CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH
OMISSIONS.
Exhibit 10.1
------------
Agreement by and between Shiva Corporation, a Massachusetts
corporation, with offices at 28 Crosby Drive, Bedford, MA and
Northern Telecom Inc., a Delaware corporation, with offices at
4001 E. Chapel Hill-Nelson Hwy., Research Triangle Park, NC 27709
for itself and for the benefit of its parent, Northern Telecom
Limited and Northern Telecom Limited's SUBISDIARIES AND
AFFILIATES.
1. This Agreement is made pursuant to and hereby incorporates
by reference the terms and conditions of that certain
Marketing and Distribution Agreement ("M&A Agreement"),
between Shiva Corporation and Northern Telecom Limited,
effective as of March 21, 1997. Unless otherwise specified
herein, terms defined in the M&A Agreement which are used
herein shall have the same meaning as defined in the M&A
Agreement.
2. The parties hereby agree that the attached Addenda 6, 7 and
8 are added to and made a part of Exhibit E of the M&A
Agreement.
3. Notwithstanding anything to the contrary in the M&A
Agreement, including, without limitation, Addendum 3 to
Exhibit E, each party is hereby relieved of any restriction
stated in the M&A Agreement or elsewhere on its right or
ability to perform or have performed research and
development with respect to any products of THIRD PARTIES,
or to promote, market, sell or otherwise distribute products
of any THIRD PARTIES, or any obligation to promote the use,
marketing or sale of products of the other party, provided
that the restriction set forth under "License Type" in
Exhibit E, Addendum 6 shall remain in effect.
4. Notwithstanding anything in Section 16.5 of the M&A
Agreement to the contrary, the parties acknowledge that (a)
NORTEL shall have the rights set forth in Section 16.5 of
the M&A Agreement to obtain a fully paid-up license with
respect to the PRODUCTS collectively described in Exhibit E,
Addenda 6 and 7 for the sum of Twenty Million Dollars
($20,000,000.00), provided that such sum shall be payable in
equal quarterly installments over ten (10) calendar quarters
in accordance with Section 16.5, and (b) such rights may be
exercised by NORTEL at any time after the execution of this
Agreement by the parties. Such sum of Twenty Million
Dollars ($20,000,000.00) is a net amount which shall not be
reduced by any royalty payments (prepaid or otherwise) paid
by NORTEL to SHIVA pursuant to the Agreement and upon the
exercise by NORTEL of its rights as set forth in this
Section, NORTEL shall have no other right to repayment of
any such royalty payments.
5. Upon the exercise under Section 4 above by NORTEL of its
rights pursuant to Section 16.5 of the M&A Agreement (as
amended as described above) with respect to the PRODUCTS
described in Exhibit E, Addenda 6 and 7, SHIVA shall at
NORTEL's option, (which may be exercised through December 31,
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH
OMISSIONS.
1998) and for and in consideration of the payment of Six
Million Dollars ($6,000,000.00) by NORTEL to SHIVA: (a)
provide to NORTEL within ***** (**) days of the exercise of
such option a ******* in form satisfactory to NORTEL pursuant
to which NORTEL, and ****************** NORTEL may *********
("NORTEL ********"), including, but not limited to,
************************** and/or its parent, subsidiary and
affiliated companies, entities and all of their shareholders,
directors, officers, employees, attorneys, agents, successor
and assigned (collectively, "*****") shall be *********** and
************************* any and all ****** and ****** which
SHIVA (including its offers, directors, shareholders,
employees, agents, assigns, transferees and beneficiaries)
may have ******************************** NORTEL, a NORTEL
********, including, but not limited to, *****, including,
but not limited to, any such ****** and ****** which SHIVA
************ NORTEL by letter dated January 29, 1998 from
James L. Zucco to Glenn Falcao, and all related or similar
*****************, including without limitation any patent,
trade secret and/or other intellectual property ************
or ******************and any ********************** or
****************** or
************************************************, or (b)
assign to NORTEL or any NORTEL ******** all such
**** and ********* within such ***** (**) day period in form
satisfactory to NORTEL. Such ********** assignment shall be
effective upon payment of the sum of Six Million Dollars
($6,000,000.00) set forth in this Section and shall be
subject to revocation by SHIVA in the event NORTEL is in
breach of its obligation to pay any of the quarterly payments
set forth in Section 4 for more than thirty (30) days after
written notice of such breach is provided to NORTEL by SHIVA.
