<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 23, 1999.
REGISTRATION NO. 333-86919
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
QUINTUS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7372 77-0021612
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
47212 MISSION FALLS COURT
FREMONT, CALIFORNIA 94539
(510) 624-2800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ALAN K. ANDERSON
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
QUINTUS CORPORATION
47212 MISSION FALLS COURT
FREMONT, CALIFORNIA 94539
(510) 624-2800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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<S> <C>
SCOTT C. DETTMER DOUGLAS H. COLLOM
DAVID T. YOUNG ROBERT F. KORNEGAY
DOUGLAS T. SHEEHY PRIYA CHERIAN HUSKINS
KEVIN A. LUCAS SCOTT GIESLER
GUNDERSON DETTMER STOUGH WILSON SONSINI GOODRICH & ROSATI
VILLENEUVE FRANKLIN & HACHIGIAN, LLP PROFESSIONAL CORPORATION
155 CONSTITUTION DRIVE 650 PAGE MILL ROAD
MENLO PARK, CALIFORNIA 94025 PALO ALTO, CALIFORNIA 94304
(650) 321-2400 (650) 493-9300
</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, as amended, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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 THAT 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 SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION -- , 1999
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PROSPECTUS
, 1999
LOGO
SHARES OF COMMON STOCK
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QUINTUS CORPORATION:
- - We provide a comprehensive software solution to manage customer interactions
and deliver consistent customer service across multiple communication
channels, including the Internet, email and advanced telephony systems.
- - Quintus Corporation
47212 Mission Falls Court
Fremont, California 94539
(510) 624-2800
PROPOSED SYMBOL AND MARKET:
- - QNTS/Nasdaq National Market
THE OFFERING:
- - We are offering shares of our common stock.
- - The underwriters have an option to purchase up to additional shares
from Quintus to cover over-allotments.
- - This is the initial public offering of our common stock. We anticipate that
the initial public offering price will be between $ and $ per share.
- - We plan to use the proceeds from this offering for working capital and other
general purposes, and for the required payment of approximately $18.2 million
to holders of some series of our preferred stock.
- - Closing: , 1999.
<TABLE>
<CAPTION>
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Per Share Total
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<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Quintus:
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</TABLE>
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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DONALDSON, LUFKIN & JENRETTE
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
SG COWEN
DLJDIRECT INC.
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE> 3
[INSIDE FRONT COVER ARTWORK TO FOLLOW]
<PAGE> 4
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of the
prospectus or any sale of the common stock. In this prospectus, unless the
context indicates otherwise, "Quintus," "we," "us," and "our" refer to Quintus
Corporation, a Delaware corporation, and its wholly-owned subsidiaries, "Acuity"
refers to Acuity Corp., a Delaware corporation, and "Nabnasset" refers to
Nabnasset Corporation, a Delaware corporation.
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 7
Special Note Regarding Forward-
Looking Statements................ 17
Use of Proceeds..................... 17
Dividend Policy..................... 17
Corporate Information............... 18
Capitalization...................... 19
Dilution............................ 20
Selected Consolidated Financial
Data.............................. 21
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 23
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Business............................ 36
Management.......................... 50
Certain Transactions................ 62
Principal Stockholders.............. 65
Description of Capital Stock........ 68
Shares Eligible for Future Sale..... 71
Underwriting........................ 73
Legal Matters....................... 75
Experts............................. 75
Change in Accountants............... 76
Additional Information.............. 76
Index to Consolidated Financial
Statements........................ F-1
</TABLE>
<PAGE> 5
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding Quintus and the common stock being sold in this offering
and our consolidated financial statements and the related notes included
elsewhere in this prospectus. Unless otherwise indicated, all information in
this prospectus assumes the closing of our acquisition of Acuity prior to the
effectiveness of this offering.
QUINTUS CORPORATION
We provide a comprehensive e-Customer Relationship Management or eCRM
solution to manage customer interactions and deliver consistent customer service
across multiple communication channels, including the Internet, email and
advanced telephony systems. Our Quintus eContact software suite includes
customer relationship management applications that address the needs of sales
and service, consumer relations, technical support and human resources contact
centers and a sophisticated routing engine to manage customer interactions.
eContact enables companies to handle high volumes of customer interactions,
increase the efficiency of contact center resources and leverage cross-selling
and up-selling opportunities.
Customer service is increasingly critical to attracting and retaining
customers. Many companies are re-orienting their businesses to be more
responsive to customer needs and are focusing on customer satisfaction as a
means of differentiation. In addition, the emergence of the Internet as a major
platform for communication and commerce has increased competition for customers
and reduced the importance of traditional competitive advantages such as price,
location, availability and access. International Data Corporation estimates that
the number of customers buying goods and services over the Internet worldwide
will grow from approximately 30.8 million in 1998 to 182.6 million in 2003 and
that the value of these purchases will increase from $50.4 billion to $1.3
trillion over the same period.
The Internet enables customers and companies to interact in more ways than
ever before. In addition to traditional, telephone-based communications,
customers and companies can now interact through email, Web chat and Web
self-service. The Gartner Group estimates that approximately 25% of all customer
interactions will take place over the Internet via email or Web communications
by 2001. As a result of the growing number of communication channels, companies
are struggling to handle the volume and variety of customer interactions.
Customers increasingly expect to be able to interact with companies through
whichever channel best suits their needs and are likely to use a combination of
communication channels. For example, a customer may request product literature
via email, review marketing materials or fill in an application on the Web, call
to receive more detailed information or assistance, send a signed form by fax,
and check the status of an order online. We believe a significant market
opportunity exists for solutions that integrate a broad range of communication
channels and manage the entire customer interaction lifecycle.
The Quintus eContact software suite provides a platform for the
personalization, routing and management of customer interactions. Our eContact
suite enables consistent customer service through the use of common workflows
and business rules, shared customer profile information, uniform cross-selling
and up-selling strategies, and consolidated management and reporting functions.
3
<PAGE> 6
The Quintus eContact suite includes:
- eContact engine, the foundation of our eContact suite, provides advanced
routing, tracking, management and reporting functionality, and
consolidates all relevant customer information into a common data
repository.
- Channel applications enable companies to manage customer interactions
across multiple communication channels, including the Internet, email and
advanced telephony systems.
- Business applications address the needs of sales and service, consumer
relations, technical support and human resources contact centers and are
tightly integrated with our eContact engine.
In addition, we provide professional services, customer service management,
technical support and educational services to facilitate successful customer
implementations.
Our objective is to be the leading provider of eCRM software solutions. Key
elements of our strategy include maintaining and extending our technology
leadership, broadening our direct and indirect distribution channels, targeting
Global 1000 and leading Internet-based companies, and developing and expanding
strategic relationships.
We sell our products through a direct sales force in North America and
indirectly through resellers and distribution partners worldwide. We have over
250 customers across many industries including financial services,
telecommunications and consumer products. Our customers include Anheuser-Busch,
Citigroup, First Union Bank, Lucent Technologies, Procter & Gamble, Sun
Microsystems and United Airlines.
ACQUISITION OF ACUITY
On September 10, 1999, we entered into an agreement to acquire Acuity, a
provider of software products to manage Internet-based customer interactions. We
are currently integrating Acuity's WebCenter and WebACD products into our
Quintus eContact suite in order to provide a more comprehensive eCRM solution.
The acquisition is structured as a merger in which Acuity will become our
wholly-owned subsidiary and the stockholders of Acuity will become our
stockholders. The total number of our shares to be issued plus the number of
shares issuable upon exercise of options and warrants we will assume in
connection with the acquisition will equal 18% of our fully-diluted
capitalization immediately following the acquisition. The closing of the merger
is subject to regulatory approval and the approval of Acuity's stockholders. We
expect to close this acquisition prior to the effectiveness of this offering.
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<PAGE> 7
THE OFFERING
Common stock offered............ shares
Common stock to be outstanding
after the offering.............. shares
Use of proceeds................. For working capital and other general
corporate purposes, and for the required cash
distribution upon the completion of this
offering of approximately $18.2 million to
holders of some series of our preferred
stock.
Proposed Nasdaq National Market
symbol........................ QNTS
Generally, unless otherwise indicated, all information in this prospectus:
- gives effect to the conversion of all outstanding shares of preferred
stock into shares of common stock effective upon the closing of this
offering; and
- assumes no exercise of the underwriters' over-allotment option to
purchase up to additional shares.
The number of shares of our common stock to be outstanding after the
offering includes:
- shares of our common stock outstanding as of August 31, 1999;
- an estimated 4,530,000 shares to be issued in connection with our
acquisition of Acuity; and
- 247,602 shares issuable upon the exercise of outstanding warrants that
otherwise terminate upon the closing of this offering.
The number of shares of our common stock to be outstanding after the
offering does not include:
- 3,682,772 shares issuable upon exercise of options outstanding as of
August 31, 1999, including options to be assumed in connection with our
acquisition of Acuity;
- 613,723 shares reserved for future issuance under our stock option plans
as of August 31, 1999;
- 2,500,000 shares reserved for future issuance under our stock plans
subsequent to August 31, 1999;
- 755,043 shares issuable upon exercise of warrants outstanding as of
August 31, 1999, including warrants to be assumed in connection with our
acquisition of Acuity; and
- 300,000 shares issuable upon exercise of warrants granted subsequent to
August 31, 1999.
5
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
----------------------------- -------------------
1997 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................. $13,614 $ 21,890 $ 30,307 $ 7,552 $10,293
Gross profit......................... 8,443 13,600 21,130 5,521 7,654
Net loss from continuing
operations........................ (3,526) (10,146) (10,586) (2,786) (690)
Net loss............................. (3,526) (11,249) (11,466) (2,976) (690)
Basic and diluted net loss per common
share from continuing
operations........................ $ (3.73) $ (0.20)
======== =======
Shares used in computation, basic and
diluted........................... 2,835 3,506
</TABLE>
The pro forma as adjusted column of the table below gives effect to the:
- sale of 1,363,334 shares for proceeds of $11.2 million on August 26,
1999;
- issuance of an estimated 4,530,000 shares and the assumption of
approximately $1.8 million in debt in connection with our acquisition of
Acuity;
- issuance of 247,602 shares upon the assumed exercise of outstanding
warrants that otherwise terminate upon the closing of this offering;
- required payment of approximately $18.2 million to holders of some series
of our preferred stock upon conversion of our preferred stock into our
common stock;
- sale in this offering of shares of common stock at an
assumed initial public offering price of $ per share; and
- conversion of all outstanding shares of our preferred stock into shares
of our common stock upon the closing of this offering.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------
PRO FORMA
AS
ACTUAL ADJUSTED
<S> <C> <C>
BALANCE SHEET DATA:
Cash...................................................... $ 467 $
Working capital (deficiency).............................. (8,909)
Total assets.............................................. 20,724
Long-term obligations, less current portion............... 1,649
Liability related to redeemable convertible preferred
stock.................................................. 17,811
Total stockholders' equity (deficiency)................... (20,622)
</TABLE>
6
<PAGE> 9
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors and the other information
in this prospectus before investing in our common stock. Our business and
results of operations could be seriously harmed by any of the following risks.
The trading price of our common stock could decline due to any of these risks,
and you may lose all or part of your investment in our common stock.
WE HAVE A HISTORY OF LOSSES AND WE EXPECT TO INCUR FUTURE LOSSES.
We have not had a profitable quarter and we cannot assure you that we will
become profitable. We expect to increase our sales and marketing, research and
development, and other expenses as we attempt to grow our business. As a result,
we will need to generate significant revenues to achieve profitability, which we
may be unable to do. We have funded our operations through the sale of equity
securities, borrowings and the sale of our products and services. We incurred
net losses from continuing operations of $3.5 million, $10.1 million, $10.6
million and $690,000 in fiscal 1997, 1998 and 1999 and for the three months
ended June 30, 1999. As of June 30, 1999 we had an accumulated deficit of $37.0
million. In addition, in September 1999, we entered into an agreement to acquire
Acuity which had incurred net losses of $6.6 million, $7.7 million and $2.2
million in the years ended December 31, 1997 and 1998 and for the six months
ended June 30, 1999. Acuity had an accumulated deficit of $21.7 million as of
June 30, 1999. Upon the closing of the acquisition of Acuity, we will record
approximately $41.5 million of intangible assets, which will be amortized on a
quarterly basis over five years. In connection with the acquisition of Acuity,
we expect to recognize a charge for in-process technologies of approximately
$3.0 million in the quarter ending December 31, 1999.
BECAUSE WE RECENTLY EXPANDED THE SCOPE OF OUR PRODUCT OFFERINGS, IT MAY BE
DIFFICULT FOR YOU TO EVALUATE OUR BUSINESS PROSPECTS.
You should not evaluate our business prospects based on our historical
operating results. In February 1999, we expanded the scope of our product
offering with the introduction of the Quintus eContact suite. To date no
customer has implemented our eContact suite. Prior to 1999, we sold some of the
components that are included in our eContact suite, but we have only recently
begun to sell the components that enable companies to manage customer
interactions over Internet-based communication channels. We cannot assure you
that our eContact suite will achieve market acceptance. In addition, we are
still in the process of integrating Acuity's WebCenter and WebACD products and
third-party providers' email and call routing functionality into our eContact
suite. We may encounter technical difficulties, delays and unforeseen expenses
as we continue our product integration and development efforts relating to
eContact.
IF OUR INITIAL IMPLEMENTATIONS OF THE QUINTUS ECONTACT SUITE SUFFER UNUSUAL
PROBLEMS OR DELAYS, OUR REPUTATION AND FUTURE OPERATING RESULTS MAY BE HARMED.
We are just beginning to deploy our eContact products as an integrated
suite. We cannot assure you that the initial implementations of our eContact
suite will succeed without problems or delays. Although we have deployed some of
the components that are included in our eContact suite, we have not deployed
eContact with integrated computer telephony, email, Web chat and Web
self-service capabilities. To complete a full implementation of our eContact
suite, we have to complete the integration of its components and will likely
have to integrate eContact with a wide variety of complex systems currently used
by our customers. If these implementations meet with significant technological
obstacles, we may be forced to spend additional resources, which may harm our
7
<PAGE> 10
operating results. If the ease and speed of these implementations do not meet
the expectations of our customers, our reputation and ability to sell our
eContact suite will be harmed.
THE TRADING PRICE OF OUR COMMON STOCK IS LIKELY TO BE VOLATILE IN RESPONSE TO
FLUCTUATIONS IN OUR QUARTERLY REVENUES AND OPERATING RESULTS.
We believe that quarter-to-quarter comparisons of our operating results may
not be meaningful. It is likely that in some future quarter our operating
results will be below the expectations of public market analysts and investors.
If this happens, the trading price of our common stock may fall substantially.
Our revenues and operating results are likely to vary significantly from quarter
to quarter due to a variety of factors, including the risks we describe in this
section.
Our ability to forecast revenue is limited. We derive substantially all of
our revenues from licenses of our software and related services. License
revenues in any quarter are substantially dependent on orders booked and shipped
in that quarter, and we cannot predict revenues for any future quarter with any
significant degree of certainty.
Our expenses are relatively fixed and are based, in part, on our
expectations of future revenues. Consequently, if revenue levels do not meet our
expectations, our financial results will be adversely effected. In addition, we
expect that sales derived through indirect channels, which are more difficult to
forecast, will increase as a percentage of total revenues in the future.
THE FAILURE TO OBTAIN A LARGE PROSPECTIVE CUSTOMER COULD CAUSE OUR REVENUES TO
DROP QUICKLY AND UNEXPECTEDLY.
We depend upon a limited number of large sales for a substantial portion of
our revenues in each quarter. For example, in the three months ended June 30,
1999, our largest customer accounted for 19.3% of our total revenues. Our
failure to successfully close one or more large sales in any particular period
could cause our revenues to drop quickly and unexpectedly. We expect to continue
to be dependent upon a limited number of customers for a significant portion of
our revenues and these customers are expected to vary from period-to-period. The
loss of a prospective major customer could result in our failure to meet
quarterly revenue expectations.
THE SUCCESS OF OUR BUSINESS RELIES HEAVILY ON INDIRECT DISTRIBUTION CHANNELS,
PARTICULARLY OUR DISTRIBUTION AGREEMENT WITH LUCENT TECHNOLOGIES.
If Lucent Technologies were to cease reselling our products or offer
competing products, our business would be harmed. Lucent Technologies accounted
for 9.2%, 19.3% and 33.9% of our total revenues in fiscal 1998 and 1999 and for
the three months ending June 30, 1999. Our distribution agreement with Lucent
Technologies expires in May 2000 but can be terminated on 30 days' notice
following a material breach of the agreement. Lucent Technologies is not
obligated to make any minimum purchases.
In addition, the loss of a reseller, the failure of a reseller to sell our
products, or our failure to attract and retain qualified new resellers in the
future could also harm our business. Typically our resellers do not have minimum
purchase or resale obligations, can cease marketing our products at any time,
and may offer competing products. We intend to expand our indirect distribution
channels by establishing additional relationships with resellers and
distribution partners. Competition for these relationships is intense, and we
may be unable to establish relationships on favorable terms, if at all. Even if
we are successful in establishing these relationships, they may not result in
substantial increases in our revenues.
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<PAGE> 11
A SUBSTANTIAL PORTION OF OUR REVENUES RESULT FROM SALES OF OUR QUINTUS CTI
PRODUCT.
If sales of our Quintus CTI product do not meet our expectations, our
operating results will be harmed. Revenues from our Quintus CTI product were
39.6% and 40.1% in fiscal 1999 and for the three months ended June 30, 1999. We
expect that revenues from our Quintus CTI product will continue to account for a
substantial portion of our revenues in the future.
WE FACE A NUMBER OF RISKS RELATED TO OUR PENDING ACQUISITION OF ACUITY, AND WE
MAY FACE SIMILAR RISKS IN THE FUTURE IF WE ACQUIRE OTHER BUSINESSES OR
TECHNOLOGIES.
In September 1999, we entered into an agreement to acquire Acuity and began
integrating its WebCenter and WebACD products into the Quintus eContact suite.
If we are unable to effectively integrate Acuity into our operations, including
its products, personnel and systems, our business and operating results are
likely to suffer. This integration will be made more difficult by Acuity's
operations being located in Austin, Texas, where we currently have no other
operations. We have just begun to integrate Acuity with our operations and we
expect this integration to place a significant burden on our management team.
The acquisition of Acuity will be our third acquisition within the last
three years, and we may make more acquisitions in the future. If we are unable
to integrate effectively any newly acquired businesses, technologies or
products, our operating results could suffer. Integrating any newly acquired
businesses, technologies or products may be expensive and time-consuming. Future
acquisitions could also result in large and immediate write-offs for in-process
research and development, increased amortization charges or the incurrence of
debt and contingent liabilities, any of which could harm our operating results.
To finance acquisitions, we may need to raise additional funds through public or
private financings. Additional funds may not be available on favorable terms, or
at all, and, in the case of equity financings, may result in dilution to our
stockholders. Moreover, we may not be able to operate any acquired businesses
profitably or otherwise implement our growth strategy successfully.
IF WE FAIL TO SUCCESSFULLY EXPAND OUR SALES, MARKETING AND CUSTOMER SUPPORT
ACTIVITIES, WE MAY BE UNABLE TO EXPAND OUR BUSINESS.
We cannot expand our business without highly trained sales, marketing and
customer support personnel to educate existing and prospective customers,
systems integrators and resellers regarding the use and benefits of our
products, and to provide effective customer support. We have replaced a large
number of our sales people during the last year. As a result, the size of our
sales force has not grown substantially, and many of our sales personnel are new
to us. We expect our new sales personnel will require substantial training in
our products and sales practices. New sales personnel tend to be less productive
than those with greater experience selling our products. Moreover, we intend to
hire additional direct sales force personnel in the United States. Competition
for qualified sales personnel is particularly intense in the software industry.
In the past, we have experienced difficulty hiring employees with appropriate
qualifications in the timeframe we desired. Any delays or difficulties we
encounter in these recruiting, training or retention efforts could impair our
ability to attract new customers and enhance our relationships with existing
customers.
UNLESS WE ARE ABLE TO OVERCOME SUBSTANTIAL COMPETITION IN THE ECRM MARKET, WE
WILL NOT BE ABLE TO GROW OR SUSTAIN OUR REVENUES.
We cannot assure you that we will be able to compete successfully against
current and future competitors. Increased competition is likely to result in
price reductions, reduced margins and loss of market share, any of which could
harm our business, financial condition and results of operations. In
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<PAGE> 12
order to be successful in the future, we must respond promptly and effectively
to technological change, changing customer requirements and competitors'
innovations. The introduction of new products by competitors or shifts in market
demands could render our existing products obsolete.
We may not be able to compete effectively in the future as current
competitors expand their product offerings and new companies enter the rapidly
evolving eCRM market. We currently face competition primarily from customer
relationship management software vendors such as Siebel Systems and Clarify,
emerging Internet customer interaction software vendors such as Kana
Communications and WebLine Communications, and computer telephony software
vendors such as Genesys Telecommunications Labs.
Because there are relatively low barriers to entry in the software market,
we expect additional competition from other established and emerging companies.
Potential future competitors include traditional call center technology
providers and large enterprise application vendors as well as independent
systems integrators, consulting firms and in-house information technology
departments that may develop solutions that compete with our products.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, sales, marketing and
other resources, greater name recognition and a larger installed base of
customers than we do. As a result, these competitors can devote greater
resources to the development, promotion and sale of products than we can and may
be able to respond to new or emerging technologies and changes in customer
requirements more quickly than we can.
Current and potential competitors have established and may in the future
establish relationships among themselves or with third parties to increase the
ability of their products to address the needs of our current or prospective
customers. In addition, a number of companies with significantly greater
resources than ours could attempt to increase their presence in the eCRM market
by acquiring or forming strategic alliances with our competitors. As a result,
it is likely that new competitors or alliances among competitors will emerge and
may rapidly acquire significant market share, which would harm our business,
financial condition and results of operations.
WE RELY ON RESELLING BRIGHTWARE'S EMAIL MANAGEMENT PRODUCT AND CISCO
SYSTEMS-GEOTEL COMMUNICATIONS' CALL ROUTING PRODUCT IN ORDER TO PROVIDE SOME OF
THE FUNCTIONALITY OF OUR ECRM SOLUTION.
We resell Brightware's software to provide the email management
functionality of our Quintus eContact suite and resell the Cisco Systems-GeoTel
Communications' Intelligent Contact Management product to provide call routing
functionality. Our agreement with Brightware can be cancelled without cause upon
60 days' notice. If Brightware were to cancel our reseller agreement or be
acquired by one of our competitors, or their email management product were
otherwise unavailable to us, we would likely incur substantial delays and costs
as we attempt to integrate alternative email management functionality into our
product suite. In particular, there may be few alternative sources for
Brightware's natural language text analysis and automated email response
functionality. Our agreement with Cisco Systems-GeoTel Communications expires in
April 2000 and may be terminated if a breach of the agreement is not resolved
within 30 days' notice. If Cisco Systems-GeoTel Communications were to cancel
our reseller agreement or if their call routing product were otherwise
unavailable to us, we would not be able to provide call routing functionality as
part of our eContact suite. In addition, if we were not able to resell
Brightware's product or Cisco Systems-Geotel Communications' product, customers
that require such functionality would have to purchase those products
separately. As a result, the sales process with our prospective customers would
be complicated by the need to coordinate with a third party.
10
<PAGE> 13
OUR BUSINESS WILL SUFFER IF THE ECRM MARKET DOES NOT DEVELOP AND GROW.
The eCRM market is new, not well defined and may not grow. The use of
email, Web chat and Web self-service as channels for companies to interact with
their customers is recent and may not grow as expected. Concerns about the
security, reliability and quality of service may inhibit the growth of
Internet-based customer service. In addition, our potential customers are just
beginning to look for comprehensive solutions to manage customer interactions
across multiple communication channels. Our future success will depend on the
increased market acceptance of comprehensive solutions for the management of
customer interactions.
IF WE ARE NOT ABLE TO MAINTAIN AND DEVELOP RELATIONSHIPS WITH SYSTEMS
INTEGRATORS, THE ACCEPTANCE OF OUR PRODUCTS AND GROWTH OF OUR REVENUES WILL BE
IMPEDED.
We rely on systems integrators to promote our solution and implement our
products. If we fail to maintain and develop relationships with systems
integrators, our revenues may be harmed. We currently rely on systems
integrators such as AnswerThink Consulting Group, Cambridge Technology Partners
and Technology Solutions Company to recommend our products to their customers
and to install our products. If we are unable to rely on systems integrators to
implement our products, we will likely have to provide these services ourselves.
As a result, our ability to grow may be harmed. Systems integrators may develop,
market or recommend products that compete with our products. Moreover, if these
systems integrators fail to implement our products successfully, our reputation
may be harmed.
OUR LENGTHY AND VARIABLE SALES CYCLE MAKES IT DIFFICULT TO PREDICT THE TIMING OF
A SALE OR WHETHER A SALE WILL BE MADE.
The timing of our revenues is difficult to predict in large part due to the
length and variability of the sales cycle for our products. Customers often view
the purchase of our products as a significant and strategic decision. As a
result, our customers tend to take significant time and effort to evaluate our
products. The amount of time and effort depends in part on the size and the
complexity of the deployment. This evaluation process frequently results in a
lengthy sales cycle, typically ranging from three to nine months. During this
time we may incur substantial sales and marketing expenses and expend
significant management efforts. We do not recoup these investments if the
prospective customer does not ultimately license our product.
IF WE ARE UNABLE TO INTRODUCE NEW PRODUCTS OR PRODUCT ENHANCEMENTS ON A TIMELY
BASIS, OR IF THESE PRODUCTS OR PRODUCT ENHANCEMENTS DO NOT ACHIEVE MARKET
ACCEPTANCE, OUR BUSINESS WOULD BE MATERIALLY HARMED.
Our future success will depend on our ability to effectively and timely
anticipate and adapt to customer requirements and offer products and services
that meet customer demands. Our failure to introduce products or services that
satisfy customer requirements would harm our ability to remain competitive in
the eCRM market. Some of our customers may want features and capabilities that
our products do not have. As a result, we may need to develop features for our
products, which may result in a longer sales cycle, increased research and
development expenses and reduced margins on our products. In addition, the
development of new or enhanced products is a complex and uncertain process. We
may experience design, development, marketing and other difficulties that could
delay or prevent the introduction of new products and enhancements.
11
<PAGE> 14
OUR BUSINESS WOULD SUFFER IF WE DO NOT RETAIN OUR KEY PERSONNEL.
Our future success depends on the continuing service of our senior
management and other key personnel. The loss of the services of one or more of
our key personnel could seriously harm us. Most of our key personnel are not
bound by employment agreements. In addition, we do not carry key person life
insurance on any of our employees.
Our future success also depends on our continuing ability to attract, hire,
train and retain a substantial number of highly skilled personnel. Competition
for qualified personnel in our industry is intense, particularly for software
development and technical personnel. Our business would be seriously harmed if
we are unable to attract and retain key employees or other highly qualified
personnel in the future.
WE MAY NOT BE ABLE TO MANAGE OUR GROWTH EFFECTIVELY.
We have experienced rapid growth and plan to continue to significantly
expand our operations. We may not be able to manage our growth effectively,
which would impair our ability to attract and service customers and cause us to
incur higher operating costs. Expanding our operations has placed a significant
strain on our personnel and other resources. Our revenues have grown from $13.6
million in fiscal 1997 to $30.3 million in fiscal 1999. Our headcount increased
from 113 at the end of fiscal 1997 to 158 at the end of fiscal 1999. For the
three months ended June 30, 1999, our revenues were $10.3 million and our
headcount was 181. Upon the closing of our acquisition of Acuity, we will have
additional employees and operations to manage. As of June 30, 1999, Acuity had
92 employees. To manage our growth effectively, we may need to further improve
our operational, financial and management systems.
IF WE DO NOT SUCCESSFULLY ADDRESS THE RISKS INHERENT IN THE EXPANSION OF OUR
INTERNATIONAL OPERATIONS, OUR OPERATING RESULTS MAY SUFFER.
We have limited experience in international operations and may not be able
to compete effectively in international markets. We currently intend to expend
significant financial and management resources to expand our international
operations. We believe that the future expansion of our international operations
is important to the growth of our business. Most of our international sales are
generated through resellers and distributors, and we expect substantial costs
and resources will be required to train and support these resellers. Among the
various risks we face in conducting business internationally are:
- difficulties and costs of staffing and managing foreign operations;
- longer accounts receivable payment cycles and possible difficulties in
collecting accounts receivable, which may increase our operating costs
and hurt our financial performance;
- technology standards that are different from those on which our products
are designed, which could require expensive redesigns of our products;
- political and economic instability;
- unexpected changes in regulatory requirements that could make our
products and services more expensive and therefore less attractive to
potential customers; and
- fluctuations in currency exchange rates and the imposition of currency
exchange controls.
12
<PAGE> 15
To date, our international product sales have been denominated in U.S.
dollars. To the extent the U.S. dollar appreciates against foreign currencies
our products would become less competitive in foreign markets.
IF WE ARE UNABLE TO LICENSE THIRD-PARTY TECHNOLOGIES, WE MAY BE REQUIRED TO
EXPEND TIME AND RESOURCES TO OBTAIN SUBSTITUTE TECHNOLOGY.
Our products incorporate technologies that we license from third parties.
Although we believe we could obtain similar functionality from alternative
sources, substituting and integrating replacement technologies could require us
to divert substantial development resources. As a result, it could delay the
shipment of existing products pending the integration of the replacement
technology and could delay the introduction of new products or enhancements as a
result of the diversion of development resources. In addition, we may be
required to license replacement technologies on terms less favorable than our
current terms, which would increase our expenses. If we are unable to obtain the
third-party technologies necessary for the successful operation of our products,
our business would be harmed.
UNKNOWN SOFTWARE DEFECTS COULD HARM OUR BUSINESS AND REPUTATION.
Our software interacts with other complex systems and software. Our
software products may contain defects, particularly when first introduced.
Despite our software testing procedures, we may not discover software defects
that affect our products until after they are deployed. These defects could
result in:
- damage to our reputation;
- lost sales or product returns;
- product liability claims against us;
- delays in or loss of market acceptance of our products; and
- unexpected expenses and diversion of resources to remedy errors.
The occurrence of any of these events would negatively impact our operating
results. In addition, our customers generally use our products together with
products from other vendors. As a result, when problems occur, it may be
difficult to identify the source of the problem. Therefore, even if these
problems are not caused by our products, they may cause us to incur significant
warranty and repair costs, divert the attention of our engineering personnel and
cause significant customer relations problems.
A PRODUCT LIABILITY SUIT AGAINST US COULD HARM OUR BUSINESS.
A successful product liability claim brought against us could harm our
reputation and business. Our license agreements with our customers typically
contain provisions designed to limit our exposure to potential liability claims.
However, it is possible that the limitation of liability provisions contained in
our license agreements may not be effective under the laws of certain
jurisdictions. Moreover, our standard liability limitations may be reduced
during contract negotiations. Although we have not experienced any product
liability claims to date, we may in the future. In addition, even if not
successful, a product liability suit against us could harm our reputation and
business.
13
<PAGE> 16
OUR FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY MAY
SIGNIFICANTLY IMPAIR OUR COMPETITIVE POSITION.
Third parties may infringe or misappropriate our copyrights, trademarks and
similar proprietary rights. We cannot be certain that the steps we have taken to
prevent the misappropriation of our intellectual property are adequate,
particularly in foreign countries where the laws may not protect our proprietary
rights as fully as in the United States. We rely on a combination of patent,
copyright, trademark and trade secret laws and restrictions on disclosure to
protect our intellectual property rights. In addition, we enter into
confidentiality agreements with our employees and certain customers, vendors and
strategic partners. Quintus has one issued U.S. patent and one filed U.S. patent
application. Through our acquisition of Acuity, we will acquire one additional
issued U.S. patent as well as nine additional filed U.S. patent applications. We
cannot assure you that any patents will be issued from these applications or
that any issued patent will protect our intellectual property. Furthermore,
other parties may independently develop similar or competing technology or
design around any patents that may be issued to us.
We may in the future initiate claims or litigation against third parties
for infringement of our proprietary rights in order to determine the scope and
validity of our proprietary rights or the proprietary rights of our competitors.
These claims could result in costly litigation and the diversion of our
technical and management personnel.
WE MAY FACE COSTLY INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS.
If third parties claim that our products infringe on their intellectual
property rights, we may be forced to seek expensive licenses, re-engineer our
products, engage in expensive and time-consuming litigation or stop marketing
the challenged product. Further, by contract we typically indemnify our
customers against infringement claims related to our products. In the past third
parties have alleged that our products infringe their patents. Third parties may
make similar allegations in the future. In addition, because the contents of
patent applications in the United States are not publicly disclosed until the
patent is issued, we may not be aware of applications that have been filed which
relate to our software products. We may be subject to legal proceedings and
claims from time to time in the ordinary course of our business, including
claims of alleged infringement of the trademarks and other intellectual property
rights of third parties. Intellectual property litigation is expensive and time-
consuming and could divert management's attention away from running our
business. This litigation could also require us to develop non-infringing
technology or enter into royalty or license agreements. These royalty or license
agreements, if required, may not be available on acceptable terms, if at all.
Our failure or inability to develop non-infringing technology or license the
proprietary rights on a timely basis in a cost-effective manner would harm our
business.
WE COULD LOSE REVENUES AND INCUR SIGNIFICANT COSTS IF OUR SYSTEMS OR THE SYSTEMS
OF OUR CUSTOMERS OR MATERIAL THIRD PARTIES ARE NOT YEAR 2000 COMPLIANT.
We may experience material problems and costs associated with Year 2000
compliance that could adversely affect our business, results of operations and
financial condition. If systems do not correctly recognize date information when
the year changes to 2000, we could experience
- potential warranty or other claims by our customers;
- errors in systems we use to run our business;
- errors in systems used by our suppliers;
- errors in systems used by our customers; and
14
<PAGE> 17
- the potential reduced spending by other companies on contact center
products as a result of significant information systems spending on Year
2000 remediation.
We have not yet fully developed a contingency plan to address situations
that may result if we are unable to achieve Year 2000 readiness of our critical
operations. The cost of developing and implementing such a plan may itself be
material.
Any of these events could significantly harm our business, financial
condition and results of operations.
THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE.
The stock markets have in general, and with respect to technology companies
in particular, recently experienced substantial stock price and volume
volatility. The stock markets may continue to experience volatility that may
adversely affect the market price and trading volume of our common stock. Stock
prices for many companies in the technology sector have experienced wide
fluctuations that have often been unrelated to their financial performance.
Similar fluctuations may affect the market price of our common stock. In
addition, if we fail to address any of the risks described in this section, the
market price of our common stock and the value of your investment could decline
significantly.
SALES OF OUR COMMON STOCK FOLLOWING THIS OFFERING COULD ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK.
The value of your investment in our common stock and our ability to raise
money through the sale of additional equity securities could be adversely
affected if our existing stockholders sell large amounts of their Quintus common
stock. If significant volumes of our common stock are sold into the market, the
market price of our common stock and therefore the value of your investment
could fall. This could impair our ability to raise capital through the sale of
additional equity securities. Based on shares outstanding as of August 31, 1999,
upon completion of this offering, we will have shares of common
stock outstanding (or shares if the underwriters' over-allotment
option is exercised in full). Our directors, executive officers and holders of
substantially all of our current stock have executed lock-up agreements with the
underwriters that limit their ability to sell shares of our common stock. These
parties have agreed not to sell or otherwise dispose of any shares of our common
stock for a period of at least 180 days after the date of this prospectus
without the prior written approval of Donaldson, Lufkin & Jenrette Securities
Corporation. When these lock-up agreements expire, many of these shares and the
shares of common stock underlying any options held by these individuals will
become eligible for sale. See "Shares Eligible for Future Sale"
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price of our common stock is expected to be
substantially higher than the book value per share of our outstanding common
stock immediately after this offering. Accordingly, if you purchase our common
stock in this offering, you will incur immediate dilution of approximately
$ in the book value per share of our common stock from the price you
pay for our common stock. This calculation assumes that you purchased our common
stock for $ per share.
15
<PAGE> 18
THERE MAY BE NO ACTIVE TRADING MARKET IN OUR COMMON SHARES AFTER THIS OFFERING,
WHICH MAY MAKE IT DIFFICULT FOR YOU TO RESELL YOUR SHARES.
There has been no public trading market for our common shares prior to this
offering, and we cannot be sure that an active trading market will develop upon
completion of this offering or, if one does develop, that it will be sustained.
If no public trading market for our common shares develops, or if this market is
not active or sustained, it may be difficult for you to resell your shares at a
price at or above the initial public offering price.
CONTROL BY EXISTING STOCKHOLDERS MAY LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME
OF DIRECTOR ELECTIONS AND THE APPROVAL OF MERGERS OR OTHER BUSINESS
COMBINATIONS.
Upon completion of this offering, our executive officers, directors and
principal stockholders and their affiliates will beneficially own
shares, or approximately %, of the outstanding shares of
common stock ( % if the underwriters' over-allotment option is exercised in
full). If they were to act in concert, these stockholders would be able to
significantly influence all matters requiring approval by our stockholders,
including the election of directors and the approval of mergers or other
business combination transactions.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW, AS WELL AS
PROVISIONS OF EMPLOYMENT AGREEMENTS OF SOME OF OUR KEY EXECUTIVE OFFICERS, COULD
PREVENT OR DELAY A CHANGE IN CONTROL OF QUINTUS.
Provisions in our bylaws and in our certificate of incorporation may have
the effect of delaying or preventing a change of control or changes in
management of Quintus. These provisions include:
- the requirement that a special meeting of stockholders may only be called
by stockholders owning at least a majority of our outstanding shares;
- the ability of our board of directors to issue preferred stock without
stockholder approval; and
- the right of our board of directors to elect a director to fill a vacancy
created by the expansion of the board of directors.
Furthermore, we are subject to the provisions of section 203 of the
Delaware General Corporation Law. These provisions prohibit large stockholders
owning 15% or more of our outstanding voting stock, from consummating a merger
or combination with a corporation unless this stockholder receives board
approval for the transaction or unless 66 2/3% of the outstanding shares of our
voting stock not owned by this stockholder approve the merger or combination.
In addition, our 1999 Stock Incentive Plan provides for full acceleration
of unvested options following certain sales or mergers of Quintus if the
optionee is terminated without cause within 18 months of the closing of the sale
or merger transaction. In addition, some of our officers have agreements with us
that provide for acceleration of vesting following certain sales or mergers of
Quintus. These provisions could make our acquisition by a third party more
costly and could delay or prevent a change of control or changes in our
management.
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<PAGE> 19
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. In evaluating these statements you should specifically
consider various factors, including the risks outlined under "Risk Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform such statements to actual results
or to changes in our expectations.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of shares of
common stock we are offering will be approximately $ ($ if the
underwriters exercise their over-allotment option in full) at an assumed initial
public offering price of $ and after deducting estimated offering
expenses of $ and underwriting discounts and commissions payable by
Quintus.
We expect to use the net proceeds for working capital and other general
corporate purposes. In addition, under the terms of our certificate of
incorporation in effect prior to this offering, we are required to make a
payment of approximately $18.2 million upon the closing of this offering to the
current holders of our Series A, Series B, Series C and Series D preferred stock
as a result of the conversion of this preferred stock into common stock. A
portion of the net proceeds may also be used to acquire or invest in
complementary businesses, technologies, product lines or products. We have no
current plans, agreements or commitments with respect to any such acquisitions
or investments other than the pending closing of our acquisition of Acuity. We
will use shares of our capital stock to complete this acquisition. Our
management will have broad discretion concerning the use of the net proceeds of
this offering. We intend to invest these proceeds in investment grade,
interest-bearing securities pending their use.
DIVIDEND POLICY
We have never declared or paid any dividends on our common stock or other
securities. We currently expect to retain future earnings, if any, for use in
the operation and expansion of our business and do not anticipate paying cash
dividends in the future. Our existing bank line of credit prohibits the payment
of cash dividends.
17
<PAGE> 20
CORPORATE INFORMATION
Quintus was incorporated in California in February 1984. Quintus became a
wholly-owned subsidiary of Intergraph Corporation in October 1989 and was
reincorporated in Delaware in June 1990. Quintus was purchased from Intergraph
Corporation in May 1995 in a management-led buyout backed by new investors. Our
principal executive offices are located at 47212 Mission Falls Court, Fremont,
California 94539 and our telephone number is (510) 624-2800. We have registered
the trademarks "Quintus" and "CustomerQ." Every other trademark, trade name or
service mark of any other company appearing in this prospectus is the property
of its holder.
18
<PAGE> 21
CAPITALIZATION
The following table sets forth our cash position, current portion of
long-term obligations and total capitalization as of June 30, 1999. The pro
forma column of the table gives effect to the:
- sale of 1,363,334 shares of our preferred stock for proceeds of $11.2
million on August 26, 1999;
- issuance of an estimated 4,530,000 shares and the assumption of
approximately $1.8 million in debt in connection with our acquisition of
Acuity; and
- issuance of 247,602 shares upon the assumed exercise of outstanding
warrants that otherwise terminate upon the closing of this offering.
The pro forma as adjusted column of the table gives effect to the:
- required payment of approximately $18.2 million to holders of some series
of our preferred stock upon conversion of our preferred stock into our
common stock;
- sale in this offering of shares of common stock at an
assumed initial public offering price of $ per share, less
underwriting discounts and commissions and estimated offering expenses
payable by Quintus; and
- conversion of all outstanding shares of our preferred stock into shares
of our common stock upon the closing of this offering.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C>
Cash........................................................ $ 467 $ 14,328 $
======== ======== =======
Current portion of long-term obligations.................... $ 1,425 $ 2,687 $
======== ======== =======
Long-term obligations, less current portion................. $ 1,649 $ 2,215 $
Liability related to redeemable convertible preferred
stock..................................................... 17,811 18,164
Stockholders' equity (deficiency):
Convertible preferred stock, $0.001 par value, shares
authorized 17,555,000 and 16,575,515 outstanding,
actual: 10,000,000 shares authorized and no shares
outstanding, pro forma: 10,000,000 shares authorized
and no shares outstanding, pro forma as adjusted....... 13,707 --
Common stock, $0.001 par value, shares authorized
40,000,000 and 4,311,084 outstanding, actual;
100,000,000 shares authorized and 27,027,535 shares
outstanding, pro forma; 100,000,000 shares authorized
and outstanding, pro forma as adjusted.. 4,323 74,506
Note receivable from stockholder.......................... (267) (267)
Deferred stock based compensation......................... (1,415) (1,415)
Accumulated deficit....................................... (36,970) (39,966)
-------- -------- -------
Total stockholders' equity (deficiency)................ (20,622) 32,858
-------- -------- -------
Total capitalization.............................. $ (1,162) $ 53,237 $
======== ======== =======
</TABLE>
This table does not include:
- 3,682,772 shares issuable upon exercise of options outstanding as of
August 31, 1999, including an estimated number of options to be assumed
in connection with our acquisition of Acuity as if it had occurred on
August 31, 1999;
- 613,723 shares reserved for future issuance under our stock option plans
as of August 31, 1999;
- 2,500,000 shares reserved for future issuance under our stock plans,
director option plan and employee stock purchase plan subsequent to
August 31, 1999;
- 755,043 shares issuable upon exercise of warrants outstanding as of
August 31, 1999, including an estimated number of warrants to be assumed
in connection with our acquisition of Acuity as if it had occurred on
August 31, 1999; and
- 300,000 shares issuable upon exercise of warrants granted subsequent to
August 31, 1999.
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<PAGE> 22
DILUTION
Our pro forma net tangible book value as of June 30, 1999, was $(12.9)
million, or approximately $(0.48) per share. Pro forma net tangible book value
per share represents the pro forma stockholders equity less pro forma intangible
assets divided by the pro forma number of shares of common stock outstanding,
giving effect to the conversion of all outstanding shares of preferred stock,
including the 1,363,334 shares of preferred stock issued on August 26, 1999, the
estimated 4,530,000 shares to be issued in connection with the closing of the
acquisition of Acuity and the issuance of 247,602 shares upon the assumed
exercise of outstanding warrants that otherwise terminate upon the closing of
this offering. After giving effect to the sale of the shares of
common stock being offered at an assumed initial public offering price of
$ per share and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses payable by us, our pro forma net
tangible book value at June 30, 1999, would have been , or
approximately $ per share. This represents an immediate increase in pro
forma net tangible book value of $ per share to existing stockholders and an
immediate dilution in net tangible book value of $ per share to new
investors of common stock in this offering. The following table illustrates this
dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ --
Pro forma net tangible book value per share as of June 30,
1999................................................... $ (0.48)
Increase attributable to new investors.................... --
Pro forma net tangible book value per share after
offering.................................................. --
Dilution per share to new investors......................... $
=======
</TABLE>
The following table sets forth, on a pro forma basis as of June 30, 1999,
the differences between the number of shares of common stock purchased, the
total consideration paid and the average price per share paid by existing
stockholders and by the new investors purchasing shares of common stock in this
offering, before deducting underwriting discounts and commissions and estimated
offering expenses payable by us, at the assumed public offering price of
$ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... % $ % $
New public investors......................
--------- ----- ---------- -----
Total........................... 100.0% 100.0%
========= ===== ========== =====
</TABLE>
To the extent that any shares are issued upon exercise of options or
warrants that were outstanding at June 30, 1999 or granted after that date, or
reserved for future issuance under our stock plans, there will be further
dilution to new investors.
20
<PAGE> 23
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and the related notes and
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
The consolidated statements of operations data for the years ended March
31, 1997 and 1998 and consolidated balance sheet data as of March 31, 1998 are
derived from our consolidated financial statements included elsewhere in this
prospectus, which have been audited by Ernst & Young LLP. The consolidated
statements of operations data for the year ended March 31, 1999 and consolidated
balance sheet data as of March 31, 1999 are derived from our consolidated
financial statements included elsewhere in this prospectus, which have been
audited by Deloitte & Touche LLP. The consolidated statements of operations data
for the period from May 25, 1995, the date of the acquisition of Quintus from
Intergraph Corporation in a management-led buyout with the financial backing of
new investors, to March 31, 1996 and balance sheet data as of March 31, 1996 and
1997 are derived from financial statements audited by Ernst & Young LLP, which
are not included in this prospectus. Prior to May 25, 1995, we were a
wholly-owned subsidiary of Intergraph Corporation. As a result, we believe
financial data for periods prior to May 25, 1995 is not material.
The consolidated statements of operations data for the three months ended
June 30, 1998 and 1999 and the consolidated balance sheet data as of June 30,
1999 are derived from our unaudited consolidated financial statements which, in
the opinion of management, have been prepared on the same basis as the audited
consolidated financial statements and reflect all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of our
results of operations and financial position. The historical results presented
below are not necessarily indicative of the results to be expected for any
future period.
21
<PAGE> 24
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
MAY 25, 1995 THREE MONTHS
THROUGH YEAR ENDED MARCH 31, ENDED JUNE 30,
MARCH 31, ------------------------------- ------------------
1996 1997 1998 1999 1998 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License..................................... $ 5,174 $ 8,406 $ 12,948 $ 17,577 $ 4,790 $ 6,126
Service..................................... 1,267 5,208 8,942 12,730 2,762 4,167
------- ------- -------- -------- ------- -------
Total revenues........................ 6,441 13,614 21,890 30,307 7,552 10,293
------- ------- -------- -------- ------- -------
Cost of revenues:
License..................................... 637 972 708 554 74 218
Service..................................... 985 4,199 7,582 8,623 1,957 2,421
------- ------- -------- -------- ------- -------
Total cost of revenues................ 1,622 5,171 8,290 9,177 2,031 2,639
------- ------- -------- -------- ------- -------
Gross profit.................................. 4,819 8,443 13,600 21,130 5,521 7,654
Operating expenses:
Sales and marketing......................... 4,031 6,879 11,336 17,147 4,518 4,314
Research and development.................... 1,795 3,667 5,102 6,719 1,795 1,873
General and administrative.................. 1,196 1,263 3,233 3,577 803 998
Amortization of intangibles................. -- -- 1,335 3,185 796 796
Acquired in-process technologies............ 6,060 -- 2,200 -- -- --
Stock-based compensation.................... -- -- -- 171 4 169
------- ------- -------- -------- ------- -------
Total operating expenses.............. 13,082 11,809 23,206 30,799 7,916 8,150
------- ------- -------- -------- ------- -------
Loss from continuing operations............... (8,263) (3,366) (9,606) (9,669) (2,395) (496)
Interest expense, net......................... (32) (160) (540) (917) (391) (194)
------- ------- -------- -------- ------- -------
Net loss from continuing operations........... (8,295) (3,526) (10,146) (10,586) (2,786) (690)
Discontinued operations:
Loss from discontinued operations........... -- -- (1,103) (1,891) (190) --
Gain on disposal of discontinued
operations................................ -- -- -- 1,011 -- --
------- ------- -------- -------- ------- -------
Net loss...................................... $(8,295) $(3,526) $(11,249) $(11,466) $(2,976) $ (690)
======= ======= ======== ======== ======= =======
Basic and diluted net loss per common share
from continuing operations.................. $(72.34) $ (4.25) $ (6.88) $ (3.73) $ (1.12) $ (0.20)
======= ======= ======== ======== ======= =======
Basic and diluted net loss per common share... $(72.34) $ (4.25) $ (7.53) $ (4.04) $ (1.20) $ (0.20)
======= ======= ======== ======== ======= =======
Shares used in computation, basic and
diluted..................................... 115 868 1,695 2,835 2,484 3,506
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF
------------------------------------------- JUNE 30,
1996 1997 1998 1999 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash........................................................ $ 792 $ 3,045 $ 1,986 $ 1,785 $ 467
Working capital (deficiency)................................ 582 1,552 (11,250) (8,644) (8,909)
Total assets................................................ 5,699 9,852 23,141 19,594 20,274
Long-term obligations, net of current portion............... 528 19 4,246 2,201 1,649
Redeemable convertible preferred stock...................... 9,478 14,110 17,811 17,811 17,811
Total stockholders' deficiency.............................. (7,850) (10,831) (20,333) (20,091) (20,622)
</TABLE>
22
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated
financial statements and related notes included elsewhere in this prospectus.
This discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including, but not limited to, those set forth under "Risk
Factors" and elsewhere in this prospectus.
OVERVIEW
We provide a comprehensive e-Customer Relationship Management or eCRM
solution to manage customer interactions and deliver consistent customer service
across multiple communication channels, including the Internet, email and
advanced telephony systems. Our Quintus eContact software suite includes
customer relationship management applications that address the needs of sales
and service, consumer relations, technical support and human resources contact
centers and a sophisticated routing engine to manage customer interactions.
eContact enables companies to handle high volumes of customer interactions,
increase the efficiency of contact center resources and leverage cross-selling
and up-selling opportunities.
Quintus was incorporated in 1984 to develop artificial intelligence
software and was acquired in 1989 by Intergraph Corporation, a provider of
interactive computer graphics systems. Quintus was purchased from Intergraph in
May 1995 in a management-led buyout with the financial backing of new investors.
At the time of the buyout we primarily provided application software and
consulting services to the help desk market. Since then we have introduced
several customer relationship management applications for call centers. In
November 1997, we acquired Nabnasset, a provider of computer telephony
integration software. Following the acquisition we introduced our Quintus CTI
product and began integrating it with our customer relationship management
applications. As new communication channels have emerged, we have introduced new
products and added functionality to our existing products. In February 1999, we
introduced our Quintus eContact suite as a platform for integrating our existing
products with new channel applications. As part of our eContact suite, we also
resell an email management product from Brightware and a call routing product
from Cisco Systems-GeoTel Communications. In September 1999, we entered into an
agreement to acquire Acuity, a provider of software products to manage
Internet-based customer interactions. The acquisition is expected to close prior
to the effectiveness of this offering.
Our revenues were $13.6 million, $21.9 million, $30.3 million and $10.3
million in fiscal 1997, 1998 and 1999 and for the three months ended June 30,
1999. We derive substantially all of our revenues from licenses and services
associated with our products. License revenues are derived from product sales to
customers and through resellers and distributors. Service revenues are
attributable to the installation, consulting, maintenance and other support
services related to the sale of our products.
License revenues from sales to end users are recognized upon shipment of
the product, if a signed contract exists, the fee is fixed and determinable,
collection is deemed probable and vendor-specific objective evidence exists to
allocate the total fee to elements of the arrangement. License revenues for
contracts requiring us to provide significant customization services are
recognized using percentage of completion accounting using labor days as the
basis for determining the percentage complete. License revenues from sales to
resellers and distributors are generally recognized at the time a reseller or
distributor reports to us that they have sold our software and all revenue
recognition criteria have been met.
23
<PAGE> 26
Service revenues include maintenance revenues which are deferred and
recognized ratably over the maintenance period, which in most cases is one year,
and revenues from training and consulting services, which are recognized as
services are performed.
We sell our products to customers in North and South America, Europe, South
Africa and Japan. Sales to customers outside of the United States represented
15.3%, 14.0%, 18.3% and 12.1% of total revenues in fiscal 1997, 1998 and 1999
and for the three months ended June 30, 1999. All of our sales are denominated
in U.S. dollars. We intend to establish additional distribution relationships
with partners outside of the United States and expect international revenues to
continue to increase as a percent of our total revenues in the future.
We sell our products through a direct sales force and indirectly through
resellers and distribution partners. Lucent Technologies, which began reselling
our products in November 1997, accounted for 9.2%, 19.3% and 33.9% of total
revenues in fiscal 1998 and 1999 and for the three months ended June 30, 1999.
In fiscal 1997, one customer, State Farm Insurance, accounted for 23.8% of total
revenues. In fiscal 1998 and 1999, no customer accounted for more than 10% of
total revenues. For the three months ended June 30, 1999, one customer, Procter
& Gamble, accounted for 19.3% of total revenues. We expect that sales of our
products to a limited number of parties will continue to account for a large
percentage of total revenues for the foreseeable future.
In July 1997, we acquired Call Center Enterprises, a provider of strategic
call center consulting services, for $965,000 in cash. The acquisition was
accounted for as a purchase. In February 1999, we sold this business to
AnswerThink Consulting Group for $2.1 million in cash. The results of operations
for Call Center Enterprises are presented as discontinued operations in our
consolidated financial statements.
In November 1997, we acquired Nabnasset for $3.5 million in cash, stock and
options to purchase our common stock. The transaction was accounted for as a
purchase. In this acquisition, acquired technology included both existing
technology and in-process research and development. The valuation of acquired
technology was made by applying the income forecast method, which considers the
present value of cash flows by product lines. Acquired in-process technologies
were charged to operations, as the technologies did not have alternative future
uses as of the date of the acquisition.
As of June 30, 1999 we had an accumulated deficit of approximately $37.0
million. Our net loss from continuing operations was $3.5 million, $10.1
million, $10.6 million and $690,000 in fiscal 1997, 1998 and 1999 and for the
three months ended June 30, 1999. These losses resulted from costs incurred in
the development and sale of our products and services. We expect to continue to
experience significant growth in our operating expenses, particularly in the
areas of sales and marketing. As a result, we expect to incur additional losses
and cannot assure you that we will achieve or sustain profitability in the
future.
24
<PAGE> 27
RESULTS OF OPERATIONS
The following table sets forth our results of operations as a percentage of
total revenues:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31, JUNE 30,
----------------------- --------------
1997 1998 1999 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License...................................... 61.7% 59.2% 58.0% 63.4% 59.5%
Service...................................... 38.3 40.8 42.0 36.6 40.5
----- ----- ----- ----- -----
Total revenues............................ 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Cost of revenues:
License...................................... 7.1 3.2 1.8 1.0 2.1
Service...................................... 30.8 34.6 28.5 25.9 23.5
----- ----- ----- ----- -----
Total cost of revenues.................... 37.9 37.8 30.3 26.9 25.6
----- ----- ----- ----- -----
Gross profit................................... 62.1 62.2 69.7 73.1 74.4
Operating expenses:
Sales and marketing.......................... 50.5 51.8 56.6 59.8 41.9
Research and development..................... 26.9 23.3 22.2 23.8 18.2
General and administrative................... 9.3 14.8 11.8 10.6 9.7
Amortization of intangibles.................. -- 6.1 10.5 10.5 7.7
Acquired in-process technologies............. -- 10.1 -- -- --
Stock-based compensation..................... -- -- 0.6 0.1 1.6
----- ----- ----- ----- -----
Total operating expenses.................. 86.7 106.1 101.7 104.8 79.1
----- ----- ----- ----- -----
Loss from continuing operations................ (24.6) (43.9) (32.0) (31.7) (4.7)
Interest expense, net.......................... (1.2) (2.5) (3.0) (5.2) (1.9)
----- ----- ----- ----- -----
Net loss from continuing operations............ (25.8) (46.4) (35.0) (36.9) (6.6)
Discontinued operations:
Loss from discontinued operations............ -- (5.0) (6.2) (2.5) --
Gain on disposal of discontinued
operations................................ -- -- 3.3 -- --
----- ----- ----- ----- -----
Net loss....................................... (25.8)% (51.4)% (37.9)% (39.4)% (6.6)%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 AND 1999
REVENUES
Total Revenues. Total revenues increased 36.3% from $7.6 million to $10.3
million for the three months ended June 30, 1998 and 1999.
License. License revenues increased 27.9% from $4.8 million to $6.1 million
for the three months ended June 30, 1998 and 1999. The increase in license
revenues was primarily due to a significant increase in products sold through
Lucent Technologies and a large direct sale to Procter & Gamble.
Service. Service revenues increased 50.9% from $2.8 million to $4.2 million
for the three months ended June 30, 1998 and 1999. The growth in service
revenues was due primarily to an increase in maintenance revenues as a result of
our increased installed base, and an increase in consulting services to new and
existing customers. In future periods, we expect service revenues to decrease as
a
25
<PAGE> 28
percentage of total revenues as we seek to have third-party systems integrators
undertake a greater percentage of our product implementation.
COST OF REVENUES
License. Cost of licenses consists primarily of royalties, product
packaging, documentation and production. Cost of licenses was $74,000 and
$218,000 for the three months ended June 30, 1998 and 1999, representing 1.5%
and 3.6% of license revenues in the respective periods. The increase was
primarily due to an increase in license revenues and the resulting increase in
third-party royalty payments and to a lesser extent increases in material costs
and other related expenses. Recently, we have entered into reseller agreements
with Brightware and Cisco Systems-GeoTel Communications which require
significantly higher royalty rates. Although the sale of products under these
agreements has been minimal to date, the cost of licenses will vary
significantly in the future, depending on the mix of internally developed and
third-party products.
Service. Cost of services consists primarily of personnel costs and
third-party consulting fees associated with implementation, customization,
maintenance and other support services. Cost of services was $2.0 million and
$2.4 million for the three months ended June 30, 1998 and 1999, representing
70.9% and 58.1% of service revenues in the respective periods. The dollar
increase was primarily due to an increase in the number of third-party
consultants we engaged. Cost of services as a percentage of service revenues
declined primarily due to the higher margins for maintenance revenues. The cost
of services as a percentage of services revenues may vary between periods due to
the mix of services provided and the resources used to provide these services.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions, travel, public relations, marketing materials and trade
shows. Sales and marketing expenses decreased 4.5% from $4.5 million to $4.3
million for the three months ended June 30, 1998 and 1999, representing 59.8%
and 41.9% of total revenues in the respective periods. The decrease in sales and
marketing expenses was primarily due to lower spending on marketing programs. We
intend to invest substantial resources to expand our direct sales force and
other distribution channels, and to conduct marketing programs to support our
existing and new product offerings. As a result, sales and marketing expenses
are expected to increase in absolute dollars in future periods.
Research and Development. Research and development expenses consist
primarily of personnel and related costs associated with the development of new
products, the enhancement and localization of existing products, quality
assurance and testing. Research and development expenses increased 4.3% from
$1.8 million to $1.9 million for the three months ended June 30, 1998 and 1999,
representing 23.8% and 18.2% of total revenues in the respective periods. The
decline in research and development expenses as a percentage of total revenues
was primarily due to the growth in total revenues. We anticipate that research
and development expenses will increase in absolute dollars in future periods. To
date, all research and development costs have been expensed as incurred.
General and Administrative. General and administrative expenses consist
primarily of salaries and other related costs for finance and human resource
employees, as well as accounting, legal, other professional fees and allowance
for doubtful accounts. General and administrative expenses increased 24.3% from
$803,000 to $998,000 for the three months ended June 30, 1998 and 1999,
representing 10.6% and 9.7% of total revenues in the respective periods. The
dollar increase was primarily due to an increase in the allowance for doubtful
accounts and increased staffing and associated expenses necessary to manage and
support our increased scale of operations. We anticipate that our general
26
<PAGE> 29
and administrative expenses will continue to increase in absolute dollars as a
result of the continued expansion of our administrative staff and facilities to
support growing operations.
Amortization of Intangibles. Amortization of intangibles consists of costs
associated with our acquisition of Nabnasset in November 1997. Amortization is
recorded on a straight-line basis over a period of three years ending in October
2000. Amortization of intangibles was $796,000 for the three months ended June
30, 1998 and 1999.
Stock-Based Compensation. In the three months ended June 30, 1998 and 1999,
we recorded deferred stock-based compensation of $43,000 and $700,000, relating
to stock options granted to employees. Such amounts represent the difference
between the exercise price and the deemed fair value of our common stock at the
date of grant. These amounts are being amortized over the vesting periods of the
granted options. In the three months ended June 30, 1998 and 1999, we recognized
stock-based compensation expense, in continuing operations, related to options
granted to employees of $4,000 and $169,000.
Interest Expense, Net. Interest expense consists of interest expense and
other non-operating expenses. In the three months ended June 30, 1998, we
recognized interest expense of $165,000 with respect to warrants granted in
connection with notes payable to stockholders. There was no such expense
recognized during the three months ended June 30, 1999.
DISCONTINUED OPERATIONS
On February 26, 1999 we sold the assets of our Call Center Enterprises
division. The division was sold for $2.1 million of cash resulting in a gain on
disposal of $1.0 million. We may receive an additional payment of up to $400,000
from the sale of Call Center Enterprises based on the number of former Call
Center Enterprises employees who remain employed by the purchaser for one year
subsequent to the date of disposition. The division had a loss of $190,000 for
the three months ended June 30, 1998, which was recorded as discontinued
operations.
FISCAL 1997, 1998 AND 1999
REVENUES
Total Revenues. Total revenues were $13.6 million, $21.9 million and $30.3
million in fiscal 1997, 1998 and 1999, increasing 60.8%, from fiscal 1997 to
1998 and 38.5% from fiscal 1998 to 1999.
License. License revenues were $8.4 million, $12.9 million and $17.6
million in fiscal 1997, 1998 and 1999, increasing 54.0% from fiscal 1997 to 1998
and 35.8% from fiscal 1998 to 1999. The increase in revenues from fiscal 1997 to
1998 was primarily due to an increase in our customer base as well as an
increase in sales to our existing customers. In addition, we acquired Nabnasset
in November 1997 and began realizing license revenues from our newly acquired
Quintus CTI product. The increase in license revenues from fiscal 1998 to 1999
was primarily due to a full year of CTI product sales in fiscal 1999 compared to
fewer than five months in fiscal 1998.
Service. Service revenues were $5.2 million, $8.9 million and $12.7 million
in fiscal 1997, 1998 and 1999, increasing 71.7% from fiscal 1997 to 1998 and
42.4% from fiscal 1998 to 1999. The increase in service revenues was primarily
due to growth in the installed base of customers with maintenance agreements,
maintenance renewals from products licensed in prior periods and increased
consulting revenues. The increase in service revenues from fiscal 1998 to 1999
was also due to additional consulting and maintenance revenues resulting from
our acquisition of Nabnasset.
27
<PAGE> 30
COST OF REVENUES
License. Cost of licenses was $972,000, $708,000 and $554,000 in fiscal
1997, 1998 and 1999, representing 11.6%, 5.5% and 3.2% of license revenue in the
respective periods. The decrease was primarily due to a decrease in royalty
payments associated with the licensing of our products.
Service. Cost of services was $4.2 million, $7.6 million and $8.6 million
for fiscal 1997, 1998 and 1999, representing 80.6%, 84.8% and 67.7% of service
revenue in the respective periods. From fiscal 1997 to 1998, the dollar increase
was primarily due to increases in professional services personnel, third-party
consulting expenses, and customer support staffing. From fiscal 1998 to 1999,
the dollar increase was primarily due to increases in professional services
personnel and third party consulting expenses. The decrease in cost of services
as a percentage of service revenues from fiscal 1998 to 1999 was primarily due
to a result of higher margins on our maintenance revenues.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses were $6.9 million, $11.3
million and $17.1 million in fiscal 1997, 1998 and 1999, representing 50.5%,
51.8% and 56.6% of total revenues in the respective periods. The increase was
primarily due to the further expansion of our worldwide sales and marketing
organization, higher sales commissions associated with increased revenues and
increased marketing activities.
Research and Development. Research and development expenses were $3.7
million, $5.1 million and $6.7 million in fiscal 1997, 1998 and 1999,
representing 26.9%, 23.3% and 22.2% of total revenues in the respective periods.
The dollar increases for each of the periods were primarily due to increases in
personnel and related overhead costs and to a lesser extent increased consulting
expenses.
General and Administrative. General and administrative expenses were $1.3
million, $3.2 million, and $3.6 million in fiscal 1997, 1998 and 1999,
representing 9.3%, 14.8% and 11.8% of total revenues in the respective periods.
The increase from fiscal 1997 to 1998 was primarily due to increases in
personnel, related overhead costs and expenses related to our infrastructure
expansion. The percentage decrease from fiscal 1998 to 1999 was primarily due to
our increased revenues.
Amortization of Intangibles. Amortization of intangibles was $1.3 million
and $3.2 million in fiscal 1998 and 1999, representing 6.1% and 10.5% of total
revenues in the respective periods. The increase was due to a full year of
amortization in fiscal 1999 versus a partial year of amortization in fiscal
1998.
Acquired In-Process Technologies. In November 1997, we acquired Nabnasset
for $3.5 million in cash, stock and options to purchase our common stock. The
transaction was accounted for as a purchase. In this acquisition, acquired
technology included both existing technology and in-process research and
development. The valuation of acquired technology was made by applying the
income forecast method, which considers the present value of cash flows by
product lines. Acquired in-process technologies were charged to operations, as
the technologies did not have alternative future uses as of the date of the
acquisition.
Stock-Based Compensation. During fiscal 1998 and 1999 we recorded deferred
stock-based compensation of $99,000 and $1.1 million relating to stock options
granted to employees. We had no deferred stock compensation relating to stock
options granted to employees in fiscal 1997. We recorded $171,000 of stock-based
compensation expense in operating expenses in fiscal 1999. There was no
stock-based compensation expense recorded in operating expenses during fiscal
1997 or 1998.
28
<PAGE> 31
Interest Expense, Net. Interest expense consists of interest expense and
other non-operating expenses. During fiscal 1998 and 1999, we recognized
interest expense of $258,000 and $165,000 with respect to warrants granted in
connection with notes payable to stockholders.
DISCONTINUED OPERATIONS
Our Call Center Enterprises division, which was sold in February 1999, had
revenues of $2.5 million and $3.2 million for fiscal 1998 and 1999, and incurred
a loss from operations of $1.1 million and $1.9 million in fiscal 1998 and 1999.
There were no assets or liabilities remaining as of March 31, 1999. Included
within the $1.0 million gain on the sale of discontinued operations is the fair
value of options granted in connection with the sale of Call Center Enterprises
of $453,000.
29
<PAGE> 32
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited quarterly results of operations
data for the five quarters ended June 30, 1999, as well as such data expressed
as a percentage of our total revenues for the periods presented. The information
in the table below should be read in conjunction with our annual audited
consolidated financial statements and related notes included elsewhere in this
prospectus. We have prepared this information on the same basis as our
consolidated financial statements and the information includes all adjustments,
consisting only of normal recurring adjustments, that we consider necessary for
a fair presentation of our financial position and operating results for the
quarters presented. Our quarterly operating results have varied substantially in
the past and may vary substantially in the future. You should not draw any
conclusions about our future results for any period from the results of
operations for any particular quarter.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1999 1999
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
License....................... $ 4,790 $ 5,123 $ 2,930 $ 4,734 $ 6,126
Service....................... 2,762 3,185 3,024 3,759 4,167
------- ------- ------- ------- -------
Total revenues............. 7,552 8,308 5,954 8,493 10,293
Cost of revenues:
License....................... 74 194 155 131 218
Service....................... 1,957 2,219 2,426 2,021 2,421
------- ------- ------- ------- -------
Total costs of revenues.... 2,031 2,413 2,581 2,152 2,639
Gross profit.................... 5,521 5,895 3,373 6,341 7,654
Operating expenses:
Sales and marketing........... 4,518 4,098 4,639 3,892 4,314
Research and development...... 1,795 1,558 1,792 1,574 1,873
General and administrative.... 803 829 1,109 836 998
Amortization of intangibles... 796 800 798 791 796
Stock-based compensation...... 4 56 56 55 169
------- ------- ------- ------- -------
Total operating expenses... 7,916 7,341 8,394 7,148 8,150
------- ------- ------- ------- -------
Loss from continuing
operations.................... (2,395) (1,446) (5,021) (807) (496)
Interest expense, net........... (391) (134) (181) (211) (194)
------- ------- ------- ------- -------
Net loss from continuing
operations.................... (2,786) (1,580) (5,202) (1,018) (690)
Discontinued operations:
Loss from discontinued
operations................. (190) (459) (781) (461) --
Gain on disposal of
discontinued operations.... -- -- -- 1,011 --
------- ------- ------- ------- -------
Net loss........................ $(2,976) $(2,039) $(5,983) $ (468) $ (690)
======= ======= ======= ======= =======
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
--------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1998 1998 1998 1999 1999
<S> <C> <C> <C> <C> <C>
Revenues:
License........................ 63.4% 61.7% 49.2% 55.7% 59.5%
Service........................ 36.6 38.3 50.8 44.3 40.5
----- ----- ------ ----- -----
Total revenues.............. 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
License........................ 1.0 2.3 2.6 1.5 2.1
Service........................ 25.9 26.7 40.7 23.8 23.5
----- ----- ------ ----- -----
Total costs of revenues..... 26.9 29.0 43.3 25.3 25.6
Gross profit..................... 73.1 71.0 56.7 74.7 74.4
Operating expenses:
Sales and marketing............ 59.8 49.3 77.9 45.8 41.9
Research and development....... 23.8 18.8 30.1 18.5 18.2
General and administrative..... 10.6 10.0 18.6 9.8 9.7
Amortization of intangibles.... 10.5 9.6 13.4 9.3 7.7
Stock-based compensation....... 0.1 0.7 0.9 0.6 1.6
----- ----- ------ ----- -----
Total operating expenses.... 104.8 88.4 140.9 84.2 79.1
----- ----- ------ ----- -----
Loss from continuing
operations..................... (31.7) (17.4) (84.3) (9.5) (4.8)
Interest expense, net............ (5.2) 1.6 3.0 2.5 1.9
----- ----- ------ ----- -----
Net loss from continuing
operations..................... (36.9) (19.0) (87.3) (12.0) (6.7)
Discontinued operations:
Loss from discontinued
operations.................. (2.5) (5.5) (13.1) (5.4) --
Gain on disposal of
discontinued operations..... -- -- -- 11.9 --
----- ----- ------ ----- -----
Net loss......................... (39.4)% (24.5)% (100.4)% (5.5)% (6.7)%
===== ===== ====== ===== =====
</TABLE>
License revenues have generally increased in each of the five quarters
ended June 30, 1999, primarily due to increased market acceptance for our
products. Service revenues have also generally increased in each of these
quarters primarily due to the recognition of maintenance revenues attributable
to our growing installed base, and to a lesser extent, consulting and training
services associated with increased sales of our products. In the quarter ended
December 31, 1998 we recorded a large net loss due to our inability to close a
large number of license sales which had been forecasted to close in the quarter
coupled with an increase in operating expenses. In the following quarter we
experienced significant turnover in our sales personnel and we implemented
tighter expense controls resulting in lower overall operating expenses.
Our quarterly operating results have fluctuated significantly in the past,
and will continue to fluctuate in the future, as a result of a number of
factors, many of which are outside our control. As a result of our limited
operating history, we cannot forecast operating expenses based on historical
results. Accordingly, we base our anticipated level of expense in part on future
revenue projections. Most of our expenses are fixed in the short term and we may
not be able to quickly reduce spending if revenues are lower than we have
projected. Our ability to forecast our quarterly revenues accurately is limited
given our limited operating history, the length of our sales cycle and other
uncertainties in our business. If revenues in a particular quarter do not meet
projections, our net losses in a given quarter would be greater than expected.
As a result, we believe that quarter to quarter comparisons of our operating
results are not necessarily meaningful. Investors should not rely on the results
of one quarter as an indication of future performance.
31
<PAGE> 34
RECENT DEVELOPMENTS
On September 10, 1999, we entered into an agreement to acquire Acuity, a
provider of software products to manage Internet-based customer interactions. We
expect to close this acquisition prior to the effectiveness of this offering.
