SOFTWARE PURCHASE AGREEMENT

 

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                                                                Exhibit 10.2

 

Vertical Networks, Inc.                                             8/24/2004

 

Confidential Materials omitted and filed separately with the Securities and

Exchange Commission. Asterisks denote omissions.

 

                           SOFTWARE PURCHASE AGREEMENT

 

          THIS Software Purchase Agreement (the "Agreement") dated as of August

20, 2004 ("Effective Date") is by and between Vertical Networks, Inc., a

corporation organized and existing under the laws of the State of California and

having its principal office at 1148 East Arques Avenue, Sunnyvale, CA 94086

(hereinafter referred to as "Licensor"), and CVS Pharmacy, Inc., a corporation

organized and existing under the laws of the State of Rhode Island and having

its principal place of business at One CVS Drive, Woonsocket, RI 02895

(hereinafter referred to as "CVS").

 

                                   WITNESSETH:

 

          WHEREAS, Licensor currently has the right and desires to license

INSTANTOFFICE VOICE SERVER SOFTWARE ("IOVS Software"), as defined below, to CVS,

such software to be embedded in, installed on, or used in conjunction with

equipment manufactured and/or sold by Licensor and purchased by CVS either

directly or from or through AT&T Solutions, Inc.; and

 

          WHEREAS, Licensor also desires to sell CVS rights to all enhancements,

modifications, upgrades and new releases ("Upgrades") to IOVS Software; and

 

          WHEREAS, CVS desires to purchase licenses to IOVS Software and rights

to Upgrades from Licensor;

 

          NOW, THEREFORE, in consideration of the promises and mutual covenants

contained herein, and other good and valuable consideration, the receipt and

sufficiency of which are hereby acknowledged, the parties wish to agree as

follows:

 

  I.    SCOPE OF THE AGREEMENT.

 

          a.    SOFTWARE LICENSE. CVS will purchase licenses to Licensor's IOVS

               Software. A standard list of components and a general description

               of IOVS Software is attached hereto as Exhibit C.

 

          b.    RIGHTS TO UPGRADES. CVS will have the right to purchase upgrades

               to the IOVS Software listed in Exhibit A to the Agreement

               (hereinafter, "Upgrades").

 

  II.   TERMS OF IOVS SOFTWARE PURCHASE.

 

          a.    COMMITMENT FOR PURCHASE. CVS commits to purchase a License for a

               Pilot implementation and a Site License for the network rollout

               of the IOVS Software from the Licensor, per the pricing set forth

               in Exhibit B and per the payment terms set forth in Section IV

               (d). The payment terms set out in Section IV (d) assume the

               successful completion of a pilot implementation of CVS's Rapid

                Prescription Refill Application project on or before December 31,

               2004. In the event, however, that the pilot implementation is not

               completed by this date, the quarterly payments for the Site

               License that are scheduled to commence in January 2005, will be

               deferred until such time as the pilot implementation has been

               successfully completed. At that time, all such deferred payments

               will become immediately due and payable. "Rapid Prescription

               Refill Application Project" means the implementation of the

               automated prescription refill application utilizing the

               InstantOffice Voice Services platform and a custom application

                developed by CVS utilizing VxML technology.

 

          b.    LICENSE. CVS's rights to, and use of, IOVS Software are governed

               solely by the terms of this Agreement, including the Software

               License Agreement for IOVS

 

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Vertical Networks, Inc.                                                 8/24/2004

 

               Software attached hereto as Exhibit D and any updates thereto

               agreed to in writing by the parties.

 

          c.    DELIVERY; NUMBER OF LICENSES. Licensor shall deliver one copy of

               the IOVS Software to CVS and hereby authorizes CVS to use such

               copy subject to the terms of the Pilot implementation and Site

               License indicated in Section II (a) of the Agreement and to the

               number and type of licenses purchased hereunder, as specified in

               Exhibit B to this Agreement.

 

          d.    WARRANTY OF SOFTWARE FUNCTION. For a period of ninety (90) days

               after the initial implementation at CVS of the "released version"

               of IOVS Software, Licensor warrants that the IOVS Software

               provided hereunder will function according to Licensor's

               specifications for such product (as set out in Exhibit C hereto),

               including the ability to support a number of InstantOffice

               systems that is equal to the number of CVS stores where such IOVS

               Software has been deployed, subject to the limits of this site

               license as set out in Section IV (b). If the IOVS Software fails

               to perform as warranted and Licensor is unable to resolve the

               problem within a forty five (45) day period, starting from the

               initial date of notice to Vertical's Level 3 technical assistance

               center, and such failure is confirmed pursuant to the arbitration

               provisions of Section VII of the Agreement, CVS's sole recourse

               will be for Licensor to refund the Purchase Price payments made

               to date, as identified in Section IV below associated with the

               initial purchase of the IOVS Software. Notwithstanding the

               foregoing, Licensor shall use reasonable commercial efforts to

               assist CVS in the successful implementation and deployment of

               CVS's Rapid Refill Application.