Such release or assignment shall also not be subject to or
conditioned upon any regulatory approvals which may be
required with respect to the exercise by NORTEL of the rights
set forth in Section 4.
6. Notwithstanding the provisions of Section 17.13 of the M&A
Agreement, NORTEL shall have the right to extend offers of
employment to SHIVA's SPG personnel for a four (4) week
period following the execution of this Agreement. NORTEL
shall provide SHIVA with a list of the SPG personnel who
accept such offers.
7. Unless otherwise specified in the M&A Agreement or an
Addendum to Exhibit E to the M&A Agreement, SHIVA's standard
and published United States list price for each PRODUCT
ordered by NORTEL shall be reduced by a discount of *****
percent (**%).
8. Contemporaneously with the execution of this Agreement,
Northern Telecom Inc. shall issue unconditional, non-
cancelable blanket purchase orders to SHIVA for the
following:
a. reimbursement of One Million Two Hundred Thousand Dollars
($1,200,000.00) in first quarter 1998 SPG expenses, and
b. reimbursement of Two Million Five Hundred Thousand
Dollars ($2,500,000.00) in P3/P4 prototype material
expense.
Contemporaneously with the execution of this Agreement,
Northern Telecom Inc. shall issue an unconditional, non-
cancelable blanket purchase order to SHIVA for a minimum of
Five Million Dollars ($5,000,000.00) to cover releases of
PRODUCTS to be issued during the first three (3) calendar
months of 1998 provided that the foregoing Five Million
Dollar ($5,000,000.00) commitment shall be reduced by the
dollar value of any purchase orders which Northern Telecom
Inc. may have issued between January 1, 1998 and the date of
execution of this Agreement.
Thereafter, on or before the first day of each of the next
succeeding seven (7) calendar quarters, NORTEL shall issue an
unconditional, non-cancelable blanket purchase order to
SHIVA, each for a minimum of Five Million Dollars
($5,000,000.00) to cover releases of PRODUCTS to be issued
during the three (3) calendar months of each of said calendar
quarters, provided that in the event NORTEL fails to exercise
its options pursuant to Sections 4 and 5 of this Agreement,
NORTEL shall issue such blanket purchase orders for three (3)
additional calendar quarters beyond the seven (7) quarters
referred to above.
The releases issued pursuant to each of the blanket purchase
orders referenced in the two (2) preceding paragraphs shall
identify the specific PRODUCTS to be shipped and the dates
said PRODUCTS shall be shipped.
Notwithstanding anything to the contrary above, NORTEL's
obligations to issue or to continue to issue any blanket
purchase orders shall be deemed fully satisfied, and NORTEL
shall have no further obligation to issue any blanket
purchase orders after it has issued blanket purchase orders,
or any other purchase orders regardless of the number of such
blanket purchase orders or other purchase orders theretofore
issued, totaling, in the aggregate, Forty Million Dollars
($40,000,000.00) or, if NORTEL is required to issue blanket
purchase orders for three (3) additional calendar quarters
pursuant to the second paragraph of this Section, Fifty-Five
Million Dollars ($55,000,000.00).
9. The total fee for the development to be performed by Shiva
with respect to the RCAS and SS7 on Rapport Model 112
Products set forth in Addenda 6 and 7 to Exhibit E, attached
hereto, shall be $12 Million, payable pursuant to two (2)
unconditional, non-cancelable purchase orders issued upon
execution of this Agreement with payment terms as follows:
a. The first payment shall be due and payable upon execution
of this Agreement, and
b. The second payment shall be due and payable on April 1,
1998.
Shiva shall use commercially reasonable efforts to pursue the
development of the RCAS and SS7 on Rapport Model 112 Products
set forth in Addenda 6 and 7 to Exhibit E.