The acquisition is structured as a merger in which Acuity will become our
wholly-owned subsidiary and the stockholders of Acuity will become our
stockholders. The total number of our shares to be issued in connection with the
acquisition of Acuity plus the number of shares issuable upon exercise of
options and warrants we assume in the acquisition will equal 18% of our
fully-diluted capitalization immediately following the acquisition. Based on our
outstanding capitalization as of August 31, 1999, we expect to issue
approximately 2,960,000 shares of our preferred stock and 1,570,000 shares of
our common stock. In addition, we will assume warrants to purchase approximately
280,000 shares of our common and preferred stock and options to purchase
approximately 950,000 shares of our common stock. The closing of the merger is
subject to regulatory approval and the approval of the Acuity stockholders. The
acquisition will be accounted for using the purchase method of accounting. The
aggregate purchase price for the acquisition is approximately $45.5 million
based on the value of our capital stock to be issued and the value of the
options, warrants and liabilities to be assumed. In connection with the
acquisition of Acuity, we expect to recognize a charge for in-process
technologies of approximately $3.0 million in the quarter ending December 31,
1999. Acuity is located in Austin, Texas and had 92 employees on June 30, 1999.
Acuity's revenues for the year ended December 31, 1998 were $6.7 million, of
which $5.6 million were related to a product line that was subsequently sold in
March 1999. Acuity incurred net losses of $6.6 million, $7.7 million and $2.2
million in the years ended December 31, 1997 and 1998 and for the six months
ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since May 1995, we have financed our operations primarily through the sale
of equity securities, borrowings and the sale of our products and services. As
of June 30, 1999, we have raised approximately $26.1 million, net of offering
costs, from the issuance of preferred stock. As of June 30, 1999, we had
$467,000 in cash. On August 26, 1999, we raised $11.2 million from the sale of
shares of our preferred stock.
We have a $7.5 million credit line under which $4.9 million was outstanding
as of June 30, 1999. The line bears interest at prime plus 1.5% per annum and
has a maturity date of September 17, 1999. We expect to extend the maturity date
of the credit line to November 16, 1999. We also have a $1.1 million term loan,
of which $761,000 was outstanding as of June 30, 1999. The term loan bears
interest at prime plus 2.0% per annum and is due in monthly installments through
September 2001.
Cash used in operating activities was $2.0 million, $4.0 million, $7.3
million and $823,000 in fiscal 1997, 1998 and 1999 and for the three months
ended June 30, 1999. Cash used in fiscal 1997 was primarily due to a net loss of
$3.5 million and an increase in accounts receivable, offset in part by an
increase in accounts payable, deferred revenues and depreciation and
amortization expenses. Cash used in fiscal 1998 was primarily due to a net loss
of $11.2 million and an increase in accounts receivable, offset in part by an
increase of deferred revenues, depreciation and amortization expenses, and a
$2.2 million non-cash charge for in-process technologies related to our
acquisition of Nabnasset. Cash used in fiscal 1999 was primarily due to a net
loss of $11.5 million and a $1.0 million gain on the disposal of discontinued
operations, offset in part by depreciation and amortization expenses. Cash used
for the three months ended June 30, 1999 was primarily due to a net loss of
$690,000 and an increase in accounts receivable offset in part by an increase in
accounts payable.
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Cash used in investing activities was $1.0 million, $3.7 million and
$297,000 in fiscal 1997 and 1998 and for the three months ended June 30, 1999.
Cash used in investing activities was primarily for purchases of property and
equipment in each period. In addition, cash used in fiscal 1998 included $2.5
million for the acquisition of Nabnasset. Cash provided by investing activities
of $924,000 in fiscal 1999 was primarily due to proceeds from the sale of
discontinued operations, offset by purchases of property and equipment.
Cash provided by financing activities was $5.2 million, $6.6 million and
$6.2 million in fiscal 1997, 1998 and 1999. Cash provided by financing
activities consisted primarily of proceeds from private sales of preferred stock
and borrowings under a bank line of credit. Cash used in financing activities
for the three months ended June 30, 1999 was $198,000.
We expect to experience significant growth in our operating expenses,
particularly sales and marketing and research and development expenses, for the
foreseeable future in order to execute our business plan. As a result, we
anticipate that such operating expenses, as well as planned capital
expenditures, will constitute a material use of our cash resources. In addition,
we may utilize cash resources to fund acquisitions or investments in
complementary businesses, technologies or product lines. We believe that the net
proceeds from this offering, together with bank financing, will be sufficient to
make a required cash payment of $18.2 million to holders of some series of our
preferred stock, upon the closing of this offering, and to meet our anticipated
needs for working capital and capital expenditures for at least the next 12
months. Thereafter, we may find it necessary to obtain additional equity or debt
financing. In the event additional financing is required, we may not be able to
raise it on acceptable terms or at all.
YEAR 2000 COMPLIANCE
The "Year 2000 Issue" refers generally to the problems that some software
may have in determining the correct century of the year. Many existing
electronic systems, including computer systems, use only the last two digits to
refer to a year. Therefore, these systems may recognize a date using "00" as
1900 rather than the year 2000. If not corrected, these electronic systems could
fail or create erroneous results when addressing dates on and after January 1,
2000.
We have developed and are implementing a company-wide program to identify
and remedy the Year 2000 issues. The scope of our Year 2000 readiness program
includes the review and evaluation of:
- our software products;
- our IT systems, such as hardware and software used in the operation of
our business;
- our non-IT systems or embedded technology, such as micro-controllers
contained in various equipment and facilities; and
- the readiness of third parties such as suppliers and other key vendors.
We have tested our software products to determine that they are Year 2000
compliant, when configured and used in accordance with the related
documentation, assuming that the underlying operating system of the host machine
and any other software used with or in the host machine or our products are Year
2000 compliant. Based on the results of these tests, we do not expect that the
current versions of our products would abnormally end or provide incorrect or
invalid results due to date data, including dates that represent a different
century.
We have tested software obtained from third parties that we incorporate
into our products. Despite our tests and assurances from developers of products
incorporated into our products, our
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products may contain undetected errors or defects associated with Year 2000 date
functions. Known or unknown errors or defects in our products could result in
financial loss, harm to our reputation, and liability to others and could
seriously harm our business.
We have initiated an assessment of our material internal information
technology systems, including both our own software products and third party
software and hardware technology, and our non-information technology systems. We
expect to complete testing of our material information technology systems by
November 30, 1999. To the extent that we are not able to test the technology
provided by third-party vendors, we are seeking assurances from these vendors
that their systems are Year 2000 compliant. We are not currently aware of any
material operational issues or costs associated with preparing our internal
information technology and non-information technology systems for the Year 2000.
Because we are substantially dependent upon the proper functioning of our
computer systems, a failure of our systems to be Year 2000 compliant could
materially disrupt our operations, which could seriously harm our business.
Some commentators have predicted significant litigation regarding Year 2000
compliance issues. Because of the unprecedented nature of this litigation, it is
uncertain whether or to what extent we may be affected by it.
We do not currently have any information concerning the Year 2000
compliance status of our customers. Our current or future customers may incur
significant expenses to achieve Year 2000 compliance. If our customers are not
Year 2000 compliant, they may experience material costs to remedy problems, or
they may face litigation costs. In either case, Year 2000 issues could reduce or
eliminate the budgets that current or potential customers could have for or
delay purchases of our products and services. As a result, our business could be
seriously harmed.
We have funded our Year 2000 plan from operating cash flows and have not
separately accounted for these costs in the past. To date, these costs have not
been material. We will incur additional costs related to Year 2000 compliance
for administrative personnel to manage the testing, review and remediation, and
outside vendor and contractor assistance. In addition, we may experience
material problems and costs with Year 2000 compliance that could seriously harm
our business.
Year 2000 issues affecting our business, if not adequately addressed by us,
our third party vendors or suppliers or our customers, could have a number of
"worst case" consequences. These include:
- the inability of our customers to use our products and services to manage
their call centers;
- claims from our customers asserting liability, including liability for
breach of warranties related to the failure of our products and services
to function properly, and any resulting settlements or judgements; and
- our inability to manage our own business.
We are in the process of designing our Year 2000 contingency plan to
address situations that may result if we are unable to achieve Year 2000
readiness for our critical operations. Although it is not yet fully developed,
we expect to complete our Year 2000 contingency plan before December 31, 1999.
We do not expect the cost of developing and implementing our contingency plan to
be material. In addition, we cannot assure you that our contingency plan will
successfully address any Year 2000 problems that may arise.
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RECENT ACCOUNTING PRONOUNCEMENTS
In fiscal 1998, we adopted Statement of Financial Accounting Standards
(SFAS) No. 130, Reporting Comprehensive Income, which requires an enterprise to
report, by major components and as a single total, the change in net assets
during the period from non-owner sources. The adoption of SFAS No. 130 did not
have a material impact on our consolidated financial statements.
In fiscal 1998, we adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which established annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products, services and geographic areas and major
customers. The adoption of SFAS No. 131 did not have a material impact on our
consolidated financial statements.
In fiscal 1998, we adopted Statement of Position, or SOP 97-2, Software
Revenue Recognition, and SOP 98-4, Deferral of the Effective Date of a Provision
of SOP 97-2, Software Revenue Recognition. SOP 97-2 and SOP 98-4 provide
guidance for recognizing revenue on software transactions and supercede SOP
91-1. The adoption of SOP 97-2 and SOP 98-4 did not have a material impact on
our financial results.
In March 1998, the Accounting Standards Executive Committee (AcSEC) issued
SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use. SOP 98-1 establishes the accounting for costs of software
products developed or purchased for internal use, including when such costs
should be capitalized. SOP 98-1 will be effective for our fiscal year ending
March 31, 2000. We believe the adoption of this statement will not have a
significant impact on our financial position, results of operations or cash
flows.
In April 1998, the AcSEC issued SOP 98-5, Reporting on the Costs of
Start-up Activities. Under SOP 98-5, the cost of start-up activities should be
expensed as incurred. SOP 98-1 will be effective for our fiscal year ending
March 31, 2000. We believe the adoption of this statement will not have a
significant impact on our financial position, results of operations or cash
flows.
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement requires companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedge accounting. SFAS
No. 133 will be effective for our fiscal year ending March 31, 2001. We believe
the adoption of this statement will not have a significant impact on our
financial position, results of operations or cash flows.
INTEREST RATE RISK
At June 30, 1999, we had an outstanding balance of $4.9 million under a
revolving line of credit with interest at prime plus 1.5% and a term loan with
an outstanding balance of $761,000 at prime plus 2.0%. A 10% movement in market
interest rates would not significantly impact our financial position or results
of operations.
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BUSINESS
We provide a comprehensive e-Customer Relationship Management or eCRM
solution to manage customer interactions and deliver consistent customer service
across multiple communication channels, including the Internet, email and
advanced telephony systems. Our Quintus eContact software suite includes
customer relationship management applications that address the needs of sales
and service, consumer relations, technical support and human resources contact
centers and a sophisticated routing engine to manage customer interactions.
eContact enables companies to handle high volumes of customer interactions,
increase the efficiency of contact center resources and leverage cross-selling
and up-selling opportunities.
INDUSTRY BACKGROUND
In today's competitive global marketplace, customer service is increasingly
critical to attracting and retaining customers. Many companies are re-orienting
their businesses to be more responsive to customer needs and are focusing on
customer service and satisfaction as a means of differentiation. Moreover,
companies are recognizing that every customer interaction provides an
opportunity to sell additional products and services, as well as increase
customer loyalty. As a result, in many industries customer service is becoming a
key competitive advantage.
The Internet has emerged as a major platform for communication and
commerce, enabling new and highly efficient channels for companies to engage in
commerce and interact directly with their customers. The growth of e-commerce
has increased competition for customers and reduced the importance of
traditional competitive advantages such as price, location, availability and
access. International Data Corporation estimates that the number of customers
buying goods and services over the Internet worldwide will grow from
approximately 30.8 million in 1998 to 182.6 million in 2003 and that the value
of these purchases will increase from $50.4 billion to $1.3 trillion over the
same period.
The Internet enables customers and companies to interact in more ways than
ever before. In addition to traditional, telephone-based communications,
customers and companies can now interact through email, Web chat and Web
self-service. These Internet-based communication channels are growing rapidly,
creating new challenges for companies attempting to provide quality customer
service. The Gartner Group estimates that approximately 25% of all customer
interactions will take place over the Internet via email or Web communications
by 2001. Forrester Research estimates that by 2001 consumers will send companies
approximately 50 million emails per day requesting product information or
service.
As a result of the growing number of communication channels, companies are
struggling to handle the volume and variety of customer interactions. While
Internet-based communications are forecast to grow substantially,
telephone-based communications will remain a critical component of companies'
customer service. Many companies are not equipped to address the convergence of
traditional and Internet-based communication channels and, consequently, cannot
offer customers the flexibility and service they demand. Customers increasingly
expect to be able to interact with companies through whichever channel best
suits their needs and are likely to use a combination of communication channels.
For example, a customer may request product literature via email, review
marketing materials or fill in an application on the Web, call to receive more
detailed information or assistance, send a signed form by fax, and check the
status of an order online. Companies' ability to provide consistent customer
service across all these communication channels will become increasingly
critical to delivering a superior customer experience.
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In many industries, Internet-based companies have captured increasing
market share and emerged as competitive threats to traditional "brick and
mortar" companies. As a result, many Global 1000 companies are under pressure to
quickly expand their online presence. These companies have typically provided
customer service through telephone-based communication channels and are now
looking to support new Internet-based communication channels. Many of these
companies have invested considerable resources to establish call centers that
manage inbound and outbound customer calls, including customer inquiries, orders
and service requests, as well as telesales and telemarketing operations. As
these companies move to support Internet-based communication channels and
establish multi-channel customer contact centers, they will seek to leverage
their existing investments in call center infrastructure and personnel. Frost
and Sullivan estimates that spending on Web-enabled call centers will increase
from $14.1 million in 1998 to $889.9 million in 2004.
Similarly, many Internet-based companies that have grown rapidly and built
sizable customer bases are faced with an increasingly competitive online market
environment and are looking for ways to differentiate themselves. These
Internet-based companies have relied primarily on email and Web self-service to
interact with their customers and many have delivered unsatisfactory customer
service. According to a recent survey of Internet sites by Jupiter
Communications, more than a third had no email address listed, took longer than
five days to respond or never responded to an email.
To date, companies have turned to several types of products to deliver
customer service. These products have primarily been point solutions targeted at
discrete communication channels. For example, computer telephony integration
software products, which automate call routing and reduce the time it takes to
respond to customer calls, are designed for telephone-based communications and
often are not able to handle or integrate with Internet-based communication
channels. Similarly, email management software products, which automate email
responses, typically are not integrated with other communication channels and
therefore do not provide a complete and accurate view of the customer. Companies
have also deployed customer relationship management applications to automate
customer interactions such as problem management and to provide a repository for
customer information. However, these applications are usually not integrated
with the underlying communication infrastructure and therefore cannot leverage
call routing or other features that enable more timely, efficient and
personalized customer service. Deploying these disparate solutions requires
significant integration and, as a result, they can be difficult and expensive to
implement and maintain.
We believe a significant market opportunity exists for solutions that
provide both traditional "brick and mortar" companies and new Internet-based
companies with the ability to integrate a broad range of communication channels
and manage the entire customer interaction lifecycle. We refer to this market
opportunity as the e-Customer Relationship Management or eCRM market. eCRM
solutions enable companies to:
- manage high volumes of customer interactions;
- support a broad range of communication channels;
- deliver consistent and integrated customer service;
- leverage Internet and telephony technologies; and
- capture all relevant customer information.
THE QUINTUS SOLUTION
We provide a comprehensive eCRM solution to manage customer interactions
and deliver consistent customer service across multiple communication channels,
including the Internet, email
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and advanced telephony systems. Our Quintus eContact software suite includes
customer relationship management applications that address the needs of sales
and service, consumer relations, technical support and human resources contact
centers and a sophisticated routing engine to manage customer interactions. Our
eContact software suite provides a platform for the personalization, routing and
management of customer interactions and is designed to leverage third party
products that support email and Internet-based customer service. We recently
entered into an agreement to acquire Acuity, which will extend our ability to
provide customer service functionality through Web chat, Web self-service,
browser-based collaboration and email. Our eContact suite enables companies to
handle high volumes of customer interactions, increase the efficiency of contact
center resources and leverage cross-selling and up-selling opportunities through
the use of common workflows and business rules, shared customer profile
information, and consolidated management and reporting functionality.
We have designed Quintus eContact to be a highly scalable and flexible
solution that can be easily deployed to assist companies in reducing the costs
and improving the efficiency of their customer service operations. eContact is
based on an open, standards-based architecture and can be integrated with other
systems, enabling companies to leverage their existing customer relationship
management applications and communication infrastructure. eContact addresses the
customer service needs of large organizations as well as rapidly growing
companies that require highly functional solutions to automate and manage high
volumes of customer interactions across traditional as well as Internet-based
communication channels.
The key features of the Quintus eContact solution are:
Broad Range of Communication Channels. Quintus eContact is a comprehensive
solution that enables companies to provide sophisticated routing, tracking and
reporting capabilities across their communication infrastructure and manage
customer interactions via telephone, email, Web self-service, Web chat,
browser-based collaboration and Web callback. Our solution also supports third-
party e-commerce applications, facsimile and imaging applications, and advanced
telephony systems, including automatic call distributors and interactive voice
response systems.
Integrated Applications and Communication Infrastructure. Quintus eContact
integrates communication infrastructure with customer relationship management
applications. We currently sell four customer relationship management
applications that address the needs of sales and service, consumer relations,
technical support and human resources contact centers. These applications
provide out-of-the-box functionality and allow companies to accelerate the
deployment of our solution.
Consistent Customer Service Across Communication Channels. Quintus eContact
allows companies to set business rules and personalization strategies to handle
customer interactions and deliver a consistent level of customer service across
multiple communication channels. Individual customer interactions can be managed
using transaction histories, legacy data, customer profiles and resource status
to offer a consistent and highly personalized level of customer service.
Business rules and personalization strategies can also be defined for specific
communication channels in order to leverage the attributes of each channel to
provide more targeted customer service and cross-selling and up-selling
opportunities.
Consolidated Customer Interaction Repository. Quintus eContact provides a
consolidated repository of information about each customer interaction
regardless of communication channel. Companies can analyze customer interactions
and determine the use and effectiveness of different channels by different
customer segments. Contact center agents can access complete customer histories
and review previous interactions. As a result, agents can respond more
effectively when, for
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example, a customer calls to discuss an email she received in response to an
order she previously placed online.
Highly Scalable and Flexible. Quintus eContact is designed to handle
millions of customer interactions per day and support thousands of agents across
multiple contact centers. eContact allows companies to increase the number of
customer interactions handled by routing customer interactions to the best
resource available, based on agent availability and experience, as well as prior
contact history. eContact is a modular solution, providing companies the
flexibility to implement the solution they need today and add functionality as
they expand the scope of their contact centers. In addition, our solution is
based on open standards, enabling it to share information with existing customer
relationship management applications and legacy systems.
OUR GROWTH STRATEGY
Our objective is to be the leading provider of eCRM software solutions that
manage customer interactions across a broad range of communication channels. Key
elements of our strategy include:
Maintain and Extend Technology Leadership. We will continue to leverage
leading Internet and telephony technologies to enhance the performance and
functionality of our products. We believe our Quintus eContact suite is the most
comprehensive solution that enables companies to efficiently and
cost-effectively manage high volumes of customer interactions across multiple
communication channels. We plan to incorporate new technologies, such as
Internet telephony, speech recognition and digital video, into our solution as
they achieve significant market acceptance. We intend to maintain our technology
leadership through focused research and development and, potentially, through
the licensing or acquisition of complementary technologies or businesses.
Broaden Direct and Indirect Distribution Capabilities. We intend to
continue to develop and extend our distribution capabilities. We sell our
solution through a direct sales force in North America and indirectly through 15
domestic and international resellers and distribution partners including IBM
Japan, Lucent Technologies and Logica. We plan to increase the size of our
direct sales organization and broaden our indirect distribution network with
strategic resellers and other distribution partners.
Target Global 1000 Companies. We plan to continue to target Global 1000
companies as they rapidly transition their businesses online. We believe that
there is a significant opportunity to provide a solution that enables these
companies to leverage their existing customer service infrastructure and deliver
a consistent and integrated level of customer service across both traditional
and Internet-based communication channels. Our customers include Global 1000
companies such as Citigroup, Lucent Technologies, Procter & Gamble and United
Airlines.
Target Leading Internet-based Companies. We plan to continue to target
leading Internet-based companies. We believe that these companies increasingly
recognize the need for higher levels of customer service in order to attract and
retain customers, and are looking for highly scalable solutions that are easy to
deploy and support both their existing Internet-based communication channels as
well as traditional communication channels. Leading Internet-based companies
that have purchased Acuity's WebCenter product line include drugstore.com,
living.com and REI.com.
Develop and Expand Strategic Relationships. We plan to continue to develop
technology and marketing relationships with leading vendors of complementary
products in order to increase our visibility in the marketplace and broaden the
functionality of our solution. We currently have strategic relationships with
Cisco Systems-GeoTel Communications and Brightware. We also intend to expand our
strategic relationships with leading systems integrators that have significant
influence over companies' purchasing decisions. We believe that systems
integrators help provide industry-specific
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expertise and support our growth and entry into new markets. We currently have
implementation relationships with AnswerThink Consulting Group, Cambridge
Technology Partners and Technology Solutions Company.
PRODUCTS
The Quintus eContact suite is a comprehensive eCRM solution that allows
companies to provide consistent customer service across a broad range of
communication channels, including voice, email, Web self-service, Web chat,
browser-based collaboration and Web callback. The eContact suite includes the
eContact engine, channel applications and business applications.
LOGO
The Quintus eContact suite is priced according to the product components
purchased and the number of users. Product components are typically priced from
$15,000 to $85,000 per installation, with per user prices typically ranging from
$500 to $2,300.
QUINTUS ECONTACT ENGINE
The Quintus eContact engine is the foundation of our eContact suite and
serves as a platform for managing customer interactions consistently across
multiple communication channels. Our eContact engine provides advanced routing,
tracking, management and reporting functionality, and consolidates all relevant
customer information into a common data repository. The eContact engine includes
the following features:
- Personalization Services. The Quintus eContact engine allows companies to
personalize each customer interaction based on sophisticated business
rules and workflows that take into account customer profiles, transaction
histories and resource availability. A customer interaction can be
managed and routed based upon the communication channel, the customer or
the purpose of that specific customer interaction. As a result, customers
can receive the same level of service across multiple communication
channels and companies can leverage the
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attributes of each communication channel to deliver more targeted and
effective customer service.
- Coordination Services. For each customer interaction, the Quintus
eContact engine captures all relevant customer information in real time.
By sharing customer information across systems, agents and communication
channels, companies can provide better informed, consistent and
synchronized customer service.
- Consolidated Repository and Reporting. All customer profiles and
histories, as well as detailed records of every customer interaction
regardless of communication channel, are stored in a common data
repository. The Quintus eContact engine includes a set of reporting tools
that allow companies to perform in-depth customer segmentation and trend
analysis.
- Centralized Customization and Administration. Companies can easily
customize business rules, workflows, screen layouts, Web pages, data
models and data access using Quintus eContact's drag-and-drop graphical
tools. This common toolset gives companies the flexibility necessary to
rapidly respond to changing business needs. Our eContact engine also
provides centralized administration of our solution. Companies can
control and monitor system status and availability as well as receive
notification alerts when pre-defined thresholds are met.
The Quintus eContact engine includes an enterprise data access layer that
provides access to relational databases as well as external data sources and
transactional systems, enabling companies to use their own business data to
manage customer interactions. Contact center agents interact with our eContact
suite through our agent console. The agent console provides an intuitive user
interface that displays customer information and pre-defined scripts, and can be
integrated with multiple applications, including front and back office systems
and legacy applications.
QUINTUS ECONTACT CHANNEL APPLICATIONS
Our channel applications enable companies to manage customer interactions
consistently across multiple communication channels including the Internet,
email and advanced telephony systems. Our channel applications can be deployed
separately or as a comprehensive solution to meet companies' evolving need for
multi-channel contact centers.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------
CHANNEL APPLICATION PRODUCT DESCRIPTION
- -----------------------------------------------------------------------------------
Computer Telephony Quintus CTI integrates eContact with advanced telephony
Integration systems.
- -----------------------------------------------------------------------------------
Web Interaction Quintus WebCenter provides Web self-service and online
customer service through Web chat, browser-based
collaboration and Web callback.
- -----------------------------------------------------------------------------------
Email Management* Quintus Email Management provides email management with
natural language text analysis and rule-driven automated
responses.
- -----------------------------------------------------------------------------------
Electronic Commerce Quintus eCommerce Connector integrates eContact with
Connector e-commerce applications to capture transaction information.
- -----------------------------------------------------------------------------------
Network Routing* Quintus Network Routing creates an enterprise-wide "virtual
call center" with optimized routing between distributed
resources.
- -----------------------------------------------------------------------------------
</TABLE>
* Third-party products that we currently resell as part of the Quintus eContact
suite.
Computer Telephony Integration. Quintus CTI provides a highly scalable
platform for integrating advanced telephony systems such as automatic call
distributors and interactive voice response systems from major
telecommunications equipment vendors. Quintus CTI allows companies
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to apply sophisticated business rules and workflows to qualify and route
telephone-based customer communications. By integrating the telephony
infrastructure with our eContact solution, Quintus CTI also enables traditional
voice-only call centers to be extended to handle Web, email and other
communication channels.
Web Interaction. Quintus WebCenter, an Acuity product, provides a
comprehensive framework to manage Internet-based customer interactions,
including Web self-service, Web chat, browser-based collaboration and Web
callback. WebCenter enables companies to provide live customer service on the
Internet. Through Acuity's WebACD, Web-based customer interactions are routed to
the appropriate resources based on agent availability and experience. Agents can
collaborate with customers by synchronizing their browsers, seeing the Web pages
that customers are viewing and pushing new Web pages to customers to assist
them. WebCenter also allows companies to build a knowledge base of frequently
asked questions, deploy it on the Web and provide customers with full search
capabilities. With WebCenter companies can enhance their Web sites and deliver a
more engaging and personalized customer experience by providing immediately
available online customer service options. We have not yet implemented WebCenter
as part of our eContact suite; however, WebCenter has been sold to over 100
customers and we are currently engaged in our first WebCenter and eContact
deployment. We will acquire the WebCenter and WebACD products upon the closing
of our acquisition of Acuity, which is expected to occur prior to the
effectiveness of this offering.
Email Management. We deliver email management functionality by reselling
Brightware's software under a non-exclusive reseller agreement. Quintus Email
Management provides natural language analysis and automated response
capabilities, enabling companies to answer customers' emails accurately,
cost-effectively and rapidly. Email Management analyzes the email message
content, determines the nature of the customer request and automatically
responds to the email or forwards it with a suggested response to an agent for
further review. Responses can be automatically generated and include information
provided by the eContact repository or other external data sources. The next
version of the Quintus eContact suite, which is expected to be released in
October 1999, will integrate Brightware's email management products with our
eContact suite.
Electronic Commerce Connector. Quintus eCommerce Connector enables our
eContact solution to exchange information with e-commerce applications using
standard Internet protocols. Online customer transactions and purchases can be
recorded in the eContact repository and displayed to agents providing customer
service. Companies can integrate our Internet-based customer service solution
with their e-commerce applications to offer online customer assistance at the
time of purchase as well as aftersales support. In addition, our eCommerce
Connector enables companies to leverage information on customer purchasing
patterns to sell additional products or services with each customer interaction.
Network Routing. Quintus Network Routing provides enhanced call routing
functionality to distribute inbound customer calls across different locations.
We offer this functionality by reselling Cisco Systems-GeoTel Communications'
Intelligent Contact Management product under a non-exclusive reseller agreement.
Network Routing enables companies to create a real-time enterprise-wide "virtual
call center" that is independent of carriers and telephone switches. Companies
with multiple call centers can increase customer satisfaction and achieve
significant cost efficiencies by optimizing call delivery and transfers between
geographically dispersed resources.
QUINTUS ECONTACT BUSINESS APPLICATIONS
We currently market four business applications that address the needs of
sales and service, consumer relations, technical support and human resources
contact centers. Our business applications can run separately or be integrated
with the Quintus eContact suite, can be deployed across multiple
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locations and are accessed through agent desktops or via a Web browser.
Companies can easily customize data models, business rules, screen forms and Web
pages to meet specific requirements. Our business applications can also be
integrated with third-party applications and data sources.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------
BUSINESS PRODUCT DESCRIPTION
APPLICATION
- -----------------------------------------------------------------------------------
Sales and Service Quintus CallCenterQ supports multi-function
business-to-consumer sales, service and marketing contact
centers.
- -----------------------------------------------------------------------------------
Consumer Relations Quintus CallCenterQ for Consumer Relations supports consumer
relations contact centers in the consumer product, service,
travel, hospitality and other industries.
- -----------------------------------------------------------------------------------
Technical Support Quintus CustomerQ supports business-to-business technical
support contact centers.
- -----------------------------------------------------------------------------------
Human Resources Quintus HRQ supports human resources contact centers serving
employees, former employees and retirees.
- -----------------------------------------------------------------------------------
</TABLE>
Sales and Service. Quintus CallCenterQ is designed for multi-function
sales, service and marketing contact centers. Targeted at business-to-consumer
industries, CallCenterQ enables agents to easily access pricing and product
information, process returns, track service issues and capture orders as well as
qualify and manage customer leads. CallCenterQ also allows companies to define
and manage marketing campaigns, and agents can be automatically prompted with
targeted cross-selling and up-selling opportunities. Additional features include
list management, literature fulfillment, automatic personalized letter
generation, agent scripting, and outbound preview dialing. CallCenterQ is
designed to help companies maximize revenue by enabling them to set up,
administer and evaluate the effectiveness of their sales and marketing
campaigns.
Consumer Relations. Quintus CallCenterQ for Consumer Relations is designed
for consumer relations contact centers and is targeted primarily at the consumer
product, service, travel and hospitality industries. CallCenterQ for Consumer
Relations provides agents with the information needed to resolve customer issues
including customer history and product information, and the ability to issue
vouchers and other forms of compensation. Additional features include scanned
letter/fax viewing, frequently asked questions knowledge base, automatic
personalized letter generation, and literature fulfillment. In addition,
CallCenterQ for Consumer Relations enables companies to gather important
customer feedback and market research to help them manage their brands.
Technical Support. Quintus CustomerQ is designed for business-to-business
technical support contact centers. CustomerQ provides agents with complete
customer history and product information, as well as service contracts,
warranties, billing and shipping information. Companies can also allow customers
to search for solutions, enter issues, and track the status of their technical
problems through the Internet. Other features include problem resolution, case
management, access to knowledge bases, defect tracking, automatic notification
and escalation, return processing and report generation. CustomerQ enables
companies to increase customer loyalty by rapidly and effectively addressing
customer requests for technical support. We also offer Quintus HelpQ, a
technical support application, which is targeted at the internal help desk
market.
Human Resources. Quintus HRQ is designed for human resources contact
centers serving employees, former employees and retirees. HRQ provides human
resources personnel with detailed employee history as well as health care and
financial benefits information. Other features include problem resolution,
dependent profiles, scanned letter/fax viewing, automatic personalized letter
generation and literature fulfillment. In addition, HRQ can be integrated with
leading human resources applications and knowledge bases. HRQ helps companies be
more responsive to their
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employees while reducing administrative costs and improving the productivity of
human resource departments.
CUSTOMERS
To date, we have licensed our software products to over 250 customers,
including companies in the financial services, telecommunications and consumer
product industries. The following is a representative list of companies from
which we have derived more than $300,000 of license and service revenue since
April 1, 1996.
<TABLE>
<S> <C> <C>
AMS Management Systems Engen Petroleum PricewaterhouseCoopers
Anheuser-Busch First Union Bank Procter & Gamble
Canada Trust Hartford Insurance Reuters
Canadian Imperial Bank of Inova Healthcare Services The Santa Cruz Operation
Commerce International Paper Siemens Nixdorf
Capita Group Lucent Technologies Steelcase
Citigroup Massachusetts Division of Sun Microsystems
Clarke American Employment & Training Telefonica do Brasil
Countrywide Home Loans Meca Software United Airlines
Deere & Company Northern Trust
</TABLE>
Prior to our acquisition of Acuity, Acuity licensed its WebCenter product
to over 100 customers.
The following case studies illustrate how some companies are using our
products.
PROCTER & GAMBLE
Procter & Gamble is a leading food and consumer products company, marketing
over 300 brands in more than 140 countries.
Business Challenge. Each year, Procter & Gamble receives high volumes of
calls and letters from consumers concerning its products and company policies.
Procter & Gamble required a solution that could integrate its telephone, letter
and facsimile interactions, and support emerging Internet communication
channels. In addition, Procter & Gamble, which has over 110,000 employees
worldwide, was looking for a solution to help manage human resources inquiries
by both current and former employees.
Solution. Procter & Gamble licensed our Quintus CallCenter for Consumer
Relations application for its consumer relations contact centers. Procter &
Gamble is also implementing our Quintus HRQ application in its human resources
contact centers to handle inquiries such as health benefits, payroll and pension
plans. Procter & Gamble expects that our solution will enable it to increase the
efficiency of its contact centers and improve its service to consumers and
employees by automating contact center interactions, providing detailed consumer
and employee information, and tracking problem resolution to completion.
CITIGROUP
Citigroup is a leading global financial services company, providing over
100 million consumers, corporations, governments and institutions in more than
100 countries with a broad range of financial products and services.
Business Challenge. Citigroup relies on multiple call centers and thousands
of agents to provide financial services to customers over the telephone.
Citigroup needed to integrate its call center
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telephony systems with its back-office systems to enable agents to access
detailed customer information and perform additional business functions. In
addition, Citigroup required a flexible and scalable solution that could be
deployed across multiple call centers. Citigroup was also looking for a solution
that could be implemented in conjunction with its "e-Citi" initiative to
increase its presence on the Internet and deliver financial services online.
Solution. Citigroup is currently using our Quintus CTI product to integrate
its telephony systems and enable approximately 1,000 agents across multiple call
centers to deliver superior customer service. Our solution enables Citigroup to
handle service requests quickly and cost-effectively by providing agents with
detailed customer information and routing calls to the most appropriate agent.
Citigroup has also deployed our Quintus CustomerQ application integrated with
our Quintus CTI product as part of its e-Citi projects. In addition to
increasing customer satisfaction by enabling e-Citi agents to track customer
relationships and activities, our solution is designed to increase revenue by
alerting agents to likely cross-selling and up-selling opportunities.
TICKETMASTER
Ticketmaster is a leading provider of automated ticketing distribution
services, selling approximately 70 million tickets worldwide in 1998.
Business Challenge. Ticketmaster sells tickets to the public through the
telephone, the Internet and retail outlets. More recently, Ticketmaster has
started selling a greater percentage of tickets over the Internet. Through the
Internet, Ticketmaster allows customers to find information about upcoming
events and purchase tickets and other related merchandise. To support its
growing online sales and customer service needs, Ticketmaster sought a more
comprehensive solution that would enable it to provide a higher level of
customer service through automated email, Web chat, Web callback and
collaborative browsing. Ticketmaster wanted to be able to integrate this
solution with its existing call centers and telephone systems.
Solution. Ticketmaster selected our Quintus eContact suite earlier this
year. Ticketmaster expects that our solution, which is being developed, will
enable it to provide live customer support through Web chat and browser-based
collaboration, and to respond more efficiently to large volumes of emails.
Ticketmaster plans to integrate our solution within its call centers as its need
for Internet customer service increases.
TECHNOLOGY
Quintus eContact is based on a scalable, multi-tiered architecture. Our
eContact product suite enables eCRM features through a sequence of cooperating,
distributed software servers that perform a variety of functions, including
creating and manipulating data containers, routing customer contacts, allowing
agents to access data and interact with customers through a Web browser. Our
multi-platform solution runs on all major UNIX and Windows NT operating systems.
Electronic Data Container. When a customer contacts a company, whether by
telephone, fax, email or through a Web site, an electronic data container for
that customer interaction is created. Existing customer information can be
retrieved from the data repository to populate the data container, or new
information can be obtained directly from the customer. The data container
continually collects information throughout the lifecycle of the customer
interaction and can be routed throughout an enterprise, carrying detailed
information about the customer, including the customer's history with the
company and details of this particular customer interaction. If the customer is
transferred to another agent at another site or to an agent using a different
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communication channel, the data container accompanies the transition, ensuring
that the customer perceives a seamless service process.
Enterprise Data Access Layer. Quintus eContact includes a powerful
enterprise data access layer that provides access to relational and legacy data
sources. The enterprise data access layer creates a uniform view of third party
data regardless of the data source and allows eContact to incorporate
third-party customer information.
Abstraction and Customization. Quintus eContact uses a sophisticated data
abstraction layer that allows companies to store data entities, business rules
and screen layouts as business objects. Customizations are performed on the
business objects to modify them. All changes to the business objects are
automatically reflected throughout our eContact suite.
Workflow and Routing Engine. Quintus eContact provides a graphical tool to
create and modify customer interaction flows, define routing rules and build
agent scripts. These customer interaction flows, rules and scripts are
specified, distributed and stored in Extensible Markup Language, allowing
eContact to leverage industry-standard tools and technologies. Customer
interaction flows are defined using re-usable building blocks that can be used
to create new routing rules as companies' needs evolve.
High Availability. We have built our system using a modular,
component-based approach. Additional contact center capabilities and
applications can be introduced without requiring companies to change their
computing infrastructure and, in most cases, without affecting their operations.
Our system also provides multiple redundant configurations, delivering the
ability to "failover" to an alternative configuration in the event of a system
failure.
CUSTOMER SUPPORT SERVICES
We believe that high quality services and support are critical requirements
for continued growth and increased sales of our products. We have made and
expect to continue to make significant investments to increase our ability to
service and support our customers.
Our customer support services organization is organized into four groups
including customer service management, professional services, technical support
and education services.
Customer Service Management. Our customer service management team handles
many aspects of our customer relationships including answering general
questions, renewing maintenance agreements, shipping product upgrades and
coordinating with our other resources to meet customer needs.
Professional Services. Our professional services group helps facilitate the
implementation of our solution. We provide systems integration services to
support our entire product suite. Our services include integration,
customization, data modeling, project management and business rules development.
The professional services group also provides support for our implementation
partners.
Technical Support. Our technical services group is dedicated to providing
the highest level of support to our customers. We currently operate three
technical support centers in the United States and rely upon a network of
service providers internationally to provide consultations via toll-free
telephone, email and the Web. Additionally, customers have 24-hour access to our
online knowledge repository and the ability to directly log and track their
issues through our Web site. We offer a tiered maintenance and support program.
Customers can choose from our existing support packages or have a custom package
developed to meet their particular needs including 24x7 coverage and other
assistance options.
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Education Services. Our education services group offers a full spectrum of
classes providing the training needed to understand, implement and use our
solution. We offer lectures and teaching labs to end-users, administrators,
developers and system integration partners at our facilities in California and
Massachusetts. Upon request, we can also provide customized on-site training.
SALES AND MARKETING
Sales. We sell our products through a direct sales force and indirectly
through resellers and distribution partners. To date, we have targeted our sales
efforts at Global 1000 companies and other rapidly growing companies pursuing
eCRM initiatives, including those in the financial services, telecommunications
and consumer products industries. Our sales force consists primarily of sales
people and sales engineers located in our sales offices in numerous locations
across the United States. We also maintain international offices in Amsterdam
and London from which we provide sales support to our international distribution
partners.
We currently have relationships with 15 domestic and international reseller
and distribution partners including IBM Japan, Lucent Technologies and Logica.
We also enhance our sales efforts through strategic relationships with systems
integrators such as AnswerThink Consulting Group, Cambridge Technology Partners
and Technology Solutions Company. We intend to continue to expand our sales
efforts by increasing the size of our direct sales force and broadening our
indirect distribution channels.
Marketing. Our marketing efforts focus on creating market awareness for
eCRM solutions, promoting our products and services, and generating sales
opportunities. We have a comprehensive marketing strategy that includes print
advertising, public relations campaigns, direct mailings, newsletters, industry
events including trade shows, analyst programs and speaking engagements, and
joint marketing arrangements. We also advertise on the Internet and use our Web
site to further our market presence and generate additional leads.
RESEARCH AND DEVELOPMENT
Our research and development efforts are focused primarily around enhancing
our core technology and developing additional applications for the Quintus
eContact suite. We operate development centers in California, Massachusetts and,
following the acquisition of Acuity, Texas. Our software development approach
consists of a well-defined methodology that provides guidelines for planning,
controlling and implementing projects. This approach uses a cross-functional,
team-based development and release process. Our research and development group
works closely with customers, partners, our sales and marketing group and senior
management to assist in defining product direction and to ensure that products
are brought to market successfully. Members of our research and development
group have extensive experience in customer relationship management software as
well as Internet and telephony communication technologies.
Our research and development expenditures were approximately $3.7 million,
$5.1 million, $6.7 million and $1.9 million in fiscal 1997, 1998 and 1999 and
for the three months ended June 30, 1999. We believe that our future performance
will depend in large part on our ability to enhance our current product line,
develop new products and maintain our technological competitiveness. As a
result, we intend to continue to expend significant resources in research and
development.
COMPETITION
The eCRM market is highly competitive and subject to rapid technological
change. We expect competition to increase significantly in the future as current
competitors expand their product
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offerings and new companies enter the market. We currently face competition
primarily from customer relationship management software vendors such as Siebel
Systems and Clarify, emerging Internet customer interaction software vendors
such as Kana Communications and WebLine Communications, and computer telephony
software vendors such as Genesys Telecommunications Labs.
Because there are relatively low barriers to entry in the software market,
we expect additional competition from other established and emerging companies
if the eCRM market continues to develop and expand. Potential future competitors
include traditional call center technology providers and large enterprise
application vendors as well as independent systems integrators, consulting firms
and in-house information technology departments that may develop solutions that
compete with our products.
We believe that we compete favorably with respect to the principal
competitive factors affecting our market, including price, product quality,
product scalability and reliability, core technology and architecture, customer
service and support, and ability to implement solutions.
PATENTS AND PROPRIETARY RIGHTS
Our success and competitiveness are dependent to a significant degree on
the protection of our proprietary technology. We rely primarily on a combination
of copyrights, trademarks, licenses, trade secret laws and restrictions on
disclosure to protect our intellectual property and proprietary rights. We also
enter into confidentiality agreements with our employees and consultants, and
generally control access to and distribution of our documentation and other
proprietary information. Despite these precautions, others may be able to copy
or reverse engineer aspects of our products, to obtain and use information that
we regard as proprietary or to independently develop similar technology. Any
such actions by competitors could harm our business, operating results and
financial condition.
In addition, the laws of some foreign countries may not protect our
proprietary rights to the same extent as the laws of the United States, and
effective patent, copyright, trademark and trade secret protection may not be
available in these jurisdictions.
We may need to take legal action in the future to enforce or defend our
intellectual property and proprietary rights, to protect our trade secrets or to
determine the validity and scope of the intellectual property and proprietary
rights of others. Litigation, whether successful or unsuccessful, could result
in substantial costs and diversion of management and technical resources, either
of which could harm our business, operating results and financial condition.
We attempt to avoid infringing upon known intellectual property and
proprietary rights of third parties in our product development efforts. However,
we have not conducted and do not plan to conduct comprehensive patent searches
to determine whether the technology used in our products infringes patents held
by others. In addition, product development is inherently uncertain in a rapidly
evolving technological environment in which there may be numerous patent
applications pending, many of which are confidential when filed, with regard to
similar technologies. If our products were to violate the proprietary rights of
others, we may be liable for substantial damages. In addition, we may be
required to reengineer our products or seek to obtain licenses to continue
offering our products. We cannot assure you that such efforts would be
successful.
EMPLOYEES
As of June 30, 1999, we had a total of 181 employees, including 51 people
in research and development, 63 people in sales and marketing, 42 people in
customer support services and 25 people
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in general and administrative services. We do not have a collective bargaining
agreement with any of our employees and we consider our employee relations to be
good. As of June 30, 1999, Acuity had a total of 92 employees.
FACILITIES
Our principal administrative, sales, marketing, support and research and
development facilities are located in approximately 30,000 square feet of space
in Fremont, California and our lease expires on December 2000. We lease several
office suites in the United States and the United Kingdom for sales and service
personnel. In addition, we maintain offices in Acton, Massachusetts and have our
European headquarters in Amsterdam, the Netherlands. Upon the closing of our
acquisition of Acuity, we will assume a lease for 17,000 square feet in Austin,
Texas, expiring in June 2000.
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MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth certain information regarding our directors
and officers as of September 9, 1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Executive Officers
Alan Anderson................... 36 Chairman and Chief Executive Officer
John Burke...................... 39 President
Susan Salvesen.................. 44 Chief Financial Officer and Secretary
Muralidhar Sitaram.............. 36 Senior Vice President, Engineering
Other Officers
Lawrence Byrd................... 42 Vice President, Marketing
Roger Nunn...................... 44 Vice President, Americas Operations
Mark Payne...................... 44 Vice President, International Operations
Candace Sestric................. 53 Vice President, Worldwide Customer Support Services
Directors
Paul Bartlett(a)................ 39 Director
Fredric Harman(b)............... 39 Director
William Herman(a)............... 39 Director
Alexander Rosen(b).............. 31 Director
Robert Shaw..................... 52 Director
Jeanne Wohlers(b)............... 54 Director
</TABLE>
- -------------------------
(a) Member of compensation committee
(b) Member of audit committee
EXECUTIVE OFFICERS
Alan Anderson has served as our Chief Executive Officer since May 1995 and
our Chairman since September 1999. From May 1995 to July 1999, Mr. Anderson also
served as our President. From October 1992 to May 1995, Mr. Anderson served as
Senior Vice President responsible for the North American operations of
OpenVision Technologies, a systems management software developer. From December
1991 to October of 1992, Mr. Anderson served as a director for consulting
services at Oracle Corporation, a database software company. From April 1989 to
December 1991, Mr. Anderson served as a director of professional services for
Sybase, a database software company. Mr. Anderson received his B.S. in
information systems from the University of San Francisco.
John Burke has served as our President since July 1999. From October 1996
to July 1999, Mr. Burke served as Senior Vice President for field sales and
support for SAP America, a provider of enterprise resource planning software.
From April 1996 to October 1996, Mr. Burke served as Senior Vice President of
sales and marketing for Oneware, a software development and distribution
company. From September 1990 to April 1996, Mr. Burke served as Executive Vice
President of SAP America. Mr. Burke received his B.B.A. in finance and marketing
from Ohio University.
Susan Salvesen has served as our Chief Financial Officer and Secretary
since January 1998. From April 1996 to September 1997, Ms. Salvesen served as
Vice President, Finance and Administration and Chief Financial Officer and
Secretary at Unify Corporation, a provider of e-
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commerce software solutions. From May 1994 to April 1996, Ms. Salvesen served as
Vice President of Finance and Chief Financial Officer at AG Associates, a
semiconductor equipment manufacturer. From February 1988 to May 1994, Ms.
Salvesen served as Corporate Controller at Aspect Telecommunications, a
telecommunications equipment company. Ms. Salvesen received her B.A. in
economics from Rutgers University and her M.B.A. from the University of
Pittsburgh.
Muralidhar Sitaram has served as our Senior Vice President, Engineering
since June 1996. From January 1994 to June 1996, Mr. Sitaram served as a
Director of Engineering at Quintus. Mr. Sitaram received his B.S. in physics and
computer science from Bombay University, India and his M.S. in computer science
from the Case Western Reserve University.
OTHER OFFICERS
Lawrence Byrd was a co-founder of Quintus in 1984 and has most recently
served as our Vice President, Marketing since May 1998. From October 1997 to May
1998, Mr. Byrd served as our Vice President, Product Marketing, from June 1996
to October 1997, as our Chief Technology Officer, from June 1995 to June 1996,
as our Vice President, Engineering and from December 1993 to June 1995, as a
vice president in our consulting group. Prior to this, Mr. Byrd held a range of
engineering, consulting and marketing positions for us. Mr. Byrd received his
B.A. in philosophy from the University of Durham, England.
Roger Nunn has served as Vice President, Americas Operations since
September 1999. From January 1999 to September 1999, Mr. Nunn served as our
Senior Vice President of Sales. From October 1997 to December 1998, Mr. Nunn
served as our Vice President of Channel Sales. From May 1994 to September 1997,
Mr. Nunn served as a Director of Marketing for Auspex Systems, a provider of
network file servers. From December 1988 to April 1994, Mr. Nunn was an area
channels manager for Sun Microsystems, a provider of computer workstations. Mr.
Nunn received his B.Sc. in engineering and his M.Sc. in management science from
Imperial College of London, England.
Mark Payne has served as our Vice President, International Operations since
July 1998. From June 1996 to June 1998, Mr. Payne served as Senior Vice
President of International Operations for Versatility, a software development
company. From July 1992 to June 1996, he served as General Manager of Northern
Europe for Gupta (now Centura), an applications development software company.
Candace Sestric has served as our Vice President, Worldwide Customer
Support since April 1997. From April 1996 to April 1997, Ms. Sestric served as
Vice President, Professional Services for Knowledge Networks, a customer
relationship management systems integrator. From November 1995 to February 1996,
Ms. Sestric served as Vice President, Customer Services for Siebel Systems, a
sales force automation software company. From June 1993 to November 1995, Ms.
Sestric served as Vice President, Worldwide Customer Support Services for Gupta
(now Centura). Ms. Sestric received her B.A. in business administration from the
College of Santa Fe.
DIRECTORS
Paul Bartlett has served as a director of Quintus since May 1995. Mr.
Bartlett joined Hall Kinion & Associates, a recruiting and staffing firm, in
September 1996 as President and has served as a director of Hall Kinion since
January of that same year. From August 1990 to September 1996, he was with the
Sprout Group, a venture capital firm, most recently as a partner. Mr. Bartlett
received his A.B. in economics from Princeton University and his M.B.A. from the
Stanford University Graduate School of Business.
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Fredric Harman has served as a director of Quintus since September 1996.
Since July 1994, Mr. Harman has served as a managing member of the general
partners of venture capital funds affiliated with Oak Investment Partners. From
April 1991 to June 1994, he served as a general partner of Morgan Stanley
Venture Capital. Mr. Harman sits on the boards of ILOG, S.A., Inktomi
Corporation, Primus Knowledge Solutions, Inc. and InterNAP Network Services. Mr.
Harman received his B.S. and M.S. in electrical engineering from Stanford
University and his M.B.A. from the Harvard Graduate School of Business.
William Herman has served as a director of Quintus since May 1995. Since
October 1998, Mr. Herman has served as President, Chief Executive Officer and a
director of Viewlogic Systems, a provider of electronic design automation
software. From December 1997 to October 1998, Mr. Herman served as President,
Viewlogic Systems Division, of Synopsys, a provider of electronic design
automation software. In October 1998, Synopsys acquired Viewlogic Systems, whose
business included the products and technologies offered by the current
Viewlogic. Mr. Herman served as President and Chief Executive Officer of the
predecessor Viewlogic from January 1997 to December 1997, and as President and
Chief Operating Officer from March 1995 to January 1997. From May 1994 to March
1995, Mr. Herman was President and Chief Operating Officer of Silerity, a
computer-aided engineering software company. Mr. Herman also sits on the board
of Hall Kinion & Associates. Mr. Herman received his B.S. in computer science
from Temple University.
Alexander Rosen has served as a director of Quintus since August 1997. Mr.
Rosen has been with the Sprout Group since 1996, most recently as a general
partner. From July 1993 to August 1994, he served as an associate for General
Atlantic Partners, a venture capital firm, focusing on software investments. Mr.
Rosen received his B.S. in electrical engineering and economics from the
Massachusetts Institute of Technology and his M.B.A. from the Stanford
University Graduate School of Business.
Robert Shaw has served as a director of Quintus since October 1995. Since
November 1998, Mr. Shaw has served as Chief Executive Officer and a director of
USWeb/CKS, an Internet professional services company. From June 1992 to August
1998, Mr. Shaw served in various capacities at Oracle, most recently as
Executive Vice President, Worldwide Consulting Services and Vertical Markets.
Mr. Shaw received his B.B.A. in finance from the University of Texas.
Jeanne Wohlers has served as a director of Quintus since October 1995. From
May 1994 to July 1998, Ms. Wohlers served as partner of Windy Hill Productions,
a producer of education and entertainment software. From August 1993 to June
1995, Ms. Wohlers was a consultant to Scopus Technology, a provider of customer
information management systems. Ms. Wohlers currently serves as an independent
director/trustee and Audit Committee Chair of 39 mutual funds managed by
American Century, and as a director of Indus International. Ms. Wohlers received
her B.A. in mathematics from Skidmore College and her M.B.A. from Columbia
University.
BOARD COMMITTEES
The board of directors has a compensation committee and an audit committee.
Compensation Committee. The compensation committee of the board of
directors reviews and makes recommendations to the board regarding all forms of
compensation provided to our executive officers and directors, including stock
compensation and loans. In addition, the compensation committee reviews and
approves stock compensation arrangements for all of our employees and
administers our 1999 Stock Incentive Plan, Employee Stock Purchase Plan and 1999
Director Option Plan. The current members of the compensation committee are
Messrs. Bartlett and Herman.
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Audit Committee. The audit committee of the board of directors reviews and
monitors our corporate financial reporting and our internal and external audits,
including, among other things, our internal audit and control functions, the
results and scope of the annual audit and other services provided by our
independent auditors and our compliance with legal matters that have a
significant impact on our financial reports. The audit committee also consults
with our management and our independent auditors prior to the presentation of
financial statements to stockholders and, as appropriate, initiates inquiries
into aspects of our financial affairs. In addition, the audit committee has the
responsibility to consider and recommend the appointment of, and to review fee
arrangements with, our independent auditors. The current members of the audit
committee are Ms. Wohlers and Messrs. Harman and Rosen.
DIRECTOR COMPENSATION
Directors do not receive any cash fees for their service on the board or
any board committee, but they are entitled to reimbursement for all reasonable
out-of-pocket expenses incurred in connection with their attendance at board and
board committee meetings. From time to time, certain directors who are not
employees of Quintus have received grants of options to purchase shares of our
common stock. Following this offering, directors will receive automatic option
grants under our 1999 Director Option Plan. If a change in control of Quintus
occurs, a non-employee director's option granted under our 1999 Director Option
Plan will become fully vested. See "Stock Plans -- 1999 Director Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of the board of directors currently consists of
Messrs. Bartlett and Herman. No interlocking relationship exists between any
member of our board of directors or our compensation committee and any member of
the board of directors or compensation committee of any other company, and no
such interlocking relationship has existed in the past.
INDEMNIFICATION
In September 1999, the board of directors authorized Quintus to enter into
indemnification agreements with each of our directors and executive officers.
The form of indemnification agreement provides that we will indemnify our
directors and executive officers against any and all of their expenses incurred
by reason of their status as a director or executive officer to the fullest
extent permitted by Delaware law and our bylaws.
Our certificate of incorporation and bylaws each contain certain provisions
relating to the limitation of liability and indemnification of our directors and
officers. Our certificate of incorporation provides that our directors will not
be personally liable to Quintus or our stockholders for monetary damages for any
breach of fiduciary duty as a director, except for liability
- for any breach of the director's duty of loyalty to Quintus or our
stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- in respect of certain unlawful payments of dividends or unlawful stock
repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law; or
- for any transaction from which the director derives any improper personal
benefit.
Our certificate of incorporation also provides that if the Delaware General
Corporation Law is amended after the approval by our stockholders of our
certificate of incorporation to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of
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our directors will be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law. The foregoing provisions of our
certificate of incorporation are not intended to limit the liability of our
directors or officers for any violation of applicable federal securities laws.
In addition, as permitted by Section 145 of the Delaware General
Corporation Law, our bylaws provide that
- we are required to indemnify our directors and executive officers to the
fullest extent permitted by the Delaware General Corporation Law;
- we may, in our discretion, indemnify other of our officers, employees and
agents as provided by the Delaware General Corporation Law;
- we are required to advance all expenses incurred by our directors and
executive officers in connection with a legal proceeding (subject to
certain exceptions);
- the rights conferred in the bylaws are not exclusive;
- we are authorized to enter into indemnification agreements with our
directors, officers, employees and agents; and
- we may not retroactively amend our bylaw provisions relating to
indemnification.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation for
the fiscal year ended March 31, 1999 paid by us for services by our Chief
Executive Officer and our other executive officers whose total salary and bonus
for such fiscal year exceeded $100,000, collectively referred to as the Named
Executive Officers. Amounts in the "All Other Compensation" column represent
premiums paid by us for term life insurance.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS COMPENSATION
<S> <C> <C> <C> <C>
Alan Anderson, Chief Executive
Officer............................. $190,000 $ 11,875 -- $408
Susan Salvesen, Chief Financial
Officer............................. 150,000 10,000 25,000 408
Muralidhar Sitaram, Senior Vice
President, Engineering.............. 155,833 -- 85,000 255
Peter Kenyon, former Vice President,
Field Operations(a)................. 89,702 304,773 -- 306
</TABLE>
- -------------------------
(a) Mr. Kenyon resigned as our Vice President, Field Operations in October 1998.
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<PAGE> 57
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options during the
fiscal year ended March 31, 1999 to each of the Named Executive Officers. No
stock appreciation rights were granted to these individuals during this period.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES OF
NUMBER OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(D)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(A) FISCAL YEAR(B) ($/SH)(C) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Alan Anderson.......... -- --% $ -- -- $ -- $ --
Susan Salvesen......... 10,000 0.8 1.75 3/09/09 11,006 27,890
15,000 1.3 1.50 7/20/08 14,150 35,859
Muralidhar Sitaram..... 85,000 7.1 1.75 3/09/09 93,548 237,069
Peter Kenyon........... -- -- -- -- -- --
</TABLE>
- -------------------------
(a) Each of the options listed in the table is immediately exercisable except to
the extent exercisability was deferred to preserve incentive stock option
tax benefits. The shares purchasable upon exercise of these options are
subject to repurchase by us at the original exercise price paid per share
upon the optionee's cessation of service prior to vesting in such shares.
Other than Ms. Salvesen's option for 10,000 shares, the repurchase right
lapses and the optionee vests as to 25% of the option shares upon completion
of one year of service from the date of grant and the balance in a series of
equal monthly installments over the next 36 months of service thereafter.
Ms. Salvesen's option for 10,000 shares vests in equal monthly installments
over a two-year period. The option shares will vest upon an acquisition of
Quintus by merger or asset sale, unless our repurchase right with respect to
the unvested option shares is transferred to the acquiring entity. Each of
the options has a ten-year term, subject to earlier termination in the event
of the optionee's cessation of service with us.
(b) Based on an aggregate of 1,205,612 options granted to our employees under
the 1995 Stock Option Plan during the 12 months ended March 31, 1999.
(c) The exercise price was equal to the fair market value of our common stock as
valued by our board of directors on the date of grant. The exercise price
may be paid in cash, in shares of our common stock valued at fair market
value on the exercise date or through a cashless exercise procedure
involving a same-day sale of the purchased shares. We may also finance the
option exercise by loaning the optionee sufficient funds to pay the exercise
price for the purchased shares, together with any federal and state income
tax liability incurred by the optionee in connection with such exercise.
(d) The potential realizable value is calculated based on the term of the option
at the time of grant (ten years). Stock price appreciation of 5% and 10% is
assumed pursuant to rules promulgated by the Securities and Exchange
Commission and does not represent our prediction of our stock price
performance. The potential realizable values at 5% and 10% appreciation are
calculated by assuming that the exercise price on the date of grant
appreciates at the indicated rate for the entire term of the option and that
the option is exercised at the exercise price and sold on the last day of
its term at the appreciated price.
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<PAGE> 58
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth for each of the Named Executive Officers,
the number of options exercised during the fiscal year ended March 31, 1999 and
the number and value of securities underlying unexercised options that were held
by the Named Executive Officers as of March 31, 1999. No stock appreciation
rights were exercised by the Named Executive Officers in fiscal year 1999, and
no stock appreciation rights were outstanding at the end of that year.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT MARCH 31, OPTIONS AT
SHARES 1999(B) MARCH 31, 1999(C)
ACQUIRED ON VALUE ---------------------- ------------------
NAME EXERCISE REALIZED(A) VESTED UNVESTED VESTED UNVESTED
<S> <C> <C> <C> <C> <C> <C>
Alan Anderson............. -- $ -- -- -- $ -- $ --
Susan Salvesen............ 28,000 7,000 33,499 156,501 15,239 71,011
Muralidhar Sitaram........ -- -- 5,312 94,688 2,656 4,844
Peter Kenyon.............. -- -- -- -- -- --
</TABLE>
- -------------------------
(a) Equal to the fair market value of the purchased shares on the option
exercise date, less the exercise price paid for such shares.
(b) The options are immediately exercisable for all the option shares, but any
shares purchased under those options will be subject to repurchase by us, at
the original exercise price paid per share, upon the optionee's cessation of
service with us, prior to the vesting in such shares. The heading "Vested"
refers to shares no longer subject to repurchase; the heading "Unvested"
refers to shares subject to repurchase as of March 31, 1999.
(c) Based on the fair market value of our common stock at the end of fiscal 1999
($1.75 per share), less the exercise price payable for such shares.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
The Compensation Committee of the Board of Directors, as Plan Administrator
of the 1999 Stock Incentive Plan, has the authority to provide for accelerated
vesting of the shares of common stock subject to outstanding options held by the
Named Executive Officers and any other person in connection with certain changes
in control of Quintus. In connection with our adoption of the 1999 Stock
Incentive Plan, we have provided that upon a change in control of Quintus, each
outstanding option and all shares of restricted stock will generally become
fully vested unless the surviving corporation assumes the option or award or
replaces it with a comparable award.
Except for Mr. Anderson and Mr. Burke, none of the Named Executive Officers
has employment agreements with us, and his or her employment may be terminated
at any time. We have entered into an agreement with Mr. Anderson, our Chief
Executive Officer, dated May 23, 1995, which provides for payment of severance
pay in the amount of nine months base salary in the event that his employment is
involuntarily terminated without cause. In May 1995, we granted Mr. Anderson
unvested options to purchase 1,142,858 shares of common stock. Subsequently, Mr.
Anderson exercised his option to purchase all of these options subject to our
right to repurchase his unvested shares should he cease his service with us. As
of September 1999, Mr. Anderson had fully vested in 571,429 of these shares.
Provided that Mr. Anderson remains in our service, the remaining 571,429 shares
of unvested common stock will vest as follows: 142,857 will vest in equal annual
installments beginning in May 2000. However, these 571,429 shares of unvested
common stock could vest in full if following this offering the per share value
of our common stock reaches certain targets as measured on May 25, 2000, 2001 or
2002. Mr. Anderson's agreement also provides
56
<PAGE> 59
that these 571,429 shares of unvested common stock will vest in full following
certain changes in control of Quintus.
We have entered into an agreement with Mr. Burke, our President, dated June
11, 1999, which provides for payment of severance in the amount of 3 months base
salary in the event that his employment is involuntarily terminated without
cause before July 5, 2000. In addition, Mr. Burke has been granted unvested
options to purchase 685,000 shares of common stock. Of these 685,000 options,
411,000 will vest as follows: 205,000 will vest upon completion of one year of
service from the date of grant and the balance will vest in equal monthly
installments over the next 36 months of service thereafter. 274,000 of these
685,000 options will vest within three to five years, depending on Quintus'
achievement of certain license and revenue targets. Mr. Burke's agreement also
provides for accelerated vesting of up to half of his 685,000 options if his
employment is involuntarily terminated without cause within six months following
certain changes in control of Quintus and he is then vested in less than half of
such options.
STOCK PLANS
1999 STOCK INCENTIVE PLAN
Share Reserve. Our board of directors adopted our 1999 Stock Incentive Plan
in September 1999 to be effective simultaneously with this offering. We will
seek the approval of this plan by our stockholders. We have reserved 1,000,000
shares of our common stock for issuance under the 1999 Stock Incentive Plan. Any
shares not yet issued under our 1995 Stock Option Plan on the date of this
offering will also be available under the 1999 Stock Incentive Plan. On January
1 of each year, starting with the year 2000, the number of shares in the reserve
will automatically increase by 5% of the total number of shares of common stock
that are outstanding at that time or, if less, by 2,000,000 shares. In general,
if options or shares awarded under the 1999 Stock Incentive Plan or the 1995
Stock Option Plan are forfeited, then those options or shares will again become
available for awards under the 1999 Stock Incentive Plan. We have not yet
granted any options under the 1999 Stock Incentive Plan.
Outstanding options under the 1995 Stock Option Plan will be incorporated
into the 1999 Stock Incentive Plan at the time of this offering and no further
option grants will be made under the 1995 Stock Option Plan. The incorporated
options will continue to be governed by their existing terms, unless the Board
elects to extend one or more features of the 1999 Stock Incentive Plan to those
options or to other outstanding shares. Previously, options granted under the
1995 Stock Option Plan provided that vesting of the shares would accelerate upon
an acquisition only if not assumed by the acquiring entity.
Administration. The compensation committee of our board of directors
administers the 1999 Stock Incentive Plan. The committee has the complete
discretion to make all decisions relating to the interpretation and operation of
our 1999 Stock Incentive Plan. The committee has the discretion to determine who
will receive an award, what type of award it will be, how many shares will be
covered by the award, what the vesting requirements will be (if any), and what
the other features and conditions of each award will be. The compensation
committee may also reprice outstanding options and modify outstanding awards in
other ways.
Eligibility. The following groups of individuals are eligible to
participate in the 1999 Stock Incentive Plan:
- employees;
- members of our board of directors who are not employees; and
57
<PAGE> 60
- consultants.
Types of Award. The 1999 Stock Incentive Plan provides for the following
types of award:
- incentive stock options to purchase shares of our common stock;
- nonstatutory stock options to purchase shares of our common stock;
- restricted shares of our common stock; and
- stock appreciation rights and stock units.
Options. An optionee who exercises an incentive stock option may qualify
for favorable tax treatment under Section 422 of the Internal Revenue Code of
1986. On the other hand, nonstatutory stock options do not qualify for such
favorable tax treatment. The exercise price for incentive stock options granted
under the 1999 Stock Incentive Plan may not be less than 100% of the fair market
value of our common stock on the option grant date. In the case of nonstatutory
stock options, the minimum exercise price is 85% of the fair market value of our
common stock on the option grant date. Optionees may pay the exercise price by
using:
- cash;
- shares of common stock that the optionee already owns;
- a full-recourse promissory note, except that the par value of newly
issued shares must be paid in cash;
- an immediate sale of the option shares through a broker designated by us;
or
- a loan from a broker designated by us, secured by the option shares.
Options vest at the time or times determined by the compensation committee.
In most cases, our options vest over a four-year period following the date of
grant. Options generally expire ten years after they are granted, except that
they generally expire earlier if the optionee's service terminates earlier. The
1999 Stock Incentive Plan provides that no participant may receive options
covering more than 1,000,000 shares in the same year, except that a newly hired
employee may receive options covering up to 2,000,000 shares in the first year
of employment.
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<PAGE> 61
Stock Appreciation Rights. A participant who exercises a stock appreciation
right shall receive the increase in value of our common stock over the base
price. The base price for stock appreciation rights granted under the 1999 Stock
Incentive Plan shall be determined by the compensation committee. The settlement
value of the stock appreciation right may be paid in cash or shares of common
stock.
Stock appreciation rights vest at the time or times determined by the
compensation committee. In most cases, our stock appreciation rights vest over a
four-year period following the date of grant. Stock appreciation rights
generally expire 10 years after they are granted, except that they generally
expire earlier if the participant's service terminates earlier. The 1999 Stock
Incentive Plan provides that no participant may receive stock appreciation
rights covering more than 1,000,000 shares in the same year, except that a newly
hired employee may receive stock appreciation rights covering up to 2,000,000
shares in the first year of employment.
Restricted Shares. Restricted shares may be awarded under the 1999 Stock
Incentive Plan in return for:
- cash;
- a full-recourse promissory note, except that the par value of newly
issued shares must be paid in cash;
- services already provided to us; and
- in the case of treasury shares only, services to be provided to us in the
future.
Restricted shares vest at the time or times determined by the compensation
committee.
Stock units. Stock units may be awarded under the 1999 Stock Incentive Plan
in return for:
- cash;
- a full-recourse promissory note, except that the par value of newly
issued shares must be paid in cash;
- services already provided to us; and
- in the case of treasury shares only, services to be provided to us in the
future.
Stock units vest at the time or times determined by the compensation
committee.
Change in Control. If a change in control of Quintus occurs, an option or
restricted stock award under the 1999 Stock Incentive Plan will generally become
fully vested. However, if the surviving corporation assumes the option or award
or replaces it with a comparable award, then vesting shall generally not
accelerate. A change in control includes:
- a merger of Quintus after which our own stockholders own 50% or less of
the surviving corporation (or its parent company);
- a sale of all or substantially all of our assets;
- the replacement of more than one-half of our directors over a 24-month
period; or
- an acquisition of 50% or more of our outstanding stock by any person or
group, other than a person related to Quintus (such as a holding company
owned by our stockholders).
59
<PAGE> 62
Amendments or Termination. Our board may amend or terminate the 1999 Stock
Incentive Plan at any time. If our board amends the plan, it does not need to
ask for stockholder approval of the amendment unless applicable law requires it.
The 1999 Stock Incentive Plan will continue in effect indefinitely, unless the
board decides to terminate the plan earlier.
EMPLOYEE STOCK PURCHASE PLAN
Share Reserve and Administration. Our board of directors adopted our
Employee Stock Purchase Plan on September 9, 1999. We will seek the approval of
this plan by our stockholders. Our Employee Stock Purchase Plan is intended to
qualify under Section 423 of the Internal Revenue Code and will become effective
simultaneously with this offering. We have reserved 1,000,000 shares of our
common stock for issuance under the plan. On May 1 of each year, starting with
the year 2000, the number of shares in the reserve will automatically be
increased by 2% of the total number of shares of our common stock that are
outstanding at that time or, if less, by 1,000,000 shares. The plan will be
administered by a committee of our board of directors.
Eligibility. All of our employees are eligible to participate if they are
employed by us for more than 20 hours per week and for more than five months per
year. Eligible employees may begin participating in the Employee Stock Purchase
Plan at the start of any offering period. Each offering period lasts 24 months.
Overlapping offering periods start on May 1 and November 1 of each year.
However, the first offering period will start on the effective date of this
offering and end on October 31, 2001.
Amount of Contributions. Our Employee Stock Purchase Plan permits each
eligible employee to purchase common stock through payroll deductions. Each
employee's payroll deductions may not exceed 15% of the employee's cash
compensation. Purchases of our common stock will occur on April 30 and October
31 of each year. Each participant may purchase up to 2,000 shares on any
purchase date. However, the value of the shares purchased in any calendar year
(measured as of the beginning of the applicable offering period) may not exceed
$25,000.
Purchase Price. The price of each share of common stock purchased under our
Employee Stock Purchase Plan will be 85% of the lower of:
- The fair market value per share of common stock on the date immediately
before the first day of the applicable offering period, or
- The fair market value per share of common stock on the purchase date.
In the case of the first offering period, the price per share under the
plan will be 85% of the lower of:
- The price per share to the public in this offering, or
- The fair market value per share of common stock on the purchase date.
Other Provisions. Employees may end their participation in the Employee
Stock Purchase Plan at any time. Participation ends automatically upon
termination of employment with Quintus. If a change in control of Quintus
occurs, our Employee Stock Purchase Plan will end and shares will be purchased
with the payroll deductions accumulated to date by participating employees,
unless the plan is assumed by the surviving corporation or its parent. Our board
of directors may amend or terminate the Employee Stock Purchase Plan at any
time. Our chief executive officer may also amend the plan in certain respects.
If our board increases the number of shares of common stock reserved for
issuance under the plan (except for the automatic increases described above), it
must seek the approval of our stockholders.
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<PAGE> 63
1999 DIRECTOR OPTION PLAN
Share Reserve. Our board of directors adopted our 1999 Director Option Plan
on September 9, 1999. We will seek the approval of this plan by our
stockholders. We have reserved 500,000 shares of our common stock for issuance
under the plan. In general, if options granted under the 1999 Director Option
Plan are forfeited, then those options will again become available for grants
under the plan. The Director Option Plan will be administered by the
compensation committee of our board of directors, although all grants under the
plan are automatic and non-discretionary.
Initial Grants. Only the non-employee members of our board of directors
will be eligible for option grants under the 1999 Director Option Plan. Each
non-employee director who first joins our board after the effective date of this
offering will receive an initial option for 30,000 shares. That grant will occur
when the director takes office. The initial options vest in monthly installments
over the two-year period following the date of grant.
