<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
SECURICOR TELESCIENCES INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 3669 22-3311903
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
351 NEW ALBANY ROAD, MOORESTOWN, NJ 08057-1177, (609) 866-1000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ANDREW P. MAUNDER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SECURICOR TELESCIENCES INC.
351 NEW ALBANY ROAD
MOORESTOWN, NJ 08057-1177
(609) 866-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
COPY TO:
JASON M. SHARGEL, ESQUIRE BARBARA L. BECKER, ESQUIRE
Wolf, Block, Schorr and Solis-Cohen Chadbourne & Parke LLP
Twelfth Floor Packard Building 30 Rockefeller Plaza
S.E. Corner 15th & Chestnut Streets New York, NY 10112
Philadelphia, PA 19102 (212) 408-5100
(215) 977-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As promptly as practicable after the effective date of this Registration
Statement.
If the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
- ---------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ---------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED SHARE(1) PRICE(1) FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value.................... 2,990,000(2) $13.00 $38,870,000 $11,779
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Includes shares which the Underwriters have a right to purchase to cover
over-allotments, if any.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains a prospectus relating to an offering in
the United States and Canada (the "U.S. Offering") of an aggregate of
shares of Common Stock, par value $0.01 per share, of Securicor
Telesciences Inc. together with separate prospectus pages relating to a
concurrent offering outside the United States and Canada of an aggregate of
shares of Common Stock, par value $0.01 per share, of Securicor
Telesciences Inc. (the "International Offering"). The complete prospectus for
the U.S. Offering follows immediately after this Explanatory Note. Following
such prospectus are the alternate front cover and back cover pages for the
International Offering. All other pages of the prospectus for the U.S. Offering
are to be used for both the U.S. Offering and the International Offering. The
complete prospectus for each of the U.S. Offering and the International
Offering, in the forms in which they are to be used after effectiveness, will be
filed with the Securities and Exchange Commission via EDGAR pursuant to Rule
424(b) under the Securities Act of 1933.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 18, 1997
PROSPECTUS
2,600,000 SHARES
SECURICOR TELESCIENCES INC.
COMMON STOCK
----------------
All of the shares of Common Stock, par value $.01 per share (the "Common
Stock") offered hereby are being sold by Securicor Telesciences Inc. (the
"Company"). Of the 2,600,000 shares of Common Stock offered hereby, are
initially being offered in the United States and Canada by the U.S. Underwriters
(the "U.S. Offering") and are initially being offered outside the United
States and Canada by the International Managers (the "International Offering"
and, together with the U.S. Offering, the "Offering"). Of the net proceeds from
the sale by the Company of the Common Stock, approximately $20.4 million will be
used to repay certain indebtedness from, and pay a special dividend to, the
Company's sole stockholder. See "Use of Proceeds" and "Certain Transactions."
Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be between
$11.00 and $13.00 per share. See "Underwriting" for a discussion of the factors
considered in determining the initial public offering price. The initial public
offering price and underwriting discounts and commissions per share are
identical for the U.S. Offering and the International Offering. Application has
been made to have the Common Stock approved for quotation on The Nasdaq Stock
Market's National Market ("Nasdaq") under the symbol "STIQ."
------------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share.............................. $ $ $
Total (3).............................. $ $ $
</TABLE>
(1) The Company and its sole stockholder have agreed to indemnify the U.S.
Underwriters and the International Managers against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting estimated expenses of $775,000 payable by the Company.
(3) The Company has granted the U.S. Underwriters and the International Managers
30-day options to purchase up to an aggregate of 390,000 additional shares
of Common Stock on the same terms and conditions as set forth above solely
to cover over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The shares of Common Stock offered by this Prospectus are offered by the
U.S. Underwriters, subject to prior sale, withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
U.S. Underwriters and to certain further conditions. It is expected that
delivery of certificates for the shares of Common Stock will be made at the
offices of Lehman Brothers Inc., New York, New York, on or about , 1997.
------------------------
LEHMAN BROTHERS J.P. MORGAN & CO.
, 1997.
<PAGE>
[Description of graphics to be inserted:
1. Outer flap of gatefold: Representation of a world map with stars marked
to show the locations of customers of the Company's products and services during
the preceding eighteen months. Large caption above the map setting forth the
Company's name and one phrase "World Class Information Management Solutions." A
box appears below the map containing the following text: "Leaders in Serving
Global Telecommunications with: Collection, Preprocessing and Delivery of
Billing and Transaction Data; Traffic Management Reporting."
2. Innerflap of gatefold: graphical representation of the Company's
products, showing how they can be used together as a system in conjunction with
the customer's billing data network data and management applications. In the box
identifying the Company's products the Company's name and logo appear together
with the phrase: "World Class Information Management Solutions."]
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SUCH TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING
THE PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON
STOCK OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE TRANSACTIONS, SEE
"UNDERWRITING."
IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ STOCK MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE
SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS OF THE COMPANY AND THE PREDECESSOR
BUSINESS (AS DEFINED BELOW) AND THE NOTES THERETO APPEARING ELSEWHERE IN THIS
PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS
REFLECTS THE FOLLOWING: (I) A 34,769-FOR-ONE STOCK SPLIT (IN THE FORM OF A STOCK
DIVIDEND) OF THE COMPANY'S COMMON STOCK, PAR VALUE $.01 PER SHARE (THE "COMMON
STOCK") WHICH WILL BE EFFECTED PRIOR TO THE COMPLETION OF THE OFFERING AND (II)
NO EXERCISE OF THE OVER-ALLOTMENT OPTIONS GRANTED TO THE U.S. UNDERWRITERS AND
THE INTERNATIONAL MANAGERS (COLLECTIVELY, THE "UNDERWRITERS") OR OF OPTIONS TO
PURCHASE 325,000 SHARES OF COMMON STOCK EXPECTED TO BE GRANTED TO CERTAIN
EMPLOYEES OF THE COMPANY PRIOR TO THE COMPLETION OF THE OFFERING. SEE
"MANAGEMENT--1997 STOCK INCENTIVE PLAN" AND "UNDERWRITING." AS USED IN THIS
PROSPECTUS, THE TERM "FISCAL 1994" REFERS TO THE PREDECESSOR BUSINESS' FISCAL
YEAR ENDED JUNE 30, 1994, AND THE TERMS "FISCAL 1995," "FISCAL 1996" AND "FISCAL
1997" REFER TO THE COMPANY'S FISCAL YEARS ENDED SEPTEMBER 30, 1995, SEPTEMBER
30, 1996 AND SEPTEMBER 30, 1997, RESPECTIVELY.
THE COMPANY
The Company is a leader in providing comprehensive billing data collection
solutions to providers of local, long-distance and other advanced
telecommunications services. The Company's largest customers include Regional
Bell Operating Companies ("RBOCs"), such as Ameritech Corporation, Southwestern
Bell Telephone Company and U S West, Inc., and international providers of
telecommunications services, such as Telecom Argentina. The Company develops,
markets and supports integrated hardware and software systems that are able to
collect and process an increasing volume of transaction information from a wide
variety of wireline telecommunications switches and transmit this information to
the customer's information management networks. The Company also is developing
systems that process transaction information from wireless, asynchronous
transfer mode ("ATM") and other specialized telecommunications switches. The
Company's customers use this information to bill their subscribers, to implement
customized marketing programs and to perform other data management functions.
The Company also provides traffic management solutions to telecommunications
companies such as TELESP, a Brazilian telecommunications service provider. The
Company plans to offer its first applications software product, a fraud
detection and management system, by the end of calendar 1997. The Company
provides installation, ongoing maintenance, support and training, as well as
customized engineering services, related to the Company's systems.
The telecommunications industry is currently experiencing rapid growth and
change resulting from the combined effects of regulatory, competitive and
technological developments. Regulatory changes, including the Telecommunications
Act of 1996, have created competitive wholesale and retail telecommunications
markets and have required RBOCs and other wholesalers to provide to retail
resellers detailed call data that previously were not required to be captured.
To comply with regulatory requirements and to be successful in increasingly
competitive markets, telecommunications providers are being required to upgrade
their existing data collection systems to new systems that can process large
volumes of transaction information without compromising the integrity of the
billing stream and can efficiently transmit the information for use by
increasingly sophisticated and varied data management applications. The growing
number and categories of telecommunications providers is creating a need for
more sophisticated data management systems that utilize call data as part of
marketing and other information management programs. Escalating competition has
also created the need for systems that can provide real-time access to call
data.
The Company believes that it provides to large wireline customers the most
advanced and reliable billing data collection systems and that it is the leader
in designing these systems to meet the Automatic Message Accounting Data
Networking System ("AMADNS") generic requirements established in 1994. A
critical feature of the Company's systems is redundancy, permitting them to
protect the integrity of call detail records ("CDRs") and provide "financial
grade" reliability (greater than 99.999% system availability). The Company's
products also are capable of delivering transaction information on a real-time
basis. Reflecting the engineering expertise acquired through the Company's
30-year history, the Company's
3
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products offer a high degree of connectivity, permitting them to interface with
switches from all major domestic and most international wireline switch
manufacturers, including Northern Telecom Inc., Lucent Technologies Inc.,
Siemens AG, L.M. Ericsson Telephone Co. and NEC Corp. The Company's systems
utilize an open systems architecture, permitting them to interface with other
elements of the customer's data collection network and with virtually any
billing processing or other information management application. The Company's
systems also are scaleable, thereby allowing them to handle a large range of
call volumes. The systems can be configured with proprietary software
applications that provide a wide variety of preprocessing functions such as
filtering (extracting data that meet preset criteria), distribution (directing
predetermined data to certain specialized applications) and reformatting
(rearranging input data into a user-defined output format).
The Company is currently the leading supplier of billing data collection
products to the RBOCs. Six of the seven RBOCs are current customers for the
Company's products or services. The Company's aggregate revenues from sales to
its three main RBOC customers increased from $10.2 million in fiscal 1994 to
$13.1 million in fiscal 1995 and $20.9 million in fiscal 1996. During the 1980s,
the Company was a primary supplier to Ameritech Corporation, U S West, Inc. and
their predecessors, of SEBX Series products, the Company's prior generation of
billing data collections systems. The Company introduced its next generation
product, the Sterling Series, in late 1995 and has made initial sales of the
Sterling Series products to these customers and to Southwestern Bell Telephone
Company. The Company has sold over 200 units of Sterling Series products to
date. The Company believes that these three customers have replaced in the
aggregate less than 25% of their prior generation billing data collection units,
and that these customers will replace the balance of these units, and purchase
additional products and services from the Company, over the next three to five
years. The Company also believes that there is a significant opportunity to sell
Sterling Series products to other RBOCs and to other wireline customers
worldwide. The Company sells its products to wireless telecommunications
companies through a supply relationship with another company.
The Company's objective is to leverage its position as the leading provider
of comprehensive billing data collection systems to RBOCs to become the leading
provider of those systems and related information management products and
services to telecommunications and other information providers domestically and
internationally. The Company's strategy to achieve this objective includes the
following key elements: (i) expand relationships with wireline customers; (ii)
continue to expand sales to new telecommunications markets; (iii) continue to
develop marketing channels; (iv) expand international business; (v) expand
product and service offerings; and (vi) retain technology leadership.
The Company is the successor to a corporation formed in 1967. The Company
was formed as a Delaware corporation in July 1994 in connection with the
acquisition of the wireline division of TeleSciences, Inc. (the "Predecessor
Business"). The Company is a wholly-owned subsidiary of Securicor Communications
Inc., a Delaware corporation ("Securicor Communications"), and an indirect
wholly-owned subsidiary of Securicor plc, a multi-national company based in the
United Kingdom (collectively with Securicor Communications and other
wholly-owned subsidiaries, "Securicor"). The Company's principal executive
office is located at 351 New Albany Road, Moorestown, NJ 08057-1177, and its
telephone number is (609) 866-1000.
THE OFFERING
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<S> <C>
Common Stock offered......................... 2,600,000 shares
Common Stock to be outstanding after
the Offering............................... 6,076,900 shares
Use of Proceeds.............................. To repay indebtedness from, and pay a special
dividend to, Securicor; for product
development; to enhance international sales,
marketing and support efforts; and for
working capital and other general corporate
purposes.
Proposed Nasdaq National Market symbol....... STIQ
</TABLE>
4
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary financial information should be read in conjunction
with the Financial Statements of the Company and the Predecessor Business and
Notes thereto, "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus.
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<CAPTION>
PREDECESSOR SECURICOR TELESCIENCES INC.
BUSINESS(1) ---------------------------------------------------------
----------- PERIOD FROM
YEAR JULY 1, 1994 YEAR ENDED SIX MONTHS ENDED
ENDED TO SEPTEMBER 30, MARCH 31,
JUNE 30, SEPTEMBER 30, -------------------- --------------------
1994 1994 1995 1996 1996 1997
----------- ------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Unrelated third parties............. $ 20,229 $ 5,606 $ 24,147 $ 31,641 $ 8,740 $ 10,921
Related parties..................... -- -- 1,421 2,323 2,040 --
----------- ------------- --------- --------- --------- ---------
20,229 5,606 25,568 33,964 10,780 10,921
----------- ------------- --------- --------- --------- ---------
----------- ------------- --------- --------- --------- ---------
Charge for purchased research and
development(2).................... -- 6,700 -- -- -- --
Operating income (loss)............. (3,009) (6,871) 551 2,085 (3,364) (4,039)
Net income (loss)................... (4,098) 367 2,192 (1,963) (2,504)
Pro forma net income (loss) per
common share(3)................... $ 0.49 $ (0.45)
--------- ---------
--------- ---------
Shares used in computing pro forma
net income (loss) per common share
(3)............................... 5,180 5,180
--------- ---------
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF MARCH 31, 1997
SEPTEMBER 30, -------------------------
1996 ACTUAL AS ADJUSTED(4)
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<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................. $ 3,326 $ 1,279 $ 9,078
Working capital....................................................... 2,257 865 18,256
Total assets.......................................................... 30,336 23,519 31,318
Obligations to parent and affiliates.................................. 12,441 9,592 --
Long-term debt........................................................ 147 -- --
Stockholder's equity.................................................. 9,311 6,807 24,198
</TABLE>
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(1) The statement of operations data presented for the Predecessor Business
represents the information for the Wireline Division of TeleSciences, Inc.
See Statement of Revenues and Certain Expenses for the Predecessor Business
and Notes thereto.
(2) Represents a one-time charge for purchased research and development which
was incurred as a result of the acquisition of the Predecessor Business by
the Company on July 1, 1994. The acquisition was accounted for under the
purchase method of accounting. See Notes 1 and 2 of Notes to Financial
Statements.
(3) See Note 2 of Notes to Financial Statements for an explanation of the
computation of pro forma net income (loss) per common share.
(4) Adjusted to give effect to the sale by the Company of 2,600,000 shares of
Common Stock offered hereby (at an assumed initial public offering price of
$12.00 per share and after deducting the estimated underwriting discount and
offering expenses) and the application of the net proceeds therefrom. See
"Use of Proceeds" and "Capitalization."
5
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING
MATTERS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN INVESTMENT IN THE SHARES
OF COMMON STOCK OFFERED BY THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE IN THIS PROSPECTUS.
RELIANCE ON A LIMITED NUMBER OF SIGNIFICANT CUSTOMERS; DEPENDENCE ON STERLING
SERIES PRODUCTS
A significant portion of the Company's revenues have been, and are expected
to continue to be, derived from substantial orders placed by large
organizations, and in particular three RBOCs. For fiscal 1996, U S West, Inc.
