<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1996
REGISTRATION NO. 333-13263
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GEOTEL COMMUNICATIONS
CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7372 04-3194255
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
25 PORTER ROAD
LITTLETON, MASSACHUSETTS 01460
(508) 486-1100
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
------------------------
JOHN C. THIBAULT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GEOTEL COMMUNICATIONS CORPORATION
25 PORTER ROAD
LITTLETON, MASSACHUSETTS 01460
(508) 486-1100
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
------------------------
Copies to:
<TABLE>
<S> <C>
ANTHONY J. MEDAGLIA, JR., ESQUIRE JOHN A. BURGESS, ESQUIRE
MICHAEL J. RICCIO, JR., ESQUIRE DAVID A. WESTENBERG, ESQUIRE
HUTCHINS, WHEELER & DITTMAR HALE AND DORR
A PROFESSIONAL CORPORATION 60 STATE STREET
101 FEDERAL STREET BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02110 (617) 526-6000
(617) 951-6600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable 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, check the following box and
list the Securities Act registration statement number of 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, please check the following box and list the Securities
Act registration 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>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) FEE(3)
- ------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 per share...... 2,530,000 shares $12.00 $30,360,000 $9,200
==================================================================================================================
<FN>
(1) Includes 330,000 shares which the Underwriters have the option to purchase
from the Company and the selling Stockholders solely to cover
over-allotments, if any. See "Underwriting."
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933, as amended.
(3) This Amendment increases the proposed maximum offering price per share to
$12.00. At the time of the original filing of the Registration Statement,
the Company paid a registration fee of $7,667. The additional fee paid
herewith for the increase in the proposed maximum offering price is $1,533.
</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 THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
GEOTEL COMMUNICATIONS
CORPORATION
------------------------
CROSS-REFERENCE SHEET
(PURSUANT TO ITEM 501 OF REGULATION S-K SHOWING THE LOCATION IN
THE PROSPECTUS OF THE RESPONSES TO THE ITEMS IN PART I OF FORM S-1)
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING OF FORM S-1 LOCATION IN PROSPECTUS
------------------------------------------- -------------------------------------------
<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 Cover Page; Outside Back Cover
Page
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............. Prospectus Summary; Risk Factors
4. Use of Proceeds............................ Prospectus Summary; Use of Proceeds
5. Determination of Offering Price............ Outside Front Cover Page; Underwriting
6. Dilution................................... Risk Factors; Dilution
7. Selling Security Holders................... Principal and Selling Stockholders
8. Plan of Distribution....................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered............................... Capitalization; Description of Capital
Stock
10. Interests of Named Experts and Counsel..... Legal Matters
11. Information with Respect to the
Registrant............................... Outside Front Cover Page; Prospectus
Summary; Risk Factors; Use of Proceeds;
Dividend Policy; Capitalization; Dilution;
Selected Financial Data; Management's
Discussion and Analysis of Financial
Condition and Results of Operations;
Business; Management; Certain Transactions;
Principal and Selling Stockholders;
Description of Capital Stock; Shares
Eligible for Future Sale
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
</TABLE>
<PAGE> 3
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.
SUBJECT TO COMPLETION
DATED NOVEMBER 19, 1996
2,200,000 SHARES
LOGO
COMMON STOCK
------------------
All of the shares of Common Stock offered hereby are being sold by GeoTel
Communications Corporation ("GeoTel" or the "Company"). 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
$11.00 and $12.00 per share. See "Underwriting" for 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 "GEOC."
------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
------------------
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>
=====================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $ $ $
- ------------------------------------------------------------------------------------------------------
Total(2)............................... $ $ $
======================================================================================================
<FN>
(1) Before deducting expenses payable by the Company estimated at $600,000.
(2) The Company and certain Selling Stockholders have granted to the
Underwriters a 30-day option to purchase up to 330,000 additional shares of
Common Stock solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to the Selling Stockholders
will be $ , $ , $ and $ , respectively.
See "Principal and Selling Stockholders" and "Underwriting."
</TABLE>
------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that the delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1996.
ALEX. BROWN & SONS WESSELS, ARNOLD & HENDERSON
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 4
[GEOTEL LOGO]
[Screen Shots Showing the Implementation of
GEOTEL'S Intelligent CallRouter Software by Customer Service Representatives]
Enterprise-Wide Call Distribution Creates a Virtual Call Center Network
* Each call is matched with the best answering resource
* Enterprise-wide call monitoring and reporting
* Full integration with AT&T, MCI, Sprint networks, all major ACD/PBX/VRU
equipment
* Open/industry standards -- Microsoft Windows NT
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 TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE> 5
GEOTEL INTELLIGENT CALLROUTER(R)
Managing the interaction between customers and answering resources
The system operates in a fault-tolerant, multi-vendor, multi-carrier, open
telecommunications environment.
Pre-Routing(R) allows intelligence to be applied at the network level before
the call is sent to a destination.
Post-Routing(R) controls the routing of calls among ACDs, PBXs or VRUs.
[DIAGRAM ILLUSTRATING THE PRINCIPAL COMPONENTS OF THE INTELLIGENT CALLROUTER]
EVENT AND THRESHOLD MONITORING
The Intelligent CallRouter contains a comprehensive event monitoring system. It
uses intuitive graphical display elements to immediately notify users of
conditions requiring management intervention.
[SCREEN SHOT OF EVENT MONITORING SYSTEM]
<PAGE> 6
VISUAL SCRIPT EDITOR
A powerful visual object-oriented environment is used to create and monitor
call flow.
The ICR combines real-time call information with customer profile data before
determining a destination for a call.
[SCREEN SHOT OF VISUAL SCRIPT EDITOR]
COMPREHENSIVE MANAGEMENT INFORMATION SYSTEM
Real-time call handling statistics are integrated with consolidated historical
reporting for all calls across attached ACDs, PBXs, and VRUs. Data can be mixed
and matched in any real-time/historical combination.
[SCREEN SHOT OF GRAPHICAL MANAGEMENT REPORT PREPARED BY CUSTOMER]
<PAGE> 7
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus.
THE COMPANY
GeoTel Communications Corporation ("GeoTel" or the "Company") is a provider
of telecommunications software solutions focused on enhanced call routing
technology that enables customer-oriented companies to deliver responsive and
cost-effective customer service. The Company's software solutions are aimed at
decentralized or service-oriented corporations that use call centers, voice
response units and other answering resources to interact with their customers.
GeoTel's software solution, the Intelligent CallRouter, is designed for
companies that utilize multiple call centers to handle high volumes of inbound
customer calls and regard their effective handling of customer interaction
through call center technology as a key competitive advantage. The Company is
focused on open, standards-based software solutions for enterprise-wide call
distribution in a multi-vendor, multi-carrier, fault-tolerant, distributed
environment. GeoTel's call routing solutions have been deployed by a variety of
companies, including America Online, American Express, Fidelity, MCI, Matrixx
Marketing, Spiegel and USAir, representing approximately 6.5%, 2.6%, 23.3%,
7.0%, 4.9%, 3.8% and 6.7%, respectively, of the Company's total revenues to
date.
Companies are increasingly recognizing that excellent customer service can
be used as a strategic weapon to differentiate their firms from competitors. In
order to remain competitive, corporations must continually evaluate their
product and service offerings to expand market share, lower costs and meet
customer expectations. To improve service quality, companies have invested in
technologies that enable them to concentrate customer service representatives,
or agents, into groups known as call centers. Many large corporations utilize
call centers as the primary method of interfacing with their customers. These
call centers are typically deployed in multiple locations and can be utilized to
provide a prioritized level of services for the most valued customers. Call
centers allow businesses to reduce costs and deliver premium customer service.
The technology utilized by call centers has evolved dramatically over the
past three years. Historically, due to the closed nature of public networks,
corporations installed premises-based switching systems at the end of long
distance or local exchange telephone lines. Reliance on these switching systems
requires corporations to use proprietary closed solutions offered by service
providers where multi-vendor switching system interoperability was not possible.
Consequently, the call center solutions employed by most corporations have been
designed around the technological limits of premises-based switching systems and
the limitations of carrier networks, which prevent corporations from realizing
the potential benefits of virtual call centers. Virtual call centers draw upon
all of the organization's call response resources and utilize open systems-based
applications to enhance the capabilities of the existing call center
infrastructure by integrating it with existing business applications and data.
The Company's Intelligent CallRouter (the "ICR") enables enterprise-wide
call routing and consolidated real-time management information at the network
level. The ICR is an advanced call-by-call routing server that supports multiple
routing clients independent of their location, toll-free carrier or switch
provider. The multi-carrier, multi-vendor capabilities of the ICR allow the user
to focus on delivering premium customer service without the limitations of
proprietary or customer developed solutions. Its open architecture enables
interoperability with other call processing and call volume management systems
within an enterprise and provides a means for integrating these various
stand-alone solutions. The ICR can be interfaced to agent scheduling, workflow
management and other call center management tools. The distributed software
fault tolerance implemented in the ICR provides the mission-critical reliability
required for enterprise-wide call distribution. The Company also offers
consulting and training, installation services and post-sale maintenance and
support services.
3
<PAGE> 8
The Company's objective is to become the leading supplier of
enterprise-wide call distribution software solutions. To achieve this objective,
the Company is pursuing a number of strategies, including extending its
technology leadership in order to expand the value-added call processing
features required by its customers; expanding its call distribution technology
to include all of the answering resources available within a customer's business
environment; leveraging its open architecture to develop interfaces to both
existing and emerging call center technologies; utilizing a multiple-channel
distribution system to cost-effectively address the market for its products; and
providing superior customer service, support and training to ensure customer
satisfaction and the effective deployment of the Company's products.
GeoTel sells its software and services to large corporations with multiple
call center locations that are major users of inbound, toll-free services. The
Company sells primarily through a direct sales force in the United States and is
also developing strategic relationships both domestically and internationally.
The Company has signed agreements with MCI Telecommunications Corporation and
Optus Systems PTY Ltd, representing 7.0% and 12.8%, respectively, of the
Company's total revenues to date. To date, the Company has licensed its software
to over 20 companies.
The Company was incorporated in Delaware in June 1993. The Company's
principal executive offices are located at 25 Porter Road, Littleton,
Massachusetts 01460. The Company's telephone number is (508) 486-1100.
------------------------
Intelligent CallRouter, Pre-Routing and Post-Routing are registered
trademarks of the Company and GeoTel is a trademark of the Company. All other
trademarks and trade names referred to in this Prospectus are the property of
their respective owners.
4
<PAGE> 9
- --------------------------------------------------------------------------------
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company......................... 2,200,000 shares
Common Stock to be outstanding after the offering........... 12,840,509 shares(1)(2)
Use of proceeds............................................. For working capital and other
general corporate purposes,
including repayment of bank
indebtedness
Proposed Nasdaq National Market symbol...................... GEOC
</TABLE>
<TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<CAPTION>
INCEPTION
(JUNE 4, 1993) YEAR ENDED NINE MONTHS ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ------------------- -------------------
1993 1994 1995 1995 1996
-------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $ -- $ -- $ 1,534 $ -- $6,284
Income (loss) from operations.... (401) (3,090) (4,026) (3,591) 177
Net income (loss)................ (377) (2,966) (3,862) (3,479) 308
Pro forma net income (loss) per
common and common equivalent
share(2)....................... $ (0.37) $ 0.03
Pro forma weighted average number
of common and common equivalent
shares(2)...................... 10,365,465 11,514,315
<CAPTION>
AS OF SEPTEMBER 30, 1996
---------------------------------------
PRO FORMA
PRO AS
ACTUAL FORMA(2) ADJUSTED(2)(3)
------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 5,812 $5,812 $27,918
Working capital....................................... 4,699 4,699 27,178
Total assets.......................................... 9,176 9,176 31,282
Long-term debt, less current portion.................. 450 450 --
Convertible preferred stock........................... 12,229 -- --
Preferred stock....................................... -- --
Total stockholders' equity (deficit).................. (7,004) 5,225 28,154
<FN>
- ---------------
(1) Based upon the number of shares of Common Stock outstanding as of September
30, 1996. Excludes 860,396 shares of Common Stock issuable upon the exercise
of options outstanding on that date, of which options to purchase 8,400
shares were then exercisable. See "Management -- Stock Plans."
(2) Reflects the conversion of all issued and outstanding shares of Convertible
Preferred Stock into 8,315,672 shares of Common Stock upon the closing of
this offering. See Notes F and G to Financial Statements.
(3) Adjusted to reflect the sale of 2,200,000 shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $11.50 per
share, after deducting estimated underwriting discounts and commissions and
offering expenses. See "Use of Proceeds."
</TABLE>
Unless otherwise indicated, all information contained in this Prospectus
reflects (i) the conversion of all outstanding shares of the Company's Series A
Convertible Participating Preferred Stock, Series B Convertible Participating
Preferred Stock and Series C Convertible Participating Preferred Stock
(collectively, the "Convertible Preferred Stock") into an aggregate of 8,315,672
shares of Common Stock upon the closing of this offering, based upon an assumed
initial public offering price of $11.50 per share; (ii) reflects the restatement
of the Company's Certificate of Incorporation, to be filed upon the closing of
this offering, to eliminate the Company's existing series of Convertible
Preferred Stock and to create a class of authorized but undesignated preferred
stock; and (iii) assumes no exercise of the Underwriters' over-allotment option.
See "Description of Capital Stock" and "Underwriting."
- --------------------------------------------------------------------------------
5
<PAGE> 10
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of the Common Stock offered by this Prospectus. This Prospectus contains
forward-looking statements which involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Limited Operating History; Future Operating Results Uncertain. The Company
was incorporated in June 1993 and did not begin shipping products until May
1995. As of September 30, 1996, the Company had an accumulated deficit of
$6,901,000. The Company has experienced substantial revenue growth since product
introduction, and first achieved profitability in the first quarter of 1996.
However, due to the Company's limited operating history there can be no
assurance that such revenue growth and profitability will continue on a
quarterly or annual basis in the future. Future operating results will depend on
many factors, including the demand for the Company's products, the level of
product and price competition, the Company's success in expanding its direct
sales force and indirect distribution channels and the ability of the Company to
develop and market new products and control costs. In order to support the
growth of its business, the Company plans to significantly expand its level of
operations. Due to the anticipated increase in the Company's operating expenses
caused by this expansion, the Company's operating results will be adversely
affected if revenues do not increase. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Potential Fluctuations in Quarterly Operating Results. The Company's
quarterly operating results may in the future vary significantly depending on
factors such as increased competition, the timing of new product announcements
and changes in pricing policies by the Company and its competitors, market
acceptance of new and enhanced versions of the Company's products, the size and
timing of significant orders, order cancellations by customers, the lengthy
sales cycles of the Company's products, changes in operating expenses, changes
in Company strategy, personnel changes and general economic factors. Product
revenues are also difficult to forecast because the market for the Company's
software products is rapidly evolving, and the Company's sales cycle varies
substantially from customer to customer. A significant portion of the Company's
revenues and operating income has been, and is expected to continue to be,
derived from software licensing fees from a limited number of customers.
Variability in the timing of such license fees may cause material fluctuations
in the Company's business, operating results and financial condition. The
Company's products and services generally require capital expenditures by
customers as well as the commitment of resources to implement the Company's
products. Accordingly, the Company is substantially dependent on its customers'
decisions as to the timing and level of such expenditures and resource
commitments. In addition, the Company typically realizes a significant portion
of license revenues in the last month of a quarter. As a result, the magnitude
of quarterly fluctuations may not become evident until late in, or after the
close of, a particular quarter. The Company's expenses are based in part on the
Company's expectations as to future revenue levels and to a large extent are
fixed in the short-term. If revenues do not meet expectations, the Company's
business, operating results and financial condition are likely to be materially
adversely affected. In particular, because only a small portion of the Company's
expenses varies with revenues, net income may be disproportionately affected by
a reduction in revenues. As a result, the Company believes that period-to-period
comparisons of its operating results are not necessarily meaningful and should
not be relied upon as indications of future performance. Due to the foregoing
factors, it is likely that in some future quarter the Company's revenue or
operating results will be below the expectations of public market analysts and
investors. In such event, the price of the Company's Common Stock could be
materially
6
<PAGE> 11
adversely affected. See "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Risks Associated with Customer Concentration and One-Time License Fees. A
significant portion of the Company's revenues to date has been derived from a
limited number of customers. Revenues attributable to the Company's five largest
customers accounted for approximately 94.4% and 62.2% of the Company's total
revenues in 1995 and the nine months ended September 30, 1996, respectively.
Fidelity Investments ("Fidelity"), Sprint Corporation and America Online
accounted for approximately 38.3%, 25.9% and 20.0%, respectively, of the
Company's total revenues in 1995, and Fidelity, Optus Systems PTY Ltd ("Optus"),
GTE Communication Systems Corporation, MCI Telecommunications Corporation
("MCI"), and USAir Corp. accounted for approximately 19.7%, 15.9%, 10.2%, 8.7%
and 7.7%, respectively, of the Company's total revenues for the nine months
ended September 30, 1996. The Company expects that it will continue to be
dependent upon a limited number of customers for a significant portion of its
revenues in future periods. None of the Company's customers, other than MCI and
Optus, is contractually obligated to license or purchase additional products or
services from the Company and these customers generally have acquired fully-paid
licenses to the installed product. As a result of this customer concentration,
the Company's business, operating results and financial condition could be
materially adversely affected by the failure of anticipated orders to
materialize or by deferrals or cancellations of orders. In addition, a
significant portion of the Company's revenues to date has been derived from
initial license fees from customers who have acquired fully-paid licenses to the
installed product. There can be no assurance that any of the Company's customers
will continue to purchase the Company's products and services in amounts similar
to previous periods or that revenues from customers that have accounted for
significant revenues in past periods, individually or as a group, will continue
or, if continued, will reach or exceed historical levels in any future period.
The Company's operating results may in the future be subject to substantial
period-to-period fluctuations as a consequence of such customer concentration.
See "Business -- Customers."
Lengthy Sales and Implementation Cycles. The Company's products are
typically intended for use in applications that may be critical to a customer's
business. The license and implementation of the Company's software products
generally involves a significant commitment of resources by prospective
customers. As a result, the Company's sales process is often subject to delays
associated with lengthy approval processes that typically accompany significant
capital expenditures. For these and other reasons, the sales cycle associated
with the license of the Company's products is often lengthy (recently averaging
approximately six months) and subject to a number of significant delays over
which the Company has little or no control. In addition, the Company does not
recognize license revenues until all significant post-delivery obligations have
been satisfied, including the development of specific product features which, in
certain cases, can take several quarters. The time required to implement the
Company's products can vary significantly with the needs of its customers and is
generally a process that extends for several months. There can be no assurance
that the Company will not experience delays in the future, particularly if the
Company receives orders for large, complex installations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business -- Sales and Marketing" and "-- Customer Service and Support."
Product Concentration; Dependence on Growth in Call Center Market. The
Company currently derives substantially all of its revenues from licenses of the
Intelligent CallRouter and related services. Broad market acceptance of the
Company's product is critical to the Company's future success. As a result, a
decline in demand for or failure to achieve broad market acceptance of the
Intelligent CallRouter as a result of competition, technological change or
otherwise, would have a material adverse effect on the business, operating
results and financial condition of the Company. A decline in sales of the
Intelligent CallRouter could also have a material adverse effect on sales of
other Company products that may be sold to Intelligent CallRouter customers. The
Company's future financial performance will depend in part on the successful
development, introduction and customer acceptance of new and enhanced versions
of the Intelligent CallRouter and other
7
<PAGE> 12
products. There can be no assurance that the Company will continue to be
successful in marketing the Intelligent CallRouter or any new or enhanced
products. See "Business -- Products," "-- Product Development" and
"-- Competition."
The Intelligent CallRouter is utilized in call centers maintained by
companies in a variety of industries. This product is currently expected to
account for substantially all of the Company's future revenues. Although demand
for the Intelligent CallRouter has grown in recent quarters, the call center
market is still an emerging market. The Company's future financial performance
will depend in large part on continued growth in the number of organizations
adopting software applications to enhance their responsiveness to customers and
the number of applications developed for use in those environments. There can be
no assurance that the market for the Company's products will continue to grow.
In addition, changes in the business or pricing strategies of the interexchange
carriers or ACD vendors could adversely affect demand for the Company's
products. If the call center market fails to grow or grows more slowly than the
Company currently anticipates, the Company's business, operating results and
financial condition would be materially adversely affected. During recent years,
segments of the telecommunications industry have experienced significant
economic downturns characterized by decreased product demand, price erosion,
work slowdowns and layoffs. The Company's operations may in the future
experience substantial fluctuations from period to period as a consequence of
such industry patterns, general economic conditions affecting the timing of
orders from major customers, and other factors affecting capital spending. There
can be no assurance that such factors will not have a material adverse effect on
the Company's business, operating results and financial condition. See
"Business -- Industry Background."
Competition. The market for telecommunications software products is
intensely competitive and is subject to rapid technological change. Although to
date the Company has experienced limited competition, the Company expects
competition to increase significantly in the future. Currently, the Company's
principal competitors are the interexchange carriers, particularly AT&T, and to
a lesser extent MCI and Sprint, which provide proprietary call routing solutions
as part of their service offerings. In addition, a number of other companies
have introduced or announced their intention to introduce products that could be
competitive with the Company's products, including Genesys Telecommunications
Laboratories and IEX Corporation. Additional competitors, including traditional
ACD providers, such as Lucent Technologies, Aspect Telecommunications
Corporation, Northern Telecommunications, Inc. and Rockwell International
Corporation, may enter the market by enhancing their proprietary private network
solutions or by entering into arrangements with the interexchange carriers. The
Company believes that, to date, approximately one-half of the Company's
customers have purchased the Company's products to replace or enhance existing
call routing solutions offered by the interexchange carriers. The Company's
other customers have purchased the Company's products in order to implement a
virtual call center solution for the first time. Increased competition is likely
to result in price reductions, reduced gross margins and loss of market share,
any of which could materially adversely affect the Company's business, operating
results and financial condition. Some of the Company's current, and many of the
Company's potential, competitors have significantly greater financial,
technical, marketing and other resources than the Company. As a result, they may
be able to respond more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the development,
promotion and sale of their products than the Company. In addition, one or more
interexchange carriers, including MCI, Optus and Sprint which are customers of
the Company, could choose to provide or distribute competitive products and
services. Accordingly, there can be no assurance that the Company will be able
to compete successfully against current and future competitors or that
competitive pressures faced by the Company will not materially adversely affect
its business, operating results and financial condition. Moreover, the Company
may be subject to potential conflicts of interest from time to time if a
customer, such as MCI, Optus or Sprint, provides or distributes competitive
products or services. In this regard, a customer which elects to provide or
distribute competitive products or services could make strategic decisions with
respect to pricing and other matters relating to products provided or
distributed by it which could adversely affect the Company's business, operating
results and financial condition. See "Business -- Competition."
8
<PAGE> 13
Dependence on New Products and Rapid Technological Change. The market for
the Company's products is characterized by rapid technological change, frequent
new product introductions and evolving industry standards. The introduction of
products embodying new technologies and the emergence of new industry standards
can render existing products obsolete and unmarketable. The life cycles of the
Company's products are difficult to estimate. The Company's future success will
depend upon its ability to enhance its current products and to develop and
introduce new products on a timely basis that keep pace with technological
developments and emerging industry standards and address the increasingly
sophisticated needs of its customers. There can be no assurance that the Company
will be successful in developing and marketing product enhancements or new
products that respond to technological change or evolving industry standards,
that the Company will not experience difficulties that could delay or prevent
the successful development, introduction and marketing of these products, or
that its new products and product enhancements will adequately meet the
requirements of the marketplace and achieve market acceptance. If the Company is
unable, for technological or other reasons, to develop and introduce new
products or enhancements of existing products in a timely manner in response to
changing market conditions or customer requirements, the Company's business,
operating results and financial condition will be materially adversely affected.
In June 1996, the Company released a new version of its Intelligent CallRouter
and the Company plans to introduce additional enhancements in the near term.
These enhancements are subject to significant technical risks. If these
enhancements are delayed or if they do not achieve market acceptance, the
Company's business, operating results and financial condition will be materially
adversely affected. See "Business -- Product Development."
Risk of Product Defects or Development Delays. Software products as
complex as those offered by the Company frequently contain errors or failures,
especially when first introduced or when new versions are released. Although the
Company conducts extensive product testing, new products and enhancements could
contain software errors and, as a result, the Company could experience delays in
recognizing revenues during the period required to correct these errors. The
Company could in the future lose revenues as a result of software errors or
defects. The Company's products are typically intended for use in applications
that may be critical to a customer's business. As a result, the Company believes
that its current customers and potential customers have a greater sensitivity to
product defects than the market for software products generally. Although the
Company has not experienced material adverse effects resulting from any such
errors to date, there can be no assurance that, despite testing by the Company
and by current and potential customers, errors will not be found in new products
or releases after commencement of commercial shipments, resulting in the loss of
revenue or delay in market acceptance, diversion of development resources,
damage to the Company's reputation, or increased service and warranty costs, any
of which could have a material adverse effect upon the Company's business,
operating results and financial condition.
Management of Growth; Dependence Upon Key Personnel. The Company has
recently experienced a period of rapid growth in revenues that has placed a
significant strain upon its management systems and resources. The Company's
ability to compete effectively and to manage future growth, if any, will require
the Company to continue to improve its financial and management controls,
reporting systems and procedures on a timely basis and expand, train and manage
its employee work force. There can be no assurance that the Company will be able
to do so successfully. The Company's failure to do so could have a material
adverse effect upon the Company's business, operating results and financial
condition. The Company's future performance depends in significant part upon the
continued service of its key technical, sales and senior management personnel,
none of whom is bound by an employment agreement. The loss of the services of
one or more of the Company's executive officers could have a material adverse
effect on the Company's business, operating results and financial condition. The
Company's future success also depends on its continuing ability to attract and
retain highly qualified technical, sales and managerial personnel.
9
<PAGE> 14
Competition for such personnel is intense, and there can be no assurance that
the Company can retain its key technical, sales and managerial employees or that
it can attract, assimilate or retain other highly qualified technical, sales and
managerial personnel in the future. See "Business -- Sales and Marketing" and
"Management."
Risks Associated with International Expansion. International sales
accounted for approximately 21.6% of the Company's revenues for the nine months
ended September 30, 1996. As part of its business strategy, the Company is
seeking opportunities to expand its products into international markets. The
Company believes that such expansion is important to the Company's ability to
continue to grow and to market its products and services. In marketing its
products and services internationally, however, the Company will face new
competitors, some of whom may have established strong relationships with
carriers. In addition, the ability of the Company to enter the international
markets will be dependent upon the Company's ability to integrate its products
with local proprietary networks in foreign countries. There can be no assurance
that the Company will be successful in integrating its products with these
proprietary networks or marketing or distributing its products abroad or that,
if the Company is successful, its international revenues will be adequate to
offset the expense of establishing and maintaining international operations. To
date, the Company has limited experience in marketing and distributing its
products internationally. In addition to the uncertainty as to the Company's
ability to establish an international presence, there are certain difficulties
and risks inherent in doing business on an international level, such as
compliance with regulatory requirements and changes in these requirements,
export restrictions, export controls relating to technology, tariffs and other
trade barriers, protection of intellectual property rights, difficulties in
staffing and managing international operations, longer payment cycles, problems
in collecting accounts receivable, political instability, fluctuations in
currency exchange rates and potentially adverse tax consequences. There can be
no assurance that one or more of such factors will not have a material adverse
effect on any international operations established by the Company and,
consequently, on the Company's business, operating results and financial
condition.
Dependence on Proprietary Technology; Risks of Infringement. The Company
is dependent upon its ability to protect its proprietary technology. To protect
its proprietary rights, the Company relies on a combination of patents,
copyrights, trademarks, trade secret laws and confidentiality procedures. The
Company has been issued one United States patent and also has one patent
application pending in the United States and internationally. There can be no
assurance that patents will be issued with respect to the pending or future
patent applications or that the Company's existing or future patents will be
upheld as valid or will prevent the development of competitive products. In
addition, existing patent, copyright, trademark and trade secret laws afford
only limited protection, and many countries' laws do not protect the Company's
proprietary rights to the same extent as do the laws of the United States.
Accordingly, there can be no assurance that the Company will be able to protect
its proprietary rights against unauthorized third-party copying, use or
exploitation, any of which could have a material adverse effect on the Company's
business, operating results and financial condition. Attempts may be made to
copy or reverse engineer aspects of the Company's products, or to obtain, use or
exploit information or methods which the Company deems proprietary.
Additionally, there can be no assurance that the Company's customers and others
will not develop products which infringe upon the Company's rights, or that
compete with the Company's products. Policing the use of the Company's products
is difficult and expensive, and there is no assurance that such efforts would
prove effective. Litigation or other action may be necessary in the future to
enforce the Company's proprietary rights, to seek and confirm patent protection
for the Company's technologies, or to determine the validity and scope of the
proprietary rights of others. Any litigation could be time-consuming and result
in significant costs. The Company expects that its software products may
increasingly be subject to claims as the number of products and competitors in
the Company's markets grows and the functionality of such products overlaps. Any
such claims, with or without merit, could result in substantial costs and
diversions of resources and management's attention, and could cause product
shipment delays or require the Company to enter into royalty or licensing
agreements, any of which could have a material adverse
10
<PAGE> 15
impact on the Company's business, operating results and financial condition.
Such royalty or licensing agreements, if required, may not be available on terms
acceptable to the Company, if at all, which could have a material adverse effect
upon the Company's business, operating results and financial condition. See
"Business -- Intellectual Property and Other Proprietary Rights."
Dependence on a Single Supplier for a Certain Product. The software and
network adapter necessary to enable the Company's Intelligent CallRouter to
interface with the AT&T network is licensed by the Company from a single vendor
under a perpetual, fully-paid license. Although the Company has access to the
source code underlying this software and rights to manufacture the network
adapter, if for any reason the vendor does not make the software or network
adapter available to the Company, there can be no assurance that the Company
will be able to develop these products on a timely basis. See
"Business -- Intellectual Property and Other Proprietary Rights."
Product Liability. The Company's license agreements with its customers
generally contain provisions designed to limit the Company's exposure to
potential product liability claims. However, it is possible that the limitation
of liability provisions contained in the Company's license agreements may not be
effective under the laws of certain jurisdictions. Although the Company has not
experienced any product liability claims to date, the sale and support of
products by the Company may entail the risk of such claims, and there can be no
assurance that the Company will not be subject to such claims in the future. A
successful product liability claim brought against the Company could have a
material adverse effect upon the Company's business, operating results and
financial condition.
No Prior Public Market; Determination of Public Offering Price; Potential
Volatility of Stock Price. Prior to this offering there has been no public
market for the Common Stock, and there can be no assurance that an active
trading market will develop or be sustained. The initial public offering price
for the Common Stock will be determined by negotiation between the Company and
the Representatives of the Underwriters. Among the factors to be considered in
determining the initial public offering price are prevailing market and economic
conditions, revenues and earnings of the Company, the market valuations of other
companies engaged in activities similar to those of the Company, estimates of
the business potential and prospects of the Company, the present state of the
Company's business operations, the Company's management and other factors deemed
relevant, and may not be indicative of the market price of the Common Stock
after this offering. In addition, the stock markets in general, and the market
prices for high technology companies in particular, have historically
experienced volatility that at times has been unrelated to the operating
performance of such companies. The trading price of the Common Stock could also
be subject to significant fluctuations in response to variations in quarterly
results of operations, announcements of new products or acquisitions by the
Company or its competitors, governmental regulatory action, other developments
or disputes with respect to proprietary rights, general trends in the industry
and overall market conditions, and other factors. These broad market and
industry fluctuations may adversely affect the market price of the Common Stock
regardless of the Company's operating performance. See "Underwriting" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Shares Eligible for Future Sale; Registration Rights. A substantial number
of outstanding shares of Common Stock and shares of Common Stock issuable upon
exercise of outstanding options will become available for future sale in the
public market at prescribed times or pursuant to the exercise of registration
rights. Sales of substantial amounts of such shares in the public market could
adversely affect the market price of the Common Stock. Approximately 2,086
shares may be eligible for resale in the public market without restriction in
reliance on Rule 144(k) under the Securities Act of 1933, as amended (the
"Securities Act"). An additional 344,346 shares may be eligible for resale in
the public market without restriction in reliance on Rule 144(k) upon the
expiration of certain 180-day lock-up agreements. In addition, beginning 90 days
after the date of this Prospectus, 6,833,128 shares of Common Stock, all of
which shares are subject to 180-day lockup agreements with the Representatives
of the Underwriters, will be eligible for resale in the public market subject to
the restrictions of Rule 144 under the Securities Act. See "Shares
11
<PAGE> 16
Eligible for Future Sale." In addition, the Securities and Exchange Commission
has proposed an amendment to Rule 144 which would reduce the holding period
before shares subject to Rule 144 become eligible for sale in the public market.
This proposal, if adopted, would substantially increase the number of shares of
the Company's Common Stock eligible for immediate sale following the expiration
of the lock-up period. Approximately 90 days after the date of this Prospectus,
the Company intends to register on one or more registration statements on Form
S-8 approximately 2,972,341 shares of Common Stock issuable under its restricted
stock purchase plan, stock restriction agreements and stock option plan. Shares
covered by such registration statements will be eligible for sale in the public
market after the effective date of such registration, except for 1,704,146
shares which are subject to 180-day lockup agreements with Representatives of
the Underwriters.
The executive officers and the directors of the Company and certain
stockholders, who in the aggregate own beneficially approximately 10,753,518
shares of Common Stock (including shares issuable pursuant to the exercise of
stock options), have agreed pursuant to lock-up agreements that they will not,
without the prior written consent of Alex. Brown & Sons Incorporated, sell or
otherwise dispose of any such shares of Common Stock beneficially owned by them
for a period of 180 days from the date of this Prospectus. Upon the expiration
of these lock-up agreements, 8,090,308 of such shares (including shares issuable
pursuant to the exercise of stock options) will become eligible for sale in the
public market, subject to the provisions of Rule 144 under the Securities Act.
As of the date of this Prospectus, the holders of 9,529,862 shares of
Common Stock are entitled to certain registration rights with respect to such
shares. If the Company is required to register shares held by any such holder
pursuant to the exercise of its or his registration rights, such sales may have
an adverse effect on the Company's ability to raise needed capital or adversely
affect the Common Stock. See "Management," "Principal and Selling Stockholders,"
"Shares Eligible for Future Sale" and "Underwriting."
Control by Existing Stockholders. Following this offering, the Company's
executive officers, directors and their respective affiliates, in the aggregate,
will beneficially own approximately 44.5% of the Company's outstanding Common
Stock (43.3% of the outstanding Common Stock if the over-allotment option is
exercised in full). As a result, these stockholders, if acting together, would
be able to exert substantial influence over the Company and to effectively
control most matters requiring approval by the stockholders of the Company,
including the election of directors. The voting power of these stockholders
under certain circumstances could have the effect of delaying or preventing a
change in control of the Company. See "Management," "Principal and Selling
Stockholders" and "Description of Capital Stock."
Certain Anti-Takeover Provisions Affecting Stockholders. The Company's
Restated Certificate of Incorporation and Bylaws contain provisions that might
diminish the likelihood that a potential acquiror would make an offer for the
Common Stock, or impede a transaction favorable to the interest of the
stockholders, or increase the difficulty of removing an incumbent Board of
Directors or management. After the closing of this offering, the Company's Board
of Directors will have the authority, without further stockholder approval, to
issue up to 5,000,000 shares of Preferred Stock in one or more series and to
determine the price, rights, preferences and privileges of those shares. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. The issuance of shares of Preferred Stock, while potentially
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue shares of Preferred Stock. In
addition, the Company is subject to the anti-takeover provisions of Section 203
of the Delaware General Corporation Law, which will prohibit the Company from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. The application of Section 203 also could
12
<PAGE> 17
have the effect of delaying or preventing a change of control of the Company.
Furthermore, certain provisions of the Company's Restated Certificate of
Incorporation, including provisions that provide for the Board of Directors to
be divided into three classes to serve for staggered three-year terms, may have
the effect of delaying or preventing a change of control of the Company, which
could adversely affect the market price of the Company's Common Stock. Each of
the Company's executive officers is a party to a change in control agreement
which provides for salary continuation and other benefits upon the occurrence of
certain events following a change of control. These agreements could have the
effect of discouraging a change of control of the Company. See "Description of
Capital Stock -- Certain Charter, Bylaw and Statutory Provisions Affecting
Stockholders" and "Management -- Employment Agreements and Change of Control
Arrangements."
Dilution. Purchasers in this offering will suffer an immediate and
substantial dilution, in the amount of $9.31 per share, in the net tangible book
value of the Common Stock from the initial public offering price. See
"Dilution."
No Dividends. The Company has never declared or paid cash dividends to its
stockholders and does not anticipate paying cash dividends in the foreseeable
future. See "Dividend Policy."
Discretion as to Use of Proceeds. The principal purposes of this offering
are to increase the Company's equity capital, to create a public market for the
Company's Common Stock, to increase the visability of the Company in the
marketplace and to facilitate future access to public equity markets. As of the
date of this Prospectus, the Company has no specific plans to use the net
proceeds from this offering other than for working capital and general corporate
purposes, including repayment of bank indebtedness. Accordingly, the Company's
management will retain broad discretion as to the allocation of the net proceeds
from this offering. Pending any such uses, the Company plans to invest the net
proceeds in the investment grade, interest-bearing securities. See "Use of
Proceeds."
13
<PAGE> 18
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,200,000 shares of
Common Stock offered by the Company pursuant to this offering are estimated to
be $22,929,000 ($25,763,000 if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $11.50 per
share and after deducting the estimated underwriting discounts and commissions
and offering expenses payable by the Company. The principal purposes of this
offering are to increase the Company's equity capital, to create a public market
for the Common Stock, to increase the visibility of the Company in the
marketplace and to facilitate future access by the Company to public equity
markets.
The Company anticipates using a portion of the net proceeds to repay in
full the Company's existing bank indebtedness and the balance for general
corporate purposes, including working capital. At September 30, 1996, the
Company's bank indebtedness consisted of equipment lines of credit which
amounted to approximately $823,000, payable in monthly installments. Future
principal payments are $101,000, $347,000, $252,000, $99,000 and $24,000 for the
remainder of 1996 and annually for 1997, 1998, 1999 and 2000, respectively. At
September 30, 1996, interest accrued on such loans at the bank's prime rate
(8.25% at September 30, 1996) per annum. The proceeds of such loans were used by
the Company to acquire capital equipment. The Company may seek acquisitions of
businesses, products and technologies that are complementary to those of the
Company, and a portion of the net proceeds may be used for such acquisitions in
as early as the fourth quarter of 1996. While the Company engages from time to
time in discussions with respect to potential acquisitions, the Company has no
plans, commitments or agreements with respect to any such acquisitions as of the
date of this Prospectus, and there can be no assurance that any such
acquisitions will be made. Pending such uses, the Company intends to invest the
net proceeds from this offering in short-term, investment-grade,
interest-bearing securities.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and currently intends to retain all available funds for use in the
operation and expansion of its business. The Company does not, therefore,
anticipate that any cash dividends will be declared or paid in the foreseeable
future. The Company's current loan agreement prohibits the payment of cash
dividends without the bank's consent. See Financial Statements and the related
Notes.
14
<PAGE> 19
CAPITALIZATION
<TABLE>
The following table sets forth the capitalization of the Company as of
September 30, 1996 on an actual, pro forma and as adjusted basis to give effect
to the sale of 2,200,000 shares of Common Stock offered by the Company in this
offering at an assumed initial public offering price of $11.50 per share, and
the application of the estimated net proceeds therefrom. This table should be
read in conjunction with the Financial Statements and Notes thereto included
elsewhere in this Prospectus.
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED(2)
------- ------------ --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current portion............... $ 450 $ 450 --
------- ------- -------
Convertible preferred stock, $.01 par value,
7,788,615 shares authorized, issued and
outstanding (actual), no shares (pro forma and pro
forma as adjusted) (aggregate liquidation
preference of $12,756,000)........................ 12,229 -- --
Stockholders' equity (deficit):
Preferred stock, $.01 par value; no shares
authorized, issued and outstanding (actual);
5,000,000 shares authorized, no shares issued and
outstanding (pro forma and pro forma as
adjusted)(3)
Common Stock, $.01 par value; 14,000,000 shares
authorized, 2,599,580 shares issued and 2,324,837
shares outstanding (actual); 40,000,000 shares
authorized, 10,915,252 shares issued and
10,640,509 shares outstanding (pro forma); and
40,000,000 shares authorized, 13,115,252 shares
issued and 12,840,509 shares outstanding (pro
forma as adjusted)(3)(4).......................... 26 109 $ 131
Additional paid-in capital......................... 1,173 13,319 36,226
Accumulated deficit................................ (6,901) (6,901) (6,901)
Notes receivable from stockholders................. (153) (153) (153)
Unearned compensation.............................. (1,107) (1,107) (1,107)
Less treasury stock, at cost, 274,743 shares....... (42) (42) (42)
------- ------- -------
Total stockholders' equity (deficit).......... (7,004) 5,225 28,154
------- ------- -------
Total capitalization.......................... $ 5,675 $ 5,675 $28,154
======= ======= =======
<FN>
- ---------------
(1) Reflects the conversion of all issued and outstanding shares of Convertible
Preferred Stock into 8,315,672 shares of Common Stock upon the closing of
this offering, based upon an assumed initial public offering price of $11.50
per share.
(2) Adjusted to give effect to the sale of 2,200,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$11.50 per share, after deducting the estimated underwriting discounts and
commissions and offering expenses payable by the Company, and the
anticipated application of the net proceeds therefrom.
(3) On September 26, 1996, the Company's Board of Directors and stockholders
approved amendments to the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock from 14,000,000 to
40,000,000 and to set the number of authorized shares of undesignated
Preferred Stock at 5,000,000 to be effected upon the closing of this
offering. See "Description of Capital Stock" and Notes to the Financial
Statements.
(4) Excludes 860,396 shares of Common Stock issuable pursuant to the exercise of
options outstanding at September 30, 1996, of which options to purchase
8,400 shares were then exercisable. See "Management -- Stock Plans."
</TABLE>
15
<PAGE> 20
DILUTION
<TABLE>
The pro forma net tangible book value of the Company at September 30, 1996,
after giving effect to the automatic conversion of Convertible Preferred Stock
upon the closing of the offering, was approximately $5,225,000, or $0.49 per
share of Common Stock. Net tangible book value per share is equal to the
Company's total tangible assets less total liabilities, divided by the total
number of shares of Common Stock outstanding. Net tangible book value dilution
per share represents the difference between the amount per share paid by
purchasers of shares of Common Stock in the offering made hereby and the net
tangible book value per share of Common Stock immediately after completion of
this offering. After giving effect to the sale by the Company of the 2,200,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $11.50 per share, and after deducting the estimated underwriting
discounts and commissions and offering expenses, the pro forma net tangible book
value of the Company as of September 30, 1996 would have been $28,154,000 or
$2.19 per share of Common Stock. This represents an immediate increase in such
pro forma net tangible book value of $1.70 per share to existing stockholders
and an immediate dilution of $9.31 per share to new investors purchasing shares
in this offering. If the initial public offering price is higher or lower, the
dilution to the new investors will be, respectively, greater or less. The
following table illustrates this per share dilution:
<S> <C> <C>
Assumed initial public offering price per share................... $11.50
Pro forma net tangible book value per share before this
offering........................................................ $0.49
Increase per share attributable to new investors.................. 1.70
Pro forma net tangible book value per share after this offering... 2.19
------
Dilution per share to new investors............................... $ 9.31
======
</TABLE>
<TABLE>
The following table summarizes, on a pro forma basis as of September 30,
1996, after giving effect to the conversion of all outstanding shares of
Convertible Preferred Stock into 8,315,672 shares of Common Stock upon the
closing of this offering, the number of shares of Common Stock purchased from
the Company (excluding shares repurchased by the Company and held in treasury),
the total consideration paid and the average price per share paid to the Company
by existing stockholders (net of expenses) and by new investors purchasing
shares offered by the Company hereby (at an assumed initial public offering
price of $11.50 per share), respectively, before deducting the underwriting
discounts and commissions and estimated offering expenses:
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 10,640,509 82.9% $12,250,000 32.6% $ 1.15
New investors.................... 2,200,000 17.1% 25,300,000 67.4% 11.50
---------- ----- ----------- -----
Total.................. 12,840,509 100.0% $37,550,000 100.0%
========== ===== =========== =====
</TABLE>
The foregoing tables assume no exercise of the Underwriters' over-allotment
option or of options to purchase an aggregate of 860,396 shares of Common Stock
that were outstanding at September 30, 1996. To the extent that the
Underwriters' over-allotment option and other options are exercised in the
future, there will be further dilution to new investors. If all of the
outstanding options were exercised in full, the dilution per share to new
investors would be $9.32. Such exercises would increase the number of shares
held by existing stockholders to 11,500,905 shares, or 83.9%, of the total
number of shares of Common Stock to be outstanding after this offering, and
would (i) decrease the percentage ownership of the Company held by the new
investors to 16.1% of the total number of shares of Common Stock to be
outstanding after this offering, (ii) increase the total consideration paid to
the Company by existing stockholders to $13,941,000, or 35.5% of the total
consideration paid to the Company, and (iii) increase the average price per
share paid by existing stockholders to $1.21. See "Management -- Stock Plans."
16
<PAGE> 21
SELECTED FINANCIAL DATA
<TABLE>
The following selected financial data should be read in conjunction with
the Financial Statements and the Notes thereto and other financial information
included elsewhere in this Prospectus. The selected financial data set forth
below has been derived from, and qualified by reference to, those Financial
Statements and Notes thereto. The selected financial data set forth below for
the year ended December 31, 1995 and the nine months ended September 30, 1996
has been derived from Financial Statements of the Company which has been audited
by Coopers & Lybrand L.L.P., independent accountants. The selected financial
data set forth below from inception (June 4, 1993) through December 31, 1993 and
for the year ended December 31, 1994 has been derived from Financial Statements
of the Company which have been audited by Arthur Andersen LLP, independent
public accountants. The selected financial data for the nine months ended
September 30, 1995 is unaudited but has been prepared on the same basis as the
audited financial statements and, in the opinion of management, contain all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the operating results for the period. The operating results
for the nine months ended September 30, 1996 are not necessarily indicative of
the results to be expected for any other interim period or the full year.
<CAPTION>
INCEPTION
(JUNE 4, 1993) YEAR ENDED NINE MONTHS ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, -------------------- --------------------
1993 1994 1995 1995 1996
-------------- ------- ---------- ------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software license.......................... $ 1,360 $5,618
Services and other........................ 174 666
------- ------
Total revenues............................ 1,534 6,284
------- ------
Cost of Revenues:
Cost of software license.................. 264 235
Cost of services and other................ 611 $ 372 988
------- ------- ------
Total cost of revenues.................... 875 372 1,223
------- ------- ------
Gross profit (loss)......................... 659 (372) 5,061
------- ------- ------
Operating Expenses:
Research and development.................. $ 140 $ 1,879 2,322 1,720 2,210
Sales and marketing....................... -- 570 1,476 998 1,969
General and administrative................ 261 641 887 501 705
----- ------- ------- ------- ------
Total operating costs..................... 401 3,090 4,685 3,219 4,884
----- ------- ------- ------- ------
Income (loss) from operations............... (401) (3,090) (4,026) (3,591) 177
Interest income, net........................ 24 124 164 112 131
----- ------- ------- ------- ------
Net income (loss)........................... $(377) $(2,966) $(3,862) $(3,479) $ 308
===== ======= ======= ======= ======
Pro forma net income (loss) per common and
common equivalent share(1)................ $ (0.37) $ 0.03
======= ======
Pro forma weighted average number of common
and common equivalent shares(1)........... 10,365,465 11,514,315
========== ==========
</TABLE>
17
<PAGE> 22
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
DECEMBER 31, ------------------------------------------
---------------------------- PRO FORMA
1993 1994 1995 ACTUAL PRO FORMA(1) AS ADJUSTED(2)
------ ------- ------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents.......... $ 451 $ 3,793 $ 4,537 $ 5,812 $5,812 $27,918
Working capital........ 2,841 4,249 4,292 4,699 4,699 27,178
Total assets........... 3,020 5,483 6,449 9,176 9,176 31,282
Long-term debt, less
current portion...... -- 338 408 450 450 --
Convertible preferred
stock................ 3,267 7,937 11,986 12,229 -- --
Preferred stock........ -- --
Total stockholders'
equity (deficit)..... (370) (3,357) (7,312) (7,004) 5,225 28,154
<FN>
- ---------------
(1) Reflects the conversion of all issued and outstanding shares of Convertible
Preferred Stock into 8,315,672 shares of Common Stock upon the closing of
this offering, based upon an assumed initial public offering price of $11.50
per share. See Notes F and G to Financial Statements.
(2) Adjusted to give effect to the sale of 2,200,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$11.50 per share, after deducting the estimated underwriting discounts and
commissions and offering expenses payable by the Company, and the
anticipated application of the net proceeds therefrom.
</TABLE>
18
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such a difference include, but are not limited to, those discussed
in "Risk Factors." The following discussion of the financial condition and
results of operations of the Company should be read in conjunction with the
Company's Financial Statements and Notes thereto, and the other financial
information included elsewhere in this Prospectus.
OVERVIEW
The Company was incorporated in June 1993 to develop telecommunications
software solutions that enable enhanced call center applications. From inception
through the first half of 1995, the Company was engaged principally in research
and product development of its Intelligent CallRouter product. The Company's
first customer installation of the Intelligent CallRouter occurred in May 1995
and the Company recognized its first revenue from customer shipments in the
fourth quarter of 1995. The Company initially achieved profitability in the
first quarter of 1996. Unit shipments have grown due to increasing market
acceptance of the Company's product and increases in the size of the Company's
direct sales force. The Company expects that the Intelligent CallRouter product
will account for substantially all of its revenue for the foreseeable future.
The Company believes that its future performance will depend in large part on
its ability to maintain and enhance its current Intelligent CallRouter product
line, develop new products that achieve market acceptance, maintain
technological competitiveness, meet an expanding range of customer requirements
and continue to recruit highly skilled and qualified software professionals. The
Company primarily markets its products in the United States through a direct
sales force which is complemented by strategic sales channels, including MCI,
selected resellers and an international partner.
The Company's revenue is derived from two sources: software licenses and
services. Software license revenue, which has historically represented the
majority of the Company's total revenue, is generally payable within thirty days
of product acceptance. The Company recognizes software license fee revenues upon
shipment unless there are significant post-delivery obligations. When
significant post-delivery obligations exist, revenues are deferred until such
obligations have been satisfied. Service revenues consist primarily of
maintenance, installation and training revenues. Maintenance revenues are
recognized ratably over the term of the support period, which is typically
twelve months. Installation and training revenues are recognized when the
services are performed.
A significant portion of the Company's revenues to date has been derived
from a limited number of customers. Revenues attributable to the Company's five
largest customers accounted for approximately 94.4% and 62.2% of the Company's
total revenues in 1995 and the nine months ended September 30, 1996,
respectively. The Company expects that it will continue to be dependent upon a
limited number of customers for a significant portion of its revenues in future
periods. See "Risk Factors -- Risks Associated with Customer Concentration."
The Company has experienced substantial revenue growth since product
introduction and first achieved profitability in the first quarter of 1996.
However, due to the Company's limited operating history there can be no
assurance that such revenue growth and profitability will continue on a
quarterly or annual basis in the future. Future operating results will depend on
many factors, including the demand for the Company's products, the level of
product and price competition, the Company's success in expanding its direct
sales force and indirect distribution channels and the ability of the Company to
develop and market new products and control costs. In order to support the
growth of its business, the Company plans to significantly expand its level of
operations. Due to the anticipated increase in the Company's operating expenses
caused by this expansion, the Company's operating results will be adversely
affected if revenues do not increase. Although demand for the Intelligent
CallRouter has grown in recent quarters, the call center market is still an
emerging market. The Company's future financial performance will depend in large
part on
19
<PAGE> 24
continued growth in the number of organizations adopting software applications
to enhance their responsiveness to customers and the number of applications
developed for use in these environments. See "Risk Factors -- Limited Operating
History; Future Operating Results Uncertain."