Annual Grants. At the time of each of our annual stockholders' meetings,
beginning in 2000, each non-employee director who will continue to be a director
after that meeting will automatically be granted an annual option for 10,000
shares of our common stock. However, a new non-employee director who is
receiving the 30,000-share initial option will not receive the annual option in
the same calendar year. The annual options are fully vested on the first
anniversary of the date of grant.
Other Option Terms. The exercise price of each non-employee director's
option will be equal to the fair market value of our common stock on the option
grant date. A director may pay the exercise price by using cash, shares of
common stock that the director already owns, or an immediate sale of the option
shares through a broker designated by us. The non-employee directors' options
have a 10-year term, except that they expire one year after a director leaves
the board (if earlier). If a change in control of Quintus occurs, a non-employee
director's option granted under the 1999 Director Option Plan will become fully
vested. Vesting also accelerates in the event of the optionee's death or
disability.
Amendments or Termination. Our board may amend or terminate the 1999
Director Option Plan at any time. If our board amends the plan, it does not need
to ask for stockholder approval of the amendment unless applicable law requires
it. The 1999 Director Option Plan will continue in effect indefinitely, unless
the board decides to terminate the plan.
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<PAGE> 64
CERTAIN TRANSACTIONS
RELATIONSHIPS AMONG OFFICERS OR DIRECTORS WITH CERTAIN INVESTORS
Two of our directors are associated with entities that each own more than
five percent of our capital stock. Mr. Rosen is a general partner in Sprout
Group, and Mr. Harman is a general partner in Oak Investment Partners. No other
officer or director of Quintus has any material relationship with any other
principal stockholder. The Sprout Group is affiliated with Donaldson, Lufkin &
Jenrette Securities Corporation, one of the underwriters of this offering. See
"Underwriting."
STOCK TRANSACTIONS
The following table summarizes the sales of preferred stock to our
executive officers, directors and principal stockholders, and persons and
entities associated with them, since our inception. Each share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock automatically converts into one share of common stock and the
right to receive a cash payment equal to approximately 92.5% of the original per
share purchase price upon the closing of this offering. Each share of Series E
Preferred Stock and Series F Preferred Stock automatically converts into one
share of common stock upon the closing of this offering. See "Principal
Stockholders" for a summary of the affiliations of each of the persons and
entities described below.
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F
PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED
STOCK STOCK STOCK STOCK STOCK STOCK
<S> <C> <C> <C> <C> <C> <C>
Date of sale.......................... 5/25/95 3/7/96 9/17/96 11/10/97 5/21/98 8/26/99
Price per share....................... $1.00 $1.43 $1.91 $2.75 $4.15 $8.25
Entities associated with our directors
Entities Associated with DLJ Capital
Corporation (Mr. Rosen)........... 9,000,000 699,300 501,182 -- 1,304,100 --
Entities Associated with Oak
Investment Partners (Mr.
Harman)........................... -- -- 2,094,240 -- 669,085 --
Other 5% stockholders
HarbourVest Partners IV............. -- -- -- 970,002 455,760 --
Meritech Capital Partners........... -- -- -- -- -- 1,333,334
Outside directors
William Herman...................... 100,000 -- -- -- 60,241 30,000
Paul Bartlett....................... -- -- 52,356 -- 24,097 --
Jeanne Wohlers...................... -- 34,420 -- -- 12,049 --
Robert Shaw......................... -- -- -- -- 18,072 --
</TABLE>
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATION ARRANGEMENTS
We have entered into employment agreements or compensation arrangements
with Alan Anderson, our Chief Executive Officer, and John Burke, our President.
See "Management--Employment and Change of Control Agreements."
OPTION GRANTS
We have granted options to our directors and executive officers, and we
intend to grant additional options to our directors and executive officers in
the future. See "Management--Option Grants in Last Fiscal Year" and
"Management--Director Compensation."
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<PAGE> 65
INDEMNIFICATION AGREEMENTS
We have entered into indemnification agreements with our directors and
executive officers. Such agreements may require us, among other things, to
indemnify our officers and directors, other than for liabilities arising from
willful misconduct of a culpable nature, and to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified. See "Management--Indemnification."
RIGHTS OF CERTAIN STOCKHOLDERS
Certain holders of our common stock are entitled to demand and "piggyback"
registration rights pursuant to an Amended and Restated Investors' Rights
Agreement, dated as of August 26, 1999. The following directors are parties to
this agreement: Jeanne Wohlers; William Herman; Paul Bartlett; and Robert Shaw.
In addition, the following principal stockholders are party to this agreement:
entities associated with the Sprout Group, in which Alexander Rosen is a general
partner; entities associated with Oak Investment Partners, in which director
Fredric W. Harman is a general partner; and HarbourVest Partners IV.
AGREEMENTS WITH COMPANIES WITH WHICH OUR DIRECTORS ARE ASSOCIATED
We have an ongoing contract with Hall, Kinion Associates, Inc., a
recruiting and staffing firm. Paul Bartlett, one of our directors, is president
of Hall, Kinion. In fiscal 1999, we paid an aggregate of $20,387 to Hall, Kinion
under this agreement.
LOANS TO CERTAIN EXECUTIVE OFFICERS
On May 14, 1996, we loaned Alan Anderson, our Chief Executive Officer, a
total of $37,500 for the exercise of stock options. Mr. Anderson purchased
750,000 shares of our common stock with the loan. In connection with the loan,
we entered into a stock pledge agreement with Mr. Anderson on May 14, 1996 and
became the holder of a full-recourse promissory note from Mr. Anderson dated May
14, 1996 in the amount of $37,500 and bearing an interest rate of 6.36%,
compounded annually. Principal and interest are due on May 14, 2001, subject to
acceleration upon the cessation of Mr. Anderson's employment and certain other
events. As of August 31, 1999, the amount outstanding on this note was $43,016.
On May 14, 1996, we loaned Alan Anderson, our Chief Executive Officer, a
total of $19,643 for the exercise of stock options. Mr. Anderson purchased
392,858 shares of our common stock with the loan. In connection with the loan,
we entered into a stock pledge agreement with Mr. Anderson on May 14, 1996 and
became the holder of a full-recourse promissory note from Mr. Anderson dated May
14, 1996 in the amount of $19,643 and bearing an interest rate of 6.36%,
compounded annually. Principal and interest are due on May 14, 2001, subject to
acceleration upon the cessation of Mr. Anderson's employment and certain other
events. As of August 31, 1999, the amount outstanding on this note was $22,533.
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<PAGE> 66
On April 20, 1999, we loaned Susan Salvesen, our Chief Financial Officer, a
total of $164,868 for the exercise of a stock option. She purchased 132,000
shares of our common stock with the loan. In connection with the loan, we
entered into a stock pledge agreement with Ms. Salvesen on April 20, 1999, and
became the holder of a full-recourse promissory note from Ms. Salvesen dated
April 20, 1999, in the amount of $164,868 and bearing an interest rate of 5.28%,
compounded annually. Principal and interest are due on April 20, 2003, subject
to acceleration upon the cessation of Ms. Salvesen's employment and certain
other events. As of August 31, 1999, the amount outstanding on this note was
$167,688.
We believe that the transactions above were made on terms no less favorable
to us than could have been obtained from unaffiliated parties. All future
transactions, including loans between us and our officers, directors, principal
stockholders and their affiliates, will be approved by a majority of the board
of directors, including a majority of the independent and disinterested
directors, and will continue to be made on terms no less favorable to us than
could have been obtained from unaffiliated parties.
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<PAGE> 67
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of our common stock
as of August 31, 1999 and as adjusted to reflect the closing of our acquisition
of Acuity and the sale of the common stock offered in this offering for:
- each person who is known by us to beneficially own more than 5% of our
common stock;
- each of the Named Executive Officers;
- each of our directors; and
- all of our directors and executive officers as a group (11 persons).
As of August 31, 1999, there were 22,470,000 shares of our common stock
outstanding. We will issue approximately 4,530,000 shares in connection with our
acquisition of Acuity. Thus, the figures in the "Before Offering" column below
are based on 27,000,000 shares outstanding. The information in the table below
assumes no exercise of the underwriters' over-allotment option.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options
currently exercisable within 60 days of August 31, 1999 are deemed outstanding
for purposes of computing the percentage ownership of the person holding such
option but are not deemed outstanding for purposes of computing the percentage
ownership of any other person. Except where indicated, and subject to community
property laws where applicable, the persons in the table below have sole voting
and investment power with respect to all common stock shown as beneficially
owned by them. Unless otherwise indicated, the address of each of the
individuals listed in the table is c/o Quintus Corporation, 47212 Mission Falls
Court, Fremont, CA 94539.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
----------------------
NUMBER OF SHARES OUTSTANDING
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
<S> <C> <C> <C>
Entities Affiliated with Donaldson, Lufkin &
Jenrette, Inc.(a)................................ 11,842,037 43.3%
c/o Sprout Group
3000 Sand Hill Road, Suite 170, Bldg. 3
Menlo Park, CA 94025
Entities Affiliated with Oak Investment
Partners(b)...................................... 2,903,516 10.7
525 University Avenue, Suite 1300
Palo Alto, CA 94301
HarbourVest Partners IV(c)......................... 1,530,908 5.6
One Financial Center
Boston, MA 02111
Entities Affiliated with MeriTech Capital.......... 1,333,334 4.9
428 University Avenue
Palo Alto, CA 94301
Alan K. Anderson(d)................................ 1,142,858 4.2
John J. Burke(e)................................... 685,000 2.5
Susan Salvesen(f).................................. 218,000 *
</TABLE>
65
<PAGE> 68
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
----------------------
NUMBER OF SHARES OUTSTANDING
BENEFICIALLY BEFORE AFTER
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING
<S> <C> <C> <C>
Muralidhar Sitaram(g).............................. 300,000 1.1
Paul Bartlett(h)................................... 116,453 *
Fredric Harman(i).................................. 2,903,516 10.7
Will Herman(j)..................................... 250,241 *
Alexander Rosen(k)................................. 11,842,037 43.3
Robert Shaw........................................ 84,097 *
Jeanne Wohlers..................................... 122,049 *
All directors and executive officers as a
group(l)......................................... 17,664,251 62.1%
</TABLE>
- -------------------------
* Less than 1%.
(a) Includes 653,655 shares held by entities affiliated with Donaldson, Lufkin
& Jenrette, Inc., of which 9,947 are held in the form of warrants to
purchase Series B preferred stock, and 7,511 are held in the form of
warrants to purchase common stock. Also includes 3,605,644 shares held by
Sprout Capital VI, L.P., of which 62,815 are held in the form of warrants
to purchase Series B preferred stock and 47,437 are held in the form of
warrants to purchase common stock. Also includes 7,360,350 shares held by
Sprout Capital VII, L.P., of which 119,500 are held in the form of warrants
to purchase Series B preferred stock and 90,245 are held in the form of
warrants to purchase common stock. Also includes 17,463 and 204,925 shares
held by Sprout CEO Fund, L.P. and DLJ ESC II, L.P., DLJ ESC II, L.P. is an
Employees' Securities Corporation as defined in the Investment Company Act
of 1940. The general partner of DLJ ESC II, L.P. is DLJ LBO Plans
Management Corporation and the limited partners of DLJ ESC II, L.P. are
current or former employees of Donaldson, Lufkin & Jenrette, Inc. and its
affiliates. DLJ Capital Corporation is the managing general partner of
Sprout Capital VI, L.P., the managing general partner of Sprout Capital
VII, L.P, and the General Partner of Sprout CEO Fund, L.P.
(b) Includes 2,837,318 shares held by Oak Investment Partners VI, L.P., of
which 136,997 are held in the form of warrants to purchase common stock.
Also includes 66,198 shares held by Oak VI Affiliates Fund, L.P., of which
3,194 are held in the form of warrants to purchase common stock. Mr. Harman
has indirect ownership of the shares and has shared power to vote and
dispose of the shares held by Oak Investment Partners VI, L.P. and Oak VI
Affiliates Fund, L.P. The parties who share power to vote and dispose of
the shares held by Oak Investment Partners VI, L.P., with Mr. Harman are
Bandel L. Carano, Eileen M. More, Ann H. Lamont, Edward F. Glassmeyer and
Gerald R. Gallagher, all of whom are managing members of Oak Associates VI,
LLC, the general partner of Oak Investment Partners VI, L.P. The parties
who share power to vote and dispose of the shares held by Oak VI Affiliates
Fund, L.P., with Mr. Harman are Bandel L. Carano, Eileen M. More, Ann H.
Lamont, Edward F. Glassmeyer and Gerald R. Gallagher, all of whom are
managing members of Oak VI Affiliates, LLC, the general partner of Oak VI
Affiliates Fund, L.P. Mr. Harman, Bandel L. Carano, Eileen M. More, Ann H.
Lamont, Edward F. Glassmeyer and Gerald R. Gallagher disclaim beneficial
ownership of the securities held by such partnerships in which Mr. Harman,
Bandel L. Carano, Eileen M. More, Ann H. Lamont, Edward F. Glassmeyer and
Gerald R. Gallagher do not have a pecuniary interest.
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<PAGE> 69
(c) Includes 105,146 shares held in the form of warrants to purchase common
stock.
(d) Includes 571,429 shares of unvested common stock.
(e) Includes options to purchase 685,000 shares of common stock.
(f) Includes options to purchase 58,000 shares of common stock.
(g) Includes options to purchase 100,000 shares of common stock.
(h) Includes options to purchase 40,000 shares of common stock.
(i) Includes 2,903,516 shares held by entities affiliated with Oak Investment
Partners. See Note b above. Mr. Harman is a managing member of Oak
Associates VI, LLC, the general partner of Oak Investment Partners VI,
L.P., and a managing member of Oak VI Affiliates, LLC, the general partner
of Oak VI Affiliates Fund, L.P.
(j) Includes options to purchase 60,000 shares of common stock.
(k) Includes 11,842,037 shares held by entities affiliated with DLJ Capital
Corporation. See Note a above. Mr. Rosen is a general partner of the Sprout
Group and a general partner of DLJ Associates VII, L.P., which is a general
partner of Sprout Capital VII, L.P. Mr. Rosen disclaims beneficial
ownership of these shares, except to the extent of his pecuniary interest
arising from his interests in the partnerships named in Note a above.
(l) Includes options and warrants to purchase 1,420,646 shares.
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<PAGE> 70
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the closing of this offering, our authorized capital stock will
consist of 100,000,000 shares of common stock, $0.001 par value, and 10,000,000
shares of preferred stock, $0.001 par value. The following summary of certain
provisions of the common stock and the preferred stock does not purport to be
complete and is subject to, and qualified in its entirety by, our certificate of
incorporation and bylaws and by the provisions of applicable law.
COMMON STOCK
As of August 31, 1999, there were 22,470,000 shares of common stock
outstanding that were held of record by approximately stockholders. There
will be shares of common stock outstanding, assuming no exercise of
the underwriters' over-allotment option and assuming no exercise after August
31, 1999, of outstanding options, after giving effect to the issuance of
approximately 4,530,000 shares in connection with our acquisition of Acuity, the
sale of shares of common stock to the public in this offering and the
conversion of our preferred stock into common stock at a one-to-one ratio.
The holders of our common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the board of directors out of funds legally available therefor. We
have never declared or paid cash dividends on our common stock or other
securities and do not currently anticipate paying cash dividends in the future.
Our bank line of credit currently prohibits the payment of dividends. In the
event of the liquidation, dissolution or winding up of Quintus, the holders of
common stock are entitled to share ratably in all assets remaining after payment
of liabilities, subject to prior distribution rights of preferred stock, if any,
then outstanding. The common stock has no preemptive or conversion rights or
other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully
paid and nonassessable, and the shares of common stock to be issued upon the
effectiveness of this offering will be fully paid and nonassessable.
PREFERRED STOCK
Our certificate of incorporation authorizes 10,000,000 shares of preferred
stock. The board of directors has the authority to issue the preferred stock in
one or more series and to fix the rights, preferences, privileges 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, without further vote or action by the stockholders. The issuance
of preferred stock may have the effect of delaying, deferring or preventing a
change in control of Quintus without further action by the stockholders and may
adversely affect the voting and other rights of the holders of common stock. The
issuance of preferred stock with voting and conversion rights may adversely
affect the voting power of the holders of common stock, including the loss of
voting control to others. At present, we have no plans to issue any of the
preferred stock.
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<PAGE> 71
WARRANTS
As of August 31, 1999, the following warrants to purchase an aggregate of
1,022,645 shares of our capital stock were outstanding:
- Warrants to purchase an aggregate of 5,000 shares of common stock at
$0.05 per share, which expire on April 17, 2006;
- Warrants to purchase an aggregate of 385,530 shares of common stock at
$0.30 per share, which expire on November 10, 2001;
- Warrants to purchase an aggregate of 8,466 shares of common stock at
$3.94 per share, which expire on January 7, 2002; and
- Warrants to purchase an aggregate of 76,047 shares of common stock at
$4.54 per share, which expire on November 10, 2001.
We have assumed throughout this prospectus the cash exercise of warrants to
purchase an aggregate of 192,262 shares of Series B preferred stock at $1.43 per
share and a warrant to purchase 55,340 shares of Series C preferred stock at
$1.91 per share.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
CERTIFICATE OF INCORPORATION AND BYLAWS
The certificate of incorporation provides that, effective upon the closing
of this offering, all stockholder actions must be effected at a duly called
meeting and not by a consent in writing. The bylaws provide that our
stockholders may call a special meeting of stockholders only upon a request of
stockholders owning at least 50% of our capital stock. These provisions of the
certificate of incorporation and bylaws could discourage potential acquisition
proposals and could delay or prevent a change in control of Quintus. These
provisions are intended to enhance the likelihood of continuity and stability in
the composition of the board of directors and in the policies formulated by the
board of directors and to discourage certain types of transactions that may
involve an actual or threatened change of control of Quintus. These provisions
are designed to reduce the vulnerability of Quintus to an unsolicited
acquisition proposal. The provisions also are intended to discourage certain
tactics that may be used in proxy fights. However, such provisions could have
the effect of discouraging others from making tender offers for our shares and,
as a consequence, they also may inhibit fluctuations in the market price of our
shares that could result from actual or rumored takeover attempts. Such
provisions also may have the effect of preventing changes in our management. See
"Risk Factors--Anti-takeover provisions in our charter documents and Delaware
law could prevent or delay a change in control of Quintus."
DELAWARE TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless:
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
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<PAGE> 72
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (x) by persons who are
directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- 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 that is not owned by the
interested stockholder.
Section 203 defines business combination to include:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
- subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
REGISTRATION RIGHTS
After this offering, the holders of 18,495,392 shares of common stock will
be entitled to certain rights with respect to the registration of those shares
under the Securities Act. If we proposed to register any of our securities under
the Securities Act, either for our own account or for the account of other
security holders exercising registration rights, we must notify these
stockholders of the registration, and these stockholders may be entitled to
include all or part of their shares in the registration. Additionally, holders
of 18,495,392 shares of common stock have certain demand registration rights
under which they may require us to use our best efforts to register shares of
their common stock. Further, the holders of these demand rights may require us
to file additional registration statements on Form S-3. All of these
registration rights are subject to certain conditions and limitations, including
the right of underwriters to limit the number of shares included in a
registration and our right to not effect a requested registration within six
months following an offering of our securities, including this offering.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is ChaseMellon
Shareholders Services, L.L.C.
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<PAGE> 73
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of common stock in the public market,
including shares issued upon exercise of outstanding options and warrants,
following this offering could adversely affect the prevailing market price of
our common stock and could impair our ability to raise capital through the sale
of our equity securities. As described below, none of the shares currently
outstanding will be available for sale immediately after this offering due to
contractual and legal restrictions on resale (described below). However, public
sales of substantial amounts of our common stock after these restrictions lapse
could adversely affect the prevailing market price of our stock and our ability
to raise equity capital in the future.
Upon completion of this offering, we will have outstanding 27,081,047
shares of common stock based upon shares outstanding as of August 31, 1999,
assuming no exercise of the underwriters' over-allotment option and no exercise
of outstanding options or warrants, other than 328,649 warrants that would
otherwise expire upon the consummation of this offering. Of these shares, the
shares sold in this offering will be freely tradable without
restriction under the Securities Act except for any shares purchased by our
"affiliates," as that term is defined in Rule 144 under the Securities Act. The
remaining 27,081,047 shares of common stock held by existing stockholders
include 21,481,529 restricted shares and 5,599,518 non-restricted shares. These
27,081,047 restricted and non-restricted shares are subject to lock-up
agreements providing that, with certain limited exceptions, the stockholder will
not offer, sell, contract to sell or otherwise dispose of any common stock or
any securities that are convertible into common stock for a period of 180 days
after the date of this prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. As a result of these
lock-up agreements, notwithstanding possible earlier eligibility for sale under
the provisions of Securities Act Rules 144, 144(k) or 701, none of these shares
will be resellable until 181 days after the date of this prospectus. Donaldson,
Lufkin & Jenrette Securities Corporation may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
lock-up agreements.
The following table shows approximately when the 27,081,047 shares of our
common stock that are not being sold in this offering, but which will be
outstanding when this offering is complete, will be eligible for sale in the
public market:
ELIGIBILITY OF SHARES FOR SALE IN THE PUBLIC MARKET
<TABLE>
<S> <C>
At the effective date....................................... 0
180 days after the effective date........................... 25,389,064
More than 180 days after the effective date................. 1,691,983
</TABLE>
Resale of 15,101,679 of the restricted shares and 863,295 of the
non-restricted shares that will become available for sale in the public market
starting 180 days after the effective date will be limited by volume and other
resale restrictions under Rule 144 because the holders of those shares are our
affiliates. The 1,069,518 shares issued in connection with our acquisition of
Nabnasset and the approximately 4,530,000 shares to be issued in connection with
out acquisition of Acuity will be freely tradable starting 180 days after the
effective date.
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<PAGE> 74
RULE 144
In general, under Rule 144, beginning 90 days after the date of this
prospectus, a person who has beneficially owned restricted shares for at least
one year would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding which will
equal approximately shares immediately after this offering and
the private placement; or
- 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 and notice
requirements and to the public availability of information about us. Under Rule
144(k), a person who is not deemed to have been an affiliate of us at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
RULE 701
Rule 701, as currently in effect, permits resales of shares in reliance
upon Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any of our employees, officers,
directors or consultants who purchased shares under 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 nonaffiliates may sell such shares in reliance on Rule 144 without
having to comply with the holding period, public information, volume limitation
or notice provisions of Rule 144. All holders of Rule 701 shares are required to
wait until 90 days after the date of this prospectus before selling such shares.
However, all Rule 701 shares are subject to lock-up agreements and will only
become eligible for sale upon the expiration of the 180-day lock-up agreements.
Donaldson, Lufkin & Jenrette Securities Corporation may, in its sole discretion
and at any time without notice, release all or any portion of the securities
subject to lock-up agreements.
Within 90 days following the effectiveness of this offering, we will file a
registration statement on Form S-8 registering 6,796,495 shares of common stock
subject to outstanding options or reserved for future issuance under our stock
plans. As of August 31, 1999, options to purchase a total of 2,623,103 shares
were outstanding and 799,473 shares were reserved for future issuance under our
stock plans. In addition, options to purchase 685,000 shares granted outside of
our stock plans were also outstanding. Common stock issued upon exercise of
outstanding vested options or issued under or purchase plan, other than common
stock issued to our affiliates, is available for immediate resale in the open
market.
LOCK-UP AGREEMENTS
Our officers, directors and stockholders have agreed not to sell or
otherwise dispose of any of their shares for a period of 180 days after the date
of this offering. Donaldson, Lufkin & Jenrette Securities Corporation, however,
may in its sole discretion, at any time without notice, release all or any
portion of the shares subject to lock-up agreements.
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<PAGE> 75
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement
dated , 1999, the underwriters named below, who are represented by
Donaldson, Lufkin & Jenrette Securities Corporation, Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated, SG Cowen Securities Corporation and
DLJdirect Inc., are serving as representatives, have severally agreed to
purchase from Quintus, the respective number of shares of common stock set forth
opposite their names below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.......
Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated...........................................
SG Cowen Securities Corporation...........................
DLJdirect Inc. ...........................................
--------
Total..................................................
========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
offered hereby are subject to approval by their counsel of legal matters
concerning the offering and to condition precedents that must be satisfied by
Quintus. The underwriters are obligated to purchase and accept delivery of all
of the shares of common stock offered hereby, other than those shares covered by
the over-allotment option described below, if any are purchased.
The underwriters initially propose to offer the shares of common stock in
part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to dealers, including the
underwriters, at such price less a concession not in excess of $ per share.
The underwriters may allow, and such dealers may re-allow, to other dealers a
concession not in excess of $ per share. After the initial offering of the
common stock, the public offering price and other selling terms may be changed
by the representatives at any time without notice. The underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
An electronic prospectus will be available on the Web site maintained by
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation. Other than the prospectus in electronic format, the information on
this Web site relating to the offering is not part of this prospectus and has
not been approved or endorsed by Quintus or the underwriters, and should not be
relied on by prospective investors.
Quintus has granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus, to purchase, from time to time, in whole or
in part, up to an aggregate of additional shares of common stock at the
initial public offering price less underwriting discounts and commission. The
underwriters may exercise the option solely to cover over-allotments, if any,
made in connection with the offering. To the extent that the underwriters
exercise the option, each underwriter will become obligated, subject to
conditions contained in the underwriting agreement, to purchase its pro rata
portion of such additional shares based on the underwriters' percentage
underwriting commitment as indicated in the above table.
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<PAGE> 76
Quintus has agreed to indemnify the underwriters against liabilities which
may arise in connection with the offering, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters may
be required to make.
Each of Quintus, its executive officers, directors, stockholders and option
holders has agreed not to:
- offer, pledge sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of
directly or indirectly any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
- enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock, whether any such transaction described above is to be
settled by delivery of common stock or other securities, in cash or
otherwise
for a period of 180 days after the date of this prospectus. Donaldson, Lufkin &
Jenrette Securities Corporation may release some or all of these shares from
such restrictions prior to the expiration of the 180-day period lock-up period,
although it has no current intention of doing so.
In addition, during such 180-day period, Quintus has also agreed not to
file any registration statement with respect to and each of its executive
officers, directors and stockholders of Quintus have agreed not to make any
demand for, or exercise any right with respect to, the registration of any
shares of common stock or any securities convertible into or exercisable or
exchangeable for common stock without the prior written consent of Donaldson,
Lufkin & Jenrette Securities Corporation.
Prior to the offering, there has been no established trading market for the
common stock. The initial public offering price of the shares of common stock
offered was determined by negotiation among Quintus and the underwriters. The
factors considered in determining the initial public offering price included:
- the history of and the prospects for the industry in which Quintus
competes;
- the past and present operations of Quintus;
- the historical results of operations of Quintus;
- the prospectus for future earnings of Quintus;
- the recent market prices of securities of generally comparable companies;
and
- the general condition of the securities markets at the time of the
offering.
Other than in the United States, no action has been taken by Quintus or the
underwriters that would permit a public offering of the shares of common stock
offered in any jurisdiction where action for that purpose is required. The
shares of common stock offered may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such shares of
common stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and observe any restrictions
relating to the offering and the distribution of this prospectus. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any shares of common stock offered in any jurisdiction in which such an
offer or a solicitation is unlawful.
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<PAGE> 77
DLJ Capital Corporation, Sprout Capital VI, L.P., Sprout Capital VII, L.P.,
Sprout CEO Fund, L.P. and DLJ ESC II, L.P. (collectively, the "Sprout Entities")
are affiliates of Donaldson, Lufkin & Jenrette Securities Corporation, one of
the underwriters. As described under "Principal Stockholders," the Sprout
Entities beneficially own an aggregate of shares of the outstanding
common stock, which represent more than 10% of the outstanding common stock. Of
these shares, shares are subject to a voting trust agreement and are held
and voted by an independent third party, Norwest Bank Indiana, N.A., as voting
trustee.
Because the Sprout Entities affiliated with Donaldson, Lufkin & Jenrette
Securities Corporation beneficially own more than 10% of the outstanding common
stock, this offering is being conducted in accordance with Rule 2720 of the
Conduct Rules of the National Associate of Securities Dealers, Inc., which
provides that the public offering price of an equity security be no higher than
that recommended by a "qualified independent underwriter" meeting certain
standards. In accordance with this requirement, Dain Rauscher Wessels, a
division of Dain Rauscher Incorporated assumed the responsibilities of acting as
qualified independent underwriter and recommended a price in compliance with the
requirements of Rule 2720.
In connection with the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot the offering,
creating a syndicate short position. The underwriters may bid for and stabilize
the price of the common stock. In addition, the underwriting syndicate may
reclaim selling concessions from syndicate members and selected dealers if they
repurchase previously distributed common stock in syndicate covering
transactions, in stabilizing transactions or otherwise. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
LEGAL MATTERS
The validity of the common stock offered in this offering will be passed
upon for us by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
Menlo Park, California. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The Quintus consolidated financial statements as of and for the year ended
March 31, 1999, included in this prospectus and the related financial statement
schedule for the year ended March 31, 1999 included elsewhere in the
registration statement have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports appearing herein and elsewhere in the
registration statement, and have been so included in the reliance upon the
reports of such firm given upon their authority as experts in auditing and
accounting.
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedules at March 31, 1998 and 1997, and for the years
then ended, as set forth in their report. We've included our financial
statements and schedule in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
The Acuity financial statements as of December 31, 1997 and 1998 and for
each of the two years in the period ended December 31, 1998 included in this
prospectus and registration statement
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<PAGE> 78
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of that firm as experts in
auditing and accounting.
CHANGE IN ACCOUNTANTS
In February 1999, Quintus dismissed Ernst & Young LLP as its independent
auditors and subsequently appointed Deloitte & Touche LLP as its principal
accountants. There were no disagreements with the former accountants during the
fiscal years ended March 31, 1998 and 1999 or during any subsequent interim
period preceding their replacement on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedures,
which disagreements, if not resolved to the former accountants' satisfaction,
would have caused them to make reference to the subject matter of the
disagreement in connection with their reports. The former independent auditors
issued an unqualified report on the financial statements as of and for the years
ended March 31, 1997 and 1998. Quintus did not consult with Deloitte & Touche
LLP on any accounting or financial reporting matters in the periods prior to
their appointment. The change in accountants was approved by our board of
directors.
ADDITIONAL INFORMATION
We filed with the Securities and Exchange Commission a registration
statement on Form S-1 in connection with this offering. This prospectus does not
contain all the information set forth in the registration statement and its
exhibits and schedules. For further information with respect to Quintus and our
common stock please refer to the registration statement and to its exhibits and
schedules. Statements contained in this prospectus as to the contents of any
contract or other document referred to are not necessarily complete, and each
such statement is qualified in all respects by reference to the full text of
such contract or other document filed as an exhibit to the registration
statement. A copy of the registration statement and its exhibits and schedules
may be inspected without charge at the public reference facilities maintained by
the SEC in Room 1024, 450 Fifth Street, N.W. Washington, D.C. 20549, and at the
SEC's regional offices located at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the registration statement may be obtained from such offices upon payment of the
fees prescribed by the SEC. The SEC maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address of the
site is http://www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchange Act of 1934 and
will file periodic reports, proxy statements and other information with the SEC.
Such periodic reports, proxy statements and other information will be available
for inspection and copying at the regional offices, public reference facilities
and web site of the SEC referred to above.
76
<PAGE> 79
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUINTUS CORPORATION:
Independent Auditor's Report -- Deloitte & Touche LLP..... F-2
Report of Independent Auditors -- Ernst & Young LLP....... F-3
Consolidated Balance Sheets............................... F-4
Consolidated Statements of Operations..................... F-5
Consolidated Statements of Stockholders' Deficiency....... F-6
Consolidated Statements of Cash Flows..................... F-7
Notes to Consolidated Financial Statements................ F-8
ACUITY CORP.:
Report of Independent Accountants......................... F-26
Balance Sheets............................................ F-27
Statements of Operations.................................. F-28
Statements of Changes in Stockholders' Equity............. F-29
Statements of Cash Flows.................................. F-30
Notes to Financial Statements............................. F-31
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION:
Pro Forma Consolidated Balance Sheets..................... F-43
Pro Forma Consolidated Statements of Operations........... F-44
Notes to Pro Forma Consolidated Financial Statements...... F-46
</TABLE>
F-1
<PAGE> 80
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Quintus Corporation:
We have audited the accompanying consolidated balance sheet of Quintus
Corporation and subsidiaries (the Company) as of March 31, 1999, and the related
consolidated statements of operations, stockholders' deficiency, and cash flows
for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of March 31, 1999, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/ Deloitte and Touche LLP
San Jose, CA
June 18, 1999
(September 10, 1999 as to Note 15)
F-2
<PAGE> 81
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Quintus Corporation
We have audited the accompanying consolidated balance sheets of Quintus
Corporation as of March 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity (net capital deficiency), and
cash flows for the years then ended. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Quintus Corporation at March 31, 1998 and 1997, and the consolidated results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
Palo Alto, California
April 30, 1998,
except for Note 12,
as to which the date is
September 18, 1998
F-3
<PAGE> 82
QUINTUS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
------------------- JUNE 30,
1998 1999 1999
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 1,986 $ 1,785 $ 467
Accounts receivable, less allowance for doubtful accounts
of $848, $729 and $761.................................. 7,573 8,671 10,765
Prepaid expenses and other assets......................... 608 573 1,295
-------- -------- --------
Total current assets................................ 10,167 11,029 12,527
Property and equipment, net................................. 3,508 3,162 3,139
Purchased technology, less accumulated amortization of $556,
$1,889 and $2,222......................................... 3,444 2,111 1,778
Intangible assets, less accumulated amortization of $1,059,
$2,630 and $3,093......................................... 5,803 2,970 2,506
Other assets................................................ 219 322 324
-------- -------- --------
Total assets................................................ $ 23,141 $ 19,594 $ 20,274
======== ======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 1,762 $ 2,352 $ 3,983
Accrued compensation and related benefits................. 2,073 2,114 2,185
Other accrued liabilities................................. 1,633 2,268 2,269
Deferred revenue.......................................... 5,008 6,615 6,706
Borrowings under bank line of credit...................... 4,950 4,868 4,868
Notes payable to stockholders............................. 4,500 -- --
Current portion of capital lease obligations.............. 134 109 78
Current portion of long-term debt......................... 1,357 1,347 1,347
-------- -------- --------
Total current liabilities........................... 21,417 19,673 21,436
Capital lease obligations, less current portion............. 109 101 88
Long-term debt, less current portion........................ 2,637 1,700 1,361
Deferred revenue............................................ 1,500 400 200
Commitments and contingencies (Note 7)
Redeemable convertible preferred stock...................... 17,811 17,811 17,811
STOCKHOLDERS' DEFICIENCY:
Series A redeemable convertible preferred stock, $0.001
par value; authorized shares -- 9,100,000; issued and
outstanding shares -- 9,100,000; aggregate liquidation
preference -- $9,100.................................... 455 455 455
Series B redeemable convertible preferred stock, $0.001
par value; authorized shares -- 1,000,000; issued and
outstanding shares -- 768,140; aggregate liquidation
preference -- $1,098.................................... 128 128 128
Series C redeemable convertible preferred stock, $0.001
par value; authorized shares -- 3,000,000; issued and
outstanding shares -- 2,647,778; aggregate liquidation
preference -- $5,057.................................... 530 530 530
Series D redeemable convertible preferred stock, $0.001
par value; authorized shares -- 1,455,000; issued and
outstanding shares -- 1,454,996; aggregate liquidation
preference -- $4,001.................................... 1,819 1,819 1,819
Series E convertible preferred stock, $0.001 par value;
authorized shares -- 3,000,000; issued and outstanding
shares -- 2,604,601; aggregate liquidation
preference -- $10,809................................... -- 10,775 10,775
Common stock, $0.001 par value; authorized
shares -- 30,000,000 in 1998 and 40,000,000 in 1999;
issued and outstanding shares -- 4,117,300 in 1998;
4,208,478 in March 1999; 4,311,084 in June 1999......... 1,686 3,468 4,323
Notes receivable from stockholders........................ (58) (102) (267)
Deferred compensation..................................... (79) (884) (1,415)
Accumulated deficit....................................... (24,814) (36,280) (36,970)
-------- -------- --------
Total stockholders' deficiency...................... (20,333) (20,091) (20,622)
-------- -------- --------
Total liabilities and stockholders' deficiency.............. $ 23,141 $ 19,594 $ 20,274
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 83
QUINTUS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MARCH 31, JUNE 30,
------------------------------- ------------------
1997 1998 1999 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
License.............................. $ 8,406 $ 12,948 $ 17,577 $ 4,790 $ 6,126
Service.............................. 5,208 8,942 12,730 2,762 4,167
------- -------- -------- ------- -------
Total revenues.................... 13,614 21,890 30,307 7,552 10,293
COST OF REVENUES:
License.............................. 972 708 554 74 218
Service.............................. 4,199 7,582 8,623 1,957 2,421
------- -------- -------- ------- -------
Total cost of revenues............ 5,171 8,290 9,177 2,031 2,639
------- -------- -------- ------- -------
Gross profit........................... 8,443 13,600 21,130 5,521 7,654
OPERATING EXPENSES:
Sales and marketing.................. 6,879 11,336 17,147 4,518 4,314
Research and development............. 3,667 5,102 6,719 1,795 1,873
General and administrative........... 1,263 3,233 3,577 803 998
Amortization of intangibles.......... -- 1,335 3,185 796 796
Acquired in-process technologies..... -- 2,200 -- -- --
Stock-based compensation............. -- -- 171 4 169
------- -------- -------- ------- -------
Total operating expenses.......... 11,809 23,206 30,799 7,916 8,150
------- -------- -------- ------- -------
Loss from continuing operations........ (3,366) (9,606) (9,669) (2,395) (496)
OTHER INCOME (EXPENSE):
Interest expense..................... (157) (567) (804) (359) (195)
Other income (expense), net.......... (3) 27 (113) (32) 1
------- -------- -------- ------- -------
Total other income (expense)...... (160) (540) (917) (391) (194)
------- -------- -------- ------- -------
Net loss from continuing operations.... (3,526) (10,146) (10,586) (2,786) (690)
DISCONTINUED OPERATIONS (NOTE 3):
Loss from discontinued operations.... -- (1,103) (1,891) (190) --
Gain on disposal of discontinued
operations........................ -- -- 1,011 -- --
------- -------- -------- ------- -------
Net loss............................... (3,526) (11,249) (11,466) (2,976) (690)
Redeemable preferred stock accretion... (167) (1,519) -- -- --
------- -------- -------- ------- -------
Loss applicable to common
stockholders......................... $(3,693) $(12,768) $(11,466) $(2,976) $ (690)
======= ======== ======== ======= =======
BASIC AND DILUTED NET LOSS PER COMMON
SHARE:
Continuing operations................ $ (4.25) $ (6.88) $ (3.73) $ (1.12) $ (0.20)
Discontinued operations:
Loss from operations.............. -- (0.65) (0.67) (0.08) --
Gain on disposal.................. -- -- 0.36 -- --
------- -------- -------- ------- -------
Basic and diluted net loss per common
share................................ $ (4.25) $ (7.53) $ (4.04) $ (1.20) $ (0.20)
======= ======== ======== ======= =======
Shares used in computation, basic and
diluted.............................. 868 1,695 2,835 2,484 3,506
======= ======== ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 84
QUINTUS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE TOTAL
-------------------- ------------------ FROM DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT STOCKHOLDERS COMPENSATION DEFICIT DEFICIENCY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT APRIL 1,
1996.................... 9,868,140 $ 493 191,160 $ 10 $ -- $ -- $ (8,353) $ (7,850)
Issuance of common stock
under stock option
plan.................... -- -- 2,913,646 154 (58) -- -- 96
Issuance of preferred
stock and warrants to
purchase preferred
stock................... 2,647,778 620 -- -- -- -- -- 620
Repurchase of common
stock................... -- -- (73,688) (4) -- -- -- (4)
Preferred stock
accretion............... -- -- -- -- -- -- (167) (167)
Net loss.................. -- -- -- -- -- -- (3,526) (3,526)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE AT MARCH 31,
1997.................... 12,515,918 1,113 3,031,118 160 (58) -- (12,046) (10,831)
Issuance of common stock
under stock option
plan.................... -- -- 944,949 167 -- -- -- 167
Issuance of common stock
and stock options in
connection with business
combinations............ -- -- 518,921 1,044 -- -- -- 1,044
Repurchase of common
stock................... -- -- (377,688) (42) -- -- -- (42)
Issuance of warrants to
purchase common stock... -- -- -- 258 -- -- -- 258
Issuance of preferred
stock................... 1,454,996 1,819 -- -- -- -- -- 1,819
Preferred stock
accretion............... -- -- -- -- -- (1,519) (1,519)
Compensatory stock
arrangements............ -- -- -- 99 -- (99) -- --
Amortization of deferred
compensation............ -- -- -- -- -- 20 -- 20
Net loss.................. -- -- -- -- -- -- (11,249) (11,249)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE AT MARCH 31,
1998.................... 13,970,914 2,932 4,117,300 1,686 (58) (79) (24,814) (20,333)
Issuance of common stock
under stock option
plan.................... -- -- 303,090 151 (44) -- -- 107
Repurchase of common
stock................... -- -- (211,912) (42) -- -- -- (42)
Issuance of warrants to
purchase common stock... -- -- -- 165 -- -- -- 165
Issuance of preferred
stock................... 2,604,601 10,775 -- -- -- -- -- 10,775
Compensatory stock
arrangements............ -- -- -- 1,508 -- (1,055) -- 453
Amortization of deferred
compensation............ -- -- -- -- -- 250 -- 250
Net loss.................. -- -- -- -- -- -- (11,466) (11,466)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE AT MARCH 31,
1999.................... 16,575,515 13,707 4,208,478 3,468 (102) (884) (36,280) (20,091)
Issuance of common stock
under stock option
plan*................... -- -- 148,944 160 (165) -- -- (5)
Repurchase of common
stock*.................. -- -- (46,338) (5) -- -- -- (5)
Compensatory stock
arrangements*........... -- -- -- 700 -- (700) -- --
Amortization of deferred
compensation*........... -- -- -- -- -- 169 -- 169
Net loss*................. -- -- -- -- -- -- (690) (690)
---------- ------- --------- ------ ----- ------- -------- --------
BALANCE AT JUNE 30,
1999*................... 16,575,515 $13,707 4,311,084 $4,323 $(267) $(1,415) $(36,970) $(20,622)
========== ======= ========= ====== ===== ======= ======== ========
</TABLE>
- -------------------------
* Unaudited
See notes to consolidated financial statements.
F-6
<PAGE> 85
QUINTUS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED MARCH 31, JUNE 30,
----------------------------- -----------------
1997 1998 1999 1998 1999
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................. $(3,526) $(11,249) $(11,466) $(2,976) $ (690)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 822 3,148 5,090 1,377 1,115
Stock based compensation................................ -- 20 250 4 169
Noncash interest expense................................ -- 118 231 231 --
Acquired in-process technologies........................ -- 2,200 -- -- --
Loss (gain) on disposal of property and equipment....... (6) 50 -- -- --
Gain on disposal of discontinued operations............. -- -- (1,011) -- --
Changes in operating assets and liabilities:
Accounts receivable................................... (1,314) (1,114) (1,098) (1,811) (2,094)
Prepaid expenses and other current assets............. (414) (68) 35 145 (722)
Accounts payable...................................... 1,072 (1,110) 590 47 1,631
Accrued compensation and related benefits............. 378 1,219 41 (28) (31)
Other accrued liabilities and other long-term
liabilities........................................ 218 (1,145) (469) (276) (92)
Deferred revenue...................................... 770 3,981 507 (642) (109)
------- -------- -------- ------- -------
Net cash used in operating activities....................... (2,000) (3,950) (7,300) (3,929) (823)
------- -------- -------- ------- -------
INVESTING ACTIVITIES:
Purchase of businesses, net of cash acquired.............. -- (2,461) -- -- --
Purchase of property and equipment........................ (990) (1,172) (1,073) (409) (295)
Proceeds from sale of property and equipment.............. 27 -- -- -- --
Proceeds from sale of discontinued operations............. -- -- 2,100 -- --
Increase in other assets.................................. (25) (45) (103) 55 (2)
------- -------- -------- ------- -------
Net cash provided by (used in) investing activities......... (988) (3,678) 924 (354) (297)
------- -------- -------- ------- -------
FINANCING ACTIVITIES:
Proceeds from issuance of preferred stock................. 4,085 -- 5,275 5,275 --
Proceeds from issuance of common stock.................... 96 167 107 34 160
Repurchase of common stock................................ (4) (42) (42) -- (5)
Proceeds from notes payable to stockholders............... 1,000 4,500 1,000 1,000 --
Borrowings (repayments) under bank line of credit......... 668 4,950 (82) -- --
Proceeds from (repayments of) bank loan................... (577) (2,943) 51 (4,252) (340)
Principal payments on capital lease obligations........... (27) (63) (134) (87) (13)
------- -------- -------- ------- -------
Net cash provided by (used in) financing activities......... 5,241 6,569 6,175 1,970 (198)
------- -------- -------- ------- -------
Net increase (decrease) in cash............................. 2,253 (1,059) (201) (2,313) (1,318)
Cash at beginning of period................................. 792 3,045 1,986 1,986 1,785
------- -------- -------- ------- -------
Cash at end of period....................................... $ 3,045 $ 1,986 $ 1,785 $ (327) $ 467
======= ======== ======== ======= =======
Supplemental disclosure of cash flow information -- cash
paid for interest......................................... $ 160 $ 282 $ 643 $ 194 $ 195
======= ======== ======== ======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Property acquired under capital leases.................... $ -- $ -- $ 101 $ -- $ --
======= ======== ======== ======= =======
Issuance of Series C preferred stock and warrants to
purchase Series B preferred stock in exchange for notes
payable................................................. $ 1,000 $ -- $ -- $ -- $ --
======= ======== ======== ======= =======
Issuance of common stock in exchange for notes
receivable.............................................. $ 58 $ -- $ 44 $ 120 $ 165
======= ======== ======== ======= =======
Issuance of Series D preferred stock in exchange for notes
payable to stockholders................................. $ -- $ 3,001 $ -- $ -- $ --
======= ======== ======== ======= =======
Issuance of Series D preferred stock, common stock and
stock options for purchase of business.................. $ -- $ 2,044 $ -- $ -- $ --
======= ======== ======== ======= =======
Issuance of Series E preferred stock in exchange for notes
payable to stockholders................................. $ -- $ -- $ 5,684 $ -- $ --
======= ======== ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 86
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Quintus Corporation (Quintus or the Company) provides a comprehensive
e-Customer Relationship Management ("eCRM") solution to manage customer
interactions and deliver consistent customer service across multiple
communication channels, including the Internet, email and advanced telephony
systems. The Company was founded in Delaware in May 1995.
Basis of Presentation -- The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries after the elimination
of all significant intercompany balances and transactions.
Liquidity -- As disclosed in the consolidated financial statements during
the years ended March 31, 1997, 1998 and 1999, the Company incurred net losses
from continuing operations of $3,526,000, $10,146,000 and $10,586,000 and had
net cash outflows from continuing operations of $2,000,000, $3,950,000 and
$7,300,000. The Company had a stockholders' deficiency of $20,091,000 at March
31, 1999. Management expects to incur further losses in fiscal year 2000. In
addition, in September 1999 the Company entered into an agreement to acquire
Acuity Corporation (see Note 15). Acuity Corporation has a history of losses and
net cash outflows from operations. In August 1999, the Company secured
$11,247,500 in equity financing (see Note 15). Management believes that this
equity financing when combined with existing cash on hand will be sufficient to
meet the Company's minimum obligations through March 31, 2000. However, the
Company will seek additional financing in the near term to execute its business
strategies and meet its longer term obligations.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Property and Equipment -- Property and equipment are recorded at cost and
depreciated using the straight-line method over the estimated useful lives of
the assets, which are generally two to five years. Assets recorded under capital
leases are amortized by the straight-line method over the shorter of their
respective useful lives or the lease term.
Revenue Recognition -- Statement of Position 97-2, Software Revenue
Recognition ("SOP 97-2"), was issued in October 1997 by the American Institute
of Certified Public Accountants ("AICPA") and was amended by Statement of
Position 98-4 ("SOP 98-4"). The Company adopted SOP 97-2 effective April 1, 1998
and SOP 98-4 effective March 31, 1998. The Company believes its current revenue
recognition policies and practices are consistent with SOP 97-2 and SOP 98-4.
Additionally, the AICPA issued SOP 98-9 in March 1998, which provides for
certain amendments to SOP 97-2, and is effective for transactions entered into
by the Company beginning April 1, 1999. The adoption of these amendments did not
have a material impact on its financial position, results of operations or cash
flows.
The Company licenses software to end users under noncancelable license
agreements and provides services such as installation, implementation, training,
and software maintenance. Software license revenue for contracts not requiring
significant customization services is recognized upon meeting each of the
following criteria: an executed agreement has been signed; products have been
F-8
<PAGE> 87
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
shipped; the license fee is fixed and determinable; collection of the resulting
receivable is probable; and vendor specific objective evidence exists to
allocate the total fee to elements of the arrangement. Vendor-specific objective
evidence is based on the price generally charged when an element is sold
separately, or if not yet sold separately, is established by authorized
management. For sales made through distributors the Company generally recognizes
revenue at the time these partners report to the Company that they have sold the
software to the end users and all revenue recognition criteria have been met.
Software license revenue from contracts requiring the Company to perform
significant customization services are recognized on the
percentage-of-completion method based on the ratio of labor hours incurred to
total estimated labor hours. Provisions for estimated losses on contracts are
made in the period in which the anticipated losses become known. Actual costs
and gross margins on such contracts could differ from management's estimates,
and such differences could be material to the financial statements. Allowances
for estimated future warranty costs are provided at the time revenue is
recognized. Service revenue includes maintenance revenue, which is deferred and
recognized ratably over the maintenance period, which in most cases is one year,
and revenue from training services which is recognized as services are
performed. Consulting revenues are recognized as services are performed.
Software Development Costs -- Costs for the development of new software
products and substantial enhancements to existing software products are expensed
as incurred until technological feasibility has been established, at which time
any additional costs would be capitalized in accordance with Statement of
Financial Accounting Standards (SFAS) No. 86, Computer Software to be Sold,
Leased or Otherwise Marketed. The costs to develop such software have not been
capitalized as the Company believes its current software development process is
essentially completed concurrent with the establishment of technological
feasibility.
Impairment of Long-Lived Assets -- In accordance with Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the Company
evaluates its long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
Intangible Assets -- Intangible assets, including purchased technology, are
related to the business acquisitions described in Note 2. Amortization is
recorded on a straight-line basis over a period of three years.
Income Taxes -- The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes. Under this
method, deferred tax liabilities and assets are recognized for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. A valuation allowance is recorded
to reduce net deferred tax assets to amounts that are more likely than not to be
realized.
Stock-Based Compensation -- The Company accounts for employee stock options
in accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" (APB Opinion No. 25).
Loss per Common Share -- Basic loss per common share excludes dilution and
is computed by dividing loss applicable to common stockholders by the weighted
average number of common shares outstanding, less the weighted average number of
common shares subject to repurchase by the
F-9
<PAGE> 88
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
Company. Diluted loss per common share reflects the potential dilution that
could occur if securities or other contracts to issue common stock (convertible
preferred stock, warrants and common stock options) were exercised or converted
into common stock. Common share equivalents are excluded from the computation in
loss periods as their effect would be antidilutive.
Unaudited Interim Financial Information -- The interim financial
information for the three months ended June 30, 1998 and 1999 is unaudited and
has been prepared on the same basis as the audited financial statements. In the
opinion of management, such unaudited financial information includes all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the interim information.
Foreign Currency Transactions -- The functional currency of the Company's
foreign subsidiaries is the U.S. dollar. Accordingly, all monetary assets and
liabilities are remeasured at the current exchange rate at the end of each
period reported. Nonmonetary assets and liabilities are remeasured at historical
rates and revenues and expenses are remeasured at average exchange rates in
effect during the period, except for those expenses related balance sheet
amounts that are remeasured at historical exchange rates. Transaction gains and
losses, which are included in other income (expense) in the accompanying
consolidated statements of operations, have not been significant.
Concentration of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of trade
receivables. The Company sells its products to companies in diverse industries
and generally does not require its customers to provide collateral to support
accounts receivable. To reduce credit risk, management performs ongoing credit
evaluations of its customers' financial condition. The Company maintains
allowances for potential credit losses.
Certain Significant Risks and Uncertainties -- The Company operates in the
software industry, and accordingly, can be affected by a variety of factors. For
example, management of the Company believes that changes in any of the following
areas could have a significant negative effect on the Company's future financial
position, results of operations and cash flows: ability to obtain additional
financing; regulatory changes; fundamental changes in the technology underlying
software products; market acceptance of the Company's products under
development; development of distribution channels; ability to implement and
expand operational customer support and financial control systems to manage
rapid growth, both domestically and internationally; the hiring and retention of
key employees; relationship with Lucent; fundamental changes in technology
underlying software products; litigation or other claims against the Company.
Recently Issued Accounting Standards -- In 1998, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, which requires an enterprise to report, by major
components and as a single total, the change in net assets during the period
from nonowner sources. The Company's comprehensive loss was equal to its net
loss for all years presented.
In 1998, the Company adopted SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information, which established annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products, services and geographic areas and major
customers. The Company operates in two reportable segments (see Note 15).
In March 1998, the Accounting Standards Executive Committee (AcSEC) issued
SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use. SOP 98-1
F-10
<PAGE> 89
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
establishes the accounting for costs of software products developed or purchased
for internal use, including when such costs should be capitalized. SOP 98-1 will
be effective for the Company's fiscal year ending March 31, 2000. The Company
believes the adoption of this statement will not have a significant impact on
its financial position, results of operations or cash flows.
In April 1998, the AcSEC issued SOP 98-5, Reporting on the Costs of
Start-up Activities. Under SOP 98-5, the cost of start-up activities should be
expensed as incurred. SOP 98-1 will be effective for the Company's fiscal year
ending March 31, 2000. The Company believes the adoption of this statement will
not have a significant impact on its financial position, results of operations
or cash flows.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. This statement
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. SFAS No. 133 will
be effective for the Company's fiscal year ending March 31, 2001. Management
believes that this statement will not have a significant impact on the Company's
financial position, results of operations or cash flows.
2. BUSINESS COMBINATIONS AND DISCONTINUED OPERATIONS
CALL CENTER ENTERPRISES, INC.
In July 1997, the Company acquired Call Center Enterprises, Inc. (CCE), a
provider of strategic call center consulting services, for $965,000 in cash in a
transaction that was accounted for as a purchase. Assets acquired and
liabilities assumed in the acquisition were as follows (in thousands):
<TABLE>
<S> <C>
Accounts receivable......................................... $ 826
Other assets................................................ 30
Goodwill.................................................... 1,262
Less liabilities assumed.................................... (1,153)
-------
$ 965
=======
</TABLE>
During fiscal 1999 the Company was required to make additional cash
payments of approximately $962,000 to former stockholders of CCE based upon
achievement of certain performance goals. These payments, which were contingent
upon the continued employment of the former CCE stockholders, were recorded as
charges to operations when the performance goal was attained.
On February 26, 1999, the Company sold the assets of CCE, which provided
implementation services for support and help-desk centers software application.
The division was sold for cash of $2,100,0000 with a gain on disposal of
$1,011,000. As a result, the operations of CCE have been classified as
discontinued operations in the statement of operations. The Company recorded as
a part of the gain on disposal of discontinued operations the fair value of
options granted in connection with the disposal of $453,000. The Company may
receive an additional payment of up to $400,000 from the sale of CCE based on
the number of former CCE employees who remain employed by the purchaser for one
year subsequent to the date of disposition. The division had revenues of
$2,528,000
F-11
<PAGE> 90
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
and $3,210,000 for the years ended March 31, 1998 and 1999, respectively. There
were no assets or liabilities remaining as of March 31, 1999.
NABNASSET CORPORATION
In November 1997, the Company acquired Nabnasset Corporation (Nabnasset), a
provider of software which integrates telephone, voice, and data for $1,496,000
in cash, preferred stock with a fair value of $1,000,000, and 518,921 shares of
common stock and options to purchase 617,528 shares of common stock with an
aggregate fair value of $1,044,000. The transaction was accounted for as a
purchase. Assets acquired and liabilities assumed in the acquisition were as
follows (in thousands):
<TABLE>
<S> <C>
Accounts receivable......................................... $ 1,036
Property and equipment...................................... 2,062
Other assets................................................ 75
In-process technologies..................................... 2,200
Purchased technology........................................ 4,000
Intangible assets........................................... 5,599
Accounts payable and accrued liabilities.................... (4,230)
Notes payable............................................... (6,070)
Other liabilities........................................... (1,132)
-------
$ 3,540
=======
</TABLE>
In this acquisition, acquired technology included both existing technology
and in-process research and development. The valuation of acquired technology
was made by applying the income forecast method, which considers the present
value of cash flows by product lines. Acquired in-process technologies were
charged to operations, as the technologies did not have alternative future uses
as of the date of the acquisition.
The operating results of Nabnasset have been included in the consolidated
statements of operations since the date of acquisition. Had the acquisition
taken place at the beginning of fiscal 1997, the unaudited pro forma results of
operations would have been as follows for the year ended March 31, (in
thousands, except per share data):
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Net revenues............................................... $17,439 $ 24,827
Net loss................................................... (7,807) (15,669)
Basic and diluted loss per common share.................... $ (5.63) $ (7.79)
</TABLE>
The pro forma results of operations give effect to certain adjustments,
including amortization of purchased intangibles and goodwill. The $2,200,000
charge for purchased in-process technology has been excluded from the pro forma
results as it is a material non-recurring charge.
The pro forma amounts are based on certain assumptions and estimates and do
not necessarily represent results which would have occurred if the acquisition
had taken place on the basis assumed above, nor are they indicative of results
of future combined operations.
F-12
<PAGE> 91
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
---------------- JUNE 30,
1998 1999 1999
<S> <C> <C> <C>
Land................................................. $ 170 $ 170 $ 170
Building............................................. 688 688 688
Computer equipment and software...................... 4,179 6,075 6,078
Furniture and equipment.............................. 548 1,279 1,368
Leasehold improvements............................... 184 306 306
------ ------ ------
5,769 8,518 8,610
Less accumulated depreciation and amortization....... 2,261 5,356 5,471
------ ------ ------
Net property and equipment........................... $3,508 $3,162 $3,139
====== ====== ======
</TABLE>
4. BANK LINE OF CREDIT
The Company maintains a committed revolving line with a bank that provides
for borrowings of up to $7,500,000, based on a percentage of eligible accounts
receivable, with interest at the bank's prime rate plus 1.5% (9.25% at March 31,
1999). At March 31, 1999, the Company had $4,868,000 in outstanding borrowings
under the line of credit agreement. Borrowings under this facility may be repaid
and reborrowed at any time prior to September 17, 1999 and are collateralized by
substantially all of the Company's assets and are subject to the Company's
compliance with certain financial and nonfinancial covenants.
As of March 31, 1999, the Company obtained a waiver from the bank for
noncompliance with certain covenants required by the line of credit agreement.
5. NOTES PAYABLE TO STOCKHOLDERS
As of March 31, 1998, the Company had notes payable to stockholders in the
amount of $4,500,000, which accrued interest at the prime rate plus 1% (9.5% at
March 31, 1998). In connection with the issuance of the notes payable, the
Company also issued warrants to stockholders to purchase 385,530 shares of
common stock at an exercise price of $0.30 per share. The principal and accrued
interest on the notes payable to stockholders were subsequently converted to
Series E convertible preferred stock during the year ended March 31, 1999 at the
same price as the Series E convertible preferred stock was sold to investors.
During fiscal 1999 the Company had additional notes payable to stockholders in
the amount of $1,000,000, which accrued interest at the prime rate plus 1%
(8.75% at March 31, 1999).
F-13
<PAGE> 92
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
6. LONG-TERM DEBT
Long-term debt consists of the following (in thousands, except monthly
installments and interest rates):
<TABLE>
<CAPTION>
MARCH 31,
---------------- JUNE 30,
1998 1999 1999
<S> <C> <C> <C>
Equipment loan payable to a bank, due in monthly
installments of $20,062 through 2000, with
interest at the prime rate plus 0.75% (8.5% at
March 31, 1999). The loan is secured by the
related equipment................................. $ 785 $ -- $ --
Amortizing term loan payable to a bank, due in
monthly installments of $28,571 through September
2001, with interest at the prime rate plus 2%
(9.75% at March 31, 1999). The loan is secured by
substantially all of the Company's assets......... -- 846 761
Mortgage notes payable to a bank, due in monthly
installments of $3,942 and $1,183 through 2020;
interest rate is subject to adjustment every three
years (8.25% at March 31, 1999). The mortgage is
secured by real property.......................... 628 618 614
Note payable from Nabnasset acquisition, due in
monthly installments of $55,555 and $27,778
through October 2000, with interest at 7.75%...... 2,581 1,583 1,333
------ ------ ------
Total............................................... 3,994 3,047 2,708
Less current portion................................ 1,357 1,347 1,347
------ ------ ------
Long-term debt...................................... $2,637 $1,700 $1,361
====== ====== ======
</TABLE>
At March 31, 1999, maturities of long-term debt are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEARS ENDING
MARCH 31,
<S> <C>
2000................................................. $1,347
2001................................................. 938
2002................................................. 178
2003................................................. 14
2004................................................. 16
Thereafter................................................ 554
------
Total..................................................... $3,047
======
</TABLE>
7. COMMITMENTS
LEASES
The Company leases office space under a noncancelable operating lease
expiring in December 2000. The Company leases certain office equipment under
noncancelable lease agreements that are accounted for as capital leases.
Equipment under capital lease arrangements included in property and
F-14
<PAGE> 93
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
equipment amounted to $365,000 and $693,000 at March 31, 1998 and 1999,
respectively. The related accumulated amortization was $99,000 and $425,000 at
March 31, 1998 and 1999, respectively.
At March 31, 1999, future minimum lease payments under noncancelable
operating leases and capital leases are as follows during the years ended March
31 (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
2000........................................................ $132 $406
2001........................................................ 55 244
2002........................................................ 32 --
2003........................................................ 29 --
2004........................................................ 17 --
---- ----
Total future minimum lease payments......................... 265 $650
====
Less amount representing interest........................... (55)
----
Present value of future minimum lease payments.............. 210
Less current portion........................................ 109
----
Long-term portion........................................... $101
====
</TABLE>
Rent expense was $431,000, $645,000 and $856,000 for the years ended March
31, 1997, 1998 and 1999, respectively.
ROYALTIES
The Company is required to pay royalties based on product revenue in excess
of specified minimum levels. The royalty rates are generally 1% to 3% of product
revenue, and certain agreements require royalties based upon the number of
users. At March 31, 1999, required minimum payments under such royalty
agreements are as follows during the years ended March 31 (in thousands):
<TABLE>
<S> <C>
2000........................................................ $429
2001........................................................ 80
----
Total....................................................... $509
====
</TABLE>
Royalty expense totaled $416,000, $328,000 and $285,000 for the years ended
March 31, 1997, 1998 and 1999, respectively. Such amounts have been included in
the cost of license revenue.
8. REDEEMABLE CONVERTIBLE PREFERRED STOCK
Each share of Series A, B, C and D redeemable preferred stock is
convertible into one share of common stock at any time upon the election of the
holders of a majority of the then outstanding convertible preferred stock,
subject to certain antidilution adjustments. At the time of conversion, the
holders of the convertible preferred stock are entitled to a cash payment of
$0.925 for each share of Series A convertible preferred stock, $1.325 for each
share of Series B convertible preferred stock, $1.765 for each share of Series C
convertible preferred stock, and $2.544 for each share of Series D convertible
preferred stock. Cash payments that would be payable to convertible preferred
stockholders upon conversion to common stock total $17,811,000 as of March 31,
1999. At the time
F-15
<PAGE> 94
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
of issuance, a portion of the proceeds from the sale was allocated to
stockholders equity based on the then fair market value of the common stock into
which the shares will be converted. The remainder was credited to redeemable
preferred stock which is presented outside of stockholders' equity. For each of
the years ended March 31, 1997 and 1998, accretion of preferred stock totaled
$167,000 and $1,519,000, respectively, to reflect the difference between the
carrying value and the redemption value of the preferred stock on the date of
issuance. The accretion of the preferred stock has been recorded as increases to
the carrying value of the redeemable preferred stock and accumulated deficit.
There was no accretion for the year ended March 31, 1999.
The holder of each share of Series A convertible preferred stock has the
right to 10 votes, and the holder of each share of Series B, C, and D
convertible preferred stock has the right to 14 votes for each share of common
stock into which Series A, B, C, and D convertible preferred stock can be
converted.
The holders of Series A, B, C, and D convertible preferred stock are
entitled to noncumulative annual dividends of $0.20, $0.286, $0.382 and $0.55
per share, respectively, as declared by the Board of Directors, prior to the
payment of dividends to the holders of common stock. No cash dividends have been
declared through March 31, 1999.
In the event of any voluntary or involuntary liquidation of the Company,
the Series A, B, C and D convertible preferred stockholders are entitled to a
liquidation preference of $1,00, $1.43, $1.91 and $2.75 per share, respectively,
plus accrued dividends, if any.
9. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
The holder of each share of Series E convertible preferred stock has the
right to 14 votes for each share of common stock into which Series E convertible
preferred stock can be converted.
The holders of Series E convertible preferred stock are entitled to
noncumulative annual dividends of $0.83 per share as declared by the Board of
Directors, prior to the payment of dividends to the holders of common stock. No
cash dividends have been declared through March 31, 1999.
In the event of any voluntary or involuntary liquidation of the Company,
the Series E convertible preferred stockholders are entitled to a liquidation
preference of $4.15 per share plus accrued dividends, if any.
STOCK OPTION PLAN
The 1995 Stock Option Plan (the "Plan"), authorized the grant of options to
purchase up to 4,185,714 shares of the Company's common stock. During the year
ended March 31, 1997, the Company's Board of Directors decreased options
available for issuance under the Plan by 410,715 shares. During the year ended
March 31, 1998, the Company's Board of Directors increased options available
under the Plan by 1,012,110 shares. Under the Plan, incentive options may be
granted at a price per share no less than the fair market value of common stock
at the date of grant. Nonqualified stock options may be granted at a price per
share no less than 85% of the fair market value on the date of grant. Options
granted to any 10% stockholder may have an exercise price per share that is not
less than 110% of the fair market value per share of common stock on the date of
grant. Options granted are immediately exercisable, and unvested shares are
subject to repurchase by the Company
F-16
<PAGE> 95
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
at the amount originally paid. Options granted generally have a maximum term of
ten years and generally vest over four or five years. At March 31, 1999, 949,998
shares of common stock were subject to repurchase by the Company.
In connection with the acquisitions by the Company described in Note 2, the
Company granted options outside of the Plan to purchase up to 1,202,528 shares
of common stock. The options are generally exercisable immediately and have
similar vesting terms as options granted under the Plan with the exception of
options to purchase 486,168 shares of common stock, which vest immediately.
Stock option activity is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------
WEIGHTED
NUMBER AVERAGE
OF SHARES EXERCISE PRICE
<S> <C> <C>
Balances, April 1, 1996............................... 2,742,352 $0.05
Granted (weighted average fair value of $0.02)........ 1,090,250 0.07
Exercised............................................. (2,913,646) 0.05
Canceled.............................................. (579,423) 0.05
----------
Balances, March 31, 1997 (55,479 vested at a weighted
average price of $0.05 per share)................... 339,533 0.07
Granted (weighted average fair value of $0.90)........ 2,699,367 0.57
Exercised............................................. (944,949) 0.20
Canceled.............................................. (270,251) 0.32
----------
Balances, March 31, 1998 (616,824 vested at a weighted
average price of $0.42 per share)................... 1,823,700 0.70
Granted (weighted average fair value of $1.35)........ 1,205,612 1.57
Exercised............................................. (303,090) 0.44
Canceled.............................................. (931,092) 0.91
----------
Balances, March 31, 1999.............................. 1,795,130 1.22
Granted (weighted average fair value of $3.19)........ 386,500 4.61
Exercised............................................. (148,944) 1.23
Canceled.............................................. (218,185) 0.38
----------
Balances, June 30, 1999............................... 1,814,501 $2.04
==========
</TABLE>
At March 31, 1999, 940,227 shares were available under the Plan for future
grant.
F-17
<PAGE> 96
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
Additional information regarding options outstanding as of March 31, 1999
is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
--------------------------- ---------------------
WEIGHTED
AVERAGE WEIGHTED
REMAINING VESTED AT AVERAGE
RANGE OF NUMBER CONTRACTUAL MARCH 31, EXERCISE
EXERCISE PRICES OUTSTANDING LIFE (YEARS) 1999 PRICE
<S> <C> <C> <C> <C>
$0.03 - $0.10........................... 210,815 7.70 190,262 $0.05
$0.15 - $0.53........................... 174,945 7.00 135,162 0.36
$1.25 - $1.75........................... 1,409,370 9.33 168,340 1.39
--------- ---- -------- -----
1,795,130 8.91 493,764 $0.59
========= ==== ======== =====
</TABLE>
ADDITIONAL STOCK PLAN INFORMATION
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, (SFAS No. 123) requires the disclosure of pro forma
net income and earnings per share had the Company adopted the fair value method
as of the beginning of fiscal 1995. Under SFAS No. 123, the fair value of the
stock-based awards to employees is calculated through the use of option pricing
models, even though such models were developed to estimate the fair value of
freely tradable, fully transferable options without vesting restrictions, which
significantly differ from the Company's stock option awards. These models also
require subjective assumptions, including future stock price volatility and
expected time to exercise, which greatly affect the calculated values. The
Company's calculations were made using the minimum value method with the
following weighted average assumptions for 1997, 1998 and 1999; expected life,
5.2 years for 1997 grants, 6.0 years for 1998 grants, and 6.0 years for 1999
grants; risk free interest rates of 6.4% in 1997 and 6.0% in both 1998 and 1999;
and no dividends during the expected term. The Company's calculations are based
on a multiple option valuation approach and forfeitures are recognized as they
occur. If the computed fair values of the stock-based awards had been amortized
over the vesting period of the awards, pro forma net loss applicable to common
stockholders would have been approximately $3,713,000 ($4.28 per basic and
diluted share), $13,185,000 ($7.78 per basic and diluted share), and $11,887,000
($4.19 per basic and diluted share) for the years ended March 31, 1997, 1998 and
1999, respectively. However, the impact of outstanding nonvested stock options
granted prior to 1995 has been excluded from the pro forma calculation;
accordingly, the pro forma adjustments are not indicative of future period pro
forma adjustments, when the calculation will apply to all applicable stock
options.
STOCK-BASED COMPENSATION
Options Granted to Employees -- In connection with options granted to
employees to purchase common stock, the Company recorded deferred stock
compensation of $99,000 and $1,055,000 in fiscal years 1998 and 1999,
respectively. The Company had no deferred stock compensation in fiscal year
1997. Such amounts represent the difference between the exercise price and the
deemed fair value of the Company's common stock at the date of grant. The
deferred charges are being amortized to expense through fiscal year 2003.
Stock-based compensation expense of $20,000 was recognized as part of the
Company's discontinued operations during fiscal year 1998. There was no
stock-based compensation expense recognized in continuing operations during
fiscal year 1998. Stock-based
F-18
<PAGE> 97
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
compensation expense of $171,000 and $79,000 was recorded as part of the
Company's continuing and discontinued operations, respectively, during fiscal
year 1999.
Options and Warrants Granted to Nonemployees -- During fiscal years 1998
and 1999, in connection with notes payable to stockholders, the Company issued
warrants to purchase 253,012 and 132,532 shares of common stock, respectively,
with an exercise price of $0.30 per share. The balance outstanding on the notes
payable to stockholders was converted to preferred stock in May 1998. The fair
value of warrants amounting to $258,000 and $165,000 was charged to interest
expense during fiscal year 1998 and 1999, respectively.
WARRANTS
The Company had the following outstanding warrants to purchase common stock
and preferred stock at March 31, 1999:
<TABLE>
<CAPTION>
NUMBER EXERCISE EXPIRATION
OF PRICE PER DATE OF
SHARES STOCK SHARE ISSUED WARRANTS
<C> <S> <C> <C> <C>
5,000 Common stock $0.05 April 1996 April 2006
192,262 Series B preferred $1.43 August 1996 August 2000 or upon
stock an initial public
offering of common
stock
55,340 Series C preferred $1.91 September 1996 Earlier of September
stock 2006 or upon the
initial public
offering of common
stock
8,466 Common stock $3.94 February 1997 January 2002
76,047 Common stock $4.54 November 1997 November 2001
253,012 Common stock $0.30 November 1997 - November 2001
March 1998
132,518 Common stock $0.30 April 1998 - November 2001
May 1998
</TABLE>
COMMON STOCK RESERVED
At March 31, 1999, the Company has received shares of common stock for
issuance as follows:
<TABLE>
<S> <C>
Conversion of preferred stock............................... 16,575,515
Issuance available under 1995 Stock Option Plan............. 940,227
Exercise of options......................................... 1,795,130
Exercise of warrants........................................ 722,645
----------
Total............................................. 20,033,517
==========
</TABLE>
F-19
<PAGE> 98
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
10. LOSS PER COMMON SHARE
The following is a reconciliation of the numerators and denominators used
in computing basic and diluted net loss per share from continuing operations (in
thousands).