("U S West"), Southwestern Bell Telephone Company ("Southwestern Bell") and
Ameritech Corporation ("Ameritech"), the Company's largest customers for billing
data collection systems during the period, represented approximately 30.1%,
18.5% and 13.0%, respectively, of total revenues. During fiscal 1996, an
additional 9.4% of the Company's revenues was attributable to sales to Puerto
Rico Telephone Co. The Company has entered into contracts with its larger
domestic customers pursuant to which such customers place orders for the
Company's systems on an as-needed basis on the terms set forth in such
contracts. Under the terms of these contracts, the Company's customers are not
obligated to purchase a minimum number of systems nor are they required to
purchase systems exclusively from the Company. Consequently, the failure of any
of the Company's larger customers to continue to purchase systems from the
Company, or any significant delay in orders from such customers, could have a
material adverse effect on the Company's results of operations and financial
condition. The Company expects that in the future it will continue to be
dependent upon a limited number of customers in any given period for a
significant portion of its revenues. Revenues from RBOCs and other wireline
customers during the next several years will be largely dependent upon the
success of the Company's Sterling Series billing data collection systems that
were introduced in late 1995 and, accordingly, any significant performance
problems with those systems could have a material adverse effect on the
Company's results of operations and financial condition. Demand for the
Company's products will also depend to a substantial extent on the future
capital spending plans of its customers. Furthermore, customer demand generally
can be affected by numerous variables, including changes in governmental
regulation, changes in the customers' competitive environment, mergers or other
strategic alignments involving customers, pricing policies by the Company or its
competitors, personnel changes, demand for the Company's products in this
market, the number, timing and significance of new product and product
enhancement announcements by the Company and its competitors, the ability of the
Company to develop, introduce and market new and enhanced versions of its
products on a timely basis, and the mix of direct and indirect sales and general
economic factors. There can be no assurance that revenues from customers that
have accounted for significant revenues in past periods, individually or as a
group, will continue, or if continued will reach or exceed historical levels in
any future period. See "Business--Customers."
DIFFICULTY IN FORECASTING REVENUES; LONG SALES CYCLES; RELIANCE ON LARGE ORDERS;
NON-RECURRING NATURE OF SALES; FLUCTUATIONS IN QUARTERLY RESULTS
The Company's revenues are difficult to forecast as a result of the fact
that the purchase of its systems generally involves a significant commitment of
capital and management time. Accordingly, the sales cycle associated with the
purchase of the Company's products --from initial contact to contract execution
and placement of the actual order by the customer--typically is lengthy, varies
from customer to customer and from project to project, and is subject to a
number of additional significant risks, including customers' budgetary
constraints and internal acceptance reviews and, to a lesser extent, the timing
of sales by the Company's customers to their own customers over which the
Company has little or no control. The Company's results also vary based on the
type and quantity of products shipped, the timing of product shipments, the
relative revenue mix in a given period and the resulting margins. Because of the
nature of the Company's products, a large part of the Company's sales is of a
non-recurring nature. RBOCs typically do not approve their annual budgets until
the Company's second fiscal quarter of each year causing their
6
<PAGE>
purchases of the Company's products to occur later in the year. As a result of
the timing of the RBOC's budget cycle, the Company experienced a significant
concentration of revenues in the fourth fiscal quarter in fiscal 1995 and fiscal
1996. As a result, revenues have generally been lowest in the first and second
fiscal quarters of recent fiscal years. Such factors could cause the Company's
quarterly results of operations to fluctuate in future periods. The variations
may be material. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Quarterly Results of Operations."
As a result of these and other factors, the Company believes that revenues
and operating results, and particularly quarterly results, are likely to vary
significantly in the future and may be difficult to forecast. Accordingly,
period-to-period comparisons of the Company's results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. In addition, the Company's expense levels are based, in part, on
its expectations as to future revenue levels. If revenue levels are below
expectations in any given period, operating results are likely to be materially
adversely affected. Further, it is possible that in some future period the
Company's revenues or operating results will be below the expectations of public
market analysts and investors. In such event, the price of the Common Stock may
be materially adversely affected. The Company's results of operations and
financial condition also could be materially adversely affected in any fiscal
period by the failure of anticipated orders to materialize and by deferrals or
cancellation of orders.
COMPETITION
The market for billing data collection and traffic management systems is
highly competitive. Many providers offer products that are competitive with
those offered by the Company in both domestic and international markets. The
Company also experiences competition from in-house systems developed by existing
and potential customers. Several companies market products that are designed to
be an integrated solution to the customer's billing and information management
needs. If existing and potential customers of the Company conclude that an
integrated suite of products and services purchased from other providers
eliminates the need for products with the capabilities and features of the
Company's products, the Company's sales may be adversely affected. Many of the
Company's current and potential competitors have significantly greater
financial, marketing, technical, and other competitive resources than the
Company. Because the Company's focus to date has been primarily on products for
wireline customers, certain of its competitors have greater experience in
addressing the requirements of wireless telecommunications systems. Current and
potential competitors may establish cooperative relationships with one another
or with third parties or consolidate to compete more effectively against the
Company. It is also possible that new competitors may emerge, develop products
and services that compete successfully with the Company's products and services
and acquire significant market share. Any of these events could have a material
adverse effect on the Company's results of operations and financial condition.
See "Business-- Competition."
RAPIDLY CHANGING TELECOMMUNICATIONS MARKETS AND TECHNOLOGIES
Over the last decade, the market for telecommunications products and
services has been characterized by rapid technological developments, evolving
industry standards, dramatic changes in the regulatory environment and frequent
new product introductions. The Company's success will depend, in large part,
upon its ability to enhance its existing products and services, and to introduce
new products and services that will respond to these market factors as they
evolve. In particular, the Company's success during the next several years will
be largely dependent upon sales of the Company's Sterling Series billing data
collection systems that were introduced in late 1995. The introduction by third
parties of new products or services could render the Company's existing products
and services obsolete or unmarketable. There can be no assurance that the
Company will complete on a timely or successful basis the development of new or
enhanced products or services or successfully manage transitions from one
product release to the next, that the Company will not encounter difficulties or
delays in the introduction of new or enhanced products, or that defects will not
be found in such new or enhanced products after installation, resulting in a
loss of, or delay in, market acceptance. To date, the majority of the Company's
revenues are attributable to its long-
7
<PAGE>
term relationships with traditional wireline providers of telecommunications
services. To continue its revenue growth, the Company must not only continue to
expand its relationships with its current customer base, but must also expand
its customer base to include new wireline, wireless, ATM and other
telecommunications service providers. While the systems and services that the
Company offers to address the needs of the wireline market have permitted it to
begin to attract customers in other segments of the telecommunications industry,
there can be no assurance that it will be able to do so successfully over the
long-term. Failure to do so could have a material adverse effect on the
Company's results of operations and financial condition. In addition,
technologies, services or standards may be developed that could require
significant changes in the Company's business model, development of new
products, or provision of additional services, at substantial cost to the
Company and which may also result in the introduction of additional competitors
into the marketplace. Furthermore, if the overall market for telecommunications
products and services fails to evolve in the manner contemplated by the Company
or grows more slowly than anticipated as a result of regulatory or other
factors, or if the Company's products and services fail in any respect to
achieve market acceptance, there could be a material adverse effect on the
Company's results of operations and financial condition. The telecommunications
industry is also characterized by significant and rapid strategic alignments. A
merger or consolidation of one or more telecommunications service providers
could result in the loss of customers or sales opportunities to the Company, and
there can be no assurance that new entrants to the market will become customers
of the Company.
IMPLEMENTATION OF NEW SALES AND MARKETING STRATEGIES
To date, the Company has generally relied on direct sales to customers with
which it has developed strategic relationships over the years, primarily RBOCs
and certain international telecommunications companies. The Company has begun
and intends to continue to diversify its sales efforts by selling directly to
new providers and by establishing marketing relationships with systems
integrators, manufacturers of telecommunications switches and other equipment
manufacturers and billing and rating systems providers. With respect to
international sales, the Company intends to rely primarily on establishing
relationships with systems integrators and distributors in targeted countries.
The Company's marketing relationships are generally nonexclusive and are usually
terminable by either party upon three to six months prior notice and certain of
the companies with which the Company has such relationships also have agreements
with, or are themselves, competitors or potential competitors of the Company. In
addition, the Company's marketing partners generally have no obligation to
purchase or obtain orders for the purchase of any of the Company's products.
There can be no assurance that the Company will be successful in establishing
marketing relationships, that the Company's marketing partners will be effective
in marketing the Company's products or that one or more of its marketing
partners will not discontinue their relationships with the Company or form
additional competing arrangements with competitors of the Company or themselves
begin to compete with the Company. In any of those events, the Company's results
of operations and financial condition could be materially adversely affected.
See "Business--Marketing and Sales."
ABILITY TO MANAGE GROWTH
The Company is expanding into new products, services and markets. This
growth has resulted in new and increased responsibilities for management
personnel and has placed and continues to place a significant strain upon the
Company's management, operating and financial systems and resources. In order to
compete effectively and manage anticipated future growth, the Company will be
required to continue to implement and improve management information systems,
procedures and controls on a timely basis and in such a manner as is necessary
to accommodate the increased number of transactions and customers and the
increased size of the Company's operations. Management of future growth, if any,
will also require that the Company continuously expand, train, motivate and
manage its work force. These demands will require the addition of new management
personnel. Competition for qualified personnel with knowledge of the
telecommunications industry and information technologies is intense, and there
can be no assurance that the Company will be successful in attracting and
retaining such personnel. The
8
<PAGE>
Company's future success will depend to a significant extent on the ability of
its current and future executive officers to operate effectively, both
independently and as a group. There can be no assurance that the Company's
personnel, systems, procedures and controls will be adequate to support the
Company's existing and future operations. Any failure to implement and improve
the Company's operating, financial and management systems or to expand, train,
motivate or manage employees could have a material adverse effect on the
Company's results of operations and financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant degree upon the continuing
contributions of its key management personnel including Andrew P. Maunder, its
President and Chief Executive Officer. The Company currently has employment
agreements with Mr. Maunder and four other of its key personnel for indefinite
terms that can be terminated by either the Company or the employee upon prior
written notice of one year or less. The loss of key management or technical
personnel could have a material adverse effect on the Company's results of
operations and financial condition.
RISKS ASSOCIATED WITH SALES TO INTERNATIONAL CUSTOMERS
Sales of products to international customers accounted for approximately
43.2%, 39.8% and 27.9% of the Company's total revenues for fiscal 1994, fiscal
1995 and fiscal 1996, respectively. International sales include sales to Puerto
Rico Telephone Co. and non-recurring sales in fiscal 1995 and fiscal 1996 to a
United Kingdom affiliate of the Company that were delivered to end users in the
United States. See "Certain Transactions." The Company expects that
international sales will continue to account for a significant portion of its
total revenues in future periods and expects that revenues from sales to
international customers will increase. Market acceptance of the Company's
products in international markets is important to the Company's future success,
but these markets are diverse and rapidly evolving, and it is difficult to
predict their potential size, future growth rate or the timing of their
development. In addition, access to international markets is often difficult due
to the established relationships between a government owned or controlled
communications company and its traditional indigenous suppliers of
communications products. Accordingly, there can be no assurance that the
Company's products will be widely accepted by the service providers in these
emerging markets or that the Company, directly or through its marketing
partners, will be able to penetrate these markets effectively.
The proposed further inroads into international markets will require
significant management attention and expenditure of significant financial
resources and could adversely affect the Company's operating margins. Sales to
international customers involve a number of inherent risks, sometimes including
extensive field testing and lengthier sales cycles than with domestic customers,
longer receivables collection periods and greater collection difficulty, less
flexibility as to hardware platforms, difficulty in staffing and managing
international operations, currency exchange rate fluctuations, the impact of
possible recessionary environments in economies outside the United States,
unexpected changes in regulatory requirements, including a slowdown in the rate
of privatization of carriers, reduced protection for intellectual property
rights in some countries and tariffs and other trade barriers. While some of
these factors may not affect the Company directly, to the extent that it sells
products through its marketing partners, these factors may affect the sales and
operations of its partners which in turn may adversely affect demand by the
partners for the Company's products. There can be no assurance that the Company
will be able to sustain or increase revenues derived from sales to international
customers or that the foregoing factors will not have a material adverse effect
on the Company's results of operations and financial condition.
Foreign currency exchange rate fluctuations in countries in which the
Company or its marketing partners sell the Company's products could have a
material adverse effect on the Company's results of operations and financial
condition by resulting in pricing that is not competitive with products priced
in local currencies.
9
<PAGE>
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's success is dependent in part upon its proprietary hardware and
software technology. The Company relies primarily on trademark, copyright and
trade secret laws, employee and third-party non-disclosure agreements and other
methods to protect its proprietary rights. There can be no assurance that its
agreements with employees, consultants and others who participate in the
development of its software will not be breached, that the Company will have
adequate remedies for any breach, or that the Company's trade secrets will not
otherwise become known to or independently developed by competitors.
Furthermore, there can be no assurance that the Company's efforts to protect its
rights through trademark and copyright laws will prevent the development and
design by others of products or technology similar to or competitive with those
developed by the Company. The computer technology industry is characterized by
frequent and substantial intellectual property litigation. The Company is not
aware of any patent infringement or any violation of other proprietary rights
claimed by any third party relating to the Company or the Company's products.
The Company's success will depend in part on its continued ability to obtain and
use licensed software and technology that is important to certain
functionalities of its products, including the real-time operating system and
other software utilized in the Sterling Series products, software for its
traffic management products and the software for its soon to be introduced fraud
detection and management product. The inability to continue to procure or use
such software or technology could have a material adverse effect on the
Company's results of operations and financial condition. See "Business--Products
and Related Services--New Products and Services" and "--Proprietary Rights and
Licenses."
CONTROL BY SECURICOR; ANTI-TAKEOVER PROVISIONS
Securicor currently owns all of the issued and outstanding capital stock of
the Company. After the Offering, Securicor is expected to own approximately 57%
of the outstanding Common Stock. Although the Company's Amended and Restated
By-Laws (the "By-laws") require a plurality of votes of all stockholders present
in person or by proxy at a stockholder meeting to elect directors and an
affirmative vote of two-thirds of all stockholders to take stockholder actions
other than the election of directors, Securicor would likely be able to control
most matters requiring approval by the Company's stockholders, including the
election of directors. See "Principal Stockholders" and "Shares Eligible for
Future Sale." In addition, the Company is subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law, which
prohibit the Company from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the time that
such person became an "interested stockholder" unless the business combination
is approved in a prescribed manner and in certain other specified circumstances.
These provisions, together with other provisions in the Company's Amended and
Restated Certificate of Incorporation (the "Certificate of Incorporation") and
By-laws, may discourage acquisition bids for the Company by persons unrelated to
certain existing stockholders. The effect of Securicor's stock ownership and
these provisions may be to limit the price that investors might be willing to
pay in the future for shares of the Common Stock or prevent or delay a merger,
takeover, or other change in control of the Company and thus discourage attempts
to acquire the Company. In addition, the Company's Board of Directors has the
authority to issue up to 5,000,000 shares of Preferred Stock and to determine
the designations, preferences, and relative, participating, optional and other
special rights, or qualifications, limitations or restrictions of those shares
without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company. The Company has no present plan
to issue any shares of Preferred Stock. The Certificate of Incorporation and
By-laws contain other provisions, such as the supermajority voting requirements
described above, notice requirements for stockholders and limitations on the
stockholders' ability to present proposals to the stockholders for a vote, all
of which may have the
10
<PAGE>
further effect of making it more difficult for a third party to gain control or
to acquire the Company. See "Description of Capital Stock."