The Company's quarterly operating results may in the future vary
significantly depending on factors such as increased competition, the timing of
new product announcements and changes in pricing policies by the Company and its
competitors, market acceptance of new and enhanced versions of the Company's
products, the size and timing of significant orders, order cancellations by
customers, changes in operating expenses, changes in Company strategy, personnel
changes, and general economic factors. The Company's expense levels are based,
in part, on its expectations of future revenues and to a large extent are fixed
in the short-term. If revenue levels are below expectations, the Company's
business, operating results and financial condition are likely to be materially
adversely affected. Net income may be disproportionately affected by a reduction
in revenues because a proportionately smaller amount of the Company's expenses
varies with its revenues. As a result, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
See "Risk Factors -- Potential Fluctuations in Quarterly Operating Results."
OPERATING RESULTS
<TABLE>
The following table presents selected unaudited financial information for
the Company's last four quarters (since the Company began recognizing revenue),
as well as the percentage of the Company's total revenues represented by each
item. The Company has not included quarterly financial information for any
quarter prior to the quarter ended December 31, 1995 as the Company was a
development stage enterprise and expenses in those quarters related primarily to
the research and development of the Company's products and initial marketing
efforts. In the opinion of the Company's management, this unaudited information
reflects all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly this information when read in conjunction with the
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.
The Company's operating results for any one quarter are not necessarily
indicative of results for any future period.
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1995 1996 1996 1996 1995 1996 1996 1996
------------ --------- -------- ------------- ------------ --------- -------- -------------
(IN THOUSANDS) (PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Software license...... $1,360 $1,705 $1,837 $2,076 88.6% 92.7% 89.7% 86.7%
Services and other.... 174 134 212 320 11.4 7.3 10.3 13.3
------ ------ ------ ------ ----- ----- ----- -----
Total revenues........ 1,534 1,839 2,049 2,396 100.0 100.0 100.0 100.0
------ ------ ------ ------ ----- ----- ----- -----
Cost of Revenues:
Cost of software
license............. 264 75 108 52 17.2 4.1 5.3 2.2
Cost of services and
other............... 240 278 338 372 15.6 15.1 16.5 15.5
------ ------ ------ ------ ----- ----- ----- -----
Total cost of
revenues............ 504 353 446 424 32.8 19.2 21.8 17.7
------ ------ ------ ------ ----- ----- ----- -----
Gross Profit............ 1,030 1,486 1,603 1,972 67.2 80.8 78.2 82.3
------ ------ ------ ------ ----- ----- ----- -----
Operating Expenses:
Research and
development......... 601 656 734 820 39.2 35.7 35.8 34.2
Sales and marketing... 479 621 575 773 31.2 33.8 28.1 32.3
General and
administrative...... 386 204 242 259 25.2 11.1 11.8 10.8
------ ------ ------ ------ ----- ----- ----- -----
Total operating
costs............... 1,466 1,481 1,551 1,852 95.6 80.6 75.7 77.3
------ ------ ------ ------ ----- ----- ----- -----
Income(loss) from
operations............ (436) 5 52 120 (28.4) 0.2 2.5 5.0
Interest income, net.... 52 40 45 46 3.4 2.2 2.2 1.9
------ ------ ------ ------ ----- ----- ----- -----
Net income (loss)....... $ (384) $ 45 $ 97 $ 166 (25.0)% 2.4% 4.7% 6.9%
====== ====== ====== ====== ===== ===== ===== =====
</TABLE>
20
<PAGE> 25
REVENUES
Revenues consist of software license fees and services. The Company
recorded no revenues until the fourth quarter of 1995. Since the fourth quarter
of 1995, the Company's quarterly revenues have increased sequentially by 19.9%,
11.4% and 16.9% for the first, second and third quarter of 1996, respectively.
The increases were due to increases in unit sales. The Company did not record
any revenues from international sales until the first quarter of 1996.
International sales represented 21.6% of revenues for the nine months ended
September 30, 1996. To date, the Company's international sales have been
denominated in U.S. currency. Most of the Company's revenues have been from
software license and installation revenues. The Company anticipates that
maintenance revenues will increase as a percentage of revenues as the Company's
customer base increases. Service and other revenues for the fourth quarter of
1995 were derived solely from installation services. Installation and
maintenance services represented 68% and 28%, respectively, of total service and
other revenues for the nine months ended September 30, 1996. Installation
services are one time sales. Maintenance contracts are generally twelve months
in duration and are subject to customer renewal.
COST OF REVENUES
To date, cost of software licenses consists principally of product warranty
costs and costs attributable to a discontinued marketing program offered to the
Company's first five customers. Cost of software licenses as a percentage of
software license revenue were 19.4%, 4.4%, 5.9% and 2.5% for the fourth quarter
of 1995 and the first, second and third quarter of 1996, respectively. The
decreases in percentage for the fourth quarter of 1995, the first quarter of
1996 and the third quarter of 1996 resulted from decreasing hardware costs. As
part of the initial introduction of the Company's software products, the Company
purchased and resold certain hardware required by customers in order to
implement the Company's products. This program was discontinued as the Company's
general practice in September 1995. The Company does not anticipate that
hardware costs will represent a significant portion of cost of revenues in the
future. The increase in dollars and as a percentage of software license revenue
in the second quarter of 1996 as compared to the first and third quarter of
1996, was the result of an increase in the provision for warranty expense.
Cost of services consists principally of the costs incurred to provide
installation, consulting, maintenance and training services. The expenses
incurred to provide these services are comprised primarily of personnel costs,
travel and facility costs. Cost of services as a percentage of services and
other revenues were 137.9%, 207.5%, 159.4% and 116.3% for the fourth quarter of
1995 and the first, second and third quarter of 1996, respectively. The dollar
increases were a result of start-up costs associated with the building of a
customer support infrastructure to handle the anticipated future growth in
customers. The Company anticipates that the cost of services will increase in
absolute dollars, while decreasing as a percentage of services and other
revenues in the foreseeable future. The Company anticipates that services
revenues will begin to exceed the related costs of services and other expenses
as the Company begins to benefit from cost efficiencies anticipated as the
customer base and maintenance customer renewals increase.
OPERATING EXPENSES
Research and Development. Research and development expenses consist
principally of personnel and facility costs. Research and development expenses
as a percentage of total revenues were 39.2%, 35.7%, 35.8% and 34.2% for the
fourth quarter of 1995 and the first, second and third quarter of 1996,
respectively. The decrease in percentage from the fourth quarter to the first
quarter was the result of expenses remaining relatively constant during the
period while the Company experienced significant revenue growth. The increase in
absolute dollars from the fourth quarter of 1995 through the third quarter of
1996 was the result of an increase in employees and the associated hiring costs
each quarter. The Company anticipates that research and development expenses
will continue to increase in absolute dollars, while decreasing as a percentage
of total revenues in the foreseeable
21
<PAGE> 26
future. To date, the Company's development efforts have not resulted in any
capitalized software development costs.
Sales and Marketing. Sales and marketing expenses consist principally of
personnel costs, travel, promotional expenses and facility costs. Sales and
marketing expenses as a percentage of total revenues were 31.2%, 33.8%, 28.1%
and 32.3% for the fourth quarter of 1995 and the first, second and third quarter
of 1996, respectively. The Company recorded a charge associated with the
termination of an employee in the first quarter of 1996. Excluding this charge,
the Company would have experienced an increase in sales and marketing expenses
in absolute dollars but a decrease as a percentage of total revenues from the
preceding quarter. The increase in sales and marketing expenses was the result
of adding sales personnel to the direct sales force and an increase in
commission expense attributable to higher sales. The Company anticipates that
sales and marketing expenses will increase in absolute dollars and as a
percentage of total revenues in the foreseeable future.
General and Administrative. General and administrative expenses consist
principally of personnel costs for administrative, finance, information systems,
human resources and general management personnel, as well as legal expenses and
facility costs. General and administrative expenses as a percentage of total
revenues were 25.2%, 11.1%, 11.8% and 10.8% for the fourth quarter of 1995 and
the first, second and third quarter of 1996, respectively. General and
administrative expenses in the fourth quarter of 1995 were higher than in any of
the first three quarters in 1996 principally due to the settlement of litigation
for approximately $127,000. General and administrative expenses have been
increasing in absolute dollars since the first quarter of 1996 due to an
increase in employees and travel. The Company anticipates that general and
administrative expenses will increase in absolute dollars, while decreasing as a
percentage of total revenues for the foreseeable future.
INTEREST INCOME, NET
Interest income, net, of $52,000, $40,000, $45,000 and $46,000 for the
fourth quarter of 1995 and the first, second and third quarter of 1996,
respectively, resulted from investments of the Company's cash balances, net of
interest expense incurred on bank term notes.
PROVISION FOR INCOME TAXES
The Company reported a net loss in each completed year and accordingly did
not provide for an income tax liability. See Financial Statements and Notes
thereto. As of September 30, 1996, the Company had net operating loss
carryforwards of approximately $1,400,000 for federal and state income tax
purposes, and capitalized start-up costs of approximately $4,800,000 that may be
used to offset future federal income tax, if any. The Company also has $117,000
of federal research and development tax credits which expire beginning in the
year 2009 if not utilized. An ownership change, as defined in the Tax Reform Act
of 1986, may restrict the utilization of certain tax attributes. A valuation
allowance has been recorded for the entire deferred tax asset as a result of
uncertainties regarding the realization of the asset due to the limited history
of operating profits. See the Financial Statements and Notes thereto.
INFLATION
Certain of the Company's expenses increase with general inflation in the
economy. However, the Company does not believe that its results of operations
have been, or will be, adversely affected by inflation.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had cash and cash equivalents of
$5,812,000, an increase of approximately $1,275,000 from December 31, 1995. The
Company has financed its operations to
22
<PAGE> 27
date primarily by the private sales of equity securities pursuant to which the
Company received approximately $12,123,000 and by bank term notes to finance
purchases of equipment. Since inception, the principal uses of cash have been to
fund research and development of the Company's products and initial marketing of
the products and to purchase capital equipment. As of September 30, 1996, the
Company had $2,163,000 in accounts receivable.
At September 30, 1996, the Company's bank indebtedness, consisting of
equipment lines of credit amounted to $823,000, payable in monthly installments.
Future principal payments are $101,000, $347,000, $252,000, $99,000 and $24,000
for the remainder of 1996 and annually for 1997, 1998, 1999 and 2000,
respectively. Interest accrues on such loans at the bank's prime rate (8.25% at
September 30, 1996) per annum. The proceeds of such loans were used by the
Company to acquire capital equipment. In September 1996, the Company negotiated
an additional equipment line in the amount of $800,000 under similar terms. The
Company is prohibited from paying cash dividends without the consent of the bank
while there are outstanding borrowings.
As of September 30, 1996, the Company had no material commitments for
capital expenditures.
The Company believes that the net proceeds from the sale of the Common
Stock in this offering, together with existing cash balances, funds available
under the equipment line and funds generated by operations, will be sufficient
to meet its anticipated liquidity and working capital requirements for at least
the next twelve months.
23
<PAGE> 28
BUSINESS
OVERVIEW
GeoTel Communications Corporation ("GeoTel" or the "Company") is a provider
of telecommunications software solutions focused on enhanced call routing
technology that enables customer-oriented companies to deliver responsive and
cost-effective customer service. The Company's software solutions are aimed at
decentralized or service-oriented corporations that use call centers, voice
response units and other answering resources to interact with their customers.
GeoTel's software solution, the Intelligent CallRouter, is designed for
companies that utilize multiple call centers to handle high volumes of inbound
customer calls and regard their effective handling of customer interaction
through call center technology as a key competitive advantage. The Company is
focused on open, standards-based software solutions for enterprise-wide call
distribution in a multi-vendor, multi-carrier, fault-tolerant, distributed
environment. GeoTel's call routing solutions have been deployed by a variety of
companies, including America Online, American Express, Fidelity, MCI, Matrixx
Marketing, Spiegel and USAir.
INDUSTRY BACKGROUND
Call Center Market
Companies are increasingly recognizing that excellent customer service can
be used as a strategic weapon to differentiate their firms from competitors. In
order to remain competitive, corporations must continually evaluate their
product and service offerings to expand market share, lower costs and meet
customer expectations. To improve service quality, companies have invested in
technologies that enable them to concentrate customer service representatives,
or agents, into groups known as call centers. Many corporations utilize call
centers as the primary method of interacting with their customers. These call
centers are typically deployed in multiple locations and can be utilized to
provide a prioritized level of services for their most valued customers. Call
centers allow businesses to reduce costs and deliver premium customer service.
While call centers have grown both in size and importance, current
technologies have been focused on stand-alone, call center applications, rather
than the customer interaction requirements of the entire corporation. This has
led to a fragmented environment in businesses that have multiple call centers,
branch offices and divisions, with call centers evolving as technology "islands"
within the corporation. As a result, corporations are unable to provide
solutions that utilize all the customer response resources within the
organization whether they are personnel or systems-based. Increasingly,
successful organizations are seeking solutions to address these strategic
business requirements through the implementation of "virtual call centers."
Virtual call centers utilize all the relevant resources maintained by the
corporation in order to achieve a unified, controllable and adaptable customer
service solution. Enterprise-wide utilization of resources and technology
enables the corporation to maximize levels of customer service while fully
utilizing existing investments in telephony, technology and personnel.
Call Center Technology
In response to customer demand, the telecommunications environment has
changed rapidly with the emergence of new carrier-based, Advanced Intelligent
Network (AIN) services and 800/888 number portability. Most interexchange
carriers (IXCs), including AT&T, MCI and Sprint, have opened network control to
their customers, enabling the development of third party sofware to control the
routing of customer calls within their networks. Corporations can now shop for
the most competitive carrier rates and implement new network-based services
which are not based on proprietary closed solutions, while retaining their
existing telephone numbers. As the era of "open public networking" evolves,
corporations are seeking business solutions that encompass more than
24
<PAGE> 29
the limited, non-integrated, proprietary telecommunication products that have
been dominant in the past.
The technology utilized by call centers has evolved dramatically over the
past three years. Historically, due to the closed nature of public networks,
corporations installed premises-based switching systems at the end of long
distance or local exchange telephone lines. Reliance on these switching systems
requires corporations to use proprietary closed solutions offered by service
providers where multi-vendor switching system interoperability was not possible.
Consequently, the call center solutions employed by most corporations have been
designed around the technological limits of premises-based switching systems and
the limitations of carrier networks, which prevent corporations from realizing
the potential benefits of virtual call centers. Virtual call centers draw upon
all of the organization's call response resources and utilize open-systems based
applications to enhance the capabilities of the existing call center
infrastructure by integrating it with existing business applications and data.
The primary providers of call center solutions are IXCs and Automatic Call
Distribution (ACD) switching system vendors. Currently, the major IXCs offer
services that can route inbound toll-free calls to more than one call center,
but they have limited visibility as to why the call is being delivered to that
location. These services attempt to distribute calls among multiple call center
locations by relying on percentage allocations based on historical data or call
counting. Since there is no real-time data, these routing schemes are limited
because the system is not aware of what is actually taking place in the
individual call centers. For example, carriers might route 40% of a business'
incoming calls to Boston, 30% to Dallas and 30% to Denver using a set table
based on time of day and origin of call. While this solution is viable as long
as each site is staffed accordingly to handle the inflow of calls, it cannot
dynamically adjust to variances in agent availability, call handling times, and
calls from non-network sources. Furthermore, the customer is unable to benefit
from a multi-carrier environment. Many ACD switching system vendors provide
private networking options that allow calls to flow from one system to another,
but these systems consume network bandwidth and still do not optimize network
resources. They are also ineffective in a multi-vendor ACD environment.
Due to the migration towards open systems by the IXCs, customers are now
able to control connections across interexchange carrier networks based on
resources, customer profiles and other factors as determined by high-end
enterprise-level software applications. ACDs and other customer premises-based
switching systems have also opened control to computer applications. The
evolution of Computer Telephony Integration (CTI) technology allows computer
applications to interface with and control functions of the ACD or Private
Branch Exchange (PBX). These applications are capable of utilizing business
data, legacy systems and client/server systems and integrating them with
existing telecommunications systems.
To date, few organizations have fully realized the potential benefits
offered by virtual call centers due to the lack of enterprise-wide call
distribution. In particular, the need for enterprise-wide call distribution must
be addressed as a prerequisite for a well-managed customer-focused call center.
Traditional carrier services and ACD products have limited flexibility and are
generally not scalable to large enterprises. These solutions do not facilitate
enterprise-wide call distribution since they offer only local routing within a
stand-alone ACD, and do not enable a multi-vendor, multi-carrier solution. As a
result, the Company believes that the need exists for flexible, scalable,
customer premises-based call processing software that will manage the control of
customer-based switching systems, network routing, call queuing and voice
services.
GEOTEL SOLUTION
GeoTel's solution allows companies that utilize call center technology to
deliver cost-effective, premium customer service. The Company's Intelligent
CallRouter (ICR) enables enterprise-wide call routing and consolidated real-time
management information at the network level. These
25
<PAGE> 30
capabilities are independent of the manufacturer of the ACD, PBX or key system
to which they are attached. The ICR also provides interfaces to multiple carrier
networks enabling call routing independent of the toll-free network provider.
The following diagram illustrates how the ICR connects geographically dispersed
agent groups into a single virtual call center.
[DIAGRAM]
The ICR extends a corporation's existing public and private network
solutions with enterprise-wide, intelligent call processing directed at
organizations that utilize call center technologies to interact with their
customers. The ICR allows corporations to blend the logic of both the carrier
network and ACDs as well as business applications required to provide high-level
customer service and customer contact support. By integrating all call center
applications, a corporation can achieve large group efficiencies, such as
utilizing available agents regardless of location, instead of physically adding
staff to a specific call center. To achieve enterprise-wide call control, the
ICR has visibility of all call answering resources, enabling the system to route
calls and associated data transactions to the agent or skill group that best
satisfies the rules established by the corporation. The ICR connects all call
centers into a hierarchical, networked system, so that an enterprise routing
application can receive the real-time status information required to control
call transactions throughout the enterprise.
The Company's solutions offer the following advantages:
Virtual Call Center. The ICR transforms geographically dispersed agent
groups connected to different ACDs and VRUs into a single virtual team, reducing
the number of agents required for a given service level, while offering a more
uniform level of service to all callers. Since labor is a significant cost for
service-oriented corporations, the ability to utilize agent resources more
effectively provides a significant cost savings for the Company's customers. In
addition, the ICR allows local ACD capabilities to be extended to the entire
network. Sophisticated enterprise-wide call routing routines, such as those
using customer account numbers or Automatic Number Identification (ANI), can be
developed once and deployed at either the network level or in conjunction with
an ACD or VRU at the customer's premises, or both.
26
<PAGE> 31
Multiple Carrier and Switch Interoperability. The Company's open solution
does not require the customer to replace its existing premises-based equipment,
switches or carriers, therefore extending their value in a "plug-and-play"
environment. The Company's customers are also able to select among AT&T, MCI or
Sprint, offering them the ability to leverage new features and cost saving
opportunities from the major 800 providers. In addition, the ICR allows
customers to remain vendor independent by supporting the major ACD
switches -- Lucent DEFINITY(@), Aspect CallCenter(@), Northern Telecom
Meridian(TM), Rockwell Galaxy(TM) and Rockwell Spectrum(TM).
Real-Time Routing. The routing of customer calls is a real-time,
mission-critical application. The ICR's Pre-Routing feature is the application
of ACD-like call routing at the network level, before the caller hears ringing
and before the call is sent to a given destination. Unlike any currently
available call routing service offered by carriers, the Pre-Routing feature can
route calls based on real-time knowledge of agent availability and queue status,
not on a fixed percentage or allocation basis. The ICR recognizes where the call
originates, gathers real-time information about the status of all call centers
and agents, and then routes calls based on best available enterprise-wide
capabilities and resources at the moment the call is received. Post-Routing is
the control of calls already connected to an ACD or PBX, such as the intelligent
transfer of calls from Voice Response Units (VRUs), agent-to-agent transfers and
the overflow of calls between call centers. These capabilities enable the ICR to
route calls on an individual call basis, across different ACDs and multiple
carriers.
Fault Tolerant Open Architecture. The ICR is designed to be fault tolerant
to hardware component failures, communications network failures, asynchronous
software errors and the catastrophic loss of a site supporting the ICR. The
Company's technology utilizes an open architecture and is based on industry
standard software, such as Windows NT, SQL Server and PowerBuilder. The ICR has
been designed to integrate with existing call center applications and facilitate
support of future applications. The Company has defined and published
application programming interfaces for major call center applications such as
workforce management, interactive VRUs and customer databases.
Consolidated Management Reporting. The Company's call routing solution
enables customers to manage their distributed call centers with consolidated,
real-time and historical reporting. The ICR provides the ability to access and
combine data from multiple databases, allowing the user to source best-of-class
applications for call volume forecasting, agent scheduling, workflow management
and screen-synchronization while maintaining an enterprise-wide view of the
performance of their call centers.
STRATEGY
The Company's primary business objective is to become the leading supplier
of enterprise-wide call distribution software solutions. To achieve this
objective, the Company is pursuing the following strategies:
Extend Technology Leadership. Capitalizing on the Company's experience in
call centers, communications and software technologies, the Company was the
first to deliver a client/server-based application solely focused on
enterprise-wide call distribution. The Company intends to continue to utilize
and integrate industry available technologies whenever appropriate and focus its
development resources on expanding the value-added call processing features
required by its customers. The Company believes it distinguishes itself through
its portfolio of supported ACDs, multi-carrier connectivity, product
adaptability to business environments, implementation of industry standards,
open systems platforms, scalability and product integration with most call
center applications.
Expand Enterprise Call Distribution. GeoTel intends to ensure that its
call distribution technology continues to expand to include all of the answering
resources available within a customer's business environment. This will include
high-end production call centers, VRUs and distributed call answering resources
including branch offices, remote agents and professionals,
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network resources and desktop applications. In June 1996, GeoTel delivered and
installed ICR release Version 1.4 which includes support for the integration of
VRUs. By integrating VRU systems, the Intelligent CallRouter extends routing
control to network and premise VRUs, allows the corporation to use VRUs as an
intelligent call answering resource in the virtual call center, and provides
consolidated management information of VRU data. Intelligent CallRouter
applications have been implemented in systems supporting as few as 200 and as
many as 5,000 call center agents.
Leverage Open Architecture. The Company continues to develop interfaces to
both existing and emerging call center technologies provided by the vendors of
market-leading technologies. The Company intends to provide its customers with
the ability to protect their investment in current call center solutions, while
providing value-added services and functionally beyond their existing
infrastructure. This will be accomplished by adhering to open industry standard
interfaces of other vendor products and publishing interfaces to the Company's
call routing software platform for products and services such as ACDs, carrier
networks, interactive VRUs and customer databases.
Utilize Multiple Distribution Channels. The Company has established a
multi-channel distribution system to cost-effectively address the potential
market for its products. To date, the Company has generated the majority of its
revenues through its direct sales force which maintains frequent customer
contact and knowledge of customer applications. The Company's direct sales force
is complemented by strategic sales channels, including its relationship with
MCI, selected resellers and an international partner. The Company intends to
expand both direct and indirect distribution channels and to penetrate
international markets by expanding its relationships with the market leaders of
toll-free services on a country-by-country basis.
Ensure Customer Success. GeoTel believes that superior customer service,
support and training are essential for customer satisfaction and are key to
differentiating its overall product offering. The Company offers consulting and
installation services to assist customers in designing and deploying call
routing applications and also provides training for end-users and distribution
partners. GeoTel intends to expand its own customer service, support and
training activities, as well as to encourage third-party organizations, such as
international partners, to become proficient in deploying the Company's
products.
PRODUCTS
The GeoTel Intelligent CallRouter is an advanced call-by-call routing
server that supports multiple call routing clients independent of their
location, ACD, IXC or VRU. The multi-carrier, multi-vendor capabilities of the
ICR allow the user to focus on delivering premium customer service without the
limitations of proprietary or custom-developed solutions. The ICR combines
real-time call routing capabilities with an extensive management reporting
system. Its open architecture enables interoperability with other call
processing and call volume management systems within an enterprise and provides
a means for integrating those various stand-alone solutions. The ICR can be
interfaced to agent scheduling, workflow management and other call center
management tools. The distributed software fault tolerance implemented in the
Intelligent CallRouter provides the mission-critical reliability required for
enterprise-wide call distribution.
The principal function of the ICR is to route telephone calls among
geographically distributed call centers in a way that optimizes the use of
resources across all call centers or other answering locations. In order to
perform these functions, the ICR utilizes network-based information on the
origin of the call and information provided by the caller to match the caller
with the skills of the available answering resources. The primary components of
the ICR are a central routing controller, a database, and interfaces to the
telephone network and call answering devices such as PBXs, ACDs and VRUs.
The ICR is an open systems product that has been deployed on
industry-standard platforms. The Company designed the system to support a broad
range of intelligent telecommunications interfaces, industry standard MIS tools,
computer platforms and a growing number of vertical market
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applications. The ICR uses Windows NT as the core multitasking operating
environment. Windows NT allows customers to select from a variety of hardware
platforms certified by the Company on which to deploy the ICR application. The
database utilized by the ICR is Microsoft SQL Server for Windows NT, which
provides an advanced, client/server database management system. The Company
provides a monitoring and reporting system based on PowerBuilder, which is a
Windows-based, client-server application development tool. PowerBuilder allows
users to quickly and easily build sophisticated, graphical applications that can
access information stored in multiple databases. Since the Company utilizes a
database technology that is open database connectivity (ODBC) compliant, the
customer may choose a reporting tool of its preference as an alternative to
PowerBuilder. The following diagram illustrates the principal components of the
ICR. The components included in the ICR provided by the Company are the
CallRouter, Network Interface Controller, Peripheral Gateway, Database Server
and AWS (Admin Workstation).
[DIAGRAM]
The major components of the ICR are as follows:
CallRouter. The core of the Intelligent CallRouter is a suite of software
processes called the CallRouter that provides the central intelligence by which
customers translate business goals into call routing decisions. The CallRouter
receives and responds to routing requests from the routing clients (Network
Interface Controllers and Peripheral Gateways), collects call center event
activity from the Peripheral Gateways and communicates with users through
desktop Admin Workstations. The CallRouter provides all the routing choices
available in today's ACDs and applies them at the network level. The
implementation of routing services on an enterprise basis creates a call center
management model where geographically distributed call centers appear as if they
were at one location. The ICR utilizes real-time, event-driven data such as
agent status, queue status, and incoming call volume in making its call-by-call
routing decisions. It allows customers to establish routing decisions for a wide
range of agent and service performance metrics, including agent availability,
the ratio of calls in progress to logged-in/ready agents, and the ratio of calls
in queue to staffed/scheduled agents. The CallRouter makes routing decisions
through user-defined call routing scripts. The logic required to segment
callers, identify their reason for calling, and then forward
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those requests for service to the appropriate agent(s) is defined in call
routing objects. Having determined these routing guidelines, business rules are
defined to arbitrate between routing options where the demand for a given skill
or service resource exceeds availability. Threshold parameters can be input to
allow for the use of backup agents under certain circumstances or to prioritize
call handling of a given class of caller.
Network Interface Controller (NIC). The NIC is the software interface
between the Intelligent CallRouter and the interexchange carrier network. It
communicates with the IXC network through the intelligent network control
interfaces that have recently been made available by the carriers. The NIC
receives call routing requests from the network, forwards them to the
CallRouter, and returns responses to the carrier network. In effect, the NIC
transforms the network into a routing client. This approach allows customers to
control routing decisions at the network level and gain greater flexibility as
they seek to further deploy advanced intelligent network services.
Peripheral Gateway (PG). The PG software provides the interface between
the CallRouter and the call center system (ACD, PBX, or VRU) that is being
monitored and/or controlled by the ICR. The PG connects to the CTI link and/or
ACD's management reporting system and obtains information regarding agent
availability, agent performance, the number of calls in progress, and how they
are being handled. To facilitate Post-Routing, the PG can also exert control
over the ACD, PBX or VRU and instruct it where to route calls.
Database Server. GeoTel's database technology reduces the performance
constraints normally associated with ACD and network data aggregation. Operating
in conjunction with the CallRouter, the ICR's Database Server stores and manages
historical information, including Pre-Routing and Post-Routing records, routing
scripts, and ICR configuration data. The ICR Database Server is a relational
database that can collect and process large amounts of call and transaction
data, including call handling, planning and performance data.
Admin Workstation. The Intelligent CallRouter records call activity on an
enterprise-wide basis and reports on this activity on a real-time basis
utilizing the Admin Workstation. In addition to providing real-time call
handling statistics, the ICR provides consolidated, historical reporting for all
calls across all attached networks, ACDs, PBXs, and VRUs. Using any desktop
workstation within the network, customers can mix and match data in virtually
any combination, allowing analysis of real-time data with historical data. For
example, customers may want to compare current performance to past performance
over the last few minutes, days, or weeks.
Software license fees for the Intelligent CallRouter vary significantly
based on a number of factors, including the functionality of the system, the
number of sites, the number of agents at each site and the level of redundancy
required. The customer list price for software license fees for the Intelligent
CallRouter software typically range from approximately $420,000 for a three site
configuration with some redundancy to approximately $1,000,000 for an eight site
configuration with extensive redundancy. The Company typically provides
discounts based on volume purchases. The Company and its customers generally
enter into maintenance agreements providing for ongoing service and product
upgrades for a fixed annual fee. Maintenance services and installation services,
which are not included in the license fee, amount to an additional 15% and 10%,
respectively, of the list price license fee. Maintenance contracts are renewable
on an annual basis.
TECHNOLOGY
The Company has developed a number of innovative technologies to support
its open strategy:
Real-Time Routing. The ICR's real-time delivery of enterprise-wide call
center data makes use of innovative Local and Wide Area Network (LAN/WAN)
solutions to efficiently distribute information and facilitate connectivity. A
mixed LAN/WAN environment is supplemented by dial capabilities for both casual
access of data from remote premises as well as alarm notification and paging.
All clients are configured with redundant data paths to central services for
both configuring and
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monitoring the enterprise. The system is designed to run on single or multiple
Windows NT server-class machines. Interprocess communication is efficient based
on native capabilities within Windows NT integrated with the Company's
processes. The architecture can scale to support very large numbers of agents,
small offices, and home agents.
Fault Tolerance. To meet rigorous requirements for system reliability in
the call processing market, the Company has developed innovative industry
standard fault tolerant software solutions to provide not only tolerance of
hardware, software and communications failures, but also for the loss of an
entire site. The Company's software technology relating to virtual time
synchronization provides fault tolerance at the process level and includes
protection against single-point hardware failures. Detection of failures is
immediate and the Company has augmented standard TCP/IP protocols with features
designed to minimize outages due to communications failures.
Remote Support and Diagnostics Technology. The ICR incorporates extensive
system management capabilities, including alarming with automatic "phone home"
and paging capabilities; symmetric database replication; intelligent PC Server
node management; and tools to provide graphical representations of system
status. Consistent with an open architecture, the system will export Simple
Network Management Protocol (SNMP) "traps" to management systems. Fully
redundant communications paths are enhanced with real-time detection of
communications failures with near instantaneous switch-over to redundant links.
Carrier Connectivity. The ICR meets the certification standards of all
three of the major U.S. interexchange carrier networks, AT&T, MCI and Sprint, by
interfacing with the SS7, UDP/IP, and X.25 networks, respectively, using the
proprietary protocols of each carrier. The ICR architecture is designed to
support the introduction of other network interfaces as the Telecommunications
Act of 1996 enables the entry of other providers into the toll-free marketplace.
In addition, the Company is developing interfaces for several international
carriers.
Premises-based Switching/Call Processing lnterfaces. The Company has
developed event-based interfaces to all of the major ACDs. The ICR currently
supports five switches: Lucent DEFINITY, Aspect CallCenter, NTI Meridian,
Rockwell Galaxy and Rockwell Spectrum. By developing event-based tracking of the
ACDs (detecting when any event of interest happens at the ACD), the ICR has the
capability to report accurate enterprise-wide statistics and know accurately
which agents are available and skilled to handle incoming calls. The ICR can
also control, via Post-Routing, how calls directed to or from the switch are
subsequently routed and has the ability to deliver CTI information. By designing
the ICR to have the capability to interface to all ACDs, PBXs, VRUs, and other
premises-based equipment, the ICR enables customers to utilize equipment from
multiple vendors allowing effective use of a multi-vendor switching environment.
In contrast, proprietary solutions require all switches to be purchased from the
same vendor.
Visual Script Editor. The ICR uses visual/object-based call routing
scripts controlled and defined by the customer. The Visual Script Editor is used
to describe how calls are to be routed on a call-by-call basis. Each dialed
number can have a unique treatment or can be handled with a collection of other
dialed numbers. Many scripting objects are defined to assist the script designer
in choosing an appropriate algorithm. The Database Lookup and Application
Gateway objects enable the Script editor to import, in real-time, external
database information or arbitrary data that can be used in subsequent script
objects.
CUSTOMERS
The Company provides its software and services to customers in a variety of
industries. The Company's typical customers are large, high volume users of
toll-free services that conduct a significant portion of their interaction with
their customers using the telephone. The Company announced the Intelligent
CallRouter in August 1994. As of September 30, 1996, the Company had licensed
its products to over 20 companies directly or through its distribution partners.
These customers include some of the largest users of toll-free services in the
world. The Company believes
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that the following list is representative of its target customers by virtue of
call volume, industries represented and the required business applications:
<TABLE>
<S> <C>
America Online Matrixx Marketing
American Express MCI Telecommunications
Compaq Computer Corporation Optus Systems
Continental Airlines Private Healthcare Systems
Fidelity Investments Spiegel
GTE Sprint
Household Credit Services USAir
</TABLE>
Fidelity, Sprint and America Online accounted for approximately 38.3%,
25.9% and 20.0%, respectively, of the Company's total revenues in 1995, and
Fidelity, Optus, GTE Communications Systems Corporation, MCI and USAir accounted
for approximately 19.7%, 15.9%, 10.2%, 8.7% and 7.7%, respectively, of the
Company's total revenues for the nine months ended September 30, 1996.
A description of certain customer relationships follows:
MCI. MCI Telecommunications Corporation is one of the largest and fastest
growing diversified communications companies in the world. The Company has
entered into a three-year agreement with MCI, whereby MCI will offer the
Company's products as a network service within MCI's set of call center
solutions. Under the terms of the agreement, MCI's Call Center Division will
deploy the Company's products as a component of MCI's expanded network-based,
call center technology offerings. Additionally, the MCI worldwide sales force
offers a call center solution incorporating the Company's products. The
agreement requires MCI to make certain minimum purchases during the three year
term and may be terminated by either party upon thirty days' notice in the event
of a material default by the other party.
Spiegel. Spiegel is a leading multi-channel specialty retailer. While
catalogs remain its primary distribution channel, Spiegel also markets
merchandise through over 400 Eddie Bauer stores. Spiegel's goal is to provide
excellent customer service through more efficient call center management,
increased agent productivity, and improved load balancing across business units.
Spiegel uses the Company's products to route 20 million yearly calls to its
approximately 1,300 agent stations, located in three geographically dispersed
call centers. Spiegel is using the Company's products in a mixed ACD/VRU
environment to reduce its average speed of answer and automatically balance
loads. The Company has entered into an agreement with Spiegel pursuant to which
Spiegel was granted a non-exclusive, perpetual license to use the Company's
products in exchange for a one-time license fee. The agreement may be terminated
by Spiegel or by the Company if Spiegel fails to comply with the terms of the
agreement.
USAir. USAir is one of the world's largest airlines with 4,800 daily
flights servicing over 160,000 passengers. It operates 11 call centers, with
4,000 agents who handle between seven to eight million inbound calls each month.
The Company's products are used in a multi-carrier environment to make routing
decisions based on factors such as agent availability, load balancing across
centers, and data contained in USAir's customer database. The Company has
entered into an agreement with USAir pursuant to which USAir was granted a
non-exclusive, perpetual license to use the Company's products in exchange for a
one-time license fee. The agreement may be terminated by the Company if USAir
fails to comply with the terms of the agreement.
A significant portion of the Company's revenues to date have been derived
from initial license fees from customers who have acquired fully-paid licenses
to the installed product. None of the Company's customers, other than MCI and
Optus, is contractually obligated to license or purchase additional products or
services from the Company and there can be no assurance that revenues from these
customers will continue or, if continued, will reach or exceed historical levels
in any future period. Service revenues represent an insignificant portion of the
Company's revenues to date.
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SALES AND MARKETING
The Company's distribution strategy is to sell its software products and
services to major corporations who are significant users of inbound toll-free
services, and have multiple locations with resources that respond to incoming
calls. The Company uses a direct sales force in the United States as its primary
distribution channel to market to these companies. There are currently nine
direct sales representatives located in eight offices throughout the U.S. Each
sales representative carries a quota for a defined geographic territory and is
compensated for all sales within the territory. The Company's sales strategy is
based on a consultative sales process, working closely with customers to
understand and define their needs and determine how they can be addressed by the
Company's products. This strategy continues after the initial sale. The Company,
through ongoing sales, support, training, and maintenance, maintains close
contact with its existing customers in order to determine the customers'
evolving requirements for updates and enhancements.
In addition to the direct sales organization, the Company has signed
agreements with MCI, Optus and Rockwell Switching Systems Division to complement
direct sales and provide international distribution. MCI has signed a three-year
renewable agreement with the Company to offer its products as a service to
customers on a worldwide basis. Optus is a distributor of the Company's products
in the Australian and New Zealand markets. To complement its domestic sales
strategy, the Company intends to develop its sales channels for its products in
the international markets. The Company plans to continue to address
international markets by using its direct sales force and expects to add several
other distribution partners.
The Company supports its distribution strategy with a variety of focused
marketing activities designed to identify qualified prospects and expand the
Company's reputation. The Company attends several industry trade shows, conducts
numerous informational seminars in different cities, regularly speaks at
industry events, publishes articles and white papers, and uses direct mail. In
addition, the telecommunications marketplace is heavily influenced by reference
accounts and, as such, the Company is dependent upon its existing customers for
favorable references.
As part of its marketing and product strategy, the Company cultivates
relationships with the major ACD/PBX vendors and VRU vendors, as well as the
interexchange carriers. Equipment from each of the ACD/PBX vendors is maintained
at the Company's facilities and technical discussions are ongoing to ensure
tight integration with the various switches. The Company intends to continue to
expand the range and number of products it supports based on customer requests
and market opportunities.
CUSTOMER SERVICE AND SUPPORT
The Company believes that high quality customer service and support are
integral components of the solutions it offers. The Company's customer service
and support organization provides customers with technical support, training,
consulting and implementation/installation services. The Company believes that
in order to meet its customers' support expectations it must invest in and
leverage technology to build its service infrastructure. As of September 30,
1996, the Company had 12 employees in its customer service and support
organization. All of the Company's customers currently have software maintenance
agreements with the Company that provide for one or more of the following
services:
Software Maintenance and Support. The Company's support organization
offers a variety of support services to its customers including telephone,
electronic mail and facsimile customer support through its support services
staff. In addition, the product provides a "call home" application which allows
customers to request service on-line. Initial product license fees do not cover
software maintenance. Through its standard customer support package, the Company
provides its customers with 12-hour weekday telephone support and 24-hour
monitoring and quick response through use of the Company's remote support
technology. Periodic product updates and mainte-
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nance releases are included with the annual support fees for the company's
standard support package, which is 15% of the then-current list price of the
licensed products.
Documentation and Training. The Company provides each customer with
product design, documentation and training. The product includes an easy-to-use
graphical user applications interface with on-line help. A complete library of
end-user documentation is also provided with each system. The Company offers
comprehensive training courses in all aspects of the product at its facility in
Littleton, Massachusetts, and at the customer's option, provides on-site
customer training upon request. Fees for education and training services, beyond
those services provided as a part of installation services, are in addition to
and separate from the license fees charged for the Company's software products
and are charged per student, per class or on a time and materials basis.
Consulting. The Company's application consultants are available to work
closely with customers to provide assistance concerning application design and
report customization. Fees for consulting services are charged separately from
the Company's software products on a time and materials basis. In addition, the
Company intends to continue to develop relationships with third-party consulting
organizations in order to support its customer base.
Installation Services. The Company provides customers with comprehensive
installation services, including initial application design, implementation
planning, system design support, project management, initial education and
training, and coordination of third-party software and hardware acquisition. The
Company's fee for installation services is charged separately from the Company's
licensing fees and is based on a percentage of the current list price of the
products being installed. Fees for the Company's standard installation services
are typically 10% of the then-current list price of the licensed products.
PRODUCT DEVELOPMENT
Since its inception, the Company has made substantial investments in
product development. The Company's development organization was built upon a
base of software professionals with extensive experience in operating systems,
communications, fault tolerance, and software quality processes. Customer
experience and direct input to the product planning process is reflected in all
products designed and delivered by the Company.
The Company announced the Intelligent CallRouter in August 1994 and began
customer shipments in May 1995. The Company plans to introduce enhancements to
the Intelligent CallRouter and new products that can be sold to existing and new
customers. The Company is currently working on several strategic projects that
will enhance the ICR product in the areas of desktop integration, computer
telephony integration, and the use of the Internet and Intranets. There is also
a significant emphasis on enhancing the product to work in international
markets.
The Company intends to expand its existing product offerings and introduce
new products for the call processing software market. Although the Company
expects that most of its new products will be developed internally, the Company
may, based on timing and cost considerations, acquire technology and products
from third parties and evaluate third-party applications for inclusion within
its products on an ongoing basis. The Company believes that its future
performance will depend, in large part, on its ability to maintain and enhance
its current product line, develop new products that achieve market acceptance,
maintain technological competitiveness, meet an expanding range of customer
requirements and continue to recruit highly-skilled and qualified software
professionals. See "Risk Factors -- Dependence on New Products and Rapid
Technological Change."
As of September 30, 1996, the Company's product development, quality
assurance and technical writing staff consisted of 28 employees. The Company's
total expenses for research and development for fiscal years 1993, 1994, 1995
and the nine months ended September 30, 1996 were $140,000, $1,879,000,
$2,322,000 and $2,210,000, respectively. The Company anticipates that it will
continue to commit substantial resources to research and development in the
future and that product
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development expenses may increase in absolute dollars in future periods. To
date, the Company's development efforts have not resulted in any capitalized
software development costs.
COMPETITION
The market for telecommunications software products is intensely
competitive and is subject to rapid technological change. Although to date the
Company has experienced limited competition, the Company expects competition to
increase significantly in the future. Currently, the Company's principal
competitors are the interexchange carriers, particularly AT&T, and to a lesser
extent MCI and Sprint, which provide proprietary call routing solutions as part
of their service offerings. In addition, a number of other companies have
introduced or announced their intention to introduce products that could be
competitive with the Company's products, including Genesys Telecommunications
Laboratories and IEX Corporation. Additional competitors, including traditional
ACD providers, such as Lucent Technologies, Aspect Telecommunications
Corporation, Northern Telecommunications, Inc. and Rockwell International
Corporation, may enter the market by enhancing their proprietary private network
solutions or by entering into arrangements with the interexchange carriers. The
Company believes that, to date, approximately one-half of the Company's
customers have purchased the Company's products to replace or enhance existing
call routing solutions offered by the interexchange carriers. The Company's
other customers have purchased the Company's products in order to implement a
virtual call center solution for the first time. This additional competition
could adversely affect the Company's sales and profitability through price
reductions, reduced gross margins and loss of market share. In particular,
should one or more interexchange carriers, including MCI, Optus and Sprint which
are customers of the Company, choose to provide or distribute competitive
products and services, the Company's business could be materially adversely
affected. Many of the Company's current and potential competitors have
substantially greater financial, marketing and technical resources than the
Company. See "Risk Factors -- Competition."
The Company believes that the principal competitive factors affecting its
market include product performance and functionality, customer service and
support, product reputation, company reputation, carrier support, ACD support,
fault tolerance, adaptability to individual customer call routing requirements,
scalability, ability to integrate with third party products, ease-of-use, price,
and effectiveness of sales and marketing efforts. Although the Company believes
that it currently competes favorably with respect to such factors, there can be
no assurance that the Company can maintain its competitive position against
current and potential competitors, especially those with greater financial,
marketing, service, support, technical, and other resources than the Company.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company relies primarily on a combination of patent, copyright,
trademark and trade secrets laws, as well as confidentiality agreements to
protect its proprietary rights. The Company has been issued one patent relating
to the architecture, operating methodologies and interfaces of the Company's
Intelligent CallRouter. The Company also has one patent application pending in
the United States and internationally. While the Company believes that its
pending patent application relates to a patentable invention, there can be no
assurance that such patent application or any future patent application will be
granted or that any patent relied upon by the Company will not be challenged,
invalidated or circumvented, or that rights granted thereunder will provide
competitive advantages to the Company. Moreover, despite the Company's efforts
to protect its proprietary rights, unauthorized parties may attempt to copy
aspects of the Company's products or to obtain the use of information that the
Company regards as proprietary. In addition, the laws of some foreign countries
do not protect the Company's proprietary rights to as great an extent as do the
laws of the United States. There can be no assurance that the Company's means of
protecting its proprietary rights will be adequate or that the Company's
competitors will not independently develop similar technology.
The Company is not aware that any of its products infringes the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim infringement by the
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Company with respect to current or future products. The Company expects that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in the Company's industry segment
grows and the functionality of products in different industry segments overlaps.
Any such claims, with or without merit, could be time-consuming, resulting in
costly litigation, cause product shipment delays or require the Company to enter
into royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company, if at all,
which could have a material adverse effect upon the Company's business,
operating results and financial condition.
The software and network adapter necessary to enable the Company's
Intelligent CallRouter to interface with the AT&T network is licensed by the
Company from a single vendor under a perpetual, fully-paid license. Although the
Company has access to the source code underlying this software and rights to
manufacture the network adapter, if for any reason the vendor does not make the
software or network adapter available to the Company, there can be no assurance
that the Company will be able to develop these products on a timely basis.
EMPLOYEES
As of September 30, 1996, the Company had a total of 65 employees, all of
whom are based in the United States. Of the total, 28 were in research and
development, 12 were in support and support services, 18 were in sales and
marketing and 7 were in administration and finance. The Company's future
performance depends in significant part upon the continued service of its key
technical, sales and marketing, and senior management personnel and its
continuing ability to attract and retain highly qualified technical, sales and
marketing, and managerial personnel. Competition for such personnel is intense
and there can be no assurance that the Company will be successful in attracting
or retaining such personnel in the future. None of the Company's employees are
represented by a labor union or are subject to a collective bargaining
agreement. The Company has not experienced any work stoppages and considers its
relations with its employees to be good. See "Risk Factors -- Management of
Growth; Dependence Upon Key Personnel."
FACILITIES
The Company's executive offices are located in Littleton, Massachusetts in
a facility consisting of approximately 14,000 square feet, under a lease which
expires in December 1998. In addition, the Company leases office space in the
metropolitan areas of Atlanta, Chicago, Dallas, Phoenix and Washington, D.C.
Management believes that its current facilities will not meet its needs through
the next twelve months. The Company is evaluating alternatives for additional
space and believes that suitable additional space will be available to
accommodate expansion of the Company's operations on commercially reasonable
terms.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, and their ages as of
September 30, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- -----------------------------------------------
<S> <C> <C>
John C. Thibault..................... 42 President, Chief Executive Officer and Director
Louis J. Volpe....................... 47 Senior Vice President of Sales and Marketing
Timothy J. Allen..................... 46 Vice President of Finance, Chief Financial
Officer, Treasurer and Assistant Secretary
G. Wayne Andrews..................... 45 Vice President, Chief Technology Officer and
Director
Steven H. Webber..................... 52 Vice President of Engineering
Alexander V. d'Arbeloff(1)(2)........ 68 Director
Gardner C. Hendrie(2)................ 64 Director
W. Michael Humphreys(1)(2)........... 44 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
John C. Thibault has served as President, Chief Executive Officer and
Director of the Company since January 1994. From April 1991 to October 1993, Mr.
Thibault served as President, Chief Executive Officer and Director of Coral
Network Corporation. From April 1988 to April 1991, Mr. Thibault served as an
officer of Motorola, Inc. and Senior Vice President and General Manager of
Motorola's Codex product division. From May 1986 to April 1988, Mr. Thibault was
President and Chief Executive Officer of PBX manufacturer Intecom, Inc., a
subsidiary of Wang Laboratories. Prior to his position at Intecom, he held
several senior management positions over an 11-year period with Wang.
Louis J. Volpe has served as Senior Vice President of Sales and Marketing
of the Company since May 1996. From February 1995 to April 1996, Mr. Volpe
served as Vice President of Marketing of the Company. Mr. Volpe served as Senior
Vice President of Marketing and Operations of Parametric Technology Corporation
from May 1993 to January 1995 and as Vice President of Marketing and Operations
from September 1989 to May 1993. Prior to Parametric, Mr. Volpe was an executive
at Prime Computer. Mr. Volpe is a director of Pure Atria, Inc. and Softdesk
Inc., each of which is a publicly-traded company.
Timothy J. Allen has served as Vice President of Finance, Chief Financial
Officer, Treasurer and Assistant Secretary of the Company since February 1995.
From March 1990 to September 1994, Mr. Allen served as Vice President and Chief
Financial Officer of Object Design, Inc. From July 1988 to October 1990, Mr.
Allen served as Vice President of Finance and Chief Accounting Officer for
Xyvision Inc. From January 1983 to June 1988, Mr. Allen served as Xyvision's
corporate controller. Prior to joining Xyvision, Mr. Allen was Corporate
Controller at Nixdorf Computer Corporation.
G. Wayne Andrews, a co-founder of the Company, has served as a Director of
the Company since June 1993 and as Vice President and Chief Technical Officer of
the Company since January 1994 and served as President of the Company from June
1993 to December 1993. From October 1989 to December 1992, Mr. Andrews was
co-founder and Vice President of Teloquent Communications Corporation. At
Teloquent, Mr. Andrews held positions as Vice President Product Management, Vice
President Engineering and Vice President Customer Support. Prior to co-founding
Teloquent, Mr. Andrews was Director, International Development Center, and
Director, Advanced Switching Systems at Teknekron Infoswitch Corp.
37
<PAGE> 42
Steven H. Webber, a co-founder of the Company, has served as Vice President
of Engineering of the Company since October 1993. Prior to joining the Company,
Mr. Webber held a number of key technical and management positions with Stratus
Computer Inc., including Chief Technical Advisor and Director of Strategic
Planning. Prior to Stratus, Mr. Webber held a number of key technical positions
at Honeywell Information Systems, Inc. and Massachusetts Institute of
Technology.
Alexander V. d'Arbeloff has been a Director of the Company since July 1994.
Mr. d'Arbeloff is Chairman and Chief Executive Officer of Teradyne, Inc. He
co-founded Teradyne in 1960 and became President and Chief Executive Officer in
1971. Mr. d'Arbeloff is a life member of the MIT Corporation, Chairman of
Semi/Sematech, a trustee of Partners Health Care System, a trustee of
Massachusetts General Hospital and a trustee of the New England Conservatory. He
is a director of Stratus Computer, Inc., PRI Automation, Inc. and BTU
International Corporation, each of which is a publicly traded company. He also
serves on the boards of several privately-held companies.
Gardner C. Hendrie has been a Director of the Company since October 1993.
Since 1988, Mr. Hendrie has been a general partner of Sigma Partners, a private
venture capital firm. Mr. Hendrie is a director of Stratus Computer, Inc., which
is a publicly-traded company. He also serves on the boards of several
privately-held companies.
W. Michael Humphreys has been a Director of the Company since October 1993.
Mr. Humphreys has been a partner of Matrix Partners, a private venture capital
firm since 1982. Prior to his association with Matrix, he was a general partner
of Hellman, Ferri Investment Associates. Mr. Humphreys is a director of several
privately-held companies.
Each director holds office until that director's successor has been elected
and qualified. Upon the closing of this offering, the Company's Board of
Directors will be divided into three classes. Mr. Andrews will serve in the
class whose term expires in 1997; Messrs. d'Arbeloff and Hendrie will serve in
the class whose term expires in 1998; and Messrs. Humphreys and Thibault will
serve in the class whose term expires in 1999. Upon the expiration of the term
of each class of directors, directors comprising such class will be elected for
a three-year term at the annual meeting of stockholders in the year in which
such term expires.
Certain of the current directors of the Company were nominated and elected
in accordance with a stockholders' agreement, which will terminate upon the
closing of this offering. See "Certain Transactions."
