof) at any time receives any
funds from any third party that are properly payable to the other
party, the party receiving such funds shall promptly remit such funds
to the party entitled to such funds.
10.19 Transition Period.
At the Closing, Seller and Buyer shall enter into a Transition Services
Agreement (the "Transition Agreement") in the form of Exhibit G
attached hereto regarding Buyer's use of certain of Seller's employees
and offices following the Closing.
10.20 Erosion Caused by Product Replacement.
Seller acknowledges that Buyer has advised Seller of Buyer's concern
regarding potential cancellations or non-renewals of Customer Contracts
by customers after the Closing due to customers purchasing equipment
from Seller or a successor to Seller's business or a permitted assigns
to this Agreement, or from third parties such as resellers to whom
Seller has sold equipment to replace the Series 8500 Products covered
under the Customer Contracts. Therefore, Seller and Buyer agree that if
during any of the two (2) twelve month periods beginning June 1, 1997
(each such period hereinafter referred to as a "Measurement Period")
Buyer has received notices of (i) cancellations or non-renewals of
Customer Contracts or (ii) the removal of Series 8500 Products from
coverage under Customer Contracts, due to customers having purchased or
leased replacement equipment manufactured or sold by Seller, or a
successor to Seller's business, or a reseller of Seller's Products
after the Closing which results in Buyer's loss of an aggregate monthly
revenue (the "Displaced MMC") of more than $60,000 during any such
Measurement Period, Seller, or the successor to Seller's business, as
the case may be, shall pay to Buyer within sixty (60) days after
written notice thereof an amount equal to six (6) times the amount of
the
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Displaced MMC in excess of $60,000. Seller shall have the right, upon
reasonable notice to Buyer and during normal business hours, to review
Buyer's books and records regarding Buyer's calculation of the
Displaced MMC.
ARTICLE XI: TERMINATION
11.1 Termination.
This Agreement may be terminated at any time prior to the time of
Closing by:
(a) Buyer, if the conditions set forth in Article VIII hereof have
not been satisfied by the Closing Date:
(b) Seller, if the conditions set forth in Article IX hereof have
not been satisfied by the Closing Date; or
(c) the mutual written consent of Buyer and Seller by each of
them.
11.2 Effect of Termination.
If a party terminates or all parties terminate this Agreement pursuant
to Section 11.1 hereof, this Agreement shall become null and void
without any liability of any party hereunder.
ARTICLE XII: MISCELLANEOUS PROVISIONS
12.1 Survival of Representations and Warranties.
All representations and warranties made by each party in this Agreement
or the Transaction Documents, or in any exhibit, list, certificate or
document delivered by any such party pursuant thereto shall survive the
Closing, for a period of two (2) years thereafter, and notwithstanding
any investigation conducted before or after the Closing or the decision
of any party to complete the Closing, each party hereto shall be
entitled to rely upon the representations and warranties of the other
party set forth herein.
12.2 Costs and Expenses.
Except as otherwise expressly provided in this Agreement, each party
hereto shall bear its own costs and expenses in connection with this
Agreement and the transactions contemplated hereby.
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12.3 Finders.
No broker or finder has acted for either party in connection with the
transactions contemplated by this Agreement, and no broker or finder is
entitled to any broker's or finder's fee or other commission in respect
thereof based in any way on agreements, understandings, or arrangements
with Buyer or Seller. Buyer and Seller shall indemnify and hold the
other harmless from and against any broker's or finder's fee or
commission arising from or in any way connected with this Agreement or
the transactions contemplated hereunder.
12.4 Assignment.
This Agreement may not be assigned by any party hereto without the
prior written consent of the other parties hereto. This Agreement shall
be binding upon and shall inure to the benefit of the parties and their
respective successors and permitted assigns, including any purchaser of
the Seller's business or assets. This Agreement is not intended to
confer upon any person, except the parties hereto, any rights or
remedies hereunder.
12.5 Effect and Construction of this Agreement.
This Agreement and the Exhibits hereto embody the entire Agreement and
understanding of the parties and supersede any and all prior
agreements, arrangements, and understandings relating to matters
provided for herein. The captions are for convenience only and will not
control or affect the meaning or construction of the provisions of this
Agreement. This Agreement may be executed in one or more counterparts,
and all such counterparts will constitute one and the same instrument.
12.6 Cooperation.
Subject to the terms and conditions herein provided, each of the
parties hereto shall use its best efforts to take, or cause to be
taken, such action to execute and deliver, or cause to be executed and
delivered, such additional documents and instruments and to do, or
cause to be done, all things necessary, proper or advisable under
applicable law to consummate and make effective the transactions
contemplated by this Agreement.
12.7 Notice.
All notices required or permitted hereunder shall be in writing and
shall be deemed to be properly given when personally delivered to the
party entitled to receive the notice or when sent by facsimile, or
certified or registered mail, postage prepaid, properly addressed to
the party entitled to receive such notice at the address stated below:
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If to Seller: NetFRAME Systems Incorporated
1545 Barber Lane
Milpitas, California 95035
Attn: Mr. Terry Hartsfield
Vice President, Customer Satisfaction
and Chief Quality Officer
Fax: 408-474-4228
If to Buyer: Corporate Development Executive
DecisionOne Corporation
50 East Swedesford Road
Frazer, PA 19355
Fax: 610-296-9746
With a copy to: Vincent M. Dadamo, Esquire
DecisionOne Corporation
50 East Swedesford Road
Frazer, PA 19355
Fax: 610-408-3820
12.8 Waiver, Discharge, Etc.
This Agreement may not be released, discharged, abandoned, changed or
modified in any manner, except by an instrument in writing signed on
behalf of each of the parties hereto by its duly authorized officers or
representatives. The failure of any party hereto to enforce at any time
any of the provisions of this Agreement shall in no way be construed to
be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof.
12.9 Rights of Persons Not Parties.
Nothing contained in this Agreement shall be deemed to create rights in
persons not parties hereto, other than permitted successors and assigns
of the parties hereto.
12.10 Governing Law/Jurisdiction.
This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Pennsylvania, without regard to its
conflict of laws principles. Any dispute or claim arising out of or
relating to this Agreement or any other agreements delivered by the
parties to each other at the Closing, or breach thereof shall be
settled solely and exclusively by binding arbitration in the City of
Philadelphia, PA in accordance with the
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commercial arbitration rules then in effect of the American Arbitration
Association. The prevailing party in such arbitration shall be entitled
to recover its reasonable attorney's fees from the other party. Any
award entered by the arbitrators will be final, binding and
nonappealable and judgment may be entered by any party in accordance
with applicable law in any court of competent jurisdiction. This
arbitration provision will be specifically enforceable. The arbitrators
will not have the power to direct equitable relief.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of the parties hereto on the date first above
written.
DECISIONONE CORPORATION
By: /s/ Tracey Draeger
---------------------------
Title: Corporate Development Executive
NETFRAME SYSTEMS INCORPORATED
By: /s/ Terry Hartsfield
---------------------------
Title: VP, Customer Satisfaction and Chief
Quality Officer
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EXHIBIT "A"
ASSIGNMENT AGREEMENT
For and in consideration of DecisionOne Corporation, a Delaware
corporation ("Assignee") agreeing to enter into the Asset Purchase Agreement
dated May __, 1997 and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, NetFRAME Systems Incorporated, a
Delaware corporation with its principal offices at 1545 Barber Lane, Milpitas,
California 95035 ("Assignor") hereby sells, transfers, assigns and sets over to
Assignee all of the Assignor's right, title, and interest in and to those
certain spare parts and technical support agreements and other agreements
entered into between Assignor and its various customers as more fully identified
on Exhibit A hereto (the "Agreements") as they relate solely to the Service
Business (as defined in the Asset Purchase Agreement).
Assignee hereby accepts the foregoing Assignment and agrees, effective
on May 24, 1997, to perform the terms, covenants and conditions of the
Agreements on the part of the Assignor thereunder to be kept and performed as
they relate solely to the Service Business (as defined in the Asset Purchase
Agreement) arising after May 24, 1997, subject to and in accordance with the
terms and conditions of the Asset Purchase Agreement.
Executed this 21st day of May 1997.
NetFRAME Systems Incorporated
By:____________________________
Title:_________________________
DECISIONONE CORPORATION
By:____________________________
Title:_________________________
<PAGE> 33
EXHIBIT "B"
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS:
That NetFRAME Systems Incorporated, a Delaware corporation, with its
principal offices at 1545 Barber Lane, Milpitas, California 95035 ("Seller"),
for and in consideration of the agreements, and covenants undertaken by
DecisionOne Corporation, a Delaware corporation ("Buyer") pursuant to that
certain Asset Purchase Agreement (the "Asset Purchase Agreement"), dated as of
May __, 1997, by and between, Seller and Buyer, and for other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged by
Seller, does by these presents, sell, transfer, and convey to Buyer all of
Seller's right, title and interest in and to the assets set forth in Exhibit A
attached to this Bill of Sale (the "Assets").
TO HAVE AND TO HOLD the Assets by Buyer, its successors and assigns for
its or their own use, benefit and behalf forever.
This Bill of Sale shall be subject to the terms and conditions set
forth in the Asset Purchase Agreement.
IN WITNESS WHEREOF, Seller has executed this Bill of Sale as of the
21st day of May, 1997.
NetFRAME Systems Incorporated
By:_________________________________
Title:______________________________
<PAGE> 34
Exhibit C - Form of Seller's Standard Maintenance Agreement
<PAGE> 35
[NETFRAME LOGO]
1545 BARBER LANE, MILPITAS, CA 95035
CUSTOMER SELF-MAINTENANCE AGREEMENT
This Agreement is between NetFRAME Systems Incorporated, herein referred to as
"NetFRAME", and _____________________ herein referred to as "Customer".
================================================================================
1. DESCRIPTION OF SERVICES
1.1 NetSERVICE Customer Self-Maintenance provides remedial telephone assistance
for NetFRAME Hardware and Software products during the Principal Period of
Maintenance. In the event that a covered Hardware or Software Product fails
to operate substantially as described in the user documentation for such
products, Customer shall report the problem to NetFRAME. Remedial
maintenance will include actions to verify the problem and to determine
conditions under which such problems may re-occur. After such verification
and determination, NetFRAME will promptly provide the appropriate action to
resolve the problem.
1.2 Calls will be immediately transferred to the first available engineer for
the fastest possible solution. If immediate access to one of NetFRAME's
Technical Support engineers is not available, NetFRAME will make every
effort to respond within one (1) hour of receipt of the call. All service
requests will follow procedures for problem resolution, escalation
management, and software problem correction.
1.3 NetFRAME will provide Customer with Returned Material Authorization
procedures for return of a defective part. If the failed part is covered by
warranty, then NetFRAME will ship a replacement part via ground
transportation upon receipt of the defective item. Such replacement part
may be new or refurbished. If emergency shipment is required, NetFRAME will
ship the replacement part for next day delivery subject to NetFRAME's
expedite fees and additional shipping costs.
1.4 NetFRAME will provide telephone support in the general use of the covered
Hardware Products, Software Products, and specified Third Party Products
provided that Customer has completed minimum training as described in
Section 2.1.
1.5 In the event of a catastrophic system down situation that cannot be
resolved by Customer's support staff NetFRAME may, at its sole discretion,
send a Technical Support Engineer to the site to resolve the problem. A
NetFRAME Technical Support Engineer will be dispatched only after all other
reasonable options have been exhausted. NetFRAME's current charges for such
consulting services shall apply.
1.6 NetFRAME will make the latest technical information, product and service
notes with respect to Hardware and Software Products available from time to
time to Customer via NetFAX, our automated fax back system or NetFRAME's
Bulletin Board section on CompuServe Information Service. Customer is
responsible for obtaining a CompuServe account.
1.7 NetFRAME will provide support under this Agreement for Hardware Products
that have not been obsolete for more than a period of five (5) years since
the date of obsolescence announced by NetFRAME.
1.8 NetFRAME will provide telephone support under this Agreement for the
previous Update or Release of a NetFRAME Software Product or Third Party
Software Product that have not been obsolete for a period of ninety (90)
days since the FCS Release Date of the current Software Product Update or
Release, or Third Party Software Product Update or Release.
1.9 NetFRAME reserves the right to exclude from coverage under this Agreement
any Software or Hardware Products that are modified by Customer, or which
are used in a manner that is inconsistent with the intended use of such
products.
2. CUSTOMER RESPONSIBILITIES
2.1 Customer agrees to perform network troubleshooting and diagnosis of
NetFRAME Hardware and Software Products, and Third Party Products as
directed by NetFRAME Technical Support Engineers. In order to perform such
tasks, Customer agrees to have two (2) employees complete the NetFRAME
training requirements in addition to training on the Network Operating
System in use at the site. Such training will be scheduled within thirty
(30) days of the effective date of this Agreement.
2.2 Should Customer's designated technical contact personnel change during the
term of this Agreement, Customer agrees that any newly designated contacts
complete the minimum training within thirty (30) days of such change.
2.3 Customer agrees to either (1) purchase or rent and maintain an on site
hardware spare parts kit that will be used as needed in the event of a
hardware failure, and to designate a safe and secure storage area, or (2)
to make provision for spare parts through NetFRAME's Spares Depot Service.
2.4 In the event that Customer chooses not to maintain spares on site, Customer
accepts the risk that system downtime may exceed 4 hours. NetFRAME
recommends on site spares to minimize downtime.
2.5 Customer agrees to maintain a current on site hardware and software
maintenance agreement that covers non-NetFRAME network hardware and
software products that shall cover at minimum: same day on site hardware
problem diagnosis and repair, installation services, and the provision of
spare parts.
