Application Services Agreement

EXHIBIT 10.8



Agreement No. 1



ARISTASOFT CORPORATION



APPLICATION SERVICES AGREEMENT



This APPLICATION SERVICES AGREEMENT ("Agreement") is made effective as of December 23rd, 1999 ("Effective Date"), by and between AristaSoft Corporation ("AristaSoft"), a California corporation, having its principal place of business at 1300 Charleston Road, Mountain View, CA 94043 and Turnstone Systems, Inc. ("Customer"), a Delaware corporation, having its principal place of business at 274 Ferguson Drive, Mountain View, CA 94043. The terms of this Agreement shall apply to all services provided by AristaSoft under this Agreement.



1. DEFINITIONS



1.1 "Charter Customer" means Customer is part of the initial set of AristaSoft customers. Charter Customers have access to special terms and conditions not available to all customers. The special terms include, but are not limited to, pricing and protection clause described in this Agreement and its attached Schedules.



1.2 "Derivative Works" means a modification of an existing work protected by a copyright in the name of AristaSoft or a licensor of the Software, but excluding any Customer Data (as defined hereinafter) or reports that are created by the Customer using the Software. For the purpose of this Agreement, Software shall be deemed to include any Derivative Works of the Software.



1.3 "Designates" means those Customers' customers, suppliers, vendors, benefits providers and other such external parties whose access to the Software is necessary to effect Customer's business purposes for which Software is provided.



1.4 "Documentation" means the guides and manuals for use of the Software. Documentation is provided in whatever form is generally available to users of the Software.



1.5 "Servers" means the host-processing computer hardware servers that are customized, installed, managed, maintained and supported by AristaSoft.



1.6 "Software" shall mean the computer software, as specified in Schedule A and including any other Server software used by AristaSoft to provide the Service, in object code form owned or distributed by AristaSoft for which Customer is granted access pursuant to this Agreement, and the media, Documentation, Upgrades and Updates thereof.



1.7 "Update" shall mean a subsequent release of the Software containing minor corrections, bug fixes, and other modifications that do not meet the definition of Upgrades and are generally made available for the Software without additional charge. Update shall not include any release, option or future product that AristaSoft provides and prices separately.



1.8 "Upgrade" shall mean modifications which provide new or improved features, functionality, or performance for the Software and are priced separately by the owner of the Software.



1.9 "User," as further specified in Schedule A shall mean an individual authorized by Customer to access the Software, regardless of whether the individual is actively using the Software at any given time.



2. ARISTASOFT APPLICATION SERVICES



2.1 AristaSoft offers an information processing service that is delivered over a private dedicated network and the Internet to its Customers, giving them access to the Software hosted on AristaSoft's Servers to support the customers' internal business information processing activities.



2.2 Subject to the terms and conditions of this Agreement, AristaSoft will provide to Customer the following services (collectively the "Services"):



i. AristaSoft will provide Customer with remote access to Servers controlled by AristaSoft on which AristaSoft hosts the Software which shall be specifically listed in Schedule A - Service Order Form.



ii. AristaSoft will provide Customer with certain hardware, software, and customer support







services for the Software (the "Support Services") which shall be specifically listed in Schedule B - Software Access and Support Services Schedule.



iii. AristaSoft will provide Customer with consulting services associated to the implementation of the Software and the on-going integration and operation of the Software with Customer's business processes which shall be provided in accordance with Schedule C - Consulting Services Schedule.



2.3 Access. AristaSoft will provide Customer with the ability to remotely access the Software hosted on the Servers, as of the date that installation and implementation is completed (the "Initial Access Date"). Such access shall be provided on a twenty-four hours-a-day, seven days-a-week basis, except during scheduled and unscheduled maintenance downtime. AristaSoft will use best efforts to perform any scheduled downtime outside of normal business hours. Notwithstanding the foregoing, Customer will be able to remotely access the Software for not less than 99% of the scheduled available time, with the exception of telecommunication company service problems, software defects, any problems caused by Customer, and any other forces beyond the immediate control of AristaSoft.



2.4 Network Equipment. AristaSoft will provide network hardware and software to be used on Customer's premises to access the Software hosted by AristaSoft (the "Equipment"). AristaSoft retains exclusive and complete ownership of the Equipment including all rights, title and interest thereto. Customer shall provide to AristaSoft reasonable electronic and physical access to the Equipment. Customer is responsible for the physical security of the Equipment and will carry both general liability and property casualty insurance policies in amounts sufficient for the replacement of the Equipment. Relocation of the Equipment outside the continental United States is prohibited. Relocation of the Equipment within the continental United States is permitted upon sixty (60) days prior written notice to AristaSoft. Customer will be required to provide space, power, and physical security on Customer's own file servers and personal computers to support various aspects of AristaSoft hosting. AristaSoft will determine the exact configuration and amount of space.