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or be
sustained after the Offering. The initial public offering price will be
determined through negotiation between the Company and the Underwriters and may
bear no relationship to the price at which the Common Stock will trade after the
Offering. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. The market price of the Common
Stock may be volatile and may be significantly affected by factors such as
actual or anticipated fluctuations in the Company's operating results,
announcements of new products or services by the Company or its competitors,
developments with respect to conditions and trends in the information technology
or telecommunications industries, governmental regulation, changes in estimates
by securities analysts of the Company's or its competitors' or customers' future
financial performance, general market conditions and other factors, many of
which are beyond the Company's control. In addition, the stock market has from
time to time experienced significant price and volume fluctuations that have
adversely affected the market prices of securities of companies, irrespective of
such companies' operating performances.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Common Stock in the public market
following the Offering could adversely affect the market price of the Common
Stock. Upon the completion of the Offering, the Company will have 6,076,900
shares of Common Stock outstanding. Of these shares, the 2,600,000 shares of
Common Stock sold in the Offering will be freely tradeable without restriction
or further registration under the Securities Act of 1933, as amended (the
"Securities Act"). The remaining 3,476,900 shares of Common Stock outstanding as
of the date of this Prospectus are "restricted securities" as defined by Rule
144 under the Securities Act ("Rule 144"). All of these shares have been held by
Securicor for more than one year and will be eligible for sale in accordance
with the provisions of Rule 144 beginning 180 days from the date of this
Prospectus. In addition, the Company has entered into a Registration Rights
Agreement with Securicor (the "Registration Rights Agreement") pursuant to which
Securicor has the right, subject to customary limitations, to: (i) demand
registration of the resale of its Common Stock once every twelve months at
Securicor's expense for so long as Securicor owns at least 10% of the
outstanding Common Stock; and (ii) include its Common Stock in registration
statements filed by the Company.
Upon the completion of the Offering, there will be 325,000 shares of Common
Stock issuable upon exercise of options under the 1997 Stock Incentive Plan.
Approximately one-third of the options will be immediately exercisable, another
one-third will be exercisable in one year and the remaining one-third will be
exercisable in two years. The Company intends to file a registration statement
on Form S-8 covering the shares of Common Stock issuable upon exercise of
options within one year from the date of this Prospectus. The shares registered
under such registration statement will be available for resale in the open
market upon the exercise of options, subject to Rule 144 volume limitations
applicable to affiliates. See "Management--1997 Stock Incentive Plan."
The Company and Securicor have agreed that, for a period of 180 days after
the date of this Prospectus, they will not, without the prior written consent of
Lehman Brothers Inc., offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for any shares of Common Stock except, in the case of the Company,
in certain limited circumstances.
DILUTION
The initial public offering price is substantially higher than the net
tangible book value per share of the Common Stock. Purchasers of shares of
Common Stock in the Offering will, therefore, suffer immediate and substantial
dilution of $8.60 (assuming an initial public offering price of $12.00 per
share) in the pro forma net tangible book value per share of Common Stock. See
"Dilution."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of shares of Common Stock
hereby are estimated to be $28.2 million ($32.6 million if the Underwriters'
over-allotment options are exercised in full), assuming an initial public
offering price of $12.00 per share and after deducting the estimated
underwriting discounts and commissions and offering expenses payable by the
Company.
The Company anticipates applying approximately $9.6 million to repay the
principal and interest on outstanding indebtedness from Securicor and
approximately $10.9 million to pay a special dividend to Securicor (the
"Securicor Dividend"). See "Certain Transactions." The annual interest rate on
the interest-bearing portion of the indebtedness to Securicor averaged 6.9% for
the 12 month period ended March 31, 1997 and the principal amount is payable
upon demand. See "Certain Transactions." The Company intends to apply
approximately $1.6 million of the net proceeds to expand its Sterling Series
billing data collection system product line in order to address more effectively
the requirements of lower volume telecommunications switches. The Company also
intends to apply approximately $1.4 million to the development of interfaces
with switches utilized by wireless and international telecommunications systems.
The Company also intends to apply approximately $1.0 million to enhance its
international sales, marketing and support efforts. The remainder of the net
proceeds will be added to working capital to be used for general corporate
purposes.
The Company may seek acquisitions of businesses, products and technologies
that are complementary to those of the Company, and a portion of the net
proceeds may be used for such acquisitions. While the Company engages from time
to time in discussions with respect to potential acquisitions, the Company has
no plans, commitments or agreements with respect to any such acquisitions as of
the date of this Prospectus, and there can be no assurance that any such
acquisitions will be made. Pending such uses, the Company intends to invest the
net proceeds from the Offering in short-term, investment grade, interest-bearing
instruments.
DIVIDEND POLICY
The Company has not paid cash dividends on its capital stock during the last
three fiscal years. The Company currently expects it will retain its future
earnings for use in the operation and expansion of its business and, with the
exception of the Securicor Dividend, does not anticipate paying any cash
dividends in the foreseeable future.
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company as of
March 31, 1997, and (ii) the as adjusted capitalization which gives effect to
the sale of 2,600,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $12.00 per share and the application of the
estimated net proceeds therefrom. This table should be read in conjunction with
the Financial Statements of the Company and the Predecessor Business and Notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
--------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Obligations to parent and affiliates...................................................... $ 9,592 $ --
--------- -----------
--------- -----------
Stockholder's equity:
Preferred Stock, $0.01 par value, 5,000,000 shares authorized, no shares outstanding.... -- --
Common Stock, $0.01 par value, 25,000,000 shares authorized, 3,476,900 shares issued and
outstanding, actual; 6,076,900 shares issued and outstanding, as adjusted............. 35 61
Additional paid-in capital.............................................................. 10,815 28,180
Accumulated deficit..................................................................... (4,043) (4,043)
--------- -----------
Total stockholder's equity.......................................................... 6,807 24,198
--------- -----------
Total capitalization.............................................................. $ 16,399 $ 24,198
--------- -----------
--------- -----------
</TABLE>
12
<PAGE>
DILUTION
The net tangible book value of the Company as of March 31, 1997 was
$3,246,000 or $0.93 per share. Net tangible book value per share is determined
by dividing the net tangible book value of the Company (total tangible assets
less total liabilities) by the number of shares of Common Stock outstanding.
After giving effect to the sale by the Company of 2,600,000 shares of Common
Stock at an assumed initial public offering price of $12.00 per share (after
deducting the estimated underwriting discount and commission and estimated
offering expenses), and the application of the estimated net proceeds therefrom,
the as adjusted net tangible book value of the Company as of March 31, 1997,
would have been $20,637,000 or $3.40 per share. This represents an immediate
increase in net tangible book value of $2.47 per share to the existing
stockholder and an immediate dilution in as adjusted net tangible book value of
$8.60 per share to new investors purchasing Common Stock in the Offering. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $ 12.00
Net tangible book value per share before the
Offering................................................. $ 0.93
Net increase in net tangible book value per share
attributable to the Offering............................. 2.47
---------
As adjusted net tangible book value per share after the
Offering................................................... 3.40
---------
Dilution per share to new investors in the Offering (1)...... $ 8.60
---------
---------
</TABLE>
- ------------------------
(1) Based on the assumptions set forth above, the dilution to new investors
would be $8.17 per share if all outstanding options to purchase 325,000
shares of Common Stock expected to be granted prior to the completion of the
Offering were exercised in full at an exercise price of $12.00 per share of
Common Stock. See "Management--1997 Stock Incentive Plan" and
"Underwriting".
The following table sets forth, on an as adjusted basis (as described above)
as of March 31, 1997, the number of shares of Common Stock purchased from the
Company, the total consideration paid to the Company and the average price per
share paid by the existing stockholder and by the new investors purchasing
shares of Common Stock in the Offering, at an assumed initial public offering
price of $12.00 per share and before deducting estimated underwriting discounts
and commissions and offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------------- -------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholder.................................. 3,476,900 57.2% $ 10,850,000(1) 25.8% $ 3.12
New investors......................................... 2,600,000 42.8 31,200,000 74.2 12.00
------------ --- ------------- ---
Total........................................... 6,076,900 100% $ 42,050,000 100%
------------ --- ------------- ---
------------ --- ------------- ---
</TABLE>
- ------------------------
(1) The Company intends to pay a $10,850,000 special dividend to Securicor upon
the completion of the Offering. See "Use of Proceeds."
13
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table contains certain financial data of the Company and the
Predecessor Business and is qualified by the more detailed Financial Statements
and Notes thereto included elsewhere in this Prospectus. The statement of
operations data for the period from July 1, 1994 to September 30, 1994, the
fiscal years ended September 30, 1995 and 1996 and the balance sheet data as of
September 30, 1995 and 1996 have been derived from the Financial Statements of
the Company which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included elsewhere in this Prospectus.
The selected financial data for the Predecessor Business for the fiscal year
ended June 30, 1994 is derived from, and is qualified by reference to, the
statement of revenues and certain expenses which is included elsewhere in this
Prospectus. This statement has also been audited by Arthur Andersen LLP. The
statement of operations data for the fiscal years ended June 30, 1992 and 1993
of the Predecessor Business and for the six months ended March 31, 1996 and 1997
of the Company and the balance sheet data as of June 30, 1992, 1993 and 1994 for
the Predecessor Business and March 31, 1997 for the Company have been derived
from the unaudited financial statements. The unaudited financial statements, in
the opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
condition and results of operations for such periods. The results of operations
for the six months ended March 31, 1997 are not necessarily indicative of the
results that may be expected for any other interim period or for the entire
year. The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
14
<PAGE>
<TABLE>
<CAPTION>
SECURICOR TELESCIENCES INC.
----------------------------------------------------
PREDECESSOR BUSINESS (1) PERIOD FROM YEAR ENDED SIX MONTHS ENDED
YEAR ENDED JUNE 30, JULY 1, 1994 TO SEPTEMBER 30, MARCH 31,
------------------------- SEPTEMBER 30, ---------------- ----------------
1992 1993 1994 1994 1995 1996 1996 1997
------- ------- ------- --------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
REVENUES:
Unrelated third parties......................... $24,185 $21,698 $20,229 $ 5,606 $24,147 $31,641 $ 8,740 $10,921
Related parties................................. -- -- -- -- 1,421 2,323 2,040 --
------- ------- ------- ------- ------- ------- ------- -------
24,185 21,698 20,229 5,606 25,568 33,964 10,780 10,921
------- ------- ------- ------- ------- ------- ------- -------
COST OF REVENUES:
Unrelated third parties......................... 10,981 10,901 12,803 3,357 12,365 16,433 6,264 7,102
Related parties................................. -- -- -- -- 1,112 1,732 1,488 --
------- ------- ------- ------- ------- ------- ------- -------
10,981 10,901 12,803 3,357 13,477 18,165 7,752 7,102
------- ------- ------- ------- ------- ------- ------- -------
Gross profit...................................... 13,204 10,797 7,426 2,249 12,091 15,799 3,028 3,819
------- ------- ------- ------- ------- ------- ------- -------
OPERATING EXPENSES:
Research, development and engineering........... 4,106 4,913 5,450 1,348 5,948 7,003 3,209 3,790
Selling, general and administrative............. 6,313 4,986 4,985 1,072 5,206 6,308 2,970 3,875
Parent charges.................................. -- -- -- -- 386 403 213 193
Charge for purchased research and development
(2)........................................... -- -- -- 6,700 -- -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses...................... 10,419 9,899 10,435 9,120 11,540 13,714 6,392 7,858
------- ------- ------- ------- ------- ------- ------- -------
Operating income (loss)....................... $ 2,785 $ 898 $(3,009) (6,871) 551 2,085 (3,364) (4,039)
------- ------- ------- ------- ------- ------- ------- -------
------- ------- -------
INTEREST EXPENSE, net (including related party
interest)....................................... 9 112 514 227 279
OTHER INCOME...................................... 66 148 1,979 413 54
------- ------- ------- ------- -------
Income (loss) before
income taxes................................ (6,814) 587 3,550 (3,178) (4,264)
INCOME TAX (EXPENSE)
BENEFIT......................................... 2,716 (220) (1,358) 1,215 1,760
------- ------- ------- ------- -------
NET INCOME (LOSS)................................. $(4,098) $ 367 $ 2,192 $(1,963) $(2,504)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
PRO FORMA NET INCOME (LOSS) PER COMMON SHARE
(3)............................................. $ 0.49 $ (0.45)
------- -------
------- -------
SHARES USED IN COMPUTING PRO FORMA NET INCOME
(LOSS) PER COMMON SHARE(3)...................... 5,180 5,180
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
SECURICOR TELESCIENCES INC.
------------------------------------------
MARCH 31,
PREDECESSOR BUSINESS(1) 1997
JUNE 30, SEPTEMBER 30, ---------
------------------------------- -------------------------------
1992 1993 1994 1994 1995 1996 ACTUAL
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 765 $ 32 $ -- $ 225 $ 1,449 $ 3,326 $ 1,279
Working capital (deficit)................. 2,369 (1,389) 330 (11) (1,125) 2,257 865
Total assets.............................. 9,956 13,435 9,027 15,302 22,145 30,336 23,519
Obligations to parent and affiliates...... -- -- -- 1,753 7,611 12,441 9,592
Long-term debt............................ -- -- -- -- -- 147 --
Stockholder's equity...................... 5,007 1,363 2,330 6,752 7,119 9,311 6,807
<CAPTION>
AS
ADJUSTED(4)
-------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 9,078
Working capital (deficit)................. 18,256
Total assets.............................. 31,318
Obligations to parent and affiliates...... --
Long-term debt............................ --
Stockholder's equity...................... 24,198
</TABLE>
- ------------------------
(1) The statement of operations data presented for the Predecessor Business
represents the information for the Wireline Division of TeleSciences, Inc.
See Statement of Revenues and Certain Expenses for the Predecessor Business
and Notes thereto.
(2) Represents a one-time charge for purchased research and development which
was incurred as a result of the acquisition of the Predecessor Business by
the Company on July 1, 1994. The acquisition was accounted for under the
purchase method of accounting. See Notes 1 and 2 of Notes to Financial
Statements.
(3) See Note 2 of the Notes to Financial Statements for an explanation of the
computation of pro forma net income (loss) per common share.
(4) Adjusted to give effect to the sale by the Company of 2,600,000 shares of
Common Stock offered hereby (at an assumed initial public offering price of
$12.00 per share and after deducting the estimated underwriting, discount
and offering expenses) and the application of the net proceeds therefrom.
See "Use of Proceeds" and "Capitalization."
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company develops, markets and supports integrated hardware and software
systems that are able to collect and process an increasing volume of transaction
information from a wide variety of wireline switches and transmit the
information to the customer's information management networks. The Company is
developing systems that process transaction information from wireless, ATM and
other specialized telecommunications switches. The Company's customers use this
information to bill their subscribers, to implement customized marketing
programs and to perform other data management functions. The Company also
provides traffic management solutions to telecommunications companies. The
Company plans to offer its first applications software product, a fraud
detection and management system, by the end of calendar 1997 (first quarter of
fiscal 1998). The Company provides installation, ongoing maintenance, support
and training, as well as customized engineering services, related to the
Company's systems.
The Company is the successor to a corporation formed in 1967. The Company
was formed in July 1994 in connection with the acquisition of the assets of the
wireline division of TeleSciences, Inc. (the "Predecessor Business"). The
Company is a wholly owned subsidiary of Securicor Communications, an indirect
wholly-owned subsidiary of Securicor, a multinational public company based in
the United Kingdom. After the Offering, Securicor is expected to own
approximately 57% of the Company.
A significant portion of the Company's revenues have been, and are expected
to continue to be, derived from substantial orders placed by large
organizations, and in particular three RBOCs. Aggregate revenues from U S West,
Southwestern Bell and Ameritech accounted for 50.3%, 51.2% and 61.6% of the
Company's total revenues in fiscal 1994, fiscal 1995 and fiscal 1996,
respectively. During fiscal 1996, an additional 9.4% of the Company's revenues
was attributable to sales to Puerto Rico Telephone Co.
Domestic revenues are typically generated under cancelable general purchase
agreements which provide for the continuing supply of products and services over
future years. Pricing is based upon the volume of products ordered.
Internationally, the Company typically enters into long-term contracts for the
delivery of turn-key systems which include products and services. The Company's
revenues are difficult to forecast because the purchase of its systems generally
involves a significant commitment of capital and management time, which
generally results in lengthy sales cycles.