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve until their successors have been duly elected and
qualified. There are no family relationships among any of the executive officers
or directors of the Company.
COMMITTEES OF THE BOARD
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company and administers the Company's stock option plans.
The members of the Compensation Committee currently are Messrs. Humphreys,
d'Arbeloff and Hendrie. The Board of Directors also has an Audit Committee,
which reviews the results and scope of the audit and other services provided by
the Company's independent accountants. The members of the Audit Committee
currently are Messrs. Humphreys and d'Arbeloff.
BOARD COMPENSATION
Each non-employee director of the Company serves without compensation.
Directors who are employees of the Company are not paid any separate fees for
serving as directors. In July 1994, in conjunction with his election as a
director, Mr. d'Arbeloff purchased shares of Series A Convertible Participating
Preferred Stock and Common Stock. See "Certain Transactions."
38
<PAGE> 43
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors was established in
October 1993, and currently consists of Messrs. d'Arbeloff, Hendrie and
Humphreys. Mr. Hendrie and Mr. Humphreys are general partners of private venture
capital firms which purchased shares of Convertible Preferred Stock. Mr.
d'Arbeloff has purchased shares of Convertible Preferred Stock and Common Stock.
See "Certain Transactions."
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning
compensation earned in the year ended December 31, 1995 by the Company's Chief
Executive Officer and its five most highly compensated executive officers during
the year ended December 31, 1995 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1)
-------------------------------------------- -------- ------- ---------------
<S> <C> <C> <C>
John C. Thibault............................ $164,583 $26,915 $ 224
President, Chief Executive
Officer and Director
Louis J. Volpe.............................. 101,200 10,571
Senior Vice President of
Sales and Marketing(2)
Timothy J. Allen............................ 100,625 14,071 116
Vice President of Finance,
Chief Financial Officer,
Treasurer and Assistant
Secretary
G. Wayne Andrews............................ 115,000 10,571 122
Vice President,
Chief Technology
Officer and Director
Steven H. Webber............................ 115,000 10,571 302
Vice President of
Engineering
Joseph A. Murphy............................ 112,260 25,500 30,075
Vice President of
Sales(3)
</TABLE>
- ---------------
(1) The Company did not grant any restricted stock awards or stock appreciation
rights to the Named Executive Officers during the year ended December 31,
1995. Other annual compensation in the form of perquisites and other
personal benefits has been omitted because the aggregate amount of such
perquisites and other personal benefits constituted less than $50,000 or 10%
of each executive's total annual salary. Consists of premiums paid on behalf
of named executives for excess life insurance coverage. Consists of amounts
paid to Mr. Murphy for relocation expenses.
(2) Mr. Volpe's annual compensation was paid to Mr. Volpe for his services as a
consultant to the Company prior to his becoming an employee of the Company
in April 1996.
(3) Mr. Murphy's employment was terminated by the Company in April 1996.
39
<PAGE> 44
STOCK PLANS
1993 Restricted Stock Purchase Plan. The 1993 Restricted Stock Purchase
Plan (the "1993 Plan") was adopted by the Board of Directors in October 1993 and
approved by the stockholders of the Company in December 1993. A maximum of
1,324,063 shares of Common Stock may be issued and sold pursuant to the 1993
Plan. Under the 1993 Plan, shares of Common Stock may be sold to directors,
officers, consultants and other key personnel of the Company (collectively
"Participants") at a purchase price determined by the Compensation Committee of
the Board of Directors. As of September 30, 1996, 986,143 shares of Common Stock
were outstanding under the 1993 Plan. All shares sold pursuant to the 1993 Plan
are subject to repurchase by the Company at the original purchase price for up
to a period of five years from the date of purchase, unless the shares become
"vested" under the terms of the 1993 Plan. None of the shares become vested
until the first anniversary of the date of purchase by the Participant. A
Participant vests in twenty percent of the shares on the first anniversary of
the date of purchase and, thereafter, the remaining shares become vested on a
monthly basis through the fifth anniversary of the date of purchase. In the
event of a change in control, if the Participant has been employed by the
Company for at least six months, an additional twenty percent of the shares held
by the Participant pursuant to the 1993 Plan will become vested shares, unless
such change in control has not been approved by the Board of Directors, in which
event all shares held by the Participant pursuant to the 1993 Plan will become
vested shares.
1995 Stock Option Plan. The 1995 Stock Option Plan (the "1995 Plan") was
adopted by the Board of Directors in September 1995 and approved by the
stockholders of the Company in January 1996. A maximum of 1,474,726 shares of
Common Stock may currently be issued pursuant to the 1995 Plan upon exercise of
options. The number of shares of Common Stock available for grants under the
1995 Plan will be increased by the number of shares repurchased by the Company
from time to time under the 1993 Plan. The maximum number of shares will
increase, effective January 1, 1997 and each January 1 thereafter during the
term of the 1995 Option Plan, by an amount equal to four percent of the total
number of shares of Common Stock issued and outstanding as of the close of
business on December 31 of the preceding year. No more than an aggregate of
6,000,000 shares of Common Stock may be issued pursuant to the exercise of
options granted under the 1995 Plan. Under the 1995 Plan, incentive stock
options may be granted to employees and officers of the Company and
non-qualified stock options may be granted to consultants, employees and
officers of the Company.
The 1995 Plan is administered by the Compensation Committee of the Board of
Directors, subject to the supervision and control of the entire Board. Subject
to the provisions of the 1995 Plan, the Compensation Committee has the authority
to select optionees and determine the terms of the options granted, including
(i) the number of shares subject to each option, (ii) when the option becomes
exercisable, (iii) the exercise price of the option (which in the case of an
incentive stock option cannot be less than the fair market value of the Common
Stock on the date of grant, or less than 110% of fair market value in the case
of employees or officers holding 10% or more of the voting stock of the
Company), (iv) the duration of the option, and (v) the time, manner and form of
payment upon exercise of an option.
Options granted under the 1995 Plan vest and become exercisable starting
one year after the date of grant, with twenty percent of the shares subject to
an option becoming exercisable at that time and 1/60th of the shares subject to
the option becoming exercisable each month thereafter. The Option Agreements
governing options granted under the 1995 Plan provide that in the event of a
change in control, if the optionee has been employed by the Company for at least
six months, an additional twenty percent of the options held by the optionee
will vest and become immediately exercisable, unless such change in control has
not been approved by the Board of Directors, in which event all options will
vest and become immediately exercisable.
40
<PAGE> 45
An option is not transferrable by the optionee except by will, by the laws
of descent and distribution or pursuant to a qualified domestic relations order.
Options are exercisable only while the optionee remains in the employ of the
Company or for a short period of time thereafter. If an optionee becomes
permanently disabled or dies while in the employ of the Company, the option is
exercisable prior to the last day of the sixth or twelfth month, respectively,
following the date of termination of employment. If the optionee leaves the
employ of the Company for any other reason, the option is exercisable for only
thirty days following the date of termination of employment, which time period
may be extended by the Compensation Committee. Options which are exercisable
following termination of employment are exercisable only to the extent that the
optionee was entitled to exercise such options on the date of such termination.
As of September 30, 1996, options to purchase 860,396 shares of Common
Stock were outstanding under the 1995 Plan, of which options to purchase 8,400
shares were then exercisable. As of September 30, 1996, the following executive
officers held options to purchase Common Stock in the amounts indicated: John C.
Thibault (98,750 shares); Timothy J. Allen (30,000 shares); G. Wayne Andrews
(28,000 shares); Louis J. Volpe (163,867 shares); and Steven H. Webber (63,000
shares).
1996 Employee Stock Purchase Plan. The 1996 Employee Stock Purchase Plan
(the "1996 Purchase Plan") for employees of the Company was adopted by the Board
of Directors and approved by the stockholders of the Company in September 1996.
The 1996 Purchase Plan authorizes the issuance of a maximum of 250,000 shares of
Common Stock pursuant to the exercise of nontransferable options granted to
participating employees.
The 1996 Purchase Plan is administered by the Compensation Committee of the
Board of Directors. All employees of the Company whose customary employment is
20 hours or more per week and have been employed by the Company for at least six
months are eligible to participate in the 1996 Purchase Plan. Employees who own
5% or more of the Company's stock and directors who are not employees of the
Company may not participate in the 1996 Purchase Plan. To participate in the
1996 Purchase Plan, an employee must authorize the Company in writing to deduct
an amount (not less than 1% nor more than 10% of a participant's base
compensation) from his or her pay commencing on January 1 and July 1 of each
year (each a "Purchase Period"). On the first day of each Purchase Period, the
Company grants to each participating employee an option to purchase up to 1,000
shares of Common Stock. The exercise price for the option for each Purchase
Period is the lesser of 85% of the fair market value of the Common Stock on the
first or last business day of the Purchase Period. The fair market value will be
the closing selling price of the Common Stock as quoted on the Nasdaq National
Market. If an employee is not a participant on the last day of the Purchase
Period, such employee is not entitled to exercise his or her option, and the
amount of his or her accumulated payroll deduction will be refunded to the
employee. An employee's rights under the 1996 Purchase Plan terminate upon his
or her voluntary withdrawal from the Plan at any time or upon termination of
employment.
Common Stock for the 1996 Purchase Plan will be made available either from
authorized but unissued shares of Common Stock or from shares of Common Stock
reacquired by the Company, including shares repurchased in the open market.
EXECUTIVE INCENTIVE PROGRAM
The Company has adopted a 1996 Executive Incentive Program (the "Incentive
Program") which is available to executive officers and other management
employees of the Company. Under the Incentive Program, participants may receive
specified bonuses based upon the Company's attainment of certain financial
targets and strategic initiatives in 1996 and job performance evaluations. The
Incentive Program also provides that options to purchase an aggregate of 68,217
shares previously granted to the participants, which would otherwise vest on the
fifth anniversary of the
41
<PAGE> 46
date of grant, will be fully vested on the first anniversary of the date of
grant, subject to the achievement of the foregoing criteria.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
Messrs. Thibault, Allen, Andrews, Volpe and Webber are parties to change in
control agreements with the Company which provide for salary continuation and
other benefits upon the occurrence of certain events following a change of
control. These events will occur if such person is terminated without cause or
constructively terminated following a change of control. Upon the occurrence of
such events, the Company is required to continue to pay such person his base
salary for a period of twelve months after termination and provide medical
benefits to such person for such period.
LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Restated Certificate of Incorporation limits the personal
liability of directors to the Company, and the Company's Amended and Restated
Bylaws provide that the Company shall indemnify the Company's directors and
officers, in each case to the full extent permitted by the Delaware General
Corporation Law, including under circumstances in which indemnification is
otherwise discretionary under Delaware law. See "Description of Capital
Stock -- Certain Charter, Bylaw and Statutory Provisions Affecting
Stockholders."
42
<PAGE> 47
CERTAIN TRANSACTIONS
CERTAIN STOCK TRANSACTIONS
On September 30, 1993, the Company issued an aggregate of 3,300,000 shares
of Series A Convertible Participating Preferred Stock for aggregate
consideration of $3,300,000 in a private venture capital financing, at a price
of $1.00 per share. The following 5% or greater stockholders and affiliated
entities were purchasers of the Series A Convertible Participating Preferred
Stock in the amounts indicated: Matrix Partners III, L.P. (1,160,000 shares);
Sigma Partners II, L.P. (985,400 shares); Sigma Associates II, L.P. (74,600
shares); and Atlas Venture Fund II, L.P. (750,000 shares).
On January 5, 1994, the Company issued 410,250 shares of restricted Common
Stock to John C. Thibault, President and Chief Executive Officer, at a price per
share of $0.10. The Company loaned Mr. Thibault $36,922 in order to fund a
portion of the purchase of such shares. The loan bears interest at 5.25% per
year and is required to be repaid on the first anniversary of the closing of
this offering.
On July 29, 1994, the Company entered into a Stock Purchase Agreement with
Alexander d'Arbeloff pursuant to which the Company issued to Mr. d'Arbeloff
100,000 shares of Series A Convertible Participating Preferred Stock at a price
per share of $1.00. On such date, Mr. d'Arbeloff also purchased 50,000 shares of
Common Stock at a price per share of $0.10 pursuant to the 1993 Plan.
On July 29, 1994, the Company issued an aggregate of 2,604,286 shares of
Series B Convertible Participating Preferred Stock for an aggregate
consideration of $4,557,500 in a private venture capital financing, at a price
of $1.75 per share. The following 5% or greater stockholders, affiliated
entities, executive officers and directors were purchasers of the Series B
Convertible Participating Preferred Stock in the amounts indicated: New
Enterprise Associates VI, Limited Partnership (971,429 shares); Matrix Partners
III, L.P. (542,857 shares); Sigma Partners II, L.P. (462,343 shares); Sigma
Associates II, L.P. (34,800 shares); Atlas Venture Fund II, L.P. (351,429
shares); Alexander d'Arbeloff (90,000 shares); G. Wayne Andrews (5,714 shares);
John C. Thibault (5,714 shares); and Steven H. Webber (5,714 shares).
On August 9, 1995, the Company issued an aggregate of 1,712,329 shares of
its Series C Convertible Participating Preferred Stock for an aggregate
consideration of $4,000,000 in a private venture capital financing, at a price
of $2.336 per share. The following 5% or greater stockholders, affiliated
entities, executive officers and directors were purchasers of the Series C
Convertible Participating Preferred Stock in the amounts indicated: Fidelity
Ventures Limited (1,048,801 shares); Matrix Partners III, L.P. (200,946 shares);
Sigma Partners II, L.P. (170,888 shares); Sigma Associates II, L.P. (12,863
shares); Atlas Venture Fund II, L.P. (129,974 shares); New Enterprise Associates
VI, Limited Partnership (114,634 shares); and Alexander d'Arbeloff (22,421
shares).
On January 24, 1996, the Company issued an aggregate of 70,000 shares of
Series C Convertible Participating Preferred Stock to certain executive officers
and other employees at a purchase price of $2.336 for an aggregate consideration
of $163,520. The following executive officers were purchasers of the Series C
Convertible Participating Preferred Stock in the following amounts: Timothy J.
Allen (1,000 shares); G. Wayne Andrews (4,000 shares); and Louis J. Volpe (5,000
shares).
The terms of the Convertible Preferred Stock provided that each share of
Convertible Preferred Stock would automatically convert into one share of Common
Stock immediately prior to this offering and, upon conversion, each holder of
Convertible Preferred Stock would be entitled to receive a cash payment equal to
the original purchase price of the Convertible Preferred Stock. On September 26,
1996, the Board of Directors and stockholders of the Company approved an
amendment to the Company's Certificate of Incorporation to provide that, in lieu
of any cash payment in connection with the automatic conversion of the
Convertible Preferred Stock in an initial public offering, the Convertible
Preferred Stock will be converted into an additional number of
43
<PAGE> 48
shares of Common Stock determined by dividing fifty percent of the original
purchase price of the Convertible Preferred Stock by the initial public offering
price. Accordingly, at an assumed initial public offering price of $11.50 per
share, the total number of shares of Series A Convertible Participating
Preferred Stock, Series B Convertible Participating Preferred Stock and Series C
Convertible Participating Preferred Stock will automatically convert into
3,549,907, 2,802,431 and 1,963,334 shares of Common Stock, respectively,
immediately prior to the closing of this offering.
The investors who purchased shares of Series A, Series B and Series C
Convertible Participating Preferred Stock, which are convertible into Common
Stock as described above, and certain executive officers have certain
registration rights with respect to the shares of Common Stock. See "Shares
Eligible for Future Sale -- Registration Rights."
The Company is a party to an Amended and Restated Stockholders Agreement
dated August 9, 1995, with certain of its shareholders, including certain of its
executive officers and entities affiliated with certain of its directors,
pursuant to which such stockholders agreed to vote all securities of the Company
owned by them to elect as directors of the Company (i) two persons nominated by
Matrix Partners III, L.P., Sigma Partners II, L.P., Sigma Associates, II, L.P.
and Atlas Venture Fund II, L.P., (ii) one person nominated by certain members of
the Company's management, including Messrs. Thibault, Andrews and Webber, (iii)
the Chief Executive Officer of the Company, and (iv) one person nominated by
Matrix Partners III, L.P., Sigma Associates, L.P., Atlas Ventures Fund II, L.P.,
Sigma Partners II, L.P., Atlas Venture Fund II, L.P., New Enterprise Associates
VI Limited Partnership and Fidelity Ventures Limited. The Stockholders Agreement
will terminate upon the closing of this offering.
OTHER RELATIONSHIPS
W. Michael Humphreys, a director of the Company, is a general partner of
Matrix III Management Company, a general partner of Matrix Partners III, L.P., a
greater than 5% stockholder of the Company. Gardner C. Hendrie, a director of
the Company, is a general partner of Sigma Management II, L.P., the general
partner of Sigma Partners II, L.P., a greater than 5% stockholder of the
Company.
Fidelity Investors Limited Partnership, a greater than 5% stockholder of
the Company, is an affiliate of Fidelity Investments ("Fidelity"), one of the
Company's customers. The Company recognized approximately $587,000 and
$1,235,000 in revenue from Fidelity during the year ended December 31, 1995 and
the nine months ending September 30, 1996, respectively, representing
approximately 38.3% and 19.7% of the Company's total revenues for such periods.
The purchases by Fidelity for the year ended December 31, 1995 were made through
Aspect Telecommunications Corporation ("Aspect"), a stockholder of the Company.
The Company negotiated this transaction with Fidelity and Aspect on an arms'
length basis.
The Company has adopted a policy pursuant to which all future transactions
between the Company and its officers, directors and affiliates will be on terms
no less favorable to the Company than could be obtained from unrelated third
parties and will be approved by a majority of the disinterested members of the
Company's Board of Directors.
44
<PAGE> 49
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 30, 1996, and as
adjusted to reflect the sale of the shares offered hereby by, (i) each person
who is known by the Company to own beneficially more than 5 % of the outstanding
shares of Common Stock, (ii) each director and Named Executive Officer, and
(iii) all directors and current executive officers of the Company as a group.
Unless otherwise indicated below, to the knowledge of the Company, all persons
listed below have sole voting and investment power with respect to their shares
of Common Stock, except to the extent authority is shared by spouses under
applicable law.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER
OFFERING THE OFFERING(1)(2)
--------------------- ----------------------
NUMBER PERCENT NUMBER PERCENT
--------- ------- ---------- -------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS
Matrix Partners III, L.P...................... 2,015,950.. 19.0% 2,015,950 15.7%
1000 Winter Street
Suite 4500
Waltham, MA 02154
Sigma Partners II, L.P.
Sigma Associates II, L.P.(3)................ 1,843,467.. 17.3 1,843,467 14.4
2884 Sand Hill Road
Suite 121
Menlo Park, CA 94025
Atlas Venture Fund II, L.P.................... 1,303,950.. 12.3 1,303,950 10.2
222 Berkeley Street
Suite 1950
Boston, MA 02116
New Enterprise Associates VI,
Limited Partnership......................... 1,171,618.. 11.0 1,171,618 9.1
1119 St. Paul Street
Baltimore, MD 21202
Fidelity Investors Limited Partnership........ 1,155,322.. 10.9 1,155,322 9.0
82 Devonshire Street
Boston, MA 02109
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Gardner C. Hendrie(4)......................... 1,843,467 17.3 1,843,467 14.4
W. Michael Humphreys(5)....................... 2,015,950 19.0 2,015,950 15.7
G. Wayne Andrews(6)........................... 486,648 4.6 486,648 3.8
John C. Thibault(7)........................... 444,242 4.1 444,242 3.4
Steven H. Webber.............................. 378,840 3.6 378,840 3.0
Alexander V. d'Arbeloff(8).................... 275,892 2.6 275,892 2.2
Louis J. Volpe(9)............................. 181,781 1.7 181,781 1.4
Timothy J. Allen(10).......................... 81,883 0.8 81,883 0.6
Joseph A. Murphy.............................. 45,906 0.4 45,906 0.4
All Executive Officers and Directors as a
group (8 persons)(4)(5)..................... 5,708,703 53.6% 5,708,703 44.5%
</TABLE>
- ---------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of Common Stock subject to options held by that person that are
currently exercisable, or become exercisable within 60 days following
45
<PAGE> 50
September 30, 1996, are deemed outstanding. However, such shares are not
deemed outstanding for purposes of computing the percentage ownership of
any other person. The number of shares of Common Stock deemed outstanding
prior to this offering includes (i) 2,324,837 shares of Common Stock
outstanding as of September 30, 1996, (ii) an aggregate of 8,315,672 shares
of Common Stock issuable upon conversion of the Convertible Preferred
Stock, based upon an assumed initial public offering price of $11.50 and
(iii) shares issuable pursuant to options held by the respective person or
group which may be exercised within 60 days after September 30, 1996. No
options are presently exercisable within 60 days after September 30, 1996.
The number of shares of Common stock deemed outstanding after this offering
includes an additional 2,200,000 shares of Common Stock that are being
offered for sale by the Company in this offering.
(2) In the event that the Underwriters' over-allotment option is exercised in
full, the following stockholders will sell the following number of shares:
G. Wayne Andrews (50,000 shares) and John C. Thibault (15,000 shares). The
remaining shares subject to the Underwriters' over-allotment option will be
sold by the Company.
(3) Consists of 1,714,008 shares of Common Stock held by Sigma Partners II,
L.P. and 129,459 shares of Common Stock held by Sigma Associates II, L.P.
Sigma Management II, L.P. serves as a general partner for the
aforementioned entities, and as such exercises sole investment and voting
power.
(4) Includes 1,843,467 shares held by Sigma Partners II, L.P. and Sigma
Associates II, L.P. Mr. Hendrie is a general partner of Sigma Management
II, L.P. which is the general partner of each of Sigma Partners II, L.P.
and Sigma Associates II, L.P. and as such may be deemed to beneficially own
all of such shares. Mr. Hendrie disclaims beneficial ownership of such
shares, except to the extent of his proportionate pecuniary interest
therein.
(5) Includes 2,015,950 shares held by Matrix Partners III, L.P. Mr. Humphreys
is a general partner of Matrix III Management Company, the general partner
of Matrix Partners III, L.P. and as such may be deemed to beneficially own
all of such shares. Mr. Humphreys disclaims beneficial ownership of such
shares, except to the extent of his proportionate pecuniary interest
therein.
(6) Includes 8,200 shares of Common Stock held by Mr. Andrews' children under
the Massachusetts Uniform Transfer to Minors Act.
(7) Includes 22,844 shares of Common Stock held by Mr. Thibault's children
under the Massachusetts Uniform Transfer to Minors Act.
(8) Includes 28,333 shares of restricted Common Stock which remain subject to
vesting and the Company's right to repurchase at cost.
(9) Includes 113,085 shares of restricted Common Stock which remain subject to
vesting and the Company's right to repurchase at cost.
(10) Includes (i) 47,833 shares of restricted Common Stock which remain subject
to vesting and the Company's right to repurchase at cost; (ii) 7,000 shares
of Common Stock held by Mr. Allen's children under the Massachusetts
Uniform Transfer to Minor Act; and (iii) 3,782 shares of Common Stock held
jointly by Mr. Allen and his wife.
46
<PAGE> 51
DESCRIPTION OF CAPITAL STOCK
Effective upon the closing of this offering, the authorized capital stock
of the Company will consist of 40,000,000 shares of Common Stock, $.01 par value
per share, and 5,000,000 shares of Preferred Stock, $.01 par value per share
(the "Preferred Stock").
The following summary of certain provisions of the Common Stock and
Preferred Stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Company's Restated Certificate of
Incorporation as amended and restated upon the closing of this offering (the
"Certificate of Incorporation") which is included as an exhibit to the
Registration Statement, and by the provisions of applicable law.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on matters to be
voted upon by the stockholders. There are no cumulative voting rights. Holders
of Common Stock are entitled to receive ratable dividends when, as and if
declared by the Board of Directors out of funds legally available therefor,
subject to any preferential dividend rights of any then outstanding Preferred
Stock. Upon the liquidation, dissolution or winding up of the Company, holders
of Common Stock share ratably in the assets of the Company available for
distribution to its stockholders, subject to the preferential rights of any then
outstanding Preferred Stock. The shares of Common Stock outstanding upon the
effective date of this Prospectus are, and the shares offered hereby will be,
when issued and paid for, fully paid and nonassessable. The rights, preferences
and privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of holders of shares of any Preferred Stock that the
Company may designate in the future.
PREFERRED STOCK
After the closing of this offering, the Company's Board of Directors will
have the authority, without further stockholder approval, to issue up to
5,000,000 shares of Preferred Stock in one or more series and to fix the
relative rights, preferences, privileges, qualifications, limitations and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting any series or the designation
of such series. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of delaying, deferring or preventing a change in
control of the Company, may discourage bids for the Company's Common Stock at a
premium over the market price of the Common Stock and may adversely affect the
market price and the voting and other rights of the holders of the Common Stock.
The Company has no present plans to issue any shares of Preferred Stock.
CERTAIN CHARTER, BYLAW AND STATUTORY PROVISIONS AFFECTING STOCKHOLDERS
Classified Board and Other Matters. The Company's Board of Directors will
be divided into three classes, each of which, after a transitional period, will
serve for three years, with one class being elected each year. Under the
Delaware General Corporation Law, in the case of a corporation having a
classified Board, stockholders may remove a Director only for cause. Advance
notice of stockholder nominations and any other matter to be brought before a
meeting of stockholders will be required to be given in writing to the Secretary
of the Company within the time periods in the Bylaws. The Certificate of
Incorporation provides that special meetings of stockholders of the Company may
be called only by the Board of Directors, the Chairman of the Board of Directors
or the President. The Certificate of Incorporation also provides that no action
required or permitted to be taken at any Annual or Special Meeting of the
Stockholders of the Company may be taken without a meeting, unless the unanimous
consent of stockholders entitled to vote thereon is obtained. The affirmative
vote of the holders of at least 80% of the combined voting power of then
outstanding voting stock of the Company will be required to alter, amend or
repeal the foregoing provisions. The classification of the Board of Directors
and the limitations on the removal of directors and filling of
47
<PAGE> 52
vacancies could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from acquiring, control of the
Company.
Section 203 of Delaware Law. Following the consummation of this offering,
the Company will be subject to the "business combination" statute of the
Delaware General Corporation Law. In general, such statute prohibits a
publicly-held Delaware corporation from engaging in various "business
combination" transactions with any "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
"interested stockholder," unless (i) the transaction is approved by the Board of
Directors prior to the date the interested stockholder obtains such status, (ii)
upon the 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 by (a) persons who are directors and also
officers and (b) 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." A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the stockholder. An "interested stockholder" is a person
who, together with affiliates and associates, owns (or within three years, did
own) 15% or more of a corporation's voting stock. By virtue of the Company's
decision not to elect out of the statute's provision, the statute applies to the
Company. The statute could prohibit or delay the accomplishment of mergers or
other takeover or change of control attempts with respect to the Company and,
accordingly, may discourage attempts to acquire the Company.
Directors Liability. The Certificate of Incorporation of the Company
provides that no director shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for (i) any breach of the director's duty of loyalty to the Company or
its stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct; (iii) acts or omissions in respect of certain unlawful
dividend payments or stock redemptions or repurchases; or (iv) any transaction
from which such director derives improper personal benefit. The effect of this
provision is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (iv) above.
The limitations summarized above, however, do not affect the ability of the
Company or its stockholders to seek non-monetary based remedies, such as an
injunction or rescission, against a director for breach of his fiduciary duty
nor would such limitations limit liability under the Federal Securities Laws.
The Company's Amended and Restated Bylaws provide that the Company shall, to the
full extent permitted by the Delaware General Corporation Law, as amended from
time to time, indemnify and advance expenses to each of its currently acting and
former directors, officers, employees and agents arising in connection with
their acting in such capacities.
Certain provisions described above may have the effect of delaying
shareholder actions with respect to certain business combinations and the
election of new members to the Board of Directors. As such, the provisions could
have the effect of discouraging open market purchases of the Company's Common
Stock because they may be considered disadvantages by a shareholder who desires
to participate in a business combination or elect a new director. The existence
of these provisions may have an adverse effect on the market price of the Common
Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Fleet Bank.
48
<PAGE> 53
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 12,840,509 shares
of Common Stock outstanding (assuming no exercise of outstanding options). Of
these shares, the 2,200,000 shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act of 1933, as
amended (the "Securities Act"), except that any shares purchased by "affiliates"
of the Company, as that term is defined in Rule 144 ("Rule 144") under the
Securities Act ("Affiliates"), may generally only be sold in compliance with the
limitations of Rule 144 described below.
SALES OF RESTRICTED SHARES
The remaining 10,640,509 shares of Common Stock outstanding upon completion
of this offering will be "restricted securities" as that term is defined in Rule
144 under the Securities Act ("Restricted Shares"). Restricted Shares may be
sold in the public market only if registered or if they qualify for an exemption
from registration under Rule 144 promulgated under the Securities Act, which is
summarized below. Sales of the Restricted Shares in the public market, or the
availability of such shares for sale, could adversely affect the market price of
the Common Stock. Of the Restricted Shares, up to 346,432 may be eligible for
sale in the public market immediately after this offering pursuant to Rule
144(k) under the Securities Act, of which 344,346 shares are subject to lock-up
agreements as described below. An additional 6,833,128 Restricted Shares will be
eligible for resale under Rule 144 commencing 90 days after the effective date
of this offering. All of these shares are subject to lock-up agreements as
described below (the "Lock-Up Agreements"). Approximately 90 days after the date
of this Prospectus, the Company intends to register on one or more registration
statements on Form S-8 approximately 2,972,341 shares of Common Stock issuable
under its restricted stock purchase plan, stock restriction agreements and stock
option plan. Shares covered by such registration statements will be eligible for
sale in the public market after the effective date of such registration, except
for 1,704,146 shares which are subject to the Lock-Up Agreements. In addition,
9,529,862 of the Restricted Shares are entitled to registration rights as
described below.
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of this offering, 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 prior owner except an affiliate) would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of (i) one percent of the number of shares of Common Stock
then outstanding (which will equal approximately 128,405 shares immediately
after this offering); or (ii) the average weekly trading volume of the Common
Stock during the four calendar weeks preceding the filing of a Form 144 with
respect to such sale. Sales under Rule 144 are also subject to certain manner of
sale provisions and notice requirements and to the availability of current
public information about the Company. Under Rule 144(k), a person 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 the shares proposed to be sold
for at least three years (including the holding period of any prior owner except
an affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provision of Rule 144.
In addition, the Securities and Exchange Commission has proposed an
amendment to Rule 144 which would reduce the holding period by one year before
shares subject to Rules 144 and 144(k) become eligible for sale in the public
market. This proposal, if adopted, would substantially increase the number of
shares of the Company's Common Stock eligible for immediate sale following the
expiration of the lock-up period.
OPTIONS
As of September 30, 1996, options to purchase a total of 860,396 shares of
Common Stock were outstanding. Of the total shares issuable pursuant to such
options, 495,757 are subject to lock-up agreements. An additional 763,108 shares
of Common Stock are currently available for future grants
49
<PAGE> 54
under the Company's stock option and employee stock purchase plans. See
"Management -- Stock Plans."
In general, under Rule 701, as currently in effect, beginning 90 days after
the effective date of this offering, certain shares issued upon exercise of
options granted by the Company prior to the date of this Prospectus will also be
available for sale in the public market. Any employee, officer or director of or
consultant to the Company who purchased his or her shares pursuant to a written
compensatory plan or contract may be entitled to rely on the resale provisions
of Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirements of Rule 144.
Rule 701 further provides that non-affiliates may sell such shares in reliance
on Rule 144 without having to comply with the public information, volume
limitation or notice provisions of Rule 144. In both cases, a holder of Rule 701
shares is required to wait until 90 days after the date of this Prospectus
before selling such shares.
Prior to this offering, there has been no public market for the Common
Stock of the Company and no predictions can be made as to the effect, if any,
that market sales of shares of Common Stock prevailing from time to time may
have on the price of the Common Stock. Nevertheless, sales of significant
numbers of shares of the Common Stock in the public market could adversely
affect the market price of the Common Stock and could impair the Company's
future ability to raise capital through an offering of its equity securities.
The Company intends to file one or more registration statements on Form S-8
under the Securities Act to register all shares of Common Stock subject to
outstanding stock options and Common Stock issuable pursuant to the Company's
restricted stock purchase plan, stock restriction agreements and employee stock
purchase plan that do not qualify for an exemption under Rule 701 from the
registration requirements of the Securities Act. The Company expects to file
these registration statements 90 days after the date of this Prospectus, and
such registration statements are expected to become effective upon filing.
Shares covered by these registration statements will thereupon be eligible for
sale in the public markets, subject to the lock-up agreements, to the extent
applicable.
LOCK-UP AGREEMENTS
The Company, certain stockholders and all executive officers and directors
of the Company, who in the aggregate hold 10,753,518 shares of Common Stock
(including shares issuable pursuant to the exercise of stock options), have
agreed, pursuant to the lock-up agreements, not to directly or indirectly,
without the prior written consent of Alex. Brown & Sons Incorporated, offer,
sell, offer to sell or otherwise dispose of any shares of Common Stock, options
or warrants to acquire shares of Common Stock, beneficially owned by them for a
period of 180 days after the date of this Prospectus. See "Underwriting."
REGISTRATION RIGHTS
At the completion of this offering, certain stockholders (the
"Rightsholders") will be entitled to require the Company to register under the
Securities Act up to a total 9,529,862 shares of outstanding Common Stock (the
"Registrable Shares") under the terms of agreements among the Company and the
Rightsholders (the "Registration Agreements"). The Registration Agreements
provide that in the event the Company proposes to register any of its securities
under the Securities Act at any time or times, the Rightsholders, subject to
certain exceptions, shall be entitled to include Registrable Shares in such
registration. However, the managing underwriter of any such offering may exclude
for marketing reasons some or all of such Registrable Shares from such
registration. Certain Rightsholders have, subject to certain conditions and
limitations, additional rights to require the Company to prepare and file a
registration statement under the Securities Act with respect to their
Registrable Shares if Rightsholders holding at least a majority of the
Registrable Shares held by all such Rightsholders so request. The Company is
generally required to bear the expenses of all such registrations, except
underwriting discounts and commissions.
No predictions can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the
prevailing market price for the Common Stock. Sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock and could impair the
Company's future ability to obtain capital through an offering of equity
securities.
50
<PAGE> 55
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated and Wessels, Arnold & Henderson, L.L.C., have
severally agreed to purchase from the Company the following respective numbers
of shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Alex. Brown & Sons Incorporated..................................................
Wessels, Arnold & Henderson, L.L.C. .............................................
-------
Total..................................................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
of such shares are purchased.
The Company has been advised by the Representatives of the Underwriters
that the Underwriters propose to offer the shares of Common Stock to the public
at the initial 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 concession not in excess of $ per share to certain other
dealers. After the initial public offering, the public offering price and other
selling terms may be changed by the Representatives of the Underwriters.
The Company and the Selling Stockholders have granted the Underwriters an
option, exercisable not later than 30 days after the date of this Prospectus, to
purchase up to 330,000 additional shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus. To the extent that the Underwriters exercise such
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof that the number of shares of Common
Stock to be purchased by it shown in the above table bears to 330,000, and the
Company and such Selling Stockholders will be obligated, pursuant to cover
over-allotments made in connection with the sale of the Common Stock offered
hereby. If purchased, the Underwriters will offer such additional shares on the
same terms as those on which the 2,200,000 shares of Common Stock are being
offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters, the Company and the Selling Stockholders against certain civil
liabilities, including liabilities under the Securities Act.
The Company and each of its directors and executive officers and certain of
its stockholders, who in the aggregate will hold, following this offering,
10,257,761 shares of Common Stock and options to purchase 495,757 shares of
Common Stock, have agreed that they will not directly or indirectly, without the
prior written consent of Alex. Brown & Sons Incorporated, offer, sell, offer to
sell, contract to sell, or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of this Prospectus, except that the Company
may issue, and grant options to purchase, shares of Common Stock under its
current stock option and purchase plans and other currently outstanding options.
In addition, the Company may issue shares of Common Stock in connection with
corporate acquisitions so long as such shares are not resold until 180 days
after the date of this Prospectus. See "Shares Eligible for Future Sale."
51
<PAGE> 56
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
Prior to this offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price of the
Common Stock will be determined by negotiations among the Company and the
Representatives of the Underwriters. Among the factors to be considered in such
negotiations will be the prevailing market conditions, the results of operations
of the Company in recent periods, the market capitalizations and stages of
development of other companies which the Company and the Representatives of the
Underwriters believe to be comparable to the Company, estimates of the business
potential of the Company, the present state of the Company's development and
other factors deemed relevant. Application has been made to list the Common
Stock on the Nasdaq National Market under the symbol "GEOC."
The Underwriters have reserved for sale, at the initial public offering
price, up to 7.5% of the shares of Common Stock offered hereby for employees of
the Company and certain other individuals who have expressed an interest in
purchasing such shares of Common Stock in the offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased will
be offered by the Underwriters to the general public on the same basis as other
shares offered hereby.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Hutchins, Wheeler & Dittmar, A Professional Corporation,
Boston, Massachusetts. Certain legal matters in connection with the offering
will be passed upon for the Underwriters by Hale and Dorr, Boston,
Massachusetts. Anthony J. Medaglia, Jr., a shareholder of Hutchins, Wheeler &
Dittmar, is Secretary of the Company and beneficially owns 39,929 shares of
Convertible Preferred Stock which will convert into 42,095 shares of Common
Stock upon the closing of this offering.
EXPERTS
The balance sheets of the Company as of December 31, 1995 and September 30,
1996 and the statements of operations, stockholders' deficit and cash flows for
the year ended December 31, 1995 and the nine months ended September 30, 1996
included in this Prospectus, have been included herein in reliance on the report
of Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The balance sheet of the Company as of December 31, 1994 and the statements
of operations, stockholders' deficit and cash flows from inception (June 4,
1993) through December 31, 1993 and for the year ended December 31, 1994
included in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
CHANGE IN INDEPENDENT ACCOUNTANTS
The Company's financial statements for the year ended December 31, 1995 and
the nine months ended September 30, 1996 were audited by Coopers & Lybrand
L.L.P. The financial statements for the period from inception (June 4, 1993)
through December 31, 1993 and for the year ended December 31, 1994 were audited
by Arthur Andersen LLP. The Company retained Coopers & Lybrand L.L.P. as its
independent accountants in September 1995, after the Company's management, in
consultation with the Board of Directors of the Company, decided to dismiss
Arthur Andersen LLP. The audit reports of Arthur Andersen LLP for the period
from inception (June 4, 1993) through December 31, 1993 and for the year ended
December 31, 1994 did not contain an adverse opinion
52
<PAGE> 57
or a disclaimer of opinion, and were not qualified or modified as to
uncertainty, audit scope or accounting principles. During the period from
inception (June 4, 1993) through December 31, 1994 and through the date of
dismissal, there were no disagreements with Arthur Andersen LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement under the Securities Act (the
"Registration Statement") with respect to the Common Stock offered hereby. This
Prospectus, which constitutes part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock, reference is hereby made to the Registration
Statement and the exhibits and schedules filed therewith. Statements contained
in this Prospectus as to the contents of any contract or other document are not
necessarily complete and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission in
Washington, D.C. and copies of all or any part of which may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at
the Commission's Regional Offices located at The Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material may be
obtained at prescribed rates by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549.
The Company intends to distribute to its stockholders annual reports
containing financial statements audited by its independent accountants and will
make available copies of quarterly reports for the first three quarters of each
fiscal year containing unaudited financial information.
53
<PAGE> 58
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants -- Coopers & Lybrand L.L.P. ........................ F-2
Report of Independent Accountants -- Arthur Andersen LLP.............................. F-3
Balance Sheets as of December 31, 1994, 1995 and September 30, 1996................... F-4
Statements of Operations from inception (June 4, 1993) through December 31, 1993, for
the years ended December 31, 1994 and 1995 and for the nine months ended September
30, 1995 (unaudited) and 1996....................................................... F-5
Statements of Stockholders' Deficit from inception (June 4, 1993) through September
30, 1996............................................................................ F-6
Statements of Cash Flows from inception (June 4, 1993) through December 31, 1993, for
the years ended December 31, 1994 and 1995, and for the nine months ended September
30, 1995 (unaudited) and 1996....................................................... F-7
Notes to Financial Statements......................................................... F-8
</TABLE>
F-1
<PAGE> 59
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
GeoTel Communications Corporation:
We have audited the accompanying balance sheets of GeoTel Communications
Corporation (formerly a development stage enterprise) as of December 31, 1995
and September 30, 1996, and the related statements of operations, stockholders'
deficit and cash flows for the year ended December 31, 1995 and the nine months
ended September 30, 1996. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GeoTel Communications
Corporation as of December 31, 1995 and September 30, 1996, and the results of
its operations and its cash flows for the year ended December 31, 1995 and the
nine months ended September 30, 1996 in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
October 16, 1996
F-2
<PAGE> 60
REPORT OF INDEPENDENT ACCOUNTANTS
To GeoTel Communications Corporation:
We have audited the accompanying balance sheet of GeoTel Communications
Corporation (a Delaware corporation in the development stage) as of December 31,
1994 and the related statements of operations, stockholders' deficit and cash
flows for the period from inception (June 4, 1993) to December 31, 1993 and for
the year ended December 31, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GeoTel Communications
Corporation as of December 31, 1994, and the results of its operations and its
cash flows from inception (June 4, 1993) through December 31, 1993 and the year
ended December 31, 1994 in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 21, 1995
F-3
<PAGE> 61
GEOTEL COMMUNICATIONS CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
------------------- SEPTEMBER 30, SEPTEMBER 30, 1996
1994 1995 1996 (UNAUDITED)
------- ------- ------------- ------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 3,793 $ 4,537 $ 5,812
Marketable securities............................... 952 -- --
Accounts receivable................................. -- 749 1,412
Accounts receivable -- related party................ -- 266 751
Prepaid expenses and other current assets........... 69 107 225
------- ------- -------
Total current assets......................... 4,814 5,659 8,200
------- ------- -------
Property and equipment, net........................... 669 790 976
------- ------- -------
Total assets................................. $ 5,483 $ 6,449 $ 9,176
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................... $ 109 $ 160 $ 240
Accrued expenses.................................... 187 310 805
Accrued compensation and related accruals........... 155 324 497
Current portion of long-term debt................... 114 301 373
Deferred revenue.................................... -- 242 1,357
Deferred revenue -- related party................... -- 30 229
------- ------- -------
Total current liabilities.................... 565 1,367 3,501
------- ------- -------
Long-term debt........................................ 338 408 450
------- ------- -------
Commitments (Notes E, F and I)
Convertible preferred stock, $.01 par value,
authorized, issued and outstanding 6,006,286,
7,718,615 and 7,788,615 shares in 1994, 1995 and at
September 30, 1996, respectively, none pro forma
(aggregate liquidation preference of $12,756 at
September 30, 1996)................................. 7,937 11,986 12,229 --
------- ------- -------
Stockholders' equity (deficit):
Preferred stock, $.01 par value, authorized
5,000,000 shares pro forma, none issued
Common stock, $.01 par value, authorized 14,000,000
shares actual, and 40,000,000 shares pro forma,
issued 2,072,588, 2,572,580, 2,599,580 and
10,915,252 shares at December 31, 1994 and 1995,
September 30, 1996 and pro forma, respectively,
outstanding 1,909,377, 2,329,094, 2,324,837 and
10,640,509 shares at December 31, 1994, and 1995,
September 30, 1996, and pro forma, respectively... 21 26 26 $ 109
Additional paid-in capital.......................... 66 74 1,173 13,319
Accumulated deficit................................. (3,347) (7,209) (6,901) (6,901)
Notes receivable from stockholders.................. (94) (180) (153) (153)
Unearned compensation............................... -- -- (1,107) (1,107)
------- ------- ------- -------
(3,354) (7,289) (6,962) 5,267
Less treasury stock, at cost, 163,211, 243,486,
274,743 and 274,743 shares at December 31, 1994
and 1995, September 30, 1996 and pro forma,
respectively...................................... (3) (23) (42) (42)
------- ------- ------- -------
Total stockholders' equity (deficit)......... (3,357) (7,312) (7,004) $ 5,225
------- ------- ------- =======
Total liabilities and stockholders' equity
(deficit).................................. $ 5,483 $ 6,449 $ 9,176
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 62
GEOTEL COMMUNICATIONS CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
INCEPTION YEAR ENDED NINE MONTHS ENDED
(JUNE 4, 1993) DECEMBER 31, SEPTEMBER 30,
THROUGH DEC. 31, --------------------- -------------------------
1993 1994 1995 1995 1996
------------------ ------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software license................... $ 821 $ 4,589
Services and other................. 126 460
Related party licenses and services
(Note J)........................ 587 1,235
---------- ----------
Total revenues..................... 1,534 6,284
---------- ----------
Cost of Revenues:
Cost of software license........... 264 235
Cost of services and other......... 611 $ 372 988
---------- ------- ----------
Total cost of revenues............. 875 372 1,223
---------- ------- ----------
Gross profit (loss).................. 659 (372) 5,061
---------- ------- ----------
Operating Expenses:
Research and development........... $ 140 $ 1,879 2,322 1,720 2,210
Sales and marketing................ -- 570 1,476 998 1,969
General and administrative......... 261 641 887 501 705
----- ------- ----------- ------- ----------
Total operating costs.............. 401 3,090 4,685 3,219 4,884
----- ------- ---------- ------- ----------
Income (loss) from operations........ (401) (3,090) (4,026) (3,591) 177
----- ------- ---------- ------- ----------
Other Income:
Interest income.................... 24 141 225 155 182
Interest expense................... -- 17 61 43 51
----- ------- ---------- ------- ----------
Total other income................. 24 124 164 112 131
----- ------- ---------- ------- ----------
Net income (loss).................... $(377) $(2,966) $ (3,862) $(3,479) $ 308
===== ======= ========== ======= ==========
Net income (loss) per common and
common equivalent share --
historical basis (Note B)..........
Pro forma net income (loss) per
common and common equivalent
share.............................. $ (0.37) $ 0.03
========== ==========
Pro forma weighed average number of
common and common equivalent
shares............................. 10,365,465 11,514,315
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 63
GEOTEL COMMUNICATIONS CORPORATION
STATEMENTS OF STOCKHOLDERS' DEFICIT
INCEPTION (JUNE 4, 1993) THROUGH SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK NOTES TREASURY STOCK
----------------- ADDITIONAL RECEIVABLE ----------------- TOTAL
NUMBER OF PAID-IN ACCUMULATED FROM UNEARNED NUMBER OF STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT STOCKHOLDERS COMPENSATION SHARES AMOUNT DEFICIT
--------- ------ ---------- ----------- ------------- ------------ --------- ------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sale of common stock
for cash............. 1,034,028 $10 $ 1 $ 11
Net loss............... $ (377) (377)
Accretion of
Convertible preferred
stock to redemption
value................ (4) (4)
--------- --- ------ ------- -------
Balance Dec. 31,
1993................. 1,034,028 10 1 (381) (370)
--------- --- ------ ------- -------
Sale of common stock
for cash and notes
receivable........... 1,038,560 11 100 $ (94) 17
Acquisition of treasury
stock................ 163,211 $ (3) (3)
Net loss............... (2,966) (2,966)
Accretion of
Convertible preferred
stock to redemption
value................ (35) (35)
--------- --- ------ ------- ----- -------- ---- -------
Balance Dec. 31,
1994................. 2,072,588 21 66 (3,347) (94) 163,211 (3) (3,357)
--------- --- ------ ------- ----- -------- ---- -------
Sale of common stock
for cash, services
and notes
receivable........... 499,992 5 85 (86) 4
Acquisition of treasury
stock................ 80,275 (20) (20)
Net loss............... (3,862) (3,862)
Accretion of
Convertible preferred
stock to redemption
value................ (77) (77)
--------- --- ------ ------- ----- -------- ---- -------
Balance Dec. 31,
1995................. 2,572,580 26 74 (7,209) (180) 243,486 (23) (7,312)
--------- --- ------ ------- ----- -------- ---- -------
Sale of common stock
and exercise of stock
options.............. 27,000 34 (101,222) 1 35
Acquisition of treasury
stock................ 27 132,479 (20) 7
Stock options granted
below fair value..... 1,147 $(1,147)
Amortization of
unearned
compensation......... 40 40
Net income............. 308 308
Accretion of
Convertible preferred
stock to redemption
value................ (82) (82)
--------- --- ------ ------- ----- ------- -------- ---- -------
Balance September 30,
1996................. 2,599,580 $26 $1,173 $(6,901) $(153) $(1,107) 274,743 $(42) $(7,004)
========= === ====== ======= ===== ======= ======== ==== =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 64
GEOTEL COMMUNICATIONS CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION YEAR ENDED NINE MONTHS ENDED
(JUNE 4, 1993) DECEMBER 31, SEPTEMBER 30,
THROUGH DEC. ------------------ ----------------------
31, 1993 1994 1995 1995 1996
-------------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................ $ (377) $(2,966) $(3,862) $(3,479) $ 308
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities:
Depreciation and amortization.............. 1 159 359 274 370
Amortization of unearned compensation...... -- -- -- -- 40
Issuance of common stock in exchange for
services................................ -- -- 1 -- --
Changes in operating assets and
liabilities:
Accounts receivable..................... -- -- (1,015) -- (1,148)
Prepaid expenses and other current
assets................................ (53) (17) (38) (26) (118)
Accounts payable........................ 50 59 51 181 80
Accrued expenses and accrued
compensation.......................... 74 254 292 (113) 668
Deferred revenue........................ -- -- 272 311 1,314
------- ------- ------- ------- -------
Net cash provided by (used for) operating
activities................................. (305) (2,511) (3,940) (2,852) 1,514
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of marketable
securities................................. 1,975 3,384 -- -- --
Proceeds from maturities of marketable
securities................................. -- -- 952 202 --
Purchases of marketable securities........... (4,436) (1,875) -- -- --
Purchases of property and equipment.......... (57) (757) (480) (579) (556)
------- ------- ------- ------- -------
Net cash provided by (used for) investing
activities................................. (2,518) 752 472 (377) (556)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock........... 11 17 3 3 35
Proceeds from notes receivable for common
stock...................................... -- -- -- -- 7
Proceeds from sale of convertible preferred
stock -- net............................... 3,263 4,635 3,972 3,972 161
Proceeds from long-term debt................. -- 467 418 418 358
Principal payments under long-term debt...... -- (15) (161) (124) (244)
Acquisition of treasury stock................ (3) (20) (3) --
------- ------- ------- ------- -------
Net cash provided by financing activities:... 3,274 5,101 4,212 4,266 317
------- ------- ------- ------- -------
Net change in cash and cash equivalents...... 451 3,342 744 1,037 1,275
Cash and cash equivalents, beginning of
period..................................... -- 451 3,793 3,793 4,537
------- ------- ------- ------- -------
Cash and cash equivalents, end of period..... $ 451 $ 3,793 $ 4,537 $ 4,830 $ 5,812
======= ======= ======= ======= =======
Supplemental disclosures of noncash financing
activities:
Notes received in exchange for common stock.. -- $ 94 $ 86 $ 87 --
======= ======= ======= ======= =======
Supplemental cash flow information:
Interest paid................................ -- $ 13 $ 60 $ 42 $ 51
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE> 65
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
A. NATURE OF BUSINESS:
GeoTel Communications Corporation (the "Company") develops and markets
telecommunications software solutions, consisting primarily of one product, that
enable enhanced call center applications. The Company engages in a single
business segment.
Principal operations of the Company commenced during 1995. Prior to the
commencement of principal operations, the Company was considered to be a
development stage enterprise. The Company currently derives substantially all of
its revenues from licenses of the Intelligent CallRouter and related services.
B. SIGNIFICANT ACCOUNTING POLICIES:
Use of Accounting Estimates
The preparation of the 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 the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Statements (unaudited)
The financial statements of the Company for the nine months ended September
30, 1995 and related footnote information are unaudited. All adjustments,
consisting only of normal recurring adjustments, have been made which, in the
opinion of management, are necessary for a fair presentation of the interim
financial information. Results of operations for the nine months ended September
30, 1996 are not necessarily indicative of the results that may be expected for
any future period.
Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with an original
maturity of 90 days or less to be cash equivalents. The Company classifies its
marketable securities as available-for-sale and states them at amortized cost
plus accrued interest, which approximates fair market value. Marketable
securities include the following at December 31, 1994, December 31, 1995 and
September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------- SEPTEMBER 30,
1994 1995 1996
------ ------ -------------
<S> <C> <C> <C>
Cash equivalents:
Commercial paper................................ $3,468 $3,986 $ 4,374
Money market instruments........................ 134 340 628
Marketable securities:
U.S. Government obligations..................... 752 -- --
Commercial paper................................ 200 -- --
------ ------ ------
$4,554 $4,326 $ 5,002
====== ====== ======
</TABLE>
Income Taxes
The Company provides for income taxes under the liability method, which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax liabilities and assets are determined
based on the difference between the financial statement basis of assets and
liabilities
F-8
<PAGE> 66
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
using enacted tax rates in effect for the year in which the differences are
expected to reverse. Under this method, a valuation allowance is required
against net deferred tax assets if, based upon the available evidence, it is
more likely than not that some or all of the deferred tax assets will not be
realized.
Management evaluates on a quarterly basis the recoverability of the
deferred tax assets and the level of the valuation allowance. At such time as it
is determined that it is more likely than not that deferred tax assets are
realizable, the valuation allowance will be appropriately reduced.
Property and Equipment
Property and equipment are stated at cost. The Company provides for
depreciation and amortization using the straight-line method over their
estimated useful lives as follows:
<TABLE>
<CAPTION>
ASSET CLASSIFICATION ESTIMATED USEFUL LIFE
---------------------------------------------------------- -------------------------
<S> <C>
Computer and lab equipment................................ 3 years
Furniture and fixtures.................................... 3 years
Leasehold improvements.................................... Shorter of lease term or
estimated useful life
</TABLE>
Repairs and maintenance are charged to expense as incurred. Significant
improvements are capitalized and depreciated. Upon retirement or sale, the cost
of the assets disposed of and the related accumulated depreciation are removed
from the accounts and any resulting gain or loss is included in the results of
operations.
Revenue Recognition
The Company recognizes license fee revenues upon shipment unless there are
significant post-delivery obligations. When significant post-delivery
obligations exist, typically, customer acceptance criteria, revenues are
deferred until no such significant obligations remain. Service and other
revenues have consisted primarily of maintenance, installation and training
revenues. Maintenance revenues are recognized ratably over the term of the
support period, which is typically twelve months. Installation and training
revenues generally are recognized when the services are performed. Amounts
received prior to revenue recognition and for prepaid maintenance revenue are
classified as deferred revenue.
Product Warranty Costs
The Company provides a ninety day warranty and provides for estimated
direct labor and associated indirect costs at the time of sale. Provision for
estimated warranty costs is recorded at the time of sale and periodically
adjusted to reflect actual experience.
Financial Instruments and Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents,
trade accounts receivable and short-and long-term debt which had fair values
that approximate their carrying amounts. The Company invests its excess cash
primarily in highly rated commercial paper and financial institutions.
Accounts receivable at December 31, 1995 and September 30, 1996 consist
principally of three and eight customer balances, respectively (See Note J). To
reduce risk, the Company routinely assesses the financial strength of its
customers and, as a consequence believes that its trade accounts receivable
credit risk exposure is limited.
Based on borrowing rates currently available to the Company for installment
notes with similar terms and maturities, the fair value of long-term debt
instruments approximates their carrying values.
F-9
<PAGE> 67
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Research and Development
Research and development costs are charged to operations as incurred. The
Company capitalizes eligible software costs incurred after technological
feasibility of the product has been established. The Company achieves
technological feasibility when a working model has been established. To date,
costs eligible for capitalization have been immaterial and no costs have been
capitalized.
Net Income (Loss) Per Common and Common Equivalent Share
The pro forma net income (loss) per common share is computed based upon the
weighted average number of common and common equivalent shares outstanding
(using the treasury stock method) after certain adjustments described below.
Common equivalent shares consist of the Company's Series A, B and C Convertible
Participating Preferred Stock (collectively, the "Convertible Preferred Stock")
and common stock options outstanding. In accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 83 (SAB No. 83), all Convertible
Preferred Stock, common and common equivalent shares issued during the twelve
month period prior to the proposed date of the initial filing of the
Registration Statement have been included in the calculation as if they were
outstanding for all periods presented using the treasury stock method at the
assumed initial public offering price. In addition, all outstanding shares of
Convertible Preferred Stock, not subject to SAB No. 83, to be converted into
common stock upon the closing of the initial public offering are treated as
having been converted into common stock at the date of original issuance.
Net income (loss) per common share on a historical basis is computed in the
same manner as pro forma net income (loss) per common share, except that all
Convertible Preferred Stock is not assumed to be converted and is included in
the calculation only as a common stock equivalent when its effect is dilutive.
<TABLE>
Net income (loss) per common share on a historical basis is as follows
(dollars in thousands):
<CAPTION>
INCEPTION
(JUNE 4,
1993) YEAR ENDED NINE MONTHS ENDED
THROUGH DECEMBER 31, SEPTEMBER 30,
DECEMBER 31, ---------------------- -------------------------
1993 1994 1995 1995 1996
------------- --------- --------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income (loss).......... $ (377) $(2,966) $(3,862) $(3,479) $ 308
Accretion of Convertible
preferred stock to
redemption value......... (4) (35) (77) (52) (82)
------ ------- ------- ------- -----
Net income (loss) available
(attributable) to common
stockholders............. $ (381) $(3,001) $(3,939) $(3,531) $ 226
====== ======= ======= ======= =====
Net income (loss) available
(attributable) per common
and common equivalent
share.................... $(0.20) $ (1.10) $ (1.25) $ (1.14) $0.02
====== ======= ======= ======= =====
Weighted average number of
common and common
equivalent shares........ 1,950,088 2,724,895 3,154,729 3,104,087 11,514,315
========= ========= ========= ========= ==========
</TABLE>
F-10
<PAGE> 68
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Fully diluted net income (loss) per share is not presented as it is the
same as the amounts disclosed in historical net income (loss) per share from
inception (June 4, 1993) through December 31, 1993 and for the years ended
December 31, 1994 and 1995, and the nine month periods ended September 30, 1995
and 1996.
Pro Forma Presentation (Unaudited)
Upon the closing of a public offering, such as the one contemplated in the
Registration Statement in which the accompanying financial statements have been
included, all of the outstanding series of Convertible Preferred Stock will
automatically convert into 8,315,672 shares of common stock (assuming an initial
public offering price of $11.50 per share), and the Company's existing series of
Convertible Preferred Stock will be removed and a class of authorized but
undesignated preferred stock will be created. The unaudited pro forma
presentation of the September 30, 1996 stockholders' equity has been prepared
assuming such conversion.
New Accounting Pronouncement
In fiscal year 1996, the Company adopted Statement of Financial Accounting
Standards No. 121 ("SFAS No. 121") "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," which requires that
impairment losses be recognized when the carrying value of an asset exceeds its
fair value. The Company regularly assesses all of its long-lived assets for
impairment. Based upon Management's assessment as of September 30, 1996, the
Company has determined that no impairment of long-lived assets exists.
C. PROPERTY AND EQUIPMENT:
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------- SEPTEMBER 30,
1994 1995 1996
----- ------ -------------
<S> <C> <C> <C>
Computer and lab equipment......................... $ 799 $1,218 $ 1,760
Furniture and fixtures............................. 20 67 74
Leasehold improvements............................. 10 24 31
---- ------ ------
829 1,309 1,865
Less accumulated depreciation and amortization..... (160) (519) (889)
---- ------ ------
$ 669 $ 790 $ 976
==== ====== ======
</TABLE>
D. INCOME TAXES:
No income tax provision was recorded for federal income tax purposes from
inception (June 4, 1993) through December 31, 1993 and for the years ended
December 31, 1994 and 1995, and for the nine months ended September 30, 1996 as
the Company has not reported taxable income in those periods. The Company
elected to capitalize start-up costs and research and development costs for
income tax purposes and amortize them over five and ten years, respectively, for
the period prior to recording product revenue in 1995.
F-11
<PAGE> 69
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
The components of deferred taxes were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
------- ------- -------------
<S> <C> <C> <C>
Deferred tax assets:
Depreciation.................................. $ 17 $ 110 $ 136
Capitalized start-up costs.................... 1,286 2,151 1,937
Accrued expenses.............................. 17 37 82
Tax credits................................... 134 245 183
Net operating losses.......................... -- 574 550
------- ------- -------
Net deferred tax assets......................... 1,454 3,117 2,888
Valuation allowance............................. (1,454) (3,117) (2,888)
------- ------- -------
Total net deferred tax asset.................... $ 0 $ 0 $ 0
======= ======= =======
</TABLE>
Valuation allowances have been recorded to offset the entire net deferred
tax assets as a result of the uncertainties regarding the realization of the
asset due to the limited history of operating profits.
The difference between the statutory federal income tax rate and the
Company's effective tax rate for the nine months ended September 30, 1996 is
principally due to the utilization of net operating losses, capitalized start-up
costs including capitalized research and development cost carryforwards.
At September 30, 1996, the Company had net operating loss carryforwards of
$1,400,000 for federal and state income tax purposes, and capitalized start-up
costs of approximately $4,800,000 that may be used to offset future federal
income tax, if any. The net operating loss carryforwards expire at various dates
beginning in 2009. Similarly, research and development and state investment tax
credit carryforwards aggregating $245,000 and $183,000 were available at
December 31, 1995 and September 30, 1996, respectively, which expire at various
dates beginning in 2009. An ownership change, as defined in the Tax Reform Act
of 1986, may restrict the utilization of certain tax attributes. The difference
between the federal net operating loss carryforwards and the amount of the
accumulated deficit results primarily from certain start-up costs and research
and development expenses, which have been capitalized for tax purposes.
E. LONG-TERM DEBT:
In 1994, the Company entered into an equipment line of credit agreement
with a bank. The agreement allowed the Company to borrow the lesser of $500,000
or a 90% advance rate against the invoice price of approved equipment purchased
after January 1, 1994, as defined. The agreement provided for two borrowing
periods. The first borrowing period began on May 18, 1994 and ended on November
5, 1994. The Company borrowed a total of approximately $319,000 under the line
of credit in the first borrowing period. This outstanding principal balance is
payable monthly, in 30 equal payments of principal plus interest, commencing on
December 5, 1994. The second borrowing period began on November 6, 1994 and
ended on May 5, 1995. The Company borrowed a total of approximately $148,000
under the line of credit in the second borrowing period. This outstanding
principal balance is payable monthly, in 30 equal payments of principal plus
interest, which began on June 5, 1995.
In 1995, the Company entered into a second equipment line of credit
agreement with the bank. The agreement allows the Company to borrow the lesser
of $600,000 or a 90% advance rate against the invoice price of approved
equipment purchased after November 30, 1994, as defined. The
F-12
<PAGE> 70
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
agreement provided for two borrowing periods. The first borrowing period began
on May 1, 1995 and ended on March 1, 1996. The Company borrowed a total of
approximately $385,000 under the line of credit in the first borrowing period.
This outstanding principal balance is payable monthly, in 36 equal payments of
principal plus interest, commencing on April 1, 1996. The second borrowing
period began on April 2, 1996 and ended on May 31, 1996. The Company borrowed a
total of approximately $214,000 under the line of credit in the second borrowing
period. This outstanding principal balance is payable monthly, in 34 equal
payments of principal plus interest, which began on June 1, 1996.
In September 1996, the Company entered into a third equipment line of
credit agreement with the bank. The agreement allows the Company to borrow the
lesser of $800,000 or a 90% advance rate against the invoice price of approved
equipment purchased after May 31, 1996, as defined. Borrowings outstanding under
this agreement approximated $143,000 at September 30, 1996. The borrowing period
ends on June 30, 1997.
Borrowings under the above agreements bear interest ranging from the bank's
prime rate to prime rate plus 1% (9.50% at December 31, 1995 and 8.25% at
September 30, 1996). The interest rate, on all outstanding debt, was reduced to
prime rate in September 1996.
The borrowings are collateralized by substantially all of the Company's
assets. These agreements contain restrictive covenants that require certain
levels of equity and liquidity and prohibit the payment of cash dividends
without the bank's consent. At December 31, 1995 and September 30, 1996, the
Company was in compliance with all related covenants.
Principal payments for the last three months of 1996 and for the years
1997, 1998, 1999 and 2000 are $101,000, $347,000, $252,000, $99,000 and $24,000,
respectively.
F. CONVERTIBLE PREFERRED STOCK:
The following table reflects Convertible Preferred Stock activity, from
inception through September 30, 1996:
<TABLE>
<CAPTION>
AMOUNT
SHARES --------------
--------- (IN THOUSANDS)
<S> <C> <C>
Shares of Series A issued, September 1993............... 3,300,000 $ 3,261
Shares of Series A issued, December 1993................ 2,000 2
Accretion to redemption value........................... -- 4
--------- -------
Balance at December 31, 1993............................ 3,302,000 3,267
--------- -------
Shares of Series A issued, July 1994.................... 100,000 100
Shares of Series B issued, July 1994.................... 2,604,286 4,535
Accretion to redemption value........................... -- 35
--------- -------
Balance at December 31, 1994............................ 6,006,286 7,937
--------- -------
Shares of Series C issued, August 1995.................. 1,712,329 3,972
Accretion to redemption value........................... -- 77
--------- -------
Balance at December 31, 1995............................ 7,718,615 11,986
--------- -------
Shares of Series C issued, February 1996................ 70,000 161
Accretion to redemption value........................... -- 82
--------- -------
Balance at September 30, 1996........................... 7,788,615 $ 12,229
========= =======
</TABLE>
F-13
<PAGE> 71
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
Shares of Convertible Preferred Stock are subject to the following rights
and privileges:
Dividends
Preferred stockholders shall be entitled to receive dividends at the same
rate as dividends are paid with respect to the common stock. Such preferred
dividends will be determined by the number of shares of common stock into which
each share of preferred stock could then be converted, as defined. The Company
is prohibited from paying cash dividends under the outstanding equipment lines
unless the Company receives the bank's consent.
Liquidation
In certain events, including liquidation, dissolution or the winding up of
the Company, the holders of the Series A, B and C Convertible Preferred Stock
are entitled to receive an amount equal to $1.00, $1.75 and $2.336 per share,
respectively, plus declared but unpaid dividends, before any payment is made to
the common stockholders. The holders of the Convertible Preferred Stock shall
then share ratably with the common stockholders in the distribution of the
remaining assets distributable to the stockholders as if each share of
Convertible Preferred Stock had been converted, as defined.
Voting
Preferred stockholders are entitled to the number of votes equal to the
number of shares of common stock into which each share of Convertible Preferred
Stock is convertible.
Conversion and Redemption
The holders of a majority of the outstanding shares of Convertible
Preferred Stock shall be entitled, at any time after July 31, 2000, to cause all
such shares to be converted into common stock on a share-for-share basis, as
defined and to receive from the Company their liquidation amount in three equal,
annual installments. In addition, immediately prior to the closing of an initial
public offering of the Company's common stock, which results in proceeds of at
least $10,000,000 and a per share price of a least $4.67, each share of the
Convertible Preferred Stock will automatically convert. In September 1996, the
Company's Board of Directors adopted and the stockholders approved an amendment
to the terms of the Company's Convertible Preferred Stock to provide that, in
lieu of any cash payment in connection with the automatic conversion of the
Convertible Preferred Stock in an initial public offering, the Convertible
Preferred Stock will be converted into an additional number of shares of common
stock determined by dividing fifty percent of the original purchase price of the
Convertible Preferred Stock by the initial public offering price. At an assumed
initial public offering price of $11.50 per share, the Convertible Preferred
Stock will be converted into an additional 527,057 shares of Common Stock. Since
the holders of the Convertible Preferred Stock have voting control, such
conversion will result in an increase in common stock and additional paid-in
capital with no impact on net income or earnings per share.
The Convertible Preferred Stock is being accreted to approximately
$12,756,000 which is equal to the sum of (i) the price per share paid for each
share of Convertible Preferred Stock and (ii) the fair value of the common
stock, at the date of the original issuance of the Convertible Preferred Stock,
for which such Convertible Preferred Stock will be converted. The Company has
provided for periodic accretion of the fair value of the common stock using the
effective interest method.
F-14
<PAGE> 72
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
G. STOCKHOLDERS' EQUITY (DEFICIT):
Common and Preferred Stock
In September 1996, the Company's Board of Directors authorized management
of the Company to file a Registration Statement with the Securities and Exchange
Commission permitting the Company to sell shares of common stock to the public.
In addition, the Company's Board of Directors adopted and the stockholders
approved an increase in the number of authorized shares of capital stock from
21,788,615 shares to 45,000,000 shares, to be effected upon the closing of the
offering, of which 40,000,000 shares have been designated as common stock and
5,000,000 shares have been designated as preferred stock, for which the
Company's Board of Directors will have the authority, without further
stockholder approval, to issue in one or more series and to fix the relative
rights, preferences, privileges, qualifications, limitations and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of such series.
Each share of common stock has full voting rights. The terms of the
Company's existing borrowing arrangements with a bank prohibit the payment of
cash dividends without the prior consent of the bank.
Stock Restriction Agreements
The Company has entered into Stock Restriction Agreements (the "Stock
Restriction Agreements") with certain employees pursuant to which such employees
purchased an aggregate of 1,444,278 shares of common stock, of which 1,034,028
were purchased for $0.01 per share in 1993 and 410,250 were purchased for $0.10
per share in 1994. In connection with the 1994 sale of common stock described
above, the Company received a full recourse note receivable totaling
approximately $37,000 from a certain employee. This note bears interest at 5.25%
and is required to be paid in full upon the earlier to occur of the tenth
anniversary date of issuance or the first anniversary of an initial public
offering or other liquidity event, as defined. All shares purchased under the
Stock Restriction Agreements are subject to repurchase by the Company at the
original purchase price for up to a period of five years from the date of
purchase, unless the shares become vested. An employee vests in twenty percent
of the shares on the first anniversary of the date of purchase and, thereafter,
the remaining shares become vested on a monthly basis through the fifth
anniversary of the date of purchase. In accordance with the terms of a Stock
Restriction Agreement, the Company repurchased 148,211 unvested shares in 1994
at a price of $0.01 per share from an employee whose employment with the Company
terminated. In addition, the Company repurchased 58,595 shares from this
employee in 1995 at a price of $0.30 per share. At September 30, 1996, 448,233
shares were subject to repurchase under the Stock Restriction Agreements. Upon
an initial public offering, all shares of common stock purchased under the Stock
Restriction Agreements will become vested.
The Stock Restriction Agreements further provide the Company and the
holders of the Convertible Preferred Stock with the right of first refusal to
purchase the shares of such an employee stockholder if he intends to sell them
and has received an offer from a third party. The Company may exercise its right
to purchase the shares at the offeror's price within 30 days of receipt of
written notification of the stockholder's intent to sell. If the Company elects
not to purchase the stock, the preferred stockholders may exercise their right
to purchase their pro rata share at the offeror's price for a period of 20 days.
If the preferred stockholders do not purchase the shares, then the stockholder
is free to transfer the shares to the offeror, provided the transfer is
completed within
F-15
<PAGE> 73
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
three months from the end of the preferred stockholder option period. These
Stock Restriction Agreements terminate upon an initial public offering.
Restricted Stock Purchase Plan
The Company has adopted, and subsequently amended, a 1993 Restricted Stock
Purchase Plan (the "1993 Plan"), which provides for the issuance of common stock
to directors, officers, consultants and other key personnel at prices determined
by a Committee selected by the Board of Directors. Participants' shares are
subject to repurchase by the Company at the original purchase price for up to
five years after the beginning of the vesting period. A participant vests in
twenty percent of the shares on the first anniversary of the date of purchase
and, thereafter, the remaining shares become vested on a monthly basis through
the fifth anniversary date of purchase. At December 31, 1995 and September 30,
1996, the Company may repurchase up to 868,222 and 533,925 unvested shares,
respectively. Such shares are to be repurchased at the original purchase price
ranging from $0.10 to $0.18 per share. There are no shares available for further
grant under the 1993 Plan. The shares outstanding at September 30, 1996 under
the 1993 Plan have a weighted price of $0.14 per share with share prices ranging
from $0.10 to $0.18 per share.
Information related to the 1993 Plan is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
SEPTEMBER 30,
1994 1995 1996
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AVERAGE NUMBER OF AVERAGE NUMBER OF AVERAGE
SHARES SHARE PRICE SHARES SHARE PRICE SHARES SHARE PRICE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period............... -- -- 613,310 $0.14 1,091,622 $0.14
Issued.................... 628,310 $0.14 499,992 0.18 27,000 0.18
Repurchased............... (15,000) 0.10 (21,680) 0.10 (132,479) 0.14
--------- --------- ---------
Outstanding at end of
period.................. 613,310 $0.14 1,091,622 $0.14 986,143 $0.14
========= ========= =========
</TABLE>
In connection with the sale of common stock under the 1993 Plan described
above, the Company received full recourse notes receivable totaling
approximately $57,000 and $86,000 from certain employees during the years ended
December 31, 1994 and 1995, respectively. These notes bear interest at 5.25% and
are required to be paid in full upon the earlier to occur of the tenth
anniversary of the date of issuance or the first anniversary of an initial
public offering or other liquidity event, as defined. The interest is payable at
the date of maturity. Such notes are collateralized by the common stock
purchased and accordingly are included in stockholders' deficit.
Stock Option Plan
In 1995, the Board of Directors adopted and the stockholders subsequently
approved the Company's 1995 stock option plan (the "1995 Plan"), which provides
for the issuance of incentive stock options and nonqualified stock options to
eligible employees, officers and consultants to the Company. The options can be
granted for periods of up to ten years and generally vest ratably over a
five-year period with initial vesting occurring on the first anniversary from
the grant date and then monthly thereafter. In 1996, the Board of Directors
adopted and stockholders approved an increase in the 1995 Plan of 1,000,000
shares of common stock. In addition, the Board of Directors adopted and
stockholders approved the number of shares of common stock available for grants
under the 1995 Plan to be increased by the number of shares repurchased by the
Company from time to time under the 1993 Plan. The maximum number of shares will
increase effective January 1, 1997 and
F-16
<PAGE> 74
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
each January 1 thereafter during the term of the 1995 Plan, by an amount equal
to four percent of the total number of shares of common stock issued and
outstanding as of the close of business on December 31, of the preceding year,
not exceeding 6,000,000 shares. At December 31, 1995 and September 30, 1996,
426,051 and 1,474,726 shares, respectively, were authorized for issuance under
the 1995 Plan.
The option price for stock options granted under the 1995 Plan is
determined by a Committee consisting of two or more members of the Company's
Board of Directors. The option price for incentive stock options shall be the
fair value at the time the option is granted. In the case of options granted to
a shareholder who at the time of grant owns, directly or indirectly, stock
possessing more than 10% of total combined voting power of any class of stock of
the Company, the exercise price of the options shall not be less than 110% of
the fair value of the common stock as of the date of grant.
<TABLE>
Information related to the 1995 Plan is as follows:
<CAPTION>
DECEMBER 31, 1995 SEPTEMBER 30, 1996
--------------------------- -----------------------------
WEIGHTED AVERAGE WEIGHTED AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ ---------------- -------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning
of period............... -- -- 64,500 $0.24
Granted................... 64,500 $0.24 909,618 1.88
Cancelled................. -- -- (12,500) 0.30
Exercised................. -- -- (101,222) 0.30
------ ----- -------- -----
Outstanding at end of
period.................. 64,500 $0.24 860,396 $1.97
====== ===== ======== =====
</TABLE>
The Company granted options at the per share price, which have ranged from
$0.18 to $8.00 per share, generally equal to the fair value on the date of each
grant. No options were exercisable as of December 31, 1995 and 8,400 were
exercisable at September 30, 1996. The 101,222 options exercised during the nine
months ended September 30, 1996, related to merit grants which included
immediate vesting provisions. As of December 31, 1995 and September 30, 1996,
the Company had 361,551 and 513,108, respectively, shares available for future
option grants under the 1995 Plan. The outstanding stock options at September
30, 1996 have a weighted average contractual life of 9.67 years.
Employee Stock Purchase Plan
In September 1996, the Company's Board of Directors adopted and the
stockholders approved the 1996 Employee Stock Purchase Plan (the "1996 Purchase
Plan"). The Company has reserved 250,000 shares of common stock for issuance
under the 1996 Purchase Plan. The 1996 Purchase Plan will enable employees to
purchase common stock at 85% of the lower of the fair market value of the
Company's common stock on the first or last day of each six-month purchase
period.
Stock-Based Compensation Plans
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees, and related interpretations in accounting for the
1995 Plan. Accordingly, compensation expense has been recognized for its
stock-based compensation plan for any options granted below fair value of the
common stock. In the nine months ended September 30, 1996, the Company
recognized approximately $1,147,000 in unearned compensation for options to
purchase 696,180 shares granted at exercise prices below the fair value of the
common stock. Had compensa-
F-17
<PAGE> 75
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
tion cost for the 1995 Plan been determined based upon the fair value at the
grant date for awards consistent with the minimum value methodology prescribed
under Statement of Financial Accounting Standards No. 123 ("SFAS 123")
"Accounting for Stock-Based Compensation," the Company's net loss would have
increased by approximately $9,000 in 1995 and net income would have decreased by
approximately $32,000 for the nine months ended September 30, 1996. The pro
forma effect of adopting SFAS 123 has no effect on the Company's net income
(loss) per share in 1995 and a decrease to $0.02 per share for the nine months
ended September 30, 1996. In computing these pro forma amounts the Company has
assumed a risk-free interest rate equal to approximately 8% and expected life of
approximately five years. The options granted during 1995 and for the nine
months ended September 30, 1996 are generally equal to the fair value at the
time of option grant. The effects of applying SFAS 123 in this disclosure are
not indicative of future amounts. SFAS 123 does not apply to awards prior to
1995, and additional awards in future years are anticipated.
H. RETIREMENT SAVINGS PLAN:
In 1994, the Company adopted a Retirement Savings Plan (the "Savings Plan")
for its employees, which has been qualified under Section 401(k) of the Internal
Revenue Code. Eligible employees are permitted to contribute to the Savings Plan
through payroll deductions within statutory limitations and subject to any
limitations included in the Savings Plan. To date the Company has made no
contributions to the Plan.
I. OPERATING LEASES:
The Company leases certain equipment and office space under operating
leases that expire through 1998. Future minimum annual lease commitments,
including operating costs, under the operating leases for the last three months
of 1996, and for the years 1997 and 1998 are $38,000, $158,000 and $145,000,
respectively.
Rent expense was approximately $1,000, $41,000, $124,000, $89,000 and
$135,000 from inception (June 4, 1993) through December 31, 1993 and the years
ended December 31, 1994 and 1995 and for the nine month periods ended September
30, 1995 and 1996, respectively.
J. RELATED PARTY TRANSACTIONS AND SIGNIFICANT CUSTOMERS:
In August 1995, the Company sold 1,048,801 shares of Series C Convertible
Participating Preferred Stock to an investor that subsequently became a customer
of the Company. This customer's purchases from the Company represented 38% and
20% of revenue for the year ended December 31, 1995 and the nine months ended
September 30, 1996, respectively, and this customer had an outstanding
receivable balance of approximately $266,000 and $751,000 at December 31, 1995
and September 30, 1996, respectively. Gross profit from related party
transactions approximated those realized in similar transactions with unrelated
parties. Purchases by this customer for the year ended December 31, 1995 were
made through another shareholder of the Company.
F-18
<PAGE> 76
GEOTEL COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 IS UNAUDITED)
The following table summarizes sales as a percentage of total revenue to
significant customers for the year ended December 31, 1995 and for the nine
months ended September 30, 1996:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED SEPTEMBER 30,
DECEMBER 31, 1995 1996
----------------- -----------------
<S> <C> <C>
Related Party Customer......................... 38% 20%
Customer A..................................... 20 --
Customer B..................................... 26 --
Customer C..................................... -- 16
Customer D..................................... -- 10
---- --- -
Percentage of total revenue.................... 84% 46%
==== ====
</TABLE>
Export sales to Australia and the United Kingdom for the nine months ended
September 30, 1996 were approximately 16% and 6% of total revenues,
respectively. No export sales occurred in 1995.
F-19
<PAGE> 77
ENTERPRISE-WIDE CALL DISTRIBUTION
[Diagram illustrating
the deployment of the
Intelligent CallRouter
in a multi-carrier
call center]
- - Provides a software infrastructure that manages the interaction between
customers and agent or automated resources.
- - Interfaces to multiple carriers, multiple switches, VRUs, and customer
profile databases to create a distributed call processing environment.
- - Provides an enterprise-wide call management architecture that integrates
and leverages customers' current and future telecommunications technology.
- - Solutions based on open/industry standards--Microsoft Windows NT,
Powerbuilder, Microsoft SQL Server.
<PAGE> 78
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR
THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 14
Dividend Policy....................... 14
Capitalization........................ 15
Dilution.............................. 16
Selected Financial Data............... 17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 24
Management............................ 37
Certain Transactions.................. 43
Principal and Selling Stockholders.... 45
Description of Capital Stock.......... 47
Shares Eligible for Future Sale....... 48
Underwriting.......................... 51
Legal Matters......................... 52
Experts............................... 52
Change in Independent Accountants..... 52
Additional Information................ 53
Index to 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 IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,200,000 SHARES
LOGO
COMMON STOCK
-------------------
PROSPECTUS
-------------------
ALEX. BROWN & SONS
INCORPORATED
WESSELS, ARNOLD & HENDERSON
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 79
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth various expenses in connection with the sale
and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission registration fee and the NASD filing
fee:
<TABLE>
<S> <C>
Registration fee under the Securities Act................................ $ 9,200
NASD filing fee.......................................................... 3,030
Nasdaq National Market listing fee....................................... 50,000
Legal fees and expenses.................................................. 200,000
Accounting fees and expenses............................................. 200,000
Blue Sky fees and expenses............................................... 18,000
Printing, engraving and mailing expenses................................. 100,000
Transfer agent fees and expenses......................................... 5,000
Miscellaneous............................................................ 14,770
--------
Total.......................................................... $600,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporate Law and the Company's Restated Certificate
of Incorporation and Amended and Restated By-laws, each to be effective upon the
closing of the offering, provide for indemnification of the Company's directors
and officers for liabilities and expenses that they may incur in such
capacities. In general, directors and officers are indemnified with respect to
actions taken in good faith in a manner reasonably believed to be in, or not
opposed to, the best interests of the Company, and with respect to any criminal
action or proceeding, actions that the indemnitee has no reasonable chance to
believe were unlawful. Reference is made to the Company's Restated Certificate
of Incorporation and Amended and Restated By-laws filed as Exhibits 3.2 and 3.4
hereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has issued the following
securities, none of which have been registered under the Securities Act of 1933,
as amended (the "Act"):
(a) On September 30, 1993, the Company issued an aggregate of
3,300,000 shares of Series A Convertible Participating Preferred Stock for
aggregate consideration of $3,300,000 in a private venture capital
financing, at a price of $1.00 per share, to Matrix Partners III, L.P.,
Sigma Partners II, L.P., Sigma Associates II, L.P., Atlas Venture Fund II,
L.P., Aspect Telecommunications Corporation, Steven Finn and Anthony J.
Medaglia, Jr.
(b) On December 3, 1993, the Company issued 2,000 shares of Series A
Convertible Participating Preferred Stock at a price of $1.00 per share to
Michael Dobbins.
(c) On January 5, 1994, the Company issued 410,250 shares of
restricted Common Stock to John C. Thibault, President and Chief Executive
Officer, at a price per share of $0.10.
(d) On July 29, 1994, the Company issued to Alexander d'Arbeloff
100,000 shares of Series A Convertible Participating Preferred Stock at a
price per share of $1.00.
(e) On July 29, 1994, the Company issued an aggregate of 2,604,286
shares of Series B Convertible Participating Preferred Stock for an
aggregate consideration of $4,557,500 in a private venture capital
financing, at a price of $1.75 per share, to New Enterprise Associates VI,
II-1
<PAGE> 80
Limited Partnership, Matrix Partners III, L.P, Sigma Partners II, L.P,
Sigma Associates II, L.P, Atlas Venture Fund II, L.P., Aspect
Telecommunications Corporation, Alexander d'Arbeloff, Steven Finn, Anthony
J. Medaglia, Jr., G. Wayne Andrews, John C. Thibault and Steven Webber.
(f) On August 9, 1995, the Company issued an aggregate of 1,712,329
shares of Series C Convertible Participating Preferred Stock for an
aggregate consideration of $4,000,000 in a private venture capital
financing, at a price of $2.336 per share, to Fidelity Ventures Limited,
Matrix Partners III, L.P., Sigma Partners II, L.P., Sigma Associates II,
L.P., Atlas Venture Fund II, L.P., New Enterprise Associates VI, Limited
Partnership, Alexander d'Arbeloff, Steven Finn, Anthony J. Medaglia, Jr.
(g) On January 24, 1996, the Company sold an aggregate of 70,000
shares of Series C Convertible Participating Preferred Stock to certain
executive officers and other employees of the Company for an aggregate
consideration of $164,000, at a purchase price of $2.336 per share.
(h) Between September 29, 1993 and September 30, 1996, the Company (i)
sold an aggregate of 1,155,302 shares of Common Stock to employees and
directors of the Company pursuant to the 1993 Restricted Stock Purchase
Plan and (ii) granted options to purchase an aggregate of 967,188 shares of
Common Stock to employees of the Company pursuant to the Company's 1995
Stock Option Plan.
No underwriters were involved in any of the foregoing transactions. Such
sales of stock and options were made in reliance upon an exemption from the
registration provisions of the Act set forth in Section 4(2) thereof relative to
sales by an issuer not involving a public offering or the rules and regulations
thereunder, or, in the case of certain shares of Common Stock and options to
purchase Common Stock, Rule 701 of the Act. All of the foregoing securities are
deemed restricted securities for purposes of the Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS. The following is a list of exhibits filed as part of the
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ----------- ---------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
*3.1 Certificate of Incorporation of the Company, as amended.
*3.2 Form of Amended and Restated Certificate of Incorporation of the Company
</TABLE>
<TABLE>
<C> <S>
*3.3 By-Laws of the Company.
*3.4 Form of By-Laws of the Company, as amended and restated.
*4.1 Specimen stock certificate representing the shares of Common Stock.
*5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, as to the
legality of the securities being registered.
*10.1 Stock Purchase Agreement between the Company and the Investors named therein,
dated August 9, 1995.
*10.2 Amended and Restated Stockholders Agreement between the Company and certain
stockholders of the Company, dated August 9, 1995.
*10.3 Amended and Restated Founders Registration Rights Agreement between the Company,
G. Wayne Andrews, John C. Thibault and Steven Webber.
+10.4 Development/License Agreement between the Company and DANAR Corporation, dated
March 4, 1996.
+10.5 Software License and Technical Support Agreement between the Company and MCI
Telecommunications Corporation, dated as of June 17, 1996.
+10.6 Software License and Distribution Agreement between the Company and Optus Systems
PTY Ltd. dated as of March 29, 1996.
*10.7 Office lease by and between Nationwide Life Insurance Company and the Company,
dated as of November 22, 1996.
</TABLE>
II-2
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ----------- -----
<C> <S>
*10.8 Loan Modification Agreement between the Company and Silicon Valley Bank, dated
September 11, 1996.
*10.9 Letter Agreement between Silicon Valley Bank and the Company, dated September 11,
1996.
*10.10 Letter Agreement between Silicon Valley Bank and the Company, dated May 1, 1995.
*10.11 Letter Agreement between Silicon Valley Bank and the Company, dated May 18, 1994.
*10.12 Promissory Note executed by the Company in favor of Silicon Valley Bank, dated
March 1, 1996.
*10.13 Executive Change in Control Agreement between the Company and Timothy J. Allen,
dated September 26, 1996.
*10.14 Executive Change in Control Agreement between the Company and G. Wayne Andrews,
dated September 26, 1996.
*10.15 Executive Change in Control Agreement between the Company and John C. Thibault,
dated September 26, 1996.
*10.16 Executive Change in Control Agreement between the Company and Louis J. Volpe,
dated September 26, 1996.
*10.17 Executive Change in Control Agreement between the Company and Steven H. Webber,
dated September 26, 1996.
*10.18 GeoTel Communications Corporation 1995 Stock Option Plan.
*10.19 GeoTel Communications Corporation 1993 Restricted Stock Purchase Plan.
*10.20 GeoTel Communications Corporation 1996 Employee Stock Purchase Plan.
11.1 Statement Regarding Computation of Net Income (loss) Per Common and Common
Equivalent Share.
*16.1 Letter regarding change in certifying accountant.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Andersen LLP.
*23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in
Exhibit 5.1).
*24.1 Power of Attorney
*27.1 Financial Data Schedule.
<FN>
- ---------------
* Previously filed.
+ Confidential Treatment Requested.
</TABLE>
(b) Financial Statement Schedules. The financial statement schedules are
not included with this Registration Statement as they are either not applicable
or the information is included in the Financial Statements.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreements 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 Restated Certificate of Incorporation and Amended and
Restated Bylaws of the Registrant and the laws of the State of Delaware, 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
II-3
<PAGE> 82
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 that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 83
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston, Commonwealth of Massachusetts on the 19th day of November, 1996.
GEOTEL COMMUNICATIONS CORPORATION
By: /s/ John C. Thibault
---------------------------------
John C. Thibault
President, Chief Executive Officer
and Director
<TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John C. Thibault President, Chief Executive Officer and November 19, 1996
- ------------------------------ Director (principal executive officer)
John C. Thibault
/s/ Timothy J. Allen Vice President of Finance, Chief November 19, 1996
- ------------------------------ Financial Officer, Treasurer and
Timothy J. Allen Assistant Secretary (principal
accounting and financial officer)
* Director November 19, 1996
- ------------------------------
G. Wayne Andrews
* Director November 19, 1996
- ------------------------------
Alexander V. d'Arbeloff
* Director November 19, 1996
- ------------------------------
Gardner C. Hendrie
* Director November 19, 1996
- ------------------------------
W. Michael Humphreys
</TABLE>
*By: /s/ John C. Thibault
-------------------------------------
John C. Thibault
Attorney-in-fact
II-5
<PAGE> 84
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. TITLE
- ----------- ---------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
*3.1 Certificate of Incorporation of the Company, as amended.
*3.2 Form of Amended and Restated Certificate of Incorporation of the Company
</TABLE>
<TABLE>
<C> <S>
*3.3 By-Laws of the Company.
*3.4 Form of By-Laws of the Company, as amended and restated.
*4.1 Specimen stock certificate representing the shares of Common Stock.
*5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, as to the
legality of the securities being registered.
*10.1 Stock Purchase Agreement between the Company and the Investors named therein,
dated August 9, 1995.
*10.2 Amended and Restated Stockholders Agreement between the Company and certain
stockholders of the Company, dated August 9, 1995.
*10.3 Amended and Restated Founders Registration Rights Agreement between the Company,
G. Wayne Andrews, John C. Thibault and Steven Webber.
+10.4 Development/License Agreement between the Company and DANAR Corporation, dated
March 4, 1996.
+10.5 Software License and Technical Support Agreement between the Company and MCI
Telecommunications Corporation, dated as of June 17, 1996.
+10.6 Software License and Distribution Agreement between the Company and Optus Systems
PTY Ltd. dated as of March 29, 1996.
*10.7 Office lease by and between Nationwide Life Insurance Company and the Company,
dated as of November 22, 1996.
*10.8 Loan Modification Agreement between the Company and Silicon Valley Bank, dated
September 11, 1996.
*10.9 Letter Agreement between Silicon Valley Bank and the Company, dated September 11,
1996.
*10.10 Letter Agreement between Silicon Valley Bank and the Company, dated May 1, 1995.
*10.11 Letter Agreement between Silicon Valley Bank and the Company, dated May 18, 1994.
*10.12 Promissory Note executed by the Company in favor of Silicon Valley Bank, dated
March 1, 1996.
*10.13 Executive Change in Control Agreement between the Company and Timothy J. Allen,
dated September 26, 1996.
*10.14 Executive Change in Control Agreement between the Company and G. Wayne Andrews,
dated September 26, 1996.
*10.15 Executive Change in Control Agreement between the Company and John C. Thibault,
dated September 26, 1996.
*10.16 Executive Change in Control Agreement between the Company and Louis J. Volpe,
dated September 26, 1996.
*10.17 Executive Change in Control Agreement between the Company and Steven H. Webber,
dated September 26, 1996.
*10.18 GeoTel Communications Corporation 1995 Stock Option Plan.
*10.19 GeoTel Communications Corporation 1993 Restricted Stock Purchase Plan.
*10.20 GeoTel Communications Corporation 1996 Employee Stock Purchase Plan.
11.1 Statement Regarding Computation of Net Income (loss) Per Common and Common
Equivalent Share.
*16.1 Letter regarding change in certifying accountant.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Arthur Andersen LLP.
*23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in
Exhibit 5.1).
*24.1 Power of Attorney.
*27.1 Financial Data Schedule.
</TABLE>
- ---------------
* Previously filed.
+ Confidential Treatment Requested.
<PAGE> 1
2,200,000 SHARES
GEOTEL COMMUNICATIONS CORPORATION
Common Stock
($.01 Par Value)
UNDERWRITING AGREEMENT
November , 1996
Alex. Brown & Sons Incorporated
Wessels, Arnold & Henderson, L.L.C.
As Representatives of the
Several Underwriters
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Gentlemen:
GeoTel Communications Corporation, a Delaware corporation (the "Company"),
proposes to sell to the several underwriters (the "Underwriters") named in
Schedule I hereto for whom you are acting as representatives (the
"Representatives") an aggregate of 2,200,000 shares of the Company's Common
Stock, $.01 par value (the "Firm Shares"). The respective amounts of the Firm
Shares to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. The Company and certain shareholders of the
Company (the "Selling Shareholders") also propose to sell at the Underwriters'
option an aggregate of up to 330,000 additional shares of the Company's Common
Stock (the "Option Shares") as set forth below. The maximum number of Option
Shares to be sold by the Company and the Selling Shareholders are set forth
opposite their names on Schedule II hereto. The Company and the Selling
Shareholders are sometimes referred to herein collectively as the "Sellers."
As the Representatives, you have advised the Company and the Selling
Shareholders (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata portion
of the Option Shares if you elect to exercise the over-allotment option in whole
or in part for the accounts of the several Underwriters. The Firm Shares and the
Option Shares (to the extent the aforementioned option is exercised) are herein
collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling
Shareholders.
(a) The Company represents and warrants as follows:
(i) A registration statement on Form S-1 (File No. 333-13263) with
respect to the Shares has been carefully prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as
amended (the "Act"), and the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the
"Commission") thereunder and has been filed with the Commission. Copies
of such registration statement, including any amendments thereto, the
preliminary prospectuses (meeting the requirements of the Rules and
Regulations) contained therein and the exhibits, financial
<PAGE> 2
statements and schedules, as finally amended and revised, have
heretofore been delivered by the Company to you. Such registration
statement, together with any registration statement filed by the Company
pursuant to Rule 462(b) of the Act, herein referred to as the
"Registration Statement," which shall be deemed to include all
information omitted therefrom in reliance upon Rule 430A and contained
in the Prospectus referred to below, has been declared effective by the
Commission under the Act and no post-effective amendment to the
Registration Statement has been filed as of the date of this Agreement.
For purposes of this Agreement, the term "Prospectus" means (a) the form
of prospectus first filed with the Commission pursuant to Rule 424(b) or
(b) the last preliminary prospectus included in the Registration
Statement filed prior to the time it becomes effective or filed pursuant
to Rule 424(a) under the Act that is delivered by the Company to the
Underwriters for delivery to purchasers of the Shares, together with the
term sheet or abbreviated term sheet filed with the Commission pursuant
to Rule 424(b)(7) under the Act. Each preliminary prospectus included in
the Registration Statement prior to the time it becomes effective is
herein referred to as a "Preliminary Prospectus."
(ii) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement. The
Company is duly qualified to transact business in all jurisdictions in
which the conduct of its business requires such qualification, except
where the failure so to qualify would not have a material adverse effect
on the earnings, business, management, properties, assets, operations or
condition (financial or otherwise) of the Company. There is no
corporation, partnership, joint venture or other entity in which the
Company has, directly or indirectly, any equity interest.
(iii) The outstanding shares of Common Stock of the Company,
including all shares to be sold by the Selling Shareholders, have been
duly authorized and validly issued and are fully paid and
non-assessable; the portion of the Shares to be issued and sold by the
Company have been duly authorized and when issued and paid for as
contemplated herein will be validly issued, fully paid and
non-assessable; and no preemptive rights of shareholders exist with
respect to any of the Shares or the issue and sale thereof. Neither the
filing of the Registration Statement nor the offering or sale of the
Shares as contemplated by this Agreement gives rise to any rights, other
than those which have been waived or satisfied, for or relating to the
registration of any shares of Common Stock.
(iv) The information set forth under the caption "Capitalization"
in the Prospectus is true and correct as of the dates indicated in the
information included under such caption. All of the Shares conform to
the description thereof contained in the Registration Statement. The
form of certificates for the Shares conforms to the corporate law of the
jurisdiction of the Company's incorporation.
(v) The Commission has not issued an order preventing or suspending
the use of any Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration
Statement contains, and the Prospectus and any amendments or supplements
thereto will contain, all statements which are required to be stated
therein by, and in all respects conform or will conform, as the case may
be, to the requirements of, the Act and the Rules and Regulations. The
Registration Statement and any amendment thereto do not contain, and
will not contain, any untrue statement of a material fact and do not
omit, and will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The
Prospectus and any amendments and supplements thereto do not contain,
and will not contain, any untrue statement of material fact and do not
omit, and will not omit, to state any material fact required to be
stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made,
2
<PAGE> 3
not misleading; provided, however, that the Company makes no
representations or warranties as to information contained in or omitted
from the Registration Statement or the Prospectus, or any such amendment
or supplement, in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of any Underwriter
through the Representatives specifically for use in the preparation
thereof.
(vi) The financial statements of the Company, together with related
notes as set forth in the Registration Statement, present fairly the
financial position and the results of operations and cash flows of the
Company at the indicated dates and for the indicated periods. Such
financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied throughout the
periods involved, and all adjustments necessary for a fair presentation
of results for such periods have been made. The summary financial and
statistical data included in the Registration Statement presents fairly
the information shown therein and such data has been compiled on a basis
consistent with the financial statements presented therein and the books
and records of the Company.
(vii) Each of Coopers & Lybrand L.L.C. and Arthur Andersen LLP, who
have certified certain of the financial statements filed with the
Commission as part of the Registration Statement, are independent public
accountants as required by the Act and the Rules and Regulations.
(viii) There is no action, suit, claim or proceeding pending or, to
the knowledge of the Company, threatened against the Company before any
court or administrative agency or otherwise which if determined
adversely to the Company might result in any material adverse change in
the earnings, business, management, properties, assets, operations or
condition (financial or otherwise) of the Company or prevent the
consummation of the transactions contemplated hereby, except as set
forth in the Registration Statement.
(ix) The Company has good and marketable title to all of the
properties and assets reflected in the financial statements (or as
described in the Registration Statement) hereinabove described, subject
to no lien, mortgage, pledge, charge or encumbrance of any kind except
those reflected in such financial statements (or as described in the
Registration Statement) or which are not material in amount. The Company
occupies its leased properties under valid and binding leases conforming
to the description thereof set forth in the Registration Statement.
(x) The Company has filed all federal, state, local and foreign
income tax returns which has been required to be filed and has paid all
taxes indicated by said returns and all assessments received by it to
the extent that such taxes have become due, except for amounts which are
not material to the financial condition of the Company. All tax
liabilities have been adequately provided for in the financial
statements of the Company, except for amounts which are not material to
the financial condition of the Company.
(xi) Since the respective dates as of which information is given in
the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the earnings,
business, management, properties, assets, operations or condition
(financial or otherwise) of the Company, whether or not occurring in the
ordinary course of business, and there has not been any material
transaction entered into by the Company or any material transaction that
is probable of being entered into by the Company, other than
transactions in the ordinary course of business and changes and
transactions described in the Registration Statement, as it may be
amended or supplemented. The Company does not have any material
contingent obligations which are not disclosed in the Company's
financial statements which are included in the Registration Statement.
3
<PAGE> 4
(xii) The Company is not and with the giving of notice or lapse of
time, or both, will not be in violation of or in default under its
Certificate of Incorporation or By-laws or under any agreement, lease,
contract, indenture or other instrument or obligation to which it is a
party or by which it or any of its properties is bound and which default
is of material significance in respect of the business, management,
properties, assets, operations or condition (financial or otherwise) of
the Company. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated and the fulfillment
of the terms hereof will not conflict with or result in a breach of any
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to
which the Company is a party, or of the Certificate of Incorporation or
By-laws of the Company or any order, rule or regulation applicable to
the Company of any court or of any regulatory body or administrative
agency or other governmental body having jurisdiction.
(xiii) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and
delivery by the Company of this Agreement and the consummation of the
transactions herein contemplated (except such additional steps as may be
required by the National Association of Securities Dealers, Inc. (the
"NASD") or such additional steps as may be necessary to qualify the
Shares for public offering by the Underwriters under state securities or
Blue Sky laws) has been obtained or made and is in full force and
effect.
(xiv) The Company holds all material licenses, certificates and
permits from governmental authorities which are necessary to the conduct
of its business; and, to the Company's knowledge, the Company has not
infringed any patents, patent rights, trade names, trademarks or
copyrights, which infringement is material to the business of the
Company.
(xv) Neither the Company, nor to the Company's knowledge, any of
its affiliates, has taken or may take, directly or indirectly, any
action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate
the sale or resale of the Shares.
(xvi) The Company is not, and after giving effect to the issuance
of the Shares hereunder will not be, an "investment company" within the
meaning of such term under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the rules and regulations of the
Commission thereunder.
(xvii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (A)
transactions are executed in accordance with management's general or
specific authorization; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (C) access to assets is permitted only in accordance with
management's general or specific authorization; and (D) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.
(xviii) The Company carries, or is covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of its
business and the value of its properties and as is customary for
companies engaged in similar industries.
(xix) The Company confirms as of the date hereof that it is in
compliance with all provisions of Section 1 of Laws of Florida, Chapter
92-198, An Act Relating to Disclosure of doing Business with Cuba, and
the Company further agrees that if it commences engaging in business
with the government of Cuba or with any person or affiliate located in
Cuba after
4
<PAGE> 5
the date the Registration Statement becomes or has become effective with
the Commission or with the Florida Department of Banking and Finance
(the "Department"), whichever date is later, or if the information
reported or incorporated by reference in the Prospectus, if any,
concerning the Company's business with Cuba or with any person or
affiliate located in Cuba changes in any material way, the Company will
provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
(xx) The Company owns or possesses adequate licenses or other
rights to use all patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names,
copyrights, trade secrets and know-how or other information
(collectively "Intellectual Property") described in the Prospectus as
owned or used by it or which is necessary for the conduct of its
business as now conducted or proposed to be conducted as described in
the Prospectus. To the Company's knowledge, none of the Company's
products, services or Intellectual Property infringes or conflicts with
the rights or claims of others. The Company is not aware of any
infringement of any of the Company's Intellectual Property rights by any
third party which could have a material adverse effect on the earnings,
business, management, properties, assets, operations or condition
(financial or otherwise) of the Company.
(xxi) Except as otherwise set forth in the Prospectus, there are no
material legal, governmental, regulatory or administrative proceedings
pending to which the Company is a party or to which any of its property
is subject and, to the Company's knowledge, no such proceedings are
threatened or contemplated.
(xxii) No contract or document of a character required to be
described in the Registration Statement or the Prospectus or to be filed
as an exhibit to the Registration Statement is not so described or filed
as required.
(b) Each of the Selling Shareholders severally represents and warrants
as follows:
(i) Such Selling Shareholder now has and at any Option Closing Date
(as such date is hereinafter defined) will have good and marketable
title to any Option Shares to be sold by such Selling Shareholder, free
and clear of any liens, encumbrances, equities and claims, and full
right, power and authority to effect the sale and delivery of such
Option Shares; and upon the delivery of and payment for such Option
Shares pursuant to this Agreement, the Underwriters will acquire good
and marketable title thereto, free and clear of any liens, encumbrances,
equities and claims.
