<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1996
REGISTRATION NO. 333-3842
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
USCS INTERNATIONAL, INC.
(Name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7371 94-1727009
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
No.)
</TABLE>
2969 PROSPECT PARK DRIVE
RANCHO CORDOVA, CA 95670-6148
(916) 636-4500
(Address and telephone number of principal executive offices)
JAMES C. CASTLE, PH.D.
CHIEF EXECUTIVE OFFICER
USCS INTERNATIONAL, INC.
2969 PROSPECT PARK DRIVE
RANCHO CORDOVA, CA 95670-6184
(916) 636-4500
(Name, address and telephone number, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
GILLES S. ATTIA, ESQ. MARK A. BERTELSEN, ESQ.
KEVIN A. COYLE, ESQ. ANN YVONNE WALKER, ESQ.
Graham & James, LLP Wilson Sonsini Goodrich & Rosati
400 Capitol Mall Professional Corporation
Suite 2400 650 Page Mill Road
Sacramento, CA 95814-4411 Palo Alto, CA 94304-1050
(916) 558-6700 (415) 493-9300
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE ON OR AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
TITLE OF OFFERING MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT BEING PRICE PER AGGREGATE REGISTRATION
REGISTERED REGISTERED SHARE (1) OFFERING PRICE FEE (2)
<S> <C> <C> <C> <C>
Common Stock, Par Value
$.05 per share.......... 5,520,000 Shares $17.00 $93,840,000 $32,359
<FN>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee.
(2) Previously paid.
</TABLE>
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
USCS INTERNATIONAL, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501 OF REGULATION S-K
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
- ----------------------------------------------------------------- ------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus....................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................... Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges............................ Prospectus Summary; Risk Factors
4. Use of Proceeds....................................... Use of Proceeds
5. Determination of Offering Price....................... Underwriting
6. Dilution.............................................. Dilution
7. Selling Security Holders.............................. Principal and Selling Stockholders
8. Plan of Distribution.................................. Underwriting
9. Description of Securities to be Registered............ Description of Capital Stock
10. Interests of Named Experts and Counsel................ Not Applicable
11. Information with Respect to the Registrant............ Outside Front Cover Page; Prospectus Summary; Risk
Factors; Dividend Policy; Capitalization; Selected
Consolidated Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Principal and Selling Stockholders;
Underwriting; Financial Statements
12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities....................... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JUNE 17, 1996
PROSPECTUS
4,800,000 SHARES
[LOGO]
COMMON STOCK
--------------
Of the 4,800,000 shares of Common Stock, par value $.05 per share (the
"Common Stock"), being offered hereby, 2,763,855 shares are being offered by
USCS International, Inc. ("USCS" or the "Company") and 2,036,145 shares are
being offered by the Selling Stockholders (as defined herein). The Company will
not receive any of the proceeds from the sale of the shares by the Selling
Stockholders. See "Principal and Selling Stockholders." Prior to this offering,
there has been no public market for the Common Stock of the Company. It is
currently estimated that the initial public offering price will be between
$15.00 and $17.00 per share. See "Underwriting" for information relating to the
factors to be considered in determining the initial public offering price.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol "USCS," subject to official notice of issuance.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT (1) COMPANY (2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
Total (3)............... $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $1,500,000.
(3) The Company has granted the several Underwriters an option, exercisable
within 30 days after the date of this Prospectus, to purchase up to an
additional 720,000 shares of Common Stock solely to cover over-allotments,
if any. If all of such additional shares are purchased, the total Price to
Public, Underwriting Discount, Proceeds to Company and Proceeds to Selling
Stockholders will be $ , $ , $ and $ , respectively. See
"Underwriting."
-------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, and subject to
the approval of certain legal matters by counsel for the Underwriters and
certain other conditions. The Underwriters reserve the right to withdraw, cancel
or modify such offer and to reject orders in whole or in part. It is expected
that the delivery of shares of Common Stock will be made in New York, New York,
on or about , 1996.
-------------------
MERRILL LYNCH & CO. MONTGOMERY SECURITIES
------------
The date of this Prospectus is , 1996.
<PAGE>
[INSIDE FRONT COVER PAGE OF PROSPECTUS]
[ARTWORK]
[PHOTOGRAPH SHOWS COLLAGE OF IMAGES INCLUDING CELLULAR PHONE, COMPUTER MONITOR,
COMPUTER CABLES, A SATELLITE DISH, NUMBERS IN BINARY CODE, SITTING HUMAN FIGURE
AT A COMPUTER AND THE COMPANY'S LOGO; TEXT IN PHOTO IS AS FOLLOWS:
SERVING THE GLOBAL
COMMUNICATIONS MARKET INCLUDING:
* CABLE TELEVISION
* TELEPHONY
* MULTI-SERVICE PROVIDERS
CUSTOMER MANAGEMENT
SOFTWARE
* multi-service integration
* order processing
* customer service
* management reporting
CUSTOMER MANAGEMENT
SERVICES
* bill presentment
* statement production
* statement-based marketing
PROFESSIONAL SERVICES
* training and consulting
* custom programming
* statement design]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-------------------
CableData-Registered Trademark- is a registered trademark of the Company.
CableData's Intelecable-TM- ("Intelecable"), DDP/SQL-TM-, VantagePLUS-TM-,
International Billing Services-TM- ("IBS"), Dynamic Due Date-TM- and
ClassROM-TM- are trademarks or tradenames of the Company. The IBS servicemark is
a registered servicemark of the Company.
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
USCS is a leading provider of customer management software and services to
the global communications industry. The Company's clients include providers of
cable television, wireless and land-line telephony, direct-broadcast satellite
("DBS") and multiple communications services in the U.S. and 13 other countries.
The Company's software-based solutions enable its clients to manage critical
customer relationship functions, including new account set-up, order processing,
customer support, management reporting and marketing analysis. The Company also
provides bill presentment services, which include generation of high quality,
customized billing statements that are produced in automated facilities designed
to minimize turnaround time and mailing costs. USCS also offers a variety of
complementary professional services, including consulting, application
development and client training, as well as statement design services that allow
clients to use the billing statement as a communication and marketing tool.
The Company's clients typically enter into contracts with terms ranging from
three to seven years. Clients are billed monthly, generally based on the number
of end-users they serve. As a result, a significant portion of the Company's
revenue is recurring and increases as the service provider's customer base
grows. In 1995, the Company's revenue totaled $229.3 million, of which 73% was
generated from companies that have been clients of USCS for three or more years.
USCS has been providing comprehensive customer management software and services
to the cable television industry for more than 25 years and has been profitable
in every year since 1973.
The Company's software currently supports 53% of U.S. cable television
subscribers and is used by 15 of the 20 largest cable television service
providers in the U.S., including Adelphia Communications Corporation
("Adelphia"), Cablevision Systems Corporation ("Cablevision Systems"), Comcast
Cable Communications, Inc. ("Comcast"), Tele-Communications, Inc. ("TCI") and
Time Warner, Inc. ("Time Warner"). The Company provides bill presentment
services to clients serving 53% of U.S. cable television subscribers, 33% of
U.S. cellular users and 9% of U.S. land-line telephony customers and to a
variety of other service providers. The Company's bill presentment clients
include substantially all of its domestic customer management software clients
and other service providers such as AirTouch Paging ("AirTouch"), Ameritech
Corporation ("Ameritech") and Frontier Corporation ("Frontier"). The Company
currently processes over 60 million bills per month and is the largest
centralized first class mailer in the U.S., responsible for generating more than
1.5% of the total volume of all U.S. first class mail, including customer
remittance volume. Bill presentment services are generally provided to software
clients in bundled contracts and are also sold separately.
The Company has extended its leadership position by introducing products and
services that address the rapidly changing global communications market.
Technological advances, regulatory changes and international growth are
transforming the structure and competitive dynamics of the industry. Markets
that were once segmented by service and geographic location are converging into
a single global communications market, which includes traditional service
providers and new entrants offering a combination of services. The rapidly
shifting and increasingly complex nature of the converging communications market
has increased the need among service providers for sophisticated and flexible
customer management software and services.
3
<PAGE>
In 1993, the Company deployed Intelecable, which the Company believes is the
first customer management software product designed for providers of multiple
communications services ("multi-service providers"). The Company also believes
that Intelecable is the only integrated multi-service customer management
software system currently operational and commercially available. Intelecable is
presently installed for 17 clients worldwide, including combined cable/telephony
service providers in the U.K., a combined cable/wireless cable/DBS provider in
Australia and two interactive video providers in the U.S., including BellSouth
Interactive Media Services, Inc. ("BellSouth Interactive"). The Company has also
expanded its bill presentment services to support multi-service providers by
offering consolidated billing statements that combine data from multiple
services, such as wireless and land-line telephony, into a single integrated
billing statement.
Since its founding, the Company has been a leader in providing customer
management software and services. The Company's record of achievement includes
what USCS believes is:
- The first customer management software system for multi-service
providers, including support of combined cable/telephony sites;
- The first contract with a regional bell operating company
("RBOC") to outsource all bill presentment functions for
telephony services; and
- The first installation and operation of customer management
software for interactive video trials in the U.S.
The Company's strategy to maintain and enhance its industry position
includes the following key elements: (i) focus on recurring revenue, (ii) focus
on the needs of multi-service providers, (iii) increase international revenue,
(iv) expand bill presentment market opportunities, (v) increase professional and
strategic services revenue, and (vi) continue to develop leading-edge software
and services.
The Company conducts its business primarily through two wholly-owned
subsidiaries: CableData, Inc. and International Billing Services, Inc. The
Company's principal executive offices are located at 2969 Prospect Park Drive,
Rancho Cordova, California 95670, and its telephone number is (916) 636-4500.
The Company's international headquarters are located at Spectrum Point, 279
Farnborough Road, Farnborough, Hampshire GU14 7LS England, U.K. U.S. Computer
Services, the predecessor to USCS International, Inc., was incorporated under
California law on November 18, 1969. USCS International, Inc., which was
incorporated under Delaware law on April 10, 1996, succeeded to the business of
the California corporation pursuant to a reincorporation effective May 31, 1996.
Unless the context otherwise requires, all references in this Prospectus to
"USCS" or the "Company" refer to USCS International, Inc., a Delaware
corporation, its predecessor, U.S. Computer Services, a California corporation,
and their consolidated subsidiaries.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company................................... 2,763,855 Shares
The Selling Stockholders...................... 2,036,145 Shares
Common Stock to be outstanding after this 22,235,574 Shares (1)
offering........................................
Use of proceeds................................. Repayment of certain indebtedness
(approximately $38.0 million as of March
31, 1996) and working capital and other
general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol.......... USCS
</TABLE>
- ------------------------------
(1) Based on shares outstanding as of May 20, 1996. Excludes an aggregate of
5,178,119 shares reserved as of May 20, 1996 for future issuance under the
Company's 1988 Incentive Stock Option Plan, 1990 Nonstatutory Stock Option
Plan, 1993 Incentive Stock Option Plan, 1996 Incentive Stock Option Plan,
1996 Directors' Stock Option Plan and Employee Stock Purchase Plan. See
"Management -- Employee and Director Plans."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ---------- --------- ---------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue.................................... $ 143,513 $ 146,087 $ 166,064 $ 188,805 $ 229,263 $ 53,012 $ 60,255
Gross profit............................... 51,754 53,086 61,745 66,283 82,023 19,498 22,094
Operating income (1)....................... 12,905 16,299 13,494 15,787 22,106 4,937 5,443
Income before income taxes and cumulative
effect of accounting change (2)........... 8,160 11,250 8,885 11,503 17,140 3,769 4,237
Income before cumulative effect of
accounting change (2)..................... 5,053 6,895 4,555 6,169 10,370 2,281 2,563
Net income................................. 5,053 6,895 6,963 6,169 10,370 2,281 2,563
Income before cumulative effect of
accounting change per share (3)........... $ 0.20 $ 0.30 $ 0.20 $ 0.28 $ 0.49 $ 0.11 $ 0.12
Net income per share (3)................... $ 0.20 $ 0.30 $ 0.31 $ 0.28 $ 0.49 $ 0.11 $ 0.12
Shares used in per share computation (3)... 25,149 22,675 22,129 21,882 21,138 21,494 20,659
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED(4)
---------- --------------
(UNAUDITED)
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash.................................................................................. $ 5,930 $ 7,556
Working capital....................................................................... 28,343 29,969
Total assets.......................................................................... 182,824 184,450
Long-term debt less current portion (5)............................................... 53,090 15,090
Stockholders' equity.................................................................. 49,087 88,713
</TABLE>
- ------------------------------
(1) In 1993, the Company charged to expense $4.1 million for the consolidation
of customer support activities and relocation expenses.
(2) In 1993, the Company adopted SFAS 109 resulting in an accumulated credit to
income for an adjustment in the calculation of income tax expense.
(3) Per share data is based on the weighted average number of shares of Common
Stock and dilutive common equivalent shares from stock options outstanding
during the period using the treasury stock method. Pursuant to certain
Securities and Exchange Commission Staff Accounting Bulletins, common and
common equivalent shares issued during the 12-month period prior to the
date of the initial filing of the Registration Statement have been included
in the calculation as if they were outstanding for all periods prior to
their issuance. See Note 2 of Notes to Consolidated Financial Statements.
(4) Adjusted to give effect to the sale of 2,763,855 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price
of $16.00 per share and the anticipated application of the estimated net
proceeds therefrom. See "Use of Proceeds."
(5) See Note 5 of Notes to Consolidated Financial Statements.
------------------------------
THE STATEMENTS THAT ARE NOT HISTORICAL FACTS OR STATEMENTS OF CURRENT STATUS
CONTAINED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS (AS DEFINED IN THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) THAT INVOLVE RISKS AND
UNCERTAINTIES, INCLUDING, BUT NOT LIMITED TO, THE RISKS SET FORTH IN "RISK
FACTORS." ACTUAL RESULTS MAY DIFFER MATERIALLY. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE MATTERS SET FORTH IN "RISK FACTORS." EXCEPT AS OTHERWISE
INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS: (I) ASSUMES NO EXERCISE
OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION AND (II) HAS BEEN ADJUSTED TO GIVE
EFFECT TO (A) THE REINCORPORATION OF THE COMPANY UNDER DELAWARE LAW, (B) A
2.1-FOR-1 STOCK SPLIT OF THE COMPANY'S VOTING COMMON STOCK, (C) A 2-FOR-1 STOCK
SPLIT OF THE COMPANY'S NON-VOTING COMMON STOCK, AND (D) THE CONVERSION OF ALL
OUTSTANDING SHARES OF NON-VOTING COMMON STOCK INTO COMMON STOCK ON A 1-FOR-1
BASIS. SEE "CAPITALIZATION," "DESCRIPTION OF CAPITAL STOCK" AND "UNDERWRITING."
5
<PAGE>
RISK FACTORS
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. IN ADDITION
TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, PROSPECTIVE INVESTORS
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN EVALUATING THE COMPANY
AND ITS BUSINESS BEFORE PURCHASING THE COMMON STOCK OFFERED BY THIS PROSPECTUS.
THE STATEMENTS THAT ARE NOT HISTORICAL FACTS OR STATEMENTS OF CURRENT STATUS
CONTAINED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO, THE FACTORS SET FORTH BELOW.
ACTUAL RESULTS MAY DIFFER MATERIALLY.
DEPENDENCE ON THE CABLE TELEVISION MARKET
The Company is highly dependent on the cable television market. During 1995,
approximately two-thirds of the Company's revenue was derived from sales to
cable television service providers. Revenue from cable television providers is
based primarily on the number of subscribers served by such providers, typically
calculated monthly. Due primarily to recent consolidation, the number of
providers of cable television service in the U.S. is declining, resulting in a
reduction of the number of potential cable television clients in the U.S. As the
number of companies serving the available subscriber base decreases, the loss of
a single client could have a greater adverse impact on the Company than in the
past. Even if the number of clients remains the same, a decrease in the number
of subscribers served by the Company's cable television clients would result in
lower revenue for the Company. Furthermore, any adverse development in the cable
television market could have a material adverse effect on the financial
condition and results of operations of the Company.
CHANGING COMMUNICATIONS MARKET
The communications market is characterized by rapid technological
developments, changes in client requirements, evolving industry standards and
frequent new product introductions. The Company's future success will depend, in
part, upon its ability to enhance its existing applications, develop and
introduce new products that take advantage of technological advances and respond
promptly to new client requirements and evolving industry standards. The Company
has expended considerable funds to develop products to serve the changing
communications market. If the communications market fails to converge or grows
more slowly than anticipated or the Company's products and services fail to
achieve market acceptance, there could be a material adverse effect on the
financial condition and results of operations of the Company. Furthermore, there
can be no assurance that the Company's clients will be successful in expanding
into other segments of the converging communication markets, or that the Company
will be successful in selling its products to new entrants in the cable
television market.
NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGES
The market for the Company's products and services is characterized by rapid
technological changes. The Company believes that its future success depends in
part upon its ability to enhance its current products and services and develop
new products and services that address the increasingly complex needs of its
clients. The Company's development projects are subject to all of the risks
associated with the development of new software and other products based on
innovative technologies, including (i) unanticipated technical or other problems
that could result in a change in the design, delay in the development or
abandonment of such products, (ii) unanticipated integration, compatibility or
similar problems, such as difficulties in porting to additional hardware
platforms, (iii) problems that arise during implementation, and (iv) possible
insufficiency of development funds. Certain of the Company's development
contracts provide for reimbursement of a portion of the research and development
expenditures by third parties, subject to meeting performance milestones.
Failure to meet such milestones may result in a loss of the third party funds
and the need for the Company to reallocate Company resources to complete the
project. Products, if any, resulting from research and development activities
may not produce revenue for a substantial time, if at all. In addition, the
introduction by third parties of new products or services could render the
Company's existing products and services obsolete or unmarketable. The Company's
ability to anticipate changes in technology and successfully develop and
introduce new or enhanced products incorporating such technology on a timely
basis will be significant factors in the Company's ability to remain
competitive. There can be no assurance that the Company will timely or
successfully complete the development of new or enhanced products or services or
successfully manage transitions from one product release to the next, that the
6
<PAGE>
Company will not encounter difficulties that could delay introduction of new or
enhanced products in the future or that errors will not be found in new or
enhanced products after installation, resulting in a loss of or a delay in
market acceptance. If the Company is unable to develop new or enhanced products
on a timely basis or to meet development contract milestones, the Company's
business, operating results and financial condition could be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations" and "Business --
Research and Development."
VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's quarterly operating results may fluctuate from quarter to
quarter depending on various factors, including the impact of significant
start-up costs associated with initiating the delivery of contracted services to
new clients, the hiring of additional staff, new product development and other
expenses, introduction of new products by competitors, pricing pressures, the
evolving and unpredictable nature of the markets in which the Company's products
and services are sold and general economic conditions. The Company may invest
significant time and financial resources towards securing and implementing
contracts or developing new products and services. Revenue from such activities
may be received, if at all, only in future quarters. Thus, the Company may incur
significant expenses in a particular quarter that are not offset by
corresponding revenue and conversely may receive additional revenue in future
quarters for which related expenses were incurred in prior quarters. For
example, in the first quarter of 1994, the Company added Ameritech as a bill
presentment client, resulting in a significant increase in expenses in late 1993
and the first quarter of 1994 and a significant increase in revenue in the
second quarter of 1994. Revenue from Ameritech represented approximately 16% and
13% of the Company's revenue for the years ended December 31, 1995 and 1994,
respectively. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
COMPETITION; DEVELOPMENT OF IN-HOUSE SYSTEM BY SIGNIFICANT CLIENT
The market for the Company's products and services is highly competitive,
and competition is increasing as additional market opportunities arise. The
Company competes with independent providers of customer management software and
services and with in-house systems. The Company believes its most significant
competitors for customer management software are Information Systems Development
(owned by Cincinnati Bell Information Systems ("CBIS")), CSG Systems
International, Inc., and the Company's own clients to the extent such clients
develop in-house systems. In addition, certain of the Company's competitors,
including CBIS, have contracted with the Company to provide bill presentment
services to their own software customers. The most significant competitors for
bill presentment services are in-house services and, to a lesser extent, other
third-party providers. It is also possible that new competitors may emerge and
acquire market share as the communications market expands. TCI, which
represented approximately 17% and 18% of the Company's revenue for 1995 and
1994, respectively, has announced that it is developing and testing an in-house
customer management software system and plans to begin deploying it nationwide
by 1997. In June 1996, the Company entered into a new 3- 1/2 year agreement to
continue to provide customer management software and bill presentment services
for TCI. TCI may remove subscribers from the agreement during its term, subject
to price increases based on the number of subscribers remaining under contract.
The Company expects revenue from TCI will be reduced or eliminated in the future
if TCI is successful in developing its in-house system and such in-house system
replaces the Company's system. Another client, which accounted for 4% of total
revenue in 1995 and recently extended its contract with the Company to early
1997, has orally advised the Company that it may select an alternative solution
for its customer management software requirements. In addition, competitive
factors could influence or alter the Company's overall revenue mix between
customer management software, services, including bill presentment services, and
equipment sales and leasing. Any of these events could have a material adverse
effect on the financial condition and results of operations, including gross
profit margins, of the Company. See "-- Reliance on Significant Clients,"
"Business -- Clients," "Business -- Competition" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
7
<PAGE>
CONCENTRATION OF CLIENT BASE
Aggregate revenue from the Company's ten largest clients accounted for
approximately 63% of total revenue in both 1995 and 1994. TCI accounted for 17%
and 18% and Ameritech accounted for 16% and 13% of the Company's revenue for
1995 and 1994, respectively. Loss of all or a significant part of the business
of any of these clients or a decrease in their respective customer bases could
have a material adverse effect on the financial condition and results of
operations of the Company. See "-- Variability of Quarterly Operating Results"
and "-- Competition; Development of In-House System by Significant Client."
MANAGEMENT OF GROWTH
The Company's strategy is to grow through maximizing recurring revenue,
focusing on the needs of multi-service providers in the converging
communications market, increasing international revenue, expanding the market
for its bill presentment services, increasing professional and strategic
services revenue and continuing to develop leading-edge technologies. Management
of the Company's growth may place a considerable strain on the Company's
management, operations and systems. The Company's ability to execute its
business strategy will depend in part upon its ability to manage the demands of
a growing business. Any failure of the Company's management team to effectively
manage growth could have a material adverse effect on the Company's business,
financial condition or results of operations. See "Business -- USCS Strategy."
CLIENT FAILURE TO RENEW OR UTILIZE CONTRACTS
Substantially all of the Company's revenue is derived from the sale of
services or products under long-term contracts with its clients. The Company
typically does not have the unilateral option to extend the terms of such
contracts upon their expiration. In addition, most of the Company's software and
services contracts have no minimum purchase requirements. Other contracts
require minimum purchases that are substantially below the current level of
business under such contracts and all contracts are cancelable by clients under
certain conditions. The failure of clients to renew contracts, a reduction in
usage by clients under any contracts or the cancellation of contracts could have
a material adverse effect on the Company's financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
INTERNATIONAL BUSINESS ACTIVITIES
The Company markets its products in a variety of international markets. To
date, the Company's primary customer management software has been installed and
is generating revenue in 13 countries. While less than 5% of the Company's
customer management software and services revenue in 1995 came from
international sources, the Company is expanding its international presence,
primarily through third party marketing and distribution alliances. The
Company's practice is to bill international clients in U.S. dollars and revenue
not billed in U.S. dollars is not material to the Company as a whole. Risks
inherent in the Company's current and proposed international business activities
in general, and in its activities in the converging communications market, in
particular, include the possible failure to develop and maintain international
marketing and distribution alliances, unexpected changes in regulatory
requirements, difficulties in managing international operations, longer accounts
receivable payment cycles, potential adverse tax consequences, restrictions on
the conversion of currencies or the repatriation of earnings, the imposition of
tariffs or other trade barriers, the burdens of complying with a wide variety of
foreign laws and regulations and, in some countries, economic and political
instability. There can be no assurance that such factors will not have a
material adverse effect on the Company's future international sales and,
consequently, the Company's business, operating results and financial condition.
ATTRACTION AND RETENTION OF KEY PERSONNEL
The Company's future success depends in large part on the continued service
of its key management, sales, product development and operational personnel. The
Company believes that its future success also depends on its ability to attract
and retain skilled technical, managerial and marketing personnel, including, in
particular, additional personnel in the areas of research and development and
technical support. Competition for qualified personnel is intense. The Company
has from time to time experienced difficulties
8
<PAGE>
in recruiting qualified skilled technical personnel. Failure by the Company to
attract and retain the personnel it requires could have a material adverse
effect on the financial condition and results of operations of the Company.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company relies on a combination of patent, trade secret and copyright
laws, nondisclosure agreements, and other contractual and technical measures to
protect its proprietary technology. There can be no assurance that these
provisions will be adequate to protect its proprietary rights. Although the
Company believes that its products and services do not infringe upon the
proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against the Company or the Company's
clients. A significant cable television client has advised the Company that
Ronald A. Katz Technology Licensing, L.P. ("RAKTL") has asserted that patents
held by RAKTL may be infringed by the client's use of certain interfaces offered
by the Company. The patents relate to telephone call processing with audio
response unit and automatic number identification capabilities of certain
interfaces offered by the Company. The client recently informed the Company
that, should it become necessary, it would seek indemnification from the
Company. The Company believes that, if the patents are valid and if they apply
to the Company's business, they would also apply to many users and suppliers of
interactive computer telephony systems, including the Company's competitors. The
Company believes that it is adequately protected by its patent position and, as
of the date of this Prospectus, no legal proceedings have been instituted
against the Company, but, to the extent that the RAKTL patents are valid and
apply to the Company's business, the Company could be required to seek licenses
from RAKTL and provide indemnification to its clients. Such licenses may not be
available on commercially reasonable terms, if at all. Although the Company
believes that it has sufficient rights to conduct its current business and that
its clients have sufficient rights to use USCS products and services without
infringing upon the patent rights of such third party, there can be no
assurances that the Company or its clients will prevail in any patent
infringement dispute with such third party or that, if the Company does not
successfully resolve such dispute, the terms of any settlement with such third
party would not have a material adverse effect on the Company's business,
operating results and financial condition. See "Business -- Intellectual
Property."
GOVERNMENT REGULATION
The Company's business is not subject to direct government regulation. The
Company's existing and potential clients, however, are subject to extensive
regulation, and certain of the Company's revenue opportunities may depend on
continued regulatory changes in the worldwide communications industry. In
addition, the Company's clients are subject to certain regulations governing the
privacy and use of the customer information that is collected and managed by the
Company's products and services. Regulatory changes that adversely affect the
Company's existing and potential clients could have a material adverse effect on
the financial condition and results of operations of the Company.
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; SUBSTANTIAL
DILUTION
There has been no prior public market for the Company's Common Stock, and
there can be no assurance that a viable public market for the Common Stock will
develop or be sustained after this offering. The Company believes that factors
such as announcements of developments related to the Company's business,
fluctuations in the Company's quarterly or annual operating results, failure to
meet securities analysts' expectations, general conditions in the international
communications marketplace or the worldwide economy, announcements of
technological innovations or new systems or enhancements by the Company or its
competitors, developments in patents or other intellectual property rights and
developments in the Company's relationships with clients and suppliers could
cause the price of the Company's Common Stock to fluctuate, perhaps
substantially. In addition, in recent years the stock market has experienced
extreme price fluctuations, which have often been unrelated to the operating
performance of affected companies. Such fluctuations could adversely affect the
market price of the Company's Common Stock. In addition, investors participating
in this offering will incur immediate and substantial dilution of book value.
See "Dilution."
9
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial numbers of shares of Common Stock in the public market
after this offering could adversely affect the market price of the Common Stock.
In addition to the 4,800,000 shares to be sold in this offering, approximately
741,000 additional shares issued and outstanding as of May 20, 1996 will be
eligible for immediate sale in the public market without restriction following
consummation of this offering pursuant to Rule 144(k) of the Securities Act of
1933, as amended (the "Securities Act"). Commencing 30 days and 60 days after
the date of this Prospectus, an additional 50,000 shares and 50,000 shares,
respectively, will be eligible for immediate sale in the public market without
restriction pursuant to Rule 144(k). Commencing 90 days after the date of the
Prospectus, approximately 168,000 shares outstanding and 18,000 shares subject
to options (if exercised) will be eligible for sale in the public market
pursuant to Rule 701 or Rule 144 of the Securities Act. Commencing 120 days
after the date of this Prospectus, an additional 50,000 shares will be eligible
for immediate sale in the public market without restriction pursuant to Rule
144. Commencing 180 days after the date of the Prospectus, upon the expiration
of lock-up agreements with the Underwriters, approximately 16,372,000 shares of
Common Stock issued and outstanding as of May 20, 1996 will be eligible for
immediate sale in the public market pursuant to Rule 144 or Rule 701, subject to
compliance with certain volume limitations and other restrictions under Rule
144. The Company intends to register a total of approximately 6,534,500 shares
of Common Stock that have been issued, that are reserved for issuance or that it
intends to reserve for issuance under its 1988 Incentive Stock Option Plan, 1990
Non-Qualified Stock Option Plan, 1993 Incentive Stock Option Plan, 1996
Directors' Stock Option Plan, 1996 Incentive Stock Option Plan and Employee
Stock Purchase Plan no earlier than 90 days after the date of this Prospectus.
Holders of an aggregate of approximately 9,907,062 shares of Common Stock issued
and outstanding as of May 20, 1996 have rights under certain circumstances to
require the Company to register their shares for future sale. See "Management --
Employee and Director Plans," "Description of Capital Stock -- Registration
Rights," "Shares Eligible for Future Sale" and "Underwriting."
CONTROL BY EXISTING STOCKHOLDERS
The Company's executive officers and directors will beneficially own
approximately 45.8% of the Company's outstanding shares of Common Stock
immediately following this offering (including 39.2% owned by Westar Capital
("Westar")), and the Company's Employee Stock Ownership Plan ("ESOP") will own
approximately 17.7% of the Company's outstanding shares of Common Stock
immediately following this offering. Purchasers of the shares offered hereby
will own approximately 22% of the Company's outstanding shares of Common Stock
immediately following this offering, and although entitled to vote on matters
submitted for a vote of the shareholders, will not control the outcome of such a
vote. Management, Westar and the ESOP will thus exert significant influence over
the affairs of the Company. See "Dilution," "Management -- Executive Officers
and Directors," "Certain Transactions" and "Principal and Selling Stockholders."
ANTI-TAKEOVER EFFECT OF CERTIFICATE OF INCORPORATION, BYLAWS, STOCKHOLDERS'
RIGHTS PLAN AND DELAWARE LAW
Under the Company's Certificate of Incorporation, the Board of Directors of
the Company has the authority, without action by the Company's stockholders, to
fix certain terms of, and to issue, shares of Preferred Stock. In addition, the
Company has adopted a Stockholders' Rights Plan, which, under certain
circumstances, would significantly dilute the interest in the Company of persons
seeking to acquire control of the Company without prior approval of the Board.
The Company has also recently reincorporated under Delaware law. The
Stockholders' Rights Plan, certain provisions of the Certificate of
Incorporation and certain provisions of Delaware law may have the effect of
delaying, deterring or preventing a change in control of the Company. Other
provisions in the Company's Certificate of Incorporation and Bylaws and
Delaware law impose procedural and other requirements that could make it more
difficult to effect certain corporate actions, including replacing incumbent
directors. Further, the Board is divided into three classes, each of which is to
serve for a staggered three-year term after the initial classification and
election, which may make it more difficult for a third party to gain control of
the Board. By virtue of these provisions, the Board of Directors of the Company
may be able to take or prevent actions affecting unaffiliated stockholders
without such stockholders' approval or consent. In addition, these provisions
may adversely affect the market price of the Company's Common Stock and reduce
the possibility that an investor may receive a premium for his or her shares in
a tender offer. See "Management -- Executive Officers and Directors,"
"Description of Capital Stock -- Preferred Stock" and "Description of Capital
Stock -- Anti-takeover Effects of Provisions of the Certificate of
Incorporation, Bylaws and the Stockholders' Rights Plan."
10
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,763,855 shares of
Common Stock offered by the Company hereby are estimated to be $39.6 million
(approximately $50.3 million if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $16.00 per
share, after deducting the underwriting discount and estimated offering expenses
payable by the Company. The Company intends to use the net proceeds from this
offering to repay certain outstanding indebtedness (including amounts incurred
after March 31, 1996) under its unsecured lines of credit, of which
approximately $38.0 million was outstanding as of March 31, 1996. Such
indebtedness bears interest at LIBOR (plus a margin ranging from .75% to 1.25%)
or the bank's reference rate. At March 31, 1996, the rates were 6.25% to 8.25%
per annum. The lines of credit mature on February 17, 1999 and 2001. The Company
expects to use the balance of the net proceeds, if any, for working capital and
other general corporate purposes, including acquisitions of complementary
businesses, products or technologies, although there are no current agreements,
arrangements or understandings with respect to any material acquisitions.
Pending use of the excess proceeds for the above purposes, the Company intends
to invest such funds in short-term, interest-bearing, investment grade
obligations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
The Company will not receive any proceeds from the sale of shares of Common
Stock offered by the Selling Stockholders. See "Principal and Selling
Stockholders."
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock to date. The
Company currently intends to retain any future earnings for its business and
does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. In addition, the Company's bank credit agreements restrict
the Company's ability to pay dividends.
11
<PAGE>
CAPITALIZATION
The following table sets forth the current portion of long-term debt and the
capitalization of the Company (i) at March 31, 1996 and (ii) as adjusted to
reflect the sale of the 2,763,855 shares of Common Stock offered by the Company
hereby at an assumed initial public offering price of $16.00 per share and the
application of the estimated net proceeds therefrom as set forth under "Use of
Proceeds" and to reflect the conversion of Non-Voting Common Stock into Common
Stock subsequent to March 31, 1996. This table should be read in conjunction
with the Consolidated Financial Statements of the Company, including the related
Notes thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------
AS
ACTUAL ADJUSTED
---------- ----------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
Current portion of long-term debt (1)..................................................... $ 10,143 $ 10,143
---------- ----------
---------- ----------
Long-term debt (1)........................................................................ 53,090 15,090
Stockholders' equity (2):
Preferred Stock, $.05 par value, 10,000,000 shares authorized; no shares issued and
outstanding............................................................................ -- --
Common Stock, $.05 par value:
Voting: 40,000,000 shares authorized; 12,812,404 shares issued and outstanding
21,798,441 as adjusted............................................................... 641 1,090
Non-Voting: 12,000,000 shares authorized; 6,222,182 shares
issued and outstanding; none authorized, issued or
outstanding as adjusted.............................................................. 311 --
Additional paid-in capital.............................................................. -- 39,488
Retained earnings....................................................................... 48,487 48,487
Foreign currency translation adjustment................................................. (352) (352)
---------- ----------
Total stockholders' equity............................................................ 49,087 88,713
---------- ----------
Total capitalization................................................................ $ 102,177 $ 103,803
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(1) See Note 5 of Notes to Consolidated Financial Statements.
(2) Excludes (i) 2,312,898 shares reserved as of March 31, 1996 for future
issuance under the Company's 1988 Incentive Stock Option Plan, 1990
Nonstatutory Stock Option Plan and 1993 Incentive Stock Option Plan and (ii)
3,290,000 shares reserved for issuance under the 1996 Incentive Stock Option
Plan, the 1996 Directors' Stock Option Plan and the Employee Stock Purchase
Plan, which plans were adopted by the Board of Directors after March 31,
1996.
12
<PAGE>
DILUTION
The net tangible book value of the Company at March 31, 1996, was
$46,125,000, or $2.42 per share of Common Stock. Net tangible book value per
share represents the amount of the Company's total tangible net worth (tangible
assets less total liabilities), divided by the number of shares of Common Stock
outstanding. After giving effect to the sale by the Company of 2,763,855 shares
of Common Stock offered hereby at an assumed initial public offering price of
$16.00 per share (after deducting the underwriting discount and estimated
offering expenses) the net tangible book value, as adjusted, of the Company as
of March 31, 1996, would have been approximately $85,751,000 or $3.93 per share
of Common Stock. This represents an immediate increase from net tangible book
value per share to net tangible book value, as adjusted, of $1.51 per share to
existing stockholders and immediate dilution of $12.07 per share to new
investors purchasing shares in this offering. If the initial public offering
price is higher or lower, the dilution to new investors will be greater, or
less, respectively. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $ 16.00
Net tangible book value per share as of March 31, 1996............ $ 2.42
Increase per share attributable to new stockholders............... 1.51
---------
Adjusted net tangible book value after this offering................ 3.93
---------
Dilution per share to new stockholders (1).......................... $ 12.07
---------
---------
</TABLE>
- ------------------------
(1) Dilution is determined by subtracting adjusted net tangible book value per
share of Common Stock after the offering from the initial public offering
price paid by new investors for a share of Common Stock.
The following table sets forth, as of March 31, 1996, the number of shares
of Common Stock purchased from the Company, the total cash paid to the Company
and the average price paid per share by existing stockholders and by purchasers
of shares offered by the Company hereby:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PER
------------------------- -------------------------- SHARE
NUMBER PERCENT AMOUNT PERCENT PRICE
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing Stockholders (1)................ 19,034,586 87.3% $ 1,611,000 3.5% $ 0.08
New Investors............................ 2,763,855 12.7 44,222,000 96.5 16.00
------------ ----- ------------- ----- -----------
Total................................ 21,798,441 100.0% $ 45,833,000 100.0% $ 2.10
------------ ----- ------------- ----- -----------
------------ ----- ------------- ----- -----------
</TABLE>
- ------------------------
(1) Sales by the Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 16,998,441, or approximately 78.0%
of the total number of shares to be outstanding after this offering, and
will increase the number of shares held by new investors to 4,800,000, or
approximately 22.0% of the total number of shares to be outstanding after
this offering. If the Underwriters' over-allotment option is exercised in
full, the number of shares held by the new investors will increase to
5,520,000 shares, or approximately 24.5% of the total number of shares to be
outstanding after this offering.
The foregoing tables assume no exercise of the Underwriters' over-allotment
option or options to purchase shares of Common Stock outstanding and exercisable
under the Company's 1988 Incentive Stock Option Plan, 1990 Nonstatutory Stock
Option Plan, 1993 Incentive Stock Option Plan, 1996 Incentive Stock Option Plan
and 1996 Directors' Stock Option Plan. As of March 31, 1996, there were
outstanding under the Company's 1988 Incentive Stock Option Plan, 1990
Nonstatutory Stock Option Plan and 1993 Incentive Stock Option Plan, options to
purchase an aggregate of 1,745,136 shares of Common Stock at exercise prices
ranging from $0.20 to $7.38 per share, or a weighted average exercise price of
$3.31 per share. To the extent that such options are exercised, there will be
further dilution to new investors. See "Management -- Employee and Director
Plans" and Note 7 of Notes to Consolidated Financial Statements.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The consolidated statements of operations data presented below for the years
ended December 31, 1993, 1994 and 1995 and the consolidated balance sheet data
as of December 31, 1994 and 1995 are derived from the consolidated financial
statements of the Company, included elsewhere in this Prospectus, that have been
audited by Price Waterhouse LLP, independent accountants. The consolidated
financial data presented below for the years ended December 31, 1991 and 1992
and the consolidated balance sheet data as of December 31, 1991, 1992 and 1993
are derived from audited consolidated financial statements not included in this
Prospectus. The consolidated financial data as of March 31, 1996 and for the
three months ended March 31, 1995 and 1996 were derived from unaudited
consolidated financial statements prepared on the same basis as the audited
financial statements and, in the opinion of management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the Company's financial position and results of operations. The results of
operations for any interim period are not necessarily indicative of results to
be expected for a full year. The data set forth below should be read in
conjunction with, and are qualified by reference to, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and the Notes thereto included elsewhere
herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
Software and services............................ $ 90,532 $ 106,348 $ 116,563 $ 155,247 $ 197,282 $ 46,484 $ 55,421
Equipment sales and services..................... 52,981 39,739 49,501 33,558 31,981 6,528 4,834
--------- --------- --------- --------- --------- --------- ---------
Total........................................ 143,513 146,087 166,064 188,805 229,263 53,012 60,255
Cost of revenue:
Software and services............................ 58,360 65,904 72,758 103,046 127,702 29,813 35,228
Equipment sales and services..................... 33,399 27,097 31,561 19,476 19,538 3,701 2,933
--------- --------- --------- --------- --------- --------- ---------
Total........................................ 91,759 93,001 104,319 122,522 147,240 33,514 38,161
--------- --------- --------- --------- --------- --------- ---------
Gross profit....................................... 51,754 53,086 61,745 66,283 82,023 19,498 22,094
--------- --------- --------- --------- --------- --------- ---------
Operating expenses:
Research and development......................... 11,121 12,170 16,007 16,700 17,815 4,504 5,642
Selling, general and administrative.............. 27,728 24,617 28,148 34,160 42,102 10,057 11,009
Consolidation and relocation..................... -- -- 4,096 (364) -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total........................................ 38,849 36,787 48,251 50,496 59,917 14,561 16,651
--------- --------- --------- --------- --------- --------- ---------
Operating income................................... 12,905 16,299 13,494 15,787 22,106 4,937 5,443
Interest expense................................... 4,745 5,049 4,609 4,284 4,966 1,168 1,206
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes and cumulative effect of
accounting change................................. 8,160 11,250 8,885 11,503 17,140 3,769 4,237
Income tax provision............................... 3,107 4,355 4,330 5,334 6,770 1,488 1,674
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of accounting
change (1)........................................ 5,059 6,895 4,555 6,169 10,370 2,283 2,563
Cumulative effect of accounting change (1)......... -- -- 2,408 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income......................................... $ 5,053 $ 6,895 $ 6,963 $ 6,169 $ 10,370 $ 2,281 $ 2,563
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income before cumulative effect of accounting
change
per share (2)..................................... $ 0.20 $ 0.30 $ 0.20 $ 0.28 $ 0.49 $ 0.11 $ 0.12
--------- --------- --------- --------- --------- --------- ---------
Net income per share (2)........................... $ 0.20 $ 0.30 $ 0.31 $ 0.28 $ 0.49 $ 0.11 $ 0.12
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Shares used in per share computation............... 25,149 22,675 22,129 21,882 21,138 21,494 20,659
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
--------- --------- --------- --------- --------- -----------
(AUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEETS DATA:
Cash................................................. $ 2,334 $ 9,053 $ 8,158 $ 1,966 $ 6,627 $ 5,930
Working capital...................................... 23,801 23,757 20,029 11,454 23,440 28,343
Total assets......................................... 117,485 125,997 140,922 157,331 180,450 182,824
Long-term debt less current portion (3).............. 43,070 42,734 40,167 37,647 51,155 53,090
Stockholders' equity................................. 27,099 29,445 35,633 39,861 46,590 49,087
</TABLE>
- ------------------------------
(1) In 1993, the Company adopted SFAS 109, resulting in an accumulated credit
to income for an adjustment in the calculation of income tax expense.
(2) Net income per share is based on the weighted average number of shares of
Common Stock and dilutive common equivalent shares from stock options and
warrants outstanding during the period using the treasury stock method.
Pursuant to certain Securities and Exchange Commission Staff Accounting
Bulletins, common and common equivalent shares issued during the 12-month
period prior to the date of the initial filing of the Registration
Statement have been included in the calculation as if they were outstanding
for all periods prior to their issuance. See Note 2 of Notes to
Consolidated Financial Statements.
(3) See Note 5 of Notes to Consolidated Financial Statements.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Founded in 1969, USCS is a leading provider of customer management software
and services to the global communications industry. Revenue is derived primarily
from providing software and bill presentment services to cable television and
multi-service providers in the U.S. and 13 other countries and bill presentment
services to telecommunication companies in the U.S. Software and bill
presentment services to cable television and multi-service providers are
generally provided under bundled service arrangements. Most of the Company's
revenue is derived based on the number of subscribers or end-users of the
Company's clients, the number of billing statements mailed and/or the number of
images, generally one page side, produced. Most of the Company's revenue is
derived under long-term contracts with terms ranging from three to seven years.
Over the three years ended December 31, 1995, the Company's revenue from
software and services has increased at an average rate of 23% per year and has
grown from approximately 70% of the Company's total revenue in 1993 to over 86%
in 1995. The increase in revenue was attributable primarily to the addition of
Ameritech as a significant client in 1994 and increased bill presentment
services volume from cellular clients. Also contributing to the growth in
revenue was an increase in sales of the Company's software and services in the
international marketplace following the introduction of Intelecable in 1993. Two
significant clients represented an aggregate of 33% and 31% of the Company's
revenue in 1995 and 1994, respectively. Revenue from the ten largest accounts
aggregated 63% of the Company's total revenue in 1995 and 1994. See Note 11 of
Notes to Consolidated Financial Statements.
The Company provides software and services to North American cable
television and multi-service providers primarily through a direct sales force.
Outside of North America, the Company markets its software services primarily
through strategic partners, such as system integrators and computer hardware
manufacturers, which provide local sales and support. Building and maintaining
relationships with its clients is an important part of the Company's strategy
because selling cycles can extend a year or longer. The Company has committed
increased resources to the international, multi-service and telecommunications
markets because it believes these represent opportunities to grow at rates
greater than in the U.S. cable television marketplace alone. In 1993, the
Company increased its annual expenditures for research and development by over
30% in support of its Intelecable software product, which is being marketed to
cable television companies outside the U.S. and multi-service providers in the
U.S. and internationally.
Revenue from selling computer hardware and providing associated maintenance
and leasing services has been declining in absolute dollars and as a percentage
of total revenue. Revenue from these activities was 30% of total revenue in 1993
and had declined to less than 10% in the first quarter of 1996. The Company
expects that equipment sales and services revenue will continue to decline as a
percentage of revenue.
15
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the Company's
consolidated statements of operations and the percentage of revenue represented
by each line item:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------------- ---------------------
1993 1994 1995 1995
--------------------- --------------------- --------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software and services......... $ 116,563 70.2% $ 155,247 82.2% $ 197,282 86.1% $ 46,484 87.7%
Equipment sales and
services..................... 49,501 29.8 33,558 17.8 31,981 13.9 6,528 12.3
--------- ----- --------- ----- --------- ----- --------- -----
Total....................... 166,064 100.0 188,805 100.0 229,263 100.0 53,012 100.0
Cost of revenue:
Software and services......... 72,758 43.8 103,046 54.6 127,702 55.7 29,813 56.2
Equipment sales and
services..................... 31,561 19.0 19,476 10.3 19,538 8.5 3,701 7.0
--------- ----- --------- ----- --------- ----- --------- -----
Total....................... 104,319 62.8 122,522 64.9 147,240 64.2 33,514 63.2
--------- ----- --------- ----- --------- ----- --------- -----
Gross profit.................... 61,745 37.2 66,283 35.1 82,023 35.8 19,498 36.8
--------- ----- --------- ----- --------- ----- --------- -----
Operating expenses:
Research and development...... 16,007 9.6 16,700 8.8 17,815 7.8 4,504 8.5
Selling, general and
administrative............... 28,148 17.0 34,160 18.1 42,102 18.3 10,057 19.0
Consolidation and
relocation................... 4,096 2.4 (364) (0.2) -- -- -- --
--------- ----- --------- ----- --------- ----- --------- -----
Total....................... 48,251 29.0 50,496 26.7 59,917 26.1 14,561 27.5
--------- ----- --------- ----- --------- ----- --------- -----
Operating income................ 13,494 8.2 15,787 8.4 22,106 9.7 4,937 9.3
Interest expense................ 4,609 2.8 4,284 2.3 4,966 2.2 1,168 2.2
--------- ----- --------- ----- --------- ----- --------- -----
Income before income taxes and
cumulative effect of accounting
change......................... 8,885 5.4 11,503 6.1 17,140 7.5 3,769 7.1
Income tax provision............ 4,330 2.6 5,334 2.8 6,770 3.0 1,488 2.8
--------- ----- --------- ----- --------- ----- --------- -----
Income before cumulative effect
of accounting change........... 4,555 2.8 6,169 3.3 10,370 4.5 2,281 4.3
Cumulative effect of accounting
change (1)..................... 2,408 1.4 -- -- -- -- -- --
--------- ----- --------- ----- --------- ----- --------- -----
Net income...................... $ 6,963 4.2% $ 6,169 3.3% $ 10,370 4.5% $ 2,281 4.3%
--------- ----- --------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- ----- --------- -----
<CAPTION>
1996
---------------------
<S> <C> <C>
Revenue:
Software and services......... $ 55,421 92.0%
Equipment sales and
services..................... 4,834 8.0
--------- -----
Total....................... 60,255 100.0
Cost of revenue:
Software and services......... 35,228 58.5
Equipment sales and
services..................... 2,933 4.8
--------- -----
Total....................... 38,161 63.3
--------- -----
Gross profit.................... 22,094 36.7
--------- -----
Operating expenses:
Research and development...... 5,642 9.4
Selling, general and
administrative............... 11,009 18.3
Consolidation and
relocation................... -- --
--------- -----
Total....................... 16,651 27.7
--------- -----
Operating income................ 5,443 9.0
Interest expense................ 1,206 1.9
--------- -----
Income before income taxes and
cumulative effect of accounting
change......................... 4,237 7.1
Income tax provision............ 1,674 2.8
--------- -----
Income before cumulative effect
of accounting change........... 2,563 4.3
Cumulative effect of accounting
change (1)..................... -- --
--------- -----
Net income...................... $ 2,563 4.3%
--------- -----
--------- -----
</TABLE>
- ------------------------------
(1) In 1993, the Company adopted SFAS 109, resulting in an accumulated credit of
$2.4 million.
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
REVENUE. Revenue is derived primarily from providing customer management
software and services to cable television and multi-service providers in the
U.S. and 13 other countries and from providing bill presentment services
primarily to telecommunications companies in the U.S. Software and bill
presentment services to cable television and multi-service providers are
generally provided under bundled service arrangements. In addition, the Company
sells computer hardware and associated maintenance and leasing services to cable
television service providers in connection with providing the Company's software
and provides design, printing and graphics services in connection with its bill
presentment services. Most of the software and services revenue is derived based
on the number of end-users of the services of the Company's clients, the number
of bills mailed and/or the number of images produced under long-term contracts,
which usually have terms ranging from three to seven years. The Company
generally recognizes software and bill presentment services revenue
(collectively referred to as "software and services revenue") as services are
performed. Certain of the Company's software licenses provide for fixed or
minimum fees. Fixed fees and the present value of minimum fees under software
licenses are recognized as revenue upon installation. Such amounts have not been
material. Most contracts include provisions for inflation-based adjustments,
including changes in paper costs.
Total revenue increased by 14% to $60.3 million in the first quarter of 1996
from $53.0 million in the comparable quarter in 1995. The increase was
attributable to growth in revenue from software and services partially offset by
a decline in equipment sales and services revenue. Software and services
revenue, which was 92% of total revenue in the first quarter of 1996 versus 88%
in the comparable 1995 quarter, increased in the first quarter of 1996 by 19%
over the comparable 1995 quarter. Customer management software and
16
<PAGE>
services revenue increased by 13% to $32.5 million in the first quarter of 1996
from $28.8 million in the comparable 1995 quarter. The increase is attributable
to growth in sales to U.S. domestic cable television and multi-service
providers, and to international clients. Bill presentment revenue provided
primarily to telecommunications companies as a stand-alone service increased by
30% to $22.9 million in the first quarter of 1996 from $17.7 million in the
comparable quarter of the prior year. Equipment sales and services declined in
the first quarter of 1996 by 26% from the comparable quarter in 1995.
TCI, which accounted for $9.8 million or 16% of total revenue in the first
quarter of 1996 and $10.2 million or 19% in the first quarter of 1995, has
announced a plan to begin the replacement of the Company's software with an
in-house system. In June 1996, the Company entered into a new 3- 1/2 year
agreement with TCI to continue to provide customer management software and bill
presentment services for TCI. TCI may remove subscribers from the agreement
during its term, subject to price increases based on the number of subscribers
remaining under contract. The Company cannot estimate when this alternative
system will become available to TCI and when they would be successful in
converting their subscriber base to the TCI system. Another client, which
accounted for 4% of total revenue in the first quarter of 1996 and recently
extended its contract with the Company to early 1997, has orally advised the
Company that it may select an alternative system for its customer management
software requirements.
The Company's largest bill presentment client, Ameritech, accounted for 16%
of total revenue in the first quarter of 1996 and 13% in the comparable quarter
of 1995. Ameritech became a client early in 1994 and has long-term contracts
with the Company expiring in 2000 and 2001.
COST OF REVENUE AND GROSS PROFIT. Cost of software and services revenue
consists primarily of direct labor, equipment-related expenses, cost of
materials such as paper and facilities expense. Cost of equipment sales and
services revenue consists primarily of computer hardware purchased for resale or
lease and third party maintenance.
The Company's gross profit margin of approximately 37% in the first quarter
of 1996 remained unchanged from the first quarter of 1995. Customer management
software and services gross profit margin declined to 44% in the first quarter
of 1996 from 45% in the comparable quarter of 1995. Bill presentment services
gross profit margin increased to 26% in the first quarter of 1996 from 22% in
the comparable 1995 quarter due to economies of scale resulting from increased
revenue. The gross profit margin on equipment related revenue declined to 39% in
1996 from 43% in 1995 because of lower prices realized on equipment sales.
RESEARCH AND DEVELOPMENT. Research and development costs relate primarily
to on-going product development and consist of personnel costs, consulting,
testing, supplies, facilities and depreciation expenses. Once the product under
development reaches technological feasibility, the development expenditures are
capitalized and amortized. See Note 2 of Notes to Consolidated Financial
Statements.
Under certain development agreements, a portion of software development
expense is shared by development partners. The Company retains the rights to any
development and third-party funds may be subject to certain performance
milestones, which, if not met, may require the Company to repay the partner or
to expend its own capital for the development without reimbursement from the
partner.
The Company is currently in discussions with a development partner to revise
the milestone schedule for the completion of the porting and the enhancement of
Intelecable on that partner's computer platform. In the event it is unable to
reach an understanding for a revised milestone schedule, the Company's
capitalized development cost would not be reduced by the remaining unreimbursed
portion under this agreement, of up to $3.2 million, and will be expensed over
the life of the product. The Company has evaluated the estimated net realizable
value of capitalized development costs related to the development agreement and
has determined that such costs are not in excess of estimated future net
revenues to be earned from the product under development.
The Company spent $5.9 million in the first quarter of 1996, inclusive of
amounts reimbursable by development partners on research and development versus
$4.6 million in the comparable quarter of 1995. This represents an increase of
27% primarily from increased spending on Intelecable.
17
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE. Selling expenses consist of
compensation for sales and marketing personnel including commissions and related
bonuses, travel, trade shows and promotional expenses. General and
administrative expenses consist of compensation for administration, finance and
general management personnel, as well as legal and accounting fees.
Total sales and marketing expenses increased by 28% in the first quarter of
1996 in comparison to the first quarter of 1995. The increase in sales and
marketing expenditures was primarily because of the addition of sales and
marketing personnel committed to the international, multi-service and
telecommunications market. General and administrative expenses remained
unchanged between the quarters.
INCOME TAXES. The Company's provision for income taxes represents estimated
federal, state and foreign income taxes. The effective income tax rate of 39.5%
in the first quarter of 1996 was unchanged from the comparable quarter in 1995
and was based on the Company's anticipated effective rate for the full year.
NET INCOME. Net income in the first quarter of 1996 increased by 12% to
$2.6 million from $2.3 million in the comparable 1995 quarter primarily because
of the factors cited above.
THE YEAR 1995 COMPARED TO 1994
REVENUE. Total revenue increased by 21% to $229.3 million in 1995 from
$188.8 million in 1994. The increase was attributable to growth in revenue from
software and services, partially offset by a decline in equipment sales and
services revenue. Software and services revenue, which was 86% of total revenue
in 1995 versus 82% in 1994, increased in 1995 by 27% over the prior year.
Customer management software and services revenue increased by 15% to $116.9
million in 1995 from $101.4 million in 1994. The increase was attributable to
growth in sales to international and multi-service clients and the migration of
U.S. clients to expanded services for which higher fees are charged.
Bill presentment services revenue increased by 49% to $80.4 million in 1995
from $53.8 million in 1994. Ameritech accounted for 16% and 13% of total revenue
in 1995 and 1994, respectively. Revenue from Ameritech, which became a client in
1994, increased in 1995 by $12.6 million reflecting a full year of service and
growth in its volume of bills presented. Revenue derived from wireless service
providers, exclusive of Ameritech, also increased in 1995 reflecting an increase
in the numbers of clients served by the Company and growth in the number of
wireless service users. Another significant client, TCI, accounted for $39.3
million or 17% of total revenue in 1995, and $34.8 million or 18% in 1994.
Equipment sales and services revenue declined in 1995 by 5% from the prior
year, primarily due to lower equipment sales.
COST OF REVENUE AND GROSS PROFIT. The Company's gross profit margin in 1995
increased to approximately 36% from approximately 35% in 1994. Customer
management software and services gross profit margin increased to 43% in 1995
from 40% in 1994. The improvement is primarily related to increased efficiencies
in operations and higher prices. When provided on a stand-alone basis, bill
presentment services gross profit margin increased to 24% in 1995 from 21% in
1994 because of efficiencies related to increased volume. Depreciation and
amortization expenses included in cost of revenue were $12.6 million in 1995 and
$11.0 million in 1994, an increase of 15%. Such expenses have increased because
of the Company's capital expenditures for equipment and facilities to support
primarily bill presentment services. The gross profit margin on
equipment-related revenue was 39% in 1995 versus 42% in 1994. The margins
decreased because of lower prices realized on equipment sales.
RESEARCH AND DEVELOPMENT. The Company spent $19.8 million in 1995 on
research and development versus $18.0 million in 1994, an increase of 10%.
Included in 1995 and 1994 were expenditures of $2.0 million and $1.3 million,
respectively, that were reimbursable by development partners. See Note 2 of
Notes to Consolidated Financial Statements.
SELLING, GENERAL AND ADMINISTRATIVE. Total sales and marketing expenses
increased by 30% in 1995 in comparison to 1994. The increase in personnel and
sales and marketing expenditures was due primarily to the Company's addition of
sales and marketing personnel, reflecting an increased commitment to the
international, multi-service and telecommunications market. General and
administrative expenses increased by 21% in 1995 compared to 1994 to support
higher levels of sales, but remained constant as a percentage of total revenue.
18
<PAGE>
INCOME TAXES. In 1995, the Company's effective tax rate was less than 40%
in comparison to 46% in 1994. In 1994, losses in a foreign subsidiary were
incurred and not tax effected. The Company anticipates the 1995 effective income
tax rate to be indicative of the rate in future periods.
NET INCOME. Net income in 1995 increased by 68% from $6.2 million in 1994
to $10.4 million. Net income per share in 1995 increased 75% from $0.28 in 1994
to $0.49 because of the higher earnings and the Company's redemption of
1,044,521 shares pursuant to its obligation under the ESOP. See "Management --
Employee and Director Plans."
THE YEAR 1994 COMPARED TO 1993
REVENUE. Total revenue increased by 14% to $188.8 million in 1994 from
$166.1 million in 1993. This increase was attributable to an increase in
software and services revenue, partially offset by a decrease in revenue from
equipment sales and services. Software and services revenue increased by 33%
over 1993 and represented 82% of total revenue in 1994 as compared to 70% in
1993.
Customer management software and services revenue increased by 6% to $101.4
million in 1994 from $95.9 million in 1993. Expansion into new countries and
sales to multi-service clients contributed to the increase. Bill presentment
services revenue increased by 160% to $53.8 million in 1994 from $20.7 million
in 1993. The addition of Ameritech, which accounted for 13% of total revenues in
1994, as a client and growth in services to the cellular market accounted for
the increase. In 1994, equipment sales and services decreased by 32% as compared
to 1993.
COST OF REVENUE AND GROSS PROFIT. The Company's gross profit margin
decreased to approximately 35% in 1994 from 37% in 1993. Software and services
gross profit margin was 34% in 1994 versus 38% in 1993 due to decreased gross
margins on customer management software and services and a revenue mix that
included a higher proportion of lower-margin bill presentment services. Customer
management software and services gross profit margin declined to 40% in 1994
from 41% in 1993. When provided on a stand-alone basis, bill presentment
services gross profit margin increased to 21% in 1994 from 20% in 1993. The
gross profit margin on equipment-related revenue increased to 42% in 1994 from
36% in 1993. The improved margin percentage resulted from higher margins on
equipment sold despite the decreased total revenue.
RESEARCH AND DEVELOPMENT. The Company spent $18.0 million in 1994 on
research and development versus $16.6 million in 1993, an increase of 8%.
Included in 1994 were expenditures of $1.3 million and $0.6 million,
respectively that were reimbursable by development partners. See Note 2 of Notes
to the Consolidated Financial Statements.
SELLING, GENERAL AND ADMINISTRATIVE. Selling and marketing expenses
increased by 22% in 1994 in comparison to the prior year. This increase was
attributable primarily to additional selling efforts to the international,
multi-service and telecommunications markets. General and administrative
expenses increased 18% in 1994 over 1993 because of the growth of the overall
business.
CONSOLIDATION AND RELOCATION. In 1993, the Company charged to expense
approximately $4.1 million pertaining to the consolidation and relocation of
customer support activities in the U.S. and relocation of the Company's offices
in the U.K.
INCOME TAXES. In 1993, the Company adopted SFAS 109, resulting in an
accumulated credit to income of $2.4 million. Income tax expense in 1993,
exclusive of the change in accounting, was 49% of pretax income, versus 46% in
1994. In both years, losses in a foreign subsidiary were incurred and not tax
effected.
NET INCOME. Net income in 1994 increased 35% from $4.6 million in 1993 to
$6.2 million, exclusive of the accounting change. Net income per share in 1994
increased 33% from $0.21 in 1993 to $0.28, exclusive of the accounting change
which was $2.4 million or $0.11 per share. During 1994, the number of shares
outstanding were reduced by 560,067 primarily from the Company's redemption of
shares pursuant to its obligation under the ESOP. See "Management -- Employee
and Director Plans."