 

          e.    Warranty of Software Upgrades. For a period of ninety (90) days

               after the implementation at CVS of an "upgrade" of IOVS Software,

               Licensor warrants that the IOVS Software upgrade provided

               hereunder will function according to Licensor's specifications

               for such product (as set out in Exhibit C hereto), including the

               ability to support a number of InstantOffice systems that is

               equal to the number of CVS stores where such IOVS Software has

               been deployed, subject to the limits of this site license as set

               out in Section IV (b). If the IOVS Software upgrade fails to

               perform as warranted and Licensor is unable to resolve the

               problem within a forty five (45) day period, starting from the

               initial date of notice to Vertical's Level 3 technical assistance

               center, and such failure is confirmed pursuant to the arbitration

               provisions of Section VII of the Agreement, CVS's sole recourse

                will be for Licensor to refund the Software Subscription Services

               payments made to date, as identified in Section IV below

               associated with the OPTION TO PURCHASE RIGHTS TO IOVS SOFTWARE.

 

          f.    PROBLEM DIAGNOSIS AND REPAIR. Licensor agrees to assist CVS's

               Store Technical Services organization in diagnosing and repairing

               any defects in the IOVS Software that disrupts CVS's ability to

               perform its normal store business function and/or impacts CVS's

               employees ability to perform their work.

 

  III. TERMS OF RIGHTS TO UPGRADE PURCHASE

 

          a.    TERMS. Upgrades to the IOVS Software provided by Licensor to CVS

               pursuant to this Amendment are for use as provided herein and

               otherwise in accordance with the terms of the Agreement.

 

          b.    LICENSE. CVS's rights to, and use of, the Upgrades are governed

               by the Software License Agreement for IOVS Software attached

               hereto as Exhibit D and any updates thereto, rather than by the

               General Description attached as Exhibit C to the Agreement.

 

  IV.   FEES AND CHARGES

 

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Vertical Networks, Inc.                                                 8/24/2004

 

          a.    PURCHASE PRICE FOR IOVS SOFTWARE. For the purchase of a License

               for a Pilot implementation and a Site License for the network

               rollout on or before August 31, 2004 (as evidenced by a single

               irrevocable purchase order or similar commitment, in form and

               substance acceptable to Licensor), CVS shall pay Licensor the

               price for IOVS Software set forth in Exhibit B.

 

          b.    SITE LICENSE. The Site License for the network rollout shall give

               CVS the right to install IOVS Software in the lesser of (a) 6,500

               sites and (b) the total number of sites owned by CVS on the sixth

                (6th) anniversary of the Effective Date.

 

          c.    OPTION TO PURCHASE RIGHTS TO IOVS SOFTWARE UPGRADES. The right to

               receive Upgrades for the first year from the Effective Date is

               included in the initial purchase price of the Site License for

               IOVS Software. Following the first year, in the event that CVS

               wishes to exercise their option to purchase the rights to further

               future Upgrades, CVS shall pay Licensor an annual fee that shall

               be set at $[**] for the second year, regardless of the number

               of sites installed, and at $[**] for the third year.

               Thereafter, the annual software subscription service (SWS) fee

               shall not be increased by Licensor at more than [**] percent

               ([**]%) per year, subject to the same restrictions on the number

               of sites as set out in Site License above. Such fee shall give

               CVS the right to receive Upgrades to the IOVS Software listed

               in Exhibit A for all CVS sites where such IOVS Software is

               installed, up to the limits of this site license, as set out in

               Section IV (b). Licensor must receive irrevocable purchase orders

               from CVS in respect of the purchase of Upgrades on or before the

               date that the prior right to Upgrades expires. Payment will be

               subject to the terms of Section IV (d) below.

 

          d.    PAYMENT TERMS. Payment of all fees and other charges due

               hereunder is due forty-five (45) days from their respective

               invoice date. Based on the prices set out in Appendix B, an

               initial invoice for $[**] shall be issued on the Effective

               Date and invoices for the balance of the IOVS Software purchase

               price shall be issued in equal amounts over the six (6) quarters

               commencing on January 1, 2005, subject to the terms set forth in

                Section II (a).

 

  V.    LACK OF IMPLIED WARRANTY; LIMITATION OF LIABILITY

 

          a.    DISCLAIMER. LICENSOR SHALL USE REASONABLE COMMERCIAL EFFORTS TO

               PERFORM ALL SERVICES IN ACCORDANCE WITH GENERALLY ACCEPTED

                STANDARDS IN THE INDUSTRY. EXCEPT FOR THE WARRANTY IN THE

               PRECEDING SENTENCE AS WELL AS THE WARRANTY OF SOFTWARE FUNCTION

               AS DETAILED IN SECTION II (d), LICENSOR MAKES NO WARRANTIES,

               EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE PRODUCTS OR

               SERVICES PROVIDED HEREUNDER. LICENSOR DISCLAIMS ALL OTHER

               WARRANTIES, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF

               MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND

                NONINFRINGEMENT.

