Amended And Restated International Distributor

Exhibit 10.16 AMENDED AND RESTATED INTERNATIONAL DISTRIBUTOR AGREEMENT This Amended and Restated International Distribution Agreement (" Agreement" ) is made and entered this 8th day of July, 2002 (" Effective Date" ) by and between Castelle, Inc., a California corporation having its principal place of business located at 855 Jarvis Drive, Suite 100,, Morgan Hill, California 95037, U.S.A. (hereinafter referred to as " Castelle" ), and AMS, Ltd., having its principal place of business located at Bournemouth, England (hereinafter referred to as " Distributor" ). Castelle and Distributor are collectively referred to below as the " parties" and individually as a " party" . WHEREAS, the parties have previously executed an International Distribution Agreement effective as of 24 April 2001 (the " Prior Agreement" ); and WHEREAS the parties now wish to modify and expand their relationship, and they have thus set forth the terms of their expanded relationship within this Agreement below, with the intent and desire that this Agreement shall replace and supercede the Prior Agreement; NOW THEREFORE, the parties agree as follows: 1. APPOINTMENT OF DISTRIBUTOR AND TERRITORY 1.1 Purpose . The purpose of this Agreement is to appoint a Distributor to promote the sale of Castelle' s Products set forth in Exhibit A in the Territory. 1.2 Appointment . Subject to the terms and conditions set forth herein, Castelle hereby appoints Distributor as Castelle' s non-exclusive, authorized distributor for the Products to Customers in the Territory during the term of this Agreement, and Distributor hereby accepts such appointment. " Customers" means both Resellers and End Users in the Territory. " Resellers" means independent companies or persons who have the competence, training and resources to distribute the Products, and who Distributor contracts with for the distribution of the Products to other Resellers or End Users. " End Users" means the ultimate customer that acquires the Products for ordinary business or personal use and not for further distribution or resale. 1.3 Territory. The Distributor' s Territory shall be as set forth within Exhibit B. 1.4 Territorial Responsibility . Distributor will pursue sales policies and procedures appropriate and sufficient to realize maximum sales potential for the Products in the Territory. Distributor will maintain sufficient inventory of the Products to provide competitive delivery schedules to Customers. 2. TERM OF AGREEMENT 2.1 Initial Term . This Agreement shall become effective on the Effective Date set forth above and shall continue for an initial term of one (1) year (" Initial Term" ) subject to the terms and conditions set forth herein. 2.2 Effective Date . The Effective Date of this Agreement shall be the date it is signed as accepted by a duly authorized officer of Castelle. 2.3 Renewal of Agreement . This Agreement shall thereafter be renewed for successive periods of one year (each a " Renewal Term" ), unless terminated by either party pursuant to the provisions of Section 15(" Termination" ) below, or by notice, in writing, addressed to the other party, no less than 3 months prior to the expiration of the term, and no more than six (6) months prior to the expiration of the Initial term or Renewal Term as the case may be.


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Exhibit 10.16 3. PRICING 3.1 Distributor' s Prices . Subject to adjustments described herein, Distributor' s prices for Products shall be based upon a percentage of the U.S. Suggested List Price attached hereto as Exhibit A. Castelle prices to Distributor shall not be greater than Castelle' s prices to any other U.K. Distributor for the term of this Agreement. All prices are stated in U.S. dollars, F.O.B. Castelle, Morgan Hill, California, U.S.A. 3.2 Minimum Purchase Commitment . The Minimum Purchase Commitment, set forth in Exhibit C, shall be the total purchase price, net of taxes, duties, transportation and other charges, which Distributor has committed to purchase in each Time Period and under the parameters as set forth and defined in Exhibit C of this Agreement. Castelle reserves the right, upon thirty (30) days prior written notice, based upon its review and valuation of the market, the Territory and the results achieved, to review and adjust the Minimum Purchase Commitment for the Time Period following the current fiscal quarter. In the event Distributor fails to meet the Minimum Purchase Commitment for any Time Period and/or the total annual commitment, Castelle may, at its sole option and without notice, either (i) upon thirty (30) days prior written notice, increase the base price to Distributor or (ii) terminate this Agreement. 3.3 Price Adjustments . Castelle may change its prices set forth on Exhibit A attached hereto at any time, provided that no such price increase shall be effective until thirty (30) days after notice by Castelle to Distributor of such change. Price decreases may be effective immediately on the date of notification by Castelle. Price increases will not be applied to Product that does not ship within the thirty (30) day notice period as a result of any delays caused by Castelle. In addition, Castelle reserves the right to adjust Distributor' s prices in the event that Distributor fails to meet the Minimum Purchase Commitments set forth in Exhibit C. All price adjustments shall apply to Products ordered, but not shipped, after the effective date of such change. 