19
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly financial data
for each quarter of 1994 and 1995 and the first quarter of 1996 and the
percentage of revenue represented by each line item. The Company believes that
all necessary adjustments, consisting only of normal recurring adjustments, have
been included in the amounts stated below to present fairly the selected
quarterly information when read in conjunction with the Consolidated Financial
Statements and the Notes thereto included elsewhere herein. The operating
results for any quarter are not necessarily indicative of results for any
subsequent period or for the entire fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
1994 1995
-------------------------------------------- ---------------------------------
MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30
----------- --------- --------- --------- ----------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software and services................... $ 32,688 $ 38,777 $ 40,352 $ 43,430 $ 46,484 $ 46,129 $ 50,218
Equipment sales and services............ 8,004 11,140 5,234 9,180 6,528 10,022 6,459
----------- --------- --------- --------- ----------- --------- ---------
Total................................. 40,692 49,917 45,586 52,610 53,012 56,151 56,677
Cost of revenue:
Software and services................... 22,024 24,972 26,455 29,595 29,813 31,102 32,509
Equipment sales and services............ 5,031 6,560 2,830 5,055 3,701 5,996 4,124
----------- --------- --------- --------- ----------- --------- ---------
Total................................. 27,055 31,532 29,285 34,650 33,514 37,098 36,633
----------- --------- --------- --------- ----------- --------- ---------
Gross profit.............................. 13,637 18,385 16,301 17,960 19,498 19,053 20,044
----------- --------- --------- --------- ----------- --------- ---------
Operating expenses:
Research and development................ 4,072 4,052 4,570 4,006 4,504 3,917 4,295
Selling, general and administrative..... 7,537 8,427 7,530 10,302 10,057 10,120 9,784
----------- --------- --------- --------- ----------- --------- ---------
Total................................. 11,609 12,479 12,100 14,308 14,561 14,037 14,079
----------- --------- --------- --------- ----------- --------- ---------
Operating income.......................... 2,028 5,906 4,201 3,652 4,937 5,016 5,965
Interest expense.......................... 1,034 985 1,116 1,149 1,168 1,236 1,346
----------- --------- --------- --------- ----------- --------- ---------
Income before income taxes................ 994 4,921 3,085 2,503 3,769 3,780 4,619
Income tax provision...................... 463 2,283 1,431 1,157 1,488 1,493 1,825
----------- --------- --------- --------- ----------- --------- ---------
Net income................................ $ 531 $ 2,638 $ 1,654 $ 1,346 $ 2,281 $ 2,287 $ 2,794
----------- --------- --------- --------- ----------- --------- ---------
----------- --------- --------- --------- ----------- --------- ---------
Net income per share...................... $ 0.02 $ 0.12 $ 0.08 $ 0.06 $ 0.11 $ 0.11 $ 0.13
----------- --------- --------- --------- ----------- --------- ---------
----------- --------- --------- --------- ----------- --------- ---------
Shares used in per share calculation...... 21,995 21,963 21,864 21,707 21,494 21,186 21,078
----------- --------- --------- --------- ----------- --------- ---------
----------- --------- --------- --------- ----------- --------- ---------
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------
1994 1995
-------------------------------------------- ---------------------------------
MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30
----------- --------- --------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software and services................... 80.3% 77.7% 88.5% 82.6% 87.7% 82.2% 88.6%
Equipment sales and services............ 19.7 22.3 11.5 17.4 12.3 17.8 11.4
----------- --------- --------- --------- ----------- --------- ---------
Total................................. 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
Software and services................... 54.1 50.1 58.0 56.3 56.2 55.4 57.3
Equipment sales and services............ 12.4 13.1 6.2 9.6 7.0 10.7 7.3
----------- --------- --------- --------- ----------- --------- ---------
Total................................. 66.5 63.2 64.2 65.9 63.2 66.1 64.6
----------- --------- --------- --------- ----------- --------- ---------
Gross profit.............................. 33.5 36.8 35.8 34.1 36.8 33.9 35.4
----------- --------- --------- --------- ----------- --------- ---------
Operating expenses:
Research and development................ 10.0 8.1 10.1 7.6 8.5 7.0 7.6
Selling, general and administrative..... 18.5 16.9 16.5 19.6 19.0 18.0 17.3
----------- --------- --------- --------- ----------- --------- ---------
Total................................. 28.5 25.0 26.6 27.2 27.5 25.0 24.9
----------- --------- --------- --------- ----------- --------- ---------
Operating income.......................... 5.0 11.8 9.2 6.9 9.3 8.9 10.5
Interest expense.......................... 2.6 1.9 2.4 2.1 2.2 2.2 2.4
----------- --------- --------- --------- ----------- --------- ---------
Income before income taxes................ 2.4 9.9 6.8 4.8 7.1 6.7 8.1
Income tax provision...................... 1.1 4.6 3.2 2.2 2.8 2.6 3.2
----------- --------- --------- --------- ----------- --------- ---------
Net income................................ 1.3% 5.3% 3.6% 2.6% 4.3% 4.1% 4.9%
----------- --------- --------- --------- ----------- --------- ---------
----------- --------- --------- --------- ----------- --------- ---------
<CAPTION>
1996
-----------
DEC. 31 MAR. 31
--------- -----------
<S> <C> <C>
Revenue:
Software and services................... $ 54,451 $ 55,421
Equipment sales and services............ 8,972 4,834
--------- -----------
Total................................. 63,423 60,255
Cost of revenue:
Software and services................... 34,278 35,228
Equipment sales and services............ 5,717 2,933
--------- -----------
Total................................. 39,995 38,161
--------- -----------
Gross profit.............................. 23,428 22,094
--------- -----------
Operating expenses:
Research and development................ 5,099 5,642
Selling, general and administrative..... 12,141 11,009
--------- -----------
Total................................. 17,240 16,651
--------- -----------
Operating income.......................... 6,188 5,443
Interest expense.......................... 1,216 1,206
--------- -----------
Income before income taxes................ 4,972 4,237
Income tax provision...................... 1,964 1,674
--------- -----------
Net income................................ $ 3,008 $ 2,563
--------- -----------
--------- -----------
Net income per share...................... $ 0.14 $ 0.12
--------- -----------
--------- -----------
Shares used in per share calculation...... 20,796 20,659
--------- -----------
--------- -----------
1996
-----------
DEC. 31 MAR. 31
--------- -----------
<S> <C> <C>
Revenue:
Software and services................... 85.9% 92.0%
Equipment sales and services............ 14.1 8.0
--------- -----------
Total................................. 100.0 100.0
Cost of revenue:
Software and services................... 54.1 58.4
Equipment sales and services............ 9.0 4.9
--------- -----------
Total................................. 63.1 63.3
--------- -----------
Gross profit.............................. 36.9 36.7
--------- -----------
Operating expenses:
Research and development................ 8.0 9.4
Selling, general and administrative..... 19.1 18.3
--------- -----------
Total................................. 27.1 27.7
--------- -----------
Operating income.......................... 9.8 9.0
Interest expense.......................... 2.0 1.9
--------- -----------
Income before income taxes................ 7.8 7.1
Income tax provision...................... 3.1 2.8
--------- -----------
Net income................................ 4.7% 4.3%
--------- -----------
--------- -----------
</TABLE>
20
<PAGE>
The Company's quarterly operating results have in the past and may in the
future vary significantly depending on various factors. These factors include
the number of subscribers or end-users serviced by the Company's clients, the
timing and size of new or expiring contracts, the effort involved in converting
new clients to the Company's systems, labor and material costs, the volume of
custom design, graphics and printing services contracted by the Company's
clients, and the success of current clients' migration to alternative software
and services. The Company may invest significant time and financial resources
towards securing and implementing contracts and potential contracts, such as the
addition of Ameritech in 1994 as a client, or developing new products and
services. Revenue from such activities may be received, if at all, only in
future quarters. Thus, the Company may incur significant expenses in a
particular quarter that are not offset by corresponding revenue and conversely
may receive additional revenue in future quarters for which related expenses
were incurred in prior quarters.
Over the nine quarters ended March 31, 1996, the most significant quarterly
variances in revenue have been the addition of Ameritech as a bill presentment
client in early 1994, which resulted in the increase in software and services
revenue in the second quarter of 1994, and the variation in computer hardware
sales from quarter to quarter. In general, the Company has experienced lower
revenue from equipment sales in the second half, and particularly the third
quarter, of each year. In the third quarters of 1994 and 1995, equipment sales
and services revenue declined by $5.9 million or 53% and $3.6 million or 36%,
respectively, over the immediate prior quarters.
The overall gross margin increased to 37% and 36% in the second and third
quarters of 1994 from 34% in the first quarter. The lower margin in the first
quarter resulted from labor and equipment costs incurred in adding Ameritech as
a client. In the fourth quarter of 1994, the gross margin was reduced to 34% as
the Company incurred additional costs and increased staffing in connection with
adding approximately 287,000 square feet of leased facilities to accommodate the
expansion of bill presentment services. Gross margin improved to 37% in the
first quarter of 1995 as the facilities became operational and software and
services revenue increased. In the second quarter of 1995, gross margin declined
to 34%. The Company was anticipating the addition of a large bill presentment
services client and, accordingly, added the necessary equipment and personnel.
When it became evident that the prospective client would not outsource its
business, the equipment and personnel were redeployed or eliminated, helping to
improve gross margin in the third and fourth quarters of 1995 and the first
quarter of 1996.
Research and development expenses can vary from quarter to quarter depending
on changing priorities and client needs. In the fourth quarter of 1995, the
Company increased its spending level primarily to upgrade its Intelecable
software product. Selling, general and administrative expenses can vary from
quarter to quarter based on revenue, contract signings and the initiation of
market and promotional programs. In the fourth quarter of 1994, the Company
increased its selling and marketing expenditures by 66% over the average of the
first three quarters of that year. This increase was directed at expanding the
Company's international presence, marketing Intelecable in the U.S. and
increasing its focus on selling bill presentment services.
LIQUIDITY AND CAPITAL RESOURCES
From 1993 through the first quarter of 1996, the primary sources of
financing of the Company's growth has been cash provided by operations and
borrowings from banks and financial institutions. During the 13-quarter period,
the Company generated $82.7 million in net cash from operations and increased
its net borrowings by $10.1 million. In the same period, net capital
expenditures were $86.8 million, and repurchases by the Company of its common
stock were $8.9 million.
The Company collects from its clients and remits to the U.S. Postal Service
a substantial amount of postage. All contracts allow the Company to pre-bill
and/or require deposits from its clients to mitigate the effect on cash flow. As
of March 31, 1996, 35% of the Company's accounts receivable represented amounts
due from clients for postage. Postage collections and remittances are not
included in the Company's statements of operations.
21
<PAGE>
At March 31, 1996, the Company had $5.9 million of cash, $62.8 million of
accounts receivable (including postage receivable of $22.2 million), $5.7
million of current net investment in leases, and $28.3 million of working
capital. At the end of the first quarter of 1996, the Company and a subsidiary
had combined borrowings of $38.0 million under unsecured bank credit
arrangements with a total borrowing availability of $65.0 million. Of the $63.2
million of total debt outstanding at March 31, 1996, $10.1 million is due over
the following 12-month period. The Company plans to use a portion of the
proceeds from this offering to repay borrowings under the bank credit
agreements. See "Use of Proceeds."
The Company plans to continue making significant investments in capital
equipment, facilities and research and development. The Company believes that
the proceeds of this offering, together with net cash flow from operations and
borrowing availability, will be sufficient to support operations through the
next twelve months. The above statements that are not historical facts or
statements of current status are forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995 and as such are subject to the
risks and uncertainties set forth under "Risk Factors" herein. Actual results
may differ materially.
22
<PAGE>
BUSINESS
USCS is a leading provider of customer management software and services to
the global communications industry. The Company's clients include cable
television, wireless and land-line telephony, DBS and multi-service providers in
the U.S. and 13 other countries. The Company's software-based solutions enable
its clients to manage critical customer relationship functions, including new
account set-up, order processing, customer support, management reporting and
marketing analysis. The Company also provides bill presentment services, which
include generation of high quality customized billing statements that are
produced in automated facilities designed to minimize turnaround time and
mailing costs. USCS also offers a variety of complementary professional
services, including consulting, application development and client training, as
well as statement design services that allow clients to use the billing
statement as a communication and marketing tool. The Company's clients typically
enter into contracts with terms ranging from three to seven years. Clients are
billed monthly, generally based on the number of end-users they serve. As a
result, a significant portion of the Company's revenue is recurring and
increases as the service provider's customer base grows. In 1995, the Company's
revenue totaled $229.3 million, of which 73% was generated from companies which
have been clients of USCS for three or more years.
USCS has been providing comprehensive customer management software and
services to the cable television industry for more than 25 years. The Company's
software currently supports 53% of U.S. cable subscribers and is used by 15 of
the 20 largest cable television service providers in the U.S. The Company
provides bill presentment services to clients serving 53% of U.S. cable
television subscribers, 33% of U.S. cellular users and 9% of U.S. land-line
telephony customers and to a variety of other service providers. The Company's
bill presentment clients include substantially all of its domestic customer
management software clients and other service providers such as Ameritech,
AirTouch and Frontier. The Company currently processes over 60 million bills per
month and is the largest centralized first class mailer in the U.S., responsible
for generating more than 1.5% of the total volume of all U.S. first class mail,
including customer remittance volume. Bill presentment services are generally
provided to software clients in bundled contracts and are also sold separately.
The Company has extended its leadership position by introducing products and
services that address the rapidly changing global communications market.
Technological advances, regulatory changes and international growth are
transforming the structure and competitive dynamics of the industry. Markets
that were once segmented by service and geographic location are converging into
a single global communications market which includes traditional service
providers and new entrants offering a combination of services. The rapidly
shifting and increasingly complex nature of the converging communications market
has increased the need among service providers for sophisticated and flexible
customer management software and services.
In 1993, the Company deployed Intelecable, which the Company believes is the
first customer management software product designed for multi-service providers.
The Company also believes that Intelecable is the only integrated multi-service
customer management software system currently operational and commercially
available. Intelecable is presently installed for 17 clients worldwide,
including combined cable/telephony service providers in the U.K., a combined
cable/wireless cable/DBS provider in Australia and two interactive video
providers in the U.S., including BellSouth Interactive. The Company has also
expanded its bill presentment services to support multi-service providers by
offering consolidated billing statements that combine data from multiple
services, such as wireless and land-line telephony, into a single integrated
billing statement.
COMMUNICATIONS MARKET DYNAMICS
The communications industry includes cable television, wireless and
land-line telephony, paging, personal communications services ("PCS"), DBS,
wireless cable, interactive broadband and other services. Technological advances
and regulatory changes in the U.S. and internationally have transformed the
structure and competitive dynamics of the industry. Markets that were formerly
segmented by service and geographical location are converging into a single,
worldwide communications market, which includes both traditional service
providers and a variety of new entrants. Communications service providers can
now offer expanded combinations of services in numerous locations.
23
<PAGE>
In the U.S., cable television and telecommunications companies traditionally
operated in a highly regulated environment that often limited the number of
service providers for a particular service in a given geographical area and also
limited the types of services that could be provided by single companies.
Passage in February 1996 of the Telecommunications Act of 1996 and other recent
deregulatory measures, however, have removed some of the barriers that
previously prevented telephony companies from providing cable television service
and cable television companies from providing telephony service in the U.S.
RBOCs for example, which provided local telephony services to 78 million
households in the U.S. in 1995, now have the opportunity to offer video services
in the U.S.
The regulatory changes redefining the U.S. market have in many cases already
affected the foreign marketplace. In recent years, some countries have
authorized cable and telephony companies to compete. In the U.K., for example,
seven companies currently offer combined cable/telephony services to over one
million customers.
Improving price/performance characteristics of communications hardware have
also contributed to growth in the worldwide communications market. For example,
the retail price of cellular handsets has declined significantly in recent years
and in some instances handsets are now given away free of charge to encourage
new subscriber growth. Due in part to such developments, the number of cellular
customers increased by approximately 40% in the U.S. and 80% internationally in
1995. In addition, governments in the U.S. and other countries have recently
allocated additional bandwidth for new wireless communications services such as
PCS. In the U.S., nearly 100 PCS licenses were awarded in Federal Communications
Commission auctions in the first quarter of 1995 alone.
Historically limited availability of many traditional communications
services outside of the U.S. offers significant opportunities for local and
U.S.-based communications service providers. Many countries outside the U.S.
have recently passed legislation designed to increase availability and usage of
video-based services such as cable television and DBS. In other countries,
governments are privatizing their formerly state-owned telecommunications
monopolies to increase the quality and availability of services. Additionally,
cable television regulations have recently been approved in some countries
legalizing the construction of cable systems.
The rapidly shifting dynamics of the converging communications marketplace
have resulted in an increased emphasis on effective customer management software
and services. Companies competing in this deregulated and increasingly
competitive environment require customer management software and services that
are flexible, scaleable and capable of supporting multi-service providers.
CUSTOMER MANAGEMENT SOFTWARE AND SERVICES
Customer management software systems enable a communications service
provider to manage critical customer relationship functions, including new
account set-up, order processing, customer service and support, management
reporting, marketing analysis and accounts receivable management. Effective
customer management software systems are generally flexible, modular and
scaleable, allowing clients to manage increasing customer bases. In addition,
such systems are generally interoperable with the service provider's other
information systems such as decision support software. Customer management
services include bill presentment, the process by which electronic billing data
are analyzed, verified, formatted and presented to the end user for payment.
Billing statements are generally printed and mailed to customers, although in
recent years, service providers have begun to explore alternative presentment
methods, including electronic presentment via a PC or other communications
device. The bill presentment process must be cost-effective and produce easily
understandable bills quickly and accurately. As customer management software and
services often form the basis of the only regular communication between service
providers and their customers, the interaction enabled by these systems can be a
critical marketing tool.
Customer management software and services can either be developed and
managed by the communications service provider, outsourced to one or more third
parties or apportioned between internal and external systems. Software systems
can be operated on a stand-alone basis, using hardware located at the client's
facility, or provided on a service bureau basis using third party computer
systems located at the
24
<PAGE>
supplier's facility and linked to the client by a wide area network. Development
and implementation of a customer management software system is a costly and
time-consuming effort. The Company believes that third party customer management
software systems developed independently often provide a higher level of
price/performance, flexibility and scaleability than in-house systems. The
Company also believes that, as new communications service providers enter the
market and the amount of new services being provided by both new and established
companies increases, the demand for systems with expanded functionality,
flexibility and scaleability will also increase.
Land-line telephony service providers in the U.S. have traditionally used
customer management software systems developed internally or through cooperative
joint ventures. These so-called "legacy" systems, many of which were developed
over 10 years ago, are designed for a single-service market and do not provide
the scaleability, flexibility and service integration capability required in a
multi-service environment. Significant resources would be required to transition
most legacy systems to a multi-service environment. The Company believes that
the inherent limitations of legacy systems may encourage telephony service
providers to seek outsourcing alternatives to support new or expanded offerings
in a multi-service environment.
Unlike land-line telephony service providers, cable television, wireless and
DBS service providers in the U.S. have typically outsourced customer management
software and services, preferring to allocate resources to other aspects of
their business, including network build-out. New companies entering the market
will be required to decide between developing their own in-house systems or
outsourcing, and established companies that are expanding their service
offerings will be required to upgrade their in-house systems or seek outsourcing
alternatives. The Company believes that the enhanced functionality and features,
lower start-up cost and rapid implementation capability of outsourced solutions
will be an attractive alternative for such companies.
In non-U.S. markets, land-line telephony service providers have typically
developed in-house single-service customer management systems, while cable
television, wireless and DBS providers have typically outsourced. The Company
believes that the rapid growth of cable television, wireless and DBS providers
internationally will result in substantially increased outsourcing
opportunities. In addition, as U.S. cable companies continue to enter
international markets through acquisitions and alliances, the Company believes
that such companies will continue to outsource customer management software
systems. Non-U.S. communications companies have also historically used
internally developed bill presentment solutions. However, the Company believes
that increased activity in non-telephony services and the expansion of U.S.
companies into non-U.S. markets will increase outsourcing opportunities for bill
presentment services in non-U.S. markets.
THE USCS SOLUTION
USCS provides customer management software and services to single and
multi-service providers in the U.S. and 13 other countries. The Company's
software and related products are flexible, modular, interoperable with other
information systems and scaleable to an expanding customer base. The Company's
bill presentment services offer its clients a variety of options for generating
informative, easy-to-read and customized billing statements that maximize
marketing impact and minimize overall production cost. The Company offers its
customer management software to U.S. and international clients on a stand-alone
basis while offering U.S. clients both stand-alone and service-bureau
alternatives. USCS also offers a variety of complementary professional services,
including consulting, application development and client training, as well as
statement design services that allow clients to use the billing statement as a
communication and marketing tool.
25
<PAGE>
USCS is a leading provider of customer management software and services to
the global communications industry. In 1995, the Company was the largest
provider of customer management software systems to U.S. cable television
service providers, supporting 53% of U.S. cable subscribers. The Company's bill
presentment services generated statements for 53% of U.S. cable subscribers, 33%
of U.S. cellular customers and 9% of U.S. land-line telephony users. The
Company's record of achievement includes what USCS believes is:
-The first customer management software system for multi-service
providers, including support of combined cable television/telephony
sites;
-The first contract with an RBOC to outsource all bill presentment
functions for telephony services;
-The first installation and operation of customer management software
for interactive video trials in the U.S.;
-The first on-line processing system for the cable industry;
-The first pay-per-view module for on-line subscribers; and
-The first incorporation of a relational database into a customer
management software application which allows the user to query logical
relationships without the need to predefine or describe a specific
access path to the data.
USCS STRATEGY
The Company's strategy to maintain and enhance its industry position
includes the following key elements:
FOCUS ON RECURRING REVENUE. The Company's clients typically enter into
contracts with terms ranging from three to seven years. Clients are billed
monthly, generally based on the number of end-users they serve. As a result, a
significant portion of the Company's revenue is recurring and increases as the
service provider's customer base grows. In addition, the Company focuses on
client care and service to encourage long-term relationships and contract
renewals. In 1995, the Company's revenue totaled $229.3 million, of which 73%
was generated from companies that have been USCS clients for three or more
years. The Company will continue to focus on building recurring revenue through
long-term contracts and enhanced client care.
FOCUS ON NEEDS OF MULTI-SERVICE PROVIDERS. The Company is a pioneer in
providing integrated customer management software and services to both single
and multi-service communications providers. The Company intends to leverage its
technology, multi-service experience and installed base of clients to rapidly
expand its base of multi-service clients.
INCREASE INTERNATIONAL REVENUE. The Company currently provides customer
management software and services to clients in 13 foreign countries and is
seeking to expand its international presence, both in software and bill
presentment services, using direct and indirect sales channels. The Company has
entered into alliances with established international distributors such as Bull
Argentina S.A., Sema Group and IBM to market Intelecable. The Company intends to
target additional distribution alliances for Intelecable and to market its bill
presentment services in selected international markets, primarily through
licensing arrangements.
EXPAND BILL PRESENTMENT MARKET OPPORTUNITIES. The Company provides bill
presentment services to a variety of communications service providers,
generating billing statements for 53% of U.S. cable subscribers, 33% of U.S.
cellular users and 9% of U.S. land-line telephony customers. The Company also
services several non-communications clients, including financial service
providers and utility companies. The Company intends to target clients in both
communications and other industries to expand the market for its bill
presentment services.
26
<PAGE>
INCREASE PROFESSIONAL AND STRATEGIC SERVICES REVENUE. The Company provides
its customers with a variety of professional and strategic services, including
application development, consulting, support, training, software design,
statement design and marketing services. The Company intends to leverage its
installed client base and capitalize on the professional and strategic expertise
of its personnel to increase revenue from these activities.
CONTINUE TO DEVELOP LEADING-EDGE SOFTWARE AND SERVICES. The Company
regularly develops and incorporates new and diverse technologies into its
customer management software products and its bill presentment processes. The
Company's product development strategy is based on open systems architecture and
relational databases, which facilitate operation on multiple hardware platforms
and interoperability with other information systems. The Company has entered
into alliances with IBM and Tandem Computers Incorporated ("Tandem") in
connection with the development of customer management software. The Company is
also continually seeking to enhance its bill presentment services to increase
client interaction and reduce turnaround time and mailing costs. Additionally,
the Company is exploring electronic statement presentment alternatives. USCS
intends to use both its internal development team and strategic alliances to
maintain its technological leadership.
USCS PRODUCTS AND SERVICES
USCS offers customer management software systems, bill presentment services
and a variety of related professional and support services. The Company's
products and services enable communications service providers to manage critical
customer relationship functions, including new account set-up, order processing,
customer support, management reporting, marketing analysis and design and
generation of customized billing statements. The Company also offers a variety
of fee-based professional services, including worldwide consulting, application
development, client training and statement design services that allow clients to
use the billing statement as a communication and marketing tool.
CUSTOMER MANAGEMENT SOFTWARE
The Company's primary customer management software products are DDP/SQL and
Intelecable. The Company markets DDP/SQL to the traditional U.S. cable
television provider market while Intelecable is targeted to single and
multi-service providers in the U.S. and internationally. The Company also offers
CableWorks, a PC-based system for smaller operators. Additionally, certain
clients continue to use earlier generations of the Company's software that are
no longer marketed to new clients. Both DDP/SQL and Intelecable are scaleable
and are available in basic systems with optional modules, allowing the service
provider to design a customized system which can effectively manage a growing
customer base. Both systems were developed in compliance with ISO 9001
international quality process standards for design, production, installation and
servicing.
The Company licenses its software products to its clients under multi-year
license agreements. License fees are generally paid monthly based on the number
of subscribers or end-users served by the client. These agreements are typically
subject to periodic renewals and inflation-based license fee adjustments.
DDP/SQL. DDP/SQL is the Company's primary software system for cable
television companies in North America. Currently, 15 of the 20 largest cable
television service providers in the U.S. use the DDP/ SQL system. DDP/SQL offers
a basic system with optional modules for expanded functionality. DDP/SQL uses a
relational database which allows the user to query logical relationships without
the need to predefine or describe a specific access path to the data.
Information generated by DDP/SQL can be used with the client's internal
information systems and off-the-shelf software programs. This interoperability
allows users, for example, to easily create financial spreadsheets based on
information generated by DDP/SQL.
The Company offers DDP/SQL on either a stand-alone or a service bureau
basis. Stand-alone systems currently support approximately 75% of the Company's
client subscriber base while 25% are supported on a service bureau basis. For
stand-alone clients, the Company installs a complete DDP/SQL system at the
provider's facility, including necessary hardware and peripherals. Clients using
a service bureau arrangement access the Company's on-line processors via wide
area networks. The Company's Technical Response Center monitors traffic and
network availability to identify and respond to outages in the system. See "--
USCS Products and Services -- Hardware Leasing and Sales" and "-- Client Support
and Care."
27
<PAGE>
DDP/SQL runs on massively parallel processing hardware manufactured by
Tandem. The Company is a value-added reseller of Tandem equipment. The Company
also sells to its clients peripheral hardware made by manufacturers other than
Tandem, and generally enters into hardware maintenance agreements with its
clients. The Company also provides lease financing and maintenance services for
companies operating systems on a stand-alone basis. See "-- USCS Products and
Services -- Hardware Leasing and Sales."
INTELECABLE. The Company believes that Intelecable is the world's first
customer management software system designed for multi-service providers in the
converging communications marketplace. The Company also believes that
Intelecable is the only integrated multi-service software system currently
operational and commercially available. First installed in 1993, Intelecable
supports a diverse array of communications services, including cable television,
telephony, combined cable/telephony, interactive video and DBS. The Company has
installed Intelecable for 17 clients worldwide, including combined
cable/telephony service providers in the U.K., a combined cable/wireless
cable/DBS provider in Australia and two sites in the U.S. that support
interactive video operations.
The Company has installed Intelecable for Birmingham Cable Communications
Ltd. ("Birmingham Cable") in Birmingham, U.K. The Birmingham site became
operational in August 1993 and over 275,000 homes have been passed in its
region. At the Birmingham site, Intelecable supports 80,000 cable subscribers
and handles over 8.3 million telephone calls per month.
In addition to Birmingham Cable, Intelecable is being deployed to support
combined cable/telephony operations for Optus Vision in Australia, which is
expected to be the world's first nationwide integrated cable/telephony system.
Other sites include a nationwide cable/wireless cable/DBS operation in Australia
and cable-television-only sites in Australia, Chile, Japan, Portugal, the U.K.
and Venezuela. Intelecable is enabled with National Language Support double-byte
capability, which allows operation in a variety of foreign languages, including
Japanese, Chinese and Arabic. In the U.S., Intelecable has recently been
deployed to support an interactive video trial by BellSouth Interactive in
Chamblee, Georgia.
The Company believes that Intelecable is the only customer management
software system currently operational that has multi-platform capabilities.
Initially offered on IBM's AIX (UNIX) operating system, Intelecable is being
ported to Tandem's Integrity NR and is expected to be available on Tandem's OSS
platform. The Tandem OSS port is expected to provide a migration path to
Intelecable for DDP/ SQL users requiring multi-service customer management
software capabilities.
Intelecable is based on an open systems architecture, which facilitates
customization and interoperability with other information systems. The
Intelecable system has been developed using standard design methodologies and
transaction processing monitor architecture. Intelecable also uses an embedded
standard query language (SQL), which facilitates access to the database by
user-created applications. The design of Intelecable delivers a high-level
programming interface, which allows extensive customization without complex code
changes. Intelecable uses an Oracle relational database, which allows clients to
maintain an integrated database for each service offered by the client.
CABLEWORKS. The Company markets its CableWorks PC-based customer management
software product to domestic and international cable operators that have lower
transaction volume requirements than operators supported by DDP/SQL or
Intelecable. CableWorks is designed to introduce smaller cable operators to the
Company's products, with the expectation that such operators will migrate to
Intelecable or DDP/SQL as their business grows. CableWorks is installed in sites
in the U.S. and 26 other countries and has been translated into eight foreign
languages.
DOCUMENTATION AND TRAINING. The Company provides, at an additional charge,
complete product documentation and training services to users of its software
products. The Company has recently added CD-ROM-based product documentation. The
Company's "ClassROM" software provides interactive instruction and product
training on CD-ROM. The Company maintains training facilities in California and
the U.K. See "-- USCS Products and Services -- Professional Services and
Support."
28
<PAGE>
BILL PRESENTMENT SERVICES
The Company provides bill presentment services in a fully integrated and
automated production environment that rapidly and cost-effectively transforms
electronic data received from the client into informative, accurate and
customized billing statements. In addition, the Company's statement-based
marketing services allow clients to use the billing statement as a marketing
tool to reinforce a corporate image, advertise special offers and features and
otherwise market its services to its customers. To address the needs of
multi-service providers, the Company offers billing statements that combine data
from multiple services, such as wireless and land-line telephony, into a
consolidated billing statement.
The Company's automated bill presentment services offer several advantages
over typical in-house services, including the following:
-SHORTENED BILLING CYCLES. The "billing cycle" refers to the time
between receipt of the electronic billing data from the service
provider and the date the service provider receives payment of the bill
from its customer. By rapidly generating billing statements and
presorting to reduce mailing time, the Company's systems can
significantly reduce the time required to place a statement in the
postal stream, thereby shortening the client's billing cycle. In
addition, the Company has the ability to dynamically change the due
date of a particular batch of statements to allow a previously produced
batch of statements to have an earlier due date than later batches,
further shortening the overall billing cycle.
-MINIMIZED MAILING COSTS. The Company has developed procedures, such as
certified Manifest Mailing, that allow the Company's clients to secure
the lowest available postal rate for their statements. Additionally,
the Company's systems can automatically calculate the maximum number of
inserts that can be placed in an envelope without causing the envelope
to exceed certain specified weights.
-STATEMENT-BASED MARKETING CAPABILITIES. The Company offers custom
statement and envelope design services, custom formatting, insert
production services, selective inserting capability and a variety of
other services that enhance its clients' statement-based marketing
activities.
-REDUCED CUSTOMER CARE COSTS. By providing custom formatting and other
design services, the Company has helped certain of its clients achieve
demonstrated savings in customer care costs by substantially reducing
the number of customer inquiries and complaints regarding their bill
and the billing process.
STATEMENT PRODUCTION. The Company, which currently generates statements for
53% of U.S. cable television subscribers under bundled contracts, 33% of U.S.
cellular customers and 9% of U.S. land-line telephony users, has achieved its
industry position in part through the development and deployment of
technologically innovative systems and software. The Company operates two
statement production facilities in the Northern California area. These
facilities receive a data stream from the client's customer management software
(whether a client's legacy system, a competitor's system or the Company's
software), manipulate the data into a usable format, create cost-effective,
informative, easy-to-read and accurate customized billing statements and mail
the statements to the end-users. The Company is the largest centralized first
class mailer in the U.S., responsible for generating more than 1.5% of the total
volume of all U.S. first class mail, including customer remittance volume. The
Company processes over 60 million statements containing approximately 200
million images (generally one page side) per month. The Company generates bill
presentment revenue based on the number of statements and/or images produced and
mailed. The Company has developed automation technologies that have led to a
demonstrated 99.9% statement accuracy level for the 12 months ended March 31,
1996, based on reported client complaints.
Using patented processes and technologies, the Company provides a
fully-integrated, computerized and automated production environment that (i)
processes, logs, verifies and authenticates all customer data, (ii) creates
automated production controls for every statement, including form bar codes,
weight and
29
<PAGE>
thickness parameters, unique statement tracking numbers, "due out" dates,
address correction, carrier route/delivery point bar codes and postal processing
parameters, (iii) models every production run on-line before printing and (iv)
enables postal processing, sorting and discounting to be performed on-line.
Full real-time automation enables the Company to monitor quality, control
remakes, predict and schedule production loading, verify customer data, forecast
production volumes and maintain production system history on-line. The system is
controlled by an on-line production control system that is based on advanced
client/server architecture and has high-speed data transmission capabilities. A
local area network links the production equipment to the production control
system. To provide clients with real-time information regarding the progress of
the billing statement production process, the Company has developed its
"VantagePLUS" client information system, which provides a customized "view into
the facility" to allow clients to monitor the status of their jobs. VantagePLUS,
which is currently undergoing final testing with selected clients, includes a
client/server architecture and a PC-based graphical user interface that provides
traceability of an individual statement from the beginning of statement
production until 45 days after distribution. VantagePLUS is expected to provide
clients with greater control over the billing process in an outsourced
environment. See "Risk Factors -- New Products and Technological Changes."
The Company also offers consolidated billing statements for multi-service
providers, which combine data from multiple services, such as wireless and
land-line telephony, into a single integrated statement. Consolidated statements
can offer clients significant savings both in paper and mailing costs.
Consolidated statements can also be a powerful marketing tool for companies
seeking to establish brand name recognition and sell combined services.
STATEMENT-BASED MARKETING SERVICES. The Company provides statement-based
marketing services that allow its clients to transform regular customer billing
statements into communication tools. The billing statement is often the only
form of regular communication between a service provider and its customers. Many
clients have the opportunity, through the Company's statement-based marketing
and creative design services, to use the billing statement to reinforce a
corporate image, advertise special offers and features, deliver
customer-specific messages and otherwise market their services to their
customers. The Company believes that as competition in the communications market
increases, the ability to differentiate based on marketing and service will
become increasingly critical.
Statement design and marketing services are provided by the Company's
Creative Design Group, which works with clients to design flexible,
user-friendly statements. The Company offers its clients a choice of statement
sizes and formats, on-site forms analysis, logo and graphic design and
customer-specific messaging and advertising options. The Company also offers
custom envelope and forms design and manufacturing services.
The Company operates a full service graphics and printing facility through
which the Company offers color electronic publishing and pre-press and
multi-color printing of inserts. The Company works with its clients to design
and produce high-quality inserts that feature special offerings, promotions or
other messages from the client to its customers. The Company uses proprietary
selective inserting technology, which allows each statement to have a unique
combination of marketing inserts at the time the billing statement is produced.
The automated insert process allows clients to define an insert mailing with
precision, offering over 100 insert combinations in any given statement run.
FUTURE ELECTRONIC DELIVERY ALTERNATIVES. The Company's automated
information and technology infrastructure, which electronically prepares and
monitors the statement until final printing, provides the basis for the
Company's planned development of an electronic bill presentment alternative. The
proliferation of on-line services and the Internet provides an opportunity for
communications service providers to bill customers electronically through a PC
or other device. The Company believes that as electronic billing and payment
solutions become more accepted, communications service providers will require
electronic statement presentment capabilities. USCS is in preliminary
discussions with potential strategic partners to begin integrating electronic
presentment technologies into the Company's systems and is currently developing
a prototype. See "Risk Factors -- New Products and Rapid Technological Changes."
30
<PAGE>
PROFESSIONAL SERVICES AND SUPPORT
The Company has expanded and refocused its fee-based professional services
and support functions to better serve the needs of its clients in the global
communications industry and to expand its revenue base. The Company maintains a
Professional Services Group to provide global consulting services to its
software customers. This group provides assistance with database definition and
initialization, system operations, network consolidation and performance and
decision support services. This group also offers a variety of consulting,
educational and technical writing services. See "-- Customer Management Software
- -- Product Documentation and Training."
The Company's Integration Strategies Group assists clients in developing
custom-tailored applications and interfaces that are interoperable with the
Company's customer management software to enhance client operations. The
Integration Strategies Group is comprised of experienced developers who provide
clients with client specific software modules.
The Company's Customer Systems Group provides a full range of technical
support for the Company's bill presentment clients. This group has developed
customized programming tools that allow it to receive electronic information
streams from a variety of client systems without the need to make changes to the
customer's system. These tools allow for rapid and smooth transitions when
clients outsource bill presentment functions to the Company.
HARDWARE LEASING AND SALES
The Company sells computer equipment and provides leasing and maintenance
services to selected software clients which purchase stand-alone systems
primarily in the U.S. Maintenance is typically billed in advance of providing
the service. Revenue from sales of computer hardware and providing associated
maintenance and leasing services has been declining in absolute dollars and as a
percentage of total revenue. In 1995, revenue from these activities was less
than 14% of total revenue as compared to 30% in 1993. While the Company will
continue to offer hardware and services to current and future clients, the
Company expects the decline as a percentage of total revenue to continue.
CLIENTS
The Company sells customer management software and services to clients in
the U.S. and 13 other countries. The following are selected clients of the
Company:
<TABLE>
<CAPTION>
CABLE TELEVISION CLIENTS TELEPHONY CLIENTS MULTI-SERVICE PROVIDERS
- ----------------------------- ------------------------ ------------------------
<S> <C> <C>
Adelphia AirTouch Paging BellSouth Interactive
Cablevision Systems Ameritech Birmingham Cable
Comcast CBIS GTE Video
Continental Cablevision Frontier Optus Vision
TCI
Time Warner
</TABLE>
In addition to communications service providers, the Company provides bill
presentment services to companies in other industries, including Amerigas
Corporation (utilities) and GT Global Investor Services, Inc. (financial
services). The Company intends to seek additional non-communications clients for
its bill presentment services. See "-- USCS Strategy."
CLIENT SUPPORT AND CARE
USCS provides worldwide training and support to its clients. As of December
31, 1995, USCS employed 192 persons in its client service groups, representing
9% of its total employees. In the U.S., client care is divided into product
specific teams, with one team focusing on customer management software and the
other team focusing on bill presentment services. Both teams provide broadbased,
24 hour, 7 day support and technical assistance. The Company has developed a
full range of training products and documentation including what the Company
believes to be the first CD-ROM based training product for its software clients.
31
<PAGE>
Supplementing the front line software support groups for service bureau software
customers is the Company's Technical Response Center, which monitors traffic and
network availability to identify and respond to outages in the system.
Internationally, Intelecable is supported by teams located in the U.S. and the
U.K. as well as by alliance partners.
SALES AND MARKETING
The Company markets its products and services in the U.S. with a 72-person
direct sales force, including account management and technical support teams,
and internationally through partners supported by an 11-person sales staff. The
Company's sales and marketing teams are coordinated by the Company's Strategic
Accounts Council to promote a unified marketing and sales effort to its clients.
A marketing communications group, resident in both the U.S. and the U.K.,
supports the Company's sales teams.
Software and services are sold primarily to cable, DBS and multi-service
providers through direct sales channels and in conjunction with international
alliance partners. In North America the Company operates a 42-person software
and services sales and marketing team, including account management and
technical support teams.
The Company's international sales staff is coordinated by geographic area,
including dedicated account and technical support personnel located in the U.K.
office. In addition to direct sales, the Company has allied with 10 distribution
partners throughout the world who are responsible for sales, marketing, support
and local customization.
The Company believes that sales of separate bill presentment services to
telecommunications service providers such as RBOCs and cellular providers offers
both increased revenue opportunities as well as increased visibility for the
Company. The Company maintains a 30-person sales staff, including account
management and technical support teams and significant design resources, to
target this market. The Company has also begun a bill presentment international
marketing effort that seeks to exploit what the Company believes is significant
growth potential in that market. The Company is currently pursuing opportunities
for technology licensing and joint ventures for bill presentment in Europe and
South America. See "Risk Factors -- Technological Advances and New Product
Development."
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are focused on introducing
new products and services as well as ongoing enhancement of its existing
products and services. The Company believes that its investment in research and
development is critical to maintaining its leadership position. The Company
works closely with development partners such as Tandem and IBM to enhance its
products. The Company's research and development partnerships typically provide
for funding by development partners and include joint marketing and other
arrangements. In software product development, significant emphasis is placed on
compliance with world wide development standards and quality benchmarks. The
Company's processes used at its Research and Development Center in El Dorado
Hills, California, have received ISO 9001 certification, the globally recognized
quality standard. The Company also continually enhances its bill presentment
services by developing software and processes that increase production
efficiency and aid clients in accessing bill processing information. See "--
USCS Strategy."
The Company's research and development staff consisted of 223 employees as
of December 31, 1995, compared to 165 as of December 31, 1993. The Company's
total expenses for Company-sponsored research and development were $17.8
million, $16.7 million, and $16.0 million for the years ended December 31, 1995,
1994 and 1993, respectively. In addition, the Company spent $2.0 million, $1.3
million and $0.6 million in 1995, 1994 and 1993, respectively, for further
development of Intelecable, which amounts are reimbursable by third parties. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" and Note 2 of Notes to Consolidated Financial Statements.
32
<PAGE>
COMPETITION
The market for the Company's products and services is highly competitive,
and competition is increasing as additional market opportunities arise. The
Company competes with both independent providers and developers of in-house
systems. The Company believes its most significant competitors for software
systems are Information Systems Development (owned by CBIS), CSG Systems
International, Inc., and its own clients to the extent such clients develop
in-house systems. The most significant competitors for bill presentment services
are in-house service providers.
The Company believes that the principal competitive factors in the market
for customer management software include functionality and features of software,
quality of client care and support, type of hardware platform used and quality
of research and development. The principal competitive factors for bill
presentment services include statement production accuracy, ability to meet
statement production deadlines, product quality and price. The Company believes
that it competes favorably with respect to these factors. However, the Company
believes that to remain competitive, it will require significant financial
resources in order to market its existing products and services, to maintain
customer service and support and to invest in research and development. Many of
the Company's existing and potential competitors may have greater resources than
the Company. The Company expects its competitors to continue to improve the
design and performance of their current systems and processes and to introduce
new systems and processes with improved price/performance characteristics. No
assurance can be given that the Company will be able to compete successfully in
the U.S. or internationally. See "Risk Factors -- Competition."
INTELLECTUAL PROPERTY
The Company holds eight U.S. patents covering various aspects of its bill
presentment services. In addition, the Company has applied for 13 additional
U.S. patents. The Company has no foreign patents. The Company believes that
although the patents it holds are valuable, they will not determine the
Company's success, which depends principally upon its product quality, marketing
and service skills. However, despite patent protection, the Company may be
vulnerable to competitors who attempt to imitate the Company's systems or
processes and manufacturing techniques and processes. In addition, other
companies and inventors may receive patents that contain claims applicable to
the Company's system and processes. The sale of the Company's systems covered by
such patents could require licenses that may not be available on acceptable
terms, if at all. In addition, there can be no assurances that patent
applications will result in issued patents.
Although the Company attempts to protect its intellectual property rights
through patents, copyrights, trade secrets and other measures, there can be no
assurance that the Company will be able to protect its technology adequately or
that competitors will not be able to develop similar technology independently.
There can be no assurance that any patent applications that the Company may file
will be issued or that foreign intellectual property laws will protect the
Company's intellectual property rights. There can be no assurance that others
will not independently develop similar systems, duplicate the Company's systems
or design around the patents licensed by or issued to the Company.
A significant cable television client has advised the Company that RAKTL has
asserted that patents held by RAKTL may be infringed by the client's use of
certain interfaces offered by the Company. The patents relate to telephone call
processing with audio response unit and automatic number identification
capabilities of certain interfaces offered by the Company. The client recently
informed the Company that, should it become necessary, it would seek
indemnification from the Company. The Company believes that if the patents are
valid, and if they apply to the Company's business, they would also apply to
many users and suppliers of interactive computer telephony systems, including
the Company's competitors. The Company believes that it is adequately protected
by its patent position, but, to the extent that the RAKTL patents are valid and
apply to the Company's business, the Company could be required to seek licenses
from RAKTL and provide indemnification to its customers.
Although there currently are no pending claims or lawsuits against the
Company regarding possible infringement claims, there can be no assurance that
infringement claims by third parties, or claims for indemnification resulting
from infringement claims, will not be asserted in the future or that such
assertions,
33
<PAGE>
if proven to be true, will not materially adversely affect the Company's
business, financial condition and results of operations. In the future,
litigation may be necessary to enforce patents issued to the Company, to protect
trade secrets or know-how owned by the Company or to defend the Company against
claimed infringement of the rights of others and to determine the scope and
validity of the proprietary rights of others. Any such litigation could result
in substantial cost and diversion of effort by the Company, which by itself
could have a material adverse effect on the Company's financial condition and
operating results. Further, adverse determinations in such litigation could
result in the Company's loss of proprietary rights, subject the Company to
significant liabilities to third parties, require the Company to seek licenses
from third parties or prevent the Company from manufacturing or selling its
systems, any of which could have a material adverse effect on the Company's
financial condition and results of operations. In addition, there can be no
assurance that a license under a third party's intellectual property rights will
be available on reasonable terms, if at all. See "Risk Factors -- Dependence on
Proprietary Technology."
EMPLOYEES
Many of the Company's employees are highly skilled, and the Company's
success will depend in part upon its ability to attract, retain and develop such
employees. Skilled employees, especially employees with extensive technological
backgrounds, are currently in great demand. There can be no assurance that the
Company will be able to attract or retain the skilled employees which may be
necessary to continue its research and development or marketing programs. See
"Risk Factors -- Attraction and Retention of Key Personnel."
As of April 30, 1996, the Company had 2,181 employees, of which 1,943 were
full-time employees and 238 were part-time employees. None of the Company's
employees are represented by a labor union or covered by a collective bargaining
agreement. The Company considers its employee relations to be good.
FACILITIES
The Company owns two buildings in El Dorado Hills, California on
approximately 29 acres. One building of approximately 245,050 square feet is
utilized for statement production operations and supporting activities and the
other of approximately 48,200 square feet is the Company's system and software
research and development center. In addition, the Company owns approximately 278
acres of undeveloped land adjacent to its buildings. The Company leases a total
of approximately 476,000 square feet in Rancho Cordova and El Dorado Hills,
California of which approximately 287,000 square feet is utilized primarily for
statement production operations and warehousing. The other 189,000 square feet
is utilized primarily for corporate headquarters, sales and marketing, customer
support, and research and development.
The Company leases approximately 14,891 square feet in Norcross, Georgia for
its Eastern Regional Data Center, 1,762 square feet in Englewood, Colorado for a
sales office and approximately 2,000 square feet in Harrison, Arkansas for use
by its subsidiary, CUO, Inc. The Company also leases approximately 9,420 square
feet in the U.K. The leases for these facilities expire in the years 1997
through 2018.
The Company believes that its facilities are adequate for its proposed needs
through 1996 and that additional suitable space will be available as required.
34
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of May
20, 1996 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------ --- ----------------------------------------------------------------------
<S> <C> <C>
James C. Castle, Ph.D. 59 Chairman of the Board, Chief Executive Officer and Director
Michael F. McGrail 49 President of CableData, Inc. and Director
C. Randles Lintecum 51 President of International Billing Services, Inc.
Douglas L. Shurtleff 49 Senior Vice President, Finance and Chief Financial Officer
Claudia D. Coleman 44 Vice President, Corporate Development
George L. Argyros, Sr. (1)(2) 59 Director
George M. Crandell, Jr. (1) 50 Director
Charles D. Martin (2) 59 Director
Larry W. Wangberg (1)(2) 53 Director
</TABLE>
- ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
JAMES C. CASTLE, PH.D. joined the Company as Chairman of the Board, Chief
Executive Officer and Director in August 1992. Prior to joining USCS, Dr. Castle
served as Chief Executive Officer and Director of Teradata Corporation, a
manufacturer of high capacity, high performance parallel processing database
systems, from August 1991 until April 1992. Dr. Castle served as President and
Chief Executive Officer of Infotron Systems Corporation, a manufacturer of data
and voice transmission equipment, from October 1987 until August 1991 and was
named Chairman of the Board in May 1989. Prior to October 1987, Dr. Castle held
various senior management positions with TBG Information Systems, Inc., Memorex
Corporation, Honeywell, Inc. and General Electric. Dr. Castle is also a Director
of PAR Technology Corp., Leasing Solutions, Inc. and ADC Telecommunications,
Inc. Dr. Castle received his B.S. from the U.S. Military Academy at West Point
and a M.S.E.E. and Ph.D. in Computer and Information Sciences from the
University of Pennsylvania.
MICHAEL F. MCGRAIL has been President of CableData, Inc., the Company's
wholly owned subsidiary, and a Director of the Company since April 1995. From
December 1993 to March 1995, Mr. McGrail was President of CableData
International, Ltd., a wholly-owned subsidiary of CableData, Inc. From August
1991 to December 1993, Mr. McGrail served as President of Gandalf International,
Ltd. ("Gandalf"), a wide and local area network communications products company.
From January 1988 to July 1991, Mr. McGrail was Managing Director of Infotron
Systems International Ltd., which was acquired by Gandalf in 1991. Mr. McGrail
received a B.Sc. with honors from the University of Sussex and a M.Sc. in
Management from Trinity College, Dublin.
C. RANDLES LINTECUM has been the President of International Billing
Services, Inc. ("IBS"), a wholly-owned subsidiary of the Company, since July
1995. From February 1995 to July 1995, Mr. Lintecum was Senior Vice President,
Marketing and Business Development of USCS and from May 1993 to February 1995
Mr. Lintecum was Vice President, Corporate Development of USCS. From June 1985
to May 1993, Mr. Lintecum was Executive Vice President of Corporate Marketing
for Infonet Services Corporation ("Infonet"), an international data network
services company. Mr. Lintecum received a B.S. in Business Administration from
the University of Kansas and a M.B.A. from the University of Missouri.
DOUGLAS L. SHURTLEFF has been Senior Vice President, Finance and Chief
Financial Officer of the Company since May 1995. From September 1988 to May
1995, Mr. Shurtleff was Vice President, Finance and Administration of Infonet.
From October 1984 to September 1988, Mr. Shurtleff was Group Vice President,
Finance and Administration of Computer Sciences Corporation, a computer services
company. Previously, Mr. Shurtleff held various senior management positions at
Pacesetter Systems, Inc., and Deloitte & Touche. Mr. Shurtleff received a B.S.
in Accounting and his M.B.A. from the University of Southern California and is a
certified public accountant.
35
<PAGE>
CLAUDIA D. COLEMAN has been Vice President, Corporate Development of the
Company since December 1995. From March 1988 to December 1995, Ms. Coleman held
various positions, including Principal, at Alex. Brown & Sons ("Alex. Brown"),
an investment banking firm. Prior to joining Alex. Brown, Ms. Coleman was a Vice
President at Drexel Burnham Lambert from 1984 to 1988. From 1979 to 1984, Ms.
Coleman held various positions, including Vice President, at Bank of America.
Ms. Coleman received a B.A. from the University of California, Davis and a
M.B.A. from the University of California, Berkeley.
GEORGE L. ARGYROS, SR. has been a Director of the Company since November
1990. Mr. Argyros is Chairman and Chief Executive Officer of Arnel & Affiliates,
a West Coast diversified investment company. Mr. Argyros is sole shareholder of
GLA Financial Corp. ("GLA Financial"), a general partner of Westar Capital
Associates, which is the sole general partner of Westar Capital ("Westar"), a
private equity investment firm and a principal shareholder of the Company. Mr.
Argyros is also a limited partner of Westar. Mr. Argyros is a Director of First
American Financial Corporation, The Newhall Land and Farming Company, Tecstar
Corporation, All Post Corporation ("All Post"), Dogloo, Inc. and El Dorado
Communications. Mr. Argyros is President and Chief Executive Officer of the
Horatio Alger Association of Distinguished Americans, is Chairman of the Board
of Trustees of Chapman University, a Trustee of the California Institute of
Technology (CalTech), Chairman of the Board of Directors of The Beckman
Foundation, director of the Beckman Laser Institute and Medical Clinic, Vice
Chairman of the Estele Doheny Eye Foundation, and Chairman of the Orange County
Business Committee for the Arts. See "Certain Transactions" and "Principal and
Selling Stockholders."
GEORGE M. CRANDELL, JR. has been a Director of the Company since March 1989.
Mr. Crandell is President of George M. Crandell, Jr., A Law Corporation and is a
limited partner of Westar Capital Associates, the general partner of Westar.
Prior to joining Westar in 1988, Mr. Crandell was a partner of Brentwood
Associates ("Brentwood"), an investment firm. Prior to joining Brentwood, Mr.
Crandell was a Senior Consultant with the international consulting firm of
McKinsey & Company. He also held positions at Planning Research Corporation and
IBM. Mr. Crandell is on the Board of Directors of Tecstar Corporation and All
Post. He is also a board member and past President of the California State
Sacramento Trust Foundation and a board member of the Dean's Advisory Council of
the University of California, Davis Graduate School of Management. See "Certain
Transactions."
CHARLES D. MARTIN has been a Director of the Company since November 1990.
Mr. Martin has been a general partner of the general partner of Enterprise
Partners, a Southern California-based venture capital firm, since its formation
in 1985. He is a general partner of Westar Capital Associates, which is the sole
general partner of Westar. Mr. Martin also serves on the Board of Directors of
Apria Healthcare, Inc., Premier Ambulatory Systems, Pages Software, Tecstar,
Inc., All Post, Dogloo and El Dorado Communications. He is also a Director and
stockholder of Vedax Sciences Corporation, a firm that operates the TEC
Organization, the largest proprietary membership program in the nation for
company Presidents and Chief Executive Officers. Mr. Martin also serves as a
Trustee of Chapman University and the Newport Harbor Art Museum. See "Certain
Transactions" and "Principal and Selling Stockholders."
LARRY W. WANGBERG has been a Director of the Company since April 1996. Mr.
Wangberg has served as President, Chief Executive Officer and a Director of
StarSight Telecast, Inc. ("StarSight"), a developer of interactive electronic
television program guides and other navigation tools and services since
February, 1995. From November 1983 to February 1995, Mr. Wangberg was Senior
Vice President of The Times Mirror Company and President and Chief Executive
Officer of Times Mirror Cable Television. Mr. Wangberg has also served as
President and Chief Operating Officer (Metro Division) of Warner Amex Cable
Communications and President and COO of Coaxial Communications, Inc. Mr.
Wangberg is also on the Board of Directors of Zilog, Inc. Mr. Wangberg recently
served as Chairman of the National Cable Television Association.
36
<PAGE>
Upon completion of this offering, the Company's Board will be classified
into three classes. Class one, whose terms will expire at the conclusion of the
1997 Annual Meeting, consists of Dr. Castle and Mr. Martin. Class two, whose
terms will expire at the conclusion of the 1998 Annual Meeting, consists of
Messrs. Crandell and Wangberg. Class three, whose terms will expire at the
conclusion of the 1999 Annual Meeting, consists of Messrs. Argyros and McGrail.
See "Description of Capital Stock -- Anti-takeover Effects of Provisions of the
Certificate of Incorporation, Bylaws and the Proposed Stockholders' Rights
Plan."
There are no family relationships between any directors or executive
officers of the Company.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee, consisting of Messrs. Argyros, Crandell and
Wangberg, reviews the adequacy of internal controls and the results and scope of
the audit and other services provided by the Company's independent auditors. The
Audit Committee meets periodically with management and the independent auditors.
The Compensation Committee, consisting of Messrs. Argyros, Martin and
Wangberg establishes salaries, incentives and other forms of compensation for
officers and other employees of the Company and administers the incentive
compensation and benefit plans of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company is party to a letter agreement with Westar pursuant to which
Westar provides financial, management and strategic advisory services to the
Company for a monthly fee of $35,875 plus out-of-pocket expenses. The agreement
may be terminated at any time, with or without cause, by either the Company or
Westar. The Company paid Westar approximately $430,500 for such advisory
services during 1995. George L. Argyros, a Director of the Company, is sole
shareholder of GLA Financial, which is a general partner of Westar Capital
Associates, which is the general partner of Westar. Charles D. Martin, a
Director of the Company, is a general partner of Westar Capital Associates.
Messrs. Argyros and Martin are members of the Compensation Committee. See
"Certain Transactions" and "Principal and Selling Stockholders."
NON-EMPLOYEE DIRECTOR COMPENSATION
On April 12, 1996, the Company adopted a non-employee director compensation
plan pursuant to which the non-employee directors will be compensated as
follows: (1) $20,000 annual retainer payable in quarterly installments; (ii)
$1,500 per day for each physical Board meeting and $1,000 per day for each
physical committee meeting held on a different day; (iii) $250 for each
telephonic Board meeting; and (iv) options to purchase 10,000 shares of Common
Stock issued pursuant to the 1996 Directors Stock Option Plan upon joining the
Board. This plan was approved by the Company's stockholders on May 16, 1996. No
amounts have been paid or options issued pursuant to this plan as of the date of
this Prospectus. See "-- Employee and Director Plans -- 1996 Directors' Stock
Option Plan."
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that a
Company's certificate of incorporation may contain a provision eliminating or
limiting the personal liability of directors for monetary damages for breach of
their fiduciary duties as directors, except for liability (i) for any breach of
their duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which a director derived an
improper personal benefit. The Company's Certificate of Incorporation and Bylaws
also provide that the Company shall indemnify its directors and officers and may
indemnify its employees and agents to the fullest extent permitted by law.
The Company has entered into agreements to indemnify its directors and
officers, in addition to the indemnification provided for in the Company's
Certificate of Incorporation and Bylaws. These agreements, among other things,
indemnify the Company's directors and officers for certain expenses (including
37
<PAGE>
attorney's fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or officer of
the Company, any subsidiary of the Company or any other company or enterprise to
which the person provides services at the request of the Company. The Company
believes that these provisions and agreements are necessary to attract and
retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that might result in a claim for such indemnification.
EXECUTIVE COMPENSATION
The following table sets forth the total compensation for fiscal 1995 of the
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company whose total salary and bonus for fiscal 1995
exceeded $100,000 or would have exceeded $100,000 on an annualized basis
(collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
------------------------------------- NUMBER OF
OTHER ANNUAL SECURITIES ALL OTHER
COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) OPTIONS (#) ($)
- ----------------------------------- --------- ---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James C. Castle, Ph.D. 1995 $ 300,000 $ 102,337 $ 57,146(1) 94,500 $ 23,623(2)
Chairman of the Board and Chief
Executive Officer
Michael F. McGrail 1995 168,311 97,033 100,484(3) -- 11,732(4)
President of CableData, Inc.
C. Randles Lintecum 1995 171,223 51,048 9,230(5) 18,900 11,012(6)
President of International Billing
Services, Inc.
Douglas L. Shurtleff (7) 1995 111,000 43,652 84,399(8) 94,500 2,243(9)
Senior Vice President, Finance and
Chief Financial Officer
Claudia D. Coleman 1995 -- (10) -- -- 63,000 --
Vice President, Corporate
Development
</TABLE>
- ------------------------
(1) The amount represents a $24,839 relocation payment, $23,077 in lieu of paid
time off and a $9,230 car allowance.
(2) The amount represents a contribution by the Company of $12,000 to the
Company's 401(k) Plan, $10,699 in imputed interest payable on deferred
compensation, and payment by the Company of a $924 life insurance premium.
(3) The amount represents $77,289 of relocation expenses, $15,780 in imputed
income with respect to a leased vehicle and $7,415 in lieu of paid time off.
(4) The amount represents contributions by the Company to Mr. McGrail's
self-funded pension plan.
38
<PAGE>
(FOOTNOTES FROM PRECEDING PAGE)
(5) The amount represents a car allowance.
(6) The amount represents a contribution by the Company of $10,536 to the
Company's 401(k) Plan and payment by the Company of a $476 life insurance
premium.
(7) Mr. Shurtleff joined the Company in May 1995. Salary represents amounts
actually paid to Mr. Shurtleff during 1995.
(8) The amount represents $79,145 of relocation payments and a $5,254 car
allowance.
(9) The amount represents payment by the Company of a $333 life insurance
premium and $1,910 in imputed interest payable on deferred compensation.
(10) Ms. Coleman joined the Company in late December 1995. Ms. Coleman's annual
salary for 1996 is $160,000.
OPTION GRANTS DURING 1995
The following table sets forth for each of the Named Officers certain
information concerning stock options granted during 1995:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE PRICE FOR OPTION TERM (5)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION ----------------------
NAME GRANTED(#)(1) 1995(2) ($/SH.)(3) DATE(4) 5%($) 10%($)
- ----------------------------- ------------- --------------- ----------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James C. Castle.............. 94,500 17.1% $ 5.05 2/12/05 $ 300,000 $ 761,000
Michael F. McGrail........... -- -- -- -- -- --
C. Randles Lintecum.......... 18,900 3.4 5.05 5/23/05 60,000 152,000
Douglas L. Shurtleff......... 94,500 17.1 5.05 7/20/05 300,000 761,000
Claudia D. Coleman........... 63,000 11.4 5.05 12/29/05 200,000 507,000
</TABLE>
- ------------------------
(1) These options are incentive stock options granted pursuant to the 1988 or
1993 Incentive Stock Option Plans and have ten year terms. The options vest
over four to five years.
(2) In 1995, the Company granted options to purchase an aggregate of 551,775
shares.
(3) In determining the fair market value of the Company's Common Stock, the
Board of Directors considered various factors, including the Company's
financial condition and business prospects, its operating results, the
absence of a market for its Common Stock, the risks normally associated with
high technology companies and the report of an independent appraisal firm
with respect to the shares of the Company's Common Stock held by the
Company's ESOP. The exercise price may be paid in cash, check, shares of the
Company's Common Stock, through a cashless exercise procedure involving
same-day sale of the purchased shares or such other method as determined by
the Board of Directors.
(4) Options may terminate before their expiration dates if the optionee's status
as an employee or consultant is terminated or upon the optionee's death or
disability.
