1
* Certain confidential portions of this Exhibit were omitted by means of
blacking out the text (the "Xxxx"). This Exhibit has been filed separately
with the Secretary of the Commission without the Xxxx pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934.
EXHIBIT 10.5
MASTER AGREEMENT
Between
NORTHERN TELECOM LIMITED
And
APPLIED DIGITAL ACCESS, INC.
2
TABLE OF CONTENTS
Page
----
ARTICLE 1 - DEFINITIONS......................................................................................... 1
ARTICLE 2 - CONTRACT DOCUMENTS.................................................................................. 3
ARTICLE 3 - PERIOD OF PERFORMANCE............................................................................... 3
ARTICLE 4 - CONSIDERATION....................................................................................... 3
ARTICLE 5 - PAYMENT SCHEDULE.................................................................................... 4
ARTICLE 6 - INVOICES............................................................................................ 5
ARTICLE 7 - AUDIT............................................................................................... 5
ARTICLE 8 - INFORMATION FROM NORTEL.............................................................................. 6
ARTICLE 9 - STATUS REPORTS....................................................................................... 6
ARTICLE 10 - MEETINGS............................................................................................ 6
ARTICLE 11 - INDEPENDENT CONTRACTOR.............................................................................. 7
ARTICLE 12 - CHANGE CONTROL PROCEDURES AND ACCEPTANCE............................................................ 7
ARTICLE 13 - MINIMUM PURCHASE COMMITMENT......................................................................... 8
ARTICLE 14 - TERMINATION FOR CONVENIENCE......................................................................... 8
ARTICLE 15 - TERMINATION FOR DEFAULT............................................................................. 9
ARTICLE 16 - CHANGE IN CONTROL.................................................................................. 10
ARTICLE 17 - RIGHTS NOT CONFERRED............................................................................... 10
ARTICLE 18 - INVENTIONS AND IMPROVEMENTS
3
Page
----
ARTICLE 19 - ASSIGNMENT...........................................................................................
ARTICLE 20 - COMPLIANCE WITH LAW...................................................................................
ARTICLE 21 - PUBLICITY RELEASE.....................................................................................
ARTICLE 22 - CONFIDENTIAL INFORMATION..............................................................................
ARTICLE 23 - PATENTS AND INFORMATION...............................................................................
ARTICLE 24 - WARRANTY AND LIABILITY................................................................................
ARTICLE 25 - SPONSORS AND PRIMES...................................................................................
ARTICLE 26 - NOTICES...............................................................................................
ARTICLE 27 - APPLICABLE LAW........................................................................................
ARTICLE 28 - CONTINUING OBLIGATIONS................................................................................
ARTICLE 29 - WAIVERS...............................................................................................
ARTICLE 30 - TERM OF AGREEMENT.....................................................................................
ARTICLE 31 - ENTIRETY OF CONTRACT..................................................................................
ARTICLE 32 - FORCE MAJEURE.........................................................................................
ARTICLE 33 - ARBITRATION...........................................................................................
ARTICLE 34 - AMENDMENT.............................................................................................
ARTICLE 35 - WITHHOLDING...........................................................................................
4
THIS MASTER AGREEMENT is made as of the 26th day of June, 1997.
BETWEEN:
NORTHERN TELECOM LIMITED, a company incorporated under the laws of
Canada, having its head office at Xxxxx 000, 0000 Xxxxx Xxxx, Xxxxxxxx,
Xxxxxxx
(hereinafter called "Nortel"),
OF THE FIRST PART
AND:
APPLIED DIGITAL ACCESS, INC., a company incorporated under the laws of
the State of California, having its head office at 0000 Xxxxxxxx Xxxx,
Xxx Xxxxx, Xxxxxxxxxx, 00000, XXX
(hereinafter called "ADA"),
OF THE SECOND PART
WHEREAS:
A. ADA and Nortel had previously entered into a Master Agreement dated
July 15, 1996 (the "Prior Agreement"), pursuant to which ADA performed
certain research and development activities for Nortel from time to
time subject to the terms and conditions of such agreement;
B. ADA and Nortel wish to cancel the Prior Agreement and replace it with
the terms and conditions set out herein:
NOW THEREFORE in consideration of the premises and of the mutual covenants and
agreements hereinafter set forth and contained, this agreement witnesseth:
ARTICLE 1. DEFINITIONS
In this Master Agreement and any Work Schedule, unless there is something in the
subject matter or context inconsistent therewith, the expressions following
shall have the meanings indicated below:
"ADA Prime" has the meaning ascribed thereto in Section 25.1 hereof.
Page 1
5
"Acceptance" has the meaning ascribed thereto in Section 12.4 hereof.
"Business Day" means each of Monday, Tuesday, Wednesday, Thursday and Friday,
except when any such day occurs on a statutory holiday in British Columbia;
"Commercial Specifications" means the specifications approved by Nortel for use
in developing Custom Software and Custom Hardware and upon which the technical
proposal is based;
"Contract Amount" means the dollar amount specified in any purchase order or
Work Schedule to be paid to ADA;
"Custom Software" means the computer programs which are to be developed by ADA
under the Work Schedule in accordance with the Commercial Specifications
referred to in such Work Schedule, including all source and object code listings
and all related documentation and design data, including but not limited to,
design specifications and descriptions, change control documents, calculation
formulae and algorithms for such software;
"Deliverables" means those items (tangible and/or intangible) which are
identified in the Work Schedule and which are to be provided to Nortel by ADA
pursuant to the applicable Development Agreement, and shall include items such
as, but not be limited Hardware, Custom Software, Software, Services, details of
the development environment documentation, reports, schedules and specifications
as specified in the applicable Development Agreement;
"Development Agreement" means this Master Agreement and any Work Schedule
attached hereto pursuant to Section 2.6 hereof;
"Full Price" means the full price for Work under a Development Agreement as set
forth in the Work Schedule or Development Agreement.
