Software License, Development and Services Agreement - Tumbleweed Software Corp. and United Parcel Service General Services Co.


           Confidential treatment has been requested with respect to certain
      information contained in this document.  Confidential portions have been
      omitted from the public filing and have been filed separately with the
      Securities and Exchange Commission.



                            SOFTWARE LICENSE, DEVELOPMENT

                                         AND

                                  SERVICES AGREEMENT

                                       BETWEEN

                           TUMBLEWEED SOFTWARE CORPORATION

                                         AND

                     UNITED PARCEL SERVICE GENERAL SERVICES, CO.


                             EFFECTIVE DECEMBER 19, 1997










                                  TABLE OF CONTENTS
                                      PAGE
                                                                          
1.   Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
     a.   "Affiliate". . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
     b.   "Application Program Interfaces" . . . . . . . . . . . . . . . . . .2
     c.   "Authorized Shipping Outlet" . . . . . . . . . . . . . . . . . . . .2
     d.   "Business Day" . . . . . . . . . . . . . . . . . . . . . . . . . . .2
     e.   "Client Software". . . . . . . . . . . . . . . . . . . . . . . . . .2
     f.   "Confidential Information" . . . . . . . . . . . . . . . . . . . . .3
     g.   "Critical Defect". . . . . . . . . . . . . . . . . . . . . . . . . .3
     h.   "Custom Client Software" . . . . . . . . . . . . . . . . . . . . . .3
     i.   "Custom Server Software" . . . . . . . . . . . . . . . . . . . . . .3
     j.   "Custom Software". . . . . . . . . . . . . . . . . . . . . . . . . .3
     k.   "Dedicated Support Personnel" or "DSP" . . . . . . . . . . . . . . .3
     l.   "Derivative Work". . . . . . . . . . . . . . . . . . . . . . . . . .3
     m.   "Detailed Design Specifications" . . . . . . . . . . . . . . . . . .4
     n.   "Documentation". . . . . . . . . . . . . . . . . . . . . . . . . . .4
     o.   "Enhancement". . . . . . . . . . . . . . . . . . . . . . . . . . . .4
     p.   "Functional Specifications". . . . . . . . . . . . . . . . . . . . .5
     q.   "Major Defect" . . . . . . . . . . . . . . . . . . . . . . . . . . .5
     r.   "Messaging Service". . . . . . . . . . . . . . . . . . . . . . . . .5
     s.   "Minor Defect" . . . . . . . . . . . . . . . . . . . . . . . . . . .5
     t.   "Person" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
     u.   "Phase I Software" . . . . . . . . . . . . . . . . . . . . . . . . .5
     v.   "Phase II Software". . . . . . . . . . . . . . . . . . . . . . . . .5
     w.   "Project". . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
     x.   "Server Software". . . . . . . . . . . . . . . . . . . . . . . . . .5
     y.   "Services" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
     z.   "Software" . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
     aa.  "Source Code". . . . . . . . . . . . . . . . . . . . . . . . . . . .6
     bb.  "Specifications" . . . . . . . . . . . . . . . . . . . . . . . . . .6
     cc.  "Standard Software". . . . . . . . . . . . . . . . . . . . . . . . .6
     dd.  "Supported Datacenter" . . . . . . . . . . . . . . . . . . . . . . .6
     ee.  "Trade Secret" . . . . . . . . . . . . . . . . . . . . . . . . . . .6
     ff.  [   *    ] . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
     gg.  "Tumbleweed Marks" . . . . . . . . . . . . . . . . . . . . . . . . .7
     hh.  "UPS Information". . . . . . . . . . . . . . . . . . . . . . . . . .7
     ii.  "UPS Inventions" . . . . . . . . . . . . . . . . . . . . . . . . . .7
     jj.  "Use". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7


---------------

         [*]Confidential treatment has been requested with respect to certain
     information contained in this document.  Confidential portions have been
     omitted from the public filing and have been filed separately with the
     Securities and Exchange Commission.


                                       i



2.   Software Development. . . . . . . . . . . . . . . . . . . . . . . . . . .8
     a.   Initial Phases . . . . . . . . . . . . . . . . . . . . . . . . . . .8
     b.   Subsequent Phases. . . . . . . . . . . . . . . . . . . . . . . . . .8
     c.   Functional Specifications for Subsequent Phases. . . . . . . . . . .8
     d.   Detailed Design Specifications . . . . . . . . . . . . . . . . . . .9
     e.   Acceptance of Specifications . . . . . . . . . . . . . . . . . . . .9
     f.   Programming and Tumbleweed Testing . . . . . . . . . . . . . . . . .9
     g.   On-Site Installation Support . . . . . . . . . . . . . . . . . . . .9
     h.   Designation of Project Coordinators. . . . . . . . . . . . . . . . .9
     i.   Progress Reports . . . . . . . . . . . . . . . . . . . . . . . . . 10
     j.   Extensions of Time . . . . . . . . . . . . . . . . . . . . . . . . 10
     k.   Termination of Development Services. . . . . . . . . . . . . . . . 12

3.   Modifications to Specifications . . . . . . . . . . . . . . . . . . . . 13
     a.   Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
     b.   Accepted Changes . . . . . . . . . . . . . . . . . . . . . . . . . 13

4.   Implementation and Acceptance . . . . . . . . . . . . . . . . . . . . . 13
     a.   Implementation Schedule. . . . . . . . . . . . . . . . . . . . . . 13
     b.   Acceptance Testing . . . . . . . . . . . . . . . . . . . . . . . . 13
     c.   Interim Testing. . . . . . . . . . . . . . . . . . . . . . . . . . 15

5.   Licenses and Proprietary Rights . . . . . . . . . . . . . . . . . . . . 15
     a.   Server Software. . . . . . . . . . . . . . . . . . . . . . . . . . 15
     b.   Client Software. . . . . . . . . . . . . . . . . . . . . . . . . . 16
     c.   Ownership of Custom Software . . . . . . . . . . . . . . . . . . . 17
          i.     UPS Inventions. . . . . . . . . . . . . . . . . . . . . . . 17
          ii.    UPS Information . . . . . . . . . . . . . . . . . . . . . . 17
     d.   Ownership of Customer Data . . . . . . . . . . . . . . . . . . . . 18
     e.   Tumbleweed Trademarks and Trade Names. . . . . . . . . . . . . . . 18
     f.   Developer Kits (and Localization Kits) . . . . . . . . . . . . . . 19
     g.   Interface Information. . . . . . . . . . . . . . . . . . . . . . . 20
     h.   Documentation Licences . . . . . . . . . . . . . . . . . . . . . . 21
     i.   UPS Intellectual Property. . . . . . . . . . . . . . . . . . . . . 21
     j.   No Other Licenses. . . . . . . . . . . . . . . . . . . . . . . . . 21

6.   Fees and Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
     a.   License Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
     b.   Royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
     c.   [      *      ]. . . . . . . . . . . . . . . . . . . . . . . . . . 23
     d.   Royalty Payments . . . . . . . . . . . . . . . . . . . . . . . . . 23
     e.   Royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
     f.   Demonstration and Internal Use . . . . . . . . . . . . . . . . . . 24

---------------

         [*]Confidential treatment has been requested with respect to certain
     information contained in this document.  Confidential portions have been
     omitted from the public filing and have been filed separately with the
     Securities and Exchange Commission.


                                        ii



     g.   Initial Phase Development Fee. . . . . . . . . . . . . . . . . . . 24
     h.   Development Fees for Subsequent Phases . . . . . . . . . . . . . . 24
     i.   Software Maintenance and Support Services. . . . . . . . . . . . . 24
     j.   Dedicated Support Personnel. . . . . . . . . . . . . . . . . . . . 25
     k.   Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
     l.   Commission for Referrals . . . . . . . . . . . . . . . . . . . . . 25
     m.   Sales and Use Taxes. . . . . . . . . . . . . . . . . . . . . . . . 26
     n.   Payment Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
     o.   Payment Discrepancies. . . . . . . . . . . . . . . . . . . . . . . 26
     p.   Time and Materials Fees. . . . . . . . . . . . . . . . . . . . . . 26

7.   Marketing, Distribution and Offering of Messaging Service . . . . . . . 27
     a.   Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 27
     b.   Distribution of Client Software. . . . . . . . . . . . . . . . . . 27
     c.   Trademark Usage. . . . . . . . . . . . . . . . . . . . . . . . . . 28
     d.   End User Support . . . . . . . . . . . . . . . . . . . . . . . . . 28
     e.   Marketing Flexibility. . . . . . . . . . . . . . . . . . . . . . . 28
     f.   Additional Marketing and Sales Support . . . . . . . . . . . . . . 28

8.   Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
     a.   Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
     b.   Compatibility. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
     c.   Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
     d.   Intentionally omitted. . . . . . . . . . . . . . . . . . . . . . . 29
     e.   Reliability. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
     f.   Intentionally omitted. . . . . . . . . . . . . . . . . . . . . . . 30
     g.   Locks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
     h.   Viruses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
     i.   Millennium . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
     j.   Warranty Disclaimer. . . . . . . . . . . . . . . . . . . . . . . . 31

9.   Software Support Services . . . . . . . . . . . . . . . . . . . . . . . 31
     a.   Notification of Defects. . . . . . . . . . . . . . . . . . . . . . 31
     b.   Enhancements . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
     c.   Second Level Support . . . . . . . . . . . . . . . . . . . . . . . 32
     d.   Supported Datacenter Support . . . . . . . . . . . . . . . . . . . 33
     e.   Remedial Efforts by Tumbleweed . . . . . . . . . . . . . . . . . . 33
     f.   Termination of Maintenance . . . . . . . . . . . . . . . . . . . . 36
     g.   Maintenance Exclusions . . . . . . . . . . . . . . . . . . . . . . 36

10.  Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . 36
     a.   Non-Disclosure of Trade Secrets and Confidential Information . . . 36
     b.   Return of Materials. . . . . . . . . . . . . . . . . . . . . . . . 37


                                         iii



     c.   Third Party Materials. . . . . . . . . . . . . . . . . . . . . . . 37
     d.   Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
     e.   Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

11.  Source Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
     a.   Right to Use Source Code . . . . . . . . . . . . . . . . . . . . . 38
     b.   Source Code Escrow . . . . . . . . . . . . . . . . . . . . . . . . 38
     c.   Verification of Escrow Deposit(s). . . . . . . . . . . . . . . . . 39
     d.   Ownership of Modifications Made by UPS . . . . . . . . . . . . . . 39
     e.   Source Code License. . . . . . . . . . . . . . . . . . . . . . . . 39
     f.   Discontinuance of Marketing. . . . . . . . . . . . . . . . . . . . 39

12.  Training Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

13.  Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 40
     a.   Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . 40
     b.   Changes in Law and Regulations . . . . . . . . . . . . . . . . . . 40

14.  Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
     a.   Proprietary Rights Indemnification . . . . . . . . . . . . . . . . 41
     b.   Tumbleweed's General Indemnity . . . . . . . . . . . . . . . . . . 41
     c.   UPS's General Indemnity. . . . . . . . . . . . . . . . . . . . . . 42
     d.   Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

15.  Co-Promotion and Co-Advertising . . . . . . . . . . . . . . . . . . . . 42

16.  Term and Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 43
     a.   Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
     b.   Termination by Tumbleweed; Escalation. . . . . . . . . . . . . . . 43
     c.   Consequences of Termination. . . . . . . . . . . . . . . . . . . . 44

17.  Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
     a.   Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
     b.   Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 45
     c.   Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
     d.   Relationship of the Parties. . . . . . . . . . . . . . . . . . . . 45
     e.   Amendments and Modifications . . . . . . . . . . . . . . . . . . . 45
     f.   Personal Pronouns; Headings. . . . . . . . . . . . . . . . . . . . 45
     g.   Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
     h.   No Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
     i.   No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
     j.   Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
     k.   Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 47