The Company generally recognizes revenues for products at the time of
shipment and for services when performed. Revenues from support and maintenance
contracts are recognized on a pro-rata basis over the term of the relevant
agreement.
Quarterly revenues are subject to substantial fluctuations due primarily to
the Company's concentration of customers and the timing of orders received. The
timing of orders is dependent, to a large extent, on the timing of the Company's
customers' annual budget process. Historically, the Company's first and second
fiscal quarters have generated a lower level of revenues compared to the
Company's third and fourth fiscal quarters, by which time the Company's
customers have typically approved their budgets. Historically, product and
service backlog has been a relatively small amount and the majority is fulfilled
within three months. Because of its close links to, and ongoing communications
with, its customers, the Company generally is able to plan for product demand
and, when the order is received, ship its products within a relatively short
time period thereafter.
Cost of revenues includes the direct cost of hardware and software modules,
other manufacturing costs related to the assembly and testing of products,
customer service costs, agent commissions where applicable, and other variable
costs such as freight, scrap and installation materials. The Company has a
relatively high fixed cost base which is included in cost of revenues. As a
result, fluctuations in revenues have a significant effect on margins.
16
<PAGE>
Research, development and engineering expenses consist of payroll and
related expenses and other costs associated with the design and development of
the Company's products. These costs are charged to expense as incurred.
Selling, general and administrative expenses consist of costs to support the
Company's sales, marketing and administrative functions. Included within these
costs are payroll and related expenses, supplies, travel, outside services, as
well as the cost of the Company's participation in trade shows, industry
conferences and related travel and promotional costs.
RESULTS OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1997 COMPARED TO MARCH 31, 1996
REVENUES
Revenues attributable to unrelated third parties ("Third-party Revenues")
increased by 25.0% from $8.7 million for the six months ended March 31, 1996 to
$10.9 million for the same period in 1997. This increase resulted primarily from
larger shipments to existing RBOC customers and the addition of several new
customers. In fiscal 1995 and fiscal 1996, the Company experienced a significant
concentration of revenues in the fourth fiscal quarter. As a result, revenues
were lower in the first two quarters of fiscal 1996 and fiscal 1997. See
"--Quarterly Results of Operations." For the six months ended March 31, 1996,
the Company recognized $2.0 million of one-time related-party revenues. These
revenues were attributable to sales to a Securicor affiliate, that generated
approximately $3.7 million in revenues from January 1995 to April 1996. See
"Certain Transactions."
GROSS PROFIT
The portion of gross profit attributable to Third-party Revenues increased
from 28.3% of such revenues for the six months ended March 31, 1996 to 35.0% of
such revenues for the same period in 1997. This increase resulted primarily from
the increase in Third-party Revenues. The Company has a relatively high fixed
cost base which is included in cost of revenues. As a result, fluctuations in
revenues have a significant effect on margins. Total gross profit as a
percentage of total revenues increased from 28.1% for the six months ended March
31, 1996 to 35.0% for the same period in 1997.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering expenses increased 18.1% from $3.2
million for the six months ended March 31, 1996 to $3.8 million for the same
period in 1997 and decreased as a percentage of Third-party Revenues from 36.7%
to 34.7%. The absolute increase resulted primarily from the addition of
engineering staff and subcontractors to support the increasing development
requirements and demanding timetables of the Company's customers.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 30.5% from $3.0
million for the six months ended March 31, 1996 to $3.9 million for the same
period in 1997. As a percentage of Third-party Revenues, selling, general and
administrative expenses increased from 34.0% for the six months ended March 31,
1996 to 35.5% for the same period in 1997. The absolute increase resulted
primarily from the addition of staff in the marketing and sales departments of
the Company. The increase in marketing and sales staff was a result of the
Company's increased focus on developing new markets and expanding existing
markets for the Company's products.
17
<PAGE>
PARENT CHARGES
After the acquisition of the Predecessor Business, Securicor began to charge
the Company an allocated portion of group and divisional overhead costs (the
"Parent Charges"). The Parent Charges for the six months ended March 31, 1996
and 1997 were $213,000 and $193,000, respectively. The Company will not incur
any Parent Charges after the Offering. The Company and Securicor have entered
into an agreement effective upon the completion of the Offering pursuant to
which Securicor will provide international marketing services to the Company for
an annual charge of $160,000. In addition, the Company will pay each of its
directors who are employees of Securicor annual directors fees of $20,000, which
the directors will remit to Securicor. See "Management--Director Compensation"
and "Certain Transactions."
INTEREST EXPENSE
Interest expense was $227,000 for the six months ended March 31, 1996 and
$279,000 for the same period in 1997. This increase resulted from higher
borrowings from Securicor to meet working capital requirements. Upon the
consummation of the Offering, the borrowings from Securicor will be fully
repaid. As a result, the Company's interest expense is expected to decrease. See
"Use of Proceeds."
OTHER INCOME
Other income decreased from $413,000 for the six months ended March 31, 1996
to $54,000 for the same period in 1997. A litigation settlement gain of $350,000
was recognized in the first quarter of fiscal 1996.
INCOME TAXES
The Company's effective tax rate was 38.3% for the six months ended March
31, 1996 and was 41.3% for the same period in 1997. Income tax benefits were
recorded in both periods due to the losses incurred based upon the expected
annual effective income tax rate.
FISCAL 1996 COMPARED TO FISCAL 1995
REVENUES
Third-party Revenues increased 31.0% from $24.1 million in fiscal 1995 to
$31.6 million in fiscal 1996, of which $15.7 million was recognized in the
fourth fiscal quarter. Upon the acquisition of the Predecessor Business on July
1, 1994, the Predecessor Business had three principal customers: U S West,
Ameritech and Telecom Argentina. Since the acquisition, the Company has
increased its customer base. The increase in revenues in fiscal 1996 resulted,
in large part, to increased revenues from U S West and Southwestern Bell.
Internationally, the Company generated revenues from the Puerto Rico Telephone
Co. which were offset by lower revenues from long-term contracts with Telecom
Argentina and two Brazilian telephone operators, which contracts were
substantially completed in early fiscal 1996. Third-party Revenues from
international customers were $8.8 million in fiscal 1995 and $7.2 million in
fiscal 1996. The Company expects international revenues to continue to be
significant in future periods as a result of the Company's planned expansion of
its international marketing efforts. In fiscal 1995 and fiscal 1996, the Company
also generated related party revenues from sales to an affiliate of Securicor of
$1.4 million and $2.3 million, respectively, which will not recur in fiscal
1997.
GROSS PROFIT
The portion of gross profit attributable to Third-party Revenues was 48.8%
of such revenues in fiscal 1995 and 48.1% of such revenues in fiscal 1996. Total
gross profit as a percentage of total revenues remained substantially constant
in fiscal 1995 and 1996.
18
<PAGE>
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering expenses increased 17.7% from $5.9
million in fiscal 1995 to $7.0 million in fiscal 1996. As a percentage of
Third-party Revenues, research, development and engineering expenses decreased
from 24.6% in fiscal 1995 to 22.1% in fiscal 1996. The absolute increase in such
expenses related primarily to the further development and enhancement of the
Company's Sterling Series billing data collection products. Included in
research, development and engineering expenses for fiscal 1995 and fiscal 1996
were $720,000 of amortization related to developed technology acquired with the
purchase of the Predecessor Business in July 1994. Research, development and
engineering expenses are expected to increase in fiscal 1997.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 21.2% from $5.2
million in fiscal 1995 to $6.3 million in fiscal 1996. As a percentage of
Third-party Revenues, selling, general and administrative expenses decreased
from 21.6% in fiscal 1995 to 19.9% in fiscal 1996. The absolute increase
resulted primarily from higher selling expenses related to higher sales volumes
and increased marketing expenses incurred in connection with trade shows,
advertising and other marketing activities.
PARENT CHARGES
Parent Charges were $386,000 in fiscal 1995 and $403,000 in fiscal 1996.
Prior to July 1, 1994 (date of acquisition of Predecessor Business) there were
no Parent Charges.
INTEREST EXPENSE
Interest expense was $112,000 in fiscal 1995 and $514,000 in fiscal 1996.
The increase in fiscal 1996 resulted from higher outstanding borrowings from
Securicor incurred in order to meet working capital requirements.
OTHER INCOME
Other income increased from $148,000 in fiscal 1995 to $2.0 million in
fiscal 1996. During fiscal 1996, the Company sold an investment and recognized a
gain of $1.5 million. In addition, a litigation settlement gain of $350,000 was
recognized in the first quarter of fiscal 1996.
INCOME TAXES
The Company's effective tax rate was 37.5% and 38.3% for fiscal 1995 and
fiscal 1996, respectively. The increase in such rate in fiscal 1996 resulted
from the higher utilization of research and development credits in fiscal 1995.
FISCAL 1995 OF THE COMPANY COMPARED TO THE FISCAL 1994 OF THE PREDECESSOR
BUSINESS (PREDECESSOR FISCAL YEAR ENDED JUNE 30, 1994)
BACKGROUND
The Company was formed in connection with the acquisition of the assets of
the Predecessor Business on July 1, 1994. The following analysis compares the
results of the Company's fiscal 1995 (year ended September 30, 1995) with the
results of the Predecessor Business' fiscal 1994 (year ended June 30, 1994).
REVENUES
Third-party Revenues increased 19.4% from $20.2 million in fiscal 1994 to
$24.1 million in fiscal 1995. Revenues increased in fiscal 1995 primarily as a
result of the addition of new customers, in particular two Brazilian telephone
operators and Southwestern Bell, and increased revenues from U S West. The
Company introduced the Sterling Series billing data collection products at the
end of fiscal 1995 as the
19
<PAGE>
successor to its SEBX Series billing data collection products which the Company
had introduced in the 1980s. A majority of the fiscal 1995 billing data
collection product revenues were derived from sales of Sterling Series products.
In fiscal 1995, the Company generated related party revenues from sales to an
affiliate of Securicor of $1.4 million.
GROSS PROFIT
The portion of gross profit attributable to Third-party Revenues increased
from 36.7% of such revenues in 1994 to 48.8% of such revenues in fiscal 1995,
reflecting the benefits of spreading higher revenues over the Company's fixed
cost base. The gross profit percentage in fiscal 1994 was lower as the volume of
fiscal 1994 revenues were lower.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering expenses increased 9.1% from $5.5
million in fiscal 1994 to $5.9 million in fiscal 1995 and decreased as a
percentage of Third-party Revenues from 26.9% in fiscal 1994 to 24.6% in fiscal
1995. The absolute increase in such expenses was attributable primarily to the
further development and enhancement of the Company's billing data collection
products.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased 4.4% from $5.0
million in fiscal 1994 to $5.2 million in fiscal 1995. As a percentage of
Third-party Revenues, selling, general and administrative expenses decreased
from 24.6% in fiscal 1994 to 21.6% in fiscal 1995. The absolute increase was
attributable to increased selling expenses which are related to sales volume
increases, increased marketing expenses in the areas of advertising and other
marketing activities.
PERIOD FROM JULY 1, 1994 TO SEPTEMBER 30, 1994
REVENUES
This period represents the first three months of activity under Securicor
ownership. For the period from July 1, 1994 to September 30, 1994, total
revenues were $5.6 million. A majority of these revenues was generated from
sales to three customers: Telecom Argentina, Ameritech and U S West.
International revenues represented $2.7 million or 48.0% of total revenues.
GROSS PROFIT
Gross profit as a percentage of total revenues was 40.1% for the period from
July 1, 1994 to September 30, 1994. The gross profit percentage was lower than
in fiscal 1995 and fiscal 1996 as a result of the lower level of annualized
revenues for this period.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, development and engineering expenses were $1.3 million for the
period from July 1, 1994 to September 30, 1994 or 24.0% of total revenues. These
expenses as a percentage of total revenues were generally consistent with those
of fiscal 1995 and fiscal 1996.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses were $1.1 million for the
period from July 1, 1994 to September 30, 1994 or 19.1% of total revenues. These
expenses as a percentage of total revenues were generally consistent with those
of fiscal 1995 and fiscal 1996.
CHARGE FOR PURCHASED RESEARCH AND DEVELOPMENT
The charge for purchased research and development of $6.7 million in the
period from July 1, 1994 to September 30, 1994 represents a one-time charge
related to purchased research and development in
20
<PAGE>
connection with the acquisition of the Predecessor Business. This charge relates
to incomplete research and development projects which had not yet reached
technological feasibility as of the acquisition date and had no alternate future
uses.
QUARTERLY RESULTS OF OPERATIONS
The following table presents certain unaudited quarterly financial
information for each quarter in the 1995 and 1996 fiscal years and the first and
second quarter of fiscal 1997. In the opinion of the Company's management, this
information has been prepared on the same basis as the Financial Statements
appearing elsewhere in this Prospectus and includes all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the financial
results set forth herein. Results of operations for any previous quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1996
-------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEC. 31 MARCH 31 JUNE 30 SEPT. 30 DEC. 31 MARCH 31 JUNE 30 SEPT. 30
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 6,746 $ 4,237 $ 6,299 $ 8,286 $ 4,912 $ 5,868 $ 7,466 $ 15,718
Cost of revenues........ 3,573 2,898 3,195 3,811 3,601 4,151 4,449 5,964
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit............ 3,173 1,339 3,104 4,475 1,311 1,717 3,017 9,754
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating expenses:
Research, development
and engineering....... 1,287 1,469 1,562 1,630 1,522 1,687 1,936 1,858
Selling, general and
administrative........ 1,148 1,309 1,357 1,392 1,549 1,421 1,559 1,779
Parent charges.......... 93 93 93 107 97 116 120 70
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses.............. 2,528 2,871 3,012 3,129 3,168 3,224 3,615 3,707
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income
(loss)................ 645 (1,532) 92 1,346 (1,857) (1,507) (598) 6,047
Interest expense, net... 36 17 53 6 107 120 124 163
Other income
(expense)............. -- -- 7 141 397 16 1,571 (5)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
income taxes.......... 609 (1,549) 46 1,481 (1,567) (1,611) 849 5,879
Income tax (expense)
benefit............... (228) 580 (17) (555) 599 616 (324) (2,249)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)....... $ 381 $ (969) $ 29 $ 926 $ (968) $ (995) $ 525 $ 3,630
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<CAPTION>
FISCAL 1997
------------------------
<S> <C> <C>
DEC. 31 MARCH 31
----------- -----------
<S> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 3,711 $ 7,210
Cost of revenues........ 3,161 3,941
----------- -----------
Gross profit............ 550 3,269
----------- -----------
Operating expenses:
Research, development
and engineering....... 1,943 1,847
Selling, general and
administrative........ 2,043 1,832
Parent charges.......... 96 97
----------- -----------
Total operating
expenses.............. 4,082 3,776
----------- -----------
Operating income
(loss)................ (3,532) (507)
Interest expense, net... 150 129
Other income
(expense)............. 27 27
----------- -----------
Income (loss) before
income taxes.......... (3,655) (609)
Income tax (expense)
benefit............... 1,442 318
----------- -----------
Net income (loss)....... $ (2,213) $ (291)
----------- -----------
----------- -----------
</TABLE>
Quarterly revenues are subject to substantial fluctuations primarily
resulting from the Company's concentration of customers and the timing of orders
received. The timing of orders is dependent, to a large extent on the timing of
the Company's customers' annual budget process. Historically, the Company's
first and second fiscal quarters have generated a lower level of revenues
compared to the Company's third and fourth fiscal quarters, by which time the
Company's customers have typically approved their budgets. The Company's
operating results may fluctuate significantly from quarter to quarter or on an
annual basis in the future as a result of a number of factors, including but not
limited to the size and timing of customer orders; the length of the Company's
sales cycle; timing of product announcements and introductions by the Company
and its competitors; the Company's ability to develop, introduce and market new
products and product enhancements; market acceptance of the Company's products;
deferrals of customer orders in anticipation of new products or product
enhancements; the Company's ability to control costs; the availability of
components; political instability in, or trade embargoes with respect to,
foreign markets; changes in the Company's management team; and fluctuating
economic conditions. The Company's future operating results may fluctuate as a
result of these and other factors, which could have a material adverse effect on
the Company's business, results of operations and financial condition. See "Risk
Factors-- Difficulty in Forecasting Revenues; Long Sales Cycles; Reliance on
Large Orders; Non-recurring Nature of Sales; Fluctuations in Quarterly Results."
