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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended May 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
Commission file number 0-21921
TEMPLATE SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
Virginia 52-1042793
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
45365 Vintage Park Plaza
Dulles, Virginia 20166
(Address of principal executive offices) (Zip code)
(703) 318-1000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock June 30, 1997
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Common Stock, $.01 par value per share 4,434,133
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TEMPLATE SOFTWARE, INC.
INDEX
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PART I - FINANCIAL INFORMATION Page
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Item 1. Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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</TABLE>
Exhibit Index
This Form 10-Q contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
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amended (the "Exchange Act"), which are intended to be covered by the safe
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harbors created thereby. Investors are cautioned that all forward-looking
statements involve risks and uncertainty, including without limitation, the
ability of the Company to develop its products, as well as general market
conditions, competition and pricing. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this Form 10-Q
will prove to be accurate. In light of the significant uncertainties inherent
in the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
2
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PART I
FINANCIAL INFORMATION
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Item 1 Financial Statements.
Template Software, Inc. and Subsidiaries
Consolidated Balance Sheets
(Amounts in Thousands)
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May 31, 1997 November 30, 1996
(audited)
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ASSETS
Current assets:
Cash and cash equivalents $12,318 $ 8,397
Marketable securities 14,684 -
Accounts receivable, net 4,805 2,887
Other current assets 765 878
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Total current assets 32,572 12,162
Property and equipment, net 1,183 924
Software development costs, net 1,096 718
Goodwill and other assets 2,247 181
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Total assets $37,098 $13,985
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,984 $ 1,975
Current portion of long-term debt 144 142
Income taxes payable 398 567
Deferred income 731 469
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Total current liabilities 3,257 3,153
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Long-term liabilities:
Long-term debt, net of current portion 964 357
Other long-term liabilities 482 432
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Total liabilities 4,703 3,942
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Shareholders' equity:
Series A Convertible Preferred Stock, $0.01 par value - 5
Common Stock, $0.01 par value 43 22
Additional paid-in capital 30,405 9,110
Foreign currency translation 53 -
Retained earnings 1,894 906
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Total shareholders' equity 32,395 10,043
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Total liabilities and shareholders' equity $37,098 $13,985
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</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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Template Software, Inc. and Subsidiaries
Consolidated Statements of Operations
(amounts in thousands, except per share data)
(Unaudited)
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For the Three For the Six Months
Months Ended May 31, Ended May 31,
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1997 1996 1997 1996
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Revenues:
Products $1,236 $ 346 $2,725 $ 857
Services 3,339 2,867 5,804 4,867
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Total Revenues 4,575 3,213 8,529 5,724
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Cost of revenues:
Products 181 227 363 387
Services 1,698 1,533 3,165 2,623
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Total cost of revenues 1,879 1,760 3,528 3,010
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Gross profit 2,696 1,453 5,001 2,714
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Operating expenses:
Selling and marketing 1,289 581 2,113 1,051
Product development 310 229 636 362
General and administrative 504 403 1,137 796
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Total operating expenses 2,103 1,213 3,886 2,209
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Income from operations 593 240 1,115 505
Interest expense (16) (10) (29) (22)
Other income 344 5 481 5
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Net income before income taxes 921 235 1,567 488
Income tax provision 341 90 580 187
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Net income $ 580 $ 145 $ 987 $ 301
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Earnings per common share
and common share equivalents $ 0.10 $ 0.03 $ 0.18 $ 0.06
============================ =============================
Weighted average number of
common share and common
equivalents outstanding 6,001,290 4,659,000 5,487,222 4,659,000
============================ =============================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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Template Software, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Amounts in Thousands)
(Unaudited)
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For the Six Months Ended May 31,
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1997 1996
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Cash flows provided (used) by operating activities (702) 805
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Cash flows from investing activities:
Purchase of marketable securities (14,520) -
Capital expenditures (378) (74)
Capitalization of software development costs (505) (241)
Acquisition costs for acquired company (63) -
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Net cash used in investing activities (15,466) (315)
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Cash flows from financing activities:
Payments on revolving credit facility, net - (161)
Payments on note payable (44) (68)
Payments on capital lease obligations (24) -
Proceeds from issuance of capital stock, net of
issuance costs 20,105 -
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Net cash provided by (used in) financing activities 20,037 (229)
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Effect of exchange rate changes on cash and cash
equivalents 52 -
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Net increase in cash and cash equivalents 3,921 261
Cash and cash equivalent, beginning of period 8,397 63
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Cash and cash equivalents, end of period $12,318 $324
=====================================
Noncash investing and financing activities:
Retirement of treasury stock:
Class A Common Stock $- $9
Preferred Stock $- $36
Conversion of 500,000 shares Series A
Convertible Preferred Stock to 500,000 shares of
Common Stock $5 $-
Common Stock issued in connection with acquisition $ 1,207 $-
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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TEMPLATE SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1997
Note A -- Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements of Template Software, Inc. and subsidiaries (the "Company")
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contain all adjustments (consisting only of normal recurring accruals) necessary
to present fairly the Company's consolidated financial position as of May 31,
1997, and the results of operations and cash flows for the periods indicated.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Registration Statement of
Form S-1 (File No. 333-17063). The results of operations for the six months
ended May 31, 1997 are not necessarily indicative of the operating results to be
expected for the full year. Earnings per common share and common share
equivalents are presented on the face of the Statement of Operations and
represent primary earnings per share. Dual presentation of primary and fully
diluted earnings per share has not been made because the differences are
insignificant.
Note B - Acquisitions
Krystal Ingenierie S.A.
On March 4, 1997, the Company consummated its acquisition of all of the
issued and outstanding capital stock of Krystal Ingenierie S.A. ("Krystal"), a
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corporation organized under the laws of the Republic of France. The Krystal
acquisition was consummated pursuant to a Stock Purchase Agreement dated as of
February 19, 1997, with Alain Kuhner ("Kuhner"), whereby the Company agreed to:
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(1) exchange for an aggregate of 48,064 shares of the Company's common stock
(the "Common Stock"), 2,500 shares of Krystal held by Kuhner, representing all
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of the issued and outstanding capital stock of Krystal; and (2) exchange for an
aggregate of 45,686 additional shares of the Company's Common Stock, certain
indebtedness of Krystal owed to Kuhner in the aggregate amount of approximately
FF 3,914,000. Concurrently with the closing of the Krystal acquisition,
Krystal's name was formally changed to Template Software S.A. The acquisition
is expected to be accounted for as a purchase.
milestone software GmbH and milestone software G.m.b.H.
On June 27, 1997, the Company acquired all of the issued and outstanding
equity interests of milestone software GmbH, a German limited liability company
("Milestone"), which owns 34% of the issued and outstanding equity interests
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of milestone software, G.m.b.H., an Austrian corporation ("Milestone-Austria"),
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from Milestone's three owners, Klaus Dieter Jansen ("Jansen"), Heinz-Dieter
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Dietrich ("Dietrich") and NeSBIC III, C.V., for an aggregate cash purchase price
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of DM 12,000,000. An additional 10% interest of Milestone-Austria was acquired
from Dietrich and Jansen in exchange for 90,000 shares of the Company's Common
Stock. The acquisition is expected to be accounted for as a purchase and the
Company intends to change Milestone's name to Template Software GmbH in 1998.
In addition to the total consideration paid in connection with the
acquisition of Milestone, the Company provided Dietrich and Jansen, who each
entered into employment agreements with Milestone,
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with eligibility to earn in the aggregate approximately 78,000 shares of the
Company's Common Stock upon Milestone's attainment of certain future profit
objectives over the next 17 months.
Note C - New Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"). SFAS
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123 allows companies which grant stock options a choice to either continue the
current accounting treatment under Accounting Principles Bulletin Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"), or adopt a new set of
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fair value accounting rules for recognizing compensation expense related to
stock awards. Companies continuing under APB 25 must measure option values and
disclose the pro forma effects that the new fair value accounting would have on
earnings, if recorded. The Company has determined that it will continue the
current accounting treatment under APB 25 and will provide pro forma disclosures
as of November 30, 1997 for the effect the new fair value accounting rule would
have on earnings, if adopted.
The Financial Accounting Standards Board has also issued Statements of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which
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specifies the computation, presentation, and disclosure requirements for
earnings per share. SFAS 128 is effective for financial statements for periods
ending after December 15, 1997. The Company believes that the adoption of SFAS
128 will not have a material effect on the financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Revenue. Total Revenue was $4.6 million for the quarter ended May 31, 1997
compared to $3.2 million for the quarter ended May 31, 1996, an increase of $1.4
million or 42.4%. Total Revenue for the six month period ended May 31, 1997 was
$8.5 million compared to $5.7 million for the six month period ended May 31,
1996, an increase of $2.8 million or 49.0%. This growth resulted principally
from volume increases in sales of both software-related services and software
licenses due to the Company's shift in emphasis toward selling complete
solutions.
Product Revenue was $1.2 million for the quarter ended May 31, 1997
compared to $0.3 million for the quarter ended May 31, 1996, an increase of $0.9
million or 257.2%. For the six month period ended May 31, 1997, Product Revenue
was $2.7 million compared to $0.9 million for the six month period ended May 31,
1996, an increase of $1.8 million or 218.0%. This increase was primarily
attributable to the sale of development and deployment licenses associated with
new contract engagements as well as an increase in order size. Services Revenue
was $3.3 million for the quarter ended May 31, 1997 compared to $2.9 million for
the quarter ended May 31, 1996, and increase of $0.5 million or 16.5%. Services
Revenue was $5.8 million for the six month period ended May 31, 1997, compared
to $4.9 million for the six month period ended May 31, 1996, an increase of $0.9
million or 19.3%. This increase for both the three month period and the six
month period was primarily attributable to the implementation of larger scale
client engagements for complete solutions. Contracts for complete solutions
obtained by the Company through its direct sales force typically contain a
larger service component than those obtained through the Company's distributors,
value added resellers and systems integrators, as the Company is engaged to
develop a customized solution in addition to providing software products.
7
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Cost of Revenue. Total cost of revenue consists primarily of salaries and
related benefits for personnel, and also includes an allocated portion of rent,
building services and computer equipment services and expenses. Total cost of
revenue was $1.9 million for the quarter ended May 31, 1997 compared to $1.8
million for the quarter ended May 31, 1996, an increase of $0.1 million or 6.8%.
Total cost of revenue was $3.5 million for the six month period ended May 31,
1997 compared to $3.0 million for the six month period ended May 31, 1996, an
increase of $0.5 million or 17.2%. This increase was primarily attributable to
additional professional staff hired to perform the increased volume of software
services. Total cost of revenue was 41.1% of total revenue for the quarter
ended May 31, 1997 compared to 54.8% of total revenue for the quarter ended May
31, 1996. For the six month period ended May 31, 1997, total cost of revenue
decreased to 41.4% of total revenue compared to 52.6% for the comparable period
last year. This percentage decrease was primarily attributable to the Company's
increase in product revenue with its related higher gross margin.