                                         iv



     l.   Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
     m.   Personnel Rules and Regulations. . . . . . . . . . . . . . . . . . 47
     n.   Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
     o.   Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . 48
     p.   No Consequential Damages . . . . . . . . . . . . . . . . . . . . . 48
v SOFTWARE LICENSE DEVELOPMENT AND SERVICES AGREEMENT THIS SOFTWARE LICENSE DEVELOPMENT AND SERVICES AGREEMENT (this "Agreement") is made and entered into effective as of the 19th day of December, 1997, by and between TUMBLEWEED SOFTWARE CORPORATION ("Tumbleweed"), a California corporation with offices at 2010 Broadway Street, Redwood City, California 94063, and UNITED PARCEL SERVICE GENERAL SERVICES CO. ("UPS"), a Delaware corporation with offices at 55 Glenlake Parkway, Atlanta, Georgia 30328, and which is authorized to conduct business in the State of New York. 1. DEFINITIONS. For purposes of this Agreement, the following terms have the meetings set forth below: a. "AFFILIATE" means, with respect to UPS, any entity which controls, is controlled by or is under common control with UPS, or any partnership, joint venture, consortium or other such entity in which UPS or its Affiliates have any material form of ownership. For purposes of this definition of Affiliate, "material form of ownership" shall be deemed to include partnerships, joint ventures, consortiums or other entities in which UPS or its Affiliates have at least a thirty percent (30%) ownership interest. The definition of Affiliate shall specifically exclude [ * ] and any successor entity thereof. b. "APPLICATION PROGRAM INTERFACES" OR "APIS" mean those portions of the Software required to enable external applications to interface into and with the Software. c. "AUTHORIZED SHIPPING OUTLET" means any third party authorized shipping outlet or UPS, or any third party which resells the UPS portfolio of services, which third party is designated by UPS to provide the Messaging Service. UPS shall provide written notice to Tumbleweed of the identity of each such Authorized Shipping Outlet from time to time. d. "BUSINESS DAY" means (i) with respect to any time period within which UPS must respond or otherwise perform some action, Monday through Friday, excluding any holidays recognized by UPS as company-wide holidays; and (ii) with respect to any time period within which Tumbleweed must respond or otherwise perform some action, Monday through Friday, excluding any holidays recognized by Tumbleweed as company-wide holidays. All time period references in this Agreement to "days" other than Business Days shall be deemed to refer to calendar days. --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 1 December 18, 1997 e. "CLIENT SOFTWARE" means the client-based portions of the pre-existing computer software programs described in Exhibit A hereto, together with the Documentation therefor and all Enhancements thereto. The Client Software furnished hereunder shall be in machine readable object code form. f. "CONFIDENTIAL INFORMATION" shall mean any data or information that is of value to and is not generally known to competitors of the party which owns and/or discloses such data or information, and that (i) in the case of data or information which has been reduced to tangible form, is marked clearly and conspicuously with a legend identifying such data or information as confidential or proprietary, or (ii) in the case of data or information communicated orally, is denominated as confidential or proprietary at the time of disclosure and confirmed in a writing by the disclosing party, summarizing such data or information within a reasonable period of time thereafter. Confidential Information also includes any information described in this subsection (f) which either party obtains from another party under an obligation of confidentiality. g. "CRITICAL DEFECT" means the failure of the Software to conform to the Detailed Design Specifications such that any critical function of the Messaging Service is inoperable and no immediate circumvention is possible. h. "CUSTOM CLIENT SOFTWARE" means the client-based portions of the computer software programs, and any and all portions thereof, developed by Tumbleweed pursuant to this Agreement. The Custom Client Software includes, without limitation, the client-based portions of the Phase I Software and the client-based portions of the Phase II Software, and the Documentation therefor and all Enhancements thereto. Unless otherwise specified in the applicable Specifications, all Custom Client Software furnished hereunder shall be in machine readable object code form. i. "CUSTOM SERVER SOFTWARE" means the server-based portions of the computer software programs, and any and all portions thereof, developed by Tumbleweed pursuant to this Agreement. The Custom Server Software includes, without limitation, the server-based portions of the Phase I Software and the server-based portions of the Phase II Software, and the Documentation therefor and all Enhancements thereto. Unless otherwise specified in the applicable Specifications, all Custom Server Software furnished hereunder shall be in machine readable object code form. j. "CUSTOM SOFTWARE" means the Custom Server Software and the Custom Client Software, collectively. k. "DEDICATED SUPPORT PERSONNEL" OR "DSP" means the person(s) who shall be (i) assigned to one (1) or more UPS data centers, (ii) dedicated to assisting UPS with the ongoing support and maintenance of the Software, including without limitation, assisting UPS in performance of its first level support obligations, and (iii) physically present at the relevant UPS UPS/Tumbleweed Confidential 2 December 18, 1997 data center(s) during UPS Business Hours and available by pager twenty-four (24) hours per day, seven (7) days per week. l. "DERIVATIVE WORK" means a work which is based upon one or more pre-existing works, such as a revision, enhancement, modification, translation, abridgement, condensation, expansion, or any other form in which such pre-existing work(s) may be recast, transformed, or adapted, and which, if prepared without authorization of the owner of the copyright in such pre-existing work(s), would constitute a copyright infringement. m. "DETAILED DESIGN SPECIFICATIONS" means the detailed description of the Software to be developed and/or provided by Tumbleweed during any Phase (as defined in Section 2 below) of the Project, together with the detailed description of all Enhancements to such Software (provided that in no event shall Tumbleweed be obligated to prepare Detailed Design Specifications for Enhancements that are not developed specifically for UPS). The Detailed Design Specifications shall include, at a minimum, system flow charts, program descriptions, file layouts, database structures, report layouts and screen layouts, interface requirements and layouts, conversion requirements and layouts, equipment requirements and acceptance test plans for the Software. For Enhancements that are not developed specifically for UPS, the specifications created by Tumbleweed for such Enhancements shall be treated as Detailed Design Specifications for such Enhancements. Following preparation and acceptance of the Detailed Design Specifications by UPS with respect to any Phase(s) subsequent to Phase II of the Project, as provided for in Section 2(d), such Detailed Design Specifications, with respect to such Phase(s), shall supercede and replace the Functional Specifications for such Phase(s). In the event that Detailed Design Specifications are not prepared with respect to any subsequent Phase(s) of the Project, the term "Detailed Design Specifications," as used herein with respect to such Phase(s), shall be deemed to mean the Functional Specifications for such Phase(s). The term "Detailed Design Specifications," as used herein with respect to Phases I and II of the Project, shall be deemed to refer solely to the Specifications for such Phases set forth in Exhibits A and B hereto. In the event that any Detailed Design Specifications hereunder include any disclaimer or other limitation of warranty or liability which conflicts with any of the terms and conditions of this Agreement, the terms and conditions of this Agreement shall control and such disclaimers and limitations shall not apply. n. "DOCUMENTATION" means all detailed user and operational manuals, instructions and other documentation for the Software, and all training manuals and routines designed to train users in the operation of the Software (including without limitation, the Custom Client Software and the Custom Server Software). All Documentation supplied on disks must be in machine readable form. o. "ENHANCEMENT" means any modifications, enhancements, revisions (including, without limitation, revisions to support new releases of any operating system), corrections, updates, upgrades, new versions, additions, extensions, interfaces, new platforms, and improvements of any type made by or on behalf of Tumbleweed to the Software (where UPS/Tumbleweed Confidential 3 December 18, 1997 Tumbleweed has the right to distribute such Enhancements) and which are made available by Tumbleweed to UPS or which are made generally commercially available by Tumbleweed to its customers. For the purposes of this Agreement, software shall be "generally commercially available" when Tumbleweed lists such software on a standard price sheet or makes such software available for fee-free download by customers or makes such software available to five (5) or more Persons for use on a revenue generating basis. p. "FUNCTIONAL SPECIFICATIONS" means the description of the Software to be developed and/or provided by Tumbleweed during any Phase (as defined in Section 2 below) of the Project. In the event that any Functional Specifications hereunder include any disclaimer or other limitation of warranty or liability which conflicts with any of the terms and conditions of this Agreement, the terms and conditions of this Agreement shall control and such disclaimers and limitations shall not apply. q. "MAJOR DEFECT" means the failure of the Software to conform to the Detailed Design Specifications such that either (i) and critical function of the Software is inoperable, but immediate circumvention is possible, or (ii) any major (non-critical) function of the Software is inoperable and no immediate circumvention is possible. r. "MESSAGING SERVICE" means the electronic delivery/messaging service to be offered by UPS and/or any of its Affiliates and Authorized Shipping Outlets, for the electronic delivery (and related transaction attestation services) of digital representations, including without limitation, textual messages, photographic images, audio, video, graphics, computer software and/or other information or content. s. "MINOR DEFECT" means any failure of the Software to conform to the Detailed Design Specifications in a manner not covered by Critical Defects and/or Major Defects. t. "PERSON" means any individual, or any corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, incorporated organization or other legal entity. u. "PHASE I SOFTWARE" means the computer software programs, and any and all portions thereof, developed by Tumbleweed pursuant to this Agreement, as described in the Phase I portion of the Specifications. Except to the extent specified in the applicable Specifications, the Phase I Software furnished hereunder shall be in machine readable object code form. v. "PHASE II SOFTWARE" means the computer software programs, and any and all portions thereof, developed by Tumbleweed pursuant to this Agreement, as described in the Phase II portion of the Specifications. Except to the extent specified in the applicable Specifications, the Phase II Software furnished hereunder shall be in machine readable object code form. UPS/Tumbleweed Confidential 4 December 18, 1997 w. "PROJECT" means the design, development, installation and testing of the Software. x. "SERVER SOFTWARE" means the server-based portions of the pre-existing computer software programs described in Exhibit A hereto, together with the documentation therefor and all Enhancements thereto. The Server Software furnished hereunder shall be in machine readable object code form. y. "SERVICES" means all work to be provided by Tumbleweed under the terms of this Agreement. z. "SOFTWARE" means the Standard Software and the Custom Software, collectively. aa. "SOURCE CODE" means a copy of the source code corresponding to the Software, including all updates to the source code of the Software delivered to the Escrow Agent from time to time pursuant to Section 11 of this Agreement, plus any pertinent associated commentary or explanation that may be necessary to render the source code understandable and usable by highly-trained computer programmers. The Source Code shall be in a format and on a storage medium suitable for loading onto customary development platforms, and shall not be encrypted. Insofar as the Software includes any computer software programs or other material which are proprietary to Persons other than Tumbleweed, and for which Tumbleweed has no right to deposit such source code, the Source Code shall not include the source code for any such third party computer software programs, but shall include object code modules therefor where Tumbleweed has the right to deposit such materials. Insofar as the "development environment" employed by Tumbleweed for the development, maintenance and implementation of the Source Code includes any device, programming, or documentation not commercially available to UPS on reasonable terms through readily known sources other than Tumbleweed, the Source Code shall include al such devices, programming, or documentation. The foregoing reference to such "development environment" is intended to apply to any programs, including compilers, "workbenches," tools, and higher-level (or "Proprietary") languages, used by Tumbleweed for the development, maintenance and implementation of the Source Code. The Source Code for the Standard Software shall be deemed to be Tumbleweed's Trade Secret. bb. "SPECIFICATIONS" mean the Functional Specifications and/or the Detailed Design Specifications, individually and collectively. cc. "STANDARD SOFTWARE" means the Server Software and the Client Software, collectively. UPS/Tumbleweed Confidential 5 December 18, 1997 dd. "SUPPORTED DATACENTER" means the UPS data processing facility(ies) that will use the Software to operate the Messaging Service, for which UPS has elected to secure the Services of the Dedicated Support Personnel. ee. "TRADE SECRET" shall mean any Confidential Information of the party which owns and/or discloses such information, including but not limited to technical or non-technical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers, which (i) derives economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other person who can obtain economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Trade Secrets specifically include any Confidential Information described in this subsection (ee) which either party obtains from another party under an obligation of confidentiality. ff. "TRANSACTION" means any [ * ] gg. "TUMBLEWEED MARKS" mean the "Tumbleweed" and "Tumbleweed Posta" trademarks, the 'Tumbleweed" logo, and any other trademark, trade name or service mark of Tumbleweed relating to products and/or services involving Internet or intranet delivery systems. hh. "UPS INFORMATION" means those portions of technical information, computer or other specifications, documentation, works of authorship and other creative works, written, oral or otherwise expressed, originated by Tumbleweed or any of its employees, consultants, representatives or agents (collectively, "Associates") in the course of performing work under this Agreement in connection with any component or portion of the Custom Software for which the applicable Specifications indicate that UPS will won such component or portion. ii. "UPS INVENTIONS" mean those specific inventions, discoveries and improvements which are conceived, first reduced to practice, made or developed in the course of work performed under this Agreement by Tumbleweed or by one or more of its Associates in connection with any component or portion of the Custom Software for which the applicable Specifications indicate that UPS will own such component or portion. jj. "USE" means access, configure reproduce, execute, display, perform, employ, load, process, run and/or utilize the Software and, upon release of the Source Code for --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 6 December 18, 1997 the software to UPS pursuant to Section 11 hereof and/or the Escrow Agreement attached hereto as Exhibit F, solely with respect to such Source Code, shall also include the right to Use such Source Code (solely as permitted by the Source Code License set forth in Section 11(e)). In the event that the applicable Specifications indicate that the Source Code for any portions of the Custom Software developed thereunder will be provided to UPS, the term "Use" shall also include the right to Use, modify, maintain, update and/or create Derivative Works of the Source Code for such Custom Software, so long as such Use does not disclose any Tumbleweed Trade Secrets. 2. SOFTWARE DEVELOPMENT. The Software will be developed and/or provided by Tumbleweed in two or more phases (the "Phases"), in accordance with the following terms and procedures: a. INITIAL PHASES. During Phase I of the Project, Tumbleweed will provide to UPS the development and implementation Services, and the associated Software deliverables, identified or described in the Specifications set forth in Exhibit A hereto, covering the Standard Software and the Phase I Software. During Phase II of the Project, Tumbleweed will provide to UPS the development and implementation Services, and the associated Software deliverables, identified or described in the Specifications set forth in Exhibit B hereto, covering the Phase II Software. b. SUBSEQUENT PHASES. Tumbleweed agrees to provide to UPS, as requested by UPS from time to time, software development and other Services in connection with subsequent Phases of this Agreement. Except as may be specifically agreed in writing by the parties, the terms and conditions of this Agreement shall apply to each such subsequent Phase which is proposed by UPS and accepted by Tumbleweed for the furnishing of such Services. Each such Phase will generally be defined by a set of mutually agreed Functional Specifications, which will contain a description of the tasks to be performed by Tumbleweed, the Software, Documentation and other deliverables to be provided by Tumbleweed, a schedule of performance and either a schedule of payments (for fixed price work) or a statement of Tumbleweed's then-current rates (for work performed on a time and materials basis). The Functional Specifications may include such additional terms and conditions as the parties may agree to include. c. FUNCTIONAL SPECIFICATIONS FOR SUBSEQUENT PHASES. Within ten (10) Business Days after the delivery of any Functional Specifications to Tumbleweed (unless a longer period is reasonably required), Tumbleweed shall either (i) accept the Functional Specifications in writing, or (ii) notify UPS if Tumbleweed objects to any part of the Functional Specifications, specifying with particularity and in good faith the changes which Tumbleweed desires in order to accept the Functional Specifications. The parties agree that Tumbleweed's concerns regarding ownership issues relating to any Custom Software to be developed pursuant to the proposed Functional Specifications shall constitute "good faith" concerns of the purposes of this Agreement. Within ten (10) Business Days of delivery of any objections to the Specifications, UPS and Tumbleweed shall confer in order to resolve Tumbleweed's objections, and UPS UPS/Tumbleweed Confidential 7 December 18, 1997 shall resubmit the Functional Specifications to Tumbleweed. Within ten (10) Business Days of the delivery of the revised Functional Specifications, Tumbleweed shall either (i) accept the revised Functional Specifications in writing, (ii) notify UPS if it continues to object to any part of the Functional Specifications, or (iii) decline to perform such Services relating to the proposed Functional Specifications. If the parties are unable to agree in writing to a set of Functional Specifications within thirty (30) days of the delivery of the revised Functional Specifications, then any proposed development Services relating to that particular Phase shall be deemed terminated. d. DETAILED DESIGN SPECIFICATIONS. With respect to each Phase beyond Phase II of the Project, Tumbleweed shall, with UPS's cooperation and at no additional charge to UPS, gather the necessary detailed requirements and develop and deliver to UPS a set of Detailed Design Specifications based upon the Functional Specifications which have been mutually agreed by the parties with respect to such Phase. The Detailed Design Specifications shall be delivered to UPS on or before the specified time set forth in the applicable Functional Specifications. Within ten (10) Business Days of the delivery of the Detailed Design Specifications to UPS, UPS shall notify Tumbleweed in writing of its acceptance or rejection of the Detailed Design Specifications. If the Detailed Design Specifications are rejected, UPS will specify the reasons for such rejection and Tumbleweed shall have ten (10) Business Days to revise and re-deliver amended Detailed Design Specifications to UPS for acceptance. Once accepted by UPS, the Detailed Design Specifications shall supersede the Functional Specifications for that portion of the Project to which the Detailed Design Specifications relate. If UPS rejects the amended Detailed Design Specifications, UPS's sole and exclusive remedy shall be to terminate the particular phase to which UPS's rejection relates. e. ACCEPTANCE OF SPECIFICATIONS. Upon acceptance of the Specifications for any Phase of the Project such Specifications shall be deemed to be a part of this Agreement, and Tumbleweed shall perform the Services described in such Specifications within the time frames, in the manner, and for the fees specified therein. f. PROGRAMMING AND TUMBLEWEED TESTING. After approval of the Detailed Design Specifications by UPS pursuant o Section 2(d) hereof, Tumbleweed shall commence program coding and testing to provide the necessary programming of the Software. Upon completion of the program coding and testing, Tumbleweed shall notify UPS in writing that such program coding and testing is completed and that, upon delivery of the Software to UPS (and installation thereof by Tumbleweed in the event such installation is at a Supported Datacenter) UPS may commence its acceptance testing. g. ON-SITE INSTALLATION SUPPORT. Upon delivery of the Phase II Software, and again upon completion of the upgrade of the Custom Software to reflect version 2.0 of the Standard Software, Tumbleweed shall identify and assign at least one (1) Tumbleweed professional services employee to be on site at UPS's facilities and devote all of his or her business time for a period of up to three (3) Business Days, the duration of which will be determined by UPS/Tumbleweed Confidential 8 December 18, 1997 UPS in its sole discretion, to support the installation of the Software. In the event that UPS requires additional support beyond such three (3) Business Day period, and such support is not required as a result of any problems with the Software encountered during such installation, UPS shall pay Tumbleweed for such additional on-site installation support Services on a time and materials basis. h. DESIGNATION OF PROJECT COORDINATORS. Tumbleweed shall designate Robert A. Krauss as its Project coordinator (the "Tumbleweed Project Coordinator"), who shall be assigned by Tumbleweed to supervise the Project, shall devote the necessary time to such endeavor, and shall serve as UPS's point of contact for the resolution of problems. The services of the Tumbleweed Project Coordinator shall be included in the fees provided for herein. UPS shall also designate an employee who shall be assigned by UPS to coordinate UPS's involvement in the Project (the "UPS Project Coordinator"), who shall serve as Tumbleweed's point of contact for the resolution of problems. The initial UPS Project Coordinator is Jack Carrig. Either party may change its Project Coordinator from time to time upon prior written notice to the other party; provided, however, that Tumbleweed shall not change the Tumbleweed Project Coordinator with respect to any Phase of the Project without the prior written consent of UPS, which consent shall not be unreasonably withheld, unless such individual shall have left the employment of Tumbleweed. i. PROGRESS REPORTS. The UPS Project Coordinator and Tumbleweed Project Coordinator, as well as appropriate additional personnel involved in the particular task underway, shall arrange a conference call (or schedule a meeting at a mutually agreed site) to discuss the progress made by Tumbleweed and UPS. Such call or meeting shall take place (i) each week during the period prior to the Commercial Availability Date, (ii) each month for the first year of the Agreement, and (iii) each quarter for the remainder of the Agreement. Each such conference call (or meeting) shall include a discussion by the parties of any actual or potential events which may give rise to delays in any schedules. In order to facilitate proper project management, UPS shall notify Tumbleweed promptly of any actual or potential events which may give rise to delays of any UPS deliverables or performance of UPS's obligations (or any obligations of UPS's Affiliates or Associates) under this Agreement, and Tumbleweed shall, for each such conference call (or meeting), provide UPS with a progress report specifying in detail: (A) Any critical issue encountered by Tumbleweed during the preceding period, including without limitation, the failure of either party to perform, any delay of either party in performing or the inadequate performance of either party, which may prevent or tend to prevent Tumbleweed from completing any task by the completion date; (B) An estimated length of any delay which may result from any critical issues; and (C) The cause of any critical issue and the specific steps taken or proposed to be taken by Tumbleweed or UPS, as appropriate, to remedy such critical issue. UPS/Tumbleweed Confidential 9 December 18, 1997 Each progress report provided by Tumbleweed pursuant to this Section 2(i) shall include recent critical issues discussed and dealt with, together with those not yet raised by Tumbleweed, during the preceding period. In any event, critical issues shall be discussed and dealt with as soon as possible after identification by Tumbleweed or UPS. In the event Tumbleweed fails to specify in writing any critical issue with respect to a given period in such manner and at such time as required pursuant to this Section 2(i), it shall be presumed that no critical issue arose during such period. j. EXTENSIONS OF TIME. If Tumbleweed is delayed at any time during Phase I or Phase II of the Project by the failure of UPS or its Affiliates or Associates to perform the obligations set forth in Exhibit D hereto, then upon notice from Tumbleweed to UPS, the affected Implementation Schedule date(s) will be reasonably extended to accommodate such delays, not to exceed a day-for-day extension for each such delay. If Tumbleweed is delayed at any time during Phase I or Phase II of the Project by supervening conditions beyond Tumbleweed's reasonable control, and arising without its fault or negligence after the execution hereof, including acts of God, civil commotion, strikes, labor disputes, or governmental demands or requirements, then upon notice from Tumbleweed to