"Hardware" means original equipment manufacture (OEM) equipment which is to be
developed or qualified by ADA in accordance with the specifications referred to
in the Work Schedule, including all mechanical and electrical drawings for
components specified to the extent of ADA's legal right to do so.
"Master Agreement" means this document;
"Milestones" means the intermediate and final achievement dates specified in the
relevant Work Schedule that act as guide-posts for monitoring the progress of
the Work by identifying particularly critical portions of the Work and their
completion deadlines;
"Minimum Purchase Commitment" has the meaning ascribed thereto in Section 13.1.
Page 2
6
"Nortel Customer" means the end user, if any, identified in any purchase order
or any Work Schedule to whom Nortel will be providing the Custom Software under
such Work Schedule;
"Nortel Prime" has the meaning ascribed thereto in Section 25.1 hereof.
"RFQ" or "Request for Quotation" has the meaning ascribed thereto in Section
2.3(b) hereof.
"Services" means the services specified in the Work Schedule to be provided by
ADA;
"Software" means the third-party software which is to be qualified by ADA in
accordance with the specifications referred to in the Work Schedule. Where such
software is required to be delivered to Nortel, or to be incorporated in a
Deliverable, this requirement shall be subject to ADA having the legal right to
do so, or to have Nortel's do so;
"Technical Proposal" means a systems requirements document, preliminary project
plan, quality plan, preliminary design review, high level design document,
interface specifications document, trackable schedule and integrated plan based
upon a Commercial Specification or equivalent as described in Section 2.3 hereof
and as set forth in ADA Document Number 00-0000-0000 (Product Development
Overview), for product development phases as follows: project inception phase,
systems requirements phase, preliminary design phase and high level design
phase.
"Work" means the research and development activities, including development of
the Custom Software or Hardware, as applicable, specified in the Work Schedule;
"Work Schedule" means the added specific details of the Work to be done,
attached to or referencing this Master Agreement which is mutually agreed to in
writing by the parties, as amended from time to time as set forth in Article 12
below.
ARTICLE 2. CONTRACT DOCUMENTS
2.1 Nortel may purchase design, support or other services from ADA by
either: (a) issuing a purchase order, or (b) making a verbal or written
request for support, in each case setting out in adequate detail the
nature of the service requested and the warranty, and other terms and
conditions applicable. ADA shall invoice Nortel for such services each
month at a rate of */person-hour with payment due within 30 days of
receipt of invoice by Nortel.
2.2 Appendix A to this Agreement, the "Transition Plan" sets out, inter
alia, certain services which ADA or its Affiliates shall provide to
Nortel hereunder. ADA hereby acknowledges that it has received copies
of the quotations and purchase order pertaining to such services, and a
copy of Nortel's standard extended warranty plan. ADA hereby
* Certain confidential portions of this Exhibit were omitted by means of
blacking out the text (the "Xxxx"). This Exhibit has been filed separately
with the Secretary of the Commission without the Xxxx pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934.
Page 3
7
agrees to provide the services on the terms and conditions set out in
such purchase orders, quotations, and (where applicable) extended
warranty plan.
2.3 (a) In addition to Nortel's rights under Sections 2.1 and 2.2 hereof, Nortel
may purchase services from ADA by preparing a Commercial Specification or
equivalent and attaching such specification or equivalent to a RFQ with
sufficient information to enable ADA to prepare a quotation as described in
Section 2.4 below.
(b) All RFQs shall indicate one of the following:
(i) Whether ADA shall only be required to prepare a Technical
Proposal, but not obliged to perform any further Work upon completion of such
Technical Proposal, as contemplated in Section 2.6 below.
(ii) Whether ADA shall be required to commit to performing the
Work identified in the completed Technical Proposal in accordance with Section
2.6 below, if requested to do so by Nortel.
(iii) If neither (i) or (ii) is specified, the parties shall
meet, after the Technical Proposal is completes, to determine what further
action, if any, they will take with respect to that Technical Proposal.
2.4 Based upon the Commercial Specification and the RFQ, ADA will use
its best efforts (if such request can be accomplished with the resources
dedicated to the Minimum Purchase Commitment of Nortel) and its reasonable
efforts (if such request must be addressed by resources outside of those
dedicated to satisfying the Minimum Purchase Commitment) to prepare a quotation
for the preparation of a Technical Proposal using the resources that are
committed by ADA to satisfy Nortel's Minimum Purchase Commitment.
2.5 If Nortel accepts any quotation within the time frame for
acceptance set out in such quotation, if any, it shall signify such acceptance
by means of a purchase order approving the preparation of the Technical Proposal
by ADA.
2.6 Upon completion of the Technical Proposal and subject to Section
2.3 (b), Nortel may request ADA to perform certain Work based upon the Technical
Proposal, by means of a Work Schedule issued to ADA by Nortel, along with a
purchase order.
2.7 ADA shall, within five (5) Business Days of its receipt of the
purchase order and attached Work Schedule described in Section 2.5, advise
Nortel in writing of ADA's acceptance or rejection of the Work Schedule. or
Technical Proposals prepared pursuant to Section 2.3(b) (ii), ADA shall
acknowledge acceptance of the purchase order and attached Work Schedules, within
five (5) Business Days of receipt.
Page 4
8
2.8 Upon Nortel's receipt of the written acceptance of any purchase
order and attached Work Schedule by ADA, a contract for the performance of the
Work described in the Work Schedule (a "Development Agreement") will, in each
case, be formed. Each such Development Agreement will consist exclusively of the
terms and conditions of this Agreement and the Work Schedule related thereto. If
there is a conflict between this Agreement and the Work Schedule, this Agreement
shall govern unless it is specifically provided in the Work Schedule that the
Work Schedule shall govern.
