-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fv9gfSHPqye7zsGGsMXOAdkcBxlYhxfdRhkW+k9S8DSEKYg9daoKIZL2GhbS7ymO t+9pL1Lr+Wx50StlnmEYGw== 0000912057-97-009571.txt : 19970321 0000912057-97-009571.hdr.sgml : 19970321 ACCESSION NUMBER: 0000912057-97-009571 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19970320 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK COMPUTING DEVICES INC CENTRAL INDEX KEY: 0000886138 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 770177255 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20124 FILM NUMBER: 97559990 BUSINESS ADDRESS: STREET 1: 350 NORTH BERNARDO AVENUE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 BUSINESS PHONE: 4156940650 MAIL ADDRESS: STREET 1: 350 NORTH BERNARDO AVE CITY: MOUNTAIN VIEW STATE: CA ZIP: 94043 10-Q/A 1 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 10-Q/A (Mark One) [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended June 30, 1996 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from ______to ______ Commission file number: 0-20124 NETWORK COMPUTING DEVICES, INC. (Exact name of registrant as specified in its charter) California 77-0177255 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 350 North Bernardo Avenue, Mountain View, California 94043 (Address of principal executive offices and zip code) Registrant's telephone number: (415) 694-0650 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ------ ----- The number of shares outstanding of the Registrant's Common Stock was 16,567,591 at July 31, 1996. FORM 10-Q/A AMENDMENT NO. 1 PART II - OTHER INFORMATION The undersigned registrant hereby amends the following item of its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1996, as set forth in the pages attached hereto. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed herewith: Exhibit 2.2 Asset Purchase Agreement dated June 3, 1996 by and among the Registrant NCD Software Corporation and NetManage, Inc. Exhibits Exhibit A Certain Definitions Exhibit B-1 Assignment and Assumption Contract Exhibit B-2 Assignment and Assumption Contract Exhibit C NCD Disclosure Schedule(2) Schedules Schedule 1.1 Assets(2) Schedule 1.1(b) Assumed Customer and Other Contracts(2) Schedule 1.3(b) Assumed Liabilities Schedule 1.5 Purchase Price Allocation(2) Exhibit 10.42 Alliance Agreement dated June 27, 1996 by and between the Registrant and International Business Machines Corporation.(1) *Exhibit 11.1 Statement Regarding Computation of Shares Used in Per Share Earnings Computations. *Exhibit 27 Financial Data Schedule. (1) Confidential treatment has been requested as to a portion of this exhibit. Confidential portions have been omitted and filed separately with the Securities and Exchange Commission. (2) Exhibits not filed herewith are identified in this agreement. The Company will furnish supplementally any omitted exhibit to the Commission upon request. (b) The Company filed no reports on Form 8-K during the three-month period ended June 30, 1996. - --------------- * Previously Filed 2 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Network Computing Devices, Inc. (Registrant) Date: March 19, 1997 By: /s/ Rudolph G. Morin ------------------------------------------------ Rudolph G. Morin Executive Vice President, Operations and Finance (Duly Authorized and Principal Financial and Accounting Officer) 3 EX-2.2 2 EXHIBIT 2.2 ASSET PURCHASE AGREEMENT BY AND AMONG: NETMANAGE, INC., A DELAWARE CORPORATION; NETWORK COMPUTING DEVICES, INC., A CALIFORNIA CORPORATION; AND NCD SOFTWARE CORPORATION, A CALIFORNIA CORPORATION. DATED AS OF JUNE 3, 1996 TABLE OF CONTENTS Page ARTICLE 1. The Transaction.. . . . . . . . . . . . . . . . . . . . . . . 1 1.1 Assets. . . . . . . . . . . . . . . . . . . . . . . . .1 1.2 Excluded Assets. . . . . . . . . . . . . . . . . . . .2 1.3 Liabilities. . . . . . . . . . . . . . . . . . . . . .3 1.4 Purchase Price and Method of Payment. . . . . . . . . .4 1.5 Tax Matters; Bulk Sales. . . . . . . . . . . . . . . .4 1.6 Limited License to NCD to Satisfy Post-Closing Support Obligations . . . . . . . . . . . . . . . . . . . . .4 1.7 Closing. . . . . . . . . . . . . . . . . . . . . . . .4 ARTICLE 2. Representations and Warranties of NCD. . . . . . . . . . . . .4 2.1 Organization. . . . . . . . . . . . . . . . . . . . . .5 2.2 Power, Authority and Validity. . . . . . . . . . . . .5 2.3 Title and Related Matters. . . . . . . . . . . . . . .5 2.4 Proprietary Rights and Warranty Claims. . . . . . . . .6 2.5 Contracts. . . . . . . . . . . . . . . . . . . . . . .7 2.6 Orders, Commitments and Returns. . . . . . . . . . . .8 2.7 Compliance With Law. . . . . . . . . . . . . . . . . .9 2.8 Labor Difficulties; No Discrimination. . . . . . . . .9 2.9 Trade Regulation. . . . . . . . . . . . . . . . . . . .9 2.10 Employees. . . . . . . . . . . . . . . . . . . . . . 10 2.11 Litigation. . . . . . . . . . . . . . . . . . . . . . 10 2.12 Compliance with Environmental Requirements. . . . . . 10 2.13 No Brokers. . . . . . . . . . . . . . . . . . . . . . 11 2.14 Disclosure. . . . . . . . . . . . . . . . . . . . . . 11 ARTICLE 3. Representations and Warranties of NetManage. . . . . . . . . 11 3.1 Organization and Good Standing. . . . . . . . . . . 11 3.2 Power, Authorization and Validity. . . . . . . . . . 11 3.3 No Violation of Existing Agreements. . . . . . . . . 11 3.4 Compliance With Other Instruments and Laws. . . . . . 12 3.5 Litigation. . . . . . . . . . . . . . . . . . . . . . 12 3.6 No Brokers. . . . . . . . . . . . . . . . . . . . . . 12 ARTICLE 4. Conditions to NCD's Obligations . . . . . . . . . . . . . . . 12 4.1 Accuracy of Representations and Warranties. . . . . . 12 4.2 Covenants. . . . . . . . . . . . . . . . . . . . . . 12 4.3 Authorizations . . . . . . . . . . . . . . . . . . . 12 4.4 Government Consents . . . . . . . . . . . . . . . . . 12 4.5 No Litigation. . . . . . . . . . . . . . . . . . . . 13 4.6 Board of Directors Approval. . . . . . . . . . . . . 13 4.7 Delivery of Cash Consideration and Executed Assignment and Assumption of Contracts. . . . . . . . . . . . . 13 ARTICLE 5. Conditions to NetManage's Obligations. . . . . . . . . . . . 13 5.1 Accuracy of Representations and Warranties. . . . . . 13 5.2 Covenants.. . . . . . . . . . . . . . . . . . . . . . 13 5.3 Authorizations. . . . . . . . . . . . . . . . . . . . 13 5.4 No Litigation.. . . . . . . . . . . . . . . . . . . . 13 5.5 Board of Directors Approval.. . . . . . . . . . . . . 13 5.6 Government Consents.. . . . . . . . . . . . . . . . . 14 5.7 Due Diligence.. . . . . . . . . . . . . . . . . . . . 14 5.8 Assignment and Assumption of Contracts. . . . . . . . 14 5.9 Bill of Sale and Other Transfer Documents.. . . . . . 14 ARTICLE 6. Termination of Agreement. . . . . . . . . . . . . . . . . . . 14 6.1 Termination.. . . . . . . . . . . . . . . . . . . . . 14 6.2 Effect of Termination.. . . . . . . . . . . . . . . . 14 6.3 Certain Effects of Termination. . . . . . . . . . . . 14 ARTICLE 7. Indemnification.. . . . . . . . . . . . . . . . . . . . . . . 15 7.1 Survival of Representations.. . . . . . . . . . . . . 15 7.2 Indemnification by NCD. . . . . . . . . . . . . . . . 16 7.3 Indemnification by NetManage. . . . . . . . . . . . . 16 7.4 Threshold; Ceiling; Exclusivity.. . . . . . . . . . . 16 ARTICLE 8. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . 17 8.1 Governing Laws. . . . . . . . . . . . . . . . . . . . 17 8.2 Binding upon Successors and Assigns.. . . . . . . . . 17 8.3 Personnel.. . . . . . . . . . . . . . . . . . . . . . 17 8.4 Building Lease. . . . . . . . . . . . . . . . . . . . 17 8.5 Further Assurances; Benefits of Nonassignable Rights; Notices.. . . . . . . . . . . . . . . . . . . . . . . 18 8.7 Severability. . . . . . . . . . . . . . . . . . . . . 18 8.8 Entire Agreement. . . . . . . . . . . . . . . . . . . 18 8.9 Facsimile; Counterparts.. . . . . . . . . . . . . . . 18 8.10 Expenses. . . . . . . . . . . . . . . . . . . . . . . 19 8.11 Amendment and Waivers.. . . . . . . . . . . . . . . . 19 8.12 Survival of Agreements. . . . . . . . . . . . . . . . 19 8.13 No Waiver.. . . . . . . . . . . . . . . . . . . . . . 19 8.14 Attorneys' Fees.. . . . . . . . . . . . . . . . . . . 19 8.15 Notices.. . . . . . . . . . . . . . . . . . . . . . . 19 8.16 Construction of Agreement.. . . . . . . . . . . . . . 20 8.17 No Joint Venture. . . . . . . . . . . . . . . . . . . 20 8.18 Pronouns. . . . . . . . . . . . . . . . . . . . . . . 20 8.19 Further Assurances. . . . . . . . . . . . . . . . . . 21 8.20 Absence of Third Party Beneficiary Rights.. . . . . . 21 EXHIBITS EXHIBIT A Certain Definitions EXHIBIT B-1 Assignment and Assumption of Contracts EXHIBIT B-2 Assignment and Assumption of Contracts EXHIBIT C NCD Disclosure Schedule SCHEDULES Schedule 1.1 Assets Schedule 1.1(b) Assumed Customer and Other Contracts Schedule 1.3(b) Assumed Liabilities Schedule 1.5 Purchase Price Allocation ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of this 3rd day of June 1996, by and among NETMANAGE, INC., a Delaware corporation ("NetManage"), NETWORK COMPUTING DEVICES, INC., a California corporation ("NCD, Inc.") and NCD Software Corporation, a California corporation ("NCD Sub"). "NCD" shall mean NCD, Inc. and its subsidiary NCD Sub. Certain other capitalized terms used in this Agreement are defined in EXHIBIT A attached hereto. RECITALS A. NCD is engaged in, among other things, the business of developing, marketing and selling an electronic e-mail package for the UNIX, Macintosh, MS- DOS and Windows marketplace (the "Z-Mail Business"). B. NetManage desires to purchase from NCD certain assets used or usable in connection with the Z-Mail Business and to assume certain liabilities related to the Z-Mail Business, and NCD desires to sell to NetManage such certain assets and to transfer to NetManage such certain liabilities, all according to the terms and subject to the conditions set forth in this Agreement (the "Acquisition"). AGREEMENT NOW, THEREFORE, for and in consideration of the mutual agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, NetManage and NCD hereby agree as follows: ARTICLE I. THE TRANSACTION. 1.1 ASSETS. SUBJECT TO AND IN RELIANCE UPON THE REPRESENTATIONS, WARRANTIES AND AGREEMENTS HEREIN SET FORTH, AND SUBJECT TO THE TERMS AND CONDITIONS HEREIN CONTAINED, NCD, INC. AND NCD SUB AGREE TO GRANT, CONVEY, SELL, ASSIGN, TRANSFER AND DELIVER TO NETMANAGE ON THE CLOSING DATE (AS HEREINAFTER DEFINED), AND NETMANAGE AGREES ON THE CLOSING DATE TO PURCHASE, ACCEPT AND ASSUME, THOSE ASSETS SET FORTH ON SCHEDULE 1.1 ATTACHED HERETO (COLLECTIVELY, THE "ASSETS"). WITHOUT LIMITING THE FOREGOING, THE ASSETS SHALL INCLUDE THE FOLLOWING, EXCEPT TO THE EXTENT THAT ANY OF THE FOLLOWING ARE EXCLUDED ASSETS: (a) all proprietary software relating to the Assets, in every case including all documentation, object code and source code with respect to such software set forth on SCHEDULE 1.1; (b) all customer contracts and service agreements relating to the supply and servicing of the Z-Mail products and all other contracts relating to the Z-Mail Business set forth on SCHEDULE 1.1(b), which Schedule shall be prepared and attached hereto within 15 days following the Closing to include, among other things, technical support and maintenance agreements and the agreement between NCD and Software.com, Inc. dated December 14, 1995 (the "Software.com Agreement") (collectively, the "Contracts"); (c) all inventory of the Z-Mail Business (collectively, the "Inventory"); (d) certain tangible personal property located at the facility held under the Lease (as defined in Section 8.4) (the "Property") but only as determined by mutual agreement of the parties; (e) all intellectual property rights, whether held by NCD as owner or as licensee, relating to the Assets including, without limitation, patents, patent applications, trademarks (whether registered or unregistered), trademark applications, copyrights (whether registered or unregistered), copyright applications, trade secrets, know-how, customer lists, franchises, systems, computer software, computer programs (including both source and object code forms), inventions, designs, proprietary products, technologies, proprietary rights or other intellectual property or intangible assets and any rights to use or exploit any of the foregoing (collectively, the "Proprietary Rights"); (f) all tangible records of the Proprietary Rights, customer lists, customer records and similar information relating to the ongoing conduct of the Z-Mail Business, including, without limitation, commented source code and other technical papers, inventory, maintenance, and asset records (the "Proprietary Rights Records"); (g) all sales and promotional materials, catalogues and advertising literature relating to the Assets; and (h) any and all claims, choses in action, rights of indemnification and rights against third parties if and to the extent that they relate to (i) the condition of the Assets, including, without limitation, all rights under manufacturers' and vendors' warranties, or (ii) the operation of the Z-Mail Business prior to the Closing (collectively, the "Claims"); PROVIDED, HOWEVER, that Claims shall not include any claims, choses in action, rights of indemnification or rights against third parties arising solely in connection with accounts receivable or accounts payable or prepaid expenses (other than prepaid expenses, if any, relating to the Contracts). 1.2 EXCLUDED ASSETS. THERE SHALL BE EXCLUDED FROM THE ASSETS AND RETAINED BY NCD ALL ITEMS NOT IDENTIFIED IN SECTION 1.1, INCLUDING TO THE EXTENT IN EXISTENCE ON THE CLOSING DATE, THE FOLLOWING ASSETS (COLLECTIVELY, THE "EXCLUDED ASSETS"): (a) all cash or securities owned or held by NCD relating to the Z-Mail Business; (b) all prepaid expenses (other than prepaid expenses relating to the Contracts) and accounts receivable owned or held by NCD relating to the Z-Mail Business; (c) all contracts of insurance relating to Z-Mail Business; (d) all pension, profit sharing and savings plans and trusts relating to the Z-Mail Business and any assets thereof; (e) any contracts relating to the Z-Mail Business not being assumed by NetManage pursuant to Section 1.1(b) hereof; and (f) any and all claims, choses in action, and rights against third parties relating to the Z-Mail Business other than the Claims as defined in Section 1.1(h). 1.3 LIABILITIES. (a) NCD shall sell and convey the Assets to NetManage free and clear of all mortgages, liens, deeds of trust, security interests, pledges, restrictions, prior assignments, charges, claims, defects in title and encumbrances of any kind or type whatsoever except: (i) for liens for taxes not yet due and payable or that are being contested in good faith by appropriate proceedings, and (ii) for the obligations of NCD under contracts which NetManage hereby agrees to assume as described in Section 1.3(b) of this Agreement. (b) NetManage agrees to assume at the Closing the certain obligations arising, and expressly provided to be performed by NCD, after the Closing Date under the technical support and maintenance agreements identified in Schedule 1.1(b) and the obligations under the Software.com Agreement pursuant to the form of Assignment and Assumption of Contracts attached hereto as EXHIBIT B-1. At the time the parties have finalized Schedule 1.1(b), NetManage shall execute and deliver an additional assignment and assumption of contracts in the form attached hereto as Exhibit B-2 to assume, effective as of the Closing, all Contracts identified in such Schedule 1.1(b). Notwithstanding the foregoing, and subject to Section 8.5, NetManage shall not be obligated to assume any obligations under any Contract as to which NCD fails to deliver any required written consent of all other parties thereto. (c) Except as otherwise specifically provided herein, NetManage shall not assume or be liable for, and does not, and does not undertake to attempt to, assume or discharge any liability of NCD relating to the Z-Mail Business or otherwise. (d) NCD retains and shall hereafter pay, satisfy, discharge, perform and fulfill all such obligations and liabilities not expressly assumed by NetManage hereunder as they become due, without any charge or cost to NetManage, and NCD agrees to indemnify and hold NetManage and its successors and assigns harmless from and against any and all such liabilities in accordance with the terms of Article 7 below. 1.4 PURCHASE PRICE AND METHOD OF PAYMENT. The purchase price for the Assets shall be comprised of (i) One Million Three Hundred Twenty-Five Thousand Dollars ($1,325,000) in cash (the "Cash Consideration"), and (ii) the assumption of the liabilities identified on Schedule 1.3(b) (collectively with the Cash Consideration, the "Purchase Price"). NetManage shall (i) pay, or cause to be paid to NCD on thE Closing Date an amount equal to the Cash Consideration by (A) check, or (B) bank wire transfer of immediately available federal funds, as instructed by NCD, and (ii) execute and deliver to NCD the Assignment and Assumption of Contracts in the form attached hereto as EXHIBIT B. NetManage shall pay all sales and transfer taxes incurred in connection with thE Acquisition. 1.5 TAX MATTERS; BULK SALES. NetManage and NCD agree on the allocation of the Purchase Price for the Assets set forth on SCHEDULE 1.5 attached hereto based on the fair market value of the Assets as reasonably determined by NetManage and NCD and as may be required by Section 1060 of the Internal Revenue Code of 1986, as amended. NetManage and NCD each agree not to take any tax position that is inconsistent with the allocation of the Purchase Price set forth as SCHEDULE 1.5. NetManage waives compliance with any bulk sales notice or other bulk sale provisions of applicable law. 1.6 LIMITED LICENSE TO NCD TO SATISFY POST-CLOSING SUPPORT OBLIGATIONS. Subject to the terms and conditions herein contained, NetMAnage grants to NCD a nontransferable, worldwide, royalty-free, nonexclusive and nonassignable right and license to use the Proprietary Rights subsequent to the Closing, solely for the purposes of (i) internal use by NCD, and (ii) providing technical support under existing support and maintenance contracts and licenses relating to thE Z-Mail Business which are not assumed by NetManage pursuant to this Agreement. 1.7 CLOSING. The closing (the "ClosinG") of the sale and purchase of the Assets shall take place at the offices of Gray Cary Ware & Freidenrich, 400 Hamilton, Palo Alto, California, on June 3, 1996 at 2:00 p.m., Pacific Standard Time. The actual date of the Closing is sometimes herein referred to as the "Closing Date." ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF NCD. Except as otherwise set forth in the NCD Disclosure Schedule provided to NetManage on the date hereof, a copy of which is attached hereto as EXHIBIT C, NCD represents and warrants to NetManage as set forth below. No fact or circumstance disclosed to NetManage shall constitute an exception to these representations and warranties unless such fact or circumstance is set forth in the NCD Disclosure Schedule. 2.1 ORGANIZATION. (a) Each of NCD, Inc. and NCD Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has corporate power and authority to carry on the Z-Mail Business as it is now being conducted by each of them. (b) NCD, Inc. is duly qualified or licensed to do business and in good standing in each jurisdiction in which the nature of the Z-Mail Business or properties makes such qualification or licensing necessary, except where the failure to so qualify or be licensed would not result in a material effect on the Z-Mail Business, and NCD Sub is duly qualified or licensed to do business in California. (c) The NCD Disclosure Schedule contains a true and complete listing of the locations of all sales offices, manufacturing facilities, and any other offices or facilities of the Z-Mail Business and a true and complete list of all states in which the Z-Mail Business maintains any employees. 2.2 POWER, AUTHORITY AND VALIDITY. Each of NCD, Inc. and NCD Sub has the corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement and the Transaction Documents to which it is a party and the consummation of the Acquisition have been duly authorized by the board of directors of NCD, Inc. AND NCD Sub, and no other corporate proceedings are necessary to authorize this Agreement and the other Transaction Documents. NCD is not subject to or obligated under any charter, bylaw or contract provision or any license, franchise or permit, or subject to any order or decree, which would be breached or violated in a material manner by or in material conflict with its executing and carrying out this Agreement and the Acquisition. To NCD'S knowledge, no consent of any person who is a party to a contract which is material to NCD, nor consent of any governmental body, is required to be obtained on the part of NCD to permit the consummation of the Acquisition and continue the business activities of the Z-Mail Business as previously conducted by NCD. This Agreement is, and the other Transaction Documents to which NCD is a party when executed and delivered by NCD shall be, the valid and binding obligations of NCD enforceable in accordance with their respective terms, subject to (i) laws of general application relating to bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. 2.3 TITLE AND RELATED MATTERS. NCD has good title to the Assets, free and clear of all mortgages, liens (including without limitation tax liens), pledges, charges or encumbrances of any kind or character, except the lien of current taxes not yet due and payable and except for liens which in the aggregate do not secure more than Ten Thousand Dollars ($10,000) in liabilities. 