UPS, the affected Implementation Schedule date(s) will be reasonably extended to accommodate such delays, not to exceed a day-for-day extension for each such delay and all such extensions pursuant to this sentence not to exceed, in the aggregate, ten (10) days. If Tumbleweed will be delayed by more than ten (10) days, in the aggregate, during Phase I or Phase II of the Project by supervening conditions beyond Tumbleweed's reasonable control, including acts of God, civil commotion, strikes, labor disputes, or governmental demands or requirements, then Tumbleweed may request that the affected Implementation Schedule date(s) be further extended. UPS shall review such request with Tumbleweed at the appropriate conference call (or meeting) provided for in Section 2(i) above, and shall grant an extension of time commensurate with the circumstances, subject to the following conditions: (A) The cause of the delay (i) is beyond Tumbleweed's control and arises without its fault or negligence, and (ii) arises after the execution hereof; (B) Tumbleweed demonstrates that the affected Implementation Schedule date(s) will be actually and necessarily delayed; and (C) Tumbleweed provides a written request to UPS in conjunction with the next progress report provided for in Section 2(i) above after the time Tumbleweed knows of any cause or circumstances which might, under reasonable foreseeable circumstances, result in a delay. If Tumbleweed shall fail to give the foregoing notice, the right to request an extension for such cause shall be waived. If either party is delayed at any time in the performance of its obligations hereunder subsequent to Phase II of the Project by the failure of the other party to perform its obligations under this Agreement, or by supervening conditions beyond such party's reasonable UPS/Tumbleweed Confidential 10 December 18, 1997 control, including acts of God, civil commotion, strikes, labor disputes, or governmental demands or requirements, then the parties shall review the cause of such delay at the appropriate conference call (or meeting) provided for in Section 2(i) above, and an extension of time commensurate with the circumstances shall be provided, subject to the following conditions: (X) The cause of the delay is beyond the control of the party requesting the extension of time and arises without its fault or negligence; and (Y) The party requesting the extension demonstrates that the affected obligation(s) will be actually and necessarily delayed. Any delay by Tumbleweed in the performance of its obligations hereunder as a result of (i) any failure by UPS, its Affiliates or Associates to perform their express obligations under this Agreement; or (ii) by any supervening condition beyond Tumbleweed's reasonable control, and which failure or condition satisfies the applicable requirement(s) set forth above in this subsection (j) shall be deemed an "Excusable Delay," with respect to Tumbleweed's performance. Unless otherwise agreed by the parties, in the event of an Excusable Delay, Tumbleweed shall proceed continuously and diligently with the performance of the unaffected portions of its obligations under this Agreement. Notwithstanding the foregoing, UPS shall have the right to terminate this Agreement, or any Phase hereunder or Maintenance Services (hereinafter defined), as applicable, without liability to Tumbleweed (except as expressly set forth in this paragraph), in the event that any Excusable Delay materially adversely affects UPS's ability to offer the Messaging Service, whereupon (i) if such Excusable Delay occurs prior to acceptance of Phase II of the Project, (x) if such Excusable Delay is due to UPS's or its Affiliates' or Associates' failure to perform the obligations set forth in Exhibit D hereto, Tumbleweed shall be entitled to payment of the Initial Phase Development Fee described in Section 6(g) in full, but shall refund to UPS any License Fees previously paid pursuant to Section 6(a), in which case all licenses granted hereunder shall terminate, Section 15 terminates, and neither party shall have any further obligations to the other, and (y) if such Excusable Delay is not due to any such failure by UPS. Tumbleweed shall refund to UPS all amounts paid hereunder, in which case all licenses granted hereunder shall terminate, Section 15 terminates, and neither party shall have any further obligations to the other; (ii) in the event that such Excusable Delay occurs in connection with any subsequent Phase of the Project, and if such Excusable Delay is not due to any failure by UPS or its Affiliates or Associates to perform the obligations set forth in the relevant Specifications, Tumbleweed shall refund to UPS all amounts paid with respect to such Phase; and (iii) in the event that such Excusable Delay involves the provision of Maintenance Services by Tumbleweed, Tumbleweed shall refund to UPS a pro rata amount (calculated on a daily basis) of any annual Maintenance Service fees previously paid by UPS for the period in which such termination is effective. Such foregoing termination (and associated refund, if applicable) shall constitute UPS's sole and exclusive remedy for any Excusable Delay which materially adversely affects UPS's ability to offer the Messaging Service. UPS/Tumbleweed Confidential 11 December 18, 1997 k. TERMINATION OF DEVELOPMENT SERVICES. UPS may terminate the software development Services of Tumbleweed for any reason whatsoever during any Phase beyond Phase II of this Agreement by not less than [ * ] written notice to Tumbleweed specifying the date upon which termination becomes effective. In the event of any termination during any such Phase, Tumbleweed shall be entitled to payment, on a time and materials basis, for Services rendered by Tumbleweed prior to the effective date of termination; provided, however, that payments for such Phase shall not exceed the maximum amount specified in the applicable Specifications, and such payments shall constitute full settlement of any and all claims of Tumbleweed of every description arising out of or relating to the termination of such Phase, including without limitation, claims for lost profits. 3. MODIFICATIONS TO SPECIFICATIONS. a. PROCEDURES. No changes in or deviations from the Specifications shall be permitted unless the UPS Project Coordinator shall submit a written request to Tumbleweed setting forth with reasonable specificity any requested changes to such Specifications. Alternatively, a proposal for such a change or deviation submitted in writing by Tumbleweed and accepted in writing by UPS shall suffice for this purpose. As soon as reasonably practicable, but in no event later than ten (10) days following Tumbleweed's receipt of such request (unless a longer period is reasonably required), Tumbleweed shall provide UPS with written notice stating any anticipated change in price, schedule, or any other terms of the Specifications resulting from the requested changes. All changes and adjustments required by Tumbleweed in its notice shall be made by Tumbleweed in good faith. b. ACCEPTED CHANGES. Unless UPS accepts in writing any changes in price, schedule, or other terms set forth by Tumbleweed in its notice, the changes to the Specifications shall not be made. If such changes are accepted in writing by UPS, the changes to the Specifications shall be made, and UPS's written request for such changes and Tumbleweed's written acceptance thereof shall be deemed to constitute an amendment to the Specifications and shall be deemed to be a part of this Agreement. 4. IMPLEMENTATION AND ACCEPTANCE. a. IMPLEMENTATION SCHEDULE. The Implementation Schedule attached hereto as Exhibit D sets forth the timing requirements for the various stages of the completion of Phase I and Phase II of the Project. In the event any milestone set forth in the Implementation Schedule is not met due to any delay caused by Tumbleweed, in addition to damages for the delay (if applicable), as provided for in Section 4(b) below, Tumbleweed shall [ * ]. --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 12 December 18, 1997 Additionally, Tumbleweed shall use commercially reasonable efforts to ensure that such delay does not result in slippage of later milestones. b. ACCEPTANCE TESTING. Tumbleweed shall notify UPS in writing when Tumbleweed has completed the final version of the Software associated with any Phase of the Project such that it is ready for acceptance testing by UPS. UPS shall then promptly conduct the acceptance tests provided for in the Detailed Design Specifications (the "Acceptance Tests") to determine whether or not the Software, Documentation and other deliverables to be provided pursuant to such Phase materially conform to the Detailed Design Specifications (the "Acceptance Standard"). The Acceptance Tests shall be conducted over a period not to exceed thirty-five (35) days (the "Acceptance Test Period"), and may consist both of testing by UPS in a test environment and beta testing by allowing a limited number of customers to process Transactions using the Software in a product environment. In the event that the applicable Software, Documentation and other deliverables materially conform to the Acceptance Standard, UPS shall notify Tumbleweed in writing that same have passed the Acceptance Tests. In the event that UPS does not provide notice of rejection of any Phase of the Project by the end of the Acceptance Test Period for such Phase, such Phase shall be deemed accepted. In the event that the Acceptance Tests reveal that the applicable Software, Documentation and other deliverables, or any portion thereof, to be provided pursuant to any Phase do not materially conform to the Acceptance Standard, then UPS shall so notify Tumbleweed in writing specifying the nature of such failure, and Tumbleweed shall have [ * ] to correct such failure after which UPS shall have [ * ] to repeat the Acceptance Tests according to the above process; provided, however that UPS will use reasonable efforts to notify Tumbleweed as promptly as possible during the initial Acceptance Test Period when and as such failures are identified. If the Software, Documentation and other deliverables again fail to pass the Acceptance Tests, UPS's sole and exclusive remedy shall be to elect one of the following options in its sole discretion: (i) the parties may mutually agree that Tumbleweed shall have an additional [ * ] to correct the failure, in which case the above process (including, without limitation, these remedies) shall be repeated; (ii) UPS may accept the applicable Software, Documentation and other deliverables despite the nonconformities; (iii) the Acceptance Tests associated with either Phase I or Phase II of this Agreement, UPS may terminate the Agreement, whereupon UPS, at its sole option, may elect one (1) of the following remedies: (X) Tumbleweed will [ * ] which amount is agreed by the parties to be the deemed --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 13 December 18, 1997 amount of damages suffered by UPS as a result of such failure and not a penalty, in which event all licenses granted hereunder shall terminate, Section 15 shall terminate, and the provisions of Section 16(c) shall apply, or (Y) Section 15 shall continue to apply, in which event all licenses granted hereunder shall terminate and the provisions of Section 16(c) shall apply, but Tumbleweed shall not be obligated to pay to UPS the aforementioned [ * ] or (iv) for Acceptance Tests associated with Phases beyond Phase II of this Agreement, UPS may terminate such Phase(s), whereupon Tumbleweed will promptly refund to UPS all amounts paid to Tumbleweed in connection with such Phase(s). Notwithstanding anything to the contrary herein, acceptance of Phase II shall be deemed to have occurred when UPS begins using the Software associated with Phase II of the Project to support revenue generating customers of the Messaging Service. Such date shall be defined as the "Commercial Availability Date." In the event that Tumbleweed fails to deliver the Software, Documentation and other deliverables associated with Phase I or Phase II of this Agreement by the final delivery date set forth in the Implementation Schedule set forth in Exhibit D hereto, or in the event UPS elects option (i) above with respect to Acceptance Tests associated with either Phase I or Phase II of this Agreement, then as UPS's sole and exclusive remedy for any delay in passing the Acceptance Tests associated with Phase I and Phase II of this Agreement on or before the scheduled acceptance milestone date therefor (as specified in the Implementation Schedule), UPS may elect one of the following options in its sole discretion: (x) UPS may terminate this Agreement, whereupon UPS, at its sole option, may elect one (1) of the following remedies: (A) Tumbleweed [ * ], which amount is agreed by the parties to be the deemed amount of damages suffered by UPS as a result of such failure and not a penalty, in which event all licenses granted hereunder shall terminate, Section 15 shall terminate, and the provisions of Section 16(c) shall apply, or (B) Section 15 shall continue to apply, in which event all licenses granted hereunder shall terminate and the provisions of Section 16(c) shall apply, but Tumbleweed shall not be obligated to pay to UPS the aforementioned [ * ]; or (y) the parties may mutually agree that Tumbleweed shall continue performing, in which event UPS will be entitled to deduct from the amounts otherwise payable hereunder, as damages for any delay of up to thirty (30) days ("Delay Damages"), [ * ] for each calendar day that the Software, Documentation and other deliverables associated with Phase I or Phase II of this Agreement fail to pass the Acceptance Tests beyond the scheduled milestone date therefor (as specified in the Implementation Schedule). The foregoing Delay Damages are agreed by the parties to be the deemed amount of damages suffered by UPS as a result of any such delay of up to thirty (30) days and not a penalty. Any failure of the Software, Documentation and other deliverables --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 14 December 18, 1997 associated with Phase I or Phase II of this Agreement to pass the Acceptance Tests within thirty (30) days of the scheduled acceptance milestone date therefor (as specified in the Implementation Schedule, as such dates may be extended pursuant to Section 2(j)) shall constitute non-delivery by Tumbleweed. c. INTERIM TESTING. For efficiency and project management purposes, informal testing, in addition to the acceptance testing provided for herein, may be conducted at various times as the work progresses, at Tumbleweed's discretion, but neither such informal testing nor any provisional acceptance of the results thereof by UPS shall constitute acceptance of any aspect of the Software by UPS or relieve Tumbleweed of the responsibility to complete successful acceptance tests on the Software, as a whole, as a precondition to its entitlement to certain payments under this Agreement. 5. LICENSES AND PROPRIETARY RIGHTS. a. SERVER SOFTWARE. Tumbleweed hereby grants to UPS a non-exclusive, worldwide, royalty-bearing, perpetual (subject to termination pursuant to the provisions hereof) license (the "License"): (i) to Use [ * ] copies of the Server Software and Custom Server Software to provide the Messaging Service, and shall include the right to operate the Server Software and Custom Server Software on [ * ] processors and [ * ] data center locations [ * ]; and (ii) to reproduce the Server Software and Custom Server Software, and to distribute and sublicense same, with equivalent rights to those enumerated in (i) to (x) any one or more of UPS's Affiliates and/or Authorized Shipping Outlets, and (y) to any third party which shall have been approved in writing by Tumbleweed in advance, which approval shall not be unreasonably withheld, conditioned or delayed, where such third party is one to which UPS outsources all or any portion of the responsibility for operating the Messaging Service (collectively, "Server Sublicensees"). All sublicenses granted by UPS under this Section 5(a) shall include the minimum terms and conditions which are set out in Exhibit I hereto. Upon request by UPS, Tumbleweed shall offer to provide maintenance and support services to the Server Sublicensees on commercially reasonable terms and conditions (including price). UPS shall not, nor shall it authorize any third party to, decompile, reverse engineer or disassemble the Server Software and/or Custom Server Software. UPS shall not remove, modify or obscure any proprietary rights notices in the Server Software and/or Custom Server Software, or any logos or trademarks displayed in such Software, as long as no such notices are visually perceptible to end user customers of UPS and its Server Sublicensees under this Section 5(a), except to the extent expressly provided for in Section 7(c) hereof. b. CLIENT SOFTWARE. In addition to the rights and licenses provided for in Section 5(a) above, the License shall also include a License to Use and to distribute and sublicense, either on a standalone basis or bundled with UPS's products or services, and to provide services based upon, the Client Software and Custom Client Software to any end users. Such License includes the right to grant perpetual licenses to Use, sublicense and distribute copies of the Client Software and Custom Client Software for an end user's use and permits UPS --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 15 December 18, 1997 to privately label the Client Software and Custom Client Software under UPS's name and trademarks. Distribution of the Client Software and Custom Client Software may be made by any means selected by UPS, including without limitation, by making the Client Software and Custom Client Software available for download from one or more FTP sites on the Internet, and by utilizing Affiliates, Authorized Shipping Outlets, distributors, dealers, VARs, resellers, subsidiaries or other third parties. To facilitate such distribution, the License shall include the right for UPS to grant sublicenses to such Affiliates, Authorized Shipping Outlets, distributors, dealers, VARs, resellers, subsidiaries and third parties to Use the Client Software and Custom Client Software for demonstration purposes. UPS shall license the Client Software and Custom Client Software to end users in any manner which is commercially acceptable for products distributed over or for use in connection with the Internet, including without limitation, by written license agreements, which may be either signed by UPS and the end user or included in the package containing the product, or by the inclusion of license terms within copies of the Client Software and/or Custom Client Software whereby the end user signifies his or her acceptance by "clicking" on an "accept" button or performing some other action; PROVIDED, HOWEVER, that each end user must sign a license agreement, open a package containing the Client Software and/or Custom Client Software, "click" on an "accept" button or perform some other action, at a minimum, designed to signify its acceptance of the license terms and conditions with respect to such Software which are set out in Exhibit E hereto. The parties acknowledge that in the event future versions of the Client Software or Custom Client Software incorporate additional software (which may be royalty-bearing or subject to other limitations on use or distribution), or otherwise requires modification or supplementation of the terms set forth in Exhibit E in order to reflect the nature of such versions, the parties will mutually agree on any required amendments to Exhibit E. Tumbleweed acknowledges that UPS is not guarantying the enforceability of such terms and conditions against end users nor that the methods of purported acceptance described above shall ultimately be found to constitute acceptance of such terms and conditions. UPS shall not, nor shall it authorize any third party to, decompile, reverse engineer or disassemble the Client Software and/or Custom Client Software. c. OWNERSHIP OF CUSTOM SOFTWARE. Unless otherwise stated in the applicable Specifications, as between UPS and Tumbleweed, Tumbleweed shall own all right, title and interest in and to all developments made during the course of performing any work under this Agreement and UPS shall enjoy those licenses provided for in this Agreement with respect to such developments. If the parties mutually agree that UPS shall own one or more components of the Custom Software produced during the course of Tumbleweed's performance of a Phase, then, with respect to such components (and not with respect to any other component), the following terms apply: i. UPS INVENTIONS. Tumbleweed assigns and agrees to assign to UPS all of Tumbleweed's and its Associates' entire right, title and interest in and to the UPS Inventions, and any patents that may be granted thereon in any country of the world. Tumbleweed shall promptly share with UPS all information relating to such UPS inventions. Tumbleweed also agrees to UPS/Tumbleweed Confidential 16 December 18, 1997 acquire from its Associates who perform work hereunder, such assignments, rights and covenants as to assure that UPS shall receive the rights provided for in this Section 5(c)(i). Tumbleweed agrees that upon UPS's request it will promptly have its Associates sign all papers and perform all acts which may be reasonably requested by UPS to enable UPS at its expense to file and prosecute applications for patents on such UPS Inventions, and to maintain patents granted thereon, provided that UPS shall compensate Tumbleweed for the costs incurred by Tumbleweed that are associated with such activities. ii. UPS INFORMATION. Tumbleweed agrees to disclose and promptly furnish to UPS any and all UPS Information originated by Tumbleweed or any of its Associated hereunder. UPS shall own all right, title and interest in and to the UPS Information created by Tumbleweed hereunder, including all copyrights and proprietary rights therein. Tumbleweed expressly acknowledges that the parties have agreed that all aspects of the UPS Information and all work in process in connection therewith are to be considered "works made for hire" within the meaning of the Copyright Act of 1976, as amended (the "Act"), and that UPS is to be the "author" within the meaning of such Act. All such copyrightable UPS Information, as well as all copies of such UPS Information in whatever medium fixed or embodied, shall be owned exclusively by UPS as its creation, and Tumbleweed hereby expressly disclaims any interest in any of them. In the event (and to the extent) that the UPS Information created by Tumbleweed hereunder or any part or element thereof is found as a matter of law not to be a "work made for hire" within the meaning of the Act, Tumbleweed hereby conveys and assigns to UPS the sole and exclusive right, title and interest in the ownership to all such UPS Information, and all copies of any of them, without further consideration, and agrees to assist UPS to register, and from time to time enforce (at UPS's expense), all copyrights relating to the UPS Information created hereunder in any and all countries. Tumbleweed shall place a copyright notice in favor of UPS on the UPS Information at UPS's request. d. OWNERSHIP OF CUSTOMER DATA. Tumbleweed agrees that all records, files, reports and other data relating to UPS's customers which are received, used or stored in connection with the Messaging Service or otherwise are the exclusive property of UPS and its customers and that Tumbleweed hereby waives any interest, title, lien or right to any such data or records. Customer records and other data shall not be (i) used by Tumbleweed other than in connection with supporting UPS's offering of the Messaging Service, (ii) disclosed, sold, assigned, leased, or otherwise provided to third parties by Tumbleweed, or (iii) commercially exploited by or on behalf of Tumbleweed, its employees, subcontractors or agents. UPS/Tumbleweed Confidential 17 December 18, 1997 e. TUMBLEWEED TRADEMARKS AND TRADE NAMES. Tumbleweed hereby grants to UPS and its Affiliates and Authorized Shipping Outlets worldwide, non-exclusive, non-transferable, non-sublicenseable, [ * ] licenses to use and reproduce the Tumbleweed Marks in their advertising and promotion of the Messaging Service and/or the Software, including without limitation, the right to brand the Messaging Service by referencing the Tumbleweed Mark "Tumbleweed Software." Tumbleweed acknowledges that (A) the licenses granted pursuant to this Section 5(e) in no way, form or manner create or infer any obligation on the part of UPS to use any of the Tumbleweed Marks, and (B) UPS shall have sole discretion and control as to the size, location and position of its usage of the Tumbleweed Marks, understanding that the Tumbleweed Marks will be prominently and reasonably displayed. UPS acknowledges Tumbleweed's ownership and exclusive rights in the Tumbleweed Marks, and UPS's use of the Tumbleweed's ownership and exclusive rights in the Tumbleweed Marks, and UPS's use of the Tumbleweed Marks shall inure to the benefit of Tumbleweed. UPS shall not adopt or attempt to register any of the Tumbleweed Marks, as a whole, or adopt, use or attempt to register any mark which is confusingly similar to any of the Tumbleweed Marks, as a whole. For the period during which UPS is using any of the Tumbleweed Marks, Tumbleweed shall have the right to monitor and observe UPS's operation of the Messaging Service for the purpose of protecting and maintaining the standards of quality established by Tumbleweed for products sold and services rendered under the Tumbleweeds Marks as of the date UPS exercised its rights. If UPS does not operate the Messaging Service in a manner consistent with Tumbleweed's standards of quality, UPS shall be in breach of the terms of this Section 5(e). Tumbleweed may immediately terminate this trademark license if UPS breaches any of the terms of this Section 5(e) and does not either (i) cure such breach within thirty (30) days after receiving notice thereof, or (ii) discontinue any conduct in breach of the terms of this Section 5(e). UPS shall include the symbols TM and -Registered Trademark- as appropriate at the first instance of each use of each Tumbleweed Mark. UPS shall provide, at its own expense, samples of Tumbleweed Mark usage for Tumbleweed to inspect from time to time upon written request from Tumbleweed. f. DEVELOPER KITS (AND LOCALIZATION KITS). Tumbleweed shall deliver to UPS, at no charge therefor, such number of developer kit(s) and/or localization kit(s) as shall be reasonably requested by UPS, which developer/localization kit(s) shall be comprised of the Software described in Exhibit C hereto and successor versions thereof, and any other developer/localization kit software made generally commercially available by Tumbleweed and successor versions thereof (collectively, the "Developer Kit Software"), solely to permit UPS's development of localized versions of the Software and/or applications to be deployed as part of or in support of the Messaging Service. The License set forth in Sections 5(a) and (b) above includes the right to modify, maintain, support, update and create Derivative Works of the Software, to the extent enabled by the Developer Kit Software. Tumbleweed grants to UPS a non-exclusive, perpetual, irrevocable right and license (the "Developer Kit License") to Use the Developer Kit Software for purposes of the development of localized versions of the Software and/or applications to be deployed as part of or in support of the Messaging Service, and for testing the operation of such localized versions and applications to be deployed in connection with the Messaging Service, and to sublicense such right, subject to mutually agreed upon --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 18 December 18, 1997 minimum terms