2.9 The Work Schedule shall specify the Work to be done and the
Deliverables to be provided and shall include provisions with respect to the
following:
- the scope of the Work
- the estimated Contract Amount
- the project organization
- the project schedule including milestones
- the payment schedule
- Deliverables
- delivery dates
- the acceptance plan, conditions and specifications
- Nortel's responsibilities
- the change control procedure
and may include provisions with respect to the following:
- development process
- the decision request procedure
- shipping and transit insurance
- travel and living
- provisions and relating to follow-on work
- liquidated damages for late delivery
- additional ADA responsibilities
- assumptions and dependencies
- resource allocations
- risk assessment
- quality and process standards
ARTICLE 3. PERIOD OF PERFORMANCE
3.1 Both Nortel and ADA agree that time shall be of the essence herein
and ADA shall use its best efforts, within the current resource
commitment of Nortel, to commence and complete the Work in accordance
with the Work Schedule.
Page 5
9
ARTICLE 4. CONSIDERATION
4.1 Except for services purchased pursuant to Section 2.1 and 2.2, ADA
shall be paid the Contract Amount for performance of the Work in
accordance with one of the following payment options and the selection
of the appropriate payment option for each Development Agreement will
be described in the Work Schedule:
(A) Time and Material Payment Option, which shall include the
following:
(i) An estimate of the price to Nortel to perform the Work,
together with an estimate of the price to perform that portion of the
Work applicable to each Milestone.
(ii) ADA will invoice Nortel monthly for the Work on the following
basis:
a. The actual hours required to perform the Work, in
accordance with the provisions of the Work Schedule, multiplied by the
hourly rate per employee classification, as agreed to by the parties;
b. All materials, contractors, and other preapproved project
expenses reasonably incurred by ADA in connection with the performance
of the Work, at cost plus a markup as agreed to by the parties;
c. All pre-approved travel expenses reasonably incurred by ADA
in connection with the performance of the Work, at cost plus a markup
as agreed to by the parties.
(iii) ADA shall notify Nortel forthwith upon ADA becoming aware
during the course of performance of the Work that the actual price of
the Work or any portion of the Work applicable to any Milestone is
likely to exceed the estimated price of the Work or portion of the
Work, as the case may be (hereinafter called the "Budget Overrun").
In addition to such notice, ADA shall forthwith provide Nortel with
a written report setting out ADA's explanation or understanding of the
causes of any such Budget Overrun and ADA's estimate of the cost to
Nortel to complete the Work or that portion of the Work applicable to
the Milestone.
(v) At such time as the price of performance of the Work equals the
estimated total price of the Work prior to completion of the Work, ADA
shall advise Nortel and no further costs shall be incurred by ADA
without the prior written consent of Nortel. Nortel will provide such
written consent in a timely manner, or will instruct ADA as to what
action to take with regard to the unfinished Work.
Page 6
10
(B) Firm Price Option, which will mean ADA will perform the Work
for a firm cost agreed upon in advance and set forth in the Work
Schedule. ADA shall be solely responsible for any Budget Overruns.
4.2 The Contract Amount, unless otherwise specifically provided in any
purchase order or Work Schedule, is exclusive of any goods and services
tax, custom and excise duties, provincial, sales, use, ad valorem, or
franchise taxes, or other similar taxes or duties. Any such amounts
billed by ADA to Nortel will be paid promptly 30 days from the date of
receipt of the invoice to be paid, however, Nortel shall have 10 days
to dispute any invoice, failing which the invoice shall be paid within
the aforementioned 30 days. Payment shall not be due until the dispute
is settled.
4.3 ADA provides no warranty, actual or implied, that the work
performed will qualify as eligible scientific research and experimental
development as defined in the Income Tax Act. ADA agrees that it will
take all commercially reasonable steps and provide all reasonable
assistance to establish such eligibility, at Nortel request and
expense.
4.4 The parties acknowledge that certain Work Schedules may contain
Work to be carried out partly under both Payment Options.
ARTICLE 5. PAYMENT SCHEDULE
5.1 Any Development Agreement entered into between Nortel and ADA
pursuant to the terms of this Master Agreement shall provide for
payment to be made pursuant to the following options:
Page 7
11
(a) Time and Material Payment Option:
Under the Time and Material Payment Option, ADA will issue monthly
invoices to Nortel in connection with the Work in accordance with the
provisions of Section 4.1 (A) (ii) hereof. Prior to the issuance of any
invoice, the ADA Prime, shall certify to Nortel in writing that such
amounts were calculated according to the formula as agreed to between
the parties, and were reasonably expended or incurred by ADA in the
performance of the Work and attach said writing to the invoice. ADA
will be paid the amount so invoiced, as described in Article 6 below.
(b) Firm Price Option:
Under the Firm Price Option, unless agreed otherwise in the Work
Schedule, ADA shall only issue an invoice upon delivery of any of the
Deliverables, which invoice shall become due on Acceptance of those
Deliverables for the value of those Deliverables, as set out in the
Work Schedules.
5.2 An alternative payment arrangement may be negotiated for each
project by mutual written agreement of Nortel and ADA.
ARTICLE 6. INVOICES
6.1 A maximum of one invoice per month shall be issued for each
purchase order issued by Nortel. Labour will be broken down into total
hours and total dollars per invoice and expenses incurred will be
broken down by category in accordance with ADA's normal accounting
methods. Terms of payment shall be thirty (30) days from date of
receipt of invoice by Nortel provided, however, that Nortel shall be
entitled to retain * per cent of the aggregate amount of all such
invoices under Firm Price Option contracts, until the fortieth (40th)
day following Acceptance of the Work. Nortel shall have ten (10) days
from receipt of invoice to dispute the accuracy of the invoice, failing
which the invoice shall be due as aforesaid. Payment shall not be due
until the dispute is settled.