2.4 PROPRIETARY RIGHTS AND WARRANTY CLAIMS. (a) Part 2.4 of the Disclosure Schedule sets forth, with respect to each Proprietary Right registered with any Governmental Body or for which an application has been filed with any Governmental Body, (i) a list of such Proprietary Right, and (ii) the names of the jurisdictions covered by the applicable registration or application. Part 2.4 of the NCD Disclosure Schedule identifies each Proprietary Right licensed to NCD by any Person (except for any Proprietary Right that is licensed to NCD under any third party software license generally available to the public at a cost of less than One Thousand Dollars ($1,000), and identifies the license agreement under which such Proprietary Right is being licensed to NCD. Except as set forth in Part 2.4 of the NCD Disclosure Schedule, NCD has, to the best of NCD's knowledge good title to all of the Proprietary Rights identified in Part 2.4 of the NCD Disclosure Schedule, free and clear of all liens and other Encumbrances, and has a valid right to use all Proprietary Rights identified in Part 2.4 of the NCD Disclosure Schedule. (b) Except as set forth in Part 2.4 of the NCD Disclosure Schedule, NCD has taken all reasonable and customary measures and precautions necessary to protect and maintain the confidentiality and secrecy of all Proprietary Rights (except Proprietary Rights whose value would be unimpaired by public disclosure) and otherwise to maintain and protect the value of all Proprietary Rights. Except as set forth in Part 2.4 of the NCD Disclosure Schedule, NCD has not (other than pursuant to license agreements identified in Part 2.4 of the NCD Disclosure Schedule) disclosed or delivered to any Person, or permitted the disclosure or delivery to any Person of, (i) the source code, or any portion or aspect of the source code, of any Proprietary Right, or (ii) the object code, or any portion or aspect of the object code, of any Proprietary Right. (c) To the best of NCD's knowledge in connection with the conduct of the Z-Mail Business, NCD is not infringing, misappropriating or making any unlawful use of, and NCD has not at any time infringed, misappropriated or made any unlawful use of, or received any notice or other communication (in writing or otherwise) of any actual, alleged, possible or potential infringement, misappropriation or unlawful use of, any proprietary right owned or used by any other Person. To the best of NCD's knowledge, no other Person is infringing, misappropriating or making any unlawful use of, and no proprietary right owned or used by any other Person infringes or conflicts with, any Proprietary Right. (d) Except as set forth in Part 2.4 of the NCD Disclosure Schedule: (i) each Proprietary Right conforms substantially to any specification, documentation, performance standard, representation or statement made or provided with respect thereto by or on behalf of NCD; and (ii) there has not been any claim made against NCD by any customer or other Person alleging that any Proprietary Right (including each version thereof that has ever been licensed or otherwise made available by NCD to any Person) does not substantially conform to any specification, documentation, performance standard, representation or statement made or provided by or on behalf of NCD, and, to the best of NCD's knowledge, there is no basis for any such claim. (e) The Proprietary Rights constitute all the Proprietary Rights necessary, in NCD's reasonable judgment, to enable NCD to conduct the Z-Mail Business in the manner in which such business has been and is being conducted. Except as set forth in Part 2.4 of the NCD Disclosure Schedule, (i) NCD has not licensed any of the Proprietary Rights to any Person on an exclusive basis, and (ii) NCD has not entered into any covenant not to compete or contract limiting its ability to exploit fully any of the Proprietary Rights or to transact business in any market or geographical area or with any Person. (f) Except as set forth in Part 2.4 of the NCD Disclosure Schedule, (i) all current and former employees of the Z-Mail Business have executed and delivered to NCD an agreement (containing no exceptions to or exclusions from the scope of its coverage) that is substantially identical to the forms of Confidential Information and Invention Assignment Agreements previously delivered to NetManage, and (ii) all current and former consultants and independent contractors to the Z-Mail Business have executed and delivered to NCD an agreement (containing no exceptions to or exclusions from the scope of its coverage) that is substantially identical to the form of Consultant Confidential Information and Invention Assignment Agreement previously delivered to NetManage. 2.5 CONTRACTS. (a) Except as set forth in Part 2.5 of the NCD Disclosure Schedule: (i) NCD has not entered into any employment, independent contractor or similar agreement, contract or commitment relating to the Z- Mail Business that obligates NCD to pay more than $10,000 over the life of the contract, or has a fixed term of more than one year, or that is not terminable on not more than ninety (90) days' notice without penalty or liability of any type, including without limitation severance or termination pay. (ii) NCD is not restricted by agreement from competing with any person or from carrying on the Z-Mail Business anywhere in the world. (b) The NCD Disclosure Schedule lists all agreements pursuant to which NCD has agreed to manufacture for or supply to any third party any Z-Mail Products or components thereto requiring, or expected to require, payments of Fifty Thousand Dollars ($50,000) or more over the life of any such agreement. The NCD Disclosure Schedule also lists each vendor who is the sole source for any product or component included in the Products. (c) Each Contract is valid and in full force and effect, and, to the best of the knowledge of NCD, is enforceable by NCD in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. To NCD's knowledge, no party to any such Contract, agreement or instrument intends to cancel, withdraw, modify or amend such Contract. (d) Except as set forth in Part 2.5 of the NCD Disclosure Schedule: (i) NCD has not violated or breached, or committed any default under, any NCD contract relating to the Z-Mail Business, and, to the best of NCD's knowledge, no other Person has violated or breached, or committed any default under, any such contract; in each case which default would have a Material Adverse Effect on the Z-Mail Business. (ii) to the best of NCD's knowledge, no event has occurred, and no circumstance or condition exists, that (with or without notice or lapse of time) will, or could reasonably be expect to, (A) result in a violation or breach of any of the provisions of any NCD contract relating to the Z-Mail Business, (B) give any Person the right to declare default or exercise any remedy under any such NCD contract, (C) give any Person the right to accelerate the maturity or performance of any such contract; or (D) give any Person the right to cancel, terminate or modify any such contract, in each case, the result of which would have a Material Adverse Effect on the Z-Mail Business. (iii) The Lease, as defined in Section 8.4 herein, is valid, binding, enforceable and effective in accordance with its terms. To the best of NCD's knowledge, there is not any existing material default by NCD or any other party of any provision of the Lease or event which, with notice or lapse of time or both, would constitute a material default of any such provision. (e) The Lease contains no provision which would require the consent of third parties to the Acquisition in the event of the subletting of the Building, as defined in Section 8.4 or the assignment of the Lease by NCD to NetManage. If the Lease contains any such provisions, then NCD has described in the NCD Disclosure Schedule such actions as are necessary with respect to the Lease to avoid any adverse consequence as a result of the subletting of the Building or the assignment of the Lease. 2.6 ORDERS, COMMITMENTS AND RETURNS. All accepted and unfilled orders entered into by NCD for the sale, license, or lease or other disposition by ncd of the Z-Mail Products, and all agreements, contracts, or commitments for the purchase of supplies by NCD relating to the Z-Mail Business, were made in the ordinary course of business. 2.7 COMPLIANCE WITH LAW. With respect to its Z-Mail Business, NCD is in compliance in all material respects with all applicable laws and regulations. With respect to its Z-Mail Business, neither NCD nor, to the best of NCD's knowledge, any of its employees has directly or indirectly paid or delivered any fee, commission or other sum of money or item of property, However characterized, to any finder, agent, government official or other party in the United States or any other country, that was or is in violation of any federal, state, or local statute or law or of any statute or law of any other country having jurisdiction. With respect to its Z-Mail Business, NCD has not participated directly or indirectly in any boycotts or other similar practices affecting any of its customers. With respect to its Z-Mail Business, NCD has complied in all material respects at all times with any and all applicable federal, state and foreign laws, rules, regulations, proclamations and orders relating to the importation or exportation of its products. All licenses, franchises, permits and other governmental authorizations held by NCD and which are material to the Z-Mail Business are valid and sufficient in all material respects for the Z-Mail Business presently carried on by NCD. 2.8 LABOR DIFFICULTIES; NO DISCRIMINATION. (a) To the best of NCD's knowledge, NCD is not with respect to its Z-Mail Business engaged in any unfair labor practice and is not in violation of any applicable laws respecting employment and employment practices, terms and conditions of employment, and wages and hours. (b) There is no strike, labor dispute, slowdown, or stoppage actually pending or, to the best of NCD's knowledge, threatened against NCD that would have a Material Adverse Effect on the Z-Mail Business. (c) No union representation question exists respecting the employees of NCD and to the best of NCD's knowledge no union organizing activities are taking place. (d) No collective bargaining agreement that is binding on NCD restricts it from relocating or closing any of its operations relating to the Z- Mail Business. (e) NCD has not experienced any work stoppage or other labor difficulty having a Material Adverse Effect on the Z-Mail Business. 2.9 TRADE REGULATION. NCD has not terminated its relationship with or refused to ship Z-MAIL Products to any dealer, distributor, OEM, third party marketing entity or customer which had theretofore paid or been obligated to pay NCD in excess of Ten Thousand Dollars ($10,000) over any consecutive twelve (12) month period. All of the prices charged by NCD in connection with the marketing or sale of any Z-Mail Products or Z-Mail Business services have been in compliance in all material respects with all applicable laws and regulations. No claims against NCD have been communicated or threatened in writing to NCD in connection with thE Z-Mail Business with respect to wrongful termination of any dealer, distributor or any other marketing entity, discriminatory pricing, price fixing, unfair competition, false advertising, or any other violation of any laws or regulations relating to anti-competitive practices or unfair trade practices of any kind, and to the best of NCD's knowledge, no specific situation, set of facts, or occurrence provides any basis for any such claim. 2.10 EMPLOYEES. The NCD Disclosure Schedule lists and describes all currently effective written or, to NCD's knowledge, oral employment agreements and other material agreements concluded with individual employees relating to the Z-Mail Business and to which NCD is a party. True and correct copies of all such written agreements have been provided to NetManage or NeTManage's representatives. All salaries and wages paid by NCD in connection with the Z- Mail Business are in compliance in all material respects with applicable federal, state and local laws. 2.11 LITIGATION. To the best of NCD's knowledge, there is no suit, action or proceeding (i) pending, (ii) which has been threatened against or materially affects the Z-Mail Business in each case other than immaterial matters, or (iii) which questions or challenges the validity of this Agreement or the transaction documents. There is no judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator outstanding against NCD which relates to the Z-Mail Business. 2.12 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. To the best of NCD's knowledge, NCD has obtained all material permits, licenses and other authorizations which are required under federal, state and local laws applicable to NCD and relating to pollution or protection of the environment, including laws or provisions relating to emissions, discharges, releases or threatened releases of pollutants, contaminants, or hazardous or toxic materials, substances, or wastes into air, surface water, groundwater, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants or hazardous or toxic materials, substances, or wastes. Except as set forth in the NCD Disclosure SchedulE, To the best of NCD's knowledge, NCD is in material compliance with all terms and conditions of the required permits, licenses and authorizations in connection with the Z-Mail Business. Except as set forth in the NCD Disclosure Schedule, NCD is not aware of, nor has NCD received written notice of, any conditions, circumstances, activities, practices, incidents, or actions which may form the basis of any claim, action, suit, proceeding, hearing, or investigation of, by, against or relating to the Z-Mail Business, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, or hazardous or toxic substance, material or waste. 2.13 NO BROKERS. Neither NCD nor, to the best of NCD's knowledge, any NCD shareholder is obligated for the payment of fees or expenses of any broker or finder in connection with the origin, negotiation or execution of this Agreement or in connection with the Acquisition. 2.14 DISCLOSURE. No statements by NCD contained in this Agreement, its exhibits and schedules nor any of the certificates or documents required to be delivered by NCD to NetManage under this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading in light of the circumstances under which they were made. ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF NETMANAGE. Except as set forth in the NetManage Disclosure Schedule provided to NCD on the date hereof, NetManage represents and warrants to NCD that: 3.1 ORGANIZATION AND GOOD STANDING. NetManage is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has full power and authority to carry on its businesses as now conducted. 3.2 POWER, AUTHORIZATION AND VALIDITY. NetManage has the right, power, legal capacity and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents to which it is a party. The execution and delivery of this Agreement and the other Transaction Documents have been duly and validly approved and authorized by the Board of Directors of NetManage. No authorization or approval, governmental or otherwise, is necessary in order to enable NetManage to enter into and to perform the terms of this Agreement or the other Transaction Documents on its part to be performed. This Agreement is, and the other Transaction Documents when executed and delivered by NetManage shall be, the valid and binding obligations of NetManage enforceable in accordance with their terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. 3.3 NO VIOLATION OF EXISTING AGREEMENTS. Neither the execution and delivery of this Agreement nor the consummation of the Acquisition will conflict with, or result in a material breach or violation of, any provision of NetManage's certificate of incorporation or bylaws, as currently in effect; any instrument or contract to which NetManage is a party or by which it is bound; or any federal, state or local judgment, writ, decree, order, statute, rule or regulation applicable to NetManage. Neither the execution and delivery of this Agreement, nor any Agreement attached hereto as an Exhibit, nor the consummation of the transactions contemplated hereby or thereby will have a Material Adverse Effect on the operations, assets, or financial condition of NetManage. 3.4 COMPLIANCE WITH OTHER INSTRUMENTS AND LAWS. NetManage is not in violation of any provisions of its certificate of incorporation or bylaws as currently in effect or in effect at the Closing, or any federal, state or local judgment, writ, decree, or order applicable to NetManage. 3.5 LITIGATION. There is no suit, action, proceeding, claim or investigation pending or, to the best of netmanage's knowledge, threatened against NetManage before any court or administrative agency or which questions or challenges the validity of this Agreement which could have a Material Adverse Effect on the operations, assets or financial condition of NetManage. 3.6 NO BROKERS. Neither NetManage nor, to the best of NetManage's knowledge, any NetManage shareholder is obligated for the payment of fees or expenses of any broker or finder in connection with the origin, negotiation or execution of this Agreement or in connection with the Acquisition. ARTICLE 4. CONDITIONS TO NCD'S OBLIGATIONS The obligations of NCD to close the transactions contemplated under this Agreement are subject to the fulfillment or satisfaction on and as of the Closing Date of each of the following conditions (any one or more of which may be waived by NCD but only in a writing signed by NCD): 4.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of NetManage set forth in Article 3 shall be true and correct when made and on and as of the Closing with the same force and effect as if they had been made at the Closing. 4.2 COVENANTS. NetManage shall have performed and complied with all of its covenants and obligations contained in this Agreement on or before the Closing (to the extent such covenants are capable of being performed on or before the Closing). 4.3 AUTHORIZATIONS. The execution, delivery and performance of NetManage's obligations under this Agreement shall have been duly and validly approved and authorized by the board of directors of NetManage. 4.4 GOVERNMENT CONSENTS. There shall have been obtained at or prior to the Closing Date such permits or authorizations, if any, and there shall have been taken such other action, if any, as may be required by any regulatory authority having jurisdiction over the parties and the subject matter and the actions herein proposed to be taken. 4.5 NO LITIGATION. On and as of the Closing Date, no litigation or proceeding shall be threatened or pending against NetManage challenging the validity of any of the transactions contemplated by this Agreement. 4.6 BOARD OF DIRECTORS APPROVAL. The boards of directors of NCD, Inc. and NCD Sub shall have approved the Acquisition. 4.7 DELIVERY OF CASH CONSIDERATION AND EXECUTED ASSIGNMENT AND ASSUMPTION OF CONTRACTS. NetManage shall have delivered the Cash Consideration and the executed Assignment and Assumption of Contracts in accordance with Section 1.4 hereof. ARTICLE 5. CONDITIONS TO NETMANAGE'S OBLIGATIONS. The obligations of NetManage are subject to the fulfillment or satisfaction on and as of the Closing of each of the following conditions (any one or more of which may be waived by NetManage, but only in a writing signed by NetManage): 5.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and warranties made by NCD contained in Article 2 and in any certificate delivered by NCD in connection with this Agreement shall be true and correct when made and on and as of the Closing Date with the same force and effect as if they had been made at the Closing (subject to changes to the NCD Disclosure Schedule which, in the aggregate, would not constitute a Material Adverse Change). 5.2 COVENANTS. NCD shall have performed and complied with all of its covenants and obligations contained in this Agreement on or before the Closing (to the extent such covenants are capable of being performed on or before the Closing). 5.3 AUTHORIZATIONS. The execution, delivery and performance of this Agreement have been duly and validly approved and authorized by the boards of directors of NCD, Inc. and NCD Sub. 5.4 NO LITIGATION. On and as of the Closing, no litigation or proceeding shall be threatened or pending against NCD for the purpose or with the probable effect (in the reasonable opinion of NetManage's counsel) of enjoining or preventing the consummation of the Acquisition or which would have a Material Adverse Effect on the business, liabilities, income, property, or operations of the Z-Mail Business Subsequent to the Closing, and no judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator relating to the Z-Mail Business shall be outstanding against NCD. 5.5 BOARD OF DIRECTORS APPROVAL. The board of directors of NetManage shall have approved the Acquisition. 5.6 GOVERNMENT CONSENTS. There shall have been obtained at or prior to the date of Closing such permits or authorizations, and there shall have been taken such other action, as may be required by any regulatory authority having jurisdiction over the parties and the subject matter and the actions herein proposed to be taken. 5.7 DUE DILIGENCE. NetManage shall have satisfactorily completed its due diligence investigation of the Z-Mail Business. 5.8 ASSIGNMENT AND ASSUMPTION OF CONTRACTS. NCD shall have executed and delivered to NetManage the assignment and assumption of contracts in the form attached as EXHIBIT B with respect to the Contracts. 5.9 BILL OF SALE AND OTHER TRANSFER DOCUMENTS. NCD shall execute and deliver to NetManage such bills of sale, certificates of title, endorsements, assignments and other good and sufficient instruments of sale, conveyance and transfer and assignment, in form and substance satisfactory to NetManage sufficient to sell, convey, transfer, and assign to NetManage all right, title and interest of NCD in the Assets. ARTICLE 6. TERMINATION OF AGREEMENT. 6.1 TERMINATION. This Agreement may be terminated at any time prior to the Closing by the mutual written consent of each of the parties hereto. This Agreement may also be terminated and abandoned by either NetManage or NCD for any reason if the Closing has not occurred by June 3, 1996, or such later date as the parties may agree in writing, provided that a party cannot terminate under this provision if the failure to occur of the Closing is the result of the failure on the part of such party to perform any of its obligations hereunder (except the failure on the part of such party to satisfy a closing condition over which such party has no control). Any termination of this Agreement under this Section 6.1 shall be effective by the delivery of written notice of the terminating party to the other parties hereto. 6.2 EFFECT OF TERMINATION. Any termination of this Agreement pursuant to this Article 6 shall be without further obligation or liability upon any party in favor of any other party hereto; PROVIDED, HOWEVER that if such termination by one party shall result from the willful failure of the other party to carry out its obligations under this Agreement, then such party shall be liable for Damages incurred by the other party, and such termination shall not be deemed or construed as limiting or denying any legal or equitable right or remedy of said party, and said party shall be entitled to recover its costs and expenses which are incurred in pursuing its rights and remedies (including reasonable attorneys' fees). 6.3 CERTAIN EFFECTS OF TERMINATION. In the event of the termination of this Agreement by either NCD or NetManage as provided in Section 6.1 hereof: (a) each party, if so requested by the other party, will (i) return promptly every document (other than documents publicly available) furnished to it by the other party (or any subsidiary, division, associate or affiliate of such other party) in connection with the transactions contemplated hereby, whether so obtained before or after the execution of this Agreement, and any copies thereof which may have been made, and will cause its representatives and any representatives of financial institutions and investors and others to whom such documents were furnished promptly to return such documents and any copies thereof any of them may have made, or (ii) destroy such documents and cause its representatives and such other representatives to destroy such documents, and such party shall deliver a certificate executed by its president or vice president stating to such effect; and (b) NCD and NetManage shall continue to abide by the provisions of that certain Mutual Nondisclosure Agreement between NetManage and NCD dated May ___, 1996. This Section 6.3 shall survive any termination of this Agreement. ARTICLE 7. INDEMNIFICATION. 7.1 SURVIVAL OF REPRESENTATIONS. (a) The representations and warranties made by NCD (including the representations and warranties set forth in Article 2 hereof and the representations and warranties set forth in any certificate delivered by NCD in connection with this Agreement) shall survive the Closing and shall remain in full force and effect and shall survive until the end of the Indemnification Period and shall survive thereafter only with respect to any claims made prior to the end of the Indemnification Period; PROVIDED, HOWEVER, that the termination hereunder of the representations and warranties made by NCD shall not terminate or limit in any manner whatsoever any rights NetManage has or may have for intentional misrepresentation or fraud. The representations and warranties made by NetManage shall survive the Closing and shall remain in full force and effect and shall survive until the end of the Indemnification Period; PROVIDED, HOWEVER, that the termination hereunder of the representations and warranties made by NetManage shall not terminate or limit in any manner whatsoever any rights which NCD has or may have for intentional misrepresentation or fraud. (b) The representations, warranties, covenants and obligations of NCD, and the rights and remedies that may be exercised by the Indemnitees, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, any of the Indemnitees or any of their Representatives. (c) For purposes of this Agreement, each statement or other item of information set forth in the NCD Disclosure Schedule or in any update to the NCD Disclosure Schedule shall be deemed to be a modification of the representations and warranties made by NCD in this Agreement. 