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
MARCH 31, JUNE 30,
-------------------------------- ----------------
1997 1998 1998 1998 1999
<S> <C> <C> <C> <C> <C>
Net loss from continuing operations....... $(3,526) $(10,146) $(10,586) $(2,786) $ (690)
Redeemable preferred stock accretion...... (167) (1,519) -- -- --
------- -------- -------- ------- ------
Loss from continuing operations applicable
to common shareholders (numerator),
basic and diluted....................... $(3,693) $(11,665) $(10,586) $(2,786) $ (690)
======= ======== ======== ======= ======
Shares (denominator):
Weighted average common shares
outstanding.......................... 2,095 3,530 4,194 4,110 4,268
Weighted average common shares
outstanding subject to repurchase.... (1,227) (1,835) (1,359) (1,626) (762)
------- -------- -------- ------- ------
Shares used in computation, basic and
diluted................................. 868 1,695 2,835 2,484 3,506
======= ======== ======== ======= ======
Loss per share from continuing operations
applicable to common stockholders,
basic and diluted....................... $ (4.25) $ (6.88) $ (3.73) $ (1.12) $(0.20)
======= ======== ======== ======= ======
</TABLE>
For the above mentioned periods, the Company had securities outstanding
which could potentially dilute basic earnings per share in the future, but were
excluded in the computation of diluted net loss per share in the periods
presented, as their effect would have been antidilutive. Such outstanding
securities consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
MARCH 31, JUNE 30,
------------------------------------ -----------------------
1997 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C>
Convertible preferred stock..... 12,515,918 13,970,914 16,575,515 16,575,515 16,575,515
Shares of common stock subject
to repurchase................. 1,985,648 1,873,390 949,998 1,659,465 893,383
Outstanding options............. 339,533 1,823,700 1,795,130 1,863,975 1,814,501
Warrants........................ 252,602 590,127 722,645 722,645 722,645
---------- ---------- ---------- ---------- ----------
Total........................... 15,093,701 18,258,131 20,043,288 20,821,600 20,006,044
========== ========== ========== ========== ==========
</TABLE>
F-20
<PAGE> 99
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
11. INCOME TAXES
The Company's deferred income tax assets are comprised of the following at
March 31:
<TABLE>
<CAPTION>
1998 1999
(IN THOUSANDS)
<S> <C> <C>
Net deferred tax assets:
Net operating loss carryforwards.......................... $ 4,836 $ 8,394
Accruals deductible in different periods.................. 2,363 1,094
General business credits.................................. 327 327
Depreciation and amortization............................. 287 285
------- -------
Total deferred tax assets................................... 7,813 10,100
Valuation allowance......................................... (6,320) (9,142)
------- -------
Net deferred tax assets..................................... 1,493 58
Deferred tax liability -- purchased intangibles............. (1,493) (58)
------- -------
Net deferred tax assets..................................... $ -- $ --
======= =======
</TABLE>
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, as well as net operating
loss and tax credit carryforwards. Due to the uncertainty surrounding the
realization of the benefits of its favorable tax attributes in future tax
returns, as of March 31, 1998 and 1999, the Company has fully reserved its net
deferred tax assets of approximately $6,320,000 and $9,142,000, respectively.
For all periods presented the Company's effective rate differs from the
expected benefit at the federal statutory tax rate due primarily to state taxes
of approximately 5% offset by a valuation allowance against deferred tax assets.
The Company's loss from continuing operations for 1999 was generated by
$9,081,000 and $1,505,000 from domestic and international operations,
respectively. The Company did not have international operations in 1997 and
1998.
At March 31, 1999, the Company has net operating loss (NOL) carryforwards
of approximately $24,215,000 and $5,386,000 for federal and state income tax
purposes, respectively. The federal NOL carryforwards expire beginning in 2011,
while the state NOL carryforwards expire beginning in 2001.
At March 31, 1999, the Company also has research and development credit
carryforwards of approximately $242,000 and $128,000 available to offset future
federal and state income taxes, respectively. The federal credit carryforward
expires beginning in 2011, while the state credit carryforward has no
expiration.
The extent to which the loss and credit carryforwards can be used to offset
future taxable income and tax liabilities, respectively, may be limited,
depending on the extent of ownership changes within any three-year period.
F-21
<PAGE> 100
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
12. SAVINGS PLAN
The Company maintains a savings plan under Section 401(k) of the Internal
Revenue Code. Under the plan, employees may defer a portion of their pretax
salaries. The Company makes no matching contributions.
13. SEGMENT INFORMATION, OPERATIONS BY GEOGRAPHIC AREA AND SIGNIFICANT CUSTOMERS
As discussed in Note 1, the Company follows the requirements of SFAS No.
131, Disclosures About Segments of an Enterprise and Related Information. As
defined in SFAS No. 131, the Company operates in two reportable segments. The
Company's operations were divided into two segments: Quintus and CCE. As
discussed in Note 3, the Company discontinued its operations of CCE during
fiscal 1999. At the end of 1999, the Company operates in one reportable segment.
GEOGRAPHIC INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, THREE MONTHS ENDED JUNE 30,
----------------------------------------------------------------- --------------------------------------
1997 1998 1999 1998 1999
----------- ------------------------ ------------------------ ----------- ------------------------
LONG-LIVED LONG-LIVED LONG-LIVED
REVENUES(1) REVENUES(1) ASSETS REVENUES(1) ASSETS REVENUES(1) REVENUES(1) ASSETS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
United States........ $11,536 $18,830 $ 3,727 $24,749 $3,391 $6,557 $ 9,044 $3,365
Rest of the
world(2)........... 2,078 3,060 -- 5,558 93 995 1,249 98
------- ------- ------- ------- ------ ------ ------- ------
$13,614 $21,890 $ 3,727 $30,307 $3,484 $7,552 $10,293 $3,463
======= ======= ======= ======= ====== ====== ======= ======
</TABLE>
- -------------------------
(1) Revenues are attributed to countries based on location of customer invoiced.
(2) No individual foreign country accounted for greater than 10% of total
revenues or long-lived assets in any of the periods presented.
SIGNIFICANT CUSTOMERS
One unrelated customer accounted for 23.8% and 19.3% of total revenues in
1997 and 1999, respectively. No one customer accounted for greater than 10% of
total revenues in fiscal 1998.
Four customers accounted for 30.9%, 21.8%, 10.9% and 10.5% of accounts
receivable at March 31, 1997. One customer accounted for 21.1% and 28.6% of
accounts receivable at March 31, 1998 and 1999, respectively.
14. LITIGATION
The Company is a defendant and may be a potential defendant in lawsuits and
claims arising in the ordinary course of business. While the outcomes of such
claims, lawsuits, or other proceedings cannot be predicted with certainty,
management expects that such liability, to the extent not provided by insurance
or otherwise, will not have a material adverse effect on the financial condition
of the Company.
F-22
<PAGE> 101
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
15. SUBSEQUENT EVENTS
On August 26, 1999, the Company issued a total of 1,363,334 shares of
Series F convertible preferred stock at $8.25 per share for cash consideration
of $11,247,500. The Series F convertible preferred stock is convertible into one
share of common stock and has preferences, liquidation and voting rights similar
to those of Series E preferred stock. The Series F preferred stockholders are
entitled to no cash payments upon conversion to common stock.
On September 10, 1999, Quintus entered into an Agreement and Plan of
Reorganization to acquire all of the outstanding shares and assume the
outstanding options and warrants of Acuity Corp. (Acuity), a company
specializing in providing Web based customer interaction software. Quintus will
issue approximately 1,570,000 shares of common stock valued at approximately
$13,000,000, approximately 2,960,000 shares of Series G preferred stock valued
at approximately $24,400,000, and assume approximately 1,230,000 options and
warrants to purchase common and preferred stock valued at approximately
$7,800,000. The aggregate purchase price, including approximately $300,000 of
transaction costs not paid in stock, will be approximately $45,500,000. The
agreement is subject to shareholder approval and is expected to close in October
1999. The acquisition will be accounted for using the purchase method of
accounting.
On September 9, 1999, the Board of Directors approved, subject to
stockholder approval, the following:
ADOPTION OF THE 1999 STOCK INCENTIVE PLAN
1,000,000 shares of common stock were reserved for issuance under the 1999
Stock Incentive Plan. Any shares not yet issued under the 1995 Stock Option Plan
on the date of this offering will also be available under the 1999 Stock
Incentive Plan. On January 1 of each year, starting with the year 2000, the
number of shares in the reserve will automatically increase by 5% of the total
number of shares of common stock that are outstanding at that time or, if less,
by 2,000,000 shares. In general, if options or shares awarded under the 1999
Stock Incentive Plan or the 1995 Stock Incentive Plan are forfeited, then those
options or shares will again become available for awards under the 1999 Stock
Incentive Plan.
Outstanding options under the 1995 Stock Option Plan will be incorporated
into the 1999 Equity Incentive Plan at the time of this offering and no further
option grants will be made under the 1995 Stock Option Plan. The incorporated
options will continue to be governed by their existing terms, unless the Board
elects one or more features of the 1999 Stock Incentive Plan to those options or
to other outstanding shares. The Board has elected to extend the change in
control acceleration feature of the 1999 Stock Inventive Plan to all outstanding
options and unvested shares. Previously, options granted under the 1995 Stock
Option Plan provided that vesting of the shares would accelerate upon an
acquisition only if not assumed by the acquiring entity.
ADOPTION OF THE EMPLOYEE STOCK PURCHASE PLAN
Under the purchase plan, eligible employees are allowed to have salary
withholdings of up to 15% of their cash compensation to purchase shares of
common stock at a price equal to 85% of the lower of the market value of the
stock on the first date immediately before the first day of the applicable
offering period or the fair market value on the purchase date. The initial
offering period
F-23
<PAGE> 102
QUINTUS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 1997, 1998 AND 1999 AND THREE
MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
commences upon the effective date for the initial public offering of the
Company's common stock. For the first offering period, shares of common stock
may be purchased at a price equal to 85% of the lower of the price per share in
the initial public offering or the market value on the purchase date. The
Company has initially reserved 1,000,000 shares of common stock under this plan,
plus an annual increase to be added on May 1st beginning with the year 2000
equal to the lesser of (i) 1,000,000 shares, or (ii) 2% of the shares of common
stock outstanding on May 1st.
ADOPTION OF THE DIRECTORS OPTION PLAN
500,000 shares of common stock have been reserved under the Director Option
Plan. The plan provides for an initial automatic grant of an option to purchase
30,000 shares of common stock to a nonemployee director who first becomes a
director after the Company's initial public offering. The grant will occur when
the director takes office. The initial option will vest monthly over the
two-year period following the date of grant. In addition, at the time of the
annual stockholders' meeting beginning in 2000, each nonemployee director who
continues to be a director after that meeting will automatically be granted an
annual option to purchase 10,000 shares of common stock. However, a nonemployee
director who is receiving the 30,000 option initial grant will not receive the
annual option in the same calendar year. The annual options are fully vested on
the first anniversary of the date of grant.
F-24
<PAGE> 103
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Acuity Corp.
In our opinion, the accompanying balance sheets and the related statements
of operations, changes in stockholders' equity and cash flows present fairly, in
all material respects, the financial position of Acuity Corp. (the "Company"),
at December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has sustained recurring losses from operations
in the years then ended December 31, 1997 and 1998 which raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also discussed in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Austin, Texas
February 8, 1999, except as to Note 11,
for which the date is March 31, 1999
F-25
<PAGE> 104
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1997 1998 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 2,135,448 $ 2,173,101 $ 2,232,231
Accounts receivable, net of allowance for doubtful
accounts of $73,215, $60,340 and $0, respectively..... 1,703,075 944,024 292,190
Note receivable......................................... -- -- 350,000
Prepaid expenses and other current assets............... 182,100 176,701 259,204
------------ ------------ ------------
Total current assets.................................. 4,020,623 3,293,826 3,133,625
Computer equipment, furniture and fixtures, net........... 1,171,168 1,233,464 1,103,048
Note receivable -- related party.......................... 75,000 -- --
Deposits and other assets................................. 64,478 56,013 49,300
------------ ------------ ------------
Total assets.......................................... $ 5,331,269 $ 4,583,303 $ 4,285,973
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Borrowings under line of credit......................... $ -- $ 721,240 $ 721,240
Current maturities of capital lease obligations......... -- 96,570 90,671
Current maturities of long-term obligations............. 533,534 518,182 450,000
Accounts payable........................................ 495,463 362,225 445,043
Accrued expenses........................................ 771,664 959,748 404,889
Accrued expenses -- related party....................... -- -- 226,968
Deferred revenue and customer advances.................. 1,345,809 762,776 576,874
------------ ------------ ------------
Total current liabilities............................. 3,146,470 3,420,741 2,915,685
Capital lease obligations, net of current maturities...... -- 239,863 203,564
Long-term obligations, net of current maturities.......... 1,185,785 587,500 362,500
------------ ------------ ------------
Total liabilities..................................... 4,332,255 4,248,104 3,481,749
------------ ------------ ------------
Commitments (Note 7)
Stockholders' Equity:
Convertible preferred stock, $.001 par value:
8,680,644 shares authorized at December 31, 1997 and
1998 and 9,823,502 shares at June 30, 1999;
6,220,994 and 8,252,074 shares issued at December
31, 1997 and 1998 and 9,037,789 at June 30, 1999,
6,173,994 and 8,252,074 outstanding in 1997 and
1998 and 9,037,789 at June 30, 1999; liquidation
value 19,857,196 at December 31, 1998 and
22,607,199 at June 30, 1999........................ 6,221 8,252 9,038
Common stock, $.001 par value, 15,000,000 shares
authorized at December 31, 1997 and 1998, and
20,065,969 shares at June 30, 1999; 4,852,383,
5,253,430 and 5,305,127 shares issued and
4,852,383, 4,853,430 and 4,905,127 outstanding at
December 31, 1997 and 1998 and June 30, 1999,
respectively....................................... 4,852 5,253 5,305
Additional paid-in capital............................ 12,847,565 20,069,214 22,780,735
Treasury stock -- at cost
Series B-1, 25,000, 0 and 0 shares, Series B-2,
22,000, 0 and 0 shares, and common stock, 0,
400,000 and 400,000 shares, respectively......... (76,000) (280,000) (280,000)
Accumulated deficit................................... (11,783,624) (19,467,520) (21,710,854)
------------ ------------ ------------
Total stockholders' equity....................... 999,014 335,199 804,224
------------ ------------ ------------
Total liabilities and stockholders' equity....... $ 5,331,269 $ 4,583,303 $ 4,285,973
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 105
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- -------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue:
License........................... $ 3,085,200 $ 4,212,501 $ 1,825,845 $ 947,647
Service........................... 819,488 1,743,199 816,319 129,310
Consulting........................ 906,487 763,391 447,222 221,817
----------- ----------- ----------- -----------
Total revenue................ 4,811,175 6,719,091 3,089,386 1,298,774
Cost of revenue:
License........................... 252,536 91,547 26,085 31,043
Service........................... 564,375 427,858 214,132 190,103
Consulting........................ 595,871 861,382 499,745 346,562
----------- ----------- ----------- -----------
Total cost of revenue........ 1,412,782 1,380,787 739,962 567,708
Gross profit........................ 3,398,393 5,338,304 2,349,424 731,066
Operating expenses:
Research and development.......... 1,542,199 4,389,983 2,054,385 1,971,432
Sales and marketing............... 6,373,790 6,311,540 2,715,236 2,971,363
General and administrative........ 2,020,157 2,377,393 1,097,521 745,212
----------- ----------- ----------- -----------
Total operating expenses..... 9,936,146 13,078,916 5,867,142 5,688,007
----------- ----------- ----------- -----------
Operating loss...................... (6,537,753) (7,740,612) (3,517,718) (4,956,941)
Other income (expense):
Gain on sale of assets............ -- -- -- 2,737,144
Interest expense.................. (91,452) (124,137) (44,952) (69,748)
Interest income................... 73,296 164,356 67,283 45,992
Other income (expense)............ (10,581) 16,497 13,388 219
----------- ----------- ----------- -----------
Net loss..................... $(6,566,490) $(7,683,896) $(3,481,999) $(2,243,334)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 106
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998
AND THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
------------------ ------------------ PAID-IN TREASURY ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCK DEFICIT EQUITY
--------- ------ --------- ------ ----------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997..... 3,843,994 $3,844 4,145,000 $4,145 $ 5,920,897 $ -- $ (5,217,134) $ 711,752
Issuance of Series B-2
convertible preferred stock,
net of issuance costs........ 127,000 127 -- -- 252,123 -- -- 252,250
Issuance of Series C
convertible preferred stock,
net of issuance costs, and
related issuance of common
stock to Series B holders
under anti-dilution
provisions................... 2,250,000 2,250 400,000 400 6,613,915 -- -- 6,616,565
Exercise of stock options...... -- -- 307,383 307 60,630 -- -- 60,937
Purchase of treasury stock..... -- -- -- -- -- (76,000) -- (76,000)
Net loss....................... -- -- -- -- -- -- (6,566,490) (6,566,490)
--------- ------ --------- ------ ----------- --------- ------------ -----------
Balance at December 31, 1997... 6,220,994 6,221 4,852,383 4,852 12,847,565 (76,000) (11,783,624) 999,014
Issuance of Series C
convertible preferred stock
to vendors................... 6,650 7 -- -- 13,468 -- -- 13,475
Issuance of Series D
convertible preferred stock,
net of issuance costs........ 2,071,430 2,071 -- -- 7,203,319 -- -- 7,205,390
Exercise of stock options,
net.......................... -- -- 401,047 401 80,815 -- -- 81,216
Purchase of treasury stock..... -- -- -- -- -- (280,000) -- (280,000)
Retirement of treasury stock... (47,000) (47) -- -- (75,953) 76,000 -- --
Net loss....................... -- -- -- -- -- -- (7,683,896) (7,683,896)
--------- ------ --------- ------ ----------- --------- ------------ -----------
Balance at December 31, 1998... 8,252,074 8,252 5,253,430 5,253 20,069,214 (280,000) (19,467,520) 335,199
Issuance of Series E
convertible preferred stock,
net of issuance costs
(unaudited).................. 785,715 786 -- -- 2,696,478 -- -- 2,697,264
Exercise of stock options
(unaudited).................. -- -- 51,697 52 15,043 -- -- 15,095
Net loss (unaudited)........... -- -- -- -- -- -- (2,243,334) (2,243,334)
--------- ------ --------- ------ ----------- --------- ------------ -----------
Balance at June 30, 1999
(unaudited).................. 9,037,789 $9,038 5,305,127 $5,305 $22,780,735 $(280,000) $(21,710,854) $ 804,224
========= ====== ========= ====== =========== ========= ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 107
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- -------------------------
1997 1998 1998 1999
----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................. $(6,566,490) $(7,683,896) $(3,481,999) $(2,243,334)
Adjustments to reconcile net loss to net
cash used in operating activities:
Forgiveness of related party
receivable........................... -- 75,000 75,000 --
Gain on sale of assets................. -- -- -- (2,737,144)
Depreciation........................... 540,723 745,917 386,539 354,365
Provision for doubtful accounts........ 226,567 155,574 66,756 79,666
Stock compensation expense............. -- 13,475 -- --
Changes in assets and liabilities:
Accounts receivable.................. (1,353,251) 603,477 569,713 572,168
Prepaid expenses and other current
assets............................ (157,991) 5,399 (76,892) (82,503)
Accounts payable..................... 189,594 (133,238) 76,087 82,818
Accrued expenses..................... 387,596 188,084 (71,773) (607,556)
Deferred revenue and customer
advances.......................... 843,009 (583,033) (334,121) (78,134)
----------- ----------- ----------- -----------
Net cash used in operating activities....... (5,890,243) (6,613,241) (2,790,690) (4,659,654)
----------- ----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of computer equipment, furniture
and fixtures........................... (1,218,550) (808,213) (622,337) (223,949)
Cash received from the sale of assets, net
of transaction costs................... -- -- -- 2,559,041
Change in deposits and other assets....... (34,655) 8,465 (5,870) 6,713
----------- ----------- ----------- -----------
Net cash provided by (used in) investing
activities................................ (1,253,205) (799,748) (628,207) 2,341,805
----------- ----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of short-term
debt................................... 1,000,000 721,240 721,240 --
Repayment of short-term debt.............. (1,000,000) -- -- --
Proceeds from issuance of long-term
note................................... 450,000 -- -- --
Amounts paid on installment obligation.... (275,000) (300,000) (150,000) (150,000)
Repayment of other long-term debt......... (105,682) (313,637) (157,153) (143,182)
Proceeds from sales -- leaseback.......... -- 386,280 386,280 --
Repayment of capital lease obligation..... -- (49,847) (12,128) (42,198)
Proceeds from issuance of preferred
stock.................................. 7,002,250 7,250,005 7,250,005 2,750,003
Financing costs related to preferred stock
issuance............................... (133,434) (44,615) (44,615) (52,739)
Proceeds from issuance of common stock.... 60,937 81,216 48,564 15,095
Purchase of treasury stock................ (76,000) (280,000) (280,000) --
----------- ----------- ----------- -----------
Net cash provided by financing activities... 6,923,071 7,450,642 7,762,193 2,376,979
----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................... (220,377) 37,653 4,343,296 59,130
Cash and cash equivalents at beginning of
period.................................... 2,355,825 2,135,448 2,135,448 2,173,101
----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period.................................... $ 2,135,448 $ 2,173,101 $ 6,478,744 $ 2,232,231
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE> 108
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS
1. BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Acuity Corp., a Delaware corporation (the "Company") was incorporated on
August 2, 1995 as ichat, Inc. The Company is a provider of Web-based customer
interaction software. In June 1998 the Company changed its name to Acuity Corp.
to reflect a strategic change in its core product offerings from internet chat
software to its WebCenter customer interaction software. Shortly thereafter, the
Company commenced shipment of its WebCenter products that enable users to
interact with their customers over the Internet. During the year ended December
31, 1998, WebCenter revenue was approximately $1,215,000 and ichat revenue was
$5,504,000.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred operating
losses since inception related primarily to the development and marketing of its
products and has an accumulated deficit of $19,467,520 as of December 31, 1998.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. In February 1999, the Company completed a sale of preferred
stock and in March 1999 completed the sale of an exclusive license to its chat
technology (see note 11). The Company's management has developed a fiscal 1999
operating plan in which the Company has placed significant reliance on obtaining
additional outside financing. Management is actively pursuing additional debt
and equity financing from institutional investors as necessary and intends to
increase revenues and eventually achieve profitable operations. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying interim statements of operations and cash flows for the
six months ended June 30, 1998 and 1999 are unaudited but include all
adjustments, consisting only of normal recurring adjustments, which the Company
considers necessary for a fair presentation of the results of operations and
cash flows for the six months ended June 30, 1998 and 1999. The results of
operations and cash flows for the six months ended June 30, 1999 are not
necessarily indicative of the results to be expected for the full year. The data
disclosed in these notes to the financial statements for these periods are
unaudited.
CERTAIN RISKS AND UNCERTAINTIES
The Company's operating results are significantly dependent on the
Company's ability to market and develop its products. The life cycles of the
Company's products are difficult to estimate due in part to the effect of future
product enhancements and competition. The inability of the Company to
successfully develop and market its products as a result of competition or other
factors would have a material adverse effect on the Company's business,
financial condition and results of operations.
F-30
<PAGE> 109
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Concentrations of credit risk with respect to trade receivables are
generally limited due to the large number of customers, short payment terms, and
their dispersion across geographic areas. During 1998, sales to one customer was
$1,064,000, or 16%, with a related receivable balance of approximately $18,000.
Two other customers had receivable balances totaling approximately $590,000 at
December 31, 1998.
REVENUE RECOGNITION
The Company's revenues are derived from product licensing fees, fees for
maintenance and support, training and consulting. Product licensing fees are
recognized upon delivery, net of allowances for estimated future returns,
provided that no significant vendor obligations remain and collection of the
resulting receivable is deemed probable. Revenues from ongoing maintenance and
support are recognized ratably over the term of the maintenance period,
typically 12 months. Payments for maintenance and support are generally made in
advance and are nonrefundable. Revenues generated from training and consulting
are recognized upon completion and customer acceptance.
ADVERTISING EXPENSES
Advertising expenses consist primarily of costs incurred promoting the
Company's products, including public relations, trade shows, lead generation and
promotional materials. The Company expenses all advertising costs as incurred.
The Company's advertising expenses were approximately $1,035,189 for the year
ended December 31, 1997 and $687,080 for the year ended December 31, 1998.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and on deposit at local
banks. The Company considers highly liquid investments with original maturities
of three months or less to be cash equivalents. Cash equivalents consist of
deposits in money market funds at December 31, 1997 and 1998 and at June 30,
1999.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of cash and cash equivalents and
accounts receivable. Management does not believe there is undue risk of loss
because in management's opinion, the financial institutions in which cash is
deposited are high credit quality institutions and the securities are
obligations of the United States government. However, cash and cash equivalents
exceeded FDIC insurance coverage limits. The Company has not experienced any
losses on its deposits. Although the Company does not require collateral on
accounts receivable, it does maintain reserves for credit losses.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of certain of the Company's financial instruments,
including cash and cash equivalents, accounts and notes receivable, accounts
payable and accrued liabilities, approximated fair value as of December 31, 1997
and 1998, because of the relatively short maturity of these instruments.
F-31
<PAGE> 110
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The carrying amounts of the Company's borrowings under variable rate
long-term debt instruments approximate their fair value. The fair value of the
Company's other long-term obligation is estimated using discounted cash flow
analyses, based upon the Company's approximate incremental borrowing rates for
similar types of borrowing arrangements.
COMPUTER EQUIPMENT, FURNITURE AND FIXTURES
Computer equipment, furniture and fixtures, software and leasehold
improvements are recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the respective assets,
generally three to seven years. Expenditures that increase the value or extend
the life of the asset are capitalized, while the cost of maintenance and repairs
are expensed as incurred. Upon disposal, assets and related accumulated
depreciation are removed from the accounts and the related gain or loss is
included in operations.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations as incurred. The
Company capitalizes certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Company between completion of the working
model and the point at which the product is ready for general release have been
insignificant.
INCOME TAXES
The Company accounts for income taxes in accordance with the liability
method. This method requires that deferred taxes be computed annually utilizing
the liability method and adjusted when new tax laws or rates are enacted.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized. The Company recorded no income
tax expense for both the years ended December 31, 1997 or 1998 and has provided
a valuation allowance to fully offset the net deferred tax asset because the
realization of tax benefits associated with net operating loss carryforwards is
not assured.
COMPREHENSIVE INCOME
The Company has had no items of comprehensive income other than its net
loss for each of the two years in the period ended December 31, 1998.
RECLASSIFICATION
Certain amounts previously reported in 1997 have been reclassified to
conform to the 1998 presentation.
F-32
<PAGE> 111
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. COMPUTER EQUIPMENT, FURNITURE AND FIXTURES:
Computer equipment, furniture and fixtures is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1997 1998 1999
---------- ----------- -----------
<S> <C> <C> <C>
Computer equipment.............................. $1,129,599 $ 1,624,785 $ 1,669,207
Furniture and fixtures.......................... 168,957 219,819 249,865
Office equipment................................ -- 130,030 157,684
Software........................................ 105,790 233,343 353,393
Leasehold improvements.......................... 376,920 376,920 376,920
---------- ----------- -----------
1,781,266 2,584,897 2,807,069
Less: accumulated depreciation.................. (610,098) (1,351,433) (1,704,021)
---------- ----------- -----------
$1,171,168 $ 1,233,464 $ 1,103,048
========== =========== ===========
</TABLE>
During 1998, the Company entered into capital leases for computer equipment
with a capitalized cost of $386,280. Amortization expense and accumulated
amortization are included in depreciation expense and accumulated depreciation,
respectively. Accumulated amortization on these capitalized leases totaled
$96,570 at December 31, 1998. Future minimum lease payments as of December 31,
1998 are as follows:
<TABLE>
<S> <C>
1999........................................................ $147,867
2000........................................................ 147,867
2001........................................................ 95,643
2002........................................................ 23,177
--------
414,554
Less amount representing interest........................... (78,121)
--------
Present value of minimum lease payments................ 336,433
Less current portion........................................ (96,570)
--------
$239,863
========
</TABLE>
3. NOTE RECEIVABLE -- RELATED PARTY:
In August 1996, the Company issued a note receivable in the amount of
$75,000, due from a shareholder and officer of the Company ("Maker"), which bore
interest at 5.76% per annum and was collateralized by a stock pledge agreement
covering certain shares of common stock held by the Maker. During 1998, the note
was forgiven by the Company as part of the consideration given for a noncompete
agreement between the officer and the Company. The Company has received interest
payments during the year ended December 31, 1997 and 1998 of $4,320 and $2,160,
respectively.
4. LINE OF CREDIT:
The Company has a revolving line of credit arrangement with a commercial
bank that enables the Company to borrow against eligible trade accounts
receivable up to a total of $2,500,000. As of December 31, 1998, the Company had
$721,240 outstanding under the revolving line of credit. The credit arrangement
contains certain financial covenants and restrictions as to various matters,
F-33
<PAGE> 112
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
including the Company's net worth. The credit facility bears interest at prime
plus .5% (8.75% at December 31, 1998) and expires on March 25, 1999.
5. LONG-TERM OBLIGATIONS:
Long-term obligations are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Term loans:
Variable rate term loan with a commercial bank,
bearing interest at the bank's prime rate plus 1%
per annum (8.75% at December 31, 1998). The loan
requires monthly principal and interest payments
through May 1999................................. $ 231,819 $ 68,182 $ --
Variable rate term loan with a commercial bank,
bearing interest at prime plus 1% per annum
(8.75% at December 31, 1998). The loan requires
monthly principal and interest payments through
August 2001...................................... 412,500 262,500 187,500
Installment obligation:
Non-interest bearing installment obligation to a
minority shareholder of the Company. The note
is payable in quarterly installments and is
scheduled to be paid in full in May 2001....... 1,075,000 775,000 625,000
---------- ---------- ----------
1,719,319 1,105,682 812,500
Less: current maturities............................ (533,534) (518,182) (450,000)
---------- ---------- ----------
$1,185,785 $ 587,500 362,500
========== ========== ==========
</TABLE>
The term loans and line of credit are collateralized by substantially all
the assets of the Company and contain certain financial covenants and
restrictions as to various matters, including the Company's net worth. At
December 31, 1998 the Company was not in compliance with its minimum quick ratio
and maximum loss covenants, which were waived by the bank in a letter dated
February 18, 1999. Should the Company continue to be in non-compliance with its
debt covenants, the bank has various remedies including the acceleration of the
due dates of principal payments that are currently classified as non-current
liabilities in the Company's financial statements.
6. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest payments of $91,452, $124,137, $44,953 and $67,748 were made for
the years ended December 31, 1997 and 1998 and during the six months ended June
30, 1997 and 1998, respectively. No tax payments were made during the same
periods.
F-34
<PAGE> 113
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following is a detail of non-cash financing activities:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------- -------------------
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Issuance of 400,000 common shares to Series B
convertible preferred stock and warrant
holders.................................... $120,000 $ -- $ -- $ --
Issuance of 6,650 Series C convertible
preferred stock to vendors................. -- 13,475 -- --
Deferred revenue liability extinguished in
the sale of assets......................... -- -- -- 107,768
Accrued commission-related party associated
with the sale of assets.................... -- -- -- 279,665
Note received in exchange for the sale of
assets..................................... -- -- -- 350,000
</TABLE>
7. COMMITMENTS:
The Company leases its facilities and certain other equipment under
operating lease agreements. Rental expense for the years ended December 31, 1997
and 1998 was approximately $159,134 and $356,080, respectively. Future minimum
rental commitments as of December 31, 1998 under these leases are as follows:
<TABLE>
<S> <C>
1999........................................................ $350,368
2000........................................................ 283,781
2001........................................................ 188,884
2002........................................................ 86,757
2003........................................................ 29,184
--------
$938,974
========
</TABLE>
8. STOCKHOLDERS' EQUITY:
PREFERRED STOCK
The Company currently has authorization for the issuance of 8,680,644
shares of $.001 par value preferred stock. At December 31, 1998 the following
series of convertible preferred stock were authorized:
<TABLE>
<CAPTION>
SHARES
SHARES ISSUED AND LIQUIDATION
SERIES DESIGNATED OUTSTANDING PREFERENCE
- -------------------------------------------- ---------- ----------- -----------
<S> <C> <C> <C>
Series A.................................... 750,000 750,000 750,000
Series B-1.................................. 1,868,994 1,868,994 2,803,491
Series B-2.................................. 1,305,000 1,305,000 2,283,750
Series C.................................... 2,256,650 2,256,650 6,769,950
Series D.................................... 2,500,000 2,071,430 7,250,005
</TABLE>
Each series of preferred stock is convertible into common stock at the
option of the holder on a one-for-one basis, subject to certain adjustments.
Each series of preferred stock will automatically convert upon the earliest of
(i) the closing date of an underwritten public offering of the Company's
F-35
<PAGE> 114
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
common stock with aggregate proceeds of more than $18,000,000 and a per share
offering price of at least $9.00 or (ii) the date of an affirmative election of
the holders of 75% of the outstanding shares of preferred stock. The Company has
reserved 8,296,274 shares of common stock at December 31, 1998 to permit
conversion of the preferred stock in accordance with these terms.
Holders of the preferred stock are entitled to one vote for each share of
common stock into which such shares may be converted. Each share of preferred
stock entitles the holder to receive noncumulative dividends, if and when
declared by the board of directors, prior to any dividend paid on the common
stock. Dividends, if any, on preferred stock shall be declared at an annual rate
of 10% of the original price paid per share. As of December 31, 1998, no
dividends have been declared. In the event of liquidation, the preferred stock
has preference over the common stock in the amount equal to the original issue
price plus declared but unpaid dividends.
During 1995, the Company adopted the 1995 Stock Option/Stock Issuance Plan
(the "Plan"), providing for two separate equity programs: (i) the Option Grant
Program providing for the granting of both incentive and non-statutory stock
options, as defined by the Internal Revenue Code, and (ii) the Stock Issuance
Program providing for the issuance of common stock directly, either through the
immediate purchase of such shares or as a bonus for services rendered to the
Company.
The Plan, as amended, provides for a maximum number of common shares to be
optioned/issued of 3,950,000. Accordingly, the Company has reserved a sufficient
number of shares of common stock to permit exercise of options or issuance of
shares in accordance with the terms of the Plan. If an option expires or becomes
unexercisable for any reason, options related to the unpurchased shares become
available for grant. Each option granted under the Plan has a term of ten years
from the date of grant and an exercise price and vesting schedule as determined
by the Plan Administrator, at the date of grant, with the exception that
incentive stock options can not be granted for less than 100% of the fair market
value of the stock and non-statutory stock options can not be granted for less
than 110% of the fair market value of the stock to any shareholder of the
Company with a 10% or greater interest in the common stock of the Company. The
number of common stock options exercised and unvested was 313,437 and 176,033 at
December 31, 1997 and 1998, respectively.
F-36
<PAGE> 115
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
STOCK OPTION PLAN
Option activity under the Company's Plan follows:
<TABLE>
<CAPTION>
WEIGHTED-
AVAILABLE EXERCISE AVERAGE
FOR GRANT SHARES PRICE EXERCISE PRICE AMOUNT
---------- ---------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997... 991,500 1,183,500 $0.10 - $0.20 $0.13 $ 151,700
Options granted......... (1,634,750) 1,634,750 0.10 - 0.30 0.27 442,273
Options exercised....... -- (307,383) 0.10 - 0.30 0.20 (60,937)
Options cancelled....... 766,382 (766,382) 0.10 - 0.30 0.15 (115,455)
---------- ---------- ----------
Balance at December 31,
1997....................... 123,132 1,744,485 417,581
Options approved for
grant................. 1,350,000 -- -- -- --
Options granted......... (2,775,000) 2,775,000 0.30 - 0.70 0.48 1,320,450
Options exercised....... (403,547) 0.10 - 0.50 0.20 (81,816)
Options cancelled....... 1,328,273 (1,328,273) 0.10 - 0.70 0.33 (432,724)
Options repurchased..... 2,500 0.20 0.20 --
---------- ---------- ----------
Balance at December 31,
1998....................... 28,905 2,727,665 1,223,491
Options approved for
grant (unaudited)..... 1,000,000 -- -- -- --
Options granted
(unaudited)........... (914,106) 914,106 0.70 0.70 636,607
Options exercised
(unaudited)........... -- (51,697) 0.10 - 0.70 0.29 (15,095)
Options cancelled
(unaudited)........... 693,659 (693,659) 0.10 - 0.70 0.54 (377,439)
---------- ---------- ----------
Balance at June 30, 1999
(unaudited)................ 808,458 2,956,415 $1,467,564
========== ========== ==========
</TABLE>
The weighted-average fair value of options granted during the years ended
December 31, 1997 and 1998 was $0.27 and $0.48 per share, respectively.
The following table summarizes information with respect to stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------- OPTIONS
WEIGHTED-AVERAGE EXERCISABLE
EXERCISE NUMBER REMAINING NUMBER
PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISABLE
- --------------------------------------- ----------- ---------------- -----------
<S> <C> <C> <C>
$0.10................................. 20,000 6.9 20,000
0.15................................. 43,031 7.7 43,031
0.20................................. 25,874 8.1 25,874
0.30................................. 1,603,927 9.0 1,603,927
0.50................................. 168,500 9.3 168,500
0.70................................. 926,333 9.8 928,333
--------- ---------
Number outstanding at December 31,
1998................................. 2,787,665 2,787,665
========= =========
</TABLE>
F-37
<PAGE> 116
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1997, options to purchase 1,744,485 shares of common stock
were exercisable at a weighted average exercise price of $0.24 per share.
PRO FORMA STOCK BASED COMPENSATION
The Company has applied Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations, in
accounting for the Plan. Accordingly, no compensation expense has been
recognized for the Plan. Had compensation cost for the Plan been determined
based upon the fair value at the grant date for awards under the Plan consistent
with the methodology prescribed under Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," such amount would
not have been materially different.
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following weighted average assumptions used
for grants in 1997 and 1998: dividend yield of 0.0%, risk-free interest rate of
6.39% in 1997 and 6.00% in 1998 and expected lives of five years. Volatility of
the Company common stock underlying the options was not considered because the
Company's equity is not publicly traded as of December 31, 1998.
COMMON STOCK WARRANTS
The B-1 Series Preferred Stock Agreement was amended to provide for the
issuance of warrants to certain Series B-2 holders to purchase 465,153 shares of
the Company's common stock in consideration for terminating their rights to
purchase shares of Series B-3 Preferred Stock upon the Company's achievement of
designated milestone events in fiscal year 1997. The warrants are exercisable at
$2.75 per share. The Company has reserved a sufficient number of shares of
Series B-1 to permit exercise of this warrant.
9. EMPLOYEE BENEFITS:
The Company has established a 401(k) retirement savings plan for its full
time employees. All employees meeting minimum age requirements are eligible to
enroll in the Plan sixty days after commencement of employment. As of December
31, 1998, the Company has not provided matching contributions to employee
accounts.
10. INCOME TAXES:
The Company has not recorded the tax benefits attributable to its taxable
losses incurred during the years ended December 1997 or 1998 due to the
uncertainty surrounding the recoverability of these deferred tax assets.
At December 31, 1998 the Company had federal net operating loss
carryforwards of approximately $18,500,000 available to offset future taxable
income. The Company's federal operating loss carryforwards begin to expire
starting in the year 2011.
As a result of ownership changes in prior years as defined by Internal
Revenue Code Section 382, approximately $4,365,000 in net operating loss
carryforwards are subject to a maximum annual utilization of approximately
$1,000,000 at December 31, 1998.
F-38
<PAGE> 117
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The components of the net deferred tax asset are as follows at December 31,
1997 and 1998:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 3,505,193 $ 6,292,559
Non-recurring charge related to purchased technology...... 672,093 570,883
Allowance for doubtful accounts and returns............... 131,930 124,699
Capitalization of software development costs.............. 6,479 3,906
Depreciation.............................................. 57,050 135,727
----------- -----------
Net deferred tax asset before valuation allowance........... 4,372,745 7,127,774
Valuation allowance......................................... (4,372,745) (7,127,774)
----------- -----------
Net deferred tax asset...................................... $ -- $ --
=========== ===========
</TABLE>
The following is a reconciliation of the amount of the income tax benefit
that would result from applying the statutory Federal income tax rates to pretax
loss and the reported amount of income tax benefit:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Tax benefit at statutory rate of 34%........................ $ 2,235,089 $ 2,612,524
State income tax benefit.................................... 196,343 229,140
Permanent difference........................................ (9,861) (15,603)
Other....................................................... -- (71,032)
Net increase in valuation allowance......................... (2,421,571) (2,755,029)
----------- -----------
$ -- $ --
=========== ===========
</TABLE>
11. SUBSEQUENT EVENTS:
AUTHORIZATION AND SALE OF SERIES E PREFERRED STOCK
On February 22, 1999 the Company's board of directors designated 1,142,858
shares of the Company's authorized preferred stock as Series E preferred stock.
On February 25, 1999 the Company sold 785,715 shares of Series E preferred stock
and warrants to purchase 392,858 shares of common stock for an aggregate
purchase price of $2,750,000. The warrants are exercisable through February 27,
2001 at an exercise price of $0.70 per share.
Each share of Series E preferred stock is entitled to receive noncumulative
dividends, when and if declared by the Company's board of directors, at a rate
of $0.35 per share per annum. Each share of Series E preferred stock is
convertible at the option of the holder into common shares of the Company on a
one for one basis, subject to certain anti-dilution provisions as described in
the Company's articles of incorporation. Conversion of the Series E preferred
stock is automatic upon either i) the sale of the Company's common stock in a
firmly underwritten public offering in which the offering price is not less than
$9.00 per share and which results in aggregate proceeds to the Company of at
least $18,000,000 net of underwriting discounts, commissions and fees, or ii)
the written consent of 75% of the outstanding shares of Series E preferred
stock.
F-39
<PAGE> 118
ACUITY CORP.
(FORMERLY KNOWN AS ICHAT, INC.)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Upon any liquidation, dissolution or winding up of the Company, the Series
E preferred shareholders are entitled to a liquidation preference of $3.50 per
share plus all declared but unpaid dividends thereon.
SALE OF EXCLUSIVE TECHNOLOGY LICENSE
In March 1999, the Company entered into an agreement to sell exclusive
source and object code licenses for the ichat software. Under the terms of the
agreement, the Company received $1.3 million in cash at the time of purchase,
notes receivable in the principal amounts of $1 million due on June 30, 1999,
$700,000 due on December 15, 1999, and $600,000 of preferred stock from the next
issuance of the purchaser. In connection with this sale, the Company entered
into a commission agreement with a stockholder under which the stockholder will
receive a total of $354,665 for negotiating the sale of these assets.
12. SUBSEQUENT EVENTS (UNAUDITED)
On September 10, 1999 the Company entered into an agreement to have all of
its outstanding capital stock acquired by Quintus Corporation.
In September, 1999 the Company's board of directors designated and sold
482,625 shares of the Company's authorized preferred stock as Series F preferred
stock for an aggregate purchase price of $1,250,000. The board also issued
warrants to purchase 178,570 shares of the Company's common stock.
* * * * *
F-40
<PAGE> 119
QUINTUS CORPORATION
PRO FORMA CONDENSED COMBINING
FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1999 AND
THREE MONTHS ENDED JUNE 30, 1999
On September 10, 1999, Quintus entered into an Agreement and Plan of
Reorganization to acquire all of the outstanding shares and assume the
outstanding options and warrants of Acuity Corp. (Acuity), a company
specializing in providing Web based customer interaction software. Quintus will
issue approximately 1,570,000 shares of common stock valued at approximately
$13,000,000, approximately 2,960,000 shares of Series G preferred stock valued
at approximately $24,400,000, and assume approximately 1,230,000 options and
warrants to purchase common and preferred stock valued at approximately
$7,800,000. The aggregate purchase price, including approximately $300,000 of
transaction costs not paid in stock, will be approximately $45,500,000. The
agreement is subject to shareholder approval and will close prior to the
effectiveness of this offering.
The acquisition will be accounted for using the purchase method of
accounting. The aggregate purchase price will be allocated to the assets and
liabilities acquired based on their fair value. The total consideration is
expected to exceed the fair value of the net assets acquired by approximately
$44.5 million. Approximately $3.0 million will be allocated to purchased
in-process technology, which has not yet reached technological feasibility and
does not have alternative future uses. This amount will be charged to Quintus'
operations in the period in which the transaction is consummated. The allocation
of the purchase price is preliminary and will not be finalized until the
transaction is consummated.
The accompanying pro forma financial statements are presented in accordance
with Article 11 of Regulation S-X.
The unaudited pro forma condensed combining balance sheet has been prepared
as if the acquisition was completed as of June 30, 1999. The unaudited pro forma
condensed combining statements of operations were prepared as if the acquisition
was completed at the beginning of the periods presented. To prepare the pro
forma unaudited condensed combining statements of operations, the Quintus
statement of operations for the year ended March 31, 1999 has been combined with
the statement of operations of Acuity for the year ended December 31, 1998.
Acuity's revenue of $6,719,000 for the year ended December 31, 1998 includes
$5,504,000 of revenue related to a product line that was sold during the first
quarter of 1999. Also, the statement of operations of both Quintus and Acuity
have been combined for the quarter ended June 30, 1999. The statement of
operations of Acuity for the quarter ended March 31, 1999 which has been
excluded from these pro forma financial statements included revenues, operating
loss and net income of $765,000, $2.4 million, and $321,000, respectively. This
method of combining the companies is only for presentation of pro forma
unaudited condensed combining financial statements. Actual statements of
operations of the companies will be combined from the effective date of the
acquisition.
The unaudited pro forma condensed combining financial statements should be
read in conjunction with the historical financial statements of Quintus and
Acuity.
The unaudited pro forma condensed combining statements of operations do not
include the one-time $3.0 million charge for purchased in-process technology
arising from this acquisition, as it is a material nonrecurring charge. This
charge will be included in the actual consolidated statement of operations of
Quintus when the acquisition is consummated.
The unaudited pro forma condensed balance sheet reflects the 1,363,334
shares of Series F convertible preferred stock issued on August 26, 1999, at
$8.25 per share for cash consideration of $11,247,500.
F-41
<PAGE> 120
QUINTUS CORPORATION
PRO FORMA CONDENSED COMBINING BALANCE SHEETS
JUNE 30, 1999
<TABLE>
<CAPTION>
SERIES F
PREFERRED PRO FORMA PRO FORMA
QUINTUS ACUITY STOCK ADJUSTMENTS NOTES COMBINED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................. $ 467 $ 2,232 $11,248 $ -- $ 13,947
Accounts receivable, less
allowance for doubtful
accounts....................... 10,765 292 -- -- 11,057
Prepaid expenses and other
assets......................... 1,295 610 -- -- 1,905
-------- -------- ------- ------- --------
Total current assets........... 12,527 3,134 11,248 -- 26,909
Property and equipment, net......... 3,139 1,103 -- -- 4,242
Purchased technology, less
accumulated amortization.......... 1,778 -- -- -- 1,778
Intangible assets, less accumulated
amortization...................... 2,506 -- -- 41,500 3 44,006
Other assets........................ 324 49 -- -- 373
-------- -------- ------- ------- --------
Total assets................... $ 20,274 $ 4,286 $11,248 $41,500 $ 77,308
======== ======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable.................. $ 3,983 $ 445 $ -- $ -- $ 4,428
Other accrued liabilities......... 4,454 632 -- 300 5 5,386
Deferred revenue.................. 6,706 577 -- (200) 6 7,083
Borrowings under bank line of
credit......................... 4,868 -- -- -- 4,868
Current portion of long-term
debt........................... 1,425 1,262 -- -- 2,687
-------- -------- ------- ------- --------
Total current liabilities...... 21,436 2,916 -- 100 24,452
Long-term debt, less current
portion........................... 1,449 566 -- -- 2,015
Deferred revenue.................... 200 -- -- -- 200
Redeemable convertible preferred
stock............................. 17,811 -- -- -- 17,811
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock................... 13,707 9 11,248 24,391 1, 2, 8 49,355
Common stock...................... 4,323 5 -- 20,795 1, 2 25,123
Additional paid-in capital........ -- 22,781 -- (22,781) 1 --
Notes receivable from
stockholder.................... (267) -- -- -- (267)
Deferred stock-based
compensation................... (1,415) -- -- -- (1,415)
Treasury stock.................... -- (280) -- 280 1 --
Accumulated deficit............... (36,970) (21,711) -- 18,715 1, 4 (39,966)
-------- -------- ------- ------- --------
Total stockholders' equity
(deficiency)................. (20,622) 804 11,248 41,400 32,830
-------- -------- ------- ------- --------
Total liabilities and
stockholders' equity
(deficiency)................. $ 20,274 $ 4,286 $11,248 $41,500 $ 77,308
======== ======== ======= ======= ========
</TABLE>
See notes to pro forma consolidated financial statements.
F-42
<PAGE> 121
QUINTUS CORPORATION
PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
QUINTUS ACUITY
YEAR ENDED YEAR ENDED
MARCH 31, DECEMBER 31, PRO FORMA
1999 1998 ADJUSTMENTS NOTES PRO FORMA
(UNAUDITED) COMBINED
<S> <C> <C> <C> <C> <C>
Revenue.............................. $ 30,307 $ 6,719 $ 400 6 $ 37,426
Cost of revenue...................... 9,177 1,381 -- 10,558
-------- ------- ------- --------
Gross profit......................... 21,130 5,338 400 26,868
Operating Expenses:
Sales and marketing................ 17,147 6,312 -- 23,459
Research and development........... 6,719 4,390 -- 11,109
General and administrative......... 3,577 2,377 -- 5,954
Amortization of intangibles........ 3,185 -- 8,300 7 11,485
Stock-based compensation........... 171 -- -- 171
-------- ------- ------- --------
Total operating expenses... 30,799 13,079 8,300 52,178
-------- ------- ------- --------
Loss from operations................. (9,669) (7,741) (7,900) (25,310)
Other income (expense), net.......... (917) 57 (860)
-------- ------- ------- --------
Net loss from continuing
operations......................... $(10,586) $(7,684) $(7,900) $(26,170)
======== ======= ======= ========
Basic and diluted loss per common
share from continuing operations... $ (3.73) (6.01)
======== ========
Shares used in basic and diluted loss
per common share................... 2,835 4,355
======== ========
</TABLE>
See notes to pro forma consolidated financial statement of operations.
F-43
<PAGE> 122
QUINTUS CORPORATION
PRO FORMA CONDENSED COMBINING STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
QUINTUS ACUITY ADJUSTMENTS NOTES COMBINED
<S> <C> <C> <C> <C> <C>
Revenue.................................... $10,293 $ 534 $ 200 6 $11,027
Cost of revenue............................ 2,639 313 -- 2,952
------- ------- ------- -------
Gross profit............................... 7,654 221 200 8,075
Operating Expenses:
Sales and marketing...................... 4,314 1,339 5,653
Research and development................. 1,873 989 2,862
General and administrative............... 998 442 -- 1,440
Amortization of intangibles.............. 796 -- 2,075 7 2,871
Stock-based compensation................. 169 -- 169
------- ------- ------- -------
Total operating expenses......... 8,150 2,770 2,075 12,995
------- ------- ------- -------
Loss from operations....................... (496) (2,549) (1,875) (4,920)
Other income (expense), net................ (194) (15) (209)
------- ------- ------- -------
Net loss from continuing operations........ $ (690) $(2,564) $(1,875) $(5,129)
======= ======= ======= =======
Basic and diluted loss per common share
from continuing operations............... $ (0.20) $ (1.02)
======= =======
Shares used in basic and diluted loss per
common share............................. 3,506 5,026
======= =======
</TABLE>
See notes to pro forma consolidated financial statement of operations.
F-44
<PAGE> 123
QUINTUS CORPORATION
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 1999 AND STATEMENT OF
OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
The following pro forma adjustments have been made to the pro forma
condensed combining financial statements:
1. Reflects the elimination of Acuity's shareholders' equity comprised
of preferred stock of $9,000, common stock of $5,000, additional paid in
capital of $22,781,000, treasury stock of $280,000 and accumulated deficit
of $21,711,000.
2. Reflects the issuance of approximately 2,960,000 shares of
preferred stock valued at approximately $24,400,000, approximately
1,570,000 shares of common stock valued at approximately $13,000,000 and
the assumption of approximately 1,230,000 options and warrants to purchase
common and preferred stock valued at approximately $7,800,000.
3. Reflects the allocation of purchase price to the intangible assets
identified in the purchase price allocation.
4. Reflects the one-time charge of $3,000,000 for purchased in-process
technology identified in the purchase
5. Reflects the accrual of estimated costs to be paid in cash directly
attributable to the completion of the acquisition.
6. Reflects an adjustment to conform to Quintus' accounting policy for
revenue recognition.
7. Reflects pro forma amortization of the purchased intangibles over
the estimated useful life of five years of $8,300,000 for the year ended
March 31, 1999 and $2,075,000 for the quarter ended June 30, 1999.
8. Reflects the issuance on August 26, 1999 of 1,363,334 shares of
Series F convertible preferred stock at $8.25 per share for total cash
consideration of $11,247,500.
F-45
<PAGE> 124
[INSIDE BACK COVER ARTWORK TO COME]
<PAGE> 125
APPENDIX TO GRAPHICS
Page 41:
"The Quintus eContact Suite" appears above the rectangular graphic. Across the
top of the graphic (from left to right), the phrases "Channel Applications,"
eContact Engine" and "Business Applications" break up the rectangular box into
three main columns. The left-hand column is broken into five vertical segments
entitled (from top to bottom) "Computer Telephony Integration," "Web
Interaction," "Email Management," "Electronic Commerce Connector" and "Network
Routing." The word "eContact" appears in the center of the large middle column.
In the corners of the middle column, appearing above and below "eContact," are
the phrases "Personalization Services," "Coordination Services," Centralized
Customization & Administration" and "Consolidated Repository & Reporting." The
right-hand column contains the phrases (from top to bottom) "Sales & Service,"
"Consumer Relations," "Technical Support" and "Human Resources." Two narrow
sub-columns, vertically labeled "Enterprise Data Access" and "Agent Console"
separate the large middle column from the right-hand column.
<PAGE> 126
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
LOGO
SHARES OF COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
DONALDSON, LUFKIN & JENRETTE
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
SG COWEN
DLJDIRECT INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, sales person or other person to give you
written information other than this prospectus or to make representations as to
matter not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of you offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of Quintus have
not changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 1999 (25 days after the date of this prospectus), all
dealers that effect transactions in these shares of common stock may be required
to deliver a prospectus. This is in addition to the dealer's obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE> 127
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Quintus in connection with
the sale of Common Stock being registered. All amounts are estimates except the
SEC registration fee and the NASD filing fees.
<TABLE>
<S> <C>
SEC Registration fee........................................ $ 16,624
NASD fee.................................................... 7,228
Nasdaq National Market listing fee..........................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Blue sky fees and expenses..................................
Transfer agent fees.........................................
Miscellaneous fees and expenses.............................
----------
Total............................................. $
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers, including reimbursement for expenses incurred, in terms
sufficiently broad to permit such indemnification under certain circumstances
for liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article VII, Section 6, of the Registrant's bylaws provides
for mandatory indemnification of its directors and permissible indemnification
of officers and employees to the maximum extent permitted by the Delaware
General Corporation Law. The Registrant's certificate of incorporation provides
that, pursuant to Delaware law, its directors shall not be liable for monetary
damages for breach of the directors' fiduciary duty as directors to Quintus and
its stockholders. This provision in the certificate of incorporation does not
eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to Quintus
for acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. The Registrant has
entered into indemnification agreements with its officers and directors, a form
of which is attached as Exhibit 10.1 hereto and incorporated herein by
reference. The indemnification agreements provide the Registrant's officers and
directors with further indemnification to the maximum extent permitted by the
Delaware General Corporation Law. Reference is made to Section of the
Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers
and directors of the Registrant against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since September 1, 1996, we have issued and sold the following securities:
1. On September 17, 1996, we issued and sold an aggregate of 2,595,422
shares of our Series C Preferred Stock to a group of five investors for an
aggregate purchase price of $4,957,256.02. On
II-1
<PAGE> 128
December 18, 1996, we issued and sold 52,356 shares of our Series C Preferred
Stock to one investor for an aggregate purchase price of $99,999.96.
2. On November 10, 1997, we issued and sold an aggregate of 1,091,362
shares of our Series D Preferred Stock to a group of three investors for an
aggregate purchase price of $3,000,000.00. On that same date, in connection with
our acquisition of Nabnasset Corporation, we issued an additional aggregate of
363,634 shares of our Series D Preferred Stock to the same three investors in
exchange for the outstanding shares of Series A preferred stock of Nabnasset
Corporation.
3. On November 10, 1997, in connection with the acquisition of Nabnasset
Corporation, we assumed two warrants issued by Nabnasset on February 12, 1997.
These two warrants are exercisable for an aggregate of 8,466 shares of our
common stock.
4. On November 10, 1997, we issued and sold six warrants to purchase an
aggregate of 72,287 shares of our common stock to a group of six investors at a
per share exercise price of $4.54.
5. On November 10, 1997, in connection with our acquisition of Nabnasset,
we assumed a warrant issued by Nabnasset to its financial advisor on that same
date. The assumed warrant is exercisable for 76,047 shares of our common stock.
On March 9, 1998, Nabnasset's financial advisor transferred warrants to purchase
an aggregate of 18,252 shares of our common stock to a group of four investors.
6. On March 12, 1998, we issued and sold two warrants to purchase an
aggregate of 13,142 shares of our common stock to two investors at a per share
exercise price of $0.30.
7. On March 16, 1998, we issued and sold a warrant to purchase an aggregate
of 9,857 shares of our common stock to an investor at a per share exercise price
of $0.30.
8. On March 17, 1998, we issued and sold three warrants to purchase an
aggregate of 13,143 shares of our common stock to an investor at a per share
exercise price of $0.30.
9. On April 30, 1998, we issued and sold six warrants to purchase an
aggregate of 24,093 shares of our common stock to six investors at a per share
exercise price of $0.30.
10. On May 21, 1998, we issued and sold an aggregate of 2,538,335 shares of
our Series E Preferred Stock to a group of thirteen investors for an aggregate
purchase price of $10,534,090.25. On May 27, 1998, we issued and sold an
additional aggregate of 66,266 shares of our Series E Preferred Stock to a group
of three investors for an aggregate purchase price of $275,003.90.
11. On May 21, 1998, we issued and sold twelve warrants to purchase an
aggregate of 253,008 shares of our common stock to twelve investors at a per
share exercise price of $0.30.
12. On August 26, 1999, we issued and sold an aggregate of 1,363,334 shares
of our Series F Preferred Stock to a group of three investors for an aggregate
purchase price of $11,247,505.50.
13. On September 2, 1999, we issued and sold a warrant to purchase an
aggregate of 300,000 shares of our common stock at a per share exercise price of
$7.50.
14. From September 1, 1996 to August 31, 1996, we issued an aggregate of
2,617,339 shares of common stock to our employees, consultants and other service
providers pursuant to exercises of options under our 1995 Stock Option Plan
(Exhibit 10.2).
The sale of the above securities were deemed to be exempt from registration
under the Securities Act in reliance upon Section 4(2) of the Securities Act or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
of the Securities Act, as transactions by an issuer not involving any public
offering or transactions under compensation benefit plans and contracts relating
to compensation as provided under Rule 701, or Section 3(a)(10) of the
Securities Act as a security issued after a ruling by an authorized authority
upon the fairness of the transaction's terms and
II-2
<PAGE> 129
conditions. With regard to the sales of securities exempted by Section 4(2) of
the Securities Act, the recipients of securities in each transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution and appropriate legends
were affixed to the share certificates issued in these transactions. All
recipients had adequate access, through their relationships with us, to
information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.
2.1* Agreement and Plan of Reorganization by and among
Registrant, Acuity Corp., Ribeye Acquisition Corp. and
certain stockholders of Acuity Corp., dated September 10,
1999.
3.1* Certificate of Incorporation of Registrant, as amended to
date.
3.2* Form of Registrant's Restated Certificate of Incorporation
to be filed upon the closing of Registrant's acquisition of
Acuity Corp.
3.3* Form of Registrant's Restated Certificate of Incorporation
to be filed upon the closing of this offering.
3.4* Amended and Restated Bylaws of Registrant.
4.1* Reference is made to Exhibits 3.1, 3.2, 3.3, and 3.4.
4.2** Specimen Common Stock certificate.
4.3* Form of Registrant's Amended and Restated Investors Rights
Agreement to be adopted upon the closing of Registrant's
acquisition of Acuity Corp.
5.1** Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP.
10.1* Form of Indemnification Agreement to be entered into between
Registrant and each of its directors and officers.
10.2* 1995 Stock Option Plan and form of stock purchase agreement
thereunder.
10.3* 1999 Stock Incentive Plan and forms of agreements
thereunder.
10.4* Employee Stock Purchase Plan.
10.5* 1999 Director Option Plan.
10.6* Light Industrial Lease between Registrant and Teachers
Insurance and Annuity Association of America, dated October
6, 1995.
10.7* Sublease Agreement between Pavilion Technologies, Inc. and
Acuity Corporation, dated December 19, 1996.
10.8+ Software Distribution Agreement dated May 5, 1997, between
Nabnasset Corporation and Lucent Technologies Inc.
10.9+ Distribution Agreement for ICR and SICR Programs dated April
26, 1999, between Registrant and GeoTel Communications
Corporation.
10.10+ Authorized OEM/Reseller Agreement dated December 22, 1998,
between Registrant and Brightware, Inc.
10.11* Employment agreement between Registrant and Alan Anderson,
dated May 23, 1995 and Notice of Grant of Stock Option.
10.12* Employment agreement between Registrant and John Burke,
dated June 11, 1999.
10.13* Loan and Security Agreement between Registrant and Silicon
Valley Bank, dated as of September 18, 1998.
16.1* Letter regarding change in certifying accountant.
21.1* Subsidiaries of Registrant.
</TABLE>
II-3
<PAGE> 130
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.1 Consent of Deloitte & Touche LLP, Independent Auditor
23.2 Consent of Ernst & Young LLP Independent Auditors
23.3 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.4** Consent of Counsel. Reference is made to Exhibit 5.1.
24.1* Power of Attorney (see page II-7).
27.1* Financial Data Schedule.
</TABLE>
- -------------------------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment requested as to certain portions of these exhibits.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of the Registrant, the Underwriting Agreement, 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 Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, 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 of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, 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, 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> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Fremont,
State of California, on this 23rd day of September, 1999.
QUINTUS CORPORATION
By: /s/ ALAN K. ANDERSON
------------------------------------
Alan K. Anderson
Chief Executive Officer
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 ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES
INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ ALAN K. ANDERSON Chief Executive Officer September 23, 1999
- -------------------------------------------------------- (Principal Executive
Alan K. Anderson Officer) and Director
/s/ SUSAN SALVESEN Chief Financial Officer September 23, 1999
- -------------------------------------------------------- (Principal Financial
Susan Salvesen and Accounting Officer)
and Secretary
* Director September 23, 1999
- --------------------------------------------------------
Paul H. Bartlett
* Director September 23, 1999
- --------------------------------------------------------
Fredric W. Harman
* Director September 23, 1999
- --------------------------------------------------------
William Herman
* Director September 23, 1999
- --------------------------------------------------------
Alexander Rosen
* Director September 23, 1999
- --------------------------------------------------------
Robert W. Shaw
* Director September 23, 1999
- --------------------------------------------------------
Jeanne Wohlers
*By: /s/ ALAN K. ANDERSON
----------------------------------------
Alan K. Anderson
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 132
REPORT ON SCHEDULE OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of Quintus Corporation:
We have audited the consolidated financial statements of Quintus
Corporation (the Company) as of and for the year ended March 31, 1999, and have
issued our report thereon dated June 18, 1999 (September 10, 1999 as to Note 15)
(included elsewhere in this registration statement). Our audit also included the
financial statement schedule of the Company for the year ended March 31, 1999,
listed in Item 16(b). The financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audit. In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
San Jose, California
June 18, 1999
S-1
<PAGE> 133
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Quintus Corporation
We have audited the consolidated financial statements of Quintus
Corporation as of March 31, 1998 and 1997, and for the years then ended, and
have issued our report thereon dated April 30, except for Note 12, as to which
the date is September 18, 1999 (included elsewhere in this Registration
Statement). Our audits also included the data for the two years ended March 31,
1998 included in the financial statement schedules listed in Item 16(b) of this
Registration Statement. These schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Palo Alto, California
April 30, 1998
S-2
<PAGE> 134
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED BALANCE
AT TO COST AT
BEGINNING AND END OF
OF PERIOD EXPENSES WRITE-OFFS PERIOD
--------- -------- ---------- -------
<S> <C> <C> <C> <C>
Year ended March 31, 1997
Allowance for doubtful accounts............. $569 $255 $(299) $525
==== ==== ===== ====
Year ended March 31, 1998
Allowance for doubtful accounts............. $525 $408 $ (85) $848
==== ==== ===== ====
Year ended March 31, 1999
Allowance for doubtful accounts............. $848 $235 $(354) $729
==== ==== ===== ====
</TABLE>
S-3
<PAGE> 135
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.
2.1* Agreement and Plan of Reorganization by and among
Registrant, Acuity Corp., Ribeye Acquisition Corp. and
certain stockholders of Acuity Corp., dated September 10,
1999.
3.1* Certificate of Incorporation of Registrant, as amended to
date.
3.2* Form of Registrant's Restated Certificate of Incorporation
to be filed upon the closing of Registrant's acquisition of
Acuity Corp.
3.3* Form of Registrant's Restated Certificate of Incorporation
to be filed upon the closing of this offering.
3.4* Amended and Restated Bylaws of Registrant.
4.1* Reference is made to Exhibits 3.1, 3.2, 3.3, and 3.4.
4.2** Specimen Common Stock certificate.
4.3* Form of Registrant's Amended and Restated Investors Rights
Agreement to be adopted upon the closing of Registrant's
acquisition of Acuity Corp.
5.1** Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP.
10.1* Form of Indemnification Agreement to be entered into between
Registrant and each of its directors and officers.
10.2* 1995 Stock Option Plan and form of stock purchase agreement
thereunder.
10.3* 1999 Stock Incentive Plan and forms of agreements
thereunder.
10.4* Employee Stock Purchase Plan.
10.5* 1999 Director Option Plan.
10.6* Light Industrial Lease between Registrant and Teachers
Insurance and Annuity Association of America, dated October
6, 1995.
10.7* Sublease Agreement between Pavilion Technologies, Inc. and
Acuity Corporation, dated December 19, 1996.
10.8+ Software Distribution Agreement dated May 5, 1997, between
Nabnasset Corporation and Lucent Technologies Inc.
10.9+ Distribution Agreement for ICR and SICR Programs dated April
26, 1999, between Registrant and GeoTel Communications
Corporation.
10.10+ Authorized OEM/Reseller Agreement dated December 22, 1998,
between Registrant and Brightware, Inc.
10.11* Employment agreement between Registrant and Alan Anderson,
dated May 23, 1995 and Notice of Grant of Stock Option.
10.12* Employment agreement between Registrant and John Burke,
dated June 11, 1999.
10.13* Loan and Security Agreement between Registrant and Silicon
Valley Bank, dated as of September 18, 1998.
16.1* Letter regarding change in certifying accountant.
21.1* Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP, Independent Auditor
23.2 Consent of Ernst & Young LLP Independent Auditors
23.3 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.4** Consent of Counsel. Reference is made to Exhibit 5.1.
24.1* Power of Attorney (see page II-7).
27.1* Financial Data Schedule.
</TABLE>
- -------------------------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment requested as to certain portions of these exhibits.
<PAGE> 1
EXHIBIT 10.8
SOFTWARE DISTRIBUTION AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC.
AND
NABNASSET CORPORATION
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<PAGE> 2
TABLE OF CONTENTS
SOFTWARE DISTRIBUTION AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC.
AND
NABNASSET CORPORATION
<TABLE>
<S> <C>
RECITALS................................................................ -1-
1. DEFINITIONS........................................................ -1-
2. LICENSE GRANT...................................................... -3-
3. RELATIONSHIP OF THE PARTIES........................................ -4-
4. PERIODIC MEETINGS.................................................. -5-
5. GOLDEN MASTERS..................................................... -6-
6. MONTHLY REPORTS.................................................... -6-
7. AUDIT.............................................................. -7-
8. LICENSE FEE........................................................ -7-
9. RIGHTS TO PRODUCT.................................................. -7-
10. DELIVERABLES....................................................... -8-
11. TAXES.............................................................. -9-
12. PAYMENTS........................................................... -10-
13. MISCELLANEOUS EXPENSES............................................. -11-
14. ESCROW AGREEMENT................................................... -11-
15. ACCEPTANCE......................................................... -12-
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
16. CONTINUED PRODUCT AVAILABILITY..................................... -13-
17. MARKETING.......................................................... -13-
18. WARRANTY........................................................... -14-
19. LIMITATION OF LIABILITY............................................ -16-
20. TECHNICAL SUPPORT.................................................. -16-
21. TRAINING........................................................... -17-
22. END USER SUBLICENSES............................................... -17-
23. TERM, TERMINATION AND DEFAULT...................................... -18-
24. INDEMNIFICATION.................................................... -20-
25. COPYRIGHT NOTICE................................................... -21-
26. ASSIGNMENT......................................................... -22-
27. USE OF TRADENAME................................................... -23-
28. CONFIDENTIALITY.................................................... -24-
29. EXPORT............................................................. -26-
30. LUCENT RIGHT TO COMPARABLE PRODUCT................................. -26-
31. NOTICES AND REQUESTS............................................... -27-
32. CONTROLLING LAW.................................................... -28-
33. ENTIRE AGREEMENT................................................... -28-
34. DISPUTE RESOLUTION................................................. -28-
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
35. GENERAL............................................................ -29-
36. FORCE MAJEURE...................................................... -29-
37. AGREEMENT TITLE AND ARTICLE HEADINGS............................... -29-
38. IMPLEADER.......................................................... -29-
39. EXCLUSION OF LICENSES.............................................. -30-
40. NON-WAIVER......................................................... -30-
41. INSURANCE AND LIABILITY............................................ -30-
42. COMPLIANCE WITH LAWS............................................... -31-
43. RELEASES VOID...................................................... -31-
44. PLANT RULES AND GOVERNMENT CLEARANCE............................... -32-
45. SURVIVAL OF OBLIGATIONS............................................ -32-
46. HARDWARE AND SOFTWARE DEVELOPMENT ASSISTANCE....................... -32-
47. EXHIBITS INCORPORATED.............................................. -32-
</TABLE>
EXHIBITS and ATTACHMENTS
Exhibit A - Product to be Delivered
Exhibit B - Payment Schedule
Exhibit C - Training Deliverables
Exhibit D - Technical Support
Exhibit E - Supplier's Existing and Potential Customers
Exhibit F - Supplier's Standard License Agreement
Attachment 1 - Escrow Agreement
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<PAGE> 5
SOFTWARE DISTRIBUTION AGREEMENT
This Agreement is entered into by and between Lucent Technologies Inc.,
a Delaware corporation, by and through its Business Communications Systems
Division with a place of business at 211 Mt. Airy Rd., Basking Ridge NJ 07920
(hereinafter called LUCENT), and Nabnasset Corporation, a Massachusetts
corporation, with a place of business at 15 Craig Road, Acton, Massachusetts
01720 (hereinafter called SUPPLIER).
The effective date of this Agreement shall be the later of the dates
executed by the respective parties.
RECITALS
WHEREAS, SUPPLIER has the right to license PRODUCT, as hereinafter
defined, and
WHEREAS, LUCENT desires to obtain rights to PRODUCT and related materials
described hereinafter; and
WHEREAS, SUPPLIER desires to provide LUCENT with such rights upon the
terms and conditions set forth in this Agreement; and
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions set forth in this Agreement, the parties agree as
follows:
1. DEFINITIONS
A. AFFILIATE: means a subsidiary, corporation, partnership, or venture a
majority of whose voting stock or ownership interest is owned directly or
indirectly by LUCENT.
B. AGREEMENT: means this document and all of the annexed schedules and
exhibits, all of which are hereby incorporated herein by reference together with
any future written amendments hereto which have been executed by SUPPLIER and
LUCENT.
C. CONFIDENTIAL INFORMATION: means information which is defined in Section 28
hereof.