6.2 Nortel shall pay simple interest at the rate of prime plus one
percent on all overdue amounts owing to ADA after thirty (30) days.
ARTICLE 7. AUDIT
7.1 ADA agrees to keep and maintain complete and accurate records of
costs incurred in connection with the performance of the Work, and
maintain books and accounts in accordance with generally accepted
accounting procedures, principles and practices, and in accordance with
such other procedures, principles and practices as may be specified in
* Certain confidential portions of this Exhibit were omitted by means of
blacking out the text (the "Xxxx"). This Exhibit has been filed separately
with the Secretary of the Commission without the Xxxx pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934.
Page 8
12
the applicable Work Schedule respecting all matters pertinent to this
Master Agreement and any Development Agreements formed hereunder. Upon
notice in writing, and at its expense, Nortel through its independent
auditors shall have access to and the right to audit all accounts and
records maintained for the Work during normal business hours. Provided,
however, that Nortel independent auditors shall not, unless otherwise
provided in the applicable Work Schedule, have such access or right to
audit such accounts and records for Work performed under the Firm Price
Option, save and except where the Development Agreement for the Work
has been terminated by Nortel in accordance with Article 15. Any claims
or discrepancies disclosed by such audit shall be made in writing to
ADA within a reasonable period of time after completion of such audit
for resolution between the Nortel Prime and the ADA Prime or by
reference to more senior management.
ARTICLE 8. INFORMATION FROM NORTEL
8.1 ADA shall use its commercially reasonable efforts to identify in
the Work Schedule all information or documentation required for it to
perform the Work and deliver the Deliverables in the Work Schedule.
However, if in execution of the Work, ADA shall require additional
information or documents from Nortel, Nortel shall provide same, if
possible, promptly upon written request and reasonable notice from ADA.
If Nortel fails to respond to any request for information or documents
as herein provided and the failure to provide such information or
documents results in ADA not being able to meet its Milestones as set
forth in the Work Schedule, the Milestones shall be extended by the
length of the period of delay so caused.
8.2 In the event any Milestones are extended due to the unavailability
of information and documents from Nortel, ADA agrees to use reasonable
efforts to allocate its manpower to other Work and to advise Nortel in
the event such manpower cannot, after the exercise of reasonable
efforts, be allocated to other Work.
8.3 As an alternative to extension of any Milestone, Nortel may direct
ADA to make assumptions regarding the information or documents required
by ADA from Nortel. Nortel will approve any reasonable assumptions made
by ADA and if such assumptions are subsequently shown to be invalid,
Nortel will provide ADA written approval to proceed with any necessary
re-Work and will treat such re-Work as a change in the Work pursuant to
Section 12.2.
ARTICLE 9. STATUS REPORTS
9.1 Status reports shall be detailed periodically or as set forth in
the Work Schedule and shall summarize progress, problems, financial
expenditure (including ADA's estimate of the price to complete the
Work), and highlights in the execution of the Work. ADA
Page 9
13
shall respond promptly, verbally or in writing, if requested by Nortel
to any comments or queries of Nortel resulting from the review of
status reports. ADA shall notify Nortel immediately upon the
satisfaction or achievement of any Milestone or upon any Deliverable
becoming available for evaluation by Nortel or delivery to Nortel.
ARTICLE 10. MEETINGS
10.1 At the request of either party and as specified in the Work
Schedule, Nortel and ADA shall meet to discuss matters related to the
Work including progress, review of results, analysis of problems,
financial expenditures, adequacy of information to be provided by
Nortel pursuant to any Development Agreement and changes in the Work.
10.2 Any costs incurred by ADA in participating in such meeting will:
(i) in the case of the Time and Material Payment Option, be billed
to Nortel as part of the Work,
(ii) in the case of Work performed under the Firm Price Payment
Option, be included in the Firm Price as an anticipated and reasonable
expense in performing the Work.
ARTICLE 11. INDEPENDENT CONTRACTOR
11.1 In the execution of the Work provided for herein, ADA shall
operate as an independent contractor, and nothing in this Master
Agreement or any Development Agreement formed hereunder shall be
construed to constitute ADA or any of its employees as an agent,
representative or employee of Nortel.
ARTICLE 12. CHANGE CONTROL PROCEDURES AND ACCEPTANCE
12.1 The Work Schedule shall have a corresponding change control
section to accommodate requests by Nortel for changes to the scope of
the Work. Such requests for change are subject to the procedures set
out in this Article 12.
12.2 Nortel-Originated Changes
Nortel may request changes to the Work in accordance with the following
procedure:
(a) Nortel shall advise ADA, in writing, of a desired change
specifying the desired change with sufficient details to enable ADA to
evaluate the change.
Page 10
14
(b) Following receipt of a change request ADA will within five (5)
Business Days provide Nortel with an estimate (the "Preliminary
Estimate") of the estimated time to assess the change and the estimated
price of preparing such assessment. If ADA determines that it cannot
prepare the Preliminary Estimate within such period, ADA will advise
Nortel of the date by which the Preliminary Estimate will be available
and ADA will deliver the Preliminary Estimate by such date.
(c) Following receipt of the Preliminary Estimate, Nortel will, within
five Business Days (the "Response Period"), advise ADA in writing
whether or not to proceed with the assessment of the requested change.
If Nortel advises ADA not to proceed, the change request shall be
deemed withdrawn and ADA shall take no further action in respect of it.
If ADA has not received written notice to proceed within the Response
Period, Nortel shall be deemed to have advised ADA not to proceed.
(d) If Nortel instructs ADA to proceed, ADA will prepare an assessment
(the "Assessment') of the impact, if any, of the desired change on the
Contract Amount, the Milestones, the time frame for completion, the
performance of the Deliverables and any other areas which in the
opinion of ADA are likely to be affected by the requested change.