(5) Potential Realizable Value is based on certain assumed rates of appreciation
pursuant to rules prescribed by the Securities and Exchange Commission (the
"SEC"). Actual gains, if any, on stock option exercises are dependent on the
future performance of the stock. There can be no assurance that the amounts
reflected in this table will be achieved. In accordance with rules
promulgated by the SEC, Potential Realizable Value is based upon the
exercise price of the options, which is substantially less than the expected
initial public offering price. If the Potential Realizable Value is
calculated based on an assumed initial public offering price of $16.00 per
share and the assumed rates of appreciation over the ten-year term of the
options, the resulting stock price at the end of the term would be $21.01
and $41.50 per share at 5% and 10%, respectively. This would result in the
following Potential Realizable Values: Dr. Castle ($1,985,000; $3,445,000);
Mr. Lintecum ($397,000; $689,000); Mr. Shurtleff ($1,985,000; $3,445,000);
and Ms. Coleman ($1,324,000; $2,296,000).
39
<PAGE>
OPTION GRANTS DURING 1996
In April 1996, the Company granted incentive stock options to each of the
Named Officers as follows: Dr. Castle (420,000 shares); Mr. McGrail (154,770
shares); Mr. Lintecum (117,810 shares); Mr. Shurtleff (43,050 shares) and Ms.
Coleman (21,000 shares). Such options vest annually over a period of five years
and have an exercise price of $12.50 per share.
AGGREGATED OPTION EXERCISES DURING 1995 AND YEAR-END OPTION VALUES
The following table sets forth for each of the Named Officers certain
information concerning options exercised during fiscal year 1995 and the number
of shares subject to both exercisable and unexercisable stock options as of
December 31, 1995. Also reported are values for "in-the-money" options that
represent the positive spread between the respective exercise prices of
outstanding options and the fair market value of the Company's Common Stock as
of December 31, 1995:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
VALUE
REALIZED NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF (MARKET PRICE OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES AT EXERCISE DECEMBER 31, 1995 DECEMBER 31, 1995(1)
ACQUIRED ON LESS EXERCISE -------------------------- --------------------------
NAME EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James C. Castle.............. 189,000 $ 493,000 12,214 201,986 $ 146,000 $ 2,463,000
Michael F. McGrail........... -- -- 29,484 46,116 362,000 546,000
C. Randles Lintecum.......... -- -- 60,480 52,920 790,000 665,000
Douglas L. Shurtleff......... -- -- -- 94,500 -- 1,035,000
Claudia D. Coleman........... -- -- -- 63,000 -- 690,000
</TABLE>
- ------------------------
(1) Calculated by determining the difference between the fair market value of
the securities underlying the option at December 31, 1995 and the exercise
price of the Named Officer's option. There was no established public trading
market for the Common Stock underlying the options as of December 31, 1995.
Accordingly, the amounts set forth have been calculated based on the
difference between an assumed initial public offering price of $16.00 per
share and the exercise price of the option.
EMPLOYMENT AND SEVERANCE AGREEMENTS
The Company has an employment agreement with James C. Castle, Ph.D., the
Company's Chairman of the Board and Chief Executive Officer, terminable at will
by either the Company or Dr. Castle. The agreement provides for an initial base
salary of $22,500 per month and an annual bonus of up to 40% of base salary,
contingent on meeting certain performance targets. The agreement may be
terminated at any time by either the Company or Dr. Castle upon 30 days' notice.
In connection with such agreement, Dr. Castle was granted an option to purchase
283,500 shares of the Company's Common Stock at an exercise price of $2.44 per
share, vesting over five years. Upon termination for any reason, Dr. Castle will
receive $0.35 per share for all unvested options. If Dr. Castle is terminated
without cause he will receive one year's salary, which will cease to be paid
upon Dr. Castle starting new employment. Upon a change of control, defined as a
sale of substantially all assets, certain mergers or acquisition by any person
of 50% or more of the Company's voting securities, such options immediately
vest.
The Company has entered into an agreement with Michael F. McGrail, President
of Cabledata, Inc. and a Director of the Company. The Company may terminate Mr.
McGrail's employment upon 12 months notice, with or without cause. The Company
shall have the right to pay salary in lieu of any notice. Mr. McGrail may
terminate his employment with the Company at any time, with or without cause.
The Company has entered into severance agreements with C. Randles Lintecum,
Douglas L. Shurtleff and Claudia D. Coleman, the President of IBS, the Company's
Chief Financial Officer and the Company's Vice President, Corporate Development,
respectively, pursuant to which Mr. Lintecum, Mr. Shurtleff and Ms. Coleman are
entitled to receive certain benefits in the event of termination without cause
upon a change
40
<PAGE>
of control. Benefits consist primarily of a lump-sum payment of one year's
compensation. Change of control is defined as sale of substantially all assets,
merger or upon 50% of outstanding stock of the Company becoming held by a person
or entity other than Westar, Enterprise Partners, the ESOP or any employee stock
purchase plan.
EMPLOYEE AND DIRECTOR PLANS
1988 STOCK OPTION PLAN. The Board of Directors adopted the 1988 Incentive
Stock Option Plan (the "1988 Plan") in May 1988. A total of 945,000 shares have
been authorized for issuance under the 1988 Plan, of which 227,115 shares are
subject to outstanding options, 161,952 shares are available for future grant
and 555,933 shares have been issued on exercise of options as of May 20, 1996.
The 1988 Plan provides for the grant of "incentive stock options" as defined in
Section 422A of the Internal Revenue Code of 1986, as amended (the "Code"), to
key employees and officers of the Company (including any director who is also an
employee). The exercise price of any option granted under the 1988 Plan may not
be less than 100% of the fair market value of the Company's Common Stock on the
date of grant and, in the case of a participant owning stock possessing more
than 10% of the voting rights of the Company's outstanding capital stock, the
exercise price shall be 110% of the fair market value of the Company's Common
Stock on the date of grant. Shares subject to an option granted under the 1988
Plan may be purchased for cash, in exchange for shares of Common Stock owned by
the optionee, or such other consideration as set forth in the 1988 Plan. The
1988 Plan is administered by the Compensation Committee. Under the 1988 Plan,
options generally vest over two to five years and have a term of ten years
(except with respect to 10% stockholders, which have five-year terms). All
shares received upon exercise of an option under the 1988 Plan are subject to a
right of first refusal by the Company. Shares subject to outstanding options
held at least six months prior to an acquisition of the Company by merger or
sale of all or substantially all of the Company's assets shall be exercisable
pro rata plus one year vesting acceleration. Shares subject to outstanding
options held less than six months prior to such event will be canceled.
1990 NONQUALIFIED STOCK OPTION PLAN. The Board of Directors adopted the
1990 Nonqualified Stock Option Plan (the "1990 Plan") in December 1990. A total
of 1,039,500 shares have been authorized under the 1990 Plan, of which 301,589
shares are subject to outstanding options, 88,074 shares are available for
future grant and 649,837 shares have been issued on exercise of options as of
May 20, 1996. The 1990 Plan provides for the grant of options to senior
executives of the Company subject to terms and conditions set forth in
individual option plan agreements between the Company and each optionee. Options
granted under the 1990 Plan do not qualify as incentive stock options under
Section 422A of the Code.
1993 STOCK OPTION PLAN. The Board of Directors adopted the 1993 Incentive
Stock Option Plan (the "1993 Plan") in April 1993. A total of 1,260,000 shares
have been authorized for issuance under the 1993 Plan, of which 806,352 shares
are subject to outstanding options, 303,036 shares are available for future
grant and 150,612 shares have been issued on exercise of options as of May 20,
1996. The 1993 Plan provides for the grant of "incentive stock options" as
defined in Section 422A of the Internal Revenue Code of 1986, as amended (the
"Code"), to senior executives of the Company. The exercise price of any option
granted under the 1993 Plan may not be less than 100% of the fair market value
of the Company's Common Stock on the date of grant and 110% of fair market value
in the case of a participant owning stock possessing more than 10% of the voting
rights of the Company's outstanding capital stock. Shares subject to an option
granted under the 1993 Plan may be purchased for cash, in exchange for shares of
Common Stock owned by the optionee, or other consideration as set forth in the
1993 Plan. The 1993 Plan is administered by the Compensation Committee. Under
the 1993 Plan, options generally vest over three to five years and have ten-year
terms (except with respect to 10% stockholders, which have five-year terms).
Shares subject to outstanding options held at least six months prior to an
acquisition of the Company by merger or sale of all or substantially all of the
Company's assets shall be exercisable pro rata plus one year vesting
acceleration. Shares subject to outstanding options held less than six months
prior to such event will be canceled.
1996 STOCK OPTION PLAN. The Board of Directors adopted the 1996 Incentive
Stock Option Plan (the "1996 Plan") in April 1996. A total of 2,940,000 shares
have been authorized for issuance under the 1996 Plan, of which 974,694 shares
are subject to outstanding options and 1,965,306 shares are available for future
41
<PAGE>
grant as of May 20, 1996. The 1996 Plan provides for the grant of "incentive
stock options" as defined in Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code"), to employees of the Company. The 1996 Plan also
provides for the grant of options which are not intended to qualify as incentive
stock options under Section 422A of the Code to employees, non-employee
directors and consultants of the Company. The exercise price of any option
granted under the 1996 Plan may not be less than 100% of the fair market value
of the Company's Common Stock on the date of grant and 110% of fair market value
in the case of a participant owning stock possessing more than 10% of the voting
rights of the Company's outstanding capital stock. Shares subject to an option
granted under the 1996 Plan may be purchased for cash, in exchange for shares of
Common Stock owned by the optionee, or other consideration as set forth in the
1996 Plan. The 1996 Plan is administered by the Board of Directors. Under the
1996 Plan, options generally vest 20% per year over 5 years and have ten year
terms (except with respect to 10% stockholders which have five-year terms). If
the Company dissolves, sells substantially all of its assets, is acquired in a
stock-for-stock or security exchange or is party to a merger or reorganization
in which it is not the surviving corporation (a "Change of Control"), then 50%
of the unvested portion of each option held 6 months prior to the effective date
of a Change of Control shall immediately vest and shall be exercisable by the
holder thereof for a period of not less than thirty (30) days prior to the
effective date of such Change of Control. All options shall terminate in their
entirety to the extent not exercised on or prior to the last day of such 30 day
period.
1996 DIRECTORS' STOCK OPTION PLAN. The Board of Directors adopted the 1996
Directors' Stock Option Plan (the "Directors' Plan") in April 1996. A total of
150,000 shares have been authorized for issuance under the Directors' Plan, of
which no shares are subject to outstanding options. Effective upon completion of
an initial public offering, the Directors' Plan provides for the grant to each
non-employee director of the Company upon joining the Board of a stock option to
purchase 10,000 shares of the Company's Common Stock. Under the Directors' Plan,
the exercise price of each option is 100% of the fair market value of the
Company's Common Stock on the date of grant. Options vest annually over three
years and have a term of five years. If an optionee ceases to serve as a
director for any reason, the option may be exercised, to the extent vested,
within 90 days after the date such individual ceases to be a director. In the
event of a Change of Control, then 50% of the unvested portion of each option
held at least six months prior to the effective date of a Change of Control
shall immediately vest and shall be exercisable by the holder thereof for a
period of not less than 30 days prior to the effective date of such Change of
Control. All options shall terminate in their entirety to the extent not
exercised on or prior to the last day of such 30-day period.
EMPLOYEE STOCK PURCHASE PLAN. The Board adopted the Employee Stock Purchase
Plan (the "Purchase Plan") in April 1996. A total of 200,000 shares have been
authorized for issuance under the Purchase Plan, of which none have been issued.
The Purchase Plan provides for employees of the Company to purchase shares of
the Company's Common Stock through payroll deductions. Under the Purchase Plan,
shares are purchased on a quarterly basis at the lower of 95% of the fair market
value of the Company's Common Stock on the first and last business days of each
calendar quarter. Shares purchased under the Purchase Plan may not be sold or
otherwise transferred for six months after issuance under the Purchase Plan. The
Purchase Plan is intended to qualify as an "employee stock purchase plan" under
Sections 421 and 423 of the Code.
DEFERRED COMPENSATION PLAN. The Board adopted the Deferred Compensation
Plan (the "Deferred Plan") effective as of August 1994. The Deferred Plan
permits senior executives of the Company to defer any portion of their
compensation until their termination of employment and allows such executives to
elect to receive the deferred payment in a lump sum or in five, ten or fifteen
annual installments. All deferred payments accrue deemed interest as the Board
of Directors may determine from time to time. The current interest rate is 9.5%.
401(K) RETIREMENT PLAN. The Company has a tax-qualified employee savings
and retirement plan (the "401(k) Plan") covering substantially all of the
Company's employees. Pursuant to the 401(k) Plan, employees may elect to
contribute up to 12% of their compensation, up to the statutorily prescribed
limit, to the 401(k) Plan as a savings contribution. The Company matches
employee contributions of up to 6% of compensation at a ratio of fifty percent.
The plan has a profit sharing element whereby the Company can make a
contribution of up to 5% of each eligible employee's compensation determined at
the discretion of
42
<PAGE>
the Board of Directors and limited in the aggregate to up to 10% of the
Company's consolidated pretax income effective January 1, 1996. The Company is
required to make an additional contribution of 3% of each eligible employee's
annual compensation. The Company's contribution to the 401(k) Plan was
$4,204,000 in 1995. An employee's interest in the savings contributions made by
the employee and matching contributions made by the Company of the 401(k) Plan
are 100% vested when contributed. An employee's interest in profit-sharing and
the Company's required contributions under the 401(k) Plan vest over five years
from date of employment. The 401(k) Plan is intended to qualify under Section
401 of the Code such that contributions made by the employees of the Company to
the 401(k) Plan and income earned on such contributions are not taxable to the
employees until withdrawn from the 401(k) Plan and contributions made by the
Company to the 401(k) Plan are deductible by the Company when made.
The 401(k) Plan is administered by an Administrative Committee composed of
ten members. The current members of the Administrative Committee are Andrew
Beard, Deborah Beitz, Shelley Butler, Randy Gorrell, Arthur Hawkins, Mary
Jordan, Richard Langan, Terence Rooney, Douglas Shurtleff and David Smith, all
of whom are officers or employees of the Company. CG Trust Company serves as
trustee of the 401(k) Plan (the "401(k) Plan Trustee") and follows the
directions of the Administrative Committee with respect to administration of the
401(k) Plan. The 401(k) Plan Trustee, at the direction of each participant, may
invest the assets of the 401(k) Plan in any of six investment options.
EMPLOYEE STOCK OWNERSHIP PLAN. Effective January 1, 1974, the Company
established the ESOP to provide for the accumulation of Company Stock for the
benefit of eligible employees. The ESOP is a non-contributory, individual
account retirement plan which is qualified under Section 401(a) of the Internal
Revenue Code of 1986, as amended. Effective as of January 1, 1992, the Company
ceased making contributions to the ESOP and replaced such contributions with
increased Company contributions to the Company's 401(k) Retirement Plan. The
ESOP will be selling shares of Common Stock in this offering based upon
elections of the ESOP participants (who have been given the opportunity to
direct the sale of a portion of the shares allocated to their individual ESOP
accounts).
The ESOP is administered by an Administrative Committee composed of six
members. The current members of the Administrative Committee are Andrew Beard,
Deborah Beitz, Randy Gorrell, Arthur Hawkins, Mary Jordan and Douglas Shurtleff,
all of whom are officers or employees of the Company. Imperial Trust Company
serves as the trustee of the ESOP (the "ESOP Trustee") and follows the
directions of the Administrative Committee with respect to ESOP investments and
benefit distributions. The ESOP provides that participating employees are
entitled to direct the ESOP Trustee as to the voting of shares of Common Stock
allocated to their ESOP Accounts on all matters presented for a vote of
stockholders. The Administrative Committee directs the ESOP Trustee as to the
voting of any shares with respect to which participants do not provide voting
directions. Following retirement, disability, death or other termination of
employment, a participant's ESOP Account is made available for distribution. Any
ESOP participant who has attained age 55 and has participated in the ESOP for at
least ten years is entitled to request that a portion of his ESOP Account be
transferred to the 401(k) Retirement Plan for investment in assets other than
Common Stock.
43
<PAGE>
CERTAIN TRANSACTIONS
The Company is party to a letter agreement with Westar pursuant to which
Westar provides financial management and strategic advisory services to the
Company for a monthly fee of $35,875 plus out-of-pocket expenses. The agreement
may be terminated at any time, with or without cause, by either the Company or
Westar. The Company paid Westar approximately $430,500 for advisory services
during 1995. George L. Argyros, a Director of the Company, is sole shareholder
of GLA Financial, which is a general partner of Westar Capital Associates, which
is the general partner of Westar. Charles D. Martin, a Director of the Company,
is a general partner of Westar Capital Associates. George M. Crandell, a
Director of the Company, is a limited partner of Westar Capital Associates.
The Company, Westar and Enterprise Partners have entered into a Shareholder
Rights Agreement dated December 30, 1988 pursuant to which Westar and Enterprise
Partners have certain registration rights with respect to shares of the
Company's Common Stock owned by them. Charles D. Martin is a general partner of
Enterprise Partners. See "Management -- Executive Officers and Directors,"
"Description of Capital Stock -- Registration Rights" and "Principal and Selling
Stockholders."
In August 1992, the Company entered into an employment agreement with James
C. Castle, Chairman of the Board and Chief Executive Officer. In June 1995, the
Company entered into an employment agreement with Michael McGrail, President of
CableData, Inc. and a Director of the Company. In April, 1996, the Company
entered into severance agreements with C. Randles Lintecum, Douglas L. Shurtleff
and Claudia D. Coleman pursuant to which such individuals will be paid one
year's compensation upon a change of control, as defined in such agreements. See
"Management -- Employment and Severance Agreements." The Company has also
entered into indemnification agreements with each of its officers and directors.
See "Management -- Limitation of Liability and Indemnification Matters."
In March 1995, U.S. Computer Services, the predecessor to the Company,
entered into asset acquisition agreements with two new wholly-owned
subsidiaries, CableData, Inc. ("CableData") and IBS, whereby U.S. Computer
Services transferred the net assets of its Cable Division to CableData and the
net assets of its billing division to IBS in consideration for the issuance of
shares of CableData and IBS, respectively, and the assumption of specified
obligations and liabilities of U.S. Computer Services by CableData and IBS.
Additionally, U.S. Computer Systems Leasing ("USCSL"), a subsidiary of U.S.
Computer Services, entered into asset acquisition agreements with CableLease,
Inc. ("CableLease"), and RPA, Inc. ("RPA"), whereby USCSL transferred its
equipment leasing assets to CableLease and its real property and associated
assets to RPA in consideration for the issuance of shares of CableLease and RPA,
respectively, and the assumption of specified obligations and liabilities of
USCSL by CableLease and IBS.
With respect to each transaction between the Company and an affiliate of the
Company, the Company believes that such transactions were on terms at least as
favorable to the Company as they would have been had they been consummated with
unrelated third parties under similar circumstances. Under Delaware law, a
transaction between the Company and any of its officers or directors or
affiliates of any officer or director may be void or voidable unless the
transaction is approved by a majority of the disinterested directors or a
majority of the stockholders after disclosure of material facts or is fair to
the Company at the time it is authorized.
44
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of May 20,
1996, and as adjusted to reflect the sale of the shares offered hereby by the
Company and the Selling Stockholders, of (i) each Selling Stockholder, (ii) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (iii) each of the Company's directors, (iv)
each of the Named Executive Officers and (v) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the securities listed below, based on
information furnished by such owner, have sole investment and voting power with
respect to the Common Stock shown as being beneficially owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED NUMBER OF OWNED
PRIOR TO OFFERING SHARES AFTER OFFERING (2)
NAME AND ADDRESS OF --------------------------- BEING ---------------------------------
BENEFICIAL OWNER NUMBER PERCENT (1) OFFERED NUMBER PERCENT (1)
- ------------------------------------------ ------------ ------------- ---------- ------------ -------------------
<S> <C> <C> <C> <C> <C>
Westar Capital,
a California limited partnership (3)
Attn: Charles Martin
950 S. Coast Drive, Suite 165
Costa Mesa, CA 92626..................... 8,718,276 44.8% -- 8,718,276 39.2%
ESOP -- Imperial Trust Co.,
Trustee for U.S. Computer Services
Employee Stock Ownership Plan (4)
456 Montgomery Street, Suite 600
San Francisco, CA 94101.................. 5,558,645 28.5 1,616,998 3,941,647 17.7
Gerald S. Knapp (5)
5150 Fair Oaks Blvd., #101-134
Carmichael, CA 95608..................... 1,153,219 5.9 200,000 953,219 4.3
George L. Argyros, Sr. (6)................ 8,718,276 44.8 -- 8,718,276 39.2
Charles D. Martin (7)..................... 9,907,062 50.9 -- 9,907,062 44.6
George M. Crandell, Jr.................... -- -- -- -- --
Larry W. Wangberg......................... -- -- -- -- --
Frank Delfer (8).......................... 369,940 1.9 156,744 213,196 1.0
James C. Castle, Ph.D. (9)................ 232,415 1.2 -- 232,415 1.0
C. Randles Lintecum (10).................. 60,480 * -- 60,480 *
Michael F. McGrail (11)................... 39,942 * -- 39,942 *
Douglas L. Shurtleff (12)................. 18,900 * -- 18,900 *
Claudia D. Coleman........................ -- -- -- -- --
All current directors and executive
officers as a group (9 persons)
(6)(7)(13)............................... 10,239,899 52.2 % -- 10,239,899 45.8 %
Other Selling Shareholders (each
beneficially owning less than 1% of the
Company's Common Stock)
(13 persons)(14)......................... 197,596 1.0 62,403 135,193 *
----------
Total.............................................................. 2,036,145
----------
----------
</TABLE>
- ------------------------
* Less than 1%.
45
<PAGE>
(FOOTNOTES FROM PRECEDING PAGE)
(1) Applicable percentage of ownership is based on 19,471,719 shares of Common
Stock outstanding (on an as-converted basis) as of May 20, 1996 and
22,235,574 shares of Common Stock outstanding after completion of this
offering. The number of shares of Common Stock beneficially owned and
calculation of percent ownership, in each case, takes into account those
shares underlying stock options that are exercisable within 60 days after
May 20, 1996, but that may or may not be subject to repurchase rights.
(2) Assumes the Underwriters' over-allotment option to purchase up to 720,000
shares of Common Stock is not exercised.
(3) Shares held of record by Westar Capital, a California limited partnership
("Westar"). The sole general partner of Westar is Westar Capital Associates.
GLA Financial, Charles D. Martin and John Clark are general partners of
Westar Capital Associates. George L. Argyros, Jr. is sole shareholder of GLA
Financial and a limited partner of Westar and Westar Capital Associates. GLA
Financial and Messrs. Argyros, Clark and Martin may be deemed to have shared
voting or dispositive power with respect to the shares held by Westar. GLA
Financial and Messrs. Argyros, Clark and Martin disclaim beneficial
ownership of shares held by Westar except to the extent of their interests
described above.
(4) See "Management -- Employee and Director Plans -- Employee Stock Ownership
Plan."
(5) Consists of 772,884 shares held by Gerald S. Knapp and Susan G. Knapp,
Trustees of the Knapp 1996 Revocable Trust and 380,335 shares held by the
Gerald S. Knapp Individual Retirement Account. Mr. Knapp was President of
the Company's CableData subsidiary and a Director of the Company until April
1995.
(6) Consists of 8,718,276 shares held by Westar, a private equity investment
firm. Mr. Argyros disclaims beneficial ownership of the shares held by
Westar, except to the extent of his ownership interests in GLA Financial and
Westar.
(7) Consists of 8,718,276 shares held by Westar, and 691,212 shares held by
Enterprise Partners, 456,183 shares held by Enterprise Partners II, L.P. and
41,391 shares held by Enterprise Partners II Associates, L.P., each a
venture capital firm (collectively, the "Enterprise Entitites"). Mr. Martin
is a general partner of Westar Capital Associates and is a general partner
of each of Enterprise Management Partners (which is general partner of
Enterprise Partners) and Enterprise Management Partners II (which is general
partner of Enterprise Partners II, L.P. and Enterprise Partners II
Associates, L.P.). Mr. Martin disclaims beneficial ownership of the shares
held by Westar and the Enterprise Entities, except to the extent of his
ownership interest in Westar, Enterprise Management Partners and Enterprise
Management Partners II, respectively.
(8) Includes 132,657 shares issuable pursuant to stock options within 60 days
of May 20, 1996 and 16,632 shares of Common Stock held of record by Debbie
Delfer, Mr. Delfer's spouse. Of the 156,744 shares offered by Mr. Delfer
hereby, 16,632 shares are held of record by Mrs. Delfer. Mr. Delfer was
President and General Manager of International Billing Services, a
subsidiary of the Company, until July 1995.
(9) Includes 15,368 shares issuable pursuant to stock options within 60 days of
May 20, 1996.
(10) Includes 58,380 shares issuable pursuant to stock options within 60 days of
May 20, 1996.
(11) Consists of 39,942 shares issuable pursuant to stock options within 60 days
of May 20, 1996.
(12) Consists of 18,900 shares issuable pursuant to stock options within 60 days
of May 20, 1996.
(13) Includes 132,590 shares issuable pursuant to stock options within 60 days
of May 20, 1996. See "Management -- Employee and Director Plans."
(14) Includes 882 shares issuable pursuant to stock options within 60 days of
May 20, 1996.
46
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following summary is a description of certain provisions of the
Company's Certificate of Incorporation and Bylaws that will be in effect as of
the closing of this offering. Such summary does not purport to be complete and
is subject to, and is qualified in its entirety by, all of the provisions of the
Certificate of Incorporation and Bylaws, including the definitions therein of
certain terms. Copies of the Certificate of Incorporation and Bylaws are filed
as exhibits to the Registration Statement of which this Prospectus forms a part.
Upon the closing of this offering, the authorized capital stock of the
Company will consist of 40,000,000 shares of Common Stock, $.05 par value and
10,000,000 shares of Preferred Stock. After this offering, 22,235,574 shares of
Common Stock will be outstanding, after giving effect to the 2-for-1 stock split
of the Common Non-Voting Stock, the 2.1-for-1 stock split of the Common Voting
Stock and the conversion of Common Non-Voting Stock into Common Voting Stock on
a 1-for-1 basis.
COMMON STOCK
As of May 20, 1996, there were 19,471,719 shares of Common Stock outstanding
(as adjusted to reflect the conversion of 3,117,159 shares of Common Non-Voting
Stock into 6,234,318 shares of Common Stock and 6,303,524 shares of Common
Voting Stock into 13,237,401 shares of Common Stock) held of record by
approximately 260 stockholders. Each holder of record of Common Stock is
entitled to one vote per share on all matters submitted to a vote of the
stockholders. There are no cumulative voting or preemptive rights applicable to
any shares of Common Stock. All shares of Common Stock are entitled to
participate pro rata in distributions and in such dividends as may be declared
by the Board of Directors out of funds legally available therefor, subject to
any preferential divided rights of any outstanding shares of Preferred Stock.
Subject to the prior rights of creditors, all shares of Common Stock are
entitled in the event of liquidation, dissolution or winding up of the Company
to participate ratably in the distribution of all the remaining assets of the
Company after distribution in full of preferential amounts, if any, to be
distributed to holders of Preferred Stock. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of any series of Preferred Stock which the Company may
designate and issue in the future.
PREFERRED STOCK
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors has the authority, without further action by the stockholders, to
issue up to 10,000,000 shares of Preferred Stock in one or more series and to
fix the designations, powers, preferences, privileges, and relative
participating, optional or special rights and the qualifications, limitations or
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which may
be greater than the rights of the Common Stock. The Board of Directors, without
stockholder approval, can issue Preferred Stock with voting, conversion or other
rights that could adversely affect the voting power and other rights of the
holders of Common Stock. Preferred Stock could thus be issued quickly with terms
calculated to delay or prevent a change in control of the Company or make
removal of management more difficult. Additionally, the issuance of Preferred
Stock may have the effect of decreasing the market price of the Common Stock,
and may adversely affect the voting and other rights of the holders of Common
Stock. As of the date of the Offering, there are no issued and outstanding
shares of Preferred Stock and no such shares are being offered hereby. However,
a right to purchase shares of Series A Preferred Stock has been attached to each
share of Common Stock in connection with the Company's adoption of the
Stockholder Rights Plan discussed below. The Company has authorized 52,000
shares of Series A Preferred Stock initially for issuance upon exercise of such
rights.
Holders of Series A Preferred Stock shall be entitled prior to the payment
of any dividends of shares ranking junior to the Series A Preferred Stock to
receive, when, as and if declared by the Board out of funds legally available
therefor, quarterly dividends in an amount determined under the terms of the
Certificate of Designation. The dividends shall be cumulative and shall begin to
accrue on outstanding shares as set forth in such Certificate.
47
<PAGE>
Holders of Series A Preferred Stock are entitled to one vote for each
1/1000th share of Series A Preferred Stock on all matters submitted to a vote of
stockholders and, except as otherwise provided in the Certificate of
Designation, shall vote together with the holders of Common Stock as one class
on all such matters. The number of votes per share are subject to adjustment
under certain circumstances as set forth in the Certificate of Designation. The
affirmative vote of the holders of a majority of the outstanding shares of
Series A Preferred Stock, voting separately as a class, is required on any
amendment to the Company's Certificate that would materially alter or change in
an adverse manner the powers, preferences, rights, qualifications, limitations
and restrictions of the Series A Preferred Stock.
Except as set forth in the Certificate of Designation, in the event of any
liquidation, dissolution or winding up of the Company, the holders of Series A
Preferred Stock are entitled to receive an amount per share equal to 1,000 times
the aggregate amount to be distributed per share to holders of the Common Stock
prior to any distribution on shares of capital stock of the Company that rank
junior to the Series A Preferred Stock.
The Series A Preferred Stock shall not be redeemable. No shares of Series A
Preferred Stock have been issued and no shares will be issued except upon
exercise of the rights distributed under the Stockholders' Rights Plan.
REGISTRATION RIGHTS
Pursuant to an agreement among the Company, Westar and Enterprise Partners,
Westar and Enterprise Partners are entitled to certain rights with respect to
the registration of such shares under the Securities Act. If the Company
proposes to register any of its securities under the Securities Act, either for
its own account or for the account of other security holders, Westar and
Enterprise Partners are entitled to notice of such registration and are entitled
to include shares of such Common Stock therein. Additionally, Westar and
Enterprise Partners are also entitled to certain demand registration rights
pursuant to which they may require the Company to file a registration statement
under the Securities Act with respect to their shares of Common Stock, and the
Company is required to use its best efforts to effect such registration. All of
these registration rights are subject to certain conditions and limitations,
among them the right of the underwriters of an offering to limit the number of
shares included in such registration. Westar and Enterprise Partners have agreed
to waive their registration rights in this offering.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND THE PROPOSED STOCKHOLDERS' RIGHTS PLAN
CERTIFICATE OF INCORPORATION AND BYLAWS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
could be deemed to have an anti-takeover effect. These provisions are intended
to enhance the likelihood of continuity and stability in the composition of the
Board and in the policies formulated by the Board, and to discourage an
unsolicited takeover of the Company if the Board determines that such takeover
is not in the best interests of the Company and its stockholders. However, these
provisions could have the effect of discouraging certain attempts to acquire the
Company or remove incumbent management even if some or a majority of
stockholders deemed such an attempt to be in their best interests.
The Certificate of Incorporation provides for a classified Board consisting
of three classes, as nearly equal in number as the then authorized number of
directors constituting the Board permits. The initial terms of the first class,
the second class and the third class are set to expire at the conclusion of the
1996 annual meeting, the 1997 annual meeting, and the 1998 annual meeting of
stockholders, respectively. At each annual meeting of stockholders beginning in
1996, successors to the directors whose terms expire at that annual meeting
shall be elected for a three-year term, with each director to hold office until
a successor has been duly elected and qualified. As a result, approximately
one-third of the Board will be elected each year.
The Bylaws provide that stockholders may remove a director with cause only
upon the affirmative vote of a majority of shares entitled to vote at an
election of directors. This provision, combined with the provisions in the
Bylaws authorizing the Board to fill vacant directorships, precludes a
stockholder from removing incumbent directors and simultaneously gaining control
of the Board by filling the vacancies
48
<PAGE>
created by such removal with its own nominees. The Certificate of Incorporation
also provides that the affirmative vote of 66 2/3% of the outstanding shares is
required to amend certain provisions in the Company's Certificate of
Incorporation.
The Bylaws establish an advance notice procedure for the nomination, other
than by or at the direction of the Board, of candidates for election as
directors as well as for other stockholder proposals to be considered at annual
meetings of stockholders. Notice must be received by the Company not less than
60 days prior to the annual meeting and must contain certain specified
information concerning the persons to be nominated or the matters to be brought
before the meeting and concerning the stockholder submitting the proposal. The
Bylaws also provide that special meetings of stockholders of the Company may be
called by a stockholder holding not less than 20% of the Company's outstanding
voting stock only upon 60 days advance notice.
STOCKHOLDERS' RIGHTS PLAN
The Company has entered into a Stockholders' Rights Plan (the "Rights Plan")
by and between the Company and Chase/Mellon Shareholder Services, LLC, as rights
agent with the following terms. Under the Rights Plan, the Board declared and
distributed a dividend of one right ("Right") for each outstanding share of the
Common Stock to the stockholders of record as of the Company as of the date
selected by the Board. Shares of Common Stock issued in the Offering (assuming
no triggering event) automatically receive these Rights. The Rights are not
exercisable or transferrable separately from the shares of Common Stock until
the earlier of (the "Distribution Date"): (i) ten days following a public
announcement that a person or group has acquired or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding shares of the
Common Stock; or (ii) ten days following the commencement or announcement of an
intention to make a tender or exchange offer that would result in an acquiring
person or group beneficially owning 15% or more of such outstanding shares of
the Common Stock, unless the Board sets a later date in either event. The Board
has the option to redeem the Rights at a nominal cost to prevent the Rights from
being triggered by designating certain offers for all the outstanding Common
Stock as a permitted offer. Prior to the Distribution Date, the Company may
amend or supplement the Rights Plan without the consent of any of the holders of
the Rights. Following the Distribution Date, the Rights Plan may be so amended
to cure any ambiguity, to correct or supplement any inconsistent provision or
any other provision so long as such amendment or supplement does not adversely
affect the holders of the Rights (other than an acquiring person or group). The
Rights expire ten years after the date of adoption of the Rights Plan by the
Board unless earlier redeemed by the Company.
The Rights, when exercisable, entitle their holders (other than those held
by an acquiring person or group) to purchase 1/1,000th of a share of Preferred
Stock (subject to adjustment) or, in certain instances, other securities of the
Company. In certain circumstances, if the Company is involved in a merger or
consolidation and is not the surviving entity or disposes of more than 50
percent of the Company's assets or earnings power, the Rights would also entitle
their holders (other than an acquiring person or group) to purchase the highest
priority voting shares in the surviving entity or its affiliates having a market
value of two times the exercise price of the Rights.
The Rights Plan is intended to encourage a potential acquiring person or
group to negotiate directly with the Board, but may have certain anti-takeover
effects. The Rights Plan could significantly dilute the interests in the Company
of an acquiring person or group. The Rights Plan may therefore have the effect
of delaying, deterring or preventing a change in control of the Company.
The foregoing description of the Rights Plan is qualified in its entirety by
reference to the Rights Plan, a copy of which is included as an exhibit to the
Registration Statement of which this Prospectus is a part.
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporations
Law ("Section 203") which, subject to certain exceptions, prohibits a Delaware
corporation from engaging in any business combination with any interested
stockholder for a period of three years following the date that such stockholder
became an interested stockholder, unless: (i) prior to such date, the board of
directors of the
49
<PAGE>
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (x) by persons who are directors and also
officers and (y) by employee stock plans in which employee participants do not
have the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or (iii) on or subsequent
to such date, the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder.
Section 203 defines business combinations to include: (i) any merger or
consolidation involving the corporation and the interested stockholder, (ii) any
sale, transfer, pledge or other disposition involving the interested stockholder
of 10% or more of the assets of the corporation, (iii) subject to certain
exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder, (iv)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder, or (v) the receipt by the
interested stockholder of the benefits of any loans, advances, guarantees,
pledges, or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
TRANSFER AGENT AND REGISTRAR
Chase/Mellon Shareholder Services, LLC has been appointed as the transfer
agent and registrar for the Company's Common Stock.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation and Bylaws provide for expanded
indemnification of directors and officers of the Company and limits the
liability of directors of the Company. The Bylaws provide that the Company shall
indemnify each person who is or was an officer or director of the Company, or is
or was serving as an officer, director, employee or agent of any other
corporation, partnership, joint venture, trust or other enterprise at the
request of the Company, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement (if such settlement is approved in advance
by the Company, which approval shall not be unreasonably withheld) actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. Such right to indemnification includes the right to
advancement of expenses incurred by such person prior to final disposition of
the proceeding, provided that such director or officer shall provide the Company
with an undertaking to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision that such person is not entitled to be
indemnified for such expenses. The Bylaws also provide that the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he or she
is or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection with the defense or settlement of such action or suit,
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the Company, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Company unless
and only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware
50
<PAGE>
Court of Chancery or such other court shall deem proper. No person shall be
indemnified by the Company for any expenses or amounts paid in settlement with
respect to any action to recover short-swing profits under Section 16(b) of the
Securities Exchange Act of 1934, as amended. The Certificate of Incorporation
provides that if the Delaware General Corporation Law is amended to further
eliminate or limit the personal liability of directors, then the liability of a
director of the Company shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended. The Company
has also entered into agreements to indemnify its officers and directors in
addition to the indemnification provided for in the Company's Bylaws.
SHARES ELIGIBLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that market sales of the
Company's Common Stock or the availability of the Company's Common Stock for
sale will have on the market price prevailing from time to time. Nevertheless,
sales of substantial amounts of the Common Stock of the Company in the public
market after the restrictions described below lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.
Upon completion of this offering (assuming no exercise of the Underwriters'
over-allotment option), the Company will have outstanding 22,235,574 shares of
Common Stock. In addition to the 4,800,000 shares to be sold in this offering,
approximately 741,000 additional shares issued and outstanding as of May 20,
1996, will be eligible for immediate sale in the public market without
restriction following consummation of this offering pursuant to Rule 144(k) of
the Securities Act. Commencing 30 days and 60 days after the date of this
Prospectus, an additional 50,000 shares and 50,000 shares, respectively, will be
eligible for immediate sale in the public market without restriction pursuant to
Rule 144(k). Commencing 90 days after the date of the Prospectus, approximately
168,000 shares outstanding and 18,000 shares subject to options will be eligible
for sale in the public market pursuant to Rule 701 or Rule 144 of the Securities
Act. Commencing 120 days after the date of this Prospectus, an additional 50,000
shares will be eligible for immediate sale in the public market without
restriction pursuant to Rule 144. Commencing 180 days after the date of the
Prospectus, upon the expiration of lock-up agreements with the Underwriters,
approximately 16,372,000 shares of Common Stock issued and outstanding as of May
20, 1996, will be eligible for immediate sale in the public market pursuant to
Rule 144 or Rule 701, subject to compliance with certain volume limitations and
other restrictions under Rule 144 as well as, in some cases, certain contractual
restrictions on sale. See "Risk Factors -- Shares Eligible for Future Sale."
In general, under Rule 144, a person (or persons whose shares are
aggregated) who has beneficially owned Restricted Shares for at least two years,
including the holding period of any securities which converted into the
Restricted Shares and including the holding period of any prior owner except an
affiliate, will be entitled to sell within any three month period a number of
shares that does not exceed the greater of 1% of the then outstanding shares of
Common Stock (222,356 shares immediately after this offering assuming no
exercise of the Underwriters' over-allotment option) or the average weekly
trading volume of the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. Any person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days preceding a sale, and who has beneficially owned shares
for at least three years (including any period of ownership of preceding non-
affiliated holders), will be entitled to sell such shares under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its employees,
directors, officers, consultants or advisers prior to the closing of this
offering, pursuant to written compensatory benefit plans or written contracts
relating to the compensation of such persons. In addition, the Commission has
indicated that Rule 701 will apply to stock options granted by the Company
before this offering, along with the shares acquired upon exercise of such
options. Securities issued in reliance on Rule 701 are deemed to be Restricted
Shares and, beginning 90 days after the date of this
51
<PAGE>
Prospectus (unless subject to the contractual restrictions described above), may
be sold by persons other than affiliates subject only to the manner of sale
provisions of Rule 144 and by affiliated under Rule 144 without compliance with
its two-year minimum holding period requirements.
The Company intends to file a Registration Statement under the Securities
Act covering approximately 6,534,500 shares of Common Stock which have been
issued, are reserved for issuance or which the Company intends to reserve for
issuance under the Company's 1988 Incentive Stock Option Plan, 1990 Nonstatutory
Stock Option Plan, 1993 Incentive Stock Option Plan, 1996 Incentive Stock Option
Plan, 1996 Directors' Stock Option Plan and the Employee Stock Purchase Plan.
See "Management -- Employee and Director Plans." Such Registration Statement is
expected to be filed as soon as practicable after the date of this Prospectus
and will automatically become effective upon filing. Accordingly, shares
registered under such Registration Statement will be available for sale in the
open market, unless such shares are subject to vesting restrictions and subject
to limitations on resale by affiliates.
52
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company and each of the Selling Stockholders have
agreed to sell to each of the Underwriters named below, and each of the
Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch") and Montgomery Securities are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Company and the
Selling Stockholders, the aggregate number of shares of Common Stock set forth
opposite its name below. The Underwriters are committed to purchase all of such
shares if any are purchased. Under certain circumstances, the commitments of
non-defaulting Underwriters may be increased as set forth in the Purchase
Agreement.
<TABLE>
<S> <C>
NUMBER OF
UNDERWRITERS SHARES
- ----------------------------------------------------------------------------------------------------- ----------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................................................
Montgomery Securities................................................................................
----------
Total.................................................................................... 4,800,000
----------
----------
</TABLE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters propose initially to offer the shares of Common Stock to
the public at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers at such price less a concession not in excess
of $
per share. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Company has granted the Underwriters an option, exercisable for 30 days
after the date hereof, to purchase up to 720,000 additional shares of Common
Stock, respectively, solely to cover over-allotments, if any, at the initial
public offering price, less the underwriting discount. If the Underwriters
exercise this option, each of the Underwriters will have a firm commitment,
subject to certain conditions, to purchase approximately the same percentage
thereof which the number of shares of Common Stock to be purchased by it in the
foregoing table is of the 4,800,000 shares of Common Stock initially offered
hereby.
The Company's officers and directors, the Selling Stockholders, certain
other stockholders of the Company, and the Company, subject to certain limited
exceptions, have agreed not to offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant for the sale of, or otherwise dispose of or
transfer, directly or indirectly, any shares of the Company's Common Stock or
any securities convertible into or exchangeable or exercisable for Common Stock,
or enter into any swap or any other agreement or any transaction that transfers,
in whole or in part, directly or indirectly, the economic consequence of
ownership of the Common Stock, without the prior written consent of Merrill
Lynch, for a period of 180 days after the date of this Prospectus. Such
officers, directors and stockholders have executed 180-day lock-up agreements
with respect to an aggregate of approximately 16,372,000 shares of Common Stock.
53
<PAGE>
The Underwriters have reserved for sale at the initial public offering price
up to 300,000 shares which may be sold to the Company's management employees,
customers and suppliers and other persons associated with the Company or
affiliated with any director, officer or management employee of the Company. The
number of shares available for sale to the general public will be reduced to the
extent any reserved shares are purchased. Any reserved shares not so purchased
will be offered by the Underwriters on the same basis as the other shares
offered hereby.
Prior to this offering, there has been no public market for the shares of
Common Stock of the Company. The initial public offering price will be
determined through negotiations among the Company, the Selling Stockholders and
the Representatives. Among the factors to be considered in determining the
initial public offering price, in addition to prevailing market conditions, are
price-earnings ratios of publicly traded companies that the Representatives
believe to be comparable to the Company, certain financial information of the
Company, the history of, and the prospects for, the Company and the industry in
which it competes, an assessment of the Company's management, its past and
present operations, the prospects for, and timing of, future revenues of the
Company, the present state of the Company's development, and the above factors
in relation to market values and various valuation measures of other companies
engaged in activities similar to the Company. There can be no assurance that an
active trading market will develop for the Common Stock or that the Common Stock
will trade in the public market subsequent to this offering at or above the
initial public offering price.
The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company and the Selling Stockholders by Graham & James LLP,
Sacramento, California. Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California, are acting as counsel for the Underwriters
in connection with certain legal matters relating to the shares of Common Stock
offered hereby.
EXPERTS
The consolidated financial statements as of December 31, 1994 and 1995 and
for each of the three years in the period ended December 31, 1995 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1
under the Securities Act, and the rules and regulations promulgated thereunder,
with respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. Statements contained in the Prospectus as to the contents of
any contract or other document that is filed as an exhibit to the Registration
Statement are not necessarily complete and each such statement is qualified in
all respects by reference to the full text of such contract or document. For
further information with respect to the Company and the Common Stock, reference
is hereby made to such exhibits and schedules thereto, which may be inspected
and copied at the principal office of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 7 World
Trade Center, 13th Floor, New York, New York 10048 and at Citicorp Center,
54
<PAGE>
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of each
such document may be obtained from the Commission at its principal office in
Washington, D.C. upon payment of the charges prescribed by the Commission.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by independent certified public
accountants and with quarterly reports containing unaudited financial
information for each of the three quarters of each fiscal year.
55
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March 31, 1996 (unaudited)................ F-3
Consolidated Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and the three
months ended March 31, 1995 (unaudited) and 1996 (unaudited).............................................. F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1993, 1994 and 1995 and
the three months ended March 31, 1996 (unaudited)......................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and the three
months ended March 31, 1995 (unaudited) and 1996 (unaudited).............................................. F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of USCS International, Inc. (formerly U.S. Computer Services)
The stock split as described in Note 13 to the consolidated financial
statements has not been consummated at June 17, 1996. When the stock split has
been consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and
of cash flows present fairly, in all material respects, the financial
position of USCS International, Inc. (formerly U.S. Computer Services) and
its subsidiaries at December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above."
Price Waterhouse LLP
Sacramento, California
March 4, 1996, except for Note 13 which is as of , 1996
F-2
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- MARCH 31,
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash...................................................................... $ 1,966 $ 6,627 $ 5,930
Accounts receivable....................................................... 51,519 59,907 62,768
Current portion of net investment in leases (note 12)..................... 9,705 6,868 5,746
Paper products and other inventory........................................ 4,710 5,608 6,134
Other..................................................................... 4,803 4,904 5,618
---------- ---------- -----------
Total current assets.................................................... 72,703 83,914 86,196
Property and equipment, net (note 3)........................................ 72,256 85,385 86,274
Net investment in leases, net of current portion (note 12).................. 10,998 7,320 6,125
Other....................................................................... 1,374 3,831 4,229
---------- ---------- -----------
Total assets................................................................ $ 157,331 $ 180,450 $ 182,824
---------- ---------- -----------
---------- ---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses (note 3)............................ $ 44,641 $ 44,974 $ 43,944
Current portion of long-term debt (note 5)................................ 14,711 11,679 10,143
Deferred revenue.......................................................... 1,897 3,821 3,766
---------- ---------- -----------
Total current liabilities............................................... 61,249 60,474 57,853
Long-term debt, net of current portion (note 5)............................. 37,647 51,155 53,090
Customer deposits........................................................... 11,640 13,497 13,364
Other liabilities........................................................... 6,934 8,734 9,430
---------- ---------- -----------
Total liabilities....................................................... 117,470 133,860 133,737
---------- ---------- -----------
Commitments and Contingencies (note 6)
Stockholders' Equity (notes 7, 10 and 13):
Preferred Stock, $.05 par value, 10,000,000 shares authorized; no shares
issued and outstanding................................................... -- -- --
Common Stock, $.05 par value
Voting: Authorized 40,000,000 shares; Issued and outstanding: 12,516,903
shares at December 31, 1994, 12,813,313 shares at December 31, 1995 and
12,812,404 shares at March 31, 1996 (unaudited)........................ 626 641 641
Non-Voting: Authorized 12,000,000 shares; Issued and outstanding:
6,861,240 shares at December 31, 1994, 6,228,702 shares at December 31,
1995 and 6,222,182 shares at March 31, 1996 (unaudited)................ 343 311 311
Retained earnings......................................................... 39,185 45,966 48,487
Foreign currency translation adjustment................................... (293) (328) (352)
---------- ---------- -----------
Total stockholders' equity.............................................. 39,861 46,590 49,087
---------- ---------- -----------
Total liabilities and stockholders' equity.................................. $ 157,331 $ 180,450 $ 182,824
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------------- ----------------------------
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Revenue:
Software and services.............. $ 116,563 $ 155,247 $ 197,282 $ 46,484 $ 55,421
Equipment sales and services....... 49,501 33,558 31,981 6,528 4,834
------------- ------------- ------------- ------------- -------------
Total revenue.................... 166,064 188,805 229,263 53,012 60,255
Cost of revenue:
Software and services.............. 72,758 103,046 127,702 29,813 35,228
Equipment sales and services....... 31,561 19,476 19,538 3,701 2,933
------------- ------------- ------------- ------------- -------------
Total cost of revenue............ 104,319 122,522 147,240 33,514 38,161
------------- ------------- ------------- ------------- -------------
Gross profit......................... 61,745 66,283 82,023 19,498 22,094
------------- ------------- ------------- ------------- -------------
Operating Expenses:
Research and development........... 16,007 16,700 17,815 4,504 5,642
Selling, general and
administrative.................... 28,148 34,160 42,102 10,057 11,009
Consolidation and relocation
expenses (note 8)................. 4,096 (364) -- -- --
------------- ------------- ------------- ------------- -------------
Total operating expenses......... 48,251 50,496 59,917 14,561 16,651
------------- ------------- ------------- ------------- -------------
Operating income..................... 13,494 15,787 22,106 4,937 5,443
Interest expense..................... 4,609 4,284 4,966 1,168 1,206
------------- ------------- ------------- ------------- -------------
Income before income taxes and
cumulative effect of accounting
change.............................. 8,885 11,503 17,140 3,769 4,237
Income tax provision (note 9)........ 4,330 5,334 6,770 1,488 1,674
------------- ------------- ------------- ------------- -------------
Income before cumulative effect of
accounting change................... 4,555 6,169 10,370 2,281 2,563
Cumulative effect to January 1, 1993
of change in method of accounting
for income taxes (note 9)........... 2,408 -- -- -- --
------------- ------------- ------------- ------------- -------------
Net income........................... $ 6,963 $ 6,169 $ 10,370 $ 2,281 $ 2,563
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Earnings per share (note 13):
Income before cumulative effect of
accounting change................. $ 0.20 $ 0.28 $ 0.49 $ 0.11 $ 0.12
Cumulative effect of accounting
change............................ 0.11 -- -- -- --
------------- ------------- ------------- ------------- -------------
Net income......................... $ 0.31 $ 0.28 $ 0.49 $ 0.11 $ 0.12
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average common shares and
equivalents......................... 22,129,307 21,881,516 21,137,863 21,493,604 20,659,378
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK FOREIGN
-------------------------------------- CURRENCY
NUMBER OF PAID-IN RETAINED TRANSLATION
SHARES VOTING NON- VOTING CAPITAL EARNINGS ADJUSTMENT
------------ ----------- ----------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993........................ 20,058,219 $ 627 $ 376 $ 4 $ 29,288 $ (850)
Issuance of common stock........................ 10,962 -- -- 15 -- --
Repurchase of common stock...................... (292,377) (3) (11) (19) (1,089) --
Translation adjustment.......................... -- -- -- -- -- 332
Net income...................................... -- -- -- -- 6,963 --
------------ ----- ----- --------- --------- -----
Balance, December 31, 1993...................... 19,776,804 624 365 -- 35,162 (518)
Issuance of common stock........................ 161,406 8 -- 332 -- --
Repurchase of common stock...................... (560,067) (6) (22) (332) (2,146) --
Translation adjustment.......................... -- -- -- -- -- 225
Net income...................................... -- -- -- -- 6,169 --
------------ ----- ----- --------- --------- -----
Balance, December 31, 1994...................... 19,378,143 626 343 -- 39,185 (293)
Issuance of common stock........................ 708,393 35 -- 1,608 --
Repurchase of common stock...................... (1,044,521) (20) (32) (1,608) (3,589) --
Translation adjustment.......................... -- -- -- -- -- (35)
Net income...................................... -- -- -- -- 10,370 --
------------ ----- ----- --------- --------- -----
Balance, December 31, 1995...................... 19,042,015 641 311 -- 45,966 (328)
Repurchase of common stock (unaudited).......... (7,429) -- -- -- (42) --
Translation adjustment (unaudited).............. -- -- -- -- -- (24)
Net income (unaudited).......................... -- -- -- -- 2,563 --
------------ ----- ----- --------- --------- -----
Balance, March 31, 1996 (unaudited)............. 19,034,586 $ 641 $ 311 -- $ 48,487 $ (352)
------------ ----- ----- --------- --------- -----
------------ ----- ----- --------- --------- -----
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net income............................................ $ 6,963 $ 6,169 $ 10,370 $ 2,281 $ 2,563
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization....................... 11,987 13,734 16,000 3,721 4,684
Loss on sale of assets.............................. 74 148 102 -- 35
Provision for consolidation and relocation,
net of payments.................................... 4,028 (364) -- -- --
Cumulative effect of accounting change.............. (2,408) -- -- -- --
Changes in operating assets and liabilities:
Accounts receivable............................... (19,819) (2,955) (8,388) (2,850) (2,861)
Net investment in leases.......................... (11,876) (8,904) (7,230) (715) (512)
Collections on leases............................. 10,651 11,201 13,745 3,486 2,829
Paper products and other inventory................ 4,109 (1,961) (898) (1,923) (526)
Other assets...................................... (294) (372) (558) (1,952) (862)
Customer deposits................................. 8,914 4,820 1,857 195 (133)
Other liabilities................................. 8,967 6,076 4,022 (3,362) (413)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) operating activities... 21,296 27,592 29,022 (1,119) 4,804
---------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Capital expenditures, net........................... (18,546) (33,412) (29,231) (8,427) (5,608)
Capitalized software expenditures................... -- -- (2,000) (128) (250)
---------- ---------- ---------- ---------- ----------
Net cash used in investing activities................. (18,546) (33,412) (31,231) (8,555) (5,858)
---------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Net borrowings under revolving credit agreement..... -- 8,000 22,000 17,164 8,000
Proceeds from issuance of long-term debt............ 11,627 4,678 4,096 -- --
Payments on long-term debt.......................... (14,165) (10,884) (15,620) (7,037) (7,601)
Proceeds from issuance of common stock.............. 15 340 1,643 4 --
Repurchase of common stock.......................... (1,122) (2,506) (5,249) (13) (42)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing activities... (3,645) (372) 6,870 10,118 357
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash....................... (895) (6,192) 4,661 444 (697)
Cash at beginning of period........................... 9,053 8,158 1,966 1,966 6,627
---------- ---------- ---------- ---------- ----------
Cash at end of period................................. $ 8,158 $ 1,966 $ 6,627 $ 2,410 $ 5,930
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Supplemental cash flow information:
Cash paid during the year for:
Interest............................................ $ 4,580 $ 4,277 $ 5,145 $ 1,129 $ 1,412
Income taxes........................................ $ 4,783 $ 7,228 $ 4,210 $ 16 $ 60
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
1. GENERAL
U.S. Computer Services (the Company) was incorporated in California in 1969.
On April 18, 1996, the Board of Directors authorized the reincorporation of the
Company into USCS International Inc., a Delaware corporation. See Note 13. The
Company operates in one segment providing transaction based comprehensive
customer management software and services and bill presentment services to the
global communications industry, and sells, maintains and leases computer systems
primarily in North America. The Company generally provides software and bill
presentment services to cable television and multi-service providers under
long-term bundled service contracts. The Company also provides bill presentment
services on a stand-alone basis primarily to clients in the telecommunications
market.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION -- The consolidated financial statements include the
accounts of USCS International, Inc. and its wholly owned subsidiaries after
elimination of intercompany accounts and transactions.
FINANCIAL STATEMENT PREPARATION -- The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION -- The Company recognizes services revenue monthly as
the services are performed. Fixed fees and the present value of minimum fees
under software licenses are recognized as revenue upon installation. Variable
software license fees are a component of fees billed under bundled service
contracts and are recognized as revenue over the life of the license based on
usage. Revenue from equipment sales is recognized as equipment is shipped.
Income from sales-type leases is recognized as revenue at a constant periodic
rate of return on the net investment in the lease. Billing for services in
advance of performance is recorded as deferred revenue.
CONCENTRATION OF CREDIT RISK -- Financial instruments that subject the
Company potentially to significant concentrations of credit risk consist
principally of trade accounts receivable. A majority of the Company's trade
receivables are derived from sales to cable television and telecommunications
companies. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral. The Company
maintains an allowance for doubtful accounts on its receivables based upon
expected collectibility. Uncollectible accounts have not been significant.
PAPER PRODUCTS AND OTHER INVENTORY -- Paper products and other inventory
is stated at the lower of standard cost, which approximates actual cost
(determined on a first-in, first-out basis), or market.
PROPERTY AND EQUIPMENT -- Property and equipment is recorded at cost.
Depreciation and amortization expense is recognized on the declining balance and
straight-line methods over useful lives ranging from two to seven years on
equipment and thirty-one to forty years on buildings.
RESEARCH AND DEVELOPMENT -- Research and development costs are expensed as
incurred and consist primarily of software development costs incurred prior to
the achievement of technological feasibility. The Company capitalizes software
development costs after the products reach technological feasibility. These
costs are amortized on a product-by-product basis using the greater of the
amount computed by taking the ratio of current year net revenue to estimated
future net revenue or the amount computed by the straight-line method over the
estimated useful life of the product. No amortization has been recorded to date.
The
F-7
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT (CONTINUED)
Company evaluates the net realizable value of capitalized software development
costs on a product-by-product basis in accordance wtih SFAS 86. The cost of
custom development that is required by a specific client is charged to cost of
revenue.
The Company has entered into strategic alliances with vendors which
underwrite a portion of the enhancements to the Company's software. The Company
retains the rights to the enhancements and the vendors may be entitled to
repayment if certain milestones are not achieved. Funding subject to repayment
is deferred until the related repayment obligations lapse. Funding not subject
to repayment is offset against related software development costs.
CUSTOMER DEPOSITS -- The Company requires postage deposits of its clients
based on long-term contractual arrangements. The Company does not anticipate
repaying in the next year amounts classified as non-current.
FOREIGN CURRENCY TRANSLATION -- The functional currency of the Company's
foreign subsidiaries is the foreign currency. Adjustments arising from the
translation of balance sheets to U.S. dollars at the year-end exchange rates are
included in stockholders' equity. Income and expenses are translated at the
average prevailing rate during the year.
INCOME TAX -- The Company adopted Statement of Financial Accounting
Standards (SFAS) 109, "Accounting for Income Taxes," in 1993. The adoption of
SFAS 109 changed the Company's method of accounting for income taxes from the
deferred method to an asset and liability method. The Company recognizes
deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between tax bases and financial reporting bases of assets
and liabilities.
EARNINGS PER SHARE -- Earnings per share are based on the weighted average
number of shares outstanding and common stock equivalents during the respective
periods, including the assumed net shares issuable upon exercise of stock
options when dilutive. Common and common equivalent shares issued during the
twelve month period prior to an initial public offering (IPO) are included in
the calculations as if they were outstanding for all periods presented (using
the treasury stock method at the anticipated public offering price).
INTERIM FINANCIAL DATA (UNAUDITED) -- The unaudited consolidated financial
statements as of March 31, 1996 and for the three months ended March 31, 1995
and 1996 have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, include all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the financial position and results of operations, in accordance with generally
accepted accounting principles.
F-8
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
3. BALANCE SHEET COMPONENTS
Property and equipment, net, consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer and production equipment....................... $ 90,121 $ 102,381 $ 100,980
Plant and property...................................... 29,957 31,375 31,375
Leasehold improvements.................................. 4,228 10,532 10,508
Office equipment........................................ 5,823 7,271 7,428
Capital projects-in-progress............................ 6,703 6,795 11,373
---------- ---------- -----------
136,832 158,354 161,664
Less accumulated depreciation and amortization.......... 64,576 72,969 75,390
---------- ---------- -----------
$ 72,256 $ 85,385 $ 86,274
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
Accounts payable and accrued expenses consists of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1994 1995 1996
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Trade accounts payable.................................. $ 22,181 $ 19,981 $ 16,465
Book overdraft.......................................... 3,454 2,720 2,343
Accrued payroll and related expenses.................... 10,709 11,752 12,774
Accrued retirement contributions........................ 3,864 4,419 4,671
Other accrued expenses.................................. 4,433 6,102 7,691
---------- ---------- -----------
$ 44,641 $ 44,974 $ 43,944
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
4. BENEFIT PLANS
The Company has an employee savings and pension benefit plan (known as the
401(k) Retirement Plan). This plan covers substantially all employees. The
Company matches employee contributions of up to six percent of compensation at a
rate of fifty percent. The plan has a profit-sharing element whereby the Company
can make a contribution of up to 3% of each eligible employee's compensation
determined at the discretion of the Board of Directors. The Company is required
to make an additional contribution of 3% of each eligible employee's annual
compensation. The Company's contribution to the 401(k) Retirement Plan was
$2,995,000, $3,763,000, and $4,204,000 in 1993, 1994 and 1995, respectively, and
$1,234,000 and $1,511,000 for the three months ended March 31, 1995 and 1996,
respectively.
The Company also has two defined contribution stock ownership plans covering
substantially all employees who were employed by the Company as of February 18,
1993. There were no contributions to the plans in 1993, 1994, 1995 and the three
months ended March 31, 1995 and 1996. Under the plans, the Company is obligated,
at the employees' option, to repurchase vested shares at the current fair market
value upon termination or retirement. Substantially all share repurchases in
1993, 1994 and 1995 resulted from the repurchase of shares from former
employees. At December 31, 1995, the estimated fair market value of shares
subject to repurchase obligations under the plans totaled approximately
$6,240,000. The Company's repurchase obligations under the plans lapse upon the
effective date of an IPO.
F-9
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
4. BENEFIT PLANS (CONTINUED)
In August 1994, the Company adopted a non-qualified deferred compensation
plan for senior management. The plan permits participants to defer a portion of
their compensation until termination of their employment at which time payment
of amounts deferred is made in a lump sum or annual installments. Deferred
amounts accrue interest at a rate determined by the Board of Directors. At
December 31, 1995, amounts deferred under the plan and the related accrued
interest were not significant.