3. ACCESS TO SOFTWARE



3.1 Pursuant to the terms and conditions herein, including those in any attached Schedules, AristaSoft grants to Customer, its Users, and its Designates, a non-exclusive, non-transferable right to access and use the Software as described in Schedule A, in accordance with the associated Documentation, solely in connection with Customer's business operations. The foregoing license is only granted for the duration of the Term set forth in Schedule A.



3.2 Access exclusions. Except as expressly authorized herein, Customer shall not:



i. Authorize or permit Designates to access the Software other than in connection with Customer's internal data processing operations.



ii. Copy, except for backup purposes, assign, relicense or sublicense the Software or the use of the Software; or



iii. Reverse engineer, reverse compile or reverse assemble the Software.



3.3 AristaSoft or its licensors shall retain all title, copyright and other proprietary rights in the Software and Derivative Works. Customer does not acquire any implied rights to the Software or the Derivative Works.



3.4 Data and Documents Resulting from the Software. Customer shall be free to use any customer data, such as customer data in databases or reports, that are used in connection with, or created as a by-product of, the Software ("Customer Data"). Customer retains all right, title and interest to Customer Data except as to preexisting portions of the Software included in the Customer Data.



4. CUSTOMER'S OBLIGATIONS



4.1 Customer shall fulfill its obligations as specified in Schedules B and C or as may be supplemented or modified according to the guidelines set forth in Schedules A, B, or C and mutually agreed to by the parties hereto.



5. CONFIDENTIALITY



5.1 Confidential Information. Each party acknowledges that it will have access to certain confidential information of the other party ("Confidential Information") including the Software, the terms and pricing under this Agreement, and all materials or information clearly identified as confidential. Each party agrees that during the Term,







and for two (2) years after the expiration or termination of this Agreement, (a) it will hold the Confidential Information of the other party in confidence with at least the same level of care as it uses for its own confidential information of the same nature, but not less than a reasonable level of care; (b) it will not use it, for its own account or the account of any third party, except as expressly permitted by this Agreement, (c) unless required by law, it will not disclose it to any third party, except that party's attorneys, accountants and other advisors as reasonably necessary.



5.2 Confidentiality of Customer Data. AristaSoft will treat with utmost confidentiality the Customer Data and documents resulting from the Software, according to Section 3.4. The Customer Data is the sole and exclusive property of the Customer, and AristaSoft will not have any rights, title or interest to Customer Data. Should AristaSoft require access to the Customer Data in order to fulfill its own duties under this Agreement, Customer will permit such access, as reasonable under the circumstances, to specifically identified AristaSoft personnel. As a precondition for access by such personnel, each must first agree in writing to maintain the confidentiality of any Customer Data to which they are exposed no less stringently than as required by this Agreement. Should AristaSoft be required to give access to Customer Data to any of its subcontractors, vendors, Software licensors or any other third party in order to fulfill AristaSoft's own duties under this Agreement, Customer will permit such access, as reasonable under the circumstances, to specifically identified third parties. As a precondition for access by such third party, each must first agree in writing to maintain the confidentiality of any Customer Data to which they are exposed no less stringently than as required by this Agreement. AristaSoft will not use any information of the Customer in any manner except as necessary to fulfill its obligations under this Agreement.



5.3 Exceptions. Information will not be deemed Confidential Information hereunder if such information: (i) is known to the receiving party prior to receipt from the disclosing party directly or indirectly from a source other than one having an obligation of confidentiality to the disclosing party; (ii) becomes known (independently of disclosure by the disclosing party) to the receiving party directly or indirectly from a source other than one having an obligation of confidentiality to the disclosing party; (iii) becomes publicly known or otherwise ceases to be secret or confidential, except through a breach of this Agreement by the receiving party; or (iv) is independently developed by the receiving party.



6. FEES AND BILLING



6.1 Customer will pay all fees incurred pursuant to Schedules A and C.



6.2 Unless otherwise specified in either Schedules A or C, AristaSoft will invoice Customer monthly, one month in advance of actual service delivery. All invoices are due and payable in full within 30 days of date of invoice. Application access fees will begin to accrue on the Initial Access Date. Any increases in fees due to additional Users, or any other adjustments in fees, will be reflected in subsequent invoices. Any invoice not paid within 15 days of the due date will be deemed late, and will accrue late charges as of the date due. Late charges shall be at a rate of 1 1/2% per month, or the maximum rate allowed under law, whichever is lower, from the date such payment was due until the date paid.