10. Notwithstanding the description of the blanket purchase
orders and purchase orders in Sections 8 and 9 above as
unconditional and non-cancelable, NORTEL reserves the right
to cancel any of said blanket purchase orders and purchase
orders if SHIVA is in breach of its obligations under any one
or more of such blanket purchase orders or purchase orders of
the same type (e.g. a breach of a development purchase order
may act to allow cancellation of development purchase orders
but may not be used to cancel product purchase orders), or
any one or more of the conditions described in Section 16.3
of the M&A Agreement occurs with respect to SHIVA.
11. NORTEL hereby agrees to supply SHIVA with NORTEL's model of
the cabinet or chassis consisting of a set of designed
subassemblies and a shelf, cable management panels, cooling
unit, air intake baffle and breaker interface panel (the
"RCAS Chassis") for the RCAS PRODUCT described in Exhibit E,
Addendum 6, of this Agreement, on an as-ordered basis, for as
long as NORTEL continues to manufacture the RCAS Chassis,
under such terms as shall be mutually agreed upon, provided
that such terms shall include the following: (a) the price
for such RCAS Chassis shall be the product obtained by
multiplying NORTEL's standard cost of goods sold (as used by
NORTEL under generally accepted accounting practices to
determine the cost of goods sold for financial reporting
purposes) by a factor of 1.25, and (b) SHIVA shall deliver a
rolling forecast every thirty (30) days of its requirements
for the next twelve (12) months of the RCAS Chassis and
NORTEL shall accept orders from SHIVA consistent with the
most recent forecast for shipment within sixty (60) days.
12. The parties agree to prepare a mutually acceptable joint
press release that describes the terms of this Agreement,
such press release to occur as soon as SHIVA's federal
securities regulations obligation requires, subsequent to
execution.
13. Except as otherwise specified herein, the M&A Agreement shall
remain unchanged and enforceable in accordance with its
terms.
Shiva Corporation Northern Telecom Inc.
By: /s/ James L. Zucco By: /s/ Glenn Falcao
---------------------- -------------------------
Vice President/General
Manager
Title: President & CEO Title: Public Data Networks
------------------- ----------------------
Date: February 27, 1998 Date: February 27, 1998
------------------- ----------------------
CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH
OMISSIONS.
EXHIBIT E
SPECIFIC PRODUCT/FEATURE ADDENDUM 6-RCAS
SPECIFIC PRODUCT
- ----------------
RCAS (as developed per the Specifications attached hereto)
License Type
- ------------
Type A,
Type A, provided that anything in the M&A Agreement or this
Addendum notwithstanding, so long as NORTEL shall have exercised
its rights pursuant to Section 4 of this Agreement by June 30,
1998, SHIVA shall not promote, market, sell, distribute or
otherwise convey any RCAS PRODUCTS or license or otherwise convey
any INTELLECTUAL PROPERTY with respect to any RCAS PRODUCTS to
(a) any of ******** THIRD PARTY competitors identified in Exhibit
K of the M&A Agreement during the twelve (12) month period
commencing on the date of such exercise by NORTEL, and (b) to any
of SHIVA's current or future channel partners for such twelve
(12) month period.
Royalties
- ---------
No separate royalty fee is assessed. The price for the SPECIFIC
PRODUCT RCAS identified in this Addendum 6 shall be the product
obtained by multiplying SHIVA's standard cost of goods sold (as
used by SHIVA under generally accepted accounting practices to
determine the cost of goods sold for financial reporting
purposes) multiplied by a factor of 1.75.
Development Provisions
- ----------------------
Upon execution of this Agreement, SHIVA shall promptly commence
and diligently pursue the development of the Specific Product
identified in this Addendum in accordance with the Specifications
attached as Schedule 1 hereto.
SHIVA shall not include in any deliverable any technology,
including, without limitation, any software, firmware or hardware
rights, in which it does not own all right, title and interest,
except for the NORTEL BACKGROUND INTELLECTUAL PROPERTY identified
below, and solely to the extent set forth below.