Cost of Product Revenue was $0.2 million for the quarter ended May 31, 1997
unchanged from $0.2 million for the quarter ended May 31, 1996. Cost of Product
Revenue was $0.4 million for the six months ended May 31, 1997 unchanged from
the same period last year. The cost of Product Revenue for the three and six
month periods ending May 31, 1997 decreased as a percentage of Product Revenue
due to significant increases in product order size while labor costs have
remained relatively constant. Cost of Services Revenue was $1.7 million for the
quarter ended May 31, 1997 compared to $1.5 million for the quarter ended May
31, 1996, an increase of $0.2 million or 10.8%. Cost of Services Revenue was
$3.2 million for the six month period ended May 31, 1997, compared to $2.6
million for the six month period ended May 31, 1996, an increase of $0.6 million
or 20.7%. This increase resulted primarily from the cost associated with
staffing the growth in services contracts. Because such staffing is relatively
fixed in the short term, if any of the Company's engagements were to be
terminated on short notice, the Company would be unable to reduce cost of
Services Revenue commensurate with the associated decrease in Services Revenue.
Any such termination would have a material adverse effect on the Company's
business, operating results and financial condition.
Selling and Marketing. Selling and marketing expenses consist primarily of
expenses related to sales and marketing personnel, advertising, promotion, trade
show participation and public relations. Selling and marketing expenses were
$1.3 million for the quarter ended May 31, 1997 compared to $0.6 million for the
quarter ended May 31, 1996, an increase of $0.7 million or 121.9%. Selling and
marketing expenses were $2.1 million for the six month period ended May 31,
1997, compared to $1.1 million for the six month period ended May 31, 1996, an
increase of $1.0 million or 101.0%. This increase resulted primarily from the
Company's strategic shift toward direct sales and expenditures related to
expanding market awareness of the Company's products and services. The Company
anticipates that selling and marketing expenses will increase in the near future
due to the shift in sales and marketing strategy.
Product Development. Product development expenses were $0.3 million for
the quarter ended May 31, 1997 compared to $0.2 million for the quarter ended
May 31, 1996, an increase of $0.1 million or 35.4%. Product development
expenses were $0.6 million for the six month period ended May 31, 1997, compared
to $0.4 million for the six month period ended May 31, 1996, an increase of $0.2
million or 75.7%. This increase resulted primarily from the development of
enhancements to the Company's visual development tools and Release 8.0 of the
Company's Foundation Template. Product development expenses in the three-month
period ended May 31, 1997 and May 31, 1996, and the six month periods ended May
31, 1997 and May 31, 1996, included offsets of $0.1 million, $0.1 million, $0.2
million and $0.2 million, respectively, as a result of the Company's
participation in a Federal Technology Reinvestment Program. This program is
expected to end in the third quarter of 1997.
8
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General and Administrative. General and administrative expenses include
costs of corporate services functions including accounting, human resources and
legal services, as well as the corporate executive staff. General and
administrative expenses were $0.5 million for the quarter ended May 31, 1997
compared to $0.4 million for the quarter ended May 31, 1996 an increase of $0.1
million or 25.1%. This increase is primarily attributable to an increase in
administrative staff and the initiation of goodwill amortization for Krystal,
the French subsidiary acquired in March 1997. General and administrative
expenses were $1.1 million for the six month period ended May 31, 1997, compared
to $0.8 million for the six month period ended May 31, 1996, an increase of $0.3
million or 42.8%. The Company anticipates general and administrative expenses
to increase in the future due to increases in staffing and the use of outside
legal and accounting professionals.
Income Tax Provision. The provision for income taxes was $0.3 for the
quarter ended May 31, 1997 compared to $0.1 for the quarter ended May 31, 1996,
an increase of $0.2. The provision for income taxes for the six months ended
May 31, 1997 was $0.6 million compared to $0.2 million in the comparable period
last year. This increase was attributable to the Company's greater pretax
profit level in the three-month and six month period ended May 31, 1997. The
Company's effective tax rate of 37% for the quarter ended May 31, 1997 was lower
than the effective tax rate of 38% for the quarter ended May 31, 1996, primarily
as a result of increased profits in European jurisdictions with lower tax rates.
Liquidity and Capital Resources
The Company's overall cash and cash equivalents were $12.8 million at May
31, 1997, which is an increase of approximately $3.9 million from $8.4 million
as of November 30, 1996. During the three month period ended May 31, 1997, the
Company financed its operations from available working capital. The Company's
operating activities provided cash of $0.9 million for the six month period
ended May 31, 1996 and used $0.7 million for the six month period ended May 31,
1997. During the six month period ended May 31, 1997, cash flow used by
operating activities reflected an increase in accounts receivable and decreases
in accounts payable, accrued expenses and income taxes payable which were
partially offset by the net income and an increase in deferred income.
Cash used in investing activities totaled $15.5 million during the six
month period ended May 31, 1997 relating primarily to investment in short-term,
investment grade marketable securities with maturities of less than one year.
Cash flow provided from financing activities totaled $20.0 million for the
six month period ended May 31, 1997 relating to the net proceeds from the
initial public offering of the Company's Common Stock.
The Company has a line of credit under a Loan and Security Agreement (the
"Loan Agreement") with Signet Bank (the "Bank") in the aggregate principal
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amount of $3.0 million. As of May 31, 1997, there were no amounts outstanding
under this line of credit. The Company has been in compliance with all
financial and non-financial covenants of the Loan Agreement. In addition, the
Company obtained the Bank's consent in connection with the acquisition of
Milestone and Krystal.
The Company believes its cash balances, cash generated from operations and
borrowings available under its line of credit, will satisfy the Company's
working capital and capital expenditure requirements for at least the next
twelve months. In the longer term, the Company may require additional sources
of liquidity to fund future growth. Such sources of liquidity may include
additional equity offerings or debt
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financings. There are no assurances that such sources of financing will be
available to the Company and if they are, that they will be sufficient to meet
the Company's liquidity needs at such time.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On May 28, 1997, the Company held its annual shareholder's meeting (the
"Annual Meeting"). The business of the Annual Meeting was the election of Class
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I directors to the Company's Board of Directors and the selection of the
Company's independent auditors for fiscal year 1997. Set forth below is the
number of votes cast for, against or withheld, as well as the number of
abstentions, as applicable, as to the foregoing matters.
1. The balloting for the election of Class I Directors of the Company
resulted as follows:
a. Joseph M. Fox:
For: 2,469,426; Abstain: 2,600
Alan B. Salisbury
For: 2,469,426; Abstain: 2,600
II. The proposal submitted to the shareholders to approve and ratify the
selection of Coopers & Lybrand LLP as the Company's independent auditors for
the fiscal year ending November 30, 1997 was adopted by the following vote:
For: 2,467,926; Against: 4,000; Abstain: 100
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Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed herewith:
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Exhibit
Number Exhibit Title
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3.1* Articles of Incorporation
3.2* By-laws
10.1 Consulting Agreement between the Company and WinStar
Telecommunications, Inc., dated as of December 17, 1996.
10.2 License Agreement between the Company and WinStar
Telecommunications, Inc., dated as of February 28, 1997,
as amended by Amendment One to License Agreement, dated
as of February 28, 1997.
10.3 Sales and Purchase Agreement between Template Software
(UK) Limited and British American Financial Services IT
& Group Services Limited, dated May 27, 1997.
11 Statement regarding computation of per share earnings
27 Financial Data Schedule
</TABLE>
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* Incorporated by reference to exhibit of the same number to the Company's
Registration Statement on Form S-1 (Registration No. 333-17063), originally
filed with the Securities and Exchange Commission on November 27, 1996.
(b) Reports on Form 8-K
On July 14, 1997, the Company filed a report on Form 8-K regarding the
acquisition of all of the issued and outstanding equity interests of Milestone,
which owns 34% of the issued and outstanding equity interests of Milestone-
Austria, from Milestone's three owners, Jansen, Dietrich and NeSBIC III, C.V.,
for an aggregate cash purchase price of DM 12,000,000. An additional 10%
interest of Milestone-Austria was acquired from Dietrich and Jansen in exchange
for 90,000 shares of the Company's Common Stock.
The foregoing information is qualified in its entirety by reference to the
complete text of the Form 8-K filed on July 14, 1997.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 15, 1997 TEMPLATE SOFTWARE, INC.
By: /s/ Kimberly E. Osgood
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Kimberly E. Osgood
Chief Financial Officer and
Chief Accounting Officer
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EXHIBIT 10.1
CONSULTING AGREEMENT
This CONSULTING AGREEMENT (this "Agreement"), effective as of the
17/th/ day of December, 1996 (the "Effective Date"), by and between WinStar
Telecommunications, Inc., a Delaware corporation, having a principal place of
business at 7799 Leesburg Pike, Falls Church, VA 22043 (hereinafter "Client"),
and Template Software, Inc., a Virginia Corporation having a principal place of
business at 45365 Vintage Park Plaza, Dulles, VA 20166 (hereinafter
"Consultant").
Article 1
TERM AND TERMINATION
1.1 Term. This Agreement will become effective on the Effective Date
and will continue in effect through the successful completion of the Services
(as defined in Section 3.1 herein) unless this Agreement is terminated earlier
or extended in accordance with its provisions or by any written agreement of the
parties.
1.2 Termination for Cause. In the event of a material breach of this
Agreement by either party, the non-breaching party (reserving cumulatively all
other rights and remedies at law or in equity unless expressly stated herein)
may terminate this Agreement at any time if, after thirty (30) days' prior
written notice, the breaching party fails to correct a material breach of this
Agreement. Notwithstanding the foregoing, Consultant only may terminate this
Agreement in accordance with this Section 1.2 in the event that (i) Client fails
to pay Consultant undisputed amounts under this Agreement for ninety (90) days
from the date such payments are due and owing; or (ii) Client willfully and
intentionally copies or disseminates the Licensed Product(s) (as Licensed
Product(s) is defined in the License Agreement between the parties dated
February 28, 1997) such that Client knowingly infringes Consultant's copyright,
patent, trade mark or service mark with respect to such Licensed Product(s)
Each party agrees to continue performing its obligations under this Agreement
while any dispute is being resolved except to the extent the issue in dispute
precludes performance (dispute over payment shall not be deemed to preclude
performance). In the event that Client terminates the License Agreement in
accordance with the terms thereof, then it immediately may terminate this
Agreement without affording Consultant an opportunity to cure.
1.3 Termination for Convenience. Client may, at its sole option,
terminate this Agreement, or any portion thereof, for convenience and without
cause upon thirty (30) days' advance written notice, without penalty. Upon
receipt of such notice, Consultant shall advise Client of the extent to which
Services have been completed through such date, and collect and deliver to
Client whatever work product then exists in the manner requested by Client.
Consultant shall be paid for all work actually performed through the date of
termination. In the event that a purported termination for cause by Client under
Section 1.2 above is determined by a competent authority not to be properly a
termination for cause, then such termination by Client shall be deemed to be a
termination for convenience as described under this Section 1.3.
1.4 No Further Obligation. Notwithstanding anything to the contrary
in this Agreement, Consultant shall not be obligated to perform Services beyond
December 31, 1997. If, however, the parties mutually agree to have services
performed after such date, then all such services will be deemed Services
(referencing additional Exhibit(s) if applicable) and shall be performed in
accordance with this Agreement.