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------- MARCH 31,
MATURITIES 1994 1995 1996
----------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Notes payable to insurance companies, without collateral,
interest at 7.91% payable semi-annually, principal payable in 1996 to
five equal annual installments of $4,500. 1999 $ 22,500 $ 18,000 $ 13,500
1999 to
Credit lines with a bank, refinanced in February 1996. 2001 8,000 30,000 38,000
Credit agreement with a finance company, collateralized,
without recourse, by minimum rentals receivable of $12,346.
Principal and interest payable monthly at fixed interest rates
resulting in a weighted average interest rate of 8.75% at 1996 to
December 31, 1995. 1999 11,424 9,486 7,971
Notes payable to a bank, collateralized, without recourse, by
minimum rentals receivable of $2,844. Principal and interest
payable monthly at fixed interest rates resulting in a
weighted average interest rate of 9.69% at December 31, 1995. 1996 5,436 1,653 402
Bonds payable, with interest (rates at 5.75% and 6.83% at
December 31, 1995), principal repayable in approximately equal
monthly installments, collateralized by first deeds of trust 1998 to
on buildings with a net book value of $12,900. 1999 4,998 3,695 3,360
--------- --------- -----------
52,358 62,834 63,233
Less current portion 14,711 11,679 10,143
--------- --------- -----------
Total long-term debt $ 37,647 $ 51,155 $ 53,090
--------- --------- -----------
--------- --------- -----------
</TABLE>
In 1995, the Company entered into a revolving credit agreement which enables
the Company to borrow up to 85% of eligible accounts receivable through July 31,
1995, and 75% of eligible accounts receivable through June 1, 1996, to a maximum
of $35 million. The line of credit was not collateralized and bore interest at
the bank's reference rate, plus percentage points (ranging from .25% to 1.25%)
or one of two optional interest rates if elected by the Company. At December 31,
1995, there were outstanding borrowings of $30 million bearing interest at a
rate of 8.75% per annum.
Subsequent to December 31, 1995, the Company replaced its revolving credit
agreement with a new three year revolving unsecured credit line with a bank in
the amount of $20 million. In addition, a subsidiary entered into a new five
year term agreement with two banks in the amount of $45 million. The amount of
F-10
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
5. LONG-TERM DEBT (CONTINUED)
availability is reduced by $5 million per year after the third year. Borrowings
under both agreements bear interest at the Company's choice of LIBOR (plus a
margin ranging from .75% to 1.25%) or the bank's reference rate.
Under the borrowing agreements, the Company and/or its subsidiaries are
required to maintain certain financial ratios and meet certain net worth and
indebtedness tests. In addition, the Company has two outstanding standby letters
of credit totaling $3,244,000 at December 31, 1995.
Maturities of long-term debt at December 31, 1995, after the refinancing as
discussed above, are as follows (in thousands):
<TABLE>
<S> <C>
1996....................................................... $ 11,679
1997....................................................... 7,853
1998....................................................... 7,349
1999....................................................... 5,895
2000....................................................... 30,058
---------
$ 62,834
---------
---------
</TABLE>
Based on the borrowing rates currently available to the Company for bank
loans and bonds with similar terms and average maturities, the carrying value of
long-term debt at December 31, 1995, is considered to approximate fair value.
6. COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and equipment under operating leases
with terms ranging from one to fifteen years. Rental expense was $5,752,000,
$7,317,000 and $8,798,000 in 1993, 1994 and 1995, respectively and $2,019,000
and $2,255,000 for the three months ended March 31, 1995 and 1996, respectively.
Future minimum rental commitments under operating leases are (in thousands):
<TABLE>
<S> <C>
1996....................................................... $ 6,730
1997....................................................... 4,517
1998....................................................... 3,539
1999....................................................... 2,544
2000....................................................... 1,491
Thereafter................................................. 1,555
</TABLE>
The Company has legal proceedings incidental to its normal business
activities. In the opinion of the Company, the outcome of the proceedings will
not have a material adverse effect on the Company's consolidated financial
position, results of operations or cash flows.
The Company has been advised by a major cable customer that a third party
has asserted that patents held by the third party may be infringed by the
customer's use of interactive computer telephony systems, and that, should it
become necessary, the customer would seek indemnification from the Company. The
Company believes that it has substantial defense against that third party's
patent infringement claims and the Company does not believe that efforts by the
third party to enforce the patents against the Company or its clients are likely
to have a material adverse effect on the Company's financial position, results
of operations or cash flows.
F-11
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
7. STOCK OPTION PLANS
The Company has three stock option plans under which shares of the Company's
voting common stock have been reserved for issuance to officers and key
employees.
Under the Incentive Stock Option Plans, options may be granted at prices not
less than the fair market value at the date of grant. Options granted under the
incentive plans become exercisable generally in annual installments over a
period of two to five years from the date of grant. The options expire ten years
from the date of grant.
Under the Non-Qualified Stock Option Plan, options may be granted at prices
and with terms and conditions established by the Company's Board of Directors at
the date of grant. Options vest over periods of up to sixty months and expire
ten years after the date of grant.
Information regarding the Company's stock option plans is summarized below:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
---------- --------------
<S> <C> <C>
Shares under option:
Outstanding at January 1, 1993................................. 1,749,951 $ .20 - $2.80
Granted...................................................... 585,963 2.80 - 3.73
Exercised.................................................... (10,962) 1.39
Canceled..................................................... (29,169) 1.39 - 1.59
---------- --------------
Outstanding at December 31, 1993............................... 2,295,783 .20 - 3.73
Granted...................................................... 305,550 4.35
Exercised.................................................... (161,406) .20 - 2.62
Canceled..................................................... (257,040) .20 - 4.35
---------- --------------
Outstanding at December 31, 1994............................... 2,182,887 .20 - 4.35
Granted...................................................... 551,775 5.05
Exercised.................................................... (708,393) .20 - 4.35
Canceled..................................................... (243,663) .20 - 4.35
---------- --------------
Outstanding at December 31, 1995............................... 1,782,606 .20 - 5.05
Granted (unaudited).......................................... 6,300 7.38
Canceled (unaudited)......................................... (43,770) 2.62 - 5.05
---------- --------------
Outstanding at March 31, 1996 (unaudited)...................... 1,745,136 $ .20 - $7.38
---------- --------------
---------- --------------
Options exercisable
at December 31, 1995........................................... 880,988 $ .20 - $5.05
at March 31, 1996 (unaudited).................................. 902,423 $ .20 - $7.38
</TABLE>
At December 31, 1995, 569,352 shares were available for future grants under
the stock option plans. Compensation expenses under the non-qualified plan was
$252,000, $140,000 and $296,000 in 1993, 1994 and 1995, respectively. See Note
13 for additional option and purchase plans authorized subsequent to year-end.
8. CONSOLIDATION AND RELOCATION EXPENSES
In 1993, the Company decided to consolidate and reorganize the North
American customer support operations to the Sacramento, California area.
Additionally, the decision was made to relocate the office in Leeds, United
Kingdom, to the London area. Consequently, expenses related to severance and
other
F-12
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
8. CONSOLIDATION AND RELOCATION EXPENSES (CONTINUED)
compensation, moving and relocation, and early lease terminations are reflected
in the 1993 statement of operations. Expenses were determined to be less than
had been expected and, in 1994, a reversal of the consolidation and relocation
accrual of $364,000 was recorded.
9. INCOME TAXES
The deferred tax assets and liabilities are comprised of the following at
December 31 (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Deferred tax assets:
Compensation and employee benefits related items................................... $ 3,264 $ 3,527
Differences in revenue recognition for book and tax purposes....................... 453 1,097
Accrual and other non-deductible reserves.......................................... 2,532 2,700
--------- ---------
Total deferred tax assets........................................................ 6,249 7,324
--------- ---------
Deferred tax liabilities:
Tax in excess of book depreciation................................................. 1,517 5,259
Capital leases recorded as operating leases for tax purposes....................... 4,355 2,619
Other.............................................................................. 466 584
--------- ---------
Total deferred tax liabilities................................................... 6,338 8,462
--------- ---------
Net deferred tax liability........................................................... $ 89 $ 1,138
--------- ---------
--------- ---------
</TABLE>
The income tax provision is comprised of the following for the years ended
December 31
(in thousands):
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal.................................................................. $ 3,957 $ 4,644 $ 4,883
State.................................................................... 678 1,033 838
--------- --------- ---------
4,635 5,677 5,721
--------- --------- ---------
Deferred:
Federal.................................................................. (260) 72 924
State.................................................................... (45) (415) 125
--------- --------- ---------
(305) (343) 1,049
--------- --------- ---------
$ 4,330 $ 5,334 $ 6,770
--------- --------- ---------
--------- --------- ---------
</TABLE>
The income tax rate varies from amounts computed by applying the U.S.
statutory rate to income before provision for income taxes. The tax rates for
the years ended December 31, are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income tax computed using U.S. statutory rate.............................. 34.0% 34.1% 34.7%
State income taxes, net of federal benefits................................ 6.1 6.1 6.1
Effect of loss by foreign subsidiary....................................... 7.7 6.6 --
Other...................................................................... .9 (0.4) (1.3)
--- --- ---
Income tax provision..................................................... 48.7% 46.4% 39.5%
--- --- ---
--- --- ---
</TABLE>
F-13
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
10. STOCK SPLIT
On March 31, 1995, the Board of Directors authorized a thirty-for-one stock
split to be distributed to stockholders of record on May 1, 1995, and increased
the authorized voting and non-voting shares from 2,000,000 shares to 6,000,000
shares, respectively. On May 3, 1995, authorized voting shares were increased to
7,500,000. References in the financial statements to number of shares and per
share amounts have been retroactively reflected. See also Note 13.
11. SIGNIFICANT CUSTOMERS AND RELATED PARTY TRANSACTIONS
During the years ended December 31, 1993, 1994 and 1995 and the three months
ended March 31, 1995 and 1996, revenues from a significant customer totaled
$31,753,000, $34,777,000, $39,253,000, $10,238,000 and $9,840,000 or 19%, 18%,
17%, 19% and 16% of total revenues, respectively. Revenues from another
significant customer totaled $24,569,000, $37,151,000, $7,080,000 and $9,723,000
or 13%, 16%, 13% and 16% of total revenues, for the years ended December 31,
1994 and 1995 and the three months ended March 31, 1995 and 1996, respectively.
Advisory services were provided to the Company in the amount of $300,000,
$400,000, and $430,500 in 1993, 1994 and 1995, respectively, and $107,600 for
each of the three months ended March 31, 1995 and 1996, by Westar Capital, a
shareholder.
12. LEASING ACTIVITIES
LEASES
The net investment in leases held by the Company and its leasing subsidiary
reflects the gross lease receivable and the estimated residual value of the
leased equipment less unearned income. The net investment in sales-type leases
consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- --------- MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Total minimum lease payments receivable.................... $ 23,174 $ 16,100 $ 13,289
Estimated unguaranteed residual value of leased property... 146 203 163
--------- --------- -----------
Gross investment in leases................................. 23,320 16,303 13,452
Less unearned income....................................... 2,617 2,115 1,581
--------- --------- -----------
Net investment in leases................................... 20,703 14,188 11,871
Less current portion....................................... 9,705 6,868 5,746
--------- --------- -----------
Non-current portion........................................ $ 10,998 $ 7,320 $ 6,125
--------- --------- -----------
--------- --------- -----------
</TABLE>
At December 31, 1995, equipment which cost $2,582,000 and has a net book
value of $355,000 is leased to others under non-cancellable and month-to-month
leases.
F-14
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
12. LEASING ACTIVITIES (CONTINUED)
Future payments to be received under leases are (in thousands):
<TABLE>
<CAPTION>
SALES-TYPE OPERATING
----------- -----------
<S> <C> <C>
1996................................................................... $ 7,811 $ 293
1997................................................................... 3,891 225
1998................................................................... 2,754 --
1999................................................................... 1,309 --
2000................................................................... 335 --
----------- -----
$ 16,100 $ 518
----------- -----
----------- -----
</TABLE>
The Company performs ongoing credit evaluations of its clients and generally
maintains a perfected security interest on all equipment leased under sales-type
and operating leases as collateral for lease payments receivable. Substantially
all lease contracts have been pledged and the related receipts have been
assigned to various lenders as collateral for nonrecourse borrowings. The
borrowing agreements provide that the debt is to be satisfied solely from
amounts due under the terms of the lease contracts and the value of the leased
equipment. The lenders' collateral interest in both the lease agreement and the
equipment terminates upon repayment of the debt.
SUBSIDIARY
Condensed balance sheets of the Company's wholly owned leasing subsidiary
and condensed statements of operations are (in thousands):
Condensed Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
<S> <C> <C>
Assets:
Cash........................................................................................ $ 594 $ 1,876
Net investment in leases.................................................................... 20,703 14,188
Other assets................................................................................ 1,301 2,192
--------- ---------
Total assets............................................................................ $ 22,598 $ 18,256
--------- ---------
--------- ---------
Liabilities and Shareholder's Equity:
Accrued expenses and liabilities............................................................ $ 413 $ 440
Long-term debt.............................................................................. 16,860 11,139
Shareholder's equity........................................................................ 5,325 6,677
--------- ---------
Total liabilities and shareholder's equity.............................................. $ 22,598 $ 18,256
--------- ---------
--------- ---------
</TABLE>
F-15
<PAGE>
USCS INTERNATIONAL, INC.
(FORMERLY U.S. COMPUTER SERVICES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(THE INFORMATION PRESENTED AS OF MARCH 31, 1996 AND FOR THE
THREE MONTHS ENDED MARCH 31, 1995 AND 1996 IS UNAUDITED)
12. LEASING ACTIVITIES (CONTINUED)
Condensed Statements of Operations
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues............................................................................. $ 6,392 $ 5,108 $ 4,437
Interest expense..................................................................... 1,963 1,633 1,120
Other expenses....................................................................... 1,759 1,135 1,064
--------- --------- ---------
Income before income taxes........................................................... 2,670 2,340 2,253
Provision for income taxes........................................................... 1,068 937 901
--------- --------- ---------
Net income....................................................................... $ 1,602 $ 1,403 $ 1,352
--------- --------- ---------
--------- --------- ---------
</TABLE>
13. SUBSEQUENT EVENTS
On April 18, 1996, the Board of Directors authorized the reincorporation of
the Company into USCS International, Inc., a newly formed Delaware corporation.
This reincorporation was approved by a majority of the Company's stockholders on
May 16, 1996. The Board and a majority of the Company's stockholders also
authorized a 2.1 for 1 stock split of the Company's Common Voting Stock and a 2
for 1 stock split of the Common Non-Voting Stock upon the effective date of an
IPO. The Board also increased the authorized amount of Common Voting Stock and
Common Non-Voting Stock to 40,000,000 and 12,000,000, respectively and
authorized 10,000,000 shares of Preferred Stock, par value $.05. The effect of
these transactions has been retroactively reflected in the financial statements.
Also upon the effective date of an IPO, the Common Non-Voting Stock converts to
Common Voting Stock on a one-for one basis.
On April 12, 1996, the Board adopted the 1996 Incentive Stock Option Plan
(1996 Plan), the 1996 Directors Stock Option Plan (1996 Directors Plan) and the
Employee Stock Purchase Plan (ESPP). A total of 3,290,000 shares have been
authorized for issuance under these plans. The options issued under the 1996
Plan and 1996 Directors' Plan must be issued at fair market value, except for
options granted under the 1996 Plan to employees possessing more than 10% of
voting stock, in which case the grant price may not be less than 110% of the
fair market value. Options under the 1996 Plan generally vest 20% per year and
have a ten year term. The Company granted 993,174 options under the 1996 Plan at
$12.50 per share. Options under the 1996 Directors' Plan vest annually over
three years and have a five year term. Stock purchased under the ESPP may be
purchased on a quarterly basis at the lower of 95% of the fair market value of
the Company's common stock on the first and last business days of each calendar
quarter.
F-16
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
-------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
Use of Proceeds................................ 11
Dividend Policy................................ 11
Capitalization................................. 12
Dilution....................................... 13
Selected Consolidated Financial Data........... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 15
Business....................................... 23
Management..................................... 35
Certain Transactions........................... 44
Principal and Selling Stockholders............. 45
Description of Capital Stock................... 47
Shares Eligible for Future Sale................ 51
Underwriting................................... 53
Legal Matters.................................. 54
Experts........................................ 54
Additional Information......................... 54
Index to Consolidated Financial Statements..... F-1
</TABLE>
-------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
4,800,000 SHARES
[LOGO]
COMMON STOCK
-------------------
PROSPECTUS
-------------------
MERRILL LYNCH & CO.
MONTGOMERY SECURITIES
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
commissions, payable by the Company in connection with the issuance and
distribution of the securities being registered hereunder. All of the amounts
shown are estimates (except for the SEC and NASD registration fees and the
Nasdaq National Market listing fee).
<TABLE>
<CAPTION>
PAYABLE BY
COMPANY
------------
<S> <C>
SEC registration fee............................................................ $ 32,359
NASD fee........................................................................ 9,885
Nasdaq National Market listing fee.............................................. 50,000
Printing and engraving expenses................................................. 250,000
Accounting fees................................................................. 150,000
Legal fees...................................................................... 400,000
Blue Sky fees and expenses...................................................... 10,000
Transfer agent and registrar fees............................................... 10,000
Legal Fees of Selling Stockholders.............................................. 10,000
Director and officer liability insurance premiums............................... 500,000
Stockholder solicitation costs.................................................. 50,000
Fee of Custodian for Selling Stockholders....................................... 5,000
Miscellaneous expenses.......................................................... 22,756
------------
Total....................................................................... $ 1,500,000
------------
------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has provisions in its Certificate of Incorporation which
eliminate the liability of the Company's directors to the Company and its
stockholders for monetary damages to the fullest extent permissible under
Delaware law and provisions which authorize the Company to indemnify its
directors and agents by bylaws, agreements or otherwise, to the fullest extent
permitted by law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission. The Company's
Bylaws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by Delaware law, including circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Company has entered into agreements with its directors and executive officers
that will require the Registrant, among other things, to indemnify them against
certain liabilities that may arise by reason of their status or service as
directors or executive officers to the fullest extent not prohibited by law.
Reference is made to the form of Purchase Agreement filed as Exhibit 1.1 to
this Registration Statement for certain provisions regarding the indemnification
of officers and directors of the Company by the several Underwriters.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Between May 20, 1993 and May 20, 1996, the Registrant granted options to
purchase 2,151,849 shares of Common Stock to employees pursuant to its 1988
Incentive Stock Option Plan, 1990 Nonstatutory Stock Option Plan and 1993
Incentive Stock Option Plan and issued an aggregate of 1,301,950 shares subject
to options under such plans at exercise prices ranging from $0.20 to $5.05 per
share. None of these grants or issuances were registered under the Securities
Act of 1933 (the "Securities Act"). Each of the options issued and the shares
issued upon exercise of such options was issued under the exemption afforded
such grants and exercises pursuant to Rule 701 under the Securities Act.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO.
- -------------
<C> <S>
1.1 Form of Purchase Agreement.*
2.1 Agreement and Plan of Merger dated April 18, 1996 among USCS International, Inc., a Delaware
corporation, and U.S. Computer Services, a California corporation.*
2.2 Reference exhibits 10.37, 10.38, 10.39 & 10.40.
3.1 First Amended and Restated Certificate of Incorporation of USCS International, Inc.*
3.2 Bylaws of the Company.*
3.3 Certificate of Designation of Rights, Preferences and Privileges of Series A Preferred Stock.
4.1 Reference Exhibit 3.1.
4.2 Shareholder Rights Agreement dated December 30, 1988 among U.S. Computer Services, Westar
Capital and Enterprise Partners.**
4.3 Stockholder Rights Plan.
5.1 Opinion of Graham & James LLP, Counsel to the Registrant, as to legality of securities being
registered.*
10.1 1988 Incentive Stock Option Plan.*
10.2 The Company's Employee Stock Ownership Plan ("ESOP") as amended and restated as of January 1,
1991, and as amended effective January 1, 1991, January 1, 1992, January 1, 1993, February 19,
1993, January 1, 1994, December 31, 1994, January 1, 1995, March 31, 1995, January 1, 1996 and
March 21, 1996.*
10.3 1993 Incentive Stock Option Plan.*
10.4 1996 Stock Option Plan.*
10.5 1996 Directors' Stock Option Plan.*
10.6 Employee Stock Purchase Plan.*
10.7 Agreement pursuant to Rule 601(b)(4)(iii)(A) to file Trust Indenture dated as of December 1,
1987 between the Company and Sun Bank, as Trustee.*
10.8 Agreement pursuant to Rule 601(b)(4)(iii)(A) to file Reimbursement Agreement dated as of
December 1, 1987 between the Company and Sanwa Bank of California.*
10.9 Agreement pursuant to Rule 601(b)(4)(iii)(A) to file Trust Indenture dated as of June 30, 1989
between the Company and Sun Bank, as Trustee.*
10.10 Agreement pursuant to Rule 601(b)(4)(iii)(A) to file Reimbursement Agreement dated as of June
30, 1989 between the Company and Sanwa Bank of California.*
10.11 Note Agreement dated as of February 19, 1992 (re: $22,500,000 7.91% Senior Notes due February
19, 1999) between the Company and Great-West Life and Annuity Insurance Company and Phoenix
Mutual Life Insurance Company and as amended as of February 17, 1993, April 30, 1993, August 1,
1994, March 31, 1995 and February 15, 1996.*
10.12 Credit Agreement dated as of February 15, 1996 among IBS, Nationsbank of Texas and the Lender
Parties named therein.*
10.13 Credit Agreement dated as of February 15, 1996 among The Company, Nationsbank of Texas and the
Lender Parties named therein.*
10.14 Form of Standard On/Line Operating and License Agreement.*
10.15 Form of Standard Equipment Maintenance Agreement.*
10.16 Form of Master Lease, Lease Request and Certificate of Acceptance.*
10.17 Form of Standard Agreement for the Sale and Installation of Equipment.*
10.18 Form of Standard Statement Production Services Agreement.*
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -------------
<C> <S>
10.19 Strategic Business Agreement dated January 19, 1992 between the Company and International
Business Machines Corporation and Addendum Number One to Strategic Business Agreement dated
June 4, 1993 between the Company and International Business Machines Corporation.**+
10.20 Business Alliance Program Agreement between Oracle Corporation and CableData.**+
10.21 Development Agreement dated December 5, 1994 between the Company and Tandem Computers
Incorporated.**+
10.22 Porting Agreement dated January 25, 1996 between CableData and Hewlett-Packard Company.**+
10.23 [Intentionally omitted]
10.24 On/Line Operating and License Agreement dated June 7, 1996 between CableData, Inc. and TCI Cable
Management Corporation.+
10.25 Master Lease Agreement No. DO4347 dated as of April 16, 1993 between the Company and First
Equipment Company.*
10.26 On/Line Operating and Licensing Agreement dated December 17, 1993 between the Company dba
CableData and Continental Cablevision.**+
10.27 Statement Production Services Agreement dated August 20, 1993 between the Company dba
International Billing Services and Ameritech Corporation.***+
10.28 Software Development Agreement dated December 27, 1995 between CableData and BellSouth
Interactive Media Services.**+
10.29 CableData's Intelecable-TM- Operating and License Agreement dated December 27, 1995 between
CableData. and BellSouth Interactive Media Services, Inc.**+
10.30 Software License and Service Agreement and Network User License Addendum dated May 18, 1994
between the Company and Oracle Corporation.**+
10.31 Statement Production Services Agreement dated October 9, 1990 between the Company and CBIS and
First Addendum to Statement Production Services Agreement dated July 17, 1991 between the
Company and CBIS.**+
10.32 Tandem Alliance Agreement dated January 1, 1995, between Tandem and CableData.**+
10.33 Contract for Computer Software (Postalsoft Software License Agreement) dated February 13, 1996
between IBS and Postalsoft, Inc.**+
10.34 Employment Agreement dated August 10, 1992 between the Company and James C. Castle.*
10.35 Employment Agreement dated June 29, 1995 with Michael McGrail.*
10.36 Form of Severance Agreement.*
10.37 Asset Acquisition Agreement dated March 31, 1995 by and between the Company and CableData.*
10.38 Asset Acquisition Agreement dated March 31, 1995 by and between the Company and IBS.*
10.39 Asset Acquisition Agreement dated March 15, 1995 by and between U.S. Computer Systems Leasing
and CableLease, Inc.*
10.40 Asset Acquisition Agreement dated March 15, 1995 by and between U.S. Computer Systems Leasing
and RPA, Inc.*
10.41 Building Lease for property located at 2969 Prospect Park Drive between the Company and F.I.A.
Profile Fund I dated January 19, 1994.*
10.42 Alternate Mailing System Agreement dated March 28, 1996 between the United States Postal Service
and IBS.**+
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO.
- -------------
<C> <S>
10.43 Alternate Mailing Systems Agreement dated April 18, 1996 between the United Postal Service and
International Billing Services, Inc.*
10.44 Form of Directors' Indemnification Agreement.*
10.45 Form of Custody and Escrow Agreement for Selling Stockholders.*
10.46 Form of Selling Stockholders' Irrevocable Power of Attorney.*
10.47 Amendment No. 11 to the ESOP.
21.1 List of Subsidiaries.*
23.1 Consent of Graham & James LLP (included in Exhibit 5.1).
23.2 Consent of Price Waterhouse LLP.
24.1 Powers of Attorney.*
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* Indicates Exhibit previously filed.
** Indicates Exhibit was filed in paper format pursuant to a temporary hardship
exemption under Rule 201 of Regulation S-T.
*** Indicates Exhibit was filed in paper format pursuant to a continuing
hardship exemption under Rule 202 of Regulation S-T.
+ Portions omitted pursuant to a request for confidential treatment pursuant
to Rule 406 of the Securities Act.
(b) Financial Statement Schedules
None.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide the underwriters at
the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Rancho Cordova, State of
California, on the 17th day of June, 1996.
USCS INTERNATIONAL, INC.
By /s/ DOUGLAS L. SHURTLEFF
------------------------------------
Douglas L. Shurtleff,
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C>
Dated: June 17, 1996 *
-------------------------------------------
James C. Castle
Chief Executive Officer and Chairman of the
Board of Directors (Principal Executive
Officer)
Dated: June 17, 1996 *
-------------------------------------------
George L. Argyros, Sr.
Director
Dated: June 17, 1996 *
-------------------------------------------
George M. Crandell, Jr.
Director
Dated: June 17, 1996 *
-------------------------------------------
Charles D. Martin
Director
*By /s/ DOUGLAS L. SHURTLEFF
- -------------------------------------------
Douglas L. Shurtleff
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
Dated: June 17, 1996 *
-------------------------------------------
Michael F. McGrail
Director
Dated: June 17, 1996 *
-------------------------------------------
Larry W. Wangberg
Director
Dated: June 17, 1996 /s/ DOUGLAS L. SHURTLEFF
-------------------------------------------
Douglas L. Shurtleff
Senior Vice-President of Finance and Chief
Financial Officer (Principal Financial
Officer)
Dated: June 17, 1996 /s/ ARTHUR O. HAWKINS
-------------------------------------------
Arthur O. Hawkins
Vice-President and Treasurer (Principal
Accounting Officer)
*By /s/ DOUGLAS L. SHURTLEFF
- -------------------------------------------
Douglas L. Shurtleff
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.3 Certificate of Designation of Rights, Preferences and Privileges of Series A Preferred Stock.
4.2 Shareholder Rights Agreement dated December 30, 1988 among U.S. Computer Services, Westar Capital and
Enterprise Partners.**
4.3 Stockholder Rights Plan.
10.19 Strategic Business Agreement dated January 19, 1992 between the Company and International Business
Machines Corporation and Addendum Number One to Strategic Business Agreement dated June 4, 1993 between
the Company and International Business Machines Corporation.**+
10.20 Business Alliance Program Agreement between Oracle Corporation and CableData.**+
10.21 Development Agreement dated December 5, 1994 between the Company and Tandem Computers Incorporated.**+
10.22 Porting Agreement dated January 25, 1996 between CableData and Hewlett-Packard Company.**+
10.24 On/Line Operating and License Agreement dated June 7, 1996 between CableData, Inc. and TCI Cable
Management Corporation.+
10.26 On/Line Operating and Licensing Agreement dated December 17, 1993 between the Company dba CableData and
Continental Cablevision.**+
10.27 Statement Production Services Agreement dated August 20, 1993 between the Company dba International
Billing Services and Ameritech Corporation.***+
10.28 Software Development Agreement dated December 27, 1995 between CableData and BellSouth Interactive Media
Services.**+
10.29 CableData's Intelecable-TM- Operating and License Agreement dated December 27, 1995 between CableData.
and BellSouth Interactive Media Services, Inc.**+
10.30 Software License and Service Agreement and Network User License Addendum dated May 18, 1994 between the
Company and Oracle Corporation.**+
10.31 Statement Production Services Agreement dated October 9, 1990 between the Company and CBIS and First
Addendum to Statement Production Services Agreement dated July 17, 1991 between the Company and
CBIS.**+
10.33 Contract for Computer Software (Postalsoft Software License Agreement) dated February 13, 1996 between
IBS and Postalsoft, Inc.**+
10.42 Alternate Mailing System Agreement dated March 28, 1996 between the United States Postal Service and
IBS.**+
10.47 Amendment No. 11 to the ESOP.
</TABLE>
<PAGE>
CERTIFICATE OF DESIGNATION
OF
CERTIFICATE OF INCORPORATION
OF
USCS INTERNATIONAL, INC.
SERIES A PREFERRED STOCK
(Pursuant to Section 151 of the
Delaware General Corporation Law)
1. USCS International, Inc., a corporation organized and existing under
and by virtue of The General and Business Corporation Law of Delaware, DOES
HEREBY CERTIFY:
2. That at a meeting of the Board of Directors of USCS International,
Inc., the following resolution was duly adopted creating fifty-two thousand
(52,000) shares of Preferred Stock, designated as Series A Preferred Stock.
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series of
Series A Preferred Stock, with a par value of $.05 per share, of the Corporation
and hereby states the designation and number of shares, and fixes the relative
rights, preferences and limitations thereof (in addition to the provisions set
forth in the Certificate of Incorporation which are applicable to the Preferred
Stock of all classes and series) as follows:
SERIES A PREFERRED STOCK
SECTION 1. DESIGNATION, PAR VALUE AND AMOUNT. The shares of such series
shall be designated as "Series A Preferred Stock" (hereinafter referred to as
"Series A Preferred Stock"), the shares of such series shall be with par value
of $.05 per share, and the number of shares constituting such series shall be
fifty-two thousand (52,000); provided, however, that, if more than a total of
shares of Series A Preferred Stock shall be issuable upon the exercise of Rights
(the "Rights") issued pursuant to the Stockholder Rights Plan, dated as of June
14, 1996 between the Corporation and [CHEMICAL MELLON], as Rights Agent (as
amended from time to time) (the "Rights Plan"), the Board of Directors of the
Corporation, pursuant to Section 151 of the Delaware General Corporation Law,
shall direct by resolution or resolutions that a certificate
-1-
<PAGE>
be properly executed, acknowledged and filed providing for the total number
of shares of Series A Preferred Stock authorized to be issued to be increased
(to the extent that the Certificate of Incorporation then permits) to the
largest number of whole shares (rounded up to the nearest whole number)
issuable upon exercise of the Rights.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of assets legally available for the purpose,
quarterly dividends payable in cash on the last day of March, June, September
and December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $10.00 or (b) subject to the provision for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock, par value $0.05 per share, of the Corporation
(the "Common Stock") or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time after the effective date of the firm commitment underwritten
initial public offering of the Corporation's Common Stock on Form S-1 under the
Securities Act of 1933, as amended (the "Rights Declaration Date") (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount to which holders
of shares of Series A Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. Such adjustment shall be made
successively whenever such a dividend or change in the Common Stock is
consummated.
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10.00 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the
-2-
<PAGE>
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 30 days prior to the date fixed for
the payment thereof.
SECTION 3. VOTING RIGHTS.
The holders of shares of Series A Preferred Stock shall have the following
voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
1/1,000th share of Series A Preferred Stock shall entitle the holder thereof to
one vote on all matters voted on at a meeting of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, or (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. Such adjustment shall be made
successively whenever such a dividend or change in the Common Stock is
consummated.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as set forth herein, holders of Series A Preferred Stock shall
have no special voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares
-3-
<PAGE>
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except dividends
paid ratably on the Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
(except as provided in (iv) below) shares of any stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock;
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, in any other Certificate of Designation or
Certificate of Amendment creating a series of Preferred Stock or as otherwise
required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Subject to the prior and superior rights of holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of Series
A Preferred Stock with respect to rights upon liquidation, dissolution or
winding up (voluntary or otherwise), no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received an amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock, plus
-4-
<PAGE>
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, holders of Series A Preferred Stock and holders of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of 1,000 (the "Adjustment
Number") to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of Series A Preferred Stock and the
holders of such parity shares in proportion to their respective liquidation
preferences.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declared any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then, in each such case, the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
SECTION 8. NO REDEMPTION. The shares of Series A Preferred Stock shall not
be redeemable.
SECTION 9. RANKING. The Series A Preferred Stock shall rank junior to all
other series of the Corporation's Preferred Stock as to the payment of dividends
and the distribution of assets, unless the terms of any such series shall
provide otherwise.
SECTION 10. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not
-5-
<PAGE>
be further amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as
to affect them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Preferred Stock,
voting separately as a class.
SECTION 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued in
fractions of a share, which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
-6-
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its Chairman of the Board and attested by its Secretary
this ____ day of June __, 1996.
Attest:
/s/ Mary G. Jordan /s/ James C. Castle
- ------------------------- -------------------------
Mary G. Jordan, Secretary James C. Castle, Chairman
of the Board and Chief
Executive Officer
-7-
<PAGE>
ATTACHMENT I
Stockholder Rights Plan
by and between
USCS INTERNATIONAL, INC., a Delaware corporation
and
[CHASE MELLON Shareholder Services, LLC]
Dated as of June 14, 1996
<PAGE>
TABLE OF CONTENTS
Section 1. Certain Definitions.............................................1
Section 2. Appointment of Rights Agent.....................................5
Section 3. Issue of Right Certificates.....................................5
Section 4. Form of Right Certificate.......................................7
Section 5. Countersignature and Registration...............................7
Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificate.....................................................8
Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights..........................................................9
Section 8. Cancellation and Destruction of Right
Certificates...................................................12
Section 9. Reservation and Availability of Preferred Shares...............12
Section 10. Preferred Shares Record Date...................................13
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights...............................................13
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....21
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power..........................................................22
Section 14. Fractional Rights and Fractional Shares........................24
Section 15. Rights of Action...............................................26
Section 16. Agreement of Right Holders.....................................26
Section 17. Right Certificate Holder Not Deemed a Stockholder..............27
Section 18. Concerning the Rights Agent....................................28
-i-
<PAGE>
Section 19. Merger or Consolidation or Change of Name of Rights Agent......28
Section 20. Duties of Rights Agent.........................................29
Section 21. Change of Rights Agent.........................................31
Section 22. Issuance of New Right Certificates.............................32
Section 23. Redemption and Termination.....................................33
Section 24. Exchange.......................................................35
Section 25. Notice of Certain Events.......................................36
Section 26. Notices........................................................37
Section 27. Supplements and Amendments.....................................38
Section 28. Determination and Actions by the Board of Directors, etc.......39
Section 29. Successors.....................................................39
Section 30. Benefits of this Agreement.....................................39
Section 31. Severability...................................................39
Section 32. Governing Law..................................................40
Section 33. Counterparts...................................................40
Section 34. Descriptive Headings...........................................40
Signatures.....................................................40
-ii-
<PAGE>
EXHIBITS
EXHIBIT A - Form of Certificate of Designation designating the relative
rights, preferences and privileges of the Series A Preferred
Stock of USCS International, Inc.
EXHIBIT B - Form of Right Certificate
EXHIBIT C - Summary of Rights
-iii-
<PAGE>
STOCKHOLDER RIGHTS PLAN, dated as of June 14, 1996 (the "Plan"), between
USCS International, Inc., a Delaware corporation (the "Corporation"), and
[CHASE MELLON Shareholder Services, LLC] (the "Rights Agent").
WITNESSETH
WHEREAS, the Board of Directors of the Corporation has authorized and
declared a dividend of one preferred share purchase right (a "Right") for each
Common Share (as hereinafter defined) of the Corporation outstanding at the
close of business on the effective date of the firm committment underwritten
initial public offering of the Corporation's Common Stock on Form S-1 under the
Securities Act of 1933, as amended (the "Record Date"), each Right representing
the right to purchase 1/1,000th of a Preferred Share (as hereinafter defined),
upon the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date or the Final Expiration Date (as such
terms are hereinafter defined); provided, however, that Rights may be issued
with respect to Common Shares that shall become outstanding after the
Distribution Date and prior to the earlier of the Redemption Date and the Final
Expiration Date in accordance with the provisions of Section 22 of this
Agreement.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the then outstanding Common Shares (other than as a result of a
Permitted Offer (as hereinafter defined)) or was such a Beneficial Owner at any
time after the date hereof, whether or not such person continues to be the
Beneficial Owner of 15% or more of the then outstanding Common Shares.
Notwithstanding the foregoing, (A) the term "Acquiring Person" shall not include
(i) the Corporation, (ii) any Subsidiary of the Corporation, (iii) any employee
benefit plan of the Corporation or of any Subsidiary of the Corporation, (iv)
any Person or entity organized, appointed or established by the Corporation for
or pursuant to the terms of any such plan, (v) any Person, who or which together
with all Affiliates and Associates of such Person becomes the Beneficial Owner
of 15% or more of the then outstanding Common Shares as a result of the
acquisition of Common Shares directly from the Corporation or (vi) any
Grandfathered Stockholder, and (B) no Person shall be deemed to be an "Acquiring
Person" either (X) as a result of the acquisition of Common Shares by the
Corporation which, by reducing the number of Common Shares outstanding,
increases the proportional number of shares beneficially owned by such Person
together with all Affiliates
-1-
<PAGE>
and Associates of such Person; except that if (i) a Person would become an
Acquiring Person (but for the operation of this subclause X) as a result of the
acquisition of Common Shares by the Corporation, and (ii) after such share
acquisition by the Corporation, such Person, or an Affiliate or Associate of
such Person, becomes the Beneficial Owner of any additional Common Shares, then
such Person shall be deemed an Acquiring Person, or (Y) if (i) within eight (8)
days after such Person would otherwise have become an Acquiring Person (but for
the operation of this subclause (Y), such Person notifies the Board of Directors
that such Person did so inadvertently and (ii) within two (2) days after such
notification, such Person is the Beneficial Owner of less than 15% of the
outstanding Common Shares.
(b) "Act" shall mean the Securities Act of 1933, as amended and as in
effect on the date of this Agreement.
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the date of
this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:
(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;
(ii) which such Person or any of such Person's Affiliates or Associates has
(A) the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
rights (other than the Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or exchange;
or (B) the right to vote pursuant to any agreement, arrangement or
understanding; provided, however, that a Person shall not be deemed the
Beneficial Owner of, or to beneficially own, any security if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act and (2) is not also
then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by any other
Person (or any Affiliate or Associate thereof) with which such Person (or any of
such Person's Affiliates or Associates) has any agreement, arrangement or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities)
relating to the acquisition, holding, voting (except to the extent
-2-
<PAGE>
contemplated by the proviso to Section 1(d)(ii)(B)) or disposing of any
securities of the Corporation.
Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Corporation, shall mean the number of
such securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.
(e) "Business Day" shall mean any day other than a Saturday, Sunday or
U.S. federal holiday.
(f) "Close of business" on any given date shall mean 5:00 P.M., New York
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., New
York time, on the next succeeding Business Day.
(g) "Common Shares" when used with reference to the Corporation shall mean
the shares of Common Stock, par value $0.05 per share, of the Corporation or, in
the event of a subdivision, combination or consolidation with respect to such
shares of Common Stock, the shares of Common Stock resulting from such
subdivision, combination or consolidation. "Common Shares" when used with
reference to any Person other than the Corporation shall mean the capital stock
(or equity interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(h) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(i) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(j) "Grandfathered Stockholder" shall mean at any time Westar Capital
which is at the time in question the Beneficial Owner solely of 8,718,276 Common
Shares beneficially owned by such person on the date of this Agreement; provided
that Westar Capital shall not be a Grandfathered Stockholder if Westar Capital
makes an acquisition of Common Shares that would increase its ownership to more
than 8,718,276 shares of Common Stock.
(k) "Permitted Offer" shall mean a tender or exchange offer which is for
all outstanding Common Shares at a price and on terms determined, prior to the
purchase of shares under such tender or exchange offer, by at least a majority
of the members of the Board of Directors who are not officers of the
Corporation and who are not Acquiring Persons or Affiliates, Associates,
nominees or representatives of an Acquiring Person, to be adequate (taking into
account all factors that such Directors deem relevant including, without
limitation, prices that could reasonably be achieved if the Corporation or its
assets were sold on an orderly basis designed to realize maximum value) and
otherwise in the best interests of
-3-
<PAGE>
the Corporation and its stockholders (other than the Person or any Affiliate or
Associate thereof on whose basis the offer is being made) taking into account
all factors that such directors may deem relevant.
(l) "Person" shall mean any individual, firm, partnership, corporation,
trust, association, joint venture or other entity, and shall include any
successor (by merger or otherwise) of such entity.
(m) "Preferred Shares" shall mean shares of Series A Preferred Stock, with
a par value of $.05 per share of the Corporation having the relative rights,
preferences and limitations set forth in the Form of Certificate of Designation
attached to this Agreement as Exhibit A.
(n) "Redemption Date" shall have the meaning set forth in Section 7
hereof.
(o) "Section 11 (a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.
(p) "Section 13 Event" shall mean any event described in clause (x), (y)
or (z) of Section 13(a) hereof.
(q) "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring Person has become such; provided, that, if
such Person is determined not to have become an Acquiring Person pursuant to
Section 1(a)(Y) hereof, then no Shares Acquisition Date shall be deemed to have
occurred.
(r) "Subsidiary" of any Person shall mean any corporation or other Person
of which a majority of the voting power of the voting equity securities or
equity interest is owned, directly or indirectly, by such Person.
(s) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.
Section 2. APPOINTMENT OF RIGHTS AGENT. The Corporation hereby appoints
the Rights Agent to act as agent for the Corporation and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of Common Shares) in accordance with the
terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint such co-Rights
Agents as it may deem necessary or desirable.
Section 3. ISSUANCE OF RIGHT CERTIFICATES. (a) Until the earlier of (i) the
Shares Acquisition Date or (ii) the close of business on the tenth day (or such
later date as may be
-4-
<PAGE>
determined by action of the Corporation's Board of Directors) after the date of
the commencement by any Person (other than the Corporation, any Subsidiary of
the Corporation, any employee benefit plan of the Corporation or of any
Subsidiary of the Corporation or any Person or entity organized, appointed or
established by the Corporation for or pursuant to the terms of any such plan)
of, or of the first public announcement of the intention of any Person (other
than the Corporation, any Subsidiary of the Corporation, any employee benefit
plan of the Corporation or of any Subsidiary of the Corporation or any Person or
entity organized, appointed or established by the Corporation for or pursuant to
the terms of any such plan) to commence (which intention to commence remains in
effect for five Business Days after such announcement), a tender or exchange
offer the consummation of which would result in any Person becoming an Acquiring
Person (including, in the case of both (i) and (ii), any such date which is
after the date of this Agreement and prior to the issuance of the Rights), the
earlier of such dates being herein referred to as the "Distribution Date," (x)
the Rights will be evidenced (subject to the provisions of Section 3(b) hereof)
by the certificates for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right Certificates) and
not by separate Right Certificates, and (y) the right to receive Right
Certificates will be transferable only in connection with the transfer of the
underlying Common Shares (including a transfer to the Corporation); provided,
however, that if a tender offer is terminated prior to the occurrence of a
Distribution Date, then no Distribution Date shall occur as a result of such
tender offer. As soon as practicable after the Distribution Date, the
Corporation will prepare and execute, the Rights Agent will countersign, and the
Corporation will send or cause to be sent by first-class, postage-prepaid mail,
to each record holder of Common Shares as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Corporation, a Right Certificate, substantially in the form of Exhibit B hereto
(a "Right Certificate"), evidencing one Right for each Common Share so held. As
of and after the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.
(b) As promptly as practicable following the Record Date, the Corporation
will send a copy of a Summary of Rights in substantially the form of Exhibit C
hereto (the "Summary of Rights"), by first-class, postage-prepaid mail, to each
record holder of Common Shares as of the close of business on the Record Date,
at the address of such holder shown on the records of the Corporation. With
respect to certificates for Common Shares outstanding as of the Record Date,
until the Distribution Date, the Rights will be evidenced by such certificates
registered in the names of the holders thereof together with a copy of the
Summary of Rights attached thereto. Until the Distribution Date (or the earlier
of the Redemption Date or the Final Expiration Date), the surrender for transfer
of any certificate for Common Shares outstanding on the Record Date, with or
without a copy of the Summary of Rights attached thereto, shall also constitute
the transfer of the Rights associated with such Common Shares.
(c) Certificates for Common Shares which become outstanding (including,
without limitation, reacquired Common Shares referred to in the last sentence of
this paragraph (c)) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date
-5-
<PAGE>
or the Final Expiration Date, shall be deemed also to be certificates for
Rights, and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain
rights as set forth in a Stockholder Rights Plan between USCS
International, Inc. and [CHEMICAL MELLON], dated as of June 14, 1996 (the
"Rights Plan"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices
of USCS International, Inc. Under certain circumstances, as set forth in
the Rights Plan, such Rights will be evidenced by separate certificates and
will no longer be evidenced by this certificate. USCS International, Inc.
will mail to the holder of this certificate a copy of the Rights Plan
without charge after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Plan, Rights issued to, or held by,
any Person who is, was or becomes an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Plan) and certain related
persons, whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the Common Shares represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.
In the event that the Corporation purchases or acquires any Common Shares after
the Record Date but prior to the Distribution Date, any Rights associated with
such Common Shares shall be deemed cancelled and retired so that the Corporation
shall not be entitled to exercise any Rights associated with the Common Shares
which are no longer outstanding.
Section 4. FORM OF RIGHT CERTIFICATE. (a) The Right Certificates (and the
forms of election to purchase and of assignment to be printed on the reverse
thereof) shall be substantially the form set forth in Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Corporation may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates shall
entitle the holders thereof to purchase such number of 1/1,000th of a Preferred
Share as shall be set forth therein at the price per 1/1,000th of a Preferred
Share set forth therein (the "Purchase Price"), but the amount and type of
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.
(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to Section 7(e)
of this Agreement and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange,
-6-
<PAGE>
replacement or adjustment of any other Right Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Right Certificate are or were beneficially
owned by a Person who was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms are defined in the Rights Plan).
Accordingly, this Right Certificate and the Rights represented hereby are null
and void.
Provisions of Section 7(e) of this Rights Plan shall be operative whether
or not the foregoing legend is contained on any such Right Certificate.
Section 5. COUNTERSIGNATURE AND REGISTRATION. The Right Certificates shall
be executed on behalf of the Corporation by its Chairman of the Board, its Chief
Executive Officer, its President, any of its Vice Presidents, or its Treasurer,
either manually or by facsimile signature, shall have affixed thereto the
Corporation's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Corporation, either manually or by
facsimile signature. The Right Certificates shall be countersigned by the
Rights Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Corporation who shall have signed any of the Right
Certificates shall cease to be such officer of the Corporation before
countersignature by the Rights Agent and issuance and delivery by the
Corporation, such Right Certificates may nevertheless be countersigned by the
Rights Agent and issued and delivered by the Corporation with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Corporation; and any Right Certificate may be signed on
behalf of the Corporation by any person who, at the actual date of the execution
of such Right Certificate, shall be a proper officer of the Corporation to sign
such Right Certificate, although at the date of the execution of this Rights
Plan any such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office or offices designated as the appropriate place for
surrender of such Right Certificate or transfer, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the
certificate number and the date of each of the Right Certificates.
Section 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHT
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTIFICATE. Subject
to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any
time after the close of business on the Distribution Date, and at or prior to
the close of business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of
1/1,000th of a Preferred Share (or, following a Triggering Event, other
securities, as the case may be) as the Right Certificate or Right Certificates
surrendered then entitled such holder (or former
-7-
<PAGE>
holder in the case of a transfer) to purchase. Any registered holder desiring
to transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the principal office or offices
of the Rights Agent designated for such purpose. Neither the Rights Agent nor
the Corporation shall be obligated to take any action whatsoever with respect to
the transfer of any such surrendered Right Certificate until the registered
holder shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Right Certificate and shall have provided
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Corporation shall
reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b),
Section 7(e) and Section 14 hereof, countersign and deliver to the Person
entitled thereto a Right Certificate or Right Certificates, as the case may be,
as so requested, The Corporation may require payment of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up, combination or exchange of Right Certificates.
Upon receipt by the Corporation and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Corporation's request,
reimbursement to the Corporation and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Corporation will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price for the total
number of 1/1,000th of a Preferred Share (or other securities, as the case may
be) as to which such surrendered Rights are exercised, at or prior to the
earliest of (i) the close of business on June 14, 2006 (the "Final Expiration
Date"), or (ii) the time at which the Rights are redeemed as provided in Section
23 hereof (the "Redemption Date").
(b) The Purchase Price for each 1/1,000th of a Preferred Share pursuant to
the exercise of a Right shall initially be $100.00, shall be subject to
adjustment from time to time as provided in the next sentence and in Sections 11
and 13(a) hereof and shall be payable in accordance with paragraph (c) below.
Anything in this Agreement to the contrary notwithstanding, in the event that at
any time after the date of this Agreement and prior to the Distribution Date,
the Corporation shall (i) declare or pay any dividend on the Common
-8-
<PAGE>
Shares payable in Common Shares or (ii) effect a subdivision, combination or
consolidation of the Common Shares (by reclassification or otherwise than by
payment of dividends in Common Shares) into a greater or lesser number of Common
Shares, then in any such case, each Common Share outstanding following such
subdivision, combination or consolidation shall continue to have a Right
associated therewith and the Purchase Price following any such event shall be
proportionately adjusted to equal the result obtained by multiplying the
Purchase Price immediately prior to such event by a fraction the numerator of
which shall be the total number of Common Shares outstanding immediately prior
to the occurrence of the event and the denominator of which shall be the total
number of Common Shares outstanding immediately following the occurrence of such
event. The adjustment provided for in the preceding sentence shall be made
successively whenever such a dividend is declared or paid or such a subdivision,
combination or consolidation is effected.
(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the Preferred Shares (or other
securities, as the case may be) to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 6 hereof by certified check, cashier's
check or money order payable to the order of the Corporation, the Rights Agent
shall thereupon promptly (i) (A) requisition from any transfer agent of the
Preferred Shares certificates for the number of Preferred Shares to be purchased
and the Corporation hereby irrevocably authorizes its transfer agent to comply
with all such requests, or (B) if the Corporation, in its sole discretion, shall
have elected to deposit the Preferred Shares issuable upon exercise of the
Rights hereunder into a depositary, requisition from the depositary agent
depositary receipts representing such number of 1/1,000th of a Preferred Share
as are to be purchased (in which case certificates for the Preferred Shares
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Corporation will direct the depositary agent to comply
with such requests, (i) when appropriate, requisition from the Corporation the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder, and (iv) when appropriate, after receipt thereof,
deliver such cash to or upon the order of the registered holder of such Right
Certificate. In the event that the Corporation is obligated to issue other
securities (including Common Shares) of the Corporation pursuant to Section
11(a) hereof, the Corporation will make all arrangements necessary so that such
other securities are available for distribution by the Rights Agent, if and when
appropriate.
In addition, in the case of an exercise of the Rights by a holder pursuant
to Section 11(a)(ii), the Rights Agent shall return such Right Certificate to
the registered holder thereof after imprinting, stamping or otherwise indicating
thereon that the rights represented by such Right Certificate no longer include
the rights provided by Section 11(a)(ii) of the Rights Plan and if less than all
the Rights represented by such Right Certificate were so exercised, the Rights
Agent shall indicate on the Right Certificate the number of Rights represented
thereby
-9-
<PAGE>
which continue to include the rights provided by Section 11(a)(ii).
(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof, or the
Rights Agent shall place an appropriate notation on the Right Certificate with
respect to those Rights exercised.
(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any Affiliate or
Associate thereof) who becomes a transferee after the Acquiring Person becomes
such, or (iii) a transferee of an Acquiring Person (or of any Affiliate or
Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Corporation has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The
Corporation shall use all reasonable efforts to insure that the provisions of
this Section 7(e) and Section 4(b) hereof are complied with, but shall have no
liability to any holder of Right Certificates or other Person as a result of its
failure to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Corporation shall be obligated to undertake any action
with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial owner) or Affiliates or Associates
thereof as the Corporation shall reasonably request.
Section 8. CANCELLATION AND DESTRUCTION OF RIGHT CERTIFICATES. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Corporation or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Rights Plan. The Corporation shall deliver to
the Rights
-10-
<PAGE>
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Corporation
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Right Certificates to the Corporation, or shall, at the written
request of the Corporation, destroy such cancelled Right Certificates, and in
such case shall deliver a certificate of destruction thereof to the Corporation.
Section 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES. The
Corporation covenants and agrees that at all times prior to the occurrence of a
Section 11(a)(ii) Event it will cause to be reserved and kept available out of
its authorized and unissued Preferred Shares, or any authorized and issued
Preferred Shares held in its treasury, the number of Preferred Shares that will
be sufficient to permit the exercise in full of all outstanding Rights and,
after the occurrence of a Section 11(a)(ii) Event, shall, to the extent
reasonably practicable, so reserve and keep available a sufficient number of
Common Shares (and/or other securities) which may be required to permit the
exercise in full of the Rights pursuant to this Agreement.
So long as the Preferred Shares (and, after the occurrence of a Section
11(a)(ii) Event, Common Shares or any other securities) issuable upon the
exercise of the Rights may be listed on any national securities exchange, the
Corporation shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.
The Corporation covenants and agrees that it will take all such action as
may be necessary to ensure that all Preferred Shares (or Common Shares and/or
other securities, as the case may be) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares or other securities
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and non-assessable shares or securities.
The Corporation further covenants and agrees that it will pay when due and
payable any and all U.S. federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Right Certificates or
of any Preferred Shares (or Common Shares and/or other securities, as the case
may be) upon the exercise of Rights. The Corporation shall not, however, be
required to pay any transfer tax which may be payable in respect of any transfer
or delivery of Right Certificates to a person other than, or the issuance or
delivery of certificates or depository receipts for the Preferred Shares (or
Common Shares and/or other securities, as the case may be) in a name other than
that of, the registered holder of the Right Certificate evidencing Rights
surrendered for exercise, or to issue or to deliver any certificates or
depositary receipts for Preferred Shares (or Common Shares and/or other
securities, as the case may be) upon the exercise of any Rights, until any such
tax shall have been paid (any such tax being payable by the holder of such Right
Certificate at the time of surrender) or until it has been established to the
Corporation's reasonable satisfaction that no such tax is due.
-11-
<PAGE>
The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Shares Acquisition Date, a registration statement
under the Act, with respect to the securities purchasable upon exercise of the
Rights on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act and the rules and regulations thereunder)
until the date of the expiration of the rights provided by Section 11(a)(ii).
The Corporation will also take such action as may be appropriate under the blue
sky laws of the various states.
Section 10. PREFERRED SHARES RECORD DATE. Each person in whose name any
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; provided, however, that, if the
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Corporation are closed, such person shall be deemed to have become the record
holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Preferred Shares (or Common Shares and/or
other securities, as the case may be) transfer books of the Corporation are
open.
Section 11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Corporation shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Shares payable in
Preferred Shares, (B) subdivide the outstanding Preferred Shares, (C) combine
the outstanding Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassification of the Preferred
Shares (including any such reclassification in connection with a consolidation
or merger in which the Corporation is the continuing or surviving corporation),
except as other-wise provided in this Section 11(a) and Section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books of the Corporation
were open, such holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the
-12-
<PAGE>
aggregate par value of the shares of capital stock of the Corporation issuable
upon exercise of one Right. If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event any Person, alone or together with its Affiliates and
Associates, shall become an Acquiring Person, then proper provision shall be
made so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall, for a period of sixty (60) days after the later of the
occurrence of any such event or the effective date of an appropriate
registration statement under the Act pursuant to Section 9 hereof, have a right
to receive, upon exercise thereof at a price equal to the then current Purchase
Price, in accordance with the terms of this Agreement, such number of Preferred
Shares as shall equal the result obtained by (x) multiplying the then current
Purchase Price by the then number of 1/1,000th of a Preferred Share for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event, and dividing that product by (y) 50% of the then current per
share market price of the Corporation's Common Shares (determined pursuant to
Section 11(d) hereof) on the date of such first occurrence (such number of
shares being referred to as the "Adjustment Shares"); provided, however, that if
the transaction that would otherwise give rise to the foregoing adjustment is
also subject to the provisions of Section 13 hereof, then only the provisions of
Section 13 hereof shall apply and no adjustment shall be made pursuant to this
Section 11(a)(ii).
(iii) In the event that there shall not be sufficient treasury shares or
authorized but unissued (and unreserved) Preferred Shares to permit the exercise
in full of the Rights in accordance with the foregoing subparagraph (ii) and the
Rights become so exercisable, notwithstanding any other provision of this
Agreement, to the extent necessary and permitted by applicable law, each Right
shall thereafter represent the right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, (x)
a number of (or fractions of) Common Shares (up to the maximum number of Common
Shares which may permissibly be issued) and (y) a number of (or fractions of)
other equity securities of the Corporation (or, in the discretion of the Board
of Directors, debt) including, but not limited to, fractions of a Preferred
Share, which the Board of Directors of the Corporation has determined to have
the same aggregate current market value (determined pursuant to Section 11(d)(i)
and (ii) hereof, to the extent applicable,) as one Preferred Share (such number
of (or fractions of) debt, or other equity securities or debt of the Corporation
being referred to as a "capital stock equivalent"), equal in the aggregate to
the number of Adjustment Shares; provided, however, if sufficient Preferred
Shares, and/or capital stock equivalents are unavailable, then the Corporation
shall, to the extent permitted by applicable law, take all such action as may be
necessary to authorize additional Preferred Shares or capital stock equivalents
for issuance upon exercise of the Rights, including the calling of a meeting of
stockholders; and provided, further, that if the Corporation is unable to cause
sufficient Preferred Shares and/or capital stock equivalents to be available for
issuance upon exercise in full of the Rights, then each Right shall thereafter
represent the right to receive the Adjusted Number of Shares upon exercise at
the Adjusted Purchase Price (as such terms
-13-
<PAGE>
are hereinafter defined). As used herein, the term "Adjusted Number of Shares"
shall be equal to that number of (or fractions of) Preferred Shares (and/or
capital stock equivalents) equal to the product of (x) the number of Adjustment
Shares and (y) a fraction, the numerator of which is the number of Preferred
Shares (and/or capital stock equivalents) available for issuance upon exercise
of the Rights and the denominator of which is the aggregate number of Adjustment
Shares otherwise issuable upon exercise in full of all Rights (assuming there
were a sufficient number of Preferred Shares available) (such fraction being
referred to as the "Proration Factor"). The "Adjusted Purchase Price" shall
mean the product of the Purchase Price and the Proration Factor. The Board of
Directors may, but shall not be required to, establish procedures to allocate
the right to receive Preferred Shares, Common Shares and capital stock
equivalents upon exercise of the Rights among holders of Rights.
(b) In case the Corporation shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Shares entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Preferred Shares (or shares having the
same rights, privileges and preferences as the Preferred Shares ("equivalent
preferred shares")) or securities convertible into Preferred Shares or
equivalent preferred shares at a price per Preferred Share or equivalent
preferred share (or having a conversion price per share, if a security
convertible into Preferred Shares or equivalent preferred shares) less than the
then current per share market price of the Preferred Shares (as determined
pursuant to Section 11(d) hereof) on such record date, the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of Preferred Shares outstanding on such
record date plus the number of Preferred Shares which the aggregate offering
price of the total number of Preferred Shares and/or equivalent preferred shares
so to be offered (and/or the aggregate initial conversion price of the
convertible securities so to be offered) would purchase at such current per
share market price, and the denominator of which shall be the number of
Preferred Shares outstanding on such record date plus the number of additional
Preferred Shares and/or equivalent preferred shares to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent.
Preferred Shares owned by or held for the account of the Corporation shall not
be deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed; and in the
event that such rights, options or warrants are not so issued, the Purchase
Price shall be adjusted to be the Purchase Price which would then be in effect
if such record date had not been fixed.
-14-
<PAGE>
(c) In case the Corporation shall fix a record date for the making of a
distribution to all holders of the Preferred Shares (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in Preferred Shares) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the then current per share market price (as
determined pursuant to Section 11(d) hereof) of the Preferred Shares on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one
Preferred Share and the denominator of which shall be such current per share
market price of the Preferred Shares; provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation to be
issued upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares or (B) any subdivision, combination or reclassification of such Security
and prior to the expiration of thirty (30) Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
("NASDAQ") or such
-15-
<PAGE>
other system then in use, or, if on any such date the Security is not quoted by
any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Security
selected by the Board of Directors of the Corporation. If on any such date no
such market maker is making market in the Security, the fair value of the
Security on such date as determined in good faith by the Board of Directors of
the Corporation shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the Security is listed or
admitted to trading is open for the transaction of business or if the Security
is not listed or admitted to trading on any national securities exchange, a
Business Day.
(ii) For the purpose of any computation hereunder, the "current per share
market price" of the Preferred Shares shall be determined in accordance with the
method set forth in Section 11(d)(i). If the Preferred Shares are not publicly
traded, the "current per share market price" of the Preferred Shares shall be
conclusively deemed to be the current per share market price of the Common
Shares as determined pursuant to Section 11(d)(i), (appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof), multiplied by 1,000. If neither the Common Shares nor the
Preferred Shares are publicly held or so listed or traded, "current per share
market price" shall mean the fair value per share as determined in good faith by
the Board of Directors of the Corporation, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent.
(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest 1/1,000th of a Preferred Share or one ten-thousandth of
any other share or security as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required by this Section 11 shall
be made no later than the earlier of (i) three (3) years from the date of the
transaction which mandates such adjustment or (ii) the Final Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Corporation other than
Preferred Shares, thereafter the number of other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Shares contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Shares shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Corporation subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted
-16-
<PAGE>
Purchase Price, the number of 1/1,000th of a Preferred Share purchasable from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) The Corporation may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of 1/1,000th of a Preferred Share purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of 1/1,000th of a Preferred Share for
which a Right was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights shall become
that number of Rights (calculated to the nearest one ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Corporation shall make a public announcement of its
election to adjust the number of Rights, indicating the record date for the
adjustment, and, if known at the time, the amount of the adjustment to be made.