7.2 INDEMNIFICATION BY NCD. From and after the Closing Date (but subject to Section 7.1(a), NCD shall hold harmless and indemnify each of the Indemnitees from and against, and shall compensate and reimburse each of the Indemnitees for, any Damages which are directly or indirectly suffered or incurred by any of the Indemnitees or to which any of the Indemnitees may otherwise become subject (regardless of whether or not such Damages relate to any third-party claim) and which arise from or as a result of, or are directly or indirectly connected with: (i) any inaccuracy in or breach of any representation or warranty set forth in Article 2 hereunder or in any certificate delivered by NCD in connection with this Agreement; (ii) any breach of any covenant or obligation of NCD hereunder; (iii) any Legal Proceeding relating to any inaccuracy, breach or expense of the type referred to in clause "(i)" or "(ii)" above (including any Legal Proceeding commenced by any Indemnitee for the purpose of enforcing any of its rights under this Section 7.2 if such Indemnitee is the prevailing party in any such Legal Proceeding); or (iv) any amounts exceeding the Software.com Obligation Cap as defined in SCHEDULE 1.3(b) attached hereto. 7.3 INDEMNIFICATION BY NETMANAGE. From and after the Closing Date, NetManage shall hold harmless and indemnify each of NCD, Inc., NCD Sub and their respective officers, directors, shareholders, affiliates and their successors and assigns (collectively, the "NCD Indemnitees") from and against, and shall compensate and reimburse each of the NCD indemnitees for, any damages which are directly or indirectly suffered or incurred by any of the NCD Indemnitees or to which any of the NCD Indemnitees may otherwise become subject (regardless of whether or not such Damages relate to any third-party claim) and which arise from or as a result of, or are directly or indirectly connected with, (i) any inaccuracy in or breach of any representation or warranty set forth in Article 3; (ii) any breach of any covenant or obligation of NetManage hereunder; or (iii) any liability or obligation assumed by NetManage pursuant to Section 1.3(b) of this Agreement arising after the Closing Date. 7.4 THRESHOLD; CEILING; EXCLUSIVITY. (a) NCD shall not be required to make any indemnification payment pursuant to Section 7.2 for any inaccuracy in or breach of any of the representations and warranties set forth in Article 2 hereof or in any certificate delivered by NCD in connection with this Agreement until such time as the total amount of all Damages (including the Damages arising from such inaccuracy or breach and all other Damages arising from any other inaccuracies in or breaches of any representations or warranties) that have been directly or indirectly suffered or incurred by any one or more of the Indemnitees, or to which any one or more of the Indemnitees has or have otherwise become subject, exceeds Fifty Thousand Dollars ($50,000). (b) The maximum liability of (i) NCD to all Indemnitees for any indemnification payments pursuant to Section 7.2 and (ii) NetManage to all NCD Indemnitees for any indemnification payments pursuant to Section 7.3, shall be One Million Dollars ($1,000,000). All indemnification payments shall be net of any amounts received by NetManage from insurance proceeds related to the matters for which indemnification is requested. ARTICLE 8. MISCELLANEOUS. 8.1 GOVERNING LAWS. It is the intention of the parties hereto that the internal laws of the State of California (irrespective of its choice of law principles) shall govern the validity of this Agreement, the construction of its terms, and the interpretation and enforcement of the rights and duties of the parties hereto. 8.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless otherwise provided in, this Agreement, each and all of the covenants, terms, provisions, and agreements contained herein shall be binding upon, and inure to the benefit of, the permitted successors, executors, heirs, representatives, administrators and assigns of the parties hereto provided that no party hereto shall assign this Agreement to any such entity without the prior written consent of the other party. 8.3 PERSONNEL. NetManage shall extend offers of employment entailing responsibilities comparable to those currently in effect at NCD, Inc. to all employees and consultants of the Z-Mail Business listed as "Hires" on Schedule 8.4, at levels of compensation similar to those paid to NetManage employees or consultants with similar responsibilities, such employment or consultancy to be effective as of the Closing Date. NCD will use its reasonable best efforts to encourage such employees and consultants to accept NetManage's offers of employment. NCD shall retain at its expense all employees and consultants listed on such schedule as "M" or "T," until the earlier of (i) the date such person receives an employment or consultancy relationship offer from NetManage or (ii) June 15 if labelled "M" or June 30 if labeled "T." In the event NetManage determines to make offers of employment or consultancy to any of such persons within such period, NCD will use its reasonable best efforts to encourage such employees to accept NetManage's offers of employment or consultancy. All employment and consultancy arrangements between NetManage and any employee and consultant hired by NetManage will be negotiated directly between such employees and NetManage, and NCD shall have no responsibility for or liability from such negotiations or any hiring, employment or termination decisions or related actions taken or made by NetManage. NetManage shall be responsible for all obligations to former employees of the Z-Mail business hired by NetManage accruing after the Closing Date, and for its own conduct referred to in the preceding sentence. 8.4 BUILDING LEASE. As of the Closing, NCD shall permit NetManage to use specified portions of the building located at 101 Rowland Way, Suite 300, Novato, California (the "Building") for a period of thirty (30) days without charge. NetManage may use specified portions of the Building for up to an additional sixty (60) days after the expiration of the initial thirty (30) day period, but NetManage shall pay monthly rent in the amount of Forty Thousand dollars ($40,000) to NCD during such additional period. Upon the expiration of this additional sixty (60) day period, NetManage may in its sole discretion assume the lease of the building (the "Lease") in full or enter into a sublease for the Building for the duration of the term of the lease by providing NCD with written notice of its intention to do so within sixty (60) days after the closing, subject to the consent of the landlord under the Lease. If NetManage does not provide such written notice, NetManage shall have no further obligation with respect to the building after such 90 day period. Notwithstanding the above, all phone charges incurred in connection with the Building on or after the Closing Date and until NetManage vacates the Building shall be the sole responsibility of NetManage. 8.5 FURTHER ASSURANCES; BENEFITS OF NONASSIGNABLE RIGHTS; NOTICES. Both before and after the Closing, the parties shall execute and/or cause to be executed such further documents, and perform such further acts, as may be necessary to transfer and convey any of the Contracts to NetManage, on the terms herein contained, and to otherwise comply with the terms of this agreement and consummate the transactions contemplated hereby. NCD and NetManage will use their best efforts to acquire any third party consents necessary for assigning the Contracts to NetManage and to provide such assistance as is necessary to pass through to the other party, as appropriate, relief from the obligations of or the benefits of any contract, claim, cause of action, or other assets which cannot be assigned to NetManage as required hereunder. NCD shall use its best efforts to provide notices of this transaction to its distributors and instruct them to destroy or return any inventory relating to the Z-Mail Business. 8.6 CUSTOMER ACCOUNTS. For a period of ninety (90) days following the Closing, the parties hereto shall notify each other in writing as to each problem that arises to their knowledge in connection with a customer's failure to pay on a timely basis outstanding amounts owed to NCD under a Z-Mail Business account. 8.7 SEVERABILITY. If any provision of this Agreement, or the application thereof, shall for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and application of such provision to other persons or circumstances shall be interpreted so as best to reasonably effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision which will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision. 8.8 ENTIRE AGREEMENT. This Agreement, the exhibits hereto, the documents referenced herein, and the exhibits thereto, constitute the entire understanding and agreement of the parties hereto with respect to the subject matter hereof and thereof and supersede all prior and contemporaneous agreements or understandings, inducements or conditions, express or implied, written or oral, between the parties with respect hereto and thereto. 8.9 FACSIMILE; COUNTERPARTS. This Agreement may be executed by facsimile and in any number of counterparts, each of which shall be an original as against any party whose signature appears thereon and all of which together shall constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as signatories. 8.10 EXPENSES. Each party shall pay all of its own costs and expenses incurred with respect to the negotiation, execution and delivery of this Agreement and the exhibits hereto including all legal and accounting fees and expenses, and broker's or finder's fees, whether or not the Acquisition is consummated, PROVIDED, HOWEVER, that NetManage will pay all sales and transfer taxes in connection with the Acquisition in accordance with Section 1.5. 8.11 AMENDMENT AND WAIVERS. Any term or provision of this Agreement may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a writing signed by the party to be bound thereby. The waiver by a party of any breach hereof for default in payment of any amount due hereunder or default in the performance hereof shall not be deemed to constitute a waiver of any other default or any succeeding breach or default. 8.12 SURVIVAL OF AGREEMENTS. All covenants, agreements, representations and warranties made herein shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby notwithstanding any investigation of the parties hereto and shall terminate on the date one year after the Closing Date. 8.13 NO WAIVER. The failure of any party to enforce any of the provisions hereof shall not be construed to be a waiver of the right of such party thereafter to enforce such provisions. 8.14 ATTORNEYS' FEES. Should suit be brought to enforce or interpret any part of this Agreement, the prevailing party shall be entitled to recover, as an element of the costs of suit and not as damages, reasonable attorneys' fees to be fixed by the court (including, without limitation, costs, expenses and fees on any appeal). The prevailing party shall be the party entitled to recover its costs of suit, regardless of whether such suit proceeds to final judgment. A party not entitled to recover its costs shall not be entitled to recover attorneys' fees. No sum for attorneys' fees shall be counted in calculating the amount of a judgment for purposes of determining if a party is entitled to recover costs or attorneys' fees. 8.15 NOTICES. Any notice provided for or permitted under this agreement will be treated as having been given when (i) delivered personally, (ii) sent by confirmed telex or telecopy, (iii) sent by commercial overnight courier with written verification of receipt, or (iv) mailed postage prepaid by certified or registered mail, return receipt requested, to the party to be notified, at the address set forth below, or at such other place of which the other party has been notified in accordance with the provisions of this section 8.14. NCD: Network Computing Devices, Inc. 350 North Bernardo Avenue Mountain View, CA 94043-5207 Attention: Joseph Ramirez, Esq. NCD Software Corporation c/o Network Computing Devices, Inc. 350 North Bernardo Ave. Mountain View, CA 94043-5207 Attention: Joseph Ramirez, Esq. With copy to: Graham & James LLP 600 Hansen Way Palo Alto, CA 94304-1043 Attention: Joe C. Sorenson, Esq. NetManage or Sub: NetManage, Inc. 10725 North De Anza Blvd. Cupertino, CA 95014 Attention: Walter D. Amaral With copy to: Gray Cary Ware & Freidenrich 400 Hamilton Avenue Palo Alto, CA 94301 Attention: J. Howard Clowes, Esq. Such notice will be treated as having been received upon actual receipt. 8.16 CONSTRUCTION OF AGREEMENT. This Agreement has been negotiated by the respective parties hereto and their attorneys and the language hereof shall not be construed for or against any party. The titles and headings herein are for reference purposes only and shall not in any manner limit the construction of this Agreement which shall be considered as a whole. 8.17 NO JOINT VENTURE. Nothing contained in this agreement shall be deemed or construed as creating a joint venture or partnership between any of the parties hereto. No party is by virtue of this Agreement authorized as an agent, employee or legal representative of any other party. No party shall have the power to control the activities and operations of any other and their status is, and at all times, will continue to be, that of independent contractors with respect to each other. No party shall have any power or authority to bind or commit any other. No party shall hold itself out as having any authority or relationship in contravention of this Section 8.16. 8.18 PRONOUNS. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person, persons, entity or entities may require. 8.19 FURTHER ASSURANCES. Each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurances, as may be reasonably requested by any other party to better evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement. 8.20 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of this Agreement are intended, nor shall be interpreted, to provide or create any third party beneficiary rights or any other rights of any kind in any client, customer, affiliate, shareholder, partner of any party hereto or any other person or entity unless specifically provided otherwise herein, and, except as so provided, all provisions hereof shall be personal solely between the parties to this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above. NETMANAGE, INC., NETWORK COMPUTING DEVICES, INC., a California corporation a Delaware Corporation By: ------------------------ Its: By: ----------------------- ----------------------------------- WALTER D. AMARAL, Senior Vice President, Finance, Chief Financial Officer and Secretary NCD SOFTWARE CORPORATION, a California corporation By: ---------------------------- Its: --------------------------- LIST OF EXHIBITS: EXHIBIT A: CERTAIN DEFINITIONS EXHIBIT B-1: ASSIGNMENT AND ASSUMPTION OF CONTRACTS EXHIBIT B-2: ASSIGNMENT AND ASSUMPTION OF CONTRACTS EXHIBIT C: NCD DISCLOSURE SCHEDULE EXHIBIT A CERTAIN DEFINITIONS For purposes of the Agreement (including this EXHIBIT A): CLOSING AND CLOSING DATE. "Closing" and "Closing Date" shall have the meanings set forth in Section 1.6. CONTRACTS. "Contracts" shall have the meaning set forth in Section 1.1(b). CONFIDENTIAL INFORMATION. "Confidential Information" shall mean confidential information of a party ("Disclosing Party") which is disclosed to another party ("Receiving Party"). Confidential Information shall include, but not be limited to, trade secrets, know-how, inventions, techniques, processes, algorithms, software programs, schematics, designs, contracts, customer lists, financial information, sales and marketing plans and business information. DAMAGES. "Damages" shall include any loss, damage, injury, decline in value, liability, claim, demand, settlement, judgment, award, fine, penalty, tax, fee (including reasonable attorneys' fees), charge, costs (including reasonable costs of investigation) of any nature. ENTITY. "Entity" shall mean any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity. GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; or (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body, or Entity and any court or other tribunal). INDEMNIFICATION PERIOD. "Indemnification Period" shall mean the period commencing on the Closing Date and ending at the close of business on the first anniversary of the Closing Date. INDEMNITEES. "Indemnitees" shall mean the following Persons: (a) NetManage; (b) NetManage's current and future affiliates; (c) the respective Representatives of the Persons referred to in clauses "(a)" and "(b)" above; and (d) the respective successors and assigns of the Persons referred to in clauses "(a)" and "(b)" and "(c)" above. LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit, litigation, arbitration proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving any court or other Governmental Body or any arbitrator or arbitration panel. MATERIAL ADVERSE CHANGE. "Material Adverse Change" shall mean a change which would have a Material Adverse Effect. MATERIAL ADVERSE EFFECT. A violation or other matter will be deemed to have a "Material Adverse Effect" on the Z-Mail Business or NetManage, as applicable, if such violation or other matter would have a Material Adverse Effect on (i), as to NetManage, NetManage's business, intellectual property rights, condition, assets, liabilities, operations, or financial performance or (ii) as to the Z-Mail Business, the business, intellectual property rights, condition, assets, operations or financial performance of the Z-Mail Business. MATERIAL CONTRACTS. "Material Contracts" shall mean the Contracts designated as Material Contracts in Schedule 1.1(b). PERSON. "Person" shall mean any individual, Entity or Governmental Body. REPRESENTATIVES. "Representatives" shall mean officers, directors, employees, agents, attorneys, accountants, advisors and representatives. TRANSACTION DOCUMENTS. "Transaction Documents" shall mean all documents or agreements required to be delivered by any party hereunder including the Agreement, and any related agreements. EXHIBIT B-1 ASSIGNMENT AND ASSUMPTION OF CONTRACTS This Assignment and Assumption of Contracts Agreement (this "Assignment") is entered into by and among Network Computing Devices, Inc., a California corporation ("NCD"), NCD Software Corporation, a California corporation ("Sub," and together with NCD, "Assignor"), and NetManage, Inc., a Delaware corporation ("Assignee"). Assignor hereby assigns to Assignee, its successors and assigns, for the consideration described in that certain Asset Purchase Agreement dated as of June 3, 1996 by and among NCD, Sub and NetManage (the "Agreement"), the receipt and sufficiency of which are hereby acknowledged, all of Assignor's right, title and interest (as limited by the language set forth in SCHEDULE A attached hereto) in and to the contracts listed in SCHEDULE A attached hereto (the "Obligations"). Assignee hereby accepts assignment of the Obligations. Assignee hereby assumes and agrees to pay, perform and discharge the obligations of Assignor with respect to the Obligations arising after 11:59 p.m. on the day preceding the Closing Date (as that term is defined in Section 1.7 of the Agreement). This Assignment may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Assignment shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. IN WITNESS WHEREOF, the parties hereto have caused this Assignment of Contracts and Assumption to be executed and delivered as of the 3rd day of June 1996. ASSIGNOR: NETWORK COMPUTING DEVICES, INC., a California corporation By: -------------------------------------------- Its: ------------------------------------------- NCD SOFTWARE CORPORATION, a California corporation By: -------------------------------------------- Its: ------------------------------------------ ASSIGNEE: NETMANAGE, INC., a Delaware corporation By: -------------------------------------------- WALTER D. AMARAL Senior Vice President, Finance, and Chief Financial Officer SCHEDULE A OBLIGATIONS A. NetManage will (i) provide all technical support, with respect to and (ii) assume NCD's technical support obligations under those agreements set forth on Schedule 1.1(b) arising after the Closing Date. NetManage will also assume technical support obligations arising before the Closing Date in connection with such agreements up to Four Hundred Twenty-Eight Thousand Dollars ($428,000). B. NetManage will assume all of NCD's obligations set forth in that certain Software.com Software License Development Agreement including but not limited to the obligation to purchase a minimum quantity of four thousand (4,000) units through December 18, 1996; PROVIDED, HOWEVER, that the obligations assumed by NetManage pursuant to this paragraph shall not exceed Three Hundred Thirty Thousand Dollars ($330,000) (the "Software.com Obligation Cap"). In the event that the obligations as set forth in this paragraph exceed the Software.com Obligation Cap, NCD shall be liable for all such amounts exceeding the Software.com Obligation Cap, not including costs incurred in the purchase of those units which exceed the minimum quantity of 4,000. EXHIBIT B-2 ASSIGNMENT AND ASSUMPTION OF CONTRACTS This Assignment and Assumption of Contracts Agreement (this "Assignment") is entered into by and among Network Computing Devices, Inc., a California corporation ("NCD"), NCD Software Corporation, a California corporation ("Sub," and together with NCD, "Assignor"), and NetManage, Inc., a Delaware corporation ("Assignee"). Assignor hereby assigns to Assignee, its successors and assigns, for the consideration described in that certain Asset Purchase Agreement dated as of June 3, 1996 by and among NCD, Sub and NetManage (the "Agreement"), the receipt and sufficiency of which are hereby acknowledged, all of Assignor's right, title and interest in and to the contracts listed in SCHEDULE A attached hereto (the "Contracts"). Assignee hereby accepts assignment of the Contracts. Assignee hereby assumes and agrees to pay, perform and discharge the obligations of Assignor with respect to the Contracts arising after 11:59 p.m. on the day preceding the Closing Date (as that term is defined in Section 1.7 of the Agreement). This Assignment may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Assignment shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories. IN WITNESS WHEREOF, the parties hereto have caused this Assignment of Contracts and Assumption to be executed and delivered as of the 3rd day of June 1996. ASSIGNOR: NETWORK COMPUTING DEVICES, INC., a California corporation By: --------------------------------------- Its: --------------------------------------- NCD SOFTWARE CORPORATION, a California corporation By: ---------------------------------------- Its: --------------------------------------- ASSIGNEE: NETMANAGE, INC., a Delaware corporation By: ---------------------------------------- WALTER D. AMARAL Senior Vice President, Finance, and Chief Financial Officer SCHEDULE 1.3(b) Assumed Liabilities A. NetManage will (i) provide all technical support, with respect to and (ii) assume NCD's technical support obligations under those agreements set forth in Schedule 1.1(b) arising after the Closing Date. NetManage will also assume technical support obligations arising before the Closing Date in connection with such agreements up to Four Hundred Twenty-eight Thousand Dollars ($428,000). B. NetManage will assume all of NCD's obligations set forth in that certain Software.com Software License Development Agreement including but not limited to the obligation to purchase a minimum quantity of four thousand (4,000) units through December 18, 1996; PROVIDED, HOWEVER, that the obligations assumed by NetManage pursuant to this paragraph shall not exceed Three Hundred Thirty Thousand Dollars ($330,000) (the "Software.com Obligation Cap"). In the event that the obligation as set forth in this paragraph exceed the Software.com Obligation Cap, NCD shall be liable for all such amounts exceeding the Software.com Obligation Cap not including costs incurred in the purchase of those units which exceed the minimum quantity of 4,000. C. NetManage will assume all obligations under the Contracts as defined in Section 1.1(b). EX-10.42 3 EXHIBIT 10.42 ALLIANCE AGREEMENT NO. 350-148 BETWEEN INTERNATIONAL BUSINESS MACHINES CORPORATION AND NETWORK COMPUTING DEVICES, INC. ALLIANCE AGREEMENT BETWEEN INTERNATIONAL BUSINESS MACHINES CORPORATION AND NETWORK COMPUTING DEVICES, INC. TABLE OF CONTENTS 1. ALLIANCE MANAGERS 2 2. ALLIANCE AGREEMENT STRUCTURE 4 3. DEFINITIONS 4 4. PAYMENT 9 5. COPYRIGHTS 9 6. PATENTS AND INVENTIONS 13 7. TERM AND TERMINATION 15 8. CONFIDENTIALITY 17 9. MARKETING DISCRETION 17 10. INDEMNIFICATION 17 11. DISPUTE RESOLUTION 18 12. INSURANCE 18 13. GENERAL 19 - -------------------------------------------------------------------------------- BASE AGREEMENT PAGE 1 OF 24 ALLIANCE AGREEMENT Between International Business Machines Corporation and Network Computing Devices, Inc. BASE AGREEMENT This Alliance Agreement ("Agreement"), effective on the date last signed below, is agreed to by Network Computing Devices, Inc., a corporation of the State of California, with offices located at 350 North Bernardo Avenue, Mountain View, California 94043-4207 ("NCD") and International Business Machines Corporation, a corporation of the State of New York, with offices at 3605 Highway 52 North, Rochester, Minnesota 55901-7829 ("IBM"). RECITALS A. Whereas IBM is a supplier of computing systems for information processing, services and data communication applications. B. Whereas NCD is a developer and manufacturer of computer display terminal products and NCDware allowing interoperability across networks to gain access to various applications. C. Whereas this Alliance Agreement sets forth the terms and conditions by which NCD and IBM believe that an alliance between them for the development, manufacture, and support of an IBM network application terminal ("thin client") product will be mutually advantageous. NOW THEREFORE, NCD and IBM agree as follows: 1. ALLIANCE MANAGERS 1.1 ALLIANCE MANAGERS'S RESPONSIBILITIES: The Alliance Managers will act as overall coordinators for the parties under this Alliance Agreement. Contacts with a party regarding issues relating to the terms of, or performance under, this Alliance Agreement, shall be made first with the Alliance Manager for that party. Either party may change the names and - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 2 OF 24 addressees set forth above upon notice to the other party in accordance with the terms hereof. 1.2 NCD ALLIANCE MANAGER: Lorraine Hariton Network Computing Devices, Inc. 350 North Bernardo Avenue Mountain View, CA 94043-4207 TELEPHONE: (415) 694-0650 TELEFAX: (415) 961-6289 1.3 IBM ALLIANCE MANAGER: Dean Hegrenes International Business Machines Corporation 3605 Highway 52 North Rochester, MN 55901-7829 TELEPHONE: (507) 253-3530 TELEFAX: (507) 253-8684 1.4 AUTHORITY TO COMMIT EXPENDITURES Each party understands and agrees that only certain persons are authorized on behalf of the other party to make commitments requiring the expenditure of money. With respect to IBM, only IBM procurement employees are authorized to make such commitments, and will do so only in writing. To obtain such commitment, NCD shall first contact the IBM Alliance Manager, who will be responsible for obtaining the written approval of the appropriate procurement employee. In the case of NCD, only the Alliance Manager is authorized to make such commitments, and will do so only in writing. The parties agree that they will take no actions in reliance upon any commitments requiring the expenditure of money, other than those explicitly described in this Alliance Agreement, without the express written authorization of the persons identified in this section as having the authorization to make such commitments. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 3 OF 24 2. ALLIANCE AGREEMENT STRUCTURE The Alliance Agreement (hereinafter "Alliance Agreement" or "Agreement") consists of this Base Agreement, which sets forth the basic terms and conditions of the Alliance Agreement, its Appendices, and one or more Articles, each of which may include attachments. Unless otherwise specified, references in the Alliance Agreement to the Base Agreement shall include any of its Appendices, and references to Articles shall include their attachments. The terms and conditions of this Base Agreement, including the definitions, will apply to each Article, unless otherwise specified in the Article. An Article may include additional terms and conditions that supersede terms and conditions of this Base Agreement for the purpose of that Article only. Except as otherwise specified in this Alliance Agreement, a reference to a section of this Alliance Agreement shall incorporate all subsections thereunder. Each party shall perform its respective tasks and obligations as set forth in this Base Agreement and in each Article. 3. DEFINITIONS Capitalized terms in the Alliance Agreement have the following meanings. Unless otherwise specified in an Article, the definitions listed below apply to this Base Agreement and to all Articles. "APPEARANCE DESIGN" is the appearance presented by an object, formed in hardware or by software, that creates a visual impact or impression on an observer. "Appearance Design" refers to the ornamental and not the functional aspects of the object. "CHANGE OF CONTROL" shall be deemed to have occurred if: (a) any person or group (within the meaning of Rule 13d-5 under the Securities Exchange Act of 1934 as in effect on the date hereof) other than the party, or a Subsidiary of the party, shall become the owner, directly or indirectly, beneficially or of record, of voting securities representing in excess of fifty percent (50%) of the total voting power of the party, or (b) any person, or group of persons acting in concert, shall otherwise directly or indirectly acquire control of the party. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 4 OF 24 "CODE" shall mean computer programming code and shall include both Object Code and Source Code. "OBJECT CODE" shall mean Code, substantially or entirely in binary form, which is intended to be directly executable by a computer after suitable processing but without the intervening steps of compilation or assembly. "SOURCE CODE" shall mean Code, other than Object Code, and related source code level system documentation, comments and procedural code, such as job control language, which may be printed out or displayed in human readable form. "DELIVERABLES" shall mean Materials and other materials provided to or prepared for IBM by NCD pursuant to this Alliance Agreement. Unless otherwise provided in an Article, Deliverables shall also include, in addition to any Code, Documentation, or materials specifically identified as Deliverables, any other code and documentation not listed in anArticle, but which implements or conforms to the description of Deliverables in Articles. "DERIVATIVE WORK" shall mean a work which is based upon one or more preexisting works, such as a revision, enhancement, modification, translation, abridgement, condensation, expansion, or any other form in which such preexisting works may be recast, transformed, or adapted, and which, if prepared without authorization of the owner of the copyright in such preexisting work, would constitute a copyright infringement. For purposes hereof, a Derivative Work shall also include any compilation that incorporates such a preexisting work. "DESIGN VERIFICATION TEST (DVT)" shall mean a test of Product and Deliverables conducted in NCD's engineering organization which will satisfy the requirements as defined in the Product Development Plan. This test does a complete and final verification of Product function, quality, performance, serviceability, conformance to IBM and industry standards and compliance to the specifications and drawings. "DEVELOPMENT ENVIRONMENT" shall mean any Code, Documentation, device, programming, media, and other materials, including compilers, workbenches, tools, and higher-level or proprietary languages, used by NCD or necessary for the development, maintenance and implementation of Deliverables. "DISTRIBUTORS" shall mean those entities generally utilized for the distribution of a party's products including, by way of illustration and not limitation, that party and/or its Subsidiaries and its and their subsidiaries, dealers, distributors and agents. "DOCUMENTATION" shall mean user manuals and other written works that relate to particular Code and hardware design, including works useful for design (for example, - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 5 OF 24 specifications, logic manuals, flow charts, and principles of operation), and machine-readable text or graphic files subject to display or printout. "ENHANCEMENT" shall mean a change or addition to a Deliverable to change or improve its form, fit, function, or performance. Enhancements are in addition to the Deliverables described in Article 1-Development and to any changes or improvements performed within the scope of the Phase 1 and Phase 2 development tasks described in Article 1-Development. "CUSTOM ENHANCEMENTS" shall mean any Enhancements (a) that are useful only with or as part of an IBM Workstation Product, or (b) that the parties agree in writing (pursuant to the terms set forth in an Article) shall be developed or made by NCD for an IBM Workstation Product. "MAJOR ENHANCEMENTS" shall mean any Enhancements, other than Custom Enhancements, that: (a) provide substantial additional value and utility, and (b) that result in works for which NCD charges its customers an additional payment in the form of (i) an upgrade fee for customers then currently using the applicable NCD product; or (ii) a license fee for a customer acquiring the latest version of the applicable NCD product containing such Enhancement. "BASIC ENHANCEMENTS" shall mean any Enhancements that are not Major Enhancements or Custom Enhancements. "ENGINEERING VERIFICATION TEST" (EVT) shall mean a preliminary test of a Product or Deliverable to verify function, quality, performance, serviceability, conformance to IBM and industry standards, and compliance with the functional specifications and drawings. "IBM MATERIALS" shall mean Original Deliverables that are either (1) specifically identified as IBM Materials in an Article, or (2) useful only with or as part of an IBM Workstation Product. "IBM WORKSTATION PRODUCT" shall mean any product, device, computer programming code or other thing that interoperates with or utilizes for the transfer of data, any one or more of the following: 3270 data stream, 5250 data stream, coax attachment, or twinax attachment. "IBM Workstation Product" includes, but is not limited to, Product as defined herein. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 6 OF 24 "INVENTION" shall mean any idea, design, Appearance Design, concept, technique, invention, discovery, or improvement, whether or not patentable, that is conceived or reduced to practice in either party's performance or activities under this Alliance Agreement. "JOINT INVENTION" is an Invention made by NCD Personnel and IBM Personnel jointly, within the meaning of United States Code, chapter 35, section 116. "LICENSED WORKS" shall mean Deliverables that are not IBM Materials. "MAINTENANCE MODIFICATIONS" shall mean any modifications or revisions, other than Enhancements, to Code or Documentation that correct any defects or provide any incidental corrections in such Code or Documentation. "MANUFACTURING VERIFICATION TEST" (MVT) shall mean a series of tests conducted to verify the ability of the manufacturing process and related procedures to consistently produce in a production environment and at the required quality level of a Product in quantities representative of a program's volumes. "MATERIALS" shall mean Code, Documentation, and the Development Environment. "MORAL RIGHTS" shall mean any personal rights that an author may have under applicable law which are separate and apart from the proprietary aspect of copyright, including, but not limited to, rights to identification of authorship, rights of approval on modifications or limitation on subsequent modification, and rights to withdraw a work from distribution. "ORIGINAL DELIVERABLES" shall mean Deliverables other than Preexisting Materials. "PERSONNEL" are a party's employees or subcontractors working under the Alliance Agreement. "PREEXISTING MATERIALS" shall mean any Materials that exist prior to the effective date of this Alliance Agreement, or that have been or will be licensed or otherwise acquired by NCD or developed by NCD outside the scope of this Alliance Agreement. "PRODUCT" shall mean a terminal comprised of electronic circuitry components, subassemblies, and Code which allows an individual user to connect to a computer server for the purpose of downloading, inputting, receiving, and processing data from the server, and which operates using NCD's NCDware Code or Derivative Works thereof. "PRODUCT DEVELOPMENT PLAN" shall mean a plan for how the project will be managed which will include, but not be limited to, major activities, labor, schedules, and checkpoints. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 7 OF 24 "PROTOTYPE UNIT" shall mean a product having the following minimum characteristics. * Partial function * Limited error recovery * Limited initialization tests "RAISE" shall mean a test of a Product or Deliverable conducted in IBM's engineering and system tests organization which will satisfy the requirements as defined in the Product Development Plan. This test does a complete and final verification of Product and Deliverable function, quality, performance, serviceability, conformance to IBM and industry standards and compliance with functional specifications and drawings. "SUBSIDIARY" of a party means: a) a corporation, company or other entity more than fifty percent (50%) of whose outstanding shares or securities representing the right to vote for the election of directors or other managing authority are now or hereafter owned or controlled, directly or indirectly, by that party, or b) a corporation, company or other entity that does not have outstanding shares or securities, as may be the case in a partnership, joint venture or unincorporated association, if more than fifty percent (50%) of the ownership interest representing the right to make decisions for such corporation, company, or other entity is now or hereafter owned or controlled, directly or indirectly by that party, or c) in the case of an "S" corporation under the Internal Revenue Code of 1986, as amended, a Subsidiary shall include any entity controlled directly or indirectly by an individual owning or holding fifty percent (50%) or more of such "S" corporation's outstanding shares or securities. . Any such corporation, company, or other entity shall be deemed to be a Subsidiary only so long as such ownership or controls exists. "THIRD PARTY MATERIALS" shall mean Preexisting Materials in which third parties have rights. "GENERAL AVAILABILITY (GA)" shall mean the date at which IBM first ships production versions of Products developed pursuant to this Alliance Agreement in commercial quantities to customers who have ordered such Products through IBM's standard ordering processes. GA shall not be deemed to have occurred upon IBM's shipment of Products to customers or other third parties for use in development evaluation and testing and early shipment programs. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 8 OF 24 "INITIAL DESIGN FREEZE DATE" shall mean the agreed-upon date identified in Article 1-Development in which the there shall be no additional modifications to a the design of a particular Product prior to manufacture. "BILLS OF MATERIAL" OR "B/M" shall mean a list of mechanical and/or electrical parts, to the individual component level, needed to assemble a Product or FRUs. "FIELD REPLACEMENT UNIT" (FRU) shall mean an assembly that is replaced in its entirety if one of its components fails. "WORK AUTHORIZATIONS" (WAs) shall mean written or electronic purchase orders or other electronic transactions that are expressly identified as an authorization to perform work under Article 2-Manufacturing. "TOOLING" shall mean all the required tools and/or equipment that are unique to producing a Product. "SIX SIGMA QUALITY LEVEL" shall mean a proven, statistical approach that can achieve a zero defect process and a zero defect Product. It is a level of product quality achievement equivalent to 3.4 defects per million parts (PPM). "STATISTICAL PROCESS CONTROL" (SPC) shall mean the use of certain statistical techniques to analyse a manufacturing process in order to take appropriate actions to achieve and maintain a statistically controlled process and to improve the process capability of producing of parts with a Six Sigma Quality Level. 4. PAYMENT NCD will invoice IBM, and IBM will pay NCD, according to the terms set forth in one or more Articles. All payments will be made in U.S. dollars. NCD will be responsible for applicable taxes, expenses, and payments to third parties that NCD owes unless specified otherwise in an Article. 5. COPYRIGHTS 5.1 GRANT OF LICENSE TO LICENSED WORKS Subject to the conditions and limitations set forth in sections 5.1.1 and 5.1.2 of this Base Agreement, NCD grants IBM a worldwide, copyright license to use, execute, reproduce, display, perform, transfer, market, distribute, and to make Derivative Works of, the Licensed Works (including audio and visual work - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 9 OF 24 contained in or generated by such Licensed Works) for use in conjunction with Products. NCD grants IBM the right to authorize others to do any of the above, except that Derivative Works may be prepared only by IBM, its Subsidiaries, and vendors and subcontractors performing work for IBM and its Subsidiaries. Sublicenses to the Licensed Works granted by IBM to third parties shall contain terms consistent with IBM's standard practices for licensing or distributing IBM's own goods and services. IBM's license to Licensed Work that consists of Documentation shall be fully paid up upon the effective date of this Alliance Agreement. IBM's license to Licensed Work that consists of Code, other than Code contained only in Development Environment, shall be subject to a royalty as specified in Article 2 - Manufacturing, or in one or more other Articles. IBM's license rights granted in this section 5.1 shall be revocable by NCD only if IBM terminates the Alliance Agreement without cause prior to the date that IBM's minimum order quantity obligation takes effect pursuant to section 4.3 of Article 2-Manufacturing. Otherwise, the licenses granted hereunder shall be irrevocable notwithstanding termination or expiration of the Alliance Agreement. 5.1.1 LICENSE TO IBM WORKSTATION PRODUCTS IBM's license to transfer, market, distribute and sublicense those Licensed Works that are Original Deliverables shall be exclusive in the field of use with IBM Workstation Products. The other rights granted in section 5.1 shall be nonexclusive. Without limiting other Materials that are considered Preexisting Materials under the terms of this Alliance Agreement, the parties specifically acknowledge that NCD's existing 3270 local client is considered a Preexisting Material. 5.1.2 LICENSE TO SOURCE CODE OF LICENSED WORKS IBM's license to the Source Code of Licensed Works is for IBM's internal use only. IBM shall not display, perform, transfer, market, distribute or sublicense, and shall not authorize others to make Derivative Works of, the Source Code of Licensed Works, except that IBM may display, perform, distribute, sublicense, and allow its vendors and contractors to prepare Derivative Works of, the Source Code solely for the purpose of allowing such vendors and subcontractors to provide services for IBM relating to such Source Code, including but not limited to development and support of Code. Where IBM utilizes such subcontractors and vendors, IBM shall - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 10 OF 24 have written agreements with such subcontractors and vendors sufficient to require them to comply with the licensing provisions herein and to treat the Source Code in accordance with AECI No. M96-2424. IBM shall obtain NCD's approval prior to allowing such Source Code to be used off IBM's premises by such subcontractor or vendor, and NCD will not unreasonably withhold such approval. 5.2 GRANT OF LICENSE TO DEVELOPMENT ENVIRONMENT Except for Development Environment IBM provides NCD, within fifteen (15) days after the effective date of any Article or attachment thereto describing Deliverables having associated Development Environment, NCD will deliver to IBM a written list of all such Development Environment. NCD will deliver the listed Development Environment that are not commercially available concurrent with delivery of the associated Deliverables. NCD will update such written list for all changes to such Development Environment and promptly deliver updated Development Environment that are not commercially available. NCD grants IBM a nonexclusive, worldwide, copyright license to use, execute, reproduce, display and perform, and to make or have made Derivative Works of, all Development Environment (including audio or visual works contained in or generated by such Development Environment), except insofar as NCD's authority to grant such license is restricted or limited by one or more third party agreements for Third Party Materials contained within the Development Environment and where NCD discloses to IBM such restrictions or limitations within 15 days after the effective date of this Alliance Agreement. If IBM determines that any such disclosed agreements with third parties significantly effect IBM's rights to use the Development Environment for its intended purpose under this Alliance Agreement, IBM shall notify NCD and NCD shall promptly and diligently take steps to negotiate with such third parties for rights acceptable to IBM for the use of such Third Party Materials in the Development Environment. IBM's license rights granted in this section 5.2 shall be revocable by NCD only if IBM terminates the Alliance Agreement without cause prior to the date that IBM's minimum order quantity obligation takes effect pursuant to section 4.3 of Article 2-Manufacturing. Otherwise, the licenses granted hereunder shall be irrevocable notwithstanding termination. 