<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
- -----
Exchange Act of 1934 for the quarterly period ended June 30, 1997
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- -----
Exchange Act of 1934 for the transition period from _____ to _____.
Commission File Number: 0-27468
ULTRADATA CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 94-2746681
<S> <C>
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
5000 Franklin Drive, Pleasanton, CA 94588-3031
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code:
510/463-8356
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of August 7, 1997, Registrant had outstanding 7,575,291 shares of Common
Stock, $.01 par value.
================================================================================
<PAGE>
ULTRADATA CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART 1 FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Balance Sheets as of June 30, 1997 and December 31, 1996 1
Statements of Operations for the Three Months and Six Months
Ended June 30, 1997 and 1996 2
Statements of Cash Flows for the Six Months Ended June 30,
1997 and 1996 3
Notes to Financial Statements 4
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
ITEM 4 - Submission of Matters to a Vote of Securityholders 10
PART II OTHER INFORMATION
ITEM 6 - Exhibits, Financial Statements Schedules, and
Report on Form 8-K 11
SIGNATURES 12
</TABLE>
<PAGE>
ULTRADATA CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DEC 31,
1997 1996
----------- -------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 1,107 $ 1,583
Short term investments 453 1,420
Restricted cash 657 --
Trade accounts receivable, net 3,667 6,586
Unbilled revenues 3,581 3,870
Inventories 794 1,173
Prepaid expenses and other current assets 762 1,027
Income taxes receivable -- 958
------- -------
Total current assets 11,021 16,617
Property and equipment, net 4,773 3,532
Other assets 74 254
------- -------
$15,868 $20,403
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Bank Borrowings $ 657 $ 96
Accounts payable 2,641 3,659
Accrued expenses 1,965 2,008
Deferred revenue and customer advances 2,908 3,508
------- -------
Total current liabilities 8,171 9,271
Deferred revenue and customer advances 1,442 1,313
Bank Borrowings, excluding current portion --- 323
------- -------
Total liabilities 9,613 10,907
------- -------
Stockholder's' equity:
Preferred stock; par value $.001;
2,000,000 shares authorized; none
outstanding --- ---
Common stock; par value $.001;
23,000,000 shares authorized;
7,575,740 and 7,526,313 shares
issued and outstanding;
in 1997 and 1996, respectively 8 7
Additional paid in capital 15,114 14,941
Accumulated deficit (8,867) (5,452)
------- -------
Total stockholders' equity 6,255 9,496
------- -------
$15,868 $20,403
======= =======
</TABLE>
See accompanying notes to condensed financial statements
1
<PAGE>
ULTRADATA CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Software $2,101 $ 4,975 $ 3,140 $ 8,130
Maintenance 2,571 2,008 5,107 3,956
Services and other 1,984 2,055 3,290 3,930
Hardware 2,052 3,910 3,682 9,033
------- ------- ------- -------
Total revenues 8,708 12,948 15,219 25,049
------- ------- ------- -------
Cost of revenues:
Software 248 849 500 1,669
Maintenance 1,515 1,187 3,132 2,194
Services and other 1,838 2,142 3,030 3,865
Hardware 1,424 2,916 2,655 6,296
------- ------- ------- -------
Total cost of revenues 5,025 7,094 9,317 14,024
------- ------- ------- -------
Gross margin 3,683 5,854 5,902 11,025
------- ------- ------- -------
Operating expenses:
Product development 1,105 1,356 2,497 2,774
Selling, general and administrative 3,250 3,531 7,073 6,750
------- ------- ------- -------
Total operating expenses 4,355 4,887 9,570 9,524
------- ------- ------- -------
Operating (loss) income (672) 967 (3,668) 1,501
Interest income (expense), net (5) 122 (1) 177
Other income 238 17 254 44
------- ------- ------- -------
(Loss) income before income taxes (439) 1,106 (3,415) 1,722
Income tax expense --- 409 --- 637
------- ------- ------- -------
Net (loss) income $ (439) $ 697 $(3,415) $ 1,085
======= ======= ======= =======
Net (loss) income per common and common
equivalent share $ (0.06) $ 0.09 $ (0.45) $ 0.15
======= ======= ======= =======
Shares used in per share computations 7,575 7,810 7,567 7,317
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed financial statements
2
<PAGE>
ULTRADATA CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
IN THOUSANDS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1997 1996
-------- -------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (3,415) $ 1,085
Adjustments to reconcile net income
(loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 599 492
Deferred income taxes -- 181
Gain on sale of joint venture (238) --
Loss of disposition of property and equipment 17 --
Equity in earnings of unconsolidated subsidiary (16) (44)
Changes in operating assets and liabilities:
Trade accounts receivable 2,919 (916)
Unbilled revenues 289 (6,243)
Inventories 379 (790)
Prepaid expenses and other assets 199 81
Income taxes receivable 958 --
Accounts payable (1,018) (693)
Accrued expenses (43) 1,166
Income taxes payable -- 414
Deferred revenue and customer advances (471) (2,041)
-------- -------
Net cash (used for) provided by operating activities 159 (7,308)
-------- -------
Cash flows from investing activities:
Capital expenditures (1,857) (1,292)
Sale of investment in joint venture 500 ---
Sale of short term investments 967 ---
Decrease of stockholders notes receivable --- 1,453
-------- -------
Net cash provided by (used for) investing activities (390) 161
-------- -------
Cash flows from financing activities:
Bank borrowings, net 592 (1,000)
Repayment of debt (354) (220)
Restricted cash (657) ---
Net proceeds from issuance of stock 174 ---
Net proceeds from initial public offering --- 14,279
-------- -------
Net cash provided by (used for) financing activities (245) 13,059
-------- -------
Net increase (decrease) in cash (476) 5,912
Cash and cash equivalents at beginning of period 1,583 1,124
-------- -------
Cash and cash equivalents at end of period $ 1,107 $ 7,036
======== =======
</TABLE>
See accompanying notes to condensed financial statements
3
<PAGE>
ULTRADATA CORPORATION
Notes to Condensed Financial Statements
June 30, 1997 and 1996
1. BASIS OF PRESENTATION
These unaudited financial statements have been prepared in accordance with the
instructions for Form 10-Q and therefore certain information and footnote
disclosures normally contained in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.
These statements should be read in conjunction with the financial statements
contained in the Company's report on Form 10-K for the year ended December 31,
1996.
The accompanying unaudited financial statements of the Company reflect all
adjustments of a normal recurring nature which are, in the opinion of
management, necessary to present a fair statement of the financial position as
of June 30, 1997 and the results of operations and cash flows for the interim
periods presented.
2. REVENUE RECOGNITION
The Company recognizes revenues from licenses of computer software provided that
a noncancelable license agreement has been signed, the software and related
documentation have been shipped, there are no material uncertainties regarding
customer acceptance, collection of the resulting receivable is deemed probable,
and no other significant vendor obligations exist. Maintenance revenues are
deferred and recognized over the related contract period, generally three months
to five years. Services and other revenues generated from professional
consulting and training services and software customization services are
recognized as the services are performed. Hardware revenues are recognized upon
shipment.
3. RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB)recently issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share" which is
effective for annual and interim periods ending after December 31, 1997. SFAS
No. 128 requires the presentation of basic earnings per share ("EPS") and, for
companies with complex capital structures or potentially dilutive securities,
such as convertible debt, options and warrants, diluted EPS. Had SFAS No. 128
been effective for the quarter and six months ended June 30, 1997, basic EPS and
diluted EPS would not have been significantly different from the reported net
loss per share. The FASB also recently issued SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 130 and 131 are effective for
fiscal 1998. The company is currently evaluating the impact of these statements
on the financial statements.
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS INCLUDES A NUMBER OF FORWARD-LOOKING STATEMENTS WHICH REFLECT THE
COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE.
THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES,
INCLUDING THOSE DISCUSSED BELOW AND IN THE OTHER REPORTS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, THAT COULD CAUSE RESULTS TO DIFFER
MATERIALLY FROM HISTORICAL RESULTS OR THOSE ANTICIPATED. IN THIS REPORT THE
WORDS "EXPECTS", "ANTICIPATES", "BELIEVES" AND SIMILAR EXPRESSIONS IDENTIFY
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF.
OVERVIEW
The Company provides open architecture, fully-integrated on-line information
management solutions that enable relationship-oriented financial institutions to
efficiently manage their businesses and offer real-time customized financial
services 24 hours per day, seven days per week. These solutions allow the
Company's customers to provide among other things financial services such as
checking, savings and investment accounts, credit and debit cards, ATM access
and consumer lending. The Company's products are currently targeted primarily
to large and mid-sized credit unions.
The Company derives its revenues from software license fees, maintenance fees,
service bureau operation fees and disaster recovery services, custom
development, training and installation services and sales of third party
software and hardware products. A significant portion of the Company's revenues
are derived from substantial contracts with organizations that have long
decision-making cycles, typically from six to twelve months. The decision to
purchase the Company's products is followed by an installation and training
cycle, which is labor-intensive and generally requires from three to twelve
months to complete.
Each new customer system consists of the Company's ULTRAFIS product which may be
combined with selected client-server applications, hardware and services. The
Company expects revenues related to the ULTRAFIS system to represent a
significant portion of its total revenues for the next several years.
The high volume of system sales in 1995 and 1996 and the introduction and demand
for the Company's new client-server applications across its customer base,
exceeded the capacity of the Company's training, installation and customer
support organizations during the last twelve months. In addition, the Company's
customers expressed strong demand for the new client-server applications causing
the Company to release certain products before implementation of an effective
product field testing process. Customer difficulties occurred as certain
product errors and failures arose and as customers became aware of certain
perceived functionality issues. As a result, broad market acceptance did not
occur, and the Company made some economic accommodations to resolve the product
issues. These difficulties resulted in an increase in the Company's unbilled
revenues, a significant increase in the Company's reserve for doubtful accounts
and sales returns and contributed to significant decreases in new customers and
software sales during the last two quarters of 1996 and the first quarter of
1997.
Improved operating results for the quarter ended June 30, 1997 reflect steps
taken to correct these difficulties and failures. Second quarter sales and
gross margins were higher and operating expenses were substantially lower than
any of the preceding three quarters.
The Company's employee headcount at June 30, 1997 was 205 compared to 305 at
December 31, 1996 The headcount reductions were primarily in administrative and
management overhead positions across the Company and were combined with a
reallocation of Company resources to focus on client-server product lines,
product standardization and customer support.
5
<PAGE>
RESULTS OF OPERATIONS
REVENUES
The Company's revenues are generated from software licenses, hardware sales,
maintenance support and various installation and support services. Revenues for
the three months ended June 30, 1997 decreased 33% to $8.7 million compared to
$12.9 million for the same period last year. However, revenues increased $2.2
million, or 34%, in the second quarter compared to the first quarter of 1997.
Software sales accounted for half of the increase.
The following table sets forth the Company's revenues, gross margins and gross
margin percentages for the three month periods ended June 30, 1997 and 1996,
respectively:
<TABLE>
<CAPTION>
REVENUE GROSS MARGIN GROSS MARGIN CHANGE IN
(IN THOUSANDS) (IN THOUSANDS) (BASED ON REVENUES) GROSS MARGIN
THREE MONTHS ENDED THREE MONTHS ENDED THREE MONTHS ENDED INCREASE
JUNE 30, JUNE 30, JUNE 30, (DECREASE)
----------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996
------ ------- ------ ------ ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Software 2,101 4,975 1,853 4,126 88% 83% 5%
Maintenance 2,571 2,008 1,056 821 41% 41% --%
Services & Other 1,984 2,055 146 (87) 7% (4)% 11%
Hardware 2,052 3,910 628 994 31% 25% 6%
----------------------------------------------------------------------------------------
$8,708 $12,948 $3,683 $5,854 42% 45% (3%)
----------------------------------------------------------------------------------------
</TABLE>
Software revenues decreased 58% from $5.0 million in the second quarter of
1996 to $2.1 million in the second quarter of 1997. The decrease was due
primarily to a reduction in the number of new customer contracts signed and
a reduction in sales volume of the Company's client-server applications.
Maintenance revenues increased 28% from $2.0 million in the second quarter of
1996 to $2.6 million in the second quarter of 1997. The increase was primarily a
result of growth in the number of credit unions using ULTRADATA systems. The
Company's installed customer base grew from approximately 171 systems on June
30, 1996 to approximately 185 systems on June 30, 1997.
Services and other revenues decreased 3% from $2.1 million in the second quarter
of 1996 to $2.0 million in the second quarter of 1997. The decline was mainly
attributable to decreases in training and installation activities due to lower
sales volumes during the last twelve months. Services and other revenues also
includes custom development, service bureau operation fees and disaster recovery
contracts.
Hardware revenues decreased from $3.9 million in the second quarter of 1996 to
$2.1 million in the second quarter of 1997. This 47% decrease was primarily
attributable to the decrease in the number of new customer hardware purchases
and customer product installations during the last twelve months. The Company's
high volume of shipments during the first six months of 1996 were due to the
number of new order's received during the second half of 1995 requiring delivery
during the first six months of 1996. The percentage of hardware revenues
depends on the mix of customer orders and the timing of particular customer
installations and can be expected to fluctuate substantially from quarter to
quarter.
6
<PAGE>
GROSS MARGIN
Total gross margin as a percentage of total revenue declined 3% from 45% in the
second quarter of 1996 to 42% in second quarter of 1997 primarily due to the
reduced proportion of software sales.
Software gross margin as a percentage of software revenue improved 5% due to a
lower proportion of sales of software purchased and licensed from third parties.
This change in mix was due to the lower volume of orders for upgrades and new
customer sales requiring third party software.
The gross margin percentage from maintenance revenues for the second quarter of
1997 was unchanged from the 1996 quarter.
The gross margin percentage from services and other revenues increased by 11%
for the second quarter of 1997 primarily reflecting improved cost controls
established during the first six months of 1997, as well as a favorable mix of
higher margin service bureau and disaster recovery services and lower margin
training and installation services.
Hardware gross margin as a percentage of hardware revenues increased 6% for the
second quarter of 1997 due to the mix of hardware shipped during the second
quarter of 1997.
<TABLE>
<CAPTION>
OPERATING EXPENSES
THREE MONTHS
ENDED AS A PERCENT OF
JUNE 30, (DECREASE) REVENUE
--------------------------------------------------------------------------
1997 1996 $ % 1997 1996
------ ------ --------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING EXPENSES
Product development 1,105 1,356 (251) (19%) 13% 11%
Selling, general and administrative 3,250 3,531 (281) (8%) 37% 27%
--------------------------------------------------------------------------
$4,355 $4,887 $(532) (11%) 50% 38%
==========================================================================
</TABLE>
Product Development expenses decreased 19% to $1.1 million compared to $1.4
million for the same quarter of the prior year. These costs were primarily for
staffing to support new product development programs such as Ultra-Access Remote
Banking modules, Optical Disk Systems modules, product enhancements, and
regulatory compliance. Product development expenses as a percentage of total
revenues increased from 11% to 13% during the second quarter of 1997 compared to
the same quarter of 1996 primarily as a result of the reduction in revenues
compared to the prior year.
Sales, marketing, support and general and administrative expenses decreased to
$3.3 million in second quarter of 1997 from $3.5 million in second quarter 1996.
The decrease was primarily due to staff reductions. Selling, general and
administrative expenses as a percentage of total revenues increased from 27% to
37% principally due to the decrease in revenues in 1997 which more than offset
the effect of the reduction of $0.3 million in expenses.
FUTURE OPERATING RESULTS
The Company's operating performance is subject to various risks and
uncertainties as discussed in this report and in the Company's Annual Report on
Form 10-K filed with the Securities and Exchange Commission on May 9, 1997, as
amended. This report on Form 10-Q should be read in conjunction with the
Form 10-K, particularly "Risk Factors" and "Management's Discussion and Analysis
of Financial
7
<PAGE>
Condition and Results of Operations" contained therein. The Company's future
operating results will depend upon demand for its products and its ability to
enhance its existing products and introduce new products on a timely basis. The
Company must also manage growth and change effectively as failure to do so could
materially and adversely affect its business and operating results.
Installation of the Company's ULTRAFIS system is a complex process that must
typically be done without any disruption of the customer's service. In 1996 the
Company experienced difficulty in the installation and training process on
several conversions, resulting in delays, reductions in revenues and increases
in expenses primarily as a result of the increase in new customer activity in
1996 and the failure of the Company's training and installation organization to
perform to contract schedules. Failure by the Company to successfully install an
ULTRAFIS system could result in significant loss of revenue in a particular
quarter and fluctuation in the Company's results of operations. Although the
Company schedules the installations of its products several months in advance,
its ability to achieve its revenue plans, both in the near term and in the long
term, depends on the Company's continued ability to sign new customer contracts
and to complete such contracts on schedule. Failure to close new customer
contracts as a result of lost sales or deferrals of customer decisions could
have a material adverse impact on the future operating results. There can be no
assurance that sales or installations will continue to occur at historical rates
or in accordance with the Company's expectations.
The Company has previously experienced delays in the development and
introduction of new products and product enhancements, including certain of its
client- server products. The length of these delays has varied depending upon
the size and scope of the project and the nature of the problems encountered.
Any significant delay in the development of new products, or the failure of
these new products, if and when installed, to achieve a significant degree of
market acceptance, could have a material adverse effect upon the Company's
business, financial condition and results of operations.
The Company's quarterly and annual revenues and operating results have varied
significantly in the past, and may do so in the future. Operating results may
fluctuate due to factors such as the demand for the Company's products, the
introduction and acceptance of new products and product enhancements by the
Company or its competitors, changes in the levels of operating expenses,
customer order deferrals in anticipation of new products, competitive conditions
in the credit union and financial services markets and economic conditions
generally or in various industry segments. In addition, a significant portion
of the Company's business has been derived from substantial contracts with large
organizations with long decision-making cycles, and the timing of such orders
has caused material fluctuations in the Company's operating results. The
Company's expense levels are based in part on its expectations regarding future
revenues and in the short term are fixed to a large extent. Therefore, the
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. As a result, if anticipated revenues do not
occur or are delayed, the Company's operating results would be
disproportionately affected. The Company expects quarterly and annual
fluctuations to continue for the foreseeable future. Accordingly, the Company
believes that period-to-period comparisons of its financial results should not
be relied upon as an indication of future performance.
In addition, software products as complex as those offered by the Company often
contain undetected errors or failures when first introduced or as new versions
are released. There can be no assurance that, despite testing by the Company
and by current and potential customers, errors will not be found in new products
after commencement of commercial shipments. The occurrence of such errors could
result in loss of, or delay in, market acceptance of the Company's products,
which could have a material adverse effect on the Company's business, financial
condition and results of operations.
8
<PAGE>
Substantially all of the Company's revenues historically have been related to
the Company's ULTRAFIS system, and the Company expects that for several years a
substantial portion of its revenues will continue to be related to the ULTRAFIS
system. The Company is also dependent upon the success of its new client-server
products. The Company's success will depend in large part on its ability to
sell, install, maintain and enhance the ULTRAFIS system and client-server
products and to develop, on a timely and cost-effective basis, utilizing new
technologies, application modules that meet evolving customer needs. Any
failure by the Company to anticipate or to respond adequately to new and
changing market conditions, enhance the ULTRAFIS system and develop application
modules, compete with new product offerings by third parties, complete new
stand alone product offerings, respond to emerging industry standards, adapt to
changing technologies, maintain sales of the Company's products, or continue to
sign and complete new customer contracts would have a material adverse effect on
the Company's results of operations.
