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Exhibit 10.3(a)
RELATIONSHIP AGREEMENT
This agreement with an effective date of September 22, 1997, is by and between
Integrated Physician Networks, Inc. ("IPNI"), a Delaware Corporation located at
0000 Xxxxx Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000 and
PictureTel Corporation ("PictureTel"), a Delaware Corporation located at 000
Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000.
BACKGROUND AND PURPOSE
1. PictureTel is in the business of designing, manufacturing and marketing
visual communication products ("Products").
2. IPNI is in the business of providing interactive videocommunications
systems ("IPNI Systems") connecting the pharmaceutical and healthcare
industries to targeted physicians.
3. On January 21, 1997, the Parties entered into a Letter of Intent
("LOI").
4. In the LOI, the Parties contemplated subsequently entering into a
definitive final Agreement incorporating and supplementing the matters
discussed in the LOI, which final Agreement, namely this Agreement,
will completely supercede the LOI and Major Agreed Upon Terms, dated
September 22, 1997.
5. IPNI Units are defined as the IPNI Unit(s) which consist of all such
equipment necessary to ensure that the network functions including a
server and Physician and Pharmaceutical Units both of which latter
units incorporate the PictureTel Live 200 kits as set out in EXHIBIT A
(which is incorporated herein) and which is being integrated by
Integrator.
Accordingly, to achieve the purposes described above, and in
consideration of the premises, covenants, terms, and conditions set
forth herein, the Parties agree as follows:
I. PURCHASE OF IPNI UNITS
(a) The Pilot Program, as further defined in Section VI(a) (the "Pilot
Program"), shall commence on or about March 1, 1998 and end six to nine
months later, but not later than November 30, 1998. PictureTel will,
subject to receiving IPNI's noncancelable binding purchase order under
clause (b) below, immediately place an order with the integrator
("Integrator") for 275 (Purchase Order issued November 10, 1997) IPNI
Physician systems, which have FCC Class A approval. The rollout period
shall commence upon termination of the Pilot Period, as defined in
Section VI(a), and shall last for three years (the "Rollout Period")
and will necessitate FCC Class B approval for all IPNI Systems.
(b) On or before September 22, 1997, IPNI shall place a binding
noncancelable purchase order with PictureTel for no less than 250 Live
200 units configured for use in the IPNI Unit for delivery in 1997.
IPNI may purchase the IPNI
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Units directly from PictureTel and may enter into an Agreement with a
lease company acceptable to PictureTel to finance such purchase.
(c) The IPNI Physician Units shall be placed by IPNI primarily in
physician's offices and pharmaceutical sales representative offices (as
long as an FCC Class A rating is still appropriate) throughout the
United States in accordance with agreements between IPNI, physicians,
and pharmaceutical companies wishing to utilize IPNI Systems are those
that have signed a contract to participate in the Pilot Period (such
pharmaceutical companies are sometimes referred to herein as
"Clients").
(d) The PictureTel components of the IPNI System shall be as set forth in
Exhibit A.
II. PRICE
The configured purchase price payable by a lease company (acceptable to
PictureTel) to PictureTel for the IPNI Units described in the
Background and Purposes Sections above shall not exceed $2,088,652.
There will be a nine month deferral of lease payments and such lease
payments will be approximately $92,658 per month for a period of 27
months.
III. FINANCING OF IPNI UNITS AND CASH FLOW
(a) If IPNI does not purchase the IPNI Units directly from PictureTel, IPNI
shall enter into an Agreement with a lease company acceptable to
PictureTel to lease such Products from a lease company acceptable to
PictureTel for a 27 month term (plus the term for deferral of payments
during the Pilot Period) under agreements satisfactory to PictureTel.
(b) PictureTel shall guarantee IPNI's lease payment obligations to a lease
company acceptable to PictureTel for the lease of the IPNI Units during
Pilot Period and the Rollout period, subject to the terms and
conditions set forth in Section IX and IPNI's compliance with its
obligations under this Agreement.
(c) IPNI agrees to establish a Cash Flow account within 10 days of the
execution of this Agreement, said Cash Flow Agreement (the "Cash Flow
Agreement") to be with a bank satisfactory to PictureTel and IPNI and
to be in the form of Exhibit G, with any changes being satisfactory to
PictureTel and IPNI and with the Cash Flow Account thereunder being
herein referred to as the "Cash Flow Account". IPNI agrees to fund the
Cash Flow Account with a minimum of $100,000.00 at the time the Cash
Flow Account is established.
Telecommunication recharges will go 100% to IPNI.
In the event that IPNI obtains venture capital funding of at least
$1,000,000.00, IPNI shall, regardless of the amount then in the Cash
Flow Agreement, immediately fund the Cash Flow Account to a total of
$300,000.00.
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(d) Without limiting the foregoing, upon initiation of the Rollout Period,
IPNI agrees to fund the Cash Flow account to at least a balance of
$300,000.00. Thereafter, IPNI shall continue to fund the Cash Flow
Account on a straight-line basis (dividing $500,000 by the requisite
number of months to determine the monthly funding amount) such that by
the end of month 15 from the start of the Pilot Period, the Cash Flow
Account balance is not less than $800,000.00.
IV. SYSTEM INTEGRATION, INSTALLATION AND MAINTENANCE
(a) It is the intent of the Parties to this Agreement that IPNI may select
the Integrator for system integration, installation and maintenance
provided Integrator provides these at commercially reasonable costs and
quality in the judgment of IPNI. IPNI shall pay for all necessary
integration, installation and maintenance. At IPNI's discretion these
charges may be added to IPNI's monthly lease payment obligations.
(b) IPNI agrees to oversee the assembly and integration of the IPNI Units
(which have incorporated the Live 200 kits as set out in Exhibit A)
which shall meet the IPNI quality specifications as set out in Exhibit
B. (Note: Exhibit B only describes the quality requirements - not the
configurations.)
V. PICTURETEL COMPONENTS OF PURCHASE ORDER PROCESS
(a) Physician Units (Live200-IPNI-D)
1. IPNI shall place binding noncancellable purchase orders with
PictureTel for the Live200-IPNI-D custom configuration. Orders
will be shipped by PictureTel in accordance with standard,
published lead times unless otherwise mutually agreed to.
Orders for the Live200-IPNI-D configuration will be shipped to
Integrator, the designated systems integrator for the
physician units. Specifications for these Units are in Exhibit
A.
2. Integrator shall integrate the PictureTel hardware in the IPNI
Physician units into the selected devise platform and perform
system testing as agreed upon by IPNI, PictureTel and
Integrator.
(b) Pharmaceutical Units (Live200-IPNI-R)
1. IPNI shall place orders with PictureTel for the Live200-IPNI-R
custom configuration. Orders will be shipped by PictureTel in
accordance with standard, published lead times unless
otherwise mutually agreed to. Orders for the Live200-IPNI-R
configuration will be shipped to Integrator, the designated
systems integrator for the pharmaceutical stations.
Specifications for these Products are in Exhibit A.
2. Integrator shall integrate the PictureTel hardware in the IPNI
pharmaceutical units into the selected devise platform and
perform
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system testing as agreed upon by IPNI, PictureTel,
and Integrator.
VI. CLIENT CONTRACTS
(a) PictureTel is not obligated to provide lease guarantees unless IPNI has
entered into at least two signed Client Contracts, with each Client (a
"Charter Client") committing to pay within a period satisfactory to
PictureTel at least $200,000 pursuant to the terms addressed in Section
VI(b).
The Pilot Period shall be deemed complete when both (i) the minimum
Charter Client Contract requirements as specified in this Clause (a)
above have been met and (ii) PictureTel and IPNI agree that each such
Charter Client has evaluated the IPNI System in the field for a period
of not less than six months and not more than nine months.
(b) IPNI shall submit its standard Client Contracts and Charter Client
Contracts to PictureTel for approval. PictureTel shall approve or
reject such Client Contracts and Charter Client Contracts within ten
(10) business days of receipt by PictureTel. If PictureTel rejects the
Client Contracts and Charter Client Contracts, PictureTel must propose
modifications which, if accepted, will make the Contracts acceptable.
(c) In addition, PictureTel shall have the right to approve any material
change to the approved Client Contracts and Charter Client Contracts
which may be negotiated between IPNI and any potential client.
PictureTel shall reject or approve such change as soon as possible but,
in any event, not later than four working days from receiving IPNI's
written request and full documentation regarding the transaction; such
approval may be reasonably withheld.
(d) Intentionally Left Blank
(e) If it is determined by PictureTel that the business model will not
support the revenue generation needed to continue into the Rollout,
IPNI agrees to not dismantle and/or market the PictureTel components
without the express prior written consent of PictureTel.
VII. ADVANCES AND NOTES, ETC.
(a) PictureTel has advanced IPNI the sum of $500,000 which has been used
for IPNI's reasonable business operating expenses (sometimes referred
to as the "Advance").
(b) IPNI has executed and delivered a no interest (0%) Promissory Note,
dated _____________, 1998 (the "Promissory Note") for the loan of the
$500,000.00 previously provided by PictureTel. The entire principal of
the loan shall be payable in one lump sum nine (9) months from the
beginning of the Pilot Period, but in no event later than December 1,
1998. Interest shall be due on any Principal in default at the rate of
9% per annum. A copy of the Promissory Note is attached as Exhibit C.
In the event of conflict, the terms of the Promissory Note shall
control.
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VIII. PICTURETEL'S EQUITY INTEREST IN IPNI, WARRANTS, ADDITIONAL WARRANTS,
PRE-EMPTIVE RIGHT AND CASH FLOW OF IPNI TECHNOLOGY
(a) Issuance of Warrants
In addition to the Promissory Note provided for in Section VII above,
IPNI will issue to PictureTel the following warrants to purchase stock
of IPNI set forth in (a)(1) - (a)(4) below and has agreed to issue to
PictureTel the additional warrants required in (d) below.
1. In consideration of PictureTel's Advance, and guarantee of IPNI
lease payments, IPNI has agreed to issue to PictureTel warrants to
purchase IPNI Series A Preferred Stock in an amount equal to 12.0% of
the shares of capital stock of IPNI outstanding, subject to adjustment
as provided for in the Warrant Agreement, following its initial round
of venture financing of not less than $1,000,000. In addition, for each
$10,000,000 (gross) of leases guaranteed by PictureTel, IPNI shall
issue an additional warrant, under the same terms, to purchase IPNI
Series A Preferred Stock in an amount equal to 1.0% of the shares of
capital stock of IPNI outstanding, subject to adjustment as provided
for in the Warrant Agreement, following its initial round of venture
financing of not less than $1,000,000, up to a total percentage not to
exceed under this section VIII(a)(1) of 17%, subject to adjustment as
provided for in the Warrant Agreement, as follows:
Gross Dollar Value of Leases Additional Warrants Total Warrants
0 - $9,999,999 0% 12%
$10mil - 19,999,999 1% 13%
$20mil - 29,999,99 1% 14%
$30mil - 39,999,99 1% 15%
$40mil - 49,999,99 1% 16%
$50million plus 1% 17%
2. In addition to the warrants granted pursuant to section VIII(a)(1),
should IPNI require that PictureTel continue guaranteeing new leases
during the third year of the Rollout Period, then IPNI shall
immediately issue to PictureTel warrants to purchase IPNI Series A
Preferred Stock in an amount equal to an additional 2.9% of the shares
of capital stock of IPNI outstanding, subject to adjustment as provided
for in the Warrant Agreement, following its initial round of venture
financing of not less than $1,000,000, and the table as stated above in
section VIII(a)(1) shall be modified to take into account the
additional 2.9% as follows:
Gross Dollar Value of Leases Additional Warrants Total Warrants
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0 - $9,999,999 0% 14.9%
$10mil - 19,999,999 1% 15.9%
$20mil - 29,999,99 1% 16.9%
$30mil - 39,999,99 1% 17.9%
$40mil - 49,999,99 1% 18.9%
$50million plus 1% 19.9%
3. Accordingly, IPNI has executed and delivered to PictureTel, pursuant
to section VIII(a)(1) a warrant to purchase shares of IPNI Series A
Preferred Stock in an amount equal to 12% of IPNI's current outstanding
stock, subject to adjustment as provided for in the Warrant Agreement,
at an exercise price of $0.01 per share (the "Warrants") attached as
Exhibit D. These Warrants shall be non-dilutive through the initial
venture funding of at least $1,000,000, meaning that the Warrants shall
provide that PictureTel shall be entitled to purchase shares from time
to time up to a holding of 12% of IPNI's outstanding stock, subject to
adjustment as provided for in the Warrant Agreement.
Thereafter, PictureTel shall have the preemptive right to purchase
shares of stock of IPNI from time to time to achieve or to maintain up
to the percentage ownership of warrants granted pursuant to Section
VIII(a)(1) or VIII(a)(2) above, as appropriate, of the outstanding
stock by purchasing additional shares on the same terms and conditions
as other investors, which preemptive right shall be set forth in the
Investor Rights Agreement attached as Exhibit E.
(b) Reserved
(c) IPNI Board Approval and PictureTel Member of Board of IPNI.
1. The IPNI Board of Directors shall vote to approve
PictureTel's rights described above and elsewhere in
this Agreement (including all Exhibits) and such
approval shall be reflected appropriately in the
minutes of the Board. IPNI shall provide an opinion of
its legal counsel, satisfactory to PictureTel, as to
the authorization, validity and binding effect of this
Agreement and the related agreements delivered
pursuant to this Agreement and the authorization and
validity of the Promissory Note, the Warrants and
Additional Warrants
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and upon exercise of Warrants and Additional Warrants.