and conditions, solely to permit third party developers working directly on UPS's behalf to create localized versions of the Software and/or applications for the Messaging Service. The Developer Kit License granted hereunder specifically permits UPS and those third party developers working directly on UPS's behalf, in addition to their other rights hereunder, to develop localized versions of the Software and/or applications for the Messaging Service which may utilize or require the use of the Developer Kit Software, or a portion thereof, to operate ("Applications"), and to use or license or otherwise permit third parties to use such Applications without royalty or payment to Tumbleweed, except as expressly provided hereunder, even though such Applications may contain portions or Derivative Works of the Developer Kit Software. Except as set forth in this subsection (f), UPS shall have no right to further sublicense, transfer, lease, sell, or in any way dispose of the Developer Kit Software for any purpose other than as provided for in this subsection (f), and furthermore agrees to direct any third parties who request such Developer Kit Software to create software in support of the Standard Software to Tumbleweed in order to procure licenses therefor directly from Tumbleweed. UPS shall not, nor shall it authorize any third party to, decompile, reverse engineer or disassemble the Developer Kit Software. Notwithstanding anything to the contrary set forth in this Agreement, neither UPS's development or localized versions of the Software nor its creation of Applications relating to the Software, in either case prepared utilizing the Developer Kit Software and/or APIs furnished by Tumbleweed, will, in any way, form or manner, reduce or otherwise modify Tumbleweed's Maintenance Services or other obligations hereunder with regard to the base Software, provided, however, that Tumbleweed's obligations shall not extend to support of (i) the Applications, (ii) localizations that have not been successfully certified by Tumbleweed as set forth below, or (iii) modifications made to the base Software to the extent not enabled by the Developer Kit Software. For quality control purposes, however, UPS may submit each localized version to Tumbleweed, solely for the purpose of Tumbleweed's testing and certification thereof, prior to implementing same in support of the Messaging Service. Tumbleweed shall perform such testing on a mutually agreeable schedule after the delivery of each localized version of the Software, for which testing UPS shall reimburse Tumbleweed for any costs and/or expenses (including personnel costs) reasonably incurred by Tumbleweed in connection therewith, and either certify that such localized version is in compliance with Tumbleweed's quality control requirements (and that UPS may implement the localized version without affecting any of Tumbleweed's Maintenance Services or other obligations hereunder), or that such localized version is not in compliance with Tumbleweed's quality control requirements, in which event Tumbleweed shall so notify UPS in writing specifying the nature of such non-compliance and including sufficient details to permit UPS to understand such non-compliance. Furthermore, UPS may submit Applications to Tumbleweed for the limited purpose of permitting Tumbleweed to test whether such Applications are compatible with the APIs, and Tumbleweed shall perform such testing on a mutually agreeable schedule, for which testing UPS shall reimburse Tumbleweed for any costs and/or expenses (including personnel costs) reasonably incurred by Tumbleweed in connection therewith. UPS/Tumbleweed Confidential 19 December 18, 1997 Tumbleweed agrees to use its commercial discretion to make the Developer Kit Software generally commercially available pursuant to a developer support program designed to encourage third party developers to develop high quality applications in support of, and localized versions of, the Standard Software, and which will be conducted consistent with similar programs maintained by comparable applications software vendors (e.g., [ * ] g. INTERFACE INFORMATION. Tumbleweed will disclose UPS [ * ], any and all APIs, communication protocols, interface specifications or other such documentation (collectively, "APIs") necessary to enable UPS to write Applications which interface/communicate with the Software used by UPS to operate the Messaging Service. Tumbleweed grants to UPS a non-exclusive, perpetual, irrevocable right and license (the "API License") to internally Use the APIs solely to develop Applications which interface/communicate with the Software used by UPS to operate the Messaging Service, and for testing the operation of such Applications and to sublicense such right, subject to the minimum terms and conditions of this Agreement solely to permit third party developers working directly on UPS's behalf to create Applications which interface/communicate with the Software used by UPS to operate the Messaging Service. The API License granted hereunder specifically permits UPS and the third party developers working directly on UPS's behalf, in addition to their other rights hereunder, to develop Applications which may utilize or require the use of any of the APIs to interface/communicate with the Software, and to use or license or otherwise permit third parties to use such Applications without royalty or payment to Tumbleweed, even though such Applications will take advantage of such APIs to interface/communicate with the Software. Except as set forth in this subsection (g), UPS shall have no right to further sublicense, transfer, lease, sell, or in any way dispose of the APIs for any purpose other than as provided for in this subsection (g), and furthermore agrees to direct any third parties who request such APIs to create software in support of the Standard Software to Tumbleweed in order to procure licenses therefor directly from Tumblewed. UPS shall not (except as expressly provided above), nor shall it authorize any third party to, disclose, decompile, reverse engineer or disassemble the APIs nor remove, modify or obscure any proprietary rights notices in the APIs (so long as no such notices are visually perceptible to end user customers (as opposed to third party developers) of UPS). Tumbleweed shall have an ongoing duty, during the term of this Agreement, to update its provision of APIs, as required pursuant to this Section 5(g), to cover Enhancements to the Software which are made by Tumbleweed from time to time. In addition, Tumbleweed's commitment to establish a developer support program, as provided for in Section 5(f) above, shall also extend to the APIs contemplated in this Section 5(g). --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 20 December 18, 1997 h. DOCUMENTATION LICENCES. Subject to the provisions of Section 10 hereof, Tumbleweed further grants to UPS and its Affiliates and Authorized Shipping Outlets, during the term of this Agreement, the following non-exclusive, worldwide rights and licenses: (i) to access, reproduce, display and otherwise use the Documentation and other written materials furnished to UPS hereunder; (ii) to modify, update and/or create Derivative Works of such Documentation and other written materials; and (iii) to sublicense, lease, sublease and distribute such Documentation and other written materials and to permit their respective customers to enjoy the same rights and licenses with respect thereto as are set forth in (i) above. i. UPS INTELLECTUAL PROPERTY. UPS hereby grants to Tumbleweed a limited, non-exclusive, non-transferable, fully-paid license to use those portions of the trademarks, service marks, other indicia of origin, copyrighted material and art work owned or licensed by UPS and any additional technical information (the "UPS Intellectual Property") which are deliverable by UPS to Tumbleweed solely to the extent necessary for Tumbleweed to develop the Customer Software hereunder. Tumbleweed shall not use the UPS Intellectual Property for any other purpose. j. NO OTHER LICENSES. Except as otherwise provided in this Agreement and/or in the exhibits hereto, both parties and their respective suppliers shall retain all rights, title and interest in and to all copyrights, trademarks, trade secrets, patents and all other industrial and intellectual property embodied in or appurtenant to the Software and/or any other materials or information provided by any such parties hereunder. There are no implied licenses under this Agreement, and any rights no expressly granted hereunder are reserved by the parties or their respective suppliers. 6. FEES AND PAYMENT. a. LICENSE FEE. As consideration for the License to the Software granted herein, and for the rights granted in Section 15, UPS shall pay to Tumbleweed a license fee of [ * ] (the "License Fee") in the following installments: --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 21 December 18, 1997 i. [ * ] upon the execution and delivery of the memorandum of understanding between the parties, dated [ ]*, receipt of which payment is hereby acknowledged by Tumbleweed; ii. [ * ] upon the execution and delivery of this Agreement; iii. [ * ] upon UPS's acceptance of the Software associated with Phase I of this Agreement pursuant to Section 4(b) hereof; and iv. [ * ] upon UPS's acceptance of the Software associated with Phase II of this Agreement pursuant to Section 4(b) hereof. All such payments due hereunder shall be invoiced by Tumbleweed to UPS, and shall be payable within fifteen (15) days after its receipt. b. ROYALTIES. As additional consideration for the License to the Software granted herein, UPS shall pay Tumbleweed as a royalty (the "Royalty") the following percentage of the [ * ](hereinafter defined) actually received by UPS and/or its Affiliates for [ * ] by the Messaging Service utilizing the Software, based upon the [ * ] processed during the term of this Agreement: [ * ] As used in this Section 6(b), [ * ]. c. [ * ] d. ROYALTY PAYMENTS. All Royalties shall be computed and paid to Tumbleweed monthly on the fifteenth (15th) day following the end of each calendar month for Net Fees received by UPS during such calendar month for license fees for the Software [ * ]. UPS shall have the right to set off, deduct, retain, or withhold from any --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 22 December 18, 1997 accrued Royalties or other amounts otherwise payable hereunder, any monies due by Tumbleweed hereunder and/or credits available to UPS hereunder until such monies have been paid and/or credits applied. e. ROYALTIES. At least monthly, a report shall be provided to Tumbleweed showing the basis of the computation of Tumbleweed's Royalties. In making such report, UPS shall be entitled to report only [ * ], the Net Fees received for licenses granted with respect to the Custom Software, the number of end users registered to use the Messaging Service as of the end of the applicable month, [ * ], all of which information shall bee deemed to be the Confidential Information of UPS and its Server Sublicensees. Tumbleweed shall be entitled, not more than once annually, to retain one of the "Big 6" public accounting firms (or any other independent certified public accountant, if such other independent certified public accountant is reasonably acceptable to UPS) to review the books and records of UPS and any applicable Affiliates relating to the Messaging Service solely for the purpose of verifying the accuracy of the Royalties calculated, paid or due to Tumbleweed under this Agreement. Said certified public accountant shall inform Tumbleweed only whether all Royalties have been paid and the amount of any underpayment or overpayment. Such review shall be conducted during normal business hours upon reasonable notice of at least one (1) month. Upon presentation of reasonable proof of underpayment or overpayment, such underpayment or overpayment shall be reflected in the next monthly Royalty payment. The cost of such audit shall normally be at Tumbleweed's expense; provided, however, that UPS will bear the cost of the audit if the audit reveals any underpayment or overpayment which, in the aggregate, is greater than five percent (5%) of the amount of which was actually due for the period being audited. If the audit reveals an underpayment in excess of five percent (5%) of the amount which was actually due for the period being audited, Tumbleweed shall also have the right to conduct another audit within the same twelve (12) month period. f. DEMONSTRATION AND INTERNAL USE. Notwithstanding the Royalties provided for in subsection (b) above, and notwithstanding the minimum message fee provided for in subsection (c) above, UPS shall [ * ] obligation (i) for any [ * ] performed by UPS's and its Affiliates' employees sending internally generated documents via the Messaging Service, (ii) for any [ * ] performed by UPS's and its Affiliates' employees, distributors, dealers, VARs and resellers, and by Authorized Shipping Outlets, sending documents via the Messaging Service for demonstration purposes only, or (iii) for any [ * ] performed by prospective customers sending documents via the Messaging Service pursuant to limited, pre-defined evaluation plans established by UPS from time to time, where such limited evaluation plans are designed to increase the number of revenue generating customers of the Messaging Service [ * ] --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 23 December 18, 1997 g. INITIAL PHASE DEVELOPMENT FEE. As consideration for the Phase I and Phase II development Services rendered by Tumbleweed pursuant to Section 2 of this Agreement, UPS shall pay to Tumbleweed a fixed price development fee of [ * ] (the "Initial Phase Development Fee"). The Initial Phase Development Fee shall be payable in installments in accordance with the milestone payment schedule set forth in the Implementation Schedule, and each installment shall be payable upon completion of each milestone by Tumbleweed and, if applicable, acceptance by UPS in accordance with Section 4. All such payments due hereunder shall be invoiced by Tumbleweed to UPS. h. DEVELOPMENT FEES FOR SUBSEQUENT PHASES. Upon mutual agreement as to terms and conditions (including price) for the development of Software beyond that required for Phase II of the Project, unless the parties otherwise agree to the contrary, Tumbleweed will invoice UPS, monthly in arrears, for Services provided to UPS by Tumbleweed in connection with Phases for which the agreed upon Specifications therefor specify that Services performed in connection therewith are to be performed on a time and materials basis, in accordance with the daily rate and work schedule set forth in the Specifications. In the event that the parties agree to Services on a fixed price basis, Tumbleweed will invoice UPS in accordance with the schedule of payments set forth in such Specifications. For Services agreed by the parties to be provided on a time and materials basis, Tumbleweed shall submit with each invoice, copies of time reports which relate to the Services being invoiced, together with supporting documentation for all associated reimbursable expenses, which shall be limited to reasonable out-of-pocket expenses necessarily and actually incurred by Tumbleweed in the performance of such Services. Notwithstanding anything to the contrary contained herein, UPS shall not be liable for any charges and/or expenses in connection with any Phase for work done on a time and materials basis in excess of the maximum dollar amount specified in the associated Specifications, unless previously authorized by UPS. i. SOFTWARE MAINTENANCE AND SUPPORT SERVICES. As consideration for the Software maintenance and support Services (excluding the services of the Dedicated Support Personnel) rendered by Tumbleweed pursuant to Section 9 hereof ("Maintenance Services") for the period ending as of [ * ], UPS shall pay to Tumbleweed a fee of [ * ], [ * ] of which shall be due and payable upon expiration of the Warranty Period for the --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 24 December 18, 1997 Phase II Software, as provided for in Section 8(a) below, and [ * ] of which shall be paid in quarterly installments of [ * ] each, with the first such installment becoming due and payable on [ * ]. As consideration for the Maintenance Services rendered by Tumbleweed for subsequent years, if so elected by UPS, UPS shall pay to Tumbleweed an annual fee of [ * ] per year, payable in quarterly installments of [ * ] each; provided, however, that in the event such Maintenance Services obligations increase (whether by inclusion of additional data centers to be supported, additional software, or the like, as long as the increased burden on Tumbleweed's resources or risk can be substantiated) or the burden of providing such Maintenance Services decreases (whether by reduced demand for telephone support or otherwise), the parties shall meet to mutually agree upon a reasonably adjustment to such fee. All payments due hereunder shall be invoiced by Tumbleweed. j. DEDICATED SUPPORT PERSONNEL. As consideration for the Services of the Dedicated Support Personnel, as such Services are more specifically described in Section 9(d), UPS shall bear [ * ] of Tumbleweed's actual costs and expenses (including salary, employment taxes, unemployment insurance, and all fees and costs normally associated with the employment of personnel or hiring of independent contractors) attributable to the employment of such Dedicated Support Personnel. Tumbleweed shall invoice UPS on a monthly basis for the amounts required under this Section 6(j). k. EXPENSES. Where this Agreement provides that UPS shall reimburse Tumbleweed for various expenses incurred in connection with certain activities hereunder, such expenses shall be limited to reasonable out-of-pocket expenses necessarily and actually incurred by Tumbleweed in the performance of such activities, provided that: (i) UPS has given its prior consent for any such expenses, which consent shall not be unreasonably withheld; (ii) such expenses are consistent with UPS's then-current travel and expense guidelines; and (iii) if requested by UPS, Tumbleweed submits supporting documentation to UPS for such expenses. It is understood that any air transportation reimbursable hereunder shall be coach-economy and that entertainment by or on behalf of Tumbleweed shall be at no cost to UPS. l. COMMISSION FOR REFERRALS. In the event that UPS refers one of its end user customers who has been using the Messaging Service for a period of less than twenty-four (24) months and who has had a significant presence of individual users of the Messaging Service at that customer (a "Referral Customer") to Tumbleweed, and such Referral Customer licenses software or procures services from Tumbleweed, Tumbleweed hereby agrees to pay to UPS, for --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 25 December 18, 1997 such referral, a commission of [ * ] for each individual account that switches their account from the Messaging Service and [ * ] for the new accounts, of the fees actually received by Tumbleweed from such Referral Customer during the first year that such Referral Customer licenses software or procures services from Tumbleweed. All commissions shall be computed and paid to UPS monthly on the fifteenth (15th) day following the end of each calendar month for fees received by Tumbleweed from Referral Customers during such calendar month. At least monthly, a report shall be provided to UPS showing the basis of the computation of UPS's commissions. UPS shall be entitled, not more than once annually, to retain one of the "Big 6" public accounting firms (or any other independent certified public accountant, if such other independent certified public accountant is reasonably acceptable to Tumbleweed) to review the books and records of Tumbleweed relating to such transactions solely for the purpose of verifying the accuracy of the commissions paid or due to UPS under this Agreement. Said certified public accountant shall inform UPS only whether all commissions have been paid and the amount of any underpayment or overpayment. Such review shall be conducted during normal business hours upon reasonable notice of at least one (1) month. Upon presentation of reasonable proof of underpayment or overpayment, such underpayment or overpayment shall be paid to UPS or refunded by UPS, respectively. The cost of such audit shall normally be at UPS's expense; provided, however, that Tumbleweed will bear the cost of the audit if the audit reveals any underpayment or overpayment which, in the aggregate, is greater than five percent (5%) of the amount which was actually due for the period being audited. If the audit reveals an underpayment in excess of five percent (5%) of the amount which was actually due for the period being audited, UPS shall also have the right to conduct another audit within the same twelve (12) month period. m. SALES AND USE TAXES. All fees stated herein and Royalty payments made hereunder exclude, and UPS shall pay, any sales, use, or similar tax, federal state or local, that may be assessable in connection with this Agreement, exclusive of taxes based on or measured by Tumbleweed's net income. n. PAYMENT TERMS. All fees stated in, and shall be made in, U.S. Dollars. Unless otherwise specified, all payments hereunder (including, without limitation, Royalty payments) shall be due and payable within fifteen (15) days of the date of UPS's receipt of Tumbleweed's invoice; provided, however, that Royalty payments shall be made in accordance with Section 9(d). o. PAYMENT DISCREPANCIES. UPS shall not be obligated to make payments required hereunder to the extent and for the duration that such payments are in dispute in good --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 26 December 18, 1997 faith; provided, however, that in the event of any such discrepancy or dispute, UPS shall be required to make payments required hereunder on any undisputed portion of any properly rendered invoice for which payment is due. In the event that any payment discrepancy or dispute may be resolved by audit, then Tumbleweed shall have the right to institute an audit pursuant to subsection (e) above to verify the accuracy of the amounts paid or due to Tumbleweed under this Agreement. If the audit confirms an underpayment by UPS, UPS shall pay to Tumbleweed the amount of such underpayment within thirty (30) days of the date of UPS's receipt of auditor's written findings. If UPS fails to make such payment within such thirty (30) day period, Tumbleweed may terminate this Agreement without liability for such termination. In the event such discrepancy or dispute is not susceptible to resolution by accounting audit, the parties shall engage in the escalation procedures set forth in Section 16(b). p. TIME AND MATERIALS FEES. For Services provided by Tumbleweed on a time and materials basis, the fees for such Services will be at commercially reasonable rates. 7. MARKETING, DISTRIBUTION AND OFFERING OF MESSAGING SERVICE. a. MARKETING PLAN. UPS will, in its sole discretion, develop a marketing plan for the Messaging Service, including development of brand name identities, and identifying likely markets, distribution channels, and pricing structures for the Messaging Services; provided, however, that UPS will consult with Tumbleweed with respect to the promotion and advertising of the Messaging Service and that UPS will not market the Messaging Service as "free." Subject to the foregoing, UPS shall have the sole determination of the marketing strategies to be followed, including the extent to which UPS will use the Tumbleweed Marks in connection with such marketing; provided, however, that, [ * ] the Tumbleweed Mark "Tumbleweed Software" [ * ] of advertising, collateral and promotional materials published by UPS and/or its Affiliates and Authorized Shipping Outlets in relationship to UPS's "Document Exchange" service offering, [ * ] shall be within UPS's sole discretion. Notwithstanding the foregoing commitment, UPS shall have the right to immediately discontinue its use of any or all of the Tumbleweed Marks, [ * ] of advertising, collateral and promotional materials, in the event that any of the Persons or entities identified in Section 15 of this Agreement begin marketing products and/or services involving Internet or Intranet delivery systems utilizing any of the Tumbleweed Marks, or in the event that any act, omission or misrepresentation on the part of Tumbleweed or any of its officers, directors, agents or employees directly and negatively impacts upon the goodwill associated with any of UPS's trade names, trademarks and/or service marks, as determined by UPS in its sole but reasonable discretion. Tumbleweed agrees to include a direct link to the --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 27 December 18, 1997 Messaging Service on Tumbleweed's "Posta" homepage on the World Wide Web. In addition, Tumbleweed agrees to participate in major sales calls by UPS, as reasonably requested by UPS. The foregoing shall not in any way limit UPS's obligations, pursuant to Section 7(c) below, to display the "Tumbleweed Posta" mark in the Software. b. DISTRIBUTION OF CLIENT SOFTWARE. The License granted pursuant to Section 5(b) of the Agreement permits UPS to reproduce the client-based portion of the Software, which reproduction may be in any form and on any media deemed suitable by UPS for distribution. UPS shall not be obligated to offer the Messaging Service in all formats, or for all computer systems, but shall select those which, in its judgment, are deemed most suitable for the Messaging Service. All costs of packaging and reproduction of the client-based Software shall be borne by UPS, and subject to compliance with all license restrictions in this Agreement, UPS shall have complete discretion in selecting the parties by whom and the circumstances under which and the means by which the client-based Software is reproduced for distribution, including without limitation, by making the client-based Software available for download from one or more FTP sites on the Internet. c. TRADEMARK USAGE. Unless and until any of the Persons identified in Section 15 of this Agreement begin marketing products and/or services involving Internet or Intranet delivery systems utilizing any of the Tumbleweed Marks, and unless and until any act, omission or misrepresentation on the part of Tumbleweed or any of its officers, directors, agents or employees directly and negatively impacts upon the goodwill associated with any of UPS's trade names, trademarks and/or service marks, as determined by UPS in its sole but reasonable discretion, UPS agrees Tumbleweed display the Tumbleweed Mark "Tumbleweed Posta" in the Software, and in the HTML pages created thereby, provided that the manner in which such Tumbleweed Mark appears (e.g., size, location, etc.) shall be within UPS's sole but reasonable discretion, subject to Tumbleweed's reasonable approval. d. END USER SUPPORT. UPS shall assume sole responsibility for all first level customer support of all sublicensees and end user customers of the Messaging Service, at its own expense; provided, however, that Tumbleweed agrees to promptly provide UPS with second level support to assist UPS with customer support problems which cannot be dealt with at the first level due to their complexity or their unusual nature, or due to errors or other malfunctions in the Software which can only be corrected by Tumbleweed. Tumbleweed will redirect to UPS any customer support questions it receives from end user customers of the Messaging Service. e. MARKETING FLEXIBILITY. UPS shall have full freedom and flexibility in its marketing effort for the Messaging Service, including, without limitation, the freedom to decide its methods of marketing and pricing, and to decide whether to market or discontinue marketing the Messaging Service or any particular subset of the Messaging Service. Subject to complying with the express requirements of this Agreement, Tumbleweed shall have full freedom and flexibility in its support of UPS's marketing effort for the Messaging Service, including, without UPS/Tumbleweed Confidential 28 December 18, 1997 limitation, the freedom to decide its methods of marketing support, and to decide whether to support or discontinue supporting UPS's marketing of the Messaging Service or any particular subset of the Messaging Service. Neither party makes any guarantee or commitment as to the success of its marketing effort, and each party agrees that the other party has no obligation to it whatsoever other than as specifically provided in this Agreement. f. ADDITIONAL MARKETING AND SALES SUPPORT. For the period ending (1) year after the Commercial Availability Date, in addition to its other marketing and sales support obligations hereunder, Tumbleweed shall provide the Services set forth in Exhibit G hereto. 