Each Party shall each retain all right, title and interest in, to
and under its respective BACKGROUND INTELLECTUAL PROPERTY. Each
Party may freely use, enjoy, license, dispose of, or otherwise
exploit any of its respective rights, titles and interests in, to
and under its BACKGROUND INTELLECTUAL PROPERTY in its sole
discretion. Except to the extent of NORTEL's funding of SHIVA
development under this Addendum pursuant to Section 9 of this
Agreement, all research and development costs and expenses
associated with a Party's BACKGROUND INTELLECTUAL PROPERTY shall
be borne by such Party and shall be for such Party's own account,
and no sums shall be due and payable by either Party to the other
with respect thereto.
NORTEL hereby grants to SHIVA a non-exclusive, nontransferable,
royalty free, license to use NORTEL BACKGROUND INTELLECTUAL
PROPERTY consisting of circuitry design provided by NORTEL to
SHIVA solely with respect to the Specific Product described in
this Addendum 6 in support of the development activities relating
to this Addendum 6, and solely with respect to the manufacture
and sale to NORTEL of the Specific Product identified in this
Addendum 6 under the terms of the M&A Agreement. Such license
shall automatically terminate upon the termination of the M&A
Agreement. SHIVA shall defend, indemnify and hold NORTEL harmless
with respect to any and al claims, liabilities, damages, costs
and expenses arising out of the exercise by SHIVA of such
license, except for such claims, liabilities, damages, costs and
expenses arising with respect to such Specific Products sold to
NORTEL by SHIVA. For purposes of the M&A Agreement, this
indemnity shall be deemed part of Section 15 thereof.
Except as explicitly provided herein, no other license is granted
under any INTELLECTUAL PROPERTY. For example, but without
limitation no license of any nature whatsoever is granted by
NORTEL to SHIVA with respect to NORTEL's Frame Breaker Interface
Panel.
Schedule I
Specifications
The following shall apply to the Software Specifications the
Software for SS7 on Rapport Model 112 and the Hardware and
Software for RCAS (collectively, "Pegasus").
The Delivery Date for all Deliverables associated with the items
identified below as the April 30, 1998 Deliverables shall be
April 30, 1998.
The Delivery Date for all Deliverables associated with the items
identified below as the June 30, 1998 Deliverables, including
Hardware and Software, shall be June 30, 1998.
Acceptance Criteria
Number of errors detected at Tech Trial finish must
not exceed:
Critical - severity 1: None
Major - severity 2: None
Minor 1 per 1000 lines of code
where:
Critical: bugs which cause the product to
crash.
Major: bugs which cause the product to fail to
function or which prevent effective
management of the product.
Minor: bugs for which a work-around is
available.
traffic carrying capacity -
256 simultaneous digital/analog calls
@17kbps - 20% spare CPU
documentation
all release 5.2 feature errors fixed in releasd
5.5
ShivOS 5.5 for Pegasus Content
April 30, 1998 Deliverables
IP Dialin - maximum of 256 calls
MLP dial-in calls - maximum number to be determined
connection to backbone (Egress Pipe) over 10/100Mbit/s
Ethernet
L2F (NAS)
IP Filtering enhancements from 5.2
Modem Enhancements from 5.2 - including updated Rockwell
modem code, improved modem diagnostics
Radius Enhancements from 5.2
IP address pools per phonegroup from 5.2
L2F NAS support including local L2F authentication from
5.2
Channelized T1/E1 support from 5.2
STAC version 5.2.2 from 5.2
New Modem MIBs from 5.2
TFTP configurable option from 5.2
PPP decode - including improvements since 5.2
Bootp discovery (as supported by SNM Windows) - utilizing
bootp mechanism from 5.2
Increased number of SNMP trap hosts - from 5.2
INC support - from 5.2
5.2.1 functionality - Auto-Alert, CLID, IP DoD,
TraceRoute, 2 way Authentication
PIAFS - from 5.2.4
Slot numbering changes - slots from 0 to 15
Slot discovery - algorithm to find what is installed in
what slot, including "dual" cards such as the
CPU/Ethernet card.