On October 25, 1996 the U.S. District Court ruled that federal credit unions may
not extend membership benefits to individuals who are not part of the credit
union's original charter group. This ruling imposes limits on new customers
that a federal credit union may attract. As a result, some federal credit
unions have expressed a reluctance to pursue extensive capital purchases until
the impact of the ruling is further assessed. Accordingly, if this ruling
results in deferred customer purchase decisions for the Company's products, it
could have a material adverse effect on the Company's business, financial
condition, and results of operations. While federal credit unions represent
approximately 60% of all credit unions, less than half of these credit unions
are affected by this ruling.
LIQUIDITY AND CAPITAL RESOURCES
The Company's management believes current cash, cash equivalents and short-term
investments, expected cash generated from operations and the available bank line
of credit factoring agreement will satisfy its expected working capital and
capital expenditure requirements through the immediate future.
In May 1997, the Company entered into a factoring agreement which provides for
borrowing by the Company of up to $1.5 million, to be effected by the bank's
purchase of eligible accounts receivable and payment to the Company of an amount
equal to 80% of the purchased accounts receivable. Purchases of receivables and
corresponding advances to the Company are at the discretion of the bank. There
is a 0.5% administrative fee for each receivable purchased and a 1.75% monthly
finance charge for as long as each purchased receivable remains outstanding. The
factoring agreement renews, unless terminated by the Company or the bank, in
April 1998 and is terminable by the Company or the bank at any time. The
agreement also provides that the borrowings are secured by all tangible and
intangible assets of the Company. As part of the factoring agreement, no further
draws will be available under the prior capital equipment facility and the
Company established cash collateral for this balance. As of June 30, 1997 the
Company has not drawn on the factoring facility but has an outstanding balance
of $657,000 on the prior capital equipment facility. The Company expects to pay
off this balance and relieve the cash collateral by obtaining asset-backed
lending from another source.
Capital expenditures of $1.9 million during the first two quarters of 1997 were
primarily for furniture and leasehold improvements related to the Company's
occupancy of new office facility during February 1997.
Net cash provided by operations was $.5 $0.2 million for the six months ending
June 30, 1997, including the $3.4 million net loss for the first half of 1997.
For the quarter ending June 30, 1996, net cash used for operations was $3.5 $7.3
million. Unbilled revenue decreased to $3.6 million at June 30, 1997 compared to
$3.9 million at December 31, 1996 and to the June 30, 1996 balance of $8.5
million. There can be no assurance that the Company will continue to realize
such improvements in the future or that collections of amounts billed will occur
as expected.
9
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
On May 31, 1997, the Company held its annual meeting of shareholders. At the
meeting all of the Company's incumbent directors were reelected to office by the
following vote.
<TABLE>
<CAPTION>
Name Votes for Votes against Votes withheld
<S> <C> <C> <C>
Nigel P. Gallop 6,481,394 0 32,250
John F. Carlson 5,426,394 0 1,087,250
M. M. Stuckey 5,426,394 0 1,087,250
Robert J. Majteles 6,481,345 0 32,299
Lawrence M. Howell 5,426,394 0 1,087,250
</TABLE>
The shareholders also approved an amendment to the Company's 1994 Equity
Incentive Plan to increase the number of authorized shares thereunder from
1,000,000 to 1,300,000, with 5,269,925 votes for,1,231,219 votes against, 12,500
votes abstaining, and zero votes withheld.
The shareholders also approved an amendment to the Company's 1995 Employee Stock
Purchase Plan to increase the number of authorized shares thereunder from
200,000 to 250,000 with 6,477,094 votes for, 23,950 votes against, 12,600 votes
abstaining, and zero votes withheld.
Also at that meeting, the shareholders ratified the selection of KPMG Peat
Marwick, LLP as independent auditors for the Company's current fiscal year, with
5,233,195 votes for, 1,000 votes against, 1,279,449 abstaining, and zero votes
withheld.
10
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.27 Distributor Agreement dated June 30, 1997 between the Company
and USSI, Inc. and related documents.*
10.28 Employment Agreements dated June 5, 1997 between the Company and
Executive Management Team and related documents.
10.29 Severance Agreement dated April 30, 1997 between the Company and
Nigel P. Gallop and related documents.
10.30 Sublease and Consent to Sublease dated June 22, 1997 between the
Company and 24 Hour Fitness and related documents.
* Confidential treatment has been requested with respect to
certain portions of this exhibit. Such portions are being filed
separately with the Securities and Exchange Commission.
11.01 Computation of Earnings (Loss) per Share (in thousands except
per share data)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
-----------------------------------------
1997 1996 1997 1996
------- ------ ------- ------
<S> <C> <C> <C> <C>
Net (loss) income $ (439) 697 $(3,415) $1,085
====== ====== ======= ======
Weighted average outstanding shares 7,575 7,393 7,567 6,913
Common stock equivalents 417 404
------ ------ ------- ------
7,575 7,810 7,567 7,317
====== ====== ======= ======
Net (loss) imcome per common and
common equivalent share $(0.06) $ 0.09 $ (0.45) $ 0.15
====== ====== ======= ======
</TABLE>
27.01 Financial Data Schedule
(b) There have been no reports filed on Form 8-K during the quarter ended
June 30, 1997.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ULTRADATA CORPORATION
Date ________________________ By /s/ ROBERT J. MAJTELES
Robert J. Majteles
President and Chief Executive Officer
Date ________________________ By /s/ PHILIP D. RANGER
Philip D. Ranger
Vice President and
Chief Financial Officer
12
<PAGE>
EXHIBIT 10.27
USSI No. 71-1217
---------
DISTRIBUTOR AGREEMENT
---------------------
THIS AGREEMENT is made as of June 30, 1997, between USSI, INC., a
corporation with its principal offices at 2200 Abbott Drive, Carter Lake, IA
51510, U.S.A. ("USSI"), and ULTRADATA, a corporation with its principal offices
at 5000 Franklin Drive, Pleasanton, California 94588 ("Distributor").
--------------------------------------------------
1. APPOINTMENT
-----------
a. GENERAL. Subject to this Agreement, USSI hereby grants to Distributor,
-------
and Distributor hereby accepts from USSI, the non-exclusive and non-transferable
right to market, sublicense and use for purposes of demonstrating the Products
to prospective sublicensees, testing, copying, installing, modifying,
maintaining and supporting the computer products described in Paragraph 1(b)
(the "Products") within the territory described in Paragraph 1(c) (the
"Territory").
b. PRODUCTS. "Products" means (i) the machine-readable object code
--------
version of the software described in Exhibit A1, as may be supplemented from
time to time, and the human-readable source code version thereof that USSI
makes available to Distributor, whether embedded on disc, tape, chip or other
media, for use on the computer platform(s) specified in the applicable Exhibit A
(the "Software"), (ii) the published user manuals and documentation that USSI
makes generally available for the Software (the "Documentation"), (iii) the
updates or revisions of the Software or Documentation that USSI may release from
time to time, other than as a separately-priced upgrade or option (the
"Updates"), such Updates to include maintaining the products in regulatory
compliance with federal, or state law or regulation (iv) any CSM, defined in
Section 1(e) below, and (v) all copies of the Software, Documentation, Updates
or CSMs. USSI will provide source code for all Products delivered under this
Agreement. Upon at least two years prior notice to Distributor, USSI may add
new Products to or delete existing Products from Exhibit A, subject to any
binding commitment that USSI has made to Distributor.
c. TERRITORY. "Territory" means any chartered credit union (the "Market")
---------
within the United States of America or any United States Territory, including,
but not limited to, Guam, Puerto Rico and Virgin Islands (the "Geographic
Territory") which has licensed the ULTRADATA software platform from Distributor;
provided Distributor may request USSI's consent to sub-license the
Page 1
Confidential treatment has been requested as to certain
portions of this document.
<PAGE>
Products outside the Market or Geographic Territory on a case by case basis,
such consent not to be unreasonably withheld. Distributor may only promote or
solicit orders for the Products or related services to non-ULTRADATA software
platform Customers within the Market and Geographic Territory, in conjunction
with the ULTRADATA software platform.
d. NON-COMPETE. Except for [*] a current USSI
-----------
customer, USSI will not promote, solicit or license the Products to
Distributor's ULTRADATA software platform customers within the Territory or
authorize other related or unrelated persons to do so. Further, during the
Initial Term of this Agreement, USSI will not appoint the entities listed on
Exhibit F as a distributor for the Products within the Territory.
e. CSMs. "CSMs" or "Custom Software Modification" means the special
----
application software modules specified in Exhibit B, as supplemented from time
to time, that USSI may develop for Distributor.
2. DISTRIBUTOR'S OBLIGATIONS
-------------------------
a. REASONABLE EFFORTS. Distributor will use commercially reasonable
------------------
efforts throughout the Territory to (i) promote, solicit and obtain orders for
the Products for Distributor's account, (ii) perform its installation,
maintenance and support services in a timely and professional manner and (iii)
to not harm the good will and reputation of USSI. Distributor represents that
it possesses the experience, skills and resources required to carry out these
marketing and service activities.
b. PROMOTIONAL LITERATURE. USSI will provide, at no cost to Distributor,
----------------------
200 copies of its standard brochures and promotional literature for the
Products. Distributor may use the brochures and other promotional literature
describing the Products in the English language that USSI may provide to
Distributor (the "Promotional Literature"). Distributor may reproduce the
Promotional Literature for distribution within the Territory. Distributor will
affix USSI's copyright notice to all such reproductions. Distributor will bear
all reproduction costs.
c. SOFTWARE AGREEMENT. Distributor will promote, solicit and obtain
------------------
orders for the object code version of the Products and the maintenance thereof
using the agreement attached as Exhibit E (the "Software Agreement").
Distributor will not modify or amend the terms and conditions of the Software
Agreement without USSI's prior approval on a case-by-case basis. In no event
will Distributor deliver to any customer or third person the source code for the
Products, in whole or in part, without USSI's prior approval on a case-by-case
basis.
d. SERVICES. Distributor will offer installation and support services to
--------
all customers of the Products within the Territory. These services will
include, without limitation, (i) installing and testing the Products, (ii)
educating and training the customers to operate and fully utilize the Products
and (iii) providing customer support via telephone or other means (as required),
including (A)
Page 2
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been
omitted from this filing and have been filed separately with the
Securities and Exchange Commission.
<PAGE>
answering customer inquires which require reference to USSI's on-line, printed
or other published documentation, (B) answering those customer inquires which
requires information about and advice concerning customer's hardware
configuration or use of the Products, (C) assisting with problem determination
and data collection for those customer inquires which require inspection of the
Product and (D) distribute software corrections as needed. Distributor will
negotiate and execute separate agreements with customers with respect to such
services (the "Service Agreements"). The agreements under which these services
will be performed will be assignable to USSI in the event contemplated under
Paragraph 12(b), but will not otherwise obligate or purport to obligate USSI to
perform any of these services.
e. PRICES. Distributor will establish the prices that it charges to
------
customers within the Territory for the Products and related installation,
maintenance and support services. Distributor will be solely responsible for
obtaining payment of its prices from customers. Delays or failures in obtaining
such payments will not affect Distributor's obligation to make payments to USSI
pursuant to Section 5.
f. ENFORCEMENT. Distributor will reasonably enforce against all customers
-----------
that obtained the Products from Distributor the provisions of the Software
Agreement that affect USSI's proprietary or confidentiality rights in the
Products. If Distributor learns that any customer has breached any such
provision, Distributor will immediately notify USSI and take, at Distributor's
expense, all steps that may be available to enforce the Software Agreement,
including availing itself of actions for injunctive relief. If Distributor fails
to take these steps in a timely and adequate manner, USSI may take them in its
own or Distributor's name and at Distributor's expense.
g. ORDERS. Distributor will place pro forma orders for the Products
------
directly with USSI. All orders will be placed in writing. Each pro forma order
will specify (i) the identity and location of the customer, (ii) the type and
quantity of Products ordered and (iii) the configuration of the proposed
installation, if applicable. Distributor will attach a copy of the Software
Agreement that Distributor has executed with the customer to each order.
h. RECORDS AND REPORTS. Distributor will maintain accurate records of its
-------------------
marketing and service activities under this Agreement, including (i) a current
list of customers of the Products and (ii) copies of all Software Agreements and
Service Agreements executed with customers. Within 30 days after the end of
each 3-month period of this Agreement, Distributor will provide USSI with a
quarterly report that shows the actual orders obtained during the quarter.
3. USSI'S OBLIGATIONS
------------------
a. MARKETING MATERIALS. At Distributor's request, USSI will provide
-------------------
Distributor with additional quantities of such marketing materials after the
initial 200 copies, subject to their availability at USSI. USSI may charge
Distributor for additional Promotional Literature at USSI's then-current
standard rates. Distributor may also purchase Documentation for inventory
purposes.
Page 3
<PAGE>
b. TECHNICAL MATERIALS. USSI will provide Distributor, at no charge, with
-------------------
the data, diagrams and other technical materials that USSI deems appropriate for
Distributor to install and support the Products within the Territory. USSI may
limit the number of copies of such technical materials that Distributor will be
authorized to make, if any. Distributor will (i) consecutively number each such
copy, (ii) maintain a current logbook that records the number of copies that
have been made and (iii) reproduce all confidentiality and proprietary notices
on each copy.
c. PROFESSIONAL SERVICES. USSI will provide Distributor with the
---------------------
professional services set forth in Exhibit C, as supplemented from time to time.
Distributor will bear all travel and out-of-pocket expenses that USSI may incur
in performing such services. USSI shall conform to its travel and expense
policy as set forth on Exhibit G.
d. REMOTE SUPPORT. USSI will provide Distributor, at no additional charge
--------------
other than the Monthly License Fee Payments set forth in the applicable Exhibit
A, with support as set forth on Exhibit H to diagnose and resolve the problems
that customers may encounter in using the Products (excluding CSM's for which
support must be addressed by separate agreement). USSI may provide such remote
support by (i) telephone or other forms of communication or (ii) visits by
Distributor's personnel to a USSI facility, as the parties deem appropriate.
Distributor will pay all telephone, travel and other out-of-pocket expenses that
Distributor may incur in connection with such remote support. USSI shall conform
to its travel and expense policy as set forth on Exhibit G. Notwithstanding the
foregoing, if USSI determines that a problem is a Unikix problem, Distributor
shall pay USSI its standard time and material charges associated with the
diagnoses and resolution of such problem.
e. UPDATES. USSI may periodically provide Distributor with Updates for
-------
the Products that are installed within the Territory. Unless otherwise agreed
on a case-by-case basis, Distributor will duplicate the Updates only as required
for distribution to customers that have contracted for maintenance of the
Products in accordance with the terms and conditions of the Software Agreement.
This Paragraph will not be interpreted to require USSI to (i) develop and
release Updates or (ii) customize the Updates to satisfy the particular
requirements of customers within the Territory. The Updates will not include
any new Software that USSI decides, in its sole discretion, to make generally
available as a separately-priced upgrade or option. USSI may add such upgrades
or options to this Agreement as new Products in accordance with Paragraph 1 (b).
4. INSTALLATION
------------
a. SITE. Before the scheduled installation date specified in the Exhibit
----
A, Distributor will prepare the Distributor's installation site (the "Site") in
accordance with applicable USSI and vendor specifications. Distributor will be
solely responsible for establishing and maintaining the environmental conditions
required for the proper operation of the CEC and Products. The "CEC or "Central
Electronic Complex" means a hardware system installed at the Site, on which the
Distributor will use the Products. Distributor will provide USSI with (i)
timely access to the Site and (ii) such reasonable assistance as USSI may
request to install the Products on the CEC.
Page 4
<PAGE>
b. INSTALLATION. One copy of the Software will be installed by USSI on
------------
the CEC at the Site, on the date agreed to by USSI and Distributor.
c. TESTING. On-Site testing will be conducted by USSI to demonstrate that
-------
the Software operate substantially in accordance with their Documentation, and
are free of material defects.
d. ACCEPTANCE. Distributor will be deemed to have accepted the Products
----------
upon the earliest of (i) Successful completion of the testing procedures
contemplated under Section 4(c), (ii) Distributor's first sublicense of the
Products as set forth herein or (iii) Thirty (30) days after the date that USSI
installs the Products. Upon the occurrence of any of these events, Distributor
will deliver to USSI a certificate that evidences Distributor's Acceptance of
the Products, however failure by Distributor to execute and deliver an
Acceptance certificate will not constitute non-Acceptance of the Products.
5. PRICES AND PAYMENT
------------------
a. PAYMENTS. Distributor will pay USSI the amounts specified in the
--------
Exhibit A's attached hereto, in accordance with the terms contemplated
thereunder. Distributor will make payment of all fees, reimbursable costs and
expenses, and all other charges, within thirty (30) days of Distributor's
receipt of USSI's invoice. USSI shall conform to its travel and expense policy
as set forth on Exhibit G. Notwithstanding the above, Distributor's payments
with respect to Attachments A.2, B and C shall be deferred for the same period
of time, if any, that USSI fails to meet its milestones as set forth in the
Project Plan referenced in Section 11.d.
b. CURRENCY AND PLACE. Distributor will pay all amounts due to USSI
------------------
pursuant to this Agreement in U.S. Dollars at USSI's offices in Carter Lake,
Iowa, U.S.A., or other location that USSI may designate in writing. Any late
payment will accrue interest at the lesser of (i) eighteen percent (18%) or (ii)
the maximum interest allowable under applicable law.
c. TAXES. All amounts payable by Distributor to USSI under this Agreement
-----
are exclusive of any tax, levy or similar governmental charge that may be
assessed by any jurisdiction, whether based on gross revenue, the delivery,
possession or use of the Products, the execution or performance of this
Agreement or otherwise, except for net income, net worth or franchise taxes
assessed on USSI.
6. LIMITED WARRANTIES
------------------
a. WARRANTY. USSI warrants that the Products will (i) conform to USSI's
--------
published product specifications in effect on the date of delivery and (ii)
perform substantially as described in the accompanying Documentation for ninety
(90) days after Distributor's Acceptance. Distributor acknowledges that (i) the
Products may not satisfy all of the customers' requirements and (ii) the use of
the Products may not be uninterrupted or error-free. Distributor further
acknowledges that (i) the prices and other charges contemplated under this
Agreement are based on the limited warranty,
Page 5
<PAGE>
disclaimers and limitation of liability specified in Sections 6, 7 and 8 and
(ii) such charges would be substantially higher if any of these provisions were
unenforceable.
b. REMEDIES. In case of breach of warranty during such ninety (90) day
--------
period, USSI will, at its option, correct or replace the defective Product. If
USSI determines that a defective Product cannot be corrected or replaced within
a reasonable period of time, Distributor may return the defective Product to
USSI in exchange for a refund of (i) the initial license fees that Distributor
actually paid to USSI for such Product,, and (ii) the monthly license fees that
Distributor actually paid to USSI for the period that such Product was not
usable.