(e) The Assessment shall constitute an offer from ADA to carry out
changes as requested subject to the provisions of the Assessment. The
offer shall be irrevocable for five (5) Business Days following the
receipt thereof by Nortel.
(f) If Nortel accepts ADA's offer, the Work Schedule shall be deemed to
incorporate the change on the terms stated in the Assessment.
(g) ADA shall be entitled to recover outside any limit of maximum
expenditure specified in the Work Schedule, the price of preparation of
the Preliminary Estimate and the Assessment regardless of whether the
Assessment or change is proceeded with.
(h) Any change which either increases or decreases costs or modifies
Milestones or Deliverables, shall be implemented only with the prior
written consent of the Nortel Prime and the ADA Prime.
12.3 ADA-Originated Changes
In the event ADA wishes to request a change it shall notify Nortel in
writing of the suggested change and provide Nortel with a Preliminary
Estimate and the provisions of 12.2 (c), (d), (e), (f) and (g) shall
apply except that ADA shall not be entitled to recover the cost of
preparing the Preliminary Estimate.
Page 11
15
12.4 Acceptance of Work Performed Under Firm Price Option
Acceptance of Work performed under the Firm Price Option ("Firm Price
Work") shall only occur after delivery of the Deliverable to Nortel and
only in the event that there are no priority 1 and 2 problems, as
defined by the MPR classification system dated August 10, 1992,
identified during the verification testing stage, which testing is
performed by Nortel. The test plan shall be approved by ADA for Firm
Price Work where such procedure is not feasible, the alternate
acceptance procedure shall be set out in the Work Schedule.
Notwithstanding the foregoing, Nortel will accept or reject the Firm
Price Work within sixty (60) days after delivery by ADA; failure to
give notice of acceptance or rejection within that period by Nortel
will constitute acceptance.
ARTICLE 13. MINIMUM PURCHASE COMMITMENT
13.1 During the period beginning on May 15, 1997, and ending on January
31, 1998, Nortel shall purchase at least * person-months of design
services from ADA, at a rate of */hour (the "Minimum Purchase
Commitment"). If Nortel fails to meet the Minimum Purchase Commitment
within the prescribed time for reasons other than force majeure or
reasons attributable to ADA, then Nortel shall pay ADA, as ADA's sole
and exclusive remedy, and amount equal to the difference between the
Minimum Purchase Commitment and the amount of design services ordered
by Nortel.
13.2 For purposes of calculating whether the Minimum Purchase
Commitment has been met, any services ordered by Nortel pursuant to the
Transition Plan (other than purchase order obligations and warranty
obligations expressly assumed under the Asset Purchase Agreement) shall
be included.
ARTICLE 14. TERMINATION FOR CONVENIENCE
14.1 Subject to the terms and conditions of this Master Agreement,
Nortel may, from time to time by giving written notice to ADA,
terminate any Development Agreement with respect to all or any portion
of the Work. Upon such termination notice being given, ADA shall cease
performance of the Work in accordance with and to the extent specified
in such notice. Nortel may, at any time, give one or more additional
termination notices with respect to all or any portions of the Work not
terminated by any previous termination notice.
14.2 Neither party shall be held liable for indirect or consequential
damages or loss of anticipated profits of the other party on account of
termination of this Agreement other than as set forth in this Article
15 or in Article 14.
* Certain confidential portions of this Exhibit were omitted by means of
blacking out the text (the "Xxxx"). This Exhibit has been filed separately
with the Secretary of the Commission without the Xxxx pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934.
Page 12
16
ARTICLE 15. TERMINATION FOR DEFAULT
15.1 Nortel may, at any time and from time to time, by notice of
default to ADA, terminate the whole or any part or parts of any
Development Agreement or this Agreement if ADA:
(i) fails to perform any of the other provisions of the Development
Agreement including performing the Work within the time or times
specified in the Work Schedule, or so fails to make progress so as to
endanger performance of the Development Agreement in accordance with
the Work Schedule, and, in either of these circumstances, does not cure
or take steps to promptly and diligently cure such failure within a
period of thirty (30) days after receipt of written notice from Nortel
or such longer period as Nortel may authorize; or
(ii)(a) applies for or consents to the appointment of a receiver,
trustee or liquidator of itself or of its property; or
(b) makes a general assignment for the benefit of creditors; or
(c) is adjudicated bankrupt or insolvent; or
(d) files a voluntary petition in bankruptcy or a petition or answer
seeking re-organization or an arrangement with creditors, or takes
advantage of any insolvency law, or admits to the material allegations
of a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding, or initiates a corporate action for the purpose
of effecting any of the foregoing.
15.2 ADA may, at any time and from time to time, by notice of default
to Nortel, terminate the whole or any part or parts of any Development
Agreement or this Agreement if Nortel:
(i) fails to perform any of the other provisions of the Development
Agreement including payment to ADA of amounts due thereunder, and does
not cure or take steps to promptly and diligently cure such failure
within a period of thirty (30) days after receipt of written notice
from ADA or such longer period as ADA may authorize; or
(ii)(a) applies for or consents to the appointment of a receiver,
trustee or liquidator of itself or of its property; or
(b) makes a general assignment for the benefit of creditors; or
(c) is adjudicated bankrupt or insolvent; or
Page 13
17
(d) files a voluntary petition in bankruptcy or a petition or answer
seeking re-organization or an arrangement with creditors, or takes
advantage of any insolvency law, or admits to the material allegations
of a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding, or initiates a corporate action for the purpose
of effecting any of the foregoing.
15.3 If Nortel terminates any Development Agreement as provided in
Section 15.1, ADA shall have no claims for any payment save as
hereinafter provided in this Article 15.