This record date may be the date on which the Purchase Price is adjusted or any
day thereafter, but, if the Right Certificates have been issued, shall be at
least ten (10) days later than the date of the public announcement. If Right
Certificates have been issued, upon each adjustment of the number of Rights
pursuant to this Section 11(h), the Corporation shall, as promptly as
practicable, cause to be distributed to holders of record of Right Certificates
on such record date Right Certificates evidencing, subject to Section 14 hereof,
the additional Rights to which such holders shall be entitled as a result of
such adjustment, or, at the option of the Corporation, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Corporation, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment, Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(i) Irrespective of any adjustment or change in the Purchase Price or the
number of 1/1,000th of a Preferred Share issuable upon the exercise of the
Rights, the Right Certificates theretofore and thereafter issued may continue to
express the Purchase Price and the number of 1/1,000th of a Preferred Share
which were expressed in the initial Right Certificates issued hereunder.
(j) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the number of 1/1,000th of a
Preferred Share, Common Shares or other securities issuable upon exercise of the
Rights, the Corporation shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may validly
and legally issue such number of fully paid and non-assessable 1/1,000th of a
Preferred Share, Common Shares or other securities at such adjusted Purchase
Price.
-17-
<PAGE>
(k) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Corporation may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the
Preferred Shares, Common Shares or other securities of the Corporation, if any,
issuable upon such exercise over and above the Preferred Shares, Common Shares
or other securities of the Corporation, if any, issuable upon exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(l) Anything in this Section 11 to the contrary notwithstanding, the
Corporation shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that (i) any consolidation or subdivision of the Preferred Shares, (ii)
issuance wholly for cash of Preferred Shares at less than the current market
price, (iii) issuance wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Preferred Shares, (iv)
stock dividends or (v) issuance of rights, options or warrants referred to in
this Section 11, hereafter made by the Corporation to holders of its Preferred
Shares shall not be taxable to such stockholders.
(m) The Corporation covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Corporation in a transaction which does not violate Section
11(n) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Corporation in a transaction which does not violate Section 11(n)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Corporation and/or any of its Subsidiaries in one or
more transactions each of which does not violate Section 11(n) hereof), if (x)
at the time of or immediately after such consolidation, merger, sale or transfer
there are any charter or by-law provisions or any rights, warrants or other
instruments or securities outstanding or agreements in effect or other actions
taken, which would materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates. The Corporation
shall not consummate any such consolidation, merger, sale or transfer unless
prior thereto the Corporation and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(m).
(n) The Corporation covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary
-18-
<PAGE>
to take) any action the purpose of which is to, or if at the time such action is
taken it is reasonably foreseeable that the effect of such action is to,
materially diminish or otherwise eliminate the benefits intended to be afforded
by the Rights.
(o) The exercise of Rights under Section 11(a)(ii) shall only result in
the loss of rights under Section 11(a)(ii) to the extent so exercised and shall
not otherwise affect the rights represented by the Rights under this Rights
Plan, including the rights represented by Section 13.
Section 12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Corporation shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common
Shares and the Preferred Shares a copy of such certificate and (c) mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section
26 hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of such adjustment unless and until it shall have received such
certificate.
Section 13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER. (a) In the event that, on or following the Share Acquisition Date,
directly or indirectly, (x) the Corporation shall consolidate with, or merge
with and into, any Person, (y) the Corporation shall consolidate with, or merge
with, any Person, and the Corporation shall be the continuing or surviving
corporation of such consolidation or merger (other than, in a case of any
transaction described in (x) or (y), a merger or consolidation which would
result in all of the securities generally entitled to vote in the election of
directors ("voting securities") of the Corporation outstanding immediately prior
thereto, continuing to represent (either by remaining outstanding or by being
converted into securities of the surviving entity) all of the voting securities
of the Corporation or such surviving entity outstanding immediately after such
merger or consolidation and the holders of such securities not having changed as
a result of such merger or consolidation), or (z) the Corporation shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one transaction or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Corporation and its Subsidiaries (taken as a whole) to any Person, then, and in
each such case (except as provided in Section 13(d) hereof), proper provision
shall be made so that (i) each holder of a Right, except as provided in Section
7(e) hereof, shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the then current Purchase Price, in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of
freely tradeable Common Shares of the Principal Party (as hereinafter defined),
not subject to any liens, encumbrances, rights of first refusal or other adverse
claims, as shall equal the result obtained by (A) multiplying the then current
Purchase Price by the number of 1/1,000th of a Preferred Share for which a Right
is then exercisable (without taking into account any adjustment previously made
pursuant to Section 11(a)(ii)) and dividing that product by (B) 50% of the then
current per share market price of
-19-
<PAGE>
the Common Shares of such Principal Party (determined pursuant to Section 11(d)
hereof) on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Corporation
pursuant to this Agreement; (iii) the term "Corporation" shall thereafter be
deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party
following the first occurrence of a Section 13 Event; and (iv) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient number of its Common Shares) in connection with the consummation of
any such transaction as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
the Common Shares thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of the
first sentence of Section 13(a), the Person that is the issuer of any securities
into which Common Shares of the Corporation are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to such merger or consolidation (including, if applicable, the Corporation
if it is the surviving corporation); and
(ii) in the case of any transaction described in clause (z) of the first
sentence of Section 13(a), the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions; provided, however, that in any of the foregoing cases, (1) if
the Common Shares of such Person are not at such time and have not been
continuously over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Shares of which are and have been so
registered, "Principal Party" shall refer to such other Person; (2) in case such
Person is a Subsidiary, directly or indirectly, of more than one Person, the
Common Shares of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Shares having the greatest aggregate market value; and (3) in case such
Person is owned, directly or indirectly, by a joint venture formed by two or
more Persons that are not owned, directly or indirectly, by the same Person, the
rules set forth in (1) and (2) above shall apply to each of the chains of
ownership having an interest in such joint venture as if such party were a
"Subsidiary" of both or all of such joint venturers and the Principal Parties in
each such chain shall bear the obligations set forth in this Section 13 in the
same ratio as their direct or indirect interests in such Person bear to the
total of such interests.
(c) The Corporation shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
its authorized Common Shares which have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance with this Section 13
and unless prior thereto the Corporation and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental
-20-
<PAGE>
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the date of
any consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:
(i) prepare and file a registration statement under the Act with respect
to the Rights and the securities purchasable upon exercise of the Rights on an
appropriate form, and will use its best efforts to cause such registration
statement to (A) become effective as soon as practicable after such filing and
(B) remain effective (with a prospectus at all times meeting the requirements of
the Act) until the Final Expiration Date;
(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky laws of
such jurisdictions as may be necessary or appropriate; and
(iii) deliver to holders of the Rights historical financial statements for
the Principal Party which comply in all respects with the requirements for
registration on Form 10 under the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.
(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired Common Shares pursuant to a Permitted Offer (or a wholly
owned Subsidiary of any such Person or Persons); (ii) the price per Common Share
offered in such transaction is not less than the price per Common Share paid to
all holders of Common Shares whose shares were purchased pursuant to such
Permitted Offer; and (iii) the form of consideration offered in such transaction
is the same as the form of consideration paid pursuant to such Permitted Offer.
Upon consummation of any such transaction contemplated by this Section 13(d),
all Rights hereunder shall expire.
Section 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES. (a) The Corporation
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on
-21-
<PAGE>
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Rights are not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading or, if
the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Rights
selected by the Board of Directors of the Corporation. If on any such date no
such market maker is making a market in the Rights, the fair value of the Rights
on such date as determined in good faith by the Board of Directors of the
Corporation shall be used.
(b) The Corporation shall not be required to issue fractions of Preferred
Shares (other than fractions which are 1/1,000th or integral multiples of
1/1,000th of a Preferred Share) upon exercise of the Rights or to distribute
certificates which evidence fractional Preferred Shares (other than fractions
which are 1/1,000th or integral multiples of 1/1,000th of a Preferred Share).
Fractions of Preferred Shares in integral multiples of 1/1,000th of a Preferred
Share may, at the election of the Corporation, be evidenced by depositary
receipts, pursuant to an appropriate agreement between the Corporation and a
depositary selected by it; provided that such agreement shall provide that the
holders of such depositary receipts shall have the rights, privileges and
preferences to which they are entitled as beneficial owners of the Preferred
Shares represented by such depositary receipts. In lieu of fractional Preferred
Shares that are not 1/1,000th or integral multiples of 1/1,000th of a Preferred
Share, the Corporation shall pay to the registered holders of Right Certificates
at the time such Rights are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one Preferred Share, For the
purposes of this Section 14(b), the current market value of a Preferred Share
shall be the closing price of a Preferred Share (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of one of the transactions or events
specified in Section 11 giving rise to the right to receive Common Shares,
capital, stock equivalents (other than Preferred Shares) or other securities
upon the exercise of a Right, the Corporation shall not be required to issue
fractions of shares or units of such Common Shares, capital stock equivalents or
other securities upon exercise of the Rights or to distribute certificates which
evidence fractions of such Common Shares, capital stock equivalents or other
securities. In lieu of fractional shares or units of such Common Shares,
capital stock equivalents or other securities, the Corporation may pay to the
registered holders of Right Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a share or unit of such Common Shares, capital stock equivalents
or other securities. For purposes of this
-22-
<PAGE>
Section 14(c), the current market value shall be determined in the manner set
forth in Section 11(d) hereof for the Trading Day immediately prior to the date
of such exercise and, if such capital stock equivalent is not traded, each such
capital stock equivalent shall have the value of 1/1,000th of a Preferred Share.
(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional share upon exercise
of a Right (except as provided above).
Section 15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Shares), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Shares), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Corporation to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.
Section 16. AGREEMENT OF RIGHT HOLDERS. Every holder of a Right, by
accepting the same, consents and agrees with the Corporation and the Rights
Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Shares;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purpose, duly endorsed
or accompanied by a proper instrument of transfer and with the appropriate form
fully executed;
(c) subject to Section 6 and Section 7(f) hereof, the Corporation and the
Rights Agent may deem and treat the person in whose name the Right Certificate
(or, prior to the Distribution Date, the associated Common Shares certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificate
or the associated Common Shares certificate made by anyone other than the
Corporation or the Rights Agent) for all purposes whatsoever, and neither the
Corporation nor the Rights Agent, subject to the last sentence of Section 7(e)
-23-
<PAGE>
hereof, shall be required to be affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary, neither
the Corporation nor the Rights Agent shall have any liability to any holder of a
Right or a beneficial interest in a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by reason of
any preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided,
however, the Corporation must use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as soon as possible.
Section 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Shares or any other
securities of the Corporation which may at any time be issuable on the exercise
of the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Corporation or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 25 hereof), or to receive dividends
or other distributions or to exercise any preemptive or subscription rights, or
otherwise, until the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. CONCERNING THE RIGHTS AGENT. The Corporation agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Corporation also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. The indemnity
provided for herein shall survive the expiration of the Rights and the
termination of this Agreement.
The Rights Agent shall be protected and shall incur no liability for, or in
respect of, any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for Common Shares or for other securities of the Corporation,
instrument of assignment or transfer, power of attorney, endorsement, affidavit,
letter, notice, direction, consent, certificate, statement, or other paper or
document believed by it to be genuine and to be signed, executed and, where
necessary,
-24-
<PAGE>
verified or acknowledged, by the proper Person or Persons.
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Rights Agent be liable for special, indirect or consequential loss or
damage of any land whatsoever (including but not limited to lot profits), even
if the Rights Agent has been advised of the likelihood of such loss or damage
and regardless of the form of action.
Section 19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated, or any corporation resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any corporation succeeding to the stock transfer or
all or substantially all of the corporate trust business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Agreement without the execution or filing of any paper or any further act
on the part of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall
succeed to the agency created by this Agreement, any of the Right Certificates
shall have been countersigned but not delivered, any such successor Rights Agent
may adopt the countersignature of a predecessor Rights Agent and deliver such
Right Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.
In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
Section 20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes only
those duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Corporation and the holders of Right
Certificates, by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination of the current market price of any Security) be proved or
established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established
-25-
<PAGE>
by a certificate signed by any one of the Chairman of the Board, the Chief
Executive Officer, the President, any Vice President, the Treasurer or the
Secretary of the Corporation and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature on such Right Certificates) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Corporation only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Corporation of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof) or any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after receipt of the
certificate described in Section 12 hereof); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any Preferred Shares or Common Shares to be issued pursuant to
this Agreement or any Right Certificate or as to whether any Preferred Shares or
Common Shares will, when issued, be validly authorized and issued, fully paid
and non-assessable.
(f) The Corporation agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Treasurer or the Secretary of the Corporation, and to
apply to such officers for advice or instructions in connection with its duties,
and shall not be liable for any action taken or suffered by it in good faith or
lack of action in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Corporation may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Rights
-26-
<PAGE>
Plan and the date on or after which such action shall be taken or such omission
shall be effective. The Rights Agent shall not be liable for any action taken
by, or omission of, the Rights Agent in accordance with a proposal included in
any such application on or after the date specified in such application (which
date shall not be less than five Business Days after the date any officer of the
Corporation actually receives such application, unless any such officer shall
have consented in writing to an earlier date) unless, prior to taking any such
action (or the effective date in the case of an omission), the Rights Agent
shall have received written instruction in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Corporation or become pecuniarily interested in any transaction in which
the Corporation may be interested, or contract with or lend money to the
Corporation or otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Corporation or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Corporation resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise of transfer without first consulting with the
Corporation.
Section 21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Corporation and to each
transfer agent of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates by first-class
mail. The Corporation may remove the Rights Agent or any successor Rights Agent
upon sixty (60) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common
-27-
<PAGE>
Shares or Preferred Shares by registered or certified mail, and to holders of
the Right Certificates by first-class mail. If the Rights Agent shall resign or
be removed or shall otherwise become incapable of acting, the Corporation shall
appoint a successor to the Rights Agent. If the Corporation shall fail to make
such appointment within a period of sixty (60) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Corporation), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Corporation or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of California (or
of any other state of the United States so long as such corporation is
authorized to do business as a banking institution in the State of California),
in good standing, having an office in the State of California, which is
authorized under such laws to exercise corporate trust or stock transfer powers
and is subject to supervision or examination by federal or state authority and
which has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $100,000,000. After appointment, the successor Rights Agent
shall be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Corporation shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Shares or Preferred Shares, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 22. ISSUANCE OF NEW RIGHT CERTIFICATES. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the
Corporation may, at its option, issue new Right Certificates evidencing Rights
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of Common Shares following the Distribution
Date and prior to the earlier of the Redemption Date and the Final Expiration
Date, the Corporation (a) shall with respect to Common Shares so issued or sold
pursuant to the exercise of stock options or under any employee plan or
arrangement, or upon the exercise, conversion or exchange of securities, notes
or debentures issued by the Corporation, and (b) may, in any other case, if
deemed necessary, or appropriate by the Board of Directors of the Corporation,
issue Right Certificates representing the appropriate number of Rights in
connection with such issuance or sale; provided, however, that (i) the
Corporation shall not be obligated to issue any such Right Certificates if, and
to the extent that, the Corporation shall be advised
-28-
<PAGE>
by counsel that such issuance would create a significant risk of material
adverse tax consequences to the Corporation or the Person to whom such Right
Certificate would be issued, and (ii) no Right Certificate shall be issued if,
and to the extent that, appropriate adjustment shall otherwise have been made in
lieu of the issuance thereof.
Section 23. REDEMPTION AND TERMINATION.
(a) (i) The Board of Directors of the Corporation may, at its option,
redeem all but not less than all the then outstanding Rights at a redemption
price of $0.005 per Right, as such amount may be appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such redemption price being hereinafter referred to as the
"Redemption Price"), at any time prior to the earlier of (x) the occurrence of a
Section 11(a)(ii) Event, or (y) the Final Expiration Date. The Corporation may,
at its option, pay the Redemption Price either in Common Shares (based on the
"current per share market price," as defined in Section 11(d) hereof, of the
Common Share at the time of redemption) or cash; provided that if the
Corporation elects to pay the Redemption Price in Common Shares, the Corporation
shall not be required to issue any fractional Common Shares and the number of
Common Shares issuable to each holder of Rights shall be rounded down to the
next whole share.
(ii) In addition, the Board of Directors of the Corporation may, at its
option, at any time following the occurrence of a Section 11(a)(ii) Event and
the expiration of any period during which the holder of Rights may exercise the
rights under Section 11(a)(ii) but prior to any Section 13 Event redeem all but
not less than all of the then outstanding Rights at the Redemption Price (x) in
connection with any merger, consolidation or sale or other transfer (in one
transaction or in a series of related transactions) of assets or earning power
aggregating 50% or more of the earning power of the Corporation and its
subsidiaries (taken as a whole) in which all holders of Common Shares are
treated alike and not involving (other than as a holder of Common Shares being
treated like all other such holders) an Interested Stockholder or (y)(aa) if and
for so long as the Acquiring Person is not thereafter the Beneficial Owner of
15% of the Common Shares, and (bb) at the time of redemption no other Persons
are Acquiring Persons.
(b) Notwithstanding the provisions of Section 23(a), in the event that a
majority of the Board of Directors of the Corporation is comprised of (i)
persons elected at a meeting of or by written consent of stockholders who were
not nominated by the Board of Directors in office immediately prior to such
meeting or action by written consent, and/or (ii) successors of such persons
elected to the Board of Directors for the purpose of either facilitating a
Transaction with a Transaction Person or circumventing, directly or indirectly
the provisions of this Section 23(b), then (I) the Rights may not be redeemed
for a period of one hundred eight (180) days following the effectiveness of such
election if such redemption is reasonably likely to have the purpose or effect
of facilitating a Transaction with a Transaction Person and (II) the Rights may
not be redeemed following such one hundred eighty (180) day period, if (x) such
redemption is reasonably likely to have the purpose or effect of facilitating
-29-
<PAGE>
a Transaction with a Transaction Person and (y) during such one hundred eighty
(180) day period, the Corporation enters into any agreement, arrangement or
understanding with any Transaction Person which is reasonably likely to have the
purpose or effect of facilitating a Transaction with any Transaction Person.
(c) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the date for redemption set forth (or determined in the manner
specified in) in a resolution of the Board of Directors of the Corporation
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent, and without any further action and without any notice,
the right to exercise the Rights will terminate and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price for each Right so
held. In the case of a redemption permitted only under Section 23(a)(ii),
evidence of which shall have been filed with the Rights Agent, the right to
exercise the Rights will terminate and represent only the right to receive the
Redemption Price upon the later of ten (10) Business Days following the giving
of such notice or the expiration of any period during which the rights under
Section 11(a)(ii) may be exercised. The Corporation shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within ten (10) days after such date for redemption set forth in a resolution of
the Board of Directors ordering the redemption of the Rights, the Corporation
shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Corporation nor any
of its Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than that specifically set forth in this
Section 23 and other than in connection with the purchase of Common Shares prior
to the Distribution Date.
(d) The Corporation may, at its option, discharge all of its obligations
with respect to the Rights by (i) issuing a press release announcing the manner
of redemption of the Rights in accordance with this Agreement and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at their
last addresses as they appear on the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the Transfer Agent of
the Common Shares, and upon such action, all outstanding Rights and Right
Certificates shall be null and void without any further action by the
Corporation.
Section 24. EXCHANGE. (a) The Board of Directors of the Corporation may,
at its option, at any time after any Person becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become void pursuant to the provisions of Section
11(a)(ii) hereof) for Common Shares of the Corporation at an exchange ratio of
one Common Share per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof
-30-
<PAGE>
(such exchange ratio being hereinafter referred to as the "Exchange Ratio").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Person (other than the Corporation,
any Subsidiary of the Corporation, any employee benefit plan of the Corporation,
or any such Subsidiary, any entity holding Common Shares for or pursuant to the
terms of any such a plan), together with all Affiliates and Associates of such
Person, becomes the Beneficial Owner of 15% or more of the Common Shares then
outstanding.
(b) Immediately upon the action of the Board of Directors of the
Corporation ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of Common Shares equal to
the number of such Rights held by such holder multiplied by the Exchange Ratio.
The Corporation shall promptly give public notice of any such exchange;
provided, however, that the failure to give, or any defect in, such notice shall
not affect the validity of such exchange. The Corporation shall promptly mail a
notice of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
will state the method by which the exchange of the Common Shares for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Corporation, at its
option, may substitute Preferred Shares (or equivalent preferred shares, as such
term is defined in Section 11(b) hereof) for some or all of the Common Shares
exchangeable for Rights, at the initial rate of 1/1,000th of a Preferred Share
(or equivalent preferred share) for each Common Share, as appropriately adjusted
to reflect adjustments in the voting rights of the Preferred Shares pursuant to
the terms thereof, so that the fraction of a Preferred Share delivered in lieu
of each Common Share shall have the same voting rights as one Common Share.
(d) In the event that there shall not be sufficient Common Shares or
Preferred Shares issued but not outstanding or authorized but unissued to permit
any exchange of Rights as contemplated in accordance with this Section 24, the
Corporation shall take all such action as may be necessary to authorize
additional Common Shares or Preferred Shares for issuance upon exchange of the
Rights.
Section 25. NOTICE OF CERTAIN EVENTS. (a) In case the Corporation shall
propose (i) to pay any dividend payable in stock of any class to the holders of
its Preferred Shares or to make any other distribution to the holders of its
Preferred Shares (other than a regularly quarterly cash dividend), (ii) to offer
to the holders of its Preferred Shares rights or warrants
-31-
<PAGE>
to subscribe for or to purchase any additional Preferred Shares or shares of
stock of any class or any other securities, rights or options, (iii) to effect
any reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), (iv) to effect
any consolidation or merger into or with any other Person (other than a
Subsidiary of the Corporation in a transaction which does not violate Section
11(n) hereof), or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer) in one or more
transactions, of 50% or more of the assets or earning power of the Corporation
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Corporation and/or any of its Subsidiaries in one or more transactions
each of which does not violate Section 11(n) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Corporation, then, in each such
case, the Corporation shall give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of such proposed action to the
extent feasible and file a certificate with the Rights Agent to that effect,
which shall specify the record date for the purposes of such stock dividend, or
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Preferred Shares, if any such date is to be fixed, and such notice shall be so
given in the case of any action covered by clause (i) or (ii) above at least
twenty (20) days prior to the record date for determining holders of the
Preferred Shares for purposes of such action, and in the case of any such other
action, at least twenty (20) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Preferred Shares, whichever shall be the earlier.
(b) In case of a Section 11(a)(ii) Event, then (i) the Corporation shall
as soon as practicable thereafter give to each holder of a Right Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which notice shall describe such event and the consequences of such event to
holders of Rights under Section 11(a)(ii) hereof, and (ii) all references in the
preceding paragraph (a) to Preferred Shares shall be deemed thereafter to refer
also to Common Shares and/or, if appropriate, other securities of the
Corporation.
Section 26. NOTICES. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Corporation shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:
USCS International, Inc.
2969 Prospect Park Drive
Rancho Cordova, California 95670
Attention: General Counsel
Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Corporation or by the
holder of any Right Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class
-32-
<PAGE>
mail, postage prepaid, addressed (until another address is filed in writing with
the Corporation) as follows:
[CHASE MELLON Shareholder Services, LLC]
[50 CALIFORNIA STREET]
[SAN FRANCISCO, CA 94111]
Attention:
-----------------------------------
Notices or demands authorized by this Agreement to be given or made by the
Corporation of the Rights Agent to the holder of any Right Certificate or, if
prior to the Distribution Date, to the holder of certificates representing
Common Shares shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Corporation.
Section 27. SUPPLEMENTS AND AMENDMENTS. Prior to the Distribution Date,
the Corporation and the Rights Agent shall, if the Corporation so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing Common Shares. From and after the
Distribution Date, the Corporation and the Rights Agent shall, if the
Corporation so directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner which the Corporation may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, however, that this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Corporation which states that the proposed supplement
or amendment is in compliance with the terms of this Section 27, the Rights
Agent shall execute such supplement or amendment, provided that such supplement
or amendment does not adversely affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Shares. Notwithstanding
anything contained in this Rights Plan to the contrary, in the event that a
majority of the Board of Directors of the Corporation is comprised of (i)
persons elected at a meeting of or by written consent of stockholders and who
were not nominated by the Board of Directors in office immediately prior to such
meeting or action by written consent and/or (ii) successors of such persons
elected to the Board of Directors for the purpose of either facilitating a
Transaction with a Transaction Person or circumventing directly or indirectly
the provisions of this Section 27, then for a period of 180 days following the
effectiveness of such action, this Rights Plan shall not be amended or
-33-
<PAGE>
supplemented in any manner reasonably likely to have the purpose or effect of
facilitating a Transaction with a Transaction Person.
Section 28. DETERMINATION AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. The
Board of Directors of the Corporation shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board, or the Corporation, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including, without limitation, a
determination to redeem or not redeem the Rights or to amend the Agreement and
whether any proposed amendment adversely affects the interests of the holders of
Right Certificates). For all purposes of this Agreement, any calculation of the
number of Common Shares or other securities outstanding at any particular time,
including for purposes of determining the particular percentage of such
outstanding Common Shares or any other securities of which any Person is the
Beneficial Owner, shall be made in accordance with the last sentence of Rule
13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Corporation,
the Rights Agent, the holders of the Right Certificates and all other parties,
and (y) not subject the Board to any liability to the holders of the Right
Certificates.
Section 29. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Corporation,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the Common Shares) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Corporation, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
Common Shares).
Section 31. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
Section 32. GOVERNING LAW. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the
-34-
<PAGE>
laws of such State applicable to contracts to be made and performed entirely
within such State.
Section 33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
-35-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the date and year first above written.
USCS International, Inc.
Attest:
By: By:
---------------------- ----------------------
Mary G. Jordan James C. Castle
Secretary Chairman of the Board and
Chief Executive Officer
[CHASE MELLON Shareholder Services, LLC]
Attest:
By: By:
---------------------- ----------------------
Name: Name:
Title: Title:
-36-
<PAGE>
EXHIBIT A TO STOCKHOLDER RIGHTS PLAN
FORM OF
CERTIFICATE OF DESIGNATION
OF
CERTIFICATE OF INCORPORATION
OF
USCS INTERNATIONAL, INC.
SERIES A PREFERRED STOCK
(Pursuant to Section 151 of the
Delaware General Corporation Law)
1. USCS International, Inc., a corporation organized and existing under
and by virtue of The General and Business Corporation Law of Delaware, DOES
HEREBY CERTIFY:
2. That at a meeting of the Board of Directors of USCS International,
Inc., the following resolution was duly adopted creating fifty-two thousand
(52,000) shares of Preferred Stock, designated as Series A Preferred Stock.
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series of
Series A Preferred Stock, with a par value of $.05 per share, of the Corporation
and hereby states the designation and number of shares, and fixes the relative
rights, preferences and limitations thereof (in addition to the provisions set
forth in the Certificate of Incorporation which are applicable to the Preferred
Stock of all classes and series) as follows:
SERIES A PREFERRED STOCK
SECTION 1. DESIGNATION, PAR VALUE AND AMOUNT. The shares of such series
shall be designated as "Series A Preferred Stock" (hereinafter referred to as
"Series A Preferred Stock"), the shares of such series shall be with par value
of $.05 per share, and the number of shares constituting such series shall be
fifty-two thousand (52,000); provided, however, that, if more than a total of
shares of Series A Preferred Stock shall be issuable upon the exercise of Rights
(the "Rights") issued pursuant to the Stockholder Rights Plan, dated as of June
14, 1996 between the Corporation and [CHASE MELLON Shareholder Services, LLC],
as Rights Agent (as amended from time to time) (the "Rights Plan"), the Board of
Directors of the Corporation, pursuant to Section 151 of the Delaware General
Corporation Law, shall direct by resolution or resolutions that a certificate
-1-
<PAGE>
be properly executed, acknowledged and filed providing for the total number
of shares of Series A Preferred Stock authorized to be issued to be increased
(to the extent that the Certificate of Incorporation then permits) to the
largest number of whole shares (rounded up to the nearest whole number)
issuable upon exercise of the Rights.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of assets legally available for the purpose,
quarterly dividends payable in cash on the last day of March, June, September
and December in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $10.00 or (b) subject to the provision for
adjustment hereinafter set forth, 1,000 times the aggregate per share amount of
all cash dividends, and 1,000 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock, par value $0.05 per share, of the Corporation
(the "Common Stock") or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. In the event the Corporation
shall at any time after the effective date of the firm commitment underwritten
initial public offering of the Corporation's Common Stock on Form S-1 under the
Securities Act of 1933, as amended (the "Rights Declaration Date") (i) declare
any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common Stock into
a smaller number of shares, then in each such case the amount to which holders
of shares of Series A Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. Such adjustment shall be made
successively whenever such a dividend or change in the Common Stock is
consummated.
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $10.00 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the
-2-
<PAGE>
record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a record
date for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 30 days prior to the date fixed for
the payment thereof.
SECTION 3. VOTING RIGHTS.
The holders of shares of Series A Preferred Stock shall have the following
voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
1/1,000th share of Series A Preferred Stock shall entitle the holder thereof to
one vote on all matters voted on at a meeting of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, or (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. Such adjustment shall be made
successively whenever such a dividend or change in the Common Stock is
consummated.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as set forth herein, holders of Series A Preferred Stock shall
have no special voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
SECTION 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other distributions, on any
shares
-3-
<PAGE>
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except dividends
paid ratably on the Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
(except as provided in (iv) below) shares of any stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock;
(iv) redeem or purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except in accordance with a purchase offer made in
writing or by publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative rights
and preferences of the respective series and classes, shall determine in good
faith will result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
SECTION 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation, in any other Certificate of Designation or
Certificate of Amendment creating a series of Preferred Stock or as otherwise
required by law.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Subject to the prior and superior rights of holders of any shares of
any series of Preferred Stock ranking prior and superior to the shares of Series
A Preferred Stock with respect to rights upon liquidation, dissolution or
winding up (voluntary or otherwise), no distribution shall be made to the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received an amount per share equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock, plus
-4-
<PAGE>
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, holders of Series A Preferred Stock and holders of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of 1,000 (the "Adjustment
Number") to 1 with respect to such Preferred Stock and Common Stock, on a per
share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of Series A Preferred Stock and the
holders of such parity shares in proportion to their respective liquidation
preferences.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declared any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then, in each such case, the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
SECTION 8. NO REDEMPTION. The shares of Series A Preferred Stock shall not
be redeemable.
SECTION 9. RANKING. The Series A Preferred Stock shall rank junior to all
other series of the Corporation's Preferred Stock as to the payment of dividends
and the distribution of assets, unless the terms of any such series shall
provide otherwise.
SECTION 10. AMENDMENT. The Certificate of Incorporation of the
Corporation shall not
-5-
<PAGE>
be further amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as
to affect them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Preferred Stock,
voting separately as a class.
SECTION 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued in
fractions of a share, which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
-6-
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its Chairman of the Board and attested by its Secretary
this ____ day of June __, 1996.
Attest:
_________________________ _________________________
Mary G. Jordan, Secretary James C. Castle, Chairman
of the Board and Chief
Executive Officer
-7-
<PAGE>
EXHIBIT B TO STOCKHOLDER RIGHTS PLAN
FORM OF RIGHTS CERTIFICATE
NO R. ________ RIGHTS
NOT EXERCISABLE AFTER JUNE 14, 2006 OR EARLIER IF REDEEMED BY THE CORPORATION.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.005 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS PRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
ASSOCIATE OR AFFILIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
PRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(E) OF THE RIGHTS AGREEMENT.](1)
RIGHT CERTIFICATE
USCS INTERNATIONAL, INC.
This certifies that _________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the
Stockholder Rights Plan, dated as of June 14, 1996, (the "Rights Plan "),
between USCS International, Inc., a Delaware corporation (the "Corporation"),
and [CHEMICAL MELLON] (the "Rights Agent"), to purchase from the Corporation at
any time after the Distribution Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., San Francisco time, on June 14, 2006 unless
the Rights evidenced hereby shall have been previously redeemed by the
Corporation, at the principal office or offices of the Rights Agent designated
for such purpose, or at the office of its successor as Rights Agent, 1/1,000th
of a fully paid non-assessable share of Series A Preferred Stock, $.05 par value
(the "Preferred Stock"), of the Corporation, at a purchase price of $100 per
1/1,000th of a share (the "Purchase Price"), upon presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the number of
1/1,000th of which may be purchased upon exercise hereof) set forth above, and
the Purchase Price set forth above, are the number and Purchase Price as of June
__, 1996, based on the Preferred Shares as constituted at such date.
- ---------------------
(1) The portion of the legend in brackets shall be inserted only if
applicable and shall replace the preceding sentence.
-1-
<PAGE>
Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Acquiring Person (as such terms are defined in the Rights Agreement),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate who
becomes a transferee after the Acquiring Person becomes such, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of any
such Acquiring Person, Associate or Affiliate who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such, such Rights shall
become null and void and no holder hereof shall have any right with respect to
such Rights from and after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number and
kind of shares of Preferred Stock or other securities which may be purchased
upon the exercise of the Rights evidenced by this Right Certificate are subject
to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Corporation and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set, forth in the Rights
Agreement. Copies of the Rights Agreement are on file at the principal
executive offices of the Corporation and the principal office or offices of the
Rights Agent. This Right Certificate, with or without other Right Certificates,
upon surrender at the principal office of the Rights Agent, may be exchanged
for another Right Certificate or Right Certificates of like tenor and
date evidencing Rights entitling the holder to purchase a like aggregate
number of Preferred Shares or other securities as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Corporation at a redemption price of
$.005 per Right (subject to adjustment as provided in the Rights Agreement)
payable in cash.
No fractional shares of Preferred will be issued upon the exercise of any
Right or Rights evidenced hereby (other than fractions which are 1/1,000th or
integral multiples of 1/1,000th of Preferred Stock, which may, at the election
of the Corporation, be evidenced by depositary receipts), but in lieu thereof a
cash payment will be made, as provided in the Rights Agreement.
-2-
<PAGE>
No holder of this Right Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of Preferred Stock or of any
other securities of the Corporation which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Corporation or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or other distributions or to exercise
any preemptive or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in the
Rights Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Corporation
and its corporate seal. Dated as of _____________.
[SEAL]
ATTEST: USCS International, Inc.
By: ____________________ By: _____________________________
Name: Name:
Title: Secretary Title: Chief Executive Officer
Countersigned:
[CHASE MELLON Shareholder Services, LLC]
By: _____________________
Name:
Title:
-3-
<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED, ______________________ hereby sells, assigns and
transfers unto ________________________________________________________________
(Please print name and address of transferee)
_______________________________________________________________________________
this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint __________________, Attorney, to
transfer the within Right Certificate on the books of the within-named
Corporation, with full power of substitution.
Dated: ____________ ___________________________
Signature
Signature Guaranteed:
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated: _____________ ___________________________
Signature
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
-4-
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed by the registered holder
if such holder desires to exercise Rights
represented by the Right Certificate.)
To the Rights Agent:
The undersigned hereby irrevocably elects to exercise _________ Rights
represented by this Right Certificate to purchase the Preferred Shares, Common
Shares or other securities issuable upon the exercise of such Rights and
requests that certificates for such Preferred Shares, Common Shares or other
securities be issued in the name of:
Please insert social security
or other identifying number ____________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print name and address)
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security
or other identifying number _________________________________
______________________________________________________________________________
______________________________________________________________________________
(Please print name and address)
Dated: ________________ ___________________________
Signature
Signature Guaranteed:
-5-
<PAGE>
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: ________________ ___________________________
Signature
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
NOTICE
The signature on the foregoing Forms of Assignment and Election and certificates
must conform to the name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any change whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, the
Corporation and the Rights Agent will deem the Beneficial Owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person or an Affiliate or
Associate thereof (as such terms are defined in the Rights Agreement) and such
Assignment or Election to Purchase will not be honored.
-6-
<PAGE>
EXHIBIT C TO STOCKHOLDER RIGHTS PLAN
SUMMARY OF RIGHTS
DISTRIBUTION OF RIGHTS: On June 14, 1996, the Board of Directors of USCS
International, Inc., a Delaware corporation (the
"Corporation") declared a dividend distribution of one
preferred share purchase right (a "Right") for each
outstanding share of Common Stock, par value $.05 per
share (the "Common Shares"), of the Corporation. The
dividend is payable to the stockholders of record on
June __, 1996 (the "Record Date"), and with respect to
Common Shares issued thereafter until the Distribution
Date (as defined below) and, in certain circumstances,
with respect to Common Shares issued after the
Distribution Date. Except as set forth below, each
Right, when it becomes exercisable, entitles the
registered holder to purchase from the Corporation
1/1,000th of a share of Series A Preferred Stock, $.05
par value (the "Preferred Shares"), of the Corporation
at a price of $100.00 (the "Purchase Price"), subject
to adjustment. The description and terms of the Rights
are set forth in a Stockholder Rights Plan (the "Rights
Plan") between the Corporation and [CHASE MELLON
Shareholder Services, LLC] as Rights Agent (the "Rights
Agent"), dated as of June 14, 1996. Capitalized terms
not defined herein are defined in the Rights Plan.
DISTRIBUTION DATE: Initially, the Rights will be attached to all
certificates representing Common Shares then
outstanding, and no separate Right Certificates will be
distributed. The Rights will separate from the Common
Shares upon the earliest to occur of (i) a person or
group of affiliated or associated persons having
acquired beneficial ownership of 15% or more of the
outstanding Common Shares (except pursuant to a
Permitted Offer, as hereinafter defined); or (ii) 10
days (or such later date as the Board may determine)
following the commencement of, or announcement of an
intention to make, a tender offer or exchange offer the
consummation of which would result in a person or group
becoming an Acquiring Person (as hereinafter defined)
(the earliest of such dates being called the
"Distribution Date"). A person or group whose
acquisition of Common Shares causes a Distribution Date
pursuant to clause (i) above is an "Acquiring Person."
The date that a person or group becomes an Acquiring
Person is the "Shares Acquisition Date."
<PAGE>
TRANSFER OF RIGHTS;
RIGHTS CERTIFICATE: The Rights Plan provides that, until the Distribution
Date, the Rights will be transferred with and only with
the Common Shares. Until the Distribution Date (or
earlier redemption or expiration of the Rights) new
Common Share certificates issued after the Record Date
upon transfer or new issuance of Common Shares will
contain a notation incorporating the Rights Plan by
reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender
for transfer of any certificates for Common Shares
outstanding as of the Record Date, even without such
notation or a copy of this Summary of Rights being
attached thereto, will also constitute the transfer of
the Rights associated with the Common Shares
represented by such certificate. As soon as
practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of
the Common Shares as of the close of business on the
Distribution Date (and to each initial record holder of
certain Common Shares issued after the Distribution
Date), and such separate Right Certificates alone will
evidence the Rights.
THE RIGHTS ARE NOT EXERCISABLE UNTIL THE DISTRIBUTION
DATE and will expire at the close of business on
June 14, 2006, unless earlier redeemed by the
Corporation as described below.
FLIP-IN: In the event that any person becomes an Acquiring
Person (except pursuant to a tender or exchange offer
which is for all outstanding Common Shares at a price
and on terms which a majority of certain members of
the Board of Directors determines to be adequate and
in the best interests of the Corporation, its
stockholders and other relevant constituencies, other
than such Acquiring Person, its affiliates and
associates (a "PERMITTED OFFER")), each holder of a
Right will thereafter have the right (the "FLIP-
IN RIGHT") to receive upon exercise the number of
shares or of 1/1,000th of a share of Preferred Stock
(or, in certain circumstances, other securities of the
Corporation) having a value (immediately prior to such
triggering event) equal to two times the exercise price
of the Right. Notwithstanding the foregoing, following
the occurrence of the event described above, all Rights
that are, or (under certain circumstances specified in
the Rights Plan) were, beneficially owned by any
Acquiring Person or any affiliate or associate thereof
will be null and void.
FLIP-OVER: In the event that, at any time following the Shares
Acquisition Date, (i) the Corporation is acquired in a
merger or other business combination transaction in
which the holders of all of the outstanding Common
Shares immediately prior to the consummation of the
transaction are not the holders of all of the surviving
corporation's voting power, or (ii) more than 50% of
the Corporation's (together with its subsidiaries)
assets or earning
-2-
<PAGE>
power is sold or transferred, in either case with or
to an Acquiring Person or any affiliate or
associate or any other person in which such
Acquiring Person, affiliate or associate has an
interest or any person acting on behalf of or in
concert with such Acquiring Person, affiliate or
associate, or, if in such transaction all
holders of Common Shares are not treated alike,
any other person, then each holder of a Right
(except Rights which previously have been voided
as set forth above) shall thereafter have the
right (the "FLIP-OVER RIGHT") to receive, upon
exercise, the number of shares of the highest
priority voting securities of the acquiring
company having a value equal to two times the
exercise price of the Right. The holder of a
Right will continue to have the Flip-Over Right
whether or not such holder exercises or
surrenders the Flip-In Right.
ADJUSTMENT OF RIGHTS: The Purchase Price payable, and the number of
Preferred Shares, Common Shares or other securities
issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i)
in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the
Preferred Shares, (ii) upon the grant to holders of
the Preferred Shares of certain rights or warrants to
subscribe for or purchase Preferred Shares at a
price, or securities convertible into Preferred
Shares with a conversion price, less than the then
current market price of the Preferred Shares or (iii)
upon the distribution to holders of the Preferred
Shares of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights and the number of
1/1,000th of a Preferred Share issuable upon exercise
of each Right are also subject to adjustment in the
event of a stock split of the Common Shares or a
stock dividend on the Common Shares payable in Common
Shares or subdivisions, consolidations or combinations
of the Common Shares occurring, in any such case,
prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase
Price will be required until cumulative adjustments
require an adjustment of at least 1% in such Purchase
Price. No fractional Preferred Shares will be issued
(other than fractions which are 1/1,000th or integral
multiples of 1/1,000th of a Preferred Share, which
may, at the election of the Corporation, be evidenced
by depositary receipts) and in lieu thereof, an
adjustment in cash will be made based on the market
price of the Preferred Shares on the last trading
day prior to the date of exercise.
-3-
<PAGE>
PREFERRED REDEMPTION;
DIVIDENDS; LIQUIDATION
PAYMENT: Preferred Shares purchasable upon exercise of the
Rights will not be redeemable. Each Preferred Share
will be entitled to a minimum preferential quarterly
dividend payment of $10.00 per share but, if greater,
will be entitled to an aggregate dividend per share
of 1,000 times the dividend declared per Common Share.
In the event of liquidation, the holders of the
Preferred Shares will be entitled to a minimum
preferential liquidation payment per share equal to
1,000 times the aggregate amount to be distributed
per share to holders of Common Stock, plus an amount
equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to
the date of such payment; thereafter, the holders of
the Preferred Shares and the holders of the Common
Shares will share the remaining assets in the ratio
of 1,000 to 1 (as adjusted) for each Preferred Share
and Common Share so held, respectively. Finally, in
the event of any merger, consolidation or other
transaction in which Common Shares are exchanged,
each Preferred Share will be entitled to receive 1,000
times the amount received per Common Share. These
rights are protected by customary antidilution
provisions.
REDEMPTION OF RIGHTS: At any time prior to the earlier to occur of (i) a
person becoming an Acquiring Person or (ii) the
expiration of the Rights, and under certain other
circumstances, the Corporation may redeem the Rights
in whole, but not in part, at a price of $.005 per
Right (the "Redemption Price") which redemption shall
be effective upon the action of the Board of
Directors. Additionally, following the Shares
Acquisition Date, the Corporation may redeem the then
outstanding Rights in whole, but not in part, at the
Redemption Price, provided that such redemption is in
connection with a merger or other business combination
transaction or series of transactions involving the
Corporation in which all holders of Common Shares are
treated alike but not involving an Acquiring Person
or its affiliates or associates.
AMENDMENT OF TERMS
OF RIGHTS: All of the provisions of the Rights Plan may be
amended by the Board of Directors of the Corporation
prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Plan
may be amended by the Board in order to cure any
ambiguity, defect or inconsistency, to make changes
which do not adversely affect the interests of
holders of Rights (excluding the interests of any
Acquiring Person), or, subject to certain limitations,
to shorten or lengthen any time period under the
Rights Plan.
-4-
<PAGE>
VOTING RIGHTS; TAXES: Until a Right is exercised, the holder thereof, as
such, will have no rights as a stockholder of the
Corporation, including, without limitation, the right
to vote or to receive dividends. While the
distribution of the Rights will not be taxable to
stockholders of the Corporation, stockholders may,
depending upon the circumstances, recognize taxable
income should the Rights become exercisable or upon
the occurrence of certain events thereafter.
CHANGE OF CONTROL: The Rights may have the effect of impeding a change in
control of the Company without the prior consent of
the Company's Board of Directors, and the Rights
could cause substantial dilution to a person that
attempts to acquire the Company without conditioning
the offer on redemption of the Rights by the
Company's Board of Directors or on the acquisitions
by such person of a substantial number of Rights.
RIGHTS PLAN: A copy of the Rights Plan has been filed with the
Securities and Exchange Commission as an Exhibit to a
Registration Statement on Form 8-A dated ___________,
96. A copy of the Rights Plan is available free of
charge from the Corporation. This summary description
of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights
Plan, which is hereby incorporated herein by
reference.
-5-
<PAGE>
EXHIBIT 10.24
CableData, Inc.
On/Line Op & Lic
Corp No. 021-00
-----------
MSO Code TCI
-----------
ON/LINE OPERATING & LICENSE AGREEMENT
ON/LINE OPERATING & LICENSE AGREEMENT between CABLEDATA, INC., a California
corporation ("CableData"), whose address is 2969 Prospect Park Drive, Rancho
Cordova, California 95670, and TCI Cable Management Corporation, on behalf of
TCI Communications, Inc. and its affiliates ("Customer"), whose address is 5619
DTC Parkway, Englewood, Colorado 80111.
RECITALS
A. CableData is in the business of providing software and computer support
services, including subscriber management software and support and
billing services.
B. Customer is in the business of providing telecommunications information
and other services.
C. CableData desires to provide to Customer and Customer desires to
subscribe to the services and products offered through CableData's
proprietary DDP FINANCIALS AND ON/LINE APPLICATIONS SOFTWARE, as more
fully described in ATTACHMENT A (the "Software"), and the other products
and services described in ATTACHMENT B (hereinafter together with the
Software, individually called "Product" and collectively called
"Products") for each Remote Site and Computer Facility listed in
ATTACHMENT C, as amended from time to time (the "Customer Cable
Systems"), on the terms and conditions set forth herein.
AGREEMENT
1. DEFINITIONS
As used herein, the following capitalized terms have the meanings set
forth below:
1.1 "Computer Facility" means a single Customer data center location
where its Processors are located.
1.2 "Conversion" has the meaning set forth in Paragraph 5.2.
1.3 "Corp(s)" means a Computer Facility or Remote Site identified by
a unique corp-city number as set forth in ATTACHMENT C.
1.4 "Customer Statements" means the printed invoice mailed to
Customer's telecommunications customers for services rendered by
Customer to such customers, such invoice being generated from the
Master File Data.
1.5 "Customer Cable Systems" has the meaning set forth in the third
introductory paragraph.
1.6 "Cutoff Date" means the date at which point the Customer's Cable
System(s) and/or Service Center(s) run the cutoff program and
provide the cutoff file for transmission to CableData.
1
<PAGE>
1.7 "Education Center" means the CableData training office located
in Sacramento, California.
1.8 "Exclusive System" means Remote Sites which utilize Processors
located at a Computer Facility. All Exclusive Systems as of the
date of this Agreement are denoted as such on ATTACHMENT C.
1.9 "Inclusive Systems" means Remote Sites which utilize Processors
located at a Service Center. All Inclusive Systems as of the date
of this Agreement are denoted as such on ATTACHMENT C.
1.10 "Installation" means the process by which CableData installs the
Software or any Modified Software at a Computer Facility.
1.11 "Installation Date" means the date of an Installation.
1.12 "Master File Data" means billing information relating to the
provision of services by Customer to its customers.
1.13 "Modified Software" has the meaning set forth in Paragraph 10.1.
1.14 "National Accounts Manager" means the CableData manager
responsible for Customer's account, currently Greg Robertson.
1.15 "Processing Cycle" means the elapsed time between CableData's
complete receipt of usable data transmission or tape(s) from
Customer, and the return transmission of processed data or tape(s)
to Customer.
1.16 "Processor" means the central processing unit, memory and
addressable peripherals on which the Software functions.
1.17 "Product" has the meaning set forth in the third introductory
paragraph (Recital C).
1.18 "Service Center" means a single CableData data center where its
Processors are located.
1.19 "Remote Site" means a Customer system operating by
telecommunications from Customer's Computer Facility or
CableData's Service Centers.
1.20 "Software" has the meaning set forth in the second introductory
paragraph.
1.21 "Subscribers" or "Subs" means the number of historical ledger
records produced (including all active and inactive subscribers
with a balance or a transaction).
1.22 "Term" has the meaning set forth in Paragraph 3.1.
1.23 "Terminal Response Time" means, for Inclusive Systems, the time
subsequent to depressing the "enter" key on the computer terminal
located at the Inclusive System through the "now processing" to
the "task complete" screen message in the Order Entry module.
1.24 "Update" means the processing of Customer's Master File Data for
the purpose of updating some or all of the Subscriber records.
2. PROVISION OF SERVICES TO CUSTOMER CABLE SYSTEMS; INCLUSIVE AND EXCLUSIVE
SYSTEMS; ADDITIONAL CUSTOMER CABLE SYSTEMS
2.1 CableData agrees to provide to Customer, and Customer agrees to
subscribe to, the Software and the Products for each Customer
Cable System during the Term in the manner set forth herein.
2
<PAGE>
2.2 For Exclusive Systems, CableData will install the Software in each
Computer Facility so that the Remote Sites linked to such Computer
Facility can access and update Customer's Subscriber data. For
Inclusive Systems, CableData will install the Software at each
Service Center so that Remote Sites linked to such Service Centers
can access and update Customer's Subscriber data. Each Computer
Facility or Service Center shall transmit its Subscriber data as
of the Cutoff Date to CableData's processing center located in
Sacramento, CA so that CableData can Update the Master File Data
and prepare Customer Statements and other reports listed on
ATTACHMENT D (the "Reports").
2.3 Customer may request to add new Remote Sites or Computer
Facilities to this Agreement at any time by giving CableData prior
written notice ("New System Notice"), and if a Remote Site, such
notice will identify whether such Remote Site is an Inclusive
System ("New Inclusive System") or an Exclusive System ("New
Exclusive System"). CableData will then add such new site to
ATTACHMENT C if it is an Exclusive Site and will work with
Customer to determine the best means of effecting the addition of
an Inclusive Site. Customer may not convert any Exclusive System
to an Inclusive System or any Inclusive System to an Exclusive
System without CableData's consent, which consent shall not be
unreasonably withheld. CableData will work with Customer in all
instances to determine the best means of facilitating the movement
of systems while minimizing the impact of such movement on both
Customer and CableData. In addition, Customer may at any time by
giving prior written notice to CableData ("New Product Notice"),
add new products or services which new products and services and
the prices therefor will be added to ATTACHMENT B by CableData,
provided that Customer may have a free sixty (60) day trial period
for no more than three (3) Corps for each new product or service,
and further provided that if such new product or service is
Modified Software the provisions of Section 10 shall apply.
2.4 The charges and fees under this Agreement will be comparable to
the charges and fees charged by CableData to other customers of
like size and similar circumstances who are subject to similar
contract terms and conditions. If CableData should enter into
agreements with similarly situated customers providing more
favorable charges and fees for the same services, this Agreement
shall be deemed to provide the same terms to Customer.
3. TERM OF AGREEMENT
3.1 (a) The initial term of this Agreement shall commence on the
date of full execution and shall terminate on December 31,
1999, or on the date that no Customer Cable Systems or
Subscribers are subject to this Agreement, whichever date
is earlier (the "Initial Term"). After the Initial Term,
this Agreement shall automatically renew for successive one
(1) year periods ("Renewal Term" and together with the
Initial Term, the "Term"), unless either party hereto
provides to the other party written notice of intent not to
renew at least ninety (90) days prior to the expiration
date of the Initial Term or the then-effective Renewal
Term, if any, provided that any Renewal Term will
automatically terminate on the date no Customer Cable
Systems or Subscribers are subject to this Agreement.
(b) Notwithstanding any other provision of the Agreement to the
contrary, the parties agree that Customer may at any time
during the Term, upon ninety (90) days prior written notice
to CableData, remove and delete any Customer Cable System
from ATTACHMENT C to this Agreement so that neither it nor
its Subscribers are subject to the terms of this Agreement.
3.2 Except as otherwise provided in Paragraph 3.3, it is the intent of
the parties that this Agreement shall supersede all prior
agreements between U.S. Computer Services (CableData, Inc.'s
predecessor in interest) ("USCS") and United Artists Entertainment
Company ("UAE") and TCI Cable Management Corporation ("Cable
Management") (Tele-Communications, Inc.'s predecessors in
interest), including, but not limited to, the following
agreements:
(a) Master Agreement dated March 13, 1992 between USCS and
Cable Management Corporation and attachments thereto
(except as noted in Paragraph 3.3) and letters and letter
agreements based thereon (hereinafter called "1992 TCI
Agreement"); and
3
<PAGE>
(b) On-Line Exclusive System Operating and License Agreement
dated June 6, 1989 between USCS and UAE and attachments
thereto and letters and letter agreements based thereon
(hereinafter called "1989 UAE Agreement").
3.3 Notwithstanding the foregoing, the following agreements shall
remain in full force and effect subject to any amendments
described below:
(a) The Master Equipment Rental Agreement dated February 11,
1991 between USCS and Cable Management (the "Master
Equipment Rental Agreement") provided however that the term
of the Master Equipment Rental Agreement shall be
coterminous with this Agreement and Paragraph 2.2 of the
Master Equipment Rental Agreement shall be modified to
provide that equipment may only be added under the Master
Equipment Rental Agreement upon mutual consent of the
parties;
(b) The Equipment Maintenance Agreement dated March 13, 1992
between USCS and Cable Management for Inclusive Systems
(the "Inclusive Maintenance Agreement"); and
(c) The Equipment Maintenance Agreement dated June 19, 1995
between CableData, Inc. and Tele-Communications, Inc. for
Exclusive Systems expiring on June 30, 1997 (the "Exclusive
Maintenance Agreement").
4. LICENSE
4.1 For any Software or Modified Software requested by Customer,
whether requested prior to or after the date of this Agreement,
CableData grants to Customer a non-exclusive, nontransferable
license, without right of sublicense, to use, perform, or execute
such Software or Modified Software or portions thereof solely for
Customer's own use at the Computer Facilities or Remote Sites
designated in ATTACHMENT C of this Agreement.
4.2 A license will automatically be granted to each new Computer
Facility or Remote Site added to ATTACHMENT C pursuant to
Paragraph 2.3. Customer may not use the Software or Modified
Software at other than the designated installation address(es) of
the Computer Facilities or Remote Sites set forth in ATTACHMENT C,
as amended. If Customer temporarily is unable to use the Software
or Modified Software at the designated Computer Facility or Remote
Site because of conditions beyond Customer's control, the
Agreement shall be extended to permit Customer to use the Software
at another designated Computer Facility or Remote Site.
4.3 The license granted herein shall be effective on the
Installation Date with respect to a Computer Facility or the
Conversion Date with respect to a Remote Site and shall continue
through the end of the Term, subject to the provisions of Section
23.
4.4 THIS AGREEMENT COVERS CABLEDATA'S APPLICATIONS SOFTWARE AND DOES
NOT COVER COMPUTER OPERATING SYSTEM SOFTWARE. WITH RESPECT TO ANY
TANDEM SOFTWARE PROVIDED TO CUSTOMER BY CABLEDATA, CUSTOMER IS
EXPRESSLY BOUND BY THE TANDEM SUBLICENSE TERMS AND CONDITIONS
ATTACHED HERETO AS ATTACHMENT E. SEE THE MAINTENANCE AGREEMENT
FOR SPECIFIC TERMS AND CONDITIONS REGARDING SUPPORT OF TANDEM
PRODUCTS.
5. INSTALLATION OF AND CONVERSION TO THE SOFTWARE
5.1 With respect to Exclusive Systems, CableData will install the
Software on Customer's Processors located at the respective
Computer Facility for such System in consideration of Customer's
payment of the relevant conversion fee (as outlined in ATTACHMENT
B of the Agreement, hereinafter "Conversion Fee") and reasonable
travel and expenses reimbursement. With respect to Inclusive
Systems, the Software will be installed on Processors owned by
CableData located at the respective Service Center for such
System. There is no charge for the installation of Modified
Software unless it consists of optional modules that are priced
independently and for which there is a separate charge.
4
<PAGE>
5.2 CableData will convert each Remote Site to the Software and will
convert such Remote Site's data so that it is compatible with the
Software and then will initialize such Remote Site's converted
data on the Software ("Conversion"). In the event data is not in
a defined computer format and available on magnetic tape, 9-track
1600/6250 bpi, or such other media as the parties shall mutually
agree, then an additional reasonable charge may be applicable, as
quoted by CableData. CableData's services to convert and
initialize Customer's data shall include all reasonable actions
necessary to make such data compatible with the Software and the
Products including reformatting such data if needed.
5.3 CableData agrees to provide on-site orientation and all DDP/SQL
Conversions, DDP-Financial Conversions, DDP file Conversions and
Addressable Conversions for Customer Cable Systems that are new
business to CableData at no additional charge except for
CableData's conversion representative(s) actual travel and other
reasonable associated expenses ("Travel and Associated Expenses").
Travel and Associated Expenses will be waived for Conversion of
Customer Cable Systems that both (i) have more than 20,000
Subscribers and (ii) agree in writing to exclusively use CableData
for 24 months (if the Conversion takes place prior to January 1,
1998) or 12 months (if the Conversion takes place after January 1,
1998). If a Customer Cable System which has been granted the
waiver violates (i) or (ii), then such system shall pay to
CableData the entire amount of Travel and Associated Expenses
waived, plus a surcharge of $5,000.
6. CONVERSION TRAINING
6.1 Prior to a Conversion, CableData will provide the standard
initial training program for all existing and new employees of
Customer at CableData's Education Center. Such initial training
is included in the applicable Conversion Fee (except as provided
in Paragraph 5.3) and will consist of the following classes
required by CableData, or such other classes as CableData may
require in connection with the Conversion to CableData's Software:
Fundamentals, System Management, Special Money Processing, On-line
Reports, DDP Financial Parameters, DDP Financial Reports and, if
applicable, Operations. The standard initial training program
will be provided to no more than two (2) of Customer's employees
per class and must be completed no later than four (4) months
after the first Customer Statement is prepared by CableData.
Equipment and materials used in the instruction are provided by
CableData at CableData's expense. Training for additional
employees will be at the price set forth in the CableData course
catalog included as ATTACHMENT I.
6.2 Customer is responsible for all transportation to and from
CableData's Education Center, and lodging and food for Customer's
employees that attend the CableData training.
6.3 Customer agrees to send qualified employees who will be
fulfilling system-related job roles to those classes designed for
their job roles before the Conversion, in accordance with the job
roles and the classes reasonably required by CableData. In the
event the employee does not fulfill the requirements of the class,
Customer agrees to provide a replacement and said replacement will
attend the required class or classes before Conversion of that
Customer Cable System.
6.4 CableData will provide, at the time of Conversion, a standard
on-site orientation program for all of Customer's employees at the
respective Computer Facility (for Exclusive Systems) or Remote
Site (for Inclusive Systems) as part of the applicable Conversion
Fee (except as provided in Paragraph 5.3). In the event Customer
requests on-site training for Exclusive Systems at Remote Sites,
such additional training will be provided at the prices forth in
ATTACHMENT B.
7. ON-GOING TRAINING
7.1 Customer can purchase additional instruction at CableData's then
current prices for all classes taught at CableData's Education
Center. Customer can also purchase customized on-site training at
CableData's then current prices. Customer is responsible for all
transportation to and from CableData's Education Center, lodging
and food for Customer's employees that attend the CableData
training.
5
<PAGE>
8. SUPPORT
8.1 During the Term, CableData will provide telephone Software and
Modified Software support for Customer, on a 24-hour, 7-day-a-week
basis, in consideration for Customer's payment of the monthly
Bundled Prices set forth in ATTACHMENT B.
8.2 Customer support telephone calls to CableData's service center
will be handled immediately or be returned within sixty (60)
minutes by a qualified CableData employee. Customer must provide
qualified individuals at Customer's Cable System(s) who have
attended CableData's relevant classes, with whom CableData will
deal. Customer will be required to maintain a level of expertise,
by attending appropriate CableData training as delineated in
Paragraph 6.1 and keeping current with the Documentation, to
properly utilize the Software during the term of this Agreement.
8.3 Excluded from support under this Agreement for Exclusive Systems
are (a) operational procedures for loading and shutting down the
computer system; (b) setting computer operating system command
parameters; (c) nightly procedures for database backup and file
maintenance; (d) defining whether any problems are hardware or
Software-based; (e) database recovery necessitated by an operating
system software or operational problem; (f) balancing file
allocation and disk space management; (g) operational procedures
to support lockbox, cutoff, and Transmit-X; and (h) conducting
performance analysis of the computer system. Such operational
support services are available at the prices set forth in
ATTACHMENT B.
8.4 The telephone Software support provided under this Agreement
covers only CableData applications Software licensed hereunder and
does not include support of any computer operating system software
(such as Tandem's operating software). Reference is hereby made
to the Exclusive Maintenance Agreement for specific terms and
conditions regarding support of Tandem products.
8.5 CableData recognizes Customer's commitment to the Tandem
computer platform ("Tandem Equipment") and the Software. In light
of this commitment, CableData agrees to support the Tandem
Equipment until the earlier of (i) sixty (60) months from the
Customer Tandem Equipment install date or (ii) the end of the Term
of this Agreement. Support is defined as: Hardware availability
and maintenance (as outlined in the Maintenance Agreement).
CableData reserves the right, at the end of the sixty (60) months
or the end of the initial term of this Agreement (whichever first
occurs), to withdraw maintenance support of some or all of the
Tandem Equipment and/or peripherals, other than Tandem equipment
and/or peripherals located at the Service Centers or owned by
CableData, after written notification to Customer.