1.5 Survival. In the event of any termination of this Agreement,
Articles 5, 6, 7, 8, and 10 hereof shall survive and continue in effect.
Article 2
INDEPENDENT CONTRACTOR STATUS
2.1 Intention of Parties. It is the intention of the parties that
Consultant be an independent contractor and not an employee, agent, joint
venturer, or partner of Client. Nothing in this Agreement shall be interpreted
or construed as creating or establishing the relationship of employer and
employee between Client and either Consultant or any employee or agent of
Consultant. Consultant is performing the Services as an independent contractor
and as such has the sole right and obligation to supervise, manage and perform
all work to be performed by its personnel under this Agreement. Consultant is
not an agent of Client and thus has no right or authority to represent Client as
to any matters, except as expressly authorized in this Agreement. Persons who
perform the Services are employees of Consultant and Consultant shall be solely
responsible for payment of compensation to such persons and for any injury to
them in the course of their employment. Consultant shall assume full
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responsibility for payment of all federal, state and local withholding taxes or
contributions imposed or required under unemployment insurance, social security
and income tax laws with respect to such persons. Should Client be required to
pay any amount to a governmental agency for failure to withhold any amount as
may be required by law, Consultant agrees to indemnify Client for any amount so
paid, including interest, penalties and fines.
2.2 Nonexclusive. Consultant shall retain the right to perform work
for others during the term of this Agreement. Client shall retain the right to
cause work of the same or a different kind to be performed by its own personnel
or other contractors during the term of this Agreement. Notwithstanding the
foregoing, Consultant shall provide a Project Team (as described in Section 3.4)
that performs in accordance with this Agreement.
Article 3
SERVICES TO BE PERFORMED BY CONSULTANT AND CONSULTANT PERSONNEL
3.1 Services. Consultant shall perform, for Client or its Affiliates
(as defined in this Section 3.1), the services, tasks and responsibilities as
referenced in this Agreement and described more fully in Exhibit 1 attached
hereto, including implementation services, software development, and strategic
database and architecture consulting, as such services, tasks and
responsibilities may be supplemented, enhanced, modified or replaced, by written
agreement of the parties, during the term of this Agreement (the "Services").
For purposes of this Agreement, Affiliate shall mean, with respect to any
entity, any other entity which owns, is owned by or is under common ownership
with such entity. For the purpose of the preceding sentence, "own" and its
derivatives means, with regard to any entity, the legal, beneficial, or
equitable ownership, directly or indirectly, of fifty percent (50%) or more of
the capital stock (or other ownership interest, if not a corporation) of such
entity ordinarily having voting rights. If any services not specifically
described in this Agreement are required for the proper performance of the
Services, then they shall be deemed to be implied by and included within the
scope of the Services to the same extent and in the same manner as if
specifically described herein.
3.2 Training. As part of the Services, Consultant shall provide
Client or its designees with twenty (20) class days of training, free of charge,
in Consultant's regularly scheduled training classes, provided that such
training is utilized by Client or its designees on or before August 30, 1997.
Client and Consultant shall attempt to develop appropriate administrative
procedures for performance of work at Client's site.
3.3 Reporting. Client will advise Consultant of the individuals to
whom Consultant's manager will report progress on day-to-day work. Client and
Consultant shall attempt to develop appropriate administrative procedures for
performance of work at Client's site.
3.4 Consultant Staff. Consultant shall assign an individual who will
serve as Client's primary point of contact (the "Consultant Project Manager") on
all aspects of this Agreement, including the Services. The Consultant Project
Manager shall be available on-site at Client's premises during such periods as
required by Client. The Consultant Project Manager shall oversee and manage the
performance of the dedicated Consultant staff (the "Project Team"), performing
the Services for Client under this Agreement.
3.5 Personnel Qualifications. The personnel that Consultant assigns
to perform the Services shall be properly educated, trained, and in sufficient
numbers to properly perform the Services in accordance with this Agreement.
3.6 Retention. Consultant agrees that it is in the best interest of
both Consultant and Client to keep the turnover rate of Consultant personnel
performing the Services at a reasonably low level. Accordingly, if Client
determines that the turnover rate of Consultant personnel is excessive and so
notifies Consultant, then Consultant shall provide data concerning its turnover
rate and shall meet with Client to discuss the reasons for the turnover rate.
Notwithstanding any transfer or turnover of personnel, Consultant remains
obligated to perform the Services without degradation and in accordance with
this Agreement.
3.7 Replacement. In the event that Client determines in good faith
that specific Consultant personnel performing Services hereunder are not acting
in the best interests of Client, then Client shall give Consultant notice to
that effect. After receipt of such notice, Consultant shall immediately
investigate the matters stated in such notice, discuss its findings with Client
and resolve any problems with the personnel at issue. If, following such period
(which shall not exceed five (5) business days) Client requests replacement of
such personnel, then Consultant shall replace the such person(s) with a
person(s) of equal and suitable ability and qualifications and
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shall not charge Client for any required time taken to advise or educate such
person with respect to Client's operations, business requirements or
environment.
3.8 Place of Work. Consultant's personnel will perform all work for
Client primarily at Consultant's premises except when such projects or tasks
may, as mutually determined, be performed at Client's site. When Consultant
performs work at Client's site, Client agrees to provide reasonable working
space to perform the Services. Consultant shall use Client facilities solely to
provide the Services and shall comply with Client's policies and procedures
regarding access and use of such facilities, including security and safety.
When Client facilities are no longer required for performance of the Services
(if in fact they are ever required), Consultant shall return the facilities to
Client in substantially the same condition as when Consultant began using them,
subject to reasonable wear and tear. Client facilities shall be made available
to Consultant on an "AS IS, WHERE IS" basis. Client recognizes that there may
be a need to train Consultant's personnel in the unique procedures used at
Client's location. When Client determines that such training is necessary,
Client shall, unless otherwise agreed in writing, pay Consultant for its
personnel's training time.
Article 4
COMPENSATION
4.1 Rates. The Services shall be provided by Consultant to Client at
the hourly rates set forth in Exhibit 1.
4.2 Invoices. Consultant shall submit written invoices to Client
monthly for the Services performed and any expenses expressly set forth in this
Agreement. Each invoice will provide a breakdown and distribution of charges by
name of individual, specific Services performed and expense items, (if such
expenses are set forth in this Agreement) incurred
4.3 Date for Payment of Compensation. All undisputed invoices shall
become due and payable within thirty (30) days of receipt of such invoice by
Client.
4.4 Expenses. Except as otherwise expressly set forth in this
Agreement, Consultant shall be responsible for all costs and expenses incident
to the performance of services for Client, including all costs incurred by
Consultant to do business.
4.5 Taxes. The fees for Services do not include local, state, or
federal sales, use, excise or similar taxes or duties, and such taxes and duties
shall be the sole responsibility of the Client. In no event shall the Client be
responsible for taxes based on the income or receipts of the Consultant.
4.6 Set-Off. With respect to amounts owed to Client by Consultant, if
any, Client shall have the right, upon written notice to Consultant, to set-off
that amount as a credit against charges otherwise payable to Consultant.
4.7 Disputed Amounts. Client may withhold payment of disputed
invoices, or of any disputed charge or amount on any invoice, presented by
Consultant so long as such amount is disputed in good faith. In order for an
amount to be deemed disputed in good faith under this Section 4.8, Client must
present written notification of any such good faith dispute within thirty (30)
days of receipt of the applicable invoice involving such dispute, or the
particular dispute will be deemed undisputed. Client and Consultant shall
negotiate in good faith with respect to any such disputed amounts and shall
attempt to settle the dispute within thirty (30) days.
Article 5
TREATMENT OF CONSULTANT'S PERSONNEL
5.1 Compensation of Consultant's Personnel. Consultant shall bear
sole responsibility for payment of compensation to its personnel. Consultant
shall pay and report, for all personnel assigned to Client's work, federal and
state income tax withholding, social security taxes, and unemployment insurance
applicable to such personnel as employees of Consultant. Consultant shall bear
sole responsibility for any health or disability insurance, retirement benefits,
or other welfare or pension benefits, if any, to which such personnel may be
entitled. Consultant agrees to defend, indemnify, and hold harmless Client,
Client's officers, directors, employees and
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agents, and the administrators of Client's benefit plans, from and against any
claims, liabilities, or expenses relating to such compensation, tax, insurance,
or benefit matters; provided that Client shall (1) promptly notify Consultant of
each such claim when and as it comes to Client's attention; (2) cooperate
reasonably with Consultant in the defense and resolution of such claim; and (3)
not settle or otherwise dispose of such claim without Consultant's prior written
consent, with such consent not to be unreasonably withheld.
5.2 Workers' Compensation. Notwithstanding any other workers'
compensation or insurance policies maintained by Client, Consultant shall
procure and maintain workers' compensation coverage sufficient to meet the
statutory requirements of every state in which Consultant's personnel are
engaged in Services.
5.3 Consultant's Agreements With Personnel. Consultant shall obtain
and maintain in effect written agreements with each of its personnel who perform
the Services or otherwise participate in any of Client's work under this
Agreement. Such agreements shall contain terms sufficient for Consultant to
require its personnel to comply with any non-disclosure agreement between Client
and Consultant.
Article 6
INTELLECTUAL PROPERTY RIGHTS
6.1 Confidentiality. Each party shall preserve as strictly
confidential and proprietary all information and material of the other, whether
or not marked as confidential, including but not limited to, Client strategic
plans, personnel files, customer (or potential customer) lists or information,
Client data, and any third party proprietary and confidential information,
materials or other documentation provided to the other party in connection with
this Agreement ("Confidential Information"). Each party shall hold the
Confidential Information in confidence, with the same degree of care that it
applies to its own confidential information of like importance, and never less
than reasonable care. Each party agrees to preserve any copyright, trademark
and other proprietary rights notices on all Confidential Information provided by
the other party and promptly notify the other party of any disclosure of
Confidential Information that is not in accordance with this Agreement. Each
party further agrees that in the event of a breach or threatened breach of this
Section 6.1, that the non-breaching party may be irreparably harmed such that
monetary damages will not adequately compensate for its injuries. In the event
of any such breach, the non-breaching party shall be entitled, in addition to
any rights or remedies it may have at law or in equity, to temporary and
permanent injunctive relief issued by any court of competent jurisdiction
enjoining and restraining the breaching party from continuing such breach and
the payment by the breaching party of all costs associated with any litigation,
including attorneys' fees. Neither party shall have any confidentiality
obligation to the other under this Agreement to the extent that such party can
show that the information: (i) was previously known by it at the time of
disclosure without obligation of confidence, or without breach of this
Agreement; (ii) was publicly disclosed through no wrongful act of the party
making the disclosure; (iii) was received from a third party having the right to
lawfully possess and disclose same and without breach of this Agreement, (iv)
was independently developed by the disclosing party without access or reference
to the Confidential Information, (v) was required by law, regulation or
governmental authority to be disclosed or (vi) was approved for release by prior
written authorization of the non-disclosing party.