D. DEMONSTRATION COPY: means a copy of the PRODUCT contained in demonstration
kits which shall be supplied to LUCENT by SUPPLIER at no charge.
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E. DOCUMENTATION: means the technical documentation, user manuals, handbooks.
list of errors, workarounds, specifications and other written materials relating
to PRODUCT provided by SUPPLIER for the PRODUCT.
F. END USER: means a third person or legal entity that obtains rights from
LUCENT or from a Subdistributor during the term of this Agreement to utilize
PRODUCT and who will have no right to grant further rights to or license PRODUCT
to others.
G. ENHANCEMENTS: means modifications or additions to PRODUCT other than
maintenance modifications, that may be integrated into the PRODUCT and alter
features, functionality or performance of the PRODUCT.
H. GOLDEN MASTER: means an Object Code version of the PRODUCT provided to
LUCENT on a media mutually agreed upon by LUCENT and SUPPLIER which will be
utilized by LUCENT to replicate copies of the PRODUCT for distribution to End
Users pursuant to Sublicenses.
I. LICENSE FEE: means the amount of money to be paid by LUCENT to SUPPLIER in
accordance with the schedule set forth on Exhibit B hereof for each copy of the
PRODUCT replicated and provided to an End User, to a Subdistributor or used
internally by LUCENT in a production environment.
J. MAINTENANCE AGREEMENT: means a separate agreement which addresses the
maintenance and support obligation to End Users and which is more fully
described in Exhibit D hereto.
K. MAINTENANCE RELEASE: means a modification of the Object Code of the
Product which corrects bugs or errors but does not alter the functionality of
the PRODUCT.
L. MAJOR RELEASE: means a new version of the Object Code of the PRODUCT which
SUPPLIER has determined results in a substantial alteration in the features or
functions of the PRODUCT.
M. MINOR RELEASE: means a new set of Object Code for the PRODUCT that
includes support for planned future features and /or addition of limited new
features.
N. NEW MODULE: means additional functionality that SUPPLIER may make
available to LUCENT and/or End Users for licensing separately to work with the
PRODUCT.
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<PAGE> 7
0. OBJECT CODE: means computer programs of the PRODUCT assembled or compiled
in magnetic or electronic binary form on software media which are readable and
reasonable by machine but are not generally readable by humans without reverse
assembly, reverse compiling or reverse engineering and which are executable
versions of the PRODUCT which may be utilized on platforms as defined in Exhibit
A hereto.
P. PRODUCT: means the (1) Object Code version of the software of SUPPLIER,
that is described in Exhibit A hereto that SUPPLIER markets, maintains and
supports as of the date of this Agreement, (2) any Releases, as hereinafter
defined, enhancements, fixes, updates and modifications provided to LUCENT
pursuant to the terms and provisions hereof, and the Documentation. PRODUCT does
not include any intellectual property developed or created by LUCENT pursuant to
Section 9 of this Agreement.
Q. RELEASES: means any Enhancement, Major Release, Minor Release, or
Maintenance Release.
R. SUPPORT: means warranty and maintenance services which the SUPPLIER is
obligated to provide pursuant to the terms and provisions of the warranty or a
Maintenance Agreement.
S. SUBDISTRIBUTORS: means a third party who is granted distribution rights to
End Users by Lucent through a Sublicense agreement pursuant to the terms and
provisions of this Agreement.
T. SUBLICENSE: means a written agreement between an End User and a
Subdistributor LUCENT; or between a Subdistributor and LUCENT, pursuant to which
the End User is granted limited rights to use the PRODUCT and the Subdistributor
is granted certain distribution rights.
2. LICENSE GRANT
A. SUPPLIER grants LUCENT, subject to the terms and conditions set forth
herein, including but not limited to the payment terms set forth in Exhibit B, a
non-exclusive, perpetual, worldwide right and license to use, demonstrate,
market, Sublicense, and distribute copies of PRODUCT supplied to LUCENT by
SUPPLIER in Object Code form.
SUPPLIER also grants to LUCENT a non-exclusive, perpetual, royalty-free
license to (i) use and reproduce the PRODUCT for purposes of evaluation and
acceptance; (ii) reproduce Demonstration Copies of each PRODUCT supplied to
LUCENT by SUPPLIER
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<PAGE> 8
solely for the purpose of marketing and promoting the PRODUCT and training
customers in its use; (iii) reproduce and distribute copies of Documentation for
use by LUCENT personnel in its activities pursuant to this Agreement and for use
by Subdistributors and End Users; and (iv) reproduce and distribute copies and
Documentation in furtherance of this Agreement. Any and all rights and licenses
granted to LUCENT under this Agreement shall be non-transferrable except that
(a) LUCENT may transfer all or part of said rights and licenses at any time to
any AFFILIATE; and (b) LUCENT may transfer all or part of said rights and
licenses to a third party with the prior written consent of SUPPLIER, which
consent shall not be unreasonably withheld. LUCENT shall also have the right to
appoint any AFFILIATE or any third party as a Subdistributor either in the
United States or in any countries internationally in which the PRODUCT is
Sublicensed. Such Subdistributor(s) shall have the right and license to
Sublicense the PRODUCT to further Subdistributors or to End-Users. LUCENT shall
be responsible to SUPPLIER for the acts of its Subdistributors that are in
violation of this Agreement.
B. In no event shall LUCENT reverse compile or disassemble Object Code
versions of the PRODUCT or otherwise create, or attempt to create or permit,
allow or assist others to create source code versions of the PRODUCT
C. The license grants to LUCENT in this Agreement shall extend to any
AFFILIATE.
3. RELATIONSHIP OF THE PARTIES
LUCENT and SUPPLIER are and shall remain independent companies and the
employees of one shall not hold themselves out or be considered to be employees
or representatives of the other. This Agreement is not intended by the parties
to constitute or create a joint venture, agency, partnership, OEM, or other form
of business organization, and the rights and obligations of the parties shall be
only those expressly set forth herein. If LUCENT and SUPPLIER agree to provide
an integrated solution to a customer and LUCENT and SUPPLIER determine that a
prime contractor/subcontractor relationship between LUCENT and SUPPLIER is
appropriate, unless LUCENT and SUPPLIER agree to the contrary, LUCENT shall
assume the prime contractor position, and in every prime/subcontractor
situation, a separate written prime/subcontractor agreement covering the
respective obligations of the parties and the rights to any intellectual
property created during the prime/subcontractor relationship pertaining to that
customer shall be executed by LUCENT and SUPPLIER. The terms of these separate
prime/subcontractor agreements shall not override the terms of this Agreement
unless expressly agreed to by LUCENT and SUPPLIER.
If, at any time, either party discloses to the other party information
relating to an
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<PAGE> 9
opportunity to sublicense PRODUCT to an interested End User, such information
shall be deemed Confidential Information as defined in Section 28 hereof, and as
such, shall not be used as a sales lead by either party's direct sales force to
approach said End User to license PRODUCT directly to said End User unless
agreed by the parties. Further, SUPPLIER agrees not to create any commission
plan or any other type of incentive that would have the effect of encouraging
the direct sales force of SUPPLIER to specifically compete against LUCENT.
At SUPPLIER's request, LUCENT acknowledges that SUPPLIER has established
relationships with certain end users of the PRODUCT ("Existing Customers") and
has entered into marketing discussions with certain potential end users
("Potential End Users"). Said Existing End Users and Potential End Users
(collectively, "Listed Customers") are listed in Exhibit E. As soon as practical
after the effective date of this Agreement, sales or marketing personnel of the
parties shall agree on the parties' respective roles in dealing with the Listed
Customers with respect to the PRODUCT and related services. If a joint agreement
cannot be reached by the parties as to any Existing Customer by July 1, 1997,
SUPPLIER shall have right of first preference to enter into agreements with such
Existing Customer for PRODUCT and related services. If a joint agreement cannot
be reached by the parties as to any Potential End User by July 1, 1997, the
parties shall market and sell PRODUCT and related services to such Potential End
User independently and without restriction in the absence of an agreement by the
parties to the contrary as to any Potential End User. Beginning on January 1,
1998, the parties shall market and sell PRODUCT and related services
independently and without restriction to Potential End Users. Nothing in this
paragraph shall be construed to preclude any customer, Listed Customer or End
User at any time from electing to license PRODUCT from either party and such
election shall be binding on both parties. Nothing contained in this paragraph
shall restrict LUCENT from marketing or selling any LUCENT or third party
equipment or related services to any customer or End User, including but not
limited to any Listed Customer, provided that, LUCENT shall not market or sell
the PRODUCT and related services, or a product and its related services which
directly compete with the PRODUCT and related services, to an Existing Customer
in the absence of a specific request by such Existing Customer.
4. PERIODIC MEETINGS
During the term of this Agreement, duly authorized representatives of the
parties shall meet quarterly within thirty (30) days of the receipt by SUPPLIER
of the quarterly payment by LUCENT of any fees due hereunder to discuss issues
arising out of this Agreement and related services and PRODUCT, to review
volumes of PRODUCT Sublicensed by LUCENT, to review SUPPLIER plans relating to
PRODUCT, and to
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<PAGE> 10
review levels of Sublicense satisfaction with PRODUCT. No discussions or
agreements reached during said meetings shall modify or amend this Agreement
unless reduced to the form of a Written amendment to this Agreement signed by
authorized representatives of LUCENT and SUPPLIER.
5. GOLDEN MASTERS
Upon execution of this Agreement by LUCENT and SUPPLIER, SUPPLIER shall
provide to LUCENT (i) three copies of a Golden Master of the PRODUCT software in
Object Code form and (ii) three copies of all applicable Documentation. The
Documentation shall be provided on the same media as the Object Code that will
allow LUCENT to reproduce and distribute such Documentation in accordance with
normal manufacture reproduction procedures. In addition to the rights granted in
Section 2 hereof, entitled License Grant, subject to the provisions of this
Agreement, LUCENT shall have the right to reproduce the PRODUCT in Object Code
form and all applicable Documentation for distribution to End Users solely for
the use of such End User without the right to distribute the PRODUCT further.
Subject to the provisions of this Agreement, LUCENT shall also have the right to
distribute the PRODUCT, Demonstration Copies, and Documentation to its
Subdistributors.
6. MONTHLY REPORTS
LUCENT shall render written monthly reports to SUPPLIER within [*] days
from the end of each calendar month specifying the number of copies of the
PRODUCT and the number of copies of the Documentation delivered to End Users
during the previous month. Each such report shall include the name and address
of each End User. Within [*] days from the end of each quarter, LUCENT will pay
to SUPPLIER the total License Fees payable to SUPPLIER corresponding to the
number of copies of PRODUCT replicated and shipped to End Users or used
internally by LUCENT during the quarter just ended.
SUPPLIER shall render written monthly reports to LUCENT within thirty (30)
days from the end of each calendar month specifying the number of Maintenance
Agreements with End Users executed during the previous month. Each such report
shall include the name and address of each End User. Within [*] days of the end
of each quarter SUPPLIER will pay to LUCENT the portion due LUCENT of such fees
paid pursuant to such Maintenance Agreements during the quarter just ended.
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[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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<PAGE> 11
7. AUDIT
SUPPLIER shall have the right to engage an independent accounting firm to
audit LUCENT's information on distribution of the PRODUCT to establish the
accuracy and timeliness of monthly reports and quarterly payments made to
SUPPLIER by LUCENT. The information provided to SUPPLIER by the accounting firm
shall be limited to the firm's opinion on the accuracy and timeliness of reports
and payments made by LUCENT: as to all other information qathered or discovered
during the audit, the accounting firm shall be required to hold all such
information strictly confidential to LUCENT. The audit may be conducted not more
than once a year, and LUCENT shall not unreasonably, withhold or delay its
consent to the time of the audit and SUPPLIER'S choice of accounting firm. The
accounting firm shall be bound by a non-disclosure agreement in the form to be
provided by LUCENT to ensure compliance with this paragraph and shall provide
LUCENT with a copy of its audit report. Any discrepancies or errors identified
in an audit report shall be corrected by the party who committed the error
within thirty (30) days of the receipt of the report by that party. Any dispute
related to the content of an audit report shall be resolved pursuant to Section
34.
8. LICENSE FEE
LUCENT shall pay SUPPLIER a License Fee as shown in EXHIBIT B for each
copy of the PRODUCT replicated and provided to an End User by LUCENT or its
Subdistributors.
9. RIGHTS TO PRODUCT
The PRODUCT, including all Releases and New Modules, is and shall remain
at all times the exclusive property of SUPPLIER. LUCENT shall have no right,
title or interest in the PRODUCT except as expressly set forth herein. No
Subdistributor or End User shall acquire any rights of ownership in the PRODUCT.
At the request of SUPPLIER, LUCENT will execute and deliver any document,
instrument or agreement to SUPPLIER that may be appropriate to maintain the
exclusive ownership of the PRODUCT by SUPPLIER.
The parties recognize and acknowledge that LUCENT shall have the right to
develop and create templates, interfaces, and other intellectual property that
may be used in conjunction with the PRODUCT or incorporated into the PRODUCT for
specific End Users. The parties agree that LUCENT shall have full right, title,
and interest in the
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<PAGE> 12
intellectual property that it develops and creates, and SUPPLIER shall have full
right, title, and interest in the intellectual property it has developed and
created, including but not limited to the PRODUCT delivered to LUCENT, and to
the intellectual property SUPPLIER develops and creates in the future. No right,
title or interest in intellectual property shall pass from one party to the
other unless expressly set forth in this Agreement or upon the express, written
consent of both parties. Any dispute between the Parties relating to a right or
interest of intellectual property shall be resolved pursuant to Section 34.
SUPPLIER may use, sell, assign, transfer or license the PRODUCT to third
parties free from any restrictions of LUCENT.
10. DELIVERABLES
A. SUPPLIER agrees to deliver upon execution to LUCENT three (3) Golden
Master copies of the PRODUCT; three (3) copies of all Documentation contained in
media described in EXHIBIT A; three (3) Golden Master copies of Demonstration
Copies of the PRODUCTS; and any other deliverable items set forth in Exhibit A.
B. Deliveries by SUPPLIER of Golden Masters and Documentation under this
Agreement shall be one copy of each to the following three locations:
Lucent Receiving Dock
1200 West 120 Avenue
Westminster, CO 80234
Operations Manager Integrated Business Solutions
8200 East Maplewood Avenue
Englewood, CO 80111
Attn: Jerald Wyatt
Dan Prentice
Lucent Technologies Bell Laboratories
Room 30E108
11900 N. Pecos Street
Westminster, CO 80234-2703
Any or all of these locations may be changed by LUCENT at any time upon
written notice to SUPPLIER.
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<PAGE> 13
C. From time to time, SUPPLIER may issue Releases and New Modules. SUPPLIER
shall promptly provide to LUCENT, at no additional charge, three (3) Golden
Master Copies of the Releases and New Modules, three (3) Golden Master copies
of corresponding Demonstration Copies, and three (3) copies of all applicable
Documentation for each Release or New Module as soon as such Release or New
Module is ready for use by any of SUPPLIER's customers. Whenever possible,
SUPPLIER will provide LUCENT with 120 day advance notice of Release or New
Module schedules and content. Such Release or New Module shall be considered
PRODUCT subject to all terms and conditions of this Agreement. Should SUPPLIER
introduce a Release or New Module, LUCENT may, at its sole option, elect not to
distribute said Release or New Module. Such decision shall not affect the
respective obligations of the parties under this Agreement, except that if End
Users continue to have versions or Releases of PRODUCT that have been obsoleted
and no longer supported by SUPPLIER, the parties shall negotiate with the End
User in a fair and equitable manner by which said End Users may continue to
obtain PRODUCT maintenance service. If the parties fail to reach such agreement,
they shall initiate the dispute resolution process set forth in Section 34
hereof.
D. During the entire term of this Agreement and for five (5) years
thereafter, SUPPLIER shall provide to LUCENT the most current listings of all
known bugs, and Releases associated with the PRODUCT (including all versions
then being supported by SUPPLIER). The above referenced listings supplied to
LUCENT shall be no less comprehensive than those provided by SUPPLIER to its own
installation and support personnel.
11. TAXES
In addition to all other fees and charges, LUCENT shall bear all taxes,
duties, including customs duties, import and export fees and any other charges
or assessments established by any governmental agency that are applicable to the
performance of this Agreement, whether now in force or enacted in the future.
All License Fees payable by LUCENT to SUPPLIER are exclusive of any tax, levy,
or similar governmental charge that may be assessed by any jurisdiction, whether
based on gross revenue, the delivery, possession or use of the PRODUCT, the
services provided hereunder, the execution or performance of this Agreement, or
otherwise, except for net income, net worth or franchise taxes assessed on
SUPPLIER by the U. S. Government or any state or municipality in the United
States. If under the laws of any jurisdiction LUCENT is required to withhold any
tax on License Fees, then the amount of the License Fees shall be automatically
increased to totally offset such tax so that the amount actually remitted to
SUPPLIER net of all taxes equals the amount of the License Fees due and payable
to SUPPLIER. LUCENT will pay all taxes, levies or similar governmental charges
or
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provide SUPPLIER with an executed certificate of exemption conforming to the
requirements of the relevant taxing authority.
12. PAYMENTS
A. All payments due to SUPPLIER under this Agreement shall be made in
accordance with Section 6 hereof, Exhibit B, and this Section. The License Fee
with respect to each copy of the PRODUCT replicated will be earned by SUPPLIER
on the date which LUCENT ships a copy of the PRODUCT to an End User and will be
payable to SUPPLIER within [*] days after the end of the quarter in which the
shipment date occurred.
B. If LUCENT reproduces Demonstration Copies of the PRODUCT or copies of
Documentation pursuant to paragraph A of Section 2 hereof, no payment of any
kind shall be due to SUPPLIER for the distribution of such reproduced copies.
C. License Fees payable hereunder shall be adjusted once a year. The
effective date of such adjustment, if any, shall be May 1 of each year during
the term of this Agreement. The adjusted License Fee will be computed by
multiplying the then current License Fee by a fraction, the numerator of which
is the published suggested list price of SUPPLIER in effect on February 1 of the
then current year, and the denominator of which is the published suggested list
price of the SUPPLIER on February 1 of the year immediately preceding the then
current year, provided that, only with respect to the computation of the
adjusted License Fee as of May 1, 1998, the denominator of the fraction shall be
the published suggested list price of SUPPLIER on the date of this Agreement.
The License Fee as adjusted will be effective for one (1) year beginning on the
then current May 1. This adjustment process will occur each year during the term
of this Agreement. Further, in any year there is an increase, the increase shall
not apply to copies of the PRODUCT replicated after May 1 of such year in those
cases where LUCENT has entered into a binding bid, contract or purchase order
from the End User with respect to such copies during the period from January 1
to January 31 of such year.
D. In the event that LUCENT elects to license the PRODUCT for internal
production purposes, License Fees paid to SUPPLIER shall be in accordance with
the payments as outlined in Exhibit B. License Fees paid by LUCENT for such
internal use shall accumulate toward the total payment schedules as defined in
Exhibit B.
E. [*]
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[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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<PAGE> 15
[*]
F. Notwithstanding any other provision contained in this Agreement, and
except when LUCENT is acting as an agent selling a Maintenance Agreement to an
End User on SUPPLIER's behalf, in no event will the parties disclose to each
other pricing strategy information relating to their respective customers or
specific prices that have been or will he offered to their respective customers
for the PRODUCT.
13. MISCELLANEOUS EXPENSES
Monthly reports and notices required from either LUCENT or SUPPLIER by
this Agreement will be delivered to the recipient at the expense of the party
that generated the report.
Unless otherwise expressly agreed to by the parties herein or otherwise,
LUCENT and SUPPLIER shall each pay all travel expenses of their respective
employees.
14. ESCROW AGREEMENT
The parties agree to establish a proprietary escrow account for the
benefit of LUCENT to maintain, during the life of this Agreement and five (5)
years thereafter, all then current copies of the PRODUCT, Demonstration Copies,
and Documentation related to the PRODUCT under this Agreement pursuant to a
separate escrow agreement to be concluded by and between the parties to this
Agreement and a neutral third-party escrow agent designated by the agreement of
both parties (the "Escrow Agreement") in the form attached hereto and made a
part hereof as Attachment 1. The escrow agent will be Data Securities
International, Inc. ("DSI"), or such other escrow agent as the parties mutually
designate. The nature and completeness of any deposited materials will be
subject to verification by a representative of LUCENT in the presence of a
representative of SUPPLIER, only at the facilities of the escrow agent where the
escrowed materials are kept. No copies, in whole or in part, of the escrowed
materials may be made by the SUPPLIER representative and all such materials will
be considered to be confidential information regardless of whether or not they
have been marked as confidential information. One half of the escrow fees shall
be paid by LUCENT and one half shall be paid by SUPPLIER. With reasonable prior
permission of LUCENT, SUPPLIER may change the escrow agent at any time. Any
release of escrowed materials will be subject to the terms and conditions of
Attachment 1.
Proprietary to
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[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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<PAGE> 16
15. ACCEPTANCE
A. LUCENT shall evaluate the PRODUCT and Documentation delivered under this
Agreement for compliance with the criteria referenced or set forth in Exhibit A,
and shall submit a written acceptance or rejection to SUPPLIER within [*] after
the receipt by LUCENT of the complete PRODUCT and Documentation. Such written
acceptance or rejection shall be transmitted to SUPPLIER only by LUCENT.
Shipment to and use of the PRODUCT or Documentation by a customer within the [*]
period shall not be deemed acceptance. Failure by LUCENT to submit a written
rejection to SUPPLIER by the end of the [*] period shall be deemed acceptance.
LUCENT will provide a certified copy of the PRODUCT, without charge, to those
customers who received PRODUCT prior to certification and no payment will be due
to SUPPLIER for this certified PRODUCT.
B. If a PRODUCT or Documentation evaluated pursuant to paragraph A of this
Article is rejected, SUPPLIER agrees to use its best efforts to correct each
error leading to such rejection within [*] after receipt of notice from LUCENT
of such error. The corrected PRODUCT or Documentation shall be resubmitted for
acceptance testing within [*] following receipt of notice from LUCENT of such
errors. LUCENT shall have [*] after the resubmissions of such corrected PRODUCT
or Documentation to accept or reject such PRODUCT or Documentation. If the
corrected PRODUCT or Documentation passes the acceptance tests, SUPPLIER agrees
to deliver to LUCENT new Golden Master copies and/or Documentation incorporating
the corrections within two (2) business days, at no charge to LUCENT.
C. If the errors in a rejected PRODUCT or Documentation cannot be corrected
within the period specified in Paragraph B of this Section or if a resubmitted
PRODUCT or Documentation retested by LUCENT during the re-evaluation period is
again rejected, then LUCENT shall, at its option, (1) retain the PRODUCT or
Documentation at an equitable adjustment in price as may be agreed by the
parties, in which case the PRODUCT or Documentation shall be deemed accepted;
(2) afford SUPPLIER one or more extensions for a period or periods to be
specified by LUCENT without prejudice to LUCENT's rights to thereafter exercise
its option under either clause (1) or (3) of this paragraph if the errors have
not been corrected; or (3) terminate this Agreement upon [*] written notice.
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* Certain information in this exhibit has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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16. CONTINUED PRODUCT AVAILABILITY
SUPPLIER agrees to maintain and Support the PRODUCT, Demonstration Copies,
and Documentation described in Exhibit A for a minimum of [*] from the date of
expiration or termination of this Agreement. In no event will SUPPLIER be
obligated to provide Support unless such Support: (i) is being paid for in
accordance with the terms and provisions of a Maintenance Agreement, (ii) is
covered by the ninety (90) day warranty set forth in Section 18 hereof or (iii)
is being paid by an End User on a time and materials basis at the then current
rates of SUPPLIER for time and materials. In no event will an End User be
required to purchase a Maintenance Agreement. During said [*] period, LUCENT
shall have the right and license to continue to maintain and support its
customers who had been Sublicensed PRODUCT at the time of expiration or
termination of this Agreement. LUCENT shall not have the right to enter into new
Sublicenses after the expiration or termination of this Agreement without the
express written consent of SUPPLIER. SUPPLIER will notify LUCENT, in writing, of
any decision to discontinue production, marketing, licensing or the distribution
of PRODUCT for any reason including, without limitation, the availability of any
upgraded, improved, or changed PRODUCT within ten (10) days of said decision. In
no event shall said decision be less than ninety (90) days prior to the actual
date of discontinuance, nor shall said decision result in an inability of LUCENT
to properly service its Sublicensees as intended by this Agreement. Should any
such decision materially interfere with LUCENT's ability to reasonably serve its
customers, and SUPPLIER is unable or unwilling to provide a reasonable
alternative, LUCENT shall have the right to pursue remedial actions pursuant to
the Escrow Agreement.
17. MARKETING
LUCENT shall have complete authority to market or not market any or all of
the PRODUCT as it sees fit so long as LUCENT meets the payment obligations set
forth in this Agreement and does not otherwise violate SUPPLIER's rights in the
PRODUCT. Nothing in this Agreement shall be construed to obligate LUCENT to in
any way market, distribute, ship or otherwise utilize any PRODUCT or any portion
thereof. Specifically, this Agreement shall in no way be interpreted or
considered as placing a "best efforts" standard upon LUCENT with respect to the
marketing of any or all of the PRODUCT. Notwithstanding the foregoing during the
first two years of the term of this Agreement, if Lucent does not actively
market the PRODUCT during any twelve (12) month period, then SUPPLIER may cancel
this Agreement upon thirty (30) days written notice. If there is any dispute
between SUPPLIER and LUCENT with respect to whether the PRODUCT is being
actively marketed by LUCENT, then the parties may resort to the dispute
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* Certain information in this exhibit has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 18
resolution procedures hereunder.
18. WARRANTY
SUPPLIER warrants to LUCENT and its End Users all of the following:
A. The PRODUCT and Demonstration Copies will be delivered to LUCENT free from
significant errors, conforming to and performing in accordance with the
Documentation. The Golden Master media conveying the PRODUCT and Demonstration
Copies will be free from defects in material and workmanship and conform to
PRODUCT specifications and Documentation for the warranty period described
below, provided that the PRODUCT has not been altered or modified in violation
of the terms hereof or the terms of a Sublicense. The PRODUCT will be compatible
with and may be used in conjunction with other software as described in the
Documentation. SUPPLIER at its own cost will correct any bugs or errors in the
PRODUCT necessary to make the PRODUCT conform to the Documentation and
specifications and shall replace or correct any defective PRODUCT during the
warranty period. If it is not commercially reasonable for SUPPLIER to correct or
replace the defective PRODUCT then End User shall return the PRODUCT to LUCENT.
SUPPLIER will give a credit, on the next succeeding quarterly payment due from
LUCENT, subject to the limitation below, for the License Fees on the defective
PRODUCT returned to LUCENT. The warranty period will be for a period of ninety
(90) days and will be computed as follows: The ninety (90) day warranty period
to the End User will commence on either of the following dates: (1) in the event
the PRODUCT is installed by LUCENT or the SUPPLIER, then the said warranty
period will commence on the date that such installation is completed, or (ii) in
the event the installation of the PRODUCT is to be performed by the End User,
then the said warranty period will commence on the date the PRODUCT is shipped
by LUCENT to the End User. During any calendar year, the credit to be given to
LUCENT for defective PRODUCT returned by End Users will not exceed twelve and
one half (12.5%) per cent of the License Fees received by SUPPLIER during such
calendar year.
B. Support will be performed in a first-class, workmanlike manner in
accordance with generally accepted industry standards. If any Support does not
meet the above stated warranty, then it shall be performed in a conforming
manner at no additional cost to LUCENT or End Users.
C. There are no copy protection or similar mechanisms within the PRODUCT,
Demonstration Copies, or Documentation that will, either now or in the future,
interfere with the grants made in this Agreement.
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D. SUPPLIER knows of no claims by any third party that PRODUCT, Demonstration
Copies, or Documentation infringe any patent, copyright, or trademark, nor has
SUPPLIER been notified of any such potential claim.
E. As to PRODUCT for which SUPPLIER does not solely own all intellectual
property rights, SUPPLIER has full right, power and authority to license the
PRODUCT to LUCENT and its customers as provided in this Agreement.
F. LUCENT shall make all reasonable efforts to encourage End Users to
purchase Maintenance Agreements. If the End User does not have a Maintenance
Agreement then SUPPLIER shall have no obligation to End User other than the
warranty obligations for ninety (90) days as described above provided, however,
that SUPPLIER will, after the expiration of the warranty period, provide Support
on a time and material basis, the pricing of which will be set from time to time
by SUPPLIER.
G. To the best of SUPPLIER's knowledge and belief, the PRODUCT, and
Demonstration Copies do not contain any malicious code, program, or other
internal component (e.g. computer virus, computer worm, computer time bomb, or
similar component), which could damage, destroy, or alter PRODUCT, Demonstration
Copies, firmware, or hardware or which could, in any manner, reveal, damage,
destroy, or alter any data or other information accessed through or processed by
the PRODUCT in any manner. SUPPLIER shall immediately advise LUCENT, in writing,
upon reasonable suspicion or actual knowledge that the PRODUCT provided under
this Agreement may result in the harm described above. SUPPLIER shall indemnify
and hold LUCENT and its customers harmless from any damage resulting from the
harm described above.
H. PRODUCT will record, store, process and present calendar dates falling on
or after January 1, 2000, in the same manner and with the same functionality as
it performed before January 1, 2000. The PRODUCT will process both twentieth
(20th) Century and Twenty-first (21st) dates Century simultaneously, the date
field will not be converted back to a two-digit field during processing and all
screens within the PRODUCT have been designed to accept a four (4) digit field.
This maintenance will be considered part of and covered under the maintenance
provisions of the Agreement at no additional charge to LUCENT.
I. All warranties shall survive inspection, acceptance and payment.
THE WARRANTIES ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING THE
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IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
19. LIMITATION OF LIABILITY
EXCEPT FOR PERSONAL INJURY, NEITHER LUCENT NOR SUPPLIER, THEIR
SUBSIDIARIES, AFFILIATES, DIRECTORS, OFFICERS, OR EMPLOYEES SHALL BE LIABLE FOR
ANY INCIDENTAL, INDIRECT, SPECIAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES OR FOR
LOST PROFITS, WHETHER FORESEEABLE OR UNFORESEEABLE, BASED ON CLAIMS OF THE OTHER
PARTY (INCLUDING, BUT NOT LIMITED TO, CLAIMS FOR LOSS OF DATA, GOODWILL, USE OF
MONEY, OR USE OF THE PRODUCTS, INTERRUPTION IN USE OR AVAILABILITY OF DATA,
STOPPAGE OF OTHER WORK, OR IMPAIRMENT OF OTHER ASSETS) ARISING OUT OF BREACH OR
FAILURE OF EXPRESS OR IMPLIED WARRANTY, BREACH OF CONTRACT, MISREPRESENTATION,
NEGLIGENCE, STRICT LIABILITY IN TORT, OR OTHERWISE.
20. TECHNICAL SUPPORT
If, at any time during the term of this Agreement or during the five (5)
years after its expiration or termination, LUCENT discovers or identifies
because of its own direct efforts and not because of information generated from
End Users or Subdistributors, a bug or other error in the PRODUCT that
interferes with its performance in accordance with the Documentation, SUPPLIER
shall correct such bug or error within the time frames set forth in the
Maintenance Agreement referenced in Exhibit D consistent with the severity
levels described in such Maintenance Agreement, provided that the Release of the
PRODUCT in question is then currently being supported by SUPPLIER. Any and all
Services performed by SUPPLIER to correct such bugs or error in PRODUCT shall be
performed at no additional cost, beyond the maintenance fees set forth in
Exhibit B. SUPPLIER shall have no obligation to correct any bug or error for
End Users unless such End User is under warranty or Maintenance Agreement or is
willing to pay for such corrective action on a time and materials basis.
Notwithstanding the foregoing, in the event an End User has terminated its
Maintenance Agreement in accordance with such Maintenance Agreement and
identifies a bug or error and reports same to LUCENT, LUCENT shall communicate
same to SUPPLIER. SUPPLIER shall examine the bug or error and determine the
applicable resolution. Should SUPPLIER determine that said bug or error is the
result of the specific
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use of the PRODUCT by the End User and is not related to the documented
specifications and functionality of the PRODUCT, SUPPLIER shall provide LUCENT
either separate bug fix or workaround patch to remedy the problem
or integrate the fix into the next Maintenance Release of the PRODUCT which
shall be distributed by LUCENT to its current End Users under a Maintenance
Agreement or to those willing to pay for the Maintenance Release on a time and
materials basis. Should the original reporting End User wish to receive the bug
fix or workaround patch, SUPPLIER reserves the right to charge the End User for
such correction.
In the event LUCENT believes that SUPPLIER is not making reasonable
efforts to respond to reported bugs and/or errors in the PRODUCT, LUCENT
reserves the right to suspend sale and distribution of the PRODUCT until
SUPPLIER has provided sufficient assurances that it will comply with its
obligations under this Agreement
21. TRAINING
A. SUPPLIER shall make available to LUCENT those training services defined in
Exhibit C of this Agreement.
B. LUCENT shall be granted the right and license to obtain and distribute
course or training materials from SUPPLIER at no charge.
C. LUCENT shall also have a royalty-free license to use, reproduce and
distribute fact sheets, brochures and other promotional literature for PRODUCT.
22. END USER SUBLICENSES
A. LUCENT, or its Subdistributor shall enter into a written Sublicense with
each End User to whom PRODUCT is Sublicensed. The Sublicense agreements shall
include the following provisions:
1. Acknowledgment that other than warranty or maintenance
obligations of SUPPLIER, LUCENT and/or Subdistributor shall
assume sole liability vis-a-vis the End User and/or
Subdistributor.
2. Shall be independent of this Agreement and shall survive
the termination of this Agreement.
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3. All the provisions set forth the form of SUPPLIER's end
user license attached hereto as Exhibit F, unless otherwise
agreed by the parties,
4. In the event that LUCENT enters into a Sublicense that
deviates in the provisions of (i), (ii) or (iii) above, then
such deviation shall not be deemed to be a breach of this
Agreement, provided that, LUCENT indemnifies and holds the
SUPPLIER harmless with respect to any damages directly caused by
such deviation.
LUCENT will maintain a copy of each Sublicense. LUCENT will use reasonable
efforts to ensure each Sublicense agreement includes the aforementioned terms
and conditions. However, failure to do so shall not be deemed a breach of this
Agreement. In that event, LUCENT will defend, indemnify, and hold SUPPLIER
harmless for any direct, proven damages proximately caused by LUCENT's failure
to include such terms and conditions. If LUCENT learns of any breach of a
Sublicense that could harm SUPPLIER, LUCENT shall take prompt commercially
reasonable, corrective action to remedy the breach and/or obtain other
appropriate relief and shall, in addition, immediately notify SUPPLIER in
writing of breach and corrective action undertaken. The execution of these
duties by LUCENT shall not preclude SUPPLIER from also undertaking corrective
action. In addition, if a breach in a Sublicense occurs that would, in the
opinion of SUPPLIER, result in irreparable harm to SUPPLIER, unless injunctive
or other equitable relief is entered into to restrain the violation, LUCENT
SHALL (i) use reasonable efforts of LUCENT to obtain such equitable relief as
promptly as reasonably possible; or (ii) assign the rights of LUCENT or
Subdistributor under the Sublicense to SUPPLIER to allow SUPPLIER to seek such
equitable relief. The foregoing obligations of LUCENT to enforce each Sublicense
as necessary to protect the interest of SUPPLIER shall survive the expiration or
termination of this Agreement.
Neither party shall make any representations or warranties to any third
party that would in any way would be or purport to be binding on the other party
unless such representation or warranty is pursuant to the terms of this
Agreement or unless the party to be bound expressly agrees in advance to such
representation or warranty.
23. TERM, TERMINATION AND DEFAULT
The term of this Agreement shall be three (3) years from its effective
date unless earlier terminated pursuant to this Agreement. No later than twelve
(12) months prior to the initial term or any renewal period of this Agreement,
the parties shall reach an agreement on whether to extend the term of the
Agreement for an additional one (1) year
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beyond the then scheduled expiration date. Failure by the parties to reach such
agreement to extend the term or agreement by the parties not to extend the
term shall mean that the Agreement shall expire on the expiration date then
scheduled. Additionally, either party may terminate this Agreement if the other
party is in default. A party to this Agreement is said to be in default if it
commits a material breach or if it ceases normal operations or becomes
insolvent.
In no event shall either party terminate by reason of any such default
unless written notice detailing such default is given to the other party. The
other party shall thereafter have thirty (30) days after such written notice to
correct such default; or, if said default cannot reasonably be corrected within
said thirty (30) days, the other party shall begin substantial corrective action
within said thirty (30) days and shall proceed promptly to correct said default.
If such corrective action is not completed within sixty (60) days after such
written notice, the party not in default may at its option terminate this
Agreement.
Upon expiration or termination of this Agreement for any reason, each
party shall return and make no further use of the property, materials and other
items (and all copies thereof) belonging to the other party and relating to this
Agreement except for any and all such property, material and other items,
including but not limited to Golden Masters, specifications, work-around lists,
and Documentation, needed by the parties to perform those functions and duties
that survive expiration or termination of this Agreement.
If this Agreement expires or is terminated for any reason other than
default by SUPPLIER, the licenses granted under this Agreement are terminated,
except that:
(i) LUCENT may continue to utilize such licenses to the extent
necessary for LUCENT to fulfill its support and maintenance
obligations, if any, to its existing customers; and
(ii) Licenses granted by LUCENT prior to termination of this
Agreement, and LUCENT payment obligations, if any, with respect
to PRODUCT ordered and received prior to expiration or
termination and with respect to continuing Support and any other
support services set forth in Exhibit D, shall survive; and
(iii) Upon termination of this Agreement for reason of default by
SUPPLIER, all the licenses granted to LUCENT under this Agreement
shall continue until the end of the term or extension, as the
case may be, that would have been in effect pursuant to paragraph
A of this Article in the absence of such termination for default.
Upon the conclusion of such term
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or extension, LUCENT's rights and obligations with respect to
such licenses shall terminate, except for the surviving rights
and licenses as specified in the Agreement, including but not
limited to clauses (i) and (ii) above.
24. INDEMNIFICATION
SUPPLIER represents and warrants that it now has and will retain the
sufficient right, title and interest in the PRODUCT to make this Agreement.
SUPPLIER shall indemnify LUCENT for any loss, damage, expense or liability
resulting from, and agrees to defend at its expense any suit against LUCENT or
its customers based upon, a claim that SUPPLIER does not have sufficient right,
title, and interest in any of the PRODUCT to make this Agreement, or that any of
the PRODUCT violates a trade secret or infringes a patent, a copyright or a
Tradename. The foregoing shall not prohibit LUCENT from retaining its own
counsel at its own expense and participating in the suit. Such indemnity
includes, but is not limited to, the amount of any settlement or the damages and
costs (including attorneys' fees, if any) awarded in any such suit. LUCENT shall
promptly notify SUPPLIER in writing of any notice of claim or of threatened or
actual suit, and at SUPPLIER's request and expense, shall afford SUPPLIER
cooperation for the defense or settlement of the same; provided, however, that
SUPPLIER shall not make any statement on LUCENT's behalf that would constitute
an admission against interest by LUCENT, nor enter into any settlement adversely
affecting LUCENT rights, without the prior written consent of LUCENT, which
consent shall not be unreasonably withheld, delayed or qualified. Nor shall
LUCENT enter into a settlement without the prior written consent of SUPPLIER,
unless such consent is unreasonably withheld in which case LUCENT shall enter
into such settlement and then rely upon the dispute resolution process set forth
in Section 34 to establish the amount of the settlement to be indemnified by
SUPPLIER. Upon a settlement, or in the event of an award adverse to LUCENT in
any such action, SUPPLIER shall post bond or the security acceptable to LUCENT
in an amount sufficient to insure payment in full of such settlement or such
damages and costs, as the case may be.
In the event a suit is initiated, or is reasonably likely, or an
injunction is entered against LUCENT in such suit wherein LUCENT is enjoined
from using such PRODUCT, SUPPLIER shall use commercially reasonable efforts to
procure for LUCENT the right to continue to use the PRODUCT or replace or modify
such PRODUCT to make them non-infringing. Any such replacement or modification
shall meet substantially the specifications set out in Exhibit A. The provision
of such replacement or modification shall not relieve SUPPLIER of the
obligations set forth in the preceding paragraph. The replacement or
modification shall be considered a PRODUCT subject to all terms and
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conditions including acceptance) under this Agreement.
Each party agrees to notify the other party immediately if any U.S. or
foreign patent is cited against the PRODUCT or if any legal action of the type
contemplated in this Article is commenced or threatened.
Notwithstanding any other provision contained in this Agreement, if an End
User is damaged during a time that a warranty or Maintenance Agreement is in
effect, either by a failure of a PRODUCT to perform according to the
Documentation or specifications, or a failure of the PRODUCT to meet
representations made to the End Users by SUPPLIER or by LUCENT with SUPPLIER's
written approval, or due to virus contained in Product, and said End User
obtains a judgment or reaches a settlement with LUCENT damages in accordance
with the provisions hereof, SUPPLIER shall indemnify and hold LUCENT harmless
for said judgment or settlement, subject to the following cap: (i) the License
Fee paid to SUPPLIER by LUCENT for the PRODUCT for that End User. (ii) a percent
of the judgement or settlement, said percent equal to the percent computed by
dividing the License Fee paid to SUPPLIER by LUCENT by the Sublicense fee billed
by Lucent to the End User, or (iii) $25,000, whichever is greater. In no event
shall SUPPLIER indemnify LUCENT for an amount greater than the judgment or
settlement. In the event that it appears likely that LUCENT will be entering
into a settlement with an End User for such a claim, it will so advise SUPPLIER,
who shall have the right to consult with LUCENT regarding the claim. If LUCENT
agrees to a settlement which is not consented to in writing by SUPPLIER,
SUPPLIER may resort for relief to the dispute resolution provisions of Section
34 hereof. LUCENT shall indemnify and hold SUPPLIER harmless with respect to any
claims, judgements or settlements, which do not relate to the PRODUCT or which
are based on unauthorized representations and warranties of LUCENT. Where an End
User is damaged through the actions and/or products of both LUCENT and SUPPLIER,
the damages shall be apportioned between the parties based upon mutual
agreement, or in the absence of such agreement, pursuant to Section 34. Any
refusal by one party to indemnify the other party under this paragraph shall be
resolved pursuant to Section 34.
25. COPYRIGHT NOTICE
LUCENT will not alter or delete any SUPPLIER copyright notice appearing on
the container or labels of the PRODUCT in object form.
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26. ASSIGNMENT
SUPPLIER shall not assign any right or interest under this Agreement
(excepting monies due or to become due) nor delegate any work or other
obligation to be performed by or owed under this Agreement without the prior
written consent of LUCENT, which consent shall not be unreasonably withheld,
delayed, or qualified. Any attempted assignment or delegation in contravention
of the above provisions shall be void and ineffective. Any assignment of monies
shall be void and ineffective to the extent that (1) SUPPLIER shall not have
given LUCENT at least thirty (30) days prior written notice of such assignment
and (2) such assignment attempts to impose upon LUCENT obligations to the
assignee additional to the payment of such monies, or to preclude LUCENT from
dealing solely and directly with SUPPLIER in all matters pertaining to this
Agreement including the negotiation of amendments or settlements of charges due.
[*]
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[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
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[*]
27. USE OF TRADENAME
LUCENT may use SUPPLIER's trademarks, tradenames, and tradedress
(hereafter "Tradename") in marketing the PRODUCT under the following conditions:
In order to enable SUPPLIER to maintain control of the use of its
Tradename, LUCENT agrees to submit samples of the usage of said Tradename to
SUPPLIER for its review and approval which approval will not be unreasonably
withheld. PRODUCT and materials Generated and released by LUCENT will be
consistent with the samples reviewed by SUPPLIER,
A. The rights of LUCENT to use or any Tradename of SUPPLIER will cease at the
termination of this Agreement.
B. Use of SUPPLIER Tradenames by LUCENT will bear no royalty.
C. All rights and goodwill in any SUPPLIER Tradename will remain with
SUPPLIER (except the rights specifically licensed in this Agreement) and any use
by LUCENT of any such Tradename will inure to the benefit of SUPPLIER.
D. SUPPLIER shall supply to LUCENT a list of the countries where SUPPLIER's
rights to use a Tradename have been established by registration or other
appropriate official procedures and will update such list as appropriate during
the term of this Agreement; and if no registration has been made in any country,
SUPPLIER shall so state. LUCENT shall have the option (i) to request SUPPLIER to
seek such registration, which request shall not be unreasonably denied or
delayed; or, (ii) at LUCENT's own expense, to seek such registration in any
country on behalf of SUPPLIER. If SUPPLIER seeks such registration upon LUCENT's
request, and if SUPPLIER so requests, LUCENT shall reimburse SUPPLIER for the
reasonable, direct costs of such registration, and such amounts shall then be
deducted from the License Fees subsequently paid by LUCENT for
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PRODUCT Sublicensed by LUCENT in the corresponding country.
E. LUCENT shall have the right to display its tradename and/or accompanying
language stating its involvement with SUPPLIER's PRODUCT on PRODUCTS,
DOCUMENTATION, and other materials distributed and licensed under this
Agreement. LUCENT agrees to submit samples of the usage of said Tradename and
language to SUPPLIER for its review and approval, which approval will not be
unreasonably withheld. PRODUCT, DOCUMENTATION, and other materials generated and
released by LUCENT will be consistent with the samples reviewed by SUPPLIER. If
use of LUCENT's Tradename or language on any PRODUCT or DOCUMENTATION requires
SUPPLIER to incur costs to modify such PRODUCT or DOCUMENTATION, LUCENT shall
reimburse SUPPLIER for such reasonable direct costs as long as LUCENT is advised
in advance of those costs.
F. If, at any time during the term of this Agreement and for five (5) years
after its expiration or termination, SUPPLIER decides to the change the name
under which the PRODUCT is marketed , it shall provide one hundred twenty (120)
days notice of such change to LUCENT. Further, SUPPLIER shall provide to LUCENT
evidence that the new name has been successfully registered in the United States
and every country in which the PRODUCT was substantially licensed prior to the
name change. SUPPLIER shall indemnify and hold LUCENT harmless for any damages
LUCENT incurs as a result of SUPPLIER's failure to obtain sufficient right,
title, and interest in the new name or to ensure that the new name does not
infringe any copyright or Tradename. Further, SUPPLIER's obligations to
indemnify LUCENT under the indemnification provision of Section 24 shall apply
to new names for PRODUCTS to the same degree as they applied to all other
SUPPLIER Tradenames.
28. CONFIDENTIALITY
During the Term of this Agreement, each party shall have access to
"Confidential Information" of the other. For purposes hereof, "Confidential
Information" shall mean all trade secrets, know-how, source code, and other
proprietary information regarding the PRODUCT, as well as all materials, data,
systems, procedures, financial information, customers, vendors, suppliers,
strategies and other business and technical information of the other which is
not readily accessible or otherwise known to the general public, and which, if
in written, graphic, physical or machine readable form, is appropriately labeled
as Confidential Information, or, if disclosed orally, is identified by the
disclosing party at the time of such disclosure as Confidential Information and
the disclosing party provides the recipient with written confirmation within
thirty (30) days thereafter referencing the
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date of disclosure and describing the information so disclosed as Confident
Information. Without limiting the Generality of the foregoing, all information
heretofore disclosed and designated Confidential shall be deemed Confidential
Information hereunder and hereafter subject to the restrictions imposed hereby.
Except as expressly permitted by the terms of this Agreement, neither party
hereto shall, during the term of this Agreement or thereafter, use, publish or
divulge the other party's Confidential Information without the written consent
of the other. The foregoing prohibition on disclosure shall not, however,
preclude either party from disclosing Confidential Information of the other to
their employees as long as the Confidential Information is used solely in
furtherance of this Agreement. In addition to the restrictions and limitations
on disclosure set forth herein, LUCENT and SUPPLIER at all times shall use
reasonable efforts to protect the unauthorized disclosure or use of Confidential
Information, which reasonable efforts shall require at least the same degree of
care in protecting the Confidential Information of the other as used to protect
their own such Confidential Information. The respective obligations of LUCENT
and SUPPLIER regarding Confidential Information shall not apply to such
Confidential Information which the recipient can show: (1) was already known to
the recipient prior to its disclosure; (2) was publicly available at the time of
its disclosure or subsequently has become so without violation by the recipient
of its confidentiality obligations hereunder, (3) was rightfully received from
third parties without obligations of confidentiality to the disclosing party;
(4) was approved in writing by the disclosing party for release by tile
recipient without restriction; (5) was independently developed by the recipient
as as substantiated by appropriate evidence; or (6) was disclosed because of
court order or government regulation, provided that prior to making any such
disclosure pursuant to order or regulation, the recipient shall promptly notify
the disclosing party and, upon the disclosing party's request, the recipient
shall cooperate with the disclosing party in contesting or avoiding such
disclosure at the sole cost and expense of the disclosing party.
From time to time, LUCENT shall be asked by End Users or potential
customers about new or future features, function, capabilities, operating
environments, interfaces, device drivers, servers, and clients associated with
PRODUCT and their scheduled availability in the market. Notwithstanding anything
contained herein to the contrary, LUCENT shall be permitted to disclose such
information even though such information may be deemed Confidential Information.
LUCENT shall disclose such information only when such disclosure is reasonably
intended to further market opportunities for PRODUCT or when responding to
reasonable inquiries from End Users. No prior consent is required by SUPPLIER.
for such disclosure unless such information was originally given to LUCENT by
SUPPLIER with specific prohibitions against such disclosure. Where appropriate,
LUCENT shall disclose such information after the recipient has signed a
Non-Disclosure Agreement covering such information, but LUCENT shall not be in
breach of the Agreement for disclosure of such information in the absence of
such Non-Disclosure
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Agreement.
The terms and conditions of this Agreement are confidential and shall not
be disclosed to third parties, without the written agreement of both parties
hereto, except to the extent required by a court or regulatory agency of
competent Jurisdiction. LUCENT is allowed to mention in its promotional
literature and advertising that the licensed PRODUCT has been provided to LUCENT
by SUPPLIER. SUPPLIER shall not issue or release for publication any articles or
advertising or publicity matter relating to work under this Agreement or
mentioning or implying the name or identification of LUCENT, any of its
Affiliates or any of their respective personnel, unless prior written approval
is granted by LUCENT. The term "identification" includes any trade name,
trademark, service mark, insignia symbol or any simulation thereof.
29. EXPORT
LUCENT shall not export the PRODUCT, or any other information supplied to
LUCENT by SUPPLIER under this Agreement, contrary to the laws of the United
States. SUPPLIER shall not export any LUCENT Information, or any other items
supplied to SUPPLIER under this Agreement by LUCENT, contrary to the laws of the
United States.
30. LUCENT RIGHT TO COMPARABLE PRODUCT
This Agreement does not grant to SUPPLIER any exclusive privileges or
rights related to supplying to LUCENT any products or services comparable to the
PRODUCT, and LUCENT may contract with other manufacturers and suppliers for the
development or procurement of such comparable products and services. This
Agreement does not grant to LUCENT any exclusive privileges or rights related to
licensing the PRODUCT and SUPPLIER may license the PRODUCT to third parties.
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31. NOTICES AND REQUESTS
Any notice or request which, under the terms of this Agreement or under
any statute, must or may be given or made by SUPPLIER or LUCENT shall be in
writing and shall be given or made by telegram or similar communication or by
certified or registered mail addressed to the respective parties as follows:
To: Lucent Technologies Inc.
211 Mt. Airy Rd.
Room 2E404
Basking Ridge, New Jersey 07920
Attn: Bill Riley
and, if the notice relates in any way to an alleged breach of this Agreement,
to:
Hal Bretan, Esq.
Lucent Technologies Inc.
219 Mt. Airy Road
Room 2F224
Basking Ridge, NJ 07920
To: SUPPLIER:
Nabnasset Corporation
15 Craig Road
Acton, MA 01720
Attn: Chief Executive Officer
and, if the notice relates in any way to an alleged breach of this Agreement, to
the aforementioned address with a copy to:
John T. Lynch, Esq.
Davis, Malm & D'Agostine, P. C.
One Boston Place
Boston, MA 02108
Such notice or demand shall be deemed to have been given or made when sent
by telegram or other communication or when deposited, postage prepaid in the
U.S. mail.
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The above addresses may be changed at any time by giving prior written notice
as above provided.
32. CONTROLLING LAW
The construction, interpretation and performance of this Agreement and all
transactions under it shall be governed by the laws of the State of New Jersey,
excluding its choice of law rules, and SUPPLIER further consents to jurisdiction
by the state and federal courts sitting in the State of New Jersey and any court
wherein an action is commenced against LUCENT based on a claim for which
SUPPLIER had indemnified LUCENT under this Agreement. Process may be served on
SUPPLIER by U.S. Mail, postage prepaid, certified or registered, return receipt
requested, or by such other method as is authorized by law.
33. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between LUCENT and
SUPPLIER with respect to the subject matter hereof and shall not be amended or
modified without specific written provision to that effect, signed by the
parties. No oral statement, prior written correspondence, prior dealings, any
prior communication, or any understandings of any nature of or by any person
whomsoever shall, in any manner or degree, modify or otherwise affect the terms
and provisions of this Agreement. Additional or different terms inserted in this
Agreement by either party, or deletions thereto, whether by alterations,
addenda, or otherwise, shall be of no force and effect, unless expressly
consented to by the other party in writing.
34. DISPUTE RESOLUTION
If a dispute arises out of or relates to this Agreement, or its breach,
and said dispute cannot be resolved through direct negotiations between the
parties, the parties agree to submit the dispute to non-binding mediation by a
sole mediator selected by the parties or, in the absence of an agreement on a
mediator, by the American Arbitration Association ("AAA"). If not thus resolved
by the parties within thirty (30) days of the onset of mediation, the parties
shall submit the dispute to binding arbitration by the AAA, which arbitration
shall be governed by the United States Arbitration Act, and judgment on the
award may be entered in any court having jurisdiction. The arbitrator may not
limit, expand, or otherwise modify the terms of this Agreement, nor may the
arbitrator award punitive damages. The parties, their representatives and
witnesses, and the mediator
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and/or arbitrator shall hold the existence, content, and result of mediation and
arbitration in confidence.
35. GENERAL
If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable the entire Agreement, but rather the entire Agreement shall
be construed as if not containing the particular invalid or unenforceable
provision or provisions, and the rights and obligations of SUPPLIER and LUCENT
shall be construed and enforced accordingly.
Subject to limitations set forth in this Agreement, this Agreement will
inure to the benefit of and be binding upon the parties, their successors,
administrators, heirs and assigns.
36. FORCE MAJEURE
The obligations of LUCENT and SUPPLIER under this Agreement shall be
temporarily suspended in the event of strikes, riots, war, invasion, fire,
explosion, accident, delays in carriers, acts of God and all other delays beyond
the obligated party's reasonable control, and any failure to perform by that
party as a result of any such interference or interruption shall not be deemed a
default. Performance may be suspended for the period of any such delay. The
party whose performance is suspended shall notify in writing the other party
within fifteen (15) days of such suspension. In the event that the performance
by one party is delayed by at least sixty (60) days for any reason contemplated
in this Article, the other party may elect to terminate this Agreement on
written notice.
37. AGREEMENT TITLE AND ARTICLE HEADINGS
The title and Article headings of this Agreement are inserted for
convenience only and are not intended to affect the meaning or interpretation of
this Agreement.
38. IMPLEADER
SUPPLIER shall not implead or bring an action against LUCENT and its
customers or the employees of either, based on any claim by any person for
personal injury or death that occurs in the course or scope of employment of
such person by LUCENT and its customers and that arises out of PRODUCT or
services furnished by SUPPLIER under this Agreement.
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39. EXCLUSION OF LICENSES
No licenses, express or implied, under any patents or copyrights are
granted by LUCENT to SUPPLIER under this Agreement.
40. NON-WAIVER
No course of dealing or failure of either party to strictly enforce any
term, right or condition of this Agreement shall be construed as a waiver of
such term, right or condition.
41. INSURANCE AND LIABILITY
SUPPLIER shall maintain and cause SUPPLIER's subcontractors to maintain
during the term of this Agreement: (1) Workers' Compensation insurance as
prescribed by the law of the state or nation in which the work is performed, (2)
employer's liability insurance with limits of at least $300,000 each occurrence,
and (3) comprehensive automobile liability insurance if the use of motor
vehicles is required, with limits of at least $1,000,000 for bodily injury and
property damage for each occurrence and (4) Comprehensive General Liability
(CGL) insurance, including Blanket Contractual Liability, and Broad Form
Property damage, with limits of at least $1,000,000 combined single limit for
personal injury and property damage for each occurrence, and (5) if the
furnishing to LUCENT (by sale or otherwise) of products or material is involved,
CGL insurance endorsed to include products liability and completed operations
coverage in the amount of $5,000,000 for each occurrence. All CGL insurance
shall designate LUCENT as an additional insured. All such insurance must be
primary and required to respond and pay prior to any other available coverage.
SUPPLIER agrees that SUPPLIER, SUPPLIER's insurer(s) and anyone claiming
by, through, under or in SUPPLIER's behalf shall have no claim, right of action
or right of subrogation against LUCENT and its customers based on any loss or
liability insured against under the foregoing insurance. SUPPLIER and SUPPLIER's
subcontractors shall furnish prior to the start of work certificates or adequate
proof of the foregoing insurance, including copies of the endorsements and
insurance policies. Such insurance policies or endorsements shall provide that
LUCENT be notified in writing at least thirty (30) days prior to cancellation of
or any change in the policy.
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All persons furnished by SUPPLIER shall be considered solely SUPPLIER's
employees or agents, and SUPPLIER shall be responsible for payment of all
unemployment, social security and other payroll taxes, including contributions
from them when required by law. SUPPLIER agrees to indemnify and save harmless
LUCENT, its affiliates and its customers and their officers, directors,
employees, successors and assigns (all hereinafter referred to as LUCENT) from
and against any losses, damages, claims, demands, suits, liabilities and
expenses (including reasonable attorney's fees) that arise out of or result
from: (1) injuries or death to persons or damage to property, including theft,
in any way arising out of or occasioned by, caused or alleged to have been
caused by or on account of the performance of the work or services performed by
SUPPLIER or person furnished by SUPPLIER, (2) assertions under Worker's
Compensation or similar acts made by persons furnished by SUPPLIER or by a
subcontractor, or by reason of any injuries to such persons for which LUCENT
would be responsible under Worker's Compensation or similar acts if the persons
were employed by LUCENT, or (3) any failure by SUPPLIER to perform SUPPLIER's
obligations under this Article. SUPPLIER agrees to defend LUCENT at LUCENT
request, against any such claim, demand or suit. LUCENT agrees to notify
SUPPLIER within a reasonable time of any written claims or demands against
SUPPLIER for which SUPPLIER is responsible under this Article.
42. COMPLIANCE WITH LAWS
SUPPLIER and all persons furnished by SUPPLIER shall comply with the Fair
Labor Standards Act and the Occupational Safety and Health Act and all other
federal, state, and local laws, ordinances, regulations and codes, including
identification and procurement of required permits, certificates, approvals and
inspections, in performance under this Agreement. SUPPLIER agrees to indemnify
LUCENT and its End Users any loss or damage that may be sustained by reason of
any failure to do so. LUCENT and all persons furnished by LUCENT shall comply
with the Fair Labor Standards Act and the Occupational Safety and Health Act and
all other federal, state, and local laws, ordinances, regulations and codes,
including identification and procurement of required permits, certificates,
approvals and inspections, in performance under this Agreement. LUCENT agrees to
indemnify SUPPLIER from any loss or damage that may be sustained by reason of
any failure to do so.
43. RELEASES VOID
Neither party shall require waivers or releases of any personal rights
from representatives or customers of the other in connection with visits to its
premises and both
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parties agree that no such releases or waivers shall be pleaded by them or third
persons in any action or proceeding.
44. PLANT RULES AND GOVERNMENT CLEARANCE
All persons furnished by SUPPLIER shall, while on the premises of LUCENT
and End Users, comply with all plant rules and regulations and, required by
government regulations, submit satisfactory clearance from the U.S. Department
of Defense and other federal authorities concerned. All persons furnished by
LUCENT shall, while on the premises of SUPPLIER comply with all plant rules and
regulations and, required by government regulations, submit satisfactory
clearance from the U.S. Department of Defense and other federal authorities
concerned.
45. SURVIVAL OF OBLIGATIONS
Both parties acknowledge and agree that the obligations set forth herein,
which by their nature are intended to survive, including but not limited to the
Articles entitled: DELIVERABLES, USE OF INFORMATION, WARRANTY, INDEMNIFICATION,
COMPLIANCE WITH LAWS, and INSURANCE AND LIABILITY, CONTROLLING LAW, GENERAL,
RELEASES VOID, ESCROW AGREEMENT and TERM, TERMINATION AND DEFAULT shall survive
expiration or termination of this Agreement.
46. HARDWARE AND SOFTWARE DEVELOPMENT ASSISTANCE
The parties have agreed that in furtherance of this Agreement it may
become necessary for LUCENT to provide SUPPLIER direct access to LUCENT's
hardware and software. Based upon this understanding, the parties have agreed to
either execute a mutually satisfactory addendum to this Agreement which must be
executed by both parties or a mutually satisfactory separate agreement to
address various issues which arise because of such arrangement, including
without limitation, the cost of hardware, software and support of such LUCENT
equipment to SUPPLIER.
47. EXHIBITS INCORPORATED
Exhibits A through F and Attachment 1 are included herein and made a part
hereof.
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IN WITNESS WHEREOF, the parties have executed this Software Distribution
Agreement between Lucent Technologies Inc. and Nabnasset Corporation. All signed
copies of this Agreement shall be deemed originals.
Lucent Technologies Inc. Nabnasset Corporation
Dated: May 5, 1991 Dated: May 2, 1997
----------------------------- -----------------------------
By: [Signature Illegible] By: DUNCAN I. MACKAY
-------------------------------- --------------------------------
Name (Print): [Illegible] Name (Print): Duncan I. MacKay
---------------------- ----------------------
Title: Vice President Sales and Title: Executive Vice President
Service
----------------------------- -----------------------------
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<PAGE> 38
EXHIBIT A
PRODUCT TO BE DELIVERED BY SUPPLIER
Unless otherwise specified herein, all capitalized terms used in this Exhibit
shall have the same meaning as described in the Agreement.
1. DEFINITIONS
PRODUCT
The term PRODUCT as used herein shall mean the most current version of
SUPPLIER'S software PRODUCTs currently known as Voice Enhanced Service Platform
(VESP(R)) and its components: Core (VDU Server, ORB Server, Directory Server,
History Server and Alarm Server), WAN, Multi-Wan, Telephony, IVR, Web,
Management Console (ManCon), Report, Path (includes Scripter and CQS), Recall,
Agent, Desk-Link (help desk module) and Test-Link (Hammer integration module)
together with all related documentation, and internal databases, made
commercially available by SUPPLIER to its customers, or distributors and shall
also include any New Modules made available by SUPPLIER.
The parties agree that Releases and New Modules which are released by the
SUPPLIER shall be incorporated into and made part of the pricing tables
included in Exhibit B.
If at any time SUPPLIER changes the name of the PRODUCT or any of its
components, the new name or names shall be substituted in this Agreement and
will include all functionality as referenced herein.
VESP(R) is a registered trademark of SUPPLIER.
2. DELIVERABLE ITEMS
For each PRODUCT provided to LUCENT by SUPPLIER under this Agreement, SUPPLIER
shall furnish:
(i) Object Code on the appropriate media (3 copies);
(ii) all printed Documentation applicable to (i) (3 copies);
1A
<PAGE> 39
Note: At the recipient's option, Documentation may be sent electronically via a
file transfer from SUPPLIER.
(iii) training per Exhibit C;
(iv) Technical Support per Exhibit D; and
(v) Demonstration Copies including sample integrations
3. ACCEPTANCE
The PRODUCE will be deemed accepted by LUCENT if the PRODUCT functions and
performs substantially in accordance with the Documentation and specifications
at the time of installation. Acceptance and/or rejection of the PRODUCT shall
be documented as described in Section 15, "Acceptance" of the Agreement.
4. PERFORMANCE OF THE PRODUCT
PRODUCT performance will be established by LUCENT upon installation and
implementation of PRODUCT by LUCENT and verification that the PRODUCT performs
substantially in accordance with the Documentation.
5. INSTALLATION REQUIREMENTS
All steps required for installation shall be clearly documented in the
Installation Chapter of the user Documentation or an accessible README file
provided with the PRODUCT.
All new Releases and/or New Modules when loaded will modify only files,
directories and databases which are part of the PRODUCT. The PRODUCT operates
with two (2) fixed format databases that do not change from Release and as a
result, the End-User's business data should not be impacted by a new Release
and/or New Module since the End User's applications accesses such business data
from an End User's customized server. The End User should always verify their
business data after the installation of any such Release and/or New Module.
2A
<PAGE> 40
6. ON LINE ASSISTANCE FEATURES
An on line help command shall be provided in addition to a README file for the
initial copy of the PRODUCT and all new releases and enhancements. These files
shall contain:
o Installation requirements
o General description of the application
o Known caveats
o Compatibility requirements
o Release changes (what's new in this release)
3A
<PAGE> 41
EXHIBIT B
PAYMENT SCHEDULE
Unless otherwise specified herein, all capitalized terms used in this Exhibit
shall have the same meanings as described in the Agreement.
LUCENT will take orders for the PRODUCT, replicate and package the PRODUCT,
bill End Users and make payments of the License Fees to SUPPLIER on a
quarterly basis in accordance with the schedules set forth in the following
tables. [*]
[*}
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
1B
<PAGE> 42
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
2B
<PAGE> 43
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
3B
<PAGE> 44
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
4B
<PAGE> 45
MAINTENANCE PRICING
Within [*] days from the end of each quarter, SUPPLIER will send
payment to LUCENT equal to the percentage specified as commission associated
with SUPPLIER's Maintenance Agreements sold by Lucent during the quarter.
Unless otherwise specified by LUCENT, SUPPLIER shall send payment to the
address stated in the "Notices" section of the Agreement.
SUPPLIER's Maintenance Agreement shall be sold by LUCENT according to the
following Table**
<TABLE>
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Term of Maintenance Agreement (years) 1 2 3 4 5
Commission [*] [*] [*] [*] [*]
Maintenance price to End User** [*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------
</TABLE>
[*]
[*]
[*]
*** Maintenance Pricing shall be adjusted in accordance with the provisions of
Section 12 of this Agreement.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
5B
<PAGE> 46
In the event an End User that is not under warranty or a Maintenance Agreement
wishes to license Minor Releases and/or Maintenance Releases made available by
SUPPLIER, such End User may license such Minor Releases and/or Maintenance
Releases on a time and materials basis at the then current SUPPLIER prices for
such Minor Release and/or Maintenance Releases. In the event an End User wishes
to license Minor Releases and/or Maintenance Releases from LUCENT, such End
User shall be able to do so. SUPPLIER and LUCENT agree to negotiate a
reasonable fee to be paid to SUPPLIER by LUCENT for the license of such Minor
Releases and/or Maintenance Releases.
6B
<PAGE> 47
EXHIBIT C
TRAINING DELIVERABLES
SUPPLIER, subject to the terms and conditions contained herein, shall make
training available to LUCENT at no charge. All capitalized terms used herein
shall have the same meaning as described in the Agreement.
DOMESTIC
1. Services Support and Implementation Training
Support training is intended to prepare LUCENT's technical staff to support
questions from End Users on the PRODUCT, including diagnosis of problems,
design, implementation and debugging of routing scripts, how to use reporting
tools and details of the PRODUCT's interaction with different ACD, Dialer, CTI
and VRU systems. Training should address all of the information made available
under End User training and include specific materials, such as the answers to
the most frequently asked questions by End Users directed to End User Support.
Implementation training will prepare LUCENT's Technologies Professional
Services Consultants to design, configure, install, test, customize, integrate,
and administer all components of the PRODUCT. Consultants need to be capable of
supporting pre-sale configuration of the PRODUCT and responding to detailed
customer issues, loading the PRODUCT on End User's Personal Computers and other
computers, Installing PRODUCT at the End User's sites linking Dialer, CTI, ACD
and VRU elements of the call center and training End Users in the use of the
PRODUCT. The training will also provide Lucent personnel an understanding of
call flow and script development.
In order to provide the highest level of technical and implementation support,
upon LUCENT's request, SUPPLIER shall allow LUCENT personnel to complete an
"internship" on-site with SUPPLIER to learn firsthand about the PRODUCT. Any and
all travel and expenses of LUCENT's personnel shall be the responsibility of
LUCENT.
LUCENT shall be allowed to train up to 50 students over the initial term of
this Agreement. In the event that LUCENT desires to train personnel in excess of
50 students as specified herein, training shall be charged to LUCENT at
SUPPLIER's then current rates. LUCENT shall divide this training allowance
between domestic and international audiences.
1C
<PAGE> 48
SUPPLIER may also provide an optional "train the trainer" program to allow
LUCENT to educate personnel about the PRODUCT who in turn will train other
personnel of LUCENT to support the PRODUCT or act as a End User interface for
trouble calls. Travel and expenses shall be borne by either LUCENT or SUPPLIER
as appropriate.
SUPPLIER will provide timely training on Releases and new elements of the
PRODUCT as they become available in order for LUCENT personnel to maintain
knowledge of the then current PRODUCT.
2. Sales Training
This training is intended to prepare the LUCENT Sales Channel in the operation,
configuration and sale of the PRODUCT and sale of Maintenance Agreements.
SUPPLIER shall conduct one course annually in a one day session at multiple
locations designed to familiarize the Sales Channel with the PRODUCT, to enable
the Sales Channel to identify and qualify potential End Users, and to describe
benefits and competitive advantages of PRODUCT to the potential End Users. The
parties shall mutually agree to the frequency of the sessions, number of
attendees and the locations for such training. If additional sessions in excess
of the agreed frequency are requested by LUCENT, the parties shall agree to a
fee for such sessions.
SUPPLIER will provide an annual in depth training course to develop a select
group of sales individuals to be able to design, configure and sell SUPPLIER's
PRODUCT. In the alternative, SUPPLIER may train one Lucent employee on changes
to the PRODUCT who can then train additional LUCENT sales staff.
SUPPLIER will provide its sales tools and product information to allow sales
personnel to design and configure and price a solution for the End User.
3. End User Training
If requested, SUPPLIER will provide training classes to End Users at SUPPLIER's
current rates, including reasonable travel and expenses.
SUPPLIER will provide reproducible training materials and instruction so that
LUCENT may, at its option, conduct End User training courses.
At LUCENT's request, SUPPLIER shall also provide an optional "train the
trainer" program to allow LUCENT to be able to conduct training sessions that
will educate its personnel about the
2C
<PAGE> 49
EXHIBIT D
TECHNICAL SUPPORT
Unless otherwise specified herein, all defined terms used in this Exhibit shall
have the same meanings as described in the Agreement.
This Exhibit applies to Support to be provided by SUPPLIER during the Warranty
period as defined in the Agreement and during the term of any Maintenance
Agreement between an End User and SUPPLIER.
SUPPLIER acknowledges and agrees that LUCENT is currently assessing its role in
the provision of Support for the PRODUCT to its End Users. As part of the
initial implementation of this Agreement, SUPPLIER shall provide Support to all
End Users during the warranty period and during the term of a Maintenance
Agreement between SUPPLIER and the End User.
SUPPLIER agrees to provide LUCENT's End Users that purchase a Maintenance
Agreement Support in accordance with the terms and conditions contained in
SUPPLIER's Maintenance Agreement including customer support Monday through
Friday, 8:00 AM 5:00 PM eastern standard time, excluding SUPPLIER's company
holidays. Extended Support is available from SUPPLIER and shall be negotiated
by the parties.
SUPPLIER agrees to commence negotiation of the transition of maintenance
programs for the PRODUCT to LUCENT within 270 days from the effective date of
this Agreement if LUCENT so requests. Such transition may include the
provision of Level 1 and/or Level 2 support as defined below directly to the End
User. Level 1 and Level 2 are defined as:
Level 1: Initial and primary contact for the End User. Able to understand
and discuss and diagnose PRODUCT modules, components. Provide known and easily
remedied problems. Forward calls which are considered more difficult to a
senior technical support team member.
Level 2: Provide problem isolation, gather appropriate documentation,
perform problem recreation, search problem databases, provide a work-around
solution. Forward calls which are considered more difficult to Supplier for
further diagnosis and problem resolution.
On a case-by case basis, if SUPPLIER and LUCENT agree to establish a
prime/subcontractor relationship for the provision of Support to an End User,
pricing for such prime/subcontractor relationship shall be mutually agreed
between the parties.