In the case of breach of any other duty related to the quality of the Products,
USSI will, at its option, correct or replace the defective Product. If USSI
determines that a defective Product cannot be corrected or replaced within a
reasonable period of time, Distributor may return the defective Product to USSI
in exchange for a refund of (i) the initial license fees that Distributor
actually paid to USSI for such Product, less depreciation based on a 5-year
straight-line depreciation schedule beginning after the end of the warranty
period, and (ii) a pro rata share of the monthly license fees that Distributor
actually paid after the end of the warranty period to USSI for the period that
such Product was not usable.
c. LIMITATION. The warranties and remedies specified in this Section will
----------
not apply if the Product malfunctions due to extrinsic causes, such as (i)
natural disasters, including fire, smoke, water, earthquakes or lightning, (ii)
electrical power fluctuations or failures, (iii) the neglect or misuse of the
Product or other failure to comply with the instructions set forth in the
Documentation, (iv) a correction, modification or copying of the Product not
provided by USSI, (v) the failure to install an Update in accordance with the
Update installation methodology, to be jointly developed by the parties and
attached hereto, (vi) a malfunction of the customer's hardware equipment or
(vii) the combination of the Product with other software not provided by USSI,
except for the necessary hardware operating system software and the UniKix
application software as described in the documentation.
d. DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION AND SECTION
----------
7, ALL WARRANTIES, CONDITIONS, REPRESENTATIONS, INDEMNITIES AND GUARANTEES WITH
RESPECT TO THE PRODUCTS, WHETHER EXPRESS OR IMPLIED, ARISING BY LAW, CUSTOM,
PRIOR ORAL OR WRITTEN STATEMENTS BY USSI OR OTHERWISE (INCLUDING, BUT NOT
LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE)
ARE HEREBY OVERRIDDEN, EXCLUDED AND DISCLAIMED.
7. INDEMNITY
---------
a. INDEMNITY. If an action is brought against Distributor claiming that a
---------
Product infringes a U.S. patent or copyright, USSI will defend Distributor at
USSI's expense and, subject to this Section and Section 8, will pay the damages
and costs finally awarded against Distributor in the
Page 6
<PAGE>
infringement action, but only if (i) the Distributor notifies USSI promptly upon
learning that the claim might be asserted, (ii) USSI has sole control over the
defense of the claim and any negotiation for its settlement or compromise.
b. ALTERNATIVE REMEDY. If a claim described in Paragraph 7(a) may be or
------------------
has been asserted, Distributor will permit USSI, at USSI's option and expense,
to (i) procure the right to continue using the Product, (ii) replace or modify
the Product to eliminate the infringement while proving functionally equivalent
performance or (iii) accept the return of the Product in exchange for a refund
of the up-front initial license fees that Distributor actually paid to USSI for
such Product, less depreciation based on a 5-year straight-line depreciation
schedule, and a pro rata share of any pre-paid usage fees that Distributor
actually paid to USSI.
c. LIMITATION. USSI will have no indemnity obligation to Distributor if
----------
the patent or copyright infringement claim results from (i) a correction or
modification of the Product not provided by USSI, (ii) the failure to install an
Update in accordance with the Update installation methodology, to be jointly
developed by the parties and attached hereto or (iii) the combination of the
Product with other software not provided by USSI, except for the necessary
hardware operating system software and the UniKix application software as
described in the documentation.
8. NO CONSEQUENTIAL DAMAGES
------------------------
EXCEPT FOR BREACH OF THE CONFIDENTIALITY AND OWNERSHIP OBLIGATION SET FORTH
IN SECTION 9, UNDER NO CIRCUMSTANCES WILL USSI OR ITS RELATED PERSONS BE LIABLE
FOR ANY CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE, OR INCIDENTAL DAMAGES OR
LOST PROFITS, WHETHER FORESEEABLE OR UNFORESEEABLE, BASED ON CLAIMS OF
DISTRIBUTOR OR ITS CUSTOMERS (INCLUDING, BUT NOT LIMITED TO, CLAIMS FOR LOSS OF
DATA, GOODWILL, USE OF MONEY OR USE OF THE PRODUCTS, INTERRUPTION IN USE OR
AVAILABILITY OF DATA, STOPPAGE OF OTHER WORK OR IMPAIRMENT OF OTHER ASSETS),
ARISING OUT OF BREACH OR FAILURE OF EXPRESS OR IMPLIED WARRANTY, BREACH OF
CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE,
EXCEPT ONLY IN THE CASE OF DEATH OR PERSONAL INJURY WHERE AND TO THE EXTENT THAT
APPLICABLE LAW REQUIRES SUCH LIABILITY. IN NO EVENT WILL THE AGGREGATE
LIABILITY WHICH USSI AND ITS RELATED PERSONS MAY INCUR IN ANY ACTION OR
PROCEEDING EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO USSI BY DISTRIBUTOR FOR THE
SPECIFIC PRODUCT THAT DIRECTLY CAUSED THE DAMAGE.
EXCEPT FOR BREACH OF THE CONFIDENTIALITY AND OWNERSHIP OBLIGATION SET FORTH
IN SECTION 9 AND THE AUTHORIZED USE SET FORTH IN SECTION 1, UNDER NO
CIRCUMSTANCES WILL DISTRIBUTOR OR ITS RELATED PERSONS BE LIABLE FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE, OR INCIDENTAL DAMAGES OR LOST
PROFITS, WHETHER FORESEEABLE OR
Page 7
<PAGE>
UNFORESEEABLE, BASED ON CLAIMS OF USSI ARISING OUT OF BREACH OF CONTRACT,
MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE, EXCEPT
ONLY IN THE CASE OF DEATH OR PERSONAL INJURY WHERE AND TO THE EXTENT THAT
APPLICABLE LAW REQUIRES SUCH LIABILITY.
9. INFORMATION
-----------
a. CONFIDENTIALITY. (i) Distributor acknowledges that the Products
---------------
incorporate confidential and proprietary information developed or acquired by or
licensed to USSI (the "Information"). Distributor will take all reasonable
precautions necessary to safeguard the confidentiality of the Information,
including (i) those taken by Distributor to protect its own confidential
information and (ii) those which USSI may reasonably request from time to time.
Distributor will not allow the removal or defacement of any confidentiality or
proprietary notice placed on the Products or other items of Information. The
placement of copyright notices on these items will not constitute publication or
otherwise impair their confidential nature.
(ii) USSI acknowledges that the Distributor's customer lists and
interface specifications incorporate confidential and proprietary information
developed or acquired by or licensed to Distributor (the "Information"). USSI
will take all reasonable precautions necessary to safeguard the confidentiality
of the Information, including (i) those taken by USSI to protect its own
confidential information and (ii) those which Distributor may reasonably request
from time to time. USSI will not allow the removal or defacement of any
confidentiality or proprietary notice placed on the items of Information. The
placement of copyright notices on these items will not constitute publication or
otherwise impair their confidential nature.
b. OWNERSHIP. All patents, copyrights, software designs and layouts,
---------
trade secrets and other proprietary rights in or related to the Products are and
will remain the exclusive property of USSI or its licensors, whether or not
specifically recognized or perfected under applicable law. Distributor will not
take any action that jeopardizes USSI's or its licensors' proprietary rights or
acquire any right in the Products or Information, except the limited use rights
specified in Paragraph 9(c). Unless otherwise agreed on a case-by-case basis,
USSI or its licensor will own all rights in any copy, translation, modification,
adaptation or derivation of the Products , whether made by or for Distributor or
other items of Information, including any improvement or development thereof.
Distributor will obtain, at USSI's request, the execution of any instrument that
may be appropriate to assign these rights to USSI or its licensor or perfect
these rights in USSI's or its licensor's name.
c. USE. Distributor will use the Products and other items of Information
---
exclusively to perform its marketing and service activities pursuant to this
Agreement. Except as specifically contemplated in Paragraphs 3(b) and 3(f),
Distributor will not copy the Products or other items of Information without
USSI's specific approval. Distributor will reproduce USSI's or its licensors'
confidentiality and proprietary notices on all such copies. Distributor will
not translate, modify, adapt, decompile, disassemble or reverse engineer the
Products.
Page 8
<PAGE>
d. DISCLOSURE. Distributor will not disclose, in whole or in part, the
----------
source or object code of the Products or any other item that USSI designates as
confidential to any person, except to (i) customers as and to the extent
contemplated under an executed Software Agreement and (ii) those of
Distributor's employees and contractors who require access to perform its
obligations under this Agreement and have executed a confidentiality agreement
substantially similar to that attached as Exhibit D (the "Confidentiality
Agreement"). Distributor will execute all Confidentiality Agreements as
principal on its own behalf and, exclusively to accept or otherwise perfect
USSI's rights thereunder, as agent on behalf of USSI. At USSI's request,
Distributor will provide USSI with copies of all Confidentiality Agreements. In
no event will Distributor amend or cancel any Confidentiality Agreement without
USSI's prior approval.
e. UNAUTHORIZED USE OR DISCLOSURE. Distributor acknowledges that any
------------------------------
unauthorized use or disclosure of the Products or any other item of Information
may cause irreparable damage to USSI or its licensors. If an unauthorized use
or disclosure occurs, Distributor will promptly notify USSI and take, at
Distributor's expense, all steps which are necessary to recover the Product or
Information and to prevent its subsequent unauthorized use or dissemination,
including availing itself of actions for seizure and injunctive relief. If
Distributor fails to take these steps in a timely and adequate manner, USSI may
take them in its own or Distributor's name and at Distributor's expense.
f. LIMITATION. Distributor will have no confidentiality obligation with
----------
respect to any portion of the Information that (i) Distributor independently
knew or developed before receiving the Products or Information from USSI, (ii)
Distributor lawfully obtained from a third party under no obligation of
confidentiality or (iii) became available to the public other than as a result
of an act or omission of Distributor or any of its employees or customers.
Under any of these circumstances, Distributor will notify USSI at least 30 days
before disclosing such portion of the Information to any other person.
g. THE AGREEMENT. Except as required for governmental regulatory
-------------
reporting purposes, neither party shall disclose the existence or contents of
this Agreement without the prior written approval of the other party.
10. MARKS
-----
a. OWNERSHIP. All trademarks, service marks, trade names, logos or other
---------
words or symbols identifying the Products or USSI's business (the "Marks") are
and will remain the exclusive property of USSI or its licensors, whether or not
specifically recognized or perfected under applicable law. Distributor will not
take any action that jeopardizes USSI's or its licensors' proprietary rights or
acquire any right in the Marks, except the limited use rights specified in
Paragraph 10(b). Distributor will not register, directly or indirectly, any
trademark, service mark, trade name, copyright, company name or other
proprietary or commercial right which is identical or confusingly similar to the
Marks.
Page 9
<PAGE>
b. USE. Distributor will use the Marks exclusively to advertise and
---
promote the Products within the Territory. All advertisements and promotional
materials will (i) clearly identify USSI or its licensors as the owner of the
Marks, (ii) conform to USSI's then-current trademark and logo guidelines.
Before publishing or disseminating any advertisement or promotional materials
bearing a Mark, Distributor will deliver a sample of the advertisement or
promotional materials to USSI for prior approval. USSI has thirty days to
approve or disapprove of such material. If USSI notifies Distributor that the
use of the Mark is inappropriate, Distributor will not publish or otherwise
disseminate the advertisement or promotional materials until they have been
modified to USSI's satisfaction.
c. INFRINGEMENT. Distributor will immediately notify USSI if Distributor
------------
learns (i) of any potential infringement of the Marks by a third party or (ii)
that the use of the Marks may infringe the proprietary rights of a third party.
USSI will determine the steps to be taken under these circumstances.
Distributor will (i) provide USSI with the assistance that USSI may reasonably
request and (ii) take no steps on its own without USSI's prior approval.
11. TERM AND TERMINATION
--------------------
a. TERM. This Agreement will become effective, as of the date first set
----
forth above, upon its execution by USSI and Distributor. This Agreement will
remain in effect thereafter until December 31, 2004, unless earlier terminated
under Paragraph 11 (b) or (c) (the "Initial Term") and, thereafter, this
Agreement will automatically renew for consecutive one (1) year terms ("Renewal
Term"), unless terminated by either party upon written notice to the other party
not less than one (1) year prior to the expiration of the Initial Term or any
Renewal Term. The above Initial Term shall be extended for the same period of
time, if any, that USSI fails to meet its milestones as set forth in the Project
Plan referenced in Section 11.d.
b. TERMINATION BY USSI. USSI will have just cause to terminate this
-------------------
Agreement immediately upon notice to Distributor, without Judicial or
administrative notice or resolution, upon the occurrence of any termination
event specified below or elsewhere in this Agreement.
(1) Breach. Distributor or any of its employees (i) breaches any
------
obligation under Section 9 or (ii) breaches any other obligation under this
Agreement and fails to cure the breach to USSI's satisfaction within 30
days after USSI demands its cure.
(2) Normal Business. Distributor ceases to conduct business in the normal
---------------
course, becomes insolvent, enters into suspension of payments, moratorium,
reorganization or bankruptcy, makes a general assignment for the benefit of
creditors, admits in writing its inability to pay debts as they mature,
suffers or permits the appointment of a receiver for its business or
assets, or avails itself of or becomes subject to any other judicial or
administrative proceeding that relates to insolvency or protection of
creditors' rights
Page 10
<PAGE>
(3) Ownership or Control. The direct or indirect ownership or control of
--------------------
Distributor that exists on the effective date of this Agreement changes to
any person or entity that is, in USSI's reasonable judgment, a business
competitor of USSI.
c. TERMINATION BY DISTRIBUTOR. Distributor will have just cause to
--------------------------
terminate this Agreement immediately upon notice to USSI without judicial or
administrative notice or resolution, upon the occurrence of any event specified
below or elsewhere in this Agreement.
(1) Breach. USSI or any of its employees breaches any obligation under
------
this Agreement and fails to cure the breach to Distributor's satisfaction
within 30 days after Distributor demands its cure.
(2) Normal Business. USSI ceases to conduct business in the normal course,
---------------
becomes insolvent, enters into suspension of payments, moratorium,
reorganization or bankruptcy, makes a general assignment for the benefit of
creditors, admits in writing its inability to pay debts as they mature,
suffers or permits the appointment of a receiver for its business or
assets, or avails itself of or becomes subject to any other judicial or
administrative proceeding that relates to insolvency or protection of
creditors' rights.
d. TERMINATION BY DISTRIBUTOR DURING NINETY-DAY EVALUATION PERIOD.
--------------------------------------------------------------
Notwithstanding any of the foregoing, Distributor may terminate this Agreement
upon Distributor's reasonable determination that (i) the performance of the
Products set forth in Exhibit A1 hereto does not meet Distributor's requirements
on the proposed hardware platform configuration or (ii) the parties are unable
to agree upon a project plan including USSI milestones for live installations
at a non-terminal driving customer site and a terminal driving customer (the
"Project Plan"). Distributor will make its determination under this Section by
September 30, 1997, provided delivery and installation of the Products set forth
in Exhibit A1 on Distributor's development and support computer system, is
accomplished within thirty (30) calendar days after execution of this
Agreement. In the event ULTRADATA makes a determination that the Products set
forth in Exhibit A1 do not satisfy the aforementioned requirements, or the
parties have not reached agreement on the Project Plan, it shall provide USSI
with written notice of its intent to terminate the Agreement along with a
written documentation detailing such determination. In the event of termination
under this Section, Distributor's sole liability to USSI will be to pay USSI the
pre-approved, documented expenses, including labor, telephone, travel and other
out of pocket expenses incurred by USSI in connection with the development,
delivery, testing and installation of the Products and promptly comply with
Sections 12(a)(2) and 12(a)(3).
12. CONSEQUENCES OF TERMINATION
---------------------------
a. TERMINATION OBLIGATIONS. Upon the expiration or termination of this
-----------------------
Agreement, all rights granted to Distributor hereunder will immediately cease,
except as set forth in Sections 12(a)(4) and 12(b) below, and Distributor will
(i) promptly comply with the termination obligations specified below and (ii)
otherwise cooperate with USSI to terminate relations in an orderly manner.
Except as limited herein, the parties shall have all other remedies available at
law or equity.
Page 11
<PAGE>
(1) Payments. (A) Upon expiration or termination pursuant to Section
--------
11(b), Distributor will only pay USSI all due and outstanding amounts, as
well as any amount that has not become due, the due date of which will be
automatically accelerated to the date of expiration or termination of this
Agreement, specifically, Distributor will immediately pay (i) the balance
of the ILF's set forth in Section 1.3(a) of Exhibits A1 and A2; (ii) the
present value of the balance of the MLF's set forth in Section 1.3(a) of
Exhibits A1 and A2 using a discount factor of prime plus four (4) points;
(iii) the balance of the Development Charges set forth in Exhibit B1; and
(iv) the balance of the service charges set forth in Exhibit C1 and any
other Exhibit hereto executed by the parties prior to termination.
(B) Upon termination pursuant to Section 11(c), Distributor will
only pay all due and outstanding amounts as of the date of termination.
Distributor will have no liability for amounts which become due after the
date of termination.
(2) Products. Distributor will purge from its computer systems, storage
--------
media and other files and, at USSI's option, destroy or deliver to USSI or
its designee all Products within Distributor's possession or control,
including all source code of the Products. If this Agreement is terminated
pursuant to Section 11(c), then USSI shall pay the reasonable and pre-
approved cost associated with this Section.
(3) Material. Distributor will, at USSI's option, destroy or deliver to
--------
USSI or its designee all items within Distributor's possession or control
that contain any Information or bear a Mark, except as otherwise
contemplated under Paragraph 12(b). If this Agreement is terminated
pursuant to Section 11(c), then USSI shall pay the reasonable and pre-
approved cost associated with this Section.
(4) Software Agreements. Upon expiration or termination for any reason
-------------------
reason of this Agreement, Distributor may at its option, and only in the
event of USSI's request, assign or perfect the assignment to USSI or its
designee of all Software Agreements executed with customers and notify
these customers of such assignment. Notwithstanding Subsections 12(a)(2)
and (3) above, if Distributor elects not to assign the Software Agreements,
Distributor may retain the items of Information that are reasonably
necessary for use exclusively in fulfilling Distributor's existing
obligations under the unassigned Software Agreements for up to twenty-four
(24) months. Upon expiration of such twenty-four (24) month period,
Distributor will, at USSI's option, destroy or deliver such items to USSI
or its designee. The above 24 month period shall be extended for the same
period of time, if any, that USSI fails to meet its milestones as set forth
in the Project Plan referenced in Section 11.d.
(5) Affidavit. Distributor will deliver to USSI a notarized affidavit
---------
which certifies that Distributor has complied with all of its termination
obligations contemplated under this Agreement.