6.2 Ownership of Work Product. All copyrights, patents, trade
secrets, and other intellectual property and proprietary rights (including any
ideas, concepts, techniques, inventions, processes, or any other works)
developed or created by Consultant or its personnel as part of the Services
(collectively, the "Work Product") shall belong exclusively to Client and shall,
be deemed a "work made for hire" for Client within the meaning of Title 17 of
the United States Code and the property of Client. To the extent that any such
work is not deemed a "work made for hire" and Client property by operation of
law, Consultant automatically and irrevocably assigns, and shall cause its
personnel automatically to assign, at the time of creation of the Work Product,
without any requirement of further consideration, any right, title, or interest
it or they may have in such Work Product, including any copyrights, patents,
trademarks or other intellectual property and proprietary rights pertaining
thereto. Upon request of Client, Consultant shall take such further actions, and
shall cause its personnel to take such further actions, including execution and
delivery of instruments of conveyance, as may be appropriate to give full and
proper effect to such assignment. Work Product shall not include any Licensed
Product (as defined in the License Agreement between the parties dated February
28, 1997).
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6.3 Residual Rights. Notwithstanding anything to the contrary
herein, Consultant and its personnel shall be free to use and employ its and
their general skills, know-how, and expertise, and to use, disclose, and employ
any generalized ideas, concepts, know-how, methods, techniques, or skills gained
or learned during the course of any assignment, so long as it or they acquire
and apply such information without disclosure of any Confidential Information or
proprietary information of Client and without any unauthorized use or disclosure
of Work Product.
Article 7
HIRING OF CONSULTANT'S PERSONNEL
7.1 No Hiring Without Prior Consent. Without the prior written
consent of the other party, neither party shall directly solicit any personnel
of the other party until one (1) year after the completion of the Services.
Article 8
LIMITATIONS
8.1 Disclaimer. OTHER THAN THE EXPRESS WARRANTIES CONTAINED IN THIS
AGREEMENT, CONSULTANT DOES NOT MAKE ANY WARRANTY, EXPRESS OR IMPLIED, WITH
RESPECT TO THE SERVICES RENDERED BY ITS PERSONNEL OR THE RESULTS OBTAINED FROM
THEIR WORK, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL EITHER
PARTY BE LIABLE FOR LOST PROFITS OR BUSINESS, CONSEQUENTIAL, INCIDENTAL,
PUNITIVE, SPECIAL, OR INDIRECT DAMAGES, REGARDLESS OF WHETHER IT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8.2 Total Liability. Neither party's liability for damages under this
Agreement, with respect to Services performed pursuant to Exhibit 1 attached
hereto, shall exceed the greater of one million U.S. dollars ($1,000,000) or the
total amount paid for Services, regardless of the form of action . If the
parties mutually agree in writing that future services will be performed for a
firm, fixed price, then the mutual limitation of liability, as described in this
Section 8.2, shall be the total amount payable for such services. The foregoing
limitations shall not apply to damages that are the subject of indemnification
or are occasioned by the willful misconduct, gross negligence or wrongful
termination of a party.
8.3 Force Majeure. In the event performance of this Agreement is
prevented, restricted, or interfered with by reason of acts of God or of the
public enemy, acts of the Government in its sovereign capacity, fires, floods,
epidemic, strikes, picketing or boycotts, or any other circumstances beyond the
reasonable control and without the fault or negligence of the party affected,
the party so affected, upon giving prompt notice to the other party of the
circumstances causing its delay or failure to perform and of its plans and
efforts to implement a work-around solution, shall be excused from such
performance on a day-to-day basis to the extent of such prevention, restriction
or interference (and the other party shall likewise be excused from performance
of its obligations on a day-to-day basis until the delay, restriction or
interference has ceased), provided, however, that the party so affected shall
use its reasonable efforts to avoid or remove such causes of nonperformance and
both parties shall proceed whenever such causes are removed or cease. In the
event such delay shall extend for a period which substantially and adversely
impacts the Services, and in no event more than fourteen (14) consecutive days,
then Client may terminate this Agreement without liability upon written notice
to Consultant.
Article 9
WARRANTY
9.1 Consultant represents, covenants and warrants to Client that: (a)
Consultant is a corporation, duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia; (b) Consultant has full
power and authority to execute, deliver and perform under his Agreement; (c)
this Agreement has been duly authorized, executed and delivered by Consultant
and is the legal, valid and binding obligation of Consultant in accordance with
its terms; (d) Consultant will perform the Services in a professional and
workmanlike manner with qualified and adequate numbers of personnel and in
accordance with industry standards and practice ; (e) the Services shall not be
performed in violation of any applicable law, rule or regulation, and Consultant
shall have
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obtained all permits necessary (if any) to comply with such laws, rules and
regulations; (f) all deliverables shall be the original works of Consultant or
Consultant shall have the necessary rights, power and authority to deliver such
deliverables; and neither any software, deliverables or any other materials
provided to Client, or any part of the foregoing, will infringe any patent,
copyright, trademark, service mark, trade secret or other proprietary right of a
third party. Consultant further represents, warrants and covenants that it will
not introduce: (i) any coded instructions, routine, or other method
intentionally included by Consultant to enable any person or computer system,
including authorized or unauthorized users and terminals, to bypass any log-in
and any security feature of any Licensed Product(s), or the computer systems on
which the Licensed Product(s) is, or are, installed; (ii) any code intentionally
included by Consultant that, when activated in accordance with a predetermined
method, date or event, causes any Licensed Product(s) to cease to operate, to
operate in a degraded manner, to damage or destroy data or code, or otherwise
deleteriously affect the functioning of such Licensed Product(s) (as defined in
the License Agreement between the parties dated February 28, 1997), other
programs or the computer system on which the Licensed Product(s) is installed,
or with which the computer system is in communication; or (iii) any code or
instructions intentionally included by Consultant to cause the Licensed
Product(s), other software, or the computer systems on which the Licensed
Product(s) is installed, to perform an unauthorized function or to operate in an
unauthorized manner.
Article 10
INDEMNITIES
10.1 Consultant agrees to indemnify, defend at its expense and hold
harmless Client and its Affiliates, officers, directors, employees, agents,
successors and assigns from any and all claims, actions, damages, liabilities,
costs and expenses, including reasonable attorney's fees and expenses, arising
from or related to the following: (i) any breach of any representation,
warranty or covenant made by Consultant under Article 9 of this Agreement; (ii)
any breach of the confidentiality obligations imposed on Consultant by Section
6.1 of this Agreement; and ; (iii) any third party claim of misappropriation of
Confidential Information alleged to have occurred because of Client's (or its
designated representative's) use of the software, documentation and/or other
materials provided by Consultant.
Article 11
GENERAL PROVISIONS
11.1 Notices. Any notice required or permitted to be made or given
by either party hereto pursuant to this Agreement shall be in writing and shall
be deemed to have been duly given: (i) three days after the date of mailing if
mailed and to be delivered within the U.S. by registered or certified mail,
postage pre-paid, with return receipt requested; (ii) when delivered if
delivered personally; (iii) when transmitted if sent by facsimile, provided a
confirmation of transmission is produced by the sending machine and a copy of
such facsimile is promptly sent by another means specified in this Section 11.1;
or (iv) when delivered, if sent by express courier service, with a reliable
mechanism for tracking such delivery. In each case, such notice shall be sent
to the other party at the address set forth below or at such other address as
such party shall have specified in a notice given in accordance with this
paragraph:
In the case of Consultant:
Template Software, Inc.
45635 Vintage Park Plaza
Dulles, Virginia 20166
Attention: Ms. Kimberly E. Osgood
Chief Financial Officer
Fax: (703) 318-8325
In the case of Client:
WinStar Telecommunications, Inc.
7799 Leesburg Pike, 7/th/ Floor
Falls Church, Virginia 22043
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Attention: Mr. Ronald Roades
Director of Customer Care and Systems Integration
Fax: (703) 394-0772
11.2 No Discrimination. Consultant agrees that in the performance of
this Agreement it will not discriminate or permit discrimination against any
person or group of persons on the grounds of sex, race, color, religion, or
natural origin in any manner prohibited by the laws of the United States.
11.3 Client Insurance. To the extent that Consultant's personnel may
perform work at Client's premises, Client shall maintain comprehensive general
liability insurance, including broad form property damage coverage, with limits
of at least $1 million combined single limit for personal injury and property
damage for each occurrence.
11.4 Consultant Insurance. While Consultant is performing the
Services, Consultant shall, at its own cost and expense, obtain and maintain in
full force and effect, the following insurance coverage: (a) workers'
compensation and disability insurance with minimum limits of $1,000,000; (b)
automobile liability insurance with minimum limits of $1,000,000 for bodily
injury and property damage; (c) general comprehensive liability insurance with a
minimum limit of $1,000,000 ; and (d) umbrella coverage with a minimum limit of
$4,000,000.
11.5 Entire Agreement of the Parties. This Agreement is the entire
agreement between the parties with respect to the subject matter herein and
supersedes any and all agreements, either oral or written, between the parties
hereto with respect to the Services, including that certain Memorandum of
Understanding between the parties dated February 28, 1997, and contains all the
covenants and agreements between the parties with respect to the rendering of
such Services. Each party to this agreement acknowledges that no
representations, inducements, promises, or agreements, orally or otherwise, have
been made by any party, or anyone acting on behalf of any party, that are not
embodied herein, and that no other agreement, statement, or promise not
contained in this Agreement shall be valid or binding unless properly modified.
Any modification of this Agreement will be effective only if it is in writing
signed by both parties.
11.6 Partial Invalidity. If any provision in this Agreement is held
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions will nevertheless continue in full force without being
impaired or invalidated in any way.
11.7 Parties in Interest. This Agreement is enforceable only by
Consultant and Client or its Affiliates. The terms of this Agreement are not a
contract or assurance regarding compensation, continued employment, or benefit
of any kind to any of Consultant's personnel assigned to Client's work, or any
beneficiary of any such personnel, and no such personnel, or any beneficiary
thereof, shall be a third-party beneficiary under or pursuant to the terms of
this Agreement.
11.8 Assignment. This Agreement shall be binding on the parties
hereto and their respective successors and assigns. Neither party may, or shall
have the power to, assign this Agreement without prior written consent of the
other, except that Client may assign its rights and obligations under this
Agreement without approval of Consultant (and Consultant may assign its rights
and obligations under this Agreement upon written consent of Client, which
consent will not be unreasonably withheld) to an entity that acquires all or
substantially all of the assets of Client or Consultant or to any parent,
subsidiary or affiliate or successor in a merger or acquisition of Client or
Consultant; provided that in no event shall such assignment relieve either party
from its respective obligations under this Agreement.
11.9 Right to Audit. Consultant shall make available to Client, as
may be requested upon reasonable notification, records supporting Consultant
charges, submitted expenses and other information, in order to ensure that all
amounts charged to Client hereunder are proper and accurate.
11.10 Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the Commonwealth of Virginia without reference to
conflicts of laws principles.
11.11 Successors. This Agreement shall inure to the benefit of, and
be binding upon, Consultant and Client, their successors and assigns.
[SIGNATURE PAGE FOLLOWS]
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CONSULTANT:
Template Software, Inc.