15.4 Upon a partial termination pursuant to this Article 15, ADA and
Nortel shall continue the performance of the Development Agreement to
the extent it is not terminated or otherwise affected by such partial
termination and shall not stop, suspend or impair any other aspect or
portion of the performance of the Development Agreement.
15.5 Upon a termination pursuant to this Article 15.1, and subject to
Article 18 below, Nortel, in addition to any other rights of Nortel in
this Article 15, may require ADA to transfer title and deliver to
Nortel, in the manner and to the extent directed by Nortel, any Work
which has not been delivered and accepted prior to such termination.
15.6 If, after notice of termination of the Development Agreement under
the provisions of this Article 15, it is determined by a court of
competent jurisdiction that the party allegedly in default was not in
default, such notice of termination shall be deemed to have been issued
pursuant to Article 14, TERMINATION FOR CONVENIENCE, and the rights and
obligations of ADA and Nortel shall be governed by the provisions of
that Article.
ARTICLE 16. CHANGE IN CONTROL
16.1 In the event that ADA becomes majority owned or controlled by an
entity which is a direct competitor of Nortel, ADA shall forthwith
provide written notification to Nortel of such change in majority
ownership or control. Within thirty (30) days of receipt of such
notice, Nortel may, in its sole discretion, elect to terminate without
cost or penalty whatsoever this Master Agreement provided the acquiring
entity is reasonably determined to be a direct competitor of Nortel.
ARTICLE 17. RIGHTS NOT CONFERRED
17.1 ADA agrees that this Master Agreement does not confer any right to
do all or any given proportion of Nortel's work.
ARTICLE 18. INVENTIONS AND IMPROVEMENTS
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18.1 ADA agrees to disclose and cause its employees to disclose
promptly to Nortel any inventions, designs or improvements capable of
patent, copyright or similar protection, made or conceived by such
employees either alone or jointly or with others in the course of or as
a result of the Work done hereunder, or as a result of information
supplied hereunder, directly or indirectly by Nortel. ADA further
agrees that all such inventions, designs or improvements shall without
further payment become and remain sole property of Nortel. Subject to
the provisions of Article 23, it is understood that any technology,
inventions, designs or improvements owned by ADA before starting the
Work remain the property of ADA, but shall be disclosed by notice in
writing to Nortel prior to starting the Work.
18.2 ADA agrees that it shall, at the direction and expense of Nortel
take all steps and will cause its employees to take all steps necessary
to apply for and to obtain patents, registered design or similar
protection in respect of any inventions, designs and improvements
which, by the provisions hereof, belong to Nortel in any part of the
world as Nortel may require and shall vest all such patents, registered
designs or similar protection in Nortel or as Nortel may direct;
provided ADA shall only be required to pursue such protection when the
costs associated with such pursuit are paid by Nortel.
18.3 ADA will, at the direction and expense of Nortel, render all
assistance and cause its employees to render all assistance within
their power to obtain and maintain any such patent, registered design
or similar protection and any extension thereof.
18.4 Each party warrants that it has and will maintain in effect during
the term of this Master Agreement, appropriate agreements with its
employees to carry out the obligations as to confidentiality and
inventions and improvements.
18.5 Unless the terms and conditions of any purchase order provide
otherwise, ADA shall own any Inventions that may be retained in
non-tangible form by ADA employees who had access to the Work.
ARTICLE 19. ASSIGNMENT
19.1 Neither party may assign all or any portion of this Master
Agreement, any Development Agreement formed hereunder or the Work
without the other party's prior written consent, such consent not to be
unreasonably withheld. Notwithstanding the foregoing, a party may
assign and transfer this Master Agreement and its rights and
obligations hereunder to its parents, affiliates or subsidiaries.
Furthermore, ADA may subcontract to ADA's wholly owned subsidiary, ADA
Canada Inc. ("ADA CANADA") any Services or Work, or any portion thereof
without obtaining Nortel's consent. In no
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event shall either party create any contractual relation between any
third party and the other.
ARTICLE 20. COMPLIANCE WITH LAW
20.1 ADA shall observe and comply with all applicable laws, ordinances,
codes and regulations of governmental agencies, including federal,
provincial, municipal and local governing bodies having jurisdiction
over the Work or any part thereof. All work performed by ADA must be in
accordance with such laws, ordinances, codes and regulations.
ARTICLE 21. PUBLICITY RELEASE
21.1 The parties understand and agree that they may not use each
other's name in any advertising or promotional material or publicity
release relating to the Work to be performed by the other hereunder
without the prior written consent of the other and that no publicity
release of the Work shall be made except with the prior written consent
of both parties, such consent not to be unreasonably withheld or
delayed.
ARTICLE 22. CONFIDENTIAL INFORMATION
22.1 All technical and commercial information, documentation and
know-how of every kind and description ("Information") supplied whether
before or after execution of this Master Agreement, other information
related thereto acquired or developed by either party in connection
with this Master Agreement or any Development Agreement, subject to
what is hereinafter provided, shall be confidential and the exclusive
property of the disclosing party, and the receiving party shall treat
and protect such Information as proprietary and confidential
information, shall not reproduce or divulge said Information in whole
or in part to third parties except as may be required for the
performance of its obligations under this Agreement, provided such
third parties agree in writing prior to such disclosure to keep such
Information confidential upon the same terms as herein contained. The
parties shall return each others Information and all copies thereof
forthwith upon its request. This confidentiality obligation shall
survive termination or expiry of the Development Agreement.