S115 CPU UARTs configured as 9600 baud for all operations
(LRAS uses 9600 and 19200 for different operations)
Bootp mode via the CPU pin reset button (as in
LanRoverD56) (not well tested)
Simple Menu system for admin port I
INC - support for periodic audits with 256 calls
Hot Insert/Remove software support for S117DMC-32 (as per
firmware spec - unscheduled not working)
Async-HDLC running on the DMC-32
Compression on the S116 T1/E1, including cross-bu7s
driver speed ups.
Other ShivOS Performance Enhancements (transparent to
user). E.g. single imput queue.
MVIP clocking auto-determination and O failover
I/O Alarm support for hardware failures - specifically
power supply and fans - includes O SNMP trap generation
MIB changes to support Alarms, Hot Swap and 16 slots
Shell command changes to support O Alarms, Hot Swap and
16 slots
Pre-bootstrap Manufacturing, Test and Product Integrity
code - configures by jumper settings
Improved Power-on Self Test
RCAS and IVPAC firmware branding
June 30, 1998 Deliverables
All of the April 30, 1998 Deliverables plus the
following:
S118 - Quad Serial Frame Relay Card
Frame Relay protocol module running on S116 and S118
cards.
Frame Relay on the S1`16 Quad T1/E1/PRI card
SS7
L2TP
EXHIBIT E
SPECIFIC PRODUCT/FEATURE
ADDENDUM 7-SS7 ON RAPPORT MODEL 112
SPECIFIC PRODUCT
- ----------------
SS7 on Rapport Model 112 (as developed per the Specifications
attached hereto)
License Type
Type A
Royalties
- ---------
No separate royalty fee is assessed.
Development Provisions
- ----------------------
Upon execution of this Agreement, SHIVA shall promptly commence
and diligently pursue the development of the Specific Product
identified in this Addendum in accordance with the Specifications
attached as Schedule 1 hereto.
SHIVA shall not include in any deliverable any technology,
including, without limitation, any software, firmware or hardware
rights, in which it does not own all right, title and interest,
except for the NORTEL BACKGROUND INTELLECTUAL PROPERTY identified
below, and solely to the extent set forth below.
Each Party shall each retain all right, title and interest in, to
and under its respective BACKGROUND INTELLECTUAL PROPERTY. Each
Party may freely use, enjoy, license, dispose of, or otherwise
exploit any of its respective rights, titles and interests in, to
and under its BACKGROUND INTELLECTUAL PROPERTY in its sole
discretion. Except to the extent of NORTEL's funding of SHIVA
development under this Addendum 7 pursuant to Section 9 of this
Agreement, all research and development costs and expenses
associated with a Party's BACKGROUND INTELLECTUAL PROPERTY shall
be borne by such Party and shall be for such Party's own account,
and no sums shall be due and payable by either Party to the other
with respect thereto.
NORTEL hereby grants to SHIVA a non-exclusive, nontransferable,
royalty free, license to use NORTEL BACKGROUND INTELLECTUAL
PROPERTY consisting of circuitry design provided by NORTEL to
SHIVA solely with respect to the Specific Product described in
this Addendum 7 in support of the development activities relating
to this Addendum 7, and solely with respect to the manufacture
and sale to NORTEL of the Specific Product identified in this
Addendum 7 under the terms of the M&A Agreement. Such license
shall automatically terminate upon the termination of the M&A
Agreement. SHIVA shall defend, indemnify and hold NORTEL
harmless with respect to any and al claims, liabilities, damages,
costs and expenses arising out of the exercise by SHIVA of such
license, except for such claims, liabilities, damages, costs and
expenses arising with respect to such Specific Products sold to
NORTEL by SHIVA. For purposes of the M&A Agreement, this
indemnity shall be deemed part of Section 15 thereof.
Except as explicitly provided herein, no other license is granted
under any INTELLECTUAL PROPERTY. For example, but without
limitation no license of any nature whatsoever is granted by
NORTEL to SHIVA with respect to NORTEL's Frame Breaker Interface
Panel.