By: /s/ Kimberly E. Osgood
----------------------
(Signature)
Kimberly Osgood, Chief Financial Officer
- -------------------------------------------
Typed Name Title
CLIENT:
WinStar Telecommunications, Inc.
- --------------------------------
By:/s/ M. Jaime Bullen
--------------------
(Signature)
M. Jamie Bullen, Chief Information Officer
- ---------------------------------------------
Typed Name Title
By: /s/ Arthur E. Gelven
--------------------
(Signature)
Arthur E. Gelven, Director -- Procurement and Material Management
- --------------------------------------------------------------------
Typed Name Title
<PAGE>
EXHIBIT 10.2
LICENSE AGREEMENT
License # 01-020-97-00
----------------
AGREEMENT made this 28th day of February, 1997, between Template Software, Inc.,
a Virginia corporation having its principal place of business at 45365 Vintage
Park Plaza, Suite 100, Dulles, Virginia 20166, ("TEMPLATE SOFTWARE") and
Winstar Telecommunications, Inc. having its principal place of business at 7799
Leesburg Pike, Suite 401 South, Tysons Corner, VA 22043 ("CUSTOMER").
TEMPLATE SOFTWARE has certain proprietary rights to computer software programs
and related documentation ("Licensed Product(s)") which are named in the license
schedule(s) ("License Schedule(s)") which are, from time to time, hereafter
executed by TEMPLATE SOFTWARE and CUSTOMER, and incorporated herein;
CUSTOMER desires to obtain from TEMPLATE SOFTWARE a non-exclusive and non-
transferable license to use the Licensed Product(s) solely for the regular
conduct of CUSTOMER's business; and CUSTOMER recognizes the proprietary rights
of TEMPLATE SOFTWARE in and to the Licensed Product(s).
In consideration of the above premises and the mutual covenants and conditions
contained herein, TEMPLATE SOFTWARE and CUSTOMER covenant and agree as follows:
1. License. TEMPLATE SOFTWARE hereby grants to CUSTOMER, and CUSTOMER hereby
accepts under the terms and conditions set forth in this Agreement, a non-
exclusive and non-transferable license to use the Licensed Product(s). All
references to "this Agreement" shall refer to this License Agreement as
modified and/or supplemented by the License Schedule(s).
2. Term of Agreement. The term of this Agreement will commence upon the date
of its execution and the execution of the respective License Schedule(s),
and remain in force until terminated by the mutual written consent of
TEMPLATE SOFTWARE and CUSTOMER or otherwise as provided under Article 12,
Default.
3. Use of Licensed Product(s).
a. CUSTOMER is authorized to use the Licensed Product(s) for CUSTOMER's
internal operation only (and not for any commercial purpose), to access
the Licensed Product(s) only from the location defined in the respective
License Schedule ("Designated Location"), to install the Licensed
Product(s) only on the computer platforms defined in the respective
License Schedule(s) ("Designated Computer Platform") and to use the
Licensed Product(s) only by the number of authorized users specified in
the respective License Schedule(s) ("# Users").
b. In the event CUSTOMER desires to change the Designated Location and/or
Designated Computer Platform found within any License Schedule, CUSTOMER
will request the prior written approval of TEMPLATE SOFTWARE, which
approval shall not be unreasonably withheld subject to the United States
Department of Commerce Export Restrictions and licensing requirements.
c. TEMPLATE SOFTWARE reserves the right to audit CUSTOMER for, or require
CUSTOMER to certify as to, the number of computer platforms on which
CUSTOMER has the "Licensed Products" installed and the number of Users
of the Licensed Products, no more frequently than every six months upon
five days written notice.
d. CUSTOMER is authorized to make up to 2 back-up copies of the tapes or
disks provided they are used only for back-up purposes, and CUSTOMER
keeps possession of the back-up copies. All information appearing on the
original tapes or disks including the copyright notice must be copied
onto the back-up labels.
e. CUSTOMER may not alter, decompile, disassemble, or reverse engineer the
Licensed Product(s).
4. Assignment of Use. CUSTOMER's rights under this Agreement to the Licensed
Product(s) may not be assigned, licensed or otherwise transferred, either
voluntarily, by operation of law or otherwise, without the prior written
approval of TEMPLATE SOFTWARE.
5. License Fee.
a. In consideration for the license granted, CUSTOMER will pay to TEMPLATE
SOFTWARE a license fee ("License Fee") in the amount (and under the
payment terms) specified in the respective License Schedule(s).
b. The License Fee does not include local, state or federal sales, use,
excise, personal property or other similar taxes or duties, and any such
taxes shall be the sole responsibility of CUSTOMER.
c. The License Fee does not include shipping and handling costs and any
such costs shall be assumed and paid for by the CUSTOMER. Shipping and
Handling costs shall be pursuant to the prices and under the terms in
TEMPLATE SOFTWARE's then current Commercial Price List.
6. Limited Publicity. CUSTOMER agrees that TEMPLATE SOFTWARE may identify
CUSTOMER in a list of users of the Licensed Product(s) in media such as
publicity releases, marketing literature and advertising. TEMPLATE SOFTWARE
will refrain from the use of any language which implies endorsement.
7. Warranty of Performance.
a. TEMPLATE SOFTWARE disclaims any warranty that the Licensed Product will
be free from error or will meet CUSTOMER's specific requirements.
CUSTOMER assumes complete responsibility for decisions made or actions
taken based on information obtained by using the Licensed Product. Any
statements made concerning the utility of the Licensed Product shall not
be construed as express or implied warranties.
b. TEMPLATE SOFTWARE DISCLAIMS ALL WARRANTIES, EXPRESS AND IMPLIED
INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
c. No employee, agent or representative of TEMPLATE SOFTWARE has the
authority to bind TEMPLATE SOFTWARE to any oral representation or
warranty concerning the Licensed Product(s). Any written representation
or warranty not expressly contained in this Agreement shall not be
enforceable by CUSTOMER.
8. Copyright and Patent Indemnity. TEMPLATE SOFTWARE warrants that it has the
right to grant a license to the Licensed Product(s). TEMPLATE SOFTWARE also
assures CUSTOMER that, to the best of TEMPLATE SOFTWARE's knowledge, the
Licensed Product(s) do not infringe any patent, copyright or trade secret.
In the event any legal proceedings are brought against the CUSTOMER by any
third party claiming an infringement of a patent, copyright, or trade
secret based on CUSTOMER's use of the Licensed Product(s), TEMPLATE
SOFTWARE agrees to defend at TEMPLATE SOFTWARE's own expense any such legal
proceedings relating to such claim or claims and to hold CUSTOMER harmless
from any damages incurred or awarded as the result of settlement or
judgment against the CUSTOMER, provided CUSTOMER gives TEMPLATE SOFTWARE
prompt, written notice within 30 days of any such claim or of the
institution of any such claims against CUSTOMER, and further CUSTOMER
cooperates completely with TEMPLATE SOFTWARE, at TEMPLATE SOFTWARE's
option, to settle or defend such claims.
<PAGE>
2
Template Software License Agreement
9. Trade Secret, Security and Confidentiality.
a. CUSTOMER acknowledges and agrees that the Licensed Product(s) are
TEMPLATE SOFTWARE's confidential proprietary information and trade
secret whether or not any portion thereof may be validly copyrighted or
patented, and that CUSTOMER shall have no right, title or interest
therein, except as expressly set forth in this Agreement.
b. CUSTOMER will take reasonable precautions to maintain the
confidentiality of the Licensed Product(s), but not less than employed
to protect its own proprietary information.
c. The obligations and agreements set forth in this Article 9 shall survive
termination, for whatever reason, of this Agreement.
10. Maintenance Services. TEMPLATE SOFTWARE agrees to provide maintenance
services ("Maintenance Services") for the period of time and at the prices
stated in the respective License Schedule(s). Maintenance Services include
all new releases of the Licensed Product(s) and access by telephone to
TEMPLATE SOFTWARE's error correction services. TEMPLATE SOFTWARE will
respond to CUSTOMER requests for service in the most expeditious manner
possible and will use reasonable commercial efforts to correct or provide a
workaround for any error reported by CUSTOMER which is replicatable by
TEMPLATE SOFTWARE. In the event TEMPLATE SOFTWARE reasonably finds that the
reported error is not in the Licensed Product(s), or that the error has
resulted from the negligence or modification of the CUSTOMER, the CUSTOMER
will be billed for reasonable travel and living costs incurred by TEMPLATE
SOFTWARE plus support fees at prevailing rates.
11. Liability. Except as provided in Article 8 above, TEMPLATE SOFTWARE shall
in no event be liable for loss of profit, goodwill or other special or
consequential damages suffered by CUSTOMER as a result of CUSTOMER's use of
the Licensed Product(s) even if TEMPLATE SOFTWARE has been advised of such
damages.
12. Default
a. Failure by TEMPLATE SOFTWARE or CUSTOMER to comply with any term or
condition under this Agreement, or any other default by TEMPLATE
SOFTWARE or CUSTOMER, shall entitle the other party to give the party in
default written notice requiring it to cure such default. If the party
in default has not cured such default within 30 days of such notice, the
notifying party shall be entitled, in addition to any other rights it
may have under this Agreement or otherwise under law, to immediately
terminate this Agreement by written notice to the party in default. Any
subsequent failure by TEMPLATE SOFTWARE or CUSTOMER to comply with any
term or condition under this Agreement shall entitle the other party to
terminate this Agreement immediately with written notification to the
party in default.
b. The right of either party to terminate this Agreement hereunder shall
not be affected in any way by its waiver of or failure to take action
with respect to any previous default.
c. Upon the termination of this Agreement for any reason, the Licensed
Product(s) and any copies thereof shall be destroyed by the CUSTOMER or
returned to TEMPLATE SOFTWARE, and CUSTOMER shall deliver a
certification by a duly authorized officer of CUSTOMER stating to
TEMPLATE SOFTWARE that CUSTOMER no longer has any right to use the
Licensed Product(s) and that the original and all copies of the Licensed
Product(s) have been destroyed or returned to TEMPLATE SOFTWARE.
d. TEMPLATE SOFTWARE has deposited and maintains with an escrow agent a
current copy of the source code of the Licensed Product(s), under which
Customer has specific rights to source code in the event TEMPLATE
SOFTWARE suspends or ceases to carry on regular business provided
TEMPLATE SOFTWARE has current maintenance obligations hereunder. A copy
of the escrow agreement can be provided upon CUSTOMER's written request.
13. Entire Agreement and Amendments
a. This Agreement contains all the agreements and understandings between
the parties hereto with respect to the Licensed Product(s), and no oral
agreements or written correspondence shall be held to affect the
provisions hereof. All subsequent changes, amendments and modifications,
to be valid, must be by written instrument executed by authorized
representatives of TEMPLATE SOFTWARE and CUSTOMER.
b. If any one or more provisions of this Agreement are finally adjudicated
to be unlawful or unenforceable by a court of competent jurisdiction,
then this Agreement shall be construed as if such unlawful provisions
had not been contained herein.
c. This Agreement shall be governed by and construed in accordance with the
laws of the State of Virginia.