22.2 Notwithstanding the foregoing, ADA shall not be liable for
disclosure of the Information if:
(a) the Information enters the public domain other than through a
breach of the Development Agreement;
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(b) the Information is lawfully obtained by ADA from a third party
without breach of the Development Agreement by ADA;
(c) Nortel has provided its prior express written approval for such
disclosure by ADA;
(d) the Information was known to ADA prior to the commencement of the
Development Agreement and so documented;
(e) was independently developed by employees or consultants of the
receiving party without access to such Information; or
(f) is required to be disclosed to governmental agencies in order to
complete Work, or disclosure is otherwise required by law, regulation
or governmental or court order.
ARTICLE 23. PATENTS AND INFORMATION
23.1 ADA agrees that it will not knowingly incorporate anything in the
Work which involves the use of a trade secret or proprietary
information of any third party without the prior written approval of
Nortel, such approval not to be unreasonably withheld.
23.2 ADA shall, at its expense, timely defend any suit instituted
against Nortel and indemnify Nortel against any award of damages and
costs made against Nortel in any suit insofar as such is based on a
claim that the use of the Work or Deliverables, or the manufacture,
lease, sale or sublicensing of same infringes any patent, copyright, or
other industrial or intellectual property right, in the United States,
Canada, any member country of the European Economic Community, or
Japan, except to the extent the claim is based on (i) ADA's compliance
with or use of designs, requirement specifications, or alterations
supplied, developed or requested by Nortel, and the infringement is
necessitated by such compliance or (ii) infringement is caused by the
use of with another product in combination with the Deliverables or
Work whose use with the Deliverables or Work was not otherwise intended
or reasonably foreseen by the ADA based on the information available to
it or (iii) the Work or Deliverables are altered and the infringement
results from that alteration. Provided Nortel gives ADA timely notice
in writing of the institution of suit and permits ADA to defend same
and provides, at ADA's request and expense, all available information,
assistance and authority to so defend such suit and any appeals. ADA
shall have sole control of the defense of any such claim or suit
including appeals and of all the negotiations for settlement, including
the right to effect the settlement or compromise thereof. If any
element of the Work or Deliverables is in any suit held to constitute
an infringement and its use is enjoined, ADA may at its option and
expense:
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(a) procure for Nortel and any Nortel Customer the right to continue
using such infringing element; or
(b) replace or modify the same so that it becomes non-infringing,
provided, however, the essential attributes of the element remain the
same.
(c) Where after exercising all reasonable efforts to obtain the rights
set out in a) or b) above, neither alternative is possible, ADA shall
refund all of the monies paid by Nortel pursuant to the Development
Agreement which has given rise to the infringement.
23.3 The indemnity set out in Section 23.2 shall only be extended to
countries other than those set forth therein upon mutual agreement of
the parties with respect to any specific Work or Deliverable.
ARTICLE 24. WARRANTY AND LIABILITY
24.1 ADA warrants that, upon Acceptance by Nortel, each Deliverable
will be of good quality and workmanship and will meet the
specifications set out in the Work Schedule for a period of * months or
such greater period as may be specified in the Work Schedule and that
the "design life" of each Hardware Deliverable will meet or exceed the
design life specified for that Deliverable, if any, in the Work
Schedule. If any Deliverable does not conform with such warranty, ADA
will remedy the deficiencies so that the Deliverable conforms to the
specifications set out in the Work Schedule.
24.2 Under Firm Price contracts, the cost of the warranty coverage
referred to in this Article will be borne by ADA; under Time &
Materials contracts, such costs shall be charged to Nortel on a Time &
Materials basis. In the event that neither of these methods of payment
applies, the parties will address the cost of warranty coverage in the
individual Technical Proposals.
24.3 ADA warrants that the personnel performing the Work will be
qualified and capable of performing the Work.
24.4 (a) The foregoing warranty for Deliverables will not apply to, and
ADA will have no obligation or liability whatsoever in respect of,
defects or damage caused by unauthorized use, misuse, accident,
external cause, installation error (except where installed by or on
behalf of ADA) or normal wear and tear. All of the foregoing warranties
and remedies are in lieu of all other warranties and remedies.
(a) Unless specifically defined otherwise ADA does not give and will
not be liable for any warranties, representations, or guarantees of any
kind, either express or
* Certain confidential portions of this Exhibit were omitted by means of
blacking out the text (the "Xxxx"). This Exhibit has been filed separately
with the Secretary of the Commission without the Xxxx pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934.
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implied by law or custom, regarding any products derived from or based
on the Deliverables (hereinafter called the "Products") or the
performance of the Products or their usefulness, including those
regarding fitness for purpose, merchantability, condition, design,
title, infringement of third party rights, or conformance with sample.
(b) In no event will ADA be liable to Nortel or to any other party for
damages, including but not restricted to, damages for lost profits,
lost savings, or punitive, exemplary, incidental, consequential or
special damages in respect of the Products, even if ADA has advance
knowledge of the possibility of such potential loss or damage and even
if caused by ADA's negligence. If, despite the foregoing limitations,
for any reason ADA becomes liable to Nortel for damages incurred by
Nortel in connection with any of the Products, then, the liability of
ADA will be limited to an amount equal to the price paid by Nortel to
ADA for the Development Agreement that gives rise to the claim for
damages.
24.5 Notwithstanding the foregoing or any other terms of this
Agreement, if Nortel issues a purchase order or otherwise requests
support or other services from ADA in connection with Nortel's
obligations to any customer, and if Nortel provides ADA with a copy of
such terms and conditions, then ADA's acceptance of any such purchase
order or commencement of services shall be deemed to be an agreement to
provide such services on such terms and conditions.
ARTICLE 25. SPONSORS AND PRIMES
25.1 Nortel will appoint a Prime (hereinafter called the "Nortel
Prime") and ADA will appoint a prime (hereinafter called the "ADA
Prime") for each Development Agreement (collectively the "Primes"). The
address of the applicable Primes will be identified in the Work
Schedule of the applicable Development Agreement.