2. Beginning March 31, 1998 and ending on the later of
(i) the period ending six (6) months from the entering
into of the last guarantee by PictureTel to the lease
company under this agreement, or, (ii) when
PictureTel's ownership of IPNI's capital stock falls
below 10%, subject to adjustment as provided for in
the Warrant Agreement, PictureTel shall have the
option to nominate a PictureTel representative to
become a member of IPNI's Board of Directors and the
Stockholders and outside investors holding preferred
stock will sign a voting agreement in the form
attached hereto as Exhibit F, providing that said
Stockholders and outside investors holding preferred
stock will with respect to their shares vote to
unanimously elect a designee of PictureTel to the IPNI
Board of Directors. In the event that a PictureTel
representative is not at all times elected to the IPNI
Board of Directors as required (except in the case the
PictureTel representative declines to serve), then any
outstanding Advances or Promissory Notes pursuant to
Section VII shall become immediately due and payable,
and PictureTel would not be required to make new lease
guarantees under this Agreement. Notwithstanding the
foregoing, PictuerTel's right to a board seat shall
end upon IPNI's first registered (under the Securities
Act of 1933) public offering of common stock.
(d) Issuance of Additional Warrants. In the event that IPNI has not
implemented to PictureTel's reasonable satisfaction a fully
operational network of at least 212 physicians and 4 pharmaceutical
clients with approved Client Contracts, and an additional 38
physicians under written agreement to accept the IPNI Unit as soon as
is technically possible, using IPNI Systems within 19 weeks from
November 10, 1997 ("Period 1"), (For the purposes of this section,
"Reasonable Satisfaction" shall mean that 212 IPNI Units have been
installed with end points capable of making and receiving calls
through the IPNI software network system) then PictureTel will be
granted a first additional stock warrant equal to 2% of IPNI's
outstanding stock. Similarly, if IPNI has not implemented such fully
operational network (as defined above) within 23 weeks after
PictureTel places the purchase order ("Period 2"), PictureTel shall be
granted a second additional stock warrant of 2% of IPNI's outstanding
stock. If IPNI has not implemented such fully operational network
(including at least 240 installed Physician units) within 28 weeks
after PictureTel places the purchase order ("Period 3"), PictureTel
shall be granted a third additional stock warrant of 2% of IPNI's
outstanding stock. The three additional warrants (the "Additional
Warrants") discussed in this paragraph shall be convertible into IPNI
Series A Preferred stock at a price of $0.01 per share, shall be
non-dilutive through the initial venture funding in the same manner
described in Clause (a)(2) of this Section VIII above. Thereafter
PictureTel shall have the preemptive right, as set out in the Investor
Rights Agreement, to maintain or acquire up to its additional
percentage ownership by purchasing additional shares on the same
terms and
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conditions as other investors.
The terms of the Warrants and the Additional Warrants shall have the
terms set out in Exhibits D, E, and F, which in the event of conflict
shall be the controlling documents with respect to these instruments.
(e) In the event that prior to the last day of the above noted Period 1 IPNI
obtains venture financing of $1 million dollars, or more, and IPNI
immediately funds the Cash Flow Account to a total of $500,000 pursuant to
Section III(d), the first, second and third Additional Warrants to
PictureTel shall upon written notice to PictureTel terminate. Similarly,
in the event that IPNI obtains the financing and $1 million dollars or
more is deposited into an IPNI bank account and IPNI immediately funds the
Cash Flow Account to a total of $500,000 prior to the last day of the
above noted Period 2, then the second and third Additional Warrants shall
terminate or in the event that IPNI obtains the financing and $1 million
dollars or more is deposited into an IPNI bank account, and IPNI
immediately funds the Cash Flow Account to a total of $500,000 prior to
the last day of the above noted Period 3, the third Additional Warrant
shall terminate.
(f) IPNI hereby grants to PictureTel, upon seven (7) days written notice, the
right to audit, at PictureTel's expense, IPNI's financial and business
records and contracts at PictureTel's discretion during reasonable
business hours.
(g) As a condition of PictureTel's commitment to guarantee lease payments from
IPNI to the lease company , IPNI agrees to deposit the portions of the
IPNI software developed by D.A.S Visual Media, Inc., that IPNI owns, in
source and executable code form along with doctor's lists and client
contact lists ("IPNI Technology") into escrow with collateral assignment,
held by the escrow agent selected by PictureTel and IPNI, but not
deliverable out of escrow until notified by PictureTel of a default under
any Advance, Promissory Note or other provision of this Agreement and the
agreements delivered hereunder on the part of IPNI as described in Exhibit
H, "Technology Escrow Agreement." Upon such default by IPNI, ownership and
equal rights to the ("IPNI Technology") shall belong to PictureTel and the
other outside investors in IPNI who have the right to become parties to
the Escrow Agreement. Said escrow for IPNI Technology shall provide for a
perfected security interest granted by IPNI in the IPNI Technology in
favor of PictureTel to secure IPNI's obligations to PictureTel under the
Advances, Promissory Notes and the other provisions of this Agreement and
in favor of such outside investors to secure obligations of IPNI to such
investors. Upon any such default, each party thereby entitled to the IPNI
Technology shall have a perpetual, worldwide royalty free right, with
power to sublicense, to use the IPNI Technology. The escrow for IPNI
Technology shall be in the form of Exhibit H. In addition, IPNI shall
assure that PictureTel is designated as a successor in interest, with the
same rights as IPNI, to any escrow arrangement that IPNI might have with
D.A.S. Visual Media, Inc., for any other software (executable, source or
otherwise) that might be reasonably
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necessary for the continued development and/or support of the IPNI Units.
IX. GUARANTEES BY PICTURETEL, EXPANSION OF RELATIONSHIP AND EXCLUSIVITY
(a) After completion of the Pilot Period and during the Rollout Period,
PictureTel will only guarantee to the lease company the lease payments
by IPNI for IPNI Systems as follows: (i) for year one of the Rollout
Period, if IPNI has secured a minimum of 6 pharmaceutical company
Client Contracts (the "Client Contracts") securing the payment of the
leases, which are reasonably acceptable to PictureTel; for year two,
if IPNI has secured a minimum of 8 pharmaceutical company Client
Contracts securing the payment of the leases, which are reasonably
acceptable to PictureTel and for year three, if IPNI has secured a
minimum of 10 pharmaceutical company Client Contracts securing the
payment of the leases, which are reasonably acceptable to PictureTel.
(b) The above requirements are based on the current business and pricing
model provided by IPNI. In the event that IPNI demonstrates to
PictureTel's satisfaction during the Rollout Period, adequate cash
flow to make lease payments, in full, to the leasing company, on a
timely basis, over the next one year period, PictureTel may agree, at
its option, which agreement shall not be unreasonably withheld, and
upon a written request from IPNI, to modify the minimum Client
Contracts requirements defined above for that one year period. In the
event that IPNI cannot demonstrate, from time to time, to the
satisfaction of PictureTel that the lease payments, in full, will be
made by IPNI to the lease company, PictureTel may decide not to
continue executing lease guarantees to the lease company. Unless
PictureTel specifically agrees otherwise in a writing executed by its
CFO or CEO, in no event will PictureTel's guarantees exceed the lesser
of (a) a net present value of 30 Million dollars, or (b) a gross lease
value of 50 million dollars. In addition, all Client Contracts,
including Charter Client contracts, must be in conformity with Section
VI.
(c) Provided that PictureTel offers products to IPNI at its standard list
price and standard discount, it is agreed that for so long as
PictureTel continues to guarantee new leases, that IPNI must come to
PictureTel first to source IPNI Systems.
(d) For a period of not less than six (6) months from the last PictureTel
guarantee to the lease company of lease payments owed by IPNI, IPNI
shall not use video-conferencing products of any entity other than
PictureTel.
(e) Without limiting the foregoing, in consideration of PictureTel's
Advances, Notes and lease guarantees, IPNI shall not, for as long as
PictureTel is willing to continue issuing new lease guarantees through
year two of the Rollout Period, unless IPNI exercises its option to
require PictureTel to continue issuing lease guarantees during year 3
of the Rollout Period, use third party videoconferencing equipment
unless IPNI has advised PictureTel in writing of the terms or
functionality which such third party is providing and PictureTel
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refuses to provide such functionality on similar terms, and in a
timely manner.
(f) IPNI agrees that PictureTel shall, to the extent PictureTel makes any
payments to the lease company at any time under its guaranty of IPNI
lease obligations, be subrogated to all of the rights of the lease
company with respect to such amounts and IPNI covenants to reimburse
PictureTel for such payments, including collection costs and
reasonable attorney's fees.
X. PUBLICITY
(a) All press releases regarding the relationship contemplated herein
shall be subject to the review and prior written approval of both
parties.
(b) All of IPNI's advertising regarding IPNI's systems shall include
appropriate mention of PictureTel's inclusion in the IPNI Units and
such reference shall be subject to PictureTel's prior written
approval.
XI. SOFTWARE LICENSES
(a) IPNI may distribute Products only as originally packaged by PictureTel
with the Customer License Agreement ("Shrink-wrap License"). Use of the
Product will be subject to the terms of the accompanying Shrink-wrap
license. No title or ownership of the software covered by the
Shrink-wrap License or related documentation (with the exception of the
media on which it is contained) is transferred to IPNI or Customer.
IPNI acknowledges that the software contained in and related to
Products ("Software") is the proprietary Software of PictureTel, and
that PictureTel has not granted, and IPNI does not have, and will not
acquire or receive as a result of this Agreement, any rights in or
license to use, distribute, copy sell or sublicense such Software,
except as set forth in this Agreement. Title to all applicable rights
in patents, copyrights and trade secrets in the Products will remain in
PictureTel or its licensor.
(b) IPNI is granted a license to use the Products for marketing and
demonstration purposes under this Agreement provided that IPNI complies
with the terms of the applicable Shrink-wrap License packaged with the
Products.
(c) Unless prior written consent is granted by PictureTel, IPNI will not
copy or modify any Products or related materials supplied under this
Agreement. IPNI will not remove or omit any copyright notice or other
proprietary notice contained in or packaged with the Product.
(d) The Product is provided with RESTRICTED RIGHTS. Use, duplication, or
disclosure by the Government is subject to restrictions as set forth in
subparagraph c(1)(ii) of the Rights in Technical Data and Computer
Software clause at DFARS 252.227-7013 or subparagraphs c(1) and (2) of
the Commercial Computer Software - Restricted Rights at 48 CFR
52.227-19, as applicable. IPNI agrees to clearly and appropriately xxxx
any and all Products, including documentation, that is to be directly
or indirectly delivered to any branch of the US Government with the
Restricted Rights set
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forth in the FAR clause at 52.227-19c(4), agrees to inform all US
Government Contracting Officers, when applicable, that the Product is
commercial software and subject to the restrictions set forth herein
and agrees to indemnify PictureTel from any and all losses,
liabilities or expenses incurred by PictureTel, including attorney's
fees, as a result of its failure to perform the obligations set forth
in this Section.
XII. PROPRIETARY INFORMATION
During the term of this Agreement, PictureTel and IPNI (the
"Parties") may disclose to each other or the Parties may become aware
of, proprietary information which the Parties wish to be held in
confidence ("Confidential Information"). Confidential Information
will include future product plans, price lists, sales and marketing
strategies, the software and documentation, engineering information,
competitive information, service diagnostic information, any
business, marketing, technical, scientific or other information
including the confidential information of third parties in any form
which is identified as confidential or proprietary. Any Confidential
Information received by the Parties during the term of this Agreement
will be kept in confidence and disclosed only to employees of the
Parties with a need to know such Confidential Information, and may
not be used by the Parties for any purpose other than to comply with
their obligations under this Agreement. The Parties' confidentiality
obligations will not apply to information which (a) was in the public
domain prior to disclosure, or becomes publicly available other than
through a breach of this Agreement, (b) was known by the Parties
prior to disclosure, or it is at any time developed by the Parties
independently of any such disclosure or (c) was rightfully disclosed
to the Parties by a third party without a duty of confidentiality to
the discloser.
XIII. PATENT AND COPYRIGHT INDEMNIFICATION
(a) If a claim is made or an action brought that any IPNI Unit infringes a duly
issued US patent or any copyright, trademark or trade secret because of the
PictureTel component(s), PictureTel will defend and indemnify IPNI against
such claim and will pay resulting costs, damages and attorney's fees
finally awarded, provided that: (i) IPNI promptly notifies PictureTel in
writing of the claim, and (ii) PictureTel has sole control of the defense
and all related settlement negotiations; and (iii) IPNI provides
PictureTel, at PictureTel's expense, with all reasonably necessary
assistance, information, and authority to perform the above. PictureTel's
obligation under this Paragraph is conditioned on IPNI's agreement that if
the IPNI Unit or use or operation thereof, becomes, or in PictureTel's
opinion is likely to become, the subject of such a claim, PictureTel may at
its expense, either procure the right for IPNI to continue using the IPNI
Unit or, at PictureTel's option, replace or modify the same so that it
becomes non-infringing (provided such replacement or modification does not
materially adversely affect IPNI's intended use of the IPNI Unit as
contemplated hereunder). If neither of the
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foregoing alternatives is available on terms which are reasonable in
PictureTel's judgment, IPNI will return the IPNI Units upon written request
by PictureTel and PictureTel will credit the price paid for such IPNI Units
less depreciation on a straight line basis over an assumed five (5) year
service life.