14. Construction.
a. A waiver of any breach or default under this Agreement shall not be a
waiver of any other or subsequent breach or default. Failure or delay by
either party to enforce compliance with any term or condition of this
Agreement shall not constitute a waiver of such term or condition.
b. Headings preceding the text of Articles are inserted solely for
convenience of reference and shall not constitute a part of this
Agreement, nor shall they affect the meaning, construction,
interpretation or effect of this Agreement.
c. This Agreement shall be binding upon, and shall inure to the benefit of,
the parties to this Agreement and their respective successors and
assigns.
15. Service of Notice. No notice, consent, waiver or other communication
required or permitted to be sent under this Agreement shall be effective
unless the same is in writing and is delivered by registered or certified
mail, return receipt requested, first-class postage pre-paid, to the
address of the party first set forth in this Agreement. Such notices, if
sent by registered or certified mail, shall be deemed to have been given at
the time of mailing.
TEMPLATE SOFTWARE and CUSTOMER, by their duly authorized officers, have signed
and sealed this Agreement on the day and in the year herein above first written.
TEMPLATE SOFTWARE CUSTOMER:
/s/ Kimberly E. Osgood /s/ Arthur E. Gelven
- ---------------------------- ---------------------------------
Signature Signature
Kimberly Osgood Arthur E. Gelven
- ---------------------------- ---------------------------------
Name Name
Chief Financial Officer Director - Procurement and Material Management
- ---------------------------- ------------------------------------------------
Title Title
<PAGE>
Privileged and Confidential
AMENDMENT ONE TO LICENSE AGREEMENT BETWEEN TEMPLATE SOFTWARE, INC.
AND WINSTAR TELECOMMUNICATIONS, INC.
Notwithstanding anything to the contrary, this document ("Amendment One") amends
and takes the place of the License Agreement with the Effective Date of February
28, 1997 (the "Agreement"), between Template Software, Inc. ("TEMPLATE
SOFTWARE") and WinStar Telecommunications, Inc. ("CUSTOMER") as set forth below:
1. In the second paragraph from the top, after the word "documentation",
delete the words "(Licensed Product(s))" and after the word "which",
replace the word "are" with "shall be attached hereto and may be" and then
delete the word "hereafter". In the same paragraph, after the word
"CUSTOMER", add the phrase "upon written mutual agreement of the parties".
In the same paragraph, add the words "shall be" before the words
"incorporated herein".
2. Replace the third paragraph from the top in its entirety with the following:
"CUSTOMER desires to obtain from TEMPLATE SOFTWARE, and TEMPLATE SOFTWARE
represents it is able and willing to deliver to CUSTOMER, a license to use
the Licensed Product(s) (as defined below) according to the terms and
conditions of this Agreement".
3. In the first line of Section 1, delete the phrase ", and CUSTOMER hereby
accepts". In the second line of Section 1, after the word "non-transferable"
add the words ", irrevocable, perpetual, fully paid-up, ". In the same
second line of the same Section 1, after the words "use the", delete the
words "Licensed Product(s)" and replace with the following: "software
described in the License Schedule(s) (License Schedule One is attached
hereto), including any tutorials, development tools and documentation
related thereto (collectively, the "Licensed Product(s)"). Delete the last
sentence of Section 1 in its entirety.
4. In Section 2, replace the words "the date of its execution and the execution
of the respective License Schedule(s) with the words "Effective Date". At
the end of Section 2, add the following: "Notwithstanding any termination as
described in Section 12, in no event shall CUSTOMER lose any of its license
rights with respect to the Licensed Product(s)".
5. In the first line of Section 3.a., after the first word "CUSTOMER", delete
the word "is" and add the words "and CUSTOMER's Affiliates (as defined
below) and agents (but only with respect to activities performed relating to
CUSTOMER) are". In the first line of Section 3.a., after the word
"CUSTOMER's", add the words "or CUSTOMER's Affiliates and agents (but only
with respect to activities performed relating to CUSTOMER)". In the first
line of Section 3.a., delete the words "(and not for any commercial
purpose)" and put a comma after the word "only". In the second line of
Section 3.a., before the word "computer" add the words "number of". At the
end of Section 3.a., add the following: "TEMPLATE SOFTWARE agrees to grant
the same rights to the Licensed Product(s), as are described in this
Agreement, to additional # Users at the fees described in Licensed
Schedule(s). For the purposes of this Agreement, "Affiliates" shall mean,
with respect to any entity, any other entity which owns, is owned by or is
under common ownership with such entity. For the purpose of the preceding
sentence, "own" and its derivatives means, with regard to any entity, the
legal, beneficial, or equitable ownership, directly or indirectly, of fifty
percent (50%) or more of the capital stock (or other ownership interest, if
not a corporation) of such entity ordinarily having voting rights."
6. Add the following at the end of Section 3.b. "Without changing the scope of
the licenses granted hereby as set forth in this Section 3, CUSTOMER shall
have the right to use the Licensed Product(s): (i) for backup and disaster
recovery purposes; (ii) to allow CUSTOMER to utilize facilities management
or outsourcing services at a third party data center; and (iii) for purposes
of parallel
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testing when transferring or using the Licensed Product(s) on new or
additional hardware. Additional fees, if any, that may be incurred on
account of such use will be set forth in the License Schedule(s) attached
hereto."
7. In the second line of Section 3.c., replace the words "six months" with the
word "year". At the end of Section 3.c., add the following: "TEMPLATE
SOFTWARE agrees that during such audit it shall act reasonably and not
unreasonably disrupt CUSTOMER's business activities and shall comply with
all CUSTOMER policies, procedures and confidentiality provisions.".
8. Intentionally omitted
9. Add a new Section 3.f. that states the following: "TEMPLATE SOFTWARE agrees
that CUSTOMER shall have the ongoing right to convert the scope of use of
the Licensed Product(s), or any part thereof, from the current scope
identified in Section 3.a. herein, to a server based license that will allow
CUSTOMER to use the Licensed Product(s) on one or more servers, for back-up,
disaster recovery or any other purpose (without being limited by the number
of users, number of applications, hardware platform, network configuration,
physical location of the Licensed Product(s) or similar criteria) ("Server
Based"), in accordance with Section 3 of the License Schedule attached
hereto."
10. After Section 3, add a new Section entitled "New Section" that states the
following:
"New Section. Acceptance
a. TEMPLATE SOFTWARE represents that each Licensed Product(s), as set
forth in the License Schedule(s): (i) conforms to the specifications and
documentation included in the Licensed Product(s) and otherwise with the
terms of this Agreement and will operate with other Licensed Product(s) in
accordance with this paragraph a; (ii) meets or exceeds (or will meet or
exceed in the case of 7.g. and 7.h.) the warranties set forth in Section 7
of this Agreement; (iii) contains no material errors or defects; (iv)
operates in accordance with (i)-(iii) above for the desktop and server
environments, for the relational database environment, and for the server
environment, as such environments are described in the License and Services
Schedule(s); and (v) will meet such other specific criteria as the parties
may mutually develop and agree upon in writing (with (i)-(v) above
collectively defined as the "Acceptance Criteria").
b. TEMPLATE SOFTWARE shall certify, in a signed writing to CUSTOMER, that
each individual Licensed Product(s), as set forth in the License Schedule(s)
(including, but not limited to, a separate certification for development and
run-time licenses), meets with the Acceptance Criteria (the "Acceptance").
The foregoing is the sole manner in which Acceptance may occur. Upon
Acceptance, the License Fee (as defined in Section 5.a. herein) for the
applicable Licensed Product(s) shall be due and owing by CUSTOMER in the
amount set forth in the License Schedule(s). In the event that a run-time
version of a particular Licensed Product(s) does not meet Acceptance but a
development version of the Licensed Product(s) previously met with
Acceptance, then TEMPLATE SOFTWARE promptly shall refund any amounts paid by
CUSTOMER with respect to such prior development version."
11. Delete the original Section 4 in its entirety and replace with the
following: "This Agreement shall be binding on the parties hereto and their
respective successors and assigns. Neither party may, or shall have the
power to, assign this Agreement without prior written consent of the other,
except that either party may assign its rights and obligations under this
Agreement without approval of the other party to an entity that acquires all
or substantially all of the assets of the assigning party or to any parent,
subsidiary or affiliate or successor in a merger or acquisition of such
party; provided that in no event shall such assignment relieve the assigning
party from its obligations under this Agreement.
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Privileged and Confidential
12. In Section 5.a., after the word "granted,", add the words "and upon
Acceptance,". In the same Section 5.a., replace the word "pay" with "owe"
and delete the words "(and under the payment terms)"
13. In Section 5.b., add the following as a new sentence. "In no event shall
CUSTOMER be responsible for any taxes based upon TEMPLATE SOFTWARE's income
or gross receipts".
14. Delete Section 5.c. in its entirety and add the following as a new Section
5.c.: "All undisputed invoices shall become due and payable within thirty
(30) days of receipt of such invoice by CUSTOMER."
15. Add the following as a new Section 5.d.: "With respect to amounts owed to
CUSTOMER by TEMPLATE SOFTWARE, if any, CUSTOMER shall have the right, upon
written notice to TEMPLATE SOFTWARE, to set-off that amount as a credit
against charges otherwise payable to TEMPLATE SOFTWARE".
16. Add the following as a new Section 5.e. "CUSTOMER may withhold payment of
disputed invoices, or of any disputed charge or amount on any invoice,
presented by TEMPLATE SOFTWARE, so long as such amount is disputed in good
faith. In order for an amount to be deemed disputed in good faith under this
Section 4.8, CUSTOMER must present written notification of any such good
faith dispute within thirty (30) days of receipt of the applicable invoice
involving such dispute, or the particular dispute will be deemed undisputed.
CUSTOMER and TEMPLATE SOFTWARE shall negotiate in good faith with respect to
any such disputed amounts and shall attempt to settle the dispute within
thirty (30) days."
17. Add the following as a new Section 5.f. "Undisputed amounts that remain
unpaid for more than thirty (30) days from the due date shall accrue
interest at the rate of one percent (1%) per month."
18. In Section 6, in the first line after the word "that" add the following: ",
upon prior CUSTOMER approval which shall not be unreasonably withheld,".
19. In Section 7.a., delete the first sentence in its entirety.
20. Add the word "OTHER" after the word "ALL" in Section 7.b. and move Section
7.b. (as amended) to a new Section 7.i. . Delete the last sentence of
Section 7.c. and move Section 7.c. (as amended) to a new Section 7.j. .
21. Add a new Section 7.b. that states the following: "TEMPLATE SOFTWARE
represents, warrants and covenants that: (i) it has all rights, power and
authority (including all rights needed to include, incorporate or embed any
third party software) to enter into this Agreement and to license the
Licensed Product(s) to CUSTOMER; and (ii) neither the Licensed Product(s),
deliverables or any other materials provided to CUSTOMER, or any part of the
foregoing, infringes any patent, copyright, trademark, service mark, trade
secret or other proprietary right of a third party."