(ii) Such Selling Shareholder has full right, power and authority
to execute and deliver this Agreement and the Power of Attorney and
Custodian Agreement referred to below and to perform such Selling
Shareholder's obligations under such documents. The execution and
delivery of this Agreement, the Power of Attorney and the Custodian
Agreement, the consummation by such Selling Shareholder of the
transactions herein and therein contemplated and the fulfillment by such
Selling Shareholder of the terms hereof and thereof will not require any
consent, approval, authorization or order of or declaration or filing
with any court, regulatory body, administrative agency or other
governmental body (except as may be required under the Act, state
securities laws or Blue Sky laws) and will not result in a breach of any
of the terms and provisions of, or constitute a default under,
organizational documents of such Selling Shareholder, if not an
individual, or any indenture, mortgage, deed of trust or other agreement
or instrument to which such Selling Shareholder is a party, or of any
order, rule or regulation applicable to such Selling Shareholder of any
court or of any regulatory body or administrative agency or other
governmental body having jurisdiction.
(iii) Such Selling Shareholder has not taken and will not take,
directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to
5
<PAGE> 6
cause or result in the stabilization or manipulation of the price of the
Common Stock of the Company and, other than as permitted by the Act, the
Selling Shareholder will not distribute any prospectus or other offering
material in connection with the offering of the Shares.
(iv) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties of
the Company contained herein or the information contained in the
Registration Statement, such Selling Shareholder has no reason to
believe that the representations and warranties of the Company contained
in this Section 1 are not true and correct, is familiar with the
Registration Statement and has no knowledge of any material fact,
condition or information not disclosed in the Registration Statement
which has adversely affected or may reasonably be expected to adversely
affect the business of the Company; and the sale of any Option Shares by
such Selling Shareholder pursuant hereto is not prompted by any
information concerning the Company which is not set forth in the
Registration Statement. The information pertaining to such Selling
Shareholder under the caption "Principal and Selling Stockholders" in
the Prospectus is complete and accurate in all material respects.
2. Purchase, Sale and Delivery of the Shares.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the
Company agrees to sell to the Underwriters and each Underwriter agrees,
severally and not jointly, to purchase, at a price of $ per share, the
number of Firm Shares set forth opposite the name of each Underwriter in
Schedule I hereof, subject to adjustment in accordance with Section 9
hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made in
same day funds by wire transfer or certified or bank cashier's checks drawn
to the order of the Company against delivery of certificates therefor to
the Representatives for the several accounts of the Underwriters. Such
payment and delivery are to be made at the offices of Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland, at 10:00
a.m., Baltimore time, on the third business day after the date of this
Agreement or at such other time and date not later than five business days
thereafter as you and the Company shall agree upon, such time and date
being herein referred to as the "Closing Date." (As used herein, "business
day" means a day on which the New York Stock Exchange is open for trading
and on which banks in New York are open for business and not permitted by
law or executive order to be closed.) The certificates for the Firm Shares
will be delivered in such denominations and in such registrations as the
Representatives request in writing not later than the second full business
day prior to the Closing Date, and will be made available for inspection by
the Representatives at least one business day prior to the Closing Date.
(c) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth,
the Company and the Selling Shareholders listed on Schedule II hereto
hereby grant an option to the several Underwriters to purchase the Option
Shares at the price per share as set forth in the first paragraph of this
Section 2. The maximum number of Option Shares to be sold by the Company
and such Selling Shareholders is set forth opposite their respective names
on Schedule II hereto. The option granted hereby may be exercised in whole
or in part by giving written notice (i) at any time before the Closing Date
and (ii) only once thereafter within 30 days after the date of this
Agreement, by you, as Representatives of the several Underwriters, to the
Company and the Custodian setting forth the number of Option Shares as to
which the several Underwriters are exercising the option, the names and
denominations in which the Option Shares are to be registered and the time
and date at which such certificates are to be delivered. If the option
granted hereby is exercised in part, the respective number of Option Shares
to be sold by the Company and each of the Selling Shareholders listed in
Schedule II hereto shall be determined on a pro rata basis in accordance
6
<PAGE> 7
with the percentages set forth opposite their names on Schedule II hereto,
adjusted by you in such manner as to avoid fractional shares. The time and
date at which certificates for Option Shares are to be delivered shall be
determined by the Representatives but shall not be earlier than three nor
later than 10 full business days after the exercise of such option, nor in
any event prior to the Closing Date (such time and date being herein
referred to as the "Option Closing Date"). If the date of exercise of the
option is three or more days before the Closing Date, the notice of
exercise shall set the Closing Date as the Option Closing Date. The number
of Option Shares to be purchased by each Underwriter shall be in the same
proportion to the total number of Option Shares being purchased as the
number of Firm Shares being purchased by such Underwriter bears to the
total number of Firm Shares, adjusted by you in such manner as to avoid
fractional shares. The option with respect to the Option Shares granted
hereunder may be exercised only to cover over-allotments in the sale of the
Firm Shares by the Underwriters. You, as Representatives of the several
Underwriters, may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent,
if any, that the option is exercised, payment for the Option Shares shall
be made on the Option Closing Date in New York Clearing House funds by
certified or bank cashier's check drawn to the order of the Company for the
Option Shares to be sold by it and to the order of "GeoTel Communications
Corporation, as Custodian" for the Option Shares to be sold by the Selling
Shareholders listed on Schedule II against delivery of certificates
therefor at the offices of Alex. Brown & Sons Incorporated, 135 East
Baltimore Street, Baltimore, Maryland.
(d) Certificates in negotiable form for the total number of the Option
Shares to be sold hereunder by the Selling Shareholders have been placed in
custody with the Company as custodian (the "Custodian") pursuant to the
Custodian Agreement executed by each Selling Shareholder for delivery of
any Option Shares to be sold hereunder by the Selling Shareholders. Each of
the Selling Shareholders specifically agrees that any Option Shares
represented by the certificates held in custody for the Selling
Shareholders under the Custodian Agreement are subject to the interests of
the Underwriters hereunder, that the arrangements made by the Selling
Shareholders for such custody are to that extent irrevocable, and that the
obligations of the Selling Shareholders hereunder shall not be terminable
by any act or deed of the Selling Shareholders (or by any other person,
firm or corporation including the Company, the Custodian or the
Underwriters) or by operation of law (including the death of an individual
Selling Shareholder or the dissolution of a corporate Selling Shareholder)
or by the occurrence of any other event or events, except as set forth in
the Custodian Agreement. If any such event should occur prior to the
delivery to the Underwriters of the Option Shares hereunder, certificates
for the Option Shares shall be delivered by the Custodian in accordance
with the terms and conditions of this Agreement as if such event has not
occurred. The Custodian is authorized to receive and acknowledge receipt of
the proceeds of sale of the Option Shares held by it against delivery of
such Option Shares.
3. Offering by the Underwriters.
It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it
advisable to do so. The Firm Shares are to be initially offered to the
public at the initial public offering price set forth in the Prospectus.
The Representatives may from time to time thereafter change the public
offering price and other selling terms. To the extent, if at all, that any
Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with
a Master Agreement Among Underwriters entered into by you and the several
other Underwriters.
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<PAGE> 8
4. Covenants of the Company and the Selling Shareholders.
(a) The Company covenants and agrees with the several Underwriters
that:
(i) The Company will (A) use its best efforts to cause the
Registration Statement to become effective or, if the procedure in Rule
430A of the Rules and Regulations is followed, to prepare and timely
file with the Commission under Rule 424(b) of the Rules and Regulations
a Prospectus in a form approved by the Representatives containing
information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and
Regulations, and (B) not file any amendment to the Registration
Statement or supplement to the Prospectus of which the Representatives
shall not previously have been advised and furnished with a copy or to
which the Representatives shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations.
(ii) The Company will advise the Representatives promptly (A) when
the Registration Statement or any post-effective amendment thereto shall
have become effective, (B) of receipt of any comments from the
Commission, (C) of any request of the Commission for amendment of the
Registration Statement or for supplement to the Prospectus or for any
additional information, and (D) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
the use of the Prospectus or of the institution of any proceedings for
that purpose. The Company will use its best efforts to prevent the
issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if
issued.
(iii) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of
such jurisdictions as the Representatives may reasonably have designated
in writing and will make such applications, file such documents, and
furnish such information as may be reasonably required for that purpose,
provided the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction where it is not now so qualified or required to file such a
consent. The Company will, from time to time, prepare and file such
statements, reports and other documents as are or may be required to
continue such qualifications in effect for so long a period as the
Representatives may reasonably request for distribution of the Shares.
(iv) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company
will deliver to, or upon the order of, the Representatives during the
period when delivery of a Prospectus is required under the Act, as many
copies of the Prospectus in final form, or as thereafter amended or
supplemented, as the Representatives may reasonably request. The Company
will deliver to the Representatives, at or before the Closing Date, four
signed copies of the Registration Statement and all amendments thereto,
including all exhibits filed therewith, and will deliver to the
Representatives such number of copies of the Registration Statement
(including such number of copies of the exhibits filed therewith that
may reasonably be requested), and of all amendments thereto, as the
Representatives may reasonably request.
(v) The Company will comply with the Act and the Rules and
Regulations, and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission
thereunder, so as to permit the completion of the distribution of the
Shares as contemplated in this Agreement and the Prospectus. If during
the period in which a prospectus is required by law to be delivered by
an Underwriter or dealer any event shall occur as a result of which, in
the judgment of the Company or in the reasonable opinion of the
Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the
circumstances
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<PAGE> 9
existing at the time the Prospectus is delivered to a purchaser, not
misleading, or, if it is necessary at any time to amend or supplement
the Prospectus to comply with any law, the Company promptly will either
(A) prepare and file with the Commission an appropriate amendment to the
Registration Statement or supplement to the Prospectus or (B) prepare
and file with the Commission an appropriate filing under the Exchange
Act which shall be incorporated by reference in the Prospectus, so that
the Prospectus as so amended or supplemented will not, in the light of
the circumstances when it is so delivered, be misleading, or so that the
Prospectus will comply with the law.
(vi) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not
later than 15 months after the effective date of the Registration
Statement, an earnings statement (which need not be audited) in
reasonable detail, covering a period of at least 12 consecutive months
beginning after the effective date of the Registration Statement, which
earnings statement shall satisfy the requirements of Section 11(a) of
the Act and Rule 158 of the Rules and Regulations and will advise you in
writing when such statement has been so made available.
(vii) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company
to its shareholders or filed with any securities exchange pursuant to
the requirements of such exchange or with the Commission pursuant to the
Act or the Exchange Act. The Company will deliver to the Representatives
similar reports with respect to significant subsidiaries, as that term
is defined in the Rules and Regulations, which are not consolidated in
the Company's financial statements.
(viii) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other securities convertible
into or exchangeable or exercisable for shares of Common Stock or
derivative of Common Stock (or agreement for such) will be made for a
period of 180 days after the date of this Agreement, directly or
indirectly, by the Company otherwise than hereunder or with the prior
written consent of Alex. Brown & Sons Incorporated, except that the
Company may, without such consent, (A) issue shares upon the exercise of
options outstanding on the date of this Agreement issued pursuant to its
1995 Stock Option Plan, (B) issue shares of Common Stock upon the
exercise of stock options and purchase rights granted after the date
hereof under the 1995 Stock Option Plan and the 1996 Employee Stock
Purchase Plan and (C) issue shares of Common Stock in respect of the
Company's acquisition of the stock or assets of another entity so long
as the shares so issued by the Company may not be resold until 180 days
after the date of this Agreement. The Company shall not file with the
Commission any registration statements (including without limitation any
registration statements on Form S-8 or any successor form) with respect
to any stock option, stock purchase, restricted stock or other similar
plans until at least 90 days following the date of this Agreement.
(ix) The Company will use its best efforts to have its Common Stock
authorized for inclusion on the Nasdaq National Market.
(x) The Company has caused each officer and director and specific
shareholders of the Company to furnish to you, on or prior to the date
of this Agreement, a letter or letters, in form and substance
satisfactory to the Underwriters, pursuant to which each such person
shall agree not to offer, sell, sell short or otherwise dispose of any
shares of Common Stock of the Company or other capital stock of the
Company, or any other securities convertible, exchangeable or
exercisable for Common Stock or derivative of Common Stock owned by such
person or request the registration for the offer or sale of any of the
foregoing (or as to which such person has the right to direct the
disposition of) for a period of 180 days after the date of this
Agreement, directly or indirectly, except with the prior written consent
of Alex. Brown & Sons Incorporated ("Lockup Agreements").
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<PAGE> 10
(xi) The Company shall apply the net proceeds of its sale of the
Shares as set forth in the Prospectus and shall file such reports with
the Commission with respect to the sale of the Shares and the
application of the proceeds therefrom as may be required in accordance
with Rule 463 under the Act.
(xii) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Shares in such a manner as
would require the Company to register as an investment company under the
1940 Act.
(xiii) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for
the Common Stock.
(xiv) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might
reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
(b) Each of the Selling Shareholders covenants and agrees with the
several Underwriters that:
(i) No offering, sale, short sale or other disposition of any
shares of Common Stock of the Company or other capital stock of the
Company or other securities convertible, exchangeable or exercisable for
Common Stock or derivative of Common Stock owned by the Selling
Shareholder or request the registration for the offer or sale of any of
the foregoing (or as to which the Selling Shareholder has the right to
direct the disposition of) will be made for a period of 180 days after
the date of this Agreement, directly or indirectly, by such Selling
Shareholder otherwise than hereunder or with the prior written consent
of Alex. Brown & Sons Incorporated.
(ii) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 and the Interest and Dividend Tax Compliance
Act of 1983 with respect to the transactions herein contemplated, each
of the Selling Shareholders agrees to deliver to you prior to or at the
Closing Date a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
(iii) Such Selling Shareholder will not take, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any securities of the
Company.
5. Costs and Expenses.
The Company will pay all costs, expenses and fees incident to the
performance of the obligations of the Sellers under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and disbursements of counsel for the Company and the
Selling Shareholders; the cost of printing and delivering to, or as requested
by, the Underwriters copies of the Registration Statement, Preliminary
Prospectuses, the Prospectus, this Agreement, the Underwriters' Selling
Memorandum, the Underwriters' Invitation Letter, the Listing Application, the
Custodian Agreement and related Power of Attorney, the Blue Sky Survey and any
supplements or amendments thereto; the filing fees of the Commission; the filing
fees and expenses (including legal fees and disbursements) incident to securing
any required review by the NASD of the terms of the sale of the Shares; the
Listing Fee of the Nasdaq National Market; and the expenses, including the fees
and disbursements of counsel for the Underwriters, incurred in connection with
the qualification of the Shares under state securities or Blue Sky laws. To the
extent, if at all, that any of the Selling Shareholders engage special legal
counsel to represent them in connection with this offering, the fees and
expenses of such counsel shall be borne by such Selling Shareholders. Any
transfer taxes imposed on the sale of the Shares to the several Underwriters
will be paid by the
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<PAGE> 11
Sellers pro rata. The Sellers shall not, however, be required to pay for any of
the Underwriters expenses (other than those related to qualification under NASD
regulation and state securities or Blue Sky laws) except that, if this Agreement
shall not be consummated because the conditions in Section 6 hereof are not
satisfied, or because this Agreement is terminated by the Representatives
pursuant to Section 11 hereof, or by reason of any failure, refusal or inability
on the part of the Company or the Selling Shareholders to perform any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on their part to be performed, unless such failure to satisfy
said condition or to comply with said terms be due to the default or omission of
any Underwriter, then the Company shall reimburse the several Underwriters for
reasonable out-of-pocket expenses, including fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and proposing to
market the Shares or in contemplation of performing their obligations hereunder;
but the Company and the Selling Shareholders shall not in any event be liable to
any of the several Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Shares.
6. Conditions to Obligations of the Underwriters.
The several obligations of the Underwriters to purchase the Firm Shares on
the Closing Date and the Option Shares, if any, on the Option Closing Date are
subject to the accuracy, as of the Closing Date or the Option Closing Date, as
the case may be, of the representations and warranties of the Company and the
Selling Shareholders contained herein, and to the performance by the Company and
the Selling Shareholders of their covenants and obligations hereunder and to the
following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by
Rule 424 and Rule 430A of the Rules and Regulations shall have been made,
and any request of the Commission for additional information (to be
included in the Registration Statement or otherwise) shall have been
disclosed to the Representatives and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the
Registration Statement, as amended from time to time, shall have been
issued and no proceedings for that purpose shall have been taken or, to the
knowledge of the Company or the Selling Shareholders, shall be contemplated
by the Commission and no injunction, restraining order, or order of any
nature by a federal or state court of competent jurisdiction shall have
been issued as of the Closing Date which would prevent the issuance of the
Shares.
(b) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Hutchins, Wheeler &
Dittmar, A Professional Corporation, counsel for the Company and the
Selling Shareholders, dated the Closing Date or the Option Closing Date, as
the case may be, addressed to the Underwriters (and stating that it may be
relied upon by counsel to the Underwriters) to the effect that:
(i) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own or lease its properties and
conduct its business as described in the Registration Statement; and the
Company is duly qualified to transact business in each of the
jurisdictions listed on Schedule III attached hereto based solely upon
certificates from the respective Secretary of State in such
jurisdictions.
(ii) The Company has authorized and outstanding capital stock as
set forth under the caption "Capitalization" in the Prospectus other
than changes resulting from the exercise of options outstanding as of
the date of the Prospectus and described therein; the authorized shares
of the Company's Common Stock have been duly authorized; the outstanding
shares of the Company's Common Stock, including the Option Shares to be
sold by the Selling Shareholders, have been duly authorized and validly
issued and are fully paid and non-assessable; all of the Shares conform,
in all material respects, to the
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<PAGE> 12
description thereof contained in the Prospectus under the caption
"Description of Capital Stock -- Common Stock"; the certificates for the
Shares, assuming they are in the form filed with the Commission, are in
due and proper form; the shares of Common Stock, including the Option
Shares, if any, to be sold by the Company pursuant to this Agreement
have been duly authorized and will be validly issued, fully paid and
non-assessable when issued and paid for as contemplated by this
Agreement; and no preemptive rights of shareholders exist pursuant to
the Company's charter or by-laws or any agreement to which the Company
is a party with respect to any of the Shares or the issue or sale
thereof.
(iii) Except as described in or contemplated by the Prospectus, to
the knowledge of such counsel, there are no outstanding securities of
the Company convertible or exchangeable into any shares of capital stock
of the Company and there are no outstanding options or warrants
obligating the Company to issue any shares of its capital stock or any
securities convertible or exchangeable into any shares of such stock;
and except as described in the Prospectus, to the knowledge of such
counsel, no holder of any securities of the Company or any other person
has the right, contractual or otherwise, which has not been satisfied or
effectively waived, to require registration under the Act of any shares
of Common Stock or other securities of the Company.
(iv) We have been advised by the Commission that the Registration
Statement has become effective under the Act and, to the knowledge of
such counsel, no stop order proceedings with respect thereto have been
instituted or are pending or threatened under the Act.
(v) The Registration Statement, the Prospectus and each amendment
or supplement thereto comply as to form in all material respects with
the requirements of the Act and the applicable Rules and Regulations
thereunder (except that such counsel need express no opinion as to the
financial statements, schedules and other financial or statistical
information included therein).
(vi) The statements under the captions "Risk Factors -- Shares
Eligible for Future Sale; Registration Rights," "Risk Factors -- Certain
Anti-Takeover Provisions Affecting Stockholders," "Management -- Stock
Plans," "Management -- Executive Incentive Program,"
"Management -- Limitation of Liability; Indemnification of Directors and
Officers," "Certain Transactions -- Certain Stock Transactions,"
"Description of Capital Stock" and "Shares Eligible for Future Sale" in
the Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of law, fairly and correctly
summarize and present in all material respects the information called
for with respect to such documents and matters.
(vii) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or
described in the Registration Statement or the Prospectus which are not
so filed or described as required, and such contracts and documents as
are summarized in the Registration Statement or the Prospectus are
fairly summarized in all material respects.
(viii) Such counsel knows of no material legal or governmental
proceedings pending or threatened against the Company except as set
forth in the Prospectus.
(ix) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not conflict
with or result in a breach of any of the terms or provisions of, or
constitute a default under, the Certificate of Incorporation or By-laws
of the Company, or any agreement or instrument listed as an Exhibit to
the Registration Statement.
(x) This Agreement has been duly authorized, executed and delivered
by the Company.
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<PAGE> 13
(xi) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and
delivery of this Agreement and the consummation of the transactions
herein contemplated (other than as may be required by the NASD or as
required by state securities and Blue Sky laws, as to which such counsel
need express no opinion) except such as have been obtained or made,
specifying the same.
(xii) The Company is not, and will not become, as a result of the
consummation of the transactions contemplated by this Agreement, and
application of the net proceeds therefrom as described in the
Prospectus, required to register as an investment company under the 1940
Act.
(xiii) Each of this Agreement, the Custodian Agreement and the
related Power of Attorney has been duly authorized, executed and
delivered by or on behalf of each of the Selling Shareholders.
(xiv) Each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as required by
state securities and Blue Sky laws, as to which such counsel need
express no opinion), to sell, assign, transfer and deliver the portion
of the Option Shares to be sold by such Selling Shareholder under this
Agreement.
(xv) The Custodian Agreement and the Power of Attorney executed and
delivered by each Selling Shareholder are valid, binding and irrevocable
instruments legally sufficient for the purposes intended.
(xvi) The Underwriters (assuming that they are bona fide purchasers
within the meaning of the Uniform Commercial Code) have acquired good
and marketable title to the Option Shares being sold by each Selling
Shareholder on the Option Closing Date, free and clear of all liens,
encumbrances and security interests.
In rendering such opinion, Hutchins, Wheeler & Dittmar, A Professional
Corporation, may rely as to matters governed by the laws of states other than
the Commonwealth of Massachusetts, the Delaware General Corporation Law or
federal laws on local counsel in such jurisdictions and as to the matters set
forth in subparagraphs (xiii), (xiv) and (xv) on opinions of other counsel
representing the respective Selling Shareholders, provided that in each case
Hutchins, Wheeler & Dittmar, A Professional Corporation, shall state that they
believe that they and the Underwriters are justified in relying on the opinions
of such other counsel. In addition to the matters set forth above, such opinion
shall also include a statement to the effect that nothing has come to the
attention of such counsel which leads them to believe that (i) the Registration
Statement, at the time it became effective under the Act (but after giving
effect to any modifications incorporated therein pursuant to Rule 430A under the
Act) and as of the Closing Date or the Option Closing Date, as the case may be,
contained an untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the Prospectus, or any supplement thereto, on the date
it was filed pursuant to Rule 424(b) and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they are made, not
misleading (except that such counsel need express no view as to financial
statements, schedules and other financial and statistical information included
therein). With respect to such statement, Hutchins, Wheeler & Dittmar, A
Professional Corporation, may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(c) The Representatives shall have received from Hale and Dorr,
counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case may be, substantially to the effect
specified in subparagraphs (ii), (iii), (iv) and (xi) of paragraph (b) of
this Section 6, and that the Company is a duly organized and validly
existing corporation
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<PAGE> 14
under the laws of the State of Delaware. In rendering such opinion, Hale
and Dorr may rely as to all matters governed other than by the laws of the
Commonwealth of Massachusetts, the Delaware General Corporation Law or
federal laws, and as to matters relating to the Selling Shareholders, on
the opinion of counsel referred to in paragraph (b) of this Section 6. In
addition to the matters set forth above, such opinion shall also include a
statement to the effect that nothing has come to the attention of such
counsel which leads them to believe that (i) the Registration Statement, or
any amendment thereto, as of the time it became effective under the Act
(but after giving effect to any modifications incorporated therein pursuant
to Rule 430A under the Act), as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (ii) the
Prospectus, or any supplement thereto, on the date it was filed pursuant to
the Rules and Regulations and as of the Closing Date or the Option Closing
Date, as the case may be, contained an untrue statement of a material fact
or omitted to state a material fact, necessary in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading (except that such counsel need express no view as to
financial statements, schedules and other financial information included
therein). With respect to such statement, Hale and Dorr may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(d) The Representatives shall have received at or prior to the Closing
Date from Hale and Dorr a memorandum or summary, in form and substance
satisfactory to the Representatives, with respect to the qualification for
offering and sale by the Underwriters of the Shares under the state
securities or Blue Sky laws of such jurisdictions as the Representatives
may reasonably have designated to the Company.
(e) You shall have received, on each of the date hereof, the Closing
Date and the Option Closing Date, as the case may be, a letter dated the
date hereof, the Closing Date or the Option Closing Date, as the case may
be, in form and substance satisfactory to you, of Coopers & Lybrand L.L.C.
confirming that they are independent public accountants within the meaning
of the Act and the applicable published Rules and Regulations thereunder
and stating that in their opinion the financial statements and schedules
examined by them and included in the Registration Statement comply in form
in all material respects with the applicable accounting requirements of the
Act and the related published Rules and Regulations; and containing such
other statements and information as is ordinarily included in accountants'
"comfort letters" to Underwriters with respect to the financial statements
and certain financial and statistical information contained in the
Registration Statement and Prospectus.
(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of
the President and Chief Executive Officer and the Vice President, Finance
and Chief Financial Officer of the Company to the effect that, as of the
Closing Date or the Option Closing Date, as the case may be, each of them
severally represents as follows:
(i) The Registration Statement has become effective under the Act
and no stop order suspending the effectiveness of the Registrations
Statement has been issued, and no proceedings for such purpose have been
taken or are, to his knowledge, contemplated by the Commission.
(ii) He does not know of any litigation instituted or threatened
against the Company of a character required to be disclosed in the
Registration Statement which is not so disclosed; he does not know of
any material contract required to be filed as an exhibit to the
Registration Statement which is not so filed; and the representations
and warranties of the
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<PAGE> 15
Company contained in Section 1 hereof are true and correct as of the
Closing Date or the Option Closing Date, as the case may be.
(iii) All filings required to have been made pursuant to Rules 424
or 430A under the Act have been made.
(iv) He has carefully examined the Registration Statement and the
Prospectus and, in his opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration
Statement were true and correct in all material respects, and such
Registration Statement and Prospectus did not omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, and since the effective date of the
Registration Statement, no event has occurred which should have been set
forth in a supplement to or an amendment of the Prospectus which has not
been so set forth in such supplement or amendment.
(v) Since the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been any
material adverse change or any development involving a prospective
material adverse change in or affecting the condition (financial or
otherwise) of the Company or the earnings, business, management,
properties, assets, operations or condition (financial or otherwise) of
the Company, whether or not arising in the ordinary course of business.
(g) The Company and, in the case of any Option Closing, the Selling
Shareholders shall have furnished to the Representatives such further
certificates and documents confirming the representations and warranties,
covenants and conditions contained herein and related matters as the
Representatives may reasonably have requested.
(h) The Firm Shares and Option Shares, if any, shall have been
approved for designation upon notice of issuance on the Nasdaq National
Market.
(i) The Lockup Agreements described in Section 4(a)(x) shall be in
full force and effect.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representatives and to Hale and Dorr, counsel for
the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company and the Selling Shareholders of such
termination in writing or by telegram at or prior to the Closing Date or the
Option Closing Date, as the case may be. In such event, the Selling
Shareholders, the Company and the Underwriters shall not be under any obligation
to each other (except to the extent provided in Sections 5 and 8 hereof).
7. Conditions to the Obligations of the Sellers.
The obligations of the Sellers to sell and deliver the portion of the
Shares required to be delivered as and when specified in this Agreement are
subject to the conditions that at the Closing Date or the Option Closing Date,
as the case may be, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and in effect or proceedings
therefor initiated or threatened.
8. Indemnification.
(a) The Company and the Selling Shareholders, jointly and severally,
agree to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of the Act, against
any losses, claims, damages or liabilities to which such Underwriter or any
such controlling person may become subject under the Act or otherwise,
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<PAGE> 16
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any
untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto, or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in the light of
the circumstances under which they were made; and will reimburse each
Underwriter and each such controlling person upon demand for any legal or
other expenses reasonably incurred by such Underwriter and each such
controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding or in responding to a
subpoena or governmental inquiry related to the offering of the Shares,
whether or not such Underwriter or controlling person is a party to any
such action or proceeding; provided, however, that the Company and the
Selling Shareholders will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement, or omission or alleged
omission, made in the Registration Statement, any Preliminary Prospectus,
the Prospectus, or such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by or through
the Representatives specifically for use in the preparation thereof; and
provided further, that the indemnification agreement contained in this
Section 8(a) with respect to any Preliminary Prospectus, or the Prospectus
after it has been amended or supplemented, shall not inure to the benefit
of any Underwriter (or any person controlling such Underwriter) from whom
the person asserting such loss, claim, damage or liability shall have
purchased Shares that are the subject thereof if, after copies thereof have
been delivered by the Company to such Underwriter, such Underwriter shall
have failed to send or give a copy of the final Prospectus or the
Prospectus as then amended or supplemented, as the case may be, to such
person at or prior to the confirmation of said sale of such Shares to such
person, and if such loss, claim, damage or liability would not have arisen
but for such failure. In no event, however, shall the liability of any
Selling Shareholder for indemnification under this Section 8(a) exceed the
lesser of (i) the Selling Shareholder's pro rata portion of such losses,
claims, damages and liabilities, determined by comparing the number of
Shares sold by the Selling Shareholder to the total number of Shares sold
hereunder, and (ii) the proceeds received by such Selling Shareholder from
the Underwriters in the offering. This indemnity agreement will be in
addition to any liability which the Company or the Selling Shareholders may
otherwise have.
(b) Each Underwriter severally and not jointly will indemnify and hold
harmless the Company, each of its directors, each of its officers who have
signed the Registration Statement, the Selling Shareholders and each
person, if any, who controls the Company or the Selling Shareholders within
the meaning of the Act, against any losses, claims, damages or liabilities
to which the Company or any such director, officer, Selling Shareholder or
controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) arise out of or are based upon (i) any untrue statement
or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and will reimburse any legal or
other expenses reasonably incurred by the Company or any such director,
officer, Selling Shareholder or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that each Underwriter will be liable in
each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission has been made
in the Registration Statement, any Preliminary Prospectus, the Prospectus
or such amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by or through the Representa-
16
<PAGE> 17
tives specifically for use in the preparation thereof. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may
be sought pursuant to this Section 8, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought
(the "indemnifying party") in writing. No indemnification provided for in
Section 8(a) or (b) shall be available to any party who shall fail to give
notice as provided in this Section 8(c) if the party to whom notice was not
given was unaware of the proceeding to which such notice would have related
and was materially prejudiced by the failure to give such notice, but the
failure to give such notice shall not relieve the indemnifying party or
parties from any liability which it or they may have to the indemnified
party for contribution or otherwise than on account of the provisions of
Section 8(a) or (b). In case any such proceeding shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party and shall pay as
incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred the fees and
expenses of the counsel retained by the indemnified party in the event (i)
the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to a conflict of interest between
them, or (iii) the indemnifying party shall have failed to assume the
defense and employ counsel acceptable to the indemnified party within a
reasonable period of time after notice of commencement of the action. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees and expenses of more than one separate firm for all
such indemnified parties. Such firm shall be designated in writing by you
in the case of parties indemnified pursuant to Section 8(a) and by the
Company and the Selling Shareholders in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but,
if settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the prior
written consent of the indemnified party, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action or
proceeding of which indemnification may be sought hereunder (whether or not
any indemnified party is an actual or potential party to such claim, action
or proceeding) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action or proceeding.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Shareholders on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted
by applicable law, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Company
17
<PAGE> 18
and the Selling Shareholders on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Selling Shareholders
on the one hand and the Underwriters on the other shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company and the Selling Shareholders
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of
the Prospectus. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Selling Shareholders
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this
Section 8(d) were determined by pro rata allocation (even if the
Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this Section 8(d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) referred to
above in this Section 8(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8(d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation, and (iii) no
Selling Shareholder shall be required to contribute any amount in excess of
the proceeds received by such Selling Shareholder from the Underwriters in
the offering. The Underwriters' obligations in this Section 8(d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 8 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any
such proceeding in which such other contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 8 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 8 and the
representations and warranties of the Company and the Selling Shareholders
set forth in this Agreement shall remain operative and in full force and
effect, regardless of (i) any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter, the Company, its
directors or officers or any persons controlling the Company, (ii)
acceptance of any Shares and payment therefor hereunder, and (iii) any
termination of this Agreement. A successor to any Underwriter, or to the
Company, its directors or officers, or any person controlling the Company,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 8.
18
<PAGE> 19
9. Default by Underwriters.
If on the Closing Date or the Option Closing Date, as the case may be, any
Underwriter shall fail to purchase and pay for the portion of the Shares which
such Underwriter has agreed to purchase and pay for on such date (otherwise than
by reason of any default on the part of the Company or a Selling Shareholder),
you, as Representatives of the Underwriters, shall use your reasonable efforts
to procure within 36 hours thereafter one or more of the other Underwriters, or
any others, to purchase from the Company and the Selling Shareholders such
amounts as may be agreed upon and upon the terms set forth herein, the Firm
Shares or Option Shares, as the case may be, which the defaulting Underwriter or
Underwriters failed to purchase. If during such 36 hours you, as such
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the Firm Shares or Option Shares, as the case may be, agreed to be
purchased by the defaulting Underwriter or Underwriters, then (a) if the
aggregate number of shares with respect to which such default shall occur does
not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Firm Shares or Option Shares, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Shares or
Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of shares of
Firm Shares or Option Shares, as the case may be, with respect to which such
default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case
may be, covered hereby, the Company and the Selling Shareholders or you as the
Representatives of the Underwriters will have the right, by written notice given
within the next 36-hour period to the parties to this Agreement, to terminate
this Agreement without liability on the part of the non-defaulting Underwriters
or of the Company or of the Selling Shareholders except to the extent provided
in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representatives, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting Underwriter. Any action taken under this
Section 9 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
10. Notices.
All communications hereunder shall be in writing and, except as otherwise
provided herein, will be mailed, delivered, telecopied or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 101 Federal Street, Boston, Massachusetts 02110, Attention: R.
William Burgess, Jr., with a copy to Alex. Brown & Sons Incorporated, 135 East
Baltimore Street, Baltimore, Maryland 21202, Attention: General Counsel; and if
to the Company or the Selling Shareholders, to:
GeoTel Communications Corporation
25 Porter Road
Littleton, Massachusetts 01460
Attention: President
11. Termination.
This Agreement may be terminated by you by notice to the Sellers as
follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m.
on the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse
change or any development involving a prospective material
19
<PAGE> 20
adverse change in or affecting the condition (financial or otherwise) of
the Company or the earnings, business, management, properties, assets,
operations or condition (financial or otherwise) of the Company, whether or
not arising in the ordinary course of business, (ii) any outbreak or
escalation of hostilities or declaration of war or national emergency or
other national or international calamity or crisis or change in economic or
political conditions in the United States if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the
financial markets of the United States would, in your reasonable judgment,
make it impracticable to market the Shares or to enforce contracts for the
sale of the Shares, (iii) suspension of trading in securities generally on
the New York Stock Exchange, the American Stock Exchange or the Nasdaq
National Market or limitation on prices (other than limitations on hours or
numbers of days of trading) for securities on any such exchange or market,
(iv) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court or other governmental
authority which in your opinion materially and adversely affects or may
materially and adversely affect the business or operations of the Company,
(v) declaration of a banking moratorium by United States or New York State
authorities, (vi) the suspension of trading of the Company's Common Stock
by the Commission on the Nasdaq National Market, or (vii) the taking of any
action by any governmental body or agency in respect of its monetary or
fiscal affairs which in your reasonable opinion has a material adverse
effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
12. Successors.
This Agreement has been and is made solely for the benefit of the
Underwriters, the Company and the Selling Shareholders and their respective
successors, executors, administrators, heirs and assigns, and the officers,
directors and controlling persons referred to herein, and no other person will
have any right or obligation hereunder. No purchaser of any of the Shares from
any Underwriter shall be deemed a successor or assign merely because of such
purchase.
13. Information Provided by Underwriters.
The Company, the Selling Shareholders and the Underwriters acknowledge and
agree that the only information furnished or to be furnished by any Underwriter
to the Company for inclusion in any Preliminary Prospectus, Prospectus or the
Registration Statement consists of the information set forth in the last
paragraph on the front cover page (insofar as such information relates to the
Underwriters), legends required by Item 502(d) of Regulation S-K under the Act
and the information under the caption "Underwriting" in the Prospectus.
14. Miscellaneous.
The reimbursement, indemnification and contribution agreements contained in
this Agreement and the representations, warranties and covenants in this
Agreement shall remain in full force and effect regardless of (a) any
termination of this Agreement, (b) any investigation made by or on behalf of any
Underwriter or controlling person thereof, or by or on behalf of the Company or
its directors or officers, and (c) delivery of and payment for the Shares under
this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholders, the
Company and the several Underwriters in accordance with its terms.
20
<PAGE> 21
Any person executing and delivering this Agreement as Attorney-in-Fact for
a Selling Shareholder represents by so doing that he has been duly appointed as
Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and
binding Power of Attorney which authorizes such Attorney-in-Fact to take such
action.
Very truly yours,
GEOTEL COMMUNICATIONS CORPORATION
By ...................................
JOHN C. THIBAULT, PRESIDENT
SELLING SHAREHOLDERS LISTED ON
SCHEDULE II
By ...................................
TIMOTHY J. ALLEN, ATTORNEY-IN-FACT
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
WESSELS, ARNOLD & HENDERSON, L.L.C.
As Representatives of the several
Underwriters listed on Schedule I
By: Alex. Brown & Sons Incorporated
By: ................................
AUTHORIZED OFFICER
21
<PAGE> 22
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF FIRM
SHARES
UNDERWRITER TO BE PURCHASED
----------- ---------------
<S> <C>
Alex. Brown & Sons Incorporated..........................
Wessels, Arnold & Henderson, L.L.C.......................
---------
Total............................................... 2,200,000
=========
</TABLE>
S-1
<PAGE> 23
SCHEDULE II
SCHEDULE OF OPTION SHARES
<TABLE>
<CAPTION>
MAXIMUM NUMBER
OF OPTION PERCENTAGE OF
SHARES TOTAL NUMBER OF
NAME OF SELLER TO BE SOLD OPTION SHARES
-------------- -------------- ---------------
<S> <C> <C>
GeoTel Communications Corporation.......... 265,000 80.3030%
G. Wayne Andrews........................... 50,000 15.1515
John C. Thibault........................... 15,000 4.5455
Total............................ 330,000 100%
=======
</TABLE>
S-2
<PAGE> 24
SCHEDULE III
FOREIGN QUALIFICATIONS
Massachusetts
Georgia
Illinois
Texas
Virginia
S-3
<PAGE> 1
Confidential Material Omitted and Filed Separately with the Securities
and Exchange Commission.
* denotes omissions.
EXHIBIT 10.4
DEVELOPMENT/LICENSE AGREEMENT
-----------------------------
Agreement made this 4th day of March 1994 between GeoTel Communications
Corporation, a corporation with its principal place of business at 25 Porter
Road, Littleton, Massachusetts 01460 ("Licensee") and DANAR Corporation, a
corporation with its principal place of business at 1608 NE 179th Street,
Seattle, Washington 98155 ("Licensor").
In consideration of the mutual covenants contained herein, the parties
agree as follows:
1. LICENSE GRANT. Subject to the terms and conditions of this
Agreement, Licensor hereby grants to Licensee a perpetual, worldwide,
non-exclusive license to use the software program(s) (the "Program") identified
on Exhibit A attached hereto. Licensee will receive all machine readable source
code for the Program and may modify the Program or combine it with other
software, provided that the portions of such derivative software incorporating
the Program shall remain subject to the provisions hereof. Usage of the Program
by Licensee will be limited to any application developed by licensee that
incorporates the Program in a value added manner and where the Program does not
constitute the predominant/primary market focus of the application. Licensee has
the right to enter into licensing and/or sub-licensing agreements with
customers, vars, distributors and strategic partners for Licensee's developed
applications that contain the Program, without restriction so long as usage of
the Program by such entities is as defined herein and the Programs source code
is not disclosed.
2. MATERIALS FURNISHED. Licensor shall furnish Licensee with one (1)
copy of the machine readable source code for the Program and one (1) copy of
Licensor's standard user documentation for the Program (the "Documentation").
Licensee shall have the right to duplicate, in whole or in part, the Program or
the Documentation in either its original form or incorporated within Licensee's
products or documentation. Licensor shall also furnish Licensee with source code
for Licensor's entire portfolio of SS7 software for possible future use by
Licensee under the terms herein.
3. CONFIDENTIALITY. Licensee acknowledges that the Program and the
Documentation (collectively the "Licensed Material") constitute valuable and
proprietary information of Licensor and that the entire right, title and
interest in and to the Licensed Material, together with all copyright and other
rights related thereto, shall at all time reside with Licensor. Licensee may
disclose the functionality and architecture of the Licensed Materials in
conjunction with its normal business operations. Licensee will not disclose
source code. Release of source code by licensee to any third party either
intentionally or otherwise constitutes a preach of this agreement Licensor may,
upon such violation terminate this agreement without recourse if violation is
not remedied within 30 days. Licensee has the right to remove or revise any
legends or notices affixed to the Licensed Material.
4. DEVELOPMENT SCOPE AND PAYMENT SCHEDULE. Licensor agrees to commence
a best efforts development program that delivers the following by May 1, 1994:
a.) a modified version of the Program consisting of ANSI MTP, ANSI SCCP
and CCITT TCAP as required by the AT&T document dated May 1, 1993 titled AT&T
Intelligent Call Processing Service - SS7 Network Interface Specifications for a
two-link combined linkset implementation, including co-operative interface
design with Licensee's engineers for the interface between the SS7 stack and the
TCP/IP stack for Licensee's application.
b.) Provide one week of on-site testing and integration support for
AT&T qualification and certification testing of the Licensee's application at a
to-be-defined AT&T location.
c.) Provide complete documentation for the modified Program.
d.) Provide training at DANAR Corporation on system design and
capabilities for a period not to exceed two (2) weeks. (training can be on
Licensee's site if agreement is reached on expenses.)
<PAGE> 2
In consideration for the deliverables defined above, the Licensee agrees to the
following payment schedule:
i.) $20,000 upon start of work.
ii.) $20,000 upon delivery of acceptable: SCCP source code;
Test program to demonstrate
SCCP source code;
Release notes for above.
iii.) $20,000 upon delivery of acceptable: TCAP source code;
Test program to demonstrate
TCAP source code;
Release notes for above.
iv.) $20,000 upon delivery of acceptable: Gateway API source code;
Test program to demonstrate
Gateway API source code;
Release notes for above.
v.) $20,000 upon: Successful completion of
AT&T compatibility testing;
Delivery of final Program
source code with all
bug fixes;
Delivery of final
documentation.
5. Royalty Fee and payment. Licensee shall pay Licensor the one time
royalty License fee of $*. The payment schedule is as follows:
a.) $* on March 1, 1995
b.) $* on June 30, 1995
c.) $* on September 30, 1995
one time royalty represents the entire amount paid for the perpetual
License described in Paragraph 1. Licensee has no limitations to the number of
copies it may distribute. These payments will not be made if deliverables
described in Paragraph 4 are not completely accepted by 12/31/94.
6. INFRINGEMENT. Licensor shall defend Licensee against a claim that
the modified Program, when used within the scope of the License granted herein,
infringes a U.S. patent, copyright or right to license. Licensor shall pay all
costs and damages finally awarded as a result of such a claim, provided that (a)
Licensee immediately notifies Licensor of such claim, (b) Licensor has sole
control on the defense and settlement thereof, and (c) such claim does not arise
as a result of Licensee's modification of the Program or use of the Program in
connection with other software. If such a claim occurs or in Licensor's opinion
is likely to occur, Licensor will obtain for Licensee the right to continue to
use the Program or modify the Program so that it becomes non-infringing.
Licensor warrants that it has the right to enter into this agreement and can
deliver clear title to grant the License rights described herein.
7. WARRANTY AND LIMITATION OF WARRANTY AND REMEDY. Licensor warrants
that for a period of six (6) months starting on January 1, 1995 for the modified
Program and for a period of three (3) years from date of receipt by Licensee for
each CCS7 Attachment card (the "Hardware") shall comply with Licensor's
specifications as defined in Appendix B. Upon receipt of notice from Licensee
during such period that the Program fails to comply with such specifications,
Licensor shall make best efforts to provide programming and related services to
correct such errors and defects in a timely manner. Upon receipt of notice from
Licensee during such period that the Hardware fails to comply with such
specifications, Licensor shall repair or replace the defective component within
45 days of receipt of such failed component. Any and all shipment costs will be
paid by Licensee.
8. LIMITATION OF LIABILITY. LICENSOR'S LIABILITY FOR DAMAGES HEREUNDER,
WHETHER FOR BREACH OF WARRANTY OR CONTRACT, TORT (INCLUDING NEGLIGENCE) OR
* Portions have been omitted for confidential treatment.
2
<PAGE> 3
OTHERWISE, BUT EXCLUDING INFRINGEMENT, SHALL IN NO EVENT EXCEED THE AMOUNT OF
THE LICENSE FEE PAID BY LICENSEE. IN NO EVENT WILL LICENSOR HAVE ANY LIABILITY
FOR SPECIAL, INDIRECT, CONSEQUENTIAL, PUNITIVE OR INCIDENTAL DAMAGES OR FOR LOST
PROFITS OR SAVINGS, EVEN IF LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY
THEREOF.
9. MAINTENANCE. Licensee agrees to purchase a minimum of one (1)
year of annual support maintenance for a fee of $* starting on July 1, 1995.
This maintenance shall include, but not be limited to software updates, bug
fixes, telephone support, problem determination, and on-site support (at
Licensee's expense). Licensor shall provide maintenance services for a period
of five (5) years so long as continuous maintenance is kept in force by
Licensee. Licensee will be entitled to all future modifications and
enhancements to Program as long as maintenance is in force.
10. HARDWARE PRICING AND NEW TECHNOLOGY. Licensee will purchase from
Licensor the Hardware products required to support the Program. Pricing is as
follows:
Quantity 1-4 * per card
Quantity 5-35 * per card
Quantity 36-200 * per card
Quantity 200+ * per card
Licensee will provide a four (4) quarter non-binding forecast to Licensor on a
quarterly basis. Licensee will place non-cancelable purchase orders on a
quarterly calendar basis. Lead time will be 90 days. Licensor will deliver to
Licensee a version of the Hardware and Program that conforms with the IBM AT bus
specification which requires no modifications to the Licensee's software
application external to the supplied SS7 program no latter than June 1, 1995.
Pricing is FOB Seattle, WA exclusive of taxes, insurance, shipping and duties.
11. MANUFACTURING RIGHTS. Licensee will be granted full and complete
manufacturing rights and License to the Hardware upon the following occurrence:
a.) A change of the majority ownership of Licensor occurs. In the event
Licensee evokes this clause upon change of ownership, Licensee will pay to
Licensor a royalty of $200.00 per card for the first quantity of 500 Hardware
cards the Licensee produces. Licensee retains the right to continue product
procurement of Hardware product through new majority ownership upon change of
ownership
b.) Licensor files or has filed against it court action for the purpose
of bankruptcy or liquidation.
c. Licensor fails to meet delivery of Hardware against an accepted
purchase order within the 90 day lead time for delivery.
All of Licensor's related documentation, bill of materials, vendor listings,
mechanical drawings and schematics for the Hardware will be on file at Licensees
premises. These documents will be delivered to Licensee no latter than 12/31/94.
Release of these documents by licensee to any third party either intentionally
or otherwise constitutes a preach of this agreement. Licensor may, upon such
violation terminate this agreement without recourse if violation is not remedied
within 30 days.
12. MISCELLANEOUS PROVISIONS.
a.) Licensee shall have the right to assign the rights granted
hereunder if a change in the majority ownership in Licensee occurs or upon the
sale of all or substantially all of the assets of Licensee.
* Portions have been omitted for confidential treatment.
3
<PAGE> 4
b.) Licensor shall have the right to assign the rights granted
hereunder if a change in the majority ownership in Licensor occurs or upon the
sale of all or substantially all of the assets of Licensor. Licensee retains
the rights defined in section 11(a).
c.) Licensee shall have until April 1, 1994 to evaluate the
Product. If Licensee determines the Product does not perform to specification or
meet the requirements of Licensee's application then this entire agreement will
be void. Any payments made to Licensor will be forfeited by Licensee.
d.) All notices given hereunder shall be in writing addressed to
the other party at its address set forth in the preamble hereof, to the
attention of its President in the case of Licensee and to its President in the
case of Licensor.
e.) If any provision hereof is held to be unenforceable for any
reason, such determination shall not affect the validity or enforceability of
the remaining provision hereof. Licensor shall not be responsible for any
failure to fulfill its obligations hereunder due to reasons beyond its control.
f.) This Agreement (i) shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, (ii) shall be
binding upon and insure to the benefit of the parties and their respective
successors and assigns, subject to the restriction on transfer set forth in
Subparagraph 12 (a) hereof, (iii) constitutes the entire agreement between the
parties concerning the subject matter hereof and supersedes any prior or
contemporaneous agreements, understandings, proposals, promises and
representations in connection therewith, and (iv) may be amended, modified,
waived or revoked only by a written instrument executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal in duplicate originals as of the date first written above.
GEOTEL COMMUNICATIONS CORPORATION DANAR CORPORATION
By: By:
------------------------------- ------------------------------------
Title: Title:
------------------------------- ------------------------------------
4
<PAGE> 5
5
<PAGE> 1
Confidential Material Omitted and Filed Separately with the Securities
and Exchange Commission.
* denotes omissions.
EXHIBIT 10.5
GEOTEL COMMUNICATIONS CORPORATION
AGREEMENT # 20-810816
---------
SOFTWARE LICENSE AND TECHNICAL SUPPORT AGREEMENT
This Agreement is entered into between GeoTel Communications Corporation, a
Delaware corporation with its principal place of business at 25 Porter Road,
Littleton, MA 01460 ("GeoTel") and MCI Telecommunications Corporation, a
Delaware Corporation with a principal place of business at 1801 Pennsylvania
Avenue, NW, Washington, DC 20036 ("Licensee") as of June 17, 1996 (the
"Effective Date").
WHEREAS, GeoTel is in the business of licensing software and related
documentation that provide and support call management services, and further
makes available related technical support, configuration and installation
services, and other support services; and
WHEREAS, GeoTel and Licensee desire to establish the terms and conditions,
including without limitation pricing, pursuant to which Licensee as well as
Licensee Affiliates and Alliance Partners, as such terms are defined below, can
elect to obtain licenses to copies of such GeoTel software and documentation and
further obtain such services, all on a worldwide basis.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
promises set forth below, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. DEFINITIONS
As used throughout this Agreement, the following terms shall have the meanings
set forth below unless otherwise indicated:
1.1 "ACCELERATION FEE" shall have the meaning set forth in Section 11.3 E
(iii).
1.2 "ACCEPTANCE PERIOD" shall have the meaning set forth in Section 7.1.
1.3 "ADDITIONAL ACCEPTANCE PERIOD" shall have the meaning set forth in
Section 7.2.
1.4 "ADDITIONAL SERVICES" shall have the meaning set forth in
Section 11.4.
1.5 "AFFILIATE" of a named party or other entity shall mean a corporation,
partnership, joint venture or other entity controlling, controlled by or under
common control with such party or other entity. Licensee's Affiliates as of the
Effective Date are set forth on Exhibit A ("Affiliates and Alliance Partners")
attached hereto and incorporated herein by this reference.
1.6 "ALLIANCE PARTNER" shall mean any person or legal entity (i) in which
Licensee or
<PAGE> 2
an Affiliate thereof has an equity ownership of at least twenty percent (20%) or
(ii) with which Licensee or an Affiliate thereof has an agreement requiring or
permitting (x) the large-scale licensing of technology to such person or entity
or (y) the exclusive distribution of one or more products or services by such
person or entity. Licensee's Alliance Partners as of the Effective Date are set
forth on Exhibit A.
1.7 "AUTHORIZED PLATFORM" shall mean a central processing unit certified by
GeoTel as capable of running the Programs in conformity with the applicable
Specifications.
1.8 "COMMENCEMENT DATE" shall mean the date on which Licensee receives the
applicable Installation Certificate, as defined below, from GeoTel pursuant to
Section 11.2A.2 in connection with GeoTel's installation of Programs and/or
Designated Computers hereunder.