5.3 USE OF PREEXISTING MATERIALS IN DELIVERABLES Unless IBM and NCD agree otherwise in writing with respect to certain specified Preexisting Materials, NCD may include Preexisting Materials in Deliverables only if such materials (1) are owned by NCD, or (2) are licensable by NCD to IBM, its - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 11 OF 24 Distributors and their customers under the terms of this Alliance Agreement with no additional restrictions or requirements. Within fifteen (15) days after the effective date of any Article or attachment thereto describing Deliverables that will contain Third Party Materials, NCD shall deliver to IBM a written list of such Third Party Materials and shall provide IBM with copies of all license agreements relating to such Third Party Materials. All Preexisting Materials in Deliverables are deemed Licensed Works. 5.4 REGISTRATION OF LICENSED WORKS NCD is responsible for copyright registration, maintenance and enforcement of all Licensed Works. NCD authorizes IBM to act as its agent in the copyright registration of the Licensed Works. In the event IBM uses such authority to register a copyright on behalf of NCD, IBM will promptly notify NCD of such registration. This section does not authorize IBM to act as NCD's agent for any other purpose. 5.5 RIGHTS IN IBM MATERIALS AND CUSTOM ENHANCEMENTS All IBM Materials and Custom Enhancements shall be owned exclusively by IBM and shall be deemed works made for hire. To the extent any IBM Materials or Custom Enhancements may not, by operation of law, be deemed works made for hire, NCD hereby assigns to IBM ownership of copyright in such items. IBM shall have the right to obtain and hold in its own name copyrights, registrations, and similar protection which may be available in such IBM Materials and Custom Enhancements. NCD agrees to give IBM or its designees all assistance required to perfect such rights, including the execution of any necessary documents. 5.6 CERTIFICATE OF ORIGINALITY Within sixty (60) days after the effective date of any Article or attachment thereto, and at such other times as IBM may reasonably request, NCD shall deliver to IBM a Certificate of Originality with respect to any Preexisting Materials to be included in the Deliverables listed in such Article, substantially in the form set forth in "Appendix A - Sample Certificate of Originality." Upon delivery of Deliverables to IBM, NCD shall submit an additional Certificate of Originality for such Deliverables. 5.7 MORAL RIGHTS NCD shall obtain a written agreement to waive and not to assert any Moral Rights, including any right to identification of authorship, rights of approval on modifications or limitation on subsequent modification, from any person or entity - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 12 OF 24 having Moral Rights with respect to any Deliverables hereunder. NCD hereby waives and agrees not to assert any Moral Rights, including any right to identification of authorship, rights of approval on modifications or limitation on subsequent modification, NCD has or may have in Deliverables. 5.8 TREATMENT OF THIRD PARTY MATERIALS In rendering performance pursuant to this Alliance Agreement, NCD shall comply at all times with all restrictions and covenants applicable to Third Party Materials. NCD shall bear the responsibility and expense of negotiating and obtaining any rights in Third Party Materials necessary to fulfill its obligations under this Alliance Agreement. Except as mutually agreed in writing by the parties, NCD shall have sole responsibility for payment of all royalties and other charges with respect to Third Party Materials, including royalties, charges, and payments for the licenses granted in section 5.1. If IBM is not satisfied that NCD has sufficient rights with respect to any such Third Party Materials or that NCD has assumed and discharged its responsibility for related royalties and other charges, IBM may, at its election and without limiting its other rights, suspend further action or payment or both upon notifying NCD of the problem. Such suspension shall end when the problem is remedied. Nothing herein shall restrict IBM from dealing directly with any third party with respect to such Third Party Materials or any other product or service. Provided, however, that if IBM continues to distribute the Third Party Materials after any third party claim for royalties or other charges has been raised and such matter has not been resolved within 30 days after IBM notifies NCD of such claim, IBM may either (i) place any payment due NCD under this Article in escrow pending resolution of said third party claim, or (ii) pay NCD all amounts due hereunder, less deductions for (a) any royalty payments made by IBM to such described third parties which are NCD's responsibility hereunder but which NCD has not paid and (b) IBM's reasonable, documented administrative costs in connection with making such royalty payments which are otherwise NCD's responsibility. 5.9 CONFIRMATION Promptly upon request by IBM, NCD agrees to confirm IBM's rights in Deliverables identified by IBM by execution and delivery of a written confirmation in such form as IBM may reasonably require. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 13 OF 24 6. PATENTS AND INVENTIONS 6.1 PATENT LICENSE NCD hereby grants to IBM and its Subsidiaries, sublicensees and customers, direct and indirect, a royalty free, worldwide, irrevocable, nonexclusive license under any patent or patent applications owned or licensable by NCD during the term of this Alliance Agreement to make, have made, use, have used, lease, sell, and/or otherwise transfer Deliverables, including Derivative Works thereof, and to practice or have practiced any process or method involving the use of any Deliverable. 6.2 RIGHTS IN INVENTIONS Each party shall own Inventions made by its own Personnel, except for Joint Inventions and Inventions relating to Appearance Designs. 6.2.1 INVENTIONS SOLELY BY EITHER PARTY'S PERSONNEL Each party will disclose in writing to the other at least quarterly during the term of the Alliance Agreement each Invention made solely by its Personnel together with an explanation of why the disclosing party believes it to be an Invention. NCD will identify all countries in which it will seek patent protection for each Invention. NCD authorizes IBM to act as its agent in obtaining patent protection for the Invention in countries where NCD does not seek patent protection, and IBM will promptly notify NCD in writing upon the filing of any patent application. NCD grants to IBM an irrevocable, nonexclusive, worldwide, paid-up license under these Inventions and patents issuing on and patent applications filed on these Inventions, to make, have made, use, have used, sell, license or transfer items and to practice and have practiced methods, all in conjunction with Products. 6.2.2 JOINT INVENTIONS Both parties will jointly own all Joint Inventions and resulting patents. Either party may license others under Joint Inventions and patent applications filed on, or patents issuing from, them without consent from or accounting to the other. When both parties equally share the costs associated with seeking patent protection, IBM will prepare the patent application, unless agreed to otherwise. IBM will advise NCD of the status of the application, and the - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 14 OF 24 parties will work together to complete such application. If either party decides not to equally share the costs of seeking or maintaining patent protection in a Joint Invention, the other party may do so at its own expense. The paying party will control the obtaining of, and maintenance of, such patents. The non-paying party will provide reasonable assistance and have required documents signed at the request and expense of the paying party. 6.2.3 APPEARANCE DESIGNS Unless agreed otherwise in writing, NCD assigns to IBM all Inventions, and patents issuing on them, relating to an Appearance Design of a Product. NCD will, at IBM's expense, assist in the filing of patent applications on these Inventions and have required documents signed. 6.2.4 NO OTHER PATENT LICENSES Except as expressly granted in this Alliance Agreement, neither party grants the other party any rights in any patents or patent applications. 7. TERM AND TERMINATION The initial term of this Alliance Agreement shall begin on the effective date and end on December 31, 1998 (the "Initial Term"). Termination or expiration of the Alliance Agreements shall terminate all Articles except to the extent that an Article expressly states otherwise. This Base Agreement will remain in effect for any Article or part thereof that remains in effect after termination or expiration of the Alliance Agreement until that Article fully expires or is terminated. 7.1 IBM'S RIGHT OF RENEWAL IBM shall have the right to renew this Alliance Agreement through December 31, 2000, by providing NCD with notice of renewal no later than March 1, 1998. Except as otherwise specified in one or more Articles or negotiated and agreed to in writing by the parties, all terms and conditions of this Alliance Agreement, including definitions, shall continue to apply throughout such renewal term. 7.2 IBM'S OBLIGATION TO RENEW CERTAIN ARTICLES Any obligation of IBM to renew any Article of this Alliance Agreement beyond the Initial Term shall be specified in the Article to which such obligation applies. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 15 OF 24 7.3 IBM'S RIGHT TO TERMINATE WITHOUT CAUSE IBM shall have the right to terminate this Alliance Agreement without cause at any time by providing NCD with sixty (60) days written notice. IBM's obligations, upon termination, if any, may be included in one or more Articles. 7.4 TERMINATION FOR CAUSE Either party may terminate this Alliance Agreement for cause, without any liability or obligation to compensate the other, in the event that: the other party materially breaches the Alliance Agreement, and such breach is not cured within 60 days after the notice of termination is received; or the other party becomes insolvent, files or has filed against it a petition in bankruptcy, or undergoes a reorganization pursuant to a petition in bankruptcy filed with respect to it; or the other party is dissolved or liquidated or has a petition for dissolution or liquidation filed with respect to it; or the other party ceases ongoing business operations; or the other party enters into any voluntary or involuntary receivership, or upon the appointment of a receiver by a court; or there is a Change of Control of the other party. Termination for any of the above causes shall take effect immediately upon notice from the terminating party, except that (1) termination for breach shall be effective sixty (60) days after the notice of termination describing the breach is received and shall not take effect if the breach is cured prior to such effective date, and (2) termination solely for involuntary bankruptcy shall take effect 60 days after the service of the involuntary bankruptcy petition is filed, unless such petition is dismissed within this 60 day period, in which case the termination shall not take effect. In all cases, the cause for termination shall be stated in the notice. 7.5 SURVIVAL OF CERTAIN PROVISIONS AFTER TERMINATION The following provisions of this Base Agreement shall survive beyond expiration or termination of this Alliance Agreement: Section 5 (excluding 5.6), Section 6, Section 8, Section 9, Section 10, Section 11, Section 12 (to the extent specified - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 16 OF 24 therein), Section 13 (excluding 13.12), and all applicable definitions of this Base Agreement, shall survive such expiration or termination. In addition, terms in Articles may survive termination or expiration to the extent specified in such Article. 8. CONFIDENTIALITY The treatment of either party's confidential information will be governed by AECI No. M96-2424 and all supplements thereto. 9. MARKETING DISCRETION Except where marketing rights are expressly restricted in this Alliance Agreement, the parties shall retain full freedom and flexibility concerning the marketing of their products, including the decision whether to market or discontinue marketing of products, and the decision of what level of marketing effort to be undertaken. Neither party undertakes any obligation to announce or market any products. Nothing in this Alliance Agreement shall be construed as creating any obligation of "best efforts" or other level of marketing effort. 10. INDEMNIFICATION NCD, at its own expense, will settle or defend, and will pay any damages, costs, attorneys' fees or fines as may be assessed by a court of competent jurisdiction with respect to all proceedings, threats of proceedings, or claims against IBM, its Distributors and their respective customers, for the infringement or alleged infringement by Products or Deliverables furnished under this Alliance Agreement or any part or use thereof, of patents (including utility models and registered designs), mask work rights, trade secrets, or copyrights in the following countries: the United States of America, member states of the European Community, Japan, Canada, and any other country where NCD, its Subsidiaries, Distributors or affiliates, heretofore have furnished similar goods in substantial quantities or have directly conducted their business with respect to NCD products. IBM shall provide prompt notice to NCD of any such proceeding or claim of which it becomes aware and at NCD's expense, shall provide information and assistance that NCD may request in connection with the defense and settlement of any such proceeding or claim. NCD shall not have any liability hereunder for infringement or alleged infringement resulting solely from (i) required compliance by NCD with engineering drawings or manufacturing instructions or specifications originating with or furnished by IBM (ii) alteration of Products or Deliverables by persons other than NCD, or (iii) use of the - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 17 OF 24 Products or Deliverables in combination with goods or services not provided by NCD unless the Products or Deliverables contributorily infringe. Each party will promptly notify the other in writing if it becomes aware of any patent, copyright, trade secret, mask work right, or other right of a third party which the Products or Deliverables furnished under this Alliance Agreement may infringe or violate. The indemnification provisions herein shall in no way limit or restrict either party's right to indemnity, contribution, or other remedies availables against the other as provided by statute or common law. 11. DISPUTE RESOLUTION Each party will promptly notify the other party's Alliance Manager of any dispute with the other party under or regarding this Alliance Agreement, and will further promptly notify the other party's respective Article Coordinator of any dispute with the other party under or regarding an Article of this Alliance Agreement. The parties will negotiate in good faith to resolve any dispute between them regarding this Alliance Agreement. If the dispute cannot be settled by the Article Coordinators and/or the Alliance Managers, both parties agree to engage their executives in an attempt to resolve the matter before bringing action in a court of law. Except for actions brought to enforce the provisions involving intellectual property rights and indemnification, no actions, regardless of form, arising out of or in connection with performance or transactions covered by this Alliance Agreement may be brought by either party more than two (2) years after the cause of action has accrued. The running of this period is not tolled during the time, if any, the parties are engaged in any effort to resolve any dispute, unless the parties specifically agree in writing to toll such period. 12. INSURANCE NCD will maintain Commercial General Liability insurance at its own expense with minimal coverage for two years following expiration or termination of the Alliance Agreement in the amount of $1,000,000, with an aggregate liability of $10,000,000 per event. This coverage includes: (a) "Contractual Liability" NCD responsible for under the Alliance Agreement, and (b) "Products and Completed Operations." - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 18 OF 24 NCD remains liable for any damages, including but not limited to damages in amounts above the stated minimal coverage of this section. The insurance will provide that the insurer notify IBM at least 30 days before any non-renewal, cancellation or other material change in your coverage. NCD will name IBM as an additional insured. NCD will provide IBM with a certificate of insurance as proof of this minimal coverage on request. 13. GENERAL 13.1 INDEPENDENT CONTRACTOR IBM and NCD each represent and warrant to the other that its efforts in relation to this Alliance Agreement shall be as an independent contractor. Nothing contained in this Alliance Agreement shall constitute the parties as entering upon a joint venture or partnership, or shall constitute either party the agent for the other party, or be construed as creating the relationship of employer and employee, master and servant, or any similar relationship for any purpose or any sense whatsoever. NCD and IBM and their employees shall have no authority to bind or make commitments on behalf of the other party for any purpose and shall not hold itself or themselves out as having such authority. Each party shall have sole responsibility for the supervision, daily direction and control, payment of salary (including withholding of income taxes and social security), worker's compensation benefits, and the like of its personnel. 13.2 FREEDOM OF ACTIVITY Except as explicitly stated in this Alliance Agreement with regard to license or confidentiality restrictions, this Alliance Agreement shall not prevent either party from entering into any agreement with any third party or developing, manufacturing and/or selling any product or service even if it competes with the other party's products or services, or any product developed under this Alliance Agreement. 13.3 FORCE MAJEURE Neither IBM nor NCD shall be in default or liable for any delay or failure of compliance with this Alliance Agreement due to an act of nature, public enemy, government action, or freight embargo beyond the control of the defaulting party and the defaulting party shall provide the nondefaulting party immediate notice of any such anticipated delay or failure of compliance; provided, however, that any such act shall not relieve the defaulting party's obligations hereunder and such - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 19 OF 24 party hereby agrees to perform its obligations as soon as practicable after the conditions causing such delay or failure have subsided. 13.4 LAWS Each party shall, at it's own expense, comply with applicable governmental laws, statutes, ordinances, administrative orders, rules or regulations relating to its duties under this Alliance Agreement and shall procure all licenses and pay all fees and other charges required thereby. To the extent applicable, each party will comply with Executive Order 11246 of the President of the United States on Equal Employment Opportunity and the Occupational Safety and Health Act of 1970. 13.5 NOTICES All notices to a party under this Alliance Agreement shall be delivered to that party's Alliance Manager at the address stated in this Base Agreement. All notices to a party under an Article shall be delivered to that party's Article Coordinator at the address specified in the Article. All notices required or permitted to be given under this Alliance Agreement or under an Article shall be in writing. 13.6 NO OTHER LICENSES No licenses shall be implied by this Alliance Agreement other than those specifically set forth herein. 13.7 PUBLICITY Except as required by law, NCD will not, without IBM's prior approval, with such approval not to be unreasonably withheld, issue press releases or other publicity regarding the Alliance Agreement or the parties relationship to it. If the joint activities of the parties or general terms and conditions of this Alliance Agreement are to be publicly announced by mutual agreement by the parties, procedures and restrictions for disclosure will be jointly agreed to in writing prior to any disclosure. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 20 OF 24 13.8 SEVERABILITY If any provision of this Alliance Agreement is for any reason found to be ineffective, unenforceable or illegal, such condition shall not affect the validity or enforceability of any of the remaining portions thereof. The parties shall negotiate in good faith to replace any ineffective, unenforceable or illegal provision with an effective replacement as soon as is practical. 13.9 SUBSIDIARIES Except as explicitly stated otherwise in this Alliance Agreement, the rights and licenses granted under this Alliance Agreement shall apply to a party's Subsidiaries so long as such Subsidiaries agree to comply fully with the obligations imposed on that party. Each party shall remain fully responsible for actions and omissions of its Subsidiaries relative to rights granted under this Section. 13.10 TAXES Each party shall be responsible for the payment of any taxes and duties imposed on such party arising out of its performance hereunder. Without limiting the foregoing, the parties specifically agree that IBM shall be responsible for all taxes and duties associated with its distribution of Products to its customers. 13.11 TRADEMARK USAGE Nothing in this Alliance Agreement shall imply the grant to a party of a license to use any trademark or service mark of the other party. Such a grant may only be made by explicit statement in this Alliance Agreement. 13.12 TRANSFER OR ASSIGNMENT Neither party may transfer, assign, or sell any right or obligation under this Alliance Agreement, except as expressly provided herein, without the prior written consent of the other, except IBM may assign its obligations to an IBM Subsidiary upon written notice to NCD. NCD may not subcontract any part of the work to be performed under this Alliance Agreement without the prior written consent of IBM. Purchase of services or components normally purchased by NCD, and use of on-site contract Personnel, will not be construed as an assignment or subcontract. The parties agree that IBM's written approval for the subcontracting of any part of the work will not relieve NCD of the responsibility for subcontractor performance. IBM will not unreasonably withhold its consent. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 21 OF 24 Any act of derogation of the foregoing shall be null and void and may be deemed a material breach of this Alliance Agreement. 13.13 WAIVER The waiver of any term, condition, or provision of this Alliance Agreement by either party must be in writing. No such waiver shall be construed as a waiver of any other term, condition, or provision except as provided in writing, nor as a waiver of any subsequent breach of the same term, condition, or provision. 13.14 WARRANTIES The following warranties are in addition to any other warranties described in one or more Articles: 13.14.1 NO CONFLICT Each party represents and warrants that it is under no obligation or restriction, or will it assume any such obligation or restriction, that does or would in any way interfere or conflict with, or that does or would present a conflict of interest concerning each party's performance under this Alliance Agreement or would restrict any of the rights and licenses granted to the other party herein. 