2.6 If any support is provided under the terms of this Agreement and it is
determined that the reported problem is not the result of an error in a
NetFRAME provided Software Product or Hardware Product, such remedial
support may, at NetFRAME's option, be invoiced at Consulting Service rates
in accordance with the current NetFRAME published price list
NetFRAME and Customer acknowledge that they have read this Agreement, including
any Addenda, understand them and agree to be bound by their terms and conditions
including the terms and conditions contained on the back of this Agreement,
including but not limited to the warranty disclaimer.
CUSTOMER:_________________________ NETFRAME SYSTEMS INCORPORATED
ADDRESS:__________________________ 1545 BARBER LANE
__________________________ MILPITAS, CA 95035
TELEPHONE:________________________ (408) 474-1000
TITLE:____________________________ MANAGER, CUSTOMER SERVICE PROGRAMS
SIGNATURE:________________________ SIGNATURE:____________________________
Customer's signature on this form constitute s acknowledgment and acceptance of
the following terms and conditions, as well as any terms and conditions listed
on the reverse side, which as a whole shall constitute an agreement "Agreement"
between the parties governing the provision of services by NetFRAME for certain
products at Customer's locations
<PAGE> 36
3. DEFINITIONS
3.1 "Release" shall mean a new version of Software Products or Third Party
Software Products offering extended capabilities or enhanced performance.
3.2 "System Support Site" shall mean the location where one or more NetFRAME
Hardware Products are installed.
3.3 "Support Contacts" shall mean the person(s) listed in the Equipment
Schedule, authorized by Customer to request service from NetFRAME. Customer
will provide NetFRAME with written notification of any change in the
designated Support Contacts.
3.4 "Principal Period of Support" shall mean a period of time, 6:00 a.m. to
6:00 p.m. PT Monday through Friday, unless otherwise specified in the
applicable Schedule, when support services will be available from NetFRAME.
3.5 "Extended Coverage Options" shall mean optional periods of support that may
include Monday through Friday, twenty-four (24) hours, or Monday through
Sunday, twenty-four (24) hours. Access to NetFRAME Technical Support
Engineers during the Extended Coverage Periods may be via a paging system.
Additional charges shall apply to Extended Coverage Options.
3.6 "FCS Release Date" shall mean the date that Hardware Products, Software
Products, and Third Party Software Products are first shipped from NetFRAME
and the date NetFRAME gives Customer notice of such product.
3.7 "Incident" shall mean a complete support event, including all telephone
calls, FAXES, and other communications between NetFRAME and Customer until
the reported problem is resolved. Incidents shall include and begin with
the first telephone call to NetFRAME for assistance with a technical
problem related to the Software and Hardware that together comprise the
fileservers and the network operating system.
4. TERM
4.1 Upon execution of the Agreement and all applicable Schedule documents by
Customer and NetFRAME, this Agreement shall become effective on the date
stated and shall continue for a period of twelve (12) months. This
Agreement shall automatically renew for an additional twelve (12) months at
the end of each twelve (12) months unless either party gives the other
party Notice of Non-renewal at least thirty (30) days in advance of the end
of the term or any extension thereof. Customer and NetFRAME shall execute
renewal Schedule forms for the products to be covered for the renewal term
within thirty (30) days of expiration of the term or any extension thereof.
NetFRAME shall give Customer written notice of any price increases within
thirty (30) days of the end of the term or any extension thereof.
5. CHARGES
5.1 Each Schedule executed by Customer and NetFRAME under this Agreement shall
list the standard support charges for the listed Software Products and
Hardware Products and for any required Training Classes. Charges are
payable annually in advance.
5.2 NetFRAME may change the charges specified in each Schedule after the
initial one (1) year term of the Schedule. Such new charges shall not
become effective until thirty (30) days after NetFRAME has given Customer
written notice of the charges. The new charges shall be specified in a new
mutually executed Schedule form covering the renewal term. Any new charges
will not exceed the current published NetFRAME prices for support services
on the Renewal Date of the original Schedule form.
5.3 Prices listed do not include any applicable taxes.
6. WARRANTY DISCLAIMER
NetFRAME will use commercially reasonable efforts to provide the support
services requested by Customer under this Agreement in a professional and
workmanlike manner, but NetFRAME cannot guaranty that every question or
problem raised by Customer will be resolved. NETFRAME MAKES, AND CUSTOMER
RECEIVES, NO WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, ARISING
IN ANY WAY OUT OF, RELATED TO, OR UNDER THIS AGREEMENT OR THE PROVISION OF
MATERIALS OR SERVICES THEREUNDER, AND NETFRAME SPECIFICALLY DISCLAIMS ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
<PAGE> 37
7. LIMITATION OF LIABILITY
NetFRAME's liability to Customer for loss or damage from any cause
whatsoever, and regardless of the form of action, whether in contract, in
tort or under any statute, including negligence and strict liability, shall
be limited to twelve (12) months' charges at the rate in effect on the date
the cause of action arose, for the copy of the Hardware Product or Software
Product that caused the damage or that is the subject matter of the cause
of action. IN NO EVENT SHALL NETFRAME BE LIABLE FOR ANY COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES SUCH AS LOSS OF DATA, LOSS OF ANTICIPATED PROFITS, OR
ANY OTHER ECONOMIC LOSS IN CONNECTION WITH OR OTHERWISE ARISING OUT OF THE
EXISTENCE, FURNISHING, FUNCTION, FAILURE OR CUSTOMER'S USE OF ANY PRODUCT
OR SERVICES PROVIDED FOR IN THIS AGREEMENT, EVEN IF NETFRAME WAS AWARE OF
THE POSSIBILITY OF SUCH DAMAGES. CUSTOMER FURTHER AGREES AND ACKNOWLEDGES
THAT NETFRAME VENDORS/LICENSERS SHALL NOT BE LIABLE TO CUSTOMER FOR ANY
DAMAGES SUFFERED OR INCURRED BY CUSTOMER, INCLUDING WITHOUT LIMITATION,
GENERAL, INDIRECT OR CONSEQUENTIAL DAMAGES, PROVIDED THAT THIS LIMITATION
WITH RESPECT TO NETFRAME'S SUPPLIERS SHALL NOT BE CONSTRUED TO LIMIT OR
ENLARGE NETFRAME'S LIABILITY.
8. GENERAL
8.1 EXCUSABLE DELAYS. Neither NetFRAME nor Customer shall be liable or deemed
to be in default for any delay or failure to perform its obligations (other
than payment of money due) under this Agreement resulting from events
beyond its reasonable control and without its fault or negligence, or
otherwise excusable under applicable law.
8.2 ASSIGNMENT. Customer may not assign this Agreement or any rights herein
without the prior written consent of NetFRAME. NetFRAME may assign its
rights herein, but may not, without the prior consent of Customer, delegate
its obligations hereunder except to a parent or subsidiary of NetFRAME or
to an entity acquiring substantially all of NetFRAME's business relating to
the services covered by this Agreement.
8.3 NOTICE. Any notices or consents required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given when mailed or
delivered by hand (against receipt) to the address listed in this
Agreement.
8.4 DEFAULT. If Customer defaults in the performance of any material provision
of this Agreement and fails to cure such default within sixty (60) days
from receipt of written notice, NetFRAME shall have the right to suspend
performance under each applicable Schedule, terminate each applicable
Schedule, and pursue all remedies at law or in equity. If NetFRAME defaults
in the performance of any material provision of this Agreement and fails to
cure such default within sixty (60) days from receipt of written notice,
Customer shall have the right to terminate each applicable Schedule.
8.5 SEVERABILITY. If any provision of this Agreement is held invalid, illegal
or unenforceable, the remaining provisions shall in no way be affected or
impaired thereby.
8.6 GOVERNING LAWS. The validity of this Agreement and the rights, obligations
and relations of the parties hereunder shall be determined under the
substantive law of the State of California without reference to conflict of
laws principles.
8.7 LEGAL ACTION. No action, regardless of form, arising out of the
transactions under this Agreement, may be brought by either party more than
two (2) years after the cause action arises.
8.8 ENTIRE AGREEMENT. This Agreement including the Schedules executed hereunder
constitute the entire agreement between the parties with respect to the
subject matter thereof and supersedes all proposals oral or written, all
previous negotiations and all previous communications between the parties
with respect hereto. Any provisions, terms or conditions of Customer
purchase orders that are, in any way, inconsistent with or in addition to
the terms and conditions of this Agreement, except those additional
provisions specifying shipping instructions, shall not be binding upon
NetFRAME and shall have no applicability hereunder. No representation or
promise not specifically stated in this Agreement shall be binding on
NetFRAME. The terms of this Agreement may not be waived, amended or
supplemented except in a written addendum executed by NetFRAME and
Customer. This Agreement and any modifications can only be executed by
authorized representatives of NetFRAME and Customer.
9. CUSTOMER RESPONSIBILITIES
9.1 Customer must be licensed to use the respective Software Products, Hardware
Products and Third Party Products that will be covered by this Agreement.
9.2 Customer will install, or arrange to have installed, new Updates or
Releases of Software Products within ninety (90) days of receipt.
9.3 Customer acknowledges responsibility for data integrity of Customer's
NetFRAME systems, and will maintain backups and archival copies of such
data.
9.4 Customer shall maintain a remote dial-in support capability, and at
NetFRAME's request permit NetFRAME access to all systems listed in the
Equipment Schedules for performance of its obligations herein stated.
9.5 Customer shall at all times operate all NetFRAME Hardware Products,
Software Products and Third Party Products in accordance with all
specifications and restrictions as specified in the user documentation.
9.6 Customer shall assist NetFRAME in the diagnosis of reported problems by
performing reasonable hardware or software tests requested by NetFRAME
Technical Support Engineers.
9.7 Customer shall implement any reasonable repair activity, Update, Release,
workaround or other solution provided by NetFRAME to address a reported
problem. Customer's failure to implement such action within thirty (30)
days after NetFRAME makes such action available will relieve NetFRAME of
its obligations to provide support for problems that would have been
corrected by such implementation.
9.8 Customer shall return, upon NetFRAME's request and at Customer's expense,
any and all equipment or media that may be loaned by NetFRAME to Customer
pursuant to the support provided under this Agreement.
9.9 All NetFRAME software, third party products and the corresponding systems
eligible for support under this Agreement must be listed in the applicable
Schedule. In the event that additional NetFRAME software, third party
products or hardware are subsequently installed at the System Support Site,
such additional products and cost of support shall be listed by serial
number on a mutually executed Schedule. All NetFRAME Hardware Products must
be listed and covered on an equipment Schedule. Payment for the support of
additional products will be submitted to NetFRAME before initiating support
services.
<PAGE> 38
[NETFRAME LOGO]
1545 BARBER LANE, MILPITAS, CA 95035
PARTSDEPOT SUBSCRIPTION AGREEMENT
This Agreement is between NetFRAME Systems Incorporated, herein referred to as
"NetFRAME", and _________________________, herein referred to as "Subscriber".
================================================================================
1. DESCRIPTION OF SERVICES
1.1 NetFRAME PartsDEPOT subscription provides for locally stocked Service
Spares Inventory available for service related activities by Subscriber.
Access is limited to Authorized Callers as listed on a fully executed
Subscriber Registration form and is available seven days a week,
twenty-four hours a day, via a NetFRAME provided toll-free telephone
number. NetFRAME will provide individualized PIN access codes for each
Authorized Caller.
1.2 When an installed part fails on a registered system, Subscriber will
request a replacement part from the PartsDEPOT inventory and return the
failed part to NetFRAME postage prepaid according to NetFRAME's Return
Material Authorization (RMA) process.
1.3 Depending on the subscription ordered, NetFRAME's PartsDEPOT will deliver a
replacement item from its Service Spares Inventory according to the
following guidelines:
a) Local Subscription -- Subscriber will have access to one PartsDEPOT
location with parts delivery within four hours if the subscribion is
within one-hundred (100) miles of the subscribed PartsDEPOT. For 2
hour Local, delivery will be within 2 hours if the registered
subscription is within fifty (50) miles of the PartsDEPOT. Delivery
is based on location and subscription type.
b) Next Business Day Delivery Subscription -- Subscriber will have
access to our Central PartsDEPOT location with parts delivery on the
next business day after Subscriber's call.
c) National Subscription -- Subscriber will have access to all
PartsDEPOT locations. Parts delivery will be within four (4) hours
of Subscriber's call if the delivery location is within one hundred
(100) miles of a PartsDEPOT. Delivery will be on the next business
day after Subscriber's call if the delivery location is outside one
hundred (100) miles of a PartsDEPOT location.
1.4 Invoicing for the ordered part will be governed by the terms of either (a)
NetFRAME's standard warranty provided with product, (b) NetFRAME's Extended
Parts Warranty Agreement, or (c) NetFRAME's out-of-warranty repair charges
in effect.
1.5 Should an item fail that Subscriber has not registered, NetFRAME will make
every effort to ship a replacement component but is not responsible for
delays or system downtime. In such event, emergency shipments for next day
delivery or counter-to-counter are subject to NetFRAME's current expedite
fees.
2. SUBSCRIBER RESPONSIBILITIES
2.1 Subscriber agrees to register with NetFRAME each system location and
configuration that will be covered by this Agreement as a Subscriber
Registered Site. All systems must be registered and all equipment for a
system must be identified on the registration.
2.2 Subscriber agrees to provide NetFRAME with a list of Authorized Callers and
agrees to notify NetFRAME of any changes to its Authorized Users within
seven (7) days of such change. Subscriber agrees to be responsible for any
unauthorized usage of assigned PIN numbers.
2.3 All NetFRAME product and third party products eligible for support under
this Agreement must be listed in the applicable Subscriber Registration.
Subscriber agrees to notify NetFRAME of any change to the installed
configuration including upgrades or new installations within seven (7) days
of the upgrade or installation in order to allow NetFRAME to upgrade the
PartsDEPOT accordingly.