Page 12
<PAGE>
(6) Non-compete. In the event this Agreement is terminated pursuant to
-----------
Section 11(c), USSI shall be prohibited from marketing the Products to
Distributor's existing customers of the Products for a period of four (4)
years from the date of termination.
b. SERVICE AGREEMENTS. Upon the expiration or termination of this
------------------
Agreement, Distributor may at its option and only in the event of USSI's
request, assign to USSI or its designee, in whole or in part, the Service
Agreements then in effect with customers that USSI may designate. USSI will pay
Distributor the accrued and unpaid charges under these assigned Service
Agreements, but only if Distributor certifies that (i) it has performed the
services to which the charges relate and (ii) the unpaid charges are collectable
from the customers. Distributor will refund such payment to USSI or its designee
if the customer fails to pay these charges within 90 days after the assignment
of the Service Agreement. Notwithstanding Subsections 12(a)(2) and (3) above, if
Distributor elects not to assign the Service Agreements, Distributor may retain
the items of Information that USSI deems appropriate for use exclusively in
fulfilling Distributor's existing obligations under the unassigned Service
Agreements for up to twenty-four (24) months. Upon expiration of the twenty-four
(24) month period, Distributor will, at USSI's option, destroy or deliver such
items to USSI or its designee. The above 24 month period shall be extended for
the same period of time, if any, that USSI fails to meet its milestones as set
forth in the Project Plan referenced in Section 11.d.
c. DISCLAIMER. Upon the expiration of this Agreement or its termination
----------
in accordance with Paragraph 11(b) or 11(c)(2), Distributor will not be entitled
under local law or otherwise to receive any payment from USSI, whether for
actual, consequential, indirect, special or incidental damages, costs or
expenses, whether foreseeable or unforeseeable (including, but not limited to,
labor claims and loss of profits, investments or good will), any right to which
Distributor hereby waives and disclaims.
d. SURVIVAL. The provisions of Sections 8, 9, 10, 12, 13, 14, 15, 23 and
--------
24 will survive the expiration or termination of this Agreement. Section 2(f)
shall survive to the extent Distributor retains the Software Agreements pursuant
to Section 12(a)(4) and/or Services Agreements pursuant to Section 12(b) above.
13. INSPECTION.
----------
During the term of this Agreement and for 1 year after its expiration or
termination, USSI or its representatives may, upon prior notice to Distributor,
inspect the agreements, business records, computer processors, equipment and
facilities of Distributor during normal working hours to verify Distributor's
compliance with this Agreement. The USSI representative which performs any such
inspection function shall be an individual which is technically qualified to
perform the applicable inspection. While conducting these inspections, USSI and
its representatives will be entitled to copy any item that Distributor may
possess in violation of this Agreement.
Page 13
<PAGE>
14. U.S. EXPORT RESTRICTIONS.
------------------------
Distributor acknowledges that the Products and all related technical
information, documents and materials are subject to export controls under the
U.S. Export Administration Regulations. Distributor will (i) comply strictly
with all legal requirements established under these controls, (ii) cooperate
fully with USSI in any official or unofficial audit or inspection that relates
to these controls and (iii) not export, reexport, divert, transfer or disclose,
directly or indirectly, any Product or related technical information, document
or material or direct products thereof outside the United States of America or
to any person not national or resident thereof without first obtaining the prior
written authorization of USSI, which authorization will not be unreasonably
withheld, and the U.S. Commerce Department.
15. INDEMNITY.
---------
Distributor will defend and indemnify USSI against any damage, loss,
Liability or expense (including lawyers' fees) that USSI may incur (i) with
respect to any negligent act or omission by, or willful misconduct of,
Distributor's employees or agents or (ii) as a result of (a) any modification or
amendment of the prescribed terms of the Software Agreement that USSI did not
specifically approve, (b) any warranty, condition, representation, indemnity or
guarantee granted by Distributor with respect to the Products in addition to or
in lieu of the limited warranties specified in Section 6, (c) any omission or
inaccuracy in Distributor's advertisements and promotional materials that relate
to the Products or (d) any modification of or addition to the Products not
provided or approved by USSI, but only if (i) USSI notifies Distributor upon
learning that the claim might be asserted and (ii) Distributor has sole control
over the defense of the claim and any negotiation for its settlement or
compromise. Notwithstanding the foregoing, if in USSI's reasonable judgement,
such claim may materially affect USSI's intellectual property rights in or to
its Product(s), USSI reserves the right to participate and or control such
defense or settlement. This Section will not be construed to limit or exclude
any other claims or remedies which USSI may assert under this Agreement or by
law.
16. INDEPENDENT PARTIES.
-------------------
USSI and Distributor are independent parties. Nothing in this Agreement
will be construed to make Distributor an agent, employee, franchisee, joint
venturer, partner or legal representative of USSI. Except as otherwise provided
in this Agreement, Distributor will neither have nor represent itself to have
any authority to act on USSI's behalf.
17. FORCE MAJEURE.
-------------
Neither party will be liable for any failure or delay in performing an
obligation under this Agreement that is due to causes beyond its reasonable
control, such as natural catastrophes,
Page 14
<PAGE>
governmental acts or omissions, laws or regulations, labor strikes or
difficulties, transportation stoppages or slowdowns or the inability to procure
parts or materials. These causes will not excuse Distributor from paying accrued
amounts due to USSI through any available lawful means acceptable to USSI.
18. NOTICES.
-------
Any notice, approval or other communication required or permitted under
this Agreement will be given in writing and will be sent by telex, telefax,
courier or registered airmail, postage prepaid, to the address specified below
or to any other address that may be designated by prior notice. Any notice or
other communication delivered by telex or telefax will be deemed to have been
received the day it is sent. Any notice or other communication sent by courier
will be deemed to have been received on the 3rd day after its date of posting.
Any notice or other communication sent by registered airmail will be deemed to
have been received on the 7th business day after its date of posting.
IF TO USSI:
USSI, Inc.
Attn: Contracts Administration
2200 Abbott Drive
Carter Lake, IA 51510, U.S.A.
Telephone: (712)347-4000
Telefax: (712)347-4100
IF TO DISTRIBUTOR:
Attn: Phil Ranger
5000 Franklin Drive
Pleasanton, California 94588
Telephone: 510/463-8356
Telefax: 510/224-9879
19. ASSIGNMENT.
----------
Distributor may only assign, delegate, sub-contract or otherwise transfer
this Agreement or any of its rights or obligation without USSI's prior approval
(i) to a related company, or (ii) to an unrelated company pursuant to a sale or
merger so long as the company is not, in USSI's reasonable judgement, a business
competitor of USSI. Any attempt to assign without USSI's approval, except as
set forth above, will be void. USSI may assign this Agreement or any of its
rights or obligations, upon notice to Distributor, (i) to a related company or
(ii) to an unrelated company pursuant to a sale, merger or other consolidation
of USSI or any of its operating divisions.
Page 15
<PAGE>
20. WAIVER, AMENDMENT, MODIFICATION.
-------------------------------
Except as otherwise provided above, any waiver, amendment or other
modification of this Agreement will not be effective unless in writing and
signed by the party against whom enforcement is sought.
21. SEVERABILITY.
------------
If any provision of this Agreement is held to be unenforceable, in whole or
in part, such holding will not affect the validity of the other provisions of
this Agreement, unless either party deems the unenforceable provision to be
essential to this Agreement, in which case such party may terminate this
Agreement, effective immediately upon notice to the other party. In the event
of a termination under this Section 21, Section 12 shall apply.
22. INTERPRETATION.
--------------
The terms that are defined in this Agreement may be used in the singular or
the plural, as the context requires. "Days" means calendar days, unless
otherwise specified. "Person" means an individual, partnership, company,
corporation or other legal entity, as the context requires. "Section" means all
provisions under the numerical heading. "Paragraph" means all provisions under
the alphabetical heading. "Agreement" means this Agreement and all of its
Exhibits. Headings are intended only for reference purposes.
23. GOVERNING LAW.
-------------
This Agreement will be governed by and interpreted in accordance with the
laws of the State of Nebraska, U.S.A., excluding its conflict of law principles.
USSI and Distributor exclude the United Nations Convention on Contracts for the
International Sale of Goods from this Agreement and any transaction between them
that may be implemented in connection with this Agreement.
24. ARBITRATION
-----------
a. GENERAL. Except as contemplated under Paragraph 24(d), any controversy
-------
or claim arising out of or relating to this Agreement or the existence,
validity, breach or termination thereof, whether during or after its term, will
be finally settled by compulsory arbitration in accordance with the Commercial
Arbitration Rules and Supplementary Procedures for International Commercial
Arbitration of the American Arbitration Association ("AAA"), as modified or
supplemented under this Section 24; provided, however, that in the event of any
such controversy or claim, (i) neither party will initiate arbitration within
the first 30 days after the aggrieved party first notifies the other party of
the controversy or claim and (ii) during such 30-day period, the chief executive
officers of both parties
Page 16
<PAGE>
convene at least once in Phoenix, Arizona, to endeavor in good faith to amicably
resolve the controversy or claim.
b. PROCEEDING. To initiate arbitration, either party will file the
----------
appropriate notice at the Regional Office of the AAA in Omaha, Nebraska, U.S.A.
The arbitration proceeding will take place during a period not exceeding 120
days in Omaha, Nebraska, U.S.A., and will be conducted in the English language.
The arbitration panel will consist of 3 arbitrators, one arbitrator appointed by
each party and a third neutral arbitrator appointed by the AAA. Any
communication between a party and any arbitrator will be directed to the AAA for
transmittal to the arbitrator. The parties expressly agree that the arbitrators
will be empowered to, at USSI's request, (i) issue an interim order or award
requiring Distributor to cease using the Products or Information pending the
outcome of the arbitration or (ii) grant injunctive relief.
c. AWARD. The arbitral award will be the exclusive remedy of the parties
-----
for all claims, counterclaims, issues or accountings presented or plead to the
arbitrators. The award will (i) be granted and paid in U.S. Dollars exclusive
of any tax, deduction or offset and (ii) include interest from the date of
breach or other violation of the Agreement until the award is fully paid,
computed at the then-prevailing LIBOR rate. Judgment upon the arbitral award
may be entered in any court that has jurisdiction thereof. Any additional
costs, fees or expenses incurred in enforcing the arbitral award will be charged
against the party that resists its enforcement.
d. LEGAL ACTIONS. Nothing in this Section will prevent USSI from seeking
-------------
injunctive relief against Distributor or filing legal actions for payment of
outstanding and past due debts in the courts of the Territory.
25. ENTIRE AGREEMENT
----------------
This Agreement and its Exhibits constitute the complete and entire
statement of all terms, conditions and representations of the agreement between
USSI and Distributor with respect to its subject matter.
Page 17
<PAGE>
IN WITNESS WHEREOF, USSI and Distributor cause this Agreement to be
executed by their duly authorized representatives identified below.
USSI, Inc. ULTRADATA
("USSI") ("Distributor")
By: /s/ Mark R. Vipond By: /s/ Robert J. Majteles
__________________________ ---------------------------
Name: Mark R. Vipond Name: Robert J. Majteles
------------------------ -------------------------
Title: President Title: President/Chief Executive Officer
----------------------- -----------------------------------
Exhibit A: Products and License Fees
Exhibit B: CSM's
Exhibit C: Professional Services
Exhibit E: Software Agreement
Exhibit F: Non-Compete Entities
Exhibit G: USSI Travel Expense Policy
Exhibit H: Product Support Services Policy
Page 18
<PAGE>
EXHIBIT A1
----------
SOFTWARE SCHEDULE
-----------------
THIS SOFTWARE SCHEDULE is executed as of June 30, 1997, between USSI, INC.
("USSI") and ULTRADATA ("Distributor") pursuant to Distributor Agreement No.
---------
USSI/71-1217, dated June 30, 1997 (the "Agreement"). The Agreement is hereby
supplemented as follows:
1.0 SOFTWARE/LICENSE AND FEES
-------------------------
1.1 TRANS24 Standard Programs:
--------------------------
<TABLE>
<CAPTION>
Product
Support License
I.D. No. Description Category Fees
-------- ----------- -------- -------
<C> <S> <C> <C>
T24-AT000 ATM Terminal Manager A
T24-AT210 Diebold 910/911 Device Handler A
T24-SS000 SuperSwitch A
T24-SS099 ISO 8583 Host Interface A
T24-SS100 ISO 8583 Network Interface A
T24-EA000 EFT Authorization A
T24-PC000 Card Management A
T24-SM000 Settlement Manager A
T24-AT110 NCR 5XXX Device Handler A
T24-AT120 NCR 56XX Device Handler A
T24-AT220 Interbold MDS 1000 Device Handler A
</TABLE>
(Section 1.3 below)
1.2 GRANT. In accordance with Section 1.0 of the Agreement, USSI grants
-----
to Distributor and Distributor accepts from USSI the right to sublicense the
Products set forth above for use on the Authorized Hardware Platform, and
subject to the following terms and conditions, and the terms and conditions of
the Agreement.
1.3 INITIAL/MONTHLY LICENSE FEES.
-----------------------------
(a) Distributor shall pay USSI [*] for [*] copies of the Products, payable
by (i) an Initial License Fee ("ILF") of [*], payable according to the terms set
---
forth in Section 2.0 of this Exhibit A1, and (ii) Monthly License Fee ("MLF")
payments totaling [*], payable in advance, on the first day of each month
---
according to the terms set forth in Section 2.0 of this Exhibit A1.
Page 1
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been
omitted from this filing and have been filed separately with the
Securities and Exchange Commission.
<PAGE>
(b) For each copy of the Products sublicensed in excess of the one hundred
fifty copies authorized under Subsection (a) above, Distributor shall pay USSI
(i) an Initial License Fee of $[*] upon execution of the applicable Sublicense
Agreement and (ii) Monthly License Fee payments of $[*] per copy, payable
monthly in advance commencing upon acceptance of the Products by the
Sublicensee.
For purposes of this Subsection 1.3, any combination of the Software
Programs set forth above for each sublicensee shall be deemed one (1) copy.
Beginning January 1, 2005, USSI may increase the MLFs specified in
Subsections (a) and (b) above no more than once each calendar year, by an amount
not to exceed [*] percent [*] of the most recently effective MLF amount. USSI
will not ship any Products to Distributor, nor provide services to Distributor
hereunder until USSI has received this Exhibit A1 executed by Distributor and
all amounts due upon such execution.
1.4 TERM. Subject to payment of the license fees as and when they become
----
due, the term of the license granted with respect to the Products listed in this
Exhibit A1 will be for a minimum term through December 31, 2004 ("Initial
Term") and will automatically renew for consecutive one (1) year terms ("Renewal
Term") unless terminated by either party upon written notice to the other party
not less than one (1) year prior to the expiration of the Initial or Renewal
Term.
2.0 PAYMENT TERMS
-------------
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
a) Initial License Fees Payment Payable as follows:
1) upon Contract Execution: $ [*]
-------
2) Monthly in Advance Commencing January 1, 1998
and continuing through October 31, 1998: $ [*]
-------
3) Monthly in Advance Commencing November 1, 1998
and continuing through October 31, 1999: $ [*]
-------
4) Monthly in Advance Commencing November 1, 1999
and continuing through October 31, 2000: $ [*]
-------
5) Monthly in Advance Commencing November 1, 2000
and continuing through October 31, 2001: $ [*]
-------
b) Monthly License Fees Payment Payable as follows:
1) upon Contract Execution: $ [*]
-------
2) Monthly in Advance Commencing January 1, 1998
and continuing through October 31, 1998: $ [*]
-------
3) Monthly in Advance Commencing November 1, 1998
and continuing through October 31, 1999: $ [*]
-------
4) Monthly in Advance Commencing November 1, 1999
and continuing through October 31, 2000: $ [*]
-------
5) Monthly in Advance Commencing November 1, 2000
and continuing through October 31, 2001: $ [*]
-------
</TABLE>
Page 2
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and
Exchange Commission.
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
6) Monthly in Advance Commencing November 1, 2001
and continuing through December 1, 2004: $ [*]
--------
7) Monthly in Advance Commencing January 1, 2005: $ [*]
--------
</TABLE>
3.0 AUTHORIZED HARDWARE PLATFORMS
-----------------------------
IBM RISC System/6000
-----------------------------
Hewlett-Packard HP9000
------------------------------
4.0 GENERAL
-------
The provisions of the Agreement shall remain in full force and effect.
Accepted: Accepted:
USSI, INC. ULTRADATA
("USSI") -------------------------------------
("Distributor")
By: /s/ Mark R. Vipond By: /s/ Philip D. Ranger
--------------------------------- --------------------------------
Name: Mark R. Vipond Name: Philip D. Ranger
----------------------------- ------------------------------
Vice President and
Title: President Title: Chief Financial Officer
---------------------------- ----------------------------
Date: June 30, 1997 Date: June 30, 1997
----------------------------- ----------------------------
Page 3
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT A2
----------
SOFTWARE SCHEDULE
-----------------
THIS SOFTWARE SCHEDULE is executed as of June 30, 1997, between USSI, INC.
("USSI") and ULTRADATA ("Distributor") pursuant to Distributor Agreement No.
----------
USSI/71-1217, dated June 30, 1997 (the "Agreement"). The Agreement is hereby
supplemented as follows:
1.0 SOFTWARE/LICENSE AND FEES
-------------------------
1.1 TRANS24 Interface Programs:
---------------------------
<TABLE>
<CAPTION>
Product
Support License
I.D. No. Description Category Fees
-------- ----------- -------- --------
<C> <S> <C> <C>
Deluxe-based ISO Interface:
---------------------------
Deluxe Data Services ISO C $ [*]
Alaska Option C [*]
HONOR ISO C [*]
NYCE ISO C [*]
PULSE ISO C [*]
BASE24-based ISO Interfaces:
----------------------------
ACS/Moneymaker C $ [*]
Bank of Hawaii C [*]
Fiserv C [*]
Norwest C [*]
ISO Interfaces:
---------------
TransAlliance C [*]
ITS/Shazam C [*]
ANSI X9.2 Interfaces:
---------------------
EDS C [*]
MPS/Jeannie C [*]
</TABLE>
(Section 1.3 below)
Page 1
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and
Exchange Commission.
<PAGE>
1.2 GRANT. In accordance with Section 1.0 of the Agreement, USSI grants
-----
to Distributor and Distributor accepts from USSI the right to sublicense the
Products set forth above for use on the Authorized Hardware Platform, and
subject to the following terms and conditions, and the terms and conditions of
the Agreement.
1.3 INITIAL/MONTHLY LICENSE FEES.
-----------------------------
(a) Distributor agrees to license the Products for the minimum amount of
$[*], payable by (i) an Initial License Fee ("ILF") of $[*], payable
----
according to the terms set forth in Section 2.0 of this Exhibit A2, and (ii)
Monthly License Fee ("MLF") payments totaling $[*], payable in advance, on
----
the first day of each month according to the terms set forth in Section 2.0 of
this Exhibit A2.
For purposes of this Subsection 1.3, each individual Software Program set
forth above per sublicensee shall be deemed one (1) copy.
Beginning January 1, 2005, USSI may increase the MLFs specified in
Subsections (a) and (b) above no more than once each calendar year, by an amount
not to exceed [*] percent [*] of the most recently effective MLF amount. USSI
will not ship any Products to Distributor, nor provide services to Distributor
hereunder until USSI has received this Exhibit A2 executed by Distributor and
all amounts due upon such execution.