(b) PictureTel will have no liability for any claim based upon the combination,
operation or use of any IPNI Unit with equipment, software or data not
supplied by PictureTel if such claim would have been avoided by the use of
other equipment, software or data whether or not capable of achieving the
same results, or based upon alteration of the hardware component of the
IPNI Unit or modification of any software provided by PictureTel.
(c) IPNI agrees to indemnify, defend and hold PictureTel harmless from any
expenses, losses, claims, demands, liabilities and damages arising from or
connected with IPNI's sale, lease, license or use of IPNI Systems or
Software or of IPNI's Support Services obligations, except where any such
expenses, losses, claims, demands, liabilities or damages are directly
caused by negligent actions of PictureTel.
(d) If a claim is made or an action brought that any IPNI Systems infringe a
duly issued patent or any copyright, trademark or trade secret, IPNI will
defend and indemnify PictureTel against such claim and will pay resulting
costs, damages and attorney's fees finally awarded, provided that: (i)
PictureTel promptly notifies IPNI in writing of the claim, and (ii) IPNI
has sole control of the defense and all related settlement negotiations;
and (iii) PictureTel provides IPNI, at IPNI's expense, with all reasonably
necessary assistance, information, and authority to perform the above.
(e) THE FOREGOING STATES THE ENTIRE OBLIGATION OF THE PARTIES WITH RESPECT TO
INFRINGEMENT OF PATENTS, COPYRIGHTS, TRADEMARKS OR TRADE SECRETS.
XIV. LIMITED WARRANTY.
(a) IPNI Units are warranted as set forth in the Limited Warranty Statement
which for the Pilot is attached hereto as EXHIBIT B.1 and for subsequent
orders will accompany each IPNI Unit. IPNI will make no warranty
representation on PictureTel's behalf beyond those contained in the
applicable Limited Warranty Statement. The warranty shall commence when the
IPNI Units are installed and/or licensed to the Customer by Reseller,
subject to the terms and conditions of the Limited Warranty Statement.
PictureTel makes no warranty to Reseller with respect to the IPNI Units. In
the event any IPNI Unit fails to operate according to PictureTel's
specifications prior to being resold to a Customer, the exclusive remedy
and PictureTel's exclusive responsibility will be the repair or replacement
of the IPNI Unit, at PictureTel's option, in accordance with PictureTel's
then prevailing policy.
13
(b) EXCEPT AS EXPRESSLY STATED IN THIS SECTION XIV, THERE ARE NO WARRANTIES,
EXPRESS OR IMPLIED, BY OPERATION OF LAW OR OTHERWISE, OF PRODUCTS OR
SERVICES SOLD OR FURNISHED UNDER THIS AGREEMENT OR IN CONNECTION HEREWITH.
PICTURETEL DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. NO REPRESENTATION OR OTHER AFFIRMATION OF FACT,
INCLUDING BUT NOT LIMITED TO, STATEMENTS REGARDING CAPACITY, SUITABILITY
FOR USE OR PERFORMANCE OF PRODUCTS, WHETHER MADE BY PICTURETEL EMPLOYEES OR
OTHERWISE, WHICH IS NOT CONTAINED IN THIS AGREEMENT, WILL BE DEEMED TO BE A
WARRANTY BY PICTURETEL FOR ANY PURPOSE, OR GIVE RISE TO ANY LIABILITY OF
PICTURETEL WHATSOEVER. THE WARRANTIES AND CORRESPONDING REMEDIES AS STATED
IN THIS SECTION XIV ARE EXCLUSIVE AND IN LIEU OF ALL OTHERS WRITTEN OR
ORAL.
XV. LIMITATION OF REMEDIES AND LIABILITIES.
EXCEPT AS PROVIDED HEREIN OR IN SECTION XIII, PICTURETEL'S MAXIMUM
LIABILITY WILL BE LIMITED IN ANY EVENT TO ACTUAL DIRECT DAMAGES TO THE
EXTENT CAUSED SOLELY BY THE ACTS OR OMISSIONS OF PICTURETEL, SUBJECT TO A
MAXIMUM LIABILITY OF THE GREATER OF $25,000 OR THE AMOUNT PAID FOR THE
SPECIFIC PRODUCT WHICH DIRECTLY CAUSED SUCH DAMAGE. IN NO EVENT WILL
PICTURETEL BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT
DAMAGES, LOST BUSINESS PROFITS, OR LOSS, DAMAGE OR DESTRUCTION OF DATA,
REGARDLESS OF THE FORM OF ACTION, WHETHER IN CONTRACT, TORT (INCLUDING
NEGLIGENCE), BREACH OF WARRANTY OR OTHERWISE, EVEN IF PICTURETEL HAS BEEN
ADVISED AS TO THE POSSIBILITY OF SAME. NO LIMITATION AS TO DAMAGES FOR
PERSONAL INJURY IS HEREBY INTENDED. SOME STATES DO NOT ALLOW THE EXCLUSION
OR LIMITATION OF INCIDENTAL OR CONSEQUENTIAL DAMAGES AND THE ABOVE
EXCLUSION OR LIMITATION MAY NOT APPLY.
XVI. TRADEMARKS AND TRADENAMES.
(a) IPNI may use the name PictureTel and any other tradename or
trademark of PictureTel ("Marks") solely in the performance of its
rights and obligations under this Agreement. IPNI will not attach any
additional trademarks or tradenames to the Products and will refrain
from removing or altering any PictureTel trademark, logo or notice
affixed by PictureTel to Products. IPNI will not use any PictureTel
trademark or trade name in a way that implies IPNI is an agency or
branch of PictureTel. IPNI will immediately change or discontinue any
use as requested by PictureTel.
14
(b) IPNI may display the Marks in connection with the marketing, sale or
support of Products with an appropriate trademark notice or other
notice or proprietary rights in the Marks as PictureTel may request.
IPNI shall not register, assign or take other action concerning the
Marks except with the express written permission of PictureTel. IPNI
shall not refer to PictureTel in any of IPNI's advertising, except
where PictureTel has specifically approved such advertisement in
writing prior to its publication. All rights that arise from the use
of the Marks in any jurisdiction by IPNI will belong solely
PictureTel.
XVII. INDEMNIFICATION
(a) IPNI shall indemnify, defend, and hold harmless PictureTel and all its
subsidiaries, against any costs, damages, or expenses (including
attorney's fees) incurred by PictureTel arising out of or relating to
PictureTel's guarantee of the lease agreements between IPNI and the
lease company.
Any commitment made by IPNI to Customers with respect to quantities,
delivery, modification, interfacing capability, suitability of
Products, or suitability in specific applications will be IPNI's sole
responsibility. IPNI has no authority to modify any warranty contained
in this Agreement or provided with the Products or to make any other
commitment on behalf of PictureTel, and IPNI will indemnify and defend
PictureTel from any expense, loss or liability (including reasonable
attorney's fees), suit or proceeding for any such modified warranty or
other commitment.
XVIII. TERM AND TERMINATION; DEFAULT.
(a) The Term of this Agreement shall, unless extended by agreement,
commence on the effective date first mentioned above and shall
terminate three years after the completion of the Pilot Period.
Provided, however, if at such time PictureTel has outstanding any
guarantee to the Lease Company of lease payments to be paid by IPNI
to the Lease company, the provisions of the Cash Flow Account
established under section III shall remain in effect and, in
addition, security for such lease guarantee(s) shall remain the IPNI
Technology Escrow until such time as the net lease guarantees are
$10,000,000 or less.
(b) Either party may, at its option, terminate this Agreement (but not the
Cash Flow or Warrant Agreements) by written notice to the other party
upon occurrence of any of the following events which shall constitute
cause:
(i) A party's substantial or material failure to comply with any of
the provisions of this Agreement, provided, however, that the
defaulting party shall have a period of thirty (30) days from the
date of notice in which to cure such breach, or, if the breach cannot
be reasonably cured within said thirty (30) day period, then the
party shall have a reasonable time in which to cure the breach, so
long as the party diligently attempts to cure; or
15
(ii) A party becoming insolvent or committing any act of bankruptcy,
or upon any proceeding being commenced by or against either party
under any law providing relief to a party as a debtor.
(c) Any suspension or termination of this Agreement pursuant to its terms
will not relieve either party of its obligation to pay any sum due
hereunder or of its obligations with respect to the confidential
treatment and protection of the others proprietary information and
Software. PictureTel will not pay for any loss or damage of any
nature whatsoever arising from any such suspension or termination
which is in accordance with the provisions of this Agreement.
(d) Upon termination or expiration of this Agreement, IPNI will
immediately cease to represent itself as selling PictureTel Products
and will refrain from representing itself as such and from using any
PictureTel Trademarks in any manner.
(e) Notwithstanding the foregoing, all indemnifications of IPNI to
PictureTel, all Advances, Promissory Notes and Warrants and Additional
Warrants, the Exclusivity provisions and any other obligations stated
to survive termination of this Agreement shall survive any such
termination. In addition, so long as PictureTel has outstanding any
guarantee to the lease company of lease payments to be paid by IPNI to
the lease company, IPNI hereby covenants to make such payments to the
lease company and the provisions of the Cash Flow Account established
under Section III shall remain in effect, in addition, subject to
section XVIII(a), above, the IPNI Technology Escrow Agreement provided
pursuant to Section VIII shall also remain in effect.
XVIV. GOVERNMENT EXPORT RESTRICTION.
IPNI and/or its Customers will comply with any government export control
laws and procedures applicable to the export of IPNI Systems or Units and
also shall obtain any permits and licenses required for the operation or
use of IPNI Systems or Units.
XX. FORCE MAJEURE.
In no event shall either party be liable for its failure to perform
hereunder due to contingencies beyond its reasonable control including,
without limitation, fire, explosion, flood, strike, war, civil
disturbances, inability to obtain materials on reasonable terms, acts of
God, or acts in compliance with any law or government regulation.
XXI.REPRESENTATIONS
(a) IPNI represents as follows: (i) IPNI is legally incorporated, in
existence and in good standing, (ii) its representatives are duly
authorized to execute this Agreement and all securities thereunder on
IPNI's behalf, (iii) the execution
16
of this Agreement or the issuance of any securities thereunder shall
not breach any law or any agreement, (iv) all financial statements
provided to PictureTel are true and correct, and (v) all business plan
delivered to PictureTel are believed to be reasonable and prepared in
good faith.
(b) PictureTel represents as follows: (i) PictureTel is legally
incorporated, in existence and in good standing, (ii) its
representatives are duly authorized to execute this Agreement on
PictureTel's behalf,
(c) Bringdown of Representations by IPNI. It shall be a condition to the
delivery by PictureTel of any lease guaranty to the lease company
hereunder that the representations by IPNI shall be true and correct on
and as of the date of delivery of such lease guaranty and that
PictureTel shall have received an officer's certificate of IPNI signed
by its CEO and CFO to the foregoing
(d) Additional Covenants by IPNI. IPNI will promptly supply unaudited
quarterly and audited annual financial statements to PictureTel.
XXII. CHANGE IN CONTROL
(a) In the event of a change in control in the ownership of IPNI (a
change in control shall be deemed to have occurred (i) if fifty one
percent of the then outstanding voting stock is transferred to a
single unaffiliated third party(s)), or (ii) in the event of
bankruptcy or insolvency of IPNI, such events shall constitute a
default hereunder and PictureTel may terminate this Agreement, be
under no obligation to continue providing lease guarantees, and/or
declare immediately due all obligations owing by IPNI to PictureTel,
including all Advances and Promissory Notes, and, unless such default
is cured within 30 days, PictureTel shall, subject to the right of the
lease company, be entitled to receive the funds in the Cash Flow
Account.
XXIII. GENERAL.
(a) IPNI Unit prices are exclusive of sales, use, value-added or other
excise tax, however designated or levied. Unless IPNI provides
PictureTel a valid tax exemption certificate, PictureTel will invoice
IPNI for all such taxes based upon this Agreement, or on IPNI Units
purchased or services provided under this Agreement and all personal
property taxes assessed on any IPNI Units after delivery, together with
any interest.
(b) IPNI Units will be delivered to IPNI (or the lease company ) F.O.B. the
manufacturing facility. Title to the non-software related IPNI Units
shall pass upon payment to PictureTel in full. Risk of loss will pass
to IPNI or the lease company upon delivery to the carrier. Title to all
software IPNI Units supplied under this Agreement remains with
PictureTel and shall not pass to IPNI or any other third party.
(c) Unless IPNI (or the lease company ) specifies a common carrier, and
method of delivery, PictureTel will arrange to ship IPNI Units to
IPNI's specified
17
location(s) and will select a common carrier. PictureTel will prepay
the freight and any other necessary and reasonable transportation and
delivery charges and invoice IPNI for such costs, which are due and
payable in full at the time the invoice for the shipped IPNI Unit is
due.
(d) Neither party may assign or transfer any part or all of this Agreement
or any of its rights or obligations hereunder (except as allowed in an
exhibit to this Agreement), without the prior written consent of the
other party.
(e) Either party's failure to enforce any provision of this Agreement will
not be deemed a waiver of that provision or of the right to enforce it
in the future.