1D
<PAGE> 50
POTENTIAL SUPPLIER END USERS
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE> 51
EXHIBIT E
SUPPLIER'S EXISTING CUSTOMERS
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE> 52
EXHIBIT F
VOICE ENHANCED SOFTWARE PLATFORM (VESP)
SOFTWARE LICENSE AGREEMENT
This Agreement made as of the _____ day of _______, 199__, between NABNASSET
CORPORATION, a Massachusetts corporation with a usual place of business located
at 15 Craig Road, Acton, MA 01720 ("Nabnasset"), and _______________________,
a corporation with a usual place of business situated at ____________________,
______________________ ("Licensee").
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, NABNASSET hereby grants
to Licensee, and Licensee accepts, a non-transferable, non-assignable and
non-exclusive license to use the Licensed Software (as defined below) provided
by Nabnasset at the Designated Sites (as defined below) and in the
configuration listed on Schedule A hereto.
Subject to the rights granted to Licensee pursuant to this Agreement, all
right, title, and interest in and to the Licensed Software, Program
Documentation, Confidential Information and all related materials are and
shall at all times remain the sole and exclusive property of Nabnasset.
Nabnasset may use, sell, assign, transfer, and license copies of and rights
relating to the Licensed Software to third parties free from any claim or
interference by Licensee.
Licensee shall not modify, enhance or otherwise change or supplement the
Licensed Software without the prior written consent on Nabnasset. Licensee
agrees that a modification or enhancement to the Licensed Software developed by
Licensee, whether or not authorized by this Agreement, or by Nabnasset for
Licensee, whether or not reimbursed by Licensee, shall be the exclusive
property of Nabnasset. The modified or enhanced version of the Licensed
Software shall not constitute computer software or a computer program different
from the Licensed Software and as such, is encompassed by the terms and
conditions of this Agreement.
2. DEFINITIONS
As used in this Agreement the following words shall mean:
CALL CENTER APPLICATIONS means the internal Use by Licensee of the Licensed
Software in a Workstation at a Designated Site for Use by Licensee to
coordinate computerized data with voice data.
DESIGNATED SITES means locations of Licensee which have workstations and which
are listed in Schedule A hereto which shall be updated quarterly by Licensee.
LICENSE FEES means the consideration set forth in Schedule B hereto to be paid
to Licensee by Nabnasset with respect to the Licensed Software.
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Licensee shall not cause or permit display, loan, publication, transfer or
possession (whether by sale, exchange, gift, operation of law or otherwise),
sublicensing or other dissemination of the Licensed Software or Program
Documentation, in whole or in part, to any third party without the prior
written consent of Nabnasset.
The rights of Licensee under this Agreement to use the Licensed Software shall
not be assigned or sublicensed by Licensee to any third party without the prior
written consent of Nabnasset.
4. CONFIDENTIALITY
Licensee hereby acknowledges that (i) the Licensed Software contains and is
comprised of trade secrets, know-how and other confidential information of
Nabnasset which constitutes and shall be treated as the confidential property
of Nabnasset (the "Confidential Information"): (ii) this Agreement grants
Licensee no title to or rights of ownership in the Licensed Software or any
component thereof; (iii) Licensee shall keep in confidence all Confidential
Information with respect to the Licensed Software and shall exercise all
reasonable care to safeguard the confidentiality of the Licensed Software and
(iv) neither the Licensed Software nor any component thereof shall be
duplicated or reproduced except as explicitly permitted hereunder without the
prior written consent of Nabnasset.
Notwithstanding the foregoing, Confidential Information shall not include any
information which (i) is or becomes part of the public domain through no act or
omission on the part of the Licensee, (ii) is in the possession of Licensee, as
evidenced by a writing, without actual or constructive knowledge of an
obligation of confidentiality with respect thereto, at or prior to the time of
disclosure under this Agreement; (iii) is released from confidential treatment
by written consent of the disclosing party; (iv) is disclosed to Licensee by a
third party with the legal right to make such disclosure.
All forms of the Licensed Software (including, but not limited to, storage
units, magnetic media containers and/or printed listings) and all media used
with the Licensed Software and all modifications thereto by Licensee, shall
bear an appropriate copyright and proprietary notice in a form reasonably
specified by Nabnasset. Licensing of the Licensed Software is not intended as
an admission, nor should it be deemed to create a presumption, that publication
of such materials has occurred.
Licensee acknowledges that unauthorized use or any use not authorized hereby,
disclosure or transfer of the Confidential Information will: (i) substantially
diminish the value of the trade secrets and other Confidential Information of
Nabnasset; (ii) render the remedy at law of Nabnasset for such unauthorized
use, disclosure or transfer inadequate; and (iii) cause irreparable harm to
Nabnasset. Nabnasset shall be entitled to injunctive relief to protect the
interests of Nabnasset herein, including but not limited to preliminary and
permanent injunctive relief.
It is expressly understood by Licensee that the obligations of Licensee under
this Section 4 shall survive the termination of this Agreement.
5. TERM
The license granted under this Agreement shall be in effect from the date of
this Agreement and shall remain in effect for ten (10) years or until sooner
terminated in accordance with the provisions hereof. This Agreement shall be
automatically extended for one five (5) year period unless Licensee gives
written notice of termination to Nabnasset no less than six (6) months prior
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to the expiration of the initial term of this Agreement. All terms and
conditions of this Agreement shall apply during the extended term.
6. DELIVERY AND INSTALLATION
One copy of the Master Copy and one copy of the Program Documentation shall be
delivered to Licensee on the date hereof unless a later date is mutually agreed
upon. Nabnasset assumes the risk of loss to the Licensed Software until
delivered to Licensee. Thereafter, the risk of loss or damage to the Licensed
Software (except for replacement of defective items, pursuant to the applicable
warranties herein or in the Maintenance Agreement, if any) shall be upon
Licensee. Licensee shall be solely responsible for the selection, installation,
management, and control of the utilization of the Licensed Software. Licensee
shall be solely responsible for making copies of and installation of the
Licensed Software at Workstations.
7. PERFORMANCE WARRANTIES
Nabnasset hereby represents and warrants that the Licensed Software will, at
the time of shipment, substantially conform to the Program documentation
provided by Nabnasset when given normal, proper, and intended Use. Nabnasset
shall have no obligation to make repairs or replacements to the Licensed
Software to the extent any damage, defect, malfunction, error, or loss in, to,
or out of the Licensed Software results in whole or in part from catastrophe,
fault, or negligence of Licensee, or from improper or unauthorized Use of the
Licensed Software, or use of the Licensed Software in a manner for which the
Licensed Software was not designed, or by causes external to the Licensed
Software such as but not limited to power failure or electric power surges.
Nabnasset will replace any Licensed Software storage media which is defective
upon request by Licensee made within thirty (30) days after shipment of the
Licensed Software and upon return of the original storage media containing the
Licensed Software. The sole remedy of the Licensee for defects in the media
shall be the repair or replacement of the defective media.
This warranty shall not be applicable in the event that any modifications to
the Licensed Software or its storage media are made by Licensee or its
employees, agents or contractors without the prior written consent of Nabnasset.
8. DISCLAIMER OF IMPLIED WARRANTIES
THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES AND CONDITIONS
EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO THOSE CONCERNING
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
9. LIMITATION OF DAMAGES
LIABILITY OF NABNASSET FOR ANY CAUSE OF ACTION WHATSOEVER, INCLUDING LIABILITY
FOR ANY CLAIM OF INFRINGEMENT FOR PROPRIETARY RIGHTS, SHALL NOT EXCEED THE
TOTAL AMOUNT OF LICENSE FEES THEN PAID TO DATE BY LICENSEE FOR LICENSED
SOFTWARE. IN NO EVENT SHALL NABNASSET BE LIABLE FOR LOSS OF DATA, LOST PROFITS
OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES OF LICENSEE UNDER ANY
CIRCUMSTANCES WHATSOEVER.
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10. LICENSE FEES
In consideration of the license rights granted to Licensee pursuant to this
Agreement. Licensee shall pay Nabnasset the License Fees and any additional
expenses, including but not limited to travel, subsistence, and other
reasonable documented expenses incurred by Nabnasset, in the amounts and at the
times set forth on Schedule B hereto. Nabnasset reserves the right to invoice
any such "out of pocket expenses" on a separate invoice. All payments are due
to Nabnasset thirty (30) days from the receipt of invoice.
Any License Fee or other amount not timely paid hereunder shall bear interest
at the rate of one and one half percent (1.5%) per month (or such lesser amount
as may be the maximum amount allowed by law) for each month or portion thereof
during which such fees or amounts are not paid. All amounts payable pursuant to
this Agreement are exclusive of all federal, state, local, municipal, or other
excise, sales, use, property, or similar taxes and fees (but not any income
tax or any tax on or measured by income), now in force or enacted in the
future, and all such taxes and fees shall be paid by Licensee. Licensee shall
obtain and provide to Nabnasset any certificate of exemption or similar
document required to exempt any transaction under this Agreement from sales
tax, use tax, or other tax liability.
11. MAINTENANCE AND TRAINING
Simultaneously with the execution of this Agreement, Licensee may enter into a
Maintenance Agreement with Nabnasset. Upon shipment of the Licensed Software
and the execution of the Maintenance Agreement. Licensee shall be provided by
Nabnasset any and all released updates, maintenance, and support of the
Licensed Software pursuant to the terms of Nabnasset's Maintenance Agreement.
In no event shall Nabnasset be under any obligation to revise or update the
Licensed Software or to maintain or support the Licensed Software in the event
of a termination of the Maintenance Agreement unless Licensee agrees to obtain
such update or support in a time and materials basis.
Upon the request of Licensee, Nabnasset will provide programming, project
management, consulting, and other related services at its then current
published hourly rates. The scope and charges for such services will be
specified in a mutually satisfactory task order, which task order shall become
effective upon acceptance and execution by Licensee and Nabnasset.
12. INFRINGEMENT
If a third party claims that the Licensed Software infringes any United States
patent or copyright, Nabnasset will, provided that Licensee is not in default
hereunder, defend Licensee against such claim at the expense of Nabnasset and
Nabnasset will pay all damages that a court of competent jurisdiction awards,
provided that Licensee promptly notifies Nabnasset in writing of the claim, and
allows Nabnasset to control, and cooperates with Nabnasset in, the defense of
any such claim or any related settlement negotiations. In all events any
settlement of such claim must be approved in writing by Nabnasset. If such a
claim is made or appears possible, Nabnasset may, at its option, secure for
Licensee the right of Licensee to continue to Use the Licensed Software, modify
or replace the Licensed Software in order that the Licensed Software is no
longer infringing, or, if neither of the foregoing alternatives is possible in
the judgment of Nabnasset, require Licensee to return the Licensed Software for
a credit equal to the portion of previously paid Licensee Fees allocable to
the remainder of the term hereof. Nabnasset has no obligation with respect to
any claim caused by modifications made by, or at the request of, Licensee to
the Licensed Software and in accordance with specifications or designs of
Licensee, modifications to the Licensed Software not authorized by Nabnasset,
improper Use, or any utilization by Licensee which would constitute a default
hereunder.
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THIS SECTION SETS FORTH THE ENTIRE OBLIGATION OF NABNASSET WITH RESPECT TO ANY
CLAIM OF INFRINGEMENT
13. DEFAULT AND TERMINATION
Either party may terminate this Agreement upon any breach of or default under
this Agreement by the other party. The nonbreaching party may give notice of
such breach or default to the breaching party and, with the exception of
nonpayment provided for in Section 10, unless such breach shall be cured within
thirty (30) days after delivery of such notice, then without limitation of any
other remedy available hereunder, the nonbreaching party may terminate this
Agreement forthwith by delivery of a notice of termination at anytime
thereafter and before such breach or default has been cured.
If Licensee fails to pay the License Fees, any maintenance fees, taxes, duties,
or other amounts due within ten (10) days after written notice from Nabnasset
then, at the option of Nabnasset, this Agreement and all licenses hereunder
shall terminate upon the date thereafter specified in the written notice from
Nabnasset to Licensee.
If Licensee shall fail in any respect to comply with the requirement set forth
in Section 4 above, Nabnasset may terminate this Agreement and all licenses
hereunder immediately upon written notice delivered to Licensee.
If either party files a petition under any chapter of the Bankruptcy Code as
amended or for the appointment of a receiver, or if an involuntary petition in
bankruptcy is filed against such party and said petition is not discharged
within thirty (30) days, or if either party shall become insolvent or make a
general assignment for the benefit of its creditors, or if the business or
property of either party shall come into the possession of its creditors or of
a governmental agency or of a receiver, or if any preceding supplementary to
judgment shall be commenced against either party, or any judgment against
either party, not fully bonded, shall remain unpaid in whole or in part for at
least thirty (30) days after entry thereof, then in any case, the other party
may at its option terminate this Agreement.
Upon expiration or earlier termination of this Agreement, Licensee shall, at the
request of Nabnasset (i) return to Nabnasset the Master Copy and all existing
copies of the Licensed Software, Program Documentation and any related material
or (ii) furnish to Nabnasset evidence satisfactory to Nabnasset that the Master
Copy and all copies of the Licensed Software, Program Documentation, and any
related material have been destroyed.
14. DISPUTES
If any claim or dispute between Nabnasset and Licensee arising out of or
related to this Agreement is not resolved through good faith negotiations
between Licensee and Nabnasset, Licensee and Nabnasset shall submit the claim
or dispute to binding arbitration before a single arbitrator knowledgeable in
the telecommunications and software licensing fields or in commercial matters
as agreed upon by the parties, or if the parties cannot agree upon an
arbitrator within thirty (30) days, an arbitrator appointed by the American
Arbitrator Association. The arbitration shall be conducted in the Commonwealth
of Massachusetts, and the arbitration shall be conducted under the rules then
prevailing of the American Arbitration Association. The arbitrator may award
attorney's fees and costs as part of his award; however, such arbitrator shall
not have the right to award punitive damages as part of any such award not have
the authority to modify or
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If to Licensee to:
-------------------------------------
-------------------------------------
-------------------------------------
ATTENTION:
---------------------------
or such other address as shall be specified by like notice. Any notice that is
delivered personally in the manner provided herein shall be deemed to have been
duly given to the party to whom it is directed upon actual receipt by such
party. Any notice that is addressed and mailed, postage prepaid, in the manner
herein provided shall be conclusively presumed to have been duly given to the
party to which it is addressed at the close of business, local time of the
recipient, on the fourth business day after the day it is so placed in the
mail. Any notice sent by overnight mail service will be presumed to have been
duly given to the party on the next subsequent day after such overnight mail is
sent.
Governing Law: This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Massachusetts and shall take effect
as a sealed instrument.
Severability: In the event that any provision herein shall be deemed invalid or
unenforceable; the other provisions hereof shall remain in full force and
effect and binding upon the parties hereto.
Force Majeure: Nabnasset shall not be responsible or liable for, or deemed in
breach hereof because of any delay in the performance of its obligations
hereunder to the extent caused by circumstances beyond its control, without its
fault or negligence and that could not have been prevented by the exercise of
due diligence, including but not limited to fire, flood, explosion, war,
strike, embargo, government requirement, civil or military authority, acts of
God, or similar circumstances beyond its control.
IN WITNESS WHEREOF, Nabnasset and Licensee have caused this Agreement to be
executed as of the date first written above by their respective duly authorized
officers.
<TABLE>
<CAPTION>
NABNASSET CORPORATION __________________________
<S> <C>
By: By:
--------------------------- ---------------------------
Title: Title:
--------------------------- ---------------------------
Date: Date:
--------------------------- ---------------------------
</TABLE>
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SCHEDULE A
DESIGNATED SITE(S)
The Licensed Software is to for use at the following site(s):
LICENSEE CONFIGURATION
The configuration at the above site is as follows:
Switch:
VRU:
Desktop:
Server
Database:
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SCHEDULE C
The Right to Use Software License for Nabnasset's Voice Enhanced Service
Platform Programs (VESP Programs) is provided to Licensee in the configuration
detailed in Schedule A.
The following VESP server components are licensed for use depending upon
services purchased:
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ATTACHMENT 1
PREFERRED REGISTRATION
TECHNOLOGY ESCROW AGREEMENT
Account Number 1401056-00001-1221012
This Agreement is effective May 14, 1997, among Data Securities International,
Inc. ("DSI"), Nabnasset Corporation ("Depositor") and Lucent Technologies Inc.
("Preferred Registrant"), who collectively may be referred to in this Agreement
as "the parties".
A. Depositor and Preferred Registrant have entered or will enter into a
license agreement, development agreement, and/or other agreement regarding
certain proprietary technology of Depositor. To distinguish from this
Agreement, the other agreement(s) will be referred to as "the license
agreement."
B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical to
Preferred Registrant in the conduct of its business and, therefore, Preferred
Registrant needs access to the proprietary technology under limited
circumstances.
D. Depositor and Preferred Registrant desire to establish an escrow with DSI
to provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the license
agreement pursuant to 11 United States [Bankruptcy] Code, Section 365(n).
ARTICLE 1 -- DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
parties, Depositor shall deliver to DSI the proprietary information and other
materials ("deposit materials") required to be deposited by the license
agreement or, if the license agreement does not identify the materials to be
deposited with DSI, then such materials will be identified on an Exhibit A. If
Exhibit A is applicable, it is to be prepared and signed by Depositor and
Preferred Registrant. DSI shall have no obligation with respect to the
preparation, signing or delivery of Exhibit A.
1.2 Identification of Tangible Media. Prior to the delivery of the deposit
materials to DSI, Depositor shall conspicuously label for identification each
document, magnetic tape, disk, or other tangible media upon which the deposit
materials are written or stored. Additionally, Depositor shall complete an
Exhibit B to list each such tangible media by the item label description, the
type of media and the quantity. The Exhibit B must be signed by Depositor and
delivered to DSI with the deposit materials. Unless and until Depositor makes
the initial deposit with DSI, DSI shall have no obligation with respect to this
Agreement, except the
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obligation to notify the parties regarding the status of the deposit account as
required in Section 2.2 below.
1.3 Deposit Inspection. When DSI receives the deposit materials and the
Exhibit B. DSI will conduct a deposit inspection by visually matching the
labeling of the tangible media containing the deposit materials to the item
descriptions and quantity listed on the Exhibit B. In addition to the deposit
inspection, Preferred Registrant may elect to cause a verification of the
deposit materials in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
determines that the labeling of the tangible media matches the item
descriptions and quantity on Exhibit B, DSI will sign the Exhibit B and mail a
copy thereof to Depositor and Preferred Registrant. If DSI determines the
labeling does not match the item descriptions or quantity on the Exhibit B, DSI
will (a) note the discrepancies in writing on the Exhibit B; (b) sign the
Exhibit B with the exceptions noted; and (c) provide a copy of the Exhibit B to
Depositor and Preferred Registrant. DSI's acceptance of the deposit occurs upon
the signing of the Exhibit B by DSI. Delivery of the signed Exhibit B to
Preferred Registrant is Preferred Registrant's notice that the deposit
materials have been received and accepted by DSI.
1.5 Depositor's Representations. Depositor represents as follows:
a. Depositor lawfully possesses all of the deposit materials deposited
with DSI;
b. With respect to all of the deposit materials, Depositor has the right
and authority to grant to DSI and Preferred Registrant the rights as
provided in this Agreement;
c. The deposit materials consist of proprietary information and other
materials identified either in the license agreement or Exhibit A, as
the case may be.
1.6 Verification. Preferred Registrant shall have the right, at Preferred
Registrant's expense, to cause a verification of any deposit materials. A
verification determines, in different levels of detail, the accuracy,
completeness, sufficiency and quality of the deposit materials. If a
verification is elected after the deposit materials have been delivered to DSI,
then only DSI, or at DSI's election an independent person or company selected
and supervised by DSI, may perform the verification.
1.7 Deposit Updates. Unless otherwise provided by the license agreement,
Depositor shall update the deposit materials within 60 days of each release of
a new version of the product which is subject to the license agreement. Such
updates will be added to the existing deposit. All deposit updates shall be
listed on a new Exhibit B and the new Exhibit B shall be signed by Depositor.
The processing of all deposit updates shall be in accordance with Sections 1.2
through 1.6 above. All references in this Agreement to the deposit materials
shall include the initial deposit materials and any updates.
1.8 Removal of Deposit Materials. The deposit materials may be removed and/or
exchanged only on written instructions signed by Depositor and Preferred
Registrant, or as otherwise provided in this Agreement.
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ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 Confidentiality. DSI shall maintain the deposit materials in a secure,
environmentally safe, locked receptacle which is accessible only to authorized
employees of DSI. DSI shall have the obligation to reasonably protect the
confidentiality of the deposit materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the deposit materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the deposit materials, DSI will
immediately notify the parties to this Agreement. It shall be the
responsibility of Depositor and/or Preferred Registrant to challenge any such
order; provided, however, that DSI does not waive its rights to present its
position with respect to any such order. DSI will not be required to disobey
any court or other judicial tribunal order. (See Section 7.5 below for notices
of requested orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred Registrant a
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
Registrant shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 -- GRANT OF RIGHTS TO DSI
3.1 Title to Media. Depositor hereby transfer to DSI the title to the media
upon which the proprietary information and materials are written or stored.
However, this transfer does not include the ownership of the proprietary
information and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 Right to Make Copies. DSI shall have the right to make copies of the
deposit materials as reasonably necessary to perform this Agreement and shall
provide written notice to Depositor of each such copy made. DSI shall copy all
copyright, nondisclosure, and other proprietary notices and titles contained on
the original deposit materials onto any copies made by DSI.
3.3 Right to Sublicense Upon Release. As of the effective date of this
Agreement, Depositor hereby grants to DSI a non-exclusive, irrevocable,
perpetual, and royalty-free license to sublicense the deposit materials to
Preferred Registrant upon the release, if any, of the deposit materials in
accordance with Section 4.5 below. Except upon such a release, DSI shall not
sublicense or otherwise transfer the deposit materials.
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ARTICLE 4 -- RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release Conditions" shall
mean the following:
a. The occurrence and continuance of a material breach by the Depositor,
or any successor of the Depositor, of the obligation of the Depositor
to satisfy the maintenance and support obligations of the Depositor
with respect to the Deposit Material being licensed by the Preferred
Registrant, from the Depositor pursuant to the License Agreement,
provided that, such breach is not waived by the Preferred Registrant
or is not cured by Depositor within thirty (30) days of written notice
from Preferred Registrant to Depositor; or
b. Depositor's failure to continue to do business in the ordinary course;
or
c. The filing by Depositor of a petition for protection under the
Bankruptcy Code of the United States, or an involuntary petition which
is not dismissed within ninety (90) days.
4.2 Filing For Release. If Preferred Registrant believes in good faith that a
Release Condition has occurred, Preferred Registrant may provide to DSI written
notice of the occurrence of the Release Condition and a request for the release
of the deposit materials. Upon receipt of such notice, DSI shall provide a copy
of the notice to Depositor, by certified mail, return receipt requested, or by
Federal Express or equivalent.
4.3 Contrary Instructions. From the date DSI mails the notice requesting
release of the deposit materials, Depositor shall have ten business days to
deliver to DSI Contrary Instructions. "Contrary Instructions" shall mean the
written representation by Depositor that a Release Condition has not occurred
or has been cured. Upon receipt of Contrary Instructions, DSI shall send a copy
to Preferred Registrant by registered or certified mail, return receipt
requested, or by Federal Express or equivalent. Additionally, DSI shall notify
both Depositor and Preferred Registrant that there is a dispute to be resolved
pursuant to the Dispute Resolution section of this Agreement. Subject to
Section 5.2, DSI will continue to store the deposit materials without release
pending (a) joint instructions from Depositor and Preferred Registrant, (b)
resolution pursuant to the Dispute Resolution provisions, or (c) order of a
court.
4.4 Release of Deposit. If DSI does not receive Contrary Instructions from
the Depositor, DSI is authorized to release the deposit materials to the
Preferred Registrant or, if more than one registrant is registered to the
deposit, to release a copy of the deposit materials to the Preferred
Registrant. However, DSI is entitled to receive any fees due DSI before making
the release. This Agreement will terminate upon the release of the deposit
materials held by DSI.
4.5 Use License Following Release. Unless otherwise provided in the license
agreement, upon release of the deposit materials in accordance with this Article
4, Preferred Registrant shall have a non-exclusive, non-transferrable,
irrevocable right to use the deposit materials for the sole purpose of
continuing the benefits afforded to Preferred Registrant by the license
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agreement. Preferred Registrant shall be obligated to maintain the
confidentiality of the released deposit materials.
ARTICLE 5 -- TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a period of
one year. Thereafter, this Agreement shall automatically renew from year-to-year
unless (a) Depositor and Preferred Registrant jointly instruct DSI in writing at
any time after one year that the Agreement is terminated; or (b) the Agreement
is terminated by DSI for nonpayment in accordance with Section 5.2. If the
deposit materials are subject to another escrow agreement with DSI, DSI reserves
the right, after the initial one year term, to adjust the anniversary date of
this Agreement to match the then prevailing anniversary date of such other
escrow arrangements.
5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
DSI, DSI shall provide written notice of delinquency to all parties to this
Agreement. Any party to this Agreement shall have the right to make the payment
to DSI to cure the default. If the past-due payment is not received in full by
DSI within one month of the date of such notice, then DSI shall have the right
to terminate this Agreement any time thereafter by sending written notice of
termination to all parties. DSI shall have no obligation to take any other
action under this agreement so long as any payment due to DSI remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon any termination of
this Agreement by joint instruction of Depositor and Preferred registrant, DSI
shall destroy, return, or otherwise deliver the deposit materials in accordance
with such instructions. Upon any termination for nonpayment, DSI may, at its
sole discretion, destroy the deposit materials or return them to Depositor. DSI
shall have no obligation to return or destroy the deposit materials if the
deposit materials are subject to another escrow agreement with DSI.
5.4 Survival of Terms Following Termination. Upon any termination of this
Agreement, the following provisions of this Agreement shall survive:
a. Depositor's representations (Section 1.5).
b. The obligations of confidentiality with respect to the deposit
materials.
c. The licenses granted in the sections entitled right to Sublicense Upon
Release (Section 3.3) and Use License Following Release (Section 4.5),
if a release of the deposit materials has occurred prior to
termination.
d. The obligation to pay DSI any fees and expenses due.
e. The provisions of Article 7.
f. Any provisions in this Agreement which specifically state they survive
the termination or expiration of this Agreement.
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ARTICLE 6 -- DSI'S FEES
6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expenses
applicable to the services provided. DSI shall notify the parties at least 90
days prior to any increase in fees. For any service not listed on DSI's
standard fee schedule, DSI will provide a quote prior to rendering the service,
if requested.
6.2 Payment Terms. DSI shall not be required to perform any service unless the
payment for such service and any outstanding balances owed to DSI are paid in
full. All other fees are due upon receipt of invoice. If invoiced fees are not
paid, DSI may terminate this Agreement in accordance with Section 5.2. Late
fees on past due amounts shall accrue at the rate of one and one-half percent
per month (18% per annum) from the date of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 Right to Reply on Instructions. DSI may act in reliance upon any
instruction, instrument, or signature reasonably believed by DSI to be genuine.
DSI may assume that any employee of a party to this Agreement who gives any
written notice, request, or instruction has the authority to do so. DSI shall
not be responsible for failure to act as a result of causes beyond the
reasonable control of DSI.
7.2 Indemnification. DSI shall perform its obligations under this Agreement
in a reasonable and prudent manner. Provided DSI is not in breach of its
obligations under the terms of this Agreement, the Depositor or Preferred
Registrant (the "Indemnifying Party") each agree to indemnify, defend and hold
harmless DSI from any and all claims, actions, damages, arbitration fees and
expenses, costs, attorneys' fees and other liabilities incurred by DSI.
7.3 Dispute Resolution. Any dispute relating to or arising from this
Agreement shall be resolved by arbitration under the Commercial Rules of the
American Arbitration Association by a single arbitrator knowledgeable in
computer systems. No punitive, exemplary, consequential or special damages
shall be awarded. Unless otherwise agreed by Depositor and Preferred Registrant,
arbitration will take place in San Diego, California, U.S.A. Any court having
jurisdiction over the matter may enter judgment on the award of the
arbitrator(s). Service of a petition to confirm the arbitration award may be
made by First Class mail or by Federal Express or equivalent, to the attorney
for the party or, if unrepresented, to the party at the last known business
address.
7.4 Controlling Law. This Agreement is to be governed and construed in
accordance with the laws of the state of California, without regard to its
conflict of law provisions.
Page 6
<PAGE> 66
7.5 Notice of Requested Order. If any party intends to obtain an order from the
arbitrator or any court of competent jurisdiction which may direct DSI to take,
or refrain from taking any action, that party shall:
a. Give DSI at least two business days' prior notice of the hearing;
b. Include in any such order that, as a precondition to DSI's obligation,
DSI be paid in full for any past due fees and be paid for the
reasonable value of the services to be rendered pursuant to such
order; and
c. Ensure that DSI not be required to deliver the original (as opposed to
a copy) of the deposit materials if DSI may need to retain the
original in its possession to fulfill any of its other escrow duties.
ARTICLE 8 -- GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Exhibits described
herein, embodies the entire understanding between all of the parties with
respect to its subject matter and supersedes all previous communications,
representations or understandings, either oral or written. No amendment or
modification of this Agreement shall be valid or binding unless signed by all
the parties hereto, except Exhibit A need not be signed by DSI and Exhibit B
need not be signed by Preferred Registrant.
8.2 Notices. All notices, invoices, payments, deposits and other documents and
communications shall be given to the parties at the addresses specified in the
attached Exhibit C. It shall be the responsibility of the parties to notify each
other as provided in this Section in the event of a change of address. The
parties shall have the right to rely on the last known address of the other
parties. Unless otherwise provided in this Agreement, all documents and
communications may be delivered by First Class Mail.
8.3 Severability. In the event any provision of this Agreement is found to be
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.
Page 7
<PAGE> 67
8.4 Successors. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties. However, DSI shall have
no obligation in performing this Agreement to recognize any successor of
Depositor or Preferred Registrant unless DSI receives clear, authoritative and
conclusive written evidence of the change of parties.
Nabnasset Corporation Lucent Technologies Inc.
- --------------------- ------------------------
Depositor Preferred Registrant
By: /s/ DUNCAN I. MACKAY By: /s/ CHARLES KNOPF
----------------------- ------------------------
Name: Duncan I. Mackay Name: Charles Knopf
Title: Executive Vice President Title: Relationship Manager
------------------------ ------------------------
Date: May 2nd, 1997 Date: May 5, 1997
------------------- --------------------
Data Securities International, Inc.
By: /s/ KATHLEEN M. CUMMINS
-------------------------
Name: Kathleen M. Cummins
Title: Contract Administrator
----------------------
Date: 5/14/97
-------------------
Page 8
<PAGE> 68
EXHIBIT A
MATERIALS TO BE DEPOSITED
Account Number ________________________
Depositor represents to Preferred Registrant that Deposit Materials delivered
to DSI shall consist of the following:
VESP Source Code
Nabnasset Corporation Lucent Technologies Inc.
- --------------------- ------------------------
Depositor Preferred Registrant
By: /s/ DUNCAN I. MACKAY By: /s/ CHARLES KNOPF
----------------------- ------------------------
Name: Duncan I. Mackay Name: Charles Knopf
Title: Executive Vice President Title: Relationship Manager
------------------------ --------------------
Date: May 2nd, 1997 Date: May 5, 1997
------------------- --------------------
Page 9
<PAGE> 69
Date:___________________
EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIALS
Account Number_________________________________________________________________
Depositor Company Name_________________________________________________________
DEPOSIT TYPE: ____________________ Initial _______________ Supplemental
ENVIRONMENT:
Host System CPU/OS_________________ Version___________________ Backup _________
Source System CPU/OS_________________ Version_________________ Compiler _______
Special Instructions: _________________________________________________________
DEPOSIT COPYING REQUIREMENT:
Hardware needed:________________________________________________________________
Software needed/Instructions:___________________________________________________
DEPOSIT MATERIALS:
Exhibit B Name__________________________________________ Version _______________
Item label description Media Quantity
For Depositor, I certify that the above For DSI, I certify that the deposit
described deposit materials have been inspection has been completed
transmitted to DSI: (any exceptions are noted above):
By_____________________________________ By_________________________________
Print Name_____________________________ Print Name_________________________
Date___________________________________ Date of Acceptance_________________
ISE______EX. B# ___________________
Page 10
<PAGE> 70
EXHIBIT C
DESIGNATED CONTACT
Account Number 1401056-00001-1221012
Notices, Deposit Material returns and
communication, including delinquencies Invoices to Depositor should be
to Depositor should be addressed to: addressed to:
Company Name: Nabnasset Corporation
--------------------- -------------------------------
Address: 15 Craig Road
--------------------- -------------------------------
Acton, MA 01720
--------------------- -------------------------------
--------------------- -------------------------------
Designated Contact: Contact:
---------------- -------------------------------
Telephone: (508) 787-2800
--------------------------------------------------------------
Facsimile: (508) 787-2834
--------------------------------------------------------------
State of Incorporation:
----------------------------------------------------
Notices and communications, including Invoices to Preferred Registrant
delinquencies to Preferred Registrant should be addressed to:
should be addressed to:
Company Name: Lucent Technologies Inc.
-------------------------------------------------------------
Address: 211 Mt. Airy Road
-------------------------------------------------------------
Basking Ridge NJ 07920
-------------------------------------------------------------
Room 26468
-------------------------------------------------------------
Designated Contact: Charles Knopf Contact: William Riley
-------------------- ----------------------
Telephone: 908 953 7037 908 953 8594
-------------------- -------------------------------
Facsimile: 908 953 2486 908 953 2486
-------------------- -------------------------------
Requests from Depositor or Preferred Registrant to change the Designated
Contact should be given in writing by the Designated Contact or an authorized
employee of Depositor or Preferred Registrant.
Invoice Inquiries and fee
Contracts, Deposit Material and notices remittances to DSI should be
to DSI should be addressed to: addressed to:
DSI DSI
Contract Administration Accounts Receivable
Suite 200 Suite 1450
9555 Chesapeake Drive 425 California Street
San Diego, CA 92123 San Francisco, CA 94104
Telephone: (619) 694-1900 (415) 398-7900
Facsimile: (619) 694-1919 (415) 398-7914
Date: 5-14-97
-------------------
Page 11
<PAGE> 71
AMENDMENT NO. 1
TO THE
SOFTWARE DISTRIBUTORSHIP AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC. ("LUCENT")
AND
NABNASSET CORPORATION ("SUPPLIER")
WHEREAS, the parties entered into a Software Distributorship Agreement
("Agreement") dated May 5, 1997; and
WHEREAS, the parties have identified additional pricing information to be added
to Exhibit B attached to and incorporated into the Agreement; and
WHEREAS, the parties have agreed to replace Exhibit B in its entirety to
address such missing information;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
LUCENT and SUPPLIER hereby mutually agree as follows:
1. Exhibit B of the Agreement is deleted in its entirety and replaced it
with Exhibit B(1), dated June 19, 1997 as attached hereto.
In all other respects, the Agreement dated May 5, 1997 remains unchanged.
ACCEPTED AND AGREED:
LUCENT TECHNOLOGIES INC. NABNASSET CORPORATION
By: /s/ CHARLES KNOPF /s/ DUNCAN I. MACKAY
------------------------ ---------------------------
Printed: Charles Knopf Printed: Duncan I. Mackay
------------------ ------------------
Title: Relationship Manager Title: EVP Field Operations
--------------------- --------------------
Date: 6/20/97 Date: 6/20/97
--------------------- --------------------
<PAGE> 72
EXHIBIT B(1)
PAYMENT SCHEDULE
Unless otherwise specified herein, all capitalized terms used in this Exhibit
shall have the same meanings as described in the Agreement.
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
1B
Revised 06/20/97
<PAGE> 73
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
2B
Revised 06/20/97
<PAGE> 74
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
3B
Revised 06/20/97
<PAGE> 75
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
4B
Revised 06/20/97
<PAGE> 76
[*]
MAINTENANCE PRICING
[*]
SUPPLIER's Maintenance Agreement shall be sold by LUCENT according to the
following Table**:
<TABLE>
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Term of Maintenance Agreement (years) 1 2 3 4 5 6
Commission [*] [*] [*] [*] [*] [*]
Maintenance price to End User** [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------
</TABLE>
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
5B
Revised 06/20/97
<PAGE> 77
[*]
***Maintenance Pricing shall be adjusted in accordance with the provisions
of Section 12 of this Agreement.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE> 78
For Maintenance Services on a 7X24 basis, the following surcharge percentages
shall be added to the above Maintenance fees:
<TABLE>
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Term of Agreement (years) [*] [*] [*] [*] [*] [*]
Surcharge [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------
</TABLE>
In the event an End User that is not under warranty or a Maintenance Agreement
wishes to license Minor Releases and/or Maintenance Releases made available by
SUPPLIER, such End User may license such Minor Releases and/or Maintenance
Releases on a time and materials basis at the then current SUPPLIER prices for
such Minor Release and/or Maintenance Releases. In the event an End User wishes
to license Minor Releases and/or Maintenance Releases from LUCENT, such End
User shall be able to do so. SUPPLIER and LUCENT agree to negotiate a
reasonable fee to be paid to SUPPLIER by LUCENT for the license of such Minor
Releases and or Maintenance Releases.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
7B
<PAGE> 79
AMENDMENT NO. 2
TO THE
SOFTWARE DISTRIBUTORSHIP AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC. ("LUCENT")
AND
NABNASSET CORPORATION ("SUPPLIER")
WHEREAS, the parties entered into a Software Distributorship Agreement
("Agreement") dated May 5, 1997; and
WHEREAS, the parties have identified additional pricing information to be added
to Exhibit B attached to and incorporated into the Agreement; and
WHEREAS, the parties have agreed to replace Exhibit B in its entirety to
address such missing information;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
LUCENT and SUPPLIER hereby mutually agree as follows:
1. Exhibit B of the Agreement is deleted in its entirety and replaced it
with Exhibit B(2), dated August 27, 1997 as attached hereto.
In all other respects, the Agreement dated May 5, 1997 remains unchanged.
ACCEPTED AND AGREED:
LUCENT TECHNOLOGIES INC. NABNASSET CORPORATION
By: /s/ CHARLES KNOPF By: /s/ DUNCAN I. MACKAY
------------------------- --------------------------
Printed: Charles Knopf Printed: Duncan I. Mackay
-------------------- ---------------------
Title: Relationship Manager Title: EVP Field Operations
-------------------- ---------------------
Date: 9/2/97 Date: 9/5/97
----------------------- ------------------------
<PAGE> 80
EXHIBIT B(2)
PAYMENT SCHEDULE
Unless otherwise specified herein, all capitalized terms used in this Exhibit
shall have the same meanings as described in the Agreement.
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
1B
Revised 08/27/97
<PAGE> 81
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
2B
Revised 08/27/97
<PAGE> 82
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
3B
<PAGE> 83
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
4B
<PAGE> 84
[*]
Should the parties identify an opportunity for a site and/or corporate license
which requires the establishment of a specific License Fee, the parties shall
negotiate such specific Licence Fee, negotiate the percentage that each party
shall receive for the licensing of the PRODUCT and negotiate the proportion of
the License Fee that shall accumulate toward the total License Fees payable to
SUPPLIER.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
5B
<PAGE> 85
MAINTENANCE PRICING
Within thirty (30) days from the end of each quarter, SUPPLIER will send
payment to LUCENT equal to the percentage specified as commission associated
with SUPPLIER's Maintenance Agreements sold by Lucent during the quarter.
Unless otherwise specified by LUCENT, SUPPLIER shall send payment to the
address stated in the "Notices" section of the Agreement.
SUPPLIER's Maintenance Agreement shall be sold by LUCENT according to the
following Table**:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Term of Maintenance Agreement (years) [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------------------------
Commission [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------------------------
Maintenance price to End User** [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------------------------
</TABLE>
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
6B
<PAGE> 86
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE> 87
***Maintenance Pricing shall be adjusted in accordance with the provisions of
Section 12 of this Agreement.
For Maintenance Services on a 7X 24 basis, the following surcharge percentages
shall be added to the above Maintenance fees:
<TABLE>
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Term of Agreement (years) [*] [*] [*] [*] [*] [*]
Surcharge [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------
</TABLE>
In the event an End User that is not under warranty or a Maintenance Agreement
wishes to license Minor Releases and/or Maintenance Releases made available by
SUPPLIER, such End User may license such Minor Releases and/or Maintenance
Releases on a time and materials basis at the then current SUPPLIER prices for
such Minor Release and/or Maintenance Releases. In the event an End User wishes
to license Minor Releases and/or Maintenance Releases from LUCENT, such End
User shall be able to do so. SUPPLIER and LUCENT agree to negotiate a
reasonable fee to be paid to SUPPLIER by LUCENT for the license of such Minor
Releases and or Maintenance Releases.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
8B
<PAGE> 88
AMENDMENT NO. 3
TO THE
SOFTWARE DISTRIBUTION AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC. ("LUCENT")
AND
NABNASSET CORPORATION ("SUPPLIER")
WHEREAS, the parties entered into a Software Distribution Agreement
("Agreement") dated May 5, 1997 and amended such Agreement June 20, 1997 and
September 5, 1997; and
WHEREAS, the parties have identified additional pricing information to be added,
deleted and modified to Exhibit B attached to and incorporated into the
Agreement; and
WHEREAS, the parties have agreed to replace Exhibit B(2) in its entirety to
address such information;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
LUCENT and SUPPLIER hereby mutually agree as follows:
1. Exhibit B(2) of the Agreement is deleted in its entirety and replaced
with Exhibit B(3), dated December 15, 1997 as attached hereto.
In all other respects, the Agreement dated May 5, 1997 remains unchanged.
ACCEPTED AND AGREED:
LUCENT TECHNOLOGIES INC. NABNASSET CORPORATION
By: /s/ CHARLES KNOPF By: /s/ DUNCAN I. MACKAY
--------------------------------- -----------------------------------
Printed: Charles Knopf Printed: Duncan I. Mackay
---------------------------- ------------------------------
Title: Business Development Manager Title: Vice President & General Manager
---------------------------- --------------------------------
Date: 12/10/97 Date: 12/15/97
------------------------------ ---------------------------------
1B
Revised 12/15/97
<PAGE> 89
EXHIBIT B(3)
PAYMENT SCHEDULE
Unless otherwise specified herein, all capitalized terms used in this Exhibit
shall have the same meanings as described in the Agreement.
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
2B
Revised 12/15/97
<PAGE> 90
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
3B
<PAGE> 91
[*]
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
4B
<PAGE> 92
[*]
Should the parties identify an opportunity for a site and/or corporate license
which requires the establishment of a specific License Fee, the parties shall
negotiate such specific License Fee, negotiate the percentage that each party
shall receive for the licensing of the PRODUCT and negotiate the proportion of
the License Fee that shall accumulate toward the total License Fees payable to
SUPPLIER.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
5B
<PAGE> 93
MAINTENANCE PRICING
Within thirty (30) days from the end of each quarter, SUPPLIER will send
payment to LUCENT equal to the percentage specified as commission associated
with SUPPLIER's Maintenance Agreement sold by Lucent during the quarter. Unless
otherwise specified by LUCENT, SUPPLIER shall send payment to the address
stated in the "Notices" section of the Agreement.
SUPPLIER's Maintenance Agreement shall be sold by LUCENT according to the
following Table**:
<TABLE>
- -------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Term of Maintenance Agreement (years) [*] [*] [*] [*] [*] [*]
Commission [*] [*] [*] [*] [*] [*]
Maintenance price to End User** [*] [*] [*] [*] [*] [*]
- -------------------------------------------------------------------------
</TABLE>
[*]
LUCENT shall include a statement in all quotations for multiple year
Maintenance Agreements which states that discounts for multi-year term
Maintenance Agreements as described in the schedule above shall be available to
End Users who agree to be invoiced by and pay in full to SUPPLIER the total
cost of the multi-year term of the Maintenance Agreement prior to the
commencement of services.
Should SUPPLIER and LUCENT identify an opportunity to sell maintenance services
to an End User which requires the establishment of special maintenance pricing
or terms different from those stated in this Section of Exhibit B, the parties
shall negotiate mutually acceptable prices, terms and commissions.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
6B
<PAGE> 94
[*]
[*]
***Maintenance Pricing shall be adjusted in accordance with the provisions of
Section 12 of this Agreement.
For Maintenance Services on a 7x24 basis, the following shall be used in lieu of
the above Maintenance fees:
<TABLE>
<CAPTION>
Term of Agreement (years) 1 2 3 4 5 6
<S> <C> <C> <C> <C> <C> <C>
Maintenance Price to End User [*] [*] [*] [*] [*] [*]
Commission [*] [*] [*] [*] [*] [*]
</TABLE>
In the event an End User that is not under warranty or a Maintenance Agreement
wishes to license Minor Releases and/or Maintenance Releases made available by
SUPPLIER, such End User may license such Minor Releases and/or Maintenance
Releases on a time and materials basis at the then current SUPPLIER prices for
such Minor Release and/or Maintenance Releases. In the event an End User wishes
to license Minor Releases and/or Maintenance Releases from LUCENT, such End User
shall be able to do so. SUPPLIER and LUCENT agree to negotiate a reasonable fee
to be paid to SUPPLIER by LUCENT for the license of such Minor Releases and/or
Maintenance Releases.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
7B
Revised 12/15/97
<PAGE> 95
AMENDMENT NO. 4
TO THE
SOFTWARE DISTRIBUTION AGREEMENT
BETWEEN
LUCENT TECHNOLOGIES INC. ("LUCENT")
AND
NABNASSET CORPORATION ("SUPPLIER")
WHEREAS, the Lucent Technologies Inc. and Nabnasset Corporation entered into a
Software Distribution Agreement dated May 5, 1997, which was subsequently
amended on June 20, 1997; September 5, 1997; and December 15, 1997
(collectively, the "Agreement"); and
WHEREAS, Quintus Corporation ("Quintus") assumed all of the rights,
obligations, and duties of Nabnasset Corporation pursuant to a letter agreement
dated October 29, 1997; and
WHEREAS, Lucent and Quintus now wish to further amend the Agreement,
specifically related to the provision of services by Quintus to Lucent.
NOW THEREFORE, in consideration of the premises and other good an valuable
consideration, the receipt and sufficiency of which is acknowledged hereby,
Lucent and Quintus hereby mutually agree as follows:
1. The parties hereby change the title of this Agreement to "Software
Distribution Agreement between Lucent Technologies Inc. and Quintus
Corporation." The parties acknowledge that all references to SUPPLIER in the
Agreement are to Quintus Corporation.
2. Exhibit B(3) is hereby modified to delete, in its entirety, the section
entitled Maintenance Pricing and to insert, in its place, a new section
entitled Maintenance Fee, attached hereto as Addition to Exhibit B(3).
3. Exhibit D of the Agreement is hereby deleted in its entirety and replaced
with Exhibit D(1), attached hereto, which Exhibit shall be effective as of the
Effective Date of this Amendment No. 4. Notwithstanding anything contained in
the Agreement to the contrary, all references to a Maintenance Agreement
between the parties in the Agreement shall henceforth refer solely to Exhibit
D(1).
4. Section 20 of the Agreement is hereby amended as follows: The last
sentence in the second paragraph of Section 20 is amended to read, "Should the
original reporting End User wish to receive the bug fix or workaround patch,
SUPPLIER reserves the right to charge Lucent for the reasonable time and
material expended pursuant to Exhibit D(1) (Technical Support) for such
correction if the End User is not under a Maintenance Agreement."
<PAGE> 96
5. The Effective Date of this Amendment shall be the later date that either
of the parties executes this Amendment.
In all other respects, the Agreement, as amended, remains unchanged.
ACCEPTED AND AGREED:
LUCENT TECHNOLOGIES INC. QUINTUS CORPORATION
By: /s/ CHARLES KNAPF By: /s/ ROGER A. NUNN
--------------------------------- -----------------------------------
Name: Charles Knapf Name: Roger A. Nunn
------------------------------- ---------------------------------
Title: Business Development Title: Senior VP Sales
------------------------------ --------------------------------
Date: 3/8/99 Date: 3/12/99
------------------------------- ---------------------------------
<PAGE> 97
ADDITION TO EXHIBIT B(3)
MAINTENANCE FEE
Within [*] from the end of each calendar month, Lucent shall send SUPPLIER a fee
of [*] per Site per month for those customers who elect to take, through Lucent,
a post-warranty maintenance contract for Quintus Products for work performed
from [*] Monday through Friday. For each customer, this fee will be paid by
Lucent to Quintus monthly beginning at the conclusion of each customer's
warranty period, as set forth in the Distribution Agreement in Section 18A. In
addition, Quintus will be available for out of hours coverage by pager. Lucent
will pay Quintus [*] for work performed outside of Quintus' normal business
hours [*] Monday through Friday). Billing for such out-of-hours work will occur
in 30 minute increments.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE> 98
EXHIBIT D(1)
TECHNICAL SUPPORT
This Exhibit applies to support given by SUPPLIER for the PRODUCT.
LUCENT OBLIGATIONS
Lucent is to provide first, second and third level technical support to their
customers and shall be responsible for receiving and responding to all calls
for maintenance and support. Lucent shall be responsible to identify and track
their customers issues. For problems that cannot be resolved by Lucent, Lucent
will escalate the problem to Quintus for fourth level support. Quintus will be
under no obligation to accept any calls from Lucent's customers.
Definition of Levels
o FIRST LEVEL technical problems are usually questions about a Quintus
product that requires an explanation of a feature, function, error message,
installation or system administration. The answers to these questions are
usually found in Quintus product manuals.
o SECOND LEVEL technical problems are usually questions about customization,
recommendations with design, integration, or development. Other second
level problems may require debugging the customers' designs and code.
o THIRD LEVEL technical problems are suspected to be product defects, product
performance issues, or product enhancement requests.
o FOURTH LEVEL technical problems are all Third Level issues which, given
best efforts by Lucent, could not be resolved.
SERVICE CENTER
Lucent will equip, staff and maintain a Quintus CTI-enabled Service Center.
This Service Center will have laboratory environment that will have a dedicated
set of servers, agents, phones, switch(es) and IVRs provided by Lucent.
PAYMENT
Lucent will pay Quintus a fee [*] per Site per month for those customers who
elect to take, through Lucent, a post-warranty maintenance contract for Quintus
Products for work performed from [*] Monday through Friday. For each customer,
this fee will be paid by Lucent to Quintus monthly beginning at the conclusion
of each customer's warranty period, as set forth in the Distribution Agreement
in Section 18A. In addition, Quintus will be available for out of hours coverage
by pager, Lucent will pay Quintus [*] for work performed outside of Quintus'
normal business hours ([*] Monday through Friday). Billing will occur in 30
minute increments. The fee out of hours support will be reviewed annually.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE> 99
Definition of Site: Each customer installation of the Quintus Core Services is
considered a separate Site.
In addition, Lucent will pay Quintus the time and expense (T&E) rates in
effect at the time Quintus provides services for those Lucent's customers that
require support but are not under current maintenance contract. These customers
which are not under maintenance contracts will not be entitled to patches or
upgrades.
NOTIFICATION
At least five (5) days prior to the beginning of each month, Lucent will
provide Quintus a list of Lucent's customers who will be entering maintenance
contracts for Quintus products during the upcoming months. Said list will
include the following information:
o Customer name
o Site address(es)
REMOTE ACCESS
During the term of this Agreement Lucent will make a good faith effort to
provide Quintus with remote access to the system(s) upon which the Software is
installed. Such access will be provided upon request by Quintus and will be
continuously available in any period when a problem reported by Lucent to
Quintus remains unresolved. Lucent and Quintus will mutually agree upon the
hardware and software facilities for remote access, and Lucent will make best
efforts to provide such facilities. In the event Lucent fails to provide such
access in a timely manner, Quintus shall not be deemed in breach of this
Agreement due to inability to respond.
QUINTUS OBLIGATIONS
SUPPORT SERVICES DESCRIPTION
Standard Quintus Support Services provides Lucent with fourth level technical
support and consists of the following:
o A toll free Quintus Customer Support Line
o Direct access to a Technical Support Engineer during Quintus business hours
o 24 hours access to Quintus' call tracking system
o 24 hours access to Quintus' call solutions database
o 24 hours access to Quintus' defects database
o Problem Solving
o Problem Tracking
o Bug Reporting
o Clarification of documentation
o Software maintenance releases and updates
o Bug fixes
o Reporting mechanism for Lucent to generate summaries of problems logged
o Priority problem escalation to engineering
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- - Enhancements and Feature upgrades at no additional charge
Quintus will also make available, at the time and expense rates in effect at
the time Quintus provides services, 24 by 7 on-call pager support for CRITICAL
Priority (Severity Level 4) Problems.
COMMUNICATIONS
This Agreement shall provide technical support access for two (2) named Lucent
contacts that have received appropriate Quintus training. Additional support
contacts may be purchased at the price in effect at the time Lucent requests
the service.
Lucent will notify Quintus of problems via phone calls, emails or direct entry
into the Quintus' Call Tracking System via WebQ. Quintus Technical Support
staff will log and track all Lucent assistance requests and responses in its
database. Lucent may contact Quintus Technical Support staff to track the
progress of their requests during normal Quintus business hours using the call
ID provided at the time the problem is logged. Lucent also has 24-hour WebQ
access to the Quintus Call Tracking System to monitor progress on issues.
Where required for cross-referencing purposes, Lucent may use WebQ annotate the
Quintus call to include the Lucent's ticket number.
SERVICE LEVEL AGREEMENT
DEFINITION
Quintus prioritizes support in relation to the severity of the problem.
Quintus' standard descriptions used to determine the level of support to be
provided are:
- - A CRITICAL Priority (Severity Level 4) Problem is defined as a problem that
causes significant impact to a production system for the majority of agents.
Typical examples would include a production system down condition; when
Quintus Software located on a production system is unusable; is causing data
loss or corruption; or fails catastrophically in response to internal errors,
invalid input or user error. For NABNASSET-CTI Programs, this will only apply
to the server software supplied by Quintus and its connectivity to PC-based
programs. The severity level does not apply to Lucent- or Customer- provided
or installed program(s) affecting individual Quintus PC software
installations.
- - A HIGH Priority (Severity Level 2) Problem is defined as a moderate production
system impact, when important features of the Software do not function in
accordance with the documentation or restricted use of one or more functions.
A problem affecting a Test or Development System, severely affecting the "Go
Live" date is also considered "high." This includes PC-based CTI programs.
- - A MEDIUM Priority (Severity Level 1) Problem is defined as a minor system
impact that restricts the use of features and functionality of the Software. A
problem that
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moderately impacts a Test or Development System or is isolated to a few
agents is also given Medium Priority.
- - A LOW Priority Problem is defined as a "How To" question or Enhancement
request.
RESOLUTION
During the term of this Agreement, Quintus shall use reasonable efforts to
correct or provide workarounds for all reproducible programming Problems in the
Products attributable to Quintus with a level of effort commensurate with the
severity of the Problem or Error.
- - For CRITICAL Priority (Severity Level 4) Problem, Quintus will use
reasonable efforts to respond to Lucent within one (1) hour to determine
the problem. Quintus will work diligently to assist Lucent with the
Critical Priority Problem and will make all reasonable efforts to
reproduce and resolve all issues within twenty-four hours (24) of receipt
of all pertinent information regarding the problem from Lucent. If a
solution or workaround can not be found, or if progress towards problem
resolution is stalled after the twenty-four hour period, the problem is
escalated to Engineering for resolution. The problem is deemed resolved
if a solution or a workaround is provided to Lucent. If the problem is due
to a Quintus product defect, a patch may be provided to Lucent. Quintus
will provide Lucent with four (4) hour updates until problem is resolved.
- - For HIGH Priority (Severity Level 2) Problem, Quintus will use reasonable
efforts to respond to Lucent within four (4) hours to determine the
problem and to make a first attempt at problem reproduction and
resolution. If the first attempt is unsuccessful, Quintus Technical
Support Engineers will provide continuous effort to resolve Lucent issues
for two (2) business days after which time the problem is escalated to
Engineering for assistance. The problem is deemed resolved if a solution
or a workaround is provided to Lucent. Quintus will provide Lucent with
updates twice a week until problem is resolved.
- - For MEDIUM Priority (Severity Level 1) Problem, Quintus will use
reasonable efforts to respond within eight (8) hours to give an
assessment of the problem and a time period in which the problem may be
addressed. A Medium Priority problem is deemed resolved once a solution
is provided, a workaround is provided or a defect identified to be
addressed in the next product update.
- - For LOW Priority Problems Quintus will use reasonable efforts to respond.
Preliminary status will be provided within forty-eight (48) hours.
Resolution time begins when Quintus is notified of the problem and is measured
in Quintus business hours. 24x7 support for Critical Priority problems is
available at additional charge.
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Quintus will provide customer on-site support for Critical (Severity Level 4)
trouble resolution, if deemed necessary by all parties. If Quintus provides
on-site support at the customer's request, Quintus will bill Lucent at then
current time and expense (T&E) rates.
ESCALATION
If during the course of problem resolution Lucent determines that Quintus is
not meeting established goals, Lucent can escalate the problem to the Manager
of Technical Support, then Director of Technical Support, then Vice President
of WorldWide Customer Support Services.
TERMS OF SUPPORT
Maintenance is limited to versions of the Software that are supported by
Quintus and to problems that are reproducible in that version of the Software,
running unaltered on the Designated Computers.
Quintus shall provide technical support for the current version of the
Software. Additionally, Quintus will support the previous sequential release of
the Software for a period of twelve (12) months following the release of a
subsequent version.
Corrections to certain problems may only be available through a future version
of the Software or through a documentation update.
Maintenance services will not be provided if the:
- - Software is not used in accordance with the software license agreement
under which the Software was supplied to Lucent;
- - Software has been altered or modified by Lucent, its Customer or a third
party;
- - Lucent makes significant changes to the hardware and/or software in their
operating environments that are not supported by the Software.
SOFTWARE UPDATE SERVICE
There will be no additional charge for providing new/current releases to
customers with a current Maintenance Contract. Customers under Maintenance
shall receive all generally released enhancements to the Software and all
documentation updates as well as new versions of the Software ("Updates") as
they are made commercially available. This does not include significant changes
in functionality and new releases of the Quintus Software. It will be Lucent's
responsibility to provide their customers with the software updates.
If Lucent requests Quintus support with the installation of new/current
releases, then Quintus will provide support and charge Lucent at the time and
expense (T&E) rates in effect at the time Quintus provides the service.
YEAR 2000 COMPLIANCE
Subject to any hardware limitations with respect to time and date stamps,
Quintus certifies that CustomerQ version 3.3 and higher, HelpQ versions 3.3
and higher,
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CallCenterQ version 4.0 and higher, SalesQ version 4.0 and higher, and Nab CTI
version 3.6 and higher ("Software") are "Year 2000" compliant. "Year 2000"
compliant means that the Software will record, maintain and process accurate
dates for all dates including and following January 1, 2000, including leap
years, provided that all other products used by the Customer in connection or
combination with the Software, including without limitation, hardware, software
and firmware, accurately exchange date data with the Software.
KNOWLEDGE TRANSFER
Quintus will make a good faith effort to provide Lucent with knowledge transfer
on all new Product Releases/Maintenance Releases. This knowledge transfer may
include release notes, invitations to appropriate internal trainings, and ride
alongs on appropriate engagements or presentations.
Quintus will also share access to our Solutions database which contains
frequently asked questions and answers.
CESSATION OF SERVICE
In the event that Quintus ceases to offer maintenance on any Quintus software
licensed by Lucent, or any component thereof used by Lucent, Quintus agrees to
provide Lucent with reasonable notice and options for continued support of the
software on an as needed basis for a period of one (1) year from the date of
cessation of service.
REINSTATEMENT FEES
In the event maintenance is not renewed or was never originally procured; a
reinstatement fee will be assessed. The reinstatement fee is equal to the
maintenance fee for the period in which the Software was not under maintenance
plus [*] of such fee.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE> 1
EXHIBIT 10.9
[GEOTEL LOGO] GEOTEL COMMUNICATIONS CORPORATION
Agreement #QTS990426
DISTRIBUTION AGREEMENT
FOR
ICR AND SICR PROGRAMS
The Distribution Agreement ("Agreement") is made as of April 26, 1999
("Effective Date") by and between GeoTel Communications Corporation, a Delaware
corporation, with its principal place of business at 900 Chelmsford Street,
Tower II, Floor 12, Lowell, Massachusetts, USA 01851 ("GeoTel") and Quintus
Corporation with its principal place of business at 47212 Mission Fall Court,
Fremont, CA 94539 ("Quintus" or "Distributor").
In consideration of the mutual covenants and agreements contained in this
Agreement, GeoTel and Quintus hereby agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"ACCEPTANCE CRITERIA" means the acceptance criteria for the Programs as
articulated in this Agreement and in Exhibit A.
"ACCEPTANCE DATE" means the date on which the Programs or Services are
accepted as described by this Agreement.
"CUSTOMER(S)" means the third party customers of Quintus, the third party
customers of Quintus' resellers, or both as the context requires.
"DESIGNATED COMPUTER" means the computer(s) designated on an Order or if
not so designated, the computer(s) on which the Program(s) are first installed.
"DOCUMENTATION" means GeoTel's then-current, published user documentation
containing the operating instructions for the Programs.
"EXTENDED TERM" means the term of any extensions beyond the Initial Term
of this Agreement.
"FIRST LEVEL SUPPORT" shall have the meaning specified in GeoTel's Support
Policy attached hereto in Exhibit C.
"INITIAL TERM" means the initial term of this Agreement as set forth in
Exhibit B.
"INSTALLATION CERTIFICATE" means the document issued by GeoTel upon the
successful completion of the Program installation by GeoTel at specified Quintus
or Customer locations.
"INSTALLATION SERVICES" means the installation services described in this
Agreement and in GeoTel's Support Policy attached hereto in Exhibit C, and
documented in a completed and signed Order.
"ICR PROGRAM(S) means the programs known as GeoTel's proprietary
Intelligent CallRouter program(s) and associated software programs, tools and
utilities. See Exhibit B for a detailed description.
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"NEW RELEASE" shall have the meaning specified in GeoTel's Support Policy
(a copy of which is attached hereto in Exhibit C).
"ORDER" shall mean the GeoTel standard order form (the "Order Supplement")
or Quintus' valid written purchase order (the "Purchase Order") which
references this Agreement by Agreement number, is completed and signed by
GeoTel and Quintus and contains sufficient information for GeoTel to configure,
ship, and issue an invoice for the Programs and Services. The Order shall
establish the Program licenses granted and the Services which are to be
provided hereunder.
"PRICES, COMMITMENT AND DISCOUNTS SCHEDULE" means the prices for Programs
and Services and discounts offered to Quintus for same under this Agreement and
the annual purchase commitment by Quintus and set forth in Exhibit D.
"PROFESSIONAL SERVICES" means the professional and consulting services
performed by GeoTel from time to time in accordance with this Agreement and
documented in a completed and signed Order.
"PROGRAM" OR "PROGRAMS" means (i) the GeoTel computer software programs
(which shall be distributed in object code form only) listed in Exhibit B and
in a completed and signed Order; (ii) related Documentation furnished by GeoTel
to Quintus, and (iii) if issued under Support Services, New Releases of the
Programs (which shall be distributed in object code form only) furnished by
GeoTel, but (iv) specifically excludes Work Product.
"QUINTUS PARTNERS" or "THIRD PARTY DISTRIBUTORS" means distribution
partners of Quintus who have been authorized under and in accordance with this
Agreement to use, distribute and sublicense the Programs.
"SECOND LEVEL SUPPORT" shall have the meaning specified in GeoTel's
Support Policy attached hereto in Exhibit C.
"SERVICES" means Professional, Support, Installation, and Training
Services.
"SICR PROGRAM(S)" means the Programs known as GeoTel's proprietary Site
Intelligent CallRouter program(s) and associated software tools and utilities.
See Exhibit B for a detailed description.
"SUPPORT SERVICES" shall mean technical support services described in
GeoTel's Support Policy (a copy of which is attached hereto in Exhibit C), this
Agreement, and documented in an Order.
"TERM" means the initial Term and, if any, the Extended Term(s).
"TERRITORY" means the geographic areas as set forth in Exhibit B.
"THIRD PARTY LICENSE(S)" means written license agreements entered into
between Quintus and its Customers, or between a reseller and its Customers,
which are subject to other requirements as specified herein.
"THIRD PARTY PRODUCTS" hardware and software, including upgrades thereto,
that are designated by GeoTel as required for the operation of the Programs in
conformance with the applicable Documentation. Third Party Products
specifically exclude the Programs and Work Product, and may include, but are
not limited to, those hardware and software products listed in Exhibit E. Third
Party Products are not available form GeoTel and must be acquired by Quintus or
Customer directly from third party suppliers or integrators.
"TRADEMARKS" means those GeoTel trademarks which relate to the Programs
Quintus is authorized to distribute.
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<PAGE> 3
"TRAINING SERVICES" shall mean training to be performed by GeoTel from
time to time, at Quintus or Customer's request, in accordance with this
Agreement and GeoTel's Training Catalog, and documented in an Order.
"WORK PRODUCT" shall mean any and all ideas, know-how, techniques,
materials, data, software or any deliverable produced or developed by GeoTel
and/or delivered to Quintus or Customer in the performance of Professional
Services or Installation Services, including, but not limited to, enhancements
or modifications made to the Programs.
2. GRANT OF RIGHTS
2.1 ICR Programs
2.1.1 Subject to an Order, GeoTel grants Quintus a non-exclusive,
non-transferable right to distribute and sublicense the ICR Programs
to its Customers in the Territory during the Term pursuant to Third
Party Licenses with such Customers provided that a Third Party License
to a Customer may not be reissued to another Customer without a new
Order.
2.1.2 Subject to an Order, GeoTel grants Quintus a non-exclusive,
non-transferable right to internally use one (1) ICR Program lab
systems, tools and utilities in the Territory during the Term for the
sole purpose of providing technical support services to its Customers.
2.2 SICR Programs
2.2.1 Subject to an Order, GeoTel grants Quintus a non-exclusive,
non-transferable right to distribute and sublicense the SICR Programs
to its Customers in the Territory during the Term pursuant to Third
Party Licenses with such Customers provided that a Third Party License
to a Customer may not be reissued to another Customer without a new
Order.
2.2.2 Subject to an Order, GeoTel grants Quintus a non-exclusive,
non-transferable right to internally use one SICR Program lab systems,
tools and utilities in the Territory during the Term for the sole
purpose of providing technical support services to its Customers.
2.3 Trademarks
2.3.1 GeoTel grants Quintus a non-exclusive, non-transferable right to
use its Trademarks in the Territory during the Term solely in
connection with the marketing, distribution and licensing of the
Programs.
2.3.2 Quintus shall use the Trademarks in compliance with GeoTel's
Trademark Use Guidelines which will be provided upon request. The
Programs shall at all times be branded with the Trademarks.
2.3.3 Quintus agrees to assist in the registration of the Trademarks
in the Territory in the name of GeoTel or its licensors and with the
renewal and maintenance of such registration as GeoTel may reasonably
request. Any costs incurred by Quintus and pre-approved in writing by
GeoTel in connection with such registration, renewals and maintenance
shall be reimbursed by GeoTel.
2.3.4 Quintus agrees that all use and registration of the Trademarks
shall inure to the benefit of GeoTel. Quintus shall have no right to
register any such Trademarks in its own
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<PAGE> 4
name or right, whether as owner, user or otherwise, without the prior
written consent of GeoTel.
2.4 Limitations
2.4.1 Thirty days prior to the termination date, Quintus will provide
GeoTel with a list of Customers that have a valid quote from Quintus.
Quintus' right to distribute, sublicense or use the Programs or
Trademarks shall cease upon the termination of this Agreement except
for the customers defined on the submitted list for which an order
will be accepted within 90 days after the termination date.
2.4.2 Any licenses granted by Quintus to its Customers for Customers'
use of the Programs shall continue after the termination of this
Agreement unless such licenses terminate in accordance with the terms
and conditions of the Third Party License.
2.4.3 The grant of rights described in Section 2 are subject to
Quintus' compliance with the terms and conditions of this Agreement.
2.4.4 Subject to the written consent of GeoTel and at GeoTel's sole
discretion, Quintus may authorize Quintus Partners to distribute and
sublicense the Programs to customers in accordance with the terms of
this Agreement.
2.4.5 Quintus' shall only distribute, sublicense or use the Programs
or Trademarks in combination with Quintus' core product set and when
integrated with the Quintus CTI Products. The total product solution
offered by Quintus should be comprised substantially of Quintus core
products. If GeoTel determines that Quintus has proposed to
distribute, sublicense or use the Programs or Trademarks without the
Quintus CTI Products product then, upon GeoTel's sole discretion, this
Agreement can be terminated.
2.5 Change of Designated Computer
2.5.1 ICR and SICR Programs licensed for use at a Customer's site may
be moved to another computer at such Customer's site of like
configuration to the Designated Computer or the Designated Computer
may be moved to another location within such Customer's organization
free of charge.
2.5.2 Notwithstanding anything to the contrary, nothing in this
Agreement shall be deemed to grant Quintus or Customers the right to
use or allow the use of a Program on more than one Designated Computer
concurrently for each license granted.
3. QUINTUS OBLIGATIONS
3.1 All licenses granted by Quintus hereunder shall be made pursuant to
Third Party Licenses. The aforementioned obligation shall also apply to Quintus
Partners, if any are expressly authorized by GeoTel to distribute and sublicense
the Programs, and any and all subsequent licensees in its distribution channel
that are approved by GeoTel. Each Third Party License shall be signed by each
party to such agreement and shall contain, at a minimum, the Minimum Flow-down
Terms, set forth in Exhibit F. If any Third Party License deviates from these
Minimum Flow-down Terms, Quintus shall defend, indemnify and hold GeoTel
harmless from and against any liabilities or damages it incurs as a result of
such deviation. Quintus shall enforce the obligations of each Customer under
each Third Party License and shall promptly report to GeoTel any breach of such
agreements; furthermore, Quintus shall provide for GeoTel's direct enforcement
of such obligations in the Third Party Licenses in the event Quintus fails to
enforce such obligations.
3.2 No Third Party License shall: (i) obligate GeoTel to directly provide
installation, training, support, maintenance, or other services to any third
party unless expressly agreed to in writing by GeoTel; (ii) obligate GeoTel
under any warranty, indemnification or other rights granted to Quintus; (iii)
provide for
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modifications or enhancements to the Programs other than as authorized by
GeoTel; or (iv) adversely affect GeoTel's ownership rights to the Program or
the economic interests of GeoTel.
3.3 Quintus shall, at its own expense, perform the following during the
Term:
(a) Quintus shall (i) maintain a sales and marketing program in the
Territory to market the Programs, (ii) perform all necessary
advertising to promote the Programs and (iii) in general, use every
effort to sell the Programs.
(b) Quintus shall submit to GeoTel, at least five (5) working days
prior to the beginning of each calendar quarter, a non-binding revenue
forecast for the ensuing six (6) month period.
(c) Quintus may provide GeoTel with timely reports detailing
marketing or technical information on competitive products, special
sales or service suggestions, and competitive announcements and shall
respond promptly to all reasonable inquiries and requests for help by
GeoTel.
(d) Quintus will work with GeoTel to develop and approve a joint
press release to announce this Agreement. From time to time, Quintus
and GeoTel will jointly announce any significant new Customers. Public
announcements identifying specific Customers will be made only after
securing Customer's consent.
(e) Quintus shall be responsible for billing and collecting all
amounts due from Customers.
(f) All Programs and Documentation licensed by Quintus shall be
labeled, packaged and sold by Quintus AS GeoTel products in accordance
with all GeoTel labeling, packaging and product standards except as
otherwise expressly set forth herein.
(g) Quintus shall keep correct and complete records of each Customer
to whom it has granted a license to the Programs.
3.4 Quintus Starter Package. In connection with the distribution rights
granted to Quintus hereunder, GeoTel shall provide Quintus with: (a)
thirty-five (35) copies of its Sales Demonstration Tool consisting of an
Authorware presentation prepared by GeoTel; (b) twenty-five (25) copies of the
GeoTel data sheets and (c) ten (10) copies of article reprints for
demonstration and marketing purposes and (d) two copies of GeoTel's Lab System
Programs (Installation and Support Services for same will only be provided at
GeoTel's standard fees) for internal use for development purposes and to
support Distributor's installation and support service offerings. Additionally,
GeoTel shall provide to Quintus five(5) days of sales training and 5 days per
quarter of technical training at GeoTel's training facility, located in Lowell,
Massachusetts, for up to five (5) people. The training schedule shall be by
mutual agreement of the parties. Both parties agree to use reasonable efforts
to schedule all such training to take place within ninety (90) days of the
Effective Date.
3.5 GeoTel Documentation. For the onetime fee of $25,000.00, GeoTel shall
provide Quintus with its Documentation in electronic form for the following
purpose with such fee to be paid to GeoTel prior to delivery of same. Quintus
may include limited portions of this Documentation in Quintus' documentation so
as to assist its Customers with the use of Quintus' products and services to be
distributed with the GeoTel Programs as described herein. This section only
grants Quintus limited rights and does not grant Quintus the right to distribute
GeoTel's Documentation except when same is purchased by Quintus for
distribution. Furthermore, the rights granted in this section are not intended
to eliminate the need for Quintus or its Customer to purchase additional
Documentation from GeoTel as needed or required for use of the Programs.