13.14.2 NO INFRINGEMENT NCD represents and warrants that no valid copyright, mask work, or trade secret right of a third party would be infringed by any Deliverables provided to IBM under this Alliance Agreement. NCD represents and warrants that it has the right and power to enter into and perform under this Alliance Agreement and under the Articles. 13.14.3 INTERFERING CODE NCD represents and warrants that the Deliverables do not contain any Code that is intentionally constructed with the purpose of damaging, interfering with or otherwise adversely affecting Code, data files, or hardware without the consent and intent of the computer user. NCD shall establish and enforce commercially reasonable procedures, which shall be reviewed with IBM at IBM's request, to prevent any such Code from being incorporated by NCD's Personnel into Deliverables and shall promptly notify IBM - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 22 OF 24 of any knowledge or suspicion of NCD's that any such materials have been incorporated in any Deliverables. 13.14.4 NO IMPLIED WARRANTIES No warranties other than those expressly set forth in this Alliance Agreement (including this Base Agreement and Articles) shall be implied. 13.15 LIMITATION OF LIABILITY Neither party shall be liable to the other for any consequential damages, incidental damages, or special damages (including loss profits, lost savings, loss of business, or interruption of business) even if informed that they may occur. This limitation does not apply to liabilities for indemnity to the extent such damages are included in settlements and court awards. 13.16 GOVERNING LAW/FORUM This Alliance Agreement and the performance of the parties thereunder shall be construed in accordance with and governed by the substantive laws of the United States of America and the State of Minnesota which pertain to agreements executed in, and fully performed within, the State of Minnesota. Any proceeding to enforce, or to resolve disputes arising under or relating to this Alliance Agreement shall be brought before a court of competent jurisdiction in the State of Minnesota, including a Federal District Court sitting within the State. The parties hereby expressly waive any right to a jury trial and agree that any proceedings related to this Alliance Agreement shall be tried by a judge without a jury, regardless of the type or form of the action. 13.17 EXECUTION AND MODIFICATION Execution of this Alliance Agreement shall be by signature of an authorized representative of each party. This Alliance Agreement may only be modified in a writing executed by authorized representatives of both parties or their designees. 13.18 ENTIRE AGREEMENT This Alliance Agreement along with AECI No. M96-2424 and its supplements, set forth the entire agreement and understanding between the parties as to their subject matter and merge all prior discussions and agreements between the parties, whether oral or written, related to the subject matter of the alliance. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 23 OF 24 Neither party relies on any promises, inducements, representations made by the other or expectations of more business dealings except as expressly provided in this Alliance Agreement. The Alliance Agreement accurately states our business agreement. - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 24 OF 24 IN WITNESS WHEREOF, each party has reviewed this Agreement and each party has executed this Agreement by signature of its authorized representative. NETWORK COMMUNICATION DEVICES, INC. INTERNATIONAL BUSINESS MACHINES CORPORATION Signature /s/ Lorraine Hariton Signature /s/ Bhawnesh C. Mathur ------------------------------- ------------------------- Printed Name Lorraine Hariton Printed Name Bhawnesh C. Mathur ---------------------------- ---------------------- Printed Title V.P. of Strategic Accounts Printed Title Dir. of --------------------------- Procurement, IBM Server Group ----------------------------- Date 6/27/96 Date June 27, 1996 ------------------------------------ -------------------- - -------------------------------------------------------------------------------- BASE AGREEMENT-PAGE 25 OF 24 IBM-NCD ALLIANCE AGREEMENT NO. 350-148 ARTICLE 1 DEVELOPMENT IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT This Article 1, effective on the date last signed below, is agreed to by Network Computing Devices Corporation ("NCD"), a corporation of the State of California, with offices located at 350 North Bernardo Avenue, Mountain View, California 94043-4207 and International Business Machines Corporation ("IBM"), a corporation of the State of New York, with offices at 3605 Highway 52 North, Rochester, Minnesota 55901-7829. RECITALS A. NCD and IBM have entered into an alliance between them in the area of an IBM network application terminal ("thin client") Product. B. This Article describes, among other things, terms and conditions of development and describes Deliverables. 1. ARTICLE COORDINATORS 1.1 NCD ARTICLE 1 COORDINATOR: Philip R. Graham 350 North Bernardo Avenue Mountain View, CA 94043-4207 TELEPHONE: (415) 919-2796 TELEFAX: (415) 961-6289 1.2 IBM ARTICLE 1 COORDINATOR: Ordean F. Hegrenes International Business Machines Corporation 3605 Highway 52 North Rochester, MN 55901-7829 TELEPHONE: (507) 253-3530 TELEFAX: (507) 253-8684 - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 1 OF 13 IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT 1.3 DUTIES OF ARTICLE COORDINATORS The Article Coordinators will act as overall coordinators for the parties under this Article. Each party will advise the other in writing of any change regarding its Article Coordinator. 2. GENERAL DESCRIPTION This Article sets forth the terms and conditions under which the parties will jointly develop a "thin client" terminal Product for IBM, which is intended to be positioned as a network computer terminal and as a replacement for existing non-programmable type terminals. This terminal Product will contain graphical user interface ("GUI") capabilities, download capabilities from various servers, including AS/400, S/390, RS/6000, and PC servers, and shall utilize network computing technologies such as web browsers, and JAVA applets. The "thin client" terminal Products shall be composed of a logic unit with microprocessor, memory, connectivity interface (Token Ring, Ethernet, twinax, coax, serial, and others), power supply, and enclosures. There will be multiple models of the "thin client" Product that will accomodate differing using system and customer requirements. The unit would attach to IBM PC Company selected keyboard models, mice, and standard displays of VGA/XGA and better. The IBM "thin client" terminal Product shall be based on existing and enhanced versions of NCD's EXPLORA (WILDCAT) product, and will operate using a modified version of NCD's NCDware Code, boot code loaded in programmable devices, and certain other NCD software licensed to IBM. The Product will remotely load the Code that provides functionality from the server it is logically attached to. This software would provide a basis for emulation of existing devices (e.g. 5250, 3270) as well as extend the functionality with web browsers, [ ], and other Code. The initial development of the Product shall be comprised of two phases. The following is a general description of the Phase 1 and Phase 2 versions of the Product and their contemplated availability dates: PHASE 1 VERSION (LAN VERSION) The Phase I Product will be comprised of the following function: * WILDCAT product enhancement version of the EXPLORA NCD device - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 2 OF 13 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * NCDware 4.1 or later version * [ ] * [ ] * [ ] * [ ] Although the [ ] application is not a Deliverable within Phase 1 and Phase 2, compatibility shall be provided with the [ ] application for the the Phase I, Phase II, and follow on products. It is intended that limited shipments of the Phase 1 version of Products to IBM's customers for development evaluation and early ship programs, and General Availability of the Phase 1 version of the Product, will occur in the fourth calendar quarter of 1996. PHASE 2 VERSION OF PRODUCT The Phase 2 Product will be comprised of the Phase 1 Product, plus the following functional additions to the Product family, including the integration of the host programming support into the base operating system (AS/400 specifically): * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 3 OF 13 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT * [ ] * [ ] * [ ] * [ ] * [ ] Although the [ ] application is not a Deliverable under Phase 1 and Phase 2, compatibility shall be provided with the [ ] application for the Phase I, Phase II, and follow on Products. It is intended that General Availability of the Phase 2 version of the Product will occur in July of 1997. 3. NCD'S RESPONSIBILITIES NCD shall perform the following tasks and provide IBM with the following Deliverables as set forth below: 3.1 TASKS In accordance with this Article, and with IBM's advice and joint development, NCD will develop for IBM a cost and performance effective Product for use in IBM's server system platform product lines (ie. AS / 400, RS/6000, S/390, and PC servers) in accordance with the Phase 1 and Phase 2 descriptions set forth above and other specifications set forth in the Product Development Plan. Included but not necessarily all inclusive, are the following tasks. * Specific joint design, development and testing of the Product * Assist IBM in ensuring that Product design will meet IBM Corporate instructions and standards as identified and validated by IBM. * [ ] * [ ] * Development activities necessary to ensure Bi-Directional keyboard support. * Provide support and assistance to IBM for IBM-conducted testing * Conduct unit level Engineering Verification Testing and Design Verification Testing and report test results. - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 4 OF 13 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT * NCD shall give IBM the documentation and support necessary to obtain necessary agency and government approvals. * Provide Product Engineering support for Product * [ ] * Conduct compatibility testing to ensure functionality is maintained commensurate with changes to the supported network computer functions. * Provide support for token ring device driver. * Provide L3 support for early shipment programs. * Provide a local printer support and JAVA local print support. * [ ] * Provide consultation and design support (HW and SW) to IBM * Setup of IBM-owned Sun systems with NCD Development Environment * Education of IBM development personnel on NCDware internals, tools, architecture, processes, procedures. * [ ] * [ ] * [ ] * Other tasks determined by the parties to be necessary for development the Products specified herein according to the schedules specified herein or in the Product Development Plan. 3.2 DELIVERABLES NCD shall provide the following Deliverables to IBM: 3.2.1 CODE The following Code shall be provided to IBM. Unless otherwise specified, all Code provided shall be provided in Source Code and Object Code forms: * [ ] * [ ] * [ ] * [ ] - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 5 OF 13 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT * [ ] * [ ] * [ ] [ ] Although NCD's implementation of [ ] is not considered to be a Deliverable within the scope of Phase 1 and Phase 2 development described above, NCD agrees that upon IBM's request it will make good faith efforts to acquire appropriate license rights to allow [ ] to be added as a Licensed Work under Phase 1 of development solely for the purpose of supporting the [ ] browser, provided IBM agrees to pay third-parties royalties resulting from IBM's use of such [ ] software licensed by - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 6 OF 13 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT NCD. Other than such third-party royalties that may be necessary, NCD will not charge IBM any separate fee for providing [ ] in support of the [ ] browser. [ ] NCD agrees that it will work in good faith with IBM to acquire appropriate license rights to allow its implementation of the [ ] to be added as a Licensed Work under Phase 1 of Development. NCD agrees to license the [ ] to IBM under the licensing terms of this Alliance Agreement if such rights exist or are obtained, provided that IBM shall be responsible for third-parties royalties, if any, resulting from IBM's use of such software licensed by NCD. 3.2.2 DEVELOPMENT ENVIRONMENT NCD shall provide all Development Environment for other Deliverables herein. NCD shall be responsible for providing all equipment necessary for its performance under this Article. IBM may loan or otherwise supply unique IBM equipment. Determination of need will be evaluated on a case-by-case basis. IBM will provide a loan of an AS/400 and necessary training through a separate equipment loan agreement. 3.2.3 DOCUMENTATION * NCD's Bill of Material (B/M) for Products to be supplied by NCD. * A complete list of NCD's approved suppliers for each component of the Product. * All NCD documentation source files for Products and Deliverables, including user manuals, installation guides, and system administrator manuals. (For use in IBM publications). * NCD development documentation files for Products and Deliverables. (For development and support group education and reference). * Design documentation for Products (both hardare and software). * Educational materials in support of skills transfer classes. * A source paper to be used as input to existing service and customer documentation. * Specifications for components, hardware, circuits, and function used by NCD in its Product development. * Other documentation deemed necessary by IBM or by NCD for - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 7 OF 13 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT development of the Phase 1 and Phase 2 Products. 4. IBM'S RESPONSIBILITIES IBM is responsible for the following tasks, in which NCD shall assist as requested by IBM: * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ ] * [ - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 8 OF 13 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT ] * [ ] 5. PRODUCT DEVELOPMENT PLAN AND DEVELOPMENT SCHEDULES 5.1 PRODUCT DEVELOPMENT PLAN The parties shall use best efforts to mutually agree to and complete a Product Development Plan covering Phases 1 and 2 of the Product development within 30 days after execution of this Article. The Product Development Plan shall include schedules designed to meet the intended GA timelines described in the Phase 1 and Phase 2 overviews in the General Description Section of this Article, however, actual schedules will be mutually agreed to by the parties. The Product Development Plan for Phase 1 Product shall be firm at that time to allow meeting the initial hardware design freeze date and the limited shipment and GA timelines. The Product Development Plan for Phase 2 shall contain the schedules and plans for completion of the key checkpoints required to meet the Phase 2 General Availability plan dates and shall be subject to further enhancement and modification. Such Product Development Plan shall be an attachment to this Article and shall be signed by the Article 1 Coordinators. The Product Development Plan shall describe the details of the development tasks, development schedules and milestones, function and content of Deliverables, design verification testing, acceptance criteria for Deliverables, and other items deemed appropriate for efficient management of the development process. The parties shall comply with the Product Development Plan. 5.2 INITIAL HARDWARE DESIGN FREEZE DATE The initial hardare design freeze date for Phase 1 Product shall be [ ]. The Article 1 Coordinators may change this date by mutual agreement in writing. However, any change of more than 30 days (forward or backward) in the initial hardware design freeze date shall require the concurrence and signatures of the parties' Alliance Managers. 6. ENHANCEMENTS 6.1 BASIC ENHANCEMENTS Throughout the term of this Article, NCD shall offer to provide to IBM at no - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 9 OF 13 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT additional charge all Basic Enhancements. Such Basic Enhancements shall be offered to IBM within a reasonable time period prior to the availability of any such Basic Enhancements in NCD's own products to allow IBM to incorporate and make available such Basic Enhancements in its Products. Basic Enhancements accepted by IBM shall be deemed Licensed Works. 6.2 MAJOR ENHANCEMENTS Throughout the term of the Article, NCD shall offer to provide to IBM Major Enhancements for a reasonable fee (which may incorporate NCD's costs for third party royalties and other costs incurred by NCD) to be determined in good faith by the parties, and mutually agreed upon in writing, provided that such fees shall be no greater than the lowest charges paid by other NCD customers for such Major Enhancements. Such Major Enhancements shall be offered to IBM within a reasonable time period prior to the availability of any such Major Enhancements in NCD's own products to allow IBM to incorporate and make available such Major Enhancements in its Products. Major Enhancements shall be deemed Licensed Works. 6.3 CUSTOM ENHANCEMENTS Throughout the term of this Article, NCD shall offer to provide to IBM all Custom Enhancements for a reasonable fee to be determined in good faith by the parties and mutually agreed upon in writing. IBM shall own all Custom Enhancements. 6.4 CATEGORIZING ENHANCEMENTS Prior to NCD's commencement of work on any Custom Enhancement, and prior to delivering any Enhancement to IBM, the parties shall describe the Enhancement in writing, and categorize the Enhancement as a Basic, Major, or Custom Enhancement. If the Enhancement is categorized as a Major or Custom Enhancement, the parties shall agree in writing to the compensation to be paid for such Enhancement and the provisions for ongoing maintenance and support of such Enhancements. 6.5 ENHANCEMENTS CREATED BY IBM Prior to creating any Enhancements to Licensed Works during the term of the Alliance Agreement, other than Custom Enhancements, IBM shall describe the - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 10 OF 13 IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT planned Enhancement to NCD and give NCD a reasonable opportunity to offer to provide such Enhancement to IBM under the terms set forth in sections 6.1 and 6.2 above. In the event IBM determines not to obtain the Enhancement from NCD, IBM shall negotiate in good faith with NCD to grant NCD a license back to such Enhancements created by IBM. Nothing in this section shall prevent IBM from also requesting NCD to offer to provide Custom Enhancements, except that IBM shall not be required to negotiate with NCD for the licensing back of such Custom Enhancements. 7. WARRANTIES NCD represents and warrants that Original Deliverables have been or shall be prepared and/or procured by NCD with professional diligence and skill, and will conform to the material specifications and requirements set forth or incorporated in this Alliance Agreement. NCD warrants that each Deliverable will perform in accordance with the functional specifications defined in or incorporated into this Article. These warranties will survive termination of the Alliance Agreement. 8. COMPENSATION Upon this Alliance Agreement becoming effective, NCD will be paid a non-recoverable expense in the amount of $[ ] per month, beginning June 15, 1996, up to the time of General Availability of the Phase 1 Product. That NRE will be invoiced to IBM on a monthly basis beginning July 15, 1996 covering the period dating back to the 15th of the previous month. These monthly payments will continue until GA or until the cumulative total of all such payments is of $[ ], whichever comes first. IBM will pay the invoice within 30 days of receiving it. The final payment will be prorated to the GA date. This NRE is to be used by NCD in the agressive pursuit of the achievement of the milestones set for the Product Development Plan and in recognition of their expenses incurred in early production tooling and ramp-up requirements to meet the IBM and NCD joint development schedules as defined in this Article. Except for this NRE payment and except where expressly stated otherwise in regard to Custom and Major Enhancements, there shall be no additional separate compensation for the work performed pursuant to this Article. - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 11 OF 13 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT 9. PRODUCT DEVELOPMENT PLAN 9.1 SPECIFICATIONS NCD and IBM Product specifications will be jointly defined and reviewed by the Product teams covered by this Agreement. Since the intent is to have common IBM / NCD design content on the base Product, these specifications for the Product must be agreed on and monitored closely as to implementation and tradeoffs made throughout the design. Primary vehicle for making that happen is the weekly scheduled IBM / NCD development team conference call, schedule tracking, and work item tracking, managed by the Development Article coordinators. These work item tracking project logs will serve as extensions and clarifications to the Product specification as agreed to therein, and are available for review by both parties. 9.2 DESIGN The Products covered by this Alliance Agreement will be jointly designed by NCD and IBM. NCD and/or IBM may subsequently request design changes based on the results of usability testing, market surveys, and Product Plan Reviews. Development Article coordinators will jointly agree on the design changes based on the merits of the design change for the Product as a whole and as related to each platform. 9.3 UNIT TEST NCD is responsible for performing unit testing. The mission of the unit testing is to verify that the control unit of the Product correctly implements the Product Specification and it's manufacturing quality criteria. This testing will be performed during NCD's and IBM's Engineering Verification Test (EVT) test phase. 9.4 IBM TESTING NCD shall conform with the entry and exit criteria for IBM EVT, RAISE, and MVT as defined in the EVT/RAISE Hardware System Test Process (available from the IBM Development Article I coordinator). - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 12 OF 13 IBM-NCD ALLIANCE AGREEMENT ARTICLE 1 DEVELOPMENT 9.5 INFORMATION PLAN NCD will provide IBM Information Development with current specifications and documents that could be used by IBM in generating the IBM publications in support of the Product upon request that provides enough overview, conceptual, reference, how-to, and other detailed information to enable IBM information developers to extract information from it and merge that information into existing IBM Product manuals and on-line help information to support the Product. Examples of types of information to be provided in the source paper are: a) description of overall service strategy b) problem isolation procedures c) reference code descriptions IN WITNESS WHEREOF, each party has reviewed this Article and each party has executed this Article by signature of its authorized representative. NETWORK COMMUNICATION DEVICES, INC. INTERNATIONAL BUSINESS MACHINES CORPORATION Signature /s/ Lorraine Hariton Signature /s/ Bhawnesh C. Mathur ------------------------ ---------------------------- Printed Name Lorraine Hariton Printed Name Bhawnesh C. Mathur --------------------- ------------------------- Printed Title V.P. of Strategic Accounts Printed Title Dir. of Procurement, --------------------------- IBM Server Group ------------------------------------- Date 6/27/96 Date June 27th, 1996 ----------------------------- --------------------------------- - -------------------------------------------------------------------------------- ARTICLE 1-PAGE 13 OF 13 IBBM-NCD ALLIANCE AGREEMENT NO. 350-148 ARTICLE 2 MANUFACTURING This Article 2, effective on the date last signed below, is agreed to by Network Computing Devices, Inc., ("NCD"), a corporation of the State of California, with offices located at 350 North Bernardo Avenue, Mountain View, California 94043-4207 and International Business Machines Corporation ("IBM"), a corporation of the State of New York, with offices at 3605 Highway 52 North, Rochester, Minnesota 55901-7829. RECITALS A. NCD and IBM have entered into an alliance between them in the area of a network application terminal ("thin client") product. B. This Article describes, among other things, the terms and conditions under which NCD will custom manufacture a thin client for IBM, including but not limited to forecasting, ordering, quantity, and pricing, and shipping terms and conditions. 