(f) This Agreement shall be governed and construed by the laws of the State
of Delaware. Each party agrees, and shall not contest, that the courts
of Massachusetts (including the federal courts) shall have
non-exclusive jurisdiction to adjudicate over any issue related to this
Agreement. The parties further covenant that service of process by
certified mail shall be adequate process of any such lawsuit. Each
party hereby irrevocably waives the right to a trial by jury in
connection with any action or proceeding under or in connection with
this Agreement or the subject matter hereof.
(g) If any provision or provisions of this Agreement is held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions will not in any way be affected or impaired
thereby.
(h) Each party agrees that this Agreement together with any and all
exhibits, attachments, and schedules referred to herein, expressly made
a part hereof will be the complete and exclusive statement of the
agreement between the parties, superseding all proposals or prior
agreements, oral or written, and all other communications between the
parties relating to the subject matter of this Agreement including, but
not limited to, the Letter of Intent dated January 21, 1997 and/or the
Major Agreed Upon Terms, dated September 22, 1997. This Agreement may
only be modified by a written instrument executed by an authorized
officer of PictureTel and of IPNI.
(i) This Agreement shall be binding upon each of the parties and,
subject to section XXIII (d), upon their respective successors and
assigns.
IN WITNESS WHEREOF, the parties have signed this Agreement by their duly
authorized offices as of the date and year first above written.
PICTURETEL CORPORATION INTEGRATED PHYSICIAN
NETWORKS, INC.
By: By:
Name: Name:
Title: Title:
Date: Date:
18
EXHIBIT A
CONFIGURATION OF THE PICTURETEL
SUPPLIED COMPONENTS
LIVE 200-IPNI-D LIVE 200-IPNI-R
IPNI PHYSICIAN UNITS (APPLIED INSTRUMENTS) IPNI PHARMACEUTICAL UNITS (INTEGRATOR)
PART NUMBER DESCRIPTION PART NUMBER DESCRIPTION
000-0000-00 Greyhound PCB 000-0000-00 Greyhound PCB
000-0000-00 WorldCam/cable 000-0000-00 Software, Live 200
000-0000-00 Software, Live 200 000-0000-00 Speakers
000-0000-00 Microphone 000-0000-00 Cable, camera
000-0000-00 Microphone
000-0000-00 Speaker Power Cable
19
EXHIBIT B
IPNI QUALITY SPECIFICATIONS
The IPNI custom physician unit and its component parts will adhere to the
minimum quality standards set forth below.
All components will have a minimum MTBF of 26,000 hours. The integrated
unit will be constructed to pass UL and FCC inspections.
The construction and testing process will conform to the IPNI requirements
listed below.
All component integration (unit construction) steps will be clearly
documented with diagrams as required for clarification.
Assembly testing will be performed and signed-off by assembly technicians
at each critical step. Assembly sign-off sheets will be retained by the
integrator and retained for inspection, at IPNI's request, for up to one
(1) year.
All completed units will be subjected to a hot room burn-in for a minimum
of 16 hours at an elevated temperature mutually agreed upon by IPNI and the
integrator.
Burn-in and final functional testing will employ Touchstone's Checklist v.4
or an equivalent software testing utility. Specific software testing points
will be mutually agreed upon between IPNI and the integrator.
All finished units will undergo a series of three successful network
connection tests using the IPNI application.
20
EXHIBIT B.1
LIMITED WARRANTY STATEMENT
FOR
PILOT PROGRAM
PictureTel hereby warrants all products sold hereunder as follows:
a. Products shall be free and clear of all liens or encumbrances,
except the security interest, (other than subject to the Lease
Guarantees) if any, of PictureTel herein and that PictureTel shall
have done nothing that might infringe upon the title or
proprietary rights of an uninvolved third party.
b. All manufacturer's warranties applicable to the products are the
responsibility of the manufacturer and not PictureTel, and all
such warranties will pass through to IPNI.
c. Any warranty service provided by PictuerTel will be at the
direction of, and the responsibility of, the manufacturer. All
terms and conditions of the manufacturer's warranty apply. Any
service provided by PictureTel not covered and paid pursuant to
the manufacturer warranty will be charged to the CLIENT at
PictureTel's (or its subcontractor's) then current per hour rate
for such services, including travel time and materials charges.
d. PictureTel warrants that at the time of delivery the Pilot Program
products delivered will be free from defects in material and
workmanship as specified in EXHIBIT B.2
21
EXHIBIT B.2
22
EXHIBIT C
PROMISSORY NOTE
______________ September 22, 1997
FOR VALUE RECEIVED by Integrated Physician Networks, Inc. ("IPNI"), of 0000
Xxxxx Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxxx, Arizona, IPNI hereby
promises to pay to PictureTel Corporation ("PictureTel"), of 000 Xxxxxxxxx
Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000, or order, the principal sum of
____________________________________________________($___________) (the
"Principal") payable as follows:
1. PAYMENT TERMS: IPNI will make payments to PictureTel as follows:
(a) PictureTel's advance to IPNI of $500,000. ("Advance") issued in
February 1997, receipt of which is hereby acknowledged by IPNI, shall be
payable in one lump sum nine (9) months from the beginning of the Pilot
Program, but in no event later than December 1, 1998. The principal shall
be payable in U.S in immediately available funds, by check, at PictureTel's
address set forth above or at such other place PictureTel may designate
from time to time in writing to IPNI, or by wire to PictureTel's bank
account as designated by PictureTel in writing to IPNI.
(b) IPNI will pay monthly interest on any late or unpaid portion of the
Principal at a rate of 9 percent per annum dating back to the original
Advance(s).until the Principal is paid in full. Payments will be applied to
interest first, and then Principal.
2. DEFAULT: If IPNI (i) fails to make payment as set forth above; (ii)
fails to allow PictureTel's inspection of records as set forth below; (iii)
is otherwise in breach of this Note; (iv) is or plans to be liquidated,
sold, merged, or otherwise ceases to exist; or (v) is in default under the
Relationship Agreement (as defined below), which default is not cured
within any grace period applicable thereunder, the entire outstanding
balance of the Principal and any other amounts hereunder shall become
immediately due and payable as specified in Section 9.
3. COSTS OF ENFORCEMENT: In case any payment by IPNI in respect of this
Note shall not be paid when due, IPNI promises to pay all costs of
collection and enforcement of this Note, including all reasonable
attorney's fees.
4. PREPAYMENT ALLOWED: This Note may be prepaid in whole or in part in any
time.
5. WITHHOLDING AND FILINGS: Should this transaction require any special
withholdings or local filings in order to comply with any legal or
statutory requirements, IPNI will complete and execute all such filings at
its own cost.
6. WAIVER: PictureTel's failure to enforce any default by IPNI hereunder
shall not constitute a waiver of any of PictureTel's rights hereunder. IPNI
and all endorsers of this Note hereby waive presentment, notice of
dishonor, demand, notice of nonpayment, protest and all other demands and
notices
23
in connection with the delivery, acceptance, performance or enforcement of
demands and notices in connection with the delivery, acceptance,
performance or enforcement of this Note. IPNI and all endorsers of this
Note further waive the right to assert in any action or proceeding with
regard to this Note any offsets or counterclaims which it may have.
7. MODIFICATIONS: This Note may only be modified by a written instrument
executed by an authorized officer of both PictureTel and IPNI.
8. ACCELERATION: (a) In the event of any default of IPNI under this Note or
in the event IPNI ceases to do business; commits any act of bankruptcy, is
or plans to be liquidated; or otherwise ceases to exist prior to the
fulfillment of its obligations under this Note, IPNI acknowledges
PictureTel's right, without presentment, demand, protest or notice of any
kind, to declare all amounts payable under this Note immediately due and
payable, whereupon the same shall become so due and payable. (b) In the
event of a material change of control of IPNI as provided in the
Relationship Agreement then the Principal and any other amounts due
hereunder shall immediately become due and payable within 60 days following
such change of ownership.
9. RELATIONSHIP AGREEMENT. This Note is delivered under a certain
Relationship Agreement between the Payor IPNI and the Payee PictureTel
effective September 22, 1997 (the "Relationship Agreement").
10. GOVERNING LAW: This note shall be governed by and construed under the
laws (other than the internal conflict of laws) of the State of
Massachusetts.
11. SEALED INSTRUMENT: THIS NOTE WILL TAKE EFFECT AS A SEALED INSTRUMENT.
INTEGRATED PHYSICIAN NETWORKS, INC. WITNESS
By its authorized officer:
-------------------------- --------------------------
Signature Signature
-------------------------- --------------------------
Name Name
-------------------------- --------------------------
Title Title
24
EXHIBIT D
WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE
PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED, PLEDGED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER
THE ACT COVERING THE TRANSFER OR AN OPINION OF COUNSEL, SATISFACTORY TO
THE ISSUER, THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
No.
INTEGRATED PHYSICIAN NETWORKS, INC.
SERIES A PREFERRED STOCK WARRANT CERTIFICATE
Warrant to purchase of outstanding shares of Series A Preferred Stock of
Integrated Physicians Networks, Inc.
THIS CERTIFIES that, for value received, PictureTel Corporation
("PictureTel") or its registered successors and assigns, is the owner of
Warrants to purchase a number of shares of Series A Preferred stock, $0.001 par
value (the "Series A Preferred Stock"), of Integrated Physician Networks, Inc. a
Delaware corporation (herein called the "Company") equal to the Warrant
Percentage (as defined below), at any time, at an initial exercise price per
share equal to one cent ($0.01), subject to adjustment from time to time
pursuant to the provisions of Section 3 hereof (the "Exercise Price"). The
Exercise Price shall be automatically decreased to equal one-tenth of one cent
($0.001) per share, without any further action required, in the event the
Initial Funding (as defined below) has not occurred on or prior to September 22,
1998. The Warrants evidenced by this certificate shall terminate and become void
as of the close of business upon the earlier of the sale of all or substantially
all of the Company's property, or merger into any other Company or an
underwritten public offering of the Company's common stock, or September 22,
2002. For purposes of this Warrant certificate: (i) the terms "Series a
Preferred Shares" and "Common Shares" shall mean the classes of capital stock of
the Company designated Series A Preferred and Common Stock, respectively,
pursuant to the Company's Certificate of Incorporation, as from time to time in
effect (the "Certificate of Incorporation"), and any other class of capital
stock of the Company resulting from successive changes or reclassification of
the Series A Preferred or Common Stock; and (ii) the term "Relationship
Agreement" shall mean that certain Agreement dated as of September 22, 1997
between the Company, and PictureTel.
25
1. Definitions. Capitalized terms used herein without definition have the
meanings ascribed to them in the Relationship Agreement.
"Warrant Percentage" shall mean a percentage equal to 12.0% of the
Company's capital stock issued as Series A Preferred Stock (assuming conversion
or exercise of all outstanding securities convertible or exercisable for capital
stock other than the shares referred to in Section 3.1(a) (iii) (aa) through
(cc)) as of the date of this Warrant certificate and such Warrant Percentage
shall automatically adjust to equal 12.0% of the Company's capital stock,
subject to the limitations set forth below (assuming conversion or exercise of
all outstanding securities convertible as exercisable for Common Stock other
than the shares referred to in Section 3.1 (a) (iii) (aa) through (cc)) through
and after giving effect to the occurrence of the first issuance of the Company's
Common Stock (or securities convertible into the Company's Common Stock) to
venture capital or other institutional investors resulting in aggregate net
proceeds to the Company of at least One Million Dollars ($1.0 million) (the
"Initial Funding").
2. Exercise of Warrants.
2.1 Cash Exercise. The Warrants evidenced hereby may be
exercised at any time by the registered holder hereof, in whole or in part, by
the surrender of this Warrant certificate, duly endorsed (unless endorsement is
waived in writing by the Company), at the principal office of the Company (or at
such other office or agency of the Company as it may designate by notice in
writing to the registered holder hereof at such holder's last address appearing
on the books of the Company) and upon payment to the Company by wire transfer or
a certified or bank check payable to the order of the Company for the Exercise
Price for each Warrant exercised. The certificate(s) for such Series A Preferred
Shares shall be delivered to the registered holder hereof as soon as practicable
but, in any event, not later than ten days after Warrants evidenced hereby shall
have been so exercised and a new Warrant certificate evidencing the number of
Warrants, if any, remaining unexercised shall also be issued to the registered
holder within such time unless such Warrants have expired. The holder of the
Warrants evidenced by this certificate shall have all the rights of a holder of
Series A Preferred Shares to be issued upon exercise of the Warrants when such
Warrant holder tenders payment of the Exercise Price to the Company along with
this Warrant certificate duly endorsed in accordance with this Section 2. No
fractional Series A Preferred Shares of the Company, or scrip for any such
fractional shares, shall be issued upon the exercise of any Warrants; but the
holder hereof shall be entitled to cash equal to such fraction multiplied by the
then effective Exercise Price.
26
2.2 Net Issue Exercise.
(a) In lieu of exercising this Warrant, the holder hereof may elect, at
any time or times when this Warrant is otherwise exercisable in
accordance with Section 2.2 hereof, to receive shares of Series A
Preferred Stock equal to the value of the Warrants evidenced hereby
(or the portion thereof being canceled) by surrender of this Warrant
certificate at the principal office of the Company together with
written notice of such election, with an appropriate signature
guarantee, in which event the Company shall issue to the holder hereof
a number of shares of the Company's Series A Preferred Stock computed
using the following formula:
X = Y (A - B)
-------------
A
Where X - The number of shares of Series a
Preferred Stock to be issued to Holder.
Y - The number of shares of Series A Preferred Stock issuable upon
exercise of the number of Warrants which the Holder elects to
exercise.