2.4 Subscriber's signature on this Agreement shall serve as authorization for
NetFRAME to invoice Subscriber and Subscriber's agreement to pay any
invoice generated by NetFRAME for services or product delivered under the
terms of this Agreement. NetFRAME will reference this Agreement's contract
number instead of a Subscriber Purchase Order on any invoice generated as a
result of this Agreement. Such invoices shall include:
a. Repair for any item determined by NetFRAME to be out of warranty b. Any
defective item not returned to NetFRAME according to NetFRAME's RMA
procedures c. Requests for delivery of parts outside of the contracted
service delivery d. Replacement charges for any item found by NetFRAME to
be damaged e. Attempts to return product of non-NetFRAME origin.
2.5 Subscriber is liable for loss or damage of any PartsDEPOT inventory that is
in the possession of the customer.
2.6 Subscriber is responsible for all expendable or consumable materials as
might be necessary for the operation of the NetFRAME equipment. These items
are not available under the terms of the PartsDEPOT Agreement.
2.7 Subscriber shall at all times operate all NetFRAME and third-party products
in accordance with all specifications and restrictions as specified in the
user documentation.
2.8 This Agreement does not entitle Subscriber to remedial technical assistance
to perform problem diagnostics. Such technical support shall be provided by
NetFRAME under the terms of either a NetSERVICE Agreement or a Business
Partner Authorization Agreement.
NetFRAME and Subscriber acknowledge that they have read this Agreement,
including any Addenda, understand them and agree to be bound by their terms and
conditions including the terms and conditions contained on the back of this
Agreement, including but not limited to the warranty disclaimer.
SUBSCRIBER:_______________________ NETFRAME SYSTEMS INCORPORATED
ADDRESS:__________________________ 1545 BARBER LANE
__________________________ MILPITAS, CA 95035
TELEPHONE:________________________ (408) 474-1000
TITLE:____________________________ MANAGER, CUSTOMER SERVICE PROGRAMS
SIGNATURE:________________________ SIGNATURE:____________________________
<PAGE> 39
Subscriber's signatures on the reverse side of this form constitute s
acknowledgment and acceptance of the following terms and conditions, as well as
any terms and conditions listed on the reverse side, which as a whole shall
constitute an agreement "Agreement" between the parties governing the provision
of services by NetFRAME for certain products at Subscriber's locations.
3. DEFINITIONS: The following terms may be applicable t to this agreement:
3.1 "Subscriber Registered Site" shall mean Subscribers installed locations and
NetFRAME equipment configuration as identified on the Subscriber
Registration Forms.
3.2 "Authorized Caller" shall mean Subscriber employees who are identified by
Subscriber to act on its behalf in requesting service parts from the
NetFRAME PartsDEPOT and who have completed NetFRAME Business Partner
Training. Subscriber will provide NetFRAME with written notification of any
change in the designated Authorized Caller list. Unless otherwise agreed to
in writing, no more than four (4) Authorized Callers shall be designated
for each PartsDEPOT contract.
3.3 "Per Incident Usage Fees" shall mean activity transaction charges
applicable for each part requested from a NetFRAME PartsDEPOT. that is out
of warranty.
3.4 "Service Spares Inventory" shall consist of NetFRAME's recommended spares
inventory based on statistically predicted failure rates for registered
system configurations.
3.5 "PartsDEPOT" shall mean NetFRAME's Service Spares Inventory locations.
4. TERM
4.1 Upon execution of the Agreement and all applicable Registration documents
by Subscriber and NetFRAME, this Agreement shall become effective on the
date stated and shall continue for a period of twelve (12) months. This
Agreement shall automatically renew for additional twelve (12) month
periods at the end of the initial twelve (12) months unless either party
gives the other party Notice of Non-renewal at least thirty (30) days in
advance of the end of the term or any extension thereof. Subscriber and
NetFRAME shall execute renewal Registration forms for the products to be
covered for the renewal term within thirty (30) days of expiration of the
term or any extension thereof. NetFRAME shall give Subscriber written
notice of any Subscription price increases within thirty (30) days of the
end of the term or any extension thereof. With thirty (30) days notice,
NetFRAME reserves the right to adjust the Per Incident fees at any time
during the term of this Agreement.
5. CHARGES
5.1 Each Registration executed by Subscriber under this Agreement shall list
the Hardware Products being covered by this Agreement. Annual Subscription
Charges are payable annually in advance. Any additional invoices presented
to Subscriber under this Agreement shall be payable within thirty (30) days
of issue.
5.2 NetFRAME may change the charges for the Annual Subscription and for per
incident charges after the initial one (1) year term. Such new charges
shall not become effective until thirty (30) days after NetFRAME has given
Subscriber written notice of the charges. Any new charges will not exceed
the current published NetFRAME prices for support services on the renewal
date of the original Schedule form.
5.3 Prices listed do not include any applicable taxes.
6. WARRANTY DISCLAIMER
NetFRAME will use commercially reasonable efforts to provide the support
services requested by Subscriber under this Agreement in a professional and
workmanlike manner, but NetFRAME cannot guarantee that every question or
problem raised by Subscriber will be resolved. NETFRAME MAKES, AND CUSTOMER
RECEIVES, NO WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, ARISING
IN ANY WAY OUT OF, RELATED TO, OR UNDER THIS AGREEMENT OR THE PROVISION OF
MATERIALS OR SERVICES THEREUNDER, AND NETFRAME SPECIFICALLY DISCLAIMS ANY
IMPLIED WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
7. LIMITATION OF LIABILITY
NetFRAME's liability to Subscriber for loss or damage from any cause
whatsoever, and regardless of the form of action, whether in contract, in
tort or under any statute, including negligence and strict liability, shall
be limited to twelve (12) months' charges (at the rate in effect on the
date the cause of action arose) for the copy of the Hardware Product that
caused the damage or that is the subject matter of the cause of action. IN
NO EVENT SHALL NETFRAME BE LIABLE FOR ANY COSTS OF PROCUREMENT OF
SUBSTITUTE GOODS OR SERVICES, OR INDIRECT, SPECIAL, OR CONSEQUENTIAL
DAMAGES SUCH AS LOSS OF DATA, LOSS OF ANTICIPATED PROFITS, OR ANY OTHER
ECONOMIC LOSS IN CONNECTION WITH OR OTHERWISE ARISING OUT OF THE EXISTENCE,
FURNISHING, FUNCTION, FAILURE OR CUSTOMER'S USE OF ANY PRODUCT OR SERVICES
PROVIDED FOR IN THIS AGREEMENT, EVEN IF NETFRAME WAS AWARE OF THE
POSSIBILITY OF SUCH DAMAGES. CUSTOMER FURTHER AGREES AND ACKNOWLEDGES THAT
NETFRAME VENDORS/LICENSERS SHALL NOT BE LIABLE TO CUSTOMER FOR ANY DAMAGES
SUFFERED OR INCURRED BY CUSTOMER, INCLUDING WITHOUT LIMITATION, GENERAL,
INDIRECT OR CONSEQUENTIAL DAMAGES, PROVIDED THAT THIS LIMITATION WITH
RESPECT TO NETFRAME'S SUPPLIERS SHALL NOT BE CONSTRUED TO LIMIT OR ENLARGE
NETFRAME'S LIABILITY.
<PAGE> 40
8. GENERAL
8.1 EXCUSABLE DELAYS. Neither NetFRAME nor Subscriber shall be liable or deemed
to be in default for any delay or failure to perform its obligations (other
than payment of money due) under this Agreement resulting from events
beyond its reasonable control and without its fault or negligence, or
otherwise excusable under applicable law.
8.2 ASSIGNMENT. Subscriber may not assign this Agreement or any rights herein
without the prior written consent of NetFRAME. NetFRAME may assign its
rights herein, but may not, without the prior consent of Subscriber,
delegate its obligations hereunder except to a parent or subsidiary of
NetFRAME or to an entity acquiring substantially all of NetFRAME's business
relating to the services covered by this Agreement.
8.3 NOTICE. Any notices or consents required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given when mailed or
delivered by hand (against receipt) to the address listed in this
Agreement.
8.4 DEFAULT. If Subscriber defaults in the performance of any material
provision of this Agreement and fails to cure such default within sixty
(60) days from receipt of written notice, NetFRAME shall have the right to
suspend performance under each applicable Schedule, terminate each
applicable Schedule, and pursue all remedies at law or in equity. If
NetFRAME defaults in the performance of any material provision of this
Agreement and fails to cure such default within sixty (60) days from
receipt of written notice, Subscriber shall have the right to terminate
each applicable Registration.
8.5 SEVERABILITY. If any provision of this Agreement is held invalid, illegal
or unenforceable, the remaining provisions shall in no way be affected or
impaired thereby.
8.6 GOVERNING LAWS. The validity of this Agreement and the rights, obligations
and relations of the parties hereunder shall be determined under the
substantive law of the State of California without reference to conflict of
laws principles.
8.7 LEGAL ACTION. No action, regardless of form, arising out of the
transactions under this Agreement, may be brought by either party more than
two (2) years after the cause action arises.
8.8 ENTIRE AGREEMENT. This Agreement including the Registrations executed
hereunder constitutes the entire agreement between the parties with respect
to the subject matter thereof and supersedes all proposals oral or written,
all previous negotiations and all previous communications between the
parties with respect hereto. Any provisions, terms or conditions of
Subscriber purchase orders that are, in any way, inconsistent with or in
addition to the terms and conditions of this Agreement, except those
additional provisions specifying shipping instructions, shall not be
binding upon NetFRAME and shall have no applicability hereunder. No
representation or promise not specifically stated in this Agreement shall
be binding on NetFRAME. The terms of this Agreement may not be waived,
amended or supplemented except in a written addendum executed by NetFRAME
and Subscriber. This Agreement and any modifications can only be executed
by authorized representatives of NetFRAME and Subscriber.
9. PROGRAM LIMITATIONS
9.1 This Agreement is limited to product originally purchased or acquired from
NetFRAME. Any item found to be of non-NetFRAME origination will be returned
to Subscriber and Subscriber will be invoiced for replacement costs,
handling and freight.
9.2 PartsDEPOT replacement parts will be new or warranted to be like new.
<PAGE> 41
[NETFRAME LOGO]
1545 BARBER LANE, MILPITAS, CA 94035
NETPHONE SERVICE AGREEMENT
This Agreement is between NetFRAME Systems Incorporated, herein referred to as
"NetFRAME", and ___________________________, herein referred to as "Customer".
================================================================================
1. DESCRIPTION OF SERVICE
1.1 NetPHONE provides remedial telephone assistance for NetFRAME Hardware and
Software products during the Principal Period of Maintenance as listed on
the Equipment Schedule. In the event that a covered Hardware or Software
Product fails to operate substantially as described in the user
documentation for such products, Customer shall report the problem to
NetFRAME. Remedial maintenance will include actions to verify the problem
and to determine conditions under which such problems may re-occur. After
such verification and determination, NetFRAME will promptly provide the
appropriate action to resolve the problem.
1.2 All contract calls will be immediately transferred to the first available
engineer for the fastest possible solution. If immediate access to one of
NetFRAME's Technical Support engineers is not available, NetFRAME will make
every effort to respond within one (1) hour of receipt of the call. All
service requests will follow procedures for problem resolution, escalation
management, and software problem correction.
1.3 In addition to remedial telephone support, NetFRAME will provide telephone
support in the general use of the covered Hardware Products, Software
Products, and specified Third Party Products, provided that Customer has
completed training as described in Section 2.1.
1.4 NetFRAME will make the latest technical information, product and service
notes with respect to Hardware and Software Products available from time to
time to Customer via NetFAX, our automated fax back system or NetFRAME's
Bulletin Board section on CompuServe Information Service. Customer is
responsible for obtaining a CompuServe account.
1.5 NetFRAME will provide telephone support under this Agreement for the
previous Update or Release of a NetFRAME Software Product or Third Party
Software Product that have not been obsolete for a period of ninety (90)
days since the FCS Release Date of the current Software Product Update or
Release, or Third Party Software Product Update or Release.
1.6 NetFRAME reserves the right to exclude from coverage under this Agreement
any Hardware or Software Products that are modified by Customer, or which
are used in a manner that is inconsistent with the intended use of such
products.
2. CUSTOMER RESPONSIBILITIES
2.1 Customer agrees to perform network troubleshooting and diagnosis of
NetFRAME Hardware and Software Products, and Third Party Products as
directed by NetFRAME Technical Support Engineers. In order to perform such
tasks, Customer agrees to have a minimum of two (2) employees complete
NetFRAME training requirements in addition to training on the Network
Operating System in use at the site. Such training will be completed within
thirty (30) days of the effective date of this Agreement. Such employees
will be designated as Customer's Support Contacts.
2.2 Should Customer's designated technical contact personnel change during the
term of this Agreement, Customer agrees that any newly designated contacts
complete NetFRAME training within thirty (30) days of such change.
2.3 Customer agrees to maintain in full force and effect, a maintenance
agreement with an Authorized NetFRAME Service Partner that shall cover at
minimum: same day on site hardware problem diagnosis and repair,
installation services, and the provision of spare parts.
2.4 Customer agrees to maintain a current sparing solution and software
maintenance agreement that covers non-NetFRAME network hardware and
software products that shall cover at minimum: same day on site hardware
problem diagnosis and repair, installation services, and the provision of
spare parts.
2.5 If any support is provided under the terms of this Agreement and it is
determined that the reported problem is not the result of an error in a
NetFRAME provided Software Product or Hardware Product, such remedial
support may, at NetFRAME's option, be invoiced at Consulting Service rates
in accordance with the current NetFRAME published price list.
NetFRAME and Customer acknowledge that they have read this Agreement, including
any Addenda, understand them and agree to be bound by their terms and conditions
including the terms and conditions contained on the back of this Agreement,
including but not limited to the warranty disclaimer.