8. WARRANTIES. Tumbleweed hereby warrants and represents to UPS as follows: a. SOFTWARE. All Software and Documentation delivered pursuant to this Agreement will materially conform to the Detailed Design Specifications therefor. In the event of any breach of the foregoing warranty, Tumbleweed shall use commercially reasonable efforts to promptly correct or replace the Software so that it materially conforms with the Detailed Design Specifications. As the Internet transmission medium and servers connected thereto are not entirely free form unauthorized access, Tumbleweed does not warrant that operation of the Software will be uninterrupted, secure, or error-free, or that all errors will be corrected, and further does not warrant that the information stored or transmitted by the Software will be free from unauthorized modification. The warranty set forth in this Section 8(a) shall remain in effect for the period ending [ * ] following acceptance of Phase II of the Project pursuant to Section 4(b) hereof (the "Warranty Period"), and for the period during which Tumbleweed is providing continuing support for the Software pursuant to Section 9 below (the "Support Period"). The foregoing warranty does not cover non-conformities due to: (a) any modification of the Software performed by any Person other than Tumbleweed or any of its Associates (except for localizations certified by Tumbleweed as set forth in Section 5(f) and except for modifications to the base Software enabled by the Developer Kit Software ); (b) operation of the Software under environmental conditions outside of normal operating ranges for computer hardware for UPS's data center; (c) any use of the Software on a system that does not meet Tumbleweed's minimum standards for such Software, to the extent such minimum standards are included in the Specifications; and (d) hardware or non-Tumbleweed software (where such non-conformity is due solely to the operation of such hardware or non-Tumbleweed software). b. COMPATIBILITY. All Enhancements to the Software furnished hereunder will be implemented in such a manner as to maintain backward compatibility with the immedi- --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 29 December 18, 1997 ately preceding two (2) versions, and all versions of the Software furnished hereunder and/or released within the previous year, and with any and all associated interfaces within the Software to other vendors'; software and hardware, as provided for in Section 5(g) hereof, in Exhibit C hereto, or in the Detailed Design Specifications, so that such previous versions or interfaces shall continue to be operable with the Software as Enhanced, in materially the same manner and with materially equivalent performance as prior to the Enhancement; provided, however, that Tumbleweed shall have satisfied such obligation with respect to the preservation of an interface if it furnishes to UPS, as an alternative to backward compatibility, the software retrofit(s) necessary to preserve the functionality of applications written to such previous interface. As used in this subsection (b), a "version" is any version of the Standard Software designated, in Tumbleweed's sole but reasonable discretion, by a change in the version number to the left of the first decimal point. On a case by case basis, UPS agrees to consider, in good faith, reducing Tumbleweed's two (2) version backward compatibility commitment to one (1) version for a particular version release; provided, however, that no such reduction shall be taken or held to extend to any subsequent version of the Software released by Tumbleweed hereunder. c. SERVICES. The work to be performed hereunder shall be of professional quality and will conform to generally accepted standards for software in the software development and software support fields. d. Intentionally omitted. e. RELIABILITY. During the Warranty Period and subsequent Support Period, when UPS elects to secure the Services of the DSP at the Supported Datacenter(s), in addition to the individual performance standards for the Software set forth in the Detailed Design Specifications, Tumbleweed hereby represents and warrants to UPS that the Software operating at such Supported Datacenter(s) shall on an ongoing basis, operate without unresolved Critical or Major Defects ("Uptime"), measured on a monthly basis, for an average of [ * ]. For the purposes of determining Uptime, the following formula shall be used: Uptime = Unit Hours of Operation minus Downtime (to be expressed -------------------------------------- as a percentage) Unit Hours of Operation For the purposes of this Section 8(e), "Unit Hours of Operation" shall mean twenty-four (24) hours per day, seven (7) days per week and "Downtime" shall mean that period of time when the Messaging Service at the Supported Datacenter(s) is inoperable (unavailable) for reasons --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 30 December 18, 1997 attributable to the Software. Downtime for each incident shall commence from the time UPS has made a BONA FIDE attempt to notify Tumbleweed (or the DSP) that the Messaging Service at the Supported Datacenter(s) is inoperable for reasons attributable to the Software, and shall continue until the Messaging Service at the Supported Datacenter(s) is restored to fully operable condition, but Downtime shall specifically exclude any time (x) required to perform scheduled maintenance upgrades (which shall be scheduled by UPS during non-peak hours for the Messaging Service), or (y) spent as a result of any delay by UPS in providing Tumbleweed or its DSP with access to the hardware and software at the Supported Datacenter(s). UPS will consider, in good faith, any recommendations made by Tumbleweed's DSP(s) with respect to the operation of the Supported Datacenter(s), where such recommendations shall be limited to the requirements of operating a data center for the Software in a professional manner consistent with generally accepted standards for data center operation (including, but not limited to, the operation of redundant "hot" servers for system integrity, multiple data line access, regular backups, and the like). At a minimum, UPS shall implement (i) the operation of redundant "hot" servers, (ii) automatic regular backups, and (iii) automatic switching to redundant servers in the event of a networking or hardware failure (the "Minimum Conditions"). f. Intentionally omitted. g. LOCKS. Except to the extent disclosed in the applicable Specifications, Tumbleweed has not inserted, and will not insert, in the Software any lock, clock, timer, counter, copy protection feature, CPU serial number reference, "Trojan horse," or other device which is intended to (i) disable or erase all or any part of the Software; (ii) prevent UPS or its Affiliates from fully utilizing all or any part of the Software, or prevent UPS's customers for fully utilizing all or any part of the Client Software and/or Custom Client Software; or (iii) require action or intervention by Tumbleweed or any other Person to allow UPS or its Affiliates, or their respective customers, to utilize all or any part of the Software on the type of computer equipment indicated in Exhibits A and B hereto. h. VIRUSES. Tumbleweed has used and will use all commercially reasonable efforts to ensure that each copy of the Software delivered pursuant to this Agreement is free of any computer "viruses." i. MILLENNIUM. Tumbleweed warrants to UPS (and not to any other parties) that Tumbleweed will use commercially reasonable efforts to ensure that the Software will create, store, process, compare, calculate, sequence and output data relating to (and including) dates on or after January 1, 2000, without producing inaccurate results. The foregoing warranty only applies to errors that are specifically attributable to date-specific data; if such errors would be encountered with non-date-specific data, such errors are covered solely by the other warranty and maintenance provisions of this Agreement. While the exclusions applicable to such other warranty and maintenance provisions also apply to this warranty, UPS acknowledges that inaccurate results also could be caused by software and hardware being used with the Software (including without limitation the BIOS or the operating system), and such inaccurate UPS/Tumbleweed Confidential 31 December 18, 1997 results are not covered by the foregoing warranty. Any enhancement required to enable that the Software to comply with this warranty will be considered part of and covered under the maintenance provisions of this Agreement at no additional charge to UPS. j. WARRANTY DISCLAIMER. EXCEPT AS SET FORTH IN THIS AGREEMENT, TUMBLEWEED AND ITS SUPPLIERS DISCLAIM ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. 9. SOFTWARE SUPPORT SERVICES. Tumbleweed shall provide Maintenance Services pursuant to this Section 9 for the period ending as of December 31, 1999, and on a year to year basis thereafter (collectively, the "Support Period"), unless and until terminated by UPS upon at least ninety (90) days' written notice to Tumbleweed prior to the commencement date of the next annul Support Period. Tumbleweed agrees to make the Maintenance Services available to UPS for the term of this Agreement. a. NOTIFICATION OF DEFECTS. Tumbleweed will promptly (i) notify UPS of any defects or malfunctions in the Software or Documentation of which it learns from any source and which it reasonably expects to lead to a Critical Defect or Major Defect, (ii) use commercially reasonable efforts to correct any such defects or malfunctions, and (iii) upon the earliest availability of such corrections, provide UPS with corrected copies of same. b. ENHANCEMENTS. Tumbleweed will promptly provide to UPS, on or before the date on which any such Enhancement is made generally available to any of Tumbleweed's other customers, copies of the Software and Documentation revised to reflect any Enhancements to the Standard Software which are to be made generally available to Tumbleweed's other customers, including, without limitation, modifications to the Software which can increase the speed, efficiency or ease of operation of the Software or add additional functionality or capabilities to or otherwise improve the functions of the Software, and modifications to the Software which support new protocols, new operating systems and/or new releases of the operating systems and other third party software with which the Software is designed to operate or interface. In the event that Tumbleweed develops an Enhancement for which it will owe a royalty based on the distribution of such Enhancement (a "Royalty Enhancement"), Tumbleweed agrees to offer the Royalty Enhancement to UPS on terms [ * ], and UPS agrees to pay such royalty, [ * ] based solely upon UPS's use of the Royalty Enhancement, in the event UPS elects to license such Royalty Enhancement. Solely --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 32 December 18, 1997 with respect to the migration from version 1.0 of the Standard Software to version 2.0 of the Standard Software, Tumbleweed shall perform [ * ] modifications necessary to the Custom Software furnished hereunder, [ * ] charge to UPS, to ensure that such Custom Software shall continue to be operable with the Software as Enhanced, in materially the same manner and with materially equivalent performance as Custom Software associated with version 1.0 of the Standard Software. Further, Tumbleweed hereby represents and warrants to UPS that version 2.0 of the Standard Software, and the modified version of the Custom Software provided pursuant to the previous sentence, shall have equivalent or greater functionality and performance as version 1.0 of the Standard Software, and Custom Software associated therewith, when operated on (A) SUN Ultra servers, with (B) the SUN Solaris 2.6 operating system or above, with (C) Oracle 7.3 database (with patch) or above, with (D) Netscape Enterprise Service 3.0C or above (backward compatible to 2.01), and must support (E) NFS, and must support (F) separate HTTP components (multiple web servers talking to the same file, system and database), and must provide (G) same custom API services as Tumbleweed built for UPS in version 1.0 (the functions do not have to be the same, but functionality must be), and (H) Tumbleweed must provide expert assistance for developing a distributed implementation using multiple HTTP components, and (I) Tumbleweed must provide expert assistance for developing a redundant data center recovery solution (the solution must be approved by the UPS architecture group). With respect to subsequent Enhancements to the Standard Software, subject to Section 8(b) above, UPS acknowledges that any work that the parties mutually agree that Tumbleweed shall perform to conform the Custom Software to any such subsequent Enhancement shall be performed as part of a new Phase pursuant to Section 2 hereof. With respect to all Enhancements, Tumbleweed shall provide procedures, such as database conversion procedures where applicable, and any computer program(s) required to assure a smooth and timely migration to the new environment (i.e., typically capable of being performed overnight). c. SECOND LEVEL SUPPORT. UPS shall be solely responsible for providing all first level support for its end user customers and for all aspects of the Messaging Service which do not involve the Software. Except as set forth in Section 9(d) below UPS shall further be responsible for first level support of the Server Software and Custom Server Software. Tumbleweed will provide to UPS, twenty-four (24) hours per day, seven (7) days per week, all telephone or written consultation reasonably requested by UPS in connection with its use and operation of the Software or any problems therewith which cannot be resolved a the first level. UPS may designate up to two (2) employees per data center operating the Server Software/Custom Server Software as its support interface(s) ("Support Interfaces") with Tumbleweed, which employee(s) shall initiate and administer all requests for telephone consultation hereunder. Each UPS support interface must complete the training specified in Section 12 hereof, and UPS's end user support personnel shall have completed either the end user support training specified in Section 12 hereof, or subsequent "train the trainer" sessions conducted by UPS regarding end user support. In the event that requests become excessive or overly burdensome as a result of lack of skill or training by the Support Interface(s), or high rate of turnover of such Support Interface(s), UPS and Tumbleweed personnel shall meet to provide solutions to such problem. --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 33 December 18, 1997 d. SUPPORTED DATACENTER SUPPORT. In order to assist UPS in performance of its first level support obligations for the Server Software and Custom Server Software, Tumbleweed shall make available to UPS for a period of [ * ] from the Commercial Availability Date, one Dedicated Support Personnel at each Supported Datacenter(s) as UPS may so elect. Following such [ * ] period, Tumbleweed shall continue to make the DSP(s) available to UPS on a month to month basis unless and until UPS shall have provided at least ninety (90) days' prior written notice to Tumbleweed of the termination of such DSP Services with respect to one (1) or more Supported Datacenters. In the event that UPS elects to discontinue DSP Services with respect to a particular Supported Datacenter, the parties shall meet to mutually agree upon a reasonable adjustment to the Reliability Warranty set forth in Section 8(e) hereof, and the obligations and remedies set forth in Section 9(e)(ii) and (iii) shall no longer apply, but be replaced by the obligations set forth in Section 9(e)(iv) and (v) with respect to any such data center. The DSP(s) shall have as his, her or their first priority the ongoing support and maintenance of the Software at the Supported Datacenter, and shall be physically present at the Supported Datacenter(s) during UPS Business Hours, and on call (i.e., available by pager) outside of UPS's Business Hours. "Business Hours" are 8:00 a.m. to 6:00 p.m., local time, on Business Days. UPS shall provide to the DSP(s) physical access to the server(s) running the Messaging Service at the Supported Datacenter(s), as well as remote access to any other servers running the Messaging Service, in all cases subject to compliance with UPS's reasonable security measures for such access, remote or otherwise. To the extent that UPS declines or fails to implement the Minimum Conditions (as defined above), Tumbleweed shall not be liable for any response time commitments and associated remedies set forth in Sections 9(e)(ii) and (iii). During the first five (5) days following installation of the Software at each Supported Datacenter, the DSP shall be physically present during UPS Business Hours to assist with the implementation of the Messaging Service at such Supported Datacenter. e. REMEDIAL EFFORTS BY TUMBLEWEED. Tumbleweed will respond to and resolve problems with the Software in accordance with the following procedures: i. UPS shall first attempt to identify and rectify the problem in accordance with its first-level support obligations, which may include consulting with the DSP. If such activities are unsuccessful, the DSP (or one of UPS's Support Interfaces, if UPS is not then covered by Tumbleweed's DSP Services pursuant to Section 9(d) above) shall contact Tumbleweed to report such problem. If the problem may be solved via a telephone consultation, Tumbleweed (or its DSP) shall proceed to attempt to effect such resolution. If remote access is required to permit Tumble- --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 34 December 18, 1997 weed to attempt to diagnose the problem, then subject to Tumbleweed's compliance with UPS's security procedures then in effect, UPS shall provide remote access to UPS's servers running the Messaging Service solely for the purpose of enabling Tumbleweed to attempt to diagnose and remedy reported problems remotely. Based on such remote diagnosis, the parties shall confer to determine whether the Software or some other component is responsible for any problems with respect to the Messaging Service. In the event that the problem does not arise at a Supported Datacenter, and Tumbleweed informs UPS that the Software is not responsible for the problem, and UPS nevertheless reasonably believes that the Software is responsible for such problem and that such problem is a Critical or Major Defect, and after all possible diagnosis by Tumbleweed and discussion by the parties UPS insists that on-site support is the only reasonable solution, Tumbleweed support personnel shall promptly travel to the other UPS datacenter to attempt to effectuate such repairs. In the event that after such travel it becomes clear that the Software was not responsible for such problems and Tumbleweed had informed UPS of such diagnosis prior to such travel, as provided for above, UPS shall reimburse Tumbleweed for all actual expenses incurred in the course of such service call as well as time and materials charges related to the same. In the event that such on-site service had been necessitated by a Critical or Major defect caused by the Software, Tumbleweed shall bear all expenses associated with such on-site call, but no time and materials charges shall be payable in connection therewith. Nothing provided for in this subsection (e)(i) shall have any effect on the remedies available to UPS pursuant to subsections (e)(ii) and (e)(iii) below, provided, however that Tumbleweed's obligations and UPS's remedies set forth in subsections (e)(ii) and (e)(iii) below shall apply only to Supported Datacenters; ii. For a Supported Datacenter, with respect to Critical Defects, as reasonably determined by UPS, Tumbleweed will respond to UPS's request for service by telephone response by a qualified and knowledgeable representative within one (1) hour from the time Tumbleweed receives UPS's call and will complete such repairs expeditiously. Tumbleweed personnel shall render continuous effort with respect to such problems. If Tumbleweed does not respond and remedy such problem in the Software within four (4) hours of receipt of the call , UPS shall be entitled to a credit against future amounts due hereunder of [ * ] the average hourly revenues generated by the Messaging Service (measured over the prior three-month period) for every hour or part thereof after four (4) hours that Tumbleweed fails to remedy such problem. Monies becoming due UPS shall be applied as a credit against any amounts subsequently due from UPS to Tumbleweed. Notwithstanding the foregoing, in the event that Tumbleweed fails to remedy any such problem within fifteen (15) days of receipt of the call, or in the --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 35 December 18, 1997 event that any such problem occurs four (4) or more times within any six (6) month period, such failure shall be deemed to be a material breach by Tumbleweed of this Agreement, in which event the foregoing credits shall no longer accrue and UPS shall be entitled to pursue such damages and remedies as UPS might have pursuant to this Agreement, at law or in equity, subject to the limitations (including the limitations on liability) set forth herein; iii. For a Supported Datacenter, with respect to Major Defects, as reasonably determined by UPS, Tumbleweed will respond to UPS's request for service by telephone response by a qualified and knowledgeable representative within two (2) hours from the time Tumbleweed receives UPS's call and will complete such repairs expeditiously. Tumbleweed personnel shall render continuous effort with respect to such problems. If Tumbleweed does not respond and remedy such problem in the Software within twenty-four (24) hours of receipt of the call, UPS shall be entitled to a credit against future amounts due hereunder of [ * ] the average hourly revenues generated by the Messaging Service (measured over the prior three-month period) for every hour or part thereof after twenty-four (24) hours that Tumbleweed fails to remedy such problem. Monies becoming due UPS shall be applied as a credit against any amounts subsequently due from UPS to Tumbleweed. Notwithstanding the foregoing, in the event that Tumbleweed fails to remedy any such problem within thirty (30) days of receipt of the call, or in the event that any such problem occurs six (6) or more times within any six (6) month period, such failure shall be deemed to be a material breach by Tumbleweed of this Agreement, in which event the foregoing credits shall no longer accrue and UPS shall be entitled to pursue such damages and remedies as UPS might have pursuant to this Agreement, at law or in equity, subject to the limitations (including the limitations on liability) set forth herein; iv. For locations other than Supported Datacenters, with respect to Critical Defects, as reasonably determined by UPS, Tumbleweed will respond to UPS's request for service by telephone response by a qualified and knowledgeable representative within one (1) hour from the time Tumbleweed receives UPS's call and will complete such repairs within eight (8) hours. Tumbleweed personnel shall render continuous effort with respect to such problems; v. For locations other than Supported Datacenters, with respect to Major Defects, as reasonable determined by UPS, Tumbleweed will respond to UPS's request for service by telephone response by a qualified and knowledgeable representative within two (2) hours from the time Tumbleweed receives UPS's call and will complete such repairs within forty-eight (48) hours. Tumbleweed personnel shall render continuous effort with respect to such problems; and --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 36 December 18, 1997 vi. With respect to any other problem involving the Software (i.e., Minor Defects), Tumbleweed will respond during Business Hours (hereinafter defined) to UPS's request for service by telephone response by a qualified and knowledgeable representative within four (4) hours from the time Tumbleweed receives UPS's call and will use commercially reasonable efforts to correct such Minor Defect(s) in the next Enhancement of the applicable Software. f. TERMINATION OF MAINTENANCE. UPS shall have the right to terminate the maintenance provisions of this Agreement, without affecting its Licenses to the Software granted under Section 5 hereof, at any time in the event of a breach by Tumbleweed of any of its maintenance obligations hereunder if Tumbleweed shall fail to cure such breach within thirty (30) calendar days of receipt of written notice thereof. Except as expressly provided for in Section 9(e) above, any termination of the maintenance provisions of this Agreement by UPS shall be in addition to any and all other legal or equitable remedies which may be available to UPS. In the event that UPS has terminated the maintenance provisions of this Agreement, and subsequently desires maintenance services, Tumbleweed shall have the right to require that UPS first pay all maintenance fees which would have been otherwise due during the interim and upgrade the Software to the currently supported versions of the Software. g. MAINTENANCE EXCLUSIONS. Tumbleweed will only provide Maintenance Services for (x) the then-current version of the Software, (y) the immediately preceding two (2) versions of the Software, and (z) all preceding versions of the Software (in addition to the immediately preceding version) for a period of [ * ] following the release of such preceding version(s). As used in this subsection (h), a "version" is any version of the Standard Software designated, in Tumbleweed's sole but reasonable discretion, by a change in the version number to the left of the first decimal point. Furthermore, Maintenance Services do not include any service required as a result of: (a) any modification of the Software performed by any Person other than Tumbleweed or any of its Associates (except for localizations certified by Tumbleweed as set forth in Section 5(f) and except for modifications to the base Software enabled by the Developer Kit Software); (b) operation of the Software under environmental conditions outside of normal operating ranges for computer hardware for UPS's data centers; (c) any use of the Software on a system that does not meet Tumbleweed's minimum standards for such Software, to the extent such minimum standards are included in the Specifications; or (d) the operation of hardware or non-Tumbleweed software (where such non-conformity is due solely to the operation of such hardware or non-Tumbleweed software). In the event that Tumbleweed provides services that are shown to be due to a factor not covered by the Maintenance Services enumerated in this Agreement, UPS shall pay Tumbleweed's then-current time --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 37 December 18, 1997 and materials charges needed to perform such services; provided, however, that Tumbleweed shall have informed UPS in advance that such services are not covered by the maintenance provisions hereof, and UPS shall then have expressly requested that Tumbleweed proceed to perform such services. 