21
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since the acquisition of the Predecessor Business by Securicor in July 1994,
the Company has financed its operations to date primarily with cash generated
from operations and borrowings from Securicor. Prior to July 1994, the
Predecessor Business had a credit facility with a bank, and this facility, along
with loans from certain stockholders was used to fund working capital
requirements. As of March 31, 1997, the Company had $1.3 million of cash, $8.0
million in net trade accounts receivable, and $865,000 of working capital.
Net cash used in operating activities was $1.9 million and $2.5 million in
fiscal 1995 and 1996, respectively, and net cash provided by operating
activities was $614,000 for the six months ended March 31, 1997. In fiscal 1995,
an increase in accounts receivable of $2.1 million, an increase in inventories
of $2.4 million and a decrease in other accrued expenses of $1.3 million were
only partially offset by a $1.1 million increase in accounts payable. In fiscal
1996, increases in accounts receivable of $8.3 million were only partially
offset by the cash provided by the sum of net income, adjusted for $1.9 million
in non-cash charges, and a $1.1 million increase in accrued taxes payable. For
the six months ended March 31, 1997, decreases in accounts receivable of $7.7
million were only partially offset by the net loss of $2.5 million and a $3.9
million decrease in accrued taxes payable.
Net cash used in investing activities was $2.7 million and $306,000 in
fiscal 1995 and 1996, respectively, and the net cash provided by investing
activities was $335,000 for the six months ended March 31, 1997. In fiscal 1995,
fiscal 1996 and for the six months ended March 31, 1997, purchases of property
and equipment were $877,000, $818,000 and $751,000, respectively. In fiscal
1997, the Company generated cash of $1.1 million due to the transfer of
technology to an affiliate.
Net cash provided by financing activities was $5.9 million and $4.7 million
in fiscal 1995 and fiscal 1996, respectively, and the net cash used in financing
activities was $3.0 million for the six months ended March 31, 1997. These
amounts resulted primarily from funding which the Company received from
Securicor. The Company repaid $2.8 million to Securicor during the six months
ended March 31, 1997.
The Company's funding requirements, outside of those generated from
operations have been satisfied from borrowings from Securicor. The Company's
obligations to its parent and affiliates was $12.4 million and $9.6 million at
September 30, 1996 and March 31, 1997, respectively. As of March 31, 1997, $9.0
million of the obligation bears interest at 1% over Securicor's borrowing rate.
The remaining portion of the obligation is interest free. The Company
anticipates applying approximately $9.6 million from the proceeds of the
Offering to repay the principal and interest on outstanding indebtedness from
Securicor and $10.9 million to pay the Securicor Dividend. The annual interest
rate on the interest-bearing portion of the indebtedness to Securicor averaged
6.9% for the 12 month period ended March 31, 1997 and the principal amount is
payable upon demand. See "Certain Transactions." The Company does not expect to
borrow from Securicor after the completion of the Offering.
The Company is in the process of establishing commercial banking
relationships. Discussions are ongoing to establish a credit facility which will
be used to meet short-term borrowing requirements.
The Company believes that the existing cash balances, as well as the net
proceeds from this Offering will be sufficient to meet the Company's cash
requirements during the next twelve months. However, depending upon its rate of
growth and profitability, the Company may require additional equity or debt
financing to meet its working capital requirements or capital expenditure needs.
There can be no assurance that additional financing, if needed, will be
available when required or, if available, on terms satisfactory to the Company.
INFLATION AND FOREIGN EXCHANGE
To date, inflation and foreign currency fluctuations have not had a material
impact on the Company's financial condition and results of operations. All sales
arrangements with third-party international customers are denominated in U.S.
dollars.
22
<PAGE>
BUSINESS
GENERAL
The Company is a leader in providing comprehensive billing data collection
solutions to providers of local, long-distance and other advanced
telecommunications services. The Company's largest customers include RBOCs, such
as Ameritech, Southwestern Bell and U S West, and international providers of
telecommunications services, such as Telecom Argentina. The Company develops,
markets and supports integrated hardware and software systems that are able to
collect and process an increasing volume of transaction information from a wide
variety of wireline telecommunications switches and transmit this information to
the customer's information management networks. The Company also is developing
systems that process transaction information from wireless, ATM and other
specialized telecommunications switches. The Company's customers use this
information to bill their subscribers, to implement customized marketing
programs and to perform other data management functions. The Company also
provides traffic management solutions to telecommunications companies such as
TELESP, a Brazilian telecommunications service provider. The Company plans to
offer its first applications software product, a fraud detection and management
system, by the end of calendar 1997. The Company provides installation, ongoing
maintenance, support and training, as well as customized engineering services,
related to the Company's systems.
The telecommunications industry is currently experiencing rapid growth and
change resulting from the combined effects of regulatory, competitive and
technological developments. To comply with regulatory requirements and to be
successful in increasingly competitive markets, telecommunications providers are
being required to upgrade their existing data collection systems to new systems
that can process large volumes of transaction information without compromising
the integrity of the billing stream and can efficiently transmit the information
for use by increasingly sophisticated and varied data management applications.
The Company believes that it provides to large wireline customers the most
advanced and reliable billing data collection systems and that it is the leader
in designing these systems to meet the AMADNS generic requirements established
in 1994. A critical feature of the Company's systems is redundancy, permitting
them to protect the integrity of call detail records ("CDRs") and provide
"financial grade" reliability (greater than 99.999% system availability). The
Company's products also are capable of delivering transaction information on a
real-time basis. Reflecting the engineering expertise acquired through the
Company's 30 year history, the Company's products offer a high degree of
connectivity, permitting them to interface with switches from all major domestic
and most international wireline switch manufacturers, including Northern Telecom
Inc., Lucent Technologies Inc., Siemens AG, L.M. Ericsson Telephone Co. and NEC
Corp. The Company's systems utilize an open systems architecture, permitting
them to interface with other elements of the customer's data collection network
and with virtually any billing processing or other information management
application. The Company's systems also are scaleable, thereby allowing them to
handle a large range of call volumes. The systems can be configured with
proprietary software applications that provide a wide variety of preprocessing
functions such as filtering (extracting data that meet preset criteria),
distribution (directing predetermined data to certain specialized applications)
and reformatting (rearranging input data into a user-defined output format).
INDUSTRY BACKGROUND
GENERAL
Historically, the telecommunications industry has been characterized by
significant governmental regulation or ownership and limited competition. In
this environment, telecommunications services consisted primarily of local and
long distance telephone service over traditional wirelines. More recently,
deregulation and privatization of telecommunications services have led to
increased intra-industry, cross-industry and geographic competition. In February
1996, the Telecommunications Act of 1996 (the "Telecommunications Act") was
enacted into law in the United States. The stated purposes of the
23
<PAGE>
Telecommunications Act were to reduce regulations, promote competition and
encourage the rapid employment of new telecommunications technologies. The
Telecommunications Act is expected to increase competition in the
telecommunications services market in the United States by allowing local, long
distance and cable television companies to offer competing services provided
they meet specified regulatory benchmarks.
Internationally, privatization and deregulation are resulting in similar
increases in competition, the emergence of newly authorized telecommunications
service providers and the provision of additional features over a variety of
media. The European Union is scheduled to implement a new regulatory scheme in
1998 that will permit a variety of telecommunications providers to offer
traditional local and long-distance services within each geographic market. In
addition, in February 1997, an agreement was reached through the World Trade
Organization to significantly increase international access to the
telecommunications markets of its 69 member countries, subject to certain
official ratifications. Technological advances and global expansion by
multi-national service carriers are also opening markets in less developed
countries to enhanced telecommunications services and increased competition.
In response to these regulatory changes, many telecommunications service
providers are expected to compete by offering multiple services, including
combinations of local exchange, long distance, wireless and data communications
services to customers in single or multiple geographic markets without the delay
or limitations historically imposed by regulatory approvals. In some local
markets, multiple vendors have already begun to offer competing local exchange
services and the local exchange markets are fragmenting into wholesale and
retail markets.
COMPETITION IN LOCAL EXCHANGE MARKETS
The entry of competitive local exchange companies ("CLECs") into markets
traditionally monopolized by existing or "incumbent" local exchange companies
("ILECs") (in the U.S., typically an RBOC) is expected to increase the need for
all participants in each local market to monitor closely and use effectively all
relevant data regarding each call transaction. Some CLECs are building their own
physical infrastructure of wireline, wireless and other transmission systems
while most other CLECs initially seek to provide dial-tone services to their
customers by purchasing wire access from the ILECs that own the physical
wireline infrastructure. CLECs that are commercial resellers of wire access
rights generally do not have any billing infrastructure of their own, but either
subcontract such services to a service bureau or piggyback on the ILEC's system.
In response to the entry of CLECs and other competitive factors, ILECs have
sought to reduce expenses, often by reducing staff. In addition, ILECs and other
telecommunications providers are seeking to differentiate themselves by
improving existing services and rapidly introducing new services, including
high-speed data services, video teleconferencing, video-on-demand, home shopping
and home banking. The availability of new and enhanced services has fueled a
dramatic increase in usage of telecommunications services by organizations and
individuals placing additional burdens on existing telecommunications
infrastructures. As a result of these factors, an ILEC's billing system must be
increasingly automated to reduce personnel expenses and must meet new demands
for real-time access to transactional and other data by third parties such as
CLECs and their customers and demands for more sophisticated uses of such data.
GROWTH AND CONVERGENCE OF TELECOMMUNICATIONS MARKETS
All segments of the telecommunications services industry are experiencing
change and convergence. Providers of telecommunications services through
traditional wirelines, including providers of local, long-distance, network
access and related services, provide services to approximately 165 million
access lines in the U.S., generating more than $178 billion in revenue in 1995.
Deregulation has spurred the creation of new entrants in both the local and long
distance market and has increased competitive pricing pressures among all
providers. RBOCs and long-distance providers compete with providers of cellular
and other
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<PAGE>
wireless services through the purchase of cellular companies and licences to
offer personal communications services ("PCS"), while such wireline providers
are examining opportunities in the cable market. At the same time, utility
companies are leveraging their existing electrical and fiber optic
infrastructures to provide telecommunications services to their customers. In
addition, on-line service providers, such as Prodigy, America Online and
CompuServe, and the growing use of organization-specific intranets have
generated a large and rapidly growing market for a range of services including
electronic mail, home shopping, news and access to the Internet and other
information, at present largely through existing wireline networks. The
availability of new and enhanced services has fueled a growth in the usage of
telecommunications services by organizations and individuals, placing additional
burdens on existing telecommunications infrastructures and increasing the demand
by users and services providers alike for accurate transaction information and
effective tools with which to process that information.
As companies enter other telecommunications market segments and the resale
of local exchange services becomes more widespread, there will be an increasing
need for systems that can: (i) handle the interchange of billing and other
information between wholesale and retail providers; (ii) capture additional
transactional and traffic data necessary to optimize the overall wholesale
network configuration; and (iii) enhance Decision Support Systems ("DSSs") that
enable providers to understand their customers better and to deliver new
products to precisely targeted customer segments.
GROWING IMPORTANCE OF DATA MANAGEMENT IN THE TELECOMMUNICATIONS INDUSTRY
The growing complexity of the telecommunications industry increasingly
demands that telecommunications service providers develop more effective billing
processing and other data management systems. As a result of the changes
initiated by the Telecommunications Act, ILECs now must share their physical
infrastructure, including their switches and their related operations support
systems ("OSSs"), with CLECs. Similar changes are occurring in the European
Union and other parts of the world. All participants, whether they be customers
or providers, increasingly demand accurate, real-time information with respect
to each call transaction, whether such information is used for traditional
billing functions or for more advanced marketing and customer-care applications.
Transactional billing, therefore, is no longer a simple process of matching
specific calling events with a single provider's subscriber database. Call
transaction data must be collected, processed and distributed so that they can
be used for multiple purposes by multiple users. Calls reported at a single
switch may be initiated by customers of several different service providers
requiring that data be distributed via different media to several separate
billing and rating services. New features and pricing options adopted by
services providers require that billing data systems perform more processing
steps as sophisticated rating functions require more attention to specific CDR
attributes. Also, providers are increasingly aware of the significance of the
bill as a channel for communicating with the customer. Customer retention can be
enhanced through a clear and readable presentation of relevant billing data that
is useful both to verify charges and to serve other functions for the customer.
Effective billing data collections systems will be especially critical for
ILEC's wholesale operations that interconnect with, and face competition from, a
growing number of CLECs.
Most telecommunications service providers do not currently have in place
billing data collection systems capable of handling the call volumes or the data
processing needs that exist in the current marketplace. Many of the larger
telecommunications service providers have traditionally used billing systems
that were typically mainframe-based, with proprietary software written in early
generation programming languages. As a result, these "legacy" systems were not
designed for rapid deployment or adaptation and are not easily customized to fit
specific business needs. Also, telecommunications service providers often
continue to use a wide variety of switch technologies and to connect these
switches with their billing data collection and data management systems by a
wide range of data transmission media. Legacy systems often cannot be integrated
with other information sources within a provider's organization, or databases
outside an organization. In order to keep pace with the enormous growth in the
number of subscribers, and the proliferation of services offered, the Company
expects telecommunications service providers, including the RBOCs, increasingly
to adopt more flexible OSSs and more sophisticated
25
<PAGE>
information services applications and to attempt to integrate such upgraded
systems with their existing core billing systems. This approach to system
enhancement requires that each provider maintain or have access to a flexible
and reliable system for gathering billing information from all sources,
processing the information and delivering information to the wide variety of
systems environments in which its software applications are executed.
In this rapidly-changing and competitive environment, telecommunications
service providers increasingly require solutions that:
- offer a high degree of integrity and reliability in billing, customer
communications and customer-care functions;
- enable the delivery of data to a variety of billing and data management
applications on a real-time basis;
- interface with a wide variety of telecommunications switches and integrate
seamlessly with providers' existing billing processing and other
information management systems so that providers can use the data
historically generated solely for billing purposes as an integral part of
their marketing and customer-care efforts and for other strategic
purposes;
- provide scaleable solutions that allow providers cost-effectively to
increase processing capacity and functionality to meet rising call volumes
and more sophisticated data management needs;
- enable providers to monitor, manage and optimize their network
configurations and the flow of traffic over those networks; and
- offer a variety of preprocessing functions that format data downloaded
from switches and transmit the data to information management systems in a
form that enhances the systems' efficiency and functionality.
THE COMPANY'S SOLUTIONS
The Company develops, markets and supports integrated hardware and software
systems that provide comprehensive billing data collection solutions designed to
collect, process and transmit transaction information from a variety of
telecommunications switches to customers' billing processing and other
information management systems. The Company believes that its extensive
experience in supplying products to wireline customers provides it with a
competitive advantage in meeting those customers' current needs.
The Company's billing data collection systems offer solutions that decrease
providers' costs and increase their productivity by incorporating the following
advantages:
- FINANCIAL GRADE RELIABILITY--The Company's systems make available features
that provide "financial grade" reliability (greater than 99.999% system
availability) while also performing various preprocessing functions,
thereby protecting customers against loss of revenues.
- REAL-TIME PROCESSING--The Company's systems can provide real-time
processing (I.E., the ability to process and deliver CDRs within five
minutes of receipt) which is critical to certain advanced applications,
including billing and rating functions, as well as fraud detection and
management and customer care.