1.4 TERM. Subject to payment of the license fees as and when they become
----
due, the term of the license granted with respect to the Products listed in this
Exhibit A2 will be for a minimum term through December 31, 2004 ("Initial
Term") and will automatically renew for consecutive one (1) year terms ("Renewal
Term") unless terminated by either party upon written notice to the other party
not less than one (1) year prior to the expiration of the Initial or Renewal
Term.
2.0 PAYMENT TERMS
-------------
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
a) Initial License Fees Payment Payable upon Execution
of this Attachment: $ [*]
-------
b) Initial License Fees Payment Payable Monthly in Advance
Commencing January 1, 1998 and continuing through
October 31, 1999: $ [*]
-------
c) Monthly License Fees Payable Monthly in Advance
Commencing January 1, 1998 and continuing through
October 31, 1999: $ [*]
-------
d) Monthly License Fee Payable Monthly in Advance
Commencing November 1, 1999 and continuing through
December 31, 2004: $ [*]
-------
</TABLE>
Page 2
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and
Exchange Commission.
<PAGE>
<TABLE>
<CAPTION>
AMOUNT
------
<S> <C>
e) Monthly License Fees Payment Payable Monthly
in Advance Commencing January 1, 2005: $ [*]
-------
</TABLE>
3.0 AUTHORIZED HARDWARE PLATFORMS
-----------------------------
IBM RISC System/6000
---------------------------
Hewlett-Packard HP9000
---------------------------
4.0 Notwithstanding Section 4(d) of the Agreement, acceptance for the Interface
Programs set forth in Section 1.1 herein shall occur upon the certification
by the applicable networks.
5.0 GENERAL
-------
The provisions of the Agreement shall remain in full force and effect.
Accepted: Accepted:
USSI, INC. ULTRADATA
("USSI") ------------------------------------------
("Distributor")
By: /s/ Mark R. Vipond By: /s/ Robert J. Majteles
------------------------------ -------------------------------------
Name: Mark R. Vipond Name: Robert J. Majteles
-------------------------- -----------------------------------
Title: President Title: President/Chief Executive Officer
------------------------- ---------------------------------
Date: June 30, 1997 Date: June 30, 1997
-------------------------- ---------------------------------
Page 3
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and
Exchange Commission.
<PAGE>
EXHIBIT B1
----------
CSM DEVELOPMENT
---------------
THIS EXHIBIT B1 is executed as of June 30, 1997, between USSI, INC.
("USSI") and ULTRADATA, ("Distributor"), pursuant to a Distributor Agreement,
Number USSI/71-1217, dated June 30, 1997 (the "Agreement"), between Distributor
and USSI. Distributor and USSI agree the Agreement shall be supplemented as
follows:
1.0 STATEMENT OF WORK
-----------------
1.1 GENERAL. USSI will provide Distributor with development services
-------
towards the development of the special application software module(s) (CSMs)
specified in the CSM Specification Document to be developed in conjunction with
this Exhibit B1. USSI will initiate CSM Development upon Distributor's
execution of this Exhibit B1 and acceptance of the CSM Specification Document.
DISTRIBUTOR ACKNOWLEDGES THAT THE CSM DEVELOPMENT CAN BE COMPLETED ONLY WITH THE
MUTUAL COOPERATION OF USSI AND DISTRIBUTOR.
1.2 WORK. The CSM development will include (i) the development of the
----
CSM Specification Document, (ii) project management, (iii) internal USSI
specification/design, (iv) development (program level coding and unit testing),
and (v) level I testing (integrated system testing at USSI's development
facility).
1.3 DISTRIBUTOR-SUPPLIED RESOURCES. Distributor will provide USSI with
------------------------------
timely access to Distributor's facilities, equipment, personnel and other
resources and information as required for USSI to complete the CSM development,
subject to Distributor's reasonable security requirements.
2.0 DEVELOPMENT TIME
----------------
USSI will provide Customer with [*] StaffWeeks of CSM development
(exclusive of travel, lodging, subsistence and communication expenses) for the
charge of [*].
Travel, lodging, and subsistence expenses for USSI personnel performing any
services away from USSI's Carter Lake facility, as well as communication
expenses (including but not limited to, telephone, telefax, courier, express
mail and dial-up data transmissions), are additional and are the responsibility
of Distributor.
Page 1
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been
omitted from this filing and have been filed separately with the
Securities and Exchange Commission.
<PAGE>
2.1 DEVELOPMENT TIME: 115 STAFFWEEK(S)
----------------
2.2 TOTAL CHARGES: $ [*]
------------- -------
(at USSI' discounted rate, $[*]/SW)
2.3 PAYMENT TERMS:
-------------
AMOUNT
------
a) CSM Development, Initial Amount Payable
at execution of the Agreement: $ [*]
--------
b) CSM Development, Monthly Amount Payable
Monthly in Advance Commencing January 1, 1998
and continuing through October 31, 1999: $ [*]
--------
c) Travel, Lodging, Subsistence and Communication
Expenses, Invoiced Monthly for actual expenses
incurred during each billing period: $ [*]
3.0 WARRANTY
--------
CSMs which are completed and delivered herein are warranted for 90 days
under the warranty terms set forth in Section 6.0 of the Agreement.
4.0 REPRODUCTION AND SUBLICENSES
----------------------------
Distributor's Internal License(s). Distributor is authorized to make two
---------------------------------
(2) copies of each CSM, as delivered to Distributor hereunder (source and/or
object code format), for internal nonproduction, archival, or Disaster Recovery
purposes, only and subject to the further restrictions of this Agreement. Such
copies shall be deemed an integral part of the Products for all purposes under
this Agreement. Distributor will duplicate all confidentiality and proprietary
notices on any copy. Except as expressly provided in this Agreement,
Distributor will not otherwise copy, translate, modify or adapt (or where
applicable, decompile, disassemble or reverse engineer) the Products or develop
software systems, subsystems or modules that incorporate elements thereof.
5.0 GENERAL
-------
The provisions of the Agreement shall remain in full force and effect.
Page 2
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and
Exchange Commission.
<PAGE>
ACCEPTED: ACCEPTED:
USSI, INC. ULTRADATA
------------------------------------------
("USSI") ("Distributor")
By: /s/ Mark R. Vipond By: /s/ Robert J. Majteles
-------------------------- ---------------------------------------
Name: Mark R. Vipond Name: Robert J. Majteles
------------------------ ------------------------------------
Title: President Title: President/Chief Executive Officer
---------------------- ----------------------------------
Date: June 30, 1997 Date: June 30, 1997
----------------------- -----------------------------------
Page 3
<PAGE>
EXHIBIT C1
----------
PROFESSIONAL SERVICES
---------------------
1.0 PROJECT MANAGEMENT AND IMPLEMENTATION PACKAGE
---------------------------------------------
PIR and Specification Document
Project Management and Planning
Installation and Certification
Go-Live Support
User Training
Package Fees Total: $ [*]
-------------------- -------
(maximum 25 StaffWeeks)
USSI's current standard price for the Professional Services set forth above
is $[ * ] per StaffWeek. Distributor is receiving a discounted rate for the
package of Project Management and Implementation services necessary for the
implementation of the Products set forth in Exhibit A1. Travel, lodging, and
subsistence expenses for USSI personnel performing any services away from USSI's
Carter Lake facility, as well as communication expenses (including but not
limited to, telephone, telefax, courier, express mail and dial-up data
transmissions), are additional and are the responsibility of Distributor.
2.0 PAYMENT TERMS
-------------
AMOUNT
------
a) Initial PMIP Payment Payable at Execution
of the Agreement: $ [*]
------
b) PMIP, Monthly Amount Payable Monthly in
Advance Commencing January 1, 1998
and continuing through October 31, 1999: $ [*]
------
c) Travel, Lodging, Subsistence and Communication
Expenses, Invoiced Monthly for actual expenses
incurred during each billing period: $ [*]
[*] Confidential treatment has been requested with respect to the information
contained within the "[*]" markings. Such marked portions have been omitted
from this filing and have been filed separately with the Securities and
Exchange Commission.
<PAGE>
ACCEPTED: ACCEPTED:
USSI, INC. ULTRADATA
("USSI") ----------------------------------------
("Distributor")
By: /s/ Mark R. Vipond By: /s/ Robert J. Majteles
------------------------------ ------------------------------------
Name: Mark R. Vipond Name: Robert J. Majteles
--------------------------- ----------------------------------
Title: President Title: President/Chief Executive Officer
-------------------------- ---------------------------------
Date: June 30, 1997 Date: June 30, 1997
---------------------------- ---------------------------------
<PAGE>
EXHIBIT E
Software Agreement
------------------
DISTRIBUTOR
[Address]
SOFTWARE AGREEMENT
- ------------------
Customer: ______________________________________________________________________
________________________________________________________________________________
(street)
________________________________________________________________________________
(city) (state) (postal code) (country)
Telephone: ___________________________ TeleFax: ______________________________
Contact: _______________________________________________________________________
Distributor hereby grants Customer, and Customer hereby accepts from
Distributor, an indefinite, nonexclusive and non-transferable right to use the
software products described in Section 1 below (the "Products") on the
designated hardware described in Section 2 below (the "Designated Hardware"),
subject to the terms and conditions specified below.
<PAGE>
GENERAL TERMS AND CONDITIONS
----------------------------
1. PRODUCTS.
--------
"Products" means (i) the machine-readable object code version of the software
that USSI of ___________________,_________, U.S.A. ("USSI") makes available
through Distributor and described in the Product Schedule, whether embedded on
disc, tape or other media, for use on the computer platform specified in the
Product Software (the "Software"), (ii) the published user manuals and
documentation that Distributor makes generally available for the Software (the
"Documentation"), (iii) the updates or revisions of the Software or
Documentation that Distributor may offer to Customer pursuant to Section 5 (the
"Updates") and (iv) any copy of the Software, Documentation or Updates. Nothing
in this Agreement will entitle Customer to receive the source code of the
Software or Updates, in whole or in part.
2. DESIGNATED HARDWARE.
-------------------
"Designated Hardware" means the hardware equipment specified in the Product
Schedule. Customer may use the Products only on the Designated Hardware while
it possesses and operates the Designated Hardware. If the Designated Hardware
becomes temporarily inoperable Customer may load and use the Software and
related Updates on another of its computer hardware systems at the same location
until the Designated Hardware becomes operable, but in no event for more than 30
days. Any other use or transfer of the Software or related Updates will require
Distributor's prior approval, which may be subject to additional charges.
3. USE.
---
Customer may use the Products only in and for Customer's own internal purposes
and business operations. Customer will not permit any other person to use the
Products, whether on a time sharing, remote job entry or other multiple user
arrangement. Customer will not install the Software or any updates on a network
or other multi-user computer system unless otherwise specified in the Product
Schedule, in which case the Designated Hardware may be used to provide database
or file services to other of Customer's computers across the network, up to the
number of concurrent users specified in the Product Schedule. Customer may make
only one back-up archival copy of the Software and any related Update. Customer
will reproduce all confidentiality and proprietary notices on each of these
copies and maintain an accurate record of the location of each of these copies.
Customer will not otherwise copy, translate, modify, adapt, decompile,
disassemble or reverse engineer the Products.
4. PAYMENT.
-------
Customer will pay to Distributor the Software License Fee specified in the
Product Schedule in the currency and by the date specified in the Product
Schedule. All amounts specified in the Product Schedule are exclusive of any
applicable value added, use, sales, service, property or other taxes or
contributions, which Customer will pay in addition to the amount due and
payable. Any amount not paid when due will accrue interest at the rate of ____%.
Customer will pay such interest when remitting the principal amount to
Distributor.
5. MAINTENANCE.
-----------
Distributor will provide Customer, at no additional charge with the Updates that
USSI may make generally available during the initial 12-month maintenance period
specified in the Product
Page 2
<PAGE>
Schedule. Customer may elect to continue receiving the said Updates for
additional 12-month periods by paying Distributor its then current maintenance
fee. The maintenance fee shall be payable annually in advance. The current
maintenance fee is specified in the Product Schedule. Customer shall install the
Updates only on the Designated Hardware. IF an Update replaces the prior version
of the Software, Customer will destroy such prior version upon installing the
Update. This Paragraph will not be interpreted to require USSI to (i) develop
and release Updates or (ii) customize the Updates to satisfy Customer's
particular requirements. The Updates will not include any new products that USSI
decides, in its sole discretion, to make generally available as a separately
priced upgrade or option.
6. LIMITED WARRANTIES.
------------------
(a) Warranty. Distributor warrants that (i) the Products will conform to USSI's
--------
published specifications in effect on the date of delivery and (ii) the Products
will perform substantially as described in the accompanying Documentation after
delivery for the warranty period specified in the Product Schedule. Customer
acknowledges that (i) the Products may not satisfy all of Customer's
requirements and (ii) the use of the Products may not be uninterrupted or error-
free. Customer further acknowledges that (i) the Software License Fee and other
charges contemplated under this Agreement are based on the limited warranty,
disclaimers and limitation of liability specified in Sections 6, 7 and 8 and
(ii) such charges would be substantially higher if any of these provisions were
unenforceable.(c)
(b) Remedies. In case of breach of warranty or any other duty related to the
--------
quality of the Products, Distributor or its representative will correct or
replace any defective Product or, if not practicable, Distributor will accept
the return of the defective Product and refund to Customer (i) the amount
actually paid to Distributor for the defective Product, less depreciation based
on a 5-year straight line depreciation schedule, and (ii) a pro rata share of
any maintenance fees that Customer actually paid to Distributor for the period
that such product was not usable. Customer acknowledges that this Paragraph sets
forth Customer's exclusive remedy, and Distributor's exclusive liability, for
any breach of warranty or other duty related to the quality of the Products.
(c) Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, ALL WARRANTIES,
----------
CONDITIONS, REPRESENTATIONS, INDEMNITIES AND GUARANTEES WITH RESPECT TO THE
PRODUCTS, WHETHER EXPRESS OR IMPLIED, ARISING BY LAW, CUSTOM, PRIOR ORAL OR
WRITTEN STATEMENTS BY DISTRIBUTOR, ITS LICENSORS OR REPRESENTATIVES OR OTHERWISE
(INCLUDING, BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE) ARE HEREBY OVERRIDDEN, EXCLUDED AND DISCLAIMED.
7. INDEMNITY.
---------
(a) Indemnity. If an action is brought against Customer claiming that a Product
---------
infringes a patent or copyright within the jurisdiction where the Designated
Hardware is situated (the "Territory"), Distributor will defend Customer at
Distributor's expense and, subject to this Section and Section 8, pay the
damages and costs finally awarded against Distributor in the infringement
action, but only if (i) Customer notifies Distributor promptly upon learning
that the claim might be asserted, (ii) Distributor or USSI has sole control over
the defense of the claim and any negotiation for its settlement or compromise
and (iii) Customer takes no action that, in Distributor's judgment, is contrary
to Distributor's or USSI's interest.
Page 3
<PAGE>
(b) Alternately Remedy. If a claim described in Paragraph 7(a) may be or has
------------------
been asserted, Customer will permit Distributor, at Distributor's option and
expense, to (i) procure the right to continue using the Product, (ii) replace or
modify the Product to eliminate the infringement while providing functionally
equivalent performance or (iii) accept the return of the Product and refund to
Customer the amount actually paid to Distributor for such Product, less
depreciation based on a 5 year straight-line depreciation schedule and a pro
rata share of any maintenance fees that Customer actually paid to Distributor
for the period that such Product was not usable.
(c) Limitation. Distributor shall have no indemnity obligation to Customer
----------
under this Section if the patent or copyright infringement claim results from
(i) a correction or modification of the Product not provided by USSI, (ii) the
failure to promptly install an Update or (iii) the combination of the Product
with other non-USSI software.
8. NO CONSEQUENTIAL DAMAGES.
------------------------
UNDER NO CIRCUMSTANCES WILL DISTRIBUTOR, USSI OR THEIR LICENSORS OR
REPRESENTATIVES BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR
INCIDENTAL DAMAGES OR LOST PROFITS, WHETHER FORESEEABLE OR UNFORESEEABLE, BASED
ON CUSTOMER'S CLAIMS OR THOSE OF ITS CUSTOMERS (INCLUDING, BUT NOT LIMITED TO,
CLAIMS FOR LOSS OF DATA, GOODWILL, USE OF MONEY OR USE OF THE PRODUCTS,
INTERRUPTION IN USE OR AVAILABILITY OF DATA, STOPPAGE OF OTHER WORK OR
IMPAIRMENT OF OTHER ASSETS), ARISING OUT OF BREACH OR FAILURE OF EXPRESS OR
IMPLIED WARRANTY, BREACH OF CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT
LIABILITY IN TORT OR OTHERWISE, EXCEPT ONLY IN THE CASE OF DEATH OR PERSONAL
INJURY WHERE AND TO THE EXTENT THAT APPLICABLE LAW REQUIRES SUCH LIABILITY. IN
NO EVENT WILL THE AGGREGATE LIABILITY WHICH DISTRIBUTOR, USSI OR THEIR LICENSORS
OR REPRESENTATIVES MAY INCUR IN ANY ACTION OR PROCEEDING EXCEED THE TOTAL AMOUNT
ACTUALLY PAID BY CUSTOMER FOR THE SPECIFIC PRODUCT THAT DIRECTLY CAUSED THE
DAMAGE.
9. OWNERSHIP.
---------
All trademarks, service marks, patents, copyrights, trade secrets and other
proprietary rights in or related to the Products are and will remain the
exclusive property of USSI or its designees, whether or not specifically
recognized or perfected under local applicable law. Customer will not take any
action that jeopardizes USSI's or its designee's proprietary rights or acquire
any right in the Products, except the limited use rights specified in Section 4.
USSI or its designee will own all rights in any copy, translation, modification,
adaptation or derivation of the Products, including any improvement or
development thereof. Customer will obtain, at Distributor's request, the
execution of any instrument that may be appropriate to assign these rights to
USSI or its designee or perfect these rights in USSI's or its designee's name.
10. CONFIDENTIALITY.
---------------
(A) Confidentiality. Customer acknowledges that the Products incorporate
---------------
confidential and proprietary information developed or acquired by or licensed to
USSI. Customer will take all reasonable precautions necessary to safeguard the
confidentiality of the Products, including (i) those taken by Customer to
protect Customer's own confidential information and (ii) those which
Page 4
<PAGE>
Distributor or its authorized representative may reasonably request from time to
time. Customer will not allow the removal or defacement of any confidentiality
or proprietary notice placed on the Products. The placement of copyright notices
on these items will not constitute publication or otherwise impair their
confidential nature.
(b) Disclosure. Customer will not disclose, in whole or in part, any item of
----------
the Products that has been designated as confidential to any individual, entity
or other person, except to those of Customer's employees or consultants who (i)
require access for Customer's authorized use of the Products and (ii) agree to
comply with the use and non-disclosure restrictions applicable to the Products
under this Agreement. If requested by Distributor, Customer shall cause such
employees and consultants to execute appropriate confidentiality agreements.
Customer acknowledges that any unauthorized use or disclosure of the Products
may cause irreparable damage to USSI, its licensors and Distributor. If an
unauthorized use or disclosure occurs, Customer will immediately notify
Distributor and take, at Customer's expense, all steps which may be available to
recover the Products and to prevent their subsequent unauthorized use or
dissemination.