8.6 During the Term, CableData will not abandon the Software and
force Customer to migrate to any other CableData product in order
to meet Customer's day-to-day data processing needs.
8.7 CableData agrees that should functionality which is necessary to
Customer's business be removed from any current Software, Customer
may elect to remain on a previous release of the Software until
the functionality is returned.
8.8 CableData agrees to make available to Customer on a non-
exclusive basis a fully trained CableData employee (the "Technical
Liaison") during the Term, Monday through Friday, from the hours
of 8:00 a.m. to 5:00 p.m. (California time).
8.9 The Technical Liaison shall:
(a) act as a technical resource for Customer;
(b) at Customer's request, give, or arrange for another
CableData employee or agent to give, one (1) single day
training seminar for four (4) of Customer's divisions for
each calendar year during the Term, provided that Customer
shall be responsible for the trainer(s) travel costs
(transportation expenses, hotels, meals, etc.);
(c) handle software enhancement requests made by Customer;
6
<PAGE>
(d) at Customer's request, provide or arrange for another
CableData employee or agent to provide four (4) operational
analyses per year, provided that Customer shall be
responsible for the analyst(s) travel costs (transportation
expenses, hotels, meals, etc.).
8.10 CableData shall be responsible for all employee costs (salary,
benefits, etc.) of the Technical Liaison. The Technical Liaison
shall be located at a CableData facility. In the event the
Technical Liaison travels to Customer's location(s), Customer
shall be responsible for travel costs (transportation expenses,
hotels, meals, etc.).
9. CUSTOMER'S USE OF CABLEDATA'S SOFTWARE AND THIRD PARTY SOFTWARE
9.1 Customer will be responsible for determining the appropriate
uses to be made of the Software and establishing the features
through the setting of Software parameters.
9.2 Customer will utilize the Software as set forth in the
Documentation.
9.3 Customer is not authorized to make modifications to the
Software. Should Customer make such modifications, CableData will
not be responsible for repair of database, support of any Software
as modified, or for the compatibility of such modified Software
with any equipment, with the unmodified Software or with any
future Software releases.
9.4 CableData is not responsible for any changes to Customer's
database caused by Customer or any third party. Any repair or
regeneration of database changes by Customer or third party will
be undertaken by CableData upon request at CableData's then-
current reasonable time and materials rates, but CableData does
not warrant that such repair or regeneration will be successful.
9.5 CableData understands that Customer may run software from
software suppliers other than CableData on Customer's computer
equipment located at Customer Cable Systems which are licensed to
use the Software.
9.6 Customer agrees that in the event that software from third party
vendors interferes with the Software, CableData may charge its
then-current reasonable time and materials rates for its best
efforts to correct any resulting problems with the database or
Software performance.
9.7 With respect to Inclusive Systems, Customer will run jobs in
accordance with the limitations set forth in Attachment F.
9.8 CableData agrees to allow Customer access to any Tandem
computers running Customer's data in any CableData Service Center
through Customer's network under the following terms and
conditions:
(a) Database Integrity - In the event Customer's applications
compromise database integrity, Customer shall be
responsible for database repair. CableData may, at
Customer's request, assist in database repair at then-
current reasonable time and materials rates.
(b) Performance - Prior to authorization for Customer to
access the Tandem computers in CableData's Service Centers,
CableData and Customer shall establish baseline performance
standards for each Tandem system before and subsequent to
loading Customer's TCP/IP interface application. The
purpose of these standards is to establish system and user
response times baselines. The objective is that there be no
noticeable degradation under Customer's proposed access
method over the current asynchronously connected method.
Should system or user response times be inferior under the
Customer interface, Customer will either adjust contractual
response time commitments as set forth in Section 11 of
this Agreement to reflect this alternative method, or
Customer will provide hardware resources to achieve
throughput realized prior to loading this software.
(c) Support - Customer shall assure that the introduction of
these applications will not impose additional commitment on
the CableData support organization, including Customer
Service and Computer Operations. Customer is responsible
for establishing an internal problem escalation process and
for communicating such process to CableData.
7
<PAGE>
(d) Security - Customer shall assure that no breach of
confidentiality or compromise of other CableData customers'
information or data shall result from Customer's access to
the data centers and shall indemnify CableData, up to the
total amount billed or billable for the month immediately
preceding the month in which the breach occurred (excluding
any amounts paid for postage prepayment), against any
claims by third parties resulting from Customer's access.
(e) In the event that any of the above conditions is not met
and as a result minor harm is done to CableData's business,
then CableData may withdraw such authorization for access
upon ninety (90) days' prior written notice and opportunity
for Customer to cure. However, in the event that any of
the above conditions is not met and as a result serious
harm is done to CableData's business (such as a breach of
security or other action by Customer that could have an
impact on other CableData customers), then CableData may
immediately withdraw such authorization for access until
Customer has cured the condition. In addition to the
foregoing, in the event CableData reasonably believes that
Customer's actions could result in serious harm, then it
shall give Customer prompt written notice of such belief
and the basis therefor and Customer shall have the
opportunity to cease and desist from its actions. Should
Customer disagree with CableData's assessment or otherwise
elect not to cease its actions, then it will be responsible
for any resulting harm as set forth in Paragraphs 9.8(a)
and (d) above. In no event shall CableData be liable for
any harm resulting from its failure to take action if
Customer did not cease and desist as requested or consent
to CableData's termination of its access. For purposes of
this paragraph, minor harm is defined as performance
related or database corruption of Customer's database and
serious harm is defined as database corruption of other
CableData customers' databases.
10. CHANGES TO THE SOFTWARE BY CABLEDATA
10.1 CableData reserves the right to make changes, updates and
enhancements to the existing Software as determined by
developments in the industry ("Modified Software"). It is
understood that Customer shall not be obligated to convert any of
its Customer Cable Systems to such Modified Software. CableData
must maintain a level of expertise to properly utilize the version
of the Software that is being used by Customer as of the date of
this Agreement. CableData shall make available to Customer all
Modified Software (other than optional modules that are
independently priced and for which there is a separate charge) at
no additional costs to Customer (including no costs for
Installation or Conversion).
10.2 CableData is not responsible for the inability of any software
or other product purchased or licensed from third parties to
function because of changes to CableData Software.
10.3 CUSTOMER AGREES THAT CABLEDATA WILL HAVE THE RIGHT TO LEVY A
SOFTWARE SUPPORT SURCHARGE (AS SET FORTH IN ATTACHMENT B) IN THE
EVENT CUSTOMER IS MORE THAN TWO RELEASES BEHIND THE CURRENT
SOFTWARE RELEASE, provided that CableData has given Customer not
less than ninety (90) days' prior written notice that Customer is
more than two major releases behind the current release and that
CableData intends to impose the surcharge, and provided, further
that, if CableData and Customer agree in writing during the ninety
(90) days after such notice on a mutually agreeable schedule for
migrating Customer to a software release that is less than three
behind the current release, then CableData will not impose such
surcharge unless Customer does not conform to said schedule. As
used herein, "Major Software Release" means release by CableData
to its customer base of a version of the Software which contains
(i) a major revision in database structure or design; or (ii)
modification of more than 50 application programs except bug
fixes; or (iii) changes made pursuant to 100 or more SARs
(Software Assistance Requests) or DCRs (Database Change Requests);
or (iv) addition or modification of two or more major components
or schemes (e.g., rate codes, collections).
10.4 Notwithstanding the provisions of Paragraph 10.3 above,
CableData agrees to waive all software support surcharges for
Customer if Customer migrates all of its systems to DDP/SQL
Release 3.1 or a subsequent release. In the event that Customer
elects to stay on Release 3.1, it will be responsible for paying
the costs of, or for implementing on its own, any modifications or
bug fixes if such modifications or bug fixes have been addressed
in a later Major Software Release.
8
<PAGE>
11. DATA PROCESSING, REPORTS AND STATEMENT PRODUCTION SERVICES
11.1 CableData maintains the Master File Data for all Exclusive
Systems and Inclusive Systems. Prior to a Cutoff Date, Customer
shall transmit Customer's Subscriber data for all Exclusive
Systems and CableData shall transmit Customer's Subscriber data
for all Inclusive Systems to CableData's processing center located
in Sacramento, CA. CableData will then Update the Master File
Data for the Inclusive Systems and the Exclusive Systems and
prepare Customer Statements and Reports.
11.2 WITHIN THIRTY (30) DAYS OF EXECUTION OF THIS AGREEMENT, CUSTOMER
MUST PROVIDE TO CABLEDATA A CUTOFF DATE SCHEDULE AGREEABLE TO
CABLEDATA AND CUSTOMER FOR THE SUCCEEDING TWELVE (12) MONTH PERIOD
FOR EACH CUSTOMER CABLE SYSTEM, AND CUSTOMER MUST UPDATE SUCH
SCHEDULE(S) EACH NOVEMBER FOR THE FOLLOWING CALENDAR YEAR.
11.3 Transmission of all data to and from CableData shall be via
telecommunications (including, but not limited to Transmit-X) or
shipment of tape(s) and shall be at Customer's expense.
11.4 The Processing Cycle shall be no more than an average of 60 hours
over twelve consecutive Processing Cycles. Customer Statement
production will be completed within twenty-four (24) hours after
the successful completion of the Processing Cycle and the approval
to proceed with statement production by Customer. In the event
that CableData does not meet the foregoing standards, then
Customer shall receive a credit equal to $.01 per Subscriber per
Processing Cycle for the affected Cable System until CableData is
within these guidelines.
11.5 In the event Customer requests special processing, CableData
may, at its discretion, increase the Processing Cycle by an
additional twenty-four (24) to forty-eight (48) hours. In no
event should the Processing Cycle exceed one hundred eight (108)
hours except in the case of force majeure or delays caused by
Customer. For purposes of this Paragraph, special processing
means, but is not limited to, extra actions in the statement
production process caused by Customer's requirements, such as hand
inserting of oversized inserts and complex rate increases.
11.6 Customer Reports and Customer Statements and other Products
shall be provided in accordance with options selected by Customer.
11.7 Inclusive Systems will experience an average Terminal Response
Time of six (6) seconds for all On/Line order entry transactions.
11.8 Notwithstanding Paragraph 11.7, at no time will CableData be
responsible for system performance and CableData cannot guarantee
a Terminal Response Time of six (6) seconds if:
(a) Customer fails to adhere to the system use guidelines set
forth on ATTACHMENT F;
(b) Customer fails to follow policy and procedures
established by CableData Regional Offices for Software
operations, maintenance, and utilization as set forth in
ATTACHMENT F;
(c) Customer's terminal or other equipment causes degradation
in response time;
(d) Customer's access to the computer at CableData's Service
Centers pursuant to this Agreement causes degradation in
response time; or
(e) Customer is running applications programs other than
those supplied by CableData and CableData can show that
these applications programs are the cause of the response
time difficulties.
11.9 In the event that the Terminal Response Time does not meet the
criteria set forth in Paragraph 11.7, Customer shall notify
CableData in writing. If CableData fails to meet the criteria to
Customer's satisfaction within sixty (60) days of its receipt of
written notice from Customer, then commencing on the sixty-first
(61st) day, CableData shall take terminal shared response time
measurements twice per day between the hours of 9 a.m.
9
<PAGE>
and 4 p.m. (local time for such Remote Site), at each CableData
Service Center on a random sample basis and submit the results of
such measurements to Customer weekly until system performance
meets the above guidelines. In the event that Terminal Response
Time does not meet the criteria set forth in Paragraph 11.7 by the
earlier of thirty (30) days of the commencement of measurements or
90 days from the date of notification by Customer, then Customer
shall receive a credit equal to $.005 per Subscriber per month for
affected systems until the Terminal Response Time is again within
guidelines set forth in Paragraph 11.7.
12. EQUIPMENT
12.1 CableData supports Customer's equipment pursuant to the terms of
the Inclusive Equipment Maintenance Agreement and the Exclusive
Maintenance Agreement.
13. DOCUMENTATION
13.1 CableData will provide one complete set to Customer per new
Customer Cable System of reference documentation at no charge (the
"Documentation") except applicable sales tax and shipping. In
addition, CableData will provide all updates of the Documentation
to each Customer Cable System at no charge except applicable sales
tax and shipping. Customer can purchase additional copies at the
prices set forth on ATTACHMENT B, plus taxes and shipping.
14. FEES FOR SOFTWARE AND PRODUCTS
14.1 From the date of this Agreement through September 30, 1996, the
Inclusive Systems will pay the fees set forth in ATTACHMENT G.
14.2 From and after June 1, 1996 the Exclusive Systems, and from and
after October 1, 1996 the Inclusive Systems, will be charged the
fees for utilizing the Software and Products as set forth in
ATTACHMENT B. All Inclusive Systems have the option of paying the
Inclusive Bundled Price as set forth in ATTACHMENT B and all
Exclusive Systems have the option of paying the Exclusive Bundled
Price as set forth in ATTACHMENT B. However, any Customer Cable
System may opt to pay for the Software and the Products on an "a
la carte" basis at the prices set forth on ATTACHMENT B.
14.3 All Inclusive Systems will be eligible for the Inclusive Bundled
Price, provided, however, if an Inclusive System has less than
20,000 Subscribers, the cost of any data circuits will not be
included in the Inclusive Bundled Price and such data circuits
must be acquired and paid for separately by Customer at Customer's
own expense.
14.4 Current prices for the paper component of forms and envelopes
are set forth in ATTACHMENT B.
These prices will be adjusted monthly to reflect fluctuations in
the actual price index for relevant paper products. The initial
invoice will reflect cumulative changes in paper prices from the
date on which Customer's contractual pricing was established, as
set forth in ATTACHMENT B (the "Base Date and Index(es)"), to the
first date of production of Customer's statements. On an ongoing
basis, each month's changes in paper pricing will be applied to
the following month's invoices.
Paper prices will increase or decrease on the basis of a monthly
aggregated index that reflects, on a weighted basis, Customer's
usage of paper products (i.e., forms and envelopes). The index,
which will be provided to CableData by its statement production
vendor, will compare weighted daily averages of the appropriate
indexes, based on the published prices of the leading paper mills,
to the weighted daily averages for the preceding month. The
applicable indexes for forms and envelopes, and the relative
weight given to each index for the purpose of calculating the
monthly aggregated index, are set forth in ATTACHMENT B. In the
event that there is a change in the availability, or Customer's
usage, of paper products, CableData will notify Customer of the
effect of such change, and Customer will have the right to audit
the basis for any modification to the indexes to reflect such
changed circumstances.
10
<PAGE>
14.5 Printing and graphics, inserts, supplies and other materials and
services not listed in ATTACHMENT B shall be available at then
current CableData prices. Said prices are subject to change
without notice. Customer may purchase such forms, supplies, and
materials from other vendors, provided materials which impact the
statement production process (including inserts) or the Software
meet CableData's reasonable specifications necessary to ensure
proper operation.
14.6 Customer agrees that CableData will have the right to charge in
accordance with CableData's then current prices for special
projects requested by Customer and performed for Customer by
CableData that are outside the scope of day-to-day customer
service.
15. FEE INCREASES
15.1 Commencing on January 1, 1998 and annually thereafter, the
prices set forth in ATTACHMENT B shall be subject to increase upon
forty-five (45) days' prior written notice, provided however that
the percentage of such increase or increases shall not exceed the
percentage increase in the Consumer Price Index for All Urban
Consumers published by the U.S. Department of Labor ("CPI-U").
The initial increase, effective January 1, 1998, shall reflect the
CPI-U increase for the calendar year 1996; the CPI-U increase for
1997 will be reflected in Customer's prices commencing January 1,
1999. Notwithstanding the foregoing, there may not be more than
one increase in any twelve (12) month period.
16. DISCOUNTS AND OTHER PRICING COMPONENTS
16.1 Customer shall be entitled to the volume-based discounts off the
Bundled Prices as set forth below:
DDP/SQL Subscriber Volume Discounts:
Includes all Exclusive and Inclusive subscribers
Number of Subscribers: Discount Rate Applied to
Bundled Price Per Subscriber:
0,000,000 to 1,999,999 [ * ]
2,000,000 to 2,999,999 [ * ]
3,000,000 to 3,999,999 [ * ]
4,000,000 to 4,999,999 [ * ]
5,000,000 to 5,999,999 [ * ]
6,000,000 to 6,999,999 [ * ]
7,000,000 to 7,999,999 [ * ]
8,000,000 to 8,999,999 [ * ]
9,000,000 to 9,999,999 [ * ]
10,000,000 to 10,999,999 [ * ]
11,000,000 to 11,999,999 [ * ]
12,000,000 and Over [ * ]
16.2 The Exclusive Bundled Price set forth in ATTACHMENT B (as
adjusted as provided in this Agreement) includes a discount of
[ * ] per Subscriber per month for Customer providing
customer service support for the Software and the Products to
each Customer Cable System ("Customer Support Discount").
CableData will then support Customer only through the
processing staff located at Customer's Computer Facility. This
Customer Support Discount shall remain in effect so long as the
following criteria are met and adhered to:
(a) Customer maintains at least three (3) key DDP/SQL
liaisons in place (or such other number as the parties
shall mutually agree in writing) that have attended and
passed all appropriate CableData Education Center and
advance training courses as mutually agreed to by the
parties;
(b) Customer's liaisons provide front-line customer support
to each Customer Cable System twenty-four (24) hours per
day, seven (7) days per week;
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
11
<PAGE>
(c) Customer reviews all requested DDP-Financials Type 30
changes from the individual Customer Cable Systems for
completeness and accuracy prior to forwarding the completed
paperwork to CableData for processing;
(d) Customer completes all Rate Increase/Prorate Run projects
for the individual Customer Cable Systems by preparing a
letter to CableData defining the proposed project and
filling out and submitting to CableData all of the
necessary paperwork for Type 30 changes and message
selects; makes all changes to the DDP Director file at the
appropriate time, runs the program(s), reviews the results
on DDP and sends the files to DDP-Financials at the time of
cutoff; and reviews and completes CableData-provided
checklists and signs off on the DDP-Financials Reports
prior to releasing the bills and running the DDP update
program;
(e) Customer reviews all requests for message selects,
alters, or other special DDP-Financials projects from the
individual Customer Cable Systems; prepares a letter to
CableData defining the project and including paperwork for
all required changes on DDP-Financials; and if DDP is
involved, make any necessary changes to the Director file
parameters, run the appropriate program(s), review the
results and forward the files to DDP-Financials at the time
of cutoff;
(f) Customer handles customer service support conversion as
well as splits and merges for all Software functions
including addressability for all Systems, with CableData
assisting in problem solving, provided that CableData
assumes responsibility for any and all problems requiring
use of the Dump Modification or Move Group programs except
for those specific problems for which CableData has given
Customer written permission to fix; and Customer performs
file diagnostics, history purges, and customer purges on a
regular basis; and
(g) Customer performs all system maintenance and database
management functions, including proper back-up procedures,
space maintenance, file spreads, CPU balancing, and port
configurations; and performs disk defrags and file purges
regularly, provided that CableData continues to provide
database administration support to Customer's database
management personnel.
CableData will continually review Customer's ability to qualify
for the Customer Support Discount and reserves the right to
discontinue the Customer Support Discount if Customer has three
(3) Violations in any one (1) month or if Customer has any number
of Violations in three (3) consecutive months. The Customer
Support Discount may be reinstated after one (1) month with no
Violations. CableData shall notify Customer in writing of any
Violations. Customer shall have thirty (30) days to cure any
documented substantial deficiencies prior to discontinuance of the
Customer Support Discount.For purposes of this paragraph, one
Violation shall occur when Customer has not complied with one of
the foregoing subparagraphs 16.2(a) through (g).
Customer also agrees that if any Violation requires CableData to
provide support for repair of database discrepancies, Customer
shall pay CableData's then-current charges for such repair as well
as any additional expenses which may be incurred by CableData.
CableData shall do all database repairs.
16.3 CableData shall offer Customer a discount of [ * ] per
Subscriber per month off the Inclusive Bundled Price for each
Customer Cable System for which Customer (i) notifies CableData's
National Accounts Manager in writing of its election under this
Paragraph 16.3, and (ii) purchases any equipment located at such
Customer Cable System which is owned by CableData at a price to be
negotiated in good faith by Customer and CableData. In the event
Customer elects to receive this special discount, equipment rental
shall not be part of the Products offered under the Inclusive
Bundled Price. In addition, Customer Cable Systems electing to
receive this special discount will not qualify for the special
rental rate of [ * ] of the retail value of the equipment as
outlined in the current Master Equipment Rental Agreement. Any
equipment rental requests for such Systems, if granted, will be at
the standard CableData short term rental rate of [ * ] of the
retail value of the rented equipment on a monthly basis.
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
12
<PAGE>
16.4 CableData agrees to the following pricing concessions with
regard to the pricing in ATTACHMENT B:
(a) CableData shall provide the update process for third and
fourth Processing Cycles (Product Codes 0467 and 0468) to
Customer at [ * ].
(b) CableData shall provide a credit of [ * ]
[ * ] per Subscriber per month against the Postage
Presort Fee (Product Code No. 0989) set forth in
ATTACHMENT B.
(c) CableData shall provide a PPV credit to Exclusive Systems
using PPV of [ * ] per transaction
against the PPV Support Fee (Product Code 0458) set forth
in ATTACHMENT B, provided Customer provides front-line PPV
support for Exclusive Systems twenty-four (24) hours per
day, seven (7) days per week.
(d) CableData shall provide a credit of [ * ] per
data circuit included in the Inclusive Bundled Price for
each Inclusive System that communicates to CableData via
Customer's corporate LAN network (rather than through a
primary data circuit provided by CableData), provided (A)
Customer gives not less than 60 days prior written notice
of its intent to move an Inclusive System to Customer's
corporate LAN network and (B) Customer is responsible for
all deinstallation from the primary data circuit provided
by CableData and installation on the Customer's corporate
LAN network .
(e) CableData shall insert one mailer printed by CableData
into Customer Statements on a monthly basis for each
Customer Cable System [ * ] for the inserting
provided that the insert meets the criteria of a standard
CableData insert (as outlined in the Insert Order Guide).
If a Customer Cable System should have more than one insert
task per month, CableData will absorb the costs for
inserting the least expensive mailer and Customer shall
reimburse CableData for all additional inserting charges.
16.5 CableData agrees that [ * ] will be
charged for new and additional hardware at Customer's Computer
Facilities located in Fairfield, NJ, Englewood, CO, and Livermore,
CA (and such other Computer Facilities as the parties shall
mutually agree in writing) for hardware purchased from CableData.
All other installation and deinstallation fees will be charged as
mutually agreed to by the parties.
17. TAXES
17.1 Customer shall pay, or reimburse, CableData for any tax or
assessment, including but not limited to, all sales, use, rental,
property, gross receipts, excise, or other taxes, duties, or
charges imposed by any government body or agency or subdivision
thereof (collectively "governmental body") by virtue of
CableData's interest in or sale, provision, or use of any services
or tangible personal or intangible property pursuant to the terms
of this Agreement. Customer shall pay to CableData or the
appropriate governmental body, as the case may be, such tax or
assessment, together with any fines, penalties or interest
thereon, within thirty (30) calendar days of the date of the
invoice by CableData or the date on which Customer received notice
of such requirement from the applicable governmental body,
whichever is earlier.
17.2 Notwithstanding the provisions of Paragraph 17.1, Customer shall
not be responsible for paying or reimbursing CableData for
corporate franchise tax, capital tax, net worth tax, or taxes
measured by reference to CableData's net income.
18. PAYMENT TERMS
18.1 CableData shall invoice Customer monthly for services and
products, taxes and other charges and, unless otherwise noted,
Customer shall be billed in arrears on the last day of the month.
18.2 Standard payment terms are net cash, without discount, due and
payable within thirty (30) days from the date of the invoice. In
the event that Customer does not render full payment of all
undisputed amounts within thirty (30) days of the due date,
CableData may, after notifying Customer, cease any and all
services until such account is brought to a current status.
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
13
<PAGE>
18.3 If Customer fails to pay any charges when due and payable,
Customer agrees that CableData will have the right to invoice and
Customer will pay a late payment service charge of 1.5 percent per
month, but not in excess of the lawful maximum, on the past due
balance, excluding bona fide disputed charges.
18.4 In the event that Customer should dispute a particular charge,
Customer will notify CableData's Accounting Department in writing
of the disputed charge and the reason for the dispute. CableData
will attempt to resolve such dispute as soon as possible. In all
events, Customer is obligated to pay all undisputed charges on
each invoice when due. Charges not disputed by Customer in
writing within six (6) months of invoice date shall be final and
non-disputable. Customer agrees to pay CableData as stated in
this Section, with the exception of those charges disputed in good
faith. Payment of the disputed charges may be withheld until the
disputed portion is resolved.
18.5 Notwithstanding the foregoing, postage prepayments shall be
invoiced, paid and otherwise handled pursuant to the provisions
set forth in Section 19.
19. POSTAGE
19.1 CableData shall send a postage invoice to each Remote Site at
least three weeks prior to the Cutoff Date which invoice shall
indicate the estimated postage necessary to mail such Remote
Site's Customer Statements. The estimate shall be an amount equal
to the number of Customer Statements to be prepared for such
Remote Site for that month multiplied by an average postage rate
paid during the prior month by such Remote Site. This estimated
postage amount will be adjusted for the actual postage paid for
mailing such Customer Statements on the following month's postage
invoice. The estimated postage, as adjusted, shall be prepaid no
later than one (1) week prior to the Cutoff Date. In the event
the Remote Site does not prepay postage as set forth above,
CableData reserves the right to hold such Remote Site's Customer
Statements until sufficient postage prepayment is received.
19.2 In the event of an increase in U.S. postage rates, the postage
prepayment shall be increased by the amount of such postage rate
increase.
19.3 CableData's postage payments may be subject to audit by the U.S.
Postal Service. In the event that such an audit reveals a
discrepancy between amounts paid and amounts actually due for
postage, Customer will reimburse CableData for any payment
deficiencies for which it is liable and CableData will refund any
excess payments due to Customer.
20. NON-DISCLOSURE OBLIGATIONS
20.1 CableData agrees that all information disclosed by Customer
during performance of this Agreement shall be considered
proprietary, to be held in confidence and used only in performance
of this Agreement. No information provided by Customer under this
Agreement shall be duplicated or furnished to another party
without prior written consent of Customer except as required by
law, provided CableData provides Customer with prompt notice of
such disclosure requirement and cooperates with Customer in
seeking to obtain any protective order or other arrangement
pursuant to which the confidentiality of such confidential
information is preserved. CableData will exercise the same
standard of care to protect Customer's proprietary data as is used
to protect its own proprietary data from unauthorized disclosure.
CableData warrants that no other CableData customer can access or
use any information provided by Customer under this Agreement.
20.2 Customer understands CableData's representations with respect
to the proprietary nature of the Software designed and developed
solely by CableData. Customer agrees to exercise reasonable care
to prevent unauthorized disclosure of any information that could
be injurious to the business operations and welfare of CableData.
Customer further acknowledges that the Software and Products of
CableData are provided in confidence and Customer acknowledges
that CableData represents that the Software and the Products are
trade secrets of CableData and will be so protected by Customer.
Customer agrees to maintain the Products in confidence and not to
disclose any portion of the Products to any third party, and to
utilize its reasonable efforts to protect the contents of the
Products or any part thereof from unauthorized disclosure by its
agents,
14
<PAGE>
employees or representatives, unless such Software, Products or
other information (i) is or becomes generally available to the
public other than as a result of an act or omission in violation
of this Paragraph; (ii) becomes available to Customer on a non-
confidential basis from a source, other than CableData, which is
not bound by any confidentiality agreement; (iii) was already
known by Customer on a non confidential basis, as evidenced by
Customer's records, prior to the disclosure to Customer; or (iv)
is at any time furnished to a third party by CableData without
restrictions on the third party's rights to disclose. Customer
agrees to take appropriate action, by notice to its employees and
all others who are permitted access to the Products, in order to
satisfy its obligations under this Agreement.
20.3 The parties agree that neither party will be held responsible
for the other party's information of a proprietary nature which is
currently in the public domain and is common knowledge.
21. TITLE
21.1 Customer recognizes and agrees that, during the Term and
thereafter, title to, ownership of, and all proprietary and
intellectual property rights in the Products licensed under this
Agreement, and all copies and derivative works thereof, will at
all times remain in CableData. Customer agrees to use the Products
only as provided in this Agreement. The existence of a copyright
notice shall not cause, or be construed as causing, a Product to
be a published copyrighted work or to be in the public domain.
Customer agrees that it will not make or have made any more copies
of the Products or any part(s) thereof than are necessary for the
use hereunder by Customer and that it will cause such copies upon
reproduction to have the same copyright or proprietary legends
that appear on the Products or any part(s) thereof. Customer
recognizes that certain parts of the Products may have been
copyrighted by CableData or by third parties. Customer agrees
that it will affix to any and all reproductions of those parts of
the Products which are copyrighted, the form of copyright notice
indicated by CableData and/or third parties.
22. INSPECTION
22.1 It is understood that Customer may inspect all work being
performed under this Agreement to the extent practical at all
reasonable times and places. However, it is also understood that
such inspections by Customer shall not be performed in any way
that shall unduly delay the work being performed. Reasonable
facilities and assistance shall be provided for Customer's
inspection if any inspection is made by Customer on the premises
of CableData. Such facilities and assistance shall be provided
without extra charge. However, should Customer perform inspection
at a place other than the premises of CableData, such inspection
shall be at the expense of Customer.
23. TERMINATION
23.1 Notwithstanding any other provision herein, either party shall
have the right to terminate this Agreement if the other party
fails to comply with any of its material obligations under this
Agreement. Should the non-defaulting party elect to exercise this
right to terminate for nonperformance, it must be done in writing
specifically setting forth those items of nonperformance. The
other party will then have thirty (30) days from the receipt of
notification to cure the default (fifteen (15) days if the default
is non-payment). Should the defaulting party fail to correct
these items of nonperformance, then the non-defaulting party shall
have the right to terminate this Agreement. Termination of this
Agreement pursuant to this provision shall be without prejudice to
any other remedies either party may have hereunder.
23.2 Upon expiration of the Term of this Agreement or upon the
termination of this Agreement or of any license granted hereunder
for any reason, all rights of Customer to use the Software and
Products will cease and provided that CableData has reimbursed
Customer for any postage prepayments in its possession at the time
of termination, Customer will immediately (i) purge all copies of
all Products from all computer processors or storage media on
which Customer has installed or permitted others to install such
Products and destroy all hard copies of any Products, and (ii)
when requested by CableData, certify to CableData in writing,
signed by an officer of Customer, that all copies of the Products
have been returned to CableData or destroyed and that no copy of
any Product remains in Customer's possession or under its control.
15
<PAGE>
23.3 CableData will, within ten (10) days after termination of this
Agreement, return Customer's most recent Master File Data,
provided Customer has paid in full CableData's fee for the return
of the Master File Data as set forth in ATTACHMENT B and all
outstanding monies owed. In the event there are outstanding
balances due, CableData may withhold the Master File Data until
said balances are paid in full. If Customer should reasonably
dispute any portion of the amount claimed as outstanding by
CableData, then CableData shall return Customer's Master File Data
within 10 days after Customer pays the undisputed portion of the
balance to CableData.
23.4 Any termination pursuant to this Section 23 shall be in writing
to the address of the other party as indicated on the first page
of this Agreement or to such other address as the other party may,
by prior written notice, have specified.
23.5 If fifty-one percent (51%) or more of the voting stock of
CableData is acquired or held, during the Term, by another MIS
vendor or by a cable company or by a telephone company
("Purchaser"), then Customer may, within one hundred twenty (120)
days of receipt of notice from CableData of such acquisition, or
if no notice is received from CableData, within ten (10) days
after Customer obtains knowledge of such a transaction, terminate
this Agreement by giving written notice to CableData.
23.6 CableData shall deposit and maintain in the possession of a
mutually agreed upon qualified escrow agent a copy of all versions
of Software currently used by the Customer (including source code,
compilers, interpreters, utilities, documentation, and operating
system code) necessary for Customer to assume maintenance of such
Software. CableData shall provide Customer with a written notice
of deposit. If CableData is in material default hereunder and
said material default remains uncured for a period of fifteen (15)
days after written notice from Customer to CableData or if fifty-
one percent (51%) or more of the voting stock of CableData is
acquired or held by a Purchaser, then Customer shall be allowed to
obtain such escrowed materials in order to continue operating the
Software for the Initial Term or for twelve (12) months, whichever
is greater and Customer or such Purchaser shall provide all
necessary personnel and training necessary for Customer to fully
utilize such software. Escrow expenses shall be borne by
CableData. In the event Customer obtains access to the escrowed
materials for reason other than CableData's breach of this
Agreement, then it shall pay to CableData a license fee, to be
quoted by CableData and agreed to by Customer, for access to the
materials.
24. INDEMNIFICATION; LIMITATION OF REMEDY
24.1 CableData shall maintain, in machine readable form, in off-site
premises, a duplicate copy of Customer's Master File Data as most
recently updated, to enable regeneration of Customer's DDP
Financials Master File Data in the event of loss of such items due
to machine failure, conduct of CableData's employees, fire or
other calamity at CableData's billing facility. With respect to
Exclusive Systems, Customer shall maintain duplicate backup tapes
as provided for in the Software in the event of loss of such items
due to the reasons stated above.
24.2 Neither CableData nor Customer shall be considered in default
due to any failure in performance of this Agreement, in accordance
with its terms, should such failure arise out of causes beyond
their control and without their fault or negligence.
24.3 In the event of an error or omission, whether human or
mechanical, on the part of CableData or its employees, CableData
shall reprocess the Master File Data and prepare new Customer
Statements, Reports or inserts at no extra cost to Customer to
correct said error or omission and shall pay for the cost to
remail any Customer Statements or inserts that were defective.
CableData's liability to Customer for any losses or damages,
direct or indirect, arising out of this Agreement, except as
provided in Paragraph 25.1, shall not exceed the total amount
billed or billable to Customer for the performance of the
particular task which gave rise to the loss or damage. CableData
shall not be liable for any special or consequential damages in
any event.
24.4 EXCEPT AS PROVIDED IN THIS SECTION 24, NO WARRANTY, EXPRESS OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IS MADE WITH
RESPECT TO THE PRODUCTS AND SERVICES PROVIDED HEREUNDER.
16
<PAGE>
25. INFRINGEMENT
25.1 CableData warrants that the Software and the Products and all
components thereof, and their use in the manner contemplated by
this Agreement, do not and will not result in any liability, loss,
cost, damage or expense (including reasonable attorneys' fees) to
Customer for infringement upon any right, tradename, trademark,
copyright, patent, trade secret or other intellectual property
right. If any action is instituted against Customer based upon a
claim that the Software and the Products or any component or use
thereof infringe any right, tradename, trademark, copyright,
patent, or other intellectual property right ("Infringement
Action"), CableData shall, for and on behalf of Customer,
indemnify Customer for any losses, damages, claims or liabilities
resulting from such infringement and shall defend Customer at
CableData's expense against such Infringement Action. Customer
shall promptly notify CableData in writing of said Infringement
Action. To the extent such Infringement Action solely involves
the Software and Products, CableData shall have sole control of
the defense and any settlement negotiations except with respect to
any request for an injunction. To the extent such Infringement
Action involves the Software and Products as well as other
Customer subject matter, CableData and Customer agree to cooperate
in the defense and any settlement negotiations in such
Infringement Action; provided that, in the event CableData and
Customer cannot reach agreement then CableData shall have sole
control over only that portion of the Infringement Action
involving Software and Products and Customer shall have sole
control over the remaining portions of such Infringement Action.
In the event Customer's use of the Software is enjoined as a
result of the Infringement Action, CableData shall procure for
Customer another vendor providing the same or similar services as
CableData and CableData shall pay all reasonable costs and
expenses in connection with such procurement and conversion to
such vendor.
25.2 CableData shall have no liability to Customer for any
infringement action or claim which would not have occurred but
for, and which is based upon or arises out of:
(a) Any modification of the Products by Customer without the
express written permission of CableData; or
(b) Any use of the Products in combination with (i) any other
system, equipment or software which is not furnished by
CableData or approved by CableData in writing or (ii) any
peripheral equipment, such as PCs, printers or
communication devices, which may reasonably be anticipated
to be used by Customer.
25.3 If any action is instituted against CableData based upon a claim
that any materials such as artwork or inserts provided by Customer
to CableData infringe a United States patent, copyright or
trademark, Customer shall, for and on behalf of CableData, defend
and indemnify such action at Customer's expense, provided
CableData promptly notifies Customer in writing of said action and
Customer has sole control of the defense and any settlement
negotiations.
26. DISASTER RECOVERY ASSISTANCE
26.1 The purpose of this Section 26 is to outline what CableData will
do to help Customer recover from a system loss (referred to as a
disaster) at one of Customer's Computer Facilities. Outlining our
proposed actions, it is necessary to establish the following:
(a) CableData will as a priority, in good faith and as
promptly as is possible, order, arrange for shipment and
install new equipment to get the Customer back up and
running.
(b) CableData will invoice Customer and Customer will pay for
work performed and hardware installed.
(c) It shall be the Customer's responsibility to:
(i) Procure a new computer room or replace/repair
existing computer room.
(ii) Order new or repaired phone lines.
(iii) Have usable backup files upon which to rebuild the
database.
17
<PAGE>
(iv) Notify CableData of a total system loss and
officially request a new system.
26.2 CableData will help Customer recover from a disaster, subject to
Customer's payment of CableData's standard time and materials
rates (unless the disaster is the result of CableData's actions),
as follows:
(a) Immediately after notification of a total system loss by
Customer and receipt of Customer's official written or
faxed request for a new system, CableData will source,
procure and arrange to have equipment shipped.
(b) After replacement equipment has been sourced, it will be
shipped to the location of the new computer room, provided
that a computer room is available to receive this hardware
(either an existing, a new permanent or an interim computer
room).
(c) A Tandem field engineer will be sent on-site to prepare
for installation of the new equipment when it arrives.
(d) When the new equipment arrives, an appropriate number of
field engineers will be made available for the installation
of the new hardware and to rebuild the database.
(e) If CableData is unable to source, arrange for shipment
and install new equipment within seven (7) business days of
receipt of official notification and request from Customer
for new equipment, CableData will, to the extent possible,
provide Customer with emergency data processing through
CableData's Sacramento headquarters or one of its regional
data centers at Customer's cost and expense. If CableData
is either unable to supply hardware or provide emergency
data processing, then Customer may (after the
aforementioned seven (7) days have expired), purchase
necessary emergency recovery equipment from third parties
until such time as CableData can supply hardware or provide
said data processing, provided, however that Customer shall
not directly purchase from Tandem Computers, Inc., Penril
or Fujitsu unless a dissolution of the relationship has
occurred between CableData and the manufacturer in
question, which in turn prevents Customer from purchasing
necessary equipment from CableData. CableData will source,
arrange for shipment and install any in-stock equipment to
a designated Customer site within five (5) business days.
If equipment must be purchased from a third-party vendor,
the equipment will be shipped (by Customer) to the new
permanent or interim computer room and CableData will
provide an appropriate number of field engineers to install
the new equipment at Customer's expense.
(f) At such time as Customer notifies CableData of a natural
disaster, CableData will, to the best of its ability, give
Customer an estimate within twenty-four (24) hours as to
when the necessary equipment will arrive at the appropriate
site. If this estimate is longer than the aforementioned
seven (7) business days, Customer may purchase equipment
from a third-party vendor..
(g) Upon completion of the installation, CableData personnel
will rebuild the database to the extent possible using the
Customer's off-site backup packs or tapes. The database
will be rebuilt to the point of the most recent usable
backup.
(h) Although it is the Customer's responsibility to procure
new phone service, CableData will exert any influence it
may have to speed up this process.
(i) If new leased data lines are not available in the new
computer location(s), CableData shall, if possible, help
establish communication using regular dial-up modems to be
used with dial-up lines.
26.3 It is the intention of the parties hereto to be full
participants in the planning and execution of a disaster recovery
plan. Both parties shall use their best efforts to ensure thate
the affected data center is back up and running at the earliest
possible date.
18
<PAGE>
27. SUMMITrak.
27.1 CableData acknowledges that Customer is in the process of
developing a subscriber management software package known as
SUMMITrak ("Summit"). In connection therewith, Customer will be
removing Customer Cable Systems from this Agreement in order to
place them on Summit. CableData will assist Customer in
deinstalling any hardware identified by Customer as no longer
necessary for its operations. Such deinstallation shall be
charged on a time and materials basis at hourly rates as mutually
agreed to by the parties.
27.2 CableData will waive the consultation fee for deconverting any
Customer Cable System to another vendor, but will not waive
consultation fees for deconversions to Summit until it has
determined what its exposure will be, in terms of resources and
costs, for Summit deconversions and has concluded that such
exposure is minimal. CableData and Customer will negotiate in
good faith any fees to be charged by CableData in connection with
a deconversion to Summit. All Master File Data return charges and
other charges for deconversions shall be as set forth in
ATTACHMENT B.
28. GENERAL
28.1 The parties agree that in the event it is necessary to employ
attorneys to enforce the terms of this Agreement, the prevailing
party in any lawsuit shall be entitled to an award of reasonable
attorneys' fees and court costs.
28.2 This Agreement may not be assigned without prior written mutual
consent of Customer and CableData, which consent shall not be
unreasonably withheld, provided that Customer may assign this
Agreement to any wholly-owned subsidiary or a majority-owned or
controlled (more than fifty percent (50%)) affiliate without the
consent of CableData.
28.3 This Agreement may be amended only by an instrument in writing,
executed by Customer and CableData.
28.4 This Agreement will be governed in all respects by the laws of
the State of California.
28.5 The headings of the several paragraphs are for convenience of
reference only and are not intended to be part of, or affect the
meaning or interpretation of, this Agreement.
28.6 This Agreement and Attachments represent the entire agreement
between the parties and supersede and replace all prior oral and
written proposals, communications and agreements with regard to
the subject matter hereof between Customer and CableData.
28.7 Section 20 (Nondisclosure), Section 21 (Title), Section 24
(Limitation of Remedy) and Section 25 (Infringement) shall survive
the termination of this Agreement.
28.7 Section 20 (Nondisclosure), Section 21 (Title), Section 24
(Limitation of Remedy) and Section 25 (Infringement) shall survive
the termination of this Agreement.
28.8 Except for invoices and billing related communications, any
notice, request, demand, waiver or other communication required or
permitted to be given hereunder by either party to the other shall
be in writing and shall be deemed given when addressed as set
forth on the first page of this Agreement to the attention of
National Account Manager, with a copy to the Legal Department, in
the case of CableData, and Clark Parr, in the case of Customer,
with a copy sent to the same address to the attention of the legal
department, and (1) hand delivered, or (2) sent by facsimile
transmission to (916) 636-5645 in the case of CableData or (303)
388-3207 in the case of Customer, or (3) sent by first class or
certified, postage prepaid United States Mail or (4) sent by
overnight carrier (such as Federal Express or DHL). If either
party changes its address or its designated contact person, it
shall so advise the other party in writing and any notice
thereafter required to be given shall be sent as specified herein
to such new address. All notices will be deemed to have been
received on the date of delivery or on the third business day
after mailing in accordance with this Section, except that any
notice of a change of address will be effective only upon actual
receipt.
19
<PAGE>
28.9 In the event that Customer purchases any other cable company
("Seller") and the Seller's systems are bound by a then-current
contract with CableData, then Customer may, by providing CableData
with proof of such purchase and written notification of its
election to bring the Seller's systems under this Agreement, add
the Seller's systems to this Agreement and terminate the Seller's
agreement with CableData without penalty.
28.10 The individuals signing below represent that each is authorized
to bind his or her party to this Agreement.
28.11 All agreements between CableData and Customer or any of their
affiliates regarding software development or data access must be
reviewed and approved by the Customer representative set forth in
Paragraph 28.8.
The following attachments are a part of this Agreement and are hereby
incorporated by reference:
Attachment A: Software Description
Attachment B: Selected Products and Services - Pricing
Attachment C: Customer's Computer Facilities and Remote Sites
Attachment D: Standard Fixed Reports - DDP Financials
Attachment E: Tandem Sublicense Terms and Conditions
Attachment F: Program Run Guidelines (Inclusive Systems)
Attachment G: DDP/SQL Inclusive Pricing Through September 30, 1996
Attachment H: Discontinued Products and Services
Attachment I: Training Courseware Listing
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
1st day of June, 1996.
TCI CABLE MANAGEMENT
CORPORATION CABLEDATA, INC.
By: /s/ James C. Castle By: /s/ James C. Castle
-------------------------------- --------------------------------
Name: James C. Castle Name: James C. Castle
------------------------------ ------------------------------
Title: S.V.P. Title: Chairman & CEO
----------------------------- -----------------------------
(must be an authorized signer) (must be an officer)
Date: 6-5-96 Date: June 7, 1996
------------------------------ ------------------------------
20
<PAGE>
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT A
SOFTWARE DESCRIPTION
DESCRIPTION:
1. On-Line Application Software (DDP/SQL) - The core applications of DDP/SQL
including: Order Entry, Dispatch, Check-in, Routing, and Parameter
Maintenance Programs.
2. Addressability Features - These features allow a cable system that supplies
converters that store unique digital addresses on a computer chip to
communicate with the converter by sending addressable commands.
3. Pay-Per-View Features - These programs maintain information about events
that a cable system plans to offer customers on a special order or a "pay-
per-view" basis. These programs charge customers for PPV, schedule events,
and provide a method to record and analyze sales and marketing activities.
Automatic Number Identification (ANI) - Allows a system to receive inbound
transactions or inquiries without the need of a CSR to process the orders.
4. National ANI allows the MSO to create a national addressable transaction
interface.
5. Electronic Funds Transfer (EFTS) - Provides the ability to automatically
debit a customer's checking account for monthly payments.
6. Audio Response Unit (ARU) - Allows a system to receive inbound transactions
or inquiries without the need of a CSR to process the orders. The ARU unit
resides at the system site.
7. Consolidated Reporting (Universal Select) - The Universal Select program
provides virtually unlimited access to data stored in the DDP/SQL tables
with a single report run. Consolidated reporting for MSOs with multiple
systems sharing a single computer is built into the Universal Select
program.
8. Regionalization Features - Give MSOs access to all subscriber accounts
across their multiple system offices via zip code, address, area code and
phone number, and account number.
9. Collections Module - Sophisticated program for managing delinquent customer
accounts and tracking the effectiveness of collection agency activities.
10. DDP/SQL Quickscreen Plus Emulator - Provides the dedicated DDP/SQL
functionality resident on DDP/SQL terminals to operate on desktop PC or
Macintosh workstations.
21
<PAGE>
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT B
SELECTED PRODUCTS AND SERVICES - PRICING
DDP/SQL EXCLUSIVE PRICING:
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
Exclusive DDP/SQL Bundled, Includes [ * ] [ * ]
5410 DDP/SQL License & Maintenance Fees
0442 DDP/SQL Customer Support Fee
0207 DDP Financials Package
0348 Benchmark II Panel Statement (one/sub/month)
5081 Addressability - One Way: License and Maintenance
5085 Audio Response Unit (ARU) Interface: License & Maintenance
0440 Addressability Fee Customer Support Fee
5023 DMX Splitter Program ($DMSS)
5024 DMX Program ($DMX)
5025 DMX National Authorization Center Addressable Package
0565 Corp Merge - Two Corps Into One Corp For New Business Only (excluding
travel & expenses)
0566 Corp Merge - Each Additional Corp Over Two For New Business Only
(excluding travel & expenses)
0568 Corp Split - One Corp Into Two Corps Where Corps Stay on CableData
(excluding travel & expenses)
0571 Corp Split - Each Additional Corp Over Two Where Corps Stay on
CableData (excluding travel & expenses)
0570 Cycle Split/Merge
0575/ Rate Increase - Simple & Complex
0584 Rate Increase - Automated Rate Change
0576
0577 Tax Project Fee
0572 Bi-Monthly Split
0551 DDP Phone Number Clean Up Run
0595 Transmit-X License & Maintenance Fee
0596 Transmit-X Processing Fee
0506 Message Select Set Up Charge
0573 Message Select Programming/Processing
0508 Message Select Programming - Activate
0510 Message Printing Charge
0336 Statement Logo Set Up Charge
0345 Statement Logo Programming Charge - New or Change
0311/ Original Microfiche Produced & Fiche Duplicates
0314
0477 Records Passed
0279 Fiche Report - Original Fiche Produced
0373 MSO Data Tape Transaction Transfer Fee
0365 MSO Data Tape Computer Tape
0467/ Cutoff & Update (4 cycles per month)
0468
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
22
<PAGE>
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
5423 DDP/SQL Support Surcharge* [ # ]
Statement Processing - Paper Component [ # ]
--------------------------------------
Base Date: May 1996
Benchmark II Panel/Spectrum II [ # ]
Benchmark III Panel/Spectrum III [ # ]
Benchmark IV Panel/Spectrum IV [ # ]
Cablegram [ # ]
Base Index: Benchmark II/Spectrum II = .715107
Base Index: Benchmark III/Spectrum III = .718790
Base Index: Benchmark IV/Spectrum IV = .724211
Cablegram = .724409
</TABLE>
*Persuant to the provisions outlined in section 10.5.
NOTE: Bundle price is on a per corp city basis. No discount of the
bundled price will be given for non-use of products or services
included.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
23
<PAGE>
DDP/SQL INCLUSIVE BUNDLE:
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
5763 Inclusive DDP/SQL Bundled, Includes [ * ] [ * ]
5410 DDP/SQL License & Maintenance Fees
0442 DDP/SQL Customer Support Fee
0207 DDP Financials Package
0467 Cutoff (4 cycles per month)
0468 Update (4 cycles per month)
0560 House Disk Storage
5601 Subscriber Disk Storage
0594 Transmit-X Processing Fee (2 cycles)
0348 Benchmark II Panel Statement (one/sub/month)
5730 Addressability - One Way: License, Maintenance, Support
5707 Audio Response Unit (ARU) Package: License & Maintenance
5023 DMX Splitter Program ($DMSS)
5024 DMX Program ($DMX)
5025 DMX National Authorization Center Addressable Package
0565 Corp Merge - Two Corps Into One Corp For New Business Only (excluding
travel & expenses)
0566 Corp Merge - Each Additional Corp Over Two For New Business Only
(excluding travel & expenses)
0568 Corp Split - One Corp Into Two Corps Where Corps Stay on CableData
(excluding travel & expenses)
0571 Corp Split - Each Additional Corp Over Two Where Corps Stay on CableData
(excluding travel & expenses)
0570 Cycle Split/Merge
0575 Rate Increase - Simple
0576 Rate Increase - Complex
0584 Rate Increase - Automated Rate Change
0577 Tax Project Fee
0578 Alter Runs Programming
0572 Bi-Monthly Split
0551 DDP Phone Number Clean Up Run
0506 Message Select Set Up Charge
0573 Message Select Programming/Processing
0508 Message Select Programming - Activate
0510 Message Printing Charge
0336 Statement Logo Set Up Charge
0345 Statement Logo Programming Charge - New or Change
0311 Original Microfiche Produced
0314 Fiche Duplicates
0477 Records Passed
0279 Fiche Report - Original Fiche Produced
0373 MSO Data Tape Transaction Transfer Fee
0365 MSO Data Tape Computer Tape
5502 Computer Access (see A & C below)
5262 Q/S Plus Emulator Maintenance (see A below)
5852 Equipment Rental (see B below)
Installation and Monthly Lease For Primary Data Circuit
Equipment Rental and Maintenance Charges as Follows:
A) Quickscreen Plus Emulator and/or Computer Access
(One per 2,000 subs)
B) Relevant Printers and Modem/Multiplexers
C) Quickscreen Plus Emulator and two ports for Addressability
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
24
<PAGE>
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
5423 DDP/SQL Support Surcharge * [ # ]
Statement Processing - Paper Component
--------------------------------------
Base Date: May 1996
Benchmark II Panel/Spectrum II [ # ]
Benchmark III Panel/Spectrum III [ # ]
Benchmark IV Panel/Spectrum IV [ # ]
Cablegram [ # ]
Base Index: Benchmark II/Spectrum II = .715107
Base Index: Benchmark III/Spectrum III = .718790
Base Index: Benchmark IV/Spectrum IV = .724211
Cablegram = .724409
*Persuant to the provisions outlined in section 10.5.
** A per port charge will be assessed for each port over the limit.
NOTE: Bundle price is on a per corp city basis. No discount of the
bundled price will be given for non-use of products or services
included.
</TABLE>
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
25
<PAGE>
DDP/SQL EXCLUSIVE OPTIONAL MODULES:
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
SOFTWARE LICENSE & MAINTENANCE
5082 Addressability - Two Way [ # ] [ # ]
5026 Sega Splitter Program [ # ]
5027 Sega Filter Program [ # ]
5089 Pay Per View (PPV) - includes
PPV Analysis Module [ # ] [ # ]
0427 Pay Per View (PPV) Analysis
Module*** [ # ]
SOFTWARE SUPPORT
0458 Pay Per View (PPV) Fee [ # ]
SOFTWARE LICENSE
5064 EasyLink - Initial Copy [ # ]
5064A EasyLink Exchange Diskette [ # ]
5065 EasyLink - Additional Copies [ # ]
5013 Electronic Funds Transfer (EFTS) [ # ]
5256 Event Schedular [ # ]
5031 Interactive Outage Module
(ARU corp) [ # ]
5011 Interactive Outage Module
(Non-ARU corp) [ # ]
5191 On-Line Verification & Queuing
(ANI-OLVQ) [ # ]
5245 PC Download [ # ]
5261 QuickScreen Plus Emulator -
1-9 copies* [ # ]
5261A QuickScreen Plus Emulator -
10-24 copies* [ # ]
5261B QuickScreen Plus Emulator -
25-49 copies* [ # ]
5261C QuickScreen Plus Emulator -
50-74 copies* [ # ]
5261D QuickScreen Plus Emulator -
75-99 copies* [ # ]
5261E QuickScreen Plus Emulator -
100-149 copies* [ # ]
5261F QuickScreen Plus Emulator -
150 copies or more* [ # ]
5270 Secondary Emulator Package** [ # ]
5263A TCP/IP Emulator Upgrade
(Windows, Macintosh) - 1-50 units [ # ]
5263B TCP/IP Emulator Upgrade (Windows,
Macintosh) - 51-100 units [ # ]
5263C TCP/IP Emulator Upgrade (Windows,
Macintosh) - 101-150 units [ # ]
5263D TCP/IP Emulator Upgrade (Windows,
Macintosh) - 151 or greater units [ # ]
5265A TCP/IP Emulator Upgrade (DOS) -
1-50 units [ # ]
5265B TCP/IP Emulator Upgrade (DOS) -
51-100 units [ # ]
5265C TCP/IP Emulator Upgrade (DOS) -
101-150 units [ # ]
5265D TCP/IP Emulator Upgrade (DOS) -
151 or greater units [ # ]
5253 Spreadsheet Interface [ # ]
5253A Spreadsheet Interface Exchange
Diskette [ # ]
</TABLE>
* Requires Release 2.7 or greater.
** In addition to One Way or Two Way Software License & Maintenance Fee
only if customer is using Jerrold Format 9.
*** Charged only if the corp is NOT using PPV transactional pricing. PPV
transactional pricing includes the PPV Analysis Module.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
26
<PAGE>
DDP/SQL EXCLUSIVE OPTIONAL MODULES CONTINUED:
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
SOFTWARE MAINTENANCE
5124 EasyLink [ # ]
5112 Electronic Funds Transfer (EFTS) [ # ]
5165 Event Schedular [ # ]
5114 Interactive Outage (ARU Corp) [ # ]
5118 Interactive Outage (Non-ARU Corp) [ # ]
5088 On-Line Verification & Queuing
(ANI-OLVQ) [ # ]
5196 On-Line Verification &
Queuing/Additional Interface
Same Corp [ # ]
5106 PC Download [ # ]
5262 QuickScreen Plus Emulator [ # ]
5263M TCP/IP Emulator* [ # ]
5143 Spreadsheet Interface [ # ]
PAY PER VIEW AUTO LOAD (PAL) TAPE
0414 PAL Tape or Transmission [ # ]
0415 PAL Service [ # ]
0421 PAL Reload Fee [ # ]
PROJECTS - SPECIAL HANDLING
0475A Paperwork Expedite Fee -
21 to 15 days [ # ]
0475B Paperwork Expedite Fee -
14 to 8 days [ # ]
0475C Paperwork Expedite Fee -
0 to 7 days [ # ]
FIXMASTER TAPE
0858 Consulting & Documentation [ # ]
0877 DDP Financials - 1st Run [ # ]
0878 DDP Financials - Additional Runs [ # ]
0859 DDP/SQL - 1st Run [ # ]
0876 DDP/SQL - Additional Runs [ # ]
</TABLE>
* This fee includes the standard emulator maintenance fee of
$5.27/mo/license plus an additional $3.00/mo/license for the TCP/IP
upgrade.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
27
<PAGE>
INCLUSIVE DDP/SQL OPTIONAL MODULES
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
5740 Addressable Package-Two Way [ # ] [ # ]
Includes: Addressable License
& Maintenance Fee
Addressable Customer Support
Additional two (2) ports needed
for Addressability
Sega Channel
5026 Sega Splitter Program [ # ]
5027 Sega Filter Program [ # ]
5028 Sega National Access Fee [ # ]
5750 PPV (Pay Per View) Package [ # ] [ # ]
Includes: PPV License Fee
& Maintenance Fee
PPV Customer Support
PPV Analysis Module
Event Schedular License &
Maintenance Fee
0427 PPV (Pay Per View) Analysis
Module* [ # ]
On-Line Verification & Queuing
ANI/OLVQ Package
Includes:
5185 ANI/OLVQ Package License
& Maintenance Fee [ # ] [ # ]
5195 ANI/OLVQ Package License &
Maintenance Fee/Additional
Interface Same Corp [ # ]
</TABLE>
*Charged only if the corp is NOT using PPV transactional pricing. PPV
transactional pricing includes the PPV Analysis Module.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
28
<PAGE>
INCLUSIVE DDP/SQL OPTIONAL MODULES CONTINUED:
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
Electronic Funds Transfer
(EFTS) Package
0471 EFTS Package Handling Fee [ # ]
0472 EFTS Package Transaction
Batch Fee [ # ]
5005 EFTS Package License Fee [ # ]
5608 EFTS Package Maintenance Fee [ # ]
5014 Frequent Buyer Package [ # ] [ # ]
Includes:
Software License & Maintenance Fees
Customer Support
Lockbox Transmission/Tape
Handling Charges
0470 Handling Fee [ # ]
5806 Transaction Batch Fee [ # ]
SOFTWARE LICENSE
5064 EasyLink - Initial Copy [ # ]
5065 EasyLink - Additional Copies [ # ]
5064A EasyLink Exchange Diskette [ # ]
5033 Interactive Outage (ARU Corp) [ # ]
5010 Interactive Outage (Non-ARU Corp) [ # ]
5245 PC Download [ # ]
5261 QuickScreen Plus Emulator -
1-9 copies* [ # ]
5261A QuickScreen Plus Emulator -
10-24 copies* [ # ]
5261B QuickScreen Plus Emulator -
25-49 copies* [ # ]
5261C QuickScreen Plus Emulator -
50-74 copies* [ # ]
5261D QuickScreen Plus Emulator -
75-99 copies* [ # ]
5261E QuickScreen Plus Emulator -
100-149 copies* [ # ]
5261F QuickScreen Plus Emulator -
150 copies or more* [ # ]
5270 Secondary Emulator Package** [ # ]
5263A TCP/IP Emulator Upgrade
(Windows, Macintosh) - 1-50 units [ # ]
5263B TCP/IP Emulator Upgrade (Windows,
Macintosh) - 51-100 units [ # ]
5263C TCP/IP Emulator Upgrade (Windows,
Macintosh) - 101-150 units [ # ]
5263D TCP/IP Emulator Upgrade (Windows,
Macintosh) - 151 or greater units [ # ]
5265A TCP/IP Emulator Upgrade (DOS) -
1-50 units [ # ]
5265B TCP/IP Emulator Upgrade (DOS) -
51-100 units [ # ]
5265C TCP/IP Emulator Upgrade (DOS) -
101-150 units [ # ]
5265D TCP/IP Emulator Upgrade (DOS) -
151 or greater units [ # ]
5253 Spreadsheet Interface [ # ]
5253A Spreadsheet Interface Exchange
Diskette [ # ]
</TABLE>
* Discounts are based on the number of copies per corp.
** For distribution to multiple offices.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
29
<PAGE>
INCLUSIVE DDP/SQL OPTIONAL MODULES CONTINUED:
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
SOFTWARE MAINTENANCE
5124 EasyLink [ # ]
5114 Interactive Outage (ARU Corp) [ # ]
5118 Interactive Outage (Non-ARU Corp) [ # ]
5106 PC Download [ # ]
5262 QuickScreen Plus Emulator [ # ]
5263M TCP/IP Emulator* [ # ]
5143 Spreadsheet Interface [ # ]
5502 Region Access - over and above
Inclusive Package
Computer Access: (Monday-Saturday
8AM - 12AM & Sunday 8AM - 5PM) [ # ]
Ports are available during all
other hours if system is not being
used by Region for software or
hardware maintenance.
DISK STORAGE
0555 Statement Image Records [ # ]
0556 Extended Ledger Records [ # ]
PAY PER VIEW AUTO LOAD (PAL)
0413 Pay Per View Auto Load (PAL)
Services [ # ]
0421 PAL Reload Fee [ # ]
PROJECTS - SPECIAL HANDLING
0475A Paperwork Expedite Fee -
21 to 15 days [ # ]
0475B Paperwork Expedite Fee -
14 to 8 days [ # ]
0475C Paperwork Expedite Fee -
0 to 7 days [ # ]
FIXMASTER TAPE
0858 Consulting & Documentation [ # ]
0877 DDP Financials - 1st Run [ # ]
0878 DDP Financials - Additional Runs [ # ]
0859 DDP/SQL - 1st Run [ # ]
0876 DDP/SQL - Additional Runs [ # ]
</TABLE>
* This fee includes the standard emulator maintenance fee of $5.27/mo/license
plus an additional $3.00/mo/license for the TCP/IP upgrade.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
30
<PAGE>
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
CONVERSION FEES
Conversion - Addressable
Initial Installation - On Site
0814 One-way [ # ]*
5158 Two-way [ # ]*
Includes: Interface system
to convert manufacturer's
software,
initializing files, and training
0829 Addressable Format Change [ # ]*
5029 Sega Channel Conversion Fee [ # ]
Conversion - PPV (Long Term)
Includes:
5156 Initialize File [ # ]
Consulting (no on-site
visit)
Conversion - PPV (Single
Calendar Month)
Includes:
5155 Initialize File [ # ]
Consulting (no on-site
visit)
Termination at end of
calendar month
No Software License or
Maintenance Fee
Conversion - On-Line Verification
& Queuing ANI/OLVQ
5153 New interface with vendor [ # ]
5153 Upgrade to OLVQ (for existing
ANI Customer) [ # ]
0809 Set-Up Fee - EFTS [ # ]
Includes:
Consultation with customer
and vendor for appropriate
set up
Interface with vendor
communications protocol
Initialize File
0812 Conversion - Field Service
Management Interface [ # ]
5422 Conversion - Frequent Buyer
Module [ # ]
Initial installation - via phone
Includes: Maximum 4 hours
consultation via phone
</TABLE>
* Additional programming charge of $2,652.00 if interface is not
standard in cable industry and CableData must modify program to
accommodate Vendor's interface.