10. CONFIDENTIAL INFORMATION. a. NON-DISCLOSURE OF TRADE SECRETS AND CONFIDENTIAL INFORMATION. During the term of this Agreement, and indefinitely thereafter, Tumbleweed will not use, copy, or disclose, or permit any unauthorized person access to, any of UPS's Trade Secrets, except as expressly directed by UPS or as permitted herein in connection with Tumbleweed's work hereunder. During the term of this Agreement, and indefinitely thereafter, UPS will not disclose, or permit any unauthorized person access to, any of Tumbleweed's Trade Secrets, except as expressly authorized by Tumbleweed or as permitted herein. During the term of this Agreement and for a period of two (2) years after termination thereof, Tumbleweed will not use, copy, or disclose, or permit any unauthorized person access to, any of UPS's Confidential Information, except as expressly directed by UPS or as permitted herein in connection with Tumbleweed's work hereunder. During the term of this Agreement and for a period of two (2) years after termination thereof, UPS will not disclose, or permit any unauthorized person access to, any of Tumbleweed's Confidential Information, except as expressly authorized by Tumbleweed or as permitted herein. The use and disclosure restrictions in this Section 10(a) shall not apply to Trade Secrets and/or Confidential Information which (i) are known by the recipient prior to receipt from the disclosing party, (ii) are or become, through no act or fault of the recipient, publicly known or generally utilized by others, (iii) are received by recipient from a third party without a restriction on disclosure or use, (iv) are independently developed by recipient without reference to the Trade Secrets and/or confidential Information, or (v) are required to be disclosed by a court or government agency, provided that the recipient shall have given prior written notice of such required disclosure to the disclosing party promptly upon the recipient becoming aware of such requirement, and taken reasonable steps to allow the disclosing party to seek to protect the confidentiality of the information required to be disclosed. b. RETURN OF MATERIALS. Each party acknowledges that all Trade Secrets and Confidential Information of the other party are the property of the other party or its affiliates and their respective licensors. All notes, data, reference materials, sketches, disks, memoranda, tapes, manuals, files, documentation and records in any way incorporating or reflecting any of the Trade Secrets or Confidential Information of UPS and/or its Affiliates shall belong exclusively to UPS and such Affiliates, and Tumbleweed agrees to turn over all copies of such materials in Tumbleweed's possession or control to UPS, or certify the destruction thereof, upon request and, in any event, after the termination or expiration of this Agreement. All notes, data, reference materials, sketches, disks, memoranda, tapes, manuals, files, documentation and records in any way incorporating or reflecting any of the Trade Secrets or Confidential Information of Tumbleweed or its Associates shall belong exclusively to Tumbleweed or its Associates UPS/Tumbleweed Confidential 38 December 18, 1997 and upon the termination or expiration of this Agreement, UPS agrees to turn over all copies of such materials in UPS's possession or control to Tumbleweed, or certify the destruction thereof. c. THIRD PARTY MATERIALS. Neither party wishes to incorporate any unlicenced or unauthorized materials into its products. Therefore, each party agrees that it will not knowingly disclose to the other, or cause the other to use any information or material which is confidential to any third party unless the disclosing party has a written agreement with such third party permitting disclosure of such information or material to the receiving party or the receiving party otherwise has the right to receive and use such information or material. Neither party will incorporate into its work any materials which are subject to the copyrights of any third party except with the prior written consent of said third party. d. PUBLICITY. Tumbleweed shall not use the name of or refer to UPS or any of its Affiliates directly or indirectly in any advertisement, press release or professional or trade publication without receiving prior written approval from UPS. Notwithstanding the foregoing, and subject to Tumbleweed's compliance with the applicable restrictions and other obligations hereunder (e.g., restrictions on the disclosure of UPS's Confidential Information), UPS will agree to be a reference account for Tumbleweed and will allow Tumbleweed to promote its relationship with UPS in press releases, web pages and other collateral marketing and sales materials; provided, however, that Tumbleweed must obtain UPS's prior written consent with respect to any and all such descriptions of the relationship between UPS and Tumbleweed, which consent will not be unreasonably withheld. e. REMEDIES. Both parties acknowledge and agree that there may be no adequate remedy at law available to the other party in the event of the breach of any provision of this Section 10 and that such other party, in addition to any other rights which may be available to it, shall have the right to obtain specific performance or injunctive relief, as applicable, in the event of any breach or threatened breach of these provisions. 11. SOURCE CODE. a. RIGHT TO USE SOURCE CODE. UPS shall be entitled to a copy of the Source Code for the Software, and may use same for its own benefit as set forth in Section 11(c) hereto if (i) Tumbleweed suffers an "Insolvency Event," as such term is defined in the Escrow Agreement attached hereto as Exhibit F, and in connection therewith, Tumbleweed or its trustee or receiver rejects this Agreement; or (ii) Tumbleweed is in material breach of the maintenance provisions set forth in Section 9 hereof, or of any software maintenance agreement then in effect between the parties relating to the Standard Software and that has replaced the provisions of Section 9 hereof. b. SOURCE CODE ESCROW. Within fifteen (15) days after UPS's acceptance of the Software associated with Phase II of this Agreement, and thereafter no later than the time of Tumbleweed's delivery to UPS of the Software associated with Phases subsequent to Phase II of UPS/Tumbleweed Confidential 39 December 18, 1997 this Agreement, Tumbleweed shall place the Source Code for such Software in escrow pursuant to an escrow agreement in the form of the escrow agreement attached hereto as Exhibit F (the "Escrow Agreement"), which Escrow Agreement shall be entered into prior to the date of such delivery. Except as set forth herein, Tumbleweed shall be responsible for all charges incurred in establishing and maintaining such escrow account. UPS shall be entitled to receive a copy of such Source Code under the circumstances set forth in Section 11(a) above and pursuant to the procedures set forth in the Escrow Agreement. If Tumbleweed corrects any defects in, or provides any revision to, the Software under Section 9 hereof, or under any software maintenance agreement between the parties, Tumbleweed shall simultaneously furnish the escrow agent with a corrected or revised copy of the Source Code for the Software. c. VERIFICATION OF ESCROW DEPOSIT(S). UPS may periodically, but not more frequently than once per year, trigger fresh escrow deposits. UPS shall reimburse Tumbleweed and the escrow agent under the Escrow Agreement for the reasonable expenses incurred in the preparation of such fresh escrow deposits. In addition to triggering fresh deposits, UPS shall have the right, either itself or through a third party designated by UPS, to validate the materials on deposit upon thirty (30) calendar days prior written notice to and in the presence of Tumbleweed, but no more frequently than two (2) times per year. Any third party designated by UPS to validate the materials on deposit shall be required to execute a nondisclosure agreement with Tumbleweed, in a form reasonably satisfactory to Tumbleweed, which nondisclosure agreement shall require that such third party's report to UPS contain only a non-confidential description of results of such validation. Verification shall take place at Tumbleweed's convenience during normal business hours on mutually-designated hardware. Such verification shall be at UPS's expense unless the materials on deposit have not been deposited at the frequency required in Section 11(b) above, in which event Tumbleweed shall bear all costs associated therewith. d. OWNERSHIP OF MODIFICATIONS MADE BY UPS. Any and all Derivative Works to the Source code released from escrow which are made by or on behalf of UPS shall be the sole property of UPS. UPS acknowledges that its ownership of such Derivative Works in no way, form or manner creates or transfers any right or title in the Source code to the underlying Standard Software, and that its ownership rights are limited solely to the Derivative Works. e. SOURCE CODE LICENSE. Upon the occurrence of the release events set forth in Section 11(a), Tumbleweed hereby automatically grants to UPS, a non-exclusive, irrevocable license to Use, reproduce, modify, maintain, support, update, make, have made, and create Derivative Works of the Source code, and to create object code copies of such software thereby created solely to support and enhance the Messaging Service. UPS shall have the right to employ third party contractors to exercise the foregoing license, so long as such third parties are bound by terms no less protective of the Source Code than the terms of this Agreement, including an obligation to protect the confidential and proprietary nature of the Source Code and to use the Source Code only on UPS's behalf and only to the extent necessary to support the foregoing license. Except as incident to the foregoing grant, UPS may not use, reproduce, distribute, create Derivative Works of, publicly perform, publicly display, digitally perform, UPS/Tumbleweed Confidential 40 December 18, 1997 make, have made, sell, offer to sell or import the Source Code. UPS shall continue to pay Royalties, and UPS's failure to make such payments when due shall terminate this source code license. f. DISCONTINUANCE OF MARKETING. If Tumbleweed ceases to market the Standard Software and such marketing is not continued by another Person, or is continued by another Person which UPS for reasonable cause deems unsatisfactory, at UPS's request, UPS and Tumbleweed will enter into good faith negotiations to license the Source code to UPS on commercially reasonable terms. 12. TRAINING SERVICES. In addition to the training outlined in Exhibit G hereto, the License Fees and development fees specified in Section 6 hereof include all costs (other than Tumbleweed's reasonable and actual travel and living expenses) for the following training programs: (i) attendance of up to ten (10) of UPS's technical support personnel at Tumbleweed's two-day system administrator training course, for which course UPS shall have the right to select the topics to be covered based upon training materials supplied to UPS by Tumbleweed in advance of such training; and (ii) training of up to fifteen (15) of UPS's end user support personnel on the Use and operation of the Software. Pursuant to a mutually agreed upon schedule, Tumbleweed shall provide sufficient experienced and qualified personnel to conduct such training at the location(s) designated by UPS. The parties may mutually agree that Tumbleweed shall perform additional training for UPS. Such training may be purchased by UPS, in it sole discretion, at Tumbleweed's standard list price and shall be conducted at a mutually agreed upon time. In addition, if the paries agree that such training shall be performed at any site other than Tumbleweed's Redwood City facility, UPS shall pay all reasonable and actual travel and living expenses incurred by Tumbleweed in performing the training. 13. COMPLIANCE WITH LAWS. a. LICENSES AND PERMITS. Tumbleweed (i) is responsible for obtaining all licenses, authorizations and permits required by applicable legislative enactments and regulatory authorizations, whether United States federal, state, local or otherwise, which are required in connection with the export of the Software from the United States to foreign countries which may reasonably be considered to be "major" markets, and/or in connection with the exercise by UPS and its sublicensees (to the extent of their sublicenses), within the United States, of their respective rights derived from this Agreement; and (ii) has financial responsibility for, and shall pay, all fees and taxes associated with such licenses, authorizations and permits. UPS is responsible for obtaining, and shall pay all fees and taxes associated with, all licenses, authorizations and permits required by applicable legislative enactments and regulatory authorizations, whether United States federal, state, local or otherwise, which are required in connection with the export of the Software from the United States to any and all other foreign countries. With respect to foreign jurisdictions within which UPS will provide the Messaging Service, UPS shall also be responsible for obtaining all licenses, authorizations and permits required by applicable legislative enactments and regulatory authorizations, except with respect to those provided for UPS/Tumbleweed Confidential 41 December 18, 1997 above in this Section 13(a). Notwithstanding the foregoing, upon UPS's reasonable request and subject to UPS's agreement to reimburse any associated costs and reasonable expenses, Tumbleweed will promptly execute all documents and do all acts which may be necessary, desirable or convenient to enable UPS at its expense to obtain such licenses, authorizations and permits. In the event that Tumbleweed has expertise in procuring any such licenses, authorizations or permits, Tumbleweed shall cooperate with UPS to share such information regarding the same. b. CHANGES IN LAW AND REGULATIONS. Tumbleweed shall use reasonable efforts to identify the impact of changes in applicable legislative enactments and regulations on the functions performed by the Software, whether such enactments or regulations are foreign or Untied States federal, state, local or otherwise. Tumbleweed shall notify UPS of such changes and shall work with UPS to identify the impact of such changes on UPS's offering of the Messaging Service. Tumbleweed shall promptly make any resulting modifications to the Software as reasonable necessary as a result of such changes, and shall be responsible for, and shall pay for, the cost of any such changes directly related to Tumbleweed's business. 14. INDEMNIFICATION. a. PROPRIETARY RIGHTS INDEMNIFICATION. Tumbleweed shall indemnify, defend and hold UPS and its Affiliates and Server Sublicensees and their respective officers, directors, agents and employees harmless from and against any and all liabilities, damages, losses, expenses, claims, demands, suits, fines or judgments, including reasonable attorneys' fees, and costs and expenses incidental thereto, which may be suffered by, accrued against, charged to or recoverable from UPS or any of its Affiliates or Server Sublicensees, or their respective officers, directors, agents or employees, arising out of a claim that the Software or Documentation, or any portion thereof, infringes or misappropriates any United States or foreign patent, copyright, trade secret or other proprietary right. In the event that the Software or Documentation, or any portion thereof, is held in a suit or proceeding, or Tumbleweed, in its sole discretion, believes that the software or Documentation may be held, to infringe any rights of any other Person, and the Use of the Software or Documentation or portion thereof is enjoined, or Tumbleweed, believes that the Software or Documentation may be enjoined, Tumbleweed shall, at its sole option and expense, either (i) procure for UPS the right to continue using the Software and Documentation, or (ii) modify the Software and/or Documentation or replace the same with non-infringing software or materials of equivalent functionality and performance. Tumbleweed will not be liable for claims based upon: (w) compliance with UPS specifications, where such specifications would necessarily give rise to infringement (i.e. where alternate implementations of substantially the same functionality would not avoid such infringement); (x) the use or combination of the Software with software, hardware, or other materials not provided or approved by Tumbleweed; (y) any use of a version of the Software which has been altered or modified other than by Tumbleweed or an authorized representative of Tumbleweed, if infringement would not have occurred but for the alteration or modification; or (z) any UPS Intellectual Property incorporated into the Custom Software. UPS/Tumbleweed Confidential 42 December 18, 1997 b. TUMBLEWEED'S GENERAL INDEMNITY. Tumbleweed shall indemnify, defend and hold UPS and its Affiliates, and their respective officers, directors, agents and employees, harmless from and against any and all liabilities, damages, losses, expenses, claims, demands, suits, fines or judgments, including reasonable attorneys' fees, and costs and expenses incidental thereto, which may be suffered by, accrued against, charged to or recoverable from UPS or any of its Affiliates, or any of their respective officers, directors, agents or employees, arising out of or resulting from (i) claims of bodily injury, including death, or loss or damage to property or physical destruction of property arising out of or in connection with any act, error or omission of Tumbleweed or any of its officers, directors, agents, employees or subcontractors, during the term of this Agreement; (ii) the fault or negligence of Tumbleweed in the course of its performance under this Agreement, including, without limitation, performance, nonperformance, or defect in performance or defect in design, or any failure of any license management software (to the extent placed in the software by Tumbleweed) to operate properly, or any statement, misstatement, representation or misrepresentation made by Tumbleweed; or (iii) a reclassification or attempt to reclassify any of Tumbleweed's employees as an employee of UPS, including, without limitation, any tax liability (including interest and penalties) resulting from UPS's failure to pay, deduct or withhold income taxes, Federal Insurance Contribution Act taxes, or Federal Unemployment Tax Act taxes with respect to any of Tumbleweed's employees. c. UPS'S GENERAL INDEMNITY. Except with respect to matters covered by Sections 14(a) and (b) above, UPS shall indemnify, defend and hold Tumbleweed and its officers, directors, agents and employees harmless from and against any and all liabilities, damages, losses, expenses, claims, demands, suits, fines or judgments, including reasonable attorneys' fees, and costs and expenses incidental thereto, which may be suffered by, accrued against, charged to or recoverable from Tumbleweed or any of its officers, directors, agents or employees, arising out of or resulting from claims by third parties, including end user customers of UPS, based upon (i) any representations made by UPS to such third parties which are not supported by the Documentation and/or any other information or materials supplied by Tumbleweed, or (ii) any acts committed by UPS's end user customers during the course of their use of the Messaging Service. IN NO EVENT WILL UPS'S AGGREGATE, CUMULATIVE LIABILITY UNDER THIS SECTION 14 EXCEED [ * ] d. LITIGATION. The parties' respective indemnification obligations hereunder shall require that promptly after a party seeking to be indemnified receives a threat of any action, or a notice of the commencement or filing of any action which may be subject to the provisions of this Section 14, the party seeking indemnification shall notify the other party in writing and tender the matter to said party for resolution or litigation. The indemnifying party shall keep the --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 43 December 18, 1997 other party reasonably apprized of the continuing status of the claims covered by this Section 14, including any lawsuits resulting therefrom, and shall permit the other party, upon such party's written request, to participate (at such party's own expense) in the defense or settlement of any such claim. Neither party shall be required to indemnify for, be bound by, or otherwise incur any liability with respect to, any settlement terms to which it has not agreed; and in such a case, the party has not agreed to the settlement terms shall assume the cost of defending against any such claim and shall select the attorney(s) to defend against such claim subject to the other party's approval, which shall not be unreasonably withheld. 15. CO-PROMOTION AND CO-ADVERTISING. Any and all marketing by Tumbleweed shall exclude co-promoting or co-advertising with, or otherwise licensing the use of any of the Tumbleweed Marks, to: (A) [ * ] (B) any of the following entities for the period ending [ * ], or (xi) any parent or subsidiary of any entity on the above list which is involved in the transportation industry or any successor of any entity on the above list. To the extent that any of the foregoing entities utilize any such Tumbleweed Marks in violation of the foregoing restriction, Tumbleweed will take any and all reasonable steps necessary to enjoin such entity(ies) from using said Tumbleweed Marks. The [ * ] date provided for above in this Section 15 shall be extended on a day for day basis for any slippage in any of the dates set forth in the Implementation Schedule which is caused by Tumbleweed. 16. TERM AND TERMINATION. a. TERM. The term of this Agreement shall be [ * ], subject to any earlier termination hereof pursuant to the express terms and conditions of this Agreement. b. TERMINATION BY TUMBLEWEED; ESCALATION. Tumbleweed may terminate this Agreement for UPS's breach of its payment obligations under Sections 6(a), (b), (c), (d), (g), and may terminate Section 9 of this Agreement for UPS's breach of its payment obligations under Section 6(i) and (j), provided that prior to any such termination (i) the parties shall first engage in good faith in the dispute escalation procedures set forth below, and (ii) if the dispute can be resolved via an accounting audit process, such audit process (as set forth in Sections 6(e) and (o)) shall have been completed. In the event that a dispute arises regarding any payment or withholding of any funds, either party may give the other notice of the existence of a dispute. If the dispute is not resolved in the normal course of business, then each party shall refer the dispute to the following individuals, which individuals shall attempt to settle amicably by good faith discussions such dispute: For UPS: Mark A. Rhoney --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 44 December 18, 1997 For Tumbleweed: Jeffrey C. Smith If the designated individuals are unable to resolve the dispute by such discussions within thirty (30) days (the "Escalation Period"), and the parties have not agreed that the dispute can be resolved via an accounting audit process (or if the parties have agreed that the dispute can be resolved via an accounting audit process, such process has been completed, including the thirty (30) day payment period provided for in Section 6(o)), and if UPS has not paid the disputed amounts within an additional thirty (30) days following the Escalation Period, then Tumbleweed may terminate this Agreement without liability for such termination. No payment by UPS of any disputed amount under this Agreement, whether pursuant to Section 6(o), this Section 16(b) or otherwise, shall constitute a waiver by UPS of its right to pursue any and all claims relating thereto following such payment, provided, however, that UPS shall have provided Tumbleweed written notice of its continued dispute. c. CONSEQUENCES OF TERMINATION. In the event of the termination or expiration of this Agreement, in addition to the parties' other obligations hereunder, (i) all licenses granted by either party to the other hereunder shall terminate, (ii) UPS shall promptly remove all copies of the Tumbleweed-proprietary Software from all servers in UPS's control, (iii) both parties shall promptly remove all references to the other party and its products and/or services from its advertising and other promotional materials, and from its website and any other Internet sites, and (iv) except as otherwise provided to the contrary, all obligations of one party to the other party shall cease. Sections 1, 2(j) (only to the extent any amounts remain due and payable), 2(k), 4(b) (only to the extent any amounts remain due and payable and/or restrictive covenants remain unfulfilled), 5(d), 6 (only to the extent any fees remain due and payable), 10, 13 (only to the extent of any financial obligations thereunder), 14, 15 (except as otherwise expressly provided herein), 16, 17 (except for subsections (a) and (h)) shall survive the termination or expiration of this Agreement. 17. MISCELLANEOUS. a. INSURANCE. Tumbleweed shall, at its own cost and expense, obtain and maintain in full force and effect, with sound and reputable insurers, during the term of this Agreement, the following insurance coverages: (i) Workers' Compensation insurance as required by the law of the state of hire. Tumbleweed shall cause the carrier to provide a waiver of subrogation in favor of UPS for this coverage; (ii) Employer's liability insurance with a minimum limit of [ * ] of liability, and not less than [ * ] aggregate limit of liability per policy year for disease, including death at any time resulting therefrom, not caused by accident; (iii) Comprehensive General Liability insurance, including blanket contractual liability, broad form property damage, and products and completed operations coverage, on an occurrence form insuring against all hazards with a minimum limit of liability for bodily injury, including death resulting therefrom, and property damage in the amount of [ * ] per occurrence. The coverage should also include coverage for personal and advertising injury liability, United Parcel Service of America, Inc. and each of its subsidiaries shall be named as "additional insureds" --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 45 December 18, 1997 under this policy with respect to the Services provided for under this Agreement; (iv) Automobile liability insurance against liability arising from the maintenance or use of all owned, non-owned and hired automobiles and trucks with a minimum limit of liability for bodily injury and/or property damage of [ * ] Combined Single limit. United Parcel Service of America, Inc. and each of its subsidiaries shall be named as "additional insureds" under this policy with respect to the Services provided for under this Agreement; and (v) insurance in the minimum amount of [ * ] for coverage of software errors and omissions, including services rendered and intellectual property infringement claims, with respect to the computer software developed hereunder. Tumbleweed's insurance shall be deemed primary and without right of contribution by UPS. Tumbleweed shall provide UPS with certificates of insurance evidencing the coverages required hereunder within fifteen (15) days after execution of this Agreement. Each policy required hereunder shall provide that UPS shall receive thirty (30) days' advance written notice in the event of a cancellation or material change in such policy. In the event that any of the Services under this Agreement are to be rendered by persons other than Tumbleweed's employees, Tumbleweed shall arrange to furnish UPS with evidence of insurance for such persons subject to the same terms and conditions as set forth above and applicable to UPS prior to commencement of service by such person(s). b. ENTIRE AGREEMENT. This Agreement, including the Exhibits attached hereto and the Specifications which are agreed to by the parties as provided in this Agreement, contains the entire understanding and agreement of the parties with respect to the subject matter hereof, and supersedes any prior written or oral agreements between them with respect thereto. Except as set forth herein, there are no representations, agreements, arrangements or understandings, written or oral, between the parties with respect to the subject matter of this Agreement. This Agreement shall control over any conflicting provisions of any UPS purchase order, Tumbleweed invoice or other business form, and such conflicting provisions are expressly rejected. In the event of any conflict between this Agreement and an Exhibit, the terms of this Agreement shall control. c. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, as such laws are applied to agreements entered into and to be performed entirely within the State of New York between residents of the State of New York. The parties agree that the exclusive jurisdiction and venue for any action relating to this Agreement shall be a federal or state court in the State of New York, and the parties hereby consent to such jurisdiction and venue. d. RELATIONSHIP OF THE PARTIES. Tumbleweed acknowledges, agrees, represents and warrants that it is and has been engaged as an independent contractor, and not as an employee, of UPS, and nothing in this Agreement shall be construed as creating an employer-employee relationship or any partnership or joint venture between UPS and Tumbleweed. Tumbleweed shall be responsible for payment of all federal, state and local business-related and employment-related taxes, withholding and insurance arising out of Tumbleweed's and its subcontractors' activities, including by way of illustration, but not limited to, federal and state --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 46 December 18, 1997 income taxes, social security taxes, unemployment insurance taxes, where applicable, and business license fees, where required. Neither party shall incur any liability on behalf of the other party nor in any way represent or bind such other party in any manner or thing whatsoever, and nothing herein shall be deemed to make either party the agent or legal representative of the other. e. AMENDMENTS AND MODIFICATIONS. No amendment to or modification of this Agreement shall be binding upon either party unless such amendment or modification is reduced to writing, dated and executed by the parties to this Agreement. f. PERSONAL PRONOUNS; HEADINGS. All personal pronouns in this Agreement, whether used in the masculine, feminine or neuter gender shall include all other genders; the singular shall include the plural and vice versa. Titles of all sections and paragraphs in this Agreement are for convenience only and shall neither limit nor amplify the substantive provisions of this Agreement. g. SEVERABILITY. In the event that any one or more of the provisions of this Agreement is determined by a court of competent jurisdiction to be invalid, unenforceable or illegal, such invalidity, unenforceability or illegality shall not affect any other provisions of this Agreement and this Agreement shall be construed as if the challenged provision had never been contained herein. The parties further agree that in the event such provision is an essential part of this Agreement, they will immediately begin negotiations for a suitable replacement provision. h. NO ASSIGNMENT. Neither party may assign its rights or delegate its duties under this Agreement without the other party's prior written consent. Any attempted assignment in violation of the foregoing shall be void and of no effect. Notwithstanding the foregoing, without the consent of the other party, (i) either party may assign its rights and delegate its duties, in whole but not in part, to any successor in interest by asset sale, merger, reorganization, recapitalization or similar transaction, except that UPS's prior written consent shall be required with respect to any delegation or assignment by Tumbleweed to any of the entities listed in Section 15 above, during the period specified therein, and (ii) UPS may assign its rights and delegate its duties to any of its Affiliates. Following any such assignment or delegation by Tumbleweed pursuant to the previous sentence, upon written notice to Tumbleweed (or its successor in interest), UPS shall have the right to (i) cancel any outstanding development Services with respect to any Phase(s) subsequent to Phase II of the Project, (ii) terminate the procurement of Maintenance Services from Tumbleweed pursuant to Section 9 hereof, such termination to be effective one (1) year after the giving of such notice, (iii) convert the licenses granted by Tumbleweed hereunder to irrevocable licenses for the remainder of the [ * ] --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 47 December 18, 1997 term of this Agreement, and (iv) reduce the Royalties payable pursuant to Section 6(b) hereof, for the remainder of the term of this Agreement, to [ * ] actually received by UPS and/or its Affiliates for license fees for the Software [ * ]. The parties' rights and obligations will bind and inure to the benefit of their respective successors and permitted assigns. i. NO WAIVER. The failure of either party at any time to require performance by the other party of any provision of this Agreement shall in no way affect that party's right to enforce such provisions, nor shall the waiver by either party of any breach of any provision of this Agreement be taken or held to be a waiver of any further breach of the same provision. j. NOTICES. Except as otherwise provided herein, and except for notices of failures, errors or other problems with the Software, which may be delivered by phone and confirmed in writing, all notices, requests, demands or other communications required or permitted to be given or made under this Agreement shall be in writing and shall be given by personal service, UPS Next Day Air, telecopy, or by United States certified mail, return receipt requested, postage prepaid to the addresses set forth below, or such other address as changed through written notice to the other party. If to UPS: United Parcel Service 55 Glenlake Parkway Atlanta, Georgia 30328 Attn: Joseph R. Moderow Telecopy: (404) 828-6619 With a copy to Joe Pyne (same address); Telecopy: (404) 828-6619 If to Tumbleweed: Tumbleweed Software Corp. 2010 Broadway Street Redwood City, California 94063 Attn: President Telecopy: (650) 369-7197 --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 48 December 18, 1997 Notice given by personal service shall be deemed effective on the date it is delivered, notice sent by UPS Next Day Air shall be deemed effective one Business Day after dispatch, notice given by telecopy shall be deemed effective on the date of transmission, and notice mailed shall be deemed effective on the third Business Day following its placement in the mail. k. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall be deemed an original, and all of which shall constitute one and the same Agreement. l. CONSTRUCTION. This Agreement shall be construed and interpreted fairly, in accordance with the plain meaning of its terms, and there shall be no presumption or inference against the party drafting this Agreement in construing or interpreting the provisions hereof. m. PERSONNEL RULES AND REGULATIONS. While on the other party's premises, the personnel of each party will comply with all security practices and procedures generally prescribed by such other party. In addition, unless otherwise instructed by UPS, Tumbleweed personnel shall observe the working hours, working rules, holiday schedules and policies of UPS while working on UPS's premises. n. EXHIBITS. The following Exhibits are attached hereto and incorporated herein by reference: Exhibit "A" - Standard Software and Phase I Software and Services Exhibit "B" - Phase II Software and Services Exhibit "C" - Interface Information and Developer Kits Exhibit "D" - Implementation Schedule Exhibit "E" - End User License Terms Exhibit "F" - Source Code Escrow Agreement Exhibit "G" - Marketing Support Services Exhibit "H" - [Reserved] Exhibit "I" - Server Software Sublicense Terms o. LIMITATION OF LIABILITY. EXCEPT WITH RESPECT TO TUMBLEWEED'S OBLIGATIONS UNDER SECTIONS 5, 14(a) (ONLY WITH RESPECT TO THE FIRST SENTENCE THEREOF), 15 AND 17(p) HEREOF, AND EXCEPT WITH RESPECT TO UPS'S OBLIGATIONS UNDER SECTIONS 5, 14(c) AND 17(p) HEREOF AND ITS OUTSTANDING PAYMENT OBLIGATIONS UNDER SECTION 6 HEREOF, AND EXCEPT IN THE EVENT A PARTY BREACHES ITS CONFIDENTIALITY OBLIGATIONS TO THE OTHER PARTY HEREUNDER, IN NO EVENT SHALL EITHER PARTY'S AGGREGATE CUMULATIVE LIABILITY UNDER THIS AGREEMENT EXCEED (I) DURING THE [ --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 49 December 18, 1997 * ] OF THIS AGREEMENT, [ * ]; OR (II) DURING [ * ] OF THIS AGREEMENT, [ * ] PLUS THE AMOUNTS ACTUALLY RECEIVED BY TUMBLEWEED UNDER THIS AGREEMENT IN [ * ] PERIOD PRECEDING THE DATE THE CLAIM IS MADE. p. NO CONSEQUENTIAL DAMAGES. EXCEPT WITH RESPECT TO EACH PARTY'S OUTSTANDING PAYMENT OBLIGATIONS HEREUNDER, IN NO EVENT SHALL EITHER PARTY BE LIABLE IN THE AGGREGATE IN EXCESS OF [ * ] FOR LOST PROFITS OR LOSS OF BUSINESS, OR FOR PUNITIVE, EXEMPLARY, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT (WHETHER FROM BREACH OF CONTRACT OR WARRANTY OR FROM NEGLIGENCE OR STRICT LIABILITY OR OTHERWISE), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION OF LIABILITY SHALL APPLY NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY HEREIN. --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential 50 December 18, 1997 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date first above written. UPS: UNITED PARCEL SERVICE GENERAL SERVICES CO. By: /s/ Joseph M. Pyne ---------------------------- Title: Sr. V.P. ------------------------- Print Name: Joseph M. Pyne -------------------- Tumbleweed: TUMBLEWEED SOFTWARE CORPORATION By: Joseph C. Consul ---------------------------- Title: V.P. Finance, C.F.O. ------------------------- Print Name: Joseph C. Consul -------------------- UPS/Tumbleweed Confidential 51 December 18, 1997 EXHIBIT A STANDARD SOFTWARE AND PHASE I SOFTWARE AND SERVICES [ * ] --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential December 18, 1997 EXHIBIT B PHASE II SOFTWARE AND SERVICES [ * ] --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential December 18, 1997 EXHIBIT C INTERFACE INFORMATION AND DEVELOPER KITS [ * ] --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential December 18, 1997 EXHIBIT D IMPLEMENTATION SCHEDULE [ * ] --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential December 18, 1997 EXHIBIT E END USER LICENSE TERMS United Parcel Service General Services Co. ("UPS") grants to the end-user ("Customer"), under the terms and conditions set forth herein and for so long as Customer has a valid Messaging Service account and is not in breach of this Agreement, a personal, non-exclusive and non-transferable right to use (i) all computer programs, in any form, provided to the Customer in connection with the Messaging Service (in object code form only), and all updates, enhancements and modifications thereto which are provided to the Customer; and (ii) all user documentation including manuals, handbooks and other written materials relating to such programs which are provided to the Customer (together referred to as the "Software"). Customer shall not use the Software for any purpose other than in connection with Messaging Service transactions. 1. All title and ownership rights in the Software remain with UPS and its licensors. Additional copies of the Software must contain the copyright and proprietary notices which are furnished with the original. Customer may not attempt to disable or bypass any functionality or time-limitation mechanisms of the Messaging Service or Software, nor decompile, disassemble, reverse engineer, reverse compile or otherwise reduce the Software to human readable form without prior written consent of UPS; PROVIDED, HOWEVER, that, notwithstanding anything contained herein to the contrary, UPS's authorization shall not be required where reproduction of the Software and translation of its form are indispensable in the European Union to obtain the information necessary to achieve the interoperability of the Software with other programs, provided that: (A) these acts are performed by the Customer or by another person having a right to use a copy of the Software, or on their behalf by a person authorized to do so; (B) the information necessary to achieve interoperability has not previously been readily available to the persons referred to in subparagraph (A); and (C) these acts are confined to the parts of the Software which are necessary to achieve interoperability. 2. UPS warrants that the Software provided by it will perform substantially in accordance with applicable written product specifications provided by UPS to Customer at the time of delivery for a period of [ * ] from the date of delivery. UPS does not warrant that Customer's use of the Software will be uninterrupted or error-free. Customer's sole remedy shall be replacement of the Software. UPS MAKES NO OTHER WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, IN FACT OR IN LAW, --------------- [*]Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential December 18, 1997 INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR TITLE. 3. IN NO EVENT WILL UPS OR ANY OF ITS LICENSORS BE LIABLE FOR INCIDENTAL, SPECIAL, CONSEQUENTIAL OR EXEMPLARY PENALTIES OR DAMAGES (INCLUDING LOST PROFITS, OR PENALTIES AND/OR DAMAGES FOR DELAY IN DELIVERY OR FAILURE TO GIVE NOTICE OR DELAY), EVEN IF UPS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. CUSTOMER AGREES THAT ANY LIABILITY OF UPS HEREUNDER FOR DAMAGES, REGARDLESS OF THE FORM OF ACTION, SHALL NOT EXCEED US$10.00. 4. UPS may terminate this License Agreement after giving written notice to Customer of its failure to satisfy any of its obligations hereunder if Customer then fails to begin taking corrective action within fifteen (15) days after receiving such notice and to resolve such failure within thirty (30) days after receiving such notice. Upon such termination, Customer shall cease all use of all copies of the Software which it received hereunder. In addition, UPS can terminate Customer's right to use the Software in the event Customer ceases to do business or becomes bankrupt. If UPS terminates this Agreement, Customer agrees to return to UPS all copies of the Software, including all copies or partial copies. 5. Any change to this License Agreement must be in writing, signed by both parties. Interpretation of this License Agreement will be governed by the laws of the State of Georgia, excluding (i) its conflicts of law principals; (ii) the United Nations Convention on Contracts for the International Sale of Goods; (iii) the 1974 Convention on the Limitation Period in the International Sale of Goods; and (iv) the Protocol amending the 1974 Convention, done at Vienna April 11, 1980. 6. No rights or licenses with respect to the Software, the names, trademarks, service marks or logos of UPS or any of its licensors, or any other of the intellectual property rights of UPS or any of its licensors, or with respect to rights to offer services provided by the Software to third parties, are granted or deemed granted hereunder or in connection herewith, other than those rights to use the Software which are expressly granted in this Agreement. 7. The Software is a "commercial item," as that term is defined at 48 C.F.R. 2.101 (Oct. 1995), consisting of "commercial computer software" or "commercial computer software documentation" as such terms are used in 48 C.F.R. 12.212 (Sept. 1995). If the Customer is a unit or agency of the United States Government, then the United States Government's rights with respect to the Software are limited by the terms of this Agreement, consistent with 48 C.F.R. 12.212 and 48 C.F.R. 227.7202-1 through 227.7202-4 (June 1995), as applicable. UPS/Tumbleweed Confidential December 18, 1997 8. This Agreement is the complete and exclusive statement of the agreement between UPS and Customer, and this Agreement supersedes any prior proposal, agreement, or communication, oral or written, pertaining to the subject matter of this Agreement. 9. Customer shall comply with all applicable United States export control laws and regulations, and will obtain any export and/or re-export authorizations required under the Export Administration Regulations of the U.S. Department of Commerce and other relevant regulations controlling the export of the Software or related technical data. UPS/Tumbleweed Confidential December 18, 1997 Exhibit F UPS/Tumbleweed Confidential December 18, 1997 EXHIBIT F SOURCE CODE ESCROW AGREEMENT This Agreement is made and entered into as the ___ day of _______, 199__, by and between Tumbleweed Software Corporation, a California corporation with offices at 2010 Broadway Street, Redwood City, California 94063 (hereinafter "Tumbleweed"); United Parcel Service General Services Co., a Delaware corporation with offices at 55 Glenlake Parkway, Atlanta, Georgia 30328 (hereinafter "UPS"); and Data Securities International, a Delaware corporation with offices at 9555 Chesapeake Drive, San Diego, California 92123 (hereinafter "Escrow Agent"). WITNESSETH: WHEREAS, Tumbleweed and UPS have entered into a Software License, Development and Maintenance Agreement more particularly described below pursuant to which Tumbleweed has agreed to license to UPS, its Affiliates, and certain other third parties certain proprietary computer programs in object code form; and WHEREAS, Tumbleweed and UPS have agreed to place the source code corresponding to such computer programs in escrow to be released to UPS upon breach of certain obligations of maintenance and support of such programs undertaken by Tumbleweed, or upon the occurrence of certain other events described herein; NOW THEREFORE, in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby covenant and agree as follows: Section 1 DEFINITIONS For the purposes of this Agreement, in addition to definitions set forth elsewhere in this Agreement, the definitions set forth in this Section shall apply to the respective capitalized terms immediately preceding each definition. Other capitalized terms shall have the meanings set forth in the License Agreement. 1.1 "AGREEMENT." This Source Code Escrow Agreement, including any exhibits, addenda, amendments and modifications hereto. 1.2 "INSOLVENCY EVENT." Any one or more of the following: (1) Tumbleweed's admission in writing of its inability to pay its debts generally as they become due, or (2) a general assignment for the benefit of creditors by Tumbleweed; or (3) voluntary institution of proceedings by Tumbleweed to be adjudicated as bankruptcy; or (4) Tumbleweed's consent to the filing of a petition of bankruptcy against it; or (5) adjudication of Tumbleweed UPS/Tumbleweed Confidential December 18, 1997 by a court of competent jurisdiction as being bankrupt or insolvent; or (6) Tumbleweed's application for reorganization under any bankrupt act or law, or Tumbleweed's consent to the filing of a petition seeking such a reorganization; or (7) the entry of a decree against Tumbleweed by a court of competent jurisdiction appointing a receiver, liquidator, trustee, or assignee in bankruptcy or in insolvency covering all or substantially all of Tumbleweed's property or providing for the liquidation of Tumbleweed's property or business. 1.3 "LICENSE AGREEMENT." The Software License, Development and Services Agreement entered into by the parties as of the 19th day of December, 1997, pursuant to which Tumbleweed has agreed, INTER ALIA, to license the Software to UPS. 1.4 "SUPPORT SERVICES." All warranty, maintenance (customer support), error correction, installation, and other technical assistance respecting the Software required to be performed by Tumbleweed pursuant either to Section 9 of the License Agreement or to any software maintenance agreement(s) then in effect between the parties and that has replaced the provisions of Section 9 of the License Agreement. Section 2 PURPOSE OF AGREEMENT; DEPOSIT OF SOURCE CODE 2.1 DEPOSIT OF SOURCE CODE. The deposit of Source Code and the expanded license thereof to UPS pursuant to Section 11(e) of the License Agreement are intended to provide assurance to UPS of access to, and the right to use, the Source Code in the event, INTER ALIA, that Tumbleweed fails to provide Support Services as required under the License Agreement or any software maintenance (customer support) agreement respecting the Software. In connection therewith, Escrow Agent agrees to accept from Tumbleweed and Tumbleweed agrees to deposit with Escrow Agent, within the time frames set forth in Section 11(b) of the License Agreement, a copy of the Source Code. Tumbleweed will furnish to Escrow Agent a list describing all Source Code so deposited. Such description will be supplemented and updated by Tumbleweed with each subsequent deposit of Source Code. For each deposit, Escrow Agent will issue receipts to Tumbleweed. 2.2 UPDATE AND MAINTENANCE OF SOURCE CODE. During the term of this Agreement, Tumbleweed shall keep the Source Code in escrow fully current by depositing a copy of the Source Code corresponding to each and every Enhancement to the Software licensed to UPS from time to time, such deposits to be completed within the time frames set forth in Section 11(b) of the License Agreement. 2.3 VERIFICATION AND TESTING OF SOURCE CODE. UPS shall have the right to inspect, compile, test and review the Source Code at the time of the initial deposit and at the time of each subsequent deposit of the Source Code in escrow, and from time to time thereafter, to verify that it corresponds to the Software, provided Tumbleweed is given written notice to such verification and testing of the Source Code and provided Tumbleweed is given the right UPS/Tumbleweed Confidential December 18, 1997 to supervise the verification, testing and security of the Source Code. Escrow Agent shall permit such inspections and testing of the same promptly upon request. Such inspections and testing shall be at UPS's expense and shall be conducted at Tumbleweed's premises or at such other location as Tumbleweed may approve, which approval shall not be unreasonably withheld. Section 3 TITLE TO SOURCE CODE Title to the Source Code shall remain in Tumbleweed, but title to the media upon which the Source Code is stored to be deposited in escrow hereunder shall pass to, and vest in, Escrow Agent immediately upon delivery, and in the event the Source Code shall be delivered to UPS pursuant hereto, title to the media upon which the Source Code is stored shall thereupon pass to and vest in UPS. Notwithstanding it ownership of a copy of the Source Code in such event, UPS shall remain subject to the terms of the license granted pursuant to Section 11(e) of the License Agreement with respect to the Use thereof. Section 4 RELEASE OF SOURCE CODE TO UPS 4.1 NOTICE OF DEFAULT; RIGHT TO CURE. If UPS shall conclude in good faith that a release event set forth in Section 11(a) of the License Agreement has occurred (including Tumbleweed's failure in any material respect to provide any Support Services that it is obligated to provide, and such failure has resulted in UPS's inability to use any of the major functional components of the Software), it shall so notify Tumbleweed in writing (the "Initial Notice"). Such notice shall describe such failure in reasonable detail. A copy of such Initial Notice shall be simultaneously delivered to Escrow Agent. For a period of twenty (20) days after receipt of such Initial Notice, Tumbleweed shall have the right to cure the identified failure. In the event that, at the conclusion of such cure period, UPS shall conclude in good faith that the identified failures have not been cured, UPS may so notify both Tumbleweed and Escrow Agent in writing and demand that Escrow Agent release the Source Code to UPS (the "Final Notice"). Notwithstanding the foregoing, in the event that the release event is an Insolvency Event, and in connection therewith, Tumbleweed or its trustee or receiver rejects the License Agreement, UPS shall not be obligated to provide the Initial Notice, and the initial notification by UPS shall be deemed to constitute a Final Notice. 4.2 DISPUTE BY TUMBLEWEED. If Tumbleweed disputes UPS's determination that the identified failure occurred and has not been cured following the expiration of the allowed period. Tumbleweed may so notify Escrow Agent and UPS in writing within four (4) business days after receipt of UPS's Final Notice demanding release of the Source Code. Failure of Tumbleweed to give timely notice of such an objection shall conclusively establish its consent to the release of the Source Code to UPS hereunder, whereupon Escrow Agent shall promptly release a copy of the Source Code to UPS. In the event of a dispute, Escrow Agent will continue to store the Source Code without UPS/Tumbleweed Confidential December 18, 1997 release, pending (a) joint instructions from UPS and Tumbleweed, (b) resolution pursuant to Section 5, or (c) order of a court. 4.3 INJUNCTIVE RELIEF. Tumbleweed and UPS acknowledge and agree that UPS may suffer irreparable harm to its business and operations in the event that release of the Source Code to UPS pursuant to the terms hereof is wrongfully delayed by Tumbleweed, and that UPS may petition for injunctive relief to prevent Tumbleweed from seeking to delay such release. Section 5 ARBITRATION OF DISPUTES RESPECTING RELEASE OF SOURCE CODE 5.1 ARBITRATION OF DISPUTES. In the event of any dispute respecting release of the Source Code under Section 4 hereof, representatives of Tumbleweed and UPS shall meet no later than five (5) days after delivery of Tumbleweed's notice objecting to such release and shall enter into good faith negotiations aimed at curing the deficiencies alleged to exist. If such persons are unable to resolve the dispute in a satisfactory manner within the next five (5) days, either Tumbleweed or UPS may seek binding arbitration in accordance with the terms of this Section 5. 5.2 ARBITRATION PROCEDURE. Upon receipt by Escrow Agent of written notice by Tumbleweed or UPS calling for arbitration with respect to any dispute respecting release of the Source Code under Section 4 hereof, the matter shall be submitted to binding arbitration. Such arbitration shall be conducted under the commercial rules then prevailing of the American Arbitration Association, by a single arbitrator appointed by the American Arbitration Association. Insofar as possible, such arbitrator shall be, at the time of his selection, a partner or manager of a national or regional accounting firm (including the information processing affiliates thereof) not regularly employed by Tumbleweed or UPS, and such arbitrator shall be required to have substantial experience in the field of computer software technology and licensing. The sole issue for arbitration shall be whether Tumbleweed has failed in any material respect to provide any Support Services that it is obligated to provide, in accordance with the terms of the applicable agreement. If the arbitrator shall so determine, he shall forthwith so notify the parties, and Escrow Agent shall forthwith deliver the Source Code to UPS. The decision of the arbitrator shall be final and binding on Tumbleweed and UPS and may be entered and enforced in any court in competent jurisdiction of either party. 