22. Add a new Section 7.c. that states the following: "TEMPLATE SOFTWARE
represents, warrants and covenants that the Licensed Product(s) shall not
contain:(i) any coded instructions, routine, or other method intentionally
included by TEMPLATE SOFTWARE to enable any person or computer system,
including authorized or unauthorized users and terminals, to bypass any log-
in and any security feature of the Licensed Product(s) or the computer
systems on which the Licensed Product(s) is installed; (ii) any code
intentionally included by TEMPLATE SOFTWARE that, when activated in
accordance with a predetermined method, date or event, causes the Licensed
Product(s) to cease to operate, to operate in a degraded manner, to damage
or destroy data or code, or otherwise deleteriously affect the functioning
of the Licensed Product(s), other programs or the computer system on which
the Licensed Product(s) is installed, or with which the computer system is
in
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Privileged and Confidential
communication; or (iii) any code or instructions intentionally included by
TEMPLATE SOFTWARE to cause the Licensed Product(s), other software, or the
computer systems on which the Licensed Product(s) is installed, to perform
an unauthorized function or to operate in an unauthorized manner."
Notwithstanding the foregoing, the Licensed Product(s) may contain license
management features so long as such features allow TEMPLATE SOFTWARE to
monitor, but not to disable or otherwise interrupt, the operation of the
Licensed Product(s).
23. Add a new Section 7.d. that states the following: "TEMPLATE SOFTWARE
represents, warrants and covenants that the Licensed Product(s) will operate
and continue to operate in proper date order sequence and will be compliant
with the documentation and other specifications before, during and after the
year 2000".
24. Add a new Section 7.e. that states the following: "TEMPLATE SOFTWARE
represents, warrants and covenants that the Licensed Product(s) will be
accompanied by complete documentation that shall be sufficient to allow a
reasonably knowledgeable information technology professional (trained in a
manner substantially equivalent to TEMPLATE SOFTWARE's internal training) to
use, support, modify and maintain the Licensed Product(s)".
25. Add a new Section 7.f. that states the following: "TEMPLATE SOFTWARE
represents, warrants and covenants that for a period of six (6) months from
the date that each Licensed Product(s) meets with Acceptance, that such
Licensed Product(s) shall perform in accordance with this Agreement,
including the Acceptance Criteria and Exhibits ("Warranty Period"). The
Warranty Period shall be deemed to continue thereafter for so long as
CUSTOMER continues to subscribe to TEMPLATE SOFTWARE's Maintenance Services,
as such services are described in the attached License Schedule(s). During
the Warranty Period, CUSTOMER agrees to provide TEMPLATE SOFTWARE with
written notification as to the specifics of any nonconformity or defect in
the Licensed Product(s) and TEMPLATE agrees to promptly repair such
nonconformity or defect free of charge. During such Warranty Period,
TEMPLATE SOFTWARE shall respond to all identified nonconformities and
defects in the manner set for in Section 4 of License Schedule 1 hereto."
26. Add a new Section 7.h. that states the following: "TEMPLATE SOFTWARE
represents, warrants and covenants that the Licensed Product(s) will be
capable of operating in accordance with the Acceptance Criteria on Oracle
7.3.2 by July 1997 and, provided CUSTOMER is then under a paid maintenance
agreement with TEMPLATE SOFTWARE, future general releases of same within six
(6) months of such general release, until July, 2002."
27. Delete Section 8 in its entirety and replace with a new Section 8 that
states the following:
"Indemnities.
a. TEMPLATE SOFTWARE agrees to indemnify, defend at its expense and hold
harmless CUSTOMER and its officers, directors, employees, agents,
successors and assigns from any and all claims, actions, damages,
liabilities, costs and expenses, including reasonable attorney's fees and
expenses, arising from or related to the following: (i) any breach of any
representation, warranty or covenant made by TEMPLATE SOFTWARE under this
Agreement; (ii) any breach of the confidentiality obligations hereunder
by TEMPLATE SOFTWARE; (iii) any claim of infringement made against
CUSTOMER or its representatives of any patent, copyright, trademark,
trade secret or other proprietary right relating to the Licensed
Product(s), documentation and/or other materials provided by TEMPLATE
SOFTWARE; and (iv) any claim of misappropriation of proprietary
information alleged to have occurred because of CUSTOMER's (or its
designated representatives) use of the Licensed Product(s), documentation
and/or other materials provided by TEMPLATE SOFTWARE.
4
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Privileged and Confidential
b. If such claim or threatened claim of infringement is made, then
TEMPLATE SOFTWARE shall use best efforts to (i) procure for CUSTOMER the
right to use the Licensed Product(s), and/or other materials provided by
TEMPLATE SOFTWARE claimed to be infringing such that they are free of any
liability for infringement, but if not possible then; (ii) replace the
Licensed Product(s) with a non-infringing substitute complying in all
material respects with all the requirements of this Agreement."
26. Move Section 9.c. to a new Section 9.d. and replace the original Section
9.c. with the following: "TEMPLATE SOFTWARE agrees to keep and protect as
confidential any non-public information that it receives or obtains with
respect to CUSTOMER."
27. In the first line of Section 10, before the words "(Maintenance Services)",
add the words "as described in the License Schedule(s) attached hereto".
28. Before the last line of Section 10, add the following: "The Maintenance
Services period shall be one year in duration and shall commence on the date
of expiration of the Warranty Period. The Maintenance Services shall
automatically renew for subsequent one year periods, and TEMPLATE SOFTWARE
represents that it will continue to offer such Maintenance Services, unless
CUSTOMER cancels same upon notice to TEMPLATE SOFTWARE on or before the
anniversary date of such period. The annual fee for Maintenance Services
shall be equal to fifteen percent (15%) of the License Fee for the
particular Licensed Product(s) as set forth in the License Schedule(s) and
shall be payable to TEMPLATE SOFTWARE annually in advance. Annual
maintenance fee increases shall be limited to the lesser of the previous
calendar year's annual average U.S. Consumer Price Index (CPI), For All
Urban Consumers, All Items (1982-1984=100), as published by the Bureau of
Labor Statistics of the United States Department of Labor (or such similar
index if the CPI is no longer used), or three percent (3%).
29. Delete the last line of Section 10 in its entirety.
30. Add the following at the end of Section 11: "CUSTOMER shall in no event be
liable for loss of profit, goodwill or other special or consequential
damages suffered by TEMPLATE SOFTWARE relating to this Agreement, even if
CUSTOMER has been advised of the possibility of such damages."
31. In the first line of Section 12.a., before the word "term", add the word
"material". In the first and carryover second line of Section 12.a., delete
the words ", or any default by TEMPLATE SOFTWARE or CUSTOMER,".
32. In Section 12.a., replace the word "default" wherever it appears with the
words "material breach". Delete the last sentence of Section 12.a. in its
entirety.
33. Delete Section 12.c. in its entirety.
34. In Section 13.a., after the first sentence, add the following: "This
Agreement (including any License Schedule(s) referred to herein) supersedes
all prior agreements and representations, whether written or oral, with
respect to the subject matter of this Agreement between the parties,
including that certain Memorandum of Understanding between the parties with
the effective date of February 28, 1997."
35. In Section 13.c., replace the word "State" with the word "Commonwealth" and
add the phrase "without reference to conflict of laws principles" onto the
end of the sentence.
[SIGNATURE PAGE FOLLOWS]
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Privileged and Confidential
Except for the amendments stated herein, the terms and conditions of the
Agreement shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment One to
be executed by their respective duly authorized representatives, as of
February 28, 1997, as set forth below:
WinStar Telecommunications, Inc. Template Software, Inc.
By: /s/ Arthur E. Gelven By: /s/ Kimberly E. Osgood
-------------------- ----------------------
Name: Arthur E. Gelven Name: Kimberly E. Osgood
---------------- ------------------
Title: Director- Procurement Title: Chief Financial Officer
--------------------- -----------------------
and Material Management
-----------------------
6
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EXHIBIT 1O.3
Template Software & BAFS
------------------------
SALE AND PURCHASE AGREEMENT for the supply to BAFS of
A Template Software Licensed Products which are
.SNAP and Web Template Development Environment complete with GUI Extensions
.SNAP and Web Template User Environment complete with GUI Extensions
B Maintenance services for the SNAP and Web Template Development Environment
complete with GUI Extensions and the SNAP and Web Template User Environment
complete with GUI Extensions.
C The development of commissioned bespoke software called "the Process
Engine" and the provision of a license to use the Process Engine for BAFS
internal business processes.
D Training and Support services
1. Parties
-------
1.1. Template Software (UK) Limited (Template)
1.2. British American Financial Services IT & Group Services Limited (BAFS).
1.3. BAFS acts as authorised agent for and on behalf of British American
Financial Services (UK and International) Limited and its subsidiaries (the BAFS
Group) and BAFS and the BAFS Group are jointly and severally liable to Template
under this agreement.
1.4. Template Software (UK) Ltd is authorised to license the software products
defined herein as the Licensed Products on behalf of its parent company Template
Software Inc., who owns the intellectual property in these products.
2. Introduction
------------
2.1. Template has agreed to supply BAFS with
2.1.1. The right for 30 Developers to use the SNAP and Web Template
Development Environment complete with GUI Extension and the right for 300
Users to use the SNAP and Web Template User Environment complete with GUI
Extensions, initially on a temporary basis. It is intended that this right
will be extended to 80 developer and 5,000 user perpetual licences on or
after 1/st/ January 1998, subject to clause 13.
2.1.2. "GUI" tool development to extend the SNAP and Web Template
Development Environment adding extra functionality which will be
incorporated into the development Environment.
1
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2.1.3. Maintenance to support the Developers use of the SNAP and Web
Component Development Environment (including the GUI developments) and
Users use of the SNAP and Web Component User Environment (including the GUI
developments).
2.2. Template and BAFS have collaborated to produce a design and functional
specification for bespoke software called "the Process Engine" and BAFS have
commissioned Template to develop the software. The development is at an
advanced stage and Template and BAFS have started testing version one of the
Process Engine.
2.3. Template have agreed to provide professional services comprising support
and training on an as and when needed basis to be covered by a separate Services
Agreement
3. Definitions
-----------
3.1. Licensed Product - Template standard SNAP and Web Component products with
GUI extensions as defined in Appendix 1 and Process Engine as specified in
appropriate License Schedule.
3.2. Licence Agreement - Template licence agreement for SNAP and Web Component,
GUI Extensions and Process Engine as attached and incorporated by reference.
3.3. GUI Extensions - the tools to be developed by Template as described in
Appendix 1.
3.4. Maintenance Agreement - Templates service level agreement - set out in
Appendix 3.
3.5. Functional Specification - the functional specification for the Process
Engine as set out in Appendix 2.
3.6. Process Engine - the bespoke software to be developed by Template.
3.7. Professional Services - the training and support described in Appendix 4.
3.8. Delivery of the Process Engine will occur when BAFS confirms in writing
that the software complies with the acceptance tests or when the Process Engine
is in regular use by BAFS other than for acceptance testing, whichever occurs
first.
3.9. Delivery of the SNAP and Web Template Development Environment will occur on
receipt of the full product release of SNAP version 8.0 which shall not occur
later than July 1997.