 

          b.    LIMITATION OF LIABILITY. LICENSOR'S LIABILITY ARISING OUT OF THIS

               AGREEMENT, SALE OF THE IOVS SOFTWARE, UPGRADES OR PROVISION OF

               SERVICES RELATED THERETOR SHALL BE LIMITED TO THE AMOUNT PAID BY

               CVS HEREUNDER. EXCEPT FOR BODILY INJURY OF A PERSON, IN NO EVENT

               SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER

               ENTITY FOR ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL OR INDIRECT

                DAMAGES, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY, WHETHER OR

               NOT LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

               THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF

               ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

 

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Vertical Networks, Inc.                                                 8/24/2004

 

  VI.   GENERAL

 

          a.    ASSIGNMENT. Neither party shall assign this Agreement without the

                prior written consent of the other party, which consent shall not

               be unreasonably withheld.

 

          b.    WAIVER. No waiver of any of the provisions of this Agreement or

               the failure to exercise any right herein shall be deemed nor

               shall constitute a waiver of any other provision, whether or not

               similar, nor shall a waiver be deemed a continuing waiver.

 

          c.    BINDING EFFECT. This Agreement shall be binding upon and shall

                inure to the benefit of the parties hereto as well as their

               respective successors, assigns and legal representatives, and

               likewise shall be binding upon the heirs, successors and assigns

               thereof. If any of the provisions of this Agreement are held to

               be invalid under any applicable statute or rule of law, they are,

               to that extent, deemed omitted, and the validity of the remaining

               provisions shall not be affected thereby. If any provision is

               held invalid or unenforceable with respect to particular

               circumstances, it shall, nevertheless remain in full force and

               effect in all other circumstances.

 

          d.    FORCE MAJEURE. Except for the obligation to make payments,

               neither party is responsible for failure to fulfill its

               obligations under this Agreement due to causes beyond its

               control, such as natural disaster, decrees of governmental bodies

               or communications failure, provided that the party invoking this

               provision gives notice to the other party and does everything

               possible to resume performance. If the period of non-performance

               exceeds thirty (30) days, the party whose ability to perform has

               not been so affected may terminate this Agreement by giving

               written notice. Delays during any delivery or warranty period

               shall automatically extend such period for a period equal to the

               force majeure duration.

 

          e.    RIGHT TO AUDIT. CVS, in its sole discretion, shall have the

               right, but not the obligation, to audit any and all business and

               operations practices and procedures of Licensor as they pertain

               to this Agreement, including, but not limited to, billing

               practices and procedures. CVS will also have the right to verify

               / audit that all service levels agreed to in this Agreement are

               being met via use of an outside audit company. CVS or its

               designated agent shall perform any such audits at mutually agreed

               to times during regular business hours. CVS shall provide prior

               reasonable notice of an audit to Licensor. Following such audit,

               CVS may provide a written report of its findings to Licensor,

               including a timetable for correction of any issues or problems

               discovered by the auditors. In the event Licensor fails to

               correct such issues or problems in a timely manner satisfactory

               to CVS, this Agreement may be terminated by CVS for cause in

               accordance with the termination provisions of the Agreement.

 

          f.    DISASTER RECOVERY/BUSINESS RESUMPTION. Licensor warrants that it

               will, within twelve (12) months of the date of this Agreement

               prepare a business resumption plan (the "plan") which thereafter

               will be updated and validated periodically, with a minimum twice

               per year. The following information must be supplied to CVS upon

               request: copy of the plan, including all updates; most recent

               call list; and any outside contracts required under the plan.

 

          g.    GOVERNING LAW. This Agreement is governed by the laws of the

               State of California and the United States and will be governed by

               and construed in accordance with the laws of the State of

               California.

 

          h.    ARBITRATION. Should any dispute occur between the Parties arising

               out of or related to this Agreement, the dispute will first be

               submitted to the level of management within each company with the

               authority to resolve the issue. If the dispute is not resolved by

               the respective management involvement, any controversy or claim

                between the

 

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Vertical Networks, Inc.                                                 8/24/2004

 

               Parties will be resolved by arbitration pursuant to this Section

               13.10 and the then-current Commercial Arbitration Rules (the

               "Rules") of the American Arbitration Association ("AAA") and the

               supervision of the AAA. The duty to arbitrate will extend to any

               employee, officer, shareholder, agent, or affiliate of a Party

               hereto making or defending a claim that would be subject to

               arbitration if brought by a Party hereto. If any part of this

               Section H is held to be unenforceable, it will be severed and

               will not affect either the duty to arbitrate hereunder or any

               other part of this Section H.

 

               The arbitration will be held in the United States headquarters'

               city of the Party not initiating the claim before a sole

               arbitrator knowledgeable in business information and electronic

               data processing. The arbitrator's award will be final and binding

               and may be entered in any court having jurisdiction thereof. The

               arbitrator will not have the power to award punitive or exemplary

               damages, or any damages excluded by, or in excess of, any damage

               limitations expressed in this Agreement. Issues of arbitrability

                will be determined in accordance solely with the federal

               substantive and procedural laws relating to arbitration; in all

               other respects, the arbitrator will be obligated to apply and

               follow the substantive law of the state or nation specified in

               this Agreement. Each Party will bear its own attorneys' fees

               associated with the arbitration and other costs and expenses of

               the arbitration will be borne as provided by