3.4 Price Protection . In the event Castelle should lower its Product prices to Distributor, Castelle will grant Distributor a price protection credit to be applied against future orders equal to Distributor' s net unit price difference between the higher and lower price on all new, unsold eligible Products in Distributor' s inventory that Castelle has shipped to Distributor within ninety (90) days before the effective date of the price reduction. 3.5 Product List Price in Distributor' s Territory . Castelle and Distributor agree that it is in both parties best interests that the End User prices for the Products quoted by the Distributor, or offered to or by Distributor' s Resellers, in the Territory be competitive to motivate and promote purchases by end users of Castelle Products. Castelle has provided Distributor with Castelle' s U.S. Suggested List Price for Castelle Products in Exhibit A. Distributor shall exercise its best efforts to quote and promote Castelle' s Suggested List Price in the currency of the Territory for sales to End Users. Distributor shall develop and set the prices to be offered for the Products to its Resellers in the Territory, and shall obtain Castelle' s review of such prices prior to implementation and roll-out. 4. ORDERS 4.1 Purchase Orders . Distributor shall purchase all Products hereunder by issuing written Purchase Orders to Castelle not less than thirty (30) days prior to Distributor' s requested ship date identifying the Products to be purchased, the quantity, price, total Purchase Order price, shipping instructions, requested ship dates and any other special information. Distributor may place additional interim Purchase Orders at any time and with no notice requirement as the market demand may from time to time require. Castelle will use its commercially reasonable best efforts to comply with Distributor' s Product shipment requirements for any orders submitted with short notice delivery requirements. 4.2 Acceptance of Purchase Orders . Castelle, at its place of business in the U.S.A., or at any other place Castelle may select, may, at Castelle' s option, accept or reject Distributor' s Purchase Order within ten (10) days of Castelle' s receipt thereof. Castelle intends to accept all Purchase Orders that are issued in


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Exhibit 10.16 conformance with the provisions of this Agreement. Acceptance of Purchase Orders shall be confirmed to Distributor by first class mail, telex or confirmed telefax. 4.3 Terms of Purchase Orders . Distributor' s Purchase Orders submitted to Castelle from time to time with respect to Products to be purchased hereunder shall be governed by the terms and conditions of this Agreement, and notwithstanding the content of Distributor' s Purchase Order, this Agreement shall take precedence over such Purchase Orders, and any conflicting, inconsistent, or additional terms of Distributor' s Purchase Order shall be null and void, and are hereby waived by Distributor. 4.4 Order Deferral, Cancellation and Modification . Distributor may, by prior written notice to Castelle, defer and/or cancel delivery of a Purchase Order once without penalty, provided such notice is received by Castelle not less than ten (10) business days prior to the scheduled ship date for order cancellation and five (5) business days prior to the scheduled ship date for order deferrals. Distributor may not cancel or defer orders placed for immediate shipment. 5. DISTRIBUTOR REPORTS, FORECASTS AND MINIMUM INVENTORY 5.1 Reports and Forecasts. Distributor shall submit to Castelle a three (3) month rolling forecast five (5) days before the end of each calendar month. In addition, Distributor shall within five (5) days after the end of each calendar month submit a written and electronic report to Castelle setting forth the previous month' s sales unit volume (" POS" data) and current inventory by Product model. POS data to be reported to Castelle on a monthly basis should include, at a minimum, " Product Number" , " Product Description" , " Serial Number" , " Quantity" , " Order Date" , " Name of Company Sold To" , " Country of Name of Company" , " Reseller/End User" . Service, software upgrades and support contracts should also be included in the POS report to include the above information as appropriate. Inventory data to be reported to Castelle on a monthly basis should include, at a minimum, " Product Number" , " Product Description" , " Serial Number" , " Quantity" , " Date Received" , " Evaluation or Not" . Failure to provide monthly sales unit volume and current inventory by Product model reports may forfeit the Distributor' s right to claim price protection credit (reference section 3.4). 5.2 Inventory . Distributor shall, at all times, maintain minimum inventory levels of each Castelle Product sold by Distributor, sufficient to satisfy Distributor' s and Customers' order demands, and shall use its best efforts to always have Castelle inventory on hand. Distributor shall maintain sufficient minimum inventory levels of each Castelle Product to satisfy the demands of the Territory. 6. PACKAGING, SHIPMENT, RISK OF LOSS AND ACCEPTANCE OF ORDERS 6.1 Packaging . All Products delivered pursuant to the terms of this Agreement shall be suitably packaged for shipment in Castelle' s standard shipping cartons, marked for shipment to Distributor' s address, and delivered to Distributor or its carrier agent. In the absence of shipping instructions from Distributor, Castelle shall ship via air freight and shall select the carrier. 