6.3 Customer shall be responsible for all sales taxes, use taxes and any other similar taxes and charges of any kind imposed by any federal, state or local governmental entity on the transactions contemplated by this Agreement, excluding only U.S. taxes based solely upon AristaSoft's income. When AristaSoft has the legal obligation to pay or collect such taxes, the appropriate amount shall be invoiced to and paid by Customer unless Customer provides AristaSoft with a valid tax exemption certificate authorized by the appropriate taxing authority.



7. WARRANTIES AND REMEDIES



7.1 AristaSoft warrants that: (a) it has rights to the Software to the extent required to grant Customer the rights granted herein; (b) it otherwise has the full right and authority to enter into this Agreement; (c) it has full right and authority to make any representations in Schedules A or B referring to the licensor of the Software.



7.2 Software. AristaSoft warrants that during the term of this Agreement: (a) the Software will perform in accordance with the published product specifications in effect from time to time; (b) the Software will continue to function after January 1, 2000 in the same manner as they functioned on December 31, 1999; and (c) the Documentation produced by AristaSoft, including manuals and training materials, are accurate and correct in all material respects.







AristaSoft will correct any material nonconformance to the most current version of the Software at no additional cost to the Customer. Customer shall notify AristaSoft of such nonconformance in reasonably sufficient detail to allow AristaSoft, or its business partners, to duplicate the nonconformity.



7.3 PRODUCTS COVERED UNDER THIS AGREEMENT MAY CONTAIN OR BE DERIVED FROM SOFTWARE PROVIDED BY THIRD PARTIES UNDER LICENSE TO ARISTASOFT. Customer shall have the benefit of any warranties retaining thereto that are available to AristaSoft, provided however, that Customer's remedy for breach of any such warranty shall be solely against AristaSoft.



7.4 The warranties given herein only apply during the Term of this Agreement, as provided in Schedule A.



7.5 Services. AristaSoft represents and warrants that the Services shall be performed in a professional and workmanlike manner in accordance with applicable professional standards consistent with industry practices.



7.6 Limitation of Performance Warranties. These warranties are subject to Customer fulfilling its obligations under the terms of this Agreement as described in Schedules A and B. THESE WARRANTIES DO NOT APPLY TO ANY ARISTASOFT PRODUCTS OR SERVICES THAT EXPRESSLY EXCLUDE THIS WARRANTY (AS DESCRIBED IN THE SPECIFICATION SHEETS FOR SUCH PRODUCTS AND SERVICES).



7.7 Disclaimers. EXCEPT FOR THE EXPRESS WARRANTIES SET OUT IN THIS SECTION 7, THE SOFTWARE AND SERVICES ARE PROVIDED ON AN "AS IS" BASIS, AND CUSTOMER'S USE OF THE SOFTWARE AND SERVICES IS AT ITS OWN RISK. ARISTASOFT AND ITS LICENSORS DO NOT MAKE ANY OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE, AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE.



8. LIMITATIONS OF LIABILITY



8.1 In no event shall either party be liable for any consequential, exemplary, indirect, special or incidental damages, or damages for loss of profits, revenue, data or use, incurred by either party or any third party, whether in an action in contract or tort, even if the other party has been advised of the possibility of such damages.



8.2 Maximum Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT ARISTASOFT'S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO, OR IN CONNECTION WITH, THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY CUSTOMER TO ARISTASOFT HEREUNDER FOR THE [***] PERIOD, AND IF SUCH DAMAGES RESULT FROM CUSTOMER'S USE OF A SPECIFIC SERVICE, SUCH LIABILITY SHALL BE LIMITED TO FEES PAID FOR THE SERVICE GIVING RISE TO THE LIABILITY. CUSTOMER'S MAXIMUM AGGREGATE LIABILITY TO ARISTASOFT RELATED TO, OR IN CONNECTION WITH, THIS AGREEMENT SHALL BE LIMITED TO THE TOTAL AMOUNT PAID TO ARISTASOFT HEREUNDER FOR THE [***] PERIOD.



8.3 The provisions of this Agreement allocate the rights between Aristasoft and Customer. Aristasoft's pricing reflects this allocation of risk and the limitation of liability specified herein.