** If a customer is requesting a CAM installation in a call center
environment where two or more corps are using the regionalization
module, the conversion fee is $4,480 to install all corps. However,
if the customer is not using regionalization, the conversion fee is
$4,480 per corp.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
31
<PAGE>
<TABLE>
<CAPTION>
Item Selling
Code Description Price Minimum
- ---- ----------- ----- -------
<S> <C> <C> <C>
Conversion - ARU
0821 Inclusive [ * ]
0822 Exclusive [ * ]
Includes:
Interface with vendor
Set-up parameters and
files
0062 Conversion - MobileVantage
Interface [ * ]
0804 Customer Handbook (additional
copy) [ * ]
</TABLE>
1. Customer will appoint a conversion contact from their staff, this
person is to coordinate the entire conversion effort.
2. CableData will supply one complete set of manuals to operate the
system as part of the conversion, additional documentation required
by customer is billable.
3. CableData manuals will be revised periodically and new manuals
printed. These are available for sale to the customers (including
the first set of revised manuals).
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
32
<PAGE>
DDP FINANCIALS PRICING:
<TABLE>
<CAPTION>
ITEM SELLING
CODE DESCRIPTION PRICE MINIMUM
- ---- ----------- ----- -------
DDP FINANCIALS
--------------
<S> <C> <C> <C>
0561 Historical Ledger Retention - More Than
Current Period (i.e., Not Trimmed) [ * ]
0228 Historical Ledger Retention - Not Meeting DDPF Package
Criteria [ * ]
0248 Pay Per View Ledger Detail [ * ]
0252 Dynamic Ledger [ * ]
DDP FINANCIALS - SPECIAL HANDLING FEES
--------------------------------------
0491 Reload RP/CB File [ * ]
0492 Manual Concatenation of CableGram File [ * ]
0495 Hold Statements on Production Floor [ * ] [ * ]
DDP FINANCIALS - OPTIONAL & DUPLICATE REPORTS
---------------------------------------------
0257 Detail Report Transactions, over Pay80 [ * ]
0258 Summary Report Transactions [ * ]
0276 Report Lines Printed [ * ]
0277 Report Pages Printed [ * ]
0261 Laser Report Pages Produced [ * ]
0275 Record Sort [ * ]
0260 Paper Report - Pages Printed (Laser, 8 1/2 x 12, one side) [ * ]
0278 Fiche Report - Frames Produced [ * ]
DDP FINANCIALS - REPORT WRITERS
-------------------------------
0271 Use Fee [ * ]
0272 Inventory Fee [ * ]
0273 Program or Change - Simple [ * ]
0274 Program or Change - Simple With Totals [ * ]
0280 Program or Change - Complex [*] [ * ]
0281 Activate Existing With No Changes [ * ]
0275 Sort [ * ]
0276 Paper - Lines Printed [ * ]
0278 Fiche - Frames Produced [ * ]
DDP FINANCIALS - SALES TOOLS
----------------------------
0271 Use Fee [ * ]
0365 Reel Tape (2400 feet, 9 track, 1600 bpi) [ * ]
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
33
<PAGE>
<TABLE>
<CAPTION>
DDP FINANCIALS PRICING CONTINUED:
ITEM SELLING
CODE DESCRIPTION PRICE MINIMUM
- ---- ----------- ----- -------
CYCLE SELECT
------------
<S> <C> <C> <C>
0271 Cycle Select - Use Fee [ # ]
0505 Cycle Select Programming - New or Change [ # ]
0507 Cycle Select Programming - Reactivate Existing [ # ]
0509 Cycle Select Processing [ # ]
MESSAGE SELECT
--------------
0271 Message Select - Use Fee [ # ]
ADJUSTMENT SELECT
-----------------
0271 Adjustment Select - Use Fee [ # ]
0516 Adjustment Select - Set Up Charge [ # ]
0517 Adjustment Select Programming - Activation Charge [ # ]
0518 Adjustment Select - Processing Charge [ # ] [ # ]
STATEMENT SELECT
----------------
0271 Statement Select - Use Fee [ # ]
SUPERCOMPRESS
-------------
0574 Supercompress Programming [ # ] [ # ]
RERUN
------
0480 Rerun Programming [ # ]
ALTER RUNS
----------
0578 Alter Runs Programming [ # ]
0477 Alter Runs Records Passed [ # ]
STATEMENT IMAGE
---------------
0554A Statement Image Pull to Tape - EXCLUSIVE [ # ]
0554 Statement Image Pull to Tape - INCLUSIVE [ # ]
TRANSMIT-X*
-----------
EXCLUSIVE
---------
0292 Transmit-X Transmission Fee [ # ]
INCLUSIVE
---------
0292 Transmit-X Transmission Fee [ # ]
</TABLE>
* Refer to hardware sections for Tandem X.25 AM licensing fee. (TXP X.25
AM License Fee is [ # ]
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
34
<PAGE>
<TABLE>
<CAPTION>
ITEM SELLING
CODE DESCRIPTION PRICE MINIMUM
- ---- ----------- ----- -------
STATEMENT PRODUCTS
-------------------
<S> <C> <C> <C>
0428 Statement Design & Layout Service [ # ] [ # ]
STATEMENT PROCESSING - BILL PRODUCTION
---------------------------------------
SERVICES
--------
0328 Benchmark III Panel [ # ]
0333 Benchmark IV Panel [ # ]
0329 Spectrum II - Front Print Only, 1 or 2 colors** [ # ]
0330 Spectrum II - Front and Back Print** [ # ]
0331 Spectrum III - Front Print Only, 1 or 2 colors** [ # ]
0332 Spectrum III - Front and Back Print** [ # ]
0334 Spectrum IV - Front Print Only, 1 or 2 colors** [ # ]
0335 Spectrum IV - Front and Back Print** [ # ]
0350 CableGram*** [ # ]
0358 Address Card - Inserted [ # ] [ # ]
CARRIER ROUTE/ZIP+4 MODULE
--------------------------
0422 Carrier Route/Zip+4 Module Set Up Fee -
Corp Size of 10,000 Subscribers or Less [ # ]
0423 Carrier Route/Zip+4 Module Set Up Fee -
Corp Size of 10,001 to 50,000 Subscribers [ # ]
0424 Carrier Route/Zip+4 Module Set Up Fee -
Corp Size of 50,001 to 100,000 Subscribers [ # ]
0425 Carrier Route/Zip+4 Module Set Up Fee -
Corp Size of 100,001 Subscribers or More [ # ]
0420 Carrier Route/Zip+4 Module Update Fee
(Houses Not on DDPF Master) [ # ] [ # ]
0989 Postage Presort Processing Fee** [ # ]
0988 Postal Automation Fee [ # ]
</TABLE>
** Subject to a disposal fee.
***In addition to applicable postage
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
35
<PAGE>
<TABLE>
<CAPTION>
Approx.
ITEM SELLING STOCK FORMS
CODE DESCRIPTION PRICE NUMBER COUNT/BOX
- ----- ----------- ------ -------- ---------
FORMS:
<S> <C> <C> <C> <C>
0642 Supplies Request (4-Part) No Charge
0660 Sales Tool Order Form [ # ] [#]
CONTINUOUS FORMS
----------------
0666 Salesman Call Cards [ # ] [ # ]
0667 DDP Work Order [ # ] [ # ]
0668 Statements (2 panel) [ # ] [ # ]
0665 Cable Gram (T Gram) [ # ] [ # ]
0675 One Part Paper [ # ] [ # ]
676 Three Part Paper [ # ] [ # ]
0672 Labels - 2-up Permanent [ # ] [ # ]
0673 Labels - 4-up Permanent [ # ] [ # ]
0674 Labels - 2-up Removable [ # ] [ # ]
0670 Standard Return Envelopes [ # ] [ # ]
SUPPLIES:
0683 Bulbs - EPZ [ # ] [ # ]
0699 XL20 Viewer [ # ] [#]
0475 Restocking Charge [ # ]
COMPUTER SUPPLIES
-----------------
0735 Printer Ribbon - LM315/615 [ # ]
0721 Printer Ribbon - B-300/600 [ # ]
0722 Printer Ribbon - Freedom Cartridge (MS) [ # ]
0726 Printer Ribbon - Freedom Reel (Box of 3) [ # ]
0724 Printer Ribbon - Decwriter [ # ]
0729 Printer Ribbon - Genicom 3840EP [ # ]
0727 Printer Ribbon - Genicom 4410XT & 4440XT [ # ]
0728 Printer Ribbon - Genicom 4470XT & 4490XT [ # ]
0731 Diskette (Box of 10) [ # ]
1211 Computer Tape 2400 ft. (9 Track 1600 BPI) - Tandem [ # ]
0394 Computer Tape - QuickData [ # ]
28505 DDP/SQL Keyboard Labels [ # ]
0-01
</TABLE>
* Sold only by the box.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
36
<PAGE>
<TABLE>
<CAPTION>
APPROX.
ITEM SELLING STOCK FORMS
CODE DESCRIPTION PRICE NUMBER COUNT/BOX
- ---- ------------ ----- ------ ---------
<S> <C> <C> <C> <C>
DOCUMENTATION:
DDP/SQL Reference Manuals
Addressable Parameter Maintenance Release [ * ] 605631
Box Maintenance Reference [ * ] 605635
Bulletin Board Maintenance Reference [ * ] 605611
Check-In Reference [ * ] 605541
Collection Processing Reference [ * ] 605561
Collection Queue Reference [ * ] 605573
Collections Manager Reference [ * ] 605562
Compliance Reports Reference [ * ] 605584
Consolidated Reporting Reference [ * ] 605585
Database Maintenance Reference [ * ] 605651
Data Dictionary Reference [ * ] 605504
Data Dictionary Reference - Release 2.7 Update
(purchased as part of 605504) [ * ] 605504-01
Data Dictionary Reference - Release 3.0 Update
(purchased as part of 605504) [ * ] 605504-03
Dispatch Reference [ * ] 605542
Director Maintenance Reference [ * ] 605516
Director Maintenance Reference - Release 3.0
Update Packet [ * ] 605516-01
EFTS Processing Reference [ * ] 605519
Format Builder [ * ] 605522
Frequent Buyer Maintenance Reference [ * ] 605613
House/Customer Maintenance Reference [ * ] 605506
Lockbox Processing Reference [ * ] 605517
Migration Report Reference [ * ] 605581
Miscellaneous Addressable Programs Reference [ * ] 605633
Miscellaneous Maintenance & Operations (MMOPS) Reference [ * ] 605510
Miscellaneous Maintenance & Operations
(MMOPS) Reference - update (4/23/94) [ * ] 605510-01
Miscellaneous PPV Programs Reference [ * ] 605632
Miscellaneous PPV Programs Reference -
Release 3.0 Update Packet [ * ] 605632-01
MobileVantage Reference [ * ] 605543
MSO Data Tape Processing Reference [ * ] 605508
OLVQ Maintenance [ * ] 605637
OPA Maintenance Reference [ * ] 605527
Operations Management [ * ] 605652
Order Entry Reference [ * ] 605509
Outage Tracking and Reporting Reference [ * ] 605544
Payments & Adjustments Reference [ * ] 605520
Personnel Maintenance Reference [ * ] 605505
Post/Print Batches Reference [ * ] 605523
PPV Maintenance Reference [ * ] 605634
PPV Maintenance Reference - Release 3.0 Update Packet [ * ] 605634-01
Product Manager Reference [ * ] 605571
Queue Maintenance/Job Scheduler Reference [ * ] 605521
Quota Entry Reference [ * ] 605612
Rate Increase Run Reference [ * ] 605507
Rate Increase Run Reference - update (4/13/94) [ * ] 605507-01
Refunds Processing Reference [ * ] 605518
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
37
<PAGE>
<TABLE>
<CAPTION>
Approx.
ITEM SELLING STOCK FORMS
CODE DESCRIPTION PRICE NUMBER COUNT/BOX
- ----- ----------- ----- ------- ----------
DDP/SQL Reference Manuals (continued)
--------------------------------------
<S> <C> <C> <C> <C>
Release 1.0 Reference [ * ] 605000
Release 2.0 Reference [ * ] 605001
Release 2.5 Reference [ * ] 605005
Release 2.55 Reference [ * ] 605005-01
Release 2.56 Reference [ * ] 605505-06
Release 2.7 Reference [ * ] 605007
Release 2.71 Reference [ * ] 605007-01
Release 2.72 Reference [ * ] 605007-02
Release 2.73 Reference [ * ] 605007-03
Release 3.0 Reference [ * ] 605008
Release 3.1 Reference (Release 3.0 and 3.1 must
be ordered together) [ * ] 605009
Report Key Manager [ * ] 605572
Routing Reference [ * ] 605524
Routing Reference - Release 3.0 Update Packet [ * ] 605524-01
Statement, Plans, Insert Reference [ * ] 605574
Status Summary Reference [ * ] 605582
Supplier Activity Reference [ * ] 605583
Universal Select Reference [ * ] 605526
Write Off Run Reference [ * ] 605515
Zip+4 Maintenance Reference [ * ] 605525
DDP/SQL Migration Kits
-----------------------
Boxes and Addressability Migration Training Kit [ * ] 609690
Introduction Migration Training Kit [ * ] 609640
Maintenance and Operations Migration Training Kit [ * ] 609700
Money Processing Migration Training Kit [ * ] 609670
Order Processing Migration Training Kit [ * ] 609650
Reports and Products Migration Training Kit [ * ] 609680
System Management Migration Training Kit [ * ] 609660
DDP/SQL Video Training Kits
----------------------------
Anniversary Billing Video Training Kit [ * ] 609603
Front Counter Toolbox Video Training Kit [ * ] 609602
House/Customer Maintenance Video Training Kit [ * ] 609600
Memo Credits Video Training Kit [ * ] 609604
Quota File Maintenance Video Training Kit [ * ] 609601
Universal Select Video Training Kit [ * ] 609605
DDP/SQL Lecture-Based Training Curriculum
-----------------------------------------
Ad Hoc Reporting Instructor's Guide [ * ] 609719-I
Ad Hoc Reporting Student Guide [ * ] 609719
Addressability Instructor's Guide [ * ] 609721-I
Addressability Student Guide [ * ] 609721
Advanced Addressability and PPV Instructor's Guide [ * ] 609727-I
Advanced Addressability and PPV Student Guide [ * ] 609727
Advanced Data Maintenance Instructor's Guide [ * ] 609728-I
Advanced Data Maintenance Student Guide [ * ] 609728
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
38
<PAGE>
<TABLE>
<CAPTION>
Approx
ITEM SELLING STOCK FORMS
CODE DESCRIPTION PRICE NUMBER COUNT/BOX
- ----- ------------- ----- -------- ---------
DDP/SQL LECTURE-BASED TRAINING CURRICULUM
-----------------------------------------
(CONTINUED)
-----------
<S> <C> <C> <C> <C>
Advanced Money Processing Instructor's Guide [ * ] 609725-I
Advanced Money Processing Student Guide [ * ] 609725
Advanced Order Processing Instructor's Guide [ * ] 609723-I
Advanced Order Processing Student Guide [ * ] 609723
Advanced Reporting Instructor's Guide [ * ] 609726-I
Advanced Reporting Student Guide [ * ] 609726
Application Certification Instructor's Guide [ * ] 609027-I
Application Certification Student Guide [ * ] 609027
Basic Operations Instructor's Guide [ * ] 609718-I
Basic Operations Student Guide [ * ] 609718
Database Administration Instructor's Guide [ * ] 609720-I
Database Administration Student Guide [ * ] 609720
Database Concepts Instructor's Guide [ * ] 609724-I
Database Concepts Student Guide [ * ] 609724
Migration Operations Instructor's Guide [ * ] 609716-I
Migration Operations Student Guide [ * ] 609716
Money Processing Instructor's Guide [ * ] 609715-I
Money Processing Student Guide [ * ] 609715
On-line Reports Instructor's Guide [ * ] 609723-I
On-line Reports Student Guide [ * ] 609723
Order Processing Instructor's Guide [ * ] 609712-I
Order Processing Student Guide [ * ] 609712
Pay Per View Instructor's Guide [ * ] 609722-I
Pay Per View Student Guide [ * ] 609722
Software Analyst Instructor's Guide [ * ] 609717-I
Software Analyst Student Guide [ * ] 609717
System Management Instructor's Guide [ * ] 609713-I
System Management Student Guide [ * ] 609713
DDP/SQL Documentation Accessories
----------------------------------
Slip-in Binder Covers & Spine, "DDP/SQL
Release Documentation - Reference" [ * ] 608007
Slip-in Binder Covers & Spine, "DDP/SQL
Order Processing - Reference" [ * ] 608705
Slip-in Binder Covers & Spine, "DDP/SQL
Money Processing - Reference" [ * ] 608710
Slip-in Binder Covers & Spine, "DDP/SQL
Reports & Customer Products - Reference" [ * ] 608715
Slip-in Binder Covers & Spine, "DDP/SQL
System Management - Reference" [ * ] 608720
Slip-in Binder Covers & Spine, "DDP/SQL
Operations & Periodic File Maintenance
- Reference" [ * ] 608725
Slip-in Binder Covers & Spine, "DDP/SQL
Addressability - Reference" [ * ] 608730
Slip-in Binder Covers & Spine, "Release
Documentation - Reference" [ * ] 608700
1-1/2" Binder [ * ] 608001
2" Binder [ * ] 608002
3" Binder [ * ] 608003
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
39
<PAGE>
<TABLE>
<CAPTION>
APPROX.
ITEM SELLING STOCK FORMS
CODE DESCRIPTION PRICE NUMBER COUNT/BOX
- ----- ----------- ----- ------ ----------
<S> <C> <C> <C> <C>
DDP Reference Manuals
Release 8.25 Reference [ * ] 607034
Release 8.2 Reference [ * ] 607033
Release 8.15 Reference [ * ] 607032
Release 8.12 Reference [ * ] 607031
Release 8.11 Reference [ * ] 607030
Release 8.10 Reference [ * ] 607029
Release 8.09 Reference [ * ] 607028
Release 8.08 Reference [ * ] 607027
Release 8.07 Reference [ * ] 607026
Release 8.06 Reference [ * ] 607025
Release 8.01/8.05 Reference [ * ] 607024
Release 8.0 Reference [ * ] 607022
Addressability Overview Reference [ * ] 607410
Balancing DDPF to DDP Reference [ * ] 607390
Box Maintenance Reference [ * ] 607513
Box Select Reference [ * ] 607333
Collections Reference [ * ] 607220
Complex Maintenance Reference [ * ] 607515
Director File Guide Reference [ * ] 607511
Director File Worksheets [ * ] 607599
EFTS Processing Reference [ * ] 607213
Event Select Reference [ * ] 607336
Format Builder Reference [ * ] 607361
FSMI Reference [ * ] 607453
Geocode Download Reference [ * ] 607439
History Select Reference [ * ] 607335
House/Customer Select Reference [ * ] 607331
Index/Disk Purge Reference [ * ] 607431
Job Scheduler Reference [ * ] 607525
Lockbox Reference [ * ] 607212
Magazine Labels Reference [ * ] 607362
Mass Corrections Reference [ * ] 607530
Migration Report Reference [ * ] 607357
Miscellaneous Reports Reference [ * ] 607380
MT Builder Reference [ * ] 607425
Off-Premise Addressability Maintenance Reference [ * ] 607415
OLVQ Reference [ * ] 607455
Pay-Per-View Guide Reference [ * ] 607540
Payments & Adjustments Reference [ * ] 607211
Performance Reports Reference [ * ] 607343
Personnel Maintenance Reference [ * ] 607512
Post/Print Batches Reference [ * ] 607214
Queue File Maintenance Reference [ * ] 607534
Quota Maintenance Reference [ * ] 607514
Rate Increase/Prorate/Recalculation Reference [ * ] 607452
Refunds Processings Reference [ * ] 607230
Reports & Products Overview Reference [ * ] 607310
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
40
<PAGE>
<TABLE>
<CAPTION>
Approx.
ITEM SELLING STOCK FORMS
CODE DESCRIPTION PRICE NUMBER COUNT/BOX
- ----- ----------- ----- ------ ----------
<S> <C> <C> <C> <C>
DDP Reference Manuals (continued)
Routing Reference [ * ] 609120
Sales Commission Reports Reference [ * ] 607344
Service Code Select Scheme Reference [ * ] 607320
Status Summary Report Reference [ * ] 607351
Supplier Activity Reference [ * ] 607352
WIP Select Reference [ * ] 607332
Write-Off Run Reference [ * ] 607240
Zip Maintenance Reference [ * ] 607436
DDP Training Manuals
Addressability Training [ * ] 609410
Check-In Training [ * ] 609140
Collections Training [ * ] 609220
CSR Certification Administrators Guide [ * ] 609529-I
CSR Certification Student Workbook [ * ] 609529
Dispatch Training [ * ] 609130
Format Builder Training [ * ] 609361
Job Scheduler Training [ * ] 609525
On-Line Reports [ * ] 609310-I
On-Line Reports [ * ] 609310
Order Entry Training [ * ] 609110
Pay/Adjust & Post/Print Training [ * ] 609211
Refunds Training [ * ] 609230
Write-Offs Training [ * ] 609240
DDP Documentation Accessories
Slip-in Binder Covers & Spine, "DDP Message Files" [ * ] 608014
Slip-in Binder Covers & Spine, "DDP Order
Processing" [ * ] 608110
Tabs, "DDP Order Processing" [ * ] 608111
Slip-in Binder Covers & Spine, "DDP Money
Processing" [ * ] 608210
Tabs, "DDP Money Processing" [ * ] 608211
Slip-in Binder Covers & Spine,
"DDP Reports & Customer Products" [ * ] 608310
Tabs, "DDP Reports & Customer Products" [ * ] 608311
Slip-in Binder Covers & Spine, "DDP Boxes &
Addressability" [ * ] 608410
Tabs, "DDP Boxes & Addressability" [ * ] 608411
Slip-in Binder Covers & Spine, "DDP Options
& Periodic File Maintenance" [ * ] 608430
Tabs, "DDP Options & Periodic File
Maintenance" [ * ] 608431
Slip-in Binder Covers & Spine, "DDP System
Management" [ * ] 608510
Tabs, "DDP System Management" [ * ] 608511
1-1/2" Binder [ * ] 608001
2" Binder [ * ] 608002
3" Binder [ * ] 608003
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
41
<PAGE>
<TABLE>
<CAPTION>
Item Selling Stock
Code Description Price Number
- ---- ----------- ----- ------
DDP Financials Reference Manuals
--------------------------------
<S> <C> <C> <C>
Release D10 Reference [ # ] 607050
Release DR0 Reference [ # ] 607051
Release EC0 Reference [ # ] 607052
Release EZ0 Reference [ # ] 607053
Release FA0 Reference [ # ] 607054
Release FS0 Reference [ # ] 607055
Release G60 Reference [ # ] 607056
Release JA Reference - TBOL [ # ] 607109
Release JA Reference - SQL [ # ] 607110
Release JB Reference - TBOL [ # ] 607111
Release JB Reference - SQL [ # ] 607112
Release JF Reference - TBOL [ # ] 606700
Release JF Reference - SQL [ # ] 606701
Release KA Reference - SQL [ # ] 607119
Release KB Reference [ # ] 606702
Release LA Reference [ # ] 607120
Release 91-1.5 Reference [ # ] 607062
Release 91-1 Reference [ # ] 607958
Release 91-2 Retrofit Reference - TBOL [ # ] 607101
Release 91-2 Retrofit Reference - SQL [ # ] 607102
MSO Data Tape Reference [ # ] 607066
MSO Data Tape Reference - Update Packet [ # ] 6-02
Products Reference [ # ] 607104
Reports Reconciliation Reference [ # ] 607108
Reports Users Reference [ # ] 607068
Transmit-X Installation Reference [ # ] 607107
Type 30 Parameters Forms [ # ] 607063
Type 30 Parameters Users Reference [ # ] 607060
Type 30 Parameters Users Reference - [ # ] 0-10
Change Page
Package Revision 10 60706
DDP Financials Training Manuals
-------------------------------
Basic & Statement Parameters Training [ # ] 609526
Billing & Parameters Training [ # ] 609527
Reports Training [ # ] 609528
MISCELLANEOUS MANUALS
---------------------
Guidelines on Electrical Power for ADP
Installations, National Bureau of Standards [ # ] 607905
0745 TBOL Reference Package [ # ] --
DDP/SQL Software Development Tools [ # ] --
Desktop Products - Emulators [ # ] 605653
CableData Reference & Training Product
Catalog [ # ] 607100
0789 TANDEM CD READ SYSTEM SOFTWARE MANUALS
--------------------------------------
CD Read Software & Disks (MAC) [ # ]
CD Read Software & Disks (PC) [ # ]
Tandem CD Read Disk Subscription [ # ]
Tandem CD Read Kit for MAC [ # ]
Tandem CD Read Kit for PC [ # ]
</TABLE>
* Disk contains documentation for current Guardian Operating System only.
**Billable system subscription.
NOTE: The CD Read Software/Kits include a one year subscription. Renewals
are available for $1,700.00/year.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
42
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT C
CUSTOMER'S COMPUTER FACILITIES AND REMOTE SITES
PRIMARY SITE
Corp Number 021-00
Installation Address 5970 South Greenwood Plaza, Suite 200
City Greenwood Village County Arapahoe State CO Zip 80111
REMOTE SITE
Corp Number 005-04
Installation Address 737 Howard Street
City Zanesville County Muskingum State OH Zip 43701
REMOTE SITE
Corp Number 009-45
Installation Address 2910 10th Ave. South
City Farmington County San Jaun State NM Zip 87401
REMOTE SITE
Corp Number 017-03
Installation Address 700 West Broadway
City Muskegon County Muskegon State MI Zip 49443
REMOTE SITE
Corp Number 017-08
Installation Address 4771 Niles Road
City Saint Joseph County Berrien State MI Zip 49085
43
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 020-02
Installation Address 120 Freeport Circle
City Fallon County Churchill State NV Zip 89406
REMOTE SITE
Corp Number 020-03
Installation Address 1338 Centerville Road
City Gardnerville County Douglas State NV Zip 89410
REMOTE SITE
Corp Number 021-07
Installation Address 840 East Main Street, Suite G
City Grassvalley County Nevada State CA Zip 95945
REMOTE SITE
Corp Number 021-08
Installation Address 22 West Vine
City Toole County Salt Lake State UT Zip 84074
REMOTE SITE
Corp Number 021-09
Installation Address 520 National Ave.
City Kings Beach County Placer State CA Zip 95719
REMOTE SITE
Corp Number 021-10
Installation Address 25 West 100 North
City Smithfield County Cache State UT Zip 84335
44
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 021-11
Installation Address 1990 Idaho Street
City Elko County Elko State NV Zip 89801
REMOTE SITE
Corp Number 021-12
Installation Address 324 Paige Street
City Bryan County Williams State OH Zip 43506
REMOTE SITE
Corp Number 021-13
Installation Address 87 West Joe Orr Road
City Chicago Heights County Cook State IL Zip 60411
REMOTE SITE
Corp Number 021-14
Installation Address 820 Northwest Cornell
City Corvallis County Benton State OR Zip 97330
REMOTE SITE
Corp Number 021-15
Installation Address 814 East Pittsburgh Street
City Greenburg County Westmoreland State PA Zip 15601
REMOTE SITE
Corp Number 021-17
Installation Address 655 Rodi Road
City Pittsburgh County Alleghenny State PA Zip 15236
45
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 021-19
Installation Address 5211 Brownsville Road
City Pittsburgh County Alleghenny State PA Zip 15236
REMOTE SITE
Corp Number 021-22
Installation Address 1515 North Riverside Ave.
City Provo County Utah State UT Zip 84604
REMOTE SITE
Corp Number 021-23
Installation Address 570 Milton Way
City Saint Helens County Columbia State OR Zip 97051
REMOTE SITE
Corp Number 021-25
Installation Address 1700 North Roosevelt Blvd.
City Key West County Monroe State FL Zip 33040
REMOTE SITE
Corp Number 021-30
Installation Address 1480 Lincoln Road
City Idaho Falls County Bonnieville State ID Zip 83401
REMOTE SITE
Corp Number 021-31
Installation Address 2320 Nez Perce Grade
City Lewiston County Nez Perce State ID Zip 83501
46
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 021-32
Installation Address 246 West Maumee
City Adrian County Lenawee State MI Zip 49221
REMOTE SITE
Corp Number 021-33
Installation Address 1350 East Miller Ave.
City Salt Lake City County Salt Lake State UT Zip 84106
REMOTE SITE
Corp Number 021-34
Installation Address 406 East 5th North
City Burley County Minidoka State ID Zip 83318
REMOTE SITE
Corp Number 021-35
Installation Address 204 West Alameda Road
City Pocatello County Bannock State ID Zip 83201
REMOTE SITE
Corp Number 021-36
Installation Address 2645 Towngate Road, Suite 200
City Westlake County State CA Zip 91361
REMOTE SITE
Corp Number 021-37
Installation Address 4077 West Stetson
City Hemet County State CA Zip 92545
47
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 021-38
Installation Address 110 East Idaho
City Las Cruces County State NM Zip 88005
REMOTE SITE
Corp Number 021-39
Installation Address 7192 Kalanianaole Hwy, Suite 230
City Honolulu County State Hi Zip 96825
REMOTE SITE
Corp Number 021-43
Installation Address 3585 Harrison Blvd. Suite 100
City Ogden County Weber State UT Zip 84403
REMOTE SITE
Corp Number 021-49
Installation Address 1596 North 400 West, Suite A
City Layton County Davis State UT Zip 84041
REMOTE SITE
Corp Number 021-72
Installation Address 1737 East 7th Street
City Parkersburg County Wood State WV Zip 26101
48
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
Remote Site
Corp Number 021-73
Installation Address 1810 Park West Drive
City Park City County Summit State UT Zip 84060
REMOTE SITE
Corp Number 021-74
Installation Address 214 East 100 North
City Price County Carbon State UT Zip 84501
REMOTE SITE
Corp Number 021-76
Installation Address 5711 South Western Ave.
City Chicago County Cook State IL Zip 60636
REMOTE SITE
Corp Number 021-77
Installation Address 4940 Delmar Blvd.
City St Louis County Saint Louis State MO Zip 63108
REMOTE SITE
Corp Number 021-78
Installation Address 5711 South Western Ave.
City Chicago County Cook State IL Zip 60636
REMOTE SITE
Corp Number 021-79
Installation Address 1204 Feehanville Drive
City Mt. Prospect County Cook State IL Zip 60056
49
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 021-80
Installation Address 1615 Washburn Ave.
City Topeka County Shawnee State KS Zip 66604
REMOTE SITE
Corp Number 021-81
Installation Address 300 Corliss Street
City Pittsburgh County Allegheny State PA Zip 15220
REMOTE SITE
Corp Number 021-82
Installation Address 1250 Terminal Way
City Reno County Washoe State NV Zip 89509
REMOTE SITE
Corp Number 021-83
Installation Address 2897 Chad Drive
City Eugene County Lane State OR Zip 97408
REMOTE SITE
Corp Number 021-84
Installation Address 3119 Center Street
City Tacoma County Pierce State WA Zip 98409
REMOTE SITE
Corp Number 021-85
Installation Address 15241 Pacific Highway South
City Seattle County King State WA Zip 98188
50
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 021-86
Installation Address 1029 Takela
City South Lake Tahoe County El Dorado State CA Zip 95705
REMOTE SITE
Corp Number 021-87
Installation Address 1802 North Carlson, Suite 126
City Carson City County Carson City State NV Zip 89701
REMOTE SITE
Corp Number 021-90
Installation Address 4020 Auburn Way North
City Auburn County King State WA Zip 98002
REMOTE SITE
Corp Number 021-91
Installation Address 1533 North Bend Blvd. North
City North Bend County King State WA Zip 98045
REMOTE SITE
Corp Number 021-92
Installation Address 1649 West 4200 South
City Salt Lake City County Salt Lake State UT Zip 84123
REMOTE SITE
Corp Number 021-93
Installation Address 12222 South 1000 East
City Draper County Salt Lake State UT Zip 84020
51
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 021-94
Installation Address 1140 North 94th Street
City Seattle County King State WA Zip 98103
REMOTE SITE
Corp Number 021-95
Installation Address 15332 - 34 South Center Ave.
City Harvey County Cook State IL Zip 60426
REMOTE SITE
Corp Number 044-07
Installation Address 4060 South Padre Island Drive
City Corpus Christi County Neuces State TX Zip 78411
REMOTE SITE
Corp Number 044-08
Installation Address 1120 Highway 123
City San Marco County Comal State TX Zip 78666
REMOTE SITE
Corp Number 044-09
Installation Address 900 Sidney Baker
City Kerrville County Kerr State TX Zip 78028
REMOTE SITE
Corp Number 058-12
Installation Address 350 North 22nd Street
City BattleCreek County Calhoun State MI Zip 49015
52
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 065-01
Installation Address 5723 Tokay Blvd.
City Madison County Dane State WI Zip 53711
REMOTE SITE
Corp Number 102-15
Installation Address 2921 South Expressway 83
City Harligen County Cameron State TX Zip 78550
REMOTE SITE
Corp Number 102-25
Installation Address 413 Oak Street
City Baraboo County Sauk State WI Zip 53813
REMOTE SITE
Corp Number 128-04
Installation Address 2935 Citizens Parkway, Suite 250
City Selma County Dallas State AL Zip 36701
REMOTE SITE
Corp Number 128-21
Installation Address 950 North West 66th Ave.
City Margate County Broward State FL Zip 33063
REMOTE SITE
Corp Number 149-03
Installation Address 1306 North West 7th Ave.
City Miami County Dade State FL Zip 33136
53
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 155-21
Installation Address 18601 North West 2nd Ave.
City North Miami County Dade State FL Zip 33169
REMOTE SITE
Corp Number 155-46
Installation Address 1010 Lawrence Road
City Kemah County Galveston State TX Zip 77565
REMOTE SITE
Corp Number 155-47
Installation Address 2407 A - Timberloch Place
City The Woodlands County Montgomery State TX Zip 77380
REMOTE SITE
Corp Number 155-48
Installation Address 14003 Force Street
City Houston County Fort Bend State TX Zip 77015
REMOTE SITE
Corp Number 155-49
Installation Address 8614 Teichman Road
City Galveston County Galveston State TX Zip 77553
REMOTE SITE
Corp Number 155-50
Installation Address 2505 Bisbee
City Houston County Harris State TX Zip 77017
54
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 155-51
Installation Address 911 State Road, 434 North
City Altamont Springs County Seminole State FL Zip 32714
REMOTE SITE
Corp Number 155-55
Installation Address 1060 Scottsdale Blvd.
City Dunedin County Pinellas State FL Zip 33528
REMOTE SITE
Corp Number 155-81
Installation Address 2540 East 5th Street
City Montgomery County Montgomery State AL Zip 36106
REMOTE SITE
Corp Number 155-89
Installation Address 10555 Moon Lake Road
City New Port Richey County Pasco State FL Zip 34654
REMOTE SITE
Corp Number 155-94
Installation Address 9825 South West 72nd Street
City Maimi County Dade State FL Zip 33173
REMOTE SITE
Corp Number 162-01
Installation Address 901 North College
City Columbia County Boon State MO Zip 65201
55
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 162-02
Installation Address 4160 Old Mill Parkway
City St. Peters County St. Charles State MO Zip 63376
REMOTE SITE
Corp Number 181-08
Installation Address 3500 South West Bond
City Portland County Clackmas State OR Zip 97201
REMOTE SITE
Corp Number 181-10
Installation Address 602 North Highway 69
City Nederland County Jefferson State TX Zip 77627
REMOTE SITE
Corp Number 181-11
Installation Address 4025 Nimbus Loop
City Mc Minnville County Yamhill State OR Zip 97128
REMOTE SITE
Corp Number 263-01
Installation Address 3233 West Grand Avenue
City Waukegan County State IL Zip 60085
REMOTE SITE
Corp Number 263-03
Installation Address 6161 Cleveland Street
City Merrillville County State IN Zip 46410
56
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE
Corp Number 263-04
Installation Address 137 Ellison Street
City Paterson County Passaic State NJ Zip 07505
REMOTE SITE
Corp Number 021-36
Installation Address 2645 Townsgate Road, Suite 200
City Westlake Village County Ventura State CA Zip 91361
REMOTE SITE
Corp Number 021-37
Installation Address 4077 West Stetson
City Hemet County Riverside West State CA Zip 92545
REMOTE SITE
Corp Number 021-38
Installation Address 110 East Idaho
City Las Cruces County Dona Ana State NM Zip 88005
REMOTE SITE
Corp Number 021-39
Installation Address Suite 230, 7192 Kalanianaloe Hwy
City Honolulu County Honolulu State HI Zip 96825
57
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE Corporate Office
Corp Number 021-50
Installation Address 2233 112th Ave North East
City Bellevue County King State WA Zip 98004
REMOTE SITE
Corp Number 021-51
Installation Address 3 Bethesda Metro Center, Suite 1500
City Bethesda County Montgomery State MD Zip 20814
REMOTE SITE
Corp Number 021-52
Installation Address 2204 Lake Shore Drive, Suite 325
City Birmingham County Jefferson State AL Zip 35209
REMOTE SITE
Corp Number 021-53
Installation Address 111 Pfingsten Road, Suite 400
City Deerfeild County Cook State IL Zip 60075
REMOTE SITE
Corp Number 021-54
Installation Address 4700 South Syracruse Parkway, Suite 1100
City Denver County Denver State CO Zip 80237
REMOTE SITE
Corp Number 021-55
Installation Address 8717 West 110th Street, Suite 100
City Overland Park County Johnson State KS Zip 66210
58
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center SHARED
REMOTE SITE Corporate Office
Corp Number 021-56
Installation Address 300 Corliss Street
City Pittsburgh County Allegheny State PA Zip 15220
59
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER / FAIRFIELD
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT C
CUSTOMER'S COMPUTER FACILITIES AND REMOTE SITES
PRIMARY SITE
Corp Number 025-00
Installation Address 5970 South Greenwood Plaza, Suite 200
City Greenwood Village County Arapahoe State CO Zip 80111
REMOTE SITE
Corp Number 006-13
Installation Address 5944 Sycamore Court
City Chino County San Bernardino State CA Zip 91710
REMOTE SITE
Corp Number 009-28
Installation Address 106 Whispering Pines
City Scotts Valley County Santa Cruz State CA Zip 95066
REMOTE SITE
Corp Number 009-51
Installation Address 641 West Durante Road
City Arcadia County Los Angeles State CA Zip 91006
REMOTE SITE
Corp Number 012-06
Installation Address 1722 Orange Tree Lane
City Redlands County San Bernardino State CA Zip 92374
60
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER
REMOTE SITE
Corp Number 025-01
Installation Address 1441 Woodward
City Abilene County Taylor State TX Zip 79605
REMOTE SITE
Corp Number 025-04
Installation Address 451 South Durbin
City Casper County Natrona State WY Zip 82601
REMOTE SITE
Corp Number 025-09
Installation Address 308 South 3rd Street
City Gallup County McKinley State NM Zip 87301
REMOTE SITE
Corp Number 025-10
Installation Address 2502 Foresight Circle
City Grand Junction County Mesa State CO Zip 81501
REMOTE SITE
Corp Number 025-17
Installation Address 1617 South Acoma Street
City Denver County Denver State CO Zip 80223
REMOTE SITE
Corp Number 025-18
Installation Address 217 South Ash Street
City Perryton County Ochiltree State TX Zip 79070
61
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER
REMOTE SITE
Corp Number 025-21
Installation Address 2534 Camino Entrada
City Santa Fe County Santa Fe State NM Zip 87505
REMOTE SITE
Corp Number 025-22
Installation Address 802 East 6th
City Stillwater County Payne State OK Zip 74074
REMOTE SITE
Corp Number 025-23
Installation Address 1118 East Broadway
City Sweetwater County Nolan State TX Zip 79556
REMOTE SITE
Corp Number 025-25
Installation Address 322 North Glenwood Blvd.
City Tyler County Smith State TX Zip 75792
REMOTE SITE
Corp Number 025-26
Installation Address 6650 East 44th Street
City Tulsa County Tulsa State OK Zip 74145
REMOTE SITE
Corp Number 025-27
Installation Address 3250 Walnut Street
City Boulder County Boulder State CO Zip 80301
62
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER
REMOTE SITE
Corp Number 025-34
Installation Address 23525 Clawwiter
City Hayward County Alameda State CA Zip 94545
REMOTE SITE
Corp Number 025-36
Installation Address 8400 West Park Street
City Boise City County Ada State ID Zip 83704
REMOTE SITE
Corp Number 025-37
Installation Address 6850 South Tucson Way
City Englewood County Arapahoe State CO Zip 80112
REMOTE SITE
Corp Number 025-42
Installation Address 3033 Asbury Road
City Dubuque County Dubuque State IA Zip 52001
REMOTE SITE
Corp Number 025-43
Installation Address 89 North Main Street
City Moab County Grand State UT Zip 84532
REMOTE SITE
Corp Number 025-45
Installation Address 2601 Challenger Drive
City Alameda County Alameda State CA Zip 94501
63
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER
REMOTE SITE
Corp Number 025-46
Installation Address 15255 Salt Lake Ave.
City City of Industry County Los Angeles State CA Zip 91744
REMOTE SITE
Corp Number 025-48
Installation Address 7661 East Gray Road
City Scottsdale County Maricopa State AZ Zip 85260
REMOTE SITE
Corp Number 025-51
Installation Address 410 East Central Way
City Bedford County State CA Zip 15522
REMOTE SITE
Corp Number 025-52
Installation Address Route 219 & Route 281
City Somerset County State PA Zip 15511
REMOTE SITE
Corp Number 025-53
Installation Address 15055 Oxnard street
City Van Nuys County Los Angeles State CA Zip 91411
REMOTE SITE
Corp Number 025-54
Installation Address 101 Village Drive
City Brentwood County Contra Costa State CA Zip 94513
64
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER
REMOTE SITE
Corp Number 025-55
Installation Address 500 H Street
City Los Banos County Merced State CA Zip 93635
REMOTE SITE
Corp Number 025-56
Installation Address 2840 Howe Road, Suite E
City Martinez County Contra Costa State CA Zip 94553
REMOTE SITE
Corp Number 025-57
Installation Address 2455 Henderson Way
City Monterey County State CA Zip 9394
REMOTE SITE
Corp Number 025-59
Installation Address 2450 Whitman Road
City Concord County State CA Zip 94518
REMOTE SITE
Corp Number 025-61
Installation Address 4215 Foothill
City Oakland County State CA Zip 9460
REMOTE SITE
Corp Number 025-62
Installation Address 2900 Technology Court
City Richmond County State CA Zip 95806
65
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER
REMOTE SITE
Corp Number 029-05
Installation Address 1343 West Main Street
City Merced County Merced State CA Zip 95341
REMOTE SITE
Corp Number 029-06
Installation Address 305 West 11th Street
City Tracy County San Joaquin State CA Zip 95376
REMOTE SITE
Corp Number 029-07
Installation Address 146 South Orchard Ave.
City Vacaville County Solano State CA Zip 95688
REMOTE SITE
Corp Number 029-08
Installation Address 1440 Central Road
City Walnut Creek County Contra Costa State CA Zip 94596
REMOTE SITE
Corp Number 033-02
Installation Address 152 South West Nye
City Pendleton County Umatilla State CA Zip 97801
REMOTE SITE
Corp Number 033-05
Installation Address 1520 South Caraway Road
City Jonesboro County Craighead State AR Zip 72401
66
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER
REMOTE SITE
Corp Number 033-11
Installation Address 700 East Jefferson
City Pittsburg County Crawford State KS Zip 66762
REMOTE SITE
Corp Number 033-22
Installation Address 639 North Kellogg Street
City Kennewick County Benton State WA Zip 99336
REMOTE SITE
Corp Number 033-25
Installation Address 201 Aspen Airport Business Center
City Aspen County Pitkin State CO Zip 81611
REMOTE SITE
Corp Number 049-03
Installation Address 3737 West 10th Street
City Greeley County Weld State CO Zip 80631
REMOTE SITE
Corp Number 102-01
Installation Address 2195 Ingersoll Ave.
City Des Moines County Polk State IA Zip 50312
REMOTE SITE
Corp Number 102-09
Installation Address 934 East Centerville Road
City Garland County Collin State TX Zip 75041
67
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER
REMOTE SITE
Corp Number 102-16
Installation Address 249 Warren Ave., Suite 250
City Silverthorne County Summit State CO Zip 80498
REMOTE SITE
Corp Number 102-24
Installation Address 585 East Agate Ave.
City Granby County Grand State CO Zip 80446
REMOTE SITE
Corp Number 102-26
Installation Address 1565 Chenault Street
City Dallas County Collin State TX Zip 75228
REMOTE SITE
Corp Number 102-32
Installation Address 8 Prestiage Circle, Suite 101
City Allen County Collin State TX Zip 53634
REMOTE SITE
Corp Number 155-45
Installation Address 2407 A - Timberloch Place
City The Woodlands County Montgomery State TX Zip 77380
REMOTE SITE
Corp Number 212-14
Installation Address 11855 Palm Drive Desert
City Desert Hot Springs County Riverside State CA Zip 92240
68
<PAGE>
Date: June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center DENVER
REMOTE SITE
Corp Number 212-16
Installation Address 5720 El Camino Real
City Carlsbad County San Diego State CA Zip 92008
REMOTE SITE
Corp Number 212-19
Installation Address 19000 Nugget Blvd.
City Sonora County Tuolumne State CA Zip 95370
REMOTE SITE
Corp Number 267-07
Installation Address 4201 FM 1960 West Suite 300
City Houston County State TX Zip 77068-3414
REMOTE SITE
Corp Number 155-91
Installation Address 14200 Southwest Brigadoon
City Beaverton County State OR Zip 97005
REMOTE SITE
Corp Number 020-05
Installation Address 6916 Northeast 40th Street
City Vancouver County State WA Zip 98661
69
<PAGE>
Date:June 1, 1996
Main Contract No. 021-00
MSO Code TCI
Data Center FAIRFIELD
PRIMARY SITE
Corp Number 025-98
Installation Address 6 Kingsbridge Road
City Fairfield County Essex State NJ Zip 07004
REMOTE SITE
Corp Number 006-14
Installation Address 900 Michigan Ave., Northeast
City Washington County Dist. of Columbia State DC Zip 20009
REMOTE SITE
Corp Number 021-18
Installation Address 19 Kimball Lane
City Moody County York State ME Zip 04054
REMOTE SITE
Corp Number 025-02
Installation Address 300 Carpenter Blvd.
City Carpentersville County Kane State IL Zip 30110
REMOTE SITE
Corp Number 025-05
Installation Address 8301 Coastal Highway
City Ocean City County Worcester State MD Zip 21842
REMOTE SITE
Corp Number 025-06
Installation Address 206 South Willow
City Effingham County Effingham State IL Zip 62401
70
<PAGE>
Date:June 1, 1996
MSO Code TCI
Main Contract No. 021-00
Data Center FAIRFIELD
REMOTE SITE
Corp Number 025-07
Installation Address 710 West Jefferson
City Effingham County Effingham State IL Zip 62401
REMOTE SITE
Corp Number 025-08
Installation Address 533 North Henderson
City Galesburg County Knox State IL Zip 61402
REMOTE SITE
Corp Number 025-14
Installation Address 1070 Towbridge Road
City East Lansing County Ingham State MI Zip 48823
REMOTE SITE
Corp Number 025-19
Installation Address 2216 Marquette
City Peru County La Salle State IL Zip 61354
REMOTE SITE
Corp Number 025-24
Installation Address 731 Benton Road
City Bossier City County Bossier State LA Zip 71111
REMOTE SITE
Corp Number 025-33
Installation Address 222 New Park Road
City Berlin County Hartford State CT Zip 06037
71
<PAGE>
Date:June 1, 1996
MSO Code TCI
Main Contract No. 021-00
Data Center FAIRFIELD
REMOTE SITE
Corp Number 025-39
Installation Address 844 169th Street
City Hammond County Lake State IN Zip 46324
REMOTE SITE
Corp Number 025-40
Installation Address 21170 Allen Road
City Woodhaven County Wayne State MI Zip 48183
REMOTE SITE
Corp Number 025-44
Installation Address 4500 Delemere Blvd.
City Royal Oak County Oakland State MI Zip 48073
REMOTE SITE
Corp Number 025-47
Installation Address 200 Boston Turnpike
City Bolton County Tolland State CT Zip 06040
REMOTE SITE
Corp Number 025-50
Installation Address 201 South Mechanic Street
City Cumberland County Allegany State MD Zip 21502
REMOTE SITE
Corp Number 025-67
Installation Address 1605 2nd Street
City Davis County Yolo State CA Zip 95616
72
<PAGE>
Date:June 1, 1996
MSO Code TCI
Main Contract No. 021-00
Data Center FAIRFIELD
REMOTE SITE
Corp Number 025-72
Installation Address 2525 Kirk Ave.
City Baltimore County Baltimore State MD Zip 21218
REMOTE SITE
Corp Number 025-73
Installation Address 1809 George Ave.
City Annapolis County Anne Arundel State MD Zip 21401
REMOTE SITE
Corp Number 029-01
Installation Address 1275 North Water
City Decatur County Macon State IL Zip 62521
REMOTE SITE
Corp Number 029-02
Installation Address 633 Jackson Street
City Anderson County Maddison State IN Zip 46106
REMOTE SITE
Corp Number 029-03
Installation Address 200 West Washington Loop
City Biloxi County Harrison State MS Zip 39530
REMOTE SITE
Corp Number 029-10
Installation Address 3517 North Dries Lane
City Peoria County Peoria State IL Zip 61604
73
<PAGE>
Date:June 1, 1996
MSO Code TCI
Main Contract No. 021-00
Data Center FAIRFIELD
REMOTE SITE
Corp Number 029-12
Installation Address 401 Hall Street, Southwest
City Grand Rapids County Kent State MI Zip 49505
REMOTE SITE
Corp Number 029-13
Installation Address 1900 North Fares Ave.
City Evansville County Vanderburgh State IN Zip 47711
REMOTE SITE
Corp Number 029-14
Installation Address 459 Klutey Plaza
City Henderson County Henderson State KY Zip 42420
REMOTE SITE
Corp Number 033-03
Installation Address 5675 Micco Road, Unit 5
City Barefoot Bay County Brevard State FL Zip 32976
REMOTE SITE
Corp Number 033-04
Installation Address 940 12th Street
City Vero Beach County Indian River State FL Zip 32960
REMOTE SITE
Corp Number 033-07
Installation Address 4152 Okeechobee Road, Suite D
City Fort Pierce County St. Lucie State FL Zip 34947
74
<PAGE>
Date:June 1, 1996
MSO Code TCI
Main Contract No. 021-00
Data Center FAIRFIELD
REMOTE SITE
Corp Number 033-10
Installation Address Industrial Road
City Port Jefferson Station County Suffolk State NY Zip 11776
REMOTE SITE
Corp Number 033-28
Installation Address 609 Center Ave.
City Mamaroneck County Westchester State NY Zip 10543
REMOTE SITE
Corp Number 033-29
Installation Address 40 Potash Road
City Oakland County Bergen State NJ Zip 07436
REMOTE SITE
Corp Number 033-31
Installation Address 93 South Washington Street
City North Attleboro County Bristol State MA Zip 02961
REMOTE SITE
Corp Number 049-04
Installation Address 172 Charoltte Street
City Ashville County Buncombe State NC Zip 28801
REMOTE SITE
Corp Number 102-20
Installation Address 16830 Edison Road
City Mishawaka County St. Joseph State IN Zip 46544
75
<PAGE>
Date:June 1, 1996
MSO Code TCI
Main Contract No. 021-00
Data Center FAIRFIELD
REMOTE SITE
Corp Number 102-27
Installation Address 227 North Street
City Elkton County Cecil State MD Zip 21921
REMOTE SITE
Corp Number 102-28
Installation Address 4008 Dupont Highway
City New Castle County New Castle State DE Zip 19720
REMOTE SITE
Corp Number 102-29
Installation Address 44 North Branford Road
City Branford County New Haven State CT Zip 06405
REMOTE SITE
Corp Number 102-30
Installation Address 1326 Eddie Dowling Highway
City Lincoln County Providence State RI Zip 02865
REMOTE SITE
Corp Number 102-31
Installation Address 191 Chandler Road
City Andover County Essex State MA Zip 01810
REMOTE SITE
Corp Number 191-01
Installation Address 355 Chicago Street
City Buffalo County Erie State NY Zip 14204
76
<PAGE>
Date:June 1, 1996
MSO Code TCI
Main Contract No. 021-00
Data Center FAIRFIELD
REMOTE SITE
Corp Number 209-43
Installation Address 3206 Main Street
City Baker County East Baton Rouge State LA Zip 70714
REMOTE SITE
Corp Number 212-15
Installation Address 5428 Florida Blvd.
City Baton Rouge County East Baton Rouge State LA Zip 70806
REMOTE SITE
Corp Number 212-25
Installation Address 7509 East St. Bernard Highway
City Violet County St. Bernard State LA Zip 70092
REMOTE SITE
Corp Number 212-26
Installation Address 179 Louise Drive
City Newport News County NewPort News State VA Zip 23601
REMOTE SITE
Corp Number 212-31
Installation Address 209 Thompson Street
City Shelbyville County Bedford State TN Zip 37160
REMOTE SITE
Corp Number 212-32
Installation Address 202 North Spring Street
City Manchester County Coffee State TN Zip 37355
77
<PAGE>
Date:June 1, 1996
MSO Code TCI
Main Contract No. 021-00
Data Center FAIRFIELD
REMOTE SITE
Corp Number 212-36
Installation Address 430 D - South Burnside
City Gonzales County Ascension State LA Zip 70737
REMOTE SITE
Corp Number 212-37
Installation Address 609 Hatchell Lane
City Denham Springs County Livingston State LA Zip 70726
REMOTE SITE
Corp Number 231-07
Installation Address 10 Airport View Drive
City Hollywood County St. Marys State MD Zip 20636
REMOTE SITE
Corp Number 231-08
Installation Address Route 113 Country Village
City Dagsboro County Sussex State DE Zip 19939
REMOTE SITE
Corp Number 254-01
Installation Address 10 Old Town Road
City South Yarmouth County Barnstable State MA Zip 02664
REMOTE SITE
Corp Number 254-03
Installation Address 1380 B- Main Street
City Waltham County Middlesex State MA Zip 02154
78
<PAGE>
Date:June 1, 1996
MSO Code TCI
Main Contract No. 021-00
Data Center FAIRFIELD
REMOTE SITE
Corp Number 263-03
Installation Address 6161 Cleveland Street
City Merrillville County State IN Zip 46410
REMOTE SITE
Corp Number 263-04
Installation Address 137 Ellison Street
City Patterson County State NJ Zip 07505
REMOTE SITE
Corp Number 025-58
Installation Address 1289 State Street
City Marysville County Snohomish State WA Zip 98270
REMOTE SITE
Corp Number 025-60
Installation Address Building 121
City Travis AFB County Solano West State CA Zip 94535-1388
79
<PAGE>
DATE: JUNE 1, 1996
MAIN CONTRACT NO. 021-00
MSO CODE TCI
DATA CENTER FAIRFIELD
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT C
CUSTOMER'S COMPUTER FACILITIES AND REMOTE SITES
PRIMARY SITE
CORP NUMBER 128-00
INSTALLATION ADDRESS 6 KINGSBRIDGE ROAD
CITY FAIRFIELD COUNTY ESSEX STATE NJ ZIP 07006
REMOTE SITE
CORP NUMBER 128-01
INSTALLATION ADDRESS 1202 W. DIVISION STREET
CITY BLOOMINGTON COUNTY MCLEAN STATE IL ZIP 61761
REMOTE SITE
CORP NUMBER 128-02
INSTALLATION ADDRESS 1025 JACKSON STREET
CITY ROANOKE RAPIDS COUNTY HALIFAX STATE NC ZIP 27870
REMOTE SITE
CORP NUMBER 128-03
INSTALLATION ADDRESS 819 MERCER STREET
CITY PRINCETON COUNTY MERCER STATE WV ZIP 24740
REMOTE SITE
CORP NUMBER 128-05
INSTALLATION ADDRESS 1990 MALL BLVD.
CITY AUBURN COUNTY LEE STATE AL ZIP 36830
80
<PAGE>
DATE: JUNE 1, 1996
MAIN CONTRACT NO. 021-00
MSO CODE TCI
DATA CENTER FAIRFIELD
REMOTE SITE
CORP NUMBER 128-06
INSTALLATION ADDRESS 1533 SOUTH ENTERPRISE
CITY SPRINGFIELD COUNTY GREENE STATE MO ZIP 65804
REMOTE SITE
CORP NUMBER 128-07
INSTALLATION ADDRESS 1622 5TH AVE SOUTH EAST
CITY DECATUR COUNTY MORGAN STATE AL ZIP 35601
REMOTE SITE
CORP NUMBER 128-08
INSTALLATION ADDRESS 565 EAST MAIN STREET
CITY WTHYEVILLE COUNTY WYTHE STATE VA ZIP 24382
REMOTE SITE
CORP NUMBER 128-09
INSTALLATION ADDRESS 5812 21ST STREET
CITY RACINE COUNTY RACINE STATE WI ZIP 53406
REMOTE SITE
CORP NUMBER 128-10
INSTALLATION ADDRESS 6700 MACON ROAD
CITY COLUMBUS COUNTY MUSCOGEE STATE GA ZIP 31907
REMOTE SITE
CORP NUMBER 128-11
INSTALLATION ADDRESS 8221 WEST 119TH STREET
CITY OVERLAND PARK COUNTY JOHNSON STATE KS ZIP 66213
81
<PAGE>
DATE: JUNE 1, 1996
MAIN CONTRACT NO. 021-00
MSO CODE TCI
DATA CENTER FAIRFIELD
REMOTE SITE
CORP NUMBER 128-12
INSTALLATION ADDRESS 1002 EAST CENTER ROAD
CITY KOKOMO COUNTY HOWARD STATE IN ZIP 46902
REMOTE SITE
CORP NUMBER 128-14
INSTALLATION ADDRESS 725 UNION STREET
CITY SPARTANBURG COUNTY SPARTANBURG STATE SC ZIP 29304
REMOTE SITE
CORP NUMBER 128-15
INSTALLATION ADDRESS 113 FIRST AVE.
CITY BECKLEY COUNTY RALEIGH STATE WV ZIP 25801
REMOTE SITE
CORP NUMBER 128-16
INSTALLATION ADDRESS 17 LINDSEY AVE.
CITY GREENVILLE COUNTY GREENVILLE STATE SC ZIP 29607
REMOTE SITE
CORP NUMBER 128-17
INSTALLATION ADDRESS 1235 KING STREET SOUTH EAST
CITY CLEVELAND COUNTY BRADLEY STATE TN ZIP 37311
REMOTE SITE
CORP NUMBER 128-18
INSTALLATION ADDRESS 476 WEST LINCOLN TRAIL BLVD.
CITY RADCLIFF COUNTY HARDIN STATE KY ZIP 40160
82
<PAGE>
DATE: JUNE 1, 1996
MAIN CONTRACT NO. 021-00
MSO CODE TCI
DATA CENTER FAIRFIELD
REMOTE SITE
CORP NUMBER 128-19
INSTALLATION ADDRESS 2544 PALUMBO DRIVE
CITY LEXINGTON COUNTY FAYETTE STATE KY ZIP 40555
REMOTE SITE
CORP NUMBER 128-20
INSTALLATION ADDRESS 2421 MATLOCK ROAD
CITY ARLINGTON COUNTY TARRANT STATE TX ZIP 76014
REMOTE SITE
CORP NUMBER 128-23
INSTALLATION ADDRESS 1414 SUMMIT AVENUE
CITY RICHARDSON COUNTY COLLIN STATE TX ZIP 75074
83
<PAGE>
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT D
STANDARD FIXED REPORTS - DDP FINANCIALS
DESCRIPTION:
A. ACCOUNTING ANALYSIS SUMMARY
B. DETAIL OF INCOME CHARGED BY SERVICE CODE
C. DETAIL OF INCOME CHARGED BY COMBO CODE
D. DETAIL OF ADJUSTMENTS BY REPORTING CENTER
E. DETAIL OF ADJUSTMENTS BY REASON
F. AGING ANALYSIS
G. BILLING ACTIVITY RECAP
H. REMINDER SCHEME ANALYSIS
I. FRANCHISE ACCOUNTING
J. MANAGEMENT ANALYSIS - SYSTEM STATUS
K. MANAGEMENT ANALYSIS - PERIOD ACTIVITY
L. SERVICE CODE ACTIVITY/DAY
M. UPDATE CYCLE BILLING INFORMATION
N. MANAGEMENT ANALYSIS - COMBO CUSTOMERS
O. MANAGEMENT ANALYSIS - COMBO OUTLETS
P. TRANSACTION BATCH SUMMARY
Q. LIABILITIES - ON DEPOSIT
R. LIABILITIES - UNAPPLIED PAYMENTS
S. LIABILITIES - DEFERRED DISCOUNT
T. LIABILITIES - PREPAID & CREDIT BALANCE
U. WRITE OFF ANALYSIS
Y. MANAGEMENT ANALYSIS OF COMBO CHARGES AND THEIR EFFECT ON REPORTING CENTERS
AA. REPORTING CENTER COMBINATIONS
BB. REPORTING CENTER VS. REPORTING CENTER COMBINATIONS
CC. SUBSCRIBER COUNT SUMMARY
DD. DETAIL OF INCOME EARNED BY REPORTING CENTER
EE. DETAIL OF INCOME EARNED BY COMBO
FF. DETAIL OF INCOME UNEARNED BY REPORTING CENTER
GG. DETAIL OF INCOME UNEARNED BY REPORTING COMBO
HH. CYCLE LIABILITY ANALYSIS
84
<PAGE>
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT E
TERMS AND CONDITIONS FOR TANDEM OPERATING SYSTEM SOFTWARE
TO THE EXTENT THAT ANY TANDEM SOFTWARE IS PROVIDED TO CUSTOMER BY CABLEDATA,
INC. ("CABLEDATA"), THE SAME IS LICENSED TO CUSTOMER UNDER THE FOLLOWING TERMS
AND CONDITIONS:
1. GRANT. CABLEDATA HEREBY GRANTS CUSTOMER, AND CUSTOMER ACCEPTS FROM
CABLEDATA, A PERSONAL, NON-TRANSFERABLE AND NON-EXCLUSIVE RIGHT TO USE THE
SOFTWARE DEVELOPED OR ACQUIRED BY TANDEM COMPUTERS INCORPORATED OF
CUPERTINO, CALIFORNIA, U.S.A. ("TANDEM") AND LICENSED TO CUSTOMER BY
CABLEDATA (THE "TANDEM SOFTWARE"), EXCLUSIVELY ON THE TANDEM COMPUTER
SYSTEM SPECIFIED IN CABLEDATA'S INVOICE TO CUSTOMER OR IN A SEPARATE
AGREEMENT FOR THE SALE AND INSTALLATION OF EQUIPMENT OR EQUIPMENT
RENTAL/LOAN AGREEMENT ("SALE OR RENTAL AGREEMENT") (THE "DESIGNATED
SYSTEM") DURING THE TERM OF THIS AGREEMENT.
