Fill and Sign the Services Agreement Dated as of July 1 1999 by Form

SERVICES AGREEMENT, DATED AS OF JULY 1, 1999, BY AND BETWEEN THE COMPANY AND SAND HILL SYSTEMS, INC. THIS SERVICES AGREEMENT by and between Portola Packaging, Inc., a Delaware corporation ("Portola"), and Sand Hill Systems, Inc., a Delaware corporation ("Sand Hill"), is dated as of the1st day of July, 1999. R E C I T A L S A. Sand Hill is a wholly-owned subsidiary of Portola. B. Portola is providing and intends to continue to provide certain services defined in Section 2 below (the "Services") in respect of personnel, facilities and equipment to Sand Hill. C. Sand Hill wishes to receive these Services. D. The parties have previously agreed to have Sand Hill make payment for the Services in the form of an unsecured Promissory Note. NOW THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: A G R E E M E N T 1. Term. Portola shall provide Services to Sand Hill until the date that the Services heretofore rendered and to be rendered have an aggregate value of Three Million Five Hundred Thousand ($3,500,000). This Agreement shall terminate, and Portola shall no longer be obligated to provide Services, on the earlier of that date or March 31, 2000 (the "Termination Date"). All Services heretofore or hereafter rendered shall be valued by Portola in its sole discretion, provided such valuations shall not be unreasonable under the circumstances. 2. Services Provided. The Services, as this term is used in this Agreement have consisted and shall consist of the following as well as of other services as the parties may agree in the future: 2.1 Fully serviced office space at Portola's facilities located at 850, 860 and 890 Faulstich Court in San Jose, California, to the extent available and not otherwise used by Portola for otherpurposes. 2.2 Administration services provided by senior executives of Portola including, without limitation, Jack L. Watts, Laurie D. Bassin, James A. Taylor, Dennis Berg and Pete Schneider. 2.3 General and administrative services such as the following: (i) Preparation of periodic payroll, payroll tax filings, W-2 preparation and all other services relating to the handling of Sand Hill's payroll. (ii) General ledger processing and financial statement reconciliation, including preparation of monthly financial statements and other month-end, quarter-end and year-end actions associated with closing the books of Sand Hill for those periods. (iii) External audit assistance and data compilation. (iv) Budget analysis. (v) Services relating to human resources matters, such as administering employee health and workers' compensation claims (for both those employees continuing to be employed by Portola and those employed directly by Sand Hill). (vi) Services in connection with insurance matters, such as casualty, liability and product liability claims, both for and against Sand Hill. (vii) Miscellaneous matters such as accounts payable processing, check preparation, disbursements, travel and other expense advances processing and control, cash deposit, handling and application, bank liaison, management of short term investments of cash, fixed asset reporting and control, external audit assistance and data compilation, compliance with governmental reporting requirements, training, safety and security and corporate communications. In order that Portola may provide the accounting services specified above, Sand Hill shall provide Portola with all necessary backup documentation on a monthly basis by not later than the fifth day of each next succeeding month. 2.4 Provision of full-time employees as set forth on Exhibit "A" hereto (the "Sand Hill Employees") and other employees as the parties may later agree. 2.5 Use of the computers, office furniture and other equipment as set forth on Exhibit "B" hereto (the "Sand Hill Equipment"). 2.6 Access to Portola's telephone network. 2.7 Access to Portola's internal e-mail system. 2.8 Occasional use of Portola's other facilities and equipment as reasonably necessary to execute Sand Hill's business plan. 2.9 Legal services. 2.10 Portola shall perform its obligations under this Agreement in an efficient, professional and competent manner. Portola represents that it currently has and during the term of this Agreement will continue to employ competent personnel who are capable of performing, and willing and sufficient in number to perform, its obligations hereunder. 3 Payment. The parties having agreed from the inception of Portola's providing of Services that payment therefor shall be by promissory note, Sand Hill hereby delivers to Portola its Promissory Note substantially in the form of Exhibit "C" hereto, and Portola hereby accepts said Note in payment for all Services. 4. Miscellaneous. 4.1 Governing Laws. IT IS THE INTENTION OF THE PARTIES HERETO THAT THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, U.S.A. (IRRESPECTIVE OF ITS CHOICE OF LAW PRINCIPLES) SHALL GOVERN THE VALIDITY OF THIS AGREEMENT, THE CONSTRUCTION OF ITS TERMS, AND THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO. THE PARTIES HEREBY EXCLUDE THE UNITED NATIONS CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS FROM THIS AGREEMENT. 4.2 Arbitration. The parties agree that all disputes arising under this Agreement shall be finally settled under the Commercial Rules of Arbitration of the American Arbitration Association by a single arbitrator appointed in accordance with said rules. The award of any such arbitrator may be entered and enforced in any court of competent jurisdiction, including without limitation, the Federal District Court for the Northern District of California or the Superior Court for the County of Santa Clara, California. 4.3 Other Provisions. This Agreement is binding upon and inures to the benefit of the successors and assigns of the parties hereto. This Agreement constitutes the entire understanding and agreement of the parties with respect to the subject matter hereof. This Agreement may only be amended or observance of any terms of this Agreement may be waived only by a writing signed by the party to be bound thereby. Should suit or arbitration be brought to enforce or interpret any part of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees to be fixed by the court or arbitrator. Nothing contained in this Agreement shall be deemed or construed as creating a joint venture or a partnership between the parties hereto. Neither party shall have any power or authority to bind or commit the other. 4.4 Notices. Whenever either party hereto desires or is required to give any notice, demand or request with respect to this Agreement, each such communication shall be in writing and shall be given or made by telecopy, telegraph, cable, mail or other delivery and telecopied, telegraphed, cabled, mailed or delivered to the intended recipient at the addresses specified below: If to Portola: Portola Packaging, Inc. 890 Faulstich Court San Jose, California 95112 Telecopy: (408) 453-8462 Attn: President with a copy to : Themistocles G. Michos, Esq. Vice President and General Counsel of Portola 221 Main Street, 16th floor San Francisco, CA 94105 Telecopy: (508) 437-0399 If to Sand Hill: Sand Hill Systems, Inc. 2400 Sand Hill Road, Suite 201 Menlo Park, CA 94025 Telecopy: (650) 854-1578 with a copty to: Timothy Tomlinson, Esq. Tomlinson Zisko Morosoli & Maser LLP 200 Page Mill Road, 2nd Floor Palo Alto, CA 94306 Telecopy: (650) 324-1808 Except as may be otherwise provided in this Agreement, all such communications shall be deemed to have been duly given when transmitted by telecopier with verified receipt by the receiving telecopier, when delivered to the telegraph or cable office, when personally delivered, two (2) days after being delivered to an air courier (e.g. DHL, or Federal Express) upon proof of delivery, or, in the case of a mailed notice, four (4) days after being deposited certified or registered mail, postage prepaid. Either party may change its address for such communications by giving notice thereof to the other party in conformance with this section. IN WITNESS WHEREOF, the parties hereto have made and entered into this Agreement as of the day and year first below written. PORTOLA PACKAGING, INC. By: /s/ James Taylor ------------------- James Taylor, Chief Financial Officer SAND HILL SYSTEMS, INC. By: /s/ Jack L. Watts -------------------- Jack L. Watts, President and Chief Executive Officer