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4. GEOTEL'S OBLIGATIONS
GeoTel shall, at its own expense, provide Quintus with all relevant
technical information regarding the Programs and timely reports detailing
marketing or technical information on Programs, competitive products, special
sales or service suggestions, competitive announcements and shall respond
promptly to all inquiries and reasonable requests for help from Quintus.
5. INSTALLATION
5.1 Installation Services. For the initial term of the Agreement, Quintus
shall subcontract the installation, as described in the Installation Policy, of
the Program to GeoTel for the pricing set forth in Exhibit D plus reasonable
travel and living expenses. If the parties agree to an Extended Term and at
such time as Quintus has successfully completed GeoTel's Implementation and
Support Certification Program Requirements, then Quintus shall have the right
to assume complete responsibility for installation of the Programs.
5.2 Project Plan. Programs and Services ordered by Quintus hereunder will
serve as components of a complete Quintus solution comprised of Programs,
Services and Third Party Products. With respect to each Order, for which GeoTel
will be responsible for installation, GeoTel, Quintus, and Customer will
cooperate to define a mutually agreeable project plan (the "Project Plan") that
details the project requirements (including required Programs, Services and
Third Party Products), project dependencies, the respective responsibilities of
GeoTel, Quintus, Customer and third party suppliers, and the relative milestone
dates for completion of each phase of the project. GeoTel, Quintus, and
Customer shall apply commercially reasonable efforts to meet the milestone
dates, including, but not limited to, installation and delivery dates. In the
event that GeoTel, Quintus, or Customer cannot meet a milestone date, such
party shall notify the other parties, and the parties will mutually agree upon
a revised milestone date.
5.3 Third Party Products. Quintus or Customer shall be responsible for
obtaining any and all Third Party Products in accordance with the Project Plan
plus integration and configuration of the Programs with the third Party
Products. GeoTel is not responsible for selling, licensing, manufacturing, or
providing Services relative to Third Party Products.
5.4 Other Requirements. Quintus or Customer 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 and will arrange
for the wiring, interconnection, delivery and setup of same, as the case may
be, at a demarcation point mutually agreed upon by Quintus or Customer, as
applicable, and GeoTel. Quintus or Customer, as applicable, 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. Quintus or Customer, as applicable, shall
provide, at its expense, one telephone access line for remote support and
testing of the Programs and business use of GeoTel at the demarcation point.
GeoTel shall also advise Quintus of any additional Quintus or Customer
responsibilities to enable installation of Programs by GeoTel.
6. TRAINING
GeoTel will provide, at its training facilities, Training Services ordered by
the Quintus under the terms and conditions of this Agreement and at the current
prevailing fees for such training reflected on the relevant Order plus
incidental and out-of-pocket expenses.
7. SUPPORT SERVICES
7.1 Quintus shall provide First level support to directly to it's
customers.
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7.2 GeoTel shall provide Quintus with Second Level Support and Quintus
will be required to pay GeoTel's annual Support Services fees as stated in the
Prices, Commitment and Discounts Schedule for such support based on all
Programs purchased and installed.
7.3 The initial term of Support Services shall be for a period of one (1)
year from the day after the expiration of the Warranty Period. Support Services
shall continue for additional one (1) year terms pursuant to GeoTel's policies
and fees applicable on the date of renewal, unless, not less than thirty (30)
days prior to the date upon which the then-current term is due to end, Quintus
notifies GeoTel in writing of its intention to terminate Support Services for
itself or Customers.
7.4 GeoTel may, where appropriate, prorate Support Services fees so that
Support Services 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 Support Services were not ordered at the same time. Should GeoTel
designate such a common renewal date, then renewal and/or termination shall
take place with reference to that date.
7.5 Reinstatement of lapsed Support Services is subject to a
reinstatement fee of $25,000.
7.6 GeoTel shall have no obligation to provide Second Level Support or to
otherwise provide Support Services to any party other than Quintus.
8. PROFESSIONAL SERVICES
8.1 GeoTel may provide Professional Services ordered by Quintus under the
terms and conditions of this Agreement and GeoTel's then-current policies and
pricing for same. All rights, title and interest in and to any and all Work
Product are and shall remain the exclusive property of GeoTel. Unless otherwise
specified, GeoTel grants Quintus a limited license to distribute, sublicense
and use the Work Product with such license right being consistent with, limited
to and coterminous with the rights granted to Quintus for the Programs, or
Documentation, as applicable. Unless otherwise agreed to by the parties in
writing, Installation and Support Services shall not be provided for Work
Product.
8.2 Unless otherwise agreed to, Professional Services will be performed
on a time and materials basis.
8.3 Quintus will pay for reasonable and customary pre-approved expenses
incurred by GeoTel in the performance of such services, including travel and
living expenses for GeoTel's personnel.
8.4 Quintus Responsibilities
8.4.1 Quintus and Customer shall reasonably cooperate with GeoTel
in performing the services, including providing GeoTel with safe and
timely access to its computer systems, personnel, facilities,
utilities and information reasonably necessary to the performance of
the services at no charge to GeoTel. Quintus and Customer are
responsible for the accuracy and completeness of the information and
data supplied to GeoTel for use hereunder.
8.4.2 Quintus and Customer shall provide complete back-up for any
data and programs that may be affected by GeoTel's performance of the
services. GeoTel shall not be responsible for the protection or loss
of any data or programs of Quintus or Customer.
9. ACCEPTANCE
9.1 Acceptance Of Programs Installed By GeoTel. The parties agree that
the Programs specified in the applicable Order for which GeoTel will provide
Installation Services shall be subject to the Acceptance Criteria. Quintus
shall be deemed to have accepted all Programs on the fifteen (15th) calendar
day after the date the Programs are installed by GeoTel at Quintus' or
Customer's site and
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GeoTel has issued an Installation Certificate certifying such installation as
complete. If Quintus determines that the Programs are not in accordance with
the Acceptance Criteria and notifies GeoTel in writing within fifteen (15) days
following issuance of an Installation Certificate, acceptance of the Programs
shall be deferred until such time as GeoTel and Quintus agrees that the
Programs are in accordance with the Acceptance Criteria. The acceptance period
for add-on Orders to an existing installed central site shall be ten (10) days
after the Installation Certificate has been issued.
9.2 Acceptance Of Programs Installed By Quintus or Customer. The parties
agree that the Programs specified in the applicable Order for which Quintus or
Customer will be responsible for providing Installation Services shall be
deemed to have been accepted upon shipment of the Programs by GeoTel.
9.3 Acceptance of Services. The Acceptance Date for Services shall be ten
(10) days after delivery.
10. PURCHASE ORDERS
10.1 Form of Orders. Quintus may place an order for the license of
Program(s) by submitting an executed Order to GeoTel. Each Order must state:
(i) the Program(s), Services, prices and number ordered; (ii) the name of the
Customer; and (iii) that the Programs and Services are being ordered pursuant
to this Agreement. The parties agree (i) that any pre-printed terms and
conditions on Purchase Orders shall not apply and (ii) that the terms and
conditions of this Agreement shall solely govern the relationship of the
parties relating to the subject matter hereof.
10.2 Delivery of Program. All Orders must be received by GeoTel prior to
the expiration date of this Agreement and must specify delivery within 60 days
after the term of this Agreement.
10.3 Rejection of Orders. GeoTel may reject an Order (i) that contain
terms or conditions unacceptable to GeoTel or inconsistent with this Agreement,
(ii) where GeoTel has a reasonable basis to believe that it or Quintus will be
unable to adequately provide Installation Services and/or Support Services for
such Programs in such location, (iii) where the configuration to be proposed by
Quintus to a Customer is deemed outside those configurations specified in the
documentation, or (iv) where GeoTel determines that the intellectual property
laws of the target country do not provide adequate protection of GeoTel's
intellectual property rights.
10.4 Configuration Review. Until Quintus is certified by GeoTel that it
can perform installation services, Quintus shall present all proposed system
configurations to GeoTel prior to presenting same to prospective Customers in
order that GeoTel confirm that such system is adequately configured. GeoTel
shall provide Quintus with GeoTel's "Configurator" to assist Quintus in
configuring its system offerings properly.
11. PRICING AND PAYMENT TERMS
11.1 Prices and Discounts. GeoTel's prices and discounts are stated in the
Prices, Commitment and Discounts Schedule.
11.2 Purchase Commitment. Quintus agrees to the minimum annual purchase
commitment level as defined in Section 1 of Exhibit D.
11.3 Invoicing and Payment. Invoices for Program license fees, shipping
and handling charges, insurance, and applicable taxes shall be
payable on the Acceptance Date. Fees for Services and all other
applicable fees shall be payable when invoiced. Quintus shall pay
interest at the rate of one and one-half percent (1-1/2%) per month;
on all sums which remain unpaid thirty (30) days after the due date,
such interest to commence on the due date, plus reasonable attorney's
fees and costs incurred by GeoTel in collecting overdue amounts.
Unless otherwise agreed to, all payments shall be via wire transfer
pursuant to instructions included in Exhibit G.
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11.4 Records. Quintus shall keep full and accurate records containing all
information and data which may be necessary for GeoTel to verify the amounts
payable hereunder for two (2) years after the termination of the Agreement and
GeoTel shall have the right from time to time to inspect, upon reasonable
notice and during regular business hours, such records. The expenses for any
such examination shall be paid by GeoTel.
11.5 U.S. Dollars. All quoted prices in this Agreement are in U.S.
dollars. All payments due to GeoTel under this Agreement are to be made in U.S.
dollars.
11.6 Risk of Loss. GeoTel shall accept the risk of loss for all shipments
from GeoTel to Quintus or Customer until delivered to Quintus' or Customer's
location. The foregoing notwithstanding, all costs for shipping, insurance and
other costs related to shipping shall be paid for by Quintus.
11.7 Taxes. Quintus 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
Quintus 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 Quintus is required by law to make any deduction or to
withhold from any sum payable to GeoTel by Quintus hereunder, then the sum
payable by Quintus 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, Quintus
shall promptly reimburse GeoTel therefor. Quintus 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.
12. PROPRIETARY RIGHTS AND CONFIDENTIALITY
12.1 Ownership. The parties agree that (i) GeoTel shall own and retain
sole rights, title and interest in the Programs and Work Product including any
patent, copyrights, trademarks, trade secret or other proprietary rights
contained or embodied therein, and (ii) the Programs and Work Product are the
property of GeoTel protected under U.S. and international intellectual property
laws. Quintus only has the license rights to the Programs and Work Product as
expressly set forth herein.
12.2 Notices. All copies of the Programs made by Quintus shall contain
proper copyright and proprietary notices designating GeoTel as the owner.
12.3 Confidential Information
12.3.1 "Confidential 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, business plans, price lists, customer lists and other
information provided that such information is (i) marked as
confidential or proprietary, (ii) if orally or visually disclosed,
identified as confidential or proprietary prior to its disclosure and
reduced to a written memorandum within 30 days after its disclosure.
12.3.2 Confidential Information shall not include any information
which (i) is or becomes part of the public domain through no act or
omission on the part of the receiving party, (ii) is generally
disclosed to third parties by the disclosing party without
restriction on such third parties, (iii) is disclosed to the
receiving party by a third party having no obligation of
confidentiality with respect thereto, (iv) is known to the receiving
party prior to receipt of same from the disclosing party, (v) is
independently developed by the receiving party, or (vi) is required
by law, regulation, or a valid court order to be disclosed, but only
to the extent and for the purposes of such required disclosure;
provided, however, that the
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receiving party shall first promptly notify the disclosing party of
the order to permit the disclosing party to seek an appropriate
protective order.
12.3.3 Each party shall hold in confidence and not disclose the
Confidential Information of the other party and shall not use any such
Confidential Information except for purposes contemplated by this
Agreement. Confidential Information may only be disclosed to a party's
employees or contractors (other than a competitor of the other party)
who need to know such information for the purposes of exercising its
rights or executing its obligations hereunder and are contractually
bound to preserve the confidentiality thereof. The receiving party
shall protect the Confidential Information of the disclosing party to
the same extent as it holds in confidence its own Confidential
Information of similar importance but in no case will it exercise less
than a reasonable degree of care.
12.4 Protection of the Programs. The parties acknowledge that the Programs
and Work Product are and contain Confidential Information of GeoTel. Quintus
agrees to treat the Programs and Work Product as valuable assets of GeoTel and
agrees that the Programs shall not be used for any purposes other than to
assist in the normal use of the Programs as defined in the Documentation.
12.5 Restrictions. Quintus agrees it will not alter, merge, modify or
adapt the Programs or Work Product in any way including reverse engineering,
disassembling or decompiling same except as expressly authorized by governing
law. Quintus agrees not to create derivative works or competing products based
on the Programs or Work Product. Quintus agrees not to sell, distribute, loan,
rent, timeshare, lease, license or otherwise transfer the Programs, Work
Product, or any copy thereof except as expressly authorized herein. Quintus
agrees not to make copies of the Programs or Work Product, except for the
limited purpose of creating a single, archival, non-production copy for backup
purposes only.
12.6 Equitable Relief. Because unauthorized disclosure, use or transfer of
the Programs or Work Product may substantially diminish the value of such
materials and irrevocably harm GeoTel, if Quintus breaches its obligations
relative to the Programs, Work Product or the Confidential Information of
GeoTel, GeoTel shall be entitled to equitable relief in addition to other
remedies afforded by law.
13. WARRANTIES
13.1 Program Warranty. GeoTel warrants that for a period of ninety (90)
days following the Acceptance Date (the "Warranty Period"), the Programs will
function substantially in the manner described in the applicable Documentation.
GeoTel's sole obligation and Quintus' exclusive remedy under such warranty is
limited to GeoTel repairing or replacing the Programs such that these so
conform provided that GeoTel is notified of any such non-conformity during the
Warranty Period.
13.2 Media Warranty. GeoTel warrants the tapes, diskettes or other media
of the Programs to be free of defects in materials and workmanship under normal
use during the Warranty Period. During the Warranty Period, Quintus may return
defective media to GeoTel and it will be replaced without charge. Replacement
of media shall be GeoTel's sole obligation and Quintus' sole remedy in the
event of a breach of such media warranty.
13.3 Services Warranty. GeoTel warrants that the Services will be
performed in a workmanlike manner consistent with industry standards. This
warranty shall be valid for ninety (90) days from the delivery of the Service.
The re-performance of non-conforming Service(s) shall be GeoTel's sole
obligation and Quintus' sole remedy in the event of a breach of such warranty.
13.4 Year 2000 Warranty. GeoTel warrants that the Programs' user
interfaces, date data fields, processing logic, and outputs correctly
recognize, and otherwise support year 2000 and leap year calculations ("YEAR
2000 Compatibility"). YEAR 2000 Compatibility shall include date data century
recognition, calculations that accommodate same century and multi-century
formulas and date values, and date data interface values that reflect each
century. The foregoing warranty is subject to the
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Programs being used according to the Documentation and that all user or third
party software or hardware interfacing with the Programs correctly recognize,
process, and otherwise support year 2000 calendar processing. GeoTel's sole
obligation and Quintus' sole remedy regarding the foregoing warranty is limited
to GeoTel repairing or replacing the Programs such that these so conform
provided that Quintus notifies GeoTel of any such non-conformity, in writing,
within ninety (90) days after January 1, 2000.
14. DISCLAIMERS
14.1 Portions of the Programs may be derived from third-party software
licensed to GeoTel for integration into the Programs. With respect to Quintus
and Customers, no such third-party warrants the Programs, assumes any liability
regarding use of the Programs, or undertakes to furnish any support relating to
the Programs. GeoTel assumes responsibility for those portions of the Programs
that may have been provided by GeoTel's licensors and incorporated into the
Programs to the same extent that GeoTel takes responsibility for the Programs as
described by this Agreement.
14.2 GeoTel is not obligated to perform investigation and/or corrections of
defects found by GeoTel to be (i) in other than a current release or the one
previous general release of the Programs; (ii) caused by modification of the
Programs by any party other than GeoTel, or use thereof in combination with
software not provided or authorized by GeoTel; (iii) caused by improper or
unauthorized use of the Programs; or (iv) due to external causes beyond GeoTel's
reasonable control.
14.3 GeoTel does not make any warranties with respect to Third Party
Products.
14.4 THE EXPRESS WARRANTIES SET FORTH IN THE SECTION ENTITLED "WARRANTIES"
ARE THE ONLY WARRANTIES MADE BY GEOTEL WITH RESPECT TO THE PROGRAMS AND SERVICES
AND GEOTEL MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, AND DISCLAIMS THOSE
WARRANTIES ARISING BY CUSTOM, COURSE OF DEALING, TRADE USAGE OR STATUTE AND ANY
IMPLIED WARRANTY OF MERCHANTABILITY, TITLE OR FITNESS FOR ANY PARTICULAR
PURPOSE.
15. LIMITATIONS TO LIABILITY
15.1 GeoTel's liability, whether in contract, tort, or otherwise, arising
out of or in connection with the Programs, Services, or this Agreement shall not
exceed the amounts paid to GeoTel by Quintus for the particular Program or
Service giving rise to a cause of action in the twelve (12) month period prior
to such cause of action arising. Quintus' liability, whether in contract, tort,
or otherwise, arising out of or in connection with this Agreement shall not
exceed the amounts paid and payable to GeoTel by Quintus.
15.2 IN NO EVENT SHALL EITHER PARTY OR GEOTEL'S LICENSORS BE LIABLE TO THE
OTHER FOR SPECIAL INCIDENTAL, CONSEQUENTIAL, PUNITIVE, OR INDIRECT DAMAGES,
INCLUDING, WITHOUT LIMITATION, ANY DAMAGES RESULTING FROM LOSS OF USE, DATA,
PROFITS OR BUSINESS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE
PERFORMANCE OF THE PROGRAMS, SERVICES, OR FOR ANY OTHER OBLIGATIONS RELATING TO
THIS AGREEMENT, WHETHER OR NOT THE PARTIES HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.
15.3 The foregoing limitations in this Section shall not apply to (a) a
breach of a party's confidentiality obligations as described herein, (b) bodily
injury or tangible property damage proximately caused by a party, (c) violation
or infringement of any of GeoTel's intellectual property rights, or (d) a
party's obligations under any indemnity under this Agreement.
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16. INDEMNIFICATION
16.1 Infringement Indemnity by GeoTel
16.1.1 GeoTel shall defend any claim, suit or proceeding, and pay
any settlement amounts or damages finally awarded by a court of
competent jurisdiction against Quintus to a third party arising out of
claims by such third party that the Programs infringe any United
States, Canadian, Japanese, European Union country (as constituted as
of the Effective Date of this Agreement) or Australian patent,
copyright, trade secret, trade marks or service marks. The foregoing
indemnification obligation (i) shall only apply to the Programs as
delivered to Quintus by GeoTel, (ii) shall not apply to any claim of
infringement based on any modification of the Programs or the
combination, operation or use of the Programs with materials not
supplied by GeoTel, and (iii) shall not apply to the unauthorized use
of a superseded release of the Programs. In the event of a claim of
infringement, GeoTel shall have the option at its expense (i) to
procure for Quintus the right to continue using the infringing
Programs, (ii) to replace such Programs with a non-infringing product
substantially similar in features and functionality, (iii) to modify
such Programs to be non-infringing without materially affecting
features or functionality, or (iv) to grant Quintus a refund equal to
Quintus' fees paid to GeoTel for the infringing Program(s) as
amortized straight-line over a period of five (5) years from delivery
provided that Quintus returns such Programs to GeoTel and discontinues
use of same.
16.1.2 GeoTel shall have no infringement indemnity obligation under
this Section unless Quintus (a) promptly notifies GeoTel in writing of
the claim, (b) gives GeoTel full authority 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
provided, however, that such settlement does not adversely affect
Quintus other than as described herein.
16.1.3 This Section states Quintus' sole remedy and GeoTel's
exclusive obligation with respect to any claim of intellectual
property infringement.
16.2 Infringement Indemnity by Quintus
16.2.1 Except for GeoTel's infringement indemnity obligation as
described above, Quintus agrees to defend and indemnify GeoTel against
any and all claims, demands and liabilities arising from (i) Quintus'
acts or omissions in marketing and distributing the Programs or
Services, (ii) Quintus' intellectual property provided or used with
the Programs, or (iii) Customers' use of the Programs or Services.
16.2.2 Quintus shall have no infringement indemnity obligation
under this Section unless GeoTel (a) promptly notifies Quintus in
writing of the claim, (b) gives Quintus full authority and assistance
to defend such claim and (c) gives Quintus sole control of the defense
of such claim and all negotiations for the compromise or settlement
thereof.
17. TERM AND TERMINATION
17.1 Term. This Agreement shall remain in full force and effect for an
Initial Term commencing on the Effective Date. This Agreement may be renewable
for consecutive one (1) year periods based upon the mutual written agreement of
the parties no later than ninety (90) days prior to the end of the Initial Term
or the then-current Extended Term. Unless renewed, this Agreement shall
terminate as of the end of such Initial Term or Extended Term, as applicable.
17.2 Termination. This Agreement may also be terminated as follows:
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(i) By GeoTel, in the event that Quintus fails to make payments
other than the case where an invoice has been placed in dispute per
the notice provisions of this agreement, to TeoTel when due and fails
to remedy such breach within thirty (30) days after written notice of
such breach is provided to Quintus.
(ii) By either party, if the other party breaches any of its material
obligations under this Agreement and fails to remedy such breach
within thirty (30) days after written notice of such breach is
provided to the other party.
(iii) By either party, effective immediately and without notice, if
(a) a receiver, trustee, or liquidator is appointed for any of the
properties or assets of the other party; (b) a general assignment for
the benefit of creditors is made by the other party; (c) the other
party files a petition under any federal, state, or other, bankruptcy
code for reorganization or liquidation and such petition is not
dismissed within thirty (30) days thereafter; or (d) the other party
ceases doing business in the ordinary course.
17.3 Effect of Termination. Upon any termination of this Agreement, (i)
Quintus, and all of its third party resellers, if any, shall immediately cease
distributing, sublicensing and using the Programs, and (ii) Quintus, and all of
its third party resellers, if any, shall immediately return to GeoTel all
copies of the Programs in its possession and related documentation or
collateral material, if any, including any compilations, translations, partial
copies and modifications. Termination of this Agreement shall have no effect on
Quintus' payment obligations to GeoTel under this Agreement.
17.4 Services After Termination. Following termination of this Agreement,
Quintus and GeoTel will cooperate in the smooth transition of the provision of
Warranty and Support Services to Customers. GeoTel and Quintus upon mutual
consent, may elect, to (i) continue to have Quintus provide such services for a
mutually agreed upon fee, (ii) appoint a new service provider, (iii) provide
such services directly, or (iv) provide such services by any other means as
GeoTel may determine.
18. GENERAL
18.1 Relationship. The relationship between GeoTel and Quintus 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.
Neither 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.
18.2 Export Laws. Quintus acknowledges that all obligations of GeoTel
under this Agreement, including shipments of Programs and Documentation, are
subject to the export laws of the United States and that such laws could delay
or preclude delivery in the future. Quintus shall comply with all applicable
laws, including, without limitation, the export control laws of the United
States and prevailing regulations which may be issued by it from time to time,
concerning the exporting, importing and re-exporting of computer software.
18.3 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, casualty, strike, lock out, failure of public
utilities or any other cause beyond the reasonable control of the party, if the
affected party shall have used reasonable 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.
18.4 Notices. All notices or other communications given by either party to
the other under this Agreement shall be in writing and shall be personally
delivered or sent by registered or certified, mail return-receipt requested,
or by courier or overnight carrier to the other party at its address set forth
above
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or such other address as a party may subsequently designate in writing. The
date of receipt shall be deemed to be the date on which such notice is received.
18.5 Entire Agreement. This Agreement and its exhibits and attachments
constitute the entire agreement between GeoTel and Quintus with respect to the
subject matter hereof. No waiver, failure to enforce, consent, modification,
amendment or change of the terms of this Agreement shall bind either party
unless in writing and signed by both parties.
18.6 Severability. 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.
18.7 Assignments Prohibited. Except as may be expressly provided for
herein. Quintus may not transfer, assign or delegate, by operation of law or
otherwise, any of its rights or obligations under this Agreement without the
written consent of GeoTel which will not be unreasonably withheld.
18.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts without regard to
its conflict of laws provisions. The parties agree that the United Nations
Convention on Contracts for International Sale of Goods shall not apply. The
English language version of this Agreement shall be the official text hereof,
despite translations or interpretations in other languages.
18.9 Escrow. The Additional Party Agreement, attached hereto in Exhibit H
and incorporated herein by reference (the "Escrow Agreement"), governs the
parties' respective rights to the Programs escrowed. Quintus shall be
responsible for all fees and expenses relative to its participation in the
Escrow Agreement.
18.10 Survival of Provisions. Quintus agrees that the provisions of
Sections 2.3.4, 2.4, 11, 12, 14, 15, 16, 17, and 18 shall survive the
termination of this Agreement.
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THE PARTIES HERETO EXECUTED THIS AGREEMENT AS OF THE EFFECTIVE DATE.
- ------------------------------------- GEOTEL COMMUNICATIONS CORPORATION
("Quintus")
By: /s/ ALAN K. ANDERSON By: /s/ MARTIN W. PEJKO
--------------------------------- ---------------------------------
(Signature) (Signature)
Name: Alan K. Anderson Name: MARTIN W. PEJKO
------------------------------- -------------------------------
Title: President Title: CORPORATE COUNSEL
------------------------------ ------------------------------
Date: 4/26/99 Date: 4/26/99
------------------------------- -------------------------------
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EXHIBIT A
ACCEPTANCE CRITERIA FOR INSTALLATIONS PERFORMED BY GEOTEL
During the Acceptance Period, Quintus shall test the Programs to demonstrate
the following functionality.
A. Interface to the ACD specified in the relevant Order
B. Interface to the carrier network link specified in the relevant Order.
C. Provide real-time and consolidated reporting statistics in both
graphical and text format.
D. The ability to customize both hard copy and graphical views.
E. Flexibility to create/alter routing scripts with GUI interface.
F. Route calls based on real-time statistics gathered from the sites.
G. Error checking capability for the routing logic to validate routes.
H. Automate call routing process.
I. Automatically balance call load and call allocation.
J. System availability meets or exceeds 99.9% for redundant system
components.
K. Provide individual call center and enterprise end-to-end statistics.
L. Ability to view multiple statistic windows on the same Administration
Workstation.
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EXHIBIT B
GENERAL TERMS
1. PROGRAMS DESCRIPTION
ICR Programs:
These Programs are as described in GeoTel's relevant Documentation.
SICR Programs:
These Programs are as described in GeoTel's relevant Documentation.
The Programs specifically exclude GeoTel's products known as Network
Intelligent CallRouter software.
2. TERRITORY:
Exhibit L. "Listed Countries"
3. INITIAL TERM:
The Initial Term of this Agreement shall be three (3) Years commencing on
the Effective Date; however, notwithstanding the foregoing, either party may
terminate this Agreement for convenience effective at the end of the first or
second year of the Initial Term of this Agreement provided that such party
gives the other written notice of its intent to terminate the Agreement thirty
(30) days prior to the end of either the first or second year as the case may
be. Termination or expiration of this Agreement shall not effective
Distributor's obligation to pay GeoTel (i) any minimum guaranteed payments due
as set forth in Exhibit D or (ii) other payments due GeoTel as of the date of
such termination or expiration.
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EXHIBIT C
INSTALLATION AND SUPPORT POLICIES
The following policies are attached as part of this Exhibit C:
o Distributor Support Policy for the Intelligent CallRouter (ICR) Programs
o Distributor Support Policy for the Site Intelligent CallRouter (SICR)
Programs
o Distributor Installation Policy for the Intelligent CallRouter (ICR)
Programs
o Distributor Installation Policy for the Site Intelligent CallRouter
(SICR) Programs
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[GEOTEL LOGO] [GEOTEL COMMUNICATIONS CORPORATION]
DISTRIBUTOR SUPPORT POLICY
FOR
INTELLIGENT CALLROUTER (ICR) PROGRAMS
(REV: 981008)
- --------------------------------------------------------------------------------
1. INTRODUCTION
This Distributor Support Policy sets forth GeoTel's support policy for
Distributors of ICR Programs who purchase Support Services. The terms used
herein shall have the same meaning as in GeoTel's applicable distribution
agreement ("Agreement"). References to "ICR Programs" in this Support Policy
shall refer to ICR Programs, as such term is defined in the Agreement, and
other Programs on an Order for same, and excluding Programs known as Site ICR
Programs and Network ICR Programs.
2. SUPPORT SERVICES
Support is available during the Warranty Period, and thereafter, so long as
Distributor purchases Support for each Customer and each licensed ICR Program.
2.1 Coverage
Support, as defined in this Section, is available on a continuous, 7
day, 24 hour-per-day basis, excluding GeoTel holidays. Support is provided
on a remote basis for the ICR Programs and GeoTel Hardware.
Charges for services not within the scope of this Support Policy
requested by Distributor shall be provided by quotation at the time and
materials rate in effect at the time of the request. With respect to any
such services, Distributor shall reimburse GeoTel for reasonable travel and
out-of-pocket expenses actually incurred.
2.2 Support Services
2.2.1 GeoTel will provide remedial support for the ICR Programs,
upon receipt of notice(s) from Distributor specifying failure(s) of
the ICR Programs to perform substantially in accordance with the
applicable Documentation, and upon receipt of such additional
information as GeoTel may reasonably request, provided any such notice
is received by GeoTel during the Warranty Period or the then-current
Support period, as the case may be. GeoTel will become actively
involved in resolving problems and errors reported by Distributor as
soon as practicable, but in any event, GeoTel will respond to
Distributor and initiate problem resolution activities according to
the applicable Severity Level (as defined below) within the timetable
below. GeoTel will employ reasonable efforts to provide an update,
patch, revision or temporary workaround solution to correct all such
non-conformities, or replace all such non-conforming ICR Programs,
within the Targeted Problem Resolution Time indicated below for the
relevant Severity Level.
GeoTel shall not be obligated to perform investigation and/or
correction of defects found by GeoTel to be: (i) in other than a
current, unaltered release; (ii) caused by Distributor' or Customers'
negligence, or use of the ICR Programs in combination with software
not authorized by GeoTel; (iii) unauthorized use or modification of
the ICR Programs by any
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party other than GeoTel, its employees or agents; or (iv) due to external
causes beyond GeoTel's reasonable control.
<TABLE>
<CAPTION>
Response/ Targeted Problem
Severity Level Acknowledgement Resolution Time
- -------------- --------------- -----------------
<S> <C> <C>
Priority 1 -- Critical Problem(x) 1 Hour 1 Day
Priority 2 -- Major Problem(y) 4 Hours 2 Days
Priority 3 -- Minor Problem(z) 72 Hours Next Release
</TABLE>
(x)A "Priority 1 -- Critical Problem" is defined as a problem which renders
the ICR Programs unusable or materially impacts Customer's ability to use the
ICR Programs in a production environment.
(y)A "Priority 2 -- Major Problem" is defined as a problem which a) causes
an ICR Programs feature failure that cannot be avoided by alternate methods by
Distributor and/or Customer and severely impairs Customer from using the ICR
Programs as intended, or b) causes a loss of redundancy and any redundant part
of the ICR Programs is operating in a simplex mode.
(z)A "Priority 3 -- Minor Problem" is defined as a low priority problem or
question which is not materially service affecting. Examples include, but are
not limited to, misspelled error messages, Documentation errors, and report or
script questions.
2.2.2 GeoTel's Customer Support Center will:
- Subject to Section 2.4 below, provide remote monitoring and
support of ICR Programs operation, and diagnosis of ICR
Programs and GeoTel Hardware problems;
- Serve as a central point of contact and provide tracking for
general ICR Programs questions;
- Make available to Distributor via telephone, qualified
personnel for consultation and to aid Distributor in the
resolution or verification of ICR Programs or GeoTel Hardware
problems of all Severity Levels; and
- Make available, upon request, a monthly report, detailing
Customer-specific information regarding the most current status
of Distributor-reported ICR Programs problems, corrections, and
targeted resolution dates. Distributor may request current
status information on Customer-specific, reported ICR Programs
problems at any time.
2.2.3 GeoTel shall provide modifications to the ICR Programs to accommodate
any new operating system release if the previous operating system release was
supported by GeoTel at the time the ICR Programs were installed and provided
the processor instruction set and operating system remain upwardly compatible.
2.2.4 On-site assistance is not within the scope of Support, however;
(a) If requested by Distributor, GeoTel agrees to furnish on-site
assistance in a time frame as mutually agreed by the parties and in
accordance with GeoTel's standard rates then in effect. Prior to
scheduling any on-site assistance, the solution to specific problems
shall be discussed and resolved remotely, whenever possible, by the
GeoTel Customer Support Center.
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<PAGE> 21
(b) In the case of emergencies outside the scope of Support,
Customer-affecting failures and/or when other critical factors
apply. GeoTel will provide on-site assistance using reasonable
efforts within the limits of available commercial transportation
at GeoTel's standard rates then in effect.
With respect to any on-site services, Distributor shall
reimburse GeoTel for reasonable travel and out-of-pocket
expenses actually incurred.
2.3 Support Services of GeoTel Hardware
GeoTel will provide remedial hardware support by replacing GeoTel
Hardware found not in conformity with GeoTel's specifications,
provided: 1) notice of the nonconformity is given in writing, 2) the
defective Hardware is returned to GeoTel at its factory,
transportation prepaid, in accordance with GeoTel's instructions, and
3) an inspection of the returned equipment by GeoTel indicates the
defect was not caused by abuse or improper use, maintenance, repair
or alteration. Shipment of replacement GeoTel Hardware will be made
by overnight courier or equivalent at GeoTel's expense. Distributor
or Customer is responsible for installation of replacement Hardware,
unless it purchases Installation Services for same from GeoTel.
2.4 First Level and Second Level Support
2.4.1 Distributor is responsible to provide First Level Support
to Customers. First Level Support consists of the following services:
o Multi-vendor fault isolation and resolution;
o Case management for all troubles reported or received
on GRID;
o Administration of the ICR Programs;
o Response to Frequently Asked Questions (FAQs)
regarding the ICR Programs;
o Administration of upgrades for the ICR Programs; and
o Remote monitoring.
2.4.2 GeoTel will provide Second Level Support to Distributor.
Second Level Support consists of the following services:
o Backup 7X24 Support to Distributor for the Distributor
responsibilities detailed in First Level Support; and
o Revisions for the ICR Programs according to the
Severity Levels defined above.
3. NEW RELEASES
3.1 New Releases. GeoTel will provide New Releases (as defined below) to
Distributor for Customers for which Distributor has previously purchased a
license for such ICR Programs and these ICR Programs are currently under
Support.
3.2 Support of New Releases. For one hundred eighty (180) days following
the date GeoTel makes a New Release commercially available, the previous
New Release shall be covered by Support; thereafter, only the most current
New Release shall be covered by Support.
3.3 Separate Programs. Notwithstanding anything to the contrary, GeoTel
shall have no obligation to furnish Distributor or Customers with
separately priced programs, or components or
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<PAGE> 22
options to the ICR Programs for which Distributor or Customer has not
previously purchased a license.
3.4 Use Restriction. When Distributor or Customer upgrades its ICR
Programs to a New Release, it shall not be permitted to continue to use a
previous New Release and the current New Release concurrently, e.g., only
one licensed copy of an ICR Program may be used at a time.
3.5 Definitions
"New Release" means Updates and Upgrades created and issued at the
discretion of GeoTel.
"Update" means error corrections, modifications to existing functionality,
or minor enhancements to ICR Program(s) made by GeoTel. Such Updates may
be issued as revisions which are designated as the next incremental
release of the ICR Program(s) by a change in the revision number that is
reflected by a change in the number to the right of the decimal point,
i.e., a change from X.1 to X.2.
"Upgrades" means new major functionality added to ICR Program(s) made by
GeoTel. Such new functionality may be issued as revisions which are
designated as the next incremental release of the ICR Program(s) by a
change in the revision number that is reflected by a change in the number
to the left of the decimal point, i.e., a change from 2.X to 3.X.
4. DISTRIBUTOR AND CUSTOMER RESPONSIBILITIES
4.1 Training
Distributor shall designate at least one, but not more than three,
person(s) at Distributor' primary Central Controller ICR Programs site,
who has attended ICR Programs courses at GeoTel, to serve as Distributor'
primary point-of-contact for communications on behalf of Distributor and
Customers with the GeoTel Customer Support Center. Distributor shall
ensure that at least two Distributor engineers successfully complete and
maintain GeoTel certification.
4.2 Remote Maintenance and Diagnostics Access
Distributor shall provide, and ensure that Customers provide, at no charge
to GeoTel, access to telecommunications equipment, as reasonably
determined by GeoTel to be required in order to establish a data
communication link between Distributor or Customer and GeoTel, for use in
remote diagnosis and support of the ICR Programs. Distributor also agrees
to make available, and ensure that Customers make available, to GeoTel
current system passwords as necessary to provide each remote diagnosis and
support.
4.3 Support of Premise Equipment
Distributor shall provide, and ensure that Customers provide, support for
all network Distributor and Customer premise equipment, respectively, as
may be required for network services, such as, but not limited to, data
service units, channel service units, and local and wide area network
routers and bridges.
4.4 Problem Verification
Distributor is responsible for all reasonable efforts to verify the
existence of an ICR Programs or GeoTel Hardware problem prior to
requesting Support from GeoTel.
4.5 Support of Administrative Workstation Desktop Environment
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Distributor and/or Customer are responsible for supporting the
Administrative Workstation Windows NT Desktop environment for the GeoTel
Administrative Workstation ICR Programs. GeoTel will make reasonable
efforts to assist Distributor in diagnosing and resolving problems which
may occur as a result of conflicts or resource contention between ICR
Programs and Customer applications that may be running in the
Administrative Workstation Desktop Environment.
4.6 Changes to Central Controller or Peripheral Gateways
Distributor and/or Customer shall obtain authorization from GeoTel prior
to making any software or hardware configuration changes to the Central
Controller (Router, Logger, or Network Interface Controller) or Peripheral
Gateways ICR Programs.
4.7 Support of Third Party Products
Distributor and/or Customer are solely responsible for providing technical
support for Third Party Products and all upgrades thereto.
4.8 Support of Network Services
Distributor and/or Customer shall provide support and be responsible for
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 Programs. Distributor and/or Customer
shall report network service problems to the appropriate network provider
or vendor.
5. TRAINING SERVICES
Training is conducted at GeoTel's training facility in Massachusetts.
Distributor is responsible for paying all travel and related expenses for
Distributor and Customer employees. See GeoTel's current price list for
training credits and prices applicable to the ICR Programs purchased. See
GeoTel's current Training Catalog for course availability, descriptions and
policies. Support Services do not include Training.
6. SCOPE OF SUPPORT POLICY
This Support Policy is GeoTel's current policy for same and is subject to
change by GeoTel at any time at its discretion.
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[GEOTEL LOGO] GEOTEL COMMUNICATIONS CORPORATION
DISTRIBUTOR SUPPORT POLICY
FOR
SITE INTELLIGENT CALLROUTER (SICR) PROGRAMS
(REV. 981008)
- --------------------------------------------------------------------------------
1. INTRODUCTION
This Distributor Support Policy sets forth GeoTel's support policy for
Distributors of SICR Programs who purchase Support Services. The terms used
herein shall have the same meaning as in GeoTel's applicable distribution
agreement ("Agreement"). References to "SICR Programs" in this Support Policy
shall refer to SICR Programs, as such term is defined in the Agreement, and
other Programs on an Order for same.
2. SUPPORT SERVICES
Support is available during the Warranty Period, and thereafter, so long as
Distributor purchases Support for each Customer and each licensed SICR Program.
2.1 Coverage
Support, as defined in this Section, is available on a continuous, 7
day 24 hour-per-day basis, excluding GeoTel holidays. Support is provided
on a remote basis for the SICR Programs and GeoTel Hardware.
Charges for services not within the scope of this Support Policy
requested by Distributor shall be provided by quotation at the time and
materials rate in effect at the time of the request. With respect to any
such services, Distributor shall reimburse GeoTel for reasonable travel and
out-of-pocket expenses actually incurred.
2.2 Support Services
2.2.1 GeoTel will provide remedial support for the SICR Programs, upon
receipt of notice(s) from Distributor specifying failure(s) of the
SICR Programs to perform substantially in accordance with the
applicable Documentation, and upon receipt of such additional
information as GeoTel may reasonably request, provided any such notice
is received by GeoTel during the Warranty Period or the then-current
Support period, as the case may be. GeoTel will become actively
involved in resolving problems and errors reported by Distributor as
soon as practicable, but in any event, GeoTel will respond to
Distributor and initiate problem resolution activities according to
the applicable Severity Level (as defined below) within the timetable
below. GeoTel will employ reasonable efforts to provide an update,
patch, revision or temporary workaround solution to correct all such
non-conformities, or replace all such non-conforming SICR Programs,
within the Targeted Problem Resolution Time indicated below for the
relevant Severity Level.
GeoTel shall not be obligated to perform investigation and/or
correction of defects found by GeoTel to be: (i) in other than a
current, unaltered release; (ii) caused by Distributor' or Customers'
negligence, or use of the SICR Programs in combination with software
not authorized by GeoTel; (iii) unauthorized use or modification of
the SICR Programs by any
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<PAGE> 25
party other than GeoTel, its employees or agents; or (iv) due to external
causes beyond GeoTel's reasonable control.
<TABLE>
<CAPTION>
Response/ Targeted Problem
Severity Level Acknowledgment Resolution Time
- -------------- -------------- ----------------
<S> <C> <C>
Priority 1 - Critical Problem(x) 1 Hour 1 Day
Priority 2 - Major Problem(y) 4 Hour 2 Days
Priority 3 - Critical Problem(z) 72 Hours Next Release
</TABLE>
(x)A "Priority 1 - Critical Problem" is defined as a problem which renders the
SICR Programs unusable or materially impacts Customer's ability to use the SICR
Programs in a production environment.
(y)A "Priority 2 - Major Problem" is defined a problem which a) causes a SICR
Programs feature failure that cannot be avoided by alternate methods by
Distributor and/or Customer and severely impairs Customer from using the SICR
Programs as intended, or b) causes a loss of redundancy and any part of the SICR
Programs is operating in a simplex mode.
(z)A "Priority 3 - Minor Problem" is defined as a low priority problem or
question which is not materially service affecting. Examples include, but are
not limited to, misspelled error messages, Documentation errors, and report or
script questions.
2.2.2 GeoTel's Customer Support Center will:
o Subject to Section 2.4 below, provide remote monitoring and
support of SICR Programs operation, and diagnosis of SICR
Programs and GeoTel Hardware problems;
o Serve as a central point of contact and provide tracking for
general SICR Programs questions;
o Make available to Distributor via telephone, qualified
personnel for consultation and to aid Distributor in the
resolution or verification of SICR Programs or GeoTel hardware
problems of all Severity Levels; and
o Make available, upon request, a monthly report, detailing
Customer-specific information regarding the most current status
of Distributor-reported SICR Programs problems, corrections, and
targeted resolution dates. Distributor may request current
status information on Customer-specific, reported SICR Programs
problems at any time.
2.2.3 GeoTel shall provide modifications to the SICR Programs to
accommodate any new operating system release if the previous operating
system release was supported by GeoTel at the time the SICR Programs
were installed and provided the processor instruction set and
operating system remain upwardly compatible.
2.2.4 On-site assistance is not within the scope of Support, however:
(a) If requested by Distributor, GeoTel agrees to furnish on-site
assistance in a time frame as mutually agreed by the parties and in
accordance with GeoTel's standard rates then in effect. Prior to
scheduling any on-site assistance, the solution to specific problems
shall be discussed and resolved remotely, whenever possible, by the
GeoTel Customer Support Center.
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<PAGE> 26
(b) In the case of emergencies outside the scope of Support,
Customer-affecting failures and/or when other critical factors
apply, GeoTel will provide on-site assistance using reasonable
efforts within the limits of available commercial
transportation at GeoTel's standard rates then in effect.
With respect to any on-site services, Distributor shall
reimburse GeoTel for reasonable travel and out-of-pocket
expenses actually incurred.
2.3 Support Services for GeoTel Hardware
GeoTel will provide remedial hardware support by replacing GeoTel
Hardware found not in conformity with GeoTel's specifications,
provided: 1) notice of the nonconformity is given in writing, 2) the
defective Hardware is returned to GeoTel at its factory,
transportation prepaid, in accordance with GeoTel's instructions,
and 3) an inspection of the returned equipment by GeoTel indicates
the defect was not caused by abuse or improper use, maintenance,
repair or alteration. Shipment of replacement GeoTel Hardware will
be made by overnight courier or equivalent at GeoTel's expense.
Distributor or Customer is responsible for installation of
replacement Hardware, unless it purchases Installation Services for
same from GeoTel.
2.4 First Level and Second Level Support
2.4.1 Distributor is responsible to provide First Level Support to
Customers. First Level Support consists of the following services:
- Multi-vendor fault isolation and resolution;
- Case management for all troubles reported or received on
GRID;
- Administration of the SICR Programs;
- Administration of the third party software programs;
- Response to Frequently Asked Questions (FAQs) regarding
the SICR Programs;
- Administration of upgrades for the SICR Programs; and
- Remote monitoring.
2.4.2 GeoTel will provide Second Level Support to Distributor.
Second Level Support consists of the following services:
- Backup 7X24 Support to Distributor for the Distributor
responsibilities detailed in First Level Support; and
- Revisions for the SICR Programs according to the Severity
Levels defined above.
3. NEW RELEASES
3.1 New Releases. GeoTel will provide New Releases (as defined below)
to Distributor for Customers for which Distributor has previously
purchased a license for such SICR Programs and these SICR Programs are
currently under Support.
3.2 Support of New Releases. For one hundred eighty (180) days
following the date GeoTel makes a New Release commercially available, the
previous new Release shall be covered by Support; thereafter, only the
most current New Release shall be covered by Support.
3.3 Separate Programs. Notwithstanding anything to the contrary, GeoTel
shall have no obligation to furnish Distributor or Customers with
separately priced programs, or components or
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<PAGE> 27
options to the SICR Programs for which Distributor or Customer has not
previously purchased a license.
3.4 Use Restriction. When Distributor or Customer upgrades its SICR
Programs to a New Release, it shall not be permitted to continue to use a
previous New Release and the current New Release concurrently, e.g., only
one licensed copy of a SICR Program may be used at a time.
3.5 Definitions
"New Release" means Updates and Upgrades created and issued at the
discretion of GeoTel.
"Updates" means error corrections, modifications to existing
functionality, or minor enhancements to SICR Program(s) made by GeoTel.
Such Updates may be issued as revisions which are designated as the next
incremental release of the SICR Program(s) by a change in the revision
number that is reflected by a change in the number to the right of the
decimal point, i.e., a change from X.1 to X.2.
"Upgrades" means new major functionality added to SICR Program(s) made by
GeoTel. Such new functionality may be issued as revisions which are
designated as the next incremental release of the SICR Program(s) by a
change in the revision number that is reflected by a change in the number
to the left of the decimal point, i.e., a change from 2.X to 3.X.
4. DISTRIBUTOR AND CUSTOMER RESPONSIBILITIES
4.1 Training
Distributor shall designate at least one, but not more than three,
person(s) at Distributor' primary Central Controller SICR Programs site,
who has attended SICR Programs courses at GeoTel, to serve as
Distributor' primary point-of-contact for communications on behalf of
Distributor and Customers with the GeoTel Customer Support Center.
Distributor shall ensure that at least two Distributor engineers
successfully complete and maintain GeoTel certification.
4.2 Remote Maintenance and Diagnostics Access
Distributor shall provide, and ensure that Customers provide, at no
charge to GeoTel, access to telecommunications equipment, as reasonably
determined by GeoTel to be required in order to establish a data
communication link between Distributor or Customer and GeoTel, for use in
remote diagnosis and support of the SICR Programs. Distributor also
agrees to make available, and ensure that Customers make available, to
GeoTel current system passwords as necessary to provide such remote
diagnosis and support.
4.3 Support of Premise Equipment
Distributor shall provide, and ensure that Customers provide, support for
all network Distributor and Customer premise equipment, respectively, as
may be required for network services, such as, but not limited to, data
service units, channel service units, and local and wide area network
routers and bridges.
4.4 Problem Verification
Distributor is responsible for all reasonable efforts to verify the
existence of a SICR Program GeoTel Hardware problem prior to requesting
Support from GeoTel.
4.5 Support of Administrative Workstation Desktop Environment
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<PAGE> 28
Distributor and/or Customer are responsible for supporting the
Administrative Workstation Windows NT Desktop environment for the GeoTel
Administrative Workstation SICR Programs. GeoTel will make reasonable
efforts to assist Distributor in diagnosing and resolving problems which
may occur as a result of conflicts or resource contention between SICR
Programs and Customer applications that may be running in the
Administrative Workstation Desktop Environment.
4.6 Changes to Central Controller or Peripheral Gateways
Distributor and/or Customer shall obtain authorization from GeoTel prior
to making any software or hardware configuration changes to the Central
Controller (Router, Logger, or Network Interface Controller) or
Peripheral Gateways SICR Programs.
4.7 Support of Third Party Products
Distributor and/or Customer are solely responsible for providing
technical support for Third Party Products and all upgrades thereto.
4.8 Support of Network Services
Distributor and/or Customer shall provide support and be responsible for
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 SICR Programs. Distributor and/or
Customer shall report network service problems to the appropriate network
service provider or vendor.
5. TRAINING SERVICES
Training is conducted at GeoTel's training facility in Massachusetts.
Distributor is responsible for paying all travel and related expenses for
Distributor and Customer employees. See GeoTel's current price list for
training credits and prices applicable to the SICR Programs purchased.
See GeoTel's current Training Catalog for course availability, descriptions and
policies. Support Services do not include Training.
6. SCOPE OF SUPPORT POLICY
This Support Policy is GeoTel's current policy for same and is subject to
change by GeoTel at any time at its discretion.
Page 28
<PAGE> 29
[GEOTEL LOGO] [GEOTEL COMMUNICATIONS CORPORATION LETTERHEAD]
DISTRIBUTOR INSTALLATION POLICY
FOR
INTELLIGENT CALLROUTER (ICR) PROGRAMS
(REV: 981008)
- --------------------------------------------------------------------------------
1. INTRODUCTION
This Distributor Installation Policy sets forth GeoTel's installation policy
for Distributors of ICR Programs who purchase Installation Services. The terms
used herein shall have the same meaning as in GeoTel's applicable distribution
agreement ("Agreement"). References to "ICR Programs" in this Installation
Policy shall refer to ICR Programs, as such term is defined in the Agreement,
and other Programs on an Order for same, and excluding Programs known as Site
ICR Programs and Network ICR Programs. References to the ICR Platform in this
Installation Policy shall refer to the ICR Programs located and configured on
Distributor or Customer supplied Third Party Products. References to the
"Central Controller" shall refer to ICR Programs known as the Intelligent
CallRouter and Logger, currently GeoTel model #12002 and the like.
2. INSTALLATION SERVICES -- NEW ICR PROGRAMS INSTALLATIONS
The Installation Services described in this Section are provided only for the
ICR Programs listed on an Order that includes a Central Controller. Travel
costs for GeoTel employees traveling to sites in the United States and Canada
are included. Distributor shall pay GeoTel for travel costs for GeoTel
employees traveling to Distributor or Customer sites outside the United States
and Canada. Repeat travel by GeoTel employees to an ICR Programs site as the
result of the site, Distributor and/or Customer not being ready is subject to
travel, reasonable out-of-pocket, and time and materials, charges.
2.1 Installation Planning
2.1.1 Project Engineer. Upon receipt of an Order for ICR
Programs, each party will designate a project engineer for the
installation. The Project Engineers will be the primary points of contact
for all project planning activities.
2.1.2 Project Planning Activities. The Project Engineers will
serve as the "team leaders," drawing on resources as necessary to ensure
that the following tasks are accomplished:
(a) Conduct a one-day pre-install planning meeting at
Customer's primary Central Controller site;
(b) Confirm Customer business goals and review
Acceptance Criteria for the ICR Programs;
(c) Provide Customer with implementation planning
guidance, including information regarding:
- Inter-exchange carrier access links
- ICR Programs network links (LAN/WAN)
- Third Party Products
- ACD CTI link hardware and software
- Premises space, environment, and power requirements;
Page 29
<PAGE> 30
(d) Provide application configuration and scripting assistance
as determined by GeoTel; and
(e) Coordinate tasks required to implement ICR
Programs-controlled call routing.
2.2 ICR Programs Loading, Configuration, and Test
The Distributor and/or Customer are encouraged to use a supplier
recommended by GeoTel for the acquisition and integration of Third Party
Products, and in such event, Distributor or Customer may be eligible for a
reduction in GeoTel's standard installation fees in accordance with GeoTel's
standard policies then in effect. Alternatively, Distributor and/or Customer
may elect to have GeoTel load and configure the ICR Programs on Third Party
Products at GeoTel's standard installation fee then in effect. In either case,
ICR Programs will be completely integrated and tested with the Third Party
Products.
2.3 Installation and Monitoring
2.3.1 Central Controller Site Installation. After verifying that site
preparations are complete, a qualified GeoTel employee will make a single
trip, if necessary, to each Central Controller site (including sites for
which the remote redundancy option has been licensed) for installation and
connection of ICR Platforms to Distributor or Customer provided network
facilities, ICR Programs configuration, and data and inter-exchange
carrier network services verification. The ICR Programs configuration will
be completed to the extent to allow enterprise-wide monitoring and routing
of calls.
2.3.2 Peripheral Gateway Site(s) Installation. After verifying that
site preparations are complete, a qualified GeoTel employee will make a
single trip, if necessary, to each Peripheral Gateway site for placement of
ICR Platforms, connection of ICR Platforms to Distributor or Customer
provided network facilities, ICR Programs configuration, and data network
services verification.
2.3.3 ICR Programs Monitoring. After installation of the Central
Controller site(s) and Peripheral Gateway site(s), GeoTel will conduct
remote monitoring of the ICR Programs from its Customer Support Center to
validate enterprise-wide performance and configuration.
2.4 ICR Programs-Controlled Routing
After completion of the remote monitoring phase and verifying that
inter-exchange carrier provisioning has been completed, a qualified GeoTel
employee will make a single trip, if necessary, to the Central Controller
site(s) for final ICR Programs configuration and testing, and commencement of
ICR Programs-controlled routing.
3. INSTALLATION SERVICES - ON-SITE UPGRADES AND EXPANSIONS
Distributor is responsible for planning and performing all Customer upgrades
and expansions. However, GeoTel is available to perform Installation Services
for upgrades of Third Party Products, and New Releases and add-on Orders for
the SICR Programs, in accordance with GeoTel's policies, prices and fees then
in effect.
4. TRAINING SERVICES
Training is conducted at GeoTel's training facility in Massachusetts.
Distributor is responsible for paying all travel and related expenses for
Distributor and Customer employees. See GeoTel's current price list for training
credits and prices applicable to the ICR Programs purchased. See GeoTel's
current Training Catalog for course availability, descriptions and policies.
Page 30
<PAGE> 31
5. DISTRIBUTOR AND CUSTOMER RESPONSIBILITIES
5.1 Provisioning of Network Services
Distributor and/or Customer shall be responsible for acquiring, installing
and activating 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 Programs. Distributor and/or Customer
shall report network service problems to the appropriate network service
provider or vendor.
5.2 Remote Maintenance and Diagnostics Access
Distributor and/or Customer shall provide, at no charge to GeoTel, access
to telecommunications equipment, as reasonably determined by GeoTel to be
required in order to establish a data communication link between Distributor or
Customer and GeoTel, for use in remote diagnosis and support of the ICR
Programs. Distributor also agrees to make available, and to ensure that
Customers make available, to GeoTel current system passwords as necessary to
provide such remote diagnosis and support.
5.3 Premise Equipment
Distributor and/or Customer shall be responsible for acquiring, installing
and activating all network Distributor and Customer premise equipment,
respectively, as may be required for network services, such as, but not
limited to data service units, channel service units, and local and wide area
network routers and bridges.
5.4 Third Party Products
Distributor and/or Customer are responsible for obtaining and installing
any and all Third Party Products, including upgrades thereto, as these become
available or as required for use in conjunction with the ICR Programs. If
Distributor or Customer elects to have GeoTel load and configure the ICR
Programs on the Third Party Products, then Distributor or Customer shall also
be responsible for timely delivery of the Third Party Products to the
integration facility designated by GeoTel in accordance with the schedule in
the Project Plan, or as otherwise agreed by the parties.
6. SCOPE OF INSTALLATION POLICY
This Installation Policy is GeoTel's current policy for same and is subject to
change by GeoTel at any time at its discretion.
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<PAGE> 32
GEOTEL GEOTEL COMMUNICATIONS CORPORATION
DISTRIBUTOR INSTALLATION POLICY
For
Site Intelligent CallRouter (SICR) Programs
(Rev: 981008)
- -------------------------------------------------------------------------------
1. INTRODUCTION
This Distributor Installation Policy sets forth GeoTel's installation policy
for Distributors of SICR Programs who purchase Installation Services. The terms
used herein shall have the same meaning as in GeoTel's applicable distribution
agreement ("Agreement"). References to "SICR Programs" in this Installation
Policy shall refer to SICR Programs, as such term is defined in the Agreement,
and other Programs on an Order for same. References to the SICR Platform in
this Installation Policy shall refer to the SICR Programs loaded and configured
on Distributor or Customer supplied Third Party Products. References to the
"Central Controller" shall refer to SICR Programs known as the Site Intelligent
CallRouter and Logger, currently GeoTel model #20010 and the like.
2. INSTALLATION SERVICES - NEW SICR PROGRAMS INSTALLATIONS
The Installation Services described in this Section are provided only for the
SICR Programs listed on an Order that includes a Central Controller. Travel
costs for GeoTel employees traveling to Customer sites in the United States and
Canada are included. Distributor shall pay GeoTel for travel costs for GeoTel
employees traveling to Distributor or Customer sites outside the United States
and Canada. Repeat travel by GeoTel employees to a SICR Programs site as the
result of the site, Distributor and/or Customer not being ready is subject to
travel, reasonable out-of-pocket, and time and materials, charges.
2.1 Installation Planning
2.1.1 Project Engineer. Upon receipt of an Order for SICR
Programs, each party will designate a project engineer for the
installation. The Project Engineers will be the primary points of contact
for all project planning activities.
2.1.2 Project Planning Activities. The Project Engineers will
serve as the "team leaders," drawing on resources as necessary to ensure
that the following tasks are accomplished:
(a) Conduct a one-day pre-install planning meeting at
Customer's primary Central Controller site;
(b) Confirm Customer business goals and review Acceptance
Criteria for the SICR Programs;
(c) Provide Customer with implementation planning guidance,
including information regarding:
- Inter-exchange carrier access links
- SICR Programs network links (LAN/WAN)
- Third Party Products
- ACD CTI link hardware and software
- Premises space, environment, and power requirements;
Page 32
<PAGE> 33
(d) Provide application configuration and scripting assistance
as determined by GeoTel; and
(e) Coordinate tasks required to implement SICR
Programs-controlled call routing.
2.2 SICR Programs Loading, Configuration, and Test
The Customer and/or Distributor are encouraged to use a supplier
recommended by GeoTel for the acquisition and integration of Third Party
Products, and in such event, Distributor or Customer may be eligible for a
reduction in GeoTel's standard installation fees in accordance with GeoTel's
standard policies then in effect. Alternatively, Distributor and/or Customer
may elect to have GeoTel load and configure the SICR Programs on Third Party
Products at GeoTel's standard installation fee then in effect. In either case,
SICR Programs will be completely integrated and tested with the Third Party
Products.
2.3 Installation and Monitoring
2.3.1 Central Controller Site Installation. After verifying that site
preparations are complete, a qualified GeoTel employee will make a single
trip, if necessary, to each Central Controller site (including sites for
which the remote redundancy option has been licensed)for installation and
connection of SICR Platforms to Distributor or Customer provided network
facilities, SICR Programs configuration, and data and inter-exchange
carrier network services verification. The SICR Programs configuration will
be completed to the extent to allow enterprise-wide monitoring and routing
of calls.
2.3.2 SICR Programs Monitoring. After installation of the Central
Controller site(s) and Peripheral Gateway site(s), GeoTel will conduct
remote monitoring of the SICR Programs from its Customer Support Center to
validate enterprise-wide system performance and configuration.
2.4 SICR Programs-Controlled Routing
After completion of the remote monitoring phase and verifying that
inter-exchange carrier provisioning has been completed, a qualified GeoTel
employee will make a single trip, if necessary, to the Central Controller
site(s) for final SICR Programs configuration and testing, and commencement of
SICR Programs-controlled routing.
3. INSTALLATION SERVICES - ON-SITE UPGRADES AND EXPANSIONS
Distributor is responsible for planning and performing all Customer upgrades
and expansions. However, GeoTel is available to perform Installation Services
for upgrades of Third Party Products, and New Releases and add-on Orders for
the SICR Programs, in accordance with GeoTel's policies, prices and fees then
in effect.
4. TRAINING SERVICES
Training is conducted at GeoTel's training facility in Massachusetts.
Distributor is responsible for paying all travel and related expenses for
Distributor and Customer employees. See GeoTel's current price list for
training credits and prices applicable to the SICR Programs purchased. See
GeoTel's current Training Catalog for course availability, descriptions and
policies.
5. DISTRIBUTOR AND CUSTOMER RESPONSIBILITIES
5.1 Provisioning of Network Services
Distributor and/or Customer shall be responsible for acquiring, installing
and activating all network services, including local and wide area data
networks, inter-exchange carrier access services, and all
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associated premises wiring and equipment required for the SICR Programs.
Distributor and/or Customer shall report network service problems to the
appropriate network service provider or vendor.
5.2 Remote Maintenance and Diagnostics Access
Distributor and/or Customer shall provide, at no charge to GeoTel, access
to telecommunications equipment, as reasonably determined by GeoTel to be
required in order to establish a data communication link between Distributor or
Customer and GeoTel, for use in remote diagnosis and support of the SICR
Programs. Distributor shall also make available, and ensure that Customers make
available, to GeoTel current system passwords as necessary to provide such
remote diagnosis and support.
5.3 Premise Equipment
Distributor and/or Customer shall be responsible for acquiring, installing
and activating all network Distributor and Customer premise equipment,
respectively, as may be required for network services, such as, but not limited
to data service units, channel service units, and local and wide area network
routers and bridges.
5.4 Third Party Products
Distributor and/or Customer are responsible for obtaining and installing
any and all Third Party Products, including upgrades thereto, as these become
available or as required for use in conjunction with the SICR Programs. If
Distributor or Customer elects to have GeoTel load and configure the SICR
Programs on the Third Party Products, then Distributor or Customer shall also
be responsible for timely delivery of the Third Party Products to the
integration facility designated by GeoTel in accordance with the schedule in
the Project Plan, or as otherwise agreed by the parties.
6. SCOPE OF INSTALLATION POLICY
This Installation Policy is GeoTel's current policy for same and is subject to
change by GeoTel at any time at its discretion.
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EXHIBIT D
PRICES, COMMITMENT AND DISCOUNTS SCHEDULE
1. COMMITMENT LEVEL
a. QUINTUS commits to a minimum of [*] in guaranteed payments to GeoTel for
each 12 month period following the Effective Date. This commitment is
inclusive of all royalties generated from Quintus' Orders of ICR and
SICR products during the each twelve month period. Any outstanding
balance of the minimum $2,000,000.00 payment due by the end of each 12
month period shall be paid by QUINTUS within 30 days of the end of each
such period.
b. [*]
c. GeoTel will upgrade any unsolid inventoried units to the most current
version of the product.
2. LIST PRICE SCHEDULES AND END-USER DISCOUNT SCHEDULES
a. GeoTel will deliver to QUINTUS the most current GeoTel list prices for
North America and elsewhere for customers and other resellers. Which
list prices to use for a particular Order will depend on the intended
installation or delivery site for the Programs or Services as
applicable.
b. GeoTel will give notice to QUINTUS 90 days in advance of any list price
changes.
3. DISCOUNT SCHEDULES FOR PROGRAMS
The Discount/Purchase Commitment Schedule is based on aggregate net
purchase orders during each 12 month term of the Agreement as follows:
<TABLE>
<CAPTION>
Net Annual Dollar Purchases Schedule Discount
<S> <C>
[*]
</TABLE>
Discounts will be based on actual annual net purchases achieved at the
time an Order is generated for a particular 12 month period. The foregoing
discounts shall apply to Program purchases only.
4. Installation Fees. Unless otherwise specified in the then-current Price
List, the Installation fee for completely new systems to be installed in the
Territory shall be [*] of the current list price of the Programs at the time an
Order is generated and [*] of the current list price for add-on orders to an
existing central site installation. In the event that Quintus or Customer uses a
third party integrator, certified by GeoTel, for the acquisition and integration
of Third Party Products, then Quintus or Customer, as applicable, may be
eligible for a reduction in GeoTel's standard Installation fees
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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<PAGE> 36
in accordance with GeoTel's policies then in effect. Travel and living expense
will be charged separately. The Installation fees are not discountable.
5. Order Deposit. An Order deposit equal to the sum of the Installation fees
on each Order shall be due at the time of such Order for Programs. The Order
deposit is non-refundable.
6. Support Services. Unless otherwise specified in the Price List, for the
initial one (1) year term of Support Services, the annual Support Services fee
for Programs to be installed in the Territory equal [*] of the list price of the
Programs at the time of the Order; thereafter, the Support Services fee for each
subsequent one (1) year term shall equal GeoTel's standard rate in effect on the
date of renewal for Support Services multiplied by the list price of the
Programs at the time the Programs were ordered. If Quintus is providing First
Level Support to its Customers, the annual Support Services fee for Second Level
Support to be provided by GeoTel is currently [*] of the list price of the
Programs at the time the Programs were ordered; thereafter, the Support Services
fee for Second Level Support for each subsequent one (1) year term shall equal
GeoTel's standard rate in effect on the date of renewal for such Support
Services multiplied by the list price of the Programs at the time the Programs
were ordered. Support Services are non-discountable. Support Services fees are
payable annually in advance of service. GeoTel agrees not to increase its
Support fees, in the aggregate, by more than [*] per annum unless GeoTel
materially changes its Support Services offering.
7. Professional Services. Fees for Professional Services, or any other
services, shall equal GeoTel's standard list price in effect at the time of an
Order for such services. Professional Services and all other services are
non-discountable.
8. Training. Fees for Training equal GeoTel's standard list price in effect at
the time of an Order for training. Training Services are non-discountable.
9. Implementation and Support Certification Program Requirements:
Training: Complete the Implementation and Support Certification Training
(See GeoTel's Training Catalog)
Tools: Acquire license for GeoTel's Grid, Listener, and Inspect software
tools
Fees: See applicable Price List(s).
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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10. SITE ICR UNBUNDLED PRICING SCHEDULE
Site ICR Pricing Model
<TABLE>
<CAPTION>
ICR LIST AGENTS
PRODUCT PRICE AGENTS AGENTS (SITE ICR)
------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Small Site ICR Packages
Includes: [*] [*] [*] [*]
Call Rogger (Redundant) [*] [*] [*] [*]
Peripheral Gateway [*] [*] [*] [*]
Redundant PG [*] [*] [*] [*]
PG Post-Routing [*] [*] [*] [*]
Enterprise CTI [*] [*] [*] [*]
Redundant Enterprise CTI [*] [*] [*] [*]
Enterprise IVR [*] [*] [*] [*]
Redundant Enterprise IVR [*] [*] [*] [*]
System Manager [*] [*] [*] [*]
TOTAL SOFTWARE [*] [*] [*]
ADD-ON PRODUCTS
App Gateway [*] [*] [*] [*]
Redundant App Gateway [*] [*] [*] [*]
CtiClient (Active-X Toolkit) [*] [*] [*] [*]
*SOFTWARE TOTAL [*] [*] [*] [*]
</TABLE>
Note:
1. Software Upgrade from [*] agents is [*]
2. Software Upgrade from [*] agents is [*]
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<PAGE> 38
ATTACHMENT TO EXHIBIT D
PRICE LIST
Page 38
<PAGE> 39
EXHIBIT E
THIRD PARTY PRODUCTS
<TABLE>
<CAPTION>
Manufacturer Product (then-current release)
- ------------ ------------------------------
<S> <C>
MIcrosoft Windows NT Server
Microsoft Windows NT Workstation
Microsoft Windows NT Server, Client License Only
Microsoft SQL Server NT
Microsoft SQL Server NT Workstation
Powersoft InfoMaker For Windows
Ataman Software, Inc. Ataman Telnet Service
Symantec PCAnywhere
</TABLE>
<PAGE> 40
EXHIBIT F
THIRD PARTY LICENSE
MINIMUM FLOW-DOWN TERMS
Each Third Party License shall contain the following minimum terms and
conditions:
(a) Customer ("Licensee") is granted a limited, non-exclusive and
non-transferable license to use the Programs internally within its
organization, on the Designated Computers.
(b) The Programs may not be copied or reproduced, in whole or in part,
except for use on the Designated Computer.
(c) The Licensee shall not provide or otherwise make the Programs
available to any other person or entity other than employees and
contractors directly involved in the Licensee's use of the Programs
and who are bound to protect the confidentiality of the Programs.
(d) The Licensee shall not modify, enhance or create derivative works of
the Programs or decompile, disassemble or reverse engineer the
Programs except where authorized by applicable law.
(e) Except for bodily injury or tangible property damage proximately
caused by GeoTel, GeoTel shall not be liable to Licensee under any
circumstances including, but not limited to, issues regarding
Licensee's use of, or inability to use, the Programs or Services.
(f) Portions of the Programs may be derived from third-party software
licensed to GeoTel for integration into Programs and no such
third-party (i) warrants the Programs or any portion thereof, (ii)
assumes any liability regarding use of the Programs, or (iii)
undertakes to furnish any support relating to the Programs.
(g) Licensee acknowledges that the Programs are confidential and
proprietary to GeoTel and its licensors, and same shall retain all
rights, title and interest in and to the Programs including any
intellectual property rights contained or embodied therein.
(h) The Licensee shall not export the Program without first obtaining the
appropriate U.S. or other governmental licenses and approvals, and the
approval of GeoTel.
(i) Licensee's right to use the Programs shall terminate (i) upon the
breach of any terms and conditions set forth herein, (ii) when the
initial Licensee ceases using the Programs, or (iii) upon the
expiration of the relevant Third Party License.
(j) Upon termination of a Third Party License, Licensee shall cease using
the Programs, and return to Distributor all copies of the Programs and
related documentation in its possession, in any form, or destroy same
and certify its destruction to Distributor.
(k) U.S. Government Restricted Rights: The Programs and/or user
documentation are provided with RESTRICTED AND LIMITED RIGHTS. Use, duplication
or disclosure by the Government is subject to restrictions as set forth in FAR
52.227-14 (June 1987), Alternate III(g)(3) (June 1987), FAR 52.227-19 (June
1987), or DFARS (52.227-7013 (c)(1)(ii) (June 1988), as applicable.
Contractor/Manufacturer is GeoTel Communications Corporation, 900 Chelmsford
St., Tower II - Fl. 12, Lowell, MA 01851. In the event the Government seeks to
obtain the Programs pursuant to standard commercial practice, the Third Party
License, instead of the noted regulatory clauses, shall control the terms of the
Government's license.
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Exhibit H
ADDITIONAL PARTY AGREEMENT
WHEREAS, GeoTel Communications Corporation ("Vendor") and Data Securities
International, Inc. ("Escrow Agent") have entered into a certain Deposit
Agreement (Escrow Agreement) dated August 25, 1995 (the "Escrow Agreement"), a
copy of which is attached hereto as Exhibit A;
WHEREAS, _________________________ (the "Licensee") is a licensee of the
"Program" (as defined in the Escrow Agreement) under a written license
agreement and is also party to a customer support agreement with Vendor
providing for support of such Program; and
WHEREAS, the Licensee wishes to become a "Participating User" (as defined
in the Escrow Agreement) and a party to the Escrow Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants
contained in the Escrow Agreement, the Licensee agrees as follows:
1. The Licensee shall be bound by all of the terms, conditions and
covenants of the Escrow Agreement.