(c) Limitation. Customer will have no confidentiality obligation with respect
----------
to any portion of the Products that (i) Customer independently developed before
receiving the Products under this Agreement, (ii) Customer lawfully obtained
from a third party under no confidentiality obligation or (iii) became available
to the public other than as a result of any act or omission by Customer or any
of Customer's employees or consultants.
11. TERMINATION.
-----------
Customer may terminate this Agreement, without right to refund, by notifying
Distributor of such termination. Distributor may terminate this Agreement, upon
reasonable notice and without judicial or administrative resolution, if Customer
or any of Customer's employees or consultants breach any term or condition
hereof. This Agreement will terminate automatically if Customer becomes
insolvent or enters into bankruptcy, suspension of payments, moratorium,
reorganization or any other proceeding that relates to insolvency or protection
of creditor's rights. Upon the termination of this Agreement for any reason,
all rights granted to Customer hereunder will cease, and Customer will promptly
(i) purge the Software and any related Updates from the Designated Hardware and
all of Customer's other computer systems, storage media and other files, (ii)
destroy the Products and all copies thereof and (iii) deliver to Distributor an
affidavit which certifies that Customer has complied with these termination
obligations. The provisions of Sections 8, 9, 10, and 12 will survive the
termination of this Agreement.
12. U.S. EXPORT RESTRICTIONS.
------------------------
Customer acknowledges that the Products and all related technical information,
documents and materials are subject to export controls under the U.S. Export
Administration Regulations. Customer may not re-export or divert the Products
or any related technical information, document or material, or direct products
thereof, to any of the following countries or to any resident thereof, unless
Customer has obtained an appropriate authorization from USSI and the U.S.
Commerce Department and any relevant local governmental authority: Afghanistan,
Albania, Bulgaria, Cambodia, Cuba, Czech and Slovak Federative Republic, Iran,
Iraq, Laos, Libya, Mongolia, North Korea, People's Republic of China, Poland,
Romania, Syria, Vietnam and the jurisdictions that formerly comprised the Union
of Soviet Socialist Republics (including Estonia, Latvia and Lithuania) and the
South African Military and Police Authorities.
Page 5
<PAGE>
13. INSPECTION.
----------
During the term of this Agreement, Distributor or its representative may, upon
prior notice to Customer, inspect the files, computer processors, equipment and
facilities of Customer during normal working hours to verify Customer's
compliance with this Agreement. While conducting such inspection, Distributor
or its representative will be entitled to copy any item that Customer may
possess in violation of this Agreement.
14. USSI'S RIGHTS.
-------------
Customer acknowledges that the provisions of this Agreement are intended to
inure to the benefit of USSI. If Customer breaches any of these provisions, USSI
will be entitled to enforce this Agreement directly against Customer, whether in
Distributor's or USSI's name. Customer further acknowledges that Distributor
executes this Agreement as principal on its own behalf and, exclusively to
accept or otherwise perfect USSI's rights against Customer, as agent on behalf
of USSI.
15. ASSIGNMENT.
----------
Customer shall not assign, delegate or otherwise transfer this Agreement or any
of its rights or obligations hereunder without Distributor's prior approval. If
Distributor ceases to be USSI's authorized distributor for any reason, this
Agreement may be assigned to USSI or its designee effective immediately upon
notice from USSI, and Customer consents to such assignment in advance.
16. MISCELLANEOUS.
-------------
All notices or approvals required or permitted under this Agreement must be
given in writing. Any waiver or modification of this Agreement will not be
effective unless executed in writing and signed by Distributor and approved by
USSI. This Agreement will bind Customer's successors-in-interest. This
Agreement will be governed and interpreted in accordance with the laws of the
territory (country). If any provision of this Agreement is held to be
unenforceable, in whole or in part, such holding will not affect the validity of
the other provisions of this Agreement, unless Distributor in good faith deems
the unenforceable provision to be essential, in which case Distributor may
terminate this Agreement effective immediately upon notice to Customer. This
Agreement constitutes the complete and entire statement of all conditions and
representations of the agreement between Distributor and Customer with respect
to its subject matter and supersedes all prior writings or understandings.
Page 6
<PAGE>
THIS AGREEMENT IS NOT EFFECTIVE UNTIL SIGNED ON BEHALF OF BOTH PARTIES.
_____________________________________ _____________________________________
("Distributor") ("Customer")
By:__________________________________ By:__________________________________
(Signature) (Signature)
Name:________________________________ Name:________________________________
Title:_______________________________ Title:_______________________________
Date:________________________________ Date:________________________________
PRODUCT SCHEDULE
----------------
Software: Payment Due By:
Computer Platform: Software License Fee:
Designated Hardware (Serial#): Initial 12-Month Maintenance Fee:
Multi-user Version: Yes ____ No ____ Warranty Period:
Maximum Number of Concurrent Users: ________
Page 7
<PAGE>
EXHIBIT F
----------
NON-COMPETE
-----------
Users Incorporated
XP Systems
Symitar Systems, Inc.
Cti, Inc.
C.U. Processing, Inc.
AFTECH
FiTech Systems
Re:Member Data Services, Inc.
SOS Computer Systems, Inc.
EPL, Inc.
Maine CUL Services
Share 1 Systems, Inc.
Peerless Systems, Inc.
A.S.M.
Int'l Software Sys. (SDMI)
Datamatic Processing, Inc.
<PAGE>
EXHIBIT G
---------
USSI TRAVEL EXPENSE POLICY
--------------------------
Here is an outline of USSI's employee travel expense policy. I've broken this
down into 5 categories, Air Travel, Lodging, Ground Transportation, Meals, and
Incidental Travel Expenses.
LODGING
- -------
Hotel accommodations are coordinated through the company's travel agent. The
travel agent is responsible for selecting rooms based on circumstances and
corporate programs in place. Hotels are to be moderately priced, and afford
acceptable degrees of comfort, convenience, and security.
Suggestions by ULTRADATA on a hotel that they would prefer for us to use would
be welcome.
AIR TRAVEL
- ----------
Our travel agent is responsible for booking the lowest priced fare for all
travel. Exceptions to taking the lowest priced fare must be authorized by the
employee's manager.
Air travel is booked as far in advance as possible to take advantage of discount
fares.
Only Coach Class reservations are permitted.
GROUND TRANSPORTATION
- ---------------------
Car rentals are used when the efficient conduct of business precludes less
expensive means of transportation. Employees traveling in groups should share
rental cars to minimize expense.
Car rentals are coordinated through our travel agent. Cars are selected based on
circumstances and corporate programs that impact the cost. The size of cars are
limited to compact or medium unless group size requires a larger vehicle.
MEALS
- -----
Meals and incidental costs incurred by employees while traveling are reimbursed
in the form of a Per Diem allowance.
<PAGE>
The per diem covers breakfast, lunch, dinner, tips, cleaning, laundry, and other
miscellaneous items.
Per Diem for the Oakland California area is currently $33.00
INCIDENTAL TRAVEL EXPENSES
- --------------------------
Other certain incidental but reasonable and necessary travel expenses that can
be billed are as follows.
1 personal phone call per day of reasonable length of time.
Laundry charges if the employee's trip extends for more than one week.
Tips for hotel and airline porters at $1.00 per bag.
<PAGE>
EXHIBIT H
SECTION 1
- --------------------------------------------------------------------------------
USSI STANDARD MAINTENANCE SERVICES
CUSTOMER HOTLINE
Clients are provided access to a 24 hour, 7 day a week telephone assistance
service. Hotline staff work with callers to resolve performance problems
or answer questions. Calls are logged, and tracked until resolved.
CUSTOMER SUPPORT MANAGER
An Account Manager is assigned to each customer. Account Managers channel
information between the customer and USSI. The individual maintains a
continuous formal record of all information exchanged with, and services
delivered to clients. Your Account Manager will help you with a wide range
of tasks:
- Response to general inquiries
- Document modification requirements
- Represent modification requirements to designers and track development
- Interface with Hotline agents to resolve problems and answer questions
- Package and deliver software
- Announce and schedule training and respond to special requests for
education classes
- Provide and discuss enhancement/new product details
- Coordinate onsite services of technical staff
A complete description of activities and responsibilities is provided in
the next section - Customer Support Services.
PUBLICATIONS
Maintenance customers receive regular updates of applicable system
documentation. In addition, we distribute product announcements,
enhancement announcements and other formal communiques.
<PAGE>
MAINTENANCE RELEASES
As part of our standard maintenance, USSI provides timely updates of
current software to provide regulatory and product changes. These releases
are provided with sufficient lead time to meet industry and regulatory
requirements. Installation instructions are included.
UPGRADES/ENHANCEMENTS
In response to user groups and competitive forces, USSI regularly makes
improvements to individual products. These enhancements or upgrades come
in the form of additional features and options that improve operations or
expand your markets. These upgrades are delivered in the same manner as
maintenance releases and may be combined with maintenance releases to
simplify implementation.
MAINTENANCE AND CUSTOM SOFTWARE MODIFICATIONS
Custom Software Modifications effect the compatibility of Maintenance and
Upgrade releases. The existence of customer-specific programs does not
preclude maintenance and upgrade releases. However, for these special
situations, installation of maintenance and upgrade releases becomes a
custom process. USSI designs customized installation programs for the re-
integration of Custom Software Modifications. This service is supplied
routinely to Extended Maintenance customers (explained later in this
document) or selectively on a contractual basis each time a release is made
available.
<PAGE>
SECTION 2
- --------------------------------------------------------------------------------
CUSTOMER HOTLINE SERVICE
USSI provides maintenance customers with 24 hour support to resolve software
problems and respond to questions about any aspect of products or services.
Support is supplied by the Customer Hotline.
Agents at the Hotline work with clients to identify and document problems or
questions and formulate appropriate action plans. Clients should select a
representative who will act as the primary liaison for Hotline contact. Fast
problem resolution is the goal of our service. To accomplish this we rely on
accurate communications from those seeking solutions. Guidelines for
registering inquiries include:
- Identify yourself, organization and software products used
- Identify the version of the application software indicating a problem.
- Describe the problem in detail.
- A description should include:
- accurate references to screens, reports, symptoms
- specific step-by-step process description so that our technicians can
replicate the condition, when necessary for resolving problems
- information about the impact of the problem so that a priority can be
assigned.
Each record is assigned a Customer Reference Number and a priority. The agent
then develops an action plan, which may include referral of the problem or
question to technicians, product managers or others.
Priorities have been developed so that we can identify the seriousness of an
inquiry and focus resources on problems that jeopardize clients' operations. If
there is contention for limited technical resources, treatment of high priority
problems supersedes treatment of low priority inquiries.
Priority is determined through dialog between the hotline staff and the client
caller. Four priority definitions are employed by our staff:
CRITICAL (PRIORITY 1)
The customer's production system or network is down or network control is
in immediate jeopardy of going down. Either online transaction processing
or essential batch processing activities have ceased or are in eminent
danger of stopping.
<PAGE>
USSI assigns resources immediately and makes efforts to remove the symptom.
Technicians develop and implement plans intended to restart systems and return
service to users. Once service is returned, the problem may be reassigned to a
lower priority for careful research, identification of cause and correction of
conditions that may have lead to failure.
SERIOUS (PRIORITY 2)
The customer's production system is not down, but there is an impact to the
system or networks. The customer diagnosis is that should the problem
persist, loss of online transaction processing or loss of critical batch
operations will occur. Included in this category are problems that
obstruct certification or Go-live.
USSI staff work to resolve symptoms and problems so that project plans are
not subverted.
INCONVENIENCE (PRIORITY 3)
The problem is an inconvenience to the customer on either the production or
test system. There is no loss of service to online transaction processing.
There is no interruption of critical batch processes. Serious symptoms can
be averted through operator intervention and special procedures prescribed
by USSI technicians.
INFORMATIONAL (PRIORITY 4)
The problem is an operator inconvenience, or the customer has asked for
information. There is no serious impact on the end user of the system.
The symptom or problem can be avoided by application of procedural steps
executed by the operators. There is no apparent danger of losing control
of the system/network or data.
Customers who wish to check the status of a problem registered at the Hotline
may contact the Hotline operators or their own Account Manager. The customer
should reference the tracking number.
Each client's Account Manager monitors problems that client submitted to the
Hotline. Regularly, the Account Manager reports to the client's primary contact
the status of all outstanding and recently resolved problems.
<PAGE>
SECTION 3
- --------------------------------------------------------------------------------
PRODUCT SUPPORT SERVICES POLICIES
1. USSI TRANS24 products are classified into product support categories A-D.
USSI Product Management establishes these product support levels to best
meet the on-going needs of the TRANS24 customers. Classification of a
particular product module may be modified as customer and market demand
change.
The following outlines the services provided for each product support
category, along with an explanation of each service.
<TABLE>
<CAPTION>
Product Support Categories Service Provided
-------------------------- ----------------
<C> <S>
A Maintenance Support, Enhancements, Product
Release Updates, Documentation
B Maintenance Support, Enhancements, Product
Release Updates, Informal Documentation
C Maintenance Support
D Maintenance Support not provided
</TABLE>
MAINTENANCE SUPPORT T24 support and on-going maintenance is available
- -------------------
for all supported products. Maintenance support will provide customers with
product corrections.
ENHANCEMENTS Enhancement support refers to changes made to the product by USSI
- ------------
as part of ongoing support. These changes can be requested by a customer, an
ACI/USSI source or required by third parties; interchange and device vendors.
PRODUCT RELEASE UPGRADES Base and product releases upgrade support indicates
- ------------------------
the product will be upgraded to a new release or version level at no
additional charge.
DOCUMENTATION USSI maintains and has available a combination of both formal
- -------------
and informal documentation for product modules. Informal documentation may be
included with product on the distribution tapes or delivered in conjunction with
module delivery. This documentation generally consists of specifications,
installation guidelines or configuration instructions.
<PAGE>
2. Product Support Services are available on a per customer basis. Services
are not available on an individual module basis.
3. Previous releases of products supported by USSI will continue to receive
support for customers paying Product Support Services (Maintenance) fees.
Support will consist of access to the 24 hour support desk, maintenance
(product fixes) and Account Management.
4. Functionality changes, new enhancements and vendor required enhancements
will not be included as part of the support features for previously
supported releases of products. Customers may contract for these
enhancements services over and above standard Product Support Services
(Maintenance) Fees.
5. Various modules supported as a Product Category A or B in a previous
release may not be upgraded to current release compatibility. These
modules have limited sales, are obsolete modules and may be positioned to
be phased out of use, and/or are applicable to very small regions of the
market. Customers can have these modules upgraded to current release
compatibility if they provide funding.
<PAGE>
SECTION 4
- --------------------------------------------------------------------------------
RELEASE UPGRADE POLICY
1. Customer's paying Product Support Service Fees (Maintenance) on products
classified into Support Categories A and B on a previous release will be
provided current product at no additional charge. Customers will be
provided only with the same products as initially licensed.
2. Certain software modules classified into Categories A and B in a previous
release will not automatically be upgraded to current release
compatibility. Check the current release price list to determine which
modules are available. Those modules which have been discontinued, or
maintain a Product Support Category C would need customer funding should
the customer wish to continue utilizing the module.
3. A new Product Support Services (Maintenance) Plan agreement will need to be
executed when a customer upgrades from a previous release of product to
current release to include the support category method for each licensed
product. Fees will be adjusted to reflect the then current price list of
licensed modules.
4. USSI will provide Product Support Service Solely for the current and
immediately preceding release of its standard software.
<PAGE>
SECTION 5
- --------------------------------------------------------------------------------
RESPONSIBILITIES
The responsibilities of Distributor and USSI to provide Distributor's licensees
with support services in case of software errors shall be:
a) Distributor will make the determination if the reported problem is caused
by Distributor's software or with the USSI software
b) If Distributor determines that the problem was caused by Distributor's
software, Distributor will be responsible for curing the problem
c) If Distributor determines that the problem was caused by the USSI
software(I) Distributor will be responsible for reporting the problem to
USSI following the guidelines contained in Section 2 Customer Hotline
Services(2) USSI will have the responsibility for providing a cure for the
problem to Distributor, who shall in turn provide the cure to Distributor's
licensee.
d) Unless otherwise agreed to by USSI and Distributor, in all cases
Distributor's licensee shall be instructed to communicate with Distributor
and not with USSI. Distributor will provide the information for licensee to
USSI.
<PAGE>
EXHIBIT 10.28
June 5, 1997
Name ____________________
Re: Your Employment With ULTRADATA Corporation
------------------------------------------
Dear :
-----------
This letter will set forth the binding agreement of employment (the
"Agreement"), effective as of June 5, 1997 (the "Effective Date"), between you
--------- --------------
ULTRADATA Corporation, a Delaware corporation ("ULTRADATA").
1. EMPLOYMENT AND DUTIES. During the Employment Term, as defined in
---------------------
Section 3 below, you will serve as _______________________________________ of
ULTRADATA. You will have such duties and authority as are customary for, and
commensurate with such position, and such other reasonable duties and authority
as the Board of Directors of ULTRADATA (the "Board") or the President of
-----
ULTRADATA prescribes from time to time.
2. COMPENSATION.
------------
(a) SALARY. For your services hereunder, ULTRADATA will pay as salary
------
to you the amount of __________ per month during each of the calendar years of
the Employment Term, as defined in Section 3 below, prorated for any year in
which this Agreement is in effect for only a portion of the calendar year. Such
salary will be paid in conformity with ULTRADATA's normal payroll period. Your
salary will be reviewed by the Board from time to time at its discretion, and
you will receive such salary increases, if any, as the Board in its sole
discretion determines.
(b) BONUS. In addition to the salary set forth in Section 2(a)
-----
hereof, you will be eligible starting in fiscal 1997, for an annual bonus
pursuant to a formula, and determined in accordance with criteria, in each case
to be established by the Board of Directors and/or its Compensation Committee,
which formula and criteria will be communicated to you in writing reasonably in
advance of the commencement of the performance period to which such bonus will
relate.
(c) OTHER BENEFITS. You will be entitled to participate in and
--------------
receive benefits under ULTRADATA's standard ULTRADATA benefits plans as in
effect from time to time, including medical insurance, sick leave, and vacation
time, subject to and on a basis consistent with the terms, conditions and
overall administration of such plans and ULTRADATA policies.
<PAGE>
June 5, 1997
(d) EXPENSES. During the term of your employment hereunder, you will
--------
be entitled to receive prompt reimbursement from the ULTRADATA for all
reasonable business-related expenses incurred by you, in accordance with
ULTRADATA's policies and procedures as in effect from time to time, provided
that you will properly account for such business expenses in accordance with
ULTRADATA's policy.
(e) DEDUCTIONS AND WITHHOLDING. All amounts payable or which become
--------------------------
payable under any provision of this Agreement will be subject to any deductions
authorized in writing by you and any deductions and withholdings required by
law.
3. TERM OF EMPLOYMENT.
------------------
(a) TERM. This Agreement will continue in full force and effect from
----
and including the Effective Date through and including June 5, 1998, unless
sooner terminated or extended as hereinafter provided (the "Employment Term").