2. TANDEM SOFTWARE. "TANDEM SOFTWARE" INCLUDES 1) THE MACHINE-EXECUTABLE
OBJECT CODE VERSION OF THE USER-LOADABLE PROGRAMS DELIVERED TO CUSTOMER
UNDER THIS AGREEMENT, 2) THE MICROCODE EMBEDDED IN THE DESIGNATED SYSTEM,
3) ALL RELATED USER DOCUMENTATION, 4) ANY UPDATE OR REVISION OF THESE
PROGRAMS OR MICROCODE DELIVERED TO CUSTOMER UNDER THIS AGREEMENT OR ANY
RELATED MAINTENANCE AGREEMENT AND 5) ANY COPY OF THESE ITEMS. THIS
AGREEMENT WILL NOT BE CONSTRUED TO GRANT CUSTOMER ANY RIGHT TO THE SOURCE
CODE OF THE TANDEM SOFTWARE.
3. DESIGNATED SYSTEM. "DESIGNATED SYSTEM" MEANS THE TANDEM COMPUTER
SYSTEM SPECIFIED IN CABLEDATA'S INVOICE TO CUSTOMER OR A SALE OR RENTAL
AGREEMENT THAT CUSTOMER OWNS, POSSESSES OR OPERATES. CUSTOMER MAY USE THE
TANDEM SOFTWARE ONLY ON THE DESIGNATED SYSTEM. IF THE DESIGNATED SYSTEM
BECOMES TEMPORARILY INOPERABLE, CUSTOMER MAY LOAD AND USE THE USER-LOADABLE
PROGRAMS ON ANOTHER OF ITS TANDEM COMPUTER SYSTEMS AT THE SAME LOCATION
UNTIL THE DESIGNATED SYSTEM BECOMES OPERABLE, BUT IN NO EVENT FOR MORE THAN
THIRTY DAYS. CUSTOMER'S RIGHT TO USE THE TANDEM SOFTWARE WILL TERMINATE
AUTOMATICALLY IF CUSTOMER CEASES TO OWN, POSSESS OR OPERATE THE DESIGNATED
SYSTEM.
4. USE. CUSTOMER MAY USE THE TANDEM SOFTWARE ONLY IN ITS OWN INTERNAL
BUSINESS OPERATIONS. CUSTOMER WILL NOT PERMIT ANY OTHER PERSON TO USE THE
TANDEM SOFTWARE, EXCEPT TO ENTER OR RETRIEVE INFORMATION IN THE ORDINARY
COURSE OF PROCESSING TRANSACTIONS. CUSTOMER WILL NOT RENT THE TANDEM
SOFTWARE OR MAKE IT AVAILABLE ON A TIME-SHARING BASIS. CUSTOMER MAY MAKE
ONE BACK-UP COPY OF EACH USER-LOADABLE PROGRAM AND ANY RELATED UPDATE OR
REVISION. CUSTOMER WILL REPRODUCE ALL CONFIDENTIALITY AND PROPRIETARY
NOTICES ON EACH OF THESE COPIES. CUSTOMER WILL NOT OTHERWISE COPY,
TRANSLATE, MODIFY, ADAPT, DECOMPILE, DISASSEMBLE OR REVERSE ENGINEER THE
TANDEM SOFTWARE.
5. OWNERSHIP. TITLE TO THE TANDEM SOFTWARE AND ALL PATENTS, COPYRIGHTS,
MASK WORKS, CIRCUIT LAYOUT RIGHTS, DESIGN RIGHTS, TRADE SECRETS AND OTHER
PROPRIETARY RIGHTS IN OR RELATED TO THE TANDEM SOFTWARE ARE AND WILL REMAIN
THE EXCLUSIVE PROPERTY OF TANDEM OR ITS LICENSOR, WHETHER OR NOT
SPECIFICALLY RECOGNIZED OR PERFECTED UNDER THE LAWS OF THE COUNTRY WHERE
THE TANDEM SOFTWARE IS LOCATED. CUSTOMER WILL NOT TAKE ANY ACTION THAT
JEOPARDIZES SUCH PROPRIETARY RIGHTS OR ACQUIRE ANY RIGHT IN THE TANDEM
SOFTWARE, EXCEPT THE LIMITED USE RIGHTS SPECIFIED IN THIS AGREEMENT.
TANDEM OR ITS LICENSOR WILL OWN ALL RIGHTS IN ANY COPY, TRANSLATION,
MODIFICATION, ADAPTATION OR DERIVATION OF THE TANDEM SOFTWARE, INCLUDING
ANY IMPROVEMENT OR DEVELOPMENT THEREOF.
6. CONFIDENTIALITY. CUSTOMER ACKNOWLEDGES THAT THE TANDEM SOFTWARE
INCORPORATES CONFIDENTIAL AND PROPRIETARY INFORMATION DEVELOPED OR ACQUIRED
BY TANDEM. CUSTOMER WILL TAKE ALL REASONABLE PRECAUTIONS NECESSARY TO
SAFEGUARD THE CONFIDENTIALITY OF THE TANDEM SOFTWARE, INCLUDING 1) THOSE
TAKEN BY CUSTOMER TO PROTECT ITS OWN CONFIDENTIAL INFORMATION AND 2) THOSE
WHICH TANDEM, ITS LICENSOR OR CABLEDATA MAY REASONABLY REQUEST FROM TIME TO
TIME. CUSTOMER WILL NOT ALLOW THE REMOVAL OR DEFACEMENT OF ANY
CONFIDENTIALITY OR PROPRIETARY NOTICE PLACED ON ITEMS OF TANDEM SOFTWARE.
THE PLACEMENT OF COPYRIGHT NOTICES ON THESE ITEMS WILL NOT CONSTITUTE
PUBLICATION OR OTHERWISE IMPAIR THEIR CONFIDENTIAL NATURE.
7. DISCLOSURE. CUSTOMER WILL NOT DISCLOSE, IN WHOLE OR IN PART, ANY
TANDEM SOFTWARE TO ANY PERSON, EXCEPT TO THOSE OF ITS EMPLOYEES, AGENTS OR
CONSULTANTS WHO REQUIRE ACCESS FOR CUSTOMER'S AUTHORIZED USE OF THE TANDEM
SOFTWARE. BEFORE DISCLOSING ANY OF THESE ITEMS TO SUCH PARTIES, CUSTOMER
WILL REQUIRE THAT THEY EXPRESSLY 1) RECOGNIZE TANDEM'S OR ITS LICENSOR'S
CONFIDENTIAL AND PROPRIETARY RIGHTS IN THE TANDEM SOFTWARE, 2) AGREE TO
COMPLY WITH THE USE AND NON-DISCLOSURE RESTRICTIONS APPLICABLE TO THE
TANDEM SOFTWARE UNDER THIS AGREEMENT, AND 3) ACKNOWLEDGE IN WRITING
TANDEM'S, ITS LICENSOR'S AND CABLEDATA'S ACCEPTANCE OF THIS RIGHT.
CUSTOMER WILL EXPRESSLY CONFIRM TANDEM'S, ITS LICENSOR'S AND CABLEDATA'S
ACCEPTANCE OF THIS RIGHT UPON RECEIPT OF THE WRITTEN ACKNOWLEDGMENT.
8. UNAUTHORIZED USE OR DISCLOSURE. CUSTOMER ACKNOWLEDGES THAT ANY
UNAUTHORIZED USE OR DISCLOSURE OF THE TANDEM SOFTWARE MAY CAUSE IRREPARABLE
DAMAGE TO TANDEM OR ITS LICENSOR. IF AN UNAUTHORIZED USE OR DISCLOSURE
OCCURS, CUSTOMER WILL PROMPTLY NOTIFY TANDEM AND CABLEDATA TAKE, AT
CUSTOMER'S EXPENSE, ALL STEPS NECESSARY TO RECOVER THE TANDEM SOFTWARE AND
TO PREVENT ITS SUBSEQUENT UNAUTHORIZED USE OR DISSEMINATION, INCLUDING
AVAILING ITSELF OF ACTIONS FOR SEIZURE AND INJUNCTIVE RELIEF. IF CUSTOMER
FAILS TO TAKE THESE STEPS IN A TIMELY AND ADEQUATE MANNER, TANDEM, ITS
LICENSOR OR CABLEDATA MAY TAKE THEM IN ITS OWN OR CUSTOMER'S NAME AND AT
CUSTOMER'S EXPENSE.
9. LIMITATION. CUSTOMER WILL HAVE NO CONFIDENTIALITY OBLIGATION WITH
RESPECT TO ANY PORTION OF THE TANDEM SOFTWARE THAT 1) CUSTOMER
INDEPENDENTLY KNEW OR DEVELOPED BEFORE RECEIVING THE TANDEM SOFTWARE UNDER
THIS AGREEMENT, 2) CUSTOMER LAWFULLY OBTAINED FROM A THIRD PARTY UNDER NO
OBLIGATION OF CONFIDENTIALITY OR 3) BECAME AVAILABLE TO THE PUBLIC OTHER
THAN AS RESULT OF AN ACT OR OMISSION OF CUSTOMER OR ANY OF ITS AGENTS OR
EMPLOYEES. IN THIS EVENT, CUSTOMER WILL NOTIFY TANDEM AND CABLEDATA AT
LEAST THIRTY CALENDAR DAYS BEFORE DISCLOSING THE PORTION OF THE TANDEM
SOFTWARE TO ANY OTHER PERSON.
85
<PAGE>
10. NO CONSEQUENTIAL DAMAGES. UNDER NO CIRCUMSTANCES WILL TANDEM OR ITS
RELATED COMPANIES OR LICENSOR BE LIABLE FOR ANY CONSEQUENTIAL, INDIRECT,
SPECIAL, PUNITIVE OR INCIDENTAL DAMAGES, WHETHER FORESEEABLE OR
UNFORESEEABLE, BASED ON CLAIMS OF CABLEDATA OR ITS CUSTOMERS (INCLUDING,
BUT NOT LIMITED TO, CLAIMS FOR LOSS OF DATA, GOODWILL, PROFITS, USE OF
MONEY OR USE OF THE TANDEM SOFTWARE, INTERRUPTION IN USE OR AVAILABILITY OF
DATA OR THE TANDEM SOFTWARE, STOPPAGE OF OTHER WORK OR IMPAIRMENT OF THEIR
ASSETS), ARISING OUT OF BREACH OF EXPRESS OR IMPLIED WARRANTY, BREACH OF
CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR
OTHERWISE, WHETHER BASED ON THIS AGREEMENT, ANY COMMITMENT PERFORMED OR
UNDERTAKEN UNDER OR IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE, EXCEPT
ONLY IN THE CASE OF DEATH OR PERSONAL INJURY WHERE AND TO THE EXTENT WILL
THE AGGREGATE LIABILITY WHICH TANDEM, ITS RELATED COMPANIES OR ITS LICENSOR
INCUR IN ANY ACTION OR PROCEEDING EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO
TANDEM BY CABLEDATA FOR THE SPECIFIC TANDEM SOFTWARE THAT DIRECTLY CAUSED
THE DAMAGE.
11. TERMINATION.
11.1 THIS AGREEMENT MAY BE TERMINATED WITH THIRTY DAYS PRIOR WRITTEN
NOTICE UPON VIOLATION BY CUSTOMER OF ANY TERM OR CONDITION OF THIS
AGREEMENT. UPON THE EXPIRATION OR TERMINATION OF THIS AGREEMENT, ALL
RIGHTS GRANTED TO CUSTOMER UNDER THIS AGREEMENT WILL IMMEDIATELY
CEASE, AND CUSTOMER WILL PROMPTLY 1) PURGE THE TANDEM SOFTWARE FROM
THE DESIGNATED SYSTEM (EXCEPT EMBEDDED MICROCODE) AND ALL OTHER
COMPUTER SYSTEMS, STORAGE MEDIA AND OTHER FILES, 2) DELIVER TO
CABLEDATA OR ITS DESIGNEE THE TANDEM SOFTWARE (EXCEPT EMBEDDED
MICROCODE) AND ANY OTHER ITEM WITHIN CUSTOMER'S POSSESSION OR CONTROL
THAT CONTAINS CONFIDENTIAL INFORMATION RELATING TO THE TANDEM
SOFTWARE, INCLUDING, WITHOUT LIMITATION, DOCUMENTATION, AND 3) DELIVER
TO CABLEDATA AN AFFIDAVIT CERTIFYING THAT CUSTOMER HAS COMPLIED WITH
ITS TERMINATION OBLIGATIONS UNDER THIS AGREEMENT. THE PROVISIONS OF
THIS AGREEMENT DEALING WITH OWNERSHIP, CONFIDENTIALITY, INSPECTION,
RE-EXPORTATION AND THIRD PARTY ENFORCEMENT RIGHTS WILL SURVIVE ITS
EXPIRATION OR TERMINATION FOR ANY REASON.
11.2 CABLEDATA OR TANDEM MAY TERMINATE CUSTOMER'S RIGHT TO USE AND
SUBLICENSE ANY THIRD PARTY PRODUCTS IF SUCH THIRD PARTY LICENSE
BETWEEN TANDEM AND THIRD PARTY IS TERMINATED OR EXPIRES.
12. INSPECTION. DURING THE TERM OF THIS AGREEMENT AND FOR ONE YEAR AFTER
ITS TERMINATION, TANDEM, ITS LICENSOR OR THEIR REPRESENTATIVES MAY, UPON
PRIOR NOTICE TO CUSTOMER, 1) INSPECT THE FILES, COMPUTER PROCESSORS,
EQUIPMENT, FACILITIES AND PREMISES OF CUSTOMER DURING NORMAL WORKING HOURS
TO VERIFY CUSTOMER'S COMPLIANCE WITH THIS AGREEMENT, AND 2) WHILE
CONDUCTING THE INSPECTION, COPY OR RETAIN ANY ITEM THAT CUSTOMER MAY
POSSESS IN VIOLATION OF THIS AGREEMENT.
13. U.S. EXPORT CONTROLS. CUSTOMER ACKNOWLEDGES THAT THE TANDEM SOFTWARE,
HARDWARE AND ALL RELATED TECHNICAL INFORMATION, DOCUMENTS AND MATERIALS ARE
SUBJECT TO EXPORT CONTROLS UNDER THE U.S. EXPORT ADMINISTRATION
REGULATIONS. CUSTOMER WILL 1) COMPLY STRICTLY WITH ALL LEGAL REQUIREMENTS
ESTABLISHED UNDER THESE CONTROLS, 2) COOPERATE FULLY WITH TANDEM IN ANY
OFFICIAL OR UNOFFICIAL AUDIT OR INSPECTION THAT RELATES TO THESE CONTROLS
AND 3) NOT EXPORT, RE-EXPORT, DIVERT, TRANSFER OR DIVERT, TRANSFER OR
DISCLOSE, DIRECTLY OR INDIRECTLY, ANY TANDEM SOFTWARE, HARDWARE OR RELATED
TECHNICAL INFORMATION, DOCUMENTS OR MATERIALS, OR ANY DIRECT PRODUCT
THEREOF, TO ANY OF THE FOLLOWING COUNTRIES (OR COUNTRIES SUBSEQUENTLY
LISTED IN THE U.S. EXPORT ADMINISTRATION REGULATIONS), OR TO ANY NATIONAL
OR RESIDENT THEREOF, WITHOUT OBTAINING THE PRIOR WRITTEN AUTHORIZATION OF
TANDEM AND THE U.S. COMMERCE DEPARTMENT: AFGHANISTAN, ALBANIA, BULGARIA,
CAMBODIA, CUBA, CZECHOSLOVAKIA, GERMAN DEMOCRATIC REPUBLIC (INCLUDING EAST
BERLIN), HUNGARY, LAOS, LIBYA, MONGOLIA, NORTH KOREA, PEOPLE'S REPUBLIC OF
CHINA, POLAND, ROMANIA, SOUTH AFRICA, NAMIBIA, UNION OF SOVIET SOCIALIST
REPUBLICS (INCLUDING ESTONIA, LATVIA AND LITHUANIA) AND VIETNAM. UPON
NOTICE TO CABLEDATA, TANDEM MAY MODIFY THIS LIST TO CONFORM TO CHANGES IN
THE U.S. EXPORT CONTROL REGULATIONS.
14. ASSIGNMENT. CUSTOMER MAY NOT ASSIGN, DELEGATE OR OTHERWISE TRANSFER
THE TANDEM SOFTWARE OR ANY PARTS THEREOF OR THIS AGREEMENT OR ANY OF ITS
RIGHTS OR OBLIGATIONS WITHOUT TANDEM'S AND CABLEDATA'S PRIOR APPROVAL AND
PROVIDED FURTHER THAT SUCH ASSIGNMENT IS TO ANOTHER PERSON OR ENTITY IN THE
SAME COUNTRY FOR WHICH THE TANDEM SOFTWARE IS FIRST FURNISHED TO THE
CUSTOMER, AND THEN ONLY IF THE TRANSFEROR RETAINS NO PORTION OR COPY OF THE
TANDEM SOFTWARE AND THE TRANSFEREE ENTERS INTO AN ENFORCEABLE WRITTEN
SUBLICENSE AGREEMENT IN ACCORDANCE WITH THIS AGREEMENT. CUSTOMER
ACKNOWLEDGES THAT IF CABLEDATA CEASES TO BE TANDEM'S AUTHORIZED AGENT FOR
ANY REASON, CABLEDATA'S RIGHTS AGAINST CUSTOMER UNDER THIS AGREEMENT MAY BE
ASSIGNED TO TANDEM OR ITS DESIGNEE. CUSTOMER HEREBY CONSENTS TO ANY SUCH
ASSIGNMENT AND, AT TANDEM'S REQUEST, WILL EXECUTE ANY INSTRUMENT WHICH MAY
BE REQUIRED TO PERFECT SUCH ASSIGNMENT.
15. THIRD PARTY ENFORCEMENT. CUSTOMER ACKNOWLEDGES THAT THE PROVISIONS OF
THIS AGREEMENT THAT GOVERN THE USE, OWNERSHIP, CONFIDENTIALITY, INSPECTION
AND REEXPORTATION OF THE TANDEM SOFTWARE, THE TERMINATION, ASSIGNMENT OR
MODIFICATION OF THIS AGREEMENT AND THE LIMITATION OF LIABILITY HEREUNDER
ARE INTENDED TO INURE TO THE BENEFIT OF TANDEM AND ITS LICENSOR. CUSTOMER
ACKNOWLEDGES THAT 1) TANDEM OR ITS LICENSOR HAVE THE RIGHT TO ENFORCE THESE
PROVISIONS DIRECTLY AGAINST CUSTOMER, WHETHER IN TANDEM'S, ITS LICENSOR'S
OR CABLEDATA'S NAME, 2) TANDEM AND ITS LICENSOR ACCEPT THIS RIGHT AND 3)
CUSTOMER CONFIRMS TANDEM'S AND ITS LICENSOR'S ACCEPTANCE OF THIS RIGHT BY
EXECUTING THIS AGREEMENT.
16. WAIVER, AMENDMENT, MODIFICATION. CUSTOMER AND CABLEDATA WILL NOT
WAIVE, AMEND OR OTHERWISE MODIFY ANY PROVISION OF THIS AGREEMENT THAT
AFFECTS TANDEM'S OR ITS LICENSOR'S RIGHTS WITHOUT THE PRIOR WRITTEN
APPROVAL OF TANDEM.
17. WARRANTIES. THIS AGREEMENT DOES NOT INCLUDE ANY WARRANTIES, EXPRESS
OR IMPLIED, BY OR ON BEHALF OF TANDEM OR ANY ENTITY GRANTING TANDEM LICENSE
RIGHTS TO TANDEM SOFTWARE PROVIDED HEREUNDER.
18. NO PUBLICATION. CUSTOMER SHALL NOT PUBLISH ANY RESULTS OF BENCHMARK
TESTS RUN ON THE TANDEM SOFTWARE.
86
<PAGE>
ON/LINE OPERATING & LICENSE AGREEMENT
INCLUSIVE DDP/SQL 2.7
ATTACHMENT F
SYSTEM
THE INCLUSIVE SYSTEM IS DESIGNED FOR A MEDIUM TO LARGE SIZED FRANCHISE AND IS
PRICED WITH THE FOLLOWING LIMITATIONS:
<TABLE>
<CAPTION>
1) ALL THE PROGRAMS LISTED BELOW CAN BE RUN AT ANY TIME ON THE INCLUSIVE SYSTEM.
PROGRAM # DESCRIPTION PROGRAM # DESCRIPTION
- --------- ----------- --------- -----------
<S> <C> <C> <C>
DP00127 DDP MENU DP32027 PPV CHARGING RUN*
DP00827 KEYBOARD TRAINING DP32227 PPV ANALYSIS*
DP10027 ORDER PROCESSING DP32527 PPV MAINTENANCE*
DP10527 BULLETIN BOARD MAINTENANCE DP32827 EVENT SCHEDULER SLAVE PROCESS*
DP11027 QUOTA MAINTENANCE DP32927 EVENT SCHEDULER*
DP11527 QUEUE FILE MAINTENANCE DP33027 EVENT UPLOAD*
DP12527 OPERATOR PERFORMANCE DP34227 ARU UPDATE*
DP13027 DIRECTOR MAINTENANCE DP34527 ARU DRIVER*
DP13527 DIRECTOR MAINTENANCE PRINT DP37027 OLVQ CALL RECEIVE*
DP14027 PERSONNEL MAINTENANCE DP37127 OLVQ EDIT & AUTHO*
DP14527 CYCLE SCHEDULING DP37227 OLVQ ORDER SERVER*
DP15027 COMPLEX MAINTENANCE DP37327 OLVQ UPLOAD*
DP16027 FORMAT BUILDER DP37427 OLVQ EVENT QUEUE*
DP17027 REPORT PARAMETER MAINTENANCE DP37527 OLVQ PARAMETER MAINTENANCE*
DP19027 ARU PARAMETER MAINTENANCE* DP38027 BOX DRIVER STARTUP*
DP20027 ROUTE SELECT DP38X27 BOX DRIVER (X VARIES BY VENDOR FORMAT)*
DP21127 ROUTE ASSIGN DP57027 SPOOLER
DP22027 WORK ORDERS DP60027 PAYMENTS AND ADJUSTMENTS
DP28027 PRINT STATEMENT IMAGE* DP60727 LOCKBOX PROCESSING
DP30027 BOX MAINTENANCE DP61027 POST/PRINT BATCHES
DP31027 ADDRESSABLE PARAMETER MAINTENANCE* DP63027 COLLECTIONS MANAGER
MENU SYSTEM MENU
2) THE FOLLOWING PROGRAMS MUST BE RUN DURING 5:00 P.M. TO 8:00 A.M., MONDAY THROUGH FRIDAY. ALL HOURS SATURDAY AND SUNDAY.
PROGRAM # DESCRIPTION PROGRAM # DESCRIPTION
- --------- ----------- --------- -----------
DP01027 DATABASE MAINTENANCE DP72827 HOT MOVES REPORT
DP41527 HOUSE/CUSTOMER MAINTENANCE DP73027 MAGAZINE LABELS
DP60627 EQUIP-SERVICE WRITE-OFF REPORT DP73527 MIGRATION REPORT
DP60927 EFTS PROCESSING* DP74027 HOUSE/CUSTOMER SELECT
DP62027 COLLECTIONS RUN DP75027 BOX SELECT
DP62527 COLLECTIONS LOADING REPORT DP75127 SUPPLIER ACTIVITY
DP62727 COLLECTIONS GROUP CHANGE OF EVENTS DP75227 SALES COMMISSION
DP62827 PRINT AGED BALANCE CUSTOMERS DP75427 STATUS SUMMARY
DP64027 PRODUCT MANAGER DP75527 PERFORMANCE REPORTS
DP69027 YEARLY INTEREST RUN DP75827 REPORT KEY MANAGER
DP70027 UNIVERSAL SELECT DP77027 HISTORY SELECT
DP70227 DDPF REPORT PRINT DP78027 EVENT SELECT
DP70727 UNRETURNED CONVERTER REPORT DP79027 FORM SERVER
DP72027 WIP SELECT DP79527 JOB SCHEDULER
DP72527 CAPITALIZED DROPS REPORT
3) THE FOLLOWING PROGRAMS NEED ADVANCED SCHEDULING AND MUST BE RUN 5:00 P.M. TO 8:00) A.M., MONDAY THROUGH FRIDAY:
PROGRAM # DESCRIPTION PROGRAM # DESCRIPTION
- --------- ----------- --------- -----------
DP01427 DELETE POINTER PROCESSING DP43027 CYCLE UPDATE
DP02027 DATABASE ANALYZER DP44027 CUSTOMER PURGE
DP03727 RECALCULATE RATES DP44727 HISTORY PURGE
DP04127 RECREATE LOCATORS DP45027 GEOCODE DOWNLOAD
DP05327 BOX FILE RECALCULATION DP46027 ZIP + 4 MAINTENANCE*
DP42027 CUTOFF DP47027 MSO DATA TAPE MANAGER
DP42527 RATE INCREASE RUN DP47127 MSO DATA TAPE MAINTENANCE
4) ACCESS TO THESE PROGRAMS IS RESTRICTED BY OPTION. FOR EXAMPLE,
BATCH PROCESSING OPTIONS ARE DELAYED UNTIL AFTER HOURS WHILE KEY-IN
OPTIONS ARE KEPT AVAILABLE BETWEEN 8:00 A.M. AND 5:00 P.M., MONDAY
THROUGH FRIDAY. THE TIME RESTRICTIONS FOR THESE PROGRAMS ARE
INTERNAL; THAT IS, THEY ARE BUILT INTO THE INDIVIDUAL PROGRAM.
NOTE: KEY-IN PROCEDURES CAN BE ACCOMPLISHED AT ANY TIME.
PROGRAM # DESCRIPTION PROGRAM # DESCRIPTION
- --------- ----------- --------- -----------
DP60527 WRITE OFF RUN DP71027 NOT DONES/CANCELS REPORT
DP68027 REFUNDS RUN DP71527 CDW DAILY/MONTHLY PERFORMANCE REPORT
</TABLE>
*AVAILABLE IF APPROPRIATE SOFTWARE LICENSE IS PURCHASED. SUBJECT TO MODIFICATION
FOR FUTURE RELEASES.
-87-
<PAGE>
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT G
DDP/SQL INCLUSIVE PRICING THROUGH SEPTEMBER 30, 1996
DDP/SQL INCLUSIVE PRICING:
- -------------------------
ITEM SELLING
CODE DESCRIPTION PRICE
---- ----------- -----
5763 INCLUSIVE DDP/SQL BUNDLED, INCLUDES [ * ]
5418 DDP/SQL LICENSE
5420 DDP/SQL MAINTENANCE
0442 DDP/SQL CUSTOMER SUPPORT
5004 ADDRESSABILITY - ONE WAY: LICENSE
5108 ADDRESSABILITY - ONE WAY: MAINTENANCE
0429 ADDRESSABILITY - ONE WAY: CUSTOMER SUPPORT
0207 DDP FINANCIALS PACKAGE
STANDARD FIXED DDPF REPORTS A THROUGH JJ AND REPORT VV
DDPF UPDATE SUBSCRIBER & HOUSE RECORDS - MAZ 4 MONTHS
STANDARD TRAILERS:
TECHNICAL HOUSE AUXILIARY
BILLING ADDRESS CUSTOMER AUXILIARY
CONVERTER, DEPOSIT REPORTING CENTER
REPORTING CENTER AGING SERVICE UNITS
0373 MSO DATA TAPE TRANSACTION TRANSFER FEE
0365 MSO DATA TAPE COMPUTER TAPE
5502 COMPUTER ACCESS (SEE A & C BELOW)
0311 ORIGINAL MICROFICHE PRODUCED
0314 FICHE DUPLICATES
CUTOFF (4 CYCLES PER MONTH)
0468 UPDATE (4 CYCLES PER MONTH)
0560 HOUSE DISK STORAGE
5601 SUBSCRIBER DISK STORAGE
0594 TRANSMIT-X HANDLING CHARGES (2 CYCLES)
0565 CORP MERGE - TWO CORPS INTO ONE CORP FOR NEW BUSINESS ONLY
(EXCLUDING TRAVEL & EXPENSES)
0566 CORP MERGE - EACH ADDITIONAL CORP OVER TWO FOR NEW BUSINESS ONLY
(EXCLUDING TRAVEL & EXPENSES)
0568 CORP SPLIT - ONE CORP INTO TWO CORPS WHERE CORPS STAY ON
CABLEDATA (EXCLUDING TRAVEL & EXPENSES)
0571 CORP SPLIT - EACH ADDITIONAL CORP OVER TWOWHERE CORPS STAY ON
CABLEDATA (EXCLUDING TRAVEL & EXPENSES)
0348 BENCHMARK STATEMENT (ONE/SUB/MONTH)
5023 DMX SPLITTER PROGRAM ($DMSS)
5024 DMX PROGRAM ($DMX)
5025 DMX NATIONAL AUTHORIZATION CENTER ADDRESSABLE ACKAGE
0570 CYCLE SPLIT/MERGE
0575 RATE INCREASE - SIMPLE
0576 RATE INCREASE - COMPLEX
0584 RATE INCREASE - AUTOMATED RATE CHANGE
0578 ALTER RUNS PROGRAMMING
0572 BI-MONTHLY SPLIT
0551 DDP PHONE NUMBER CLEAN UP RUN
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
-88-
<PAGE>
ITEM SELLING
CODE DESCRIPTION PRICE
---- ----------- -----
INCLUSIVE DDP/SQL BUNDLED, CONTINUED
0506 MESSAGE SELECT SET UP CHARGE
0573 MESSAGE SELECT
PROGRAMMING/PROCESSING
0508 MESSAGE SELECT PROGRAMMING - ACTIVATE
0510 MESSAGE PRINTING CHARGE
0336 STATEMENT LOGO SET UP CHARGE
0345 STATEMENT LOGO PROGRAMMING CHARGE - NEW OR CHANGE
0477 RECORDS PASSED
0279 FICHE REPORT - ORIGINAL FICHE PRODUCED
5262 Q/S PLUS EMULATOR MAINTENANCE (SEE A BELOW)
5852 EQUIPMENT RENTAL (SEE B BELOW)
INSTALLATION AND MONTHLY LEASE FOR PRIMARY DATA CIRCUIT
EQUIPMENT RENTAL AND MAINTENANCE CHARGES AS FOLLOWS:
A) QUICKSCREEN PLUS EMULATOR AND/OR COMPUTER ACCESS
(ONE PER 2,000 SUBS)
B) RELEVANT PRINTERS AND MODEM/MULTIPLEXERS
C) QUICKSCREEN PLUS EMULATOR AND TWO PORTS FOR ADDRESSABILITY
89
<PAGE>
<TABLE>
<CAPTION>
ITEM SELLING
CODE DESCRIPTION PRICE
---- -----------
<S> <C> <C>
SOFTWARE LICENSE & MAINTENANCE
5707 AUDIO RESPONSE UNIT (ARU) INTERFACE PACKAGE: [ # ]
INCLUDES: LICENSE AND MAINTENANCE
5703 PPV PACKAGE: [ # ]
INCLUDES: LICENSE, MAINTENANCE, CUSTOMER SUPPORT
SOFTWARE LICENSE
----------------
5064 EASYLINK - INITIAL COPY [ # ]
5064A EASYLINK EXCHANGE DISKETTE [ # ]
5065 EASYLINK - ADDITIONAL COPIES [ # ]
5256 EVENT SCHEDULAR [ # ]
5031 INTERACTIVE OUTAGE MODULE (ARU CORP) [ # ]
5011 INTERACTIVE OUTAGE MODULE (NON-ARU CORP) [ # ]
5245 PC DOWNLOAD [ ]
5261 QUICKSCREEN PLUS EMULATOR - 1-9 COPIES* [ # ]
5261A QUICKSCREEN PLUS EMULATOR - 10-24 COPIES* [ # ]
5261B QUICKSCREEN PLUS EMULATOR - 25-49 COPIES* [ # ]
5261C QUICKSCREEN PLUS EMULATOR - 50-74 COPIES* [ # ]
5261D QUICKSCREEN PLUS EMULATOR - 75-99 COPIES* [ # ]
5261E QUICKSCREEN PLUS EMULATOR - 100-149 COPIES* [ # ]
5261F QUICKSCREEN PLUS EMULATOR - 150 COPIES OR MORE* [ # ]
5270 SECONDARY EMULATOR PACKAGE** [ # ]
5253 SPREADSHEET INTERFACE [ # ]
5253A SPREADSHEET INTERFACE EXCHANGE DISKETTE [ # ]
SOFTWARE MAINTENANCE
--------------------
5124 EASYLINK [ # ]
5165 EVENT SCHEDULAR [ # ]
5114 INTERACTIVE OUTAGE (ARU CORP) [ # ]
5118 INTERACTIVE OUTAGE (NON-ARU CORP) [ # ]
5106 PC DOWNLOAD [ ]
5262 QUICKSCREEN PLUS EMULATOR [ # ]
5143 SPREADSHEET INTERFACE [ # ]
</TABLE>
* DISCOUNTS ARE BASED ON THE NUMBER OF COPIES PER SYSTEM.
** FOR DISTRIBUTION TO MULTIPLE OFFICES.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
90
<PAGE>
<TABLE>
<CAPTION>
ITEM SELLING
CODE DESCRIPTION PRICE MINIMUM
---- ----------- ----- -------
<S> <S> <C> <C>
ELECTRONIC FUNDS TRANSFER (EFTS) PACKAGE
----------------------------------------
0471 EFTS PACKAGE HANDLING FEE [ * ]
0472 EFTS PACKAGE TRANSACTION BATCH FEE [ * ]
5005 EFTS PACKAGE LICENSE FEE [ * ]
5608 EFTS PACKAGE MAINTENANCE FEE [ * ]
LOCKBOX TRANSMISSION/TAPE HANDLING CHARGES
------------------------------------------
0470 HANDLING FEE [ * ]
5806 TRANSACTION BATCH FEE [ * ]
SEGA CHANNEL
------------
5026 SEGA SPLITTER PROGRAM [ * ]
5027 SEGA FILTER PROGRAM [ * ]
5502 REGION ACCESS - OVER AND ABOVE INCLUSIVE PACKAGE
COMPUTER ACCESS: (MONDAY-SATURDAY 8AM - 12AM & [ * ]
& SUNDAY 8AM - 5 PM)
PORTS ARE AVAILABLE DURING ALL OTHER HOURS IF
SYSTEM IS NOT BEING USED BY REGION FOR SOFTWARE
OR HARDWARE MAINTENANCE.
DATABASE UPDATE MODULE
----------------------
0608 TEST MERGE [ * ] [ * ]
0607 ON-SITE MERGE [ * ]
0606 REPORTS ONLY FEE [ * ]
CUSTOM PLAY CORP
----------------
0486 CUSTOM PLAY CORP SET UP [ * ]
0803 CUSTOM PLAY CORP SUPPORT [ * ]
DISK STORAGE
------------
0555 STATEMENT IMAGE RECORDS [ * ]
0556 EXTENDED LEDGER RECORDS [ * ]
PAY PER VIEW AUTO LOAD (PAL)
----------------------------
0413 PAY PER VIEW AUTO LOAD (PAL) SERVICES [ * ]
0421 PAL RELOAD FEE [ * ]
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
91
<PAGE>
DDP FINANCIALS PRICING:
<TABLE>
<CAPTION>
ITEM SELLING
CODE DESCRIPTION PRICE MINIMUM
---- ----------- ----- -------
DDP FINANCIALS
--------------
<S> <C> <C> <C> <C>
0561 HISTORICAL LEDGER RETENTION - MORE THAN CURRENT PERIOD (I.E., NOT TRIMMED) [ * ]
0228 HISTORICAL LEDGER RETENTION - NOT MEETING DDPF PACKAGE CRITERIA [ * ]
0248 PAY PER VIEW LEDGER DETAIL [ * ]
DDP FINANCIALS - OPTIONAL & DUPLICATE REPORTS
---------------------------------------------
0257 DETAIL REPORT TRANSACTIONS, OVER PAY80 [ * ]
0258 SUMMARY REPORT TRANSACTIONS [ * ]
0276 REPORT LINES PRINTED [ * ]
0277 REPORT PAGES PRINTED [ * ]
0261 LASER REPORT PAGES PRODUCED [ * ]
0275 RECORD SORT [ * ]
0260 PAPER REPORT - PAGES PRINTED (LASER, 8 1/2" X 12", ONE SIDE) [ * ]
0278 FICHE REPORT - FRAMES PRODUCED [ * ]
0279 FICHE REPORT - ORIGINAL FICHE PRODUCED [ * ]
0314 FICHE REPORT - DUPLICATE FICHE PRODUCED [ * ]
DDP FINANCIALS - REPORT WRITERS
-------------------------------
0271 USE FEE [ * ]
0272 INVENTORY FEE [ * ]
0273 PROGRAM OR CHANGE - SIMPLE [ * ]
0274 PROGRAM OR CHANGE - SIMPLE WITH TOTALS [ * ]
0280 PROGRAM OR CHANGE - COMPLEX [*] [ * ]
0281 ACTIVATE EXISTING WITH NO CHANGES [ * ]
0275 SORT [ * ]
0276 PAPER - LINES PRINTED [ * ]
0278 FICHE - FRAMES PRODUCED [ * ]
0279 FICHE - ORIGINAL FICHE PRODUCED [ * ]
0314 FICHE - DUPLICATE FICHE PRODUCED [ * ]
CYCLE SELECT
------------
0271 CYCLE SELECT - USE FEE [ * ]
0505 CYCLE SELECT PROGRAMMING - NEW OR CHANGE [ * ]
0507 CYCLE SELECT PROGRAMMING - REACTIVATE EXISTING [ * ]
0509 CYCLE SELECT PROCESSING [ * ]
STATEMENT IMAGE
---------------
0554 STATEMENT IMAGE PULL TO TAPE - [ * ]
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
92
<PAGE>
<TABLE>
<CAPTION>
ITEM SELLING
CODE DESCRIPTION PRICE MINIMUM
---- ----------- ----- -------
STATEMENT PRODUCTS
------------------
<S> <C> <C> <C>
0348 BENCHMARK II PANEL [ * ]
0328 BENCHMARK III PANEL [ * ]
0333 BENCHMARK IV PANEL [ * ]
0329 SPECTRUM II - FRONT PRINT ONLY, 1 OR 2 COLORS* [ * ] [ * ]
0330 SPECTRUM II - FRONT AND BACK PRINT* [ * ] [ * ]
0331 SPECTRUM III - FRONT PRINT ONLY, 1 OR 2 COLORS* [ * ] [ * ]
0332 SPECTRUM III - FRONT AND BACK PRINT* [ * ] [ * ]
0334 SPECTRUM IV - FRONT PRINT ONLY, 1 OR 2 COLORS* [ * ] [ * ]
0335 SPECTRUM IV - FRONT AND BACK PRINT* [ * ] [ * ]
0428 STATEMENT DESIGN & LAYOUT SERVICES [ * ]
0350 CABLEGRAM** [ * ]
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
93
<PAGE>
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT H
DISCONTINUED PRODUCTS (ITEM CODES)
ITEM
CODE DESCRIPTION
---- -----------
0205 REPORT CENTER AGING
0206 REPORTING CENTER
0208 SERVICE UNITS
0253 DETAIL REPORT TRANSACTIONS
0254 SUMMARY REPORT
0255 REPORT PAGES
0267 EXPANDED LEDGERS
0347 BENCHMARK STATEMENT - 100%
0429 ADDRESSABLE SUPPORT FEE
0439 REGIONAL SUPPORT
0465 STATEMENT PACK/TAPE HANDLING
0466 MICRO PACK/TAPE HANDLING
0478 PROJECTS LATE CHARGE
0479A DOCUMENTS REC'D 22 DAYS OR
0479B DOCUMENTS REC'D 15-21 DAYS
0479B DOCUMENTS REC'D 15-21 DAYS
0479C DOCUMENTS REC'D 8-14 DAYS
0479C DOCUMENTS REC'D 8-14 DAYS
0582 SIMPLE RATE INCREASE
0583 COMPLEX RATE INCREASE
0609 SWITCH 56 CUTOFF
1211 MSO DATA TAPE FEE
5002 DDP LICENSE FEE SHARED
5004 ADDRESSABLE LICENSE FEE
5018 ARU LICENSE FEE EXCLUSIVE
5021 TELECLERK INTERFACE
5108 ADDRESSABLE MAINTENANCE FEE
5108 ADDRESSABILITY MAINT. FEE
5109 PPV EXCLUSIVE
5111 ADDRESSABLE MAINTENANCE FEE
5113 ARU MAINTENANCE EXCLUSIVE
5119 EXCLUSIVE 1-WAY ADDRESSABLE
5144 PC EMULATOR MAINTENANCE
5201 ADDRESSABILITY 2 WAY
5221 PPV EXCLUSIVE LICENSE FEE
5252 QUICKSCREEN EMULATOR MAINT.
5300 2 WAY ADDRESSABLE
5418 DDP/SQL LICENSE FEE
5420 DDP/SQL MAINTENANCE FEE
5502R COMPUTER ACCESS - LEVEL C
5600 DDP MAINTENANCE FEE SHARED
5607 ADDRESSABILITY 1 WAY
5703 DDP INCLUSIVE PPV PACKAGE
94
<PAGE>
ON/LINE OPERATING & LICENSE AGREEMENT
ATTACHMENT I
TRAINING COURSEWARE LISTING
<TABLE>
<CAPTION>
AT CABLEDATA EDUCATION CENTER ON-SITE AT CUSTOMER
LOCATION
DESCRIPTION PRICE 1 - 8 STUDENTS OVER 8 STUDENTS
<S> <C> <C> <C> <C> <C>
2720 ORDER PROCESSING $240/DAY/STUDENT 2727 [ * ] [ * ]
2721 SYSTEM MANAGEMENT $240/DAY/STUDENT 2728 [ * ] [ * ]
2722 MONEY PROCESSING $240/DAY/STUDENT 2729 [ * ] [ * ]
2723 ON-LINE REPORTS $240/DAY/STUDENT 2730 [ * ] [ * ]
2724 ADDRESSABILITY $240/DAY/STUDENT 2731 [ * ] [ * ]
2725 PAY-PER-VIEW $240/DAY/STUDENT 2732 [ * ] [ * ]
2726 BASIC OPERATIONS $240/DAY/STUDENT 2733 [ * ] [ * ]
2740 DDP FIANCIALS $240/DAY/STUDENT 2741 [ * ] [ * ]
2745 DATABASE CONCEPTS $240/DAY/STUDENT 2750 [ * ] [ * ]
2746 ADV. ORDER PROCESSING $300/DAY/STUDENT 2751 [ * ] [ * ]
2747 ADV. MONEY PROCESSING $300/DAY/STUDENT 2752 [ * ] [ * ]
2748 ADV. REPORTS $300/DAY/STUDENT 2754 [ * ] [ * ]
2748 ADV. ADDR & PPV $300/DAY/STUDENT 2754 [ * ] [ * ]
2749 ADV. DATA MAINTENANCE $300/DAY/STUDENT 2753 [ * ] [ * ]
2757 APPLICATION CERTIFICATION $240/DAY/STUDENT [ * ]
2799 TRAIN THE TRAINER $240/DAY/STUDENT 2799A [ * ] [ * ]
2800 MARKETING YOUR SERVICE $240/DAY/STUDENT 2800A [ * ] [ * ]
</TABLE>
* PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST
95
<PAGE>
MASTER EQUIPMENT RENTAL AGREEMENT
THIS MASTER MASTER EQUIPMENT RENTAL AGREEMENT (hereinafter referred to as
"Agreement") is made and entered into this 11th day of February, 1991, by and
between U.S. COMPUTER SERVICES, a California corporation, with its principal
place of business at 2969 Prospect Park Drive, Rancho Cordova, California
95670 (hereinafter referred to as "USCS") and TCI CABLE MANAGEMENT
CORPORATION, a Colorado corporation with its principal place of business at
One Regency Plaza, #600, 4643 South Ulster Street, Denver, CO 80237
(hereinafter referred to as "Customer").
USCS agrees to rent to Customer, and Customer agrees to rent from USCS
computer equipment and peripherals under the following terms and conditions:
1. TERM
1.1 The term of this Agreement shall commence on the date of execution
by USCS of the Agreement and shall terminate on September 30, 1991.
1.2 Upon termination of the term set forth in Paragraph 1.1 above, the
parties may, upon mutual consent, extend the term of this Agreement
and make this Agreement part of the Master Agreement being
currently negotiated between the parties.
1.3 In the event the parties do not extend the term as set
forth in Paragraph 1.2, then on or before September 30, 1991,
Customer must return the Rental Equipment to USCS in Rancho
Cordova, California at Customer's expense.
2. RENTAL EQUIPMENT
2.1 The equipment rented under this Agreement shall be that equipment
described in Attachment A, attached to and by this reference made a
part of this Agreement, as the same may be added to or amended from
time to time. The equipment subject to this Agreement shall be
referred to as the "Rental Equipment".
2.2 Customer may add Rental Equipment by making a request to USCS and
any such Rental Equipment added by USCS shall be acknowledged in
writing by USCS sending an additional page(s) of Attachment A to
Customer. If Customer does not notify USCS in writing of any
dispute or change to the additional page(s) to Attachment A within
ten (10)
-1-
<PAGE>
days from receipt of said page(s), such additional page(s) of
Attachment A shall automatically become part of this Agreement.
3. SHIPPING
3.1 Customer is responsible for all expenses of shipment
(including insurance) and delivery of Rental Equipment to
Customer's site and, if necessary the return shipment of Rental
Equipment to Rancho Cordova, California.
3.2 Customer shall inspect the Rental Equipment within
seventy-two (72) hours after receipt thereof. Unless Customer,
within said period of time, gives written notice to USCS specifying
any shipping damage or other proper objection to the Rental
Equipment, Customer agrees that it shall be conclusively presumed
as between USCS and Customer, that Customer has inspected and
acknowledged that the Rental Equipment was received in good
condition.
4. INSTALLATION
4.1 In the event Customer has USCS install or de-install the
Equipment, Customer shall pay USCS' standard
installation/de-installation fees for equipment not included as
part of Customer's Bundled Price (as set forth in Paragraph 5.1(a)
below)
5. RENT
5.1 The Monthly Rent for each item of Rental Equipment shall
be either--
(a) included as part of the Bundled Price under the terms
of that On/Line Shared System Operating and License Agreement
dated ________________ or that On/Line Exclusive System
Operating and License Agreement dated ________________________
(in which case, "included in Bundle" shall be inserted in the
"Monthly Rent" column in Attachment A for the items of Rental
Equipment); or
(b) the dollar amount of rent shall be as set forth in Attachment
A in the "Monthly Rent" column. Monthly Rent shall be
determined at [ # ] of Equipment Replacement
Value, as set forth in Attachment A.
5.2 USCS shall invoice Customer monthly for Rental Equipment.
The monthly charge in Attachment A for the Rental Equipment will be
billed one (1) month in advance.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST
-2-
<PAGE>
Standard payment terms are net cash, without discount, due and
payable within thirty (30) days from date of invoice.
5.3 Customer will pay, or reimburse, USCS for all taxes and charges
imposed on Customer or USCS or any interest in or use of the Rental
Equipment, or upon this Agreement including sales, use and personal
property taxes, excluding, however, all taxes on or measured by
USCS' income from Customer.
5.4 If Customer fails to pay any charges when due and payable,
Customer agrees that USCS will have the right to invoice and
Customer will pay a late payment service charge of 1.5 percent per
month, but not in excess of the lawful maximum, on the past due
balance.
5.5 Any fee or charge due herein for a fraction of a calendar month
will be computed at the rate of 1/30th of the monthly rate for each
applicable day.
5.6 The monthly charge does not include forms, disk packs, or
consumable supplies. Published prices are available from USCS for
these items, or they may be purchased from other vendors, provided
they meet the specifications of the manufacturer of the Rental
Equipment in which such items shall be used.
6. PROTECTIVE UCC FILINGS; LOCATION OF RENTAL EQUIPMENT
6.1 Customer agrees that this Agreement is a true lease and that
Customer's interest in the Rental Equipment is only that of a
lessee; however, if, for whatever reason, this Agreement is deemed
to be anything other than a true lease, Customer hereby grants USCS
a security interest in the Rental Equipment. Upon request by USCS,
Customer shall cooperate in signing a protective UCC-1 filing on
each item of Rental Equipment.
6.2 Customer will not, without the prior written consent of USCS,
permit the Rental Equipment to be removed from the location stated
in Atttachment A.
6.3 In the event Customer desires to relocate Rental Equipment,
Customer may request in writing and USCS shall promptly effect
de-installation of the Rental Equipment, transport it to and
install it at Customer's new location. USCS' fees for such
relocation shall be paid by Customer and Customer shall sign
additional UCC protective filing forms if necessary.
-3-
<PAGE>
7. ALTERATIONS
7.1 Without the prior written consent of USCS, Customer shall not make
any alterations, additions or improvements to the Rental Equipment.
All additions and improvement of whatsoever kind or nature made to
the Rental Equipment shall belong to and become the property of
USCS on the expiration, or earlier at termination of this
Agreement.
7.2 USCS shall, at any and all times during business hours, have the
right to enter into and on the premises where the Rental Equipment
may be located for the purpose of inspecting same or observing its
use. Customer shall give USCS immediate notice of any attachment
or other judicial process affecting any item of Rental Equipment,
and shall, whenever requested by USCS, advise USCS of the exact
location of the Rental Equipment.
8. RISK OF LOSS OR DAMAGE
8.1 Customer hereby assumes and shall bear the entire risk of loss or
damage to the Rental Equipment from any and every cause whatsoever,
excluding USCS' negligence or the negligence of any manufacturer of
the Rental Equipment.
8.2 Customer shall keep the Rental Equipment insured against all risk
of loss or damage from every cause whatsoever for not less than the
full replacement value thereon as stated in Attachment A and shall
name USCS as an additional insured under said insurance. Customer
shall carry public liability and property damage insurance covering
the Rental Equipment. Customer shall provide USCS with
certificates evidencing insurance required hereunder within ten
(10) days of execution of this Agreement.
8.3 USCS will maintain public liability insurance in the minimum amount
of $1,000,000 for each occurrence. This minimum amount may
represent coverage of any combination of primary in excess amounts.
Such insurance shall be non-cancelable except upon thirty days
prior written notice to Customer.
9. SURRENDER
9.1 On the expiration of this Agreement or earlier, with respect to any
item of Rental Equipment, Customer shall make the Rental Equipment
available to USCS in good repair, condition and working order,
ordinary wear and tear resulting from proper use thereon excepted,
for shipment at Customer's expense.
-4-
<PAGE>
10. TERMINATION
10.1 Notwithstanding any other provisions herein, USCS will have the
right to terminate this Agreement as to any or all items of Rental
Equipment if Customer fails to comply with any of its material
obligations under this Agreement; provided, however, that, if
Customer has not made payment of the fees or charges due hereunder
and such nonpayment continues after thirty (30) days' prior written
notice by USCS, USCS may then terminate this Agreement and take
possession of the Rental Equipment.
11. OWNERSHIP
11.1 The Rental Equipment is, and shall at all times be and remain the
sole and exclusive property of USCS; Customer shall have no right,
title, or interest therein or thereto except as expressly set forth
in this Agreement.
11.2 Customer shall keep the Rental Equipment free and clear of all
levies, liens and encumbrances.
11.3 Customer shall install a label on each item of Rental Equipment
stating "This equipment is rented from U.S. Computer Services, 2969
Prospect Park Drive, Rancho Cordova, CA 95670."
12. LIMITATION OF REMEDY
12.1 USCS shall not be liable for any damages caused by delay in
furnishing Rental Equipment, or any other performance under this
Agreement. The sole and exclusive remedy for any breach of
warranty, express or implied, including, without limitation, any
warranties of merchantability or fitness for a particular purpose,
and the sole remedy for USCS' liability of any kind, including
liability for negligence, with respect to the Rental Equipment
furnished under this Agreement, and all other performance by USCS
under or pursuant to this Agreement shall be limited to the repair
or replacement of any defective Rental Equipment or parts and shall
in no event include any incidental or consequential damages.
13. GENERAL
13.1 The parties agree that in the event it is necessary to employ
attorneys to enforce the terms of this Agreement, the prevailing
party in any lawsuit shall be entitled to an award of reasonable
attorneys' fees and court costs.
-5-
<PAGE>
(This page intentionally left blank.)
-6-
<PAGE>
13.2 This Agreement may not be assigned without prior written mutual
consent of Customer and USCS, except that either party may assign
this Agreement to a party controlling, controlled by, or under
common control without the necessity of securing the consent of the
other party, provided that no such assignment shall be effective
until notice is given by the assigning party to the other party and
new UCC forms are executed and filed.
13.3 This Agreement may be amended only by an instrument in writing,
executed by Customer and USCS.
13.4 This Agreement will be governed in all respects by the laws of the
State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
28th day of February, 1991.
TCI CABLE MANAGEMENT CORPORATION U.S. COMPUTER SERVICES
By: /s/ Arthur L. Lee By: /s/ Arthur O. Hawkins
----------------------------------- -----------------------------
Arthur L. Lee, Vice Prsident of Arthur O. Hawkins, CFO
Operating Divisions
----------------------------------- -----------------------------
(Typed Name/Title) (Typed Name/Title)
2/22/91 February 28, 1991
----------------------------------- -----------------------------
(Date) (Date)
-7-
<PAGE>
MASTER
EQUIPMENT RENTAL AGREEMENT
ATTACHMENT A
System Number 021-22
--------------------
Installation Address 1515 North Riverside Avenue
---------------------------------------------
City Provo State UT Zip 84604
--------------------------- ------------- ------
Equipment
Monthly Replacement
Model Description Qty Rent Value
- ----- ----------- --- ------- -----------
1147 Q/S Color Workstation 8 [ # ] $ 12,000.00
1230 125 LPM Printer 1 [ # ] 3,020.00
1285 M1921L 9.6 Modem** 2 [ # ] 2,990.00
1241 VCX100-16 Port Mux 1 [ # ] 2,195.00
*BPA [ # ] --
---------- -------------
TOTAL $ -- $ 20,205.00
---------- -------------
---------- -------------
NOTE: Above equipment is on monthly rental. CableData retains ownership.
*BPA-Equipment included in TCI's Bundled Price per Sub Agreement.
**One to be shipped/located at Corp 021-33.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST
<PAGE>
MASTER
EQUIPMENT RENTAL AGREEMENT
ATTACHMENT A
System Number 021-79
--------------------
Installation Address 1201 Feehanville Drive
---------------------------------------------
City Mt. Prospect State IL Zip 60056
--------------------------- ------------- ------
Equipment
Monthly Replacement
Model Description Qty Rent Value
- ----- ----------- --- ------- -----------
1147 Q/S Color Workstation 7 [ # ]* $ 10,500.00
1244 VCX150-10 Port Mux** 1 [ # ]* 3,050.00
1240 VCX100-8 Port Mux 1 [ # ] 1,495.00
---------- -------------
TOTAL [ # ] $ 15,045.00
---------- -------------
---------- -------------
NOTE: Above equipment is on monthly rental. CableData retains ownership.
*Equipment over and above TCI's Bundled Price.
**To be shipped/located at Western Service Center.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST
<PAGE>
MASTER
EQUIPMENT RENTAL AGREEMENT
ATTACHMENT A
System Number 162-02
--------------------
Installation Address 4160 Old Mill Parkway
---------------------------------------------
City St Charles State MO Zip 63303
--------------------------- ------------- ------
Equipment
Monthly Replacement
Model Description Qty Rent Value
- ----- ----------- --- ------- -----------
1147 Q/S Color Workstation 1 [ # ] $ 1,500.00
*BPA [ # ] --
---------- -------------
TOTAL $ -- $ 1,500.00
---------- -------------
---------- -------------
NOTE: Above equipment is on monthly rental. CableData retains ownership.
*BPA-Equipment included in TCI's Bundled Price per Sub Agreement.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST
<PAGE>
MASTER
EQUIPMENT RENTAL AGREEMENT
ATTACHMENT A
System Number 021-23
--------------------
Installation Address 570 Milton Way
---------------------------------------------
City St. Helens State OR Zip 97051
--------------------------- ------------- ------
Equipment
Monthly Replacement
Model Description Qty Rent Value
- ----- ----------- --- ------- -----------
1147 Q/S Color Workstation 3 [ # ] $ 4,500.00
1230 125 LPM Printer 1 [ # ] 3,020.00
1285 M1921L 9.6 Modem** 2 [ # ] 2,990.00
1240 VCX100-8 Port Mux 1 [ # ] 1,495.00
1249 16 Port Async U/G*** 1 [ # ] 1,850.00
(ALC)
*BPA [ # ] --
---------- -------------
TOTAL $ -- $ 13,855.00
---------- -------------
---------- -------------
NOTE: Above equipment is on monthly rental. CableData retains ownership.
*BPA-Equipment rental included in TCI's Bundled Price per subscriber ratio.
**One 1921L Modem to be shipped/located at Western Service Center.
***To be shipped/located at Western Service Center.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST
<PAGE>
MASTER
EQUIPMENT RENTAL AGREEMENT
ATTACHMENT A
System Number 021-94
--------------------
Installation Address 1140 North 94th Street
---------------------------------------------
City Seattle State WA Zip 98103
--------------------------- ------------- ------
Equipment
Monthly Replacement
Model Description Qty Rent Value
- ----- ----------- --- ------- -----------
1147 Q/S Color Workstation 6 [ # ] $ 9,000.00
1249 16 Port Async U/G (ALC) 2** [ # ] 3,700.00
*BPA [ # ] --
---------- -------------
TOTAL [ # ] $ 12,700.00
---------- -------------
---------- -------------
NOTE: Above equipment is on monthly rental. CableData retains ownership.
*BPA-Equipment included in TCI's Bundled Price per Sub Agreement.
**One ALC Card to be shipped/located at CableData Western Service Center.
# PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A CONFIDENTIAL
TREATMENT REQUEST
<PAGE>
U.S. COMPUTER SERVICES
EMPLOYEE STOCK OWNERSHIP PLAN
AMENDMENT NO. 11 TO AMENDED AND RESTATED PLAN
WHEREAS, U.S. Computer services ("Company") maintains the U.S. Computer
Services Employee Stock Ownership Plan ("Plan") for the benefit of its
eligible Employees;
WHEREAS, it is desirable to amend the Plan in connection with the
proposed initial public offering ("IPO") of Company Stock;
NOW, THEREFORE, the Plan is hereby amended, to become effective only as of
the time in 1996 at which the IPO becomes effective, to read as follows:
1. The definition of "Fair Market Value" in Section 2 is restated to read
as follows:
Fair Market Value ........... The fair market value of Company
Stock, as determined by the Committee
bY reference to prevailing market
prices.
2. Section 7(b) is deleted from the Plan.
3. Section 8, VOTING COMPANY STOCK, is restated to read as follows:
Shares of Company Stock in the Trust shall be voted by the Trustee as
provided in this Section 8. Each Participant (or Beneficiary) will be
entitled to give confidential instructions to the Trustee as to the voting of
any shares of Company Stock then allocated to his Company Stock Account on
all matters presented for a vote of shareholders. Each Participant (or
Beneficiary) having shares allocated to his Company Stock Account as of the
record date for voting at a shareholder meeting shall be provided with the
proxy statement and other materials furnished to the
<PAGE>
Company's shareholders in connection with the shareholder meeting, together
with a form upon which confidential voting instructions may be given to the
Trustee. The voting instructions of individual Participants (or
Beneficiaries) shall not be disclosed to the Company or the Committee. Any
allocated shares of Company Stock with respect to which timely voting
instructions are not received from Participants (or Beneficiaries), and any
shares of Company Stock held by the Trust which are not then allocated to
Participants, Company Stock Accounts, shall be voted by the Trustee in the
manner directed by the Committee.
4. Section 13 is amended by adding the following as a new subsection (c):
(c) SALE OF COMPANY STOCK AND TRANSFER OF 401(K) PLAN - As part of the
initial public offering of Company Stock in 1996, each Participant (or
Beneficiary) having shares of Company Stock allocated to his Company Stock
Account shall be given the opportunity to direct the Trustee to sell all or
any portion of such shares in such offering (but only to the extent of his
vested interest), subject to any pro-ration which may be required in
connection with the offering. If a Participant directs the sale of Company
Stock, the proceeds of each sale shall be transferred in cash by the Trustee
to the 401(k) Plan for the benefit of the Participant; provided, however, that
any such Participant who is no longer an employee shall be given the option of
receiving a cash distribution of such proceeds.
5. Section 14(a) is amended by adding the following as the third
sentence thereof:
Shares of Company stock distributed by the Trustee shall be readily
tradable on an established securities market.
6. Section 15 is amended by deleting subsections (a) and (b), and by
redesignating subsection (c) as subsection (a).
<PAGE>
7. Section 18(c) is amended by deleting the paragraph (10), and be
redesignating paragraph (11) as paragraph (10).
To record the adoption of this Amendment No. 11, the Company this
has caused it to be executed this____________________ day of ___________,
1996.
U. S. COMPUTER SERVICES
By_____________________