ARTICLE 26. NOTICES
26.1 All communications in writing between Nortel and ADA related to a
specific Development Agreement shall be deemed to have been received by
the addressee if delivered to the appropriate Primes or if sent by
courier or facsimile transmission addressed to the appropriate Prime at
the address provided in the Work Schedule or such other address for the
Prime as have been designed in writing by either party to the other.
26.2 All communications in writing between the parties hereto of a
general nature and not related solely to a single Development Agreement
for Work shall be deemed to have been received by the addressee if sent
by courier or facsimile transmission addressed as follows:
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If to Nortel:
Northern Telecom Limited
NSM Division
000-00000 Xxxxxxxx Xxxxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Fax: (000) 000-0000
Attn: General Manager
With a copy to:
Northern Telecom Limited
0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Attention: Secretary
If to ADA:
Applied Digital Access, Inc.
0000 Xxxxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: President
With a copy to:
ADA Canada, Inc.
0000 Xxxxxx Xxx
Xxxxxxx, Xxxxxxx Xxxxxxxx
Fax: (000) 000-0000
Attention: President
26.3 Invoices shall be sent to the address indicated for Nortel above,
for the attention of Accounts Payable.
26.4 All notices given hereunder shall be given in writing and
delivered or faxed. Such notice shall be deemed to have been received
upon delivery.
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ARTICLE 27. APPLICABLE LAW
27.1 This Master Agreement and all Development Agreements formed
hereunder shall be governed and construed in accordance with the laws
of the Province of British Columbia and the federal laws of Canada
applicable therein.
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ARTICLE 28. CONTINUING OBLIGATIONS
28.1 The provisions of Articles 18 - Inventions and Improvements, 20 -
Compliance with Law, 21 Publicity Release, 22 - Confidential
Information, 23 - Patents and Information and 24 - Warranty and
Liability shall survive the termination of this Master Agreement and
any Development Agreement formed hereunder.
ARTICLE 29. WAIVERS
29.1 The waiver by either party hereto of any breach of any term of
this Master Agreement or any Development Agreement formed hereunder
shall not prevent the subsequent enforcement of that term and shall not
be deemed a waiver of any subsequent breach.
ARTICLE 30. TERM OF AGREEMENT
30.1 This Master Agreement shall commence upon execution by both
parties hereto, and shall continue until terminated by either party
upon ninety (90) days' advance notice in writing. Termination of this
Master Agreement will not affect the status of any Development
Agreement formed hereunder or work performed in pursuance thereof.
ARTICLE 31. ENTIRETY OF CONTRACT
31.1 The Prior Agreement is hereby cancelled, effective as of the day
immediately prior to the date of execution of this Agreement, without
any further liability of Nortel to ADA Canada or ADA except for
Nortel's obligation to pay to ADA an amount equal to * within 30 days
of the execution of this Agreement. This Master Agreement and the
schedules hereof contain the entire agreement between the parties with
respect to the subject matter hereof. The prior Agreement and all
previous proposals and communications relative to such Work, oral or
written, will be superseded by this Master Agreement and the Work
Schedule except to the extent that they have been expressly
incorporated herein.
ARTICLE 32. FORCE MAJEURE
32.1 Neither party to this Agreement shall be liable for its failure to
perform any of its obligations hereunder during any period in which
such performance is prevented by any cause beyond its reasonable
control. In the event of any such delay the date of delivery or
performance hereunder shall be extended by a period equal to the time
lost by reason of such delay.
* Certain confidential portions of this Exhibit were omitted by means of
blacking out the text (the "Xxxx"). This Exhibit has been filed separately
with the Secretary of the Commission without the Xxxx pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934.
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ARTICLE 33. ARBITRATION
33.1 All disputes arising out of or in connection with this Master
Agreement shall be referred to and finally resolved by arbitration
under the rules of the British Columbia International Commercial
Arbitration Centre, in respect of which:
(a) the appointing authority shall be the British Columbia
International Commercial Arbitration Centre;
(b) the arbitration shall be conducted by a single arbitrator unless
the parties agree otherwise;
(c) the case shall be administered by the British Columbia
International Commercial Arbitration Centre in accordance with its
"Procedures for Cases under the BCICAC Rules"; and
(d) the place of arbitration shall be Xxxxxxxxx, Xxxxxxx Xxxxxxxx,
Xxxxxx.
The prevailing party in any arbitration or legal action arising out of
or related to this Master Agreement shall be entitled, in addition to
any other rights and remedies it may have, to reimbursement for its
expenses incurred in such arbitration or action, including court costs
and reasonable legal fees.
ARTICLE 34. AMENDMENT
34.1 No amendment, modification, supplement or other purported
alteration of this Master Agreement shall be binding upon the parties
unless it is in writing and is signed on behalf of both parties by
their duly authorized representatives.
ARTICLE 35. WITHHOLDING
35.1 ADA believes that neither this Agreement (or any term hereof) nor
the performance of or exercise of rights under this Agreement requires
tax withholding under any law or regulations promulgated by any
organization, province, group of provinces, or political or
governmental entity located within Canada. Nortel agrees not to
withhold any amounts payable to ADA, without the written consent of
ADA, unless Revenue Canada has made a specific determination or
assessment that such amounts must be withheld. ADA agrees to indemnify
and hold harmless Nortel in respect of any amounts, including without
limitation, withholding taxes, penalties and interest, that Revenue
Canada may determine Nortel failed to properly withhold pursuant to
this Agreement.
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IN WITNESS WHEREOF, Nortel and ADA have executed this Agreement as of
the day of June, 1997.
APPLIED DIGITAL ACCESS, INC. NORTHERN TELECOM LIMITED
-------------------------------- -----------------------------------------
By: By:
-------------------------------- -----------------------------------------
Name: Name:
-------------------------------- -----------------------------------------
Title: Title:
-----------------------------------------
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
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