CUSTOMER:_________________________ NETFRAME SYSTEMS INCORPORATED
ADDRESS:__________________________ 1545 BARBER LANE
__________________________ MILPITAS, CA 95035
TELEPHONE:________________________ (408) 474-1000
TITLE:____________________________ MANAGER, CUSTOMER SERVICE PROGRAMS
SIGNATURE:________________________ SIGNATURE:____________________________
<PAGE> 42
Customer's signatures on the reverse side of this form constitute s
acknowledgment and acceptance of the following terms and conditions, as well as
any terms and conditions listed on the reverse side, which as a whole shall
constitute an agreement "Agreement" between the parties governing the provision
of services by NetFRAME for certain products at Customer's locations.
3. DEFINITIONS: The following terms may be applicable t o this agreement.
3.6 "Release" shall mean a new version of Software Products or Third Party
Software Products offering extended capabilities or enhanced performance.
3.7 "System Support Site" shall mean the location designated for coverage under
this Agreement where one or more NetFRAME Hardware Products are installed.
3.8 "Support Contacts" shall mean the person(s) listed in the Equipment
Schedule authorized by Customer to request service from NetFRAME Customer
will provide NetFRAME with written notification of any change in the
designated Support Contacts. Unless otherwise agreed to in writing, no more
than two (2) Support Contacts shall be designated for each System Support
Site (one primary and one alternate). Additional charges may apply to
additional Support Contacts.
3.9 "Principal Period of Support" shall mean a period of time, 6:00 a.m. to
6:00 p.m. PT Monday through Friday, exclusive of NetFRAME published
holidays, unless otherwise specified in the applicable Schedule, when
support services will be available from NetFRAME.
3.10 "Extended Coverage Options" shall mean the optional period of support for
Monday through Sunday, twenty-four (24) hours. Access to NetFRAME Technical
Support Engineers during the Extended Coverage Period may be via a paging
system. Additional charges shall apply to Extended Coverage Option.
3.11 "FCS Release Date" shall mean the date that Hardware Products, Software
Products, and Third Party Software Products are first shipped from NetFRAME
and the date NetFRAME gives Customer notice of such product.
3.12 "Incident" shall mean a complete support event, including all telephone
calls, FAXES, and other communications between NetFRAME and Customer until
the reported problem is resolved. Incidents shall include and begin with
the first telephone call to NetFRAME for assistance with a technical
problem related to the Software and Hardware that together comprise the
fileservers and the network operating system.
4. TERM
4.1 Upon execution of the Agreement and all applicable Schedule documents by
Customer and NetFRAME, this Agreement shall become effective on the date
stated and shall continue for a period of twelve (12) months. This
Agreement shall automatically renew for additional twelve (12) months'
periods at the end of the initial twelve (12) months unless either party
gives the other party Notice of Non-renewal at least thirty (30) days in
advance of the end of the term or any extension thereof. Customer and
NetFRAME shall execute renewal Schedule forms for the products to be
covered for the renewal term within thirty (30) days of expiration of the
term or any extension thereof. NetFRAME shall give Customer written notice
of any price increases within thirty (30) days of the end of the term or
any extension thereof.
5. CHARGES
5.1 Each Schedule executed by Customer and NetFRAME under this Agreement shall
list the standard support charges for the listed Software Products and
Hardware Products and for any required Training Classes. Charges are
payable annually in advance.
5.2 NetFRAME may change the charges specified in each Schedule after the
initial one (1) year term of the Schedule. Such new charges shall become
effective upon renewal of this Agreement. The new charges shall be
specified in a new mutually executed Schedule form covering the renewal
term.
5.3 Prices listed do not include any applicable taxes.
6. WARRANTY DISCLAIMER
NetFRAME will use commercially reasonable efforts to provide the support
services requested by Customer under this Agreement in a professional and
workmanlike manner, but NetFRAME cannot guaranty that every question or
problem raised by Customer will be resolved. NETFRAME MAKES, AND CUSTOMER
RECEIVES, NO WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, ARISING
IN ANY WAY OUT OF, RELATED TO, OR UNDER THIS AGREEMENT OR THE PROVISION OF
MATERIALS OR SERVICES THEREUNDER, AND NETFRAME SPECIFICALLY DISCLAIMS ANY
IMPLIED WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
7. LIMITATION OF LIABILITY
NetFRAME's liability to Customer for loss or damage from any cause
whatsoever, and regardless of the form of action, whether in contract, in
tort or under any statute, including negligence and strict liability, shall
be limited to twelve (12) months' charges (at the rate in effect on the
date the cause of action arose) for the copy of the Hardware Product or
Software Product that caused the damage or that is the subject matter of
the cause of action. IN NO EVENT SHALL NETFRAME BE LIABLE FOR ANY COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES SUCH AS LOSS OF DATA, LOSS OF ANTICIPATED PROFITS, OR
ANY OTHER ECONOMIC LOSS IN CONNECTION WITH OR OTHERWISE ARISING OUT OF THE
EXISTENCE, FURNISHING, FUNCTION, FAILURE OR CUSTOMER'S USE OF ANY PRODUCT
OR SERVICES PROVIDED FOR IN THIS AGREEMENT, EVEN IF NETFRAME WAS AWARE OF
THE POSSIBILITY OF SUCH DAMAGES. CUSTOMER FURTHER AGREES AND ACKNOWLEDGES
THAT NETFRAME VENDORS/LICENSERS SHALL NOT BE LIABLE TO CUSTOMER FOR ANY
DAMAGES SUFFERED OR INCURRED BY CUSTOMER, INCLUDING WITHOUT LIMITATION,
GENERAL, INDIRECT OR CONSEQUENTIAL DAMAGES, PROVIDED THAT THIS LIMITATION
WITH RESPECT TO NETFRAME'S SUPPLIERS SHALL NOT BE CONSTRUED TO LIMIT OR
ENLARGE NETFRAME'S LIABILITY.
<PAGE> 43
8. GENERAL
8.1 EXCUSABLE DELAYS. Neither NetFRAME nor Customer shall be liable or deemed
to be in default for any delay or failure to perform its obligations (other
than payment of money due) under this Agreement resulting from events
beyond its reasonable control and without its fault or negligence, or
otherwise excusable under applicable law.
8.2 ASSIGNMENT. Customer may not assign this Agreement or any rights herein
without the prior written consent of NetFRAME. NetFRAME may assign its
rights herein, but may not, without the prior consent of Customer, delegate
its obligations hereunder except to a parent or subsidiary of NetFRAME or
to an entity acquiring substantially all of NetFRAME's business relating to
the services covered by this Agreement.
8.3 NOTICE. Any notices or consents required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given when mailed or
delivered by hand (against receipt) to the address listed in this
Agreement.
8.4 DEFAULT. If Customer defaults in the performance of any material provision
of this Agreement and fails to cure such default within sixty (60) days
from receipt of written notice, NetFRAME shall have the right to suspend
performance under each applicable Schedule, terminate each applicable
Schedule, and pursue all remedies at law or in equity. If NetFRAME defaults
in the performance of any material provision of this Agreement and fails to
cure such default within sixty (60) days from receipt of written notice,
Customer shall have the right to terminate each applicable Schedule.
8.5 SEVERABILITY. If any provision of this Agreement is held invalid, illegal
or unenforceable, the remaining provisions shall in no way be affected or
impaired thereby.
8.6 GOVERNING LAWS. The validity of this Agreement and the rights, obligations
and relations of the parties hereunder shall be determined under the
substantive law of the State of California without reference to conflict of
laws principles.
8.7 LEGAL ACTION. No action, regardless of form, arising out of the
transactions under this Agreement, may be brought by either party more than
two (2) years after the cause action arises.
8.8 ENTIRE AGREEMENT. This Agreement including Schedules executed hereunder
constitutes the entire agreement between the parties with respect to the
subject matter thereof and supersedes all proposals oral or written, all
previous negotiations and all previous communications between the parties
with respect hereto. Any provisions, terms or conditions of Customer
purchase orders that are, in any way, inconsistent with or in addition to
the terms and conditions of this Agreement, except those additional
provisions specifying shipping instructions, shall not be binding upon
NetFRAME and shall have no applicability hereunder. No representation or
promise not specifically stated in this Agreement shall be binding on
NetFRAME. The terms of this Agreement may not be waived, amended or
supplemented except in a written addendum executed by NetFRAME and
Customer. This Agreement and any modifications can only be executed by
authorized representatives of NetFRAME and Customer.
9. ADDITIONAL CUSTOMER RESPONSIBILITIES
9.1 Customer must be licensed to use the respective Software Products, Hardware
Products and Third Party Products that will be covered by this Agreement.
9.2 Customer will install, or arrange to have installed, new Updates or
Releases of Software Products within ninety (90) days of receipt.
9.3 Customer acknowledges responsibility for data integrity of Customer's
NetFRAME systems, and will maintain backups and archival copies of such
data.
9.4 Customer shall maintain a remote dial-in support capability, and at
NetFRAME's request permit NetFRAME access to all systems listed in Schedule
C for performance of its obligations herein stated.
9.5 Customer shall at all times operate all NetFRAME Hardware Products,
Software Products and Third Party Products in accordance with all
specifications and restrictions as specified in the user documentation.
9.6 Customer shall assist NetFRAME in the diagnosis of reported problems by
performing reasonable hardware or software tests requested by NetFRAME
Technical Support Engineers.
9.7 Customer shall reasonably implement any repair activity, Update, Release,
workaround or other solution provided by NetFRAME to address a reported
problem. Customer's failure to implement such action within thirty (30)
days after NetFRAME makes such action available will relieve NetFRAME of
its obligations to provide support for problems that would have been
corrected by such implementation.
9.8 Customer shall return, upon NetFRAME's request and at Customer's expense,
any and all equipment or media that may be loaned by NetFRAME to Customer
pursuant to the support provided under this Agreement.
9.9 All NetFRAME software, third party products and the corresponding systems
eligible for support under this Agreement must be listed in the applicable
Schedule. In the event that additional NetFRAME software, third party
products or hardware are subsequently installed at the System Support Site,
such additional products and cost of support shall be listed by serial
number on a mutually executed Schedule. Payment for the support of
additional products will be submitted to NetFRAME before initiating support
services.
<PAGE> 44
[NETFRAME LOGO]
1545 BARBER LANE, MILPITAS, CA 94035
EXTENDED PARTS WARRANTY AGREEMENT
This Agreement is between NetFRAME Systems Incorporated, herein referred to as
"NetFRAME", and ______________________ herein referred to as "Customer".
================================================================================
1. DESCRIPTION OF SERVICE
1.1 During the one (1) year Extended Parts Warranty period, NetFRAME will
repair or replace at its sole option, any defective products or parts at no
additional charge, provided that the product is returned, shipping prepaid
and in its original packaging and container, to NetFRAME.
All parts and products must be returned to NetFRAME in full accordance with
NetFRAME's Return Materials Procedure.
1.2 NetFRAME will warrant the products covered under this Agreement to be free
from defects in materials and workmanship for a period of twelve (12)
months from the date of this Agreement. This warranty is limited to the
original purchaser ("Purchaser") of the product and is not transferable.
The replacement equipment may consist of new or refurbished parts or
components, which are warranted equivalent to new.
1.3 NetFRAME replacement parts will be new or warranted to be like new.
2. EXCLUSIONS
2.1 This parts warranty does not extend to any products that have been damaged
as a result of accident, misuse, abuse, transporting without the original
packaging and container, or as a result of service or modification by
anyone other than NetFRAME, or NetFRAME's authorized representative.
System(s) Type__________________________________
System(s) S/N(s) ________________________________
End User ______________________________________
3. CUSTOMER RESPONSIBILITIES
3.1 Customer is responsible for insuring any product so returned and assumes
the risk of loss during shipping. All replaced parts and products become
the property of NetFRAME.
3.2 Customer will ship freight pre-paid, the defective component back to
NetFRAME in Milpitas, CA.
3.3 Customer agrees to perform network troubleshooting and diagnosis of
NetFRAME Hardware and Software Products, and Third Party Products as
directed by NetFRAME Technical Support Engineers.
3.4 If Customer requests repair or replacement of any component covered under
the terms of this Agreement and it is determined that the reported problem
is not the result of an error in a NetFRAME provided Product, such support
may, at NetFRAME's option, be invoiced at repair or replacement rates in
accordance with the current NetFRAME published price list.
3.5 Should Customer request on site Consulting Services, Customer will be
invoiced at NetFRAME's Consulting Service rates as published in the then
current price list.
NetFRAME and Customer acknowledge that they have read this Agreement, including
any Addenda, understand them and agree to be bound by their terms and conditions
including the terms and conditions contained on the back of this Agreement,
including but not limited to the warranty disclaimer.
CUSTOMER:_________________________ NETFRAME SYSTEMS INCORPORATED
ADDRESS:__________________________ 1545 BARBER LANE
__________________________ MILPITAS, CA 95035
TELEPHONE:________________________ (408) 474-1000
TITLE:____________________________ MANAGER, CUSTOMER SERVICE PROGRAMS
SIGNATURE:________________________ SIGNATURE:____________________________
<PAGE> 45
Customer's signatures on this form constitute s acknowledgment and acceptance of
the following terms and conditions, as well as any terms and conditions listed
on the reverse side, which as a whole shall constitute an agreement "Agreement"
between the parties governing the provision of services by NetFRAME for certain
products at Customer's locations.
4. DEFINITIONS: The following terms may be applicable t o this agreement.
4.6 "Release" shall mean a new version of Software Products or Third Party
Software Products offering extended capabilities or enhanced performance.
4.7 "System Support Site" shall mean the location where one or more NetFRAME
Hardware Products are installed.