A - The fair market value of one share of the Company's Series A
Preferred Stock.
B - Exercise Price (as adjusted to the date of such calculations).
(b) For purposes of this Section, fair market value of the
Company's Series A Preferred Stock (if converted to Common Stock)
shall mean the average of the closing bid and asked prices of the
Company's Common Stock quoted in the over-the-counter market
summary or the closing price quoted on any exchange on which the
Common Stock is listed, or on The NASDAQ National Market,
whichever is applicable, as published in the Eastern Edition of
The Wall Street Journal for the ten trading days prior to the date
of determination of fair market value. If the Common Stock is not
traded over-the-counter or on an exchange, the fair market value
shall be determined in good faith by the Board of Directors of the
Company subject to the approval of PictureTel, which approval
shall not be unreasonably withheld.
3. Adjustment in Exercise Price and Number of Shares. The Exercise Price
per Warrant shall be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the Exercise Price pursuant to Section 3.2 and
3.3 hereof (but not any other provision of this Warrant), the holder of this
Warrant shall thereafter be entitled to purchase at the Exercise Price resulting
from such adjustment, the number of shares obtained by dividing (1) the product
of (x) the number of shares purchasable pursuant hereto immediately prior to
such
27
adjustment and (y) the Exercise Price immediately preceding such adjustment
by (2) the Exercise Price resulting from such adjustment.
3.1 Issuance of Additional Shares.
(a) Special Definitions. For purposes of this Section 3.1, the
following definitions shall apply:
(i) "Options" shall mean rights,
options or warrants to subscribe
for, purchase or otherwise
acquire either Common Stock or
Convertible Securities.
(ii) "Convertible Securities" shall
mean any evidences of
indebtedness, shares or other
securities convertible into or
exchangeable for Common Stock or
convertible into or exchangeable
for securities convertible into
or exchangeable for Common Stock.
(iii) "Additional Shares of Stock"
shall mean all shares of Series A
Preferred Stock or Common Stock
issued by the Company after the
date hereof, provided that no
adjustments shall be made under
this Warrant by virtue of:
(aa) shares of Common Stock issued
to employees, officers and directors
of the Company under the Company's
stock option plans as in effect on
the date hereof, including the
proposed grant of up to 400,000
incentive options or shares after
the date hereof;
(bb) shares issuable upon exercise
of the Warrants evidenced by this
Warrant Certificate; and
(cc) any event for which adjustment
is provided pursuant to Sections 3.2
or 3.3 hereof.
(b) No Adjustment of Exercise Price. No adjustment
in the applicable Exercise Price shall be made in respect of
the issuance of Additional Shares of Common Stock unless the
consideration per share for an Additional Share of Common
Stock issued or deemed to be issued by the Company is less
than the
28
applicable Exercise Price in effect on the date of, and
immediately prior to, such issue.
( c) Deemed Issue of Additional Shares of Common
Stock - Options and Convertible Securities. Except as
provided in Sections 3.1(a) or 3.1(b) hereof, in the event
the Company at any time or from time to time after the date
hereof shall issue any Options or Convertible Securities or
shall fix a record date for the determination of holders of
any class of securities entitled to receive any such Options
or Convertible Securities, then the maximum number of shares
(as set forth in the instrument relating thereto without
regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be the
number of Additional Shares of Common Stock issued as of the
time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date,
provided that in any such case in which Additional Shares of
Common Stock are deemed to be issued,
(i) no further adjustment in the
applicable Exercise Price shall be
made upon the subsequent issue of
Convertible Securities or shares of
Common Stock upon the exercise of
such Options or conversion or
exchange of such Convertible
Securities;
(ii) if such Options or Convertible
Securities by their terms provide,
with the passage of time or
otherwise, for any increase in the
consideration payable to the
Company, or decrease in the number
of shares of Common Stock issuable,
upon the exercise, conversion or
exchange thereof, the applicable
Exercise Price computed upon the
original issue thereof (or upon the
occurrence of a record date with
respect thereto), and any subsequent
adjustments based thereon, shall,
upon any such increase or decrease
becoming effective, be recomputed to
reflect such increase or decrease
insofar as it affects such Options
or the rights of conversion or
exchange under such Convertible
Securities;
(iii) upon the expiration of any
such Options or any rights of
conversion or exchange under such
Convertible Securities which shall
not have been exercised, the
applicable Exercise Price computed
upon the original issue thereof (or
upon the occurrence of a record date
with
29
respect thereto), and any subsequent
adjustments based thereon, shall,
upon such expiration, be recomputed
as if,
(A) in the case of Convertible
Securities or Options for Common
Stock, the only Additional Shares of
Common Stock issued were shares of
Common Stock, if any, actually
issued upon the exercise of such
Options or the conversion or
exchange of such Convertible
Securities and the consideration
received therefor was the
consideration actually received by
the Company for the issue of all
such Options, whether or not
exercised, plus the consideration
actually received by the Company
upon such exercise, or for the issue
of all such Convertible Securities
whether or not converted or
exchanged, plus the additional
consideration, if any, actually
received by the Company upon such
conversion or exchange, and
(B) in the case of Options for
Convertible Securities, only the
Convertible Securities, if any,
actually issued upon the exercise
thereof were issued at the time of
issue of such Options, and the
consideration received by the
Company for the Additional Shares of
Common Stock deemed to have been
then issued was the consideration
actually received by the Company for
the issue of all such Options,
whether or not exercised, plus the
consideration deemed to have been
received by the Company upon the
issue of the Convertible Securities
with respect to which such Options
were actually exercised.
(d) Adjustment of Exercise Price Upon Issuance of Additional Shares of
Common Stock. In the event the Company shall issue Additional Shares
of Common Stock (including Additional Shares of Common Stock deemed to
be issued pursuant to Section 3.1(c)) without consideration or for a
consideration per share less than the applicable Exercise Price of the
Warrant in effect on the date of and immediately prior to such issue,
then and in such event, the applicable Exercise Price shall be
reduced, concurrently with such issue, to a price determined by
multiplying such Exercise Price by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding immediately
prior to such issue, including any Common Stock issuable pursuant to
any then outstanding Options and Convertible Securities, plus the
number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of Additional Shares of
Common Stock so issued would purchase at the then applicable Exercise
Price and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior
30
to such issue, including any Common Stock issuable pursuant to any
then outstanding Options and Convertible Securities, plus the number
of such Additional Shares of Common Stock so issued.
(e) Determination of Consideration. For purposes of this Section
3.1, the consideration received by the Company for the issue
of any Additional Shares of Common Stock shall be computed
as follows:
(i) Cash and Other Consideration: Such
consideration shall:
(A) insofar as it consists of
cash, be computed at the
aggregate amount of cash
received by the Company
excluding amounts paid or
payable for accrued interest or
accrued dividends;
(B) insofar as it consists of
consideration other than cash,
be computed at the fair value
thereof at the time of such
issue, as determined in good
faith by the Board of Directors
of the Company; and
(C ) in the event Additional
Shares of Common Stock are
issued together with other
shares or securities or other
assets of the Company for
consideration which covers both,
be the proportion of such
consideration so received,
computed as provided in clauses
(A) and (B) above, as determined
in good faith by the Board of
Directors.
(ii) Options and Convertible Securities.
The consideration per share received by
the Company for Additional Shares of
Common Stock deemed to have been issued
pursuant to Section 3.1(c), relating to
Options and Convertible Securities, shall
be determined by dividing
(A) the total amount, if any,
received or receivable by the
Company as consideration for the
issue of such Options or
Convertible Securities, plus the
minimum aggregate amount of
additional consideration (as set
forth in the instruments
relating thereto, without regard
to any provision contained
therein for a subsequent
adjustment of such
consideration) payable to the
Company upon the exercise of
such Options or the conversion
or
31
exchange of such Convertible
Securities, or in the case of
Options for Convertible
Securities, the exercise of such
Options for Convertible
Securities and the conversion or
exchange of such Convertible
Securities by
(B) the maximum number of shares
of Common Stock (as set forth in
the instruments relating
thereto, without regard to any
provision contained therein for
a subsequent adjustment of such
number) issuable upon the
exercise of such Options or the
conversion or exchange of such
Convertible Securities.
3.2 Stock Dividends. If and whenever at any time the Company
shall declare a dividend or make any other distribution upon any class or series
of stock of the Company, in each case payable in Common Shares or securities
convertible into or exercisable for Common Stock, the number of Common Shares to
be obtained upon exercise of this Warrant shall be proportionately adjusted to
reflect the issuance of any such securities issuable in payment of such dividend
or distribution.
3.3 Subdivision or Combination of Stock. If and whenever the
Company shall at any time subdivide its outstanding Common Shares into a greater
number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding Common Shares of the Company shall be combined into a smaller number
of shares, the Exercise Price in effect immediately prior to such combination
shall be proportionately increased.
3.4 Recapitalizations, Merger, etc. If at any time or from
time to time (a) there shall be any capital reorganization or reclassification
of the capital stock of the Company, consolidation or merger of the Company with
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification
of the Common Stock) or (b) the Company pays any distribution or dividend in
cash or property of the Company in complete or partial liquidation (but not
including ordinary periodic cash dividends), the registered holder hereof shall
thereafter, upon exercise of this Warrant certificate, be entitled to receive
the number of shares of stock or other securities or cash or property of the
Company (or of the successor corporation resulting from any consolidation or
merger) to which the Series A Preferred Stock (and any other securities)
deliverable upon the exercise of this Warrant certificate would have been
entitled if this Warrant certificate had been exercised immediately prior to
such event, and the Exercise Price shall be adjusted appropriately so that the
aggregate amount payable by the registered holder hereof upon the full exercise
of this Warrant certificate remains the same. The Company shall not effect any
such recapitalization, consolidation or merger unless, upon the consummation
thereof, the successor corporation shall assume by written instrument the
obligation to deliver to the registered holder hereof such shares
32
of stock, securities, cash or property as such holder shall be entitled to
purchase in accordance with the foregoing provisions.
4. Company to Provide Stock.
The Company covenants and agrees that all the Series A Preferred Shares
which may be issued upon the exercise of the Warrants evidenced hereby upon the
due exercise thereof, including the receipt by the Company of the aggregate
Exercise Price for all Warrants exercised, will be duly authorized, validly
issued and fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof to the registered holder hereof other
than those which the Company shall promptly pay or discharge. The Company
further covenants and agrees that during the period within which the Warrants
evidenced hereby may be exercised, the Company will at all times reserve such
number of shares of Series a Preferred Stock as may be sufficient to permit the
exercise in full of the Warrants.
5. Other Notices. If at any time the Warrants evidenced hereby are
outstanding:
5.1 The Company shall declare any dividend on the Series A
Preferred Shares payable in shares of capital stock of the Company; or
5.2 The Company shall authorize the issue of any options,
warrants or rights pro rata to all holders of capital stock entitling them to
subscribe for or purchase any shares of stock of the Company or to receive any
other rights; or
5.3 The Company shall authorize the distribution pro rata to
all holders of capital its stock as evidences of its indebtedness or assets
(including cash dividends or distributions paid out of retained earnings or
retained surplus); or
5.4 There shall occur any reclassification of any of the
capital shares of the Company, or any consolidation or merger of the Company
with or into another corporation (other than a consolidation or merger in which
the Company is the continuing corporation and which does not result in any
reclassification of any of the capital shares of the Company) or a sale or
transfer to another corporation of all or substantially all of the properties of
the Company; or
5.5 There shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company;
then, and in each of such cases, the Company shall mail to the registered holder
hereof at its last address appearing on the books of the Company, as promptly as
practicable but in any event at least twenty days prior to the applicable record
date (or determination date) mentioned below, a notice stating, to the extent
such information is available, (i) the date on which a record is to be taken for
the purpose of such dividend, distribution or rights, or, if a record is not to
be taken, the date as of which the holders of the capital stock of record to be
entitled to such dividend, distribution or rights are to be determined, or (ii)
the date on which such liquidation, dissolution
33
or winding up is expected to become effective and the date as of which it is
expected that holders of Series A Preferred Shares of record shall be entitled
to exchange their Series A Preferred Shares for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up.
6. Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant, and in the case of any such loss, theft or destruction of any Warrant,
on delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, unless the Company has received
notice that any such Warrant has been acquired by a bona fide purchaser, the
Company at its expense will execute and deliver, in lieu thereof, a new Warrant
of like tenor; provided, however, if any Warrant of which the original holder of
this Warrant, its nominee, or any of its affiliates is the registered holder is
lost, stolen or destroyed, the affidavit of any authorized officer of the
registered holder setting forth the circumstances with respect to such loss,
theft or destruction shall be accepted as satisfactory evidence thereof, and no
indemnity bond or other security shall be required as a condition to the
execution and delivery by the Company of a new Warrant in replacement of such
lost, stolen or destroyed Warrant other than the registered holder's written
agreement to indemnify the Company.
7. Registered Holder. The registered holder of this Warrant certificate
shall be deemed the owner hereof and of the Warrants evidenced hereby for all
purposes. The registered holder of this Warrant certificate shall not be
entitled by virtue of ownership of this Warrant certificate to any rights
whatsoever as a shareholder of the Company.