1.9 "CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
8.1 A.
1.10 "CONTRACT YEAR" shall have the meaning set forth in Section 2.4.
1.11 "CORRECTION PERIOD" shall have the meaning set forth in
Section 7.1.
1.12 "CRITICAL SITUATION" shall have the meaning set forth in Section 11.1
B 1(i).
1.13 "CURRENT RELEASE" shall have the meaning set forth in
Section 11.1 D.
1.14 "CUSTOMER" shall mean a third party which obtains products and/or
services provided by Licensee which utilize the Program(s).
1.15 "DEFICIENCY ORDER" shall have the meaning set forth in Section 2.4 C1.
1.16 "DEPOSIT AGREEMENT" shall have the meaning set forth in Section 9.2 A
(ix).
1.17 "DESIGNATED COMPUTER" shall mean the central processing unit(s)
designated by Licensee on an Order, whether such central processing unit is
owned, leased or otherwise available for use by Licensee or a Customer, provided
that each such central processing unit is an Authorized Platform.
1.18 "ELIGIBLE PURCHASES" shall have the meaning set forth in Section 2.4
B.
1.19 "ERROR" shall mean any malfunction, error, bug or other deficiency in
a copy of a Program which prevents it from performing substantially in
accordance with the applicable Specifications.
1.20 "ESCROW AGENT" shall have the meaning set forth in Section 13.1.
1.21 "EXTENSION PERIODS" shall have the meaning set forth in
Section 4.1.
<PAGE> 3
1.22 "GEOTEL PERSONNEL" shall mean any and all GeoTel employees, agents,
servants, and subcontractors performing Services hereunder for Licensee, whether
or not the Services are provided on the premises of Licensee, a Customer or a
third party, provided that in no event or for any purpose will these persons be
considered employees of Licensee.
1.23 "INITIAL TERM" shall have the meaning set forth in Section 4.1.
1.24 "INSTALLATION CERTIFICATE" shall have the meaning set forth in Section
11.2 A 2.
1.25 "INSTALLATION DEPOSIT" shall have the meaning set forth in
Section 6.1.
1.26 "LIQUIDATED DAMAGES" shall have the meaning set forth in Section 11.1
B 2.
1.27 "MODERATE SITUATION" shall have the meaning set forth in Section 11.1
B 1(ii).
1.28 "MODIFICATIONS" shall have the meaning set forth in Section
11.3 A.
1.29 "NEW PRODUCTS" shall mean new software products that are separately
priced by GeoTel on its price list published to all existing GeoTel customers
and to potential customers.
1.30 "NORTH AMERICA" shall mean Canada, the fifty states of the United
States, Puerto Rico and the U.S. Virgin Islands, and Mexico.
1.31 "OBJECT CODE" shall mean the Programs assembled or compiled in
magnetic or electronic binary form on software media, which are readable and
usable by machines, but not generally readable by humans without reverse
assembly, reverse compiling, or reverse engineering.
1.32 "ORDER" shall mean the standard purchase order form as utilized from
time to time by Licensee, a Licensee Affiliate or an Alliance Partner, as
applicable, which has been properly signed by a representative of the
procurement function of the purchasing entity authorized to execute such
purchase order on behalf of the entity and shall include all exhibits and
attachments incorporated as part of the purchase order. The term "Order" shall
further include change orders thereto and delivery orders.
1.33 "ORDER ACCEPTANCE" shall have the meaning set forth in Section
6.2.
1.34 "PERFORMANCE CRITERIA" shall mean as to a given Program the applicable
requirements for system availability and through-put, i.e. calls per second in a
given environment, and such other performance criteria or requirements as
specified on Exhibit B ("Performance Criteria") attached hereto and incorporated
herein by this reference.
1.35 "PROGRAM(S)" shall mean the computer software that is owned or
distributed by GeoTel from time to time during the Term, including specifically
but without limitation such
<PAGE> 4
computer software specified on Exhibit C ("Programs and Services Pricing")
attached hereto and incorporated herein by this reference, and in any event
listed in a completed and signed Order referencing this Agreement by number, and
the related User Documentation, and any subsequent Updates and Releases
furnished by GeoTel, whether in printed or machine readable form.
1.36 "RDG" shall have the meaning set forth in Section 3.1 E.
1.37 "RELEASE" shall mean a new version of a Program that contains
significant new functionality and/or features for which there is a published fee
charged to all commercial customers not under Technical Support and which is
identified by the numeral(s) to the right of the first decimal point from the
left of the designation for such Release or as otherwise mutually agreed by the
Parties, with the latest Release having the larger numeral. A Release shall also
include any new or modified related User Documentation.
1.38 "SERVICE BUREAU PROGRAMS" shall have the meaning set forth in Section
11.3 E.
1.39 "SERVICES" shall mean, collectively, the Technical Support, Support
Services and any other services available and/or obtained by Licensee from time
to time pursuant to this Agreement.
1.40 "SEVERITY LEVELS" shall have the meaning set forth in Section
11.1 B 1.
1.41 "SOFTWARE DEVELOPMENT SERVICES" shall have the meaning set forth in
Section 11.3 A.
1.42 "SOURCE CODE" shall mean the Programs written in programming
languages, such as C and FORTRAN, including all comments and procedural code
such as job control language statements, in a form intelligible to trained
programmers and capable of being translated into Object Code for operation on
computer equipment through assembly or compiling, and accompanied by
documentation, including without limitation flow charts, schematics, statements
of principles of operations, and architecture standards, describing the data
flows, data structures, and control logic of the Programs.
1.43 "SOURCE CODE ESCROW AGREEMENT" shall have the meaning set forth in
Section 13.1.
1.44 "SOURCE CODE MATERIALS" shall mean, collectively, the Source Code for
the Programs, and any other materials as agreed by the Parties, required to be
on deposit with the Escrow Agent as of the Effective Date pursuant to Section
9.2 A (x) and from time to time on deposit with the Escrow Agent pursuant to
Section 13.2.
1.45 "SPECIFICATIONS" shall mean as to a given Program, collectively the
applicable User Documentation and the Performance Criteria.
<PAGE> 5
1.46 "SUPPORT SERVICES" shall mean the installation, training and other
services more specifically described in Section 11.2.
1.47 "TECHNICAL SPECIFICATIONS" shall have the meaning set forth in Section
11.3 B.
1.48 "TECHNICAL SUPPORT" shall mean the software maintenance and other
related services more specifically described in Section 11.1.
1.49 "TERM" shall have the meaning set forth in Section 4.1.
1.50 "TRANSFEREE CUSTOMER" shall have the meaning set forth in Section
3.2 C.
1.51 "TRUE-UP NOTICE" shall have the meaning set forth in Section
2.4 C 1.
1.52 "UPDATES" shall mean a modification to a Program intended to resolve
any Error in the Program but that does not necessarily include additional
capacity or functionality for the Program and is identified by the numeral(s)
two places to the right of the first decimal point from the left in the
designation for such Update or as otherwise mutually agreed by the Parties, with
the latest Update having the larger numeral. An Update shall also include any
new or modified related User Documentation
1.53 "USER DOCUMENTATION" shall mean any user guides, manuals, operator
guides, installation guides, and other similar materials generally made
available by GeoTel to its licensee end-users of the Programs to facilitate
their use.
1.54 "WARRANTY PERIOD" shall have the meaning set forth in Section 9.2 B.
<PAGE> 6
2. SCOPE; PURCHASES BY AFFILIATES AND ALLIANCE PARTNERS
2.1 SCOPE OF AGREEMENT.
------------------
A. During the Term, any division, segment or other business unit or
group within Licensee, as well as any Licensee Affiliate or Alliance Partner as
provided in this Section 2.1, shall be entitled to license Programs and/or
obtain Technical Support, Support Services, or any other Services available
hereunder from GeoTel on a worldwide basis pursuant to, and subject to, the
terms and conditions of this Agreement, including specifically but without
limitation the volume discounts and pricing afforded hereunder, and the
limitation of liability set forth in Article 10, by issuing Orders for such
Programs and/or Services pursuant to Article 6, but as to any such Order
submitted by an Alliance Partner, subject to the Licensee consent requirement
specified in Section 2.2 A.
B. Exhibit A sets forth a list of Licensee Affiliates and Alliance
Partners as of the Effective Date. Licensee may from time to time notify GeoTel
of changes to said Exhibit A which shall promptly be amended accordingly by the
Parties; provided, however, that the addition of any entity as an Alliance
Partner by virtue of such entity complying with the requirements of Subitems
(ii) (x) or (ii)(y) of Section 1.2 shall be subject to the prior consent of
GeoTel, which consent shall not be unreasonably withheld or delayed. GeoTel
acknowledges and agrees that since Exhibit A may not be a complete list of all
Licensee Affiliates and Alliance Partners at any given time during the Term,
Licensee shall be entitled at any given time to certify in writing to GeoTel
that one or more additional entities not then listed on Exhibit A are Licensee
Affiliates or Alliance Partners and GeoTel shall afford such additional entities
the right to purchase Programs and/or Services as otherwise provided under this
Article 2 pending amendment of Exhibit A, but subject as to any such Alliance
Partner to the Licensee consent specified in Section 2.2 A.
2.2 ORDERS BY AFFILIATES AND ALLIANCE PARTNERS.
A. 1. GeoTel shall not accept any Order submitted against this
Agreement by an Alliance Partner unless: (i) such Order expressly references
this Agreement and this Article 2, and (ii) GeoTel receives the prior express
written consent of Licensee, which consent specifically refers to the proposed
Order, the ordering Alliance Partner, and this Section 2 of this Agreement, and
is signed on behalf of Licensee by both a Senior Vice President of Licensee and
Licensee's Chief Technology Counsel, provided that such consent of Licensee may
be granted or withheld at the sole discretion of Licensee. Under no
circumstances shall Licensee be deemed to be a party to, to have any liability
or obligation whatsoever in connection with, or to be a guarantor of the
obligations under, any Order submitted by an Alliance Partner against this
Agreement as to which Licensee has not provided to GeoTel the prior written
consent required by this Section and which otherwise fails to comply with
Subitem (i) of this Section.
2. Any conforming Order submitted by an Alliance Partner as to
which
<PAGE> 7
Licensee has consented as required pursuant to Section 2.2 A shall be accepted
by GeoTel pursuant to Section 6.2 but subject to Section 2.2 C below.
B. 1. Software programs and services obtained by an Alliance
Partner from GeoTel pursuant to agreement separately negotiated between such
Alliance Partner and GeoTel and not resulting from Section 2.1 A, shall not
accrue to the benefit of, or be credited to, Licensee for purposes of this
Agreement, including without limitation for purposes of Licensee's volume
discount, pricing or Purchase Commitment hereunder, nor shall such Alliance
Partner be afforded the benefit under such separate agreement of the volume
discounts and pricing otherwise available hereunder unless otherwise agreed to
between the Alliance Partner and GeoTel.
2. Software programs and services obtained by a Licensee
Affiliate from GeoTel pursuant to agreement separately negotiated between such
Affiliate and GeoTel and not resulting from Section 2.1 A, shall nonetheless
accrue to the benefit of, and be credited to, Licensee for purposes of
Licensee's volume discount, pricing and Purchase Commitment hereunder, and such
Affiliate shall be entitled to the pricing and volume discounts available
hereunder as to any purchases pursuant to such separate agreement but shall
otherwise not be afforded the benefit of any other terms and conditions
hereunder unless expressly agreed by the Affiliate and GeoTel.
3. Under no circumstances shall Licensee be deemed to be a party
to, to have any liability or obligation whatsoever in connection with, or to be
a guarantor of the obligations of any Alliance Partner or Licensee Affiliate
under any such separate agreement between such Alliance Partner or Affiliate
with GeoTel as referred to in Sections 2.2 B 1 and 2.
C. Notwithstanding the provisions of Sections 2.2 A 2 and 6.2, GeoTel
may nonetheless reject the Order of a Licensee Affiliate or the Order of an
Alliance Partner otherwise consented to by Licensee as required pursuant to
Section 2.2 A 1, where the site of the Designated Computer for use of Programs
is located outside of North America and GeoTel has a reasonable basis to believe
that it will be unable to adequately provide Technical Support for such Programs
in such location, provided that such rejection and reasonable basis are
communicated by GeoTel in writing to the ordering party promptly after receipt
of the Order.
2.3 ACCRUAL OF PURCHASES. All Programs licensed to, and Services
obtained by, any Affiliate or Alliance Partner resulting from Sections 2.1 A or
2.2 B 2 shall accrue to the benefit of, and be credited to, Licensee for
purposes of (i) determining pricing and volume discounts under this Agreement,
and (ii) fulfillment by Licensee of the Purchase Commitment, as defined in
Section 2.4. Nothing herein shall limit the right of Licensee or any Affiliate
or Alliance Partner from obtaining at any time from any third party the same or
similar software and/or services as may be obtained or available hereunder or
obtaining from GeoTel more favorable pricing than the pricing otherwise
available hereunder.
<PAGE> 8
2.4 PURCHASE COMMITMENT; NO OTHER MINIMUM COMMITMENTS.
-------------------------------------------------
A. Purchase Commitment. Licensee agrees that during each of the three
consecutive twelve (12) month periods during the Initial Term, the first such
twelve month period commencing with the Effective Date and each such
consecutive twelve month period being hereinafter referred to as a "Contract
Year", a minimum of * in Eligible Purchases from GeoTel shall be made
pursuant to this Agreement, such minimum purchase obligations for each of the
three Contract Years hereinafter being referred to individually or
collectively, as the context requires, as the "Purchase Commitment" and such
Eligible Purchases being defined and valued as provided in Section 2.4 B.
B. Eligible Purchases. All purchases of licenses for copies of
Programs, Technical Support, Support Services or other Services (except for
Software Development Services pursuant to Section 11.3 and any Additional
Services pursuant to Section 11.4), or any other products, materials, services
or information from GeoTel pursuant to this Agreement, whether by Licensee or
any Licensee Affiliate or Alliance Partner pursuant to Section 2.1 or credited
pursuant to Section 2.2B2 (collectively the "Eligible Purchases"), shall accrue
to the benefit of Licensee to fulfill the Purchase Commitment, including
without limitation all purchases of licenses for copies of Programs used for
demonstration, test or quality assurance purposes. All Eligible Purchases shall
be credited against the Purchase Commitment at the discounted price actually
paid to GeoTel for the Eligible Purchase.
C. Deficiency Payments/Excess Eligible Purchases.
1. GeoTel shall notify Licensee within fifteen (15) days after the
end of each of the three Contract Years as to any deficiency or excess between
the Purchase Commitment for such year and the value of the aggregate Eligible
Purchases actually made during such Contract Year (the "True-up Notice"),
failing the providing of such notice by GeoTel within such time frame as to any
deficiency, Licensee shall be deemed to have fulfilled its Purchase Commitment
for the Contract Year and shall have no further liability or obligation in
connection therewith. Provided that Licensee does not dispute any deficiency
contained in a True-up Notice, Licensee shall, within fifteen (15) days after
receipt of the notice, in fulfillment of the deficiency, either, at its sole
option: (i) pay the deficiency to GeoTel, or (ii) submit itself, and/or have
submitted by one or more Licensee Affiliates or Alliance Partners pursuant to
Section 2.1, to GeoTel one or more Orders for such aggregate quantity of
Eligible Purchases, along with any Installation Deposit required in connection
therewith pursuant to Section 6.1 B, as will be sufficient to fulfill the
deficiency (the "Deficiency Order(s)"). Licensee agrees that: (a) as to any
Program copies obtained pursuant to a Deficiency Order as to which Licensee
Designates to GeoTel an installation site prior to the thirtieth (30th) day
after Order Acceptance, acceptance of such copies shall be determined pursuant
to Article 7, or (b) as to Program copies as to which Licensee does not
designate to GeoTel an installation site by such thirtieth (30th) day from Order
Acceptance, such copies shall be deemed accepted for purposes of Article 7 as of
the ninetieth day after the end of the prior Contract Year, provided that at
such time as Licensee designates to GeoTel an installation site for any such
copy, GeoTel shall provide the required Installation Services at no additional
charge to Licensee.
2. In the event that Licensee does not cure any deficiency for a
Contract Year as required pursuant to Section 2.4 C 1, and GeoTel claims a
breach of this Agreement but does not elect to terminate this Agreement, then
Licensee shall be obligated to pay to GeoTel in connection with such failure no
more than the difference between [ * ], and the value of all Eligible Purchases
made for the Contract Year as to which such deficiency applies. Notwithstanding
the foregoing sentence, in no event can the liability of Licensee pursuant to
this Section 2.4 C 2 exceed the limitation of liability set forth in Section
10.1 (ii). Upon any payment by Licensee pursuant to this Section 2.4 C 2,
Licensee shall be released from and have no further obligation or liability
whatsoever as to the Purchase Commitment for such Contract Year.
3. Any excess of the aggregate value of Eligible Purchases made
during a Contract Year over the Purchase Commitment shall be carried over and
applied against the Purchase Commitments in any subsequent Contract Years.
E. No Other Licensee Minimum Commitments. Except to the extent
expressly set forth in this Section 2.4, Licensee does not otherwise guarantee
that any minimum quantity or dollar volume of Programs and/or Technical
Services, Support Services or other Services will be obtained by Licensee
and/or its Affiliates and Alliance Partners from GeoTel pursuant to this
Agreement or otherwise.
3. PROGRAM LICENSES
3.1 LICENSES GRANTED.
-----------------
A. Upon GeoTel's acceptance of an Order for Programs pursuant to
Article 6, GeoTel grants to Licensee a non-exclusive, fully paid-up (subject to
payment of the applicable license fees as determined pursuant to Article 5),
worldwide, nontransferable (except as otherwise herein provided), license to use
the copies of the Programs covered by such Order and related User Documentation
pursuant to this Agreement, including without limitation as follows:
(i) to use the Programs on the Designated Computer referenced
in the relevant Order or on a backup computer on a temporary basis if the
Designated Computer is inoperative, and in either event on Licensee's premises
or the premises of a Customer:
(x) for Licensee's own internal telecommunications
operations, and in connection with such operations to process the information of
Licensee;
(y) to provide telecommunications and related services to,
and access by Customers, as required during the normal course of providing
Licensee products and/or services, and to process Customer information in
connection therewith; and
(z) to cause or permit a third party to use or operate the
Programs solely for the benefit of Licensee and its Customers, including without
limitation for the purposes set forth in (x) and (y) immediately above, and in
such event on said third party's premises;
(ii) to locate and allow a Customer to use the Programs,
including pursuant to item (iii) immediately below, at its customer call center
locations on the Designated Computer(s) referenced in the relevant Order (or on
a backup computer on a temporary basis if the Designated Computer is
inoperative) solely in connection with such Customer's use of products and/or
services provided by Licensee which in turn utilize the Program(s), provided
that Licensee shall use its reasonable best efforts to ensure compliance by such
Customer with the requirements of Article 8 of this Agreement;
(iii) to copy the Program for archival or backup purposes,
provided that all such archival and backup copies of the Program are subject to
the provisions of this Agreement, and all titles, trademarks, and copyright and
restricted rights notices appearing on the copies of the Programs as received by
Licensee from GeoTel shall be reproduced in such copies;
*Portions have been omitted for confidential treatment.
<PAGE> 9
and
(iv) to use the User Documentation as reasonably necessary in
connection with Licensee's use of the Programs and to further distribute copies
of the User Documentation, including as may be modified by GeoTel at Licensee's
request pursuant to Section 11.2 D, to Customers for use solely in connection
with their use of the Programs and any related Licensee products and/or
services, all at no additional cost or expense to Licensee and/or such
Customers.
B. LIMITED RIGHTS. By virtue of this Agreement, Licensee acquires
only the right to use the Programs as provided in this Article 3 and does not
acquire any other rights or ownership therein.
C. NO DISTRIBUTION RIGHTS. Licensee acknowledges that it is not a
distributor of GeoTel for the Programs, that it has no right to sublicense or
otherwise locate elsewhere any copies of the Programs other than as explicitly
set forth herein, and that it has no right to permit third parties to resell any
Licensee services based upon the Programs.
D. LICENSE TERM. The term of each license for Programs granted
hereunder shall remain in effect perpetually (if not otherwise specified on the
Order), unless terminated as provided in Article 4.
E. CHANGES TO RDG. Upon any change in Licensee's 800 remote data
gateway interface or its commercially available equivalent (the "RDG"), Licensee
will use its reasonable efforts to provide to GeoTel: (i) early notice of such
change to the RDG, (ii) a copy of the changed specifications to the changed RDG
promptly after such specifications become generally commercially available, and
(iii) engineering and technical support to facilitate access by GeoTel to
Licensee's certification lab for purposes of GeoTel obtaining and maintaining
during the Term certification from Licensee that all of the Programs, at the
then most Current Release level, and/or Update level being utilized by Licensee
during the Term, shall function in conformity with the Specifications when
operating and interacting with all Authorized Platforms and Licensee networks.
3.2 TRANSFER.
--------
A. GENERAL RIGHT TO TRANSFER LOCATION. Subject to Section 3.2 B, a
Program may be transferred to a different Designated Computer of like
configuration or the Designated Computer may be transferred to another location,
whether within Licensee's organization, within a Customer's organization, or
among Licensee and its Customers, and in any event without incurring any
additional license fee or other cost directly related to the transfer, provided
that in each case Licensee shall give timely written notice thereof to GeoTel,
and subject to Section 14.7, and provided further that Licensee shall remain
responsible for payment for any Support Services required in connection with any
such transfer.
B. TRANSFER AFTER TERMINATION OF AGREEMENT. Notwithstanding the
provisions of Section 3.2A, during a period of three (3) years from the
expiration or any earlier termination of this Agreement, Licensee may transfer
a licensed copy of a Program once after such expiration or termination to the
site of a Customer who agrees to first commence obtaining products and/or
services provided by Licensee which utilize the Program(s) after the effective
date of such expiration or termination, [*] list price for the Program copy
and subject also to any applicable discount set forth in said Exhibit C, all as
in effect as of the effective date of such expiration or termination. No fee
whatsoever shall be payable by Licensee during such three year period for a
transfer of a licensed copy of a Program from such new Customer site back to a
Licensee site. Except as expressly provided in this Section 3.2B, the transfer
rights of Licensee set forth in Section 3.2A shall otherwise at all times be as
set forth therein, including after the end of the three year period specified
in this Section 3.2B.
* Portions have been omitted for confidential treatment
<PAGE> 10
C. RIGHT TO TRANSFER PROGRAM COPIES TO CUSTOMERS. As to each copy
of a Program licensed by Licensee hereunder, from and after the date five (5)
years from the date of receipt from GeoTel of the Installation Certificate for
the initial version of such copy obtained by Licensee hereunder, Licensee
shall be entitled to transfer the most recent Update or Release for such copy
to any then-existing Licensee Customer ("Transferee Customer") who has been
supported by that copy and/or its replacement Updates and Releases for a
minimum continuous period of five (5) years, and GeoTel shall grant an end-user
license to the Transferee Customer as to such most recent Update or Release
copy, provided that: (i) such Transferee Customer executes as to such copy
GeoTel's then current agreement for end-user licensing for use in providing
internal services or such other terms and conditions as may be mutually agreed
by GeoTel and the Transferee Customer; (ii) if the copy being transferred is
not then subject to Technical Support, the Transferee Customer pays all fees
required to bring such copy to the then-current revision level; (iii) the
Transferee Customer pays for all Services which it obtains, in its sole
discretion, from GeoTel in connection with such transfer; and (iv) no
additional fee shall be charged to the Transferee Customer for such transfer
except that where the Program copy being transferred was being used on a
partitioned Intelligent Call Router that supported multiple Customers,
including the Transferee Customer, then the Transferee Customer shall pay any
additional fee as may be negotiated between the Transferee Customer and GeoTel.
From and after the effective date of transfer of any copy of a Program to a
Transferee Customer, Licensee's license hereunder as to such copy shall be
deemed terminated and Licensee shall have no further obligation or liability
whatsoever in connection with such copy or the terminated license, all
liability thereafter as to such copy being that of the Transferee Customer.
D. NO OTHER TRANSFER OR ASSIGNMENT OF COPIES. Except as otherwise
provided in this Article 3 and Section 14.5, the rights granted herein as to
Program copies are restricted for use solely by Licensee and may not be assigned
or transferred to a third party.
4. TERM; TERMINATION
4.1 TERM. This Agreement shall have an initial term of three (3) years
from the Effective Date (the "Initial Term") after which Initial Term this
Agreement shall automatically renew for consecutive one (1) year periods
("Extension Periods") based upon the terms and conditions then contained in this
Agreement (other than the provisions of Section 2.4 regarding the Purchase
Commitment which shall not be automatically renewed), unless either Party
provides written notice to the other no later than ninety (90) days prior to the
end of the Initial Term or the then-current Extension Period of its intent to
terminate this Agreement in which event this Agreement shall terminate as of the
end of such Initial Term or Extension Period, as applicable. The Initial Term
and any Extension Periods may be collectively referred to in this Agreement as
the "Term".
4.2 TERMINATION OF AGREEMENT. Upon thirty (30) days' prior written notice,
either Party may terminate this Agreement in the event:
(i) that the other Party breaches any of its material obligations
hereunder and fails to cure such breach by the end of such thirty-day period; or
(ii) of either Party's application for or consent to the
appointment of or the taking of possession by a receiver, custodian, trustee or
liquidator of itself or of all or a substantial part of its property; its
general assignment for the benefit of creditors; its commencement of a voluntary
case under the Federal Bankruptcy Code (as now or hereinafter in effect); its
failure to contest in a timely or appropriate manner, or its acquiescence in
writing to, any petition filed against it in an involuntary case under such
Bankruptcy Code, or its liquidation, reorganization or dissolution;
provided, however, that GeoTel agrees that any termination by GeoTel of this
Agreement shall not affect any licenses for Programs previously granted to
Licensee hereunder pursuant to Article 3 unless the underlying breach of this
Agreement provides a separate basis for termination of one or more such licenses
pursuant to Section 4.3 below.
4.3 TERMINATION OF PROGRAM LICENSES.
--------------------------------
A. TERMINATION BY GEOTEL. Upon thirty (30) days' prior written
notice, GeoTel may terminate a license to a copy of a Program granted to
Licensee hereunder only in the event Licensee breaches any of its material
obligations pursuant to Sections 3.1,5.3, 8.1 or 8.2 specifically as to such
copy and Licensee fails to cure such breach by the end of such thirty-day
period; provided, however, that GeoTel agrees that any termination by GeoTel of
the license to
<PAGE> 11
a copy of a Program pursuant to this Section 4.3 A shall not constitute a basis
for termination of either (i) any other license to a Program copy as to which
such breach does not specifically apply or (ii) this Agreement pursuant to
Section 4.2.
B. TERMINATION BY LICENSEE. Licensee may terminate a license to a
copy of a Program granted to License hereunder as provided in Sections 7.2 and
9.2 B.
4.4 EFFECT OF TERMINATION.
----------------------
A. AVAILABLE REMEDIES. Termination of this Agreement or any license
granted hereunder shall not limit either party from pursuing any other remedies
available to it, including injunctive relief.
B. NO EFFECT ON LICENSES. Neither the expiration nor the
termination of this Agreement shall serve to terminate, modify or otherwise
affect any licenses for Programs granted to Licensee hereunder, all of which
licenses shall remain in full force and effect after any such termination or
expiration.
<PAGE> 12
C. Purchase Commitment. As to any termination of this Agreement:
(i) where GeoTel has terminated this Agreement pursuant to
Section 4.2, Licensee shall be obligated to pay to GeoTel in connection with
any resulting failure to fulfill Licensee's obligations pursuant to Section 2.4
no more than the difference between * , and the value of all Eligible Purchases
made from the Effective Date of this Agreement through the effective date of
termination, provided that in no event shall the liability of Licensee pursuant
to this Section 4.4C(i) exceed the limitation of liability set forth in Section
10.1(ii), and upon any payment by Licensee pursuant to this provision, Licensee
shall be released from and have no further obligation or liability whatsoever
pursuant to Section 2.4; and
(ii) where Licensee has terminated this Agreement pursuant to
Section 4.2, Licensee shall be released from and have no further liability or
obligation in connection with, any Purchase Commitment deficiency for a prior
Contract Year, the Purchase Commitment for the then-current Contract Year and
any Purchase Commitment for any subsequent Contract Years.
4.5 RETURN OF PROGRAM UPON TERMINATION. If this Agreement or a license as
to a copy of a Program granted pursuant to this Agreement expires or is
otherwise terminated, each Party shall as to this Agreement or such license, as
applicable: (i) pay to the other Party any related moneys then due and owing,
(ii) cease using the affected Confidential Information of the other Party, and
(iii) certify to the other Party within one month after such expiration or
termination that the Party has destroyed or has returned all affected
Confidential Information; provided, however, that the foregoing shall not apply
to any Program copies and related User Documentation or other Confidential
Information of GeoTel related to the use of such Program copies, and the right
of Licensee and its Customers to continue using the same, under licenses
surviving any expiration or termination of this Agreement pursuant to Section
4.4 B. The foregoing provision applies to the Confidential Information of either
Party and all copies thereof in all forms, partial and complete, in all types of
media and computer memory, and whether or not modified or merged into other
materials.
4.6 SURVIVAL OF PROVISIONS. The Parties agree that the provisions of
Articles 3, 6, 8, 9, 10, 12, and 13, and Sections 4.3, 4.4, 4.5, 4.6, 5.3, 5.4,
5.5, 11.1, 11.2, 11.5, 11.6, 11.7, 11.8 and 14.4 shall survive the expiration or
any earlier termination of this Agreement, along with such other provisions as
would reasonably be expected to survive such expiration or termination.
5. PRICE AND PAYMENT PROVISIONS
5.1 PRICING Licensee shall pay to GeoTel for licenses for Programs,
Technical Support, Support Services and other Services obtained pursuant to this
Agreement the applicable prices determined pursuant to the pricing and discounts
set forth in Exhibit C, but subject to the other requirements of this Article 5.
The pricing and discounts for both the Programs and Services set forth in said
Exhibit C shall be firm for the Term of this Agreement, provided that on any
anniversary of the Effective Date during the Term of this Agreement, GeoTel may,
by providing written notice of the same to Licensee no less than one hundred
twenty (120) days prior to said anniversary date, increase the then-current
license fees for the Programs set forth in Exhibit C by the lesser of (i) five
percent (5%) or (ii) the difference between the then-current license fee for a
Program set forth in Exhibit C and the commercially available list price for
such Program that will be in effect as of said anniversary date. Should GeoTel
at any time make any of the Programs or Services generally commercially
available at a lower price than as then listed in Exhibit C prior to application
of any available discount, then the Exhibit C pricing shall be reduced
accordingly retroactive to the effective date of such lower generally
commercially available prices.
5.2 MOST FAVORED CUSTOMER. GeoTel agrees that the prices charged, and
discounts available, hereunder from time to time for license(s) for the
Programs, or for Technical Support, Support Services or any other materials or
Services provided under this Agreement are and shall be no less favorable than
the prices charged, and discounts made available, to any other customer of
GeoTel for substantially similar volumes of such licenses, services or other
materials under
* Portions have been omitted for confidential treatment.
<PAGE> 13
similar business arrangements. Where GeoTel breaches the foregoing obligation,
the more favorable prices and/or discounts shall apply to Licensee from the date
that the same were made available to such other customer of GeoTel.
5.3 INVOICING. GeoTel's invoices for Programs will be forwarded after the
applicable Commencement Date and, subject to acceptance of Program copies
pursuant to Article 7, are then due and payable net forty five (45) days from
receipt of invoice by Licensee's Vendor Services Department. Unless otherwise
expressly provided herein, GeoTel invoices for Services will be forwarded after
the completion of the applicable Service and the invoices will then be due and
payable net forty five (45) days from receipt of invoice by Licensee's Vendor
Services Department; provided, however, that invoices for Technical Support will
be forwarded to Licensee after commencement of the applicable month of Technical
Support and the invoices will then be due and payable net forty five (45) days
from receipt of invoice by Licensee's Vendor Services Department.
5.4 TAXES. The prices listed in this Agreement are exclusive of sales,
use, value-added, or other federal, state or local taxes or import duties or
tariffs imposed on a purchaser or licensee of by law, which Licensee agrees to
pay. In the event that Licensee provides GeoTel with an applicable direct
payment permit, sale for resale exemption certificate, sales tax exemption
certificate or other applicable exemption certificate, GeoTel agrees that it
will not invoice taxes for any licenses granted in this Agreement, the Support
Services, Technical Support or on Licensee's use of Programs or other materials
or services subject to this Agreement.
5.5 DUTIES. Licensee shall pay any import duties and tariffs incurred as a
result of shipment by GeoTel at Licensee's direction of Programs and User
Documentation to a destination outside the United States.
6. ORDERING; DELIVERY; TITLE AND RISK OF LOSS
6.1 ORDERING.
---------
A. ORDERS. Licensee shall order Programs, Technical Support,
Support Services and any other Services available hereunder by means of
individual Orders. Each such Order shall specify, as applicable, quantity,
price, ship date, delivery date, shipping destination, ship method, and other
details pertaining to the products and services ordered thereunder. The terms of
this Agreement shall be expressly referred to in the Order. The printed
provisions on Orders or attached to Orders shall be deemed deleted with respect
to the Orders placed hereunder.
B. INSTALLATION DEPOSIT. When copies of Programs are being ordered,
License shall further, within forty five (45) days after Order Acceptance
pursuant to Section 6.2, forward to GeoTel a prepayment of one hundred percent
(100%) of the applicable Installation Services fees for such copy, such
prepayment hereinafter being referred to as the "Installation Deposit".
<PAGE> 14
6.2 ORDER ACCEPTANCE. Except as otherwise provided in Section 2.2C as to
certain Affiliate and Alliance Partner Orders, GeoTel shall within fifteen (15)
days after the receipt of an Order from Licensee hereunder accept such Order
("Order Acceptance") by signing and returning the "Vendor Acknowledgment" copy
of the Order to Licensee's Vendor Services Department. In the event GeoTel fails
to so return the Acknowledgment copy of the Order within thirty (30) days from
receipt, Order Acceptance shall nonetheless be deemed to have occurred as of
such thirtieth (30th) day from receipt of the Order by GeoTel.
6.3 ORDER CANCELLATION
------------------
A. RIGHT TO CANCEL. Licensee shall be entitled to cancel any Order
submitted hereunder, in whole or in part, without any penalty, cancellation fee
or other liability of any kind, except as expressly provided in the following
sentence, by providing written notice up until, as to line items in Orders for
the providing of Services, the start of the provision of such Services, and for
line items for copies of Programs in Orders, the applicable Commencement Date.
As to cancellation of line items for copies of Programs in Orders only, GeoTel
shall be entitled to retain the lesser of (i) actual charges incurred by GeoTel
in performing Installation Services up until the effective date of cancellation,
or (ii) the percentage of any applicable Installation Deposit determined as
follows:
<PAGE> 15
Receipt of Cancellation Notice % Installation
- ------------------------------ --------------
by GeoTel Deposit Retained
- --------- ----------------
Before Order Acceptance 0
After Order Acceptance, but before
receipt of Designated Computer
by GeoTel 25
After receipt of Designated Computer
by GeoTel, but before shipment to
installation site 50
After shipment of Designated Computer
by GeoTel but before Commencement Date 75
After Commencement Date 100
B. PORTIONS OF INSTALLATION DEPOSITS RETURNED. Any portion of an
Installation Deposit that GeoTel is not permitted to retain in the event of
cancellation of an Order as to Program copies pursuant to this Section 6.3 shall
be repaid to Licensee within thirty (30) days after the effective date of
cancellation.
C. PORTIONS OF INSTALLATION DEPOSITS RETAINED. Any portion of an
Installation Deposit retained by GeoTel in connection with the cancellation of
any line item for copies of Programs in an Order pursuant to this Section 6.3
shall nonetheless be deemed an "Eligible Purchase" and credited against any
applicable Purchase Commitment. Any portion of an Installation Deposit refunded
to Licensee in connection with any such cancellation, shall not be so credited.
6.4 DELIVERY; TITLE/RISK OF LOSS. Delivery by GeoTel of the combined
Programs/Designated Computers pursuant to Section 11.2 A 3, or of separate
Program, Update or Release copies, shall be made FOB the applicable Licensee or
Customer site as specified in the Order or as otherwise designated by Licensee.
Risk of loss of, or damage to, any of the foregoing items, and title to the
media for any uninstalled Program, Update or Release copies shall pass to
Licensee upon delivery to such applicable Licensee or Customer site.
7. ACCEPTANCE
7.1 ACCEPTANCE PERIOD. Licensee may test Program copies during a thirty
(30) day period (the "Acceptance Period") beginning on the date of receipt by
Licensee of the GeoTel Installation Certificate, as defined in Section 11.2 A.
Licensee may reject the Program copy within the Acceptance Period, or any such
period as extended by mutual agreement of Licensee and GeoTel, for reasons of
the presence of Errors or the failure of the Program copy to perform
<PAGE> 16
in accordance with such other test and acceptance criteria as may be mutually
agreed by the Parties in writing, provided that failure of Licensee to accept or
reject a Program copy within the applicable Acceptance Period shall be deemed
acceptance.
7.2 REJECTION OF PROGRAM COPIES. If any copy of the Programs is rejected,
GeoTel shall have fifteen (15) days from receipt of notice of rejection to
correct the Errors or other nonconformity's at no additional cost to Licensee
(the "Correction Period") and Licensee shall have a new acceptance period of
thirty (30) days from Licensee's receipt of the corrected copy of the Program to
accept or reject the Program as provided above (the "Additional Acceptance
Period"). Should GeoTel either be unable to correct the Errors or other
nonconformity's within such Correction Period or should Licensee again reject
the corrected Program during the Additional Acceptance Period, then Licensee, at
its sole option, shall be entitled to either:
(i) a full refund of any payments made to GeoTel, including but not
limited to any related Installation Deposit, Support Services or other Services,
in connection with the rejected copy, provided, that (x) the full value of the
Eligible Purchases as to which the refunds applied as determined pursuant to
Section 2.4 B shall nonetheless continue to be credited against any applicable
Purchase Commitment, and (y) as of the second time within any rolling sixth
month period that Licensee rejects any Program copy after the Additional
Acceptance Period pursuant to this Section 7.2, Licensee shall further be
entitled, in addition to such refund, to treat such second failure to correct as
a material breach of this Agreement pursuant to Section 4.2 (but without the
further right of GeoTel to cure as otherwise set forth therein), and to
immediately terminate this Agreement by written notice to GeoTel pursuant to
said Section 4.2; or
(ii) prompt replacement of the rejected Program copy with a substitute
acceptable to, and at no additional cost to, Licensee.
7.3 ABATEMENT OF PAYMENT. Licensee's obligation to pay an invoice issued
by GeoTel pursuant to Section 5.3 in connection with any Program copy rejected
pursuant to Section 7.1 shall be abated during the Correction Period and
Additional Acceptance Period provided pursuant to Section 7.2.
8. PROTECTION OF PROGRAMS: CONFIDENTIAL INFORMATION, ENFORCEMENT
8.1 CONFIDENTIALITY.
----------------
A. CONFIDENTIAL INFORMATION. By virtue of this Agreement, the
Parties may have access to, or exchange, information that is confidential to one
another. As used in this Agreement, the term "Confidential Information" shall
mean only such information which: (i) if disclosed in writing or other tangible
form bears an appropriate legend indicating its confidential or proprietary
nature; or (ii) if initially disclosed orally, visually or in other nontangible
form, is identified as confidential or proprietary at the time of disclosure.
Notwithstanding the foregoing, Licensee agrees that any Programs licensed by
GeoTel hereunder, any User Documentation
<PAGE> 17
provided by GeoTel hereunder and any Source Code that may be provided by GeoTel
to Licensee hereunder pursuant to Article 13, shall be deemed the Confidential
Information of Licensor to be treated by Licensee in conformity with the
requirements of this Article 8. Notwithstanding the foregoing, GeoTel agrees
that the existence and terms and conditions of this Agreement, as well as all
Customer information which GeoTel may obtain in the course of performance under
this Agreement, including without limitation in the course of performing any of
the Services, shall be deemed the Confidential Information of Licensee to be
treated by GeoTel in conformity with the requirements of this Article 8.
B. OBLIGATIONS. Each of the Parties agrees that as to any
Confidential Information disclosed to it hereunder:
(i) to use such Confidential Information only in the performance
of this Agreement or as otherwise expressly permitted by this Agreement or by
the disclosing Party (the "Discloser");
(ii) not to make copies of any such Confidential Information or
any part thereof except to the extent otherwise expressly permitted by this
Agreement or by the Discloser;
(iii) not to disclose any such Confidential Information to any
third party using the same degree of care used to protect the confidential or
proprietary information of like importance of the receiving Party ("Recipient"),
but in any case using no less than a reasonable degree of care; provided,
however, that Recipient may disclose Confidential Information received hereunder
to (x) its Affiliates who are bound to protect the received Confidential
Information from unauthorized use and disclosure under the terms of a written
agreement, and (y) to its employees, consultants and agents, and its Affiliates'
employees, consultants and agents, who have a need to know to perform or
exercise rights under this Agreement, and who are bound to protect the received
Confidential Information from unauthorized use and disclosure under the terms of
a written agreement. GeoTel expressly agrees that Licensee shall further be
entitled to disclose the Confidential Information of GeoTel received hereunder
to Customers and prospective Customers and their respective employees,
consultants and agents who have a need to know in connection with the exercise
of the rights set forth in Section 3.1 above or otherwise in connection with use
or the prospective use of Licensee services and products based on use of the
Programs. Confidential Information shall not otherwise be disclosed to any
person without the prior written consent of the Discloser; and
(iv) to return or destroy such Confidential Information and any
copies thereof upon the expiration or earlier termination of this Agreement, or
Program license, as applicable, to the extent, and as required pursuant to,
Section 4.5.
C. EXCEPTIONS. The restrictions set forth in this Article 8 on use
and disclosure of Confidential Information shall not apply to information that:
(i) was publicly known at the time of Discloser's communication
thereof to Recipient;
<PAGE> 18
(ii) becomes publicly known through no fault of Recipient
subsequent to the time of Discloser's communication thereof to Recipient;
(iii) is in Recipient's possession free of any obligation of
confidence at the time of Discloser's communication thereof to Recipient;
(iv) is developed by Recipient independently of and without use
of any of Discloser's Confidential Information or other information that
Discloser disclosed in confidence to any third party;
(v) is rightfully obtained by Recipient from third parties
authorized to make such disclosure without restriction; or
(vi) is identified by Discloser in writing as no longer
proprietary or confidential.
D. DISCLOSURE PER ORDER. In the event Recipient is required by law,
regulation or court order to disclose any of Discloser's Confidential
Information, Recipient will promptly notify Discloser in writing prior to making
any such disclosure in order to facilitate Discloser seeking a protective order
or other appropriate remedy from the proper authority. Recipient agrees to
cooperate with Discloser in seeking such order or other remedy. Recipient
further agrees that if Discloser is not successful in precluding the requesting
legal body from requiring the disclosure of the Confidential Information, it
will furnish only that portion of the Confidential Information which is legally
required and will exercise all reasonable efforts to obtain reliable assurances
that confidential treatment will be accorded the Confidential Information.
E. PUBLICITY. No news, media or other informational releases,
public announcements, public disclosures, advertising or marketing materials
concerning any part or terms and conditions of this Agreement or any of GeoTel's
or Licensee's respective performances hereunder shall be made, issued or
distributed by either Party without the prior written consent of the other
Party, which consent shall not be unreasonably withheld or delayed.
F. SURVIVAL. The provisions of this Article 8 shall survive for a
period of five (5) years beyond the effective date of any expiration or earlier
termination of this Agreement.
<PAGE> 19
8.2 OWNERSHIP OF PROGRAMS.
----------------------
A. Licensee acknowledges that GeoTel claims that: (i) GeoTel is
the owner of the Programs and any copies thereof, and of all copyright, trade
secret, patent, trademark, or other intellectual property rights therein, and
(ii) the ideas and the expressions thereof contained in the Programs are the
confidential and proprietary information and trade secrets of GeoTel.
B. Licensee agrees that physical copies of the Programs, in
firmware, diskette, tape, paper, or other form provided by GeoTel shall remain
the property of GeoTel, and such copies shall be deemed to be on loan to
Licensee during the term of the licenses granted pursuant to this Agreement.
C. Licensee agrees that it will not decompile, disassemble or
attempt in any way to reverse engineer the Programs.
8.3 ENFORCEMENT. Each Party acknowledges that the Confidential Information
of the other Party, including without limitation the Programs and User
Documentation, is valuable and unique to such Party and that disclosure, use or
treatment of the same in breach of the provisions of this Article 8, will result
in irreparable injury to the disclosing Party for which monetary damages alone
would not be an adequate remedy. Therefore, each Party agrees that, in the event
of a breach or threatened breach of the confidentiality or restricted use
provisions of this Article 8 by the other Party, the disclosing Party shall be
entitled to seek specific performance and injunctive or other equitable relief
from a court of competent jurisdiction as a remedy for any such breach or
anticipated breach, and the disclosing Party shall further have no obligation to
post bond or other surety in connection therewith. Any such relief shall be in
addition to and not in lieu of any appropriate available relief in the way of
monetary damages and shall not otherwise limit such Party's other available
rights and remedies.
9. INDEMNITY RE INFRINGEMENT; WARRANTIES; DISCLAIMERS
9.1 WARRANTY OF OWNERSHIP; INDEMNITY RE INFRINGEMENT.
-------------------------------------------------
A. GeoTel warrants and represents that it is the sole owner of all
patent, copyright, trade secret, trademark and other intellectual property
rights in the Programs and User Documentation or, if the Programs or User
Documentation contains third party software or other materials, GeoTel has the
unrestricted right to grant to Licensee all of the licenses and other rights
necessary for complying with this Agreement, and in any event has the full power
and authority to sell, convey, license, and deliver copies of the Programs and
User Documentation free from any liens and encumbrances of all kinds.
B. GeoTel shall at its expense defend or, at its option, settle,
any claim, action or proceeding brought against Licensee and/or any Customer
that any Program, the User Documentation or any services provided by Licensee
and/or any Customer based on the use of the Programs, or the use of any of the
foregoing, infringes a patent, copyright, trade secret,
<PAGE> 20
trademark or other intellectual property right, and shall indemnify and hold
Licensee and its Customers harmless against all losses, damages, liabilities,
expenses and costs incurred and/or awarded against or by Licensee and/or any
Customers in connection with any such claim, action or proceeding. Licensee
shall: (i) notify GeoTel in writing of any such claim promptly after Licensee
becomes aware of the same, (ii) give GeoTel such information and assistance as
reasonably required in connection therewith but at the expense of GeoTel, and
(iii) give GeoTel sole control of the defense of such claim and all negotiations
for the compromise or settlement thereof; provided, however, that the failure of
Licensee to undertake any of the foregoing actions shall not relieve GeoTel of
any liability or obligation it may have under this Section 9.1 except to the
extent that GeoTel has been adversely affected thereby. Notwithstanding Subitem
(iii) in the preceding sentence:
(i) Licensee shall have the right to participate in the
investigation and defense of any such claim, action or proceeding, with separate
counsel chosen and paid for by Licensee; and
(ii) at any time, Licensee may at its own cost and expense
purchase intellectual property or rights thereto from any third party.
C. Without limiting the rights of Licensee pursuant to Section
9.1 F, if the use of any Program, the User Documentation or any service based on
the use of the Programs or User Documentation or any part thereof, is enjoined
in connection with a claim of infringement of any patent, copyright, trade
secret right or other intellectual property right, GeoTel shall, at its sole
expense, take the following actions listed in the order of requirement (but in
no event shall GeoTel be relieved of any obligations of defense and indemnity
hereunder):
(i) obtain for Licensee a license permitting the continued use
of the Program, User Documentation and/or service or such part thereof pursuant
to the terms of this Agreement;
(ii) replace or modify the affected Program, user Documentation
or part thereof, so that it becomes non-infringing, while still complying with
the applicable Specifications and other requirements of this Agreement; or
(iii) if neither of the foregoing can be accomplished without
impacting the economic viability of GeoTel, terminate the license for the
affected Program(s) or User Documentation and promptly refund to Licensee: (x)
the license or other fees paid for the same under this Agreement amortized over
a seven (7) year period commencing as of the Commencement Date for the
applicable Program, and (y) the pro-rated unused portion of any Technical
Support fees paid in connection with the same; provided, however, that the full
value of the Eligible Purchases as to which any refunds pursuant to Subitems (x)
and (y) of this sentence relate, as determined pursuant to Section 2.4 B, shall
nonetheless continue to be deemed "Eligible Purchases" and credited against any
applicable Purchase Commitment pursuant to Section 2.4 C.
<PAGE> 21
D. GeoTel shall have no liability under Section 9.1B for any costs
of defense incurred, or settlement entered into, by Licensee as to an
indemnifiable claim hereunder without GeoTel's prior written consent.
E. GeoTel shall have no liability under this Section 9.1 to the
extent that any claim of infringement is based upon (i) the combination of a
Program with other products, equipment or materials that are either not
furnished or approved by GeoTel, not an Authorized Platform, or where GeoTel
should not reasonably have anticipated such combined use, and provided that in
any event the claim of infringement would not have occurred but for such
combination, (ii) any addition to or modification to the Program, including
without limitation to any new Release of the Program, by any person or entity
other than GeoTel made without GeoTel's consent or concurrence, if such claim of
infringement would not have occurred but for such addition or modification,
(iii) GeoTel furnishing to Licensee any information, data, service or
applications assistance, other than the Services, Programs and the related User
Documentation, if the claim of infringement would not have occurred but for such
information, data, service or applications assistance, or (iv) use of a
superseded Release of the Program beyond the time frame specified in Section
11.1D, provided that a replacement Release has been made available to Licensee
within such timeframe specified in Section 11.1D, that such replacement Release
still complies with the applicable Specifications, and that the claim of
infringement would not have occurred but for Licensee continuing to use such
superseded Release of the Program as opposed to the replacement Release.
F. Upon the receipt by Licensee or any Customer within a Contract
Year of either notice by or on behalf of a third party alleging or asserting any
claims of infringement within the scope of this Section 9.1, service upon
Licensee or any Customer of any legal action or other proceeding instituted by
or on behalf of a third party alleging in whole or in part an infringement
within the scope of this Section 9.1, or the imposition of a temporary
restraining order, or temporary or permanent injunction on Licensee or any
Customer based in whole or in part upon a claim by or on behalf of a third party
of infringement within the scope of this Section 9.1, then, in addition to, and
without limiting any of the other obligations of GeoTel pursuant to this Section
9.1 in connection with any of the foregoing, the Purchase Commitment shall from
the date of receipt of such notice, service of process, or imposition as to
Licensee or any Customer, be waived, and Licensee shall be released from and
have no further obligation or liability in connection therewith, on a day to
day, pro rata basis until such time as such claim, action or other proceeding is
finally resolved, or such temporary restraining order, or temporary or permanent
injunction is finally lifted or dissolved, as applicable, provided that from and
after the ninetieth day without such final resolution, Licensee shall be
entitled, at its option, to then or at any time while such situation continues
unresolved, to treat such failure to resolve any of such events as a material
breach of this Agreement pursuant to Section 4.2 (but without the further right
of GeoTel to cure as otherwise set forth therein), and to immediately terminate
this Agreement by written notice to GeoTel pursuant to said Section 4.2.
G. THE PROVISIONS OF THIS SECTION 9.1 STATE THE EXCLUSIVE LIABILITY
OF GEOTEL, AND THE EXCLUSIVE REMEDY OF LICENSEE, WITH RESPECT TO ANY BREACH OF
THE WARRANTY SET FORTH IN SECTION 9.1 A OR
<PAGE> 22
ANY CLAIM OF INFRINGEMENT OF ANY PATENT, COPYRIGHT, TRADE SECRET, TRADEMARK OR
OTHER INTELLECTUAL PROPERTY RIGHT BY THE PROGRAMS, THE USER DOCUMENTATION, OR
ANY SERVICES PROVIDED BY LICENSEE AND/OR ANY CUSTOMER BASED ON THE USE OF THE
PROGRAMS, OR THE USE OF ANY OF THE FOREGOING.