2. In the event the Licensee obtains any source code for the Program, in
addition to the Licensee's obligations under its license agreement and customer
support agreement applicable to such Program, the following provisions shall
apply to the Licensee's possession and use of such source code:
a. Vendor shall retain all title, patent, copyright, trade secret
and other proprietary rights in and to all Program source code obtained by the
Participating User and all copies thereof made by the Participating User.
b. The Licensee acknowledges that all Program source code is
confidential and constitutes a valuable asset of Vendor. The Licensee shall
hold all Program source code strictly confidential and shall not disclose,
publish, display or otherwise make available to any person or entity any
Program source code or any part of copy thereof without Vendor's prior written
consent. The Licensee shall not duplicate, copy, reproduce or use any of the
Program source code other than for the purpose of performing those support
services with respect to the Affected Program that Vendor was to perform under
the Licensee's customer support agreement covering such Program which was in
effect at the time the Licensee obtained such source code.
c. The Licensee shall limit the use of and access to all Program
source code to its bona fide employees and consultants whose use of or access
to Program source code is necessary to the Licensee's support of such Program
and shall take all actions and precautions necessary to prevent display,
publication, disclosure or unauthorized use of, or access to, any Program
source code, including, without limiting the generality of the foregoing,
regularly informing employees and consultants of the confidential and
proprietary nature of all Program source code, regularly instructing employees
and consultants as to procedures to be followed and precautions to be taken to
protect and maintain the confidentiality and proprietary nature of all Program
source code and, prior to their use of or access to any Program source code,
obtaining from employees and consultants their written agreement to follow all
such procedures, and otherwise take all such actions and precautions, as are
necessary to prevent the display, publication, disclosure or unauthorized use
of, or access to, any Program source code.
d. The Licensee shall not make any copies of the Program source
code other than archive or back-up copies. The Licensee may use Program source
code to make object code copies for the purpose of performing support services
with respect to the Affected Program, provided that at no time shall the
Licensee have or use any more object code copies of the Affected Program than
Licensee was entitled to have or use at the time the Licensee obtained such
source code. The Licensee shall not remove any copyright or proprietary rights
notice included in or on any Program and shall reproduce all such notices on
any copies of any Program which the Licensee may make.
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<PAGE> 42
e. Upon the expiration or earlier termination of the license
agreement granting to the Licensee the right to use any Program, the Licensee
shall return to Vendor all such Program source code and all copies thereof, in
any medium, in the Licensee's possession, custody or control.
f. The provisions of this Section 2 shall survive such expiration or
earlier termination and the expiration or earlier termination of the Licensee's
rights under the Escrow Agreement hereunder.
3. Simultaneously with the execution and delivery of this Additional
Party Agreement by the Licensee, the Licensee shall pay Escrow Agent an Initial
Escrow Participation Fee in accordance with Section 8 of the Escrow Agreement.
Thereafter, the Licensee shall pay Escrow Agent the Annual Escrow Fees in
accordance with such Section 8. As a further condition to release of any Program
from escrow under Section 4 of the Escrow Agreement, the Licensee shall pay to
the Escrow Agent the amount of any fees and expenses which the Escrow Agent
shall charge in connection with any such release, or, at Vendor's request,
reimburse Vendor for such amount. If the Licensee shall fail to pay any Annual
Escrow Fee or other amount due under this Additional Party Agreement or the
Escrow Agreement, promptly and when due, Vendor or Escrow Agent may, by notice
in writing to the Licensee, terminate the Licensee's status as a Participating
User under the Escrow Agreement and the Licensee's rights hereunder and
thereunder. Any such notice shall be effective upon its mailing to the Licensee.
4. Escrow Agent shall not by reason of its execution of the Escrow
Agreement assume any responsibility or liability other than for the performance
of its obligations with respect to Deposits held by it in accordance with the
Escrow Agreement. Escrow Agent shall act thereunder as a depository only and
shall not be responsible for the sufficiency, correctness, genuineness or
validity of a Deposit, nor shall it have any obligation to ensure that Vendor
delivers updated versions of Deposits. Escrow Agent shall not be liable for any
failure of either Vendor or the Licensee to comply with any of the provisions
of the Escrow Agreement. Escrow Agent shall be entitled to rely upon any
notice, signature or writing which on its face purports to be genuine and to be
signed and presented by a proper representative of a party or parties. Escrow
Agent's decision as to the sufficiency of any notice or affidavit delivered to
it pursuant to the Escrow Agreement shall be final and conclusive. In no event
shall Escrow Agent be liable for any loss, damage or other injury to any person
as a result of any act or failure to act in connection with the Escrow
Agreement which is not due to Escrow Agent's gross negligence or willful
misconduct, and the Licensee shall indemnify Escrow Agent and hold it harmless
from any and all liabilities, damages, costs and expenses, including reasonable
attorneys' fees, which may be sustained or incurred by Escrow Agent as a result
of any such act or failure to act in any matter involving the Licensee.
5. This Agreement shall be governed by, and construed and enforced in
accordance with, the substantive laws of the Commonwealth of Massachusetts
without regard to its principles of conflicts of laws.
6. No waiver, modification or amendment of any provision of this
Agreement shall be effective unless made in writing and signed by Vendor and
the Licensee.
7. This Agreement shall be binding upon the Licensee and shall inure to
the benefit of Vendor and Escrow Agent and their respective legal
representatives, successors and assigns.
8. Capitalized terms used, but not otherwise defined, in this Agreement
shall have the meanings given them in the Escrow Agreement.
9. This Agreement shall be effective, and the Licensee shall become a
Participating User, upon (a) Licensee's execution hereof, (b) Vendor's execution
of its consent hereto and, if this Additional Party Agreement is not
substantially in the form of Appendix C to the Escrow Agreement, Escrow Agent's
execution of its consent hereto and (c) Licensee's payment of the Initial Escrow
Participation Fee.
10. Licensee's address for notice purposes is:
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------------------------------
------------------------------
------------------------------
------------------------------
ATTENTION:
------------------------------
11. Licensee acknowledges that the Program is subject to the export
control laws of the United States of America and relevant regulations issued by
the United States Department of Commerce and Department of State. Licensee
agrees to comply with all such laws and regulations, and all other applicable
laws and regulations. Without limiting the generality of the foregoing, Licensee
shall not, and hereby assures Vendor that it will not, allow the export or
re-export, directly or indirectly, of any Program or the direct products thereof
unless prior written authorization is obtained from Vendor and, where required,
the United States government.
IN WITNESS WHEREOF, the Licensee has executed and delivered this Agreement
as an agreement under seal on this ________ day of _______________, 199__.
- ------------------------------------- Consent by Vendor:
("Licensee") GeoTel Communications Corporation
By: By:
--------------------------------- ---------------------------------
(Signature) (Signature)
Name: Name:
------------------------------- -------------------------------
Title: Title:
------------------------------ ------------------------------
Date: Date:
------------------------------- ------------------------------
Consent by Escrow Agent:
Data Securities International, Inc.
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Date:
-------------------------------
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<PAGE> 44
ATTACHMENT TO THIRD PARTY AGREEMENT
Escrow Agent's Fees
<TABLE>
<CAPTION>
Paid by Vendor:
<S> <C>
Initial Escrow Fee, for Year 1: $2560*
Annual Escrow Fee, for each subsequent year: 950**
Paid by Participating Users:
Initial Escrow Participation Fee, for Year 1: $1650**
Annual Escrow Participation Fee, for each subsequent year: 650**
</TABLE>
*Paid by Vendor in 1995.
**These fees represent Escrow Agent's published list prices in effect as of
August, 1997. Escrow Fees are subject to change by Escrow Agent based on Escrow
Agent's then-current published list prices.
Page 45
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EXHIBIT L
LISTED COUNTRIES
"Listed Countries" means all Berne Convention signatories (a current list of
these countries is attached hereto) and any other additional countries which
QUINTUS requests to be added to the Listed Countries and where GeoTel consents
in writing to such a request which consent will not be unreasonably withheld.
GeoTel may refuse to consent to add any additional country where (1) GeoTel has
a reasonable basis to believe that it will be unable to adequately provide
installation and/or maintenance and support services for such Programs in such
location or (2) the intellectual property laws of the target country do not
provide adequate protection of GeoTel's intellectual property rights.
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EXHIBIT L
(CONTINUED)
BERNE CONVENTION SIGNATORIES
STATUS ON JANUARY 1, 1999
<TABLE>
<CAPTION>
Date on which
State
became party to
the Latest Act of the Convention to which State is party
State Convention and date on which State became party to that Act
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Albania..................... March 6, 1994 Paris: March 6, 1994
Algeria..................... April 19, 1998 Paris: April 19, 1998(ii, iii)
Argentina................... June 10, 1967 Brussels: June 10, 1967
Paris: Articles 22 to 38: October 8, 1980
Australia................... April 14, 1928 Paris: March 1, 1978
Austria..................... October 1, 1920 Paris: August 21, 1982
Bahamas..................... July 10, 1973 Brussels: July 10, 1973
Paris: Articles 22 to 38: January 8, 1977
Bahrain..................... March 2, 1997 Paris: March 2, 1997
Barbados.................... July 30, 1983 Paris: July 30, 1983
Belarus..................... December 12, Paris December 12, 1997
Belgium..................... December 5, 1887 Brussels: August 1, 1951
Stockhol Articles 22 to 38: February 12, 1975
Benin....................... January 3, 1961(iv) Paris: March 12, 1975
Bolivia..................... November 4, 1993 Paris: November 4, 1993
Bosnia and Herzegovina...... March 1, 1992 Paris: March 1, 1992
Botswana.................... April 15, 1998 Paris: April 15, 1998
Brazil...................... February 9, 1922 Paris: April 20, 1975
Bulgaria.................... December 5, 1921 Paris: December 4, 1974
Burkina Faso................ August 19, 1963(vi) Paris: January 24, 1976
Cameroon.................... September 21, Paris: Articles 1 to 21: October 10, 1974
Paris: Articles 22 to 38: November 10, 1973
Canada...................... April 10, 1928 Paris: June 26, 1998
Cape Verde.................. July 7, 1997 Paris: July 7, 1997
Central African Republic.... September 3, 1977 Paris: September 3, 1977
Chad........................ November 25, Brussels: November 25, 1971(vii, viii)
Stockhol Articles 22 to 38: November 25, 1971
Chile....................... June 5, 1970 Paris: July 10, 1975
China(ix)................... October 15, 1992 Paris: October 15, 1992
Colombia.................... March 7, 1988 Paris: March 7, 1988
Congo....................... May 8, 1962(Error!) Paris: December 5, 1975
Costa Rica.................. June 10, 1978 Paris: June 10, 1978
Cote d'Ivoire............... January 1, 1962 Paris: Articles 1 to 21: October 10, 1974
Paris: Articles 22 to 38: May 4, 1974
Croatia..................... October 8, 1991 Paris: October 8, 1991
Cuba........................ February 20, 1997 Paris: February 20, 1997
Cyprus...................... February 24, Paris: July 27, 1983
Czech Republic.............. January 1, 1993 Paris: January 1, 1993
Democratic Republic
of the Congo.............. October 8, Paris: January 31, 1975
Denmark..................... July 1, 1903 Paris: June 30, 1979
Dominican Republic.......... December 24, Paris: December 24, 1997
Ecuador..................... October 9, 1991 Paris: October 9, 1991
Egypt....................... June 7, 1977 Paris: June 7, 1977
El Salvador................. February 19, 1994 Paris: February 19, 1994
Equatorial Guinea........... June 26, 1997 Paris: June 26, 1997
Estonia..................... October 26, 1994(x) Paris: October 26, 1994
Fiji........................ December 1, Brussels: December 1, 1971
Stockhol Articles 22 to 38: March 15, 1972
Finland..................... April 1, 1928 Paris: November 1, 1986
France...................... December 5, 1887 Paris: Articles 1 to 21: October 10, 1974
</TABLE>
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<PAGE> 47
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
State Date on which Latest Act of the Convention to which State is party
State and date on which State became party to that Act
became party to
the Convention
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Paris: Articles 22 to 38: December 15, 1972
Gabon............... March 26, 1962 Paris: June 10, 1975
Gambia.............. March 7, 1993 Paris: March 7, 1993
Georgia............. May 16, 1995 Paris: May 16, 1995
Germany............. December 5, 1887 Paris: Articles 1 to 21: October 10, 1974(xi)
Paris: Articles 22 to 38: January 22, 1974
Ghana.............. October 11, 1991 Paris: October 11, 1991
Greece............. November 9, 1920 Paris: March 8, 1976
Guatemala.......... July 28, 1997 Paris: July 28,1997
Guinea............. November 20, Paris: November 20, 1980
Guinea-Bissau...... July 22, 1991 Paris: July 22, 1991
Guyana............. October 25, 1994 Paris: October 25, 1994
Haiti.............. January 11, 1996 Paris: January 11, 1996
Holy See........... September 12, Paris: April 24, 1975
Honduras........... January 25, 1990 Paris: January 25, 1990
Hungary............ February 14, 1922 Paris: Articles 1 to 21: October 10, 1974
Paris: Articles 22 to 38: December 15, 1972
Iceland............ September 7, 1947 Rome: September 7, 1947
Paris: Articles 22 to 38: December 28, 1984
India.............. April 1, 1928 Paris: Articles 1 to 21: May 6, 1984(xii, xiii)
Paris: Articles 22 to 38: January 10, 1975
Indonesia......... September 5, 1997 Paris: September 5, 1997
Ireland........... October 5, 1927 Brussels: July 5, 1959
Stockhol Articles 22 to 38: December 21, 1970
Israel............ March 24, 1950 Brussels: August 1, 1951
Stockhol Articles 22 to 38: January 29 or February 26,
Italy............. December 5, 1887 Paris: November 14, 1979
Jamaica........... January 1, 1994 Paris: January 1, 1994
Japan............. July 15, 1899 Paris: April 24, 1975
Kenya............. June 11, 1993 Paris: June 11, 1993
Latvia............ August 11, 1995(xv) Paris: August 11, 1995
Lebanon........... September 30, Rome: September 30, 1947
Lesotho........... September 28, Paris: September 28, 1989
Liberia........... March 8, 1989 Paris: March 8, 1989
Libya............. September 28, Paris: September 28, 1976
Liechtenstein..... July 30, 1931 Brussels: August 1, 1951
Stockhol Articles 22 to 38: May 25, 1972
Lithuania........ December 14, Paris: December 14, 1994
Luxembourg....... June 20, 1888 Paris: April 20, 1975
Madagascar....... January 1, 1966 Brussels: January 1, 1966
Malawi.......... October 12, 1991 Paris: October 12, 1991
Malaysia........ October 1, 1990 Paris: October 1, 1990
Mali............ March 19, Paris: December 5, 1977
Malta........... September 21, Rome: September 21, 1964
Paris: Articles 22 to 38: December 12, 1977
Mauritania...... February 6, 1973 Paris: September 21, 1976
Mauritius....... May 10, 1989 Paris: May 10, 1989
Mexico.......... June 11, 1967 Paris: December 17, 1974
Monaco.......... May 30, 1889 Paris: November 23, 1974
Mongolia....... March 12, 1998 Paris: March 12, 1998
Morocco........ June 16, 1917 Paris: May 17, 1987
Namibia........ March 21, 1990 Paris: December 24, 1993
Netherlands.... November 1, 1912 Paris: Articles 1 to 21: January 30, 1986(xvi)
Paris: Articles 22 to 38: January 30, 1975(xvii)
New Zealand.... April 24, 1928 Rome: December 4, 1947
Niger.......... May 2, 1962(Error!) Paris: May 21, 1975
Nigeria........ September 14, Paris: September 14, 1993
Norway......... April 13, 1896 Paris: Articles 1 to 21: October 11, 1995
Paris: Articles 22 to 38: June 13, 1974
Pakistan....... July 5, 1948 Rome: July 5, 1948
Stockhol Articles 22 to 38: January 29 or February 26,
Panama......... June 8, 1996 Paris: June 8, 1996
Paraguay....... January 2, 1992 Paris: January 2, 1992
</TABLE>
Page 49
<PAGE> 48
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
State Date on which Latest Act of the Convention to which State is party
State became and date on which State became party to that Act
party to the
Convention
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Peru........................... August 20, 1988 Paris: August 20, 1988
Philippines.................... August 1, 1951 Paris: Articles 1 to 21: June 18, 1997
Paris: Articles 22 to 38: July 16, 1980
Poland......................... January 28, 1920 Paris: Articles 1 to 21: October 22, 1994
Paris: Articles 22 to 38: August 4, 1990
Portugal....................... March 29, 1911 Paris: January 12, 1979(xviii)
Republic of Korea.............. August 21, 1996 Paris: August 21, 1996
Republic of Moldova............ November 2, 1995 Paris: November 2, 1995
Romania........................ January 1, 1927 Paris: September 9, 1998
Russian Federation............. March 13, 1995 Paris: March 13, 1995
Rwanda......................... March 1, 1984 Paris: March 1, 1984
Saint Kitts and Nevis.......... April 9, 1995 Paris: April 9, 1995
Saint Lucia.................... August 24, 1993 Paris: August 24, 1993
Saint Vincent and
the Grenadines............... August 29, 1995 Paris: August 29, 1995
Senegal........................ August 25, 1962 Paris; August 12, 1975
Slovakia....................... January 1, 1993 Paris: January 1, 1993
Slovenia....................... June 25, 1991 Paris: June 25, 1991
South Africa................... October 3, 1928 Brussels: August 1, 1951
Paris: Articles 22 to 38: March 24, 1975
Spain.......................... December 5, 1887 Paris: Articles 1 to 21: October 10, 1974
Paris: Articles 22 to 38: February 19, 1974
Sri Lanka...................... July 20, 1959(Error!) Rome: July 20, 1959
Paris: Articles 22 to 38: September 23, 1978
Suriname....................... February 23, 1977 Paris: February 23, 1977
Sweden......................... August 1, 1904 Paris: Articles 1 to 21: October 10, 1974
Paris: Articles 22 to 38: September 20, 1973
Switzerland.................... December 5, 1887 Paris: September 25, 1993
Thailand....................... July 17, 1931 Paris: Articles 1 to 21: September 2, 1995(xix)
Paris: Articles 22 to 38: December 29, 1980(Error!)
The former Yugoslav
Republic of Macedonia........ September 8, 1991 Paris: September 8, 1991
Togo........................... April 30, 1975 Paris: April 30, 1975
Trinidad and Tobago............ August 16, 1988 Paris: August 16, 1988
Tunisia........................ December 5, 1887 Paris: August 16, 1975
Turkey......................... January 1, 1952 Paris: January 1, 1996
Ukraine........................ October 25, 1995 Paris: October 25, 1995
United Kingdom xx.............. December 5, 1887 Paris: January 2, 1990
United Republic of Tanzania.... July 25, 1994 Paris: July 25, 1989
United States of America....... March 1, 1989 Paris: March 1, 1989
Uruguay........................ July 10, 1967 Paris: December 28, 1979
Venezuela...................... December 30 Paris: December 30, 1982
Yugoslavia..................... June 17, 1930 Paris: September 2, 1975
Zambia......................... January 2, 1992 Paris: January 2, 1992
Zimbabwe....................... April 18, 1980 Rome: April 18, 1980
Paris: Articles 22 to 38: December 30, 1981
(Total: 130 States)
</TABLE>
- ---------------
i "Paris" means the Berne Convention for the Protection of Literary and
Artistic Works as revised at Paris on July 24, 1971 (Paris Act);
"Stockholm" means the said Convention as revised at Stockholm on July 14,
1967 (Stockholm Act); "Brussels" means the said Convention as revised at
Brussels on June 26, 1948 (Brussels Act); "Rome" means the said Convention
as revised at Rome on June 2, 1928 (Rome Act); "Berlin" means the said
Convention as revised at Berlin on November 13, 1908 (Berlin Act).
ii With the declaration provided for in Article 33(2) relating to the
International Court of Justice.
iii Pursuant to Article I of the Appendix of the Paris Act, this State availed
itself of the faculties provided for in Articles II and III of the said
Appendix. The relevant declaration is effective until October 10, 2004.
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<PAGE> 49
iV Date on which the declaration of continued adherence was sent, after
the accession of the State to independence.
V Subject to the reservation concerning the right of translation.
Vi Burkina Faso, which had acceded to the Berne Convention (Brussels Act) as
from August 19, 1963, denounced the said Convention as from September 20, 1970.
Later on, Burkina Faso acceded again to the Berne Convention (Paris Act); this
accession took effect on January 24, 1976.
Vii This State deposited its instrument of ratification of (or of accession
to) the Stockholm Act in its entirety; however, Articles 1 to 21 (substantive
clauses) of the said Act have not entered into force.
Viii In accordance with the provision of Article 29 of the Stockholm Act
applicable to the States outside the Union which accede to the said Act, this
State is bound by Articles 1 to 20 of the Brussels Act.
iX The Paris Act applies also to the Hong Kong Special Administrative Region
with effect from July 1, 1997.
X Estonia acceded to the Berne Convention (Berlin Act, 1908) with effect
from June 9, 1927. It lost its independence on August 6, 1940, and regained it
on August 20, 1991.
Xi This State has declared that it admits the application of the Appendix of
the Paris Act to works of which it is the State of origin by States which have
made a declaration under Article VI(1)(i) of the Appendix or a notification
under Article 1 of the Appendix. The declarations took effect on October 18,
1973, for Germany, on March 8, 1974, for Norway and on September 27, 1971, for
the United Kingdom.
Xii This State declared that its ratification shall not apply to the
provisions of Article 14bis(2)(b) of the Paris Act (presumption of
legitimization for some authors who have brought contributions to the making of
the cinematographic work).
Xiii This State notified the designation of the competent authority provided
by Article 15(4) of the Paris Act.
XiV These are the alternative dates of entry into force which the Director
General of WIPO communicated to the States concerned.
XV Latvia acceded to the Berne Convention (Rome Act, 1928) with effect from
May 15, 1937. It lost its independence on July 21, 1940, and regained it on
August 21, 1991.
XVi Ratification for the Kingdom in Europe.
XVii Ratification for the Kingdom in Europe. Articles 22 to 38 of the Paris
Act apply to the Netherlands Antilles and Aruba.
XViii Pursuant to the provisions of Article 14bis(2)(c) of the Paris Act, this
State has made a declaration to the effect that the undertaking by authors to
bring contributions to the making of a cinematographic work must be in a
written agreement. This declaration was received on November 5, 1986.
XiX Pursuant to Article I of the Appendix of the Paris Act, this State
availed itself of the faculty provided for in Article II of the said Appendix.
The relevant declaration is effective until October 10, 2004.
XX The United Kingdom extended the application of the Paris Act to the Isle
of Man with effect from March 18, 1996.
Page 51
<PAGE> 50
EXHIBIT N
MISCELLANEOUS COMMITMENTS
GeoTel will support Quintus' efforts to interface to the GeoTel CTI Server
interface. GeoTel's support of this effort shall be limited to providing
Quintus with technical advice relative to GeoTel's CTI Server interface.
Page 52
<PAGE> 1
EXHIBIT 10.10
BRIGHTWARE, INC.
AUTHORIZED OEM/RESELLER AGREEMENT
This Authorized OEM/Reseller Agreement (the "Agreement") is entered into as of
December 22, 1998, (the "Effective Date") by and between Brightware, Inc., a
Delaware corporation, having its principal place of business at 350 Ignacio
Blvd., Novato, CA 94949 ("Brightware"), and Quintus Corporation, a Delaware
corporation with its principal place of business at 47212 Mission Falls Court,
Fremont, CA 94539. ("Company").
In consideration of the covenants and conditions contained herein, the parties
agree as follows:
1. DEFINITIONS.
1.1 "Documentation" shall mean the related materials customarily
supplied by Brightware to end users of the Licensed Software.
1.2 "End-User" shall mean a third party to whom Company licenses the
Integrated Software or the Licensed Software solely for internal use and not for
resale. In the case of Company's internal use of the Integrated Software or
Licensed Software, Company shall be deemed the End-User.
1.3 "Integrated Software" shall mean the Company products described
in Exhibit A which are sold in conjunction with the Licensed Software.
1.4 "Licensed Software" shall mean the Brightware proprietary
computer software programs identified in Exhibit A attached hereto, in object
code form only, and any Updates provided by Brightware to Company under this
Agreement.
1.5 "Updates" shall mean any error corrections or modifications
which Brightware at its sole discretion deems to be logical improvements to the
Licensed Software previously supplied to Company under the Agreement, and which
Brightware makes generally available to other licensees, and does not separately
price or market.
2. GRANT OF RIGHTS.
2.1 Licenses. Subject to the terms and conditions of this Agreement,
Brightware, hereby grants to Company a limited, nonexclusive, nontransferable,
worldwide license during the term of this Agreement to (i) market and distribute
the Licensed Software and Documentation solely as part of the Integrated
Software in object code format for use by End-Users for their internal business
purposes only, (ii) allow Company's current resellers and distributors (as set
forth in Exhibit E attached hereto) and future resellers and distributors upon
Brightware's prior written consent, such consent not to be unreasonably
withheld, the right to market and distribute the Licensed Software and
Documentation, solely as part of the Integrated Software in object code format
for use by End Users for their internal business purposes only, provided such
reseller and/or distributor sublicenses
1
<PAGE> 2
the Licensed Software in accordance with terms and conditions no less
restrictive than those provided herein, and (ill) use the Licensed Software for
its own internal use. Company shall have no right to use, license, distribute or
otherwise transfer the Licensed Software or Documentation other than those
rights specifically granted hereunder.
2.2 End-User License. Company agrees to accompany each copy of the
Licensed Software and Documentation with an end-user license agreement no less
protective of Brightware than the agreement attached hereto as Exhibit B, as
modified from time to time by Brightware (the "End-User Agreement").
2.3 Diligence. Company shall use its best efforts to promote and
market the Licensed Software. Except as expressly set forth herein, Company
shall be solely responsible for all costs and expenses related to the
advertising, marketing, promotion, and distribution of the Integrated Software
and for performing its obligations hereunder.
2.4 No Competitive Products. Company shall not include in the
Integrated Software any products whose sale is competitive (i.e. email
management software and/or automated email response software) with the Licensed
Software.
2.5 Development Copy. Company may use an unlimited number of copies
of Answer Agent and Contact Center on an unlimited number of development and
test servers, at no additional charge, solely for demonstration, evaluation,
training, development and testing purposes during the term of this Agreement.
Such copies may not be deployed for operational use.
2.6 No Other Rights. All rights not expressly granted to Company
herein are retained by Brightware. Company agrees not to decompile,
reverse-engineer or otherwise attempt to derive or modify the Licensed Software
source code nor authorize or permit any third party to do so.
3. COMPENSATION.
3.1 Fees. Company agrees to pay to Brightware the license fee set
forth in Exhibit C (the "License Fee") with respect to each copy of the
Integrated Software distributed by Company.
3.2 Payment. On the eighth day of each new quarter, Company shall
submit to Brightware, a report detailing the number of copies of the Licensed
Software and maintenance licensed to End Users in conjunction with the
Integrated Software. Such report shall be in English and in reasonable detail as
mutually agreed to by both parties, showing the basis for the payment which
shall include, without limitation, a full explanation of the nature of each
Licensed Software copy made by Company during the prior quarter for which a
License Fee is not being paid. Payment for such fees shall be due and payable
[*] days from the last day of the preceding quarter.
3.3 Records; Audit Rights. Company shall maintain complete and
accurate books and records with respect to copies and distribution of Licensed
Software, or otherwise pertaining to the payment of fees hereunder until at
least three (3) years after termination of this Agreement. Brightware shall at
any time, on at least twenty (20) business days prior notice to Company, be
entitled to retain an accounting firm to audit the books and records of Company
pertaining to the payment of fees to Brightware hereunder, for the sole purpose
of confirming the accuracy of the
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
2
<PAGE> 3
License Fee payments. Such accounting firm shall execute a nondisclosure
agreement prior to any such audit. Any such audit shall be performed at
Brightware's expense during normal business hours. In the event of any
underpayment of License Fees, Company shall promptly remit to Brightware all
amounts due.
3.4 Taxes. All payments to Brightware hereunder shall be net of all
sales, use, and other taxes which may be imposed upon such payments.
4. LIMITED WARRANTIES.
4.1 Product Warranty. Brightware warrants to Company and End User
that, for a period of ninety (90) days from the date of delivery of the Licensed
Software (a) the media on which the Licensed Software is furnished will, under
normal use, be free from defects in material and workmanship and (b) the
Licensed Software will perform in accordance with the Documentation.
Brightware's sole obligation under this warranty, and Company's exclusive
remedy, shall be that Brightware at its sole option and expense shall use
commercially reasonable efforts to repair, so that it becomes noninfringing
while giving equivalent performance, or replace any non-conforming Licensed
Software with substantially equivalent functional software. Customer has the
right to terminate this Agreement should the Licensed Software not conform to
the then current Documentation, provided Customer has given Brightware written
notification of such nonconformance and such nonconformance has not been cured
within a sixty (60) day period, commencing upon receipt of such written
notification. In the event Brightware is unable to correct the non-conformity,
Brightware's sole liability and Customer's sole remedy shall be a refund of the
License Fees paid to Brightware. If Customer terminates this Agreement, Customer
shall immediately return to Brightware or destroy the Licensed Software and all
related Documentation at Brightware's option. Upon receipt or destruction of the
Licensed Software and related Documentation, Brightware shall refund the fees
paid by Customer relating to the specific non-conforming Licensed Software.
4.2 The warranty set forth above is made to and for the benefit of
Company only. The warranty will apply only if:
(a) the Licensed Software has been installed and used at all
times and in accordance with the Documentation;
(b) no modification, alteration or addition has been made to
the Licensed Software by persons other than Brightware or its authorized
representative;
(c) the media in which the Licensed Software is embedded has
not been (i) subject to accident, or misuse, or (ii) operated with other media
not meeting or not maintained in accordance with the manufacturer's
specifications.
4.3 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH ABOVE, THE LICENSED
SOFTWARE AND DOCUMENTATION ARE PROVIDED "AS IS." BRIGHTWARE MAKES NO OTHER
WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE
LICENSED SOFTWARE, THE DOCUMENTATION OR ANY SERVICES
3
<PAGE> 4
PROVIDED HEREUNDER, AND BRIGHTWARE SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES
OF FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY.
4.4 Representations. Company shall not make any warranties or
representations binding on Brightware with respect to the Licensed Software, and
Company shall limit its representations regarding the Licensed Software to those
contained in this Agreement. Company shall indemnify and hold Brightware
harmless from and against warranty claims made by End-Users for warranties made
by Company that exceed the scope of the warranty expressly set forth above.
5. PROPERTY RIGHTS.
5.1 Property Rights. Company acknowledges and agrees that, as
between Company and Brightware, Brightware owns all right, title, and interest
in and to the Licensed Software and Documentation subject to this Agreement, and
in all of Brightware's patents, trademarks, trade names, inventions, copyrights,
know-how and trade secrets relating to the design, manufacture, marketing,
operation or service of the Licensed Software.
5.2 Proprietary Notices. Company will ensure that all copies of the
Licensed Software, the Documentation and the Integrated Software reproduced or
distributed by Company, as applicable, will incorporate all copyright or other
proprietary notices in the same manner that Brightware incorporates such notices
in the Licensed Software or Documentation or in any other manner reasonably
requested by Brightware. Company shall not, and shall require that its End-Users
do not, remove, alter, cover or obfuscate any copyright notices or other
proprietary rights notices placed on, or embedded in the Licensed Software or
Documentation by Brightware.
5.3 Restrictions. Company shall not alter or remove any of
Brightware's trademarks, marks or trade names (collectively "Trademarks")
affixed to the Licensed Software by Brightware. Except as set forth in this
Section 5.4, nothing contained in this Agreement shall grant or shall be deemed
to grant to Company any right, title or interest in or to Brightware's
Trademarks. At no time during or after the term of this Agreement shall Company
challenge or assist others to challenge Brightware's Trademarks (except to the
extent such restriction is expressly prohibited by applicable law) or the
registration thereof or attempt to register any trademarks, marks or trade names
confusingly similar to those of Brightware. Upon termination of this Agreement,
Company shall immediately cease to use all Brightware's Trademarks.
5.4 Goodwill. Any and all goodwill arising from Company's use of the
Brightware Trademarks shall inure solely to the benefit of Brightware when and
as, on an on-going basis, such acquisition of goodwill occurs, as well as at the
expiration or termination of this Agreement, without any separate payment or
other consideration of any kind to Company and Company agrees to take all such
actions necessary to effect such vesting.
5.5 Branding. Upon Brightware's request, Company shall place one or
more of Brightware's Trademarks on any copies of the Integrated Software and any
promotional materials or advertisements therefor.
4
<PAGE> 5
6. CONFIDENTIAL INFORMATION.
6.1 Definition. As used in this Agreement, the term "Confidential
Information" shall mean any information disclosed by one party to the other
pursuant to this Agreement which is in written, graphic, machine readable or
other tangible form and is marked "Confidential", "Proprietary" or in some other
manner to indicate its confidential nature. Confidential Information may also
include oral information disclosed by one party to the other pursuant to this
Agreement, provided that such information is designated as confidential at the
time of disclosure and reduced to a written summary by the disclosing party,
within a reasonable time period after its oral disclosure, which is marked in a
manner to indicate its confidential nature and delivered to the receiving party.
Notwithstanding the foregoing, the Licensed Software and Documentation shall be
deemed the Confidential Information of Brightware without the necessity of
marking.
6.2 General. During the term of this Agreement and for a period of
three (3) years thereafter, each party shall treat as confidential all
Confidential Information of the other party, shall not use such Confidential
Information except as expressly set forth herein or otherwise authorized in
writing, shall implement reasonable procedures to prohibit the disclosure,
unauthorized duplication, misuse or removal of the other party's Confidential
Information and shall not disclose such Confidential Information to any third
party except as may be necessary and required in connection with the rights and
obligations of such party under this Agreement, and subject to confidentiality
and nonuse obligations at least as protective as those set forth herein. Without
limiting the foregoing, each of the parties shall use at least the same
procedures and degree of care which it uses to prevent the disclosure of its own
confidential information of like importance to prevent the disclosure of
Confidential Information disclosed to it by the other party under this
Agreement, but in no event less than reasonable care. The parties further agree
to keep confidential the terms and conditions of this Agreement.
6.3 Exceptions. Notwithstanding the above, neither party shall have
liability to the other with regard to any Confidential Information of the other
which: (i) was generally known and available in the public domain at the time it
was disclosed or becomes generally known and available in the public domain
through no fault of the receiving party; (ii) was known to the receiving party
at the time of disclosure; (iii) is disclosed with the prior written approval of
the disclosing party; (iv) was independently developed by the receiving party
without any use of the disclosing party's Confidential Information; or (v)
becomes known to the receiving party from a source other than the disclosing
party without breach of this Agreement by the receiving party and otherwise not
in violation of the disclosing party's rights. In addition, the receiving party
shall be entitled to disclose the other party's Confidential Information to the
extent such disclosure is required by order or requirement of a court,
administrative agency, or other governmental body, provided however, that the
receiving party shall provide prompt notice thereof to the disclosing party to
enable the disclosing party to seek a protective order or otherwise prevent or
restrict such disclosure.
6.4 Employee Amendments. Each party shall obtain the execution of
non-disclosure agreements with its employees, agents and consultants having
access to Confidential Information of the other party, and shall diligently
enforce such agreements.
5
<PAGE> 6
6.5 Remedies. If either party breaches any of its obligations with
respect to confidentiality and unauthorized use of Confidential Information
hereunder, the other party shall be entitled to equitable relief to protect its
interest therein, including but not limited to injunctive relief, as well as
money damages.
7. INTELLECTUAL PROPERTY INDEMNITY.
7.1 Indemnification. Brightware shall defend, or at its option
settle, at its own expense, any claim, suit or proceeding brought against
Company, its officers, employees, directors and agents and Brightware agrees to
pay, subject to the limitations hereinafter set forth, all reasonable damages
and costs (including reasonable attorney's fees), finally awarded against
Company, as a result of any such claim or any settlement entered into in good
faith on such issue in any such suit or proceeding, alleging that use of the
Licensed Software or distribution of the Licensed Software as part of the
Integrated Software as contemplated hereunder infringes any patent, copyright or
trade secret of any third party (collectively, "Intellectual Property Rights"),
subject to the limitations hereinafter set forth. Company shall (i) notify
Brightware promptly of such claim, suit or proceeding, (ii) provide Brightware
with sole control of any such action or settlement negotiations (it being
understood that Company may participate in such action at Company expense with
counsel of its own choosing), and (iii) give Brightware authority to proceed as
contemplated herein, and, at Brightware's expense, give Brightware proper and
full information and assistance to settle and/or defend any such claim, suit or
proceeding. If it is adjudicatively determined, or if Brightware believes it may
be determined, that the Licensed Software infringes any Intellectual Property
Right, then Brightware may, at its sole option and expense, and in a reasonable
time frame, either (a) procure for Company the right under such Intellectual
Property Right to use or distribute such Licensed Software as contemplated
herein; (b) replace or modify the Licensed Software with other functionally
equivalent software; or (c) if (a) and (b) are not practicable, as determined in
Brightware's sole discretion, terminate this Agreement with respect to such
Licensed Software and refund to Company all license fees paid by Company for the
terminated Licensed Software, less an amount equal to one sixtieth (1/60th) of
such license fees for each month or any portion thereof which has elapsed since
the commencement of the applicable license. Brightware will not be liable for
any costs or expenses incurred without its prior written authorization.
7.2 Limitation. Notwithstanding the provisions of Section 7.1 above,
Brightware assumes no liability to the extent such claims are based on (i) the
use of the Licensed Software other than as set forth in the Documentation; (ii)
the use of other than the most recent version and prior sequential version of
the Licensed Software; (iii) combination or use of the Licensed Software with
software not provided by Brightware if the infringement would have been avoided
by use of the Licensed Software alone; (iv) any marking or branding not applied
by Brightware or applied at the request of an authorized employee of Company; or
(v) any modification of the Licensed Software, or any part thereof, unless such
modification was made by or authorized by Brightware, if the infringement would
have been avoided in the absence of such modification.
7.3 Entire Liability. THE FOREGOING PROVISIONS OF THIS SECTION 7
STATE THE ENTIRE LIABILITY AND OBLIGATIONS OF BRIGHTWARE, AND THE EXCLUSIVE
REMEDY OF COMPANY, WITH RESPECT TO THE INFRINGEMENT OF ANY PATENT,
6
<PAGE> 7
COPYRIGHT, TRADE SECRET OR OTHER INTELLECTUAL PROPERTY RIGHT BY THE LICENSED
SOFTWARE.
8. LIMITED LIABILITY.
8.1 EXCEPT FOR LIABILITY UNDER SECTIONS 6 AND 7, IN NO EVENT SHALL
EITHER PARTY'S LIABILITY TO THE OTHER PARTY OR ANY THIRD PARTY ARISING OUT OF
THIS AGREEMENT EXCEED THE TOTAL AMOUNT ACTUALLY RECEIVED BY BRIGHTWARE. IN NO
EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR ANY OTHER ENTITY FOR ANY
SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING, WITHOUT LIMITATION,
DAMAGES FOR THE LOSS OF USE, LOSS OF PROFITS AND/OR FOR THE LOSS OF DATA OR
INFORMATION OF ANY KIND UNDER ANY CAUSE OF ACTION, WHETHER FOR BREACH OF
CONTRACT (INCLUDING NEGLIGENCE), OR OTHERWISE, AND WHETHER OR NOT SUCH PARTY OR
ITS AGENTS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. NOTHING IN THIS
SECTION 8 IS INTENDED TO EXCLUDE OR RESTRICT EITHER PARTY'S LIABILITY FOR DEATH
OR PERSONAL INJURY OR PROPERTY DAMAGE CAUSED BY THE GROSS NEGLIGENCE OF SUCH
PARTY OR ITS EMPLOYEES OR AGENTS.
9. TERM AND TERMINATION.
9.1 Term. This Agreement shall commence upon the Effective Date and
shall continue in force for an initial term of one (1) year unless terminated
earlier under the terms of this Section 9. Thereafter, this Agreement may be
renewed for successive one (1) year terms unless terminated by either party as
set forth herein.
9.2 Termination. This Agreement may be terminated by either party
upon sixty (60) days written notice for no cause or if the other party (i)
breaches any material term or condition of this Agreement and fails to remedy
the breach within thirty (30) days after being given notice thereof, or (ii)
ceases to function as a going concern or to conduct operations in the normal
course of business, (iii) has a petition filed by or against it under any state
or federal bankruptcy or insolvency laws which petition has not been dismissed
or set aside within sixty (60) days of filing.
9.3 Effect of Termination. In the event this Agreement is
terminated, Company rights under this Agreement shall terminate, provided,
however, that Company shall have the right to distribute its inventory of
Integrated Software in existence as of the date of termination, and each
End-User's right to use the Integrated Software previously licensed to it by
Company shall survive. All Licensed Software and other Brightware materials
provided hereunder will remain the property of Brightware. Within thirty (30)
days after the termination of this Agreement, Company will prepare all such
items in its possession or control for shipment, or destroy such materials as
Brightware may direct. Upon termination of this Agreement, neither party will
retain any copies of Confidential Information which may have been entrusted to
it by the other party, and within thirty (30) days of a written request by the
other party, an authorized representative of each party shall certify to the
other party that all copies of Confidential Information of the other party
received hereunder have been returned or destroyed. Notwithstanding the
foregoing, Company may retain one (1) copy of the Licensed Software and one (1)
copy of any related Documentation and may use
7
<PAGE> 8
such materials internally as is necessary to support its installed End-User
base. Company may honor any outstanding quotes for potential End Users for a
period of sixty (60) days commencing with the termination of this Agreement.
9.4 Limitation. In the event of termination by either party in
accordance with any of the provisions of this Agreement, neither party shall be
liable to the other because of such termination, for compensation, reimbursement
or damages on account of the loss of prospective profits or anticipated sales or
on account of expenditures, inventory, investment, leases or commitments in
connection with the business or goodwill of Brightware or Company. Termination
shall not, however, relieve either party of obligations incurred prior to the
termination.
9.5 Survival of Provisions. The provisions of Sections 3, 4, 5, 6,
7, 8, 9.3, 9.4 and 10 of this Agreement shall survive the termination of this
Agreement for any reason. All other rights and obligations of the parties shall
cease upon termination of this Agreement.
10. MAINTENANCE AND ENHANCEMENT
10.1 Maintenance. Provided the Licensed Software is used in
accordance with the terms and conditions of the Agreement, and provided Company
pays the applicable maintenance fee for each copy of the Licensed Software
distributed as set forth herein, Brightware will provide technical support,
upgrades and enhancements to the Company as indicated herein for the current,
unaltered version of the Licensed Software.
10.2 Updates & Enhancements. Brightware shall provide Updates and
enhancements (which may include the relevant Documentation) which Brightware at
its sole discretion deems to be logical improvements to the Licensed Software
previously supplied to Company under the Agreement, and which Brightware makes
generally available to other licensees, and does not separately price or market.
Any Updates or enhancements that are provided to Company shall be deemed part of
the Licensed Software and shall be used in accordance with the requirements and
obligations set forth in the Agreement. Company shall be responsible for
distributing such Updates and enhancements of the Licensed Software directly to
End Users who are then receiving maintenance services from the Company. This
Section 10 shall not pertain to any new products, which Brightware separately
prices.
10.3 End User Support. Company shall provide first level of support
for the Licensed Software directly to End Users and shall be responsible for
receiving and responding to all calls for maintenance and support from the End
Users and for performing initial problem analysis and diagnosis. Brightware
shall have no obligation to accept any calls from End Users.
10.4 Company Support. In the event the Company is unable to resolve a
given problem, the Company may request Brightware to assist with the diagnosis
and resolution of such problem and will provide Brightware with all data and
information requested by Brightware for such purposes. Brightware shall supply
technical support to Company for the Licensed Software via Brightware's standard
Maintenance Plan attached hereto as Exhibit D. Company will designate two
primary and two secondary representatives as points of contact to Brightware.
Company shall provide technical support to Company's End Users for the Licensed
Software. If reasonably
8
<PAGE> 9
required, Brightware will provide on-site support to Company for the Licensed
Software at Brightware's then-current fees for such services.
11. MISCELLANEOUS.
11.1 Assignment. Neither this Agreement nor any rights under this
Agreement may be assigned or otherwise transferred by Company, in whole or in
part, without the prior written consent of Brightware, which consent shall not
be unreasonably withheld, or whether voluntary or by operation of law, including
by way of sale of assets, merger or consolidation, without prior written
notification to Brightware. Notwithstanding the foregoing, this Agreement shall
be binding upon and inure to the benefit of each party's successors and assigns.
11.2 Notices. All notices, demands or consents required or permitted
under this Agreement shall be in writing. Notice shall be considered delivered
and effective (a) when personally delivered; (b) the day following transmission
if sent by telex, telegram or facsimile followed by written confirmation by
registered overnight carrier or certified United States mail; (c) one (1) day
after posting when sent by registered private overnight carrier (e.g., DHL,
Federal Express, etc.); or (d) five (5) days after posting when sent by
certified United States mail. Notices shall be sent to the parties at the
addresses set forth on the first page of this Agreement or at such other address
as shall be given by either party to the other in writing.
11.3 Publicity. Neither party will issue a press release or any other
announcement regarding this Agreement, or the relationship contemplated herein
unless both parties consent in writing, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, each party shall have the ability to
list the other party as a customer in its product literature and marketing
materials, including without limitation, on each party's website. In addition,
the parties agree to cooperate in issuing jointly approved press releases
concerning this Agreement, including without limitation an initial such release
within thirty (30) days after the Effective Date of this Agreement.
11.4 Partial Invalidity. If any paragraph, provision, or clause in
this Agreement shall be found or be held to be invalid or unenforceable in any
jurisdiction in which this Agreement is being performed, the remainder of this
Agreement shall be valid and enforceable and the parties shall negotiate, in
good faith, a substitute, valid and enforceable provision which most nearly
effects the parties' intent in entering into this Agreement.
11.5 Counterparts. This Agreement may be executed in two (2) or more
counterparts, all of which, taken together, shall be regarded as one and the
same instrument.
11.6 Waiver and Amendment. No modification, amendment or waiver of
any provision of this Agreement shall be effective unless in writing and signed
by the party to be charged. The failure of either party to enforce at any time
the provisions of this Agreement shall in no way constitute a present or future
waiver of such provisions, nor in any way affect the right of either party to
enforce each and every such provision thereafter.
11.7 Independent Contractors. The relationship of Brightware and
Company established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall
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<PAGE> 10
be construed to constitute the parties as partners, joint venturers, co-owners
or otherwise as participants in a joint or common undertaking, or allow either
party to create or assume any obligation on behalf of the other party. All
financial obligations associated with a party's business are the sole
responsibility of such party.
11.8 Governmental Approvals. Company represents and warrants that it
will obtain all required approvals of the government of any country outside the
United States in which it markets or distributes the Licensed Software in
connection with this Agreement.
11.9 Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of California without
reference to its conflict of law principles and excluding the 1980 United
Nations Convention on Contracts for the International Sale of Goods.
11.10 Jurisdiction; Venue. Any disputes under this Agreement shall be
subject to the exclusive jurisdiction and venue of the California State courts
and the Federal courts located in San Francisco County, California and the
parties hereby consent to the personal and exclusive jurisdiction and venue of
these courts.
11.11 Force Majeure. Nonperformance of either party, except the
payment of money, shall be excused to the extent that performance is rendered
impossible by strike, fire, acts of God, governmental acts or orders or
restrictions, failure of suppliers, or any other reason where failure to perform
is beyond the reasonable control of and is not caused by the negligence of the
nonperforming party.
11.12 Source Code. Brightware agrees to maintain the source code for
the Licensed Software (including all updates thereof) in both human and
machine-readable form in escrow for the benefit of Company. In the event that
Brightware becomes subject to any bankruptcy proceedings, whether voluntary or
involuntary, or ceases its business operations, then Company shall be entitled
to access the source code for the sole purpose of maintaining and updating the
Licensed Software. To the extent that Company receives access to source code as
set forth herein, Brightware grants Company a non-exclusive, non-transferable
license without right of sublicense, to install and use, execute, display,
modify and perform the source code solely for the purposes of maintaining,
operating, upgrading and enhancing the Licensed Software for use by Company in
an object code format solely pursuant to the license granted in Section 2 of the
Agreement.
11.13 Entire Agreement. The terms and conditions herein contained,
including all Exhibits which are incorporated herein by reference, constitute
the entire agreement between the parties and supersede all previous agreements
and understandings, whether oral or written, between the parties hereto with
respect to the subject matter hereof, and no agreement or understanding varying
or extending the same shall be binding upon either party hereto unless in a
written document signed by the party to be bound thereby.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by duly authorized officers or representatives as of the date first above
written.
BRIGHTWARE, INC. COMPANY
By: /s/ CHUCK WILLIAMS By: /s/ MARK P. THOMPSON
-------------------------------- -------------------------------------
Name: Chuck Williams Name: Mark P. Thompson
------------------------------ -----------------------------------
Title: CEO Title: VP & Corporate Controller
----------------------------- -------------------------------------
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EXHIBIT A
LICENSED SOFTWARE AND
INTEGRATED SOFTWARE
1. LICENSED SOFTWARE:
The Licensed Software includes the current releases of Answer Agent and Contact
Center.
2. INTEGRATED SOFTWARE:
The Integrated Software is the combination of the Licensed Software and any of
the following Company proprietary software that adds value for the End-User when
sold as a combined unit:
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<PAGE> 13
EXHIBIT B
END-USER LICENSE AGREEMENT
(Attached)
LICENSE AND MAINTENANCE CONDITIONS
1. LICENSE
Brightware grants and Licensee accepts a nonassignable, nontransferable,
non-exclusive perpetual license to use the Brightware(R) software product(s)
("Product(s)") and associated documentation and reference ("Technical Reference
Material") specifically identified in one or more mutually agreed upon schedules
hereto ("Product Schedule(s)"), which upon execution shall be attached hereto
and incorporated herein by reference. The Parties agree that the license granted
hereunder may pertain to more than one Product. Accordingly, the rights granted
to Licensee with respect to a particular Product shall be referred to herein as
a "Product License."
For annual licenses, the license granted hereunder shall be automatically
renewed for successive one year terms Licensee provides Brightware written
request to not renew the license, provided that such request is received by
Brightware at least sixty (60) days prior to the expiration of the then-current
license term. The license fee for each one year term renewal shall be as set
forth on the applicable Schedule C-2 attached hereto and shall remain at the
same price for each successive renewal of the license.
Licensee understands and agrees that any consulting service agreement and
associated statement of work that may be signed are separate and independent
contractual obligations from any schedule relating to software licenses.
Licensee shall not withhold payments that are due and payable under a schedule
relating to a software license because of the status of work performed under any
consulting service agreement that may be signed. In addition, the ability to
provide such services is not exclusive or specific to Brightware and is
commercially available from third party service providers. The types of services
to be provided under a consulting order are standard implementation assistance
which does not include complex interfaces, custom interfaces, custom
modifications and the like.
2. USE
The Products and Technical Reference Materials shall be used by Licensee solely
for Licensee's own internal use and subject to the rights and requirements
specified in the applicable Product Schedule(s) and this Agreement.
Licensee may make one archival/back-up copy of each Product to perform
site-specific backup, provided that such archival/backup copy is not used in a
production mode. Licensee acknowledges and agrees that such archival/backup copy
shall be the sole property of Brightware. Licensee further
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agrees to reproduce and include on such archival/backup copy all proprietary
and copyright notices appearing on the original Product.
3. WARRANTIES
Brightware warrants and represents that it has the full right, power and
authority to enter into this Agreement and to grant to Licensee the rights
herein granted.
Brightware warrants that upon delivery of each Product supplied to Licensee
hereunder and for a period of thirty (30) days thereafter (the "Warranty
Period"), the Product will perform in substantial conformance with the
specifications contained in the Technical Reference Material provided by
Brightware with the Product. Licensee shall immediately notify Brightware in
writing of any alleged nonconformance which occurs during the Warranty Period
("Notice of Nonconformance"). To the extent that a current unaltered release of
the Product fails to substantially conform with the specifications contained in
the Technical Reference Material (hereafter a "Substantial Nonconformance"), and
provided the alleged Substantial Nonconformance can be replicated by Brightware,
Brightware's liability under this warranty shall be limited to, at Brightware's
election, either: (i) using its best efforts to correct any Substantial
Nonconformance in the Product; or (ii) as Brightware may reasonably deem
necessary, replacing all or any part of the Product causing such Substantial
Nonconformance; provided in each case, however, that written notice of such
Substantial Nonconformance must be received by Brightware during the Warranty
Period. If such correction or replacement cannot be accomplished within thirty
days of Brightware's receipt of the Notice of Nonconformance, Licensee may, as
its sole remedy, terminate the Product License for the nonconforming Product. If
Licensee, terminates any Product License in accordance with this Section 3,
Licensee shall immediately return to Brightware the Product and all related
Technical Reference Material and shall provide to Brightware the certification
required under Schedule B, Section 6. Upon receipt of the Product, related
Technical Reference Material and required certification, Brightware shall refund
the license fees paid by Licensee for such Product. Upon licensee's receipt of
the Product, maintenance for the Product shall commence as set forth under the
Maintenance and Enhancement Plan, which is attached hereto and incorporated
herein by reference.
WITH THE EXCEPTION OF THE EXPRESS WARRANTIES CONTAINED IN SECTION 3 ABOVE,
BRIGHTWARE HEREBY DISCLAIMS ALL EXPRESS AND IMPLIED (IN FACT OR IN LAW)
WARRANTIES FOR THE PRODUCT(S) AND TECHNICAL REFERENCE MATERIAL PROVIDED BY
BRIGHTWARE IN ACCORDANCE WITH THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO,
WARRANTIES AS TO THE ACCURACY, COMPLETENESS AND NON-INFRINGEMENT OF THE
PRODUCT(S) AND TECHNICAL REFERENCE MATERIAL, AS WELL AS THE IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR PARTICULAR PURPOSE. BRIGHTWARE ALSO
EXPRESSLY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES THAT THE OPERATION OF
THE PRODUCT(S) WILL BE ERROR-FREE.
4. MAINTENANCE AND ENHANCEMENT
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<PAGE> 15
Provided the Product specified in Schedule C ("Covered Product") is used in
accordance with the terms and conditions of the Agreement, and provided Licensee
pays the applicable maintenance fee set forth in Schedule C, Brightware will
provide technical support, upgrades and enhancements as indicated herein for the
current, unaltered version of the Covered Product.
Brightware shall provide updates and enhancements (which may include the
relevant Technical Reference Material) which Brightware at its sole discretion
deems to be logical improvements to the Covered Product previously supplied to
Licensee under the Agreement, and which Brightware makes generally available to
other licensees, and does not separately price or market. Any updates or
enhancements that are provided to Licensee shall be deemed part of the Covered
Product and shall be used in accordance with the requirements and obligations
set forth in the Agreement. This Section 4 shall not pertain to any new products
which Brightware separately prices.
Brightware shall supply telephone support to Licensee for the Covered Product
via Brightware's "Support Hotline" in accordance with the terms of Schedule E.
If reasonably required, Brightware will provide on-site support to Licensee for
the Covered Product at Brightware's then-current fees for such services.
GENERAL TERMS AND CONDITIONS
1. PROPRIETARY INFORMATION
(a) OWNERSHIP: The Product(s) and Technical Reference Material, and all
tangible and intangible information related in any manner to the Product(s) and
Technical Reference Materials (whether or not protectible by patent, copyright
or trade secret rights), including without limitation works of authorship,
inventions, discoveries, patentable subject matter, patents, patent
applications, industrial models, industrial designs, trade secrets, trade secret
rights, software, copyrighted works, copyrightable subject matter, copyright
rights and registrations, know-how and show-how, trademarks, trade names,
service marks, emblems, logos, insignias and related marks and registrations,
specifications, technical manuals and data, libraries, blueprints, drawings,
proprietary processes, customer information, marketing information, product
information and development work-in-process (collectively, "Proprietary
Information") are and shall remain the sole property of Brightware and/or the
third party licensors from whom Brightware obtained rights in such Proprietary
Information ("Third Party Licensors"), and nothing in this Agreement shall be
construed to convey to Licensee any title or ownership right in any of the
Proprietary Information.
In the course of performing the Services, Brightware may employ, use and refine
knowledge, techniques, programs, processes and methodologies owned by Brightware
as of the Effective Date and used by Brightware in providing like or similar
services to its other clients (the "Brightware Technology"). Brightware owns and
shall retain all rights, title and interest in and to the Brightware Technology
and nothing in this Agreement shall be construed to restrict Brightware from
using any Brightware Technology in the course of its work for any other person
or entity either during or after the term of this Agreement.
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<PAGE> 16
(b) CONFIDENTIALITY: Licensee agrees to hold the Proprietary Information in
confidence and thus not to furnish, sell, give, assign, disclose, distribute or
otherwise make the Proprietary Information available to any other person, party,
firm, corporation or entity without the prior written consent of Brightware.
Notwithstanding the foregoing, Licensee may (i) disclose certain Proprietary
Information to consultants, agents or contractors under contract with Licensee
as required in connection with their duties for and on behalf of Licensee and
who have agreed in writing prior to Licensee's disclosure not to perform any act
in violation of this Section 1 and (ii) publicly discuss the merits and benefits
of the Product(s), and give recommendations and testimonials about the
Product(s).
(c) TRADEMARKS: Licensee recognizes the exclusive right of Brightware to all
trademarks and trade names owned and/or used by Brightware in connection with
the Product(s) and agrees not to use such trademarks or trade names in any
manner or for any reason without the prior written consent of Brightware.
(d) RESTRICTIONS: Unless otherwise permitted under the terms of this
Agreement, Licensee shall not make, sell, reproduce, prepare derivative works
based on, distribute copies of, or publicly display any Product(s) or Technical
Reference Material. Further, Licensee shall not reverse engineer, decompile,
disassemble or apply any process, technique, procedure or make any attempt to
ascertain or derive the source code of any Product.
(e) REMEDIES: Licensee acknowledges and agrees that any breach of its
obligations under this Section 1 may cause irreparable harm to Brightware and/or
its Third Party Licensors and that Brightware and each of its Third Party
Licensors shall have the right to take all reasonable steps to protect their
proprietary interests, including but not limited to seeking injunctive relief
and any other remedy as may be available at law or in equity in the event
Licensee does not fulfill its obligations under this Section 1.
(f) SCOPE: The provisions of this Section 1 shall apply to (i) the
Product(s) as delivered or subsequently modified by Brightware and (ii) all
Proprietary Information given to Licensee prior to the Effective Date of this
Agreement.
(g) LICENSEE'S CONFIDENTIAL BUSINESS INFORMATION: Brightware agrees to
maintain the confidentiality of certain materials and data relating to the
Licensee's business which are made available to Brightware in connection with
this Agreement, and which are not publicly known or available from other
sources, and which Licensee indicates in writing are confidential prior to
disclosure to Brightware.
(h) RETURN OF CONFIDENTIAL INFORMATION: Upon expiration or termination of
this Agreement for any reason or no reason, each party shall return to that
other party all tangible materials embodying the other party's confidential
information, including any documentation, records, listings, notes, data,
sketches, drawings, memoranda, models, accounts, reference materials, samples,
machine-readable media and equipment which in any way relate to the confidential
information. The Parties agree not to retain any copies (in any form) of any of
the above materials containing the other party's
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confidential information. The provisions of this Section 1 shall survive
termination or expiration of this Agreement and any Schedule(s) hereunder.
2. RECORDS
Licensee shall keep and maintain at each of the Licensee Locations complete and
accurate books of account relating to use, relocation (as provided herein) and
creation by Licensee of all archival/backup copies of the Product(s) made
pursuant to Schedule A Section 2, and, upon Brightware's request, shall provide
such records to Brightware.
Licensee agrees to allow Brightware, with reasonable prior notice, to enter
Licensee's facility during regular business hours to (i) audit the number of
archival/backup copies of Product(s) made in accordance with Schedule A Section
2, and (ii) review Licensee's overall compliance with the other provisions of
this Agreement. The obligations and rights set forth in this Section 2 shall
remain in effect for six (6) months after the termination or expiration of this
Agreement.
3. PROPRIETARY RIGHTS INDEMNIFICATION
Brightware will defend at its expense any action brought against Licensee which
is based on a claim that a Product, as used within the scope of the license
granted hereunder, infringes a United States patent, copyright or trade secret
of a third party, and will pay (i) any settlement agreed to by Brightware, or
(ii) the costs and damages finally awarded to such third party; provided,
however, that in either case that Licensee notifies Brightware promptly in
writing of the claim, and allows Brightware to fully control the defense and
settlement of such claim.
If any Product becomes, or in Brightware's opinion is likely to become, the
subject of a claim of infringement of any United States patent, copyright or
trade secret owned by any third party, Brightware may, at its election, either:
(i) procure for the Licensee the right to continue using the Product; (ii)
replace or modify the Product to make it non-infringing; or (iii) terminate the
Product License for the Product. Upon termination of the Product License in
accordance with Section 6, Licensee shall immediately return to Brightware all
copies and all versions of the Product and all related documentation, in
accordance with the obligations set forth in Section 6(b) of this Agreement and
shall provide to Brightware the certificate required under Section 6(b).
Brightware shall thereafter refund to Licensee all license fees paid by Licensee
for the terminated Product License, less an amount equal to one sixtieth
(1/60th) of such license fees for each month or any portion thereof which has
elapsed since the commencement of the applicable Product License. Brightware
shall have no liability for any claim of infringement by a Product based upon
Licensee's: (i) use of any version of the Product other than the latest
unmodified release; (ii) use or combination of the Product with non-Brightware
programs or data if such infringement would not have occurred without such use
or combination; or (iii) use of the Product after receiving notice that the
Product infringes a patent, copyright or trade secret of a third party.
This Section 3 states the entire liability of Brightware and the sole and
exclusive remedies of Licensee with respect to any Product's infringement of any
patent, copyright or trade secret of any
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third party, and Brightware shall have no liability with respect to any other
proprietary rights, including without limitation any non-U.S. proprietary
rights.
4. INDEMNIFICATION
Licensee shall indemnify Brightware and hold it harmless for and against any and
all claims, damages, losses, costs, expenses, obligations, liabilities, actions,
suits, including without limitation, interest and penalties, attorney's fees and
costs and all amounts paid in settlement of any claim, action or suit which may
be asserted against Brightware or which Brightware shall incur or suffer which
arise out of, result from or are related to: (i) the non-fulfillment of any
covenant or obligation of Licensee in connection with this Agreement; (ii) the
breach of any representation made by Licensee under this Agreement; (iii) the
results obtained or decisions made by users of any Product; (iv) any claim of
any nature whatsoever brought by any third person or entity who may suffer
damages of any sort as a direct or indirect result of Licensee's activities
relating to or in connection with any Product; or (v) any claims of infringement
of any copyright, patent or trade secret or other proprietary rights arising
from any unauthorized modification, enhancement or misuse of any Product by
Licensee.
5. LIMITATION OF LIABILITY
NEITHER BRIGHTWARE NOR ANY THIRD PARTY LICENSOR SHALL BE LIABLE FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR EXEMPLARY DAMAGES, INCLUDING,
WITHOUT LIMITATION, DAMAGES FOR THE LOSS OF USE, LOSS OF PROFITS AND/OR FOR THE
LOSS OF DATA OR INFORMATION OF ANY KIND, ARISING OUT OF OR RELATED IN ANY MANNER
TO THIS AGREEMENT, THE PRODUCT(S) OR TECHNICAL REFERENCE MATERIAL SUPPLIED
HEREUNDER OR THE USE OF SUCH PRODUCT(S) OR TECHNICAL REFERENCE MATERIAL, EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN ADDITION, NEITHER BRIGHTWARE NOR
ANY THIRD PARTY LICENSOR SHALL BE LIABLE FOR ANY LOSS OR DAMAGE RELATED TO ANY
RESULTS OBTAINED OR DECISIONS MADE BY LICENSEE IN CONNECTION WITH THE USE OF THE
PRODUCT(S) OR TECHNICAL REFERENCE MATERIAL.
EXCEPT AS OTHERWISE SPECIFIED IN SECTION 6 OF THIS AGREEMENT, BRIGHTWARE'S
LIABILITY, IF ANY, TO LICENSEE, WHETHER IN CONTRACT OR IN TORT (AND WHETHER OR
NOT BASED ON NEGLIGENCE OR STRICT LIABILITY), FOR DAMAGES OR LOSSES OF ANY
NATURE, SHALL NOT EXCEED THE LICENSE FEE PAID BY LICENSEE UNDER THIS AGREEMENT
FOR THE SPECIFIC PRODUCT WHICH CAUSED SUCH DAMAGE OR LOSS.
BRIGHTWARE SHALL NOT BE LIABLE FOR DELAYS IN THE PERFORMANCE OF ITS OBLIGATIONS
UNDER THIS AGREEMENT DUE TO CAUSES BEYOND ITS REASONABLE CONTROL, INCLUDING, BUT
NOT LIMITED TO, ACTS OF GOD, STRIKES OR INABILITY TO OBTAIN LABOR OR MATERIALS.
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6. TERMINATION
(a) BY BRIGHTWARE: In addition to the termination rights set forth under
Schedule A Section 3, and Section 3 above, if Licensee fails to fulfill any of
its obligations under this Agreement, Brightware may upon its election and in
addition to any other remedies it may have, upon written notice to Licensee of
the breach and failure of Licensee to cure such breach within two (2) weeks
thereof (unless such breach cannot be cured by its very nature), terminate all
of the rights granted to Licensee by Brightware under this License Agreement,
including without limitation all Product Licenses created hereunder.
(b) LICENSEE RESPONSIBILITIES: Upon termination of either this entire
Agreement or a particular Product License granted under the Agreement, Licensee
shall, within two (2) weeks of such termination, return to Brightware all copies
of the terminated Product(s) and all related Technical Reference Material in
Licensee's possession or control. Licensee shall further certify to Brightware,
in a writing signed by an officer of Licensee, that it has ceased using the
terminated Product(s) and has retained no copies of such terminated Product(s).
The provisions of Section 3 shall survive termination of this License Agreement
and any Product Licenses created hereunder.
7. EXPORT OF PRODUCTS
Licensee acknowledges and agrees that export or re-export of the Product(s) may
be subject to Licensee obtaining specific approvals as may be required by United
States export laws and regulations. Licensee shall at all times comply with
United States export control laws and regulations in connection with matters
relating to this Agreement. Distribution of the Product(s) in any foreign
country where the proprietary rights of Brightware in the Product(s) would not
be recognized and protected under the laws of such country is prohibited.
8. GENERAL
(a) ATTORNEYS' FEES: In the event that litigation or arbitration arises to
resolve differences or disputes in connection with the interpretation or
enforcement of this Agreement, reasonable attorneys' fees, costs and expenses
shall be awarded to the prevailing party.
(b) ASSIGNMENT: Licensee may not, without the prior written consent of
Brightware, assign or transfer this Agreement or any obligation hereunder. Any
attempt to do so in contravention of this paragraph shall be void and of no
force and effect. Further, nothing contained in this Agreement, expressed or
implied, is intended to confer upon any person or entity other than the Parties
and their successors in interest and permitted assignees, any rights or remedies
resulting from this Agreement.
(c) FORCE MAJEURE: Brightware shall not be liable for any delay,
nonperformance, or related damages, if such delay or nonperformance was due to
causes beyond its reasonable control, including, but not limited to, acts of
God, electrical power failure, loss of communications, or the delay of Licensee
to provide items as set forth herein.
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(d) COUNTERPARTS: This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
(e) ENTIRE AGREEMENT: This Agreement, including its Schedule(s), constitutes
the entire understanding between Brightware and Licensee relating to the terms
and conditions of the Products provided and Services to be performed. This
Agreement supersedes all prior understandings, agreements and documents relating
to the subject matter hereof and shall not be amended except in writing signed
by both Parties.
(f) GOVERNING LAW: This Agreement shall be construed and enforced in
accordance with the laws of the state of California.
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EXHIBIT C
LICENSE FEES
1. First Copy Special Pricing Offer.
THE FOLLOWING PRICE FOR THE INITIAL COPY OF LICENSED SOFTWARE IS SUBJECT TO THE
EXECUTION OF THIS AGREEMENT BY DECEMBER 30, 1998:
<TABLE>
<CAPTION>
ITEM QUANTITY FEES
- ---- -------- ----
<S> <C> <C>
Answer Agent (for Resale) 2
Contact Center (for Resale) 2
Answer Agent (internal production use) 1
Contact Center (internal production use 1
with unlimited seats)
Answer Agent (for development and testing) Unlimited
Contact Center (for development and testing) Unlimited
TOTAL LICENSE FEE [*]
ON SITE TRAINING [*]
[*]
FIRST YEAR'S MAINTENANCE FOR INTERNAL USE LICENSES [*]
TOTAL FEES DUE: [*]
</TABLE>
PAYMENT TERMS: [*]
2. SUBSEQUENT ANNUAL PRICING
[*]
[*]
<TABLE>
<CAPTION>
LICENSED SOFTWARE LIST PRICE DISCOUNT COMPANY PRICE
- ----------------- ---------- -------- -------------
<S> <C> <C> <C>
Answer Agent [*] [*] [*]
- -----------------------------------------------------------------------
Contact Center (includes [*] [*] [*]
10 Named User Licenses)
</TABLE>
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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<TABLE>
<CAPTION>
LICENSED SOFTWARE LIST PRICE DISCOUNT COMPANY PRICE
- ----------------- ---------- -------- -------------
<S> <C> <C> <C>
Additional Contact Center [*] [*] [*]
10 Named User Licenses*
- -----------------------------------------------------------------------
Additional Contact Center [*] [*] [*]
10 Concurrent User
Licenses
</TABLE>
* Additional Contact Center Licenses are only sold in allotments of 10
Licenses. [*].
3. Maintenance Fee for Resale Licenses Maintenance fee for the Resale
Licenses shall be [*] of the net license fee Company charges it's
End-Users.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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SCHEDULE D
MAINTENANCE PLAN
Terms and Conditions
Company shall, as soon as it is reasonably able to do so, inform Brightware of
any defect in the Licensed Software of which it becomes aware and provide to
Brightware such further information relating to the defect as is available to
Company and which Brightware may reasonably request in order to enable it to
provide maintenance for the Licensed Software.
STANDARD SUPPORT PLAN PROVIDES THE FOLLOWING:
o Extended - hours unlimited phone support, 5:30 AM to 5:30 PM Pacific
Time, Monday through Friday.
o After hours calls on a [*] fee per call basis.
o Right to receive technical support, upgrades and enhancements for the
current unaltered version of the Licensed Software.
o Service levels: one (1) hour response, regular status updates, and queue
priority.
MAINTENANCE SUPPORT MINIMUM RESPONSE GUARANTEES ARE:
o Inquiries received via phone call will open a trouble ticket, if the
issue is not solved during the initial call, an analyst will follow-up
within 24 hours with the current status.
o Problems that are not resolved within 48 hours will be escalated first
to the Support Manager, second to Development and third to Executive
management.
o Inquiries received via e-mail will be acknowledged within one hour, and
updates and escalation will be identical to inquiries received via
phone.
EXCLUSIONS:
Brightware shall not be responsible for the correction of defects in the
Licensed Software attributable to:
o Alterations, adaptations or changes to the Licensed Software not made by
or under the supervision or direction of Brightware.
o Use of, connection or installation of the Licensed Software with any
other software or equipment not supplied by or authorized by Brightware.
[*] Certain information in this exhibit has been omitted and filed
separately with the Commission. Confidential treatment has been
requested with respect to the omitted portions.
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o Any breach of any of the Company's obligations under this Agreement.
o Accidental or deliberate damage to the Licensed Software.
COMPANY RESPONSIBILITIES:
o Company shall keep and operate the Licensed Software in accordance with:
(i) this Agreement; and (ii) Brightware's reasonable instructions given
from time to time and shall ensure that only competent trained employees
(or persons under their supervision) are allowed to use and operate the
Licensed Software (provided that anyone trained by Brightware shall be
treated as being competent and trained).
o Company shall provide to Brightware all facilities and services
reasonably required by Brightware to enable it to perform its
obligations under this Agreement including computer runs, printouts,
data preparation, telephone and fax facilities, photocopying and modem
links.
o Company shall keep such records, as Brightware reasonably requires of
the maintenance history of the Licensed Software and allow Brightware to
inspect and take copies of such records upon reasonable notice to the
Company.
24
<PAGE> 25
EXHIBIT E
LIST OF COMPANY'S RESELLERS AND DISTRIBUTORS
(WHICH ARE SUBJECT TO CHANGE FROM TIME TO TIME)
25
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-86919 of Quintus Corporation on Form S-1 of our report dated June 18, 1999
(September 10, 1999 as to Note 15), appearing in the Prospectus, which is part
of this Registration Statement, and of our report dated June 18, 1999 relating
to the financial statement schedule appearing elsewhere in this Registration
Statement.
We also consent to the reference to us under the headings "Selected
Consolidated Financial Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
San Jose, California
September 20, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our reports dated April 30, 1998,
except for Note 12, as to which the date is September 18, 1998, in Amendment No.
1 to the Registration Statement (Form S-1) and related Prospectus of Quintus
Corporation.
Ernst & Young LLP
Palo Alto, California
September 20, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated February 8, 1999, except as to Note 11, for which the date is
March 31, 1999, relating to the financial statements of Acuity Corp.,
which appear in such Registration Statement. We also consent to the reference
to us under the heading "Experts" in such Registration Statement.
PricewaterhouseCoopers LLP
Austin, Texas
September 23, 1999