4.8 "Support Contacts" shall mean the person(s) listed in the Equipment
Schedule authorized by Customer to request service from NetFRAME Customer
will provide NetFRAME with written notification of any change in the
designated Support Contacts. Unless otherwise agreed to in writing, no more
than two (2) Support Contacts shall be designated for each System Support
Site (one primary and one alternate).
4.9 "Principal Period of Support" shall mean a period of time, 6:00 a.m. to
6:00 p.m. PT Monday through Friday, unless otherwise specified in the
applicable Schedule, when support services will be available from NetFRAME.
4.10 "Extended Coverage Options" shall mean optional periods of support that may
include Monday through Sunday, twenty-four (24) hours. Access to NetFRAME
Technical Support Engineers during the Extended Coverage Periods may be via
a paging system.
Additional charges shall apply to Extended Coverage Options.
4.11 "FCS Release Date" shall mean the date that Hardware Products, Software
Products, and Third Party Software Products are first shipped from NetFRAME
and the date NetFRAME gives Customer notice of such product.
4.12 "Incident" shall mean a complete support event, including all telephone
calls, FAXES, and other communications between NetFRAME and Customer until
the reported problem is resolved. Incidents shall include and begin with
the first telephone call to NetFRAME for assistance with a technical
problem related to the Software and Hardware that together comprise the
fileservers and the network operating system.
5. TERM
5.1 Upon execution of the Agreement and all applicable Schedule documents by
Customer and NetFRAME, this Agreement shall become effective on the date
stated and shall continue for a period of twelve (12) months. This
Agreement shall automatically renew for additional twelve (12) months'
periods at the end of the initial twelve (12) months unless either party
gives the other party Notice of Non-renewal at least thirty (30) days in
advance of the end of the term or any extension thereof. Customer and
NetFRAME shall execute renewal Schedule forms for the products to be
covered for the renewal term within thirty (30) days of expiration of the
term or any extension thereof. NetFRAME shall give Customer written notice
of any price increases within thirty (30) days of the end of the term or
any extension thereof.
6. CHARGES
6.1 Each Schedule executed by Customer and NetFRAME under this Agreement shall
list the standard support charges for the listed Software Products and
Hardware Products and for any required Training Classes. Charges are
payable annually in advance.
6.2 NetFRAME may change the charges specified in each Schedule after the
initial one (1) year term of the Schedule. Such new charges shall not
become effective until thirty (30) days after NetFRAME has given Customer
written notice of the charges. The new charges shall be specified in a new
mutually executed Schedule form covering the renewal term. Any new charges
will not exceed the current published NetFRAME prices for support services
on the Renewal Date of the original Schedule form.
6.3 Prices listed do not include any applicable taxes.
7. WARRANTY DISCLAIMER
NetFRAME will use commercially reasonable efforts to provide the support
services requested by Customer under this Agreement in a professional and
workmanlike manner, but NetFRAME cannot guaranty that every question or
problem raised by Customer will be resolved. NETFRAME MAKES, AND CUSTOMER
RECEIVES, NO WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, ARISING
IN ANY WAY OUT OF, RELATED TO, OR UNDER THIS AGREEMENT OR THE PROVISION OF
MATERIALS OR SERVICES THEREUNDER, AND NETFRAME SPECIFICALLY DISCLAIMS ANY
IMPLIED WARRANTY OF NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
8. LIMITATION OF LIABILITY
NetFRAME's liability to Customer for loss or damage from any cause
whatsoever, and regardless of the form of action, whether in contract, in
tort or under any statute, including negligence and strict liability, shall
be limited to twelve (12) months' charges (at the rate in effect on the
date the cause of action arose) for the copy of the Hardware Product or
Software Product that caused the damage or that is the subject matter of
the cause of action. IN NO EVENT SHALL NETFRAME BE LIABLE FOR ANY COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR INDIRECT, SPECIAL, OR
CONSEQUENTIAL DAMAGES SUCH AS LOSS OF DATA, LOSS OF ANTICIPATED PROFITS, OR
ANY OTHER ECONOMIC LOSS IN CONNECTION WITH OR OTHERWISE ARISING OUT OF THE
EXISTENCE, FURNISHING, FUNCTION, FAILURE OR CUSTOMER'S USE OF ANY PRODUCT
OR SERVICES PROVIDED FOR IN THIS AGREEMENT, EVEN IF NETFRAME WAS AWARE OF
THE POSSIBILITY OF SUCH DAMAGES. CUSTOMER FURTHER AGREES AND ACKNOWLEDGES
THAT NETFRAME VENDORS/LICENSERS SHALL NOT BE LIABLE TO CUSTOMER FOR ANY
DAMAGES SUFFERED OR INCURRED BY CUSTOMER, INCLUDING WITHOUT LIMITATION,
GENERAL, INDIRECT OR CONSEQUENTIAL DAMAGES, PROVIDED THAT THIS LIMITATION
WITH RESPECT TO NETFRAME'S SUPPLIERS SHALL NOT BE CONSTRUED TO LIMIT OR
ENLARGE NETFRAME'S LIABILITY.
<PAGE> 46
9. GENERAL
9.1 EXCUSABLE DELAYS. Neither NetFRAME nor Customer shall be liable or deemed
to be in default for any delay or failure to perform its obligations (other
than payment of money due) under this Agreement resulting from events
beyond its reasonable control and without its fault or negligence, or
otherwise excusable under applicable law.
9.2 ASSIGNMENT. Customer may not assign this Agreement or any rights herein
without the prior written consent of NetFRAME. NetFRAME may assign its
rights herein, but may not, without the prior consent of Customer, delegate
its obligations hereunder except to a parent or subsidiary of NetFRAME or
to an entity acquiring substantially all of NetFRAME's business relating to
the services covered by this Agreement.
9.3 NOTICE. Any notices or consents required or permitted to be given hereunder
shall be in writing and shall be deemed to have been given when mailed or
delivered by hand (against receipt) to the address listed in this
Agreement.
9.4 DEFAULT. If Customer defaults in the performance of any material provision
of this Agreement and fails to cure such default within sixty (60) days
from receipt of written notice, NetFRAME shall have the right to suspend
performance under each applicable Schedule, terminate each applicable
Schedule, and pursue all remedies at law or in equity. If NetFRAME defaults
in the performance of any material provision of this Agreement and fails to
cure such default within sixty (60) days from receipt of written notice,
Customer shall have the right to terminate each applicable Schedule.
9.5 SEVERABILITY. If any provision of this Agreement is held invalid, illegal
or unenforceable, the remaining provisions shall in no way be affected or
impaired thereby.
9.6 GOVERNING LAWS. The validity of this Agreement and the rights, obligations
and relations of the parties hereunder shall be determined under the
substantive law of the State of California without reference to conflict of
laws principles.
9.7 LEGAL ACTION. No action, regardless of form, arising out of the
transactions under this Agreement, may be brought by either party more than
two (2) years after the cause action arises.
9.8 ENTIRE AGREEMENT. This Agreement including the Schedules executed hereunder
constitutes the entire agreement between the parties with respect to the
subject matter thereof and supersedes all proposals oral or written, all
previous negotiations and all previous communications between the parties
with respect hereto. Any provisions, terms or conditions of Customer
purchase orders that are, in any way, inconsistent with or in addition to
the terms and conditions of this Agreement, except those additional
provisions specifying shipping instructions, shall not be binding upon
NetFRAME and shall have no applicability hereunder. No representation or
promise not specifically stated in this Agreement shall be binding on
NetFRAME. The terms of this Agreement may not be waived, amended or
supplemented except in a written addendum executed by NetFRAME and
Customer. This Agreement and any modifications can only be executed by
authorized representatives of NetFRAME and Customer.
10. ADDITIONAL CUSTOMER RESPONSIBILITIES
10.1 Customer must be licensed to use the respective Software Products,
Hardware Products and Third Party Products that will be covered by this
Agreement.
10.2 Customer will install, or arrange to have installed, new Updates or
Releases of Software Products within ninety (90) days of receipt.
10.3 Customer acknowledges responsibility for data integrity of Customer's
NetFRAME systems, and will maintain backups and archival copies of such
data.
10.4 Customer shall maintain a remote dial-in support capability, and at
NetFRAME's request permit NetFRAME access to all systems listed in the
Equipment Schedule for performance of its obligations herein stated.
10.5 Customer shall at all times operate all NetFRAME Hardware Products,
Software Products and Third Party Products in accordance with all
specifications and restrictions as specified in the user documentation.
10.6 Customer shall assist NetFRAME in the diagnosis of reported problems by
performing reasonable hardware or software tests requested by NetFRAME
Technical Support Engineers.
10.7 Customer shall reasonably implement any repair activity, Update, Release,
workaround or other solution provided by NetFRAME to address a reported
problem. Customer's failure to implement such action within thirty (30)
days after NetFRAME makes such action available will relieve NetFRAME of
its obligations to provide support for problems that would have been
corrected by such implementation.
10.8 Customer shall return, upon NetFRAME's request and at Customer's expense,
any and all equipment or media that may be loaned by NetFRAME to Customer
pursuant to the support provided under this Agreement.
10.9 All NetFRAME software, third party products and the corresponding systems
eligible for support under this Agreement must be listed in the applicable
Schedule. In the event that additional NetFRAME software, third party
products or hardware is subsequently installed at the System Support Site,
such additional products and cost of support shall be listed by serial
number on a mutually executed Schedule. All NetFRAME Hardware Products
must be listed and covered on the Equipment Schedule. Payment for the
support of additional products will be submitted to NetFRAME before
initiating support services.
<PAGE> 47
[NETFRAME LOGO]
ESCALATION CRITERIA / SEVERITY LEVELS:
LEVEL 1
SYSTEM DOWN
System Down and/or multiple continuing
failures; Mission-critical application; No workaround or
replacement system available.
LEVEL 2
MAJOR PROBLEM
Continuing failures; Loss of
functionality, serious
inconvenience; System down
but not used for
mission-critical application.
LEVEL 3
SYSTEM PROBLEM, SYSTEM QUESTION
System impaired or not working as described in user
documentation; temporary workaround available;
response time degradation; intermittent failures;
general questions.
LEVEL 4
ENHANCEMENT REQUEST
System optimization or functionality improvement desired.
- --------------------------------------------------------------------------------
TECHNICAL SUPPORT SERVICE
NETPHONE(SM)
NetFRAME offers customers an annual service contract for telephone
support. NetFRAME's Technical Assistance Center is staffed with committed,
capable engineers who provide world class support. Novell CNE and Microsoft MSEE
certified, they are highly qualified to answer complex questions related to the
operation of the enterprise serving environment. All have completed NetFRAME's
comprehensive Network Enterprise Engineer certification program to ensure that
your business receives the quickest response time and rapid resolution of
complex problems. Supporting continuous availability in the enterprising serving
environment, they collectively and individually provide solutions for a high
percentage of incidents on the first call.
MULTIVENDOR SUPPORT
NetFRAME is united with a multivendor technical support alliance,
TSANetTM, to actively take ownership of interoperability issues. As a founding
member, NetFRAME involves other TSANet members to quickly resolve multivendor
problems.
ON-SITE ESCALATION
As the scope of projects become more complex in the enterprise
environment, it is clear that on-site technical support is invaluable to isolate
occurrences relating to system reliability. Should an incident remain critical,
NetFRAME, in accordance with its escalation policy, can dispatch an engineer to
the customer's site.
NETPHONE(SM) TS WEB
Simple to access from the NetFRAME home page at
http://www.netframe.com.
TS WEB INQUIRY
TS Web provides World Wide Web access to the NetFRAME Call Tracking
system using any Internet browser. With on-line access to TS Web, customers can
initiate an incident as well as set the initial incident severity. Both the
customer and NetFRAME can communicate interactively by adding notes and
responses to an open incident allowing the resolution status to be monitored
regularly. For the first time - this places the management of an incident
directly in the hands of the customer!
TS WEB KNOWLEDGE DATABASE
NetFRAME is building a global repository of our most up-to-date
technical information to support the management of your mission critical
environment. Integrated as a direct link, NetFRAME's knowledge based query
function empowers users to proactively search information - before a problem
reaches a critical stage. Another best practice from NetFRAME - improving the
way we provide support while reducing your support costs.
(C) NetFRAME Systems Incorporated, 1996, 1997. All rights reserved
<PAGE> 48
[NETFRAME LOGO]
Technical Support Policy
Per Incident Service Per Incident service is offered on a per-incident fee basis
to support a specifically defined problem. If the problem can not be resolved
within the time period stated in the NetFRAME price list, additional charges may
apply. Registration of a Server Profile is recommended.
NetPHONE Contract NetPHONE is offered as an annual contract to provide
comprehensive technical support. Registration of a Server Profile is required.
Scope of Support Primary support is over the telephone and the internet.
NetFRAME is usually able to respond within one hour after receipt of
notification.
Server Profile The entitlements to NetPHONE service are initiated upon
registration of the Server Profile. An important source reference document for
our Technical Support Group, the Server Profile documents the model number,
serial number, and configuration of the server.
Principal Hours of Operation: Pacific Time
5 x 12 6:00 a.m. to 6:00 p.m. Monday - Friday
Extended Hours of Operation: Pacific Time
7 x 24 12:01 a.m. to 12:00 p.m. Monday - Sunday
Extended coverage calls are accepted for priority Level 1 and Level 2
occurrences. Access to NetFRAME Technical Support Engineers during the Extended
Coverage Periods may be via paging system.
Authorized Contacts NetFRAME recommends a staffing level of no less than two
authorized contacts per customer location. An authorized contact is an
individual who has completed the NetFRAME Enterprise Engineer (NEE)
certification track or the equivalent thereof.
Incident Access Reporting Options:
1. Telephone 800-NetFRAME, Option 1
2. Telephone 408-474-4444, Option 1
3. TS Web internet access - http://www.netframe.com
Definition of Incident
"Incident" shall mean the complete cycle to support an event related to the
failure of a currently marketed hardware or software product.