- CONNECTIVITY--The Company's engineering expertise acquired through the
Company's 30-year history enables its billing data collection systems to
interface with switches from all major domestic and most major
international wireline switch manufacturers. For telecommunications
companies facing a lack of industry standards for switch interfaces and
data formats, the Company's products provide the ability to standardize
transactional data for use by their data management systems. The Company
plans to develop interfaces to accommodate additional international and
wireless switches, thereby enabling the Company's systems to service
integrated domestic and international wireline and wireless operations.
26
<PAGE>
- OPEN SYSTEMS ARCHITECTURE--The Company's products utilize an overall open
systems architecture that results in several important benefits: (i)
standard interfaces enable the Company's products to connect with other
customer network elements; (ii) adherence to network management protocols
enables the Company's products to be managed as a system; and (iii)
applications programming interfaces developed by the Company enable its
products to interface effectively with the customers' applications
software. The Company believes that this open design adds greatly to the
value of its products and increases its opportunities in the marketplace.
- SCALEABILITY--The Company's systems can be configured to handle a wide
range of transaction data volumes, thereby permitting customers to
increase capacity over time on a cost-effective basis. Customers
frequently can reduce their personnel costs and increase productivity
because the Company's systems utilize fewer hardware units than systems
using prior technology, thereby requiring fewer operators.
- FLEXIBLE FUNCTIONALITY AND COST-EFFECTIVENESS--The Company's systems can
be configured with a variety of specialized processing modules to provide
a variety of preprocessing functions, thereby allowing customers to avoid
ongoing adjustments to their mainframe software and to free mainframe
capacity to handle the increased demand that will be placed on billing and
rating systems in the future.
The Company's traffic management system, the Autrax 5000, provides
telecommunications companies with real-time traffic data to detect and locate
quickly exchange and network problems, plan and route strategically call traffic
through the network, improve the overall quality of service and reduce
significantly customer complaints. The system supports open systems standards
and utilizes an object-oriented graphical-user interface ("GUI") development
tool. It provides flexible traffic measurement and analysis through standard
UNIX and Windows NT reporting tools.
The Company intends to introduce a fraud detection and management system by
the end of calendar 1997 which will be its first software applications product
that can be utilized separately from, as well as together with, the Company's
systems products. The software utilized in the product is licensed from a
company in the United Kingdom where a substantially similar product is currently
in commercial use.
STRATEGY
The Company's objective is to leverage its position as the leading provider
of comprehensive billing data collection systems to RBOCs to become the leading
provider of those systems and related products and services to
telecommunications and information providers domestically and internationally.
The Company's strategy to achieve this objective includes the following key
elements:
- EXPAND RELATIONSHIPS WITH WIRELINE CUSTOMERS. The Company has addressed
the demand from its domestic and international wireline customers for
increasingly sophisticated billing and other information by introducing
its Sterling Series line of billing data collection products at the end of
1995. Sales to the Company's three main RBOC customers, Ameritech,
Southwestern Bell and U S West, equaled $20.9 million in fiscal 1996. The
Company believes that these customers have replaced less than 25% of their
prior generation billing data collection units and that these customers
will replace the balance of their prior generation units, and purchase
additional products and services from the Company, over the next three to
five years. The Company also believes that there is a significant
opportunity to sell Sterling Series products to other RBOCs and other
wireline customers worldwide.
- CONTINUE TO EXPAND SALES TO NEW TELECOMMUNICATIONS MARKETS. The rapidly
evolving telecommunications business environment is resulting in a large
number of new telecommunications providers that will directly or
indirectly provide opportunities for the Company, including CLECs, long
distance companies, cellular service providers and PCS providers. The
Company is currently installing an initial product delivery for a major
CLEC and has begun selling to an RBOC-affiliated
27
<PAGE>
long distance company. In addition, cable television companies, Internet
service providers and utility companies are beginning to provide
telecommunications services. The Company intends to address the
opportunities arising from the new providers by developing interfaces for
wireless switches and by expanding its product line to make available
lower-priced entry-level systems with functionalities geared to lower
volume switches. See "Use of Proceeds." The Company also plans to address
these opportunities through the new marketing strategies and new product
and service offerings described below.
- CONTINUE TO DEVELOP MARKETING CHANNELS. In addition to direct sales and
marketing efforts, the Company has begun to market its systems through
indirect channels. The Company has emphasized the establishment of
relationships with switch vendors, systems integrators and billing system
providers. The Company recently entered into preliminary memoranda of
understanding with a major switch manufacturer and a major systems
integrator for the sale of certain Sterling Series products and is
negotiating arrangements with manufacturers of ATM switches that permit
greatly enhanced call processing speeds and volumes. The Company sells to
the wireless market through a supply relationship with another company.
- EXPAND INTERNATIONAL BUSINESS. The Company's products have been sold
internationally since 1972. In 1995, the Company completed a $13 million
contract with Telecom Argentina. Contracts for the sale of an aggregate of
$4.2 million of the Company's products and services to TELESP and another
major Brazilian telecommunications company are currently nearing
completion. The Company intends to develop products to interface with a
broader range of international switches. See "Use of Proceeds." The
Company is expanding its penetration of international markets by forming
relationships with systems integrators and distributors in targeted
countries. The Company is negotiating arrangements with prospective
distribution partners in Indonesia, the Phillippines and France and has
signed a distribution agreement with Mahindra-British Telecom, a company
based in India. The Company also utilizes agents in certain countries
including Argentina, Venezuela, the Phillippines and the Caribbean. In
addition, the Company employs three senior international sales executives
and, through its affiliation with Securicor, has access to business
development managers based in Hungary, Malaysia and South America. See
"Certain Transactions."
- EXPAND PRODUCT AND SERVICE OFFERINGS. The Company intends to continue to
expand the functionality of its primary products. By the end of calendar
1997, the Company plans to make available additional reformatting and
distribution capabilities in its Sterling Series systems. The Company
plans to develop additional interfaces for wireless and international
switches and to make available lower-priced entry level systems. See "Use
of Proceeds." By the end of calendar 1997, the Company also plans to
launch its fraud detection and management system which will be its first
software applications product that can be utilized separately from, as
well as together with, its systems products. The Company has also recently
upgraded its traffic management solution to provide features including a
graphical user interface, enhanced application tools, a web browser and
compatibility with Windows NT. The Company also plans to expand its
technology service offerings to make available fast response software
engineering services focused on customers' individualized needs. The
Company may also consider developing interfaces that permit its systems to
transmit data from sources other than telecommunications networks,
including possibly other utilities and cable television systems. The
Company intends to consider selective acquisitions of product and service
providers to augment its internal development efforts.
- RETAIN TECHNOLOGY LEADERSHIP. The Company has developed broad expertise in
its core product areas in the course of serving some of the largest
domestic and international telecommunications providers. The Company
currently employs 72 engineers with over 1,000 years of aggregate
engineering experience. The Company believes that this expertise provides
the Company with a competitive advantage in configuring its systems to
address most effectively its customers' requirements.
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<PAGE>
PRODUCTS AND RELATED SERVICES
BILLING DATA COLLECTION PRODUCTS
The Company offers an integrated suite of billing data collection products
marketed under the "Sterling Series" name. The individual products that comprise
the Sterling Series are designed to work as a system; however, the Company sells
each component separately so that the system can be configured to meet the exact
needs of the customer. The Sterling Series was introduced by the Company at the
end of 1995 as the successor to its PDU-20 (Pollable Data Unit) and SX5000 (Host
Collector) billing data collector system that the Company introduced in the
1980s as the "SEBX Series." Compared with the SEBX Series, the Sterling Series
provides substantially increased storage capacity and processing power, enhanced
interconnectivity with a wide range of data management systems and increased
speed of network data delivery. For example, the newest version of the Sterling
5000 can process up to 16 million CDRs per hour and the Sterling 500 can process
up to 750,000 CDRs per hour, as compared to four million CDRs per hour for the
SX5000 and 150,000 CDRs per hour for the PDU-20. The storage capacity (per disk)
of the newest version of the Sterling 5000 is up to four times that of the
SX5000 and the storage capacity of the Sterling 500 is up to ten times that of
the PDU-20. Sales to the Company's three main RBOC customers equaled $20.9
million in fiscal 1996, a large majority of which is attributable to sales of
Sterling Series products. The Company believes that its three largest customers,
Ameritech, Southwestern Bell and U S West, have replaced in the aggregate less
than 25% of their prior generation billing data collection units and that these
customers will replace the balance of their prior generation units, and purchase
additional products and services from the Company, over the next three to five
years. The Company also believes that there is a significant opportunity to sell
Sterling Series products to other RBOCs and other wireline customers worldwide.
[GRAPHIC SHOWING THE COMPANY'S PRODUCT LINE AND HOW THESE PRODUCTS RELATE TO
CUSTOMERS' EXISTING BILLING DATA NETWORK, BILLING APPLICATIONS AND TRANSACTION
DATA APPLICATIONS]
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<PAGE>
The Sterling Series is a highly flexible system that offers a number of
important features that are designed to assist the customer to make its billing
data collection system more reliable and less costly to operate:
- REDUNDANCY AND RELIABILITY. The structure of the Sterling Series permits
it to be "redundant," I.E., when one of its processing systems fails, the
Sterling Series has the ability to redirect data gathering, processing and
distribution functions to other parts of its system and take proper steps
to recover data lost when the original failure occurred. The redundancy
and audit features enable the Sterling Series to provide "financial grade"
reliability (greater than 99.999% system availability).
- AUDIT AND ALARM FEATURES. The Sterling Series has an "audit" feature that
enables it to identify problems and inconsistencies in the CDRs and recall
data that has been lost or misplaced in the CDR generating source or any
other part of the billing data collection system. The Sterling Series is
also equipped with alarms that can be programmed to notify systems
operators of the existence of data problems as they occur.
- REAL-TIME ACCESS. The Sterling Series permits transactional data to be
copied and processed early in the processing cycle so that a wide variety
of users can gain real-time access to data (I.E., the ability to process
and deliver CDRs within five minutes of receipt) without disrupting the
integrity of the stream of billing information.
- CONNECTIVITY. The Sterling Series has the ability to gather and process
information from a wide range of telecommunications switches, including
switches utilizing older or "legacy" technologies. The Sterling Series can
be adapted to interface with wireless switches and is capable of
supporting both U.S. and international billing data specifications.
- OPEN SYSTEMS ARCHITECTURE. The Sterling Series utilizes standard
interfaces to permit connection with other elements in the customer's data
collection network. These products also use network management protocols
that allow them to be managed as a system. Applications programming
interfaces developed by the Company enable its products to interface
effectively with customers' applications software.
- SCALEABILITY. The Sterling Series has a multi-processor architecture which
is "scaleable," meaning that users can add additional components to
significantly upgrade its processing power and functions. These
"scaleability" features therefore can reduce a customer's need to invest
in new systems to handle increased CDR volumes and specialized processing
requirements.
- MODULARITY AND FLEXIBILITY. The system is modular in design, and can be
configured to perform a number of user-specified applications by employing
the Company's specialized processing modules. By using specialized
processing modules to perform user-defined preprocessing functions at the
billing collectors, users of the Sterling Series can reduce the work
performed by their core billing systems, significantly increasing the
overall processing speed and performance of the billing management system.
- REMOTE ACCESS. The Sterling Series permits the customer to manage from a
centralized location billing data collection activities at remote
automated facilities. The ability to manage so-called "darkroom"
facilities at remote sites allows customers to reduce labor costs.
The core components of the Sterling Series are the Sterling 500 data server
and the Sterling 5000 billing data collector, each of which can be configured
with a variety of specialized processing modules. The Sterling Series is
controlled through the Company's Sterling Manager software that runs on the
Sterling 5001 workstation. The Sterling Series also includes the Sterling 5410
data distribution platform. These components of the Sterling Series are
described in further detail below.
STERLING 500. The Sterling 500 is a data server that consists of a
processor unit equipped with a UNIX-based operating system. The Sterling 500
typically interfaces with between one and four switches to
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<PAGE>
obtain all transactional data generated by the switches. The Sterling 500 can be
configured on a fully redundant basis and shares many capabilities with the
Sterling 5000 described below, such as the ability to support multiple switches
and switch interfaces, scaleability and compatibility with a wide range of
local-and wide-area-network environments.
STERLING 5000. The Sterling 5000 is a centralized billing data collector
that collects transactional data (primarily CDRs) from data servers, such as the
Sterling 500, or directly from up to 200 telecommunications switches or other
CDR generating sources. The Sterling 5000 consists of a multi-processor Hewlett-
Packard Co. ("Hewlett-Packard") computer equipped with specialized software. The
Sterling 5000 is equipped with specialized input interfaces which permit the
unit to collect data from a wide variety of switch and server types. After the
data is collected, the Sterling 5000's resident preprocessing software reformats
the CDRs into a normalized format which facilitates further processing, storage
or delivery to other data management systems.
The Sterling 5000 processes the normalized CDRs through a number of
applications, some of which are standard features of the Sterling 5000 and some
of which are provided by specialized processing modules that the Company sells
separately. The following processing modules are loaded on the Sterling 5000 as
standard features.
- The Copy Module generates a duplicate output file in real time from any
output file, thereby enabling customers to distribute duplicate data
streams to other applications while leaving the primary data stream intact
for transmission to, and use by, the rating and billing process.
- The Terminator Module allows customers to create a user-defined output
file that receives a copy of the CDRs generated by another processing
module and provides for the distribution of such output files on a
schedule or on a demand basis using standard file transfer protocols.
- The Daily Volume Tracking Module enables customers to create reports on
the daily volume of CDRs.
Although the Company recommends that RBOCs and most other customers purchase
a system that utilizes Sterling 500s to transmit data from switches to one or
more centrally-located Sterling 5000s that transmit data to the customer's host
billing system, Sterling 500s and 5000s can be installed in a number of
configurations depending on the processing needs and the budget constraints of
the customer. Sterling 500s can be installed alone to transmit normalized CDRs
gathered from the switches directly to the billing system. Similarly, Sterling
5000s can be installed alone to gather transaction information directly from the
switch without the need for intermediary preprocessing steps.
STERLING 5001; STERLING MANAGER. The Sterling 5001 is a workstation
equipped with GUI-based software that provides communication, command and
control capabilities for a network of one or more Sterling 5000s and Sterling
500s. The Sterling 5001 is generally used in combination with the Company's
Sterling Manager software product, which can be easily adapted to interface with
additional Sterling and non-Sterling hardware and software products. With
easy-to-use "point and click operation," the Sterling 5001 optimizes systems
control and enables the customer's personnel to manage from remote locations
data collecting, processing and distributing functions performed by equipment
installed at fully automated facilities. By combining the ability to manage
remote operations with the advantages of a user-friendly interface, the
Company's products help its customers to control their personnel-related costs.
STERLING 5410. The Sterling 5410 is a UNIX-based data distribution platform
designed to receive CDR data from other Sterling Series products and perform
independent data processing. The Sterling 5410 offers end users full access to
that data while, at the same time, maintaining a security "firewall" between
these external users and the revenue-critical billing system directly supported
by other Sterling Series products. The platform has the further advantage of
being able to aggregate data from several Sterling 5000s and 500s by
communication through a provider's own network file servers. Currently, the
primary application of the Sterling 5410 permits ILECs to provide call detail
data to their Centrex customers.
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<PAGE>
SPECIALIZED PROCESSING MODULES ("SPMS"). The Company offers purchasers of
the Sterling 500 and 5000 the power to build quickly and easily their own
applications by using Company-designed software modules called SPMs. SPMs are
user-defined transaction processing functions for exclusive use on the Sterling
Series billing data collection products that offer a rules-based approach to
building processing features. Each SPM performs a unique operation on the
transaction data, but SPMs can be implemented in groups with defined
interactions among the separate modules. Configurations of these groups of
modules can be designed, enabled and disabled by customer personnel using a
convenient graphical display, thereby reducing the need for costly and
time-consuming revisions to customers' application software systems.