6.2 Ship Dates . Shipping dates committed by Castelle require prompt receipt of all necessary documents from Distributor. Where existing priorities and schedules prevent strict compliance with requested ship dates, Purchase Orders will be scheduled as close as is practical to the requested ship date. 6.3 Shipment Terms . Shipments from Castelle shall be made Ex Works, Castelle' s manufacturing plant, freight, duties and taxes collect, to distributor' s address set forth on Distributor' s Purchase Orders. In no event shall Castelle have any liability in connection with shipment, nor shall the carrier be deemed to be an agent of Castelle. Castelle shall not be liable for damages or penalty for delay in delivery or for failure to give notice of any delay. 6.4 Title and Risk of Loss . Risk of loss with respect to Products and Software shall pass from Castelle to Distributor upon delivery. Delivery shall be deemed made upon transfer of possession to the initial


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Exhibit 10.16 common carrier or Distributor' s representative at Castelle' s manufacturing plant. Transfer of ownership and title to the Products and Software shall pass from Castelle to Distributor only after payment in full by Distributor for the Products and Software ordered by Distributor and shipped by Castelle. 6.5 Acceptance . Distributor shall inspect all Products promptly upon receipt thereof at the ship-to location and may reject any Product that is defective. Any Product not properly rejected by Distributor shall be deemed accepted. To reject a Product, Distributor shall notify Castelle of its rejection, by telefax, within ten (10) days of receipt of the shipment, and request a Return Material Authorization (" RMA" ) number. Distributor shall return the rejected Product(s), freight collect, in its original shipping carton with the RMA number displayed on the outside of the carton. Castelle may refuse to accept any Product that does not bear a valid RMA number on the carton. Rejected Product(s) must be shipped to arrive at Castelle no later than 60 days after the issuance of the RMA number; the RMA number will no longer be valid after that time. 7. PAYMENT 7.1 Products . Payment by Distributor for all Products hereunder shall be by Telephone Transfer (" TT" ) for payment in the United States to Castelle at a bank approved by Castelle. 7.2 Distributor Credit and Payment Terms . Distributor shall complete Castelle' s Credit Application and apply for credit. Payment terms shall be net thirty (30) days. In the event that Distributor' s account is past due, Castelle may and without notice, charge and distributor shall pay a finance charge equal to one and one-half percent (1bd%) per month, or the maximum amount allowed by law, whichever is less, upon the unpaid balance, until the date of payment, provided, however, that no such finance charge shall be assessed on any invoice disputed in good faith by Distributor and for which Distributor has notified Castelle by confirmed telefax within ten (10) days of receipt of invoice with a detailed explanation of the reason for the dispute. Distributor shall pay all of Castelle' s costs and expenses (including reasonable attorney' s fees) incurred in enforcing Castelle' s right under this Section 7. 7.3 Taxes and Duties . The prices stated are exclusive of Taxes and Duties. Any Taxes and Duties related to this Agreement shall be paid by distributor (other than a tax measured by Castelle' s net income) or in lieu thereof, Distributor shall provide an exemption certificate acceptable to the local taxing authorities. All Taxes and Duties shall be billed as a separate item on the invoice. 7.4 Withholding . In the event that any Government in the Territory shall require the withholding of any sums, however designated, which may be payable hereunder, there shall be added to amounts due the amount of such withholding, so that Castelle shall receive from Distributor the same and equal amount as it would have received without such withholding. No such withholding as described above shall become due as a result of actions taken by Castelle except as may be otherwise defined herein. 7.5 Currency . All prices and charges under this Agreement are stated and shall be paid in United States dollars. Distributor agrees to take all necessary actions required, including registration of this Agreement and application for permission to make payments to Castelle hereunder, with the appropriate government authorities of Distributor' s jurisdiction, or such other institution or official, and to take such other measures as may be necessary to comply with any government currency controls in effect in Distributor' s jurisdiction, as soon as reasonably practicable after execution of this Agreement. 8. LIMITED WARRANTY 8.1 Castelle Warranty . The Distributor shall provide and abide by Castelle' s warranty. Castelle warrants that it has the right and interest in the Products to make the sales and licenses contemplated herein. Castelle warrants the Products against defects in materials and/or workmanship for one (1) year from purchase by the end-user customer or fifteen (15) months from Castelle' s initial shipment to Distributor, whichever is less. This warranty is contingent upon proper use of a Product in the application for which