9.2 OTHER WARRANTIES
----------------
A. GeoTel warrants and represents that:
(i) the Programs delivered hereunder will provide substantially
fault free performance in the processing of date and date dependent data
(including, but not limited to calculating, comparing, and sequencing
operations) from the Effective Date through the year 2100. Upon request, GeoTel
shall provide sufficient evidence to demonstrate adequate testing of the
Programs to meet this requirement;
(ii) it has full power and authority to enter into and perform
this Agreement, and the person signing this Agreement on behalf of GeoTel has
been properly authorized and empowered to enter into this Agreement;
(iii) disputes over specific named Programs or copies thereof
will not interfere with Technical Support or any other Services for Programs or
copies thereof separately licensed and paid for by Licensee;
(iv) no material portion of the Programs is or will be intended,
other than under documented control of Licensee:
(x) at some specific time or on a specific instruction or
occurrence of a given event, to stop, limit or interfere with the operation of
the Programs in conformity with the applicable Specifications, or;
(y) to damage or materially alter or render inaccessible the
Programs, or any other hardware, software or data which the Programs are
designed to process or use, or any other hardware, programs or data attached to,
resident on, or accessible to the system on which the Programs are executed or
stored; and
GeoTel shall be responsible for, indemnify and hold Licensee harmless from any
damages, costs, liabilities, and/or expenses, including attorneys' fees and
other legal costs, arising out of the breach of the foregoing Subitems (x) and
(y);
(v) the Programs licensed hereunder do not contain any feature
which would impair in any way the operation of the Programs including, but not
limited to, software locks or drop-dead devices, date/time expiration codes, or
serial number dependent passwords, and GeoTel further warrants that GeoTel will
not impair the operation of the Programs in any way;
<PAGE> 23
(vi) the Programs, at the then most Current Release level
and/or Update level being utilized by Licensee during the Term, shall at all
times function in conformity with the Specifications when operating and
interacting with all Authorized Platforms and Licensee networks, provided,
however, that where Licensee makes a change in the RDG, then this warranty shall
be abated for a period of ninety (90) days commencing with the effective date of
such change and, subject to Licensee fulfilling its obligation pursuant to
Section 3.1 E, commencing with the ninety first (91st) day from the effective
date of the change to the RDG this warranty shall once again be in full force
and effect as to GeoTel, the Parties expressly agreeing that the foregoing
warranty is intended as a warranty separate from that set forth in Section 9.2
B;
(vii) during the Term, the Programs, at the then most current
Update level and then most Current Release level, will remain competitive with
respect to software made available by other vendors of call routing software;
(viii) it may lawfully grant the licenses for the Programs;
(ix) as of the Effective Date the Deposit Agreement between
GeoTel and Data Securities International, Inc. dated August 25, 1995, in the
form attached hereto as Exhibit G for information purposes only (the "Deposit
Agreement"), is in full force and effect; and
(x) as of the Effective Date, full and complete copies of
GeoTel's then-current Source Code for all of the Programs either then being
licensed to Licensee or otherwise available to Licensee pursuant to this
Agreement along with any other documentation or materials as agreed by the
Parties are held by Data Securities International, Inc. as provided for by, and
subject to, the Deposit Agreement.
B. ADDITIONAL PROGRAM LICENSE WARRANTIES. GeoTel warrants and
represents that for a period of ninety (90) days following the acceptance of a
copy of any Program by Licensee pursuant to Article 7 (the "Warranty Period"),
the copy will be free of Errors when operated on the Authorized Platforms for
such Program. Without limiting any rights or remedies that Licensee may have for
GeoTel's breach of any other warranties set forth in this Section 9.2, in the
event of breach of the foregoing warranty GeoTel shall correct the Error(s)
pursuant to the requirements of Section 11.1 at no additional cost to Licensee,
including without limitation payment to Licensee of Liquidated Damages as
defined and provided in Section 11.1 B 2. Should GeoTel fail to resolve a
Critical Situation in a copy of a Program, as required by Section 11.1 B 1 (i),
by the tenth (10th) day after receipt of notification of the same from Licensee
during the applicable Warranty Period, Licensee can elect, in its sole
discretion either to:
(i) continue to receive such Liquidated Damages until the
Critical Situation is so resolved; or
(ii) at any time from and after the twentieth (20th) day while
such Critical Situation remains unresolved, elect to immediately terminate the
license for such copy and GeoTel shall immediately refund to Licensee all
license fees plus any other moneys paid to GeoTel in
<PAGE> 24
connection with such copy, including but not limited to any fees paid for
Technical Support, Installation Services (including such fees paid as an
Installation Deposit) or other Services in connection therewith, provided,
however, that (x) the full value as determined pursuant to Section 2.4 B of the
Eligible Purchases as to which any refunds pursuant to this Subitem (ii) relate,
including without limitation the terminated license for the Program copy and any
related Services, shall nonetheless continue to be deemed Eligible Purchases and
credited against any applicable Purchase Commitment pursuant to Section 2.4 C,
and (y) as of the second instance within any rolling six (6) month period that
Licensee terminates any license to a copy of a Program pursuant to this Subitem
(ii), Licensee shall further be entitled at its option, and in addition to such
rights of termination, refund and continued crediting against the Purchase
Commitment, to treat such second failure to resolve a Critical Situation as a
material breach of this Agreement pursuant to Section 4.2 (but without the
further right of GeoTel to cure as otherwise set forth therein), and to
immediately terminate this Agreement by written notice to GeoTel pursuant to
said Section 4.2.
C. MEDIA WARRANTY. GeoTel warrants the tapes, diskettes or other
media of the Program copies to be free of defects in materials and workmanship
under normal use during the applicable Warranty Period. During such Warranty
Period, Licensee may return defective media to GeoTel and it will be replaced
without charge within twelve (12) business days of receipt by GeoTel.
D. SERVICES WARRANTY. GeoTel warrants that its Technical Support,
Support Services and any other Services provided hereunder will be performed in
a workmanlike manner and in conformity with the professional standards for
comparable services in the industry, and in compliance with the requirements of
this Agreement. This warranty shall be valid for ninety (90) days from the
completion of the Service. In the event of breach of the foregoing warranty,
GeoTel shall immediately reperform the deficient Service and correct the breach
at no additional cost to Licensee.
<PAGE> 25
9.3 OTHER LIMITATIONS ON WARRANTIES.
--------------------------------
A. No employee or agent of GeoTel is authorized to give a greater
or different warranty than those set forth herein, unless provided by way of an
amendment to this Agreement pursuant to Section 14.11.
B. Portions of the Programs are derived from third-party software
licensed to GeoTel for integration into GeoTel Programs and sublicensing. No
such third party warrants the Programs or any such portion, assumes any
liability regarding use of such portion or the Programs, or undertakes to
furnish any support or information relating to such portion or the Programs,
provided that the foregoing shall not in any manner limit the applicability of
any obligations as to the Programs undertaken by GeoTel pursuant to this
Agreement as to the Programs in their entirety.
C. DISCLAIMERS. THE EXPRESS WARRANTIES SET FORTH IN SECTION 9.1
AND 9.2 ARE THE ONLY WARRANTIES MADE BY GEOTEL WITH RESPECT TO THE PROGRAMS,
SUPPORT SERVICES AND TECHNICAL SUPPORT. GEOTEL MAKES NO OTHER WARRANTIES,
EXPRESS, IMPLIED OR ARISING BY CUSTOM OR TRADE USAGE, AND SPECIFICALLY MAKES NO
WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
10. LIMITATION OF LIABILITY
10.1 LIMITATIONS. The limitations of liability set forth in this Section
10.1 shall not apply to GeoTel's obligations pursuant to Sections 9.1,
9.2 A.(iv) and 11.8. Except as to any breaches by either Party of the provisions
of Article 8 as to which only the limitation of liability set forth in Section
10.1(ii) shall apply:
(i) in no event shall GeoTel or its licensors,or Licensee or its
Customers be liable for any special, incidental, indirect, exemplary, punitive
or consequential damages, or for any lost profits, use, data, business or
revenue, or other lost economic advantage, arising out of or relating to this
Agreement, including without limitation in connection with the performance of
the Programs, Support Services, Technical Support, or any other obligations
relating to this Agreement, whether such claims or asserted damages are based
on breach of contract, strict liability, tort, any federal or state statutory
claim, or any other legal theory, and even if the other Party knew, should have
known, or has been advised of the possibility of such damages; and
(ii) in no event shall either Party's aggregate, cumulative
liability to the other Party in connection with all breaches of this Agreement,
including any breaches of Article 8, as well as any liability of Licensee
pursuant to Section 2.4 C 2 and Section 4.4 C(i), exceed in the aggregate the
net moneys for Program copy licenses and Services (other than Software
Development Services) paid by Licensee from the Effective Date through the date
of the latest breach of this Agreement, but in any event such aggregate,
cumulative liability cap shall not be less than * subject to the following:
(x) in any event, the maximum aggregate, cumulative
recovery established pursuant to this Subitem (ii) available to a Party shall be
net of any and all sums paid by the other Party for any prior breaches of this
Agreement, and as to GeoTel only, net as well of any payments of Licensee
pursuant to Section 2.4 C 2 and Section 4.4 C(i);
(y) the Parties expressly acknowledge and agree that the
foregoing limitation is intended to apply, and shall apply, cumulatively and in
the aggregate to all breaches of this Agreement, and as to Licensee any
liability of Licensee pursuant to Section 2.4 C 2 and Section 4.4 C(i),
falling within the scope of this Subitem (ii) and not separately to each such
breach or as to Licensee, any such liability, and
(z) such aggregate, cumulative limitation shall apply
whether any damages or other liability are (i) characterized as compensatory,
direct, special, incidental, indirect, exemplary, punitive, consequential
damages or otherwise, including without limitation as lost profits, use, data,
business or revenue, or other lost economic advantage, or (ii) asserted under
a theory of breach of contract, strict liability, tort, any federal or state
statutory basis, or any other legal theory or basis, and even if the other Party
knew, should have known, or has been advised of the possibility of such damages.
10.2 MORE FAVORABLE LIMITATIONS. GeoTel agrees that the foregoing
limitations of liability, both separately and in the aggregate, afforded to
Licensee hereunder shall from time to time and at all times during the Term, be
no less favorable than any limitations of liability, offered to, or agreed to,
by GeoTel with any third party. Where GeoTel offers, or agrees to, any such more
favorable limitation(s) of liability with a third party, GeoTel shall
immediately notify Licensee in writing of the same, such more favorable
limitation(s) shall apply retroactively to Licensee from the date that the same
were offered, or otherwise agreed to, and the Parties shall promptly amend this
Agreement accordingly.
10.3 ALLOCATION OF RISKS. The provisions of this Article 10 allocate the
risks under this Agreement between GeoTel and Licensee. GeoTel's pricing
reflects this allocation of risk and the limitations of liability specified
herein.
11. SERVICES
11.1. TECHNICAL SUPPORT SERVICES.
---------------------------
A. During the applicable Warranty Period, GeoTel will provide
Licensee for each copy of the Programs obtained by License hereunder without
additional charge the technical
*Portions have been omitted for Confidential Treatment
<PAGE> 26
support as specified in this Section 11.1 and Section 4 of Exhibit D
("collectively the "Technical Support"), provided, that in the event of conflict
between the terms and conditions of this Section 11.1 and those of said Section
4 of Exhibit D, the terms and conditions of this Section 11.1 shall prevail.
Thereafter, during the Term and after any expiration or earlier termination of
this Agreement during such period as Licensee desires to continue, or obtain,
the same as to each such copy, Licensee shall be entitled to purchase Technical
Support, in its sole discretion, and GeoTel shall be obligated to provide such
Technical Support, upon payment by Licensee pursuant to Article 5 of the
applicable Technical Support fee as determined pursuant to Exhibit C, provided
that where Licensee elects to purchase Technical Support after the expiration or
termination of this Agreement, the applicable Technical Support fee shall be
determined based on Exhibit C as in effect as of the effective date of such
expiration or termination.
B. 1. Upon receipt of notice(s) from Licensee specifying Errors in
the current unaltered Release of the Program copy, and upon receipt of such
additional information as GeoTel may reasonably request, GeoTel will, without
cost to Licensee, resolve situations involving Errors according to the following
Severity Levels as assigned to such Errors by Licensee, provided such notice is
received by GeoTel within the Warranty Period or during the term of the
Technical Support, as the case may be:
(i) CRITICAL SITUATIONS: A "Critical Situation" is defined as a
situation in which an Error materially impacts Licensee's and/or a Customer's
productivity and/or service levels. Upon receipt of notification of a Critical
Situation by the GeoTel support organization, GeoTel will work with Licensee
and/or the Customer on a continuous, 24 hour per-day basis, and resolve the
Critical Situation within five (5) calendar days from such notification. GeoTel
can respond to a Critical Situation through providing an Update, patch, revision
or temporary workaround solution or by replacing the affected Program copy with
a Program copy conforming to the Specifications, and GeoTel shall be deemed to
have "resolved" a Critical Situation if it has either corrected the Error(s) or
moved Licensee and the Customer to either a "Moderate" or "Other Situation"
status, as defined below.
(ii) MODERATE SITUATIONS: A "Moderate Situation" is defined as
a situation in which Licensee's and/or Customer's operations are continuing but
the Error impairs the ability to use one or more functions of, or the
performance of, services based on the Program copy. GeoTel will respond to, and
resolve the Moderate Situation by providing to Licensee an Update, patch,
revision or temporary workaround or by replacing the affected Program copy with
a Program copy conforming to the Specifications and in any event correcting the
Error within fourteen (14) days after receiving notice from Licensee of the
situation.
(iii) OTHER SITUATIONS: In all other instances, GeoTel will
provide a solution to a reported GeoTel Program Error in the time frame
reasonably determined by GeoTel.
Where the resolution provided by GeoTel to either a Moderate Situation, or a
Critical Situation that has been reduced to a Moderate Situation, is not
permanent, then GeoTel shall provide a
<PAGE> 27
permanent solution as a part of the next Update or Release.
2. The Parties agree that it would be difficult to ascertain the
damages which might be incurred by Licensee as the result of the failure of
GeoTel to resolve a Critical Situation in a copy of a Program as required
pursuant to Section 11.1 B.1(i). Therefore, GeoTel acknowledges and agrees that
for each Error giving rise to a Critical Situation as to a copy of a Program
which GeoTel fails to resolve in the manner specified in Section 11.1 B.1(i)
within the required five days from receipt of notification from Licensee of the
Critical Situation as to such copy, GeoTel shall be liable to Licensee by way of
liquidated damages, and not by way of a penalty, for the amount of REDACTED
MATERIAL per day for each day in excess of such five day maximum that GeoTel
fails to resolve each such Error (the "Liquidated Damages"). Any such Liquidated
Damages shall be paid by GeoTel to Licensee, in Licensee's sole discretion, by
way of either: (i) a payment or payments to be made by GeoTel to Licensee at
such intervals during the continuation of any such failure to correct such
Errors as determined in Licensee's sole discretion, or (ii) one or more offsets
against any then outstanding or subsequent invoices submitted by GeoTel to
Licensee under this Agreement, again as determined in Licensee's sole
discretion, until all Liquidated Damages incurred pursuant to this Section are
paid by GeoTel in full, or (iii) a combination of the foregoing methods of
payment until all such Liquidated Damages are paid in full.
C. RESTRICTIONS ON PROVIDING ERROR CORRECTIONS. GeoTel is not
obligated to perform investigation and/or corrections of Errors reasonably found
by GeoTel to be either: (i) in other than a current, unaltered Release, provided
that GeoTel has made a current Release available to Licensee within the
timeframe specified in Section 11.1D and such new Release still complies with
the applicable Specifications; (ii) caused by Licensee's negligence; (iii)
caused by a modification to the Program by any person or entity other than
GeoTel made without GeoTel's consent or concurrence; (iv) use of the Program in
combination with programs either not furnished or approved by GeoTel or
otherwise certified by GeoTel as working in combination with such Program, or
the use of which in such combination should not reasonably have been anticipated
by GeoTel; (v) caused by use of the Program outside the scope of the User
Documentation; or (vi) due to external causes such as, but not limited to, power
failure or electric surges.
D. UPDATES AND RELEASES. Promptly after making the same generally
commercially available or otherwise available to its other licensees of the
Programs, GeoTel will provide Licensee with one (1) complete copy of each new
Release or Update and one (1) copy of the corresponding User Documentation for
each copy of the Program licensed by Licensee and covered by the Update or
Release. Following shipment of the Release materials, the previous Release shall
remain "current" for purposes hereof for a period of one hundred eighty (180)
days; thereafter only the newly delivered Release will be current. Such newly
delivered Release and the immediately prior Release for such period of 180 days
may be referred to collectively hereinafter as the "Current Release". Releases
will only be issued if Licensee has Technical Support in effect. GeoTel shall
have no obligation hereunder to furnish Licensee with separately priced
components to a Program for which Licensee has not obtained a license.
<PAGE> 28
E. RENEWAL/TERMINATION OF TECHNICAL SUPPORT. Each initial term of
Technical Support shall be for a period of one (1) year from the day after the
date of expiration of the Warranty Period and shall automatically renew for
additional, consecutive one-year terms pursuant to the terms and conditions of
this Section 11.1 unless, not less than thirty (30) days prior to the date upon
which the then-current term is due to end, Licensee notifies GeoTel in writing
of its intention to terminate Technical Support in which event Technical Support
shall terminate as of the end of the then-current term of Technical Support. In
addition, Licensee shall be entitled to terminate Technical Support at any time
for a Program copy on thirty (30) days prior written notice to GeoTel, in which
event Licensee shall receive a prorated refund, on a per diem basis, of any
remaining balance of Technical Support fees paid.
F. PRORATED STARTING DATE. GeoTel will prorate Technical Support
fees so that Technical Support for all Programs on a single Designated Computer
or in a single local area network are renewable on the same date, even if all
the Programs or Technical Support were not ordered at the same time. When GeoTel
and Licensee jointly designate such a common renewal date, then renewal and/or
termination pursuant to Section 11.1.E shall take place with reference to that
date.
G. REINSTATEMENT OF TECHNICAL SUPPORT. Licensee may reinstate
Technical Support which has been terminated by payment of a "Reinstatement Fee"
equal to the Technical Support fees that would otherwise have been applicable
pursuant to Exhibit C to the period between the effective date of termination of
Technical Support and the effective date of reinstatement plus payment of the
annual Technical Support fee for the one year period commencing upon the
effective date of reinstatement.
11.2 SUPPORT SERVICES.
----------------
A. Installation Services.
----------------------
1. During the Term Licensee shall purchase for each copy of a
Program obtained hereunder Installation Services as described in this Section
11.2 A and Section 2 of Exhibit D, and GeoTel shall be obligated to provide such
Installation Services upon the ordering of the same by Licensee pursuant to
Section 6.1 at the prices set forth in Exhibit C. Prices set forth in Exhibit C
shall cover Installation Services within North America; Installation Services
for copies of Programs to be installed outside of North America shall be
pursuant to quote from GeoTel.
2. Upon completion of the installation of each Program copy and
associated Designated Computer at Licensee's or Customer's site, such site being
designated in the Order, GeoTel will issue an Installation Certificate
confirming that GeoTel has successfully completed in conformity with the
Specifications, the configuring, installation and testing of the system
comprised of the Program copy and the Designated Computer within the intended
operational environment.
<PAGE> 29
3. Licensee shall pay the costs of any shipment of any
Designated Computers to GeoTel's facilities for purposes of installation and
configuration of the Programs on the Designated Computers. GeoTel shall prepay
the costs of shipment and any required packaging, handling and insurance, of the
combined Programs/Designated Computers to the applicable Licensee or Customer
site as specified in the Order, and shall add all such costs to Licensee's final
invoice for the installed Programs.
B. Training Services.
------------------
1. During the Term, Licensee shall be entitled, in its sole
discretion, to purchase Training Services, in addition to those otherwise
included as part of Installation Services, as described in this Section 11.2 B
and Section 3 of Exhibit D (provided that in the event of conflict between the
terms and conditions of this Section 11.2 B and those of said Section 3, the
terms and conditions of this Section 11.2 B shall prevail) and GeoTel shall be
obligated to provide such Training Services at GeoTel's training facilities or
at another location mutually agreeable to GeoTel and Licensee, upon the ordering
of the same by Licensee pursuant to Section 6.1 at the prices determined
pursuant to Exhibit C.
2. GeoTel and Licensee may agree to a "Train the Trainer"
program whereby GeoTel will provide in-depth training services to individuals
designated by Licensee as "Trainers". These "Trainers" will then develop
training materials, documentation and curricula, at Licensee's sole cost, to
support a training program in which Licensee's employees or contractors may
participate to become trained in the use and/or operation of the Programs. The
charge, if any, to Licensee for each such "Trainer" to attend GeoTel training
classes will be the same cost as for any other attendee pursuant to the charges
set forth in Exhibit C. "Trainers" may attend training classes provided in the
normal course of Installation Services pursuant to Section 2 of Exhibit D at no
additional cost.
C. PROJECT MANAGEMENT. GeoTel shall provide a qualified person for
each Customer as a point of contact for Licensee to provide project management,
coordination and other ancillary services to Licensee in connection with the
design and implementation of the project. There shall be no additional charge to
Licensee or Licensee's Customer for these services.
D. MODIFICATION OF USER DOCUMENTATION. At Licensee's request and
cost, but such cost subject to the prior approval of Licensee, GeoTel will make
reasonable modifications to the User Documentation, including without limitation
the addition of Licensee's "MCI logo" to the cover and title pages of the User
Documentation. GeoTel shall not be obligated to replace the GeoTel product names
on the User Documentation.
11.3 SOFTWARE DEVELOPMENT SERVICES
-----------------------------
A. During the Term, GeoTel shall develop and provide to Licensee
such modifications to the GeoTel Software (the "Modifications") as may be
requested from time to time by Licensee (the "Software Development Services"),
subject to GeoTel notifying Licensee in
<PAGE> 30
writing within thirty (30) days after receipt of each such request as to a
reasonable, good faith basis upon which GeoTel believes that the development of
the requested Modifications are either (i) not technically feasible, or (ii)
inconsistent with GeoTel's core business. Such notice shall set forth in
reasonably sufficient detail the basis for GeoTel's rejection.
B. Unless GeoTel provides the foregoing notice to Licensee within
the applicable thirty day time period, GeoTel shall work with Licensee to create
a requirements document for the requested Modifications (the "Technical
Specification"), which Technical Specifications are subject to the final
approval of Licensee. Licensee shall reimburse GeoTel for the reasonable time
and materials costs incurred by GeoTel in developing the Technical
Specifications by either: (i) reimbursing GeoTel for such costs promptly after
the Parties have failed to agree upon the development terms and conditions for
the Modifications required pursuant to Section 11.3 C within a reasonable period
of time after finalization of the Technical Specifications, or (ii) where such
terms and conditions are agreed upon by the Parties within such reasonable time
period, then such time and materials costs shall be incorporated into the agreed
pricing for the development of the Modifications. The rates for GeoTel personnel
developing the Technical Specifications shall be those set forth in Section C of
Exhibit C.
C. Upon finalization of the applicable Technical Specifications,
GeoTel and Licensee shall negotiate, in good faith, the terms and conditions
governing development by GeoTel of the requested Modifications pursuant to the
Technical Specifications, including without limitation: (i) the applicable
development milestones/deliverables and schedule, (ii) the payment mode, whether
by fixed price, hourly or otherwise, but subject to Section 11.3 D, and in any
event including payment of the reimbursable costs pursuant to Section 11.3 B
unless previously paid by Licensee, and (iii) such other terms and conditions as
may be agreed by the Parties. Upon agreement by the Parties as to the foregoing
terms and conditions, the same shall be set forth in either a written amendment
to this Agreement or a separate written agreement between the Parties.
D. GeoTel shall perform the Software Development Services for any
Modifications during the Term based upon the rates set forth in Section C of
Exhibit C.
E. GeoTel agrees that it shall develop Programs with so-called
"service bureau capabilities" (formerly referred to as "partitioning"), such
Programs hereinafter being referred to as the "Service Bureau Programs". GeoTel
acknowledges and agrees that it has determined that such Service Bureau Programs
are both technically feasible and consistent with the scope of GeoTel's core
business. GeoTel agrees that it shall develop the Service Bureau Programs
subject to the following:
(i) GeoTel will commence developing the Service Bureau Programs
within sixty (60) days after the Effective Date and make such Service Bureau
Programs available for licensing by Licensee hereunder in their final generally
commercially available form by no later than sixteen (16) months from the
Effective Date;
(ii) Licensee will participate in the development by GeoTel of
the Technical Specifications for the Service Bureau Programs but shall have no
liability for any costs, expenses
<PAGE> 31
or other moneys incurred by GeoTel in connection with that effort;
(iii) Licensee will fund an acceleration of GeoTel's development
calendar to include completion of the Service Bureau Programs in the time frame
specified in Subitem (i) immediately above by placing an Order with GeoTel for
the amount of Two Hundred Fifty Thousand Dollars ($250,000) upon the completion
of the Technical Specifications for the Service Bureau Programs (the
"Acceleration Fee"), and except for payment of the Acceleration Fee by Licensee,
Licensee shall have no other obligation to fund any portion of the development
of the Service Bureau Programs by GeoTel;
(iv) in consideration for payment of the Acceleration Fee,
GeoTel will further grant Licensee credits in the amount of the Acceleration Fee
which Licensee shall be entitled to apply against fees for purchases of licenses
for the Service Bureau Programs hereunder, or, at Licensee's sole discretion,
instead as a credit against fees for purchases of any other Programs or Services
hereunder if: (x) the Service Bureau Programs are made available by GeoTel to
Licensee in final generally commercially available form at a list price per copy
that exceeds sixty percent (60%) of the then applicable Exhibit C list price
hereunder per copy of a dedicated call router Program as defined in Exhibit C,
Model Number 12002 or its functional equivalent; or (y) in Licensee's sole
judgment, the Service Bureau Programs do not meet the functional and performance
requirements of Licensee. Any fees for purchases by Licensee utilizing any
portion of the Acceleration Fee credit shall be considered as Eligible Purchases
hereunder and as such will be applied towards meeting the Purchase Commitment;
and
(v) in the event that GeoTel does not make the Service Bureau
Programs conforming with the applicable Technical Specifications available in
final generally commercially available form for licensing by Licensee hereunder
by the date required pursuant to Subitem (i) immediately above, then the
Purchase Commitment shall from and after such due date be reduced by, and
Licensee shall be released from and have no further obligation or liability in
connection therewith, the amount of One Hundred Sixty Six Thousand Six Hundred
Sixty Six Dollars ($166,666) for every full calendar month after such due date
that the Service Bureau Programs are not made available for licensing by
Licensee in final generally commercially available form, provided that from and
after the date twenty four (24) calendar months from the Effective Date if such
failure to make the Service Bureau Programs so available continues, Licensee
shall further be entitled, at its option, in addition to the foregoing
continuing reduction in the Purchase Commitment, to obtain, and GeoTel shall be
obligated to provide, a prompt refund of the entire Acceleration Fee, provided,
further, however, that except to the extent of the remedies expressly provided
to Licensee pursuant to this Section 11.3 E(v) in the event of GeoTel's failure
to make the Service Bureau Programs so available by the date required pursuant
to Subitem (i) immediately above, such failure shall not otherwise be deemed a
material breach of this Agreement by GeoTel.
11.4 ADDITIONAL SERVICES During the Term, Licensee may request, and GeoTel
may perform, services in connection with the Programs which GeoTel is not
otherwise required to perform under the terms of this Agreement (the "Additional
Services") and Licensee shall pay to GeoTel a mutually agreed upon fee based on
the fees set forth in Section C of Exhibit C, including
<PAGE> 32
reasonable travel expenses and out-of-pocket expenses approved by Licensee, for
any such Additional Service which GeoTel agrees to perform.
11.5 ONSITE SERVICES GeoTel shall comply with the following requirements as
to any onsite services to be performed for Licensee hereunder:
A. INSURANCE. During the Term, GeoTel shall comply with the
Insurance Requirements set forth in Exhibit E ("Insurance Requirements")
attached hereto and incorporated herein by this reference.
B. INCIDENTAL EXPENSES. Licensee shall not be obligated to
reimburse GeoTel for travel and out-of-pocket expenses incurred by GeoTel in
connection with on-site services expressly included in the provision of the
Support Services or Technical Support. Unless otherwise agreed by the Parties,
Licensee shall reimburse GeoTel pursuant to Exhibit F ("Licensee Travel Policy")
attached hereto and incorporated herein by this reference, for reasonable travel
and out-of-pocket expenses actually incurred by GeoTel in connection with
on-site services either requested by Licensee pursuant to Section 11.4 or
otherwise outside of the scope of the on-site services expressly included in the
Technical Support or Support Services.
11.6 DESIGNATED COMPUTERS. GeoTel acknowledges and agrees that any
Designated Computers while in its possession or control during the performance
of any Services is and shall remain the property of Licensee, its bailor or its
designee, and GeoTel shall have no right, title or interest in or to such
Designated Computers other than the limited right of possession and use in order
to perform any of the Services as may be requested by Licensee from time to time
hereunder. While in GeoTel's possession or control, GeoTel shall:
(i) keep the Designated Computers in a secure environment, free
and clear of any and all claims, liens, security interests and other
encumbrances;
(ii) permit Licensee personnel or Licensee's designees
reasonable and free access to the Designated Computers; and
(iii) bear all risk of loss of and damage to the Designated
Computers, and shall further insure the Designated Computers against, and upon
receipt of an invoice, reimburse Licensee for any damage to the Designated
Computers sustained during such possession or control.
11.7 GEOTEL PERSONNEL. GeoTel represents and warrants that pursuant to the
Internal Revenue Code of 1986, as it may be amended or interpreted from time to
time, the regulations promulgated thereunder, and applicable provisions of the
common law, all GeoTel Personnel will be independent contractors in relation to
Licensee. Accordingly, GeoTel will file, or cause to filed, all required forms
and necessary payments appropriate to the status of GeoTel Personnel as
independent contractors in relation to Licensee.
<PAGE> 33
11.8 GEOTEL INDEMNITY. GeoTel at GeoTel's own expense, shall defend, hold
harmless and indemnify Licensee, its Affiliates, and its and their respective
directors, officers, employees and agents, from and against any and all claims,
costs, liabilities, damages, losses or expenses (including reasonable attorneys'
fees and allocated in-house legal expenses) arising from: (i) third party claims
of injury to or death of any person or loss of or damage to any tangible
property (excluding claims for lost data) to the extent caused by the
intentional or negligent acts or omissions of GeoTel or any GeoTel Personnel in
the performance of any of the Services, or (ii) any GeoTel Personnel being
declared to have "employee" status with respect to Licensee.
12. LICENSEE RESPONSIBILITIES REGARDING INSTALLATION SERVICES
12.1 OTHER REQUIREMENTS. Licensee will plan, select and order the quantity,
types and providers of telephone, data access lines or circuits, local area and
wide area network hardware and network services in connection with the
Installation Services and will arrange for their wiring, interconnection,
delivery and setup, as the case may be, at a demarcation point mutually agreed
upon by Licensee and GeoTel. Licensee will take appropriate steps to assure that
the date for GeoTel installation will not be delayed due to non-availability of
such lines, circuits, local area or wide area network hardware or services.
12.2 TELEPHONE ACCESS. Licensee shall provide at the installation site in
connection with Installation Services, at its expense, one telephone access line
for remote support and testing of the Programs and business use of GeoTel at the
demarcation point.
12.3 ADDITIONAL RESPONSIBILITIES. GeoTel shall also advise Licensee of any
additional Licensee responsibilities to enable installation of Programs by
GeoTel.
13. SOURCE CODE ESCROW
13.1 ESCROW AGREEMENT Simultaneously with the execution of this Agreement,
the Parties shall execute an "Additional Party Agreement" in the form of
Appendix C to the Deposit Agreement that shall be effective as of the Effective
Date to secure Licensee's rights hereunder and which Licensee shall be entitled
to maintain in effect during the period specified in Section 13.6. GeoTel
expressly agrees that any and all breaches by, or liability of, Licensee under
or in connection with the Source Code Escrow Agreement and such Additional Party
Agreement shall be subject to the limitations of liability set forth in Section
10.1 ("Limitations") of this Agreement, and that any Source Code Materials or
other Source Code received by Licensee thereunder or hereunder shall be subject
to the provisions of Section 9.1 hereto. GeoTel agrees that at its sole expense
during the period specified in Section 13.6 it shall maintain the Deposit
Agreement in full force and effect with Data Securities International, Inc., or
should such Deposit Agreement with Data Securities International, Inc. terminate
or otherwise expire for any reason during such period, then GeoTel shall
immediately enter into a replacement escrow arrangement for the Source Code
Materials, as defined below, with a replacement independent escrow agent
mutually satisfactory to GeoTel and Licensee (Data Securities International,
Inc. or such replacement escrow agent, as applicable, hereinafter being referred
to as the "Escrow Agent") pursuant to a
<PAGE> 34
form of agreement either substantially similar in form to the Deposit Agreement
or as otherwise mutually agreed by the Parties and in any event in accordance
with the provisions of this Article 13 (the Deposit Agreement or such
replacement agreement, as applicable, hereinafter being referred to as the
"Source Code Escrow Agreement").
A. SOURCE CODE RELEASE. Release of the Source Code Materials to
Licensee for a particular Program shall be on terms and conditions (including
notice, redeposit and other provisions) as set forth in the Source Code Escrow
Agreement, but in any event such release shall be granted if:
(i) GeoTel becomes unable to support such Program by reason of
insolvency, making an assignment for the benefit of creditors, having a receiver
appointed to manage its affairs, ceasing to do business or being adjudicated a
bankrupt under the laws of the United States; and
(ii) Licensee's use of such Program is likely to be seriously
impaired as a result.
B SOURCE CODE LICENSE. In the event that Licensee is furnished a
copy of any Source Code Materials, Licensee shall be authorized to use such
Source Code Materials only for the purpose of performing those support services
and Technical Support with respect to the affected Program that GeoTel was to
perform hereunder or as otherwise referred to in Section 13.6 at the time
Licensee is furnished such copy of the Source Code Materials. Any such Source
Code Materials shall be treated as proprietary and confidential material of
GeoTel under this Agreement and shall also be subject to all conditions and
restrictions set forth in Licensee's Additional Party Agreement under the Source
Code Escrow Agreement.
13.2 SOURCE CODE MATERIALS; AUDIT The Source Code Materials required to be
deposited with the Escrow Agent as of the Effective Date pursuant to Section 9.2
A (x) shall be kept current so as to accurately reflect the Source Code for the
then Current Releases of the Programs either under license to Licensee or
otherwise available to Licensee pursuant to this Agreement from time to time and
promptly updated by GeoTel, but in any event no less frequently than following
each material upgrade, modification or enhancement thereto, including without
limitation any new Releases or Updates provided to Licensee hereunder, and the
same shall be part of the Source Code Materials. GeoTel shall designate a
mutually acceptable neutral third party who, at the expense and request of
Licensee made from time to time, shall audit the materials deposited with the
Escrow Agent under the Source Code Escrow Agreement for purposes of determining
whether GeoTel has fulfilled its deposit obligations. GeoTel will promptly
correct any deficiency disclosed by the audit.
13.3 BANKRUPTCY, LIQUIDATION, ETC. The obligations of GeoTel under this
Article 13 shall extend to any trustee in bankruptcy, receiver, administrator or
liquidator appointed for
<PAGE> 35
GeoTel and GeoTel as debtor-in-possession ("Trustee"), as well as to any other
successor in interest to GeoTel. Without limiting the generality of the
foregoing, upon written request of Licensee, GeoTel shall not interfere with the
rights of Licensee as provided in this Agreement or the Source Code Escrow
Agreement to obtain the Source Code Materials from the Trustee, the escrowee or
any other person or entity having possession thereof, and shall, if requested
under the conditions specified in the Source Code Escrow Agreement for release
of the Source Code Materials, cause a copy of such Source Code Materials to be
made available to Licensee.
13.4 DISPUTES REGARDING SOURCE CODE MATERIALS. Notwithstanding that GeoTel
has submitted the affidavit referred to in Section 4 of the Source Code Escrow
Agreement in response to Licensee's written notice to the Escrow Agent of the
occurrence of an Event of Release, as defined in said Section 4, or that a
dispute between GeoTel and Licensee pursuant to the Source Code Escrow
Agreement, including arising under Section 4, has been submitted to arbitration
pursuant to Section 5 of that agreement, the Parties agree that the Source Code
Materials shall nonetheless be released to Licensee by the Escrow Agent. If the
arbitrator(s) ultimately find that under the terms of this Agreement release of
the Source Code Materials to Licensee should not have occurred, Licensee shall
return the Source Code Materials to the Escrow Agent.
13.5 FUTURE EVENTS. In the event that Licensee and GeoTel enter into a
separate agreement or an amendment to this Agreement providing for broader
distribution rights than set forth herein as of the Effective Date in which
Licensee becomes a reseller of GeoTel's Programs and Services, and/or services
based upon GeoTel's Programs and Services, directly or indirectly to the
end-user marketplace under Licensee's or third party private brand labels and is
marketing the Programs, Services and/or services as strategic Licensee products
and services, then GeoTel and Licensee will as a function of such separate
agreement or amendment to this Agreement negotiate in good faith the addition to
the then existing Source Code Escrow Agreement under this Agreement and any
escrow agreement under any such separate agreement a Source Code Materials
release trigger to address a failure of GeoTel to provide Technical Support.
13.6 SURVIVAL. The obligations of GeoTel under this Article 13 shall
survive and remain in effect until the later to terminate or expire of (i) this
Agreement or (ii) any separate agreement or other arrangement between the
Parties with respect to Technical Support or other maintenance and support for
the Programs, including without limitation any such agreement or other
arrangement between the Parties pursuant to Section 11.1 A in effect after the
expiration or termination of this Agreement.
14. GENERAL TERMS
14.1 INDEPENDENT CONTRACTORS. Notwithstanding anything herein contained to
the contrary, GeoTel and Licensee shall operate in the capacity of independent
contractors hereunder and nothing contained in this Agreement shall be deemed or
construed as creating a joint venture or partnership between GeoTel and
Licensee. Neither Party is by virtue of this Agreement authorized as an agent,
employee or legal representative of the other nor shall either Party have any
power or authority to bind or commit the other. Neither Party will represent to
any third
<PAGE> 36
parties that it has any right to enter into any binding obligation on the other
Party's behalf. Neither Party shall have power to control the activities and
operations of the other, it being intended that each Party is and at all times
will remain an independent contractor.
14.2 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement, and the prohibited
or invalid provision, to the extent of such prohibition or invalidity, shall be
replaced by a mutually acceptable provision which, being valid and enforceable,
comes closest to the intention of the Parties underlying the invalid or
unenforceable provision.
14.3 WAIVER. The waiver by either Party of any default or breach of this
Agreement shall not constitute a waiver of any other or subsequent default or
breach.
14.4 GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York, without reference to its choice of law provisions. This
Agreement will not be governed by the United Nations Convention for the
International Sale of Goods.
14.5 ASSIGNMENT. This Agreement shall be binding on and inure to the
benefit of the Parties hereto and their respective successors and assigns.
Either Party may assign this Agreement, and, at such respective Party's option,
all of such Party's rights and obligations under all licenses to Program copies
then held by Licensee, subject to the prior express written consent of the other
Party, which consent shall not be unreasonably withheld or delayed; provided,
however, that notwithstanding the foregoing, either Party may, without the
consent of the other Party, assign its rights and obligations hereunder, and at
such assigning Party's option, all of such Party's rights and obligations in
Program licenses then held by Licensee, to an Affiliate, or to a successor in
interest or to a purchaser of all or substantially all of the assets of that
portion of such Party's business as to which this Agreement pertains, provided,
further, however that where any such assignment without consent is made by
GeoTel pursuant to this clause to any of the entities or any Affiliates of such
entities as listed in Exhibit H ("Prohibited Entities for Assignment"), then as
of the effective date of such assignment Licensee shall be released from and
have no further obligation or liability in connection with, and GeoTel shall be
deemed to have waived, the Purchase Commitment for the Contract Year in which
such assignment is effective as well as any Purchase Commitments for any
subsequent Contract Years, and Licensee and the assignee covered by Exhibit G as
to which GeoTel has made such assignment shall each further be entitled, at
their respective sole option, to terminate this Agreement by providing written
notice thereof to the other Party without any liability of any kind, but subject
to the provisions of Sections 4.4 A, 4.4 B, 4.5 and 4.6. Any prohibited
assignment shall be null and void.
14.6 NOTICES. All notices, requests, demands, or communications required or
permitted hereunder shall be in writing and shall be either delivered personally
(including delivery by Federal Express or other comparable nation-wide overnight
courier service), sent by facsimile
<PAGE> 37
transmission, or sent by certified or registered mail, postage prepaid, return
receipt requested, to the respective addresses set forth below (or at such other
addresses as shall be given in writing by either Party to the other) to:
Licensee: MCI Telecommunications Corporation
6 Concourse Parkway
Atlanta, GA 30328
Attn.: Gene Davidson, Contract Administrator
GeoTel: GeoTel Communications Corporation
25 Porter Road
Littleton, MA 01460
Attn.: Tim Allen, Chief Financial Officer
All notices, requests, demands or communications shall be deemed delivered
(a) on the date of delivery (or first business day thereafter if delivered on
Saturday, Sunday or legal holiday, or after normal business hours) when
delivered personally, (b) on the date of transmission (or first business day
thereafter if delivered on Saturday, Sunday or legal holiday, or after normal
business hours) when sent by facsimile transmission with telephonic confirmation
of receipt, and (c) on the date shown on the receipt when sent by certified or
registered mail unless delivery is refused or delayed by the addressee, in which
event they shall be deemed delivered one (1) day after dispatch.
14.7 EXPORT ADMINISTRATION. GeoTel and Licensee shall comply with all
applicable laws, regulations and rules, including, without limitation, the
export control laws of the United States of America and prevailing regulations
which may be issued from time to time by the United States Department of
Commerce and Office of Munitions Control, U.S. Department of State, concerning
the exporting, importing and re-exporting of the Programs, in their respective
performances under this Agreement. Without limiting the generality of the
foregoing, GeoTel and Licensee each agrees that it shall not export or re-export
any Programs or the direct product thereof in violation of the regulations of
the United States Department of Commerce or the U.S. Export Administration Act.
14.8 APPROVAL OF APPROPRIATE GOVERNMENTAL AUTHORITIES. Prior to
delivery of the Programs, GeoTel and Licensee shall apply to the appropriate
governmental authorities and obtain all approvals necessary for their respective
execution and fulfillment of this Agreement and the payment of the fees or other
moneys due hereunder.
14.9 HEADINGS Headings used in this Agreement are for convenience of
reference only and shall not be construed as altering the meaning of an Article,
Section or this Agreement.
4.10 COUNTERPARTSARTICLE . This Agreement may be executed simultaneously in
two counterparts, each of which shall be deemed an original but both of which
together shall constitute one and the same agreement.
<PAGE> 38
14.11 EXHIBITS. In the event of conflict between the terms and conditions
of this Agreement and the provisions of any Exhibit hereto, the terms and
conditions of this Agreement shall prevail.
14.12 ENTIRE AGREEMENT. This Agreement, including all Orders, along with
the Deposit Agreement, and the Additional Party Agreement constitute the
complete agreement between the Parties and supersedes all previous agreements or
representations, written or oral, with respect to the matters specified herein.
This Agreement may not be modified or amended, or any provision hereunder
waived, except in a writing signed by a duly authorized representative of each
Party (unless otherwise expressly provided to the contrary herein as to any
waiver). This Agreement shall supersede the terms of any unsigned license
agreement included in a package for GeoTel furnished Programs.
<PAGE> 39
IN WITNESS WHEREOF, the duly authorized representatives of the Parties have
executed this Agreement.
GEOTEL: LICENSEE:
GEOTEL COMMUNICATIONS MCI TELECOMMUNICATIONS
CORPORATION CORPORATION
By: By:
------------------------------ ----------------------------
(Authorized Signature) (Authorized Signature)
Name: Name:
---------------------------- --------------------------
(Type or Print) (Type or Print)
Title: Title:
--------------------------- -------------------------
Date: Date:
---------------------------- -------------------------
<PAGE> 40
EXHIBIT A
AFFILIATES AND ALLIANCE PARTNERS
A.LICENSEE AFFILIATES
1.networkMCI, Inc.
2.MCImetro Access Transmission Services, Inc.
3.MCI International, Inc.
4.MCI International Telecommunications Corporation
5.MCI Equipment Acquisition Corporation
6.MCI Wireless, Inc.
7.Overseas Telecommunications, Inc.
8.SHL Systemhouse Inc. (Canada)
9.SHL Systemhouse Corp. (U.S.)
10.SHL Computer Innovations, Inc. (Canada)
11.Telecom*USA, Inc.
B. LICENSEE ALLIANCE PARTNERS
1.Concert Communications Company
2.British Telecommunications plc
3.*
4.*
5.*
6.*
* Portions have been omitted for confidential treatment.
<PAGE> 41
EXHIBIT B
PERFORMANCE CRITERIA
The Programs shall be subject to the following Performance Criteria:
1. uptime measured over a rolling thirty (30) day period/Programs
availability in fully redundant configurations: ninety nine percent (99%)
uptime; and
2. response time to network: 60 calls per second in a properly
configured and redundant system.
a
<PAGE> 42
EXHIBIT C
PROGRAMS AND SERVICES PRICING
A. PROGRAMS AND LIST PRICES.
The GeoTel list prices for Program copy licenses, Technical Support and
Installation Services in effect as of the Effective Date are set forth in
Attachment A ("GeoTel Price List") attached to this Exhibit C and incorporated
herein by this reference.
B. REDACTED MATERIAL
a
<PAGE> 43
EXHIBIT D
TECHNICAL SUPPORT AND SUPPORT SERVICES
<PAGE> 44
EXHIBIT E
INSURANCE REQUIREMENTS
During the term of this Agreement the following insurance shall be maintained by
Licensor:
COMPREHENSIVE OR COMMERCIAL GENERAL LIABILITY INSURANCE. Comprehensive or
Commercial General Liability Insurance naming Licensor and its affiliates as the
named insured. LICENSEE, et al is to be named as an ADDITIONAL INSURED for
purposes of this Agreement. This policy shall cover liability for injury to or
death of persons or damage to property including but not limited to work
associated with this Agreement, including such liability as may arise from the
use of independent contractors, and contractual liability assumed under this
Agreement. The policy shall provide a limit of $1 Million combined single limit
(CSL) per occurrence and aggregate (where applicable) for bodily injury,
personal injury and property damage, and shall:
Cover broad form property damage;
Cover broad form/blanket contractual liability (both oral and written
contracts); Cover personal injury liability;
Cover employees as additional insured;
BUSINESS AUTOMOBILE LIABILITY INSURANCE. Business Automobile Liability
Insurance including coverage for owned, hired, and non-owned vehicles in the
amount of:
$1 Million CSL per occurrence/accident for bodily injury and property
damage. LICENSEE, et al is to be named as an ADDITIONAL INSURED for purposes of
this Agreement.
WORKER'S COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE. Workers'
Compensation in the statutory amount(s) and with benefits required by the laws
of the state in which the Work is performed and the state(s) in which employees
are hired, if the state(s) are other than that in which the Work is performed.
Employers' Liability with minimum limit of liability of:
$1 Million for bodily injury by accident/each accident; $1
Million for bodily injury by disease/each employee; and $1 Million
for bodily injury by disease/policy limit (aggregate).
Certificates of such insurance shall be submitted to LICENSEE naming LICENSEE,
et al as ADDITIONAL INSURED on such policies as appropriate, prior to the start
of Licensor's performance or this Agreement. The certificates shall certify
that no material alteration, modification or termination of such coverage
shall be effective without at least thirty (30) days advance notice to LICENSEE.
Licensor's carriers shall waive
<PAGE> 45
all rights of recovery against LICENSEE for any injuries to persons or damage
to property related to of this Agreement.
Licensor shall require each subcontractor to provide and
maintain at all times during the term of this Agreement insurance
equivalent to that which is required of Licensor.
Subcontractor and Subcontractor's carriers shall waive all right
to recovery against LICENSEE for any injuries to persons or
damage to property in the execution of Work
performed under this Agreement.
Licensor shall permit any authorized representative of LICENSEE
to examine Licensor's original insurance policies should LICENSEE so request.
Should Licensor at any time neglect or refuse or provide the insurance
required, or should such insurance be canceled or non-renewed, LICENSEE shall
have the right to purchase such insurance, and the cost shall be billed to
Licensor. In addition, should Licensor at any time neglect or refuse to pay the
necessary premium, LICENSEE shall have the right to deduct this amount
from moneys due Licensor. Licensor and all subcontractors shall ensure full
compliance with the terms of the Occupational Safety and Health Administration
(OSHA) and all locations, jurisdictions' safety and health regulations
during the full term of this Agreement.
<PAGE> 46
EXHIBIT F
LICENSEE TRAVEL POLICY
(a)Authorization. The Licensee Technical Representative may request GeoTel
Personnel to travel in the performance of duties. GeoTel Personnel must receive
approval from GeoTel and must have the written authorization of the appropriate
Licensee Director before commencing travel.
(b) Payment Procedure.
(1) GeoTel shall initially be responsible for travel expenses and shall
reimburse GeoTel Personnel, as appropriate.
(2)GeoTel will then invoice Licensee for the travel. A
separate Purchase Order will be used for all travel expenses. All
travel, transportation, and per diem expenses, copies of which shall
accompany invoices, for which reimbursement is sought, shall have
the signature of the Licensee Technical Representative and shall be itemized
and substantiated with appropriate receipts.
(3)Expense reports must be filed within five (5) days of completion of travel
and invoiced on the next regular invoice submission to Licensee.
(c) Payment Policy. Licensee-approved travel and related Licensee-approved
out-of-pocket expenses incurred in performing services for Licensee under the
Agreement shall be invoiced to Licensee at cost. All travel expenses must comply
with Licensee's corporate travel policy in effect during the term of
this Agreement (a copy of which is on file with Licensee).
(d) Reimbursement will be as follows:
(1)Commercial transportation - Reimbursable on an "incurred cost" basis at
economy, tourist or coach rates; or business class for international travel.
(2)Private automobile - Reimbursable at Licensee's standard rate, not to
exceed $0.24 per mile.
(3)Per diem - Reimbursable for actual lodging and local transportation and
actual meal expenses not to exceed $30.00 per day.
(4)Licensee will not reimburse for rental cars in conjunction with visits
to Licensee's Arlington facility.
<PAGE> 47
(e)Licensee will not reimburse GeoTel for local travel incurred as a result
of commuting to Licensee's facility to perform Work.
(f) In no event shall Licensee be liable for any travel charges
associated with relocation of GeoTel's personnel without the written approval of
the Licensee Authorized Representative.
<PAGE> 48
EXHIBIT G
DEPOSIT AGREEMENT
<PAGE> 49
EXHIBIT H
PROHIBITED ENTITIES FOR ASSIGNMENT
REDACTED MATERIAL
<PAGE> 1
Confidential Material Omitted and Filed Separately with the Securities
and Exchange Commission.
* denotes omissions.
EXHIBIT 10.6
SOFTWARE LICENSE AND DISTRIBUTION AGREEMENT
-------------------------------------------
Agreement made as of the 29th day of March, 1996, by and between GeoTel
Communications Corporation, a Delaware corporation with its principal place of
business at 25 Porter Road Littleton, Massachusetts, USA, 01460 ("GEOTEL") and
OPTUS Systems PTY Ltd ACN: 056-541-167, an Australian Corporation with its
principal place of business at 101 Miller Street, North Sydney, NSW 2060,
Australia ("OPTUS").
In consideration of the mutual covenants and agreements contained in
this Agreement, GEOTEL and OPTUS hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following meanings:
(a) "OPTUS SUBLICENSE" means the license granted by OPTUS to a Customer
to use the Program subject to the terms and conditions herein. The number of
OPTUS Sublicenses for a given Designated Computer shall be one (1).
(b) "CUSTOMERS" means the third party customers of OPTUS who sublicense
the program for their internal use only.
(c) "DEMONSTRATION LICENSE" means the license granted by GEOTEL to
OPTUS to use the Demonstration System Package as described in Exhibit C for
demonstration and marketing purposes.
(d) "DESIGNATED COMPUTER" means the central processing unit(s)
designated in a purchase order for the Program.
(e) "PROGRAM" means GEOTEL's software products (in machine-readable,
object code form only) described on EXHIBIT A hereto.