4. Obligations of Template
-----------------------
4.1. To supply the right for 30 Developers and 300 Users with the right to use
the Licensed Products for a temporary period and to extend this right for an
unlimited time in
2
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accordance with the terms of this agreement and the License Agreements and
License Schedules referenced herein and incorporated by reference.
4.2. To develop the GUI Extensions and extend the SNAP and Web Component
Development Environment to include these extensions.
4.3. To provide maintenance for the SNAP and Web Component Development and User
Environments including the GUI Extensions to the standard described in the
Maintenance Agreement.
To complete the development and testing of the Process Engine bespoke software
to conform with the acceptance tests, defined in Appendix 5, based on the
Functional Specification. There is no requirement to supply maintenance for the
Process Engine in this agreement.
5. Delivery and Acceptance of the Process Engine
---------------------------------------------
5.1. Template will prepare acceptance tests for the Process Engine making
reference to the Functional Specification.
5.2. Template will make the Process Engine available to BAFS by July 1997.
Installation, testing and acceptance will be complete by the end of August 1997.
6. Proprietary Rights - standard products
--------------------------------------
6.1. Template owns all intellectual property rights in Template Licensed
Products as defined herein
6.2. BAFS will not have a right to sub-licence to other parties. The terms of
Template's Licence and related License Schedules will apply.
7. Proprietary Rights - Process Engine
-----------------------------------
7.1. Template owns all intellectual property rights in the implemented Process
Engine.
7.2. BAFS owns the intellectual property rights in the Functional Specification
and Design.
7.3. On BAFS acceptance of the Process Engine Template will grant BAFS a non-
exclusive royalty free licence to use the Process Engine for its internal
business purposes in accordance with the License and License Schedule attached.
BAFS will not have a right to sub-licence to other parties. The terms of
Template's Licence and related License Schedules will apply.
8. Alterations to the Functional Specification of the Process Engine
-----------------------------------------------------------------
A cut off date for interpretation of the Functional Specification has been set
as 23rd May 1997. Any alterations or clarifications of the specifications after
this date may alter the contract price and delivery dates.
9. Obligations of BAFS
-------------------
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9.1. Payment
- ------------------
9.1.1. BAFS will pay for
9.1.1.1. the Developer Licence and User Licences;
9.1.1.2. the GUI extension development;
9.1.1.3. development of the Process Engine; and
9.1.1.4. the Developer and User software maintenance
from January 1997 over three years in accordance with the agreed
payment schedule as attached (prices stated VAT inclusive and VAT
exclusive)
9.1.2. Template will give credits against the prepaid maintenance
fees in accordance with the Maintenance Agreement (Appendix 3)
9.1.3. BAFS will pay for the professional services in accordance
with Templates daily/monthly rates as specified in Appendix 6
9.1.4. Invoices are payable within 30 days of receipt.
9.1.5. BAFS does not have the right to set off counter claims
against payments.
9.2. Computer and Office Facilities and Staff
- ---------------------------------------------------
9.2.1. BAFS will provide Template with appropriate computer
facilities, accommodation and staff to carry out the testing [and
installation] of the Process Engine and provide the Maintenance
Services and the Professional Services.
9.2.2. Template and its employees and sub-contractors will respect
and comply with BAFS security and safety procedures as specified in
Appendix 7.
9.3. Compliance with Template's Licences
- --------------------------------------------------
9.3.1. BAFS will comply with the terms of the Licence and the
Licence Schedules as they apply to the Licensed Products. 10.
10. Insurance
---------
10.1. Both parties will maintain
10.1.1. employers liability insurance at least to a value of
(Pounds)5m;
10.1.2. public liability insurance at least to a value of (Pounds)2
million.
10.1.3. professional indemnity - Template has cover for $1 million
to be increased to $3 million at end of September 1997.
10.2. Each party has the right to view the others policy.
10.3. Copies of both party's policies in force at time of contract signing
are included in Appendix 8.
4
<PAGE>
11. Confidentiality
---------------
Template will undertake to keep secret BAFS confidential information which is
specifically marked confidential or described as confidential. This undertaking
of confidentiality shall not extend to information which is already known to
Template or is public knowledge. A specific confidentiality agreement has been
signed by both parties and is attached in Appendix 9.
12. Restrictions on Users
---------------------
12.1. Template's Licence and License Schedule only applies to BAFS employees,
agents and prior approved third parties by Template such as Independent
Financial Advisers, defined in the appropriate License Schedule. The maximum
number of users with the right to use the Licensed Products is also set out in
the appropriate License Schedule.
12.2. BAFS must give notice to Template if it requires the right to use the
Licensed Products for additional Users or Developers and on payment of
additional Licence fees Template will grant this right.
12.3. BAFS must give notice to Template if it wishes third parties who sell or
market BAFS products not covered by the License Schedule to be granted the right
to use the Licensed Products and Template's consent to the extension of such
right shall not be unreasonably withheld on BAFS payment of additional User
Licence fees.
12.4. Template has the right to monitor and audit the number of users and if
the number of Developers or Users, as defined in the appropriate License
Schedule exceed the maximum number set out in said License Schedule then
additional licence fees become payable back dated to the start of additional
use.
13. Contract Review and Breaks
--------------------------
13.1. BAFS and Template will hold a formal review of the contract prior to
13.1.1. the end of December 1997; and
13.1.2. the end of March 1998.
13.2. Following each review BAFS may terminate this agreement on 31 December
1997 or 30 March 1998. Termination of this agreement will terminate all rights
granted to BAFS to use the Licensed Products and the Maintenance Agreement and
neither party shall have any liability or obligation to the other except as
provide herein.
13.3. Should termination of the contract occur on 31 December 1997 the right
for 30 Developers and 300 Users to use the Licensed Products as set out in the
License Schedules shall expire and subject to BAFS right to terminate Template
will provide the right for 14
5
<PAGE>
Developers and up to 300 Users to use the Licensed Products for an unlimited
time and BAFS shall pay additional licence fees in accordance with the payment
schedule. On continuation of the contract following 31 December 1997, the right
for 30 Developers and 300 Users to use the Licensed Products as set out in the
License Schedules shall be extended to 31 March 1998 on payment of the agreed
fees.
13.4. On 31 March 1998 the right for 30 Developers and 300 Users to use the
Licensed Products as set out in the License Schedules shall expire and subject
to BAFS right to terminate Template will provide the right for 80 Developers and
5000 Users to use the Licensed Software for an unlimited time and BAFS shall pay
additional licence fees in accordance with the payment schedule.
14. Term and Termination
--------------------
The term is 3 years from April 1997.
14.1. The agreement may be terminated early by BAFS in accordance with the
Contract Review and Breaks clause above.
14.2. Either party may terminate immediately if the other becomes insolvent and
unable to pay its debts in the normal course of business.
14.3. Either party has the right to terminate should the other party fail to
meet any of its obligations under this contract. The aggrieved party shall
notify the other in writing of any such breach, and shall give 4 weeks to
rectify the breach prior to the contract being terminated.
15. Source Code Deposit
-------------------
BAFS will have the benefit of Template source code deposit agreement as defined
in Appendix 10.
16. Force Majeure
-------------
If Template cannot complete the development and delivery of the Process Engine
or the Developer or User software for reasons beyond its control Template will
give notice and the agreement will be suspended for 4 weeks without liability
after which either party has the right to terminate.
17. Applicable Law
--------------
English law shall apply and the parties agree to submit to the non-exclusive
jurisdiction of the English Courts.
18. Entire Agreement
----------------
6
<PAGE>
This is the entire agreement between BAFS and Template regarding this subject
matter with the exception of those agreements referenced herein and incorporated
by reference.
19. Amendment
---------
No amendment to this agreement may be made unless in made in writing and signed
by both BAFS and Template.
20. Waiver
------
Waiver of a breach is not to be considered as waiver of any subsequent breach.
21. Notices
-------
Notices required by this agreement may be made by Facsimile transmission in
which case they shall be deemed to have arrived on the day of transmission or by
Post in which case they shall be deemed to have been delivered 2 working days
after posting.
7
<PAGE>
signed
for and on behalf of Template Software (UK) Limited,
/s/ R H Collard Date: 27/5/95
- ---------------------- -------
R H Collard - Managing Director, Template Software (UK) Ltd.
Vice President, Template Software Inc.
for and on behalf of BAFS,
/s/ Ian Seward Date: 27 May 1997
- ---------------- ---------------------
Name: Ian Seward Position: Managing Director
---------- -----------------
/s/ Phil Smith Date: 27 May 1997
- ---------------- ---------------------
Name: Phil Smith Position: Chairman
---------- -----------------
<PAGE>
Exhibit 11
----------
Template Software, Inc.
Computation of Earnings per Common Share
(Unaudited)
<TABLE>
<CAPTION>
Primary Earnings Per Share
For the Three Months Ended May 31,
-----------------------------------------------------------
1997 1996 1997 1996
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 579,955 $ 144,691 $ 987,169 $ 300,805
===========================================================
Weighted average shares of common shares outstanding 4,324,774 2,182,994 3,622,961 2,182,994
Weighted average effect of common shares equivalents
(using the treasury stock method) 1,520,536 1,471,460 1,864,261 1,471,460
Common shares issued within one year of initial filing - 64,014 - 64,014
Common shares equivalents issued within one year of initial filing - 940,532 - 940,532
-----------------------------------------------------------
Primary Shares 5,845,310 4,659,000 5,487,222 4,659,000
===========================================================
Primary net income per common share and common share equivalents $ 0.10 $ 0.03 $ 0.18 $ 0.06
===========================================================
Fully Diluted Earnings Per Share
For the Three Months Ended May 31,
-----------------------------------------------------------
1997 1996 1997 1996
-----------------------------------------------------------
Net income $ 579,955 $ 144,691 $ 987,169 $ 300,805
===========================================================
Weighted average shares of common shares outstanding 4,324,774 2,182,994 3,622,961 2,182,994
Weighted average effect of common shares equivalents
(using the treasury stock method) 1,676,516 1,471,460 1,864,261 1,471,460
Common shares issued within one year of initial filing - 64,014 - 64,014
Common shares equivalents issued within one year of initial filing - 940,532 - 940,532
-----------------------------------------------------------
Fully diluted shares 6,001,290 4,659,000 5,487,222 4,659,000
===========================================================
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Fully diluted net income per common share and common share equivalents $ 0.10 $ 0.03 $ 0.18 $ 0.06
===========================================================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<CASH> 12,318
<SECURITIES> 14,684
<RECEIVABLES> 5,069
<ALLOWANCES> 264
<INVENTORY> 0
<CURRENT-ASSETS> 32,572
<PP&E> 1,999
<DEPRECIATION> 816
<TOTAL-ASSETS> 37,098
<CURRENT-LIABILITIES> 3,257
<BONDS> 0
43
0
<COMMON> 0
<OTHER-SE> 32,352
<TOTAL-LIABILITY-AND-EQUITY> 37,098
<SALES> 0
<TOTAL-REVENUES> 8,529
<CGS> 0
<TOTAL-COSTS> 3,528
<OTHER-EXPENSES> 3,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> 0
<INCOME-TAX> 481
<INCOME-CONTINUING> 580
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 987
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