SPMs can be grouped to perform customer-defined applications. For example, a
customer could combine the Filter and Distribution Modules to select and deliver
to an outside fraud management system only those CDRs that are most likely to
involve fraud. This screening and real-time forwarding of the data may offer
customers the ability to reduce the processing requirements placed on a fraud
management system thereby improving its real-time performance.
The following is a summary of the Company's SPM offerings:
<TABLE>
<CAPTION>
STERLING
NAME OF MODULE MODEL NO. DESCRIPTION
<S> <C> <C>
Filter 5110 Selects and copies individual CDRs using
filtering criteria that are user-defined
and that can be derived from any logical
combination of fields within each CDR
identified by type, origination,
destination, length of call and other
criteria.
Call Screening Collector/Message Detail 5120 Provides flexible and cost-effective
Recording deployment of records of a
telecommunications station providing
Centrex service, includes applications
to report station-specific call details
for end-users of Centrex service and
provides the flexibility to add or
delete screening functions.
Distribution Module 5130 Provides for the automatic disposition
of files resulting from specialized
processing of call records with output
capable of being generated in many
forms, including "mounting" data on a
network file server, E-mailing, faxing
and exporting to databases.
Reformatter 5140 Accepts a user-defined record input and
reformats the input to a user-defined
output format where input and output
rules can be updated or modified by the
user.
File Router 5180 Routes the transactional data stream
based on the data source location,
providing processing at the level of
entire files in contrast with the Filter
SPM which provides processing of each
individual CDR.
</TABLE>
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<PAGE>
TRAFFIC MANAGEMENT PRODUCTS
The Company provides a comprehensive traffic management system under the
name Autrax 5000. This product provides telecommunications companies with
real-time (I.E., the ability to process and deliver data within five minutes of
receipt) traffic data to detect and locate quickly exchange and network
problems, plan and route strategically traffic through the network, improve the
over-all quality of service and reduce significantly customer complaints. The
Autrax 5000 features a GUI-based system with cross-platform (Windows NT and
UNIX) capabilities, compliance with the Open Database Connectivity standard, a
function to permit its reports to be accessed by a web browser and an adaptive
normalizer which permits greater customer flexibility in report creation.
Many large telecommunications service providers in the United States, such
as the RBOCs, developed their own traffic management systems. These systems
typically have not been significantly upgraded or improved in nearly a decade.
With demand for wireline telecommunications services increasing rapidly, as
evidenced by the increasing demand by businesses and private households for
Internet-access through wirelines, ILECs and other owners of wireline systems
increasingly will demand more sophisticated traffic management tools. Also,
increasing competition in each market segment creates the need for products that
can accurately measure and report inter-company transactions and facilitate
settlements between telecommunications service providers. Similarly,
privatization and other competitive factors have increased the need of
international telecommunications service providers for more sophisticated
traffic management systems.
The Company's traffic management system consists of a Hewlett-Packard-based
hardware platform loaded with Company-developed software. The system collects
and processes traffic information from a wide array of switch technologies,
including digital, analog and cellular switches and traffic management system
points in the service provider's signal control system, such as the RBOCs'
Signaling System 7. The system interfaces directly with the switches to collect
traffic data and generate maintenance reports in a standard database format. The
Autrax 5000 centralizes the raw data into database tables so that standard and
customized reports can be generated. As with the Sterling Series billing data
collection products, the Autrax 5000 is fully scaleable, permitting easy
upgrades to meet rising system demands.
NEW PRODUCTS AND SERVICES
Under the name "alpha Technology Services," the Company recently commenced
offering professional engineering services to its customers to assist them to
make better use of the Company's products. The Company's engineers assist
telecommunications services customers to develop customized applications
programs and introduce them to product feature enhancements. Services include
developing: user interfaces, system interfaces and network and alarm system
management interfaces; custom filters to screen call data used in fraud
management and other processing applications; and software for custom data
handling, reformatting and report generation. The Company believes that its
technology services are important in demonstrating the Company's responsiveness
to the needs of its customers.
In late 1997, the Company intends to introduce its first software
application for use outside of, or together with, its billing data collections
system: a fraud management program. This product is designed to assist providers
in detecting and managing fraudulent use of telecommunications systems which is
estimated to have resulted in $3.3 billion of lost revenues among wireline and
wireless services providers in the United States in 1994. The software for this
product has been obtained by the Company from an outside software development
firm pursuant to a license that grants the Company exclusive rights for the
software in the United States and Canada and non-exclusive rights elsewhere
worldwide through October 1999 and thereafter until terminated by either party
upon three months notice. The licensor's products are currently in commercial
use in the United Kingdom.
In the future the Company will consider introducing new software
applications that are compatible with its other billing data collection and
traffic management products. The Company may also consider
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<PAGE>
developing interfaces that permit its systems to transmit data from sources
other than telecommunications networks, including possibly other utilities and
cable television systems. There is no assurance, however, that any of these
products will be successfully developed or marketed.
CUSTOMERS
GENERAL
The Company's customers include large telecommunications companies based in
a number of countries around the world. In fiscal 1996, the Company sold
components of its Sterling Series to three of the RBOCs, U S West, Ameritech and
Southwestern Bell, and provided product support services to three other RBOCs.
The following table sets forth information with respect to sales to certain
major customers during fiscal 1995 and fiscal 1996.
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1996
----------------------------------- --------------------------------
PERCENTAGE OF PERCENTAGE OF
CUSTOMER REVENUES TOTAL REVENUES REVENUES TOTAL REVENUES
- ----------------------------------------------------- ------------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C>
U S West............................................. $7.3 million 28.7% $10.2 million 30.1%
Southwestern Bell.................................... $1.5 million 5.8% $6.3 million 18.5%
Ameritech............................................ $4.3 million 16.7% $4.4 million 13.0%
Puerto Rico Telephone Co............................. $0.1 million 0.4% $3.2 million 9.4%
Telecom Argentina.................................... $4.4 million 17.0% $1.2 million 3.4%
</TABLE>
The Company generally enters into agreements with its major customers that
establish a framework for the ongoing relationship. Individual orders are placed
pursuant to purchase orders. Installation, maintenance and support services are
typically charged separately from product purchases. The Company has ongoing
informal communications with these customers based upon which the Company can
estimate the amount and timing of orders and can plan production accordingly.
International sales are generally obtained pursuant to contracts that cover all
applicable products and services for the entire project.
RBOC CUSTOMERS
The Company currently provides products or services to six RBOCs, three of
which are currently major customers: Ameritech, Southwestern Bell and U S West.
AMERITECH. The Company has sold billing data collection products to
Ameritech since its formation from local units of the old Bell System in 1984.
Predecessors of Ameritech had been customers of the Company since 1972.
Ameritech and its predecessors have purchased over 400 PDU-20 units. To date,
Ameritech has purchased eight Sterling 5000s and over 40 Sterling 500s.
SOUTHWESTERN BELL. The Company's relationship with Southwestern Bell began
in 1989 and has recently resulted in sales of five Sterling 5000s and over 50
Sterling 500s.
U S WEST. The Company initiated its sales to U S West when U S West was
formed in 1984. Predecessors of U S West had been customers of the Company since
1972. U S West and its predecessors have purchased over 400 PDU-20 units. U S
West has purchased 15 Sterling 5000s and over 90 Sterling 500s. One of the
Company's sales executives and one of the Company's technical staff is based in
Denver, Colorado, the location of U S West's corporate headquarters, where each
dedicates his working time exclusively to developing and maintaining the
Company's relationship with U S West.
34
<PAGE>
OTHER MAJOR CUSTOMERS
TELECOM ARGENTINA. In 1995, the Company completed a $13 million contract
entered into in 1992 with Telecom Argentina pursuant to which the Company
installed 136 PDU-20 units and three SX 5000s. The Company continues to provide
ongoing support and engineering services to Telecom Argentina pursuant to
contracts totaling $1.4 million for fiscal 1997.
PUERTO RICO TELEPHONE CO. The Company has sold products to Puerto Rico
Telephone Co. since 1993. To date, the Company has sold over 30 Sterling 500s
and one Sterling 5000 to Puerto Rico Telephone Co.
TELESP. In January 1995, the Company began supplying its products to
TELESP, a major regional telecommunications service provider in Brazil. Through
an agency agreement with a Brazilian telecommunications solutions company, the
Company has supplied hardware and software components of a traffic management
system and related services to TELESP. To date, the Company has earned $3.2
million in revenues under this contract.
BACKLOG
The Company's backlog (firm purchase orders for products and services that
have not yet been recognized as revenue) was approximately $7.1 million and $5.3
million on March 31, 1997 and March 31, 1996, respectively. The Company normally
has a relatively small amount of product and service backlog because ongoing
informal communication with its major customers generally enables the Company to
anticipate orders and ship products within a relatively short time after the
customer's order is received. The Company expects to be able to fill
substantially all backlog existing at March 31, 1997 prior to the end of fiscal
1997. Backlog with respect to RBOC sales typically is the greatest at the end of
the third quarter of each fiscal year, due to the RBOCs' budget cycles. RBOCs
generally do not order products such as those sold by the Company for delivery
beyond their current fiscal year.
SUPPLY RELATIONSHIPS
The Company purchases and licenses products and technology from a variety of
providers. The Company purchases Hewlett-Packard hardware and software that is
used primarily for its Sterling 5000 and traffic management product through an
agreement with a major Hewlett-Packard distributor. The Company licenses the
real-time operating system used in the Sterling Series from Lynx Real-Tool
Systems, Inc., software for its traffic management product from Informix
Software, Inc. and the software for its soon to be introduced fraud detection
and management product from a private United Kingdom company. The Company also
purchases processing boards for its Sterling 500s and other products from
Motorola, Inc. through a distributor.
MARKETING AND SALES
The Company's sales to date have primarily been generated through the
establishment and maintenance of long-term relationships with several key
customers. The Company's domestic sales staff consists of seven account managers
with an aggregate of over 150 years of telecommunications sales experience.
Sales have been generated primarily through direct contacts with major
customers, requests for proposals from telecommunications companies,
participation in trade shows and industry conferences and advertising in trade
journals. The Company also maintains an Internet home page as an adjunct to its
marketing activities.
DOMESTIC MARKETING CHANNELS
In addition to direct sales to telecommunications service providers such as
the RBOCs, CLECs and major wireline and wireless telecommunications service
providers, the Company is seeking to broaden its
35
<PAGE>
access to its markets through distributor relationships with systems integrators
and marketing relationships with switch vendors and billing and rating system
providers.
The Company recently entered into preliminary memoranda of understanding
with a major switch manufacturer and a major systems integrator for the sale of
certain Sterling Series products. The Company is also negotiating arrangements
with manufacturers of ATM switches pursuant to which the Company would provide
software engineering services and license software to the ATM companies that
would also sell the Company's products, on a distributor basis, as part of their
ATM switch systems. The Company also sells to the wireless market though its
supply relationship with Metapath Corporation ("Metapath"), of which the Company
was previously a stockholder. The Company supplies a product equivalent to its
Sterling 500 to Metapath which is incorporated into that company's solutions for
both cellular and PCS providers. The Company is developing interfaces for
wireless switches that would permit direct sales to this market in the future.
INTERNATIONAL MARKETING CHANNELS
The Company's products have been sold internationally since 1972. In 1995,
the Company completed a $13 million contract entered into in 1992 with Telecom
Argentina and entered into contracts to sell an aggregate of $4.2 million of its
products and services to TELESP and another major Brazilian telecommunications
company that are nearing completion. The Company continues to provide ongoing
support and engineering services to Telecom Argentina pursuant to contracts
totaling $1.4 million for fiscal 1997. The Company intends to expand its
penetration of international markets by forming relationships with systems
integrators and distributors in targeted countries. The Company recently entered
into a distributorship agreement with Mahindra-British Telecom, a company based
in India. The Company is negotiating arrangements with prospective distribution
partners in Indonesia, the Phillippines and France pursuant to which the
distributor would provide sales, marketing, installation and first-line and
second-line support functions and the Company would provide product, training,
marketing documentation and third-line support functions. The Company also
utilizes agents in certain countries, including Argentina, Venezuela, the
Phillippines and the Caribbean, who are compensated on a commission basis. In
addition, the Company employs three international sales managers and, through
its affiliation with Securicor, has access to business development managers
based in Hungary, Malaysia and South America. See "Certain Transactions."
CUSTOMER SERVICE
The Company operates an integrated Customer Service Group that it believes
is a key to success with both current and potential new customers. The Customer
Service Group consists of Quality Assurance, Program Management, Support
Services, Customer Training, Documentation, Installation and Information
Technology subgroups. The Company's installation team, which includes both
full-time and sub-contract staff, is certified to work in the central office
switch environment and can install full turn-key systems. The Company achieved
ISO 9001 certification in August 1996 and has since passed an interim audit.
A senior program manager is responsible for administering all aspects of
major contracts and other projects, including acting as contact person and
coordinator for the customer. The Company believes that this results in more
efficient project administration, greater customer satisfaction and often
additional sales opportunities during the course of contract implementation.
Through its Technical Assistance Center, the Company offers 24-hour help
desk support to anywhere in the world, 365 days per year. The technical support
offered by the Company includes remote testing and management capabilities, as
well as on-site problem resolution when required. Training is offered both at
the Company's facilities and on the customers' premises. Internationally, the
Company contracts with local
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<PAGE>
agents or distributors so that it can offer local support on a basis consistent
with its domestic standards. The Company has also begun to provide on-line
documentation and training for its products.
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are directed towards
developing new products to meet the growing needs of its telecommunications
customers and entering new markets and improving existing products by
incorporating new features and technologies. The Company believes that the
timely development of new products and enhancements is critical to its
maintaining its leadership position in its current marketplace and in gaining
penetration in new markets.
The Company plans to use a portion of the proceeds of the Offering to expand
its Sterling Series product line in order to address more effectively the
requirements of lower volume telecommunications switches and to develop
interfaces with switches utilized by wireless and international
telecommunications systems. See "Use of Proceeds." These efforts will build upon
a large amount of development work already accomplished in connection with the
Company's existing products.
To leverage its development resources, the Company works closely with its
customers and leading technology vendors to identify specific needs and tailor
the Company's systems to meet these needs. The Company's research and
development organization consists of several major groups. The architectural
group is responsible for the creation and enhancement of the key technologies
underlying all applications. This group is also responsible for exploring new
directions and applications of the Company's core technologies, incorporating
standard technology into existing product lines and developing and improving the
application architecture to facilitate rapid development of applications. Each
of the product lines has a dedicated software engineering group directly
supporting its development efforts. These software development groups are
supported by a hardware engineering group that is responsible for the
development of cross product line hardware platforms. The special projects
engineering group is responsible for addressing individual customers'
specialized requirements. The Company has also formed a new technologies group
to evaluate emerging technologies and provide input on the upgrading of existing
products and the development of new products.
The Company also has entered into a relationship with Mahindra-British
Telecom in India, pursuant to which that company performs software development
projects for the Company. The Company believes that this relationship provides
it with additional flexibility in developing its products on a timely and cost-
effective basis.
A critical element of the Company's success has been the development of a
multi-layered software and hardware architecture that facilitates the
development of application software. This architecture supports the development
of the Company's core products and provides a discrete platform that enables the
rapid development of customer- and product-specific software. In addition, the
Company's core products fully support application programming interfaces which
open up the architecture so that third-party developers can integrate their
application software packages into the Company's system.
At the most fundamental layer of its architecture, the Company has written a
common independent library of code that provides a foundation for reusability.
Together with the use of UNIX operating systems which comply with UNIX95
standards as well as the use of the C programming language in its applications
software development, the Company has positioned its products to be portable and
to be able to operate on the most suitable hardware platforms for its customers'
needs.
During fiscal 1995, fiscal 1996 and the six months ended March 31, 1997,
product research, development and engineering expenses were $5.9 million, $7.0
million and $3.8 million, respectively. Product research, development and
engineering expenses are expected to increase in fiscal 1997. None of the
research, development and engineering expenses have been capitalized. As of
March 31, 1997, the
37
<PAGE>
Company employed 75 people in product and systems development. The Company has
added 23 engineering, programming and development personnel since January 1,
1996.