(f) "TERRITORY" MEANS AUSTRALIA AND NEW ZEALAND
(g) "PURCHASE ORDER" shall mean an order prepared in accordance with
this Agreement to facilitate the license of Programs to the Customers by OPTUS
and submitted by OPTUS to GEOTEL.
(h) "Acceptance Testing" in relation to the Modified Programs referred
to in Clause 11 (f) shall mean those tests undertaken by OPTUS and for which
GEOTEL must provide reasonable assistance, to evaluate the Modified Programs to
ensure they provide the functionality specified in Clause 7 (f) by OPTUS, and
which shall take place within thirty (30) days after delivery of the Modified
Programs to OPTUS. GEOTEL shall have no responsibility for delays or failure of
Acceptance Testing caused by any third party OPTUS contractor's failure to
deliver products, features, services or interfaces which OPTUS had the
responsibility to provide in conjunction with the Modified Programs.
(i) "Modified Programs" shall mean only those custom features or
interfaces developed by GEOTEL, under contract to OPTUS and to specifications
supplied by OPTUS. GEOTEL's Programs are in no way included in the Modified
Programs or the license granted pursuant to Clause 12 (f).
2. DESIGNATION. Subject to the terms and conditions of this Agreement,
for the initial term of this Agreement, GEOTEL hereby designates OPTUS as the
exclusive authorized distributor of the Program in the Territory and hereby
grants to OPTUS the nontransferable, exclusive right to distribute the Program
to its Customers in the Territory.
2.1. (a) Notwithstanding anything to the contrary herein, except as
expressly provided for in Section 2.1 (c) hereunder, nothing in this Agreement
shall be deemed to limit or prevent GEOTEL, directly or indirectly, from
marketing, distributing, licensing or selling the Program anywhere throughout
the world, including in the Territory.
<PAGE> 2
(b) Except as otherwise authorized in writing by GEOTEL, OPTUS
shall not market, demonstrate, advertise, promote, distribute or engage in other
activities to sublicense the Programs outside the Territory.
(c) For the initial Term of this Agreement, so long as OPTUS
is not in material breach of this Agreement, GEOTEL will not designate any
company based in the Territory as a distributor of the Programs.
2.2 Internal Use Programs License Rights Granted.
(a) Upon GEOTEL's execution and receipt of initial payment,
GEOTEL grants to OPTUS a non-exclusive and nontransferable license to use the
Programs detailed in Exhibit D, pursuant to this Agreement as follows:
(i) to use the Programs solely for OPTUS's own
internal telecommunications operations ("Internal
Use") on the Designated Computer or on a backup
computer on a temporary basis if the Designated
Computer is inoperative. Programs may not be used to
process information for third parties which are not
related bodies corporate to OPTUS; and
(ii) to copy the Program for archival or backup
purposes. All archival and backup copies of the
Program are subject to the provisions of this
Agreement, and all titles, trademarks, and copyright
and restricted rights notices shall be reproduced in
such copies.
(b) By virtue of this Agreement, OPTUS acquires only the right
to use the Programs and does not acquire any other rights or ownership. All
rights, title, and interest in the Programs, including the copies of the
Programs delivered to OPTUS by GEOTEL, shall at all times remain the property of
GEOTEL or GEOTEL's licensor.
2.3 Documentation. GEOTEL will provide OPTUS with relevant user
documentation in English then current and sufficient to enable full and
efficient use of the Programs ("the Documentation"). Copying of the
Documentation and other GEOTEL materials is not permitted unless GEOTEL first
consents in writing to such copying, which for the purposes of OPTUS
sublicenses, will not be unreasonably withheld.
3. DEMONSTRATION LICENSE. Subject to the terms and conditions of this
Agreement, in connection with the distribution and Internal Use rights granted
to OPTUS set forth in Section 2 hereof, GEOTEL hereby also grants to OPTUS the
nontransferable, exclusive right in the Territory to use five (5) copies of the
GEOTEL Demonstration System Package as described in Exhibit C for demonstration
and marketing purposes ("Demonstration License"). OPTUS shall demonstrate the
Program only on system configurations that conform to the minimum configurations
specified in Exhibit B.
4. SUBLICENSES. Subject to the terms and conditions of this Agreement,
in connection with the distribution rights granted to OPTUS set forth in Section
2.1 hereof GEOTEL hereby also grants to OPTUS the nontransferable, nonexclusive
right to grant OPTUS Sublicenses in the Territory. In no event, shall OPTUS
furnish the Programs media or Documentation prior to GEOTEL's acceptance, which
acceptance shall not be unreasonably withheld, of OPTUS's Purchase Order for the
granting of an OPTUS Sublicense. OPTUS shall keep correct and complete records
of each Customer to whom it has granted a OPTUS Sublicense and furnished a copy
of the Programs media (including Updates) and related Documentation.
5. LICENSE AND SUBLICENSE AGREEMENTS. All OPTUS Sublicenses shall be
made pursuant to written sublicense agreements between OPTUS and each Customer,
and the licenses granted to OPTUS in Sections 2.2 and 3 of this Agreement are
granted pursuant to terms under which each Customer or OPTUS as the case may be
agrees (a) the sublicense or license shall be non-exclusive, personal and
nontransferable, (b) to use the Program for internal use only and only on the
Designated Computer on which the Program is installed by Customer or OPTUS, (c)
not to copy or reproduce the Program, in whole or in part, except for use on the
Designated Computer on which the Program is installed by Customer or OPTUS, and
then only with the inclusion of proper copyright and proprietary notices on such
copies, (d) not to provide or otherwise make available the Program or related
documentation to any other person or entity other than the Customer's or OPTUS's
employees and contractors (other than a competitor of GEOTEL) directly involved
with the Customer's or OPTUS's use of the Program who are bound to protect the
confidentiality of the Program, (e) not to modify, enhance or create works
derivative of the Program or decompile,
2
<PAGE> 3
disassemble or otherwise attempt to access the source code of the Program, (f)
GEOTEL'S liability shall be limited at least to the extent provided in this
Agreement, (g) Portions of the Programs are derived from third-party software
licensed to GEOTEL for integration into GEOTEL Programs and sublicensing. No
such third-party warrants the Programs or any portion thereof, assumes any
liability regarding use of the Programs, or undertakes to furnish any support or
information relating to the Programs. (h) the Programs are confidential and
proprietary to GEOTEL and GEOTEL and its licensors retain all title, copyrights,
patent rights and other proprietary rights to the Program and all copies
thereof; (i) in the event the sublicense or license of the Program is terminated
for whatever reason or expires, Customer or OPTUS must cease use and return to
OPTUS or GEOTEL or destroy the Programs and any copies thereof, (j) the Customer
or OPTUS shall not export the Program without first obtaining the appropriate US
or other governmental licenses and approvals, (k) the parties acknowledge that
GEOTEL is the owner of the intellectual property rights in the Programs. In
addition, no sublicense agreement shall (i) obligate GEOTEL to directly provide
installation, training and support or maintenance services to the Customer
unless expressly agreed to in writing by GEOTEL prior to the granting of a
Sublicense, (ii) obligate GEOTEL under any warranty or indemnification rights
granted to the Customer, (iii) provide for additional functionality or special
modifications to the Program other than for GEOTEL authorized modifications or
enhancements or (iv) adversely affect GEOTEL's ownership rights of the Program
or the economic interests of GEOTEL. Any permitted OPTUS Sublicense shall
continue upon the termination of the license from GEOTEL to OPTUS unless
terminated in accordance with the terms of the OPTUS Sublicense by termination
of use of the Program or by a breach of the OPTUS Sublicense.
6. DISTRIBUTORS REPRESENTATIVES. OPTUS shall not be entitled to appoint
third party representatives for solicitation of the Program without the prior
written consent of GEOTEL.
7. OPTUS'S OBLIGATIONS AND REPRESENTATIONS. OPTUS shall, at its own
expense and without remuneration from GEOTEL, perform the following during the
term of this Agreement:
(a) OPTUS shall (i) maintain a sales and marketing program in
the Territory to market the Programs, (ii) perform all reasonably necessary
promotion and advertising of the Programs and (iii) in general, utilize its
reasonable efforts to effect the maximum amount of gross revenues of the
Programs.
(b) OPTUS shall submit to GEOTEL, at least thirty (30) days
prior to the beginning of each calendar quarter during the term of this
Agreement, a non-binding revenue forecast for the ensuing twelve (12) month
period. Such forecasts are solely for the purpose of GEOTEL planning.
(c) OPTUS shall provide GEOTEL with timely reports detailing
marketing or technical information on products, competitive comparisons, special
sales or service suggestions, competitive announcements, etc., and shall respond
promptly to all inquiries and reasonable requests for help from GEOTEL.
(d) OPTUS will distribute only documentation produced by
GEOTEL, reproduced under a GEOTEL documentation license or approved by GEOTEL to
describe the Product, its capabilities or operations, except to the extent that
such documentation describes OPTUS customized features or OPTUS specific issues.
(e) OPTUS will work with GEOTEL to develop a joint press
release to announce the agreement described herein. From time to time, but at
least twice per calendar year, OPTUS and GEOTEL will jointly announce any
significant new customer installations. Public announcements identifying
specific customers or descriptions of identifiable customer applications will be
made only after securing customers' approval and resolution of any restrictions
imposed by the customers
(f). Upon execution of this Agreement, OPTUS will provide
GEOTEL with a specification and Acceptance Testing plan for developing the OPTUS
Network Interface or equivalent OPTUS SCP network interfaces and will jointly
perform certification testing with GEOTEL. For as long as this agreement is in
place, at GEOTEL'S request, OPTUS will re-certify the interfaces for the
Programs once each calendar year at no cost.
(g). OPTUS will certify that when the Program interface is
installed on an existing OPTUS system that the warranties and privileges granted
the customer remain in force and supported by OPTUS.
(h). Installation. OPTUS shall be responsible for the
installation of the Program on GEOTEL certified hardware platforms as described
in Exhibit B and shall subcontract for the installation of the Program with
3
<PAGE> 4
GEOTEL for the pricing set forth in Exhibit A plus reasonable travel and living
expenses. Once OPTUS has demonstrated to GEOTEL's reasonable satisfaction that
they have sufficient technical resources to properly install the product, OPTUS
can assume total installation responsibility.
(i). Training and Support. OPTUS shall be responsible for the
training and support of Customers and shall subcontract for the training and
support of the Program with GEOTEL for the pricing set forth in Exhibit A plus
reasonable travel and living expenses. Once OPTUS has demonstrated to GEOTEL's
reasonable satisfaction that they have sufficient technical resources to
properly train customers in the product, OPTUS can provide training using
instructors that have been certified by GEOTEL as well as GEOTEL materials.
(j). Maintenance.
OPTUS shall be responsible for the maintenance of the
Program to Customers under currently paid-up maintenance contracts and shall not
represent or suggest that GEOTEL will be responsible for maintenance of the
Program. For purposes of this Agreement, maintenance shall mean customer support
and problem resolution which does not require or otherwise call for source code
modification. GEOTEL shall provide OPTUS for the purposes of OPTUS Internal Use
License, Demonstration Licenses and the OPTUS Sublicenses to its Customers with
back-up maintenance and service, including providing OPTUS with any Updates that
GEOTEL generally releases to its customers and providing back-up maintenance
services by telephone from GEOTEL's offices on a timely basis. OPTUS will be
required to pay GEOTEL subject to clause 11(i) an annual maintenance fee of $ *
paid ninety (90) days after execution of this Agreement for the 12 month period
commencing on that date and $ * paid on the 15th month of the agreement covering
months 15 through 27. In the event of an occurrence of renewal of the agreement,
the annual maintenance fee will require the parties to negotiate annual fees.
(k). OPTUS shall be responsible for billing and collecting all
amounts due from Customers. OPTUS shall pay all expenses incurred by it in
connection with its business and shall be solely responsible for the acts and
expenses of its employees and agents.
8. GEOTEL'S OBLIGATIONS. GEOTEL shall, at its own expense and without
remuneration from OPTUS, perform the following during the term of this
Agreement:
(a) GEOTEL shall provide OPTUS with all relevant technical
information regarding the Programs and timely reports detailing marketing or
technical information on products, competitive comparisons, special sales or
service suggestions, competitive announcements and shall respond promptly to all
inquiries and reasonable requests for help from OPTUS.
(b) During the term of this Agreement, OPTUS shall have the
right to use the tradenames and trademarks of GEOTEL applied to the Programs by
GEOTEL, whether registered or not, in advertising and promotional literature
solely in connection with OPTUS's marketing of the Programs. OPTUS shall
prominently identify that such trademarks and tradenames are the exclusive
property of GEOTEL. OPTUS shall have no right to register any such tradenames or
trademarks in its own name or right, whether as owner, user or otherwise,
without the prior written consent of GEOTEL. The use of GEOTEL's trademarks and
tradenames shall be in accordance with instructions and procedures provided from
time to time by GEOTEL. Nothing contained in this Agreement constitutes any
right or license to apply the trademarks or tradenames of GEOTEL to any
Programs, nor constitutes any transfer of any title or ownership interest in any
trademarks or tradenames of GEOTEL. OPTUS may add its own trademarks, logos,
symbols, or other identifying labels to products or their packages or container.
Upon termination or expiration of this Agreement, OPTUS shall immediately cease
using all trademarks or tradenames of GEOTEL, and shall not thereafter use any
marks or names similar thereto either in connection with the Programs or
otherwise upon completion of all outstanding or ongoing customer obligations.
9. GEOTEL SERVICE, UPDATES, TRAINING, AND CONSULTATION. GEOTEL shall
provide the following to OPTUS.
(a) SERVICE. In consideration of the payment By OPTUS of the
amount referred to in clause 7 (j), upon receipt of written notice from OPTUS
specifying failures or errors found in a Program, and upon receipt of such
additional information as GEOTEL may reasonably request, GEOTEL shall act in an
expeditious manner to correct defects in the current, unaltered release of such
Program, such Service is further described in the GEOTEL Backup Maintenance And
Service Support Policy contained in Exhibit F hereto. GEOTEL shall not be
obligated to
* Portions have been omitted for confidential treatment.
4
<PAGE> 5
perform investigation and / or correction of defects found by GEOTEL to be (i)
in other than a current, unaltered release; (ii) caused by OPTUS or its
Customers negligence or GEOTEL unauthorized modification of the Programs or use
thereof in combination with software not provided by GEOTEL; (iii) caused by
improper or unauthorized use of the Programs; or (iv) due to external causes
such as, but not limited to, power failure or electric surges.
(b) UPDATES. In further consideration of the payment by
OPTUSof the amount referred to in clause 7 (j), from time to time, GEOTEL may
issue modified or enhanced versions of the Program which it incorporates in the
then current version of the Programs and agrees to promptly provide OPTUS, so
long as the Programs licensed to OPTUS and its Customers is covered pursuant to
the annual maintenance fees due GEOTEL under Section 7 (j), with one copy of any
such update including one copy of the related documentation updates (the
"Update"). Following shipment of the Update materials, the previous release
shall remain "current" for purposes hereof for a period of one hundred eighty
(180) days. Thereafter, only the Update shall be current. GEOTEL shall have no
obligation hereunder to furnish OPTUS with separately priced components or
options to the Program except as described on EXHIBIT A hereto. GEOTEL will
provide OPTUS with 120 days advance notice of new release schedules and content.
Updates and Maintenance releases are offered at no charge through the term of
the Warranty Period. Major new separately priced applications which include new
functionality and are not service related will require upgrade purchases by
OPTUS Customers and will be included in the programs defined in Exhibit A.
(c) OPTUS TRAINING. GEOTEL agrees to provide at no additional
fee to OPTUS three man-weeks of user, sales, system and maintenance training at
GEOTEL'S training facility, located in Littleton, MA. . The training schedule
shall be by mutual agreement of the parties. Both parties agree to use their
best efforts to schedule all Training within 90 days of the date of this
Agreement.
(d) OPTUS CONSULTATION. GEOTEL agrees to make available to
OPTUS additional technical consultation for the purpose of providing additional
technical information not normally covered in standard training courses or
technical sales support. The amount, method of delivery, limitations and cost of
such consultation and related travel shall be as mutually agreed from time to
time.
10. OPTUS PURCHASE ORDERS
---------------------
(a) Form of Purchase Orders. OPTUS may place an order for the
license of Program by submitting an executed Purchase Order to GEOTEL. Each
Purchase Order must identify (i) the Program ordered, (ii) the name of the
Customer (OPTUS may substitute its own name and provide the Customers name
promptly after delivery of the Program ),(iii) the Designated Computer on which
the Customer will use the Programs and (iv) that the Program being ordered on
the Purchase Order are being ordered pursuant to the terms and conditions of
this Agreement.
(b) Terms of Licenses and Acceptance of Purchase Orders.
OPTUS's license of Programs pursuant to the grants in Sections 2.2 and 3
hereunder, for its own use or for sublicense to Customers, shall be governed
solely by the terms and conditions of this Agreement, including the prices and
discounts set forth in Section 11 hereto. Any additional or different terms
appearing in a Purchase Order shall be null and void. each Purchase Order will
be effective only upon acceptance by GEOTEL which shall not be unreasonably
withheld.
(c) Delivery of Program . All Purchase Orders must be received
by GEOTEL not less than two weeks prior to the expiration date of this Agreement
and must specify delivery within the term of this Agreement. Deliveries will be
scheduled in a timely manner by GEOTEL after receipt and acceptance of an
executed Purchase Order. All OPTUS Sublicenses of Program are FOB GEOTEL's
offices in Littleton, MA. . Unless specific instructions to the contrary are
supplied by OPTUS, methods and routes of shipment will be selected by GEOTEL,
but GEOTEL will not assume any liability in connection with shipment nor
constitute any carrier as GEOTEL's agent. Unless otherwise instructed by OPTUS,
GEOTEL will prepay transit insurance and freight and invoice OPTUS for such
amounts. All shipments will be made at OPTUS's risk and expense, and OPTUS will
be responsible for making claims with carriers, insurers, warehousemen and
others for misdelivery, non-delivery, loss, damage or delay.
11. PRICING AND PAYMENT TERMS.
-------------------------
(a) DISCOUNT With respect to the licenses granted to OPTUS
pursuant to Sections 2.2 and 3 and detailed in Exhibits C and D the discounts
are all inclusive and are included in the prepaid minimum royalty payment
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<PAGE> 6
[*]
(b) REPORTS AND PAYMENT. OPTUS shall deliver to GEOTEL within
15 days after the end of each calendar month a written report showing which
OPTUS Sublicenses were granted. Such report shall identify each Customer to whom
a OPTUS Sublicense has been granted, the street address of the installation, the
type and configuration of license granted, , the system type, serial number for
the license and the amount due GEOTEL. Payment for all Programs shall be made by
OPTUS no later than thirty (30) days after date of GEOTEL invoice to OPTUS via
wire transfer of US dollars pursuant to wire instructions included in Exhibit E.
(c) RECORDS. OPTUS shall keep full, true and accurate books of
account and other records containing all information and data which may be
necessary to ascertain and verify the amounts payable hereunder. During the term
of this Agreement and for a period of one year following its termination, GEOTEL
shall have the right from time to time (not to exceed twice during each calendar
year) to inspect, or have an agent, accountant or other representative inspect,
upon reasonable notice and during regular business hours, such books, records
and supporting data. The expenses of any such examination shall be paid by
GEOTEL.
(d). MINIMUM ROYALTIES ON LICENSES AND SUBLICENSES OF THE
PROGRAM. [*]
6
[* Portions have been omitted for Confidential Treatment]
<PAGE> 7
(*)
(g) All payments to GEOTEL hereunder shall be paid in U.S.
dollars.
(h) All shipments to OPTUS hereunder shall be F.0.B. GEOTEL's
facility and all costs for shipping and insurance shall be paid for by OPTUS.
(i) This Agreement may be terminated by OPTUS in the event the
Modified Programs fail the Acceptance Testing. Upon termination, OPTUS will
return the Modified Programs and all copies of the Programs to GEOTEL. In the
event of OPTUS's termination of the Agreement pursuant to this clause 11 (i) and
receipt of the Modified Programs and Programs by GeoTel, then GEOTEL will
promptly refund to OPTUS all sums paid by OPTUS pursuant to Clauses 11 (f) and 7
(j). Upon such termination of this Agreement and refund of such moneys paid
pursuant to Sections 11 (f) and 7 (j) either parties continuing obligations as
they relate to this Agreement are contained in Section 26 hereunder.
12. PROPRIETARY RIGHTS AND CONFIDENTIALITY.
--------------------------------------
(a) OWNERSHIP. For purposes of Section 117 of the Copyright
Act of 1976, as amended, and for all other purposes, GEOTEL shall be considered
the owner of the Program and all related documentation and any copies thereof,
and of all copyright, trade secret, patent and other intellectual or industrial
property rights therein. All copies of the Program made by OPTUS shall contain
proper copyright an proprietary notices.
(b) PROPRIETARY INFORMATION. As used in this Agreement,
"Proprietary Information" shall mean all confidential, proprietary or secret
information of a party, including without limitation components, parts, drawings
data sketches, plans, programs, specifications, techniques, processes,
algorithms, inventions and other information or material, owned, possessed or
used by such party. Notwithstanding the foregoing, Proprietary Information shall
not include any information which (i) is or becomes party of the public domain
through no act or omission on the part of the receiving party, (ii) is disclosed
to third parties by the disclosing party without restriction on such third
parties, (iii) is in the receiving party's possession, without actual or
constructive knowledge of an obligation of the confidentiality with respect
thereto, at or prior to the time of disclosure under this Agreement, (iv) is
disclosed to the receiving party by a third party having no obligation of
confidentiality with respect thereto, (v) is independently developed by the
receiving party or (vi) is released from confidential treatment by written
consent of the disclosing party.
(c) CONFIDENTIALITY. Each party shall hold in confidence and
not disclose (except on a confidential basis to its employees or contractors
(other than a competitor of the other party) who need to know and are bound to
preserve the confidentiality thereof) all Proprietary Information received from
the other party in the manner and to the same extent as it holds in confidence
its own Proprietary Information, and shall not use any such Proprietary
Information except for purposes contemplated by this Agreement. Each party shall
limit use of and access to the other party's Proprietary Information to such of
its employees or contractors [other than a competitor of the other party] as are
directly involved in the utilization of such Proprietary Information. Each party
shall take all reasonable steps to safeguard the other party's Proprietary
Information, and to ensure that no persons authorized to have such access shall
take any action which would be in violation of this Agreement if taken by such
party. Each party shall promptly report to the other party any actual or
suspected violation of this subsection and shall take further steps as may
reasonably be requested by the other party to prevent or remedy any such
violation.
(d) PROTECTION OF THE PROGRAMS. The ideas and the expressions
thereof contained in the Programs are confidential and proprietary information
and trade secrets of GEOTEL that will be disclosed by GEOTEL to OPTUS in
confidence.. OPTUS agrees to treat the Programs as a valuable asset of GEOTEL
and agrees that the Programs shall not be used for any purpose other than to
assist in the normal use of the Programs as defined in the Documentation. In
particular, but without limitation, OPTUS agrees it will not decompile,
disassemble, or attempt in any way to reverse engineer the Programs or to
develop a competing product based on the Programs.
[*Portions have been omitted for Confidential Treatment]
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<PAGE> 8
(e) EQUITABLE RELIEF. Because unauthorized use or transfer of
the Program and related documentation may diminish substantially the value of
such materials and irrevocably harm GEOTEL, if OPTUS breaches the provisions of
this Section 12, GEOTEL shall be entitled to equitable relief (including, but
not limited to, injunctive relief), in addition to other remedies afforded by
law, to prevent a breach of this Section 12.
(f) Custom Development.
------------------
i) GEOTEL acknowledges and agrees that OPTUS may
contract with GEOTEL under terms and conditions and fees to be mutually agreed
upon, to create further Modified Programs for the purpose of both the Internal
Use and distribution of the Modified Programs by OPTUS pursuant to the Software
License and Distribution Agreement.
ii) GEOTEL hereby grants a nonexclusive,
nontransferable, royalty free, perpetual license to OPTUS to use the Modified
Programs referred to in this clause 12(f) and clause 11(f) in the normal course
of OPTUS's business.
13. WARRANTIES AND LIMITATIONS ON WARRANTIES
----------------------------------------
(a) Warranties.
(i) Program License Warranties. Subject to the
other provisions of this Section 13, GEOTEL warrants that for a period of 90
days following the execution of this Agreement (the "Warranty Period") the
Programs will function substantially in the manner described in the applicable
Documentation. Notwithstanding anything contained herein to the contrary, the
total liability of GEOTEL under this warranty is limited, at the option of
GEOTEL, to any of the following:
(I) use of reasonable efforts to
expeditiously repair any software, or
parts thereof (as GEOTEL may see fit)
including without limitation supplying
OPTUS , pursuant to the fees specified
in Clause 7(j) the services referenced
in Clause 7(j); or
(II) GEOTEL's use of reasonable efforts to
expeditiously replace any software, or
part thereof, or any shipment (as
GEOTEL may see fit) as to which any
defect is claimed by OPTUS and duly
verified by GEOTEL: or
(III) the refund of the amounts paid for the
defective product.
(ii) Support Services Warranty. GEOTEL warrants that
its Technical Support and Support Services will be performed expeditiously in a
workmanlike manner. This warranty shall be valid for ninety-days from the
completion of the service. The re-performance of services shall be GEOTEL's sole
obligation and OPTUS's sole remedy in the event of a breach of such warranty.
(iii) License Grant Warranty. GEOTEL warrants it may
lawfully grant the licenses for the Programs and has all necessary right, tittle
or interest to deal with all intellectual property rights contained in this
Agreement.
(b) Limitations on Warranties.
(i) No employee or agent of GEOTEL is authorized to
give a greater or different warranty than that set forth herein.
(ii) Portions of the Programs are derived from
third-party software licensed to GEOTEL for integration into GEOTEL Programs and
sublicensing. No such third-party warrants the Programs or any such portion,
assumes any liability regarding use of such portion or the Programs, or
undertakes to furnish any support or information relating to such portion or the
Programs.
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<PAGE> 9
(iii) GeoTel is not obligated to perform
investigation and/or corrections of defects found by GEOTEL to be (i) in other
than a current, unaltered release; (ii) caused by modification of the Programs
or use thereof in combination with software not provided by GEOTEL or not
authorized by GEOTEL; (iii) caused by OPTUS or Customers improper or
unauthorized use of the Programs; or (iv) due to external causes such as, but
not limited to, power failure or electric surges.
(c) Disclaimers. THE EXPRESS WARRANTIES SET FORTH IN SECTION
13 ARE THE ONLY WARRANTIES MADE BY GEOTEL WITH RESPECT TO THE PROGRAMS, ,
SUPPORT SERVICES AND TECHNICAL SUPPORT GEOTEL MAKES NO OTHER WARRANTIES,
EXPRESS, IMPLIED OR ARISING BY CUSTOM OR TRADE USAGE, AND, SPECIFICALLY, MAKES
NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. GEOTEL'S
EXPRESS WARRANTIES SHALL NOT BE ENLARGED, DIMINISHED OR AFFECTED BY, AND NO
OBLIGATION OR LIABILITY SHALL ARISE OUT OF, GEOTEL RENDERING TECHNICAL OR OTHER
ADVICE OR SUPPORT SERVICE IN CONNECTION WITH THE PROGRAMS OR .
(d) Limitation of Liability.
(i) Except as expressly provided for in Section 14 of
this Agreement, GEOTEL's liability, whether in contract, tort, or otherwise,
arising out of or in connection with the Programs, Support Services, and
Technical Support or this Agreement shall not exceed the amounts paid to GEOTEL
by OPTUS for the applicable copy of the Program, Support Services, Technical
Support that gave rise to such claim.
(e) IN NO EVENT SHALL GEOTEL OR ITS LICENSORS BE LIABLE FOR
SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR INDIRECT DAMAGES, INCLUDING,
WITHOUT LIMITATION, ANY DAMAGES RESULTING FROM LOSS OF USE, LOSS OF DATA, LOSS
OF PROFITS OR LOSS OF BUSINESS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, THE PERFORMANCE OF THE PROGRAMS, , SUPPORT SERVICES, TECHNICAL
SUPPORT, OR OF ANY OTHER OBLIGATIONS RELATING TO THIS AGREEMENT, WHETHER OR NOT
GEOTEL HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
(f) Allocation. The provisions of this Article 13 allocate the
risks under this Agreement between GEOTEL and OPTUS. GEOTEL's pricing reflects
this allocation of risk and the limitation of liability specified herein.
14. INDEMNIFICATION BY GEOTEL
-------------------------
(a) INFRINGEMENT WARRANTY AND INDEMNITY. GEOTEL shall defend
or, at its option, settle, any claim, action or proceeding brought against OPTUS
that any Program infringes a United States or Territory patent, copyright or
trade secret, and shall indemnify and keep indemnified OPTUS against all damages
and costs finally awarded against OPTUS in any such action or proceeding which
results from any such claim. GEOTEL shall have no liability under this Section
14 unless OPTUS (a) promptly notifies GEOTEL in writing of the claim, (b) gives
GEOTEL full authority, information and assistance to defend such claim and (c)
gives GEOTEL sole control of the defense of such claim and all negotiations for
the compromise or settlement thereof. If a Program or any part thereof becomes,
or in GEOTEL's opinion is likely to become, the subject of a claim of
infringement or the like under any patent, copyright or trade secret law, GEOTEL
shall have the right, at its option and expense, either to expeditiously obtain
for OPTUS a license permitting the continued use of the Program or such part, to
expeditiously replace or modify it so that it becomes non-infringing, or to
refund an amount equal to the depreciated license fee paid by OPTUS for the
Program (calculated on a straight line basis over a five-year life) and to
terminate the license thereafter. GEOTEL shall have no liability hereunder for
any costs incurred or settlement entered into without its prior written consent.
GEOTEL shall have no liability hereunder with respect to any claim based upon
(a) the combination of the Program with other products not furnished by GEOTEL,
(b) any addition to or modification to the Program by any person or entity other
than GEOTEL or as authorized by GEOTEL, (c) GEOTEL furnishing to OPTUS any
information, data, service or applications assistance, other than the Programs
and the printed manuals relating thereto or (d) use of a superseded or altered
release of the Program.
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<PAGE> 10
THE PROVISIONS OF THIS SECTION 14 STATE THE EXCLUSIVE LIABILITY OF GEOTEL AND
THE EXCLUSIVE REMEDY OF OPTUS WITH RESPECT TO ANY CLAIM OF PATENT, COPYRIGHT OR
TRADE SECRET INFRINGEMENT BY THE PROGRAMS, ANY PART THEREOF OR THE USE THEREOF,
AND ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, AND INDEMNITIES
WITH RESPECT THERETO.
15. INDEMNIFICATION BY OPTUS. OPTUS shall defend and hold GEOTEL
harmless against any expense, judgment or loss incurred in connection with any
action brought against GEOTEL based upon a claim that the manufacture or license
of any Program which is modified, altered or combined with any equipment or
software by OPTUS [or any of its Customers] and is not supplied by GEOTEL
hereunder constitutes an infringement because of such modification, alteration
or combination.
16. TERM AND TERMINATION.
-------------------------
(a) TERM. This Agreement shall remain in full force and effect
for an initial term ("Initial Term") commencing on the date hereof and extending
for a period of twenty seven (27) months , unless terminated earlier in
accordance with this Agreement. Notwithstanding the foregoing, OPTUS may provide
GEOTEL ninety (90) days notice any time after the first twenty four months of
this Agreement that it does not wish to continue this Agreement, in which case
this Agreement shall terminate at the end of that 90 day period, such
notification will not relieve or diminish in anyway OPTUS's obligations during
the initial term of this Agreement. This Agreement shall automatically renew for
consecutive one (1) year periods ("Extension Periods") based upon the terms and
conditions then contained in this Agreement, unless either Party provides
written notice to the other no later than ninety (90) days prior to the end of
the Initial Term or the then-current Extension Period of its intent to terminate
this Agreement in which event this Agreement shall terminate as of the end of
such Initial Term or Extension Period, as applicable. The Initial Term and any
Extension Periods may be collectively referred to in this Agreement as the Term.
(b) TERMINATION. This Agreement may also be terminated:
(i) By GEOTEL, in the event that OPTUS fails to
make royalty payments to GEOTEL when due under Section 11 hereof and fails to
remedy such breach within 60 days after written notice of such breach is
provided to OPTUS;
(ii) By either party, if the other party breaches
any of its obligations under this Agreement (other than OPTUS's obligation to
pay amounts due under this Agreement to GEOTEL) and fails to remedy such breach
within 60 days after written notice of such breach is provided to such other
party;
(iii) By either party, effective immediately and
without notice, if (A) a receiver, trustee, or liquidator of the other party is
appointed for any of the properties or assets of the other party; (B) either
party makes a general assignment for the benefit of its creditors; (C) either
party files a petition under the federal Bankruptcy Code or other federal or
state statue for the reorganization of the other party or any arrangement with
its creditors or readjustment of its debt, or its dissolution or liquidation, or
such a petition is flied against the other party and is not dismissed within 60
days thereafter; or (D) either party ceases doing business or commences
dissolution or liquidation proceedings.
(c) EFFECT OF TERMINATION. Upon any termination of this Agreement, (i)
OPTUS shall immediately cease to grant OPTUS Sublicenses, (ii) all obligations
of either party incurred hereunder prior to such termination and all obligations
of either party set forth under Section 16 hereof shall survive the termination
of this Agreement and (iii) OPTUS shall return to GEOTEL (or at GEOTEL's option,
destroy and certify in writing to GEOTEL that it has destroyed) the original and
all copies of the Program and related documentation, including compilations,
translations, partial copies and modifications, if any.
(d) SUPPORT SERVICES AFTER TERMINATION. Following expiration or
termination of this Agreement, OPTUS and GEOTEL will cooperate in the smooth
transition of the provision of the following to OPTUS Customers:, i)Warranty,
ii) Service and iii) Updates. GEOTEL may elect at it's sole discretion to: i)
continue to have OPTUS provide such services for a mutually agreed upon fee, ii)
appoint a new service provider in the Territory, iii) GEOTEL may provide such
services directly or iv) by any other means as GEOTEL may determine.
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<PAGE> 11
17. RELATIONSHIP BETWEEN PARTIES. The relationship between GEOTEL and
OPTUS is that of independent contractors, and nothing in this Agreement shall be
construed to constitute one party as an employee, partner or agent of the other
party. Without limiting the foregoing, either party shall have any authority to
act for or to bind the other party in any way, to make representations or
warranties or to execute agreements on behalf of the other party or to represent
that the other party is in any way responsible for the acts or omissions of the
other party. Both parties shall indemnify and hold each other L harmless for any
liability or damage resulting from violation of this Section 17.
18. EXPORT. OPTUS agrees that the Program products licensed hereunder
will not be exported directly or indirectly from the United States, separately
or as part of a system, without first obtaining a valid license from the United
States Government, as required, and otherwise in compliance with all United
States Government Export Regulations. OPTUS shall have sole responsibility for
obtaining all such licenses or other required permits at its sole cost and
expense. No failure to obtain any such license shall excuse any nonperformance
by OPTUS of its obligation pursuant to this Agreement. OPTUS's obligations under
this provision shall survive and continue after any termination of rights under
this Agreement.
Specifically, not by way of limitation, as required by Part 179.4
(d)(2) of the Export Administration Regulations of the United States Department
of Commerce, OPTUS assures GEOTEL that, unless prior authorization is obtained
from the United States Office of Export Administration, OPTUS will not knowingly
export (or re-export) the Program products or the confidential and proprietary
information related thereto for any purpose, to any of the countries of Romania,
Poland, Albania, Bulgaria, Czechoslovakia, East Germany (Soviet Zone of Germany
and the Soviet sector of Berlin), Estonia, Hungary, Latvia, Lithuania, Outer
Mongolia, People's Republic of China ( excluding Republic of China), Taiwan
(Formosa), Union of Soviet Socialist Republics, North Korea, North Vietnam,
South Vietnam, Cambodia, Afghanistan, Cuba and Libya.
19. TAXES. OPTUS shall pay all import duties, levies or imposts, and
all sales, use, value added, property, or other taxes of any nature, assessed
upon or with respect to any Programs, or other products or services ordered by
OPTUS from GEOTEL, which are imposed by any community of nations, nation, or
political subdivision thereof, but excluding United States taxes based on
GEOTEL's net income. If OPTUS is required by law to make any deduction or to
withhold from any sum payable to GEOTEL by OPTUS hereunder, then the sum payable
by OPTUS upon which the deduction or withholding is based shall be increased to
the extent necessary to ensure that, after all deduction and withholding, GEOTEL
receives and retains, free from liability for any deduction or withholding, a
net amount equal to the amount GEOTEL would have received and retained in the
absence of required deduction or withholding. In the event GEOTEL is required at
any time to pay any such tax, fee, duty or charge, OPTUS shall promptly
reimburse GEOTEL therefor. OPTUS shall obtain and provide to GEOTEL any
certificate of exemption or similar document required to exempt any transaction
under this Agreement from sales tax, use tax or other tax liability.
20. FORCE MAJEURE. In the event that either party is prevented from
performing, or is unable to perform, any of its obligations under this Agreement
due to any act of God, fire, casualty, flood, war, strike, lock out, failure of
public utilities, injunction or any act, exercise, assertion or requirement of
governmental authority, epidemic, destruction of production facilities,
insurrection, inability to procure materials, labor, equipment, transportation
or energy sufficient to meet manufacturing needs, or any other cause beyond the
reasonable control of the party invoking this provision, and if such party shall
have used its best efforts to avoid such occurrence and minimize its duration
and shall have given prompt written notice to the other party, then the affected
party's performance shall be excused and the time for performance shall be
extended for the period of delay or inability to perform due to such occurrence.
21. NOTICES. All notices or other communications given by either party
of the other under this Agreement shall be in writing and shall be personally
delivered or sent by registered or certified mail, return-receipt requested, to
the other party at its address set forth above or such other address as a party
may subsequently designate in writing. The date of personal delivery or the date
of mailing, as the case may be, shall be deemed to be the date on which such
notice is given.
11
<PAGE> 12
22. ENTIRE AGREEMENT. This Agreement and the Exhibits constitute the
entire agreement between GEOTEL and OPTUS with respect to the subject matter
hereof. No waiver, consent, modification, amendment or change of the terms of
this Agreement or of any Exhibit shall bind either party unless in writing and
signed by both parties.
23. SEVERABLITY. In the event that any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable because it is
invalid or in conflict with any law of any relevant jurisdiction, the validity
of the remaining provisions shall not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular provisions held to be unenforceable.
24. ASSIGNMENTS PROHIBITED. Neither this Agreement nor any rights or
licenses granted hereunder may be assigned or delegated, by operation of law or
otherwise, without the written consent of the other party, which consent shall
not be unreasonably withheld; provided, however, that GEOTEL shall be entitled
to assign this Agreement to an entity which purchases substantially all of the
assets of GEOTEL or purchases a majority interest in the voting stock of GEOTEL
or otherwise assumes the business of GEOTEL.
25. GOVERNING LAW. This Agreement shall be governed by and construed as
a sealed instrument in accordance with the laws of the Commonwealth of
Massachusetts.
26. SURVIVAL OF PROVISIONS. Optus agrees that the provisions of
Sections 11, 12, 13, 14, 15, 16 (c), 16 (d), 18, 19, 21, 24, 25 and 26 shall
survive the expiration or earlier termination of this Agreement for any reason.
IN WITNESS WHEREOF, the parties hereto executed this Agreement under
seal as of the day and year indicated above.
GEOTEL Communications Corporation
By: /s/ TIMOTHY J. ALLEN
----------------------------------------
Timothy J. Allen
Vice President & Chief Financial Officer
OPTUS SYSTEMS PTY LTD
By:
----------------------------------------
Title:
12
<PAGE> 13
EXHIBIT A
---------
GEOTEL COMMUNICATIONS CORPORATION PRICE LIST
--------------------------------------------
[CAPTION]
*
* Portions have been omitted for Confidential Treatment.
13
<PAGE> 14
*
* PORTIONS HAVE BEEN OMITTED FOR CONFIDENTIAL TREATMENT
14
<PAGE> 15
*
* PORTIONS HAVE BEEN OMITTED FOR CONFIDENTIAL TREATMENT
15
<PAGE> 16
*
*Portions have been omitted for confidential treatment.
16
<PAGE> 17
*
*Portions have been omitted for confidential treatment.
17
<PAGE> 18
EXHIBIT B--GEOTEL CERTIFIED HARDWARE PLATFORMS
----------------------------------------------
SUBJECT TO CHANGE
DETAIL SPECIFICATIONS ARE ATTACHED HEREUNDER
18
<PAGE> 19
*
[* Portions have been omitted for Confidential Treatment.]
19
<PAGE> 20
EXHIBIT D--INTERNAL USE SYSTEM
------------------------------
*
[* Portions have been omitted for Confidential Treatment.]
20
<PAGE> 21
EXHIBIT E--GEOTEL'S WIRE INSTRUCTIONS
-------------------------------------
INSTRUCTIONS FOR WIRE TRANSFERS TO
GEOTEL COMMUNICATIONS CORPORATION
FLEET BANK OF MASSACHUSETTS
75 STATE STREET
BOSTON, MA 02109
ROUTING ABA #011000138
FURTHER CREDIT TO GEOTEL COMMUNICATIONS CORPORATION
ACCOUNT #9372912511
21
<PAGE> 22
EXHIBIT F--GEOTEL'S BACK UP MAINTENANCE & SERVICE SUPPORT POLICY
----------------------------------------------------------------
1. INTRODUCTION
1.1 OVERVIEW
This document establishes policies for GEOTEL Back Up Maintenance & Service
Support Services for the GEOTEL Intelligent CallRouter System ("ICR System").
The following are discussed:
- -- Post-Installation Technical Support Services
- -- Custom Support Services (If Contracted For By OPTUS)
- -- OPTUS Responsibilities
1. TECHNICAL SUPPORT SERVICES
Post-install technical support is available during the warranty period.
1.1 COVERAGE
GEOTEL Technical Support as defined below in paragraph 1.2 is available on a
continuous, 24 hour-per-day basis. Unless otherwise agreed to, all other
Technical Support will be provided within the 50 United States and District of
Columbia between the hours of 8:30 AM and 6:30 PM Eastern time, Monday through
Friday, excluding GEOTEL holidays ("Normal GEOTEL Business Hours"). Requests
received after 6:30 PM are deemed to have been received during the next GEOTEL
working day. The Technical Support covers specified remote or on-site support
for the Programs in consideration of the fees identified in Section 7 (j) and
Exhibit A (if applicable) of this Agreement Charges for services not within the
scope of the standard Back Up Maintenance & Service Support Policy requested by
OPTUS shall be provided by quotation at the time and materials rate in effect at
the time of the request. With respect to the aforementioned on-site services
requested by OPTUS, OPTUS shall reimburse GEOTEL for reasonable travel and
out-of-pocket expenses actually incurred.
1.2 GEOTEL RESPONSIBILITIES
1.2.1 GEOTEL PROGRAMS
For those Programs unaltered and unmodified designated in the Agreement , GEOTEL
will provide the following Technical Support subject to the provisions of
Section 9 of the Agreement:
1.2.1.1 REMEDIAL PROGRAM SUPPORT
GEOTEL will provide remedial support by providing an update, patch, revision or
temporary workaround solution to verified problems reported to GEOTEL by OPTUS.
1.2.1.2 UPDATES AND NEW RELEASES OF PROGRAMS
For Programs OPTUS has purchased, GEOTEL will distribute to OPTUS Updates
and new releases of Programs as they are released for General Availability. All
updates and new releases are subject to the same software licensing terms and
conditions as governed the originally supplied version of the Programs. In
those cases where Updates are installable by OPTUS or remotely by GEOTEL,
remote or on-site installation services requested by OPTUS for updates and new
releases shall be in accordance with the GEOTEL prices and fees then in effect.
The updates and releases can be installed by GEOTEL either on-site or remotely,
and in some cases, may be installable by OPTUS.
1.2.1.3 SUPPORT FOR PAST VERSIONS AND RELEASES OF PROGRAMS
GEOTEL will have no obligation to offer support for GEOTEL Program problems
corrected by a more current version, or for problems in Releases more than 180
days older than the then current Release. The term "Release" shall mean a new
version of a GEOTEL Program that contains significant new functionality or
features. Each Release shall be identified solely by the numeral(s) to the left
of the decimal point, with the newer Release having the larger numeral. Feature
and maintenance updates are identified solely by the numeral(s) to the right of
the decimal point.
1.2.2 GEOTEL REMEDIAL PROGRAM SUPPORT OBJECTIVES
GEOTEL will use reasonable efforts to meet the following objectives with
regard to remedial support for GEOTEL Programs:
1.2.2.1 CRITICAL SITUATIONS
22
<PAGE> 23
A Critical Situation is defined by OPTUS as a service affecting product defect
that materially impacts the OPTUS's ability to operate the system. Upon
notification of a critical situation, GEOTEL will work with OPTUS on a
continuous, 24 hour-per-day basis, until the Critical Situation is resolved.
1.2.2.2 MODERATE SITUATIONS
In those instances not constituting a Critical Situation but where the GEOTEL
Program problem impacts OPTUS's use of the Intelligent CallRouter ("Moderate
Situations"), GEOTEL will schedule a patch, workaround or other fix within
fourteen (14) days of receiving notice from OPTUS of the problem.
1.2.2.3 OTHER SITUATIONS
In all other instances, GEOTEL will provide a solution to a reported GEOTEL
Program problem in the time frame determined by GEOTEL.
1.3 GEOTEL OPTUS SUPPORT CENTER
The GEOTEL OPTUS Support Center ("CSC") will provide Technical Support which may
include: Remote monitoring and support of ICR System operation and diagnosis of
GEOTEL Program and Hardware problems.
- -- Central point of contact and tracking for general ICR product questions.
- -- Making available to OPTUS via telephone, during Normal GEOTEL Business
hours, qualified personnel to aid OPTUS in the resolution or verification of
GEOTEL Program problems. GEOTEL will make all reasonable effort to respond
within 15 minutes. Calls reporting "Critical Situations" will be given priority.
- -- Making available to OPTUS via telephone, after Normal GEOTEL Business hours,
for "Critical Situations" only, qualified personnel to aid OPTUS in the
resolution or verification of GEOTEL Program or Hardware problems. GEOTEL will
make all reasonable effort to respond within 30 minutes.
1.4. CUSTOM SUPPORT SERVICES
The following custom support services are available for the ICR System, at the
then prevailing time and material rates. With respect to any custom support
services requested by OPTUS, OPTUS shall reimburse GEOTEL for reasonable travel
and out-of-pocket expenses actually incurred. Custom support services are
subject to specific acceptance by GEOTEL.
- -- Design and delivery of custom reports
- -- Custom training
- -- Application Consulting (R)
2. OPTUS RESPONSIBILITIES
2.1 TRAINING
OPTUS shall designate a person at the primary ICR System Central Controller site
who has attended GEOTEL Intelligent CallRouter training to serve as the primary
point-of-contact for OPTUS with the GEOTEL CSC. OPTUS may designate a maximum of
three persons at a primary Central Controller site.
2.2 PROVISIONING OF NETWORK SERVICES
OPTUS shall provide, support and be responsible for ordering all network
services, including Local and Wide Area Data Networks, Inter-Exchange Carrier
access services, and all associated premises wiring and equipment, required for
the ICR System. OPTUS shall report network service problems to the appropriate
network service provider or vendor.
2.3 REMOTE MAINTENANCE AND DIAGNOSTICS ACCESS
OPTUS shall provide, at no charge to GEOTEL, access to telecommunications
equipment, as reasonably determined by GEOTEL, needed to establish a data
communication link with GEOTEL, for use in remote diagnosis and support of the
ICR System Intelligent CallRouter. OPTUS also agrees to make available to GEOTEL
current system passwords as necessary to provide such remote diagnosis and
support.
2.4 SUPPORT OF PREMISE EQUIPMENT
OPTUS shall provide all support for network OPTUS premise equipment as may be
required for network services, such as, but not limited Data Service Units;
Channel Service Units; and Local and Wide Area Network Routers and Bridges.
2.5 PROBLEM VERIFICATION
23
<PAGE> 24
OPTUS is responsible for all reasonable efforts to verify the existence of a
GEOTEL Program or Hardware problem prior to requesting support from GEOTEL.
2.6 SUPPORT OF ADMINISTRATIVE WORKSTATION DESKTOP ENVIRONMENT
OPTUS accepts overall responsibility for supporting the Administrative
Workstation Windows NT Desktop environment for the GEOTEL Administrative
Workstation. GEOTEL will make all reasonable efforts to assist the OPTUS in
diagnosing and resolving problems which may occur as result of conflicts or
resource contention between GEOTEL Programs and other OPTUS applications that
may be running in the Administrative Workstation Desktop Environment.
2.7 CHANGES TO CENTRAL CONTROLLER OR PERIPHERAL GATEWAYS
OPTUS shall obtain certification from GEOTEL prior to making any software or
hardware configuration changes to the Central Controller (Router, Logger, or
Network Interface Controller) or Peripheral Gateways.
24
<PAGE> 1
GOETEL COMMUNICATIONS CORPORATION EXHIBIT 11.1
<TABLE>
STATEMENT REGARDING COMPUTATION OF NET INCOME(LOSS)
PER COMMON AND COMMON EQUIVALENT SHARE
<CAPTION>
INCEPTION NINE MONTHS ENDED
(JUNE 4, 1993) YEAR ENDED DECEMBER 31, SEPTEMBER 30,
THROUGH ----------------------- --------------------------
DECEMBER 31, 1993 1994 1995 1995 1996
----------------- ----------------------- --------------------------
<S> <C> <C> <C> <C> <C>
Historical - Primary:
Weighted average issued common stock
outstanding 1,099,493 1,874,300 2,304,134 2,253,492 2,272,389
Cheap stock(1) 850,595 850,595 850,595 850,595 850,595
Weighted average common stock
equivalents -- -- -- -- 8,391,331
---------- ---------- ---------- ---------- -----------
Weighted average number of common
and common equivalent shares 1,950,088 2,724,895 3,154,729 3,104,087 11,514,315
========== ========== ========== ========== ===========
Net income (loss) $ (377) $ (2,966) $ (3,862) $ (3,479) $ 308
Less: accretion of Convertible
preferred stock to (4) (35) (77) (52) (82)
---------- ---------- ---------- ---------- -----------
Net income (loss) available (attributable) to
common shareholders $ (381) $ (3,001) $ (3,939) $ (3,531) $ 226
========== ========== ========== ========== ===========
Net income (loss) per common and common
equivalent share $ (0.20) $ (1.10) $ (1.25) $ (1.14) $ 0.02
========== ========== ========== ========== ===========
<CAPTION>
1995 1996
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Pro forma(2):
Weighted average issued common stock
and preferred stock outstanding (2) 9,514,870 10,633,720
Cheap stock (1) 850,595 850,595
Weighted average common stock
equivalents -- --
----------- -----------
Pro forma weighted average number of common
and common equivalent shares 10,365,465 11,514,315
=========== ===========
Net income (loss) $ (3,862) $ 308
=========== ===========
Pro forma net income (loss) per common and
common equivalent share $ (0.37) $ 0.03
=========== ===========
<FN>
- -----------------------------------
Notes:
(1) In accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 83, issuances of common
stock, common stock equivalents and Series C Convertible Preferred Stock within one year prior of the initial
filing of the registration statement, at share prices below the assumed initial public offering price are
considered to have been made in anticipation of the contemplated public offering for which this registration
statement was prepared. Accordingly, these stock issuances are treated as if issued and outstanding,
using the treasury stock method for options, since the inception of the Company.
(2) All shares of Convertible Preferred Stock are considered, on a pro forma basis, to be common
stock and are included using the if-converted method on the dates of their original issuance.
(3) Fully diluted net income (loss) per share is not presented as it is the same as the amounts disclosed in
historical net income (loss) per share for all periods presented.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (No.
333-13263) of our report dated October 16, 1996 on our audits of the financial
statements of GeoTel Communications Corporation. We also consent to the
references to our firm under the caption "Experts".
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 19, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated March 21, 1995 and to all references to our Firm included in or
made a part of this registration statement. It should be noted that we have not
examined any financial statements of the Company subsequent to December 31, 1994
or performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 19, 1996