8. Amendments and Waivers. Any provision in this Warrant certificate to
the contrary notwithstanding, changes in or additions to this Warrant
certificate may be made and compliance with any covenant or provision herein set
forth may be omitted or waived if the Company shall obtain consent thereto in
writing from persons holding or having the right to acquire a majority of the
aggregate of the Warrants issued and then outstanding. Any modification or
amendment made in accordance with this Section 8 will be conclusive and binding
on all present and future holders of Warrants and all present and future holders
of shares of Series A Preferred Stock issued upon exercise of Warrants, whether
or not notation of such modification or amendment is made upon such Warrant or
certificate(s) representing such shares of Series A Preferred Stock. Any
instrument given by or on behalf of any holder of a Warrant in connection with
any consent to any modification or amendment will be conclusive and binding on
all subsequent holders of such Warrants and such shares of Common Stock.
9. Covenants.
9.1 Reports and Notices. The Company covenants and agrees to
deliver to the holder of the Warrants the following reports and notices;
provided, however, that after the consummation by the Company of an initial
public offering, the provisions of Section 9.1 may be satisfied by delivery of
copies of the Company's Forms 10-Q and 10-K and the delivery of copies
34
of other public reports filed with the Securities and Exchange Commission under
the Exchange Act at the time of such filing.
(a) Commencing with the Company's 1998 fiscal year, as soon as available
and in any event within 90 days after the end of each fiscal year, a
copy of the annual audit report for such year for the Company and its
subsidiaries, including therein consolidated balance sheets of the
Company and its subsidiaries as of the end of such fiscal year and
consolidated statements of income and a consolidated statement of cash
flows of the Company and its subsidiaries for such fiscal year, in each
case accompanied by an unqualified opinion of the Company's independent
public accountants of nationally recognized standing. For the Company's
fiscal years 1996 and 1997, the Company will provide unaudited annual
financial statements. PictureTel may at its option review Company's
financial records relating to those fiscal years for which there are no
audited financial statements provided to PictureTel hereunder.
(b) As soon as available and in any event within 45 days after the end of
each of the first three quarters of each fiscal year, consolidated
balance sheets of the Company and its subsidiaries as of the end of
such quarter and consolidated statements of income and a consolidated
statement of cash flows of the Company and its subsidiaries for the
period commencing at the end of the previous fiscal quarter and ending
with the end of such fiscal quarter and consolidated statements of
income and a consolidated statement of cash flows of the Company and
its subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail and duly certified (subject to year-end audit adjustments) by
the chief financial officer of the Company as having been prepared in
accordance with generally accepted accounting principles consistently
applied.
(c) As soon as available PictureTel shall receive forecasts prepared by
management of the Company of balance sheets, income statements and cash
flow statements on a quarterly basis as presented to the Company's
Board of Directors.
9.2 Transactions with Affiliates.
(a) The Company shall not enter into or be a party to any transaction with
any Affiliate of the Company, except in the ordinary course of and
pursuant to the reasonable requirements of the Company's business and
upon fair and reasonable terms that are no less favorable to the
Company than would obtain in a comparable arm's length transaction with
a Person not an Affiliate of the Company.
35
(b) For purposes of this Section 9.2 the term "Affiliate" shall have the
meaning referred to in the Securities Act of 1933, as amended.
9.3 Reserved
9.4 Modifications of Charter and By-Laws. The Company shall not amend
or modify any provisions of its Articles of Incorporation or By-laws in any way
which would adversely affect the interests of the holders of the Warrants.
9.5 Liquidation, Dissolution. The Company shall not, and shall not
permit any subsidiary to, wind up, liquidate or dissolve its affairs.
10. Transfer. The Company hereby consents to each Holder's transfer of
this Warrant certificate and the Warrants evidenced hereby at any time or times
in whole or in part in accordance with the terms hereof, provided, however, that
the Company may withhold its consent to any transfer of any single transaction
whereby less than 10% of the Warrants then outstanding would be transferred. In
the event that any of the Holders do so transfer the Warrant, such Holder(s)
shall promptly thereafter notify the Company of the identities of the
transferee. The transferee of such Warrant(s) will be bound by and will receive
the benefits of this Warrant. Notwithstanding the foregoing, this Warrant and
the shares of Common Stock issued upon exercise hereof may not be transferred or
assigned without compliance with applicable federal and state securities laws by
the transferor and the transferee and in accordance with the legend appearing on
the face of this Warrant (including the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). Subject to the provisions of this Section 10, title
to this Warrant may be transferred in the same manner as a negotiable instrument
transferable by endorsement and delivery with signatures appropriately
guaranteed.
Signature Page Follows.
36
IN WITNESS WHEREOF, INTEGRATED PHYSICIAN NETWORKS, INC. has caused this
Warrant certificate to be signed by a duly authorized officer under its
corporate seal, and this Warrant certificate to be dated September 22, 1997.
INTEGRATED PHYSICIAN NETWORKS, INC.
By:______________________________
Title: ____________________________
AGREED AND ACCEPTED
UPON THE TERMS HEREOF:
PICTURETEL CORPORATION
By: __________________________
Title: _________________________
37
EXHIBIT E
INVESTOR RIGHTS AGREEMENT
38
EXHIBIT F
VOTING AGREEMENT
39
EXHIBIT G
CASH FLOW AGREEMENT
This CASH FLOW AGREEMENT ("Cash Flow Agreement") is entered into by
between and among INTEGRATED PHYSICIAN NETWORK, INC. ("IPNI") , a Delaware
corporation located at 0000 X. Xxxxxx Xxxxxx Xxxxx, Xxxxxxxxxx, XX 00000,
and ___________________________ ("Cash Flow Agent"), a _____________
corporation located at __________________ and PICTURETEL CORPORATION
("Supplier"), a Delaware corporation located at 000 Xxxxxxxxx Xxxxx,
Xxxxxxx, XX 00000.
Whereas, IPNI and PictureTel have entered into a Relationship Agreement,
as defined below (the "Relationship Agreement"), pursuant to which
PictureTel has agreed to supply IPNI with videoconferencing equipment
and/or services (the "Products") for rent to IPNI's customers, such supply
being directly by sale to IPNI or indirectly by sale to a Lessor and lease
by Lessor to IPNI, in each case for rent to IPNI's customers.
Whereas, IPNI, Lessor and Supplier desire to establish an Cash Flow
arrangement into which funds will be deposited by IPNI.
NOW THEREFORE, in consideration of the mutual representations, promises
and obligations set forth in this Cash Flow Agreement, it is agreed as
follows:
1. CASH FLOW AGENCY: IPNI, a Lessor and Supplier hereby appoint,
designate and constitute "_______________________" as Cash Flow
Agent. The Cash Flow Agent accepts the agency created under this
Cash Flow Agreement and agrees to perform the obligations
imposed. This Cash Flow Agreement is entered into pursuant to
Section III of a certain Relationship Agreement dated effective
September 22, 1997 between Supplier, Lessor and IPNI (the
"Relationship Agreement"), a copy of which is attached hereto.
Terms defined in the Relationship Agreement and not otherwise
defined herein are used herein with the meanings so defined.
2. THE CASH FLOW ACCOUNT: The Cash Flow Agent represents that it has
established and maintains a interest bearing Cash Flow account to be
entitled Cash Flow Account (the "Cash Flow Account") into which the
Cash Flow Agent shall deposit payments received from IPNI. The Cash
Flow Agent has sole power of disbursement or withdrawal with respect to
all such payments.
The Cash Flow Agent shall have no tax reporting duties with respect to
such funds other than form 1099.
3. SUBMISSION OF DOCUMENTS AND FUNDS:
(a) IPNI agrees to submit to the Cash Flow Agent funds as follows:
(i) $100,000 within ten (10) days of the execution, by both
parties, of the Relationship Agreement.
(ii) An additional $200,000 within ten (10) days of IPNI
obtaining venture capital funding of at least $1,000,000,
but in no event, later than the first day of the Rollout
Period.
(iii) Upon initiation of the Rollout Period, IPNI shall deposit
an additional $500,000 by making monthly payments
determined by dividing $500,000 by the requisite number of
months such that the by the end of month 15 from the start
of the Pilot Period the
40
Cash Flow account is not less than $800,000 in total.
(b) Notwithstanding the foregoing, IPNI may at any time fund the
escrow account to $500,000 in accordance with section VIII(4)(e)
in order to avoid the issuance of additional stock warrants.
(c) IPNI agrees and is obligated to replenish the Cash Flow Account
with regard to any disbursements made by the Cash Flow Agent to
Lessor or Supplier.
4. NOTICE TO INTEGRATOR AND SUPPLIER:
(a) The Cash Flow Agent will promptly notify IPNI, Lessor and
Supplier of its receipt of of funds from IPNI.
(b) After the Cash Flow Agent has disbursed funds to Lessor (or
Supplier) in accordance with this Cash Flow Agreement, the Cash
Flow Agent will notify the other parties of the disbursement of
such funds, including the applicable Lessor invoice Number(s) for
which payment is being disbursed, the amount of funds disbursed
and the party to whom disbursed.
5. DISBURSEMENT:
(a) If IPNI is more than 20 days past due in making a monthly lease
payment and upon request from the lessor, Cash Flow Agent shall
disburse the past due lease payment.
(b) Provided that future lease payments are lease payments
guaranteed by Supplier are less than $800,000 any funds
remaining in the Cash Flow Account, which are in excess of
any lease guarantees still outstanding, after all
disbursements owing to Lessor (or to Supplier) pursuant to
subparagraphs (a) above have been made, will then be
disbursed to IPNI provided that written notice to Supplier
and Lessor has been given and no written objection made
within five business days.
6. PLACE OF PAYMENT: The Cash Flow Agent will make all payments pursuant
to the terms of Section 5 to the following accounts or address:
TO SUPPLIER: TO IPNI:
Acct. No.: 540-97803 Acct. No.:
ABA No.: 011-000390 ABA No.:
Bank: Bank of Boston Bank:
Address: Address:
000 Xxxxxxx Xxxxxx
Xxxxxx, XX State
Telephone: 000-000-0000 Telephone:
Tax ID No.: 00-0000000 Tax ID No.:
41
TO LESSOR:
Acct. No.:
ABA No.:
Bank:
Address:
Telephone:
Tax ID No.:
7. SECURITY
7.1 Security. As security for the payment and performance, first,
of the obligations of IPNI to make lease payments to Lessor (and the
obligations of IPNI to reimburse Supplier for payments by Supplier
under Supplier's guaranty to Lessor of such payments) (all of such
obligations being defined as "Obligations"), IPNI hereby pledges to the
Cash Flow Agent for the benefit of the Lessor (and the Supplier , to
the extent of the guaranty) and creates a security interest in favor of
the Cash Flow Agent for the benefit of the Lessor (and the Supplier, to
the extent of the guaranty) in all of its right, title and interest in
and to (but none of its obligations or liabilities with respect to) the
items and types of present and future property described below in this
Section 7, whether now owed or hereafter acquired by IPNI, all of which
should be included in the term "Collateral Security".
7.2 Collateral Security.
7.2.1 Collateral Security. As collateral security for the
payment and performance in full of the Obligations described in
Section 7.1, IPNI hereby pledges (and collaterally grants and
assigns to the Cash Flow Agent for the benefit of Lessor and
Supplier to the extent of its guaranty), and creates a security
interest in favor of the Cash Flow Agent for the benefit of
Lessor and Supplier to the extent of its guarantee in, all of its
right, title and interest in and to (but none of its obligations
or liabilities with respect to) cash pledged and delivered to the
Cash Flow Agent pursuant to this Agreement (the "Cash"), all
certificates of deposit, accounts and other depositary accounts
purchased with the Cash, by the Cash Flow Agent, as set forth
below in Section 7.3, and in all proceeds, additions,
substitutions and accessions to and of the Cash and such
certificates of deposit (collectively the "Collateral Security").
The Collateral Security shall constitute part of the Security.
7.2.2 Perfection of Collateral Security. The Cash Flow
Agent hereby acknowledges that such items so received constitute
Collateral Security, which is part of the Security. Upon the Cash
Flow Agent's written request from time to time, IPNI will make,
execute and deliver all such instruments and documents, including
appropriate financing statements, transfer powers and notices,
and take all such action as the Cash Flow Agent may deem
reasonably necessary or advisable to carry out the intent and
purpose of this Agreement or for assuring and confirming to the
Cash Flow Agent, the Security, including the Collateral Security.
7.3 Collateral Account; Administration of Collateral Security.
7.3.1 Collateral Account. Unless otherwise instructed by
all of the parties to the Cash Flow Agreement, the Cash Flow
Agent shall directly, or through its agents, deposit
42
the Cash in an interest-bearing First Rate Account (the
"Account") with the Cash Flow Agent. The Account shall be in the
name of "______________ as Collateral Pledgee for Lessor and
Supplier Collateral Account", shall bear the account number:
_________ and shall be administered by the agents and employees
of the Cash Flow Agent.
7.3.2 Certificates of Deposit. Upon written instructions
from all of the parties to the Cash Flow Agreement, and subject
to the approval of the Cash Flow Agent, the Cash Flow Agent
shall, directly or through its agents, invest the Cash, any
proceeds from a Certificate of Deposit, or any portion thereof in
an Cash Flow Agent certificate of deposit, which shall have a
maturity of not less than three months (a "Certificate of
Deposit"). Upon the maturity of any Certificate of Deposit, the
Cash Flow Agent shall deposit the proceeds of such Certificate of
Deposit in the Cash Flow Account.