---------------
(b) EXTENSION OF TERM. The term hereof may be extended by a written
-----------------
amendment to this Agreement signed by both you and ULTRADATA. Notwithstanding
the foregoing, if a Corporate Transaction (as defined below) occurs during the
Employment Term, the Employment Term will be automatically extended and the
terms and conditions of Section 3 and 4 will remain in effect.
(c) EARLY TERMINATION. Your employment with ULTRADATA under this
-----------------
Agreement may be terminated by ULTRADATA at any time during the Employment Term
by the President or the Board, for any reason and with or without cause, upon
delivery of written notice by ULTRADATA. ULTRADATA is not required to give you
any advance notice of termination which, in the sole discretion of ULTRADATA,
may be effective immediately upon delivery of written notice to you. You may
terminate this Agreement at any time by giving ULTRADATA written notice of your
resignation at least 30 days in advance; provided, however, that the Board may
determine upon receipt of such notice that the effective date of such
resignation will be immediate or some time prior to the expiration of the notice
period stated in your written notice to ULTRADATA.
(d) TERMINATION FOR CAUSE. Prior to the expiration of the Employment
---------------------
Term, your employment may be terminated for Cause by the Board, immediately upon
delivery of termination notice thereof to you. For these purposes, termination
for "Cause" will include, without limitation, termination because of your (a)
-----
failure or a refusal to comply in any material respect with the reasonable
policies, standards or regulations of the Company; (b) failure or a refusal in
any material respect, faithfully or diligently, to perform your duties
determined by the Company in accordance with this Agreement or the customary
duties of Employee's employment (whether due to ill health, disability or
otherwise); (c) unprofessional, unethical or fraudulent conduct or conduct that
materially discredits the Company or is materially detrimental to the
2
<PAGE>
June 5, 1997
reputation, character or standing of the Company; (d) dishonest conduct or a
deliberate attempt to do an injury to the Company; (e) material breach of a term
of this Agreement or the Employee Invention Assignment and Confidentiality
Agreement, including, without limitation, Employee's theft of the Company's
proprietary information; or (f) an unlawful or criminal act which would reflect
badly on the Company in the Company's reasonable judgment.
(e) TERMINATION DUE TO DEATH OR DISABILITY. Your employment hereunder
--------------------------------------
will terminate immediately upon your death. In the event that by reason of
injury, illness or other physical or mental impairment you are (i) completely
unable to perform your services hereunder for more than two consecutive months,
or (ii) unable in the good faith judgment of the Board to perform your services
hereunder for 50% or more of the normal working day throughout six consecutive
months, then ULTRADATA may terminate your employment hereunder at the end of
such two-month or six-month period, as applicable, by delivery to you of written
notice of such termination.
4. PAYMENTS AND BENEFITS AFTER TERMINATION OF EMPLOYMENT.
-----------------------------------------------------
(a) TERMINATION FOR CAUSE, DEATH OR DISABILITY, CERTAIN OTHER
---------------------------------------------------------
INVOLUNTARY TERMINATION OR VOLUNTARY TERMINATION. Upon termination of your
- ------------------------------------------------
employment by ULTRADATA under Section 3(c) hereof, but subject in such case to
the provisions of Section 4(b) hereof, or under Section 3(d) hereof, Section
3(e) hereof, or upon your voluntary termination of employment pursuant to
Section 3(c) hereof, all salary and benefits hereunder will cease immediately.
(b) INVOLUNTARY TERMINATION AFTER CORPORATE TRANSACTION.
---------------------------------------------------
(i) Definitions. For purposes of this Section 4(b):
-----------
(A) A "Corporate Transaction" is defined as (i) a merger or
---------------------
acquisition in which the Company is not the surviving entity (except for a
merger of the Company into a wholly-owned subsidiary, and except for a
transaction the purpose of which is to change the State in which the Company is
incorporated), (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company or (iii) any other corporate
reorganization or business combination, and in which the beneficial ownership of
50% or more of the Company's outstanding voting stock is transferred.
(B) The "Post-Transaction Period" is defined as the
-----------------------
twelve-month period commencing on the date of the closing or effectiveness
of a Corporate Transaction, and ending on the same numerical date in such
twelfth month as the date upon which such closing or effectiveness of the
Corporate Transaction occurred in the original month.
3
<PAGE>
June 5, 1997
(D) A "Constructive Termination Event" will be deemed to have
------------------------------
occurred at ULTRADATA's close of business on the fourteenth (14th) day after,
and including, the first day, that any of the following actions is taken by
ULTRADATA and such action is not reversed in full by ULTRADATA within such
fourteen-day period unless prior to the expiration of such fourteen-day period
you have otherwise agreed to the specific relevant event in writing: (1) your
aggregate benefits are materially reduced (as such reduction and materiality are
determined by customary practice within the software industry within the State
of California) below those in effect immediately prior to the effective date of
such Constructive Termination Event, and such reduction is not applied as part
of an overall reduction in benefits in which you are treated proportionally
given your position, length of service, income and other customary relevant
factors, and/or (2) your duties and/or authority are materially decreased or
increased from those in effect immediately prior to such Constructive
Termination Event, in a way that is adverse to you, as determined by customary
practice within the semiconductor industry within the State of California and/or
(3) you are required to perform your employment obligations (other than routine
travel consistent with that prior to the effective date of such Constructive
Termination Event) at a location more than twenty-five (25) miles away from your
principal place of work for ULTRADATA as such place of work was in effect
immediately prior to the effective date of such Constructive Termination Event.
(ii) Severance Pay For Involuntary Termination Without Cause. If at
-------------------------------------------------------
any time following the closing of a Corporate Transaction (A) your employment is
terminated by ULTRADATA without Cause, pursuant to Section 3(c) hereof, (but not
if your employment is terminated for Cause (under Section 3(d) hereof) or by
reason of your death or disability (under Section 3(e) hereof), nor if you
voluntarily terminate your employment under Section 3(c) hereof except if such
voluntary termination is as a result of a Constructive Termination Event), or
(B) a Constructive Termination Event occurs and you voluntarily terminate your
employment thereafter before such Constructive Termination Event is reversed by
ULTRADATA as set forth in Section 4(b)(i)(D) hereof, then from and after the
date of such termination, you will be paid severance pay by ULTRADATA: (A) if
the termination occurs during the Post-Transaction Period, for a period of
twelve (12) months from and after the date of such termination (prorated for the
first and last month of such twelve-month period if your employment is
terminated other than at the end of a calendar month) of an amount equal to the
total amount of your annualized salary as in effect immediately prior to such
termination or Constructive Termination Event, to be paid in twelve equal
installments each paid on the date you otherwise would have been paid your
salary had your employment continued; and (B) if the termination occurs
following the Post Transaction Period such termination (prorated for the first
and last month of such sixth-month period if your employment is terminated other
than at the end of a calendar month) of an amount equal to the total amount of
your annualized salary as in effect immediately prior to such termination or
Constructive Termination Event, to be paid in six equal installments each paid
on the date you otherwise would have been paid your salary had your employment
continued.
4
<PAGE>
June 5, 1997
(c) BONUS, BENEFITS; COOPERATION. In the event of any termination of
----------------------------
your employment, for whatever reason, you also will be paid, when otherwise due,
any bonus to which you otherwise would be entitled, and to such continuation of
your benefits listed in Section 2(c) hereof as may be provided by ULTRADATA
policy or required by law. After any such termination of your employment, except
to the extent you are not able to do so by reason of your death or disability,
you will cooperate with ULTRADATA in providing for the orderly transition of
your duties and responsibilities to other individuals, as is reasonably
requested by ULTRADATA.
(d) OTHER MATTERS. In the event of any termination other than voluntary
-------------
termination or termination for cause; employee will be entitled to retain his
company provided cellular phone and notebook computer as then currently provided
by Company. Additionally, placement services will be provided as the Company
customarily provides to other Executives leaving the Company.
5. PROPRIETARY RIGHTS. You hereby acknowledge and confirm that you have
------------------
executed the Company's standard Employee Invention Assignment and
Confidentiality Agreement with the Company, which agreement is in full force and
effect. The provisions of such agreement will survive any termination or
expiration of this Agreement.
6. MISCELLANEOUS. This Agreement contains the entire understanding and
-------------
sole and entire agreement between the parties with respect to the subject matter
hereof, and supersedes any and all prior agreements, negotiations and
discussions between the parties hereto with respect to the subject matter
covered hereby and may only be modified by an agreement in writing signed by
ULTRADATA and you, and which states the intent of the parties to amend this
Agreement. If any provision of this Agreement is held to be invalid or
otherwise unenforceable, in whole or in part, the remainder of such provision
and the remainder of this Agreement will not be affected thereby and will be
enforced to the fullest extent permitted by law. Neither this Agreement nor the
rights or obligations hereunder will be assignable by you. ULTRADATA may assign
this Agreement to any successor of ULTRADATA, and upon such assignment any such
successor will be deemed substituted for ULTRADATA upon the terms and subject to
the conditions hereof. This Agreement will be binding upon the successors and
assigns of the parties hereof and upon your heirs, executors and administrators.
This Agreement has been negotiated and executed in, and will be governed by and
construed with the laws of, the State of California. Any notice, request,
demand or other communication required or permitted hereunder will be deemed to
be properly given when personally served in writing, or when deposited in the
United States mail, postage pre-paid, addressed to ULTRADATA at the address
shown at the beginning of this letter, or to you at the address shown below, or
by facsimile upon confirmation of receipt. Each party hereto may change its
address by written notice in accordance with this Section 6.
5
<PAGE>
June 5, 1997
Sincerely,
/s/ Robert J. Majteles
-------------------------------------
Robert J. Majteles
President and Chief Executive Officer
ACCEPTED AND AGREED:
- --------------------
- --------------------------------------
[Name]
Date signed: June 5, 1997
6
<PAGE>
Schedule to
EXHIBIT 10.28
ULTRADATA Corporation
Executive Management Team
Executive Employment Agreement Information:
<TABLE>
<CAPTION>
Name Title Monthly Salary
<S> <C> <C>
Ronald Marguglio Vice President, Sales and Marketing $12,500
Philip D. Ranger Vice President, Secretary and Chief Financial Officer $11,250
David Robbins Vice President, Customer Services $11,250
Cindy Stinnette Vice President, Product Development $11,250
</TABLE>
All Agreements executed on June 5, 1997
7
<PAGE>
EXHIBIT 10.29
SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of April 30, 1997 by and between NIGEL P.
GALLOP ("GALLOP") and ULTRADATA Corporation, a Delaware corporation
("COMPANY").
RECITALS
--------
(a) GALLOP has served as Chairman of the Board and Chief Executive Officer
of the Company since 1989 and as a director of the Company since 1981 and served
as the Company's President from 1989 to 1996.
(b) In connection with his employment as President and Chief Executive
Officer of the Company, Gallop entered into an Employment Agreement with the
Company dated as of July 31, 1995 (the "Employment Agreement").
(c) By mutual agreement of GALLOP and COMPANY, GALLOP has resigned as Chief
Executive Officer of the Company effective April 30, 1997, subject to the terms
and conditions of this Agreement.
(d) GALLOP and COMPANY now desire to terminate the Employment Agreement
and, in consideration therefor and for other mutually beneficial consideration,
provide for certain severance benefits and other obligations of the parties as
more fully set forth herein.
In consideration of the promises, covenants, releases and other actions of
the parties set forth in this Agreement, COMPANY and GALLOP hereby agree as
follows.
1. Termination of Employment Agreement
-----------------------------------
The Employment Agreement is hereby terminated in its entirety and is of no
further force or effect.
2. Obligations of COMPANY
----------------------
(a) COMPANY will pay GALLOP, in cash, the sum of $200,000, representing 8
months of regular salary at the rate currently specified in the Employment
Agreement, without bonuses, payable in three equal installments. The first
installment will be paid upon execution of this Agreement and each additional
installment will be paid at the beginning of each calendar quarter thereafter.
(b) COMPANY will cooperate with GALLOP to make available to him the
insurance benefits as required by the Consolidated Omnibus Budget Reconciliation
Act of 1985 (COBRA). GALLOP will be responsible for the payment, directly to
benefits providers, of all amounts due with respect to such benefits.
-1-
<PAGE>
(c) COMPANY will pay GALLOP, upon execution of this Agreement, in cash, the
sum of $57,690.08, representing 10 weeks (400 hours) of accrued vacation in
accordance with the Company's vacation accrual policy.
(d) That certain nonqualified stock option, dated July 31, 1995, to
purchase 600,000 shares of the Company's Common Stock with an exercise price of
$6.00 per share currently held by GALLOP (the "Option") is hereby amended to
provide that: (a), notwithstanding the provisions of Section 2 of the Option,
such Option is now exercisable in full as to all 600,000 shares issuable under
such Option; and (b) notwithstanding Section 4 of the Option, which provides for
termination of the exercisability of the Option 90 days after a "Termination",
as defined in the Option, such Option will remain exercisable through the
"Expiration Date", as defined in the Option. The provisions of this paragraph
will not apply to any options to purchase shares of COMPANY stock now or
hereafter held by GALLOP other than the Option.
(e) COMPANY hereby agrees to reimburse GALLOP's actual relocation expenses,
as determined in accordance with the definition of moving expenses permitted to
be deducted under the Internal Revenue Code of 1986, as amended, as incurred, up
to $100,000, payable if and when spent, including the brokerage fee for the sale
of Mr. Gallop's current home in Danville, California and first class airfares
for Mr. Gallop and his spouse between Pleasanton, California and Perth,
Australia or such other similar destination as GALLOP may determine.
(f) COMPANY hereby sells, assigns and transfers to GALLOP all of its right,
title and interest in an to that certain property described more fully on
Exhibit A attached hereto. COMPANY agrees to execute and deliver the BILL OF
- ---------
SALE attached hereto as Exhibit A with respect to such property. Such property
is transferred "as is" and without warranty by the Company of any kind.
3. Obligations of GALLOP
---------------------
(a) It is understood that GALLOP is currently serving as Chairman of the
Board of COMPANY and remains a director of COMPANY notwithstanding his
resignation as an employee of COMPANY. GALLOP hereby agrees that he will not
receive, and he forever irrevocably waives any claim, right, title or interest
in or to, any additional compensation for serving as a director or Chairman of
the Board of the Company, including without limitation any options that may be
granted to GALLOP under the Company's 1995 Directors Stock Option Plan, other
than reimbursement of expenses incurred in accordance with the Company's then-
current policies, the payments and other benefits provided under this Agreement
and the options currently held by GALLOP to purchase shares of the Company's
Common Stock. Nothing herein is to be construed to confer on GALLOP any right
to continue as a director or Chairman of the Board of COMPANY.
(b) GALLOP acknowledges that he has acquired knowledge of proprietary,
trade secret and other confidential business information of COMPANY in the
course of his employment with COMPANY relating to, without limitation, the
research, development, strategy, technology, marketing, financial, and
operational aspects of COMPANY'S business operations. GALLOP further
acknowledges that the disclosure of such information to any third
-2-
<PAGE>
party, company, or business would damage COMPANY'S business interests. GALLOP
accordingly agrees to hold all proprietary, trade secret and other confidential
business information acquired by him during his employment with COMPANY as
confidential, and covenants not to disclose or make available such information
to any individual or entity, nor will he utilize such information for his own
benefit.
(c) In addition, GALLOP acknowledges and agrees that any copyrightable
works prepared by him within the scope of his employment with COMPANY are "works
for hire" under the Copyright Act and that COMPANY is considered the author and
owner of such copyrightable works and that all inventions, improvements,
designs, original works of authorship, formulas, processes, computer software
programs, databases and trade secrets that (a) are developed using equipment,
supplies, facilities or trade secrets of COMPANY or (b) result from work
performed by GALLOP for COMPANY, or (c) relate to COMPANY's business or past,
current or anticipated research and development (each an "Invention"), will be
the sole and exclusive property of COMPANY and are hereby irrevocably assigned
by GALLOP to COMPANY. In addition, GALLOP hereby irrevocably transfers and
assigns to COMPANY all worldwide patents, patent applications, copyrights, mask
works, trade secrets and other intellectual property rights in any Invention and
any and any rights to claim authorship of an Invention to object to or prevent
the modification of any Invention, or to withdraw from circulation or control
the publication or distribution of any Invention that GALLOP may have in or with
respect to any Invention. GALLOP has been notified and understands that the
provisions of this paragraph do not apply to any Invention that qualifies fully
under the provisions of Section 2870 of the California Labor Code, which is
attached hereto as Exhibit B.
----------
(d) GALLOP agrees to assist COMPANY, at COMPANY's expense, in every proper
way to obtain COMPANY and enforce patents, copyrights, trade secret rights and
other legal protections for the Company's Inventions in any and all countries.
GALLOP will execute any documents that COMPANY may reasonably request for use in
obtaining or enforcing such patents, copyrights, trade secrets and other legal
protections. GALLOP hereby appoints the Secretary of COMPANY as his attorney-
in-fact to execute documents on GALLOP's behalf for this purpose.
(e) The provisions of this Section 3 are in addition to, and will not be
construed to supersede or limit, any other obligations of GALLOP under any law
or agreement with respect to confidentiality of Company proprietary information
or ownership of the Company's property or proprietary rights.
(c) GALLOP warrants that no other individual or entity has any interest in
the subject matter hereof; that he has not transferred, hypothecated, assigned,
encumbered or disposed of any claim encompassed by this Agreement, and that he
has the sole right and exclusive authority to execute this Agreement;
4. Releases
--------
(a) In consideration of their mutual promises, covenants warranties and
payments provided for in this Agreement, GALLOP and COMPANY, for themselves,
their heirs, assigns,
-3-
<PAGE>
employees, agents, executors, predecessors and successors in interest, hereby
release and forever discharge each other from any and all claims, demands,
actions or causes of action arising from or in any way connected with GALLOP'S
employment with COMPANY, the terms and conditions of such employment or the
cessation of such employment. Notwithstanding the foregoing, the provisions of
this paragraph will not affect the obligations of the parties under this
Agreement, the Option, that certain Indemnification Agreement between COMPANY
and GALLOP or that certain option to purchase 35,000 shares of Common Stock
granted to GALLOP by COMPANY, any obligation of GALLOP under any law or
agreement with respect to confidentiality of Company proprietary information or
ownership of the Company's property or proprietary rights or any cause of action
arising from fraud or willful misconduct.
(b) GALLOP and COMPANY acknowledge that they may have sustained damage or
possess claims relating to the subject matter of this Agreement of which they
are presently unaware. Having taken such possibility into account, however, in
entering into this Agreement, GALLOP and COMPANY expressly waive the benefits of
California Civil Code Section 1542, which provides:
A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
5. Binding Effect
--------------
This Agreement in binding upon, and shall inure to the benefit of, GALLOP,
COMPANY, their heirs, assigns, executors, predecessors and successors in
interest.
6. Entire Agreement
----------------
This Agreement represents the entire agreement and understanding between
GALLOP and COMPANY concerning the subject matter hereof, and any prior or
contemporaneous representations, negotiations, understandings or covenants not
set forth herein, including without limitation the Employment Agreement, are
expressly rendered null and void. This Agreement may be modified or amended
only by a written instrument executed by GALLOP and COMPANY.