1. ARTICLE COORDINATORS 1.1 NCD ARTICLE 2 COORDINATOR: Randy Wagner Manufacturing Project Manager Network Computing Devices, Inc. 350 North Bernardo Avenue Mountain View, CA 94043-4207 TELEPHONE: (415) 919-2756 TELEFAX: (415) 961-7774 1.2 IBM ARTICLE 2 COORDINATOR : Michael Heaser International Business Machines Corporation 3605 Highway 52 North - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 1 OF 15 IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING Rochester, MN 55901-7829 TELEPHONE: (507) 253-8784 TELEFAX: (507) 253-3648 1.3 DUTIES OF ARTICLE COORDINATORS The Article Coordinators will act as overall coordinators for the parties under this Article. Each party will advise the other in writing of any change regarding its Article Coordinator. All communications between the parties regarding this Article shall be conducted through the Article Coordinators. 2. PRODUCTS NCD shall supply Products to IBM. Products to be supplied to IBM under this Alliance Agreement may include NCD's existing EXPLORA products, as well as Products developed under this Alliance Agreement which are generally described in Development-Article 1, and shall be specified in more detail in the Product Specification and Price List (PSPL) which shall be an attachment to this Article. Product descriptions and specifications may be changed from time to time by mutual agreement. NCD will supply such Products according to the terms and conditions of this Article and the PSPL attachment. No changes of any kind shall be made by NCD in the form, fit or function of Products without IBM's prior written consent. However, if either party determines that such changes are necessary for compliance with government-imposed safety requirements, that party will promptly inform the other, and the parties will promptly take the reasonable and necessary steps to implement such changes. The parties shall use their best efforts to negotiate and complete the initial PSPL within 30 days after the Initial Design Freeze Date as specified in Article 1-Development. The PSPL shall be amended when the Product specifications and/or the Product prices are changed pursuant to this Alliance Agreement. 3. QUALITY - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 2 OF 15 IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING NCD will ensure that all work performed pursuant to this Article is performed in a professional and competent manner consistent with the highest industry standards and safety practices, and with IBM's specifications, drawings, standards, directions and procedures. NCD will ensure that a total management quality system such as the Malcolm Baldridge National Quality Award Criteria, ISO 9000, or equivalent national standard, is maintained for all aspects of the key processes related to performance of work under this Article. NCD will strive to implement and maintain a Product defect level at or below a Six Sigma level. NCD will monitor the steps in all Product-related processes to identify deviations and potential improvements. NCD will employ Statistical Process Control (SPC) techniques to ensure that the quality requirements are consistently met by all Product-related processes. Upon request by IBM, NCD will provide IBM written reports and/or numerical data files containing quality information related to the Product manufacturing process. IBM will determine the structure of such reports. Upon reasonable notice during NCD's normal business hours, IBM will have the right to review NCD's quality plans and initiatives, assembly methods, manufacturing processes, and production facilities on or off NCD's premises in order to assess their adequacy. 4. PRICING AND QUANTITIES NCD shall make the Product available to IBM at the price determined as set forth below. NCD warrants that pricing of Products does not include taxes and that NCD will not include any sales taxes on any Products purchased by IBM. Upon request, IBM will provide NCD with a valid Reseller's Exemption Certificate for each taxing jurisdiction for which NCD will ship Products. 4.1 INITIAL PRICE FOR PRODUCTS The initial price of the Products shall be determined no later than 30 days after the hardware design freeze date specified in Article 1-Development, and shall be specified in the PSPL. The initial prices of Products shall be determined by adding the B/M cost to a markup amount ("Markup"). The B/M cost shall be determined by actual cost of the components that make up the B/M, including the cost of assembly, test, and delivery of the finished card assembly to NCD or the NCD- - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 3 OF 15 IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING designated assembly point. Upon IBM's written request to do so, NCD will utilize a second source for the manufacture of Products, however the B/M cost will be adjusted to reflect any incremental costs associated with obtaining such second source. The Markup during the Initial Term of this Alliance Agreement shall be as follows: Cumulative Total Products Ordered Markup --------------------------------- ------ [ ] $[ ] [ ] $[ ] [ ] $[ ] [ ] $[ ] [ ] $[ ] [ ] $[ ] For purposes of determining the Markup, the cumulative total products ordered according to the above table shall include all Products ordered by IBM during the Initial Term. In addition to the price as determined above, NCD may charge IBM for reimbursement of any import duty actually incurred by NCD resulting from the shipment of IBM-ordered Products to any IBM-designated location outside of the United States, provided however, that regardless of the country from which NCD ships the Products, the amount charged shall be no greater than the amount of duties that NCD would have incurred for shipment of the Products from the United States to the same IBM-designated location on the same date, and provided further that NCD may make this charge only to the extent NCD has notified IBM in writing of any such import duty charge prior to IBM's placement of the order to which it applies. Such charge shall be reflected as part of the piece price for Products ordered, and shall be reflected on the same invoice. This shall be IBM's sole obligation for any import duties associated with the shipment of Products. 4.2 QUARTERLY PRICE REVIEWS AND ADJUSTMENTS No less frequently than quarterly after the determination of the initial prices for Products, the Manufacturing Article Coordinators shall meet and review B/M - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 4 OF 15 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING costs and adjust the Product prices to reflect any changes in such costs. IBM will bear the risk of such cost fluctuations in B/M, and the Product prices shall be adjusted for the full amount of such increase or reduction. However, if IBM can demonstrate that a lower cost for one or more components of the B/M is available to NCD, the Product prices for Products containing such component(s) shall be determined using that lower cost, unless NCD can demonstrate to IBM after a reasonable inquiry that the component cannot be obtained from a supplier offering competitive lead times and comparable quality. The new prices for Products shall take effect on a schedule mutually agreed by the parties, taking into consideration the lead times of the components on which such price changes are based and NCD's current inventory of, and contractual commitments to purchase, such components based on IBM's forecasts , but in no case shall the price adjustment take effect later than 90 days after the determination is made. In the event of a significant price change occuring between quarterly reviews, the parties shall discuss in good faith an accelerated change in Product prices to reflect the change. 4.3 MINIMUM ORDER QUANTITY There shall be a minimum order quantity of [ ] Products during the Initial Term of the Alliance Agreement which shall apply only if no notice of termination of the Alliance Agreement has been provided prior to (a) March 30, 1997, or (b) General Availability (GA) of Products, whichever is earlier. If this minimum order quantity is triggered and IBM has failed to order [ ] Products by the expiration of the Initial Term through no fault of NCD, then IBM shall pay NCD a cancellation charge of $[ ] for each unit of the [ ] minimum order quantity not ordered. This cancellation charge shall be NCD's full and exclusive remedy in the event IBM has failed to order [ ] Products during the Initial Term. All IBM orders of Products (whether NCD's existing EXPLORA products or enhanced or derivative versions thererof) during the Initial Term shall be applied against this minimum order quantity, including those units ordered prior to the trigger date described above. Unless the parties agree in writing to a different payment schedule for such cancellation charge, NCD shall invoice IBM for the full cancellation charge no later than 30 days after the Initial Term, and IBM shall remit payment on NCD's invoice no later than 60 days after expiration of the Initial Term. IBM's obligations in this section shall cease upon IBM's termination of the - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 5 OF 15 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING Alliance Agreement for cause. If IBM terminates this Alliance Agreement without cause after the minimum order quantity obligation has been triggered, then the full cancellation charge of $[ ] for each unit of the [ ] minimum order quantity not ordered by IBM as of the date such termination without cause is effective shall become due and owing by IBM. If IBM terminates for cause, no such payment shall be due. NCD shall invoice IBM for such payment no later than 30 days after the effective date of the termination, and IBM shall pay the invoice no later than 60 days after receiving it. 5. INVOICING AND PAYMENT NCD will invoice IBM upon shipment of Product to IBM's facilities. Unless otherwise specified in writing by the parties, IBM shall make payment on undisputed invoices within 30 days from receipt of the invoice provided such invoices have been transmitted electronically in accordance with the parties' Electronic Data Interchange (EDI) Agreement. For undisputed invoices delivered through non-electronic means, IBM shall pay such invoices within 45 days of receipt of the invoice. In the event payment is not received within such period, NCD will notify IBM and IBM will make prompt payment of the amount due. IBM will notify NCD of any dispute regarding an invoice no later than the date payment of the invoice would otherwise be due. IBM's repeated and substantial failure to pay undisputed invoices when due may be treated by NCD as a material breach. 6. WORK AUTHORIZATION LOGISTICS NCD will deliver Products as specified in WAs. The agreed to lead time for IBM to issue WAs prior to delivery shall be 30 days. NCD agrees to cooperate and use best efforts for cases where IBM requests a shorter lead-time. If NCD requires an additional charge to cover added cost for fulfilling IBM's orders on a shorter lead time, NCD shall inform IBM of such charge in writing before NCD accepts such an order. Any increase in the agreed to lead-time must have IBM's prior written approval. The parties specifically contemplate that a longer lead time may be necessary for the ramp up of volumes for initial availability of the Products, and agree to negotiate a schedule for such ramp up volumes. IBM shall provide a 12 month rolling estimated forecast, updated on a monthly basis, for - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 6 OF 15 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING any quantities of Product that may be required. The first three months of a given forecast shall be binding only to the extent that each of the first three months of the forecast may vary from the previous month's forecast by no more than the following amounts: Month 1: +/- [ ]% Month 2: +/- [ ]% Month 3: +/- [ ]% For example, if a forecast is issued on January 1 showing requirements for [ ] units each month in March, April, and May, IBM may order from [ ] to [ ] units on February 1 for delivery on March 1. The forecast for April may be adjusted to [ ] units, and the May forecast may be adjusted to [ ] units. This process and the applicable percentages of allowable variance will continue to roll each month with the forecast. There will be no premiums or penalties for Products ordered within these parameters. The remaining portion of any given forecast (beyond 3 months) shall be completely preliminary and non-binding. Upon termination of this Article, NCD shall cease production of all Products ordered. If IBM terminates without cause, IBM shall be responsible for paying NCD for all finished Products which have been ordered by IBM through WAs issued prior to the date the notice of termination is provided and which have actually been produced by NCD. In addition, the parties will negotiate in good faith IBM's reimbursement to NCD for the cost of any components and work-in-process associated with IBM's binding portion of the latest forecast that NCD or its supplier cannot utilize. All such Products, components, and work-in-process paid for by IBM are the sole property of IBM, and upon termination the disposition of all such IBM property shall be in accordance with IBM's written instructions. 7. DELIVERY LOGISTICS 7.1 DELIVERY POINT All references to delivery as it applies to this Article shall mean delivery to IBM locations that may be specified by IBM in a WA or separate document. - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 7 OF 15 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING The delivery point shall be F.O.B. IBM Location. 7.2 ON -TIME DELIVERY Products must be delivered on the dates specified in WAs. If NCD will be late in meeting a scheduled delivery date by more than one business day, NCD shall promptly notify IBM of NCD's revised delivery date and IBM may, at its option, without limitation (i) cancel Products not delivered without charge, (ii) buy elsewhere, or make, and charge NCD any cost differential, subject to IBM's duty to reasonably mitigate its damages, and (iii) charge NCD for any premium shipping and handling costs incurred as a result of the late delivery, subject to IBM's duty to reasonably mitigate its damages. NCD shall not deliver Products to IBM more than 2 days earlier than the designated shipment date without IBM's prior written approval. NCD's repeated or substantial failure to meet its scheduled delivery dates may be treated by IBM as a material breach of the Alliance Agreement. In any case in which NCD is unable to timely deliver Products ordered by IBM, such orders shall be credited to IBM's minimum order quantity requirement as specified in section 4.3. 8. TOOLING NCD shall be responsible for acquiring and maintaining production-level Tooling required to perform its obligations under this Article. In the event that retooling is required after NCD has acquired such production-level tooling solely due to an IBM mechanical design change, then IBM will be responsible for providing the new Tooling, and will own such new Tooling. NCD shall be responsible for acquiring any replacement Tooling when such replacement Tooling is necessary at the Tooling's end of life. In the event NCD ceases manufacturing Products for IBM for any reason other than IBM's termination without cause, IBM shall have the right to immediately purchase Tooling owned by NCD at the Tooling's fair market value based on its usage to date. In the event any such Tooling is in the possession of a third-party, NCD shall ensure that there are agreements in place with such third parties which allow such third parties to utilize such tooling to continue supplying IBM with Products or Product components pending completion of the sale. This obligation shall survive termination of the Alliance Agreement. - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 8 OF 15 IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING 9. PACKAGING FOR SHIPMENT TO IBM In packaging Products for shipment, NCD will take the necessary precautions to ensure maximum protection of Product from damage due to rough handling and any other hazard which might occur in transit. In addition, NCD will package all Products to conform with IBM's document no. GA 21-9261-10 titled "Packaging and Handling - Supplier and Interplant Requirements," which shall be an attachment to this Article. 10. ELECTRONIC DATA INTERCHANGE NCD and IBM shall handle manufacturing transactions in accordance with the IBM Electronic Data Interchange (EDI) Agreement, which shall be an attachment to this Article. NCD will implement all required EDI capabilities no later than initial GA of the Products. 11. DEMONSTRATION AND DEVELOPMENT VERSIONS OF PRODUCTS During the Initial Term of this Alliance Agreement, NCD shall provide IBM, at no charge, up to [ ] Products for demonstration and development purposes. Such demonstration and development Products may be requested from time to time by IBM in the quantities and versions (whether Base Products or Added Feature Products) that IBM chooses, so long as the cumulative total of such Products requested by IBM does not exceed [ ]. NCD shall inform IBM in writing when the total development and demonstration allotment has been exhausted. This development and demonstration allotment shall not be counted against IBM's minimum order quantity. 12. NCD'S REPRESENTATIONS/WARRANTIES 12.1 REPRESENTATIONS AND WARRANTIES In addition to the representations and warranties set forth in the Base Agreement, - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 9 OF 15 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING NCD represents and warrants: (i) NCD's performance of this Article will not violate the terms of any license, contract, note or other obligations to which NCD is a party, or any statute, law, regulation or ordinance to which NCD is subject, including without limitation, all health, safety and environmental statutes, laws, regulations and ordinances; (ii) no claim, lien or action is pending or threatened against NCD or its suppliers, Subsidiaries, affiliates, or parent company that would interfere with IBM's, its Subsidiaries', Distributors', or customers' use of Products; (iii) the Products do not infringe any patent, trademark, copyright or other intellectual property rights of a third party in the geographic territories specified in section 10 ("Indemnification") of the Base Agreement, and NCD is not aware of any such infringement in any other areas; (iv) none of the Products contain nor are any of the Products manufactured using ozone depleting substances including, without limitation, chlorofluorocarbons, halons, methyl chloroform and carbon tetrachloride; (v) each of the Products is safe for its intended use, and (vi) all Products provided to IBM under this Agreement are new and do not contain anything used or reconditioned. The warranties in this section 12.1 shall survive termination of the Alliance Agreement. 12.2 PRODUCT WARRANTY NCD warrants that all Products provided to IBM are free from defects in design (except for designs provided by IBM), material, workmanship, and will conform to all Product specifications and quality requirements. NCD shall, at NCD's option, repair or replace Products that do not conform to this warranty, and that are returned to NCD by IBM or IBM's customer within the earlier of : (a) 1 year after the date of purchase as indicated by documented proof of the customer's purchase date submitted to NCD by IBM, IBM's Distributor, or the customer, or (b) 1 year plus 120 days after the date of NCD's shipment of the Product to IBM. Such repair or replacement shall be made and shipped back by NCD within 7 business days after NCD receives the nonconforming Product. Repair or replacement shall be at no charge to IBM or the customer. Unless a different return shipment destination is specified, NCD shall ship the repaired Product, or the replacement Product, to the IBM location or the customer location from which the non-conforming Product was shipped to NCD. The customer or - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 10 OF 15 IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING IBM shall be responsible for shipping the product to NCD, and NCD shall be responsible for shipping back the repaired or replacement Product. NCD shall specify whether the Product it returns has been repaired or is a replacement Product. Prior to initial GA of the Products, IBM and NCD shall negotiate in good faith regarding any additional administrative or logistical details associated with fulfilling warranty obligations. In addition, IBM and NCD may agree to extend the warranty period for an additional two years beyond the warranty period described in the preceding paragraph for a mutually agreed-upon charge. 13. IBM'S RIGHT TO UTILIZE OTHER MANUFACTURING SOURCES If IBM markets Products during the Initial Term of this Alliance Agreement, IBM shall utilize NCD for the supply of at least [ ]% of the volume of Products, provided: 1. NCD has not breached this Article, or any other part of the Alliance Agreement, and; 2. IBM reasonably determines that NCD has consistently shipped Products that conform to all Product specifications in a timely manner according to IBM's forecasts and WAs, and; 3. IBM reasonably determines that the Product supplied by NCD is competitive regarding price (excluding Markup), performance, quality, function, features and technology. 14. IBM'S RENEWAL OBLIGATION/RIGHTIBM'S 14.1 IBM'S OBLIGATION TO RENEW In the event IBM continues to market Products after expiration of the Initial Term of the Alliance Agreement and the conditions listed below have been satisfied, this Article shall remain in effect for an additional two years unless terminated earlier - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 11 OF 15 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING pursuant to the Base Agreement. The initial Markup for Products supplied to IBM by NCD during the renewal term shall be calculated based on the cumulative total Products ordered by IBM during the term of the Alliance Agreement. IBM shall utilize NCD for the supply of at least [ ] units of its volume of Products, whichever is less, during the first year of such renewal term, and for the supply of at least [ ] units of its volume of Products, whichever is less, for the second year of the renewal term, provided: 1. NCD has not breached this Article, or any other part of the Alliance Agreement, and; 2. IBM reasonably determines that NCD has consistently shipped Products that conform to all Product specifications in a timely manner according to IBM's forecasts and WAs, and; 3. IBM reasonably determines that the Product supplied by NCD is competitive regarding price (excluding Markup), performance, quality, function, features and technology. 