9. INDEMNIFICATION



9.1 Indemnification of Customer. AristaSoft will indemnify, defend and hold harmless Customer, its employees, officers, directors, and agents, from and against any and all costs, liabilities, losses, and expenses (including, but not limited to, reasonable attorneys' fees) (collectively, "Losses"): (i) resulting from any claim, suit, action, or proceeding (each, an "Action") brought against Customer alleging the infringement of any third party trade secret, U.S. copyright, or registered trademark resulting from the provision of the Services pursuant to this Agreement; (ii) any damage arising from the breach of AristaSoft's representations and warranties in this Agreement; (iii) any damage or destruction to the Customer Data caused in whole or in part by AristaSoft; or (iv) any other damage arising out of AristaSoft's acts or failure





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to act provided that: (1) Customer notifies AristaSoft in writing within thirty (30) days of receiving notice of such Action; (2) AristaSoft has sole control of the defense and all related settlement negotiations; and (3) Customer provides AristaSoft with the assistance, information and authority necessary to perform its obligations under this Section. AristaSoft shall reimburse Customer for reasonable out-of-pocket expenses incurred by Customer in providing such assistance. AristaSoft may not settle or compromise any claim in a manner which requires Customer to assume liability or pay money or which subjects Customer to injunctive relief without Customer's express written consent. AristaSoft shall have no liability for any claim of infringement based on use of a superseded or altered release of Software and Services if the infringement would have been avoided by the use of a current unaltered release of the Software and Services that AristaSoft provides to Customer.



9.2 If the Software is held, or is reasonably believed by AristaSoft, to infringe the intellectual property rights of a third party, AristaSoft shall have the option, at its expense, to (a) modify the Software to be noninfringing; (b) obtain for Customer a license to continue using the Software; or (c) terminate the license for the infringing Software.



9.3 Indemnification of AristaSoft. Customer will indemnify, defend and hold AristaSoft harmless from and against any and all Losses resulting from or arising out of any Action brought by a third party against AristaSoft alleging: (i) defamation, libel, slander, obscenity, pornography, or violation of the rights of privacy or publicity; (iii) spamming, or any other offensive, harassing or illegal conduct; (iv) any damage or destruction to the Customer Data or the equipment of AristaSoft caused in whole or in part by Customer or Customer's Designees; (v) any other damage arising from the breach of Customer's representation and warranties in this Agreement, or from Customer's acts or failure to act provided that (1) AristaSoft notifies Customer in writing within thirty (30) days of the claim; (2) Customer has sole control over the defenses and all related settlement negotiations; and (3) AristaSoft provides Customer with the assistance, information and authority necessary to perform its obligations under this Section 9.3. Customer shall reimburse AristaSoft's reasonable out-of-pocket expenses incurred in providing such assistance.



10. TERM AND TERMINATION



10.1 Term. This Agreement will be effective for three (3) years after the Effective Date (the "Initial Term"), unless otherwise specified for relevant services in Schedule A. This Agreement will automatically renew for additional terms of one (1) year unless otherwise specified in, or terminated pursuant to, the applicable Schedule A.



10.2 Direct License Conversion. At the end of the Initial Term, Customer may choose to directly license the Software from AristaSoft's licensor rather than renew this Agreement and applicable Schedules. In such case, Customer must provide AristaSoft with written notice of this choice not later than four (4) months prior to expiration of the Initial Term. AristaSoft shall provide Customer with consulting services, at a reasonable cost mutually agreed by both parties, sufficient to accomplish Customer's transition to a direct license of the Software, including operational start-up of the necessary hardware components.



10.3 Termination for Convenience. Customer may terminate this Agreement for convenience as specified for relevant services in Schedules A through C. All application access fees, if any, for the remaining period of the contract under this Agreement will be due and may be paid [***] payment in the same amount that would be due if this Agreement were not terminated. [***]. Notwithstanding the foregoing, Customer's payment obligations for [***] fees shall not include any [***] that otherwise would be due if this Agreement were not terminated. All other payment obligations for relevant services as specified in this Agreement will be due immediately.



10.4 Termination for Cause. Either party may terminate this Agreement if: (i) the other party breaches any material term or condition of this Agreement and fails to cure such breach within ninety (90) days after receipt of written notice of the same, except in the case of failure to pay fees, which must be cured within ten (10) days after receipt of written notice from AristaSoft; provided, however, that Customer [***], in which case no breach shall occur until [***]; (ii) the other party becomes the subject of a voluntary petition in bankruptcy or any voluntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors if





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such petition or proceeding is not dismissed within sixty (60) days of filing.



10.5 Termination for Failure to Meet Software Access Performance Standards. If AristaSoft fails to meet the Software Access Performance Standards described in Schedule B for any three (3) consecutive months or any four (4) months during a one (1) year period, Customer may terminate this Agreement and all attached Schedules pursuant to Section 10.4, or substitute for t ...