7. Severability
------------
If any clause, provision, term or condition of this Agreement is found to
be void, invalid or otherwise unenforceable, the remaining portions of this
Agreement shall continue in full force and effect and the meaning of such
provisions harmonized to give effect to this Agreement as if the offending
clause, provision or term were not included in this Agreement.
8. Multiple Counterparts
---------------------
-4-
<PAGE>
This Agreement may be executed in multiple counterparts, all of which
together shall comprise the complete agreement. Duplicate originals may be
executed with equal force and effect.
9. Applicable Law and Venue
------------------------
The validity, interpretation and enforcement of this Agreement shall be
governed by the laws of the State of California. GALLOP and COMPANY agree that
venue for any action or proceeding relating to this Agreement is proper in the
Superior Court of the State of California in and for Alameda County or in the
United States District Court for the Northern District of California, and the
parties consent to personal jurisdiction in such courts.
10. Attorney's Fees
---------------
In the event that either COMPANY or GALLOP is compelled to initiate or
defend any action or proceeding at law or equity to enforce or defend any right
or obligation accruing under the terms of this Agreement, the prevailing party
in such action or proceeding shall be entitled to recover the reasonable
attorneys' fees incurred in connection with the prosecution or defense of such
action or proceeding, in addition to such other relief as may be permitted by
law.
11. Representation by Counsel and Waiver of Conflict
------------------------------------------------
COMPANY and GALLOP recognize and hereby acknowledge that this Agreement has
been prepared by Fenwick & West LLP at the instruction of and as legal counsel
for the Company, and that Fenwick & West LLP has in the past acted as legal
counsel to Gallop. Notwithstanding the foregoing, and recognizing the potential
conflict of interest of Fenwick & West LLP in this matter, COMPANY and GALLOP
hereby waive any such conflict of interest and consent to the representation of
COMPANY by Fenwick & West LLP in connection with this Agreement. GALLOP agrees
that he will, if he deems necessary or appropriate, seek separate legal counsel
in connection with this Agreement.
-5-
<PAGE>
12. Acknowledgment of Understanding
-------------------------------
By their signatures below, GALLOP and COMPANY acknowledge that they have
read the terms of this Agreement, understand the rights and obligations accruing
under this Agreement, and are willing to be bound by such terms and conditions
voluntarily, and without duress or coercion of any kind.
Executed at Pleasanton, California this 19/th/ day of May 1997.
By: /s/ Nigel P. Gallop
-------------------
Nigel P. Gallop
Executed at Pleasanton, California this 19/th/ day of May 1997.
ULTRADATA CORPORATION
By: /s/ Philip D. Ranger
---------------------
Philip D. Ranger
Chief Financial Officer
-6-
<PAGE>
EXHIBIT A
BILL OF SALE
FOR GOOD AND VALUABLE CONSIDERATION receipt of which is hereby acknowledged,
ULTRADATA Corporation, a Delaware corporation, hereby delivers, assigns and
transfers, without warranty of any kind, express or implied, including but not
limited to any warranty of merchantability or fitness for a particular purpose,
to Nigel P. Gallop, all of its right, title and interest in and to the property
set forth on Exhibit "1" hereto.
Dated: May 19, 1997 ULTRADATA CORPORATION
By: /s/ Philip D. Ranger
--------------------
Philip D. Ranger
Chief Financial Officer
<PAGE>
EXHIBIT 1 to Bill of Sale
<TABLE>
<S> <C>
Mercedes Benz 1993 600 SEL VIN# WDBGA5789PA094814 $63,005.00
Blackhawk Country Club Membership No. 2120 $25,000.00
Computer equipment:
IBM Thinkpad 760E $ 5,429.00
Sony Trinitron 20" Monitor 1,669.00
Computer accessories 2,212.00
----------
Total computer equipment $ 9,310.00
</TABLE>
<PAGE>
EXHIBIT B
SECTION 2870, CALIFORNIA LABOR CODE
Section 2870 of the California Labor Code states as follows: ANY PROVISION IN
AN EMPLOYMENT AGREEMENT WHICH PROVIDES THAT AN EMPLOYEE SHALL ASSIGN, OR OFFER
TO ASSIGN, ANY OF HIS OR HER RIGHTS IN AN INVENTION TO HIS OR HER EMPLOYER SHALL
NOT APPLY TO AN INVENTION THAT THE EMPLOYEE DEVELOPED ENTIRELY ON HIS OR HER OWN
TIME WITHOUT USING THE EMPLOYER'S EQUIPMENT, SUPPLIES, FACILITIES, OR TRADE
SECRET INFORMATION EXCEPT FOR THOSE INVENTIONS THAT EITHER: (1) RELATE AT THE
TIME OF CONCEPTION OR REDUCTION TO PRACTICE OF THE INVENTION TO THE EMPLOYER'S
BUSINESS, OR ACTUALLY OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT OF THE
EMPLOYER, OR (2) RESULT FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE
EMPLOYER. TO THE EXTENT A PROVISION IN AN EMPLOYMENT AGREEMENT PURPORTS TO
REQUIRE AN EMPLOYEE TO ASSIGN AN INVENTION OTHERWISE EXCLUDED FROM BEING
REQUIRED TO BE ASSIGNED UNDER CALIFORNIA LABOR CODE SECTION 2870(a), THE
PROVISION IS AGAINST THE PUBLIC POLICY OF THIS STATE AND IS UNENFORCEABLE.
1
<PAGE>
EXHIBIT 10.30
CONSENT TO SUBLEASE
This Agreement is made as of this 22nd day of June, 1997. ("Agreement") by
and among UNUM Life Insurance Company of America ("Landlord"), ULTRADATA
Corporation ("Tenant"), and 24 Hour Fitness, Inc. ("Subtenant"). Under a lease
dated as of June 22nd, 1996, (as amended, the "Master Lease"), Landlord is
leasing to Tenant approximately 25,535 square feet of space in the building
located at 5020 Franklin Drive, Pleasanton, California ("Premises"). Landlord
hereby consents to the subletting of the Premises by Tenant to Subtenant
pursuant to a sublease ("Sublease") dated as of June 22, 1997, (copy attached as
Exhibit A). Landlord's consent is subject to the following conditions, to each
of which Tenant and Subtenant expressly agree:
1. Nothing contained in the Agreement shall:
(a) operate as a representation or warranty by Landlord, and Landlord
shall not be bound or estopped in any way by the provisions of the
Sublease;
(b) be construed to modify, waive, or affect (i) any provisions,
covenants, or conditions in the Master Lease, (ii) any of Tenant's
obligations under the Master Lease, (iii) any rights or remedies of
Landlord under the Master Lease, or otherwise, or (iv) Landlord's
obligations or Tenant's rights under the Master Lease, or otherwise;
or
(c) be construed to waive any present or future breach or default of
Tenant under the Master Lease.
In case of any conflict between the provisions of this Agreement and the
provisions of the Sublease, the provisions of this Agreement shall
prevail.
2. The Sublease shall be subject and subordinate at all times to the Master
Lease and all of its provisions, covenants, and conditions. In case of
conflict between the Master Lease and the Provisions of the Sublease, the
provisions of the Master Lease shall prevail.
3. Neither the Sublease nor this Agreement shall release or discharge Tenant
from any liability under the Master Lease, and Tenant shall remain liable
and responsible for the full performance and observance of all provisions,
covenants, and conditions set forth in the Master Lease. Any breach or
violation of provisions of the Master Lease by Subtenant shall be deemed a
default by Tenant of the provision.
1
<PAGE>
4. This consent by Landlord shall not be construed as a consent by Landlord
to any further subletting, either by Tenant or Subtenant. The Sublease may
not be assigned, renewed, or extended, nor shall the Premises, or any part
thereof, be further sublet without the prior written consent of Landlord.
5. Sublessee and Master Landlord agree that, in the event of a termination or
expiration of the Master Lease, (i) Sublessee shall attorn to Master
Landlord and Master Landlord shall recognize the rights and interests of
Sublessee under the Lease and the Sublease for a period not to exceed the
first ten (10) years of the Sublease (five(5) years if Sublessee fails to
exercise its first option to extend), and (ii) direct Landlord/Tenant
privity shall exist between Master Landlord and Sublessee on the basis of
the Sublease. Sublessee shall be afforded notice and an opportunity to cure
any default under the Master Lease as provided therein.
6. Sublessee hereby waives and relinquishes any right or claim against Master
Lessor for damage to Sublessee's personal property at or on the Premises by
way of subrogation or assignment, except if the damage was caused by Master
Lessor's negligence. Master Lessor hereby waives and relinquishes any right
or claim against Tenant for damages to the Premises by way of subrogation
or assignment, except if the damage was caused by Tenant's negligence. To
the extent that these damages are covered by insurance proceeds, Sublessee
and Master Lessor agree to have their respective insurance policies
endorsed to waive the carrier's right of recovery under subrogation and a
certificate of insurance shall be available to either party on request
verifying such waiver.
7. Both Tenant and Subtenant shall be liable for all bills rendered by
Landlord for charges incurred by or imposed upon subtenant for services
rendered and materials supplied to the Premises pursuant to the terms of
the Master Lease.
8. Any notice under the Master Lease, the Sublease, or this Agreement given by
any party hereto to another party hereto shall be given as required under
paragraph 23 of the Master Lease, in the case of Subtenant at 5020
Franklin Dr., Pleasanton, CA 94560 (address), or at such other address as a
party may have designated by notice given in accordance with paragraph 23
of the Master Lease.
9. This Agreement (i) shall be construed in accordance with the laws of the
State of California; (ii) contains the entire agreement of the parties with
respect to the subject matter hereof, and (iii) may not be changed or
terminated orally or by course of conduct.
10. The Sublease and this Agreement shall be attached to and incorporated into
the Master Lease identified in this Sublease.
2
<PAGE>
11. Notwithstanding the provisions of paragraph 9 of the Sublease and Article 3
of Exhibit B to the Master Lease: (i) Sublessee's work shall be performed
and administered by Sublessee, in accordance with plans submitted to Master
Lessor for approval, which approval shall not be unreasonably withheld or
delayed; (ii) Sublessee's work shall be performed by a contractor selected
by Sublessee and approved by Master Lessor, which approval shall not be
unreasonably withheld or delayed; (iii) Master Lessor shall reimburse
Sublessee for such work up to $178,745.00, within thirty (30) days
following Master Lessor's receipt of invoices and unconditional lien
releases for such work from all parties involved in the construction,
including contractors, subcontractors, and materialmen.
ACKNOWLEDGED AND AGREED:
LANDLORD: TENANT:
UNUM Life Insurance Company of America ULTRADATA Corporation
By: /s/ Anne L. Littlefield By: /s/ Philip D. Ranger
---------------------------------- ----------------------------
Its: Regional Property Mgr. Its: Vice President & CFO
--------------------------------- ---------------------------
Date: 6.20.97 Date: 7/2/97
-------------------------------- --------------------------
SUBTENANT:
24 Hour Fitness, Inc.
By: /s/ Gilbert Freeman
----------------------------------
Its: Executive Vice President and CFO
---------------------------------
Date: July 2, 1997
--------------------------------
3
<PAGE>
SUBLEASE
1. PARTIES
This sublease (hereinafter referred to as "Sublease") is entered into as of
the 10th day of May, 1997, by and between ULTRADATA Corporation, a Delaware
corporation, as Sublessor and 24 Hour Fitness, Inc., a California
corporation, as Sublessee. This Sublease is entered into under the lease
including all exhibits and addenda thereto (hereinafter referred to as
"Lease") dated June 22, 1996, between UNUM Life Insurance Company of
America, a Maine Corporation, as Lessor and Sublessor under this Sublease,
as Lessee. A copy of said Lease is attached hereto, and incorporated herein
by reference.
2. PROVISIONS CONSTITUTING SUBLEASE
2.1 This Sublease is subject to all the terms and conditions of the Lease,
except as specifically exempted herein. Sublessee shall assume and perform
the obligations of Lessee in said Lease to the extent said terms and
conditions are applicable to the premises subleased pursuant to this
Sublease. Sublessee shall not commit or permit to be committed on the
subleased premises any act or omission which shall violate any term or
condition of the Lease.
2.2 All of the terms and conditions contained in the Lease attached
hereto, are incorporated herein (except for Articles 1.3, 1.5, 1.10, 49, 50
--
and Exhibit B to the Lease,) in their entirety as terms and conditions of
this Sublease (with each reference therein to Landlord and Tenant to be
deemed to refer to Sublessor and Sublessee) and along with all the
following paragraphs set out in this Sublease, shall be the complete terms
and conditions of this Sublease.
2.3 The parties hereto agree that the Sublessee's obligations under
this Sublease are conditioned Sublessor obtaining and providing to
Sublessee the Lessor's written consent to the term and conditions of this
Sublease within forty five (45) days after the final execution of the
Letter of Intent by Sublessor and Sublessee. Such consent shall be in a
form and content acceptable to Sublessee.
In the event Sublessee has not notified Sublessor within forty-five (45)
days from the mutual execution of the Letter of Intent that all of the
above conditions are completed, satisfied or waived, this Sublease shall
terminate and be of no further force or effect and the parties shall be
relieved of all obligations and liability hereunder.
3. PREMISES
Sublessor leases to Sublessee and Sublessee hires from said Sublessor the
premises (referred to herein as the "Premises") situated in the City of
Pleasanton, County of Alameda, State of California and located at 5020
Franklin Drive. Said portion is agreed to be approximately 25,535 rentable
square feet, as identified in the Lease attached hereto.
4. TERM
4.1 The term of this Sublease shall be for a sixty (60) month period
commencing on August 1, 1997 (the "Commencement Date") terminating on July
31, 2002.
4.2 Notwithstanding said Commencement Date, if for any reason Sublessor
cannot deliver possession of the Premises to Sublessee on said Commencement
Date, Sublessor shall not be subject to any liability therefor, not shall
such failure affect the validity of this Sublease or the obligations of
Sublessee hereunder or extend the term hereof, but in such case Sublessee
shall not be obligated to pay rent until possession of the Premises in
tendered to Sublessee provided, however, that if Sublessor shall not have
delivered possession of the Premises within ninety (90) days from said
Commencement Date. Sublessee may, at Sublessee option, by notice in writing
to Sublessor within ten (10) days thereafter, cancel this Sublease. If this
Lease is canceled as herein provided, Sublessor shall return any monies
previously deposited by Sublessee and the parties shall be discharged from
all obligations hereunder.
<PAGE>
4.3 Early Possession. Sublessee shall be granted fifteen (15) days early
occupancy to prepare the space for occupancy. Such occupancy shall be
subject to all the provisions of this Sublease other than the payment of
rent or CAM charges. Said early possession shall not advance the
termination date of this Sublease.
5. RENT
Sublessee shall pay to Sublessor as rent for the Premises equal monthly
installments of $22,981.50, in advance, on the first day of each month of
the term hereof. Sublessee shall pay to Sublessor within ten (10) days of
the execution of this Sublease the sum of $22,981.50 as rent for the period
form August 1, 1997 through August 31, 1997. Rent for any period the term
hereof which is for less than one month shall be a pro rate portion of the
monthly installment. Rent shall be payable without notice or demand and
without any deduction, offset, or abatement (except as expressly provided
for herein in Paragraph 9, below) in lawful money of the United State of
America to Sublessor at the address state herein or to such other persons
at such places as Sublessor may designate in writing.
6. SECURITY DEPOSIT
Sublessee shall deposit with Sublessor upon execution hereof the sum of
$23,000.00 as security for Sublessee's faithful performance of Sublessee's
obligations hereunder. If Sublessee fails to pay rent or other charges due
hereunder, or otherwise defaults (beyond the applicable cure periods
contained in the Lease) with respect to any provision of this Sublease,
Sublessor may use and apply or become obligated by reason of Sublessees'
default, or to compensate Sublessor for any loss or damage which Sublessor
may suffer thereby. If Sublessor so uses or applies all or any portion said
deposit, Sublessee shall within ten (10) days after written demand therefor
deposit case with Sublessor in an amount sufficient to restore said
deposit to the full amount hereinabove stated and Sublessee's failure to do
so shall be a breach of this Sublease and Sublessor may at his option
terminate this Sublease. Sublessor shall not be required to keep said
deposit separate from its general accounts. If Sublessee performs all of
Sublessee's obligations hereunder, said deposit or so much thereof as had
not therefore been applied by Sublessor shall be returned without payment
of interest for its use, to Sublessee (or, at Sublessor's option, to the
last assignee, if any, of Sublessee's interest hereunder) within ten (10)
days after the expiration of the term hereof, or after Sublessee has
vacated the Premises whichever is later.
7. INSURANCE
Sublessee shall abide by the insurance requirements as outlined in Article
8 of the Master Lease and shall list Sublessor as an additional insured.
8. USE
Use. The premises shall be used and occupied only for general office use.
9. TENANT IMPROVEMENTS
Sublessee shall receive a Tenant Improvement allowance in the amount of
$178,745.00. Approval, performance and payment for Sublessee's work shall
be pursuant to the terms set forth in Exhibit B of the Lease. Otherwise,
Sublessee agrees to accept the space in its present condition.
10. OPTION TO RENEW
Sublessor grants Sublessee a right to extend the term from August 1, 2002
through January 31, 2007 with prior written notice on or before October 31,
2001. The rent for this option period shall be a the ten fair market rent
for similar type space in the market to be determined pursuant to the terms
of the Lease.
This option to renew shall be null and void should Sublessor give Sublessee
written notice of its need for the space within (30) days of receiving
Sublessee's notice of intent to exercise their option to renew.
Other than the above mentioned terms, the Option to Renew shall be governed
by Section 39 and 50 of the underlying Lease.
<PAGE>
11. REAL ESTATE BROKERS
Cushman & Wakefield represents Sublessor and Cornish & Carey Commercial
represents Sublessee. Said brokers shall be paid according to a separate
agreement. There are no other Brokers involved with this Sublease.
SUBLESSOR:
ULTRADATA Corporation, a Delaware corporation
By: /s/ Philip D. Ranger
-----------------------------------
Address: 5000 Franklin Drive
-----------------------------------
Pleasanton, CA 94588
-----------------------------------
SUBLESSEE:
24 Hour Fitness, Inc., a California corporation
By: /s/ Gilbert Freeman
-------------------------------------
Address: 6670 Owens Drive
-------------------------------------
Pleasanton, CA 94566
-------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
AS REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,217
<SECURITIES> 0
<RECEIVABLES> 7,437
<ALLOWANCES> (1,805)
<INVENTORY> 794
<CURRENT-ASSETS> (11,021)
<PP&E> 11,195
<DEPRECIATION> (6,422)
<TOTAL-ASSETS> 15,868
<CURRENT-LIABILITIES> 8,171
<BONDS> 0
0
0
<COMMON> 8
<OTHER-SE> 15,114
<TOTAL-LIABILITY-AND-EQUITY> 15,868
<SALES> 4,253
<TOTAL-REVENUES> 8,708
<CGS> 1,672
<TOTAL-COSTS> 5,025
<OTHER-EXPENSES> 4,355
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5)
<INCOME-PRETAX> (439)
<INCOME-TAX> 0
<INCOME-CONTINUING> (439)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (439)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