Schedule I
Specifications
The following shall apply to the Software Specifications the
Software for SS7 on Rapport Model 112 and the Hardware and
Software for RCAS (collectively, "Pegasus").
The Delivery Date for all Deliverables associated with the items
identified below as the April 30, 1998 Deliverables shall be
April 30, 1998.
The Delivery Date for all Deliverables associated with the items
identified below as the June 30, 1998 Deliverables, including
Hardware and Software, shall be June 30, 1998.
Acceptance Criteria
Number of errors detected at Tech Trial finish must
not exceed:
Critical - severity 1: None
Major - severity 2: None
Minor 1 per 1000 lines of code
where:
Critical: bugs which cause the product to
crash.
Major: bugs which cause the product to fail to
function or which prevent effective
management of the product.
Minor: bugs for which a work-around is
available.
traffic carrying capacity -
256 simultaneous digital/analog calls
@17kbps - 20% spare CPU
documentation
all release 5.2 feature errors fixed in releasd
5.5
ShivOS 5.5 for Pegasus Content
April 30, 1998 Deliverables
IP Dialin - maximum of 256 calls
MLP dial-in calls - maximum number to be determined
connection to backbone (Egress Pipe) over 10/100Mbit/s
Ethernet
L2F (NAS)
IP Filtering enhancements from 5.2
Modem Enhancements from 5.2 - including updated Rockwell
modem code, improved modem diagnostics
Radius Enhancements from 5.2
IP address pools per phonegroup from 5.2
L2F NAS support including local L2F authentication from
5.2
Channelized T1/E1 support from 5.2
STAC version 5.2.2 from 5.2
New Modem MIBs from 5.2
TFTP configurable option from 5.2
PPP decode - including improvements since 5.2
Bootp discovery (as supported by SNM Windows) - utilizing
bootp mechanism from 5.2
Increased number of SNMP trap hosts - from 5.2
INC support - from 5.2
5.2.1 functionality - Auto-Alert, CLID, IP DoD,
TraceRoute, 2 way Authentication
PIAFS - from 5.2.4
Slot numbering changes - slots from 0 to 15
Slot discovery - algorithm to find what is installed in
what slot, including "dual" cards such as the
CPU/Ethernet card.
S115 CPU UARTs configured as 9600 baud for all operations
(LRAS uses 9600 and 19200 for different operations)
Bootp mode via the CPU pin reset button (as in
LanRoverD56) (not well tested)
Simple Menu system for admin port I
INC - support for periodic audits with 256 calls
Hot Insert/Remove software support for S117DMC-32 (as per
firmware spec - unscheduled not working)
Async-HDLC running on the DMC-32
Compression on the S116 T1/E1, including cross-bu7s
driver speed ups.
Other ShivOS Performance Enhancements (transparent to
user). E.g. single imput queue.
MVIP clocking auto-determination and O failover
I/O Alarm support for hardware failures - specifically
power supply and fans - includes O SNMP trap generation
MIB changes to support Alarms, Hot Swap and 16 slots
Shell command changes to support O Alarms, Hot Swap and
16 slots
Pre-bootstrap Manufacturing, Test and Product Integrity
code - configures by jumper settings
Improved Power-on Self Test
RCAS and IVPAC firmware branding
June 30, 1998 Deliverables
All of the April 30, 1998 Deliverables plus the
following:
S118 - Quad Serial Frame Relay Card
Frame Relay protocol module running on S116 and S118
cards.
Frame Relay on the S1`16 Quad T1/E1/PRI card
SS7
L2TP
EXHIBIT E
SPECIFIC PRODUCT/FEATURE
ADDENDUM 8 - OTHER SHIVA PRODUCTS
SPECIFIC PRODUCTS
- -----------------
All products manufactured or marketed by SHIVA which are not
otherwise covered by another Addenda to Exhibit E of the M&A
Agreement.
License Type
- ------------
Type A, unless otherwise agreed in writing.
Royalties
- ---------
No separate royalty fee is assessed.