All subsequent telephone calls and internet messages, correspondence via FAXES,
and any subsequent communication between Net FRAME and Customer constitute the
complete incident. The incident is closed upon mutual agreement of problem
resolution.
Incident Prioritization Level 1 System Down, Level 2 Major Problem, Level 3
System Problem or question, Level 4 Enhancement Request. Refer to the NetFRAME
Escalation Policy for further information.
NON-CRITICAL INCIDENT PRIORITIZATION
Customer are requested to first research the TS Web - knowledge base for
solutions to known problems before submitting an incident request for a Level 4
(non-critical) incident.
RESOLUTION PROCESS The following is the procedure to resolve an incident: 1.
Case is registered, 2. Problem is documented, 3. Level of severity is
determined, 4. Incident is routed to an engineer. While NetFRAME has an
established procedure to resolve problems, NetFRAME can not guarantee the
successful resolution of an incident.
ON-SITE TECHNICAL SUPPORT ESCALATION In the event of a catastrophic system down
situation that cannot be resolved by phone and the supporting NetFRAME service
provider, and after all other reasonable options have been exhausted, NetFRAME
may, at its sole discretion, dispatch a Field Engineer to the customer site.
ON-SITE TECHNICAL SUPPORT FEE
NetFRAME can, at its sole discretion, invoice the Customer at the
Professional Service rates published in a current NetFRAME price list.
Customer Obligations
1. Customer agrees to perform network troubleshooting and diagnosis of
NetFRAME hardware and software products, and third party products as
directed by NetFRAME Technical Support Engineers.
2. Customer must be licensed to use the respective software, hardware and
third party products that will be covered by NetPHONE services. Customer
will install, new updates or releases of software within ninety (90) days
of receipt. Each update to a release or patch furnished to Customer becomes
part of the Licensed Product and is subject to the terms of the license
furnished with the system.
3. Customer acknowledges responsibility for data integrity of Customer's
NetFRAME systems, and will maintain backups and archival copies of such
data.
(C) NetFRAME Systems Incorporated, 1996, 1997. All rights reserved
<PAGE> 49
[NETFRAME LOGO]
Supporting continuous availability in mission critical
network serving environments.
PARTS DEPOT LOCATIONS
Arizona
California
Colorado
Florida
Georgia
Illinois
Massachusetts
Michigan
Minnesota
Missouri
New York
North Carolina
Ohio
Pennsylvania
Texas
Virginia
Washington
Puerto Rico
Alberta
Ontario
- --------------------------------------------------------------------------------
MAINTENANCE PARTS SERVICE
PARTSDEPOT EXCHANGE SERVICE
PartsDEPOT is a cost effective program to support continuous
availability in your network serving environment. By utilizing this exchange
service, customers can quickly get a replacement for a failed part without the
expense of carrying inventory or waiting for a repair service.
Depots are strategically located throughout the United States, Canada
and the Caribbean to ensure fast access to critical service parts. Every part is
fully tested and maintained at the current shippable level to ensure consistent
reliability. NetFRAME manages the warehousing and coordination of on-site
delivery. Ordering parts is simple. Three levels of response times further
ensure that access to inventory is within your reach - 24 hours a day - 365 days
a year.
- 2 HOUR PartsDEPOT - within 50 miles from DEPOT
- 4 HOUR PartsDEPOT - within 100 miles from DEPOT
- 24 HOUR PartsDEPOT - outside 100 miles from DEPOT
The exchange process is completed when the failed part is returned to
NetFRAME using the standard Return Material Authorization (RMA). NetFRAME
recommends Extended Parts Warranty coverage to avoid unexpected and costly
out-of-warranty repair charges.
With ownership and responsibility for the inventory management of spare
parts beginning with NetFRAME, your business can better forecast and budget the
support of dependable availability of spare parts. The process is simple and
cost effective.
SPARE PARTS
NetFRAME offers the purchase or leasing of spare parts to help ensure
the highest level of continuous server availability. Customers can proactively
troubleshoot suspect parts with NetFRAME's "hot-swap" technology as well as
minimize network interruptions due to unexpected hardware failure - without
powering down the NetFRAME Cluster Server(TM).
NetFRAME offers Logistic Planning, a consultation service to help
balance the necessary inventory of components to support your specific
environment. Stock of on-site parts can be replenished from factory or with a 24
HOUR PartsDEPOT contract
- ON-SITE SPARES LEASING: a two year contract
- ON-SITE SPARES PURCHASE: a one time contract
EXTENDED PARTS WARRANTY
NetFRAME offers an option to purchase a parts warranty after the
standard warranty expires. This coverage may help some customers better manage
the costs associated with out-of-warranty repair charges for replacement parts.
(C)NetFRAME Systems Incorporated, 1996, 1997. All rights reserved
<PAGE> 50
[NETFRAME LOGO]
MAINTENANCE PARTS SERVICE
PARTSDEPOT EXCHANGE SERVICE
HOURS OF OPERATION Parts may be ordered 365 days a year, 24 hours a day.
ANNUAL CONTRACT An annual contract allows unlimited access to spare part(s) for
all currently marketed systems. Parts are subject to local depot availability as
specified in the NetFRAME Parts List. Provided that the customer is within the
designated proximity to the depot, the part will be delivered within the time
frame specified.
2 HOUR PartsDEPOT within 50 miles
4 HOUR PartsDEPOT within 100 miles
24 HOUR PartsDEPOT greater than 100 miles.
Expedited service is offered for a fee to accommodate a customer request for an
earlier response time than otherwise contracted.
PURCHASE ORDER Your purchase order should include the following to register a
system for PartsDEPOT:
1. Part # and Per unit price from current price list
2. The contract time period, (annual or prorated)
3. A completed Server Profile for each system
SERVER PROFILE The Server Profile documents the model number, serial number, and
configuration of the server. This information is stored in our database to
assist NetFRAME in inventory management at each regional depot. In addition, the
Server Profile is referenced by our Technical Support Group during a support
call.
ACTIVATION OF SERVICE NetFRAME will notify the customer with the pin #.
ORDERING A PART Call 800-338-9111. The operator will ask for the following
information:
1. NetFRAME Account #, Pin #
2. Company Name or Authorized Caller Name
3. NetFRAME System Serial Number
4. Part Number
5. Ship to information, service type
COMPLETION OF THE EXCHANGE The exchange process is completed when NetFRAME
receives the failed part. The customer agrees to return the failed parts
according to the Return Material Authorization (RMA) procedure. Parts not
received within 7 days or parts received which have serious physical damage will
be invoiced at the full replacement charge in the current price list.
REPAIR CHARGES NetFRAME will invoice customer for applicable repair charges, as
stated in the current price list, for parts that are not covered by a Standard
Warranty or Extended Parts Warranty. Standard terms are net 30.
NON-NETFRAME PARTS This agreement is limited to products originally purchased
from NetFrame. If a part from another vendor is mistakenly returned to NetFRAME,
the customer will be invoiced for: 1. The full price of the part sent from the
depot and the associated shipping cost. 2. The shipping cost to return the wrong
part from NetFRAME back to the customer.
SPARE PARTS
SPARE PARTS PURCHASE The warranty period is 12 months.
SPARE PARTS RENTAL The minimum rental period is two years. Parts can be upgraded
to the most current revision during the rental period. The terms and conditions
are defined in the Spare Parts Rental Addendum.
WARRANTY PERIOD
The repaired or replacement part is warranted to be free from defects in
materials and workmanship for a period of 90 days or the duration of the system
warranty, whichever is greater.
EXTENDED PARTS WARRANTY NetFRAME's Warranty can be extended for 12 months or
more. If a system is not under Warranty at the time the Extended Parts Warranty
is ordered, NetFRAME may require a NetAUDIT to evaluate performance of the
system. The Extended Warranty may not apply to components that have been
recycled from discontinued systems.
REPLACEMENT RESPONSE TIME In-warranty replacement parts are shipped within 5
days. Out-of-warranty replacements are shipped within 15 days after receipt of
failed part(s). Out of warranty replacements are shipped prepaid domestically
and collected internationally. In warranty replacements are shipped prepaid.
EXPEDITED SERVICE NetFRAME will expedite the replacement part for a fee of $500.
Out-of-warranty replacements will be expedited for $500 or 10% of the repair
charge, which ever is greater. Providing that the order is received by 1:00
P.M., PST, NetFRAME will ship the part the same day; all other orders are
shipped within 24 hours. This service is contingent upon the available stock of
the specified spare part.
WARRANTY SERVICE POLICY
The details of the standard warranty are included with each system. During the
standard warranty period, NetFRAME covers the cost to repair failed part. The
customer agrees to returned the failed part to NetFRAME as defined in the RMA
procedure. The warranty is activated by submitting the Server Profile with the
warranty registration card.
OUT-OF-WARRANTY POLICY
A part is out-of-warranty when the standard warranty has expired and an Extended
Parts Warranty contract is not in effect. The customer agrees to return the part
to NetFRAME in accordance with the RMA procedure. NetFRAME will ship a
replacement part within 15 days after receipt of the failed part.
RMA PROCEDURE
The customer is responsible for returning the failed part FOB Milpitas, CA,
freight prepaid and insured, in the designated container. All returned parts
become the property of NetFRAME on receipt. Information on the RMA procedure is
defined in document #2001, and document # 2002, located on NetFRAME's Fax Back
at 408.474.4282. Information is also located in NetFRAME's web page, Customer
Service section, at www.netframe.com.
(C)NetFRAME Systems Incorporated, 1996, 1997. All rights reserved
<PAGE> 51
[NETFRAME LOGO]
NMAP
NetFRAME
Methodology and Accountability
through
Partnership
METHODOLOGY
Complete life-cycle processes and
procedures to plan, install,
manage and maintain a
high-availability enterprise
serving environment.
ACCOUNTABILITY
Suite of service products to cover the complete enterprise
server life-cycle.
PARTNERSHIP
Clear roles and responsibilities in
partnership with the customer
and business partner to
guarantee accountability.
NMAP
DELIVERING
ACCOUNTABILITY
- --------------------------------------------------------------------------------
PROFESSIONAL SERVICES
NetFRAME Consulting Services address the needs of today's complex
network serving environments by enhancing network availability, performance, and
productivity. Consulting Services are available to address the life-cycle phases
of system planning, installation, management and maintenance with specific
enterprise services.
Using a consistent application methodology, as outlined in the NMAP
model, they focus on the functionality required to optimize the enterprise
serving environment and offer advice to help customers lower the
cost-of-ownership. The consulting approach brings together the highest system
performance, now, and in the future.
STARTUP
StartUP defines the process to assure the successful installation and
preparation of the NetFRAME server for the operating system environment.
NetFRAME will conduct a pre-installation review, usually by telephone, to define
the roles and responsibilities at the time of installation. A post-installation
review follows to discuss optimization of the server.
AUDIT
NetAUDIT is a baseline audit to document existing network hardware and
software configurations and assess current system behavior and performance. A
fundamental first step in many aspects of enterprise server planning, the audit
produces a detailed configuration report with recommendations for improvements
and enhancements.
MIGRATE (R) AND CONSOLIDATE
For many NetWare 3.x customers, moving to NetWare 4.x is a challenge.
NetFRAME experts have the expertise to assess the current NetWare environment
and plan a robust server platform to intelligently migrate the NetWare 3.x into
the new NDS paradigm.
Reduction in the potential points of failure on a network is the number one
reason cited by industry analysts for consolidation of multiple small servers
onto a NetFRAME platform. Many customers agree that consolidation reduces the
management overhead associated with many systems resulting in a lower
cost-of-ownership.
OPTIMIZE
NetFRAME consultants analyze statistical information from the network
environment to provide recommendations on network load balancing and system
tuning parameters for optimal operation and performance. The continued high
performance of the enterprise serving environment is dependent upon scheduled
sessions to review OPTIMIZATION analysis.
ENTERPRISE SERVER CONSULTING
NetFRAME consultants are available to assist by providing specialized services
in all aspects of planning installing, and managing your enterprise to
pro-actively deploy NetFRAME technology quickly and efficiently.
(C)NetFRAME Systems Incorporated, 1996, 1997. All rights reserved
<PAGE> 52
[NETFRAME LOGO]
Sales Order No. _____
PROFESSIONAL SERVICES ("Services") WORK ORDER & AGREEMENT
<TABLE>
<S> <C>
BILL TO_____________________________________ ___________________________________________
Customer Name Delivery Location System Serial Number
____________________________________________ Ph:___________________FAX__________________
Street Address Customer Telephone Number & FAX Number
____________________________________________ ___________________________________________
City State Zip Code Customer Manager/Activity Sponsor
____________________________________________ ___________________________________________
NETFRAME Contact Person
Customer Purchase Order #_______________ Clarify Case # (if any) ___________________
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION OF SERVICES:
<S> <C> <C> <C>
( ) NetAUDIT ( ) NetMIGRATE ( ) NetCONSOLIDATE ( ) NetOPTIMIZE
05301B-01 05301B-02 05301B-03 05301B-05
</TABLE>
( ) NetFRAME Custom 05301B-06 (Optional: Attach Statement of Work)_________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
AUTHORIZATION: BEFORE AFTER
<TABLE>
<S> <C> <C>
Customer hereby acknowledges the request of Services
and agrees to the Terms & Conditions on the reverse side _________________ __________________
of this Agreement. Agreed Start Date Actual End Date
____________________________________________ _________________ __________________
Customer Signature Date __Rate Per Hour/Day or Actual Charges or
__Fixed Fee Fixed Fee
____________________________________________ _________________ __________________
Customer Name & Title (print) Est. # Hours/Days Actual Hours/Days
_________________ __________________
Estimated Expenses Actual Expenses
_________________ __________________
_____________________________________________ Total Estimated Charges Total Actual Charges
NetFRAME Signature Date
_____________________________________________ Optional: Charge to VISA___ MasterCard____
NetFRAME Name & Title (print) #____________________________Exp______
</TABLE>
If Services are canceled or rescheduled within 5 days of the agreed start date,
Customer may be billed 10% of the total estimated charges.