14.2 IBM'S RIGHT TO RENEW If IBM chooses to renew the Alliance Agreement for an additional two years (through December 31, 2000) under the terms of the Base Agreement, then during the renewal term the provisions of section 14.1 of this Article shall apply. 14.3 NO MINIMUM ORDER QUANTITY DURING RENEWAL TERM There shall be no minimum order quantity required of IBM during the renewal term. 15. ROYALTIES FOR PRODUCTS NOT SUPPLIED BY NCD For each Product that is supplied to IBM by a party other than NCD prior to December 31, 2000, IBM shall pay to NCD a royalty of [ ] ($[ ]). This royalty shall not - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 12 OF 15 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 MANUFACTURING apply to the extent the supply of Products by a third party is necessary due to NCD's failure to meet delivery schedules, NCD's failure to meet quality obligations, or due to events described in the Force Majeure section of this Alliance Agreement. Nor shall this royalty apply to IBM's acquisition or manufacture of up to [ ] Products (1) for IBM's own internal use, or (2) for limited shipments by IBM for the purpose of early testing, development-level evaluation and similar early-ship programs prior to the General Availability of such Products. No later than 30 days after the end of each calendar quarter in which such Products have been supplied to IBM by a third party, IBM shall submit a statement to NCD showing the number of units of Products supplied by third parties. NCD shall submit an invoice to IBM for the royalty as set forth in this section, and IBM shall pay the invoice in accordance with section 5 of this Article. After December 31, 2000, IBM's license to Licensed Work that consists of Code delivered by NCD pursuant to Phase 1 and Phase 2 of Development as described in Article 1-Development shall be fully paid up as of that date. This shall not include Code contained within Major Enhancement or Custom Enhancements for which NCD and IBM have agreed to a different payment arrangement. Nothing herein shall require IBM to pay royalties to NCD on IBM products or offerings other than the Products. The royalty obligations under this section shall cease upon IBM's termination of the Alliance Agreement with cause, but shall continue until December 31, 2000 in the event IBM terminates the Alliance Agreement without cause prior to that date. 16. MOST FAVORED CUSTOMER The prices provided by NCD to IBM under this Agreement should not exceed those offered to other customers purchasing similar products or services in like or lesser quantities under similar terms and conditions. If NCD offers prices to other customers which are lower than those offered to IBM in like or lesser quantities under similar terms and conditions during the same time period, then those prices shall become available to IBM at the time of their availability to that other customer. IBM and NCD shall maintain the confidentiality of prices provided to IBM. - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 13 OF 15 [ ] Confidential Treatment Requested. Omitted Portions Filed Separately with the Securities and Exchange Commission. IBM-NCD ALLIANCE AGREEMENT ARTICLE 2 DEVELOPMENT IN WITNESS WHEREOF, each party has reviewed this Article and each party has executed this Article by signature of its authorized representative. NETWORK COMMUNICATION DEVICES, INC. INTERNATIONAL BUSINESS MACHINES CORPORATION Signature /s/ Lorraine Hariton Signature /s/ Bhawnesh C. Mathur -------------------------------- ----------------------- Printed Name Lorraine Hariton Printed Name Bhawnesh C. Mathur ----------------------------- -------------------- Printed Title V.P. of Strategic Accounts Printed Title Dir. of ---------------------------- Procurement, IBM Server Group --------------------------------- Date 6/27/96 Date June 27, 1996 ------------------------------------- ---------------------------- - -------------------------------------------------------------------------------- ARTICLE 2-PAGE 14 of 15 Attachment 2 to Article 2 of IBM -- NCD Alliance Agreement ELECTRONIC DATA INTERCHANGE/ELECTRONIC FUNDS TRANSFER TRADING PARTNER AGREEMENT - ------------------------------------------------------------------------------ This EDI Agreement is an Attachment to Article 2 of the Alliance Agreement between IBM and NCD. NCD and International Business Machines Corporation (IBM) intend to create legally binding purchase and sale obligations by the electronic transmission of business documents (Documents) and agree that the following terms and conditions apply to such transmissions: 1. TRANSMISSION - Each party may electronically transmit and receive Documents through the assistance of a network in accordance with mutually agreed upon standards. Each party, at its own expense, shall provide and maintain the equipment, software, services, including network charges, and testing necessary to effectively and reliably transmit and receive documents. 2. RECEIPT - A Document is received when it arrives at the receiving party's mailbox. Upon receipt of any Document, the receiving party shall promptly send an acknowledgment which will conclusively establish receipt of a Document. If any Document is received in an unintelligible or garbled form, the receiving party shall promptly notify the originating party (if identifiable from the received Document) in a reasonable manner. In the absence of such a notice, the originating party's records of the contents of such Document shall prevail. 3. SIGNATURE AND ENFORCEABILITY - Each party shall adopt as its signature an electronic identification consisting of symbol(s) or code(s) (User ID) that shall be affixed to or contained in each Document. Each party will maintain security procedures to prevent unauthorized use or disclosure of either party's User ID. Any Document containing, or to which there is affixed, a User ID shall be considered: (a) a "writing" or "in writing"; (b) to have been "signed"; (c) an "original" when printed from electronic files or records established and maintained in the normal course of business; and (d) admissible to the same extent and under the same conditions as other business records originated and maintained in documentary form. 4. THIRD PARTY SERVICE PROVIDERS - Documents will be transmitted electronically to each party either directly or through any third party service provider (Provider) with which either party may contact. Either party may modify its election to use, not use or change a Provider upon 60 days' prior written notice. Each party shall be responsible for the costs of any Provider with which it contracts. Each party shall be liable for the acts or omissions of its Provider while transmitting, receiving, storing or handling Documents, or performing related activities for such party. 5. TRANSACTION TERMS - Unless specifically superseded in other written agreements between the parties, the terms and conditions of the Base Agreement will be incorporated and will apply to all Documents. 6. ELECTRONIC FUNDS TRANSFER - By completing this Section 6, you hereby authorize IBM to initiate electronic credit entries to the account listed below. You agree that such transactions will be governed by the National Automated Clearing House Association rules. This authority is to remain in effect until IBM has received written notification of termination in such time and such manner as to afford IBM a reasonable opportunity to act on it. Account Party (if different) NCD - ---------------------------------------------------------------------------- Address 350 North Bernardo Ave - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- City, State, Zip Mt. View, Ca 94043 - ---------------------------------------------------------------------------- Financial Institution - ---------------------------------------------------------------------------- Contact Name/Title - ---------------------------------------------------------------------------- Contact Phone Number - ---------------------------------------------------------------------------- Address - ---------------------------------------------------------------------------- - ---------------------------------------------------------------------------- City, State, Zip - ---------------------------------------------------------------------------- Account Number (max 17) - ---------------------------------------------------------------------------- Bank Routing/Transit Code (max 9) - ---------------------------------------------------------------------------- 7. LIMITATION OF REMEDIES - In addition to the limitation of liability described in the Base Agreement, the following limitations apply to this EDI Attachment. Neither party shall be liable to the other for any special, incidental, exemplary, or consequential damages arising from or as a result of: (1) any delay, omission, or error in the electronic transmission or receipt of any Documents; or (2) any delay, omission, or error of an electronic credit entry by IBM, even if the other party has been advised of the possibility of such damages. In addition, neither party shall be liable for any damages claimed by the other party based on any third party claim, in no event will either party be liable for any damages caused by the other party's failure to maintain security procedures to prevent the unauthorized use or disclosure of its User ID. 8. TERMINATION - This Agreement shall apply as long as Article 2, Manufacturing, is in effect, unless terminated by mutual agreement of the parties. - ---------------------------------------------------------------------------- The parties acknowledge that they have read this Agreement, understand it and agree to be bound by its terms. By International Business Machines By Network Computing Devices, Inc. Corporation /s/ Bhauvesh C. Mathar /s/ Lorraine Hart -------------------------------- -------------------------------- Authorized Signature Authorized Signature Name Bhauvesh C. Mathar Name Lorraine Hart Title Director of Server Title VP Strategic Procurement Date June 27, 1996 Date 6/27/96 Address 3605 Highway 52 North Address 350 North Bernardo Rochester, MN 55901 Mt View, Ca 94043 Revision JUNE 1994 IBM-NCD ALLIANCE AGREEMENT NO. 350-148 ARTICLE 3 PRODUCT SUPPORT AND MAINTENANCE IBM-NCD ALLIANCE AGREEMENT ARTICLE 3 PRODUCT SUPPORT AND MAINTENANCE This Article 3, effective on the date last signed below, is agreed to by Network Computing Devices Corporation ("NCD"), a corporation of the State of California, with offices located at 350 North Bernardo Avenue, Mountain View, California 94043-4207 and International Business Machines Corporation ("IBM"), a corporation of the State of New York, with offices at 3605 Highway 52 North, Rochester, Minnesota 55901-7829. RECITALS A. NCD and IBM have entered into an alliance between them in the area of an IBM network application terminal ("thin client") Product. B. This Article describes , among other things, the terms and conditions related to product support and maintenance for the Product. 1. ARTICLE COORDINATORS 1.1 NCD ARTICLE 3 COORDINATOR Barry Davis Network Computing Devices, Inc. 350 North Bernardo Avenue Mountain View, CA 94043-4207 TELEPHONE: (415) 919-2747 TELEFAX: (415) 961-7774 1.2 IBM ARTICLE 3 COORDINATOR Chuck Pavesich International Business Machines Corporation 3605 Highway 52 North Rochester, MN 55901-7829 TELEPHONE: (507) 253-7648 TELEFAX: (507) 253-4901 - -------------------------------------------------------------------------------- ARTICLE 3-PAGE 1 OF 6 IBM-NCD ALLIANCE AGREEMENT ARTICLE 3 PRODUCT SUPPORT AND MAINTENANCE 1.3 DUTIES OF ARTICLE COORDINATORS The Article Coordinators will act as overall coordinators for the parties under this Article. Each party will advise the other in writing of any change regarding its Article Coordinator. 2. LEVEL 3 SUPPORT RESPONSIBILITIES In addition to the Product warranties found elsewhere in this Alliance Agreement, NCD shall provide Level 3 support for Deliverables and Products. Level 3 support is the support IBM provides its customers after the first two levels of support, Levels 1 and 2, have been exhausted. This support will involve the determination of whether there is a defect (patent or latent), error or other problem ("Defects") with the Product or Deliverables. These will include both problems actually reported by IBM's customers ("APARs"), as well as problems discovered internally by IBM and reported to NCD ("PTRs"). Level 3 support shall be conducted so that IBM is the single point of contact for customer-reported problems. Unless requested by IBM in particular situations, NCD will have no direct contact with the customer, and will receive support requests only through IBM support representatives after reasonable efforts to resolve the problem using IBM resources have been exhausted. The IBM support representatives will determine which Defects appear to be related to Deliverables provided under this Alliance Agreement and, after exhausting IBM internal resources, will contact NCD for further diagnosis and correction if the Defect appears to be related to such Deliverables, including Code as well as Firmware. Upon notification of a Defect identified by IBM, NCD will be responsible for isolating and correcting all reported or discovered Defects with the Deliverables, and providing responses and corrections to IBM in accordance with the parameters set forth below: SEVERITY LEVEL 1 DEFECT REPORTS Severity Level 1 (SL1) is for reported Defects that result in an emergency condition that can cause critical impact to a customer or to an IBM delivery schedule. Defect reports classified by IBM as SL1 require immediate and - -------------------------------------------------------------------------------- ARTICLE 3-PAGE 2 OF 6 IBM-NCD ALLIANCE AGREEMENT ARTICLE 3 PRODUCT SUPPORT AND MAINTENANCE sustained work until the problem is solved. NCD shall work with IBM around the clock to provide a correction for the SL1 Defect, and shall use its best efforts to complete the correction within 24 hours of the earlier of NCD discovering the SL1 Defect or being informed of the possible SL1 Defect, unless the parties agree that a different time schedule is appropriate in light of the circumstances of the Defect report. SEVERITY LEVEL 2 DEFECT REPORTS Severity Level 2 (SL2) is for reported Defects that significantly affects an IBM schedule or that make the performance or continued performance of any feature or function difficult and that cannot easily be circumvented or avoided on a temporary basis by the end user ("Severity Level 2 Defect" or "SL2 Defect"). NCD shall use its best efforts to provide corrections within 7 days of the earlier of NCD discovering the SL2 Defect or being informed of the possible SL2 Defect, unless the parties agree that a different time schedule is appropriate in light of the circumstances of the Defect report. SEVERITY LEVEL 3 DEFECT REPORTS Severity Level 3 (SL3) is for reported Defects that are not critical in that performance can be continued without difficulty or loss of data by circumvention or avoidance by the end user ("Severity Level 3 Defect" or "SL3 Defect"). NCD shall use its best efforts to provide corrections within 14 days of the earlier of NCD discovering the SL3 Defect or being informed of the possible SL3 Defect, unless the parties agree that a different time schedule is appropriate in light of the circumstances of the Defect report. SEVERITY LEVEL 4 DEFECT REPORTS Severity Level 4 (SL4) is for reported Defects that are minor which can easily be avoided or circumvented by the end user ("Severity Level 4 Defect" or "SL4 Defect"). NCD shall use best efforts to provide corrections within 21 days of the earlier of NCD discovering the SL4 Defect or being informed of the possible SL4 Defect, unless the parties agree that a different time schedule is appropriate in light of the circumstances of the Defect report. Repeated and substantial failure by NCD to provide corrections according to the deadlines set forth above may be considered by IBM to be a material breach of the Alliance - -------------------------------------------------------------------------------- ARTICLE 3-PAGE 3 OF 6 IBM-NCD ALLIANCE AGREEMENT ARTICLE 3 PRODUCT SUPPORT AND MAINTENANCE Agreement. In the event the parties determine that a correction cannot be completed within the time deadlines set forth above, the parties will mutually agree to a time frame in which such correction will be completed. IBM shall be responsible for providing NCD all available Defect information, including reproduction of Defect symptoms and conditions if available and feasible. Once a correction is determined and developed for the Defect, NCD will ensure that the correction is tested, and that there is no other additional Defects that are created as a result of the implementation of the correction. NCD will also ensure that the implementation of this correction is included in all other Product and Derivative Works on the current and subsequent releases to prevent recurrence. NCD shall provide IBM with defect support contacts and phone numbers that are available 24 hours per day, 7 days per week for Severity Level 1 Defect reports. IBM will utilize this 24/7 coverage as necessary for problems that IBM classifies as critical (Severity Level 1 Defects). IBM contact with NCD for less severe problems (Severity Level 2, 3, and 4 Defects) will be NCD's normal business hours (8 a.m. to 5 p.m.). If IBM desires NCD to provide direct customer support for any of it's segments, this may be negotiated for a separate fee. NCD is responsible for its own expenses in diagnosing and fixing the Defects reported to NCD. 3. EDUCATION REQUIREMENTS During the term of this Alliance Agreement, NCD shall provide education classes to IBM Personnel in IBM Level 2 and Level 3 support centers sufficient to provide such Personnel with competence in providing customer service and support for the Products and Deliverables. Such instruction shall include one class in the United States, one class in IBM's Europe- Middle East-Africa sales geography (EMEA), and one class in IBM's Asia-Pacific geography (AP). Such classes shall be conducted at upon schedules requested by IBM and agreed to by NCD. Class content shall be mutually agreed to by NCD and IBM. NCD shall be responsible for payment for instructor time and all expenses for class materials and preparation for such classes. IBM will reimburse NCD for - -------------------------------------------------------------------------------- ARTICLE 3-PAGE 4 OF 6 IBM-NCD ALLIANCE AGREEMENT ARTICLE 3 PRODUCT SUPPORT AND MAINTENANCE reasonable travel and lodging expenses incurred by NCD Personnel in teaching such classes in accordance with IBM's standard travel expense guidelines to be supplied to NCD by IBM. IBM may request additional classroom instruction during the term of the Alliance Agreement, but NCD shall be paid on a reasonable fee basis, and reimbursed for all reasonable expenses for conducting such classes. 4. MAINTENANCE MODIFICATIONS Throughout the term of this Article, NCD shall offer to provide to IBM at no additional charge all Maintenance Modifications. Such Maintenance Modifications shall be offered to IBM within a reasonable time period prior to the availability of any such Maintenance Modifications in NCD's own products to allow IBM to incorporate and make available such Maintenance Modifications in its Products. Maintenance Modifications developed and offered by NCD and accepted by IBM shall be deemed Licensed Works. In the event IBM creates Maintenance Modifications to the Licensed Works during the term of this Article, IBM shall offer such Maintenance Modifications to NCD upon, or within a reasonably prompt time period after, the availability of such Maintenance Modification in IBM's Products. IBM grants NCD a worldwide, paid up copyright license to use, execute, reproduce, display, perform, transfer, market, distribute, and to make Derivative Works of, such Maintenance Modifications offered by IBM and accepted by NCD. 5. ADDITIONAL IMPLEMENTATION DETAILS Detailed procedures for implementing the hardware and software service and support described by this Article, including but not limited to procedures for on-site and remote Defect determination, testing of Defect corrections, and delivery of Defect corrections, shall be discussed by the parties prior to GA, and any such implementation details agreed to shall be considered attachments to this Article. The parties recognize that their may be a separate set of detailed procedures for each IBM product division utilizing NCD for support and maintenance of the Products and Deliverables. 6. TERM AND TERMINATION Unless otherwise agreed by the parties, NCD's obligations under this Article shall cease at the earlier of: (1) one year after IBM ceases marketing all Products, or (2) termination of the Alliance Agreement. If IBM desires NCD to provide product support and maintenance under this Article beyond such date, the parties will negotiate in good faith - -------------------------------------------------------------------------------- ARTICLE 3-PAGE 5 OF 6 IBM-NCD ALLIANCE AGREEMENT ARTICLE 3 PRODUCT SUPPORT AND MAINTENANCE for a fee for such services that is based on NCD's expenditure of time and materials in providing such services. IN WITNESS WHEREOF, each party has reviewed this Article and each party has executed this Article by signature of its authorized representative. NETWORK COMMUNICATION DEVICES, INC. INTERNATIONAL BUSINESS MACHINES CORPORATION Signature /s/ Lorraine hariton Signature /s/ Bhawnesh C. Mathur -------------------------------- ------------------------ Printed Name Lorraine Hariton Printed Name Bhawnesh C. Mathur ----------------------------- --------------------- Printed Title V.P. of Strategic Accounts Printed Title Dir. of Procurement, ---------------------------- IBM Server Group ---------------------------------- Date 6/27/96 Date June 27, 1996 ------------------------------------- ----------------------------- - -------------------------------------------------------------------------------- ARTICLE 3-PAGE 6 of 6 EXHIBIT INDEX ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are filed herewith: Exhibit 2.2 Asset Purchase Agreement dated June 3, 1996 by and among the Registrant NCD Software Corporation and NetManage, Inc. Exhibits Exhibit A Certain Definitions Exhibit B-1 Assignment and Assumption Contract Exhibit B-2 Assignment and Assumption Contract Exhibit C NCD Disclosure Schedule(1) Schedules Schedule 1.1 Assets(1) Schedule 1.1(6) Assumed Customer and Other Contracts(1) Schedule 1.3(6) Assumed Liabilities Schedule 1.5 Purchase Price Allocation(1) Exhibit 10.42 Alliance Agreement dated June 27, 1996 by and between the Registrant and International Business Machines Corporation.(2) Attachments Attachment 1 to Article 2 - Packaging and Handling Supplies and Interplant Requirements Attachment 2 to Article 2 - Electrical Data Interchange/Electronic Funds Transfer Trading Partner Agreement *Exhibit 11.1 Statement Regarding Computation of Shares Used in Per Share Earnings Computations. *Exhibit 27 Financial Data Schedule. (1) Exhibit not filed herewith is identified in this agreement. The Company will furnish supplementally any omitted exhibit to the Commission upon request. (2) Confidential treatment has been requested as to a portion of this exhibit. Confidential portions have been omitted and filed separately with the Securities and Exchange Commission. (b) The Company filed no reports on Form 8-K during the three-month period ended June 30, 1996. - --------------- * Previously Filed -----END PRIVACY-ENHANCED MESSAGE-----