5.3 COSTS OF ARBITRATION. The prevailing party in the arbitration proceedings shall be awarded reasonable attorney fees, expert witness costs and expenses, and all other costs and expenses incurred directly or indirectly in connection with the proceedings, unless the arbitrator for good cause determines otherwise. UPS/Tumbleweed Confidential December 18, 1997 Section 6 LICENSE OF SOURCE CODE 6.1 LICENSE. In the event that the Source Code shall be delivered out of escrow to UPS pursuant to the terms of this Agreement, UPS shall be licensed by Tumbleweed, and Tumbleweed does so hereby license UPS subject to such condition, to use the Source Code pursuant to the expanded license terms set forth in Section 11(e) of the License Agreement. 6.2 CONFIDENTIALITY UNDERTAKING. UPS shall treat and preserve the Source Code as a Trade Secret of Tumbleweed in accordance with the terms of Section 10 of the License Agreement, and in no event shall UPS's treatment be less secure than that of UPS's own propriety source code of similar importance. Section 7 FEES OF ESCROW AGENT 7.1 Tumbleweed shall pay to Escrow Agent, annually in advance during the term hereof, the fees of Escrow Agent at the rate prescribed on the attached Exhibit B for its performance of services hereunder. Section 8 LIMITATION ON OBLIGATIONS OF ESCROW AGENT 8.1 LIMITED DUTY OF INQUIRY. Escrow Agent shall not be required to inquire into the truth of any statements or representations contained in any notices, certificates, or other documents required or otherwise provided hereunder, and it shall be entitled to assume that the signatures on such documents are genuine, that the persons signing on behalf of any party thereto are duly authorized to execute the same, and that all actions necessary to render any such documents binding on the party purporting to be executing the same have been duly undertaken. Without limiting the foregoing, Escrow Agent may, in its discretion, require from Tumbleweed or UPS additional documents that it deems to be necessary or desirable to aid in the course of performing its obligations hereunder. 8.2 RIGHT TO INTERPLEADER. Notwithstanding any other provision of this Agreement, in the event Escrow Agent shall receive conflicting demands from Tumbleweed and UPS respecting release of the Source Code to UPS hereunder, Escrow Agent may, in its sole discretion, file an interpleader action with respect thereto in any court of competent jurisdiction. 8.3 RELEASE AND INDEMNIFICATION OF ESCROW AGENT. Tumbleweed and UPS, severally, do hereby release Escrow Agent from any and all liability for losses, damages, and expenses (including attorney fees) that may be incurred on account of any action taken by Escrow Agent in good faith pursuant to this Agreement, and such parties do hereby severally indemnify Escrow Agent and UPS/Tumbleweed Confidential December 18, 1997 undertake to hold harmless Escrow Agent from and against any and all claims, demands, or actions arising out of or resulting from such performance by Escrow Agent under this Agreement. Section 9 CONTINUED ABILITY TO PERFORM OBLIGATIONS The parties hereto respect and warrant that they have full power and authority to undertake the obligations set forth in this Agreement and that they have not entered into, nor will they enter into, any other agreements that would render them incapable of satisfactorily performing their respective obligations hereunder or that would place them in a position of conflict of interest or be inconsistent or in conflict with their respective obligations hereunder. Section 10 TERM OF AGREEMENT The term of this Agreement shall commence on the effective date hereof and shall continue until the Source Code shall be transferred to UPS pursuant to the terms hereof, or, if such transfer shall not have so occurred, this Agreement shall terminate and the Source Code shall be returned to Tumbleweed upon the expiration of the License Agreement, including any renewals of the term thereof. UPS/Tumbleweed Confidential December 18, 1997 Section 11 MISCELLANEOUS 11.1 COMPLIANCE WITH LAWS. The parties hereto agree that they will comply with all applicable laws and regulations of governmental bodies or agencies in their respective performance of obligations under this Agreement. 11.2 NO UNDISCLOSED AGENCY; NO ASSIGNMENT. Each party represents that it is acting on its own behalf and is not acting as an agent for or on behalf of any third party. Escrow Agent may not assign its rights or delegate its duties under this Agreement without the prior written consent of the other parties hereto. Neither Tumbleweed nor UPS may assign its respective rights or delegate its respective duties hereunder except in connection with a permitted assignment and delegation of such party's respective rights and duties under the License Agreement. Notwithstanding any substitution of a new escrow agent, all other terms of this Agreement shall remain in effect. 11.3 NOTICES. All notices, requests, demands or other communications required or permitted to be given or made under this Agreement shall be in writing and shall be given by personal service, UPS Next Day Air, telecopy, or by United States certified mail, return receipt requested, postage prepaid to the addresses set forth below, or such other address as changed through written notice to the other party. If to UPS: United Parcel Service 55 Glenlake Parkway Atlanta, Georgia 30328 Attn: Joseph R. Moderow Telecopy: (404) 828-6619 With a copy to Joe Pyne (same address); Telecopy: (404) 828-6619 If to Tumbleweed: Tumbleweed Software Corp. 2010 Broadway Street Redwood City, California 94063 Attn: President Telecopy: (650) 369-7197 If to Escrow Agent: DSI Contract Administration UPS/Tumbleweed Confidential December 18, 1997 Suite 200 9555 Chesapeake Drive San Diego, CA 92123 Facsimile: (619) 694-1919 Notice given by personal service shall be deemed effective on the date it is delivered, notice sent by UPS Next Day Air shall be deemed effective one Business Day after dispatch, notice given by telecopy shall be deemed effective on the date of transmission, and notice mailed shall be deemed effective on the third Business Day following its placement in the mail. 11.4 GOVERNING LAW. All questions concerning the validity, operation, interpretation, and construction of this Agreement shall be governed by and determined in accordance with the laws of the State of New York, excluding its conflict of law rules. 11.5 NO WAIVER. No party shall, by mere lapse of time, without giving notice or taking other action hereunder, be deemed to have waived any breach by the other party or parties of any of the provisions of this Agreement. Further, the waiver by any party of a particular breach of this Agreement by any other party shall be construed as or constitute a continuing waiver of such breach or of other breaches of the same or other provisions of this Agreement. 11.6 FORCE MAJEURE. No party shall be in default if failure to perform any obligation hereunder is caused solely by supervising conditions beyond such party's control, including acts of God, civil commotion, strikes, labor disputes, or governmental demands or requirements. 11.7 PARTIAL INVALIDITY. If any part, term, or provision of this Agreement shall be held illegal, unenforceable, or in conflict with any law of a federal, state, or local government having jurisdiction over this Agreement, the validity of the remaining portions or provisions hereof shall not be affected thereby. 11.8 COMPLETE STATEMENT OF AGREEMENT. The parties hereto acknowledge that each has read this Agreement, understands it, and agrees to be bound by its terms. The parties further agree that this Agreement is the complete and exclusive statement of agreement respecting the subject matters hereof, and supersedes all proposals (oral and written), understandings, representations, conditions, warranties, covenants, and all other communications between the parties relating hereto. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective duly authorized representatives as set forth below: UPS/Tumbleweed Confidential December 18, 1997 Tumbleweed Software Corp. United Parcel Service General Services Co. By: By: ------------------------------ ---------------------------------------- Title: Title: --------------------------- ------------------------------------- Date: , 199 Date: , 199 --------------------- -- ------------------------------- -- Data Securities International, Inc. By: ------------------------------ Title: --------------------------- Date: , 199 --------------------- -- UPS/Tumbleweed Confidential December 18, 1997 EXHIBIT G MARKETING SUPPORT SERVICES [ * ] --------------- *Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. UPS/Tumbleweed Confidential December 18, 1997 Exhibit H [Reserved] UPS/Tumbleweed Confidential December 18, 1997 EXHIBIT I SERVER SOFTWARE SUBLICENSE TERMS -------------------------------- Any agreement between UPS and any Server Sublicensee shall contain rights consistent with those enumerated in the Agreement, except that the agreement must also include terms at least as protective of Tumbleweed's interests in the Server Software and Custom Server Software (collectively, the "Server Software") and in the Client Software and Custom Client Software (collectively, the "Client Software" which, with the Server Software, is collectively referred to herein as the "Software") as the following: 1. RESTRICTIONS. The license grant to use the Server Software and reproduce and distribute the Client Software is not transferable, assignable or sublicenseable. Server Sublicensee shall not, nor shall it authorize a third party to, decompile, reverse engineer or disassemble the Software except where such conduct is explicitly permitted under local law. Server Sublicensee agrees to pay all required licensing fees and not to exceed the scope of the licenses granted under the Agreement. Server Sublicensee acknowledges and agrees that Tumbleweed may, at any time without notice, incorporate license management software into the Server Software to prevent Server Sublicensee from exceeding the scope of its license. Neither UPS nor Tumbleweed has provided any license of its trademarks to Server Sublicensee. 2. OTHER RESTRICTIONS. Server Sublicensee shall retain any End User license agreements included with the Client Software. Server Sublicensee shall not remove, modify or obscure any proprietary rights notices in the Software or logos or trademarks displayed in the Software or any documents automatically generated by it. Server Sublicensee shall not distribute, in connection with the Software or in the performance of reselling messaging services, any viruses, trojan horses, worms, time bombs, cancelbots or other programs containing computer programming defects which are intended to damage or detrimentally interfere with a user's system or data. 3. OWNERSHIP. Except as otherwise provided in this Agreement, UPS and its suppliers (including, without limitation, Tumbleweed) shall retain all rights, title and interest in and to all copyrights, trademarks, trade secrets, patents and all other industrial and intellectual property embodied in or appurtenant to the Software. There are no implied licenses under this Agreement, and any rights not expressly granted to Server Sublicensee hereunder are reserved by UPS or its suppliers. 4. AUDIT RIGHTS. Server Sublicensee will keep for 3 years proper records and books of account relating to Server Sublicensee's activities regarding the Software. Once every 12 months, UPS or its designee may inspect such records to verify Server Sublicensee's statements. Any such inspection will be conducted on Server Sublicensee's office in a manner that does not unreasonably interfere with Server Sublicensee's business activities. Server Sublicensee shall immediately make any overdue payments disclosed by the audit. Such inspection shall be at UPS's expense; PROVIDED, HOWEVER, if the audit reveals overdue payments in excess of 5% of the payments owed to date, Server Sublicensee shall immediately pay the cost of such audit, and UPS may conduct another audit during the same 12 month period. Server Sublicensee will make available to UPS all relevant records, including but not limited to all records relating to activities outside of the United States. 5. DISCLAIMER OF WARRANTY; NO PASS THROUGH. UPS shall be responsible for any warranties extended to Server Sublicensee regarding the Software, except that UPS shall have the UPS/Tumbleweed Confidential December 18, 1997 right to pass through to Server Sublicensee the proprietary rights indemnification of Tumbleweed, as set forth in Section 14(a) of the Agreement. TUMBLEWEED AND ITS SUPPLIERS DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. Server Sublicensee shall make no warranties to End Users on behalf of UPS or its suppliers. 6. SERVER SUBLICENSEE'S INDEMNITY. Server Sublicensee shall indemnify UPS and its suppliers against any and all claims, losses, costs and expenses, including reasonable attorneys' fees, which any of them may incur as a result of claims in any form by third parties, including End Users, based upon (i) any representations made by Server Sublicensee to such third parties which are not supported by the Documentation and/or any other information or materials supplied by UPS and/or its suppliers, or (ii) any acts committed by Server Sublicensee's End Users during the course of their use of the Software. 7. LIMITATIONS ON LIABILITY. EXCEPT FOR ANY BREACHES OF SECTIONS RELATING TO LICENSE GRANTS OR CONFIDENTIALITY, IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR LOST PROFITS OR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT (WHETHER FROM BREACH OF CONTRACT OR WARRANTY OR FROM NEGLIGENCE OR STRICT LIABILITY), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION OF LIABILITY SHALL APPLY NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY HEREIN. EXCEPT FOR TUMBLEWEED'S INDEMNIFICATION OBLIGATIONS, IN NO EVENT SHALL TUMBLEWEED'S LIABILITY TO SERVER SUBLICENSEE EXCEED THE AMOUNTS ACTUALLY RECEIVED BY TUMBLEWEED ATTRIBUTABLE TO SERVER SUBLICENSEE. 8. GENERALLY. At its own expense, Server Sublicensee shall comply with all applicable laws, regulations, rules, ordinances and orders regarding its activities related to this Agreement. Without limiting the foregoing: (a) Server Sublicensee shall fully comply with the relevant export administration and control laws and regulations, as same may be amended from time to time, to ensure that the Software is not exported (directly or indirectly) in violation of United States law. (b) Server Sublicensee shall comply with the U.S. Foreign Corrupt Practices Act and shall not make any payments to third parties which would cause UPS (or any of its suppliers) or Server Sublicensee to violate such laws. 9. GOVERNMENT END USERS. The Software is a "commercial item," consisting of "commercial computer software" and "commercial computer software documentation," and is provided to the U.S. Government only as a commercial end item. UPS/Tumbleweed Confidential December 18, 1997 EX-10.6 10 EXHIBIT 10.6 Exhibit 10.6 Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. (Translation) DATE: MAR. 31, 1999 POSTA LICENSE AND DISTRIBUTION AGREEMENT This Agreement is made and entered into by and between K.K. HIKARI TSUSHIN (hereinafter referred to as "Kou") and Tumbleweed Software, K.K. (Hereinafter referred to as "Otsu") in connection with Posta System with respect to which Tumbleweed is authorized to license and distribute. Article 1 (Grant of License and Distribution Right) 1. Otsu hereby grants to Kou a non-exclusive license (hereinafter referred to as the "License") to provide certain services (hereinafter referred to as the "Services") to Kou's users for a consideration by using Posta System (hereinafter referred to as the "Products"). The scope of the Products covered by this Agreement will be separately designated by Tumbleweed. 2. Otsu hereby grants to Kou a non-exclusive right (hereinafter referred to as the "Distribution Right") to sell the Products to certain customers (in this Agreement a customer shall mean a third party who will use the Products for such internal purposes as authorized by Tumbleweed). Kou may lease the Products to its customers in place of the sale of the Products at request of such customers. Article 2 (Payment) In consideration of the License and the Distribution Right set forth in Article I hereof, Kou shall pay the following amounts plus consumption tax thereon at the time of the execution of this Agreement: - In consideration of acquisition of the License [ * ] payable to Tumbleweed; --------------- *Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. - In consideration of acquisition of the Distribution Right, [ * ]payable to Tumbleweed; and - As a minimum license fee for the initial contract year are [ * ] and [ * ] payable to Tumbleweed as a first payment in this date of contract. After that, three months later, six months later, [ * ]. But, it isn't kept if this contract ends with the responsibility of Otsu before the payment completes. Article 3 (Compliance) Kou shall comply with the rules, regulations, instructions, etc. prescribed by Otsu and shall exert its sincere effort to expand the market share for the Services and Products when Kou exercises the rights granted by Article I hereof. Article 4 (Restrictions) 1. Unless otherwise explicitly provided for in this Agreement, Kou shall not transfer, sublicense or loan Kou's rights. 2. Kou shall not provide the Services outside of Japan and shall not directly or indirectly sell or distribute the Products outside of Japan. 3. Kou shall not reproduce, amend source code, reverse engineer or decompile the Products in any method whatsoever. Otsu shall be entitled to insert administration software into the Products without prior notice at any time in order to prevent Kou or Kou's users or customers from conducting any activities beyond the extent authorized by Otsu in advance. 4. Any trademarks, copyright indications, advertisements and promotions in relation to the Products and the Services will be subject to mutual agreement both Kou and Otsu. Article 5 (Training in relation to the Products) --------------- *Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. 2 Kou may receive training in relation to the Products in such method, period and content as designated by Otsu. Under this Agreement, Kou may receive such training free of charge only [ * ] of this Agreement to the extent that three or less persons for each occasion will receive the training for one time each of education of API and Posta administrators. Upon request of Kou, any other training and education than the above-mentioned training will be provided by Otsu for a consideration in such way as separately designated by Otsu. Article 6 (Invoice Price) The invoice prices of the Products shall be equal to the respective amounts set forth in such invoice price table as separately designated by Otsu plus consumption tax thereupon. Article 7 (Appointment of Sub-distributors) Kou may appoint a sub-distributors of the Products with notify to Otsu's. Article 8 (Loan of the Products for Providing the Services) In the event that Kou intends to provide the Services to its users for a consideration by using the Products, Otsu will loan such number of the Products as necessary for providing the Services free of charge only during the effective term of this Agreement. Provided that the free loan of the Products shall be subject to the completion of the payment set forth in Article 2 hereof. Article 9 (Protection of Third Party Licensor's Copyright) Kou acknowledges that such software of a third party licensor (hereinafter referred to as the "Licensor") as is integrated with the Products shall be used --------------- *Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. 3 for the sole purpose of transmission of files by using the Products and that the Licensor's software shall not be separated from the Products and shall not be used independently. Kou shall make a notification thereof to any customers (who will use the Products) and any users (who will use the Services provided by Kou) and shall have them comply with the above restrictions. Article 10 (Payment of Running Royalty) 1. In the event that any sales volume of Kou exceeds such number of delivery of files or such number of users as is covered by the [ * ] minimum license fees after Kou commences to provide the Services by using the Products, Kou shall pay Otsu such running royalty (plus consumption tax thereupon) as will be separately designated by Otsu. 2. Kou shall prepare, maintain and provide to Otsu accurate records based upon which the above running royalty shall be calculated. During the effective period of this Agreement and thereafter Otsu and its designee(s) shall be entitled to examine and make each copy of the above records. 3. In accordance with the terms of this Agreement, Otsu will send Kou an invoice covering the running royalty. Such invoice will be closed at the end of the month in the invoice is received by Kou, who shall pay the amount designated in the invoice by remitting the same to such bank account as separately designated by Otsu no later than the end of the following month. Article 11 (Sales Plan) Kou shall prepare sales plans for the Products an the Services provided by using the Products in such a form as separately designated by Otsu. Kou shall submit to Otsu such plans every three months on the date separately designated. --------------- *Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. 4 Article 12 (Supply of the Products) Any individual sales agreement of the Products shall become effective when Kou places an order to Otsu for shipment of the Products and such order is approved by Otsu orally or in writing. Otsu shall deliver the Products to such place as designated by the order. Article 13 (Payment of Sales Price of the Products) After delivering the Products to such place as designated by Kou, Otsu will send an invoice of sales price of the Products to Kou in accordance with the terms of this Agreement. The invoiced amount shall be closed at the end of the month in which the invoice is received by Kou, who shall pay the amount designated in the invoice by remitting the same to such bank account as separately designated by Otsu no later than the end of the after three month. Article 14 (Entrustment of Maintenance Services) With respect to maintenance services for the Products to be provided by Kou to a customer, Kou shall enter into a maintenance agreement with such customer with cooperation of Otsu. Kou shall pay Otsu annual maintenance fees which will be separately designated by Otsu. Article 15 (Prohibition of Modification) Kou shall not modify the Products and shall prevent its customers and users from modifying the Products unless otherwise agreed upon by Otsu in writing and in advance. Article 16 (Provision of APIs) 1. At Kou's request, Otsu will provide Kou with APIs in order for Kou to integrate the Products into any other software. In such event, Kou shall enter into a separate API license agreement as will be designated by Otsu. 2. In the event that Kou intends to integrate the Products with any other software by using APIs, Otsu will provide Kou with technical support 5 upon Kou's request. Terms and conditions of supply of such technical support will be determined by both parties upon mutual consultation depending upon the content of technology required by Kou. 3. The ownership of any media containing APIs belongs to Otsu and any and all rights relating to APIs will be reserved by Otsu or its licensors. Article 17 (Termination) 1. In the event that Kou or Otsu falls under any of the following, the other party shall be entitled to forthwith terminate this Agreement without any demand or notice. In such event, all of Kou's or Otsu's debts to the other party shall become due and payable and Kou or Otsu shall forthwith pay all amounts thereof to the other party: (a) If the party is subject to any provisional attachment, preliminary injunction, attachment, or any petition for bankruptcy and reorganization or any other legal proceeding which will be likely to interfere with the business of the party; (b) If the party transfers any right or obligation arising hereunder to any third party or causes any third party to take over the same; or (c) If the party breaches any of the provisions of this Agreement. 2. In the event that Otsu's right to use the Licensor's software which constitutes components of the Products expires or terminates for whatever reasons, Otsu may forthwith terminate this Agreement. 3. Upon any expiration or termination of this Agreement, Kou shall not be entitled to request any compensation from Otsu due to loss of the License and the Distribution Right, etc. Article 18 (Warranty and Damages) 1. In the event that there is a defect in media of the Products for any reason attributable to Otsu, Otsu's liability shall be limited to replacement of the non-defective products or repayment of the purchase price of the Products. 6 2. Users of the Products (namely, any of Kou, Kou's customers and users) shall be responsible for any use, operation and administration of the Products and Otsu shall not be liable for any damage of those users arising from the use of the Products. Article 19 (Confidentiality) During the effective period of this Agreement and thereafter, Kou shall not disclose to any third party any technical or business confidential information which is obtained by Kou under this Agreement or in connection with any transaction hereunder and shall not use such confidential information for any other purposes than that of this Agreement. Upon expiration or termination of this Agreement, Kou shall return to Otsu the Products loaned to Kou hereunder, media containing APIs and any other materials including Otsu's confidential information (together with all copies thereof). Article 20 (Term, etc.) This Agreement shall become effective as of the date when both parties have affixed their names and seals hereon and shall remain in force and effect for [ * ] thereafter. Unless otherwise indicated by either party no later than one month prior to any expiration date, this Agreement shall be automatically renewed for additional [ * ] periods under the same conditions hereof. Provided that no initial payment for acquisition of the License and the Distribution Right shall be required in any renewal period and annual minimum license fees applicable to any renewal period shall be agreed upon in advance based upon mutual consultation with Otsu. Article 21 (Good Faith) 1. Kou and Otsu shall cooperate with each other to sincerely perform this Agreement in good faith. --------------- *Confidential treatment has been requested with respect to certain information contained in this document. Confidential portions have been omitted from the public filing and have been filed separately with the Securities and Exchange Commission. 7 2. With regard to any matters not provided for in this Agreement or any matters that may [be] subject to dispute, both parties shall discuss such matters in good faith. In the event any dispute arises between the parties in connection with this Agreement, the Tokyo District Court shall have an exclusive jurisdiction for the first instance. Article 22 (Jurisdiction) In the event any dispute arises between the parties in connection with this agreement, the Tokyo District Court shall have an exclusive jurisdiction for the first instance. IN WITNESS WHEREOF, Kou and Otsu have executed this Agreement by affixing their names and seals in duplicate, one copy of which is retained by each of the parties. (Kou): 2-1-1 Otemachi Chiyoda-ku Tokyo K.K. HIKARI TSHUSHIN President Yasumitsu Shigeta (Otsu): Kanetatsu Bldg. 5F 2-17 Hayabusa-cho Chiyoda-ku Tokyo Tumbleweed Software K.K. Representative Shinji Eura 8