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Exhibit 10.16 it is intended and is voided if Products are modified without Castelle' s approval or are subjected to unusual physical or electrical stress. When a defective Product is returned, freight prepaid, validly to Castelle' s factory in Morgan Hill, California, U.S.A., during the warranty period, Castelle, at its sole option, shall repair or replace the defective Product at no charge. Castelle will furnish repair parts and replacement Products on an exchange basis. Such parts and replacement Products may be either reconditioned or new. After repair or replacement Castelle will return the Products, freight paid, promptly at its expense by a carrier or method of delivery of its choosing. CASTELLE DOES NOT WARRANT THAT THE PRODUCTS OR SPARE PARTS SHALL OPERATE UNINTERRUPTED OR WITHOUT ERROR. THE WARRANTY SHALL BE VOID ON PRODUCTS WHICH HAVE BEEN SUBJECTED TO ABUSE, MISUSE, ACCIDENT, ALTERATION, NEGLECT, UNAUTHORIZED REPAIR OR INSTALLATION. Castelle shall make the final determination as to the existence and cause of any alleged defect. Expendable items (such as lamps and fuses) are not warranted. 8.2 No Other Warranty . EXCEPT FOR THE LIMITED WARRANTY REFERENCED ABOVE, CASTELLE GRANTS NO OTHER WARRANTIES, EXPRESS OR IMPLIED, BY STATUTE OR OTHERWISE, REGARDING THE PRODUCTS, AND SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF FITNESS FOR ANY PURPOSE, QUALITY, MERCHANTABILITY, OR OTHERWISE. 9. CHANGES, IMPROVEMENTS AND DISCONTINUANCE 9.1 Changes and Improvements . During the term of this Agreement, Castelle agrees to inform Distributor on a timely basis of changes and improvements in the Products' performance, serviceability, uses and applications. Castelle reserves the right to make any changes to the Products which it deems appropriate. 9.2 Discontinued Product . If during the term of this Agreement, Castelle discontinues a Product(s), Castelle agrees to provide Distributor with sixty (60) days prior written notice of Product' s discontinuance. Distributor may place an order for such discontinued Product(s) during the notification period for delivery within six (6) months after the end of such notice period, but Castelle' s acceptance of such orders shall be on an " as available" basis. 10. STOCK ROTATION 10.1 At the beginning of each calendar quarter during the term of this Agreement, Distributor may return one (1) consolidated shipment of Products to Castelle, freight prepaid, for credit against future orders provided Distributor meets the following criteria: (i) the value of the returned Product(s) shall be no greater than the purchase value of the returned Product(s) based on Castelle' s then current Distributor Price List; (ii) all returned Products must be in their unopened, original packaging, be in new condition, be on Castelle' s currently available Product Price List and not have been abused or damaged; (iii) Distributor shall not return any Products for the same identical Product model; (iv) at the time of the return, Distributor must place an irrevocable Purchase Order with Castelle having a net value of not less than the value of the returned Product; (v) the total value of the returned Product shall not exceed 20% of the value of the previous quarter' s net shipments to the Distributor. Distributor shall request a Return Material Authorization (" RMA" ) number for the return of the Product(s). Distributor shall return the Product(s), in its original shipping carton with the RMA number displayed on the outside of the carton. Castelle may refuse to accept any Product that does not bear a valid RMA number on the carton. Product(s) must be shipped to arrive at Castelle no later than 60 days after the issuance of the RMA number; the RMA number will no longer be valid after that time.


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Exhibit 10.16 11. INTERNET WEB SITE AND PRODUCT DOCUMENTATION 11.1 Castelle Web Site . Castelle agrees to provide Distributor with a current copy and future updates of relevant portions of its Castelle U.S. web site to be replicated by Distributor in a format appropriate for the U.K. market. 11.2 Distributor Web Site . Distributor shall review and get approval from Castelle prior to making modifications to the Castelle U.S. web site for implementation in the U.K. market. Distributor web site may be listed as castelle.uk.co and have links to appropriate Castelle U.S. web pages such the technical support data base, product evaluation downloads, email newsletters, lead generation email blast tools, etc. Castelle also agrees that Distributor shall have access to the URL www.castelle.com/eu. 11.3 Distributor Web Site Statistics and Information . Distributor shall make available to Castelle information from its castelle.uk.co web site including page hits, leads generated and other information that may be deemed relevant. 11.4 Product Documentation . Castelle agrees to provide Distributor with a reasonable initial quantity of Castelle' s advertising and promotional materials and technical data related to the Products (" Product Documentation" ) at no charge. Distributor may purchase from Castelle any Product Documentation related to Castelle' s Products which it requires to promote such Products. 11.5 Localization and Distribution of Product Materials . Distributor shall use its best efforts to localize the Product Documentation for effective use within the various countries of the Territory. 12. TRAINING, SUPPORT AND SERVICES 12.1 Services by Distributor . Distributor shall train its Customers with respect to the Products sold. The service ...