8. DUTIES OF THE CASH FLOW AGENT: The Cash Flow Agent will not be
bound in any way by the terms of any Contract between IPNI and
Customers or any agreement or contract between IPNI and the
Lessor, Supplier or any other party, whether or not the Cash Flow
Agent has knowledge thereof. The Cash Flow Agent's only duties
or responsibilities will be to hold and disburse the Contract
funds in the Cash Flow Account, in accordance with the terms of
this Cash Flow Agreement.
9. COMPENSATION: The Cash Flow Agent shall be compensated for its services
by IPNI at a rate of $_______ per year and $_____per ________
transaction which fees are to be paid by IPNI on a quarterly basis.
10. CASH FLOW AGENT MAY RELY ON INSTRUMENTS: INDEMNIFICATION, ETC.:
(a) The Cash Flow Agent assumes no liability or responsibility for
the form, sufficiency, accuracy, genuineness, falsification or
legal effect of any documents, notices or certifications
delivered pursuant to this Cash Flow Agreement. The Cash Flow
Agent will have no responsibility or liability to IPNI, Supplier,
and the Lessor, or their successors or assigns, for any action
taken by the Cash Flow Agent in good faith upon receipt of any
instrument or other document reasonably believed by the Cash Flow
Agent to be genuine and to be properly signed and the Cash Flow
Agent will be under no duty to investigate or question any such
instrument or other writing. The Cash Flow Agent will not be
responsible for any act done or omitted by it in good faith. The
Cash Flow Agent will not be bound by any notice of a claim or
demand with respect hereto unless received by it in writing.
(b) The Cash Flow Agent's obligations and duties in connection
herewith are confined to those specifically enumerated in this
Cash Flow Agreement and the Cash Flow Agent shall not be liable,
and shall be indemnified by IPNI for any loss, damages, claims,
liabilities, costs and expenses, including, without limitation,
reasonable attorney's fees suffered or which may occur by reason
of forgeries, false representations, the exercise of its
discretion in any particular manner or for any other reason,
except gross negligence or willful misconduct. In performing the
Cash Flow Agent's obligations and duties, described above, the
parties hereto understand and agree that the Cash Flow Agent will
not act as a fiduciary and will not be held responsible or liable
for investing the deposited money, and that all tax reporting
duties are the sole responsibility of IPNI or the Supplier.
(c) The Cash Flow Agent may rely upon the mutual agreement of both
IPNI and Supplier, and shall be indemnified by IPNI for any loss,
damages, claims, liabilities, costs and expenses, including,
without limitation, reasonable attorney's fees, suffered or
incurred by the Cash Flow Agent in acting or omitting to act,
pursuant to any instruction, judgment or order delivered to it in
accordance with the terms of this Cash Flow Agreement, which it
believes in good faith to be genuine. The Cash Flow Agent will
not be required to
43
determine either the authenticity of such instruction; judgment
or order; the validity or accuracy of any statement, assertion or
fact made or stated therein; the proprietary of the delivery
thereof or the capacity; or the identity or authorship of any
party purporting to sign or deliver such document, including
without limitation the authority of any individual purporting to
be an officer of IPNI or Supplier or a representative of either
such party.
(d) IPNI shall indemnify and hold the Cash Flow Agent harmless
from, and against, all claims, damages, losses, costs,
judgments, expenses, obligations, responsibilities and
liabilities of any kind or nature, including, without
limitation, attorneys fees, which in good faith, the Cash
Flow Agent may incur, sustain or suffer in connection with
either the performance of its obligations and duties
hereunder, including the protection of its rights and
obtaining such indemnification.
11. NOTICE: All notices or communications, required to be sent or made
hereunder, will be sent by first class mail, to the parties as follows:
TO CASH FLOW AGENT:
TO SUPPLIER: PictureTel Corporation
Attn: Xxxxxx Xxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Copy to:
General Counsel
PictureTel Corporation
000 Xxxxxxxxx Xxxx
Xxxxxxx, XX 00000
TO IPNI
TO LESSOR
12. TERMINATION/RE-DESIGNATION/DESIGNATION:
Termination:
(a) This Cash Flow Agreement may terminate upon the mutual written
agreement of both IPNI and Supplier. At such time as all Contract
funds have been disbursed from the Cash
44
Flow Account in accordance with the terms hereunder, this Cash
Flow Agreement will terminate and the duties and responsibilities
of the Cash Flow Agent will cease.
Upon Termination, the Cash Flow Agent will cease making any
disbursements from the Cash Flow Account and will provide the
Lessor and the Supplier with an accounting of the contract funds
in the Cash Flow Agent's possession of the termination date, and,
unless objection from the Supplier or Lessor is received within
ten (10) days, all remaining funds shall be disbursed to IPNI.
(b) Re-designation:
Supplier and Lessor shall jointly be permitted to select and/or
re-designate the Cash Flow Agent and either party shall notify
the Cash Flow Agent in writing by registered or certified mail of
their joint selection or re-designation of an Cash Flow Agent.
The Cash Flow Agent understands and agrees that Lessor and
Supplier shall jointly have the right to remove the Cash Flow
Agent at their discretion, upon prompt written notice by
registered or certified mail, and to jointly appoint a new Cash
Flow Agent. The Cash Flow Agent shall, not later than three (3)
days from the date of receipt of such notice, release possession
of the account moneys held in the Cash Flow Account, to the
successor Cash Flow Agent, designated by Lessor and Supplier in
such notice, and thereupon will have no further obligations
hereunder.
(c) Resignation/Consultation with Counsel:
The Cash Flow Agent may resign at any time upon the giving
of thirty (30) days prior written notice to Lessor and
Supplier of the Cash Flow Agent's intent to resign. If a
successor Cash Flow agent is not appointed in thirty (30)
days after notice of such intent to resign, the Cash Flow
Agent may petition any federal or state court of competent
jurisdiction to appoint a successor Cash Flow agent. The
Cash Flow Agent will be fully relieved of all future
obligations under this Cash Flow Agreement upon the
transfer of the shares to the successor Cash Flow agent
designated by Lessor and Supplier or otherwise appointed by
such court. The Cash Flow Agent will be reimbursed jointly
by Lessor and Supplier for any and all costs, expenses and
other moneys paid by the Cash Flow Agent in connection with
the filing of such petition.
The Cash Flow Agent may consult with competent counsel of its choice,
which may be Cash Flow Agent's in-house counsel and shall not be
responsible or liable for any action taken, or omitted to be taken, by
the Cash Flow Agent in accordance with the written advice of such
counsel.
13. REVIEW OF FINANCIAL RECORDS. Supplier retains the right to review the
financial records of IPNI at any time this Cash Flow Agreement is in
effect.
14. MODIFICATIONS: This Cash Flow Agreement may not be modified, waived,
amended, discharged or terminated, unless by written agreement by and
among Supplier, Lessor, IPNI and the Cash Flow Agent. No party shall be
bound by any modification, cancellation or resolution of the Cash Flow
Agreement, unless in writing and signed by all parties to this Cash
Flow Agreement.
15. DISPUTES:
(a) In the event of a dispute between any of Lessor, Supplier
and IPNI regarding any amount invoiced by Supplier or
Lessor or any funds in the Cash Flow Agreement or any other
matter arising out of or connected with this Cash Flow
Agreement, either Lessor, IPNI or Supplier may notify the
Cash Flow Agent of such dispute, setting forth such party's
good faith estimate of the amount involved. To the extent
funds are available in the Cash Flow Account, the Cash Flow
Agent will retain funds sufficient to cover the amount at
issue until notified in writing by Lessor, IPNI and
Supplier that the dispute has been resolved.
45
If the dispute is not settled within sixty (60) days from the
date on which the Cash Flow Agent is sent notice, Lessor, IPNI
and Supplier will submit the dispute to binding arbitration to be
conducted in Chicago, Illinois under the then current rules of
the American Arbitration Association, each party to bear its own
costs. The parties herein acknowledge and agree that the Cash
Flow Agent's duties hereunder shall be suspended, to the extent
of issues in the dispute pending resolution of the referenced
dispute.
(b) If any dispute arises between the Cash Flow Agent and
Lessor and/or Supplier concerning: (i) any interpretation
of this Cash Flow Agreement; or (ii) the rights and
obligations of, or the proprietary of an action
contemplated, taken or omitted by the Cash Flow Agent, the
Cash Flow Agent may, and shall immediately upon request
made by Lessor, IPNI or Supplier, deposit the Cash Flow
Account moneys referenced herein, in the registry of a
state or federal court of competent jurisdiction and, at
the equal expense of Lessor, IPNI and Supplier (or of such
lesser number of the parties as are involved in the
dispute), file any appropriate legal action to resolve an
disagreement between or among the parties thereto,
including without limitation any action in the nature or
interpleader.
(c) The decision of the arbitrators hereunder may be enforced by any
court of competent jurisdiction.
16. JURISDICTION: This Cash Flow Agreement will be governed by the laws of
The State of Massachusetts.
17. SURVIVAL: This Cash Flow Agreement shall inure to the benefit
of, and be binding upon, the parties hereto, and their respective
heirs, executors, personal representatives, successors and
assigns. Nothing in this Cash Flow Agreement, express or
implied, shall give to anyone or any entity other than the
parties hereto and their respective heirs, executors, personal
representatives, successors and assigns, any benefit, legal or
equitable right, or remedy or claims, under or in respect to this
Cash Flow Agreement to the Cash Flow created hereunder. Where
applicable, the rights of the Cash Flow Agent contained in this
Cash Flow Agreement shall survive the resignation or removal of
the Cash Flow Agent and the termination of the Cash Flow created
hereunder.
18. ENTIRE AGREEMENT: Supplier, Lessor, IPNI and the Cash Flow Agent agree
that this Cash Flow Agreement is the entire agreement among them and
supersedes any prior or contemporaneous written or oral communications,
including but not limited to any conflicting terms contained in any
other agreement or understanding between them relating to the subject
matter of the Cash Flow.
IN WITNESS WHEREOF, the Cash Flow Agent, Lessor and Supplier have executed
this Agreement.
FOR CASH FLOW AGENT: FOR SUPPLIER: FOR IPNI:
PICTURETEL CORPORATION INTEGRATED PHYSICIAN
NETWORK, INC..
By: By: By:
Name: Name: Name:
(Print or Type) (Print or Type) (Print or Type)
Title: Title: Title:
Date: Date: Date:
46
EXHIBIT H
TECHNOLOGY ESCROW AGREEMENT
PREFERRED ESCROW AGREEMENT
Account Number ______________________
This Agreement is effective __________________, 19_____ among Data Securities
International, Inc. ("DSI"), ______________________________________
("Depositor") and ______________________________________ ("Preferred
Beneficiary"), who collectively may be referred to in this Agreement as "the
parties."
A. Depositor and Preferred Beneficiary have entered or will enter into a
license agreement, development agreement, and/or other agreement regarding
certain proprietary technology of Depositor (referred to in this Agreement as
"the license agreement").
B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore, Preferred
Beneficiary needs access to the proprietary technology under certain limited
circumstances.
D. Depositor and Preferred Beneficiary desire to establish an Escrow with DSI
to provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the license
agreement pursuant to 00 Xxxxxx Xxxxxx [Bankruptcy] Code, Section 365(n).
ARTICLE 1 -- DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
parties, Depositor shall deliver to DSI the proprietary information and other
materials ("deposit materials") required to be deposited by the license
agreement or, if the license agreement does not identify the materials to be
deposited with DSI, then such materials will be identified on an Exhibit A. If
Exhibit A is applicable, it is to be prepared and signed by Depositor and
Preferred Beneficiary. DSI shall have no obligation with respect to the
preparation, signing or delivery of Exhibit A.
1.2 Identification of Tangible Media. Prior to the delivery of the deposit
materials to DSI, Depositor shall conspicuously label for identification each
document, magnetic tape, disk, or other tangible media upon which the deposit
materials are written or stored. Additionally, Depositor shall complete Exhibit
B to this Agreement by listing each such tangible media by the item label
description, the type of media and the quantity. The Exhibit B must be signed by
Depositor and delivered to DSI with the deposit materials. Unless and until
Depositor makes the initial deposit with DSI, DSI shall have no obligation with
respect to this Agreement, except the obligation to notify the parties regarding
the status of the deposit account as required in Section 2.2 below.
1.3 Deposit Inspection. When DSI receives the deposit materials and the Exhibit
B, DSI will conduct a deposit inspection by visually matching the labeling of
the tangible media containing the deposit materials to the item
47
descriptions and quantity listed on the Exhibit B. In addition to the deposit
inspection, Preferred Beneficiary may elect to cause a verification of the
deposit materials in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
determines that the labeling of the tangible media matches the item descriptions
and quantity on Exhibit B, DSI will date and sign the Exhibit B and mail a copy
thereof to Depositor and Preferred Beneficiary. If DSI determines that the
labeling does not match the item descriptions or quantity on the Exhibit B, DSI
will (a) note the discrepancies in writing on the Exhibit B; (b) date and sign
the Exhibit B with the exceptions noted; and (c) provide a copy of the Exhibit B
to Depositor and Preferred Beneficiary. DSI's acceptance of the deposit occurs
upon the signing of the Exhibit B by DSI. Delivery of the signed Exhibit B to
Preferred Beneficiary is Preferred Beneficiary's notice that the deposit
materials have been received and accepted by DSI.