- --------------------------------------------------------------------------------
ACKNOWLEDGMENT OF COMPLETION:
Customer acknowledges that the Services were completed
as specified. ___________________________________________________
Customer Signature Date
- --------------------------------------------------------------------------------
NetFRAME Internal Use Only:
SR: _____________ _________ ______ FE: _______________ _________ _____
Name Dept. % Name Dept. Days
- --------------------------------------------------------------------------------
White - Billing Copy Yellow - Region Copy Pink - Customer Copy
<PAGE> 53
Terms and Conditions
1. After Services are performed, NetFRAME will send an invoice itemizing the
charges, including the Services, charges for parts, materials or goods
provided in connection with such Services and reasonable travel/living
expenses incurred by NetFRAME with Customer's prior approval. All such
invoices shall be paid in full by Customer within 30 days of the invoice
date (net 30 terms).
2. Customer will pay any tax NetFRAME becomes obligated to pay by virtue of
this Agreement exclusive of taxes based on the net income of NetFRAME.
3. (a) NetFRAME will provide Services on a timely basis subject to
availability of qualified personnel and the difficulty and scope of the
Services to be provided.
(b) NetFRAME may reassign and substitute personnel at any time and may
provide the same or similar Services to other customers.
(c) Services supplied by NetFRAME under this Agreement are provided to
assist Customer. Customer, not NetFRAME, will be responsible for
determining objectives and obtaining the desired results and no warranty or
guaranty of any results is provided hereby.
(d) All ideas, concepts, inventions, know-how, data-processing techniques,
software or documentation (collectively, the "Works") developed by NetFRAME
personnel (alone or jointly with Customer) in connection with Services
provided to Customer will be the exclusive property of NetFRAME. To the
extent that Customer has any rights in the Works, Customer hereby assigns
to NetFRAME all Customer's right, title, and interest in and to the Works.
NetFRAME grants Customer a non-exclusive, royalty-free, non-transferable
(without right to sublicense) license to internally use the Works solely in
the country in which the Service is provided. Customer's rights in any
intellectual property existing as of the time of provision of Services
hereunder shall be unaffected by this Section 3(d), except that Customer
hereby grants to NetFRAME a license under all such intellectual property
rights to the extent necessary to enable NetFRAME to perform the Services
hereunder and fully use the Works in any and every manner.
4. (a) THE ENTIRE LIABILITY OF NETFRAME AND CUSTOMER'S EXCLUSIVE REMEDY FOR
ANY DAMAGES FROM ANY CAUSE RELATED TO OR ARISING OUT OF THIS AGREEMENT OR
THE SERVICES OR GOODS, IF ANY, PROVIDED HEREUNDER, REGARDLESS OF THE FORM
OF ACTION, WHETHER IN CONTRACT, IN TORT OR OTHERWISE, WILL NOT EXCEED THE
CHARGES PAID TO NETFRAME UNDER THIS AGREEMENT. IN NO EVENT WILL NETFRAME BE
LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES
(INCLUDING LOST PROFIT OR DATA) EVEN IF NETFRAME HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
(b) THE GOODS, IF ANY, PROVIDED IN CONNECTION WITH THE SERVICES PERFORMED
HEREUNDER SHALL BE COVERED ONLY BY SUCH MANUFACTURER'S WARRANTY, IF ANY, AS
SHALL BE PACKAGED WITH SUCH GOODS, AND ARE OTHERWISE PROVIDED "AS IS",
WITHOUT WARRANTY OF ANY KIND. NETFRAME HEREBY DISCLAIMS ALL OTHER
WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF TITLE,
NON-INFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE.
5. (a) Both parties agree to preserve the confidentiality of data and
information relating to Customer's and NetFRAME's business, including data
and information belonging to third parties utilized by NetFRAME in
performing Services, which is 1) proprietary and/or confidential and, 2)
exchanged between the parties in order to perform Services ("Confidential
Information"). Neither party will have any obligation to maintain the
confidentiality of any data or information which (a) was in the receiving
party's lawful possession prior to the submission thereof by the owning
party, (b) is lawfully obtained by the receiving party from a third party
under no obligation of confidentiality, (c) is or becomes generally known
or available other than by unauthorized disclosure, or (d) is independently
developed by the receiving party.
(b) Each party will keep the other's Confidential Information in confidence
and will not disclose any such item of Confidential Information to any
person other than employees, agents, or contractors who need to know the
same in the performance of their duties to the parties. The receiving party
will protect and maintain the confidentiality of all such Confidential
Information with the same degree of care as it employs to protect its own
Confidential Information, but at least a reasonable degree of care. The
receiving party will be liable to the disclosing party for any
non-compliance by its agents or contractors to the same extent it would be
liable for non-compliance by its employees.
(c) NetFRAME is not precluded from developing and marketing products which
provide the same or similar functionality as the Services provided that
such products do not use Customer Confidential Information or incorporate
work originally created by or owned by Customer.
6. Customer will have the right to terminate this Agreement after work has
commenced upon ten (10) days written notice, provided that Customer will
pay to NetFRAME all charges for Services performed and all expenses
incurred by NetFRAME up to the effective date of such termination. Customer
and NetFRAME will mutually agree on the portion of the incomplete Services,
if any, to be performed by NetFRAME. The provisions of Sections 3.d, 4, 5,
6 and 7 shall survive termination hereof.
7. This Agreement constitutes the entire agreement between the parties with
respect to the Services provided hereunder and supersedes all prior
proposals, both written and oral, and all other written and oral
communications between the parties. No modification to the Agreement will
be binding unless it is in writing and signed by an authorized
representative of each party. NetFRAME may use subcontractors to perform
any Services hereunder. Any quote for Services will be valid for 30 days.
<PAGE> 54
EXHIBIT "D" - DEVIATIONS FROM SELLER'S FORM OF STANDARD MAINTENANCE AGREEMENT
<PAGE> 55
[NETFRAME LOGO]
ASSET PURCHASE AGREEMENT BETWEEN DECISIONONE
CORPORATION AND NETFRAME SYSTEMS
EXHIBIT D
EXHIBIT D: DEVIATIONS FROM SELLER'S FORM OF STANDARD MAINTENANCE AGREEMENT:
I. STANDARD CONTRACT DEVIATIONS:
NetFRAME has teo service contracts with support terms and conditions that
deviate from the standard contract.
- AMOCO Chemical Company, 501 WestLake Park Blvd., Houston, TX 77079
- NetSERVICE NetPHONE Contract #2015-NP
II. TIME AND MATERIALS ENTITLEMENTS:
NetFRAME has two Time & Materials contracts for Professional Services Contracts;
- Roche Bioscience, 3401 Hillview Avenue, Palo Alto, CA 94303
- NetSERVICE Consulting Contract #2504-CO100
- NetSERVICE Consulting Contract #2504=CO101
- Simon Frazier University, Tm. AB, Administrative Building, Barnaby BC,
CANADA, V5A 1S6
- NetSERVICE Contract #SC0001 - Customer has purchased ten (10)
hours of technical phone support. Purchase order is active in
customer file.
-1-
-Confidential-
<PAGE> 56
EXHIBIT "E" - FORM OF OPINION OF SELLER'S COUNSEL
May __, 1997
DecisionOne Corporation
50 East Swedesford Road
Frazer, PA 19355
Attention: Ms. Tracey Draeger
Dear Ms. Draeger:
This opinion is furnished in accordance with the provisions of Section
3.2(a)(iii) of the certain Asset Purchase Agreement ("Agreement") dated May __,
1997, between NetFRAME Systems Incorporated ("Seller") and DecisionOne
Corporation ("Buyer"), with respect to the sale of the assets of the Service
Business of Seller. All terms used herein that are defined terms in the
Agreement shall have the same
meaning unless the context otherwise requires.
As counsel for Seller, I have examined the Articles of Incorporation and By-laws
of Seller and the corporate proceedings taken by Seller in connection with the
Agreement and the Transaction Documents.
In my examination, I have assumed the genuineness of all signatures, the
authenticity of all documents submitted to me as originals, the conformity to
the originals of all documents submitted to me as certified, photostatic,
conformed copies, and the authenticity of the originals of all such latter
documents. I assume the accuracy of the material and the factual matters
contained therein.
The opinions given herein are limited to the laws of the State of California and
the Federal Laws of the United States and no opinion is expressed herein with
respect to the laws of any other jurisdiction, or the effect of any other such
laws on the matters with respect to which the opinions are given herein.
Based upon the foregoing, I am of the opinion that:
(1) Seller 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 perform its obligations
under the Agreement and the
Transaction Documents and to
consummate the transactions
contemplated therein.
<PAGE> 57
Page: Two
May __, 1997
- ----------------
(2) All corporate acts and other
proceedings required by law or by
the provisions of the Agreement to
be taken by Seller on or before the
Closing Date, in connection with the
execution and delivery of the
Agreement and the Transaction
Documents and the consummation of
the transactions contemplated by the
Agreement, have been duly and
validly taken;
(3) The Agreement and each of the
Transaction Documents to which
Seller is a party has been duly
executed and delivered by Seller;
(4) No consent, approval, license,
permit, order or authorization of,
or registration, declaration or
filing with, any governmental
authority is required to be obtained
or made by or with respect to Seller
in connection with the execution and
delivery of the Transaction
Documents or the consummation on the
Closing Date of the transactions
contemplated therein;
(5) The execution and delivery of the
Agreement and the Transaction
Documents by Seller and the
consummation of the transactions
contemplated thereby and compliance
with the terms thereof by Seller
does not conflict with, or result
in any violation or default (with
or without notice or lapse of time,
or both) under, or give rise to a
right of termination, cancellation
or acceleration of any obligation
or to loss of a benefit under, any
provision of Seller's Articles of
Incorporation, By-laws, or of any
indenture, agreement, judgment, or
order to which Seller is a party or
by which it is bound; and
(6) The Agreement and the Transaction
Documents are binding and
enforceable against Seller in
accordance with their terms.
This opinion is furnished solely for your benefit and may be relied upon only
for matters arising out of this transaction. This opinion may not be relied upon
by any other person or entity without my express permission. This opinion may
not be relied upon in connection with any transaction other than that
contemplated herein.
Very truly yours,
____________________________
<PAGE> 58
EXHIBIT "F"
NON-COMPETE AGREEMENT
NON-COMPETE AGREEMENT dated as of May 21, 1997 by NetFRAME
Systems Incorporated ("Seller"), in favor of DecisionOne Corporation ("Buyer").
WITNESSETH:
WHEREAS, pursuant to that certain Asset Purchase Agreement
dated as of May __ , 1997 (the "Asset Purchase Agreement") between Seller and
Buyer, Seller will transfer and sell to Buyer, and Buyer will purchase from
Seller, certain of Seller's assets used in the Service Business (as defined in
the Asset Purchase Agreement);
WHEREAS, under the Asset Purchase Agreement it is a condition
precedent to the obligation of Buyer to consummate the transactions contemplated
thereby that Seller shall have executed and delivered to Buyer a non-compete
agreement substantially in the form of this Agreement; and
WHEREAS, Buyer has informed Seller that Buyer will not
consummate the transactions contemplated by the Asset Purchase Agreement unless
the aforesaid condition precedent has been fulfilled; and
WHEREAS, it is a benefit to, and in the best interest of,
Seller that the transactions contemplated by the Asset Purchase Agreement be
consummated, and in order to induce Buyer to proceed with the same, Seller is
willing to make the covenants and agreements herein set forth;
NOW THEREFORE, in consideration of the promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Seller hereby covenants and agrees with Buyer as
follows:
1. Until the expiration date specified in paragraph 5 hereof, Seller nor
any parent, subsidiary or affiliate of Seller, shall not anywhere in
the United States or Canada, directly or indirectly, whether as owner,
partner, agent, shareholder, consultant, advisor, proprietor or in any
other relationship or capacity, for its own benefit or for the benefit
of any third party provide, offer to
<PAGE> 59
provide, assist a third party to provide or sell parts, parts repairs or parts
support, telephone technical support services, or educational or training
services for the Series 8500 products (as defined in the Asset Purchase
Agreement) unless otherwise mutually agreed by the Seller and Buyer in writing.
Nor shall Seller, any parent, subsidiary or affiliate of Seller take any action,
or grant any rights or licenses (including without limitation entering into or
performing under an agreement with Wang Laboratories, Inc. or any of its
subsidiaries or affiliates) outside the United States which are inconsistent
with, or otherwise permit or enable a breach of this Agreement.
2. The acquisition by Seller of an aggregate of less than one (1) percent
of the outstanding shares of capital stock of any corporation with one
or more classes of its capital stock listed on a national securities
exchange or publicly traded in the over-the-counter market shall not
constitute a violation of paragraph 1 hereof.
3. The terms and provisions of this Agreement shall be governed by the
laws of the Commonwealth of Pennsylvania (except for its conflict of
laws provision) and shall, together with the Asset Purchase Agreement,
constitute the entire agreement between Seller and Buyer with respect
to the subject matter hereof. This Agreement may be amended or modified
only by a written instrument executed by Seller and Buyer.
4. This Agreement shall be binding upon Seller and its successors and
assigns, and shall inure to the benefit of Buyer and its successors and
assigns.
5. This Agreement and all obligations of Seller hereunder, shall terminate
absolutely and be of no further effect whatsoever on and after May __,
2000.