1.5 Depositor's Representations. Depositor represents as follows:
a. Depositor lawfully possesses all of the deposit materials deposited
with DSI;
b. With respect to all of the deposit materials, Depositor has the right
and authority to grant to DSI and Preferred Beneficiary the rights as
provided in this Agreement;
c. The deposit materials are not subject to any lien or other
encumbrance;
d. The deposit materials consist of the proprietary information and
other materials identified either in the license agreement or Exhibit
A, as the case may be; and
e. The deposit materials are readable and useable in their current form
or, if the deposit materials are encrypted, the decryption tools and
decryption keys have also been deposited.
1.6 Verification. Preferred Beneficiary shall have the right, at Preferred
Beneficiary's expense, to cause a verification of any deposit materials. A
verification determines, in different levels of detail, the accuracy,
completeness, sufficiency and quality of the deposit materials. If a
verification is elected after the deposit materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.
1.7 Deposit Updates. Unless otherwise provided by the license agreement,
Depositor shall update the deposit materials within 60 days of each release of a
new version of the product which is subject to the license agreement. Such
updates will be added to the existing deposit. All deposit updates shall be
listed on a new Exhibit B and the new Exhibit B shall be signed by Depositor.
Each Exhibit B will be held and maintained separately within the Escrow account.
An independent record will be created which will document the activity for each
Exhibit B. The processing of all deposit updates shall be in accordance with
Sections 1.2 through 1.6 above. All references in this Agreement to the deposit
materials shall include the initial deposit materials and any updates.
1.8 Removal of Deposit Materials. The deposit materials may be removed and/or
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 Confidentiality. DSI shall maintain the deposit materials in a secure,
environmentally safe, locked facility which is accessible only to authorized
representatives of DSI. DSI shall have the obligation to reasonably protect the
confidentiality of the deposit materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the deposit materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the deposit materials, DSI will
immediately notify the parties to this Agreement. It shall be the responsibility
of Depositor and/or Preferred Beneficiary to challenge any such order; provided,
however, that DSI does not waive its
48
rights to present its position with respect to any such order. DSI will not be
required to disobey any court or other judicial tribunal order. (See Section 7.5
below for notices of requested orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 -- GRANT OF RIGHTS TO DSI
3.1 Title to Media. Depositor hereby transfers to DSI the title to the media
upon which the proprietary information and materials are written or stored.
However, this transfer does not include the ownership of the proprietary
information and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 Right to Make Copies. DSI shall have the right to make copies of the
depositmaterials as reasonably necessary to perform this Agreement. DSI shall
copy all copyright, nondisclosure, and other proprietary notices and titles
contained on the deposit materials onto any copies made by DSI. With all deposit
materials submitted to DSI, Depositor shall provide any and all instructions as
may be necessary to duplicate the deposit materials including but not limited to
the hardware and/or software needed.
3.3 Right to Transfer Upon Release. Depositor hereby grants to DSI the right to
transfer the deposit materials to Preferred Beneficiary upon any release of the
deposit materials for use by Preferred Beneficiary in accordance with Section
4.5. Except upon such a release or as otherwise provided in this Agreement, DSI
shall not transfer the deposit materials.
ARTICLE 4 -- RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release Conditions"
shall mean the following:
a. Depositor's failure to carry out obligations imposed on it pursuant
to the Relationship Agreement and its Exhibits; or
b. Depositor's failure to continue to do business in the ordinary
course.
4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a
Release Condition has occurred, Preferred Beneficiary may provide to DSI written
notice of the occurrence of the Release Condition and a request for the release
of the deposit materials. Upon receipt of such notice, DSI shall provide a copy
of the notice to Depositor, by certified mail, return receipt requested, or by
commercial express mail.
4.3 Contrary Instructions. From the date DSI mails the notice requesting
release of the deposit materials, Depositor shall have ten business days to
deliver to DSI Contrary Instructions. "Contrary Instructions" shall mean the
written representation by Depositor that a Release Condition has not occurred or
has been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to
Preferred Beneficiary by certified mail, return receipt requested, or by
commercial express mail. Additionally, DSI shall notify both Depositor and
Preferred Beneficiary that there is a dispute to be resolved pursuant to the
Dispute Resolution section (Section 7.3) of this Agreement. Subject to Section
5.2, DSI will continue to store the deposit materials without release pending
(a) joint instructions from Depositor and Preferred Beneficiary; (b) resolution
pursuant to the Dispute Resolution provisions; or (c) order of a court.
49
4.4 Release of Deposit. If DSI does not receive Contrary Instructions from the
Depositor, DSI is authorized to release the deposit materials to the Preferred
Beneficiary or, if more than one beneficiary is registered to the deposit, to
release a copy of the deposit materials to the Preferred Beneficiary. However,
DSI is entitled to receive any fees due DSI before making the release. This
Agreement will terminate upon the release of the deposit materials held by DSI.
4.5 Right to Use Following Release. Unless otherwise provided in the license
agreement, upon release of the deposit materials in accordance with this Article
4, Preferred Beneficiary shall have the right to use the deposit materials for
the sole purpose of continuing the benefits afforded to Preferred Beneficiary by
the license agreement. Preferred Beneficiary shall be obligated to maintain the
confidentiality of the released deposit materials.
ARTICLE 5 -- TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a period of
one year. Thereafter, this Agreement shall automatically renew from year-to-year
unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in writing
that the Agreement is terminated; or (b) the Agreement is terminated by DSI for
nonpayment in accordance with Section 5.2. If the deposit materials are subject
to another Escrow agreement with DSI, DSI reserves the right, after the initial
one year term, to adjust the anniversary date of this Agreement to match the
then prevailing anniversary date of such other Escrow arrangements.
5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
DSI, DSI shall provide written notice of delinquency to all parties to this
Agreement. Any party to this Agreement shall have the right to make the payment
to DSI to cure the default. If the past due payment is not received in full by
DSI within one month of the date of such notice, then DSI shall have the right
to terminate this Agreement at any time thereafter by sending written notice of
termination to all parties. DSI shall have no obligation to take any action
under this Agreement so long as any payment due to DSI remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon termination of this
Agreement by joint instruction of Depositor and Preferred Beneficiary, DSI shall
destroy, return, or otherwise deliver the deposit materials in accordance with
Depositor's instructions. Upon termination for nonpayment, DSI may, at its sole
discretion, destroy the deposit materials or return them to Depositor. DSI shall
have no obligation to return or destroy the deposit materials if the deposit
materials are subject to another Escrow agreement with DSI.
5.4 Survival of Terms Following Termination. Upon termination of this
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5);
b. The obligations of confidentiality with respect to the deposit
materials;
c. The rights granted in the sections entitled Right to Transfer Upon
Release (Section 3.3) and Right to Use Following Release (Section
4.5), if a release of the deposit materials has occurred prior to
termination;
d. The obligation to pay DSI any fees and expenses due;
e. The provisions of Article 7; and
f. Any provisions in this Agreement which specifically state they
survive the termination or expiration of this Agreement.
ARTICLE 6 -- DSI'S FEES
50
6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expenses
applicable to the services provided. DSI shall notify the party responsible for
payment of DSI's fees at least 90 days prior to any increase in fees. For any
service not listed on DSI's standard fee schedule, DSI will provide a quote
prior to rendering the service, if requested.
6.2 Payment Terms. DSI shall not be required to perform any service unless the
payment for such service and any outstanding balances owed to DSI are paid in
full. All other fees are due upon receipt of invoice. If invoiced fees are not
paid, DSI may terminate this Agreement in accordance with Section 5.2. Late fees
on past due amounts shall accrue at the rate of one and one-half percent per
month (18% per annum) from the date of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. DSI may act in reliance upon any
instruction,instrument, or signature reasonably believed by DSI to be genuine.
DSI may assume that any employee of a party to this Agreement who gives any
written notice, request, or instruction has the authority to do so. DSI shall
not be responsible for failure to act as a result of causes beyond the
reasonable control of DSI.
7.2 Indemnification. DSI shall be responsible to perform its obligations under
this Agreement and to act in a reasonable and prudent manner with regard to this
Escrow arrangement. Provided DSI has acted in the manner stated in the preceding
sentence, Depositor and Preferred Beneficiary each agree to indemnify, defend
and hold harmless DSI from any and all claims, actions, damages, arbitration
fees and expenses, costs, attorney's fees and other liabilities incurred by DSI
relating in any way to this Escrow arrangement.
7.3 Dispute Resolution. Any dispute relating to or arising from this Agreement
shall be resolved by arbitration under the Commercial Rules of the American
Arbitration Association. Unless otherwise agreed by Depositor and Preferred
Beneficiary, arbitration will take place in Boston, Massachusetts, U.S.A. Any
court having jurisdiction over the matter may enter judgment on the award of the
arbitrator(s). Service of a petition to confirm the arbitration award may be
made by First Class mail or by commercial express mail, to the attorney for the
party or, if unrepresented, to the party at the last known business address.
7.4 Controlling Law. This Agreement is to be governed and construed in
accordance with the laws of the State of California, without regard to its
conflict of law provisions.
7.5 Notice of Requested Order. If any party intends to obtain an order from the
arbitrator or any court of competent jurisdiction which may direct DSI to take,
or refrain from taking any action, that party shall:
a. Give DSI at least two business days' prior notice of the hearing;
b. Include in any such order that, as a precondition to DSI's
obligation, DSI be paid in full for any past due fees and be paid for
the reasonable value of the services to be rendered pursuant to such
order; and
c. Ensure that DSI not be required to deliver the original (as opposed
to a copy) of the deposit materials if DSI may need to retain the
original in its possession to fulfill any of its other duties.
ARTICLE 8 -- GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Exhibits described
herein, embodies the entire understanding among the parties with respect to its
subject matter and supersedes all previous communications, representations or
understandings, either oral or written. No amendment or modification of this
Agreement shall be valid or binding unless signed by all the parties hereto,
except that Exhibit A need not be signed by DSI, Exhibit B need not be signed by
Preferred Beneficiary and Exhibit C need not be signed.
51
8.2 Notices. All notices, invoices, payments, deposits and other documents and
communications shall be given to the parties at the addresses specified in the
attached Exhibit C. It shall be the responsibility of the parties to notify each
other as provided in this Section in the event of a change of address. The
parties shall have the right to rely on the last known address of the other
parties. Unless otherwise provided in this Agreement, all documents and
communications may be delivered by First Class mail.
8.3 Severability. In the event any provision of this Agreement is found to be
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.
8.4 Successors. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties. However, DSI shall have no
obligation in performing this Agreement to recognize any successor or assign of
Depositor or Preferred Beneficiary unless DSI receives clear, authoritative and
conclusive written evidence of the change of parties.
------------------------------------ ------------------------------------
Depositor Preferred Beneficiary
By: Integrated Physician Networks, By: PictureTel Corporation Inc.
Name:_______________________________ Name:_______________________________
Title:________________________________ Title:________________________________
Date:________________________________ Date:________________________________
Data Securities International, Inc.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
Date:_____________________________________
52
EXHIBIT A
MATERIALS TO BE DEPOSITED
Account Number ______________________
Depositor represents to Preferred Beneficiary that deposit materials delivered
to DSI shall consist of the following:
------------------------------------ ------------------------------------
Depositor Preferred Beneficiary
By: _________________________________ By: _________________________________
Name:_______________________________ Name:_______________________________
Title:________________________________ Title:________________________________
Date:________________________________ Date:________________________________
53
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name _______________________________________________________
Account Number _______________________________________________________________
PRODUCT DESCRIPTION:
Product Name______________________________Version_____________________________
Operating System______________________________________________________________
______________________________________________________________________________
Hardware Platform_____________________________________________________________
______________________________________________________________________________
DEPOSIT COPYING INFORMATION:
Hardware required:____________________________________________________________
______________________________________________________________________________
Software required:____________________________________________________________
______________________________________________________________________________
DEPOSIT MATERIAL DESCRIPTION:
Qty Media Type & Size Label Description of Each Separate Item
(excluding documentation)
______ Disk 3.5" or ____
______ DAT tape ____mm
______ CD-ROM
______ Data cartridge tape ____
______ TK 70 or ____ tape
______ Magnetic tape ____
______ Documentation
______ Other ______________________
I certify for Depositor that the above described DSI has inspected and accepted the above
deposit materials have been transmitted to DSI: materials (any exceptions are noted above):
Signature________________________ Signature___________________________
Print Name_______________________ Print Name__________________________
Date_____________________________ Date Accepted_______________________
Exhibit B#__________________________
Send materials to: DSI, 0000 Xxxxxxxxxx Xx. #000, Xxx Xxxxx, XX 00000
54
EXHIBIT C
DESIGNATED CONTACT
Account Number ______________________
Notices, deposit material returns and
communications to Depositor Invoices to Depositor should be
should be addressed to: addressed to:
Company Name:
Address:
Designated Contact: Contact:
Telephone:
Facsimile:
Notices and communications to Invoices to Preferred Beneficiary
Preferred Beneficiary should be should be addressed to:
addressed to:
Company Name:
Address:
Designated Contact: Contact:
Telephone:
Facsimile:
Requests from Depositor or Preferred Beneficiary to change the designated
contact should be given in writing by the designated contact or an authorized
employee of Depositor or Preferred Beneficiary.
Contracts, deposit materials and Invoice inquiries and fee remittances
notices to DSI should be addressed to: to DSI should be addressed to:
DSI DSI
Contract Administration Accounts Receivable
Xxxxx 000 Xxxxx 0000
0000 Xxxxxxxxxx Xxxxx 000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxx, XX 00000 Xxx Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000 (000) 000-0000
Facsimile: (000) 000-0000 (000) 000-0000
Date:
55
EXHIBIT I
CO-SALE AGREEMENT