6. If any covenant or agreement herein is held to be unenforceable because
of the area covered, the duration thereof, or the scope thereof, then
the court making such determination shall have the power to reduce the
area and/or duration and/or limit the scope thereof, and the covenant
or agreement shall then be enforceable in its reduced form.
7. The parties agree that any breach by Seller of the covenants and
agreements contained in this Agreement will result in irreparable
injury to Buyer for which money damages could not adequately compensate
Buyer, and therefore, in the event of any such breach Buyer shall be
entitled (in addition to any other rights and remedies which it may
have at law or in equity) to have any injunction issued by any
competent court of equity enjoining and restraining Seller and/or any
other person involved therein from continuing such breach. The
existence of any claim or cause of action which Seller may have against
Buyer, or any other person shall not constitute a defense or bar to the
enforcement of any of the covenants or agreements contained herein. If
the covenants or agreements contained herein are otherwise the subject
of litigation between the parties, then the term of such covenants and
agreements shall be extended for a period of time equal to the period
of such breach, which extension shall commence on the later of (i) the
date on which the original (unextended) term of such covenants and
agreements is scheduled to terminate, or (ii) the date of the final
court order (without further right of appeal) enforcing such covenant
or agreement.
<PAGE> 60
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by a duly authorized officer of Seller as of the date first above written.
NetFRAME SYSTEMS INCORPORATED
By:______________________________
Accepted and Confirmed:
DECISIONONE CORPORATION
By:______________________________
<PAGE> 61
EXHIBIT "G"
TRANSITION AGREEMENT
This TRANSITION AGREEMENT (this "Agreement") is made and entered into
as of this 21st day of May, 1997, by and between NetFRAME Systems Incorporated,
a Delaware corporation ("NetFRAME"), and DecisionOne Corporation, a Delaware
corporation ("DecisionOne").
WHEREAS, contemporaneously herewith, NetFRAME and DecisionOne have
entered into that certain Asset Purchase Agreement of even date herewith (the
"Purchase Agreement"), pursuant to which NetFRAME has agreed to sell and
DecisionOne has agreed to purchase certain assets related to the Service
Business (as defined in the Purchase Agreement);
WHEREAS, NetFRAME wishes to supply to DecisionOne and DecisionOne
wishes to utilize the services of certain employees of NetFRAME and certain
physical facilities of NetFRAME in connection therewith.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions herein contained, the parties do hereby agree and bind themselves as
follows:
Section 1. Transitional Services
a. NetFRAME Employee Services. During the term of this Agreement,
NetFRAME shall supply the services (the "NetFRAME Employee
Services") of those employees set forth on Schedule 1.1 hereto
(the "NetFRAME Employees") to DecisionOne in connection with
the Service Business, for the time period, and at the rate,
with respect to each NetFRAME Employee, set forth opposite
such NetFRAME Employee's name. DecisionOne may terminate the
use of one (1) or more of the NetFRAME Employees upon five (5)
days prior notice to NetFRAME. DecisionOne shall have the
right to utilize the NetFRAME Employees on a full-time basis.
NetFRAME may substitute other of its employees for the
NetFRAME Employees if they are unavailable, provided, however,
that the employees so substituted shall have comparable
experience and expertise. Any such substitution shall not
affect the other terms and conditions of this Agreement.
NetFRAME agrees that it is the employer of each NetFRAME
Employee for all federal, state or local law purposes,
including without limitation, all income or payroll-based tax
withholding purposes.
b. On-Site Services. During the term of this Agreement, it is
also anticipated that the NetFRAME Employees will utilize
physical facilities of NetFRAME, and NetFRAME shall make
available such of its physical facilities in Milpitas,
California, as reasonably required by DecisionOne at no charge
in connection with the activities of the NetFRAME Employees
relating to the Service Business.
<PAGE> 62
c. Parts Repair. During the term of this Agreement, NetFRAME
shall allow DecisionOne to purchase the repair of spare parts
under the terms and conditions, including price, of the
existing agreement between NetFRAME and General Diagnostics,
Inc. (The "GDI Agreement"). NetFRAME shall exercise its best
efforts to enable DecisionOne to have spare parts repaired
under the GDI Agreement in return for which repairs
DecisionOne shall make payment to NetFRAME.
d. Indemnification. NetFRAME agrees to indemnify and hold
DecisionOne harmless for any claim, liability or expense
related to DecisionOne's employment of the NetFRAME Employees
during the term of this Agreement, provided that DecisionOne
shall not be entitled to indemnity and shall indemnify
NetFRAME against any damages incurred by NetFRAME for (i) any
liability for which it is required to reimburse NetFRAME as
set forth in Paragraph 1.1 above, or (ii) for any claim,
liability or expense that arises because of and to the extent
of DecisionOne's use of the NetFRAME Employee's services
pursuant to this Agreement.
e. Payment for Services.
i. Actual Service Cost; Service Fee. DecisionOne shall
pay to NetFRAME the Actual Service Cost, which shall
be defined as the sum of the direct wages, salaries
and benefits costs incurred by NetFRAME in connection
with the NetFRAME Employee Services in accordance
with the rates set forth on Schedule 1.1 hereto.
ii. Invoices; Remittances. NetFRAME shall invoice
DecisionOne monthly for the Actual Service Cost.
Payment from DecisionOne is due within thirty (30)
business days of receipt of such invoice from
NetFRAME.
Section 2. Term of Agreement. Except as otherwise provided
herein or unless earlier terminated pursuant to
Section 6 hereof, the services specified hereunder
shall continue for no more than ninety (90) days
after the date hereof.
Section 3. Insurance. NetFRAME shall maintain and keep in force
through the term of this Agreement all such insurance
coverages in such amounts as it maintains as of the
Closing Date (as defined in the Purchase Agreement)
with respect to the NetFRAME Employees, including but
not limited to liability and loss coverage with
respect to the physical facilities utilized by the
NetFRAME Employees and workers' compensation.
Section 4. Confidentiality.
<PAGE> 63
a. Confidential Information. As used herein, Confidential
Information shall mean any information of the other party
(excluding information covered by the Purchase Agreement the
confidentiality of which shall be governed by the Purchase
Agreement) that might reasonably be considered proprietary,
sensitive or private, including, but not limited to, the
following:
i. Technical information, know-how, data, techniques,
discoveries, inventions, ideas, trade secrets,
unpublished patent applications, formulae, analyses,
laboratory reports, other reports, financial
information, studies, findings or other information
relating to such other party or the technology or
methods or techniques used by such other party,
whether or not contained in samples, documents,
sketches, photographs, drawings, lists and the like;
ii. Data and other information employed in connection
with the marketing of the products or services of
such other party including cost information, business
policies and procedures, revenues and markets,
distributors and customers and similar items of
information, whether or not contained in documents or
other tangible materials; and
iii. Any other information obtained by either party that
is not generally known to, and not readily
ascertainable by proper means by, third parties.
b. Confidentiality. Each party agrees from and after the Closing
Date that the other party's Confidential Information will be
disclosed or made available only to those of its employees or
consultants who have been advised of the terms of the Purchase
Agreement and this Agreement. Each party will take reasonable
measures to maintain the confidentiality of the other party's
Confidential Information, and in no event will those measures
be less than the measures it uses for its own Confidential
Information of a similar type. Each party will immediately
give notice to the other party of any unauthorized use or
disclosure of such other party's Confidential Information.
Each party agrees to use commercially reasonable efforts to
assist such other party in remedying any unauthorized use or
disclosure of the other party's Confidential Information.
Notwithstanding anything to the contrary herein, no party
shall have any obligation under this Agreement with respect to
any information that:
i. is or becomes publicly available, by other than
unauthorized disclosure;
ii. is developed by employees or agents of either party
independently of and without reference to any
Confidential Information of the other party (such
developing party shall bear the burden of proving
such independent development);
iii. is disclosed to third parties by the other party
without restriction;
<PAGE> 64
iv. is received from a third party, who is rightfully in
possession of the information, without any obligation
to treat it as proprietary, or
v. is approved for release by written authorization of
the other party.
c. Compliance with Applicable Law. The provisions of this Section
4 shall not be deemed to obligate either party to do or
refrain from doing any act, the doing or not doing of which
would cause or reasonably be expected to cause such party to
fail to fulfill or comply with any obligation or requirement
imposed by any law or regulation; provided that any
disclosures of Confidential Information made to fulfill or
comply with any such law or regulation shall be made (a) only
after notice to the other party and (b) under conditions
invoking all confidentiality protections as are available by
law or regulation.
Section 5. Independent Contractor. In the performance of all
services hereunder, the parties are at all times to
be acting and performing as independent contractors
and it is further specifically acknowledged that
nothing in this Agreement shall be considered to
create more than the mutual duties, responsibilities
and benefits specifically set forth herein. This
Agreement is not and shall not be considered an
employer-employee relationship, a
contractor-subcontractor relationship, a
landlord-tenant relationship, a joint venture or a
partnership of any kind, and neither party shall
represent to any third persons that any such
relationship exists. Neither party has the authority
to, nor shall it, bind or commit the other to any
contractual obligation.
Section 6. Termination. This Agreement may be terminated by
either party in the event of a material breach of
this Agreement, after an opportunity to cure such
breach within 14 days of notice being given to the
breaching party.
Section 7. Effect of Expiration of Term; Effect of Termination.
a. Expiration of the Term or Termination Without Breach. In the
event of expiration of the term of this Agreement pursuant to
Section 2 above, DecisionOne shall have the following
obligations:
i. to remit any Actual Service Costs unpaid as of the
date of expiration or termination; and
ii. at its sole cost and expense, to remove immediately
all equipment, inventory and other property and
employees of DecisionOne from the NetFRAME facilities
theretofore occupied.
<PAGE> 65
b. Termination for DecisionOne's Breach. In the event of
termination of this Agreement by NetFRAME pursuant to Section
6 above, DecisionOne shall have all of the obligations set
forth above in Section 7.1 and shall further be liable for any
losses, damages or claims of NetFRAME with respect to
DecisionOne's breach.
c. Termination for NetFRAME's Breach. In the event of termination
of this Agreement by DecisionOne pursuant to Section 6 above,
NetFRAME shall be liable for any losses, damages or claims of
DecisionOne with respect to NetFRAME's breach, which liability
may be set off against any amounts due to NetFRAME from
DecisionOne pursuant to this Agreement.
Section 8. Notices. Any notice required or permitted to be given
under this Agreement shall be sufficient if in
writing and if sent by registered or certified mail
as follows:
If to NetFRAME: NetFRAME Systems Incorporated
1545 Barber Lane
Milpitas, California 95035
With a copy to:
If to DecisionOne: DecisionOne Corporation
50 East Swedesford Road
Frazer, Pennsylvania 19355
Attention: Corporate Development Executive
With a copy to: Vincent M. Dadamo, Esquire
DecisionOne Corporation
50 East Swedesford Road
Frazer, Pennsylvania 19355
or such other address as the parties hereto may from time to time designate in
writing.
Section 9. Entire Agreement. This Agreement constitutes the
entire agreement between the parties with respect to
the subject matter contained herein and no
representations, warranties, covenants,
understandings, agreements or otherwise in relation
thereto exist between the parties, except as herein
expressly set forth. No modification, amendment,
addition to or termination of this Agreement shall be
valid or enforceable unless in writing and signed by
the parties hereto.
<PAGE> 66
Section 10. Applicable Law. This Agreement shall be exclusively
governed by and construed in accordance with the laws
of the Commonwealth of Pennsylvania, without regard
to the choice of law principles thereof.
Section 11. Severability. The invalidity or unenforceability of
any particular provision of this Agreement shall not
affect the other provisions hereof and this Agreement
shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
Section 12. Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This
Agreement shall not be assignable by either party,
either in whole or in part, without the prior written
consent of the other party.
Section 13. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed
an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
NetFRAME SYSTEMS INCORPORATED
By:______________________________
Title:___________________________
DECISIONONE CORPORATION
By:______________________________
Title:___________________________
<PAGE> 67
<TABLE>
<CAPTION>
Last Review
Employee Name/Title Salary Hire Date Date
- ----------------------- ------- ------- -------
<S> <C> <C> <C>
Naheed Alibhair $74,200 4-1-96 5-1-97
Escalation Engr
Derek Casanares $73,000 9-13-95 9-1-96
Technical Supt Engr
Gillyn Couch $72,000 1-11-93 9-16-96
Escalation Engr
Geoff Iverson $77,500 6-16-97
Technical Supt Engr
Azmir Mohammed $80,000 7-11-94 1-1-97
Escalation Manager
Weyman Tso $70,200 11-1-95 1-16-97
Technical Supt Engr
Christine Graham $63,000 5-17-93 8-1-97
Business Systems Analyst
*Tim Gray $66,126 5-1-95 5-1-97
Manager, Logistics
*Leonard Fyock $45,115 12-15-93 5-1-97
Customer Svc Technician
*Jennifer Vaughn $32,282 12-22-95 5-1-97
RMA Administrator
</TABLE>
*After these employee's performance reviews have been processed, their salaries
will increase
5-16-97
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUN-28-1997
<CASH> 2,209
<SECURITIES> 0
<RECEIVABLES> 5,651
<ALLOWANCES> 1,039
<INVENTORY> 8,319
<CURRENT-ASSETS> 15,940
<PP&E> 25,496
<DEPRECIATION> 19,826
<TOTAL-ASSETS> 22,670
<CURRENT-LIABILITIES> 14,663
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 7,993
<TOTAL-LIABILITY-AND-EQUITY> 22,670
<SALES> 17,344
<TOTAL-REVENUES> 19,984
<CGS> 16,263
<TOTAL-COSTS> 18,571
<OTHER-EXPENSES> 25,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (233)
<INCOME-PRETAX> (24,154)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,154)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,154)
<EPS-PRIMARY> (1.73)
<EPS-DILUTED> (1.73)
</TABLE>