COMPETITION
The market for billing data collection and traffic management services for
the telecommunications service industry is highly competitive and the Company
expects that further growth within the telecommunications service industry will
encourage the entry of new participants into U.S. and international markets in
the future. Many of the Company's current and potential future competitors have
significantly greater financial, technical and marketing resources than the
Company.
The Company believes that the principal basis of competition in the sales of
its products is functionality, including such factors as the ability of products
to provide a high degree of integrity of transaction information while
efficiently performing all preprocessing and delivery functions; the ability to
increase capacity and add functionality cost-effectively; the ability to provide
critical data on a real-time basis; compatibility with telecommunications
switches sold by a number of manufacturers; and the ability to interface
effectively with a variety of billing and other applications. Other significant
bases of competition include price and service.
In the market for its billing data collection solutions, the Company's
competitors include (i) large telecommunications service providers that
internally develop full system products for their own use; (ii) companies, such
as ACE*COMM Corporation, CGI, Inc., Lucent Technologies Inc. and Northern
Telecom Inc., that can supply billing data collection components and systems;
and (iii) vendors that supply product components or systems integration
services, including Andersen Consulting, Digital Equipment Corporation,
Hewlett-Packard and International Business Machines Corp.
In the market for its traffic management solutions, the Company's
competitors include (i) large telecommunications service providers that
internally develop full system products for their own use; (ii) companies such
as Hewlett-Packard and Objective Systems Integrators, Inc. that provide
integrated network management systems and (iii) companies such as Applied
Digital Access that provide separate traffic management solutions.
There are a large number of companies that have developed or could develop a
product competitive with the Company's planned fraud detection and management
product. The Company believes that most large telecommunications companies are
currently utilizing internally developed fraud management systems.
PROPRIETARY RIGHTS AND LICENSES
The Company relies primarily on copyright and trade secret laws to protect
its proprietary rights. The Company distributes its products under service and
software license agreements which typically grant customers non-exclusive
licenses, subject to terms and conditions prohibiting unauthorized reproduction,
transfer or use. Although the Company holds patents with respect to certain
aspects of its products, it does not believe that these patents are material to
its business. The Company believes that, because of the rapid pace of
technological change in the telecommunications and computer software and
hardware industries, the technological expertise of its personnel, the
complexity of its system architecture and the frequency and timeliness of
product and service offerings are more significant than the legal protection of
its products and services. In addition, the Company enters into non-disclosure
agreements with each employee and consultant and each third-party to whom the
Company provides proprietary information. Access to the Company's core source
code is greatly restricted. The Company licenses from third parties software and
technology that is important to certain functionalities of its products,
including the software that is the basis for the fraud detection and management
application it plans to release late in 1997. See "--Products and Related
Services--New Products and Services." The Company is not aware of any patent
infringement
38
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or any violation of other proprietary rights claimed by any third party relating
to the Company or the Company's products. See "Risk Factors--Dependence on
Proprietary Technology."
EMPLOYEES
As of March 31, 1997, the Company had a total of 197 employees, of whom 75
were engaged in engineering, programming and development, nine in marketing, 40
in customer service, 21 in sales and sales support, 39 in manufacturing and
related operations and 13 in administration and finance. At that date, the
Company also engaged nine individuals on a consulting basis, six of which were
engaged in engineering, programming and development. None of the Company's
employees is represented by a labor union. The Company believes that its
relations with its employees is good.
PROPERTIES
The Company's headquarters are located in a 40,000 square foot leased
facility in Moorestown, New Jersey and its manufacturing group is located in an
adjoining 34,000 square foot leased facility. The leases for the facilities
expire in April and August 1998, respectively, with the Company having options
to renew for an additional five years. The Company believes its existing
facilities are adequate for its current needs, but that additional space will be
required for its headquarters by late 1997. The Company is currently evaluating
proposals for relocating the Company's operations to another leased facility in
the Moorestown area.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
39
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Edmund A. Hough........................... 51 Chairman of the Board
Andrew P. Maunder......................... 40 President, Chief Executive Officer, Treasurer and Director
Donald Hoffman............................ 62 Senior Vice President, Strategic Customer Development
William J. Rahe, Jr....................... 50 Vice President, Engineering
Mark J. Kadish............................ 43 Chief Financial Officer and Secretary
Michael S. Farina......................... 45 Vice President, Marketing and Sales
Joseph F. Gorecki......................... 56 Vice President, Program Management and Customer Service
Sammy W. Pearson.......................... 51 Director
Trevor Sokell............................. 56 Director
Michael G. Wilkinson...................... 46 Director
</TABLE>
EDMUND A. HOUGH has been a member of the Company's Board of Directors since
July 1994 and was elected Chairman of the Board in March 1995. Dr. Hough has
served as Chief Executive Officer of the Communications Division of Securicor
since June 1992. Dr. Hough was the Managing Director of Johnson Matthey Europe
Limited, from 1989 to May 1992 and the Managing Director of Hoeschst Paint Group
Limited from 1985 to 1989. Dr. Hough is a director of Securicor, Chairman of the
Board of Intek Diversified Corporation, a U.S.-based wireless communications
company in which Securicor has a 63% interest, and a director of Cellnet Group
Limited, a U.K.-based mobile telephone operator in which Securicor has a 40%
interest.
ANDREW P. MAUNDER has served as the Company's President and Chief Executive
Officer since October 1994 and as the Company's Treasurer since March 1995. Mr.
Maunder has been a director of the Company since October 1996. From March 1994
until he joined the Company, Mr. Maunder served as Chief Financial Officer of
Oxford Molecular Group plc, a biotechnology company based in the United Kingdom.
From April 1987 until February 1994, Mr. Maunder was Finance and Operations
Director of Securicor 3Net, Ltd., ("3Net"), a communications company based in
the United Kingdom that has been affiliated with Securicor since August 1993.
Since October 1996, Mr. Maunder has also served as a director of Securicor 3Net,
Inc. ("3Net Delaware"), a wholly-owned indirect subsidiary of Securicor.
DONALD HOFFMAN has served as the Company's Senior Vice President, Strategic
Customer Development since February 1997. From July 1996 to February 1997, Mr.
Hoffman served the Company as Senior Vice President. From July 1994 until June
1996, Mr. Hoffman served as Vice President, Sales of the Company and from the
time he joined the Predecessor Business in 1989 until its acquisition by the
Company in July 1994, he served as its Vice President of Marketing and Sales.
Prior to joining the Predecessor Business, Mr. Hoffman was Vice President and
General Manager of the Business System Sales Division of NEC America, Inc., a
leading electronics company.
WILLIAM J. RAHE, JR. has been the Company's Vice President, Engineering
since joining the Company in April 1995. From August 1994 until April 1995, Mr.
Rahe served as Director, Business Development of
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Cable & Wireless, Inc., a telecommunications services company. From June 1991
until August 1994, Mr. Rahe had served as Director, Product Development at Cable
& Wireless, Inc. Prior to joining Cable & Wireless, Inc., Mr. Rahe was Vice
President of Engineering of Lightnet, a partnership between CSX Corporation and
Southern New England Telephone Co.
MARK J. KADISH has been with the Company and the Predecessor Business since
September 1987 and has been the Company's Chief Financial Officer since February
1997 and its Secretary since March 1995. From July 1994 to February 1997, Mr.
Kadish served as the Company's Financial Controller. From September 1987 until
June 1994, Mr. Kadish served as the Controller of the Predecessor Business.
Prior to joining the Predecessor Business, Mr. Kadish was Chief Financial
Officer and Treasurer of Transducer Systems, Inc., a publicly-traded
manufacturer of computer systems components.
MICHAEL S. FARINA has served as the Company's Vice President of Marketing
and Sales since February 1997. From January 1995 until February 1997, Mr. Farina
was the general manager of the New Media business unit established by
CSC--Communications Industry Services, a division of Computer Sciences
Corporation that is a supplier of information technology to the telephone
industry. From 1988 to December 1994, Mr. Farina held several positions, most
recently as Director of International Marketing and Strategic Alliances, with
GTE Corporation ("GTE"), a diversified telecommunications company.
JOSEPH F. GORECKI has served as the Company's Vice President, Program
Management and Customer Service since April 1995. From February 1992 until April
1995, Mr. Gorecki served at GTE as a Senior Program Manager in GTE's Spacenet
satellite communications group. Prior to joining GTE, Mr. Gorecki served as
Director, Program Operations for BBN Communications Corporation, a
publicly-traded provider of networking solutions.
SAMMY W. PEARSON has been a director of the Company since October 1996.
Since February 1994, Mr. Pearson has been the Vice President, Enterprise
Solutions of Oracle Government Services, a business unit of Oracle Corporation,
a provider of advanced software products, services and management solutions.
From May 1992 until February 1994, Mr. Pearson was Vice President of Oracle
Federal Consulting, where he managed Oracle's Federal government consulting
business. From May 1991 to May 1992, Mr. Pearson was the principal of TechSales
Limited, a software marketing company.
TREVOR SOKELL has served as a director of the Company and of Securicor
Communications since July 1994. Mr. Sokell served as the Company's President and
Chief Executive Officer from July 1994 until October 1994 and served as the
Company's Treasurer and Secretary from July 1994 until March 1995. Since
November 1996, Mr. Sokell has been the Chairman of the Board of Directors of
3Net. From January 1987 until October 1996, Mr. Sokell served as Managing
Director of 3Net. Since October 1994, Mr. Sokell has also served as the Chairman
of Securicor Telcoms Ltd., an affiliated company based in the United Kingdom.
Prior to 1987, Mr. Sokell was a director of Netlink, Ltd., managing director of
Network Technology Limited, and a director of Information Technology Ltd.
MICHAEL G. WILKINSON has been a director of the Company since July 1994. Mr.
Wilkinson has been the Finance Director of the Communications Division of
Securicor since September 1992. From 1987 to September 1992, Mr. Wilkinson was
Finance Director of Securicor's Business Services Division. Prior to joining
Securicor in 1980, Mr. Wilkinson served as a Finance Director of RCA Limited, an
electronics company based in the United Kingdom.
COMMITTEES; ADDITION OF INDEPENDENT DIRECTOR
The Board of Directors intends to establish a Compensation Committee and an
Audit Committee. The Compensation Committee will determine salaries and bonuses
and other compensation matters for officers of the Company, determine employee
health and benefit plans, and administer the Company's 1997 Stock Incentive Plan
and any similar plans created in the future. The Audit Committee will
41
<PAGE>
recommend the appointment of the Company's independent public accountants and
will review the scope and results of audits, internal accounting controls and
tax and other accounting related matters.
The Company intends that an additional independent director will be elected
to the Board of Directors within 90 days after the completion of the Offering.
This person and Mr. Pearson are expected to become the members of the Audit
Committee. Dr. Hough and Mr. Pearson are expected to become the members of the
Compensation Committee.
DIRECTOR COMPENSATION
Each of the Company's directors, other than Mr. Maunder, will be entitled to
receive an annual fee of $20,000 for their service on the Board of Directors. In
addition, each director will be entitled to reimbursement of travel and other
expenses incurred in connection with their service as a director. Pursuant to
employment arrangements between Securicor and Dr. Hough and Messrs. Sokell and
Wilkinson, their directors' fees will be paid to Securicor.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid or accrued by the Company for fiscal 1996 to the Company's
Chief Executive Officer and to the four most highly compensated executive
officers of the Company whose salary and bonus for fiscal 1996 exceeded $100,000
for all services rendered in all capacities to the Company (the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION -----------------------
NAME AND PRINCIPAL --------------------- SECURITIES UNDERLYING ALL OTHER
POSITION SALARY BONUS OPTIONS(1) COMPENSATION(2)
- ----------------------------------------------- ---------- --------- ----------------------- -----------------
<S> <C> <C> <C> <C>
Andrew P. Maunder.............................. $ 158,924 $ 23,380 48,970 $ 296
President; Chief Executive Officer
Donald Hoffman................................. $ 146,339 $ 52,338 -0- $ 7,547
Senior Vice President
William J. Rahe, Jr............................ $ 131,800 $ 24,804 18,360 $ 5,880
Vice President, Engineering
Jugtar Basi.................................... $ 121,963 $ 19,275 18,360 $ 4,934
Vice President, Marketing (3)
Joseph F. Gorecki.............................. $ 106,454 $ 18,365 18,360 $ 4,346
Vice President, Program Management and
Customer Service
</TABLE>
- ------------------------
(1) All options listed in this column are options to purchase the Common Stock
of Securicor, a company traded on the London Stock Exchange. At the close of
business on April 16, 1997, the price of Securicor Common Stock as reported
on the London Stock Exchange was L2.85 per share. At the noon exchange rate
of U.S. Dollars into British Pounds Sterling reported by the Federal Reserve
Bank of New York on April 16, 1997, the price of such shares in U.S. Dollars
was $4.62 per share. The exercise price of such options is L2.45 per share
or $3.98 per share at the above described exchange rate.
(2) Includes amounts paid by the Company in fiscal 1996 with respect to life
insurance premiums for the benefit of the Named Executives Officers and
Company contributions to the 401(k) accounts of such
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<PAGE>
officers as follows: (i) Mr. Maunder; $296 for life insurance premiums; (ii)
Mr. Hoffman; $5,471 in 401(k) contributions and $2,076 for insurance
premiums; (iii) Mr. Rahe; $5,333 in 401(k) contributions and $547 in
insurance premiums; (iv) Mr. Basi; $4,934 in 401(k) contributions; and (v)
Mr. Gorecki; $4,346 in 401(k) contributions. Excludes any amounts based upon
Mr. Maunder's right to sell to Securicor (at a price based on operating
results in fiscal 1996 of certain Securicor businesses including the
Company) shares of 3Net previously held by him that he acquired prior to his
service with the Company.
(3) Mr. Basi served as the Company's Vice President, Marketing until December
1996. Mr. Basi is no longer employed by the Company. All options granted to
Mr. Basi expired upon the termination of his employment.
SECURICOR OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------------
NUMBER OF
SECURICOR POTENTIAL REALIZABLE VALUE AT
SHARES PERCENT OF TOTAL ASSUMED RATES OF STOCK PRICE
UNDERLYING OPTIONS GRANTED TO APPRECIATION FOR OPTION TERM(3)
OPTIONS COMPANY EMPLOYEES IN EXERCISE PRICE EXPIRATION --------------------------------
NAME GRANTED(1) FISCAL YEAR (L/SHARE)(2) DATE 0% 5% 10%
- --------------------- --------------- --------------------- --------------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Andrew P. Maunder.... 36,730 30% L2.45 6/27/06 -- $ 91,836 $ 232,734
12,240 10% L2.45 6/28/06 $ 3,376 $ 36,104 $ 86,314
Donald Hoffman....... -0- -- -- -- -- -- --
William J. Rahe,
Jr................. 6,120 5% L2.45 6/27/06 -- $ 15,302 $ 38,778
12,240 10% L2.45 6/28/06 $ 3,376 $ 36,104 $ 86,314
Jugtar Basi.......... 6,120 5% L2.45 (4) -- -0- -0-
12,240 10% L2.45 (4) -0- -0- -0-
Joseph F. Gorecki.... 6,120 5% L2.45 6/27/06 -- $ 15,302 $ 38,778
12,240 10% L2.45 6/28/06 $ 3,376 $ 36,104 $ 86,314
</TABLE>
- ------------------------
(1) All options granted to Named Executive Officers in fiscal 1996 were options
to purchase the Common Stock of Securicor.
(2) At the noon exchange rate of U.S. Dollars to British Pounds Sterling
reported by the Federal Reserve Bank of New York on April 16, 1997, the
exercise price of such options in U.S. Dollars was $3.98 per share.
(3) All amounts reflect the conversion of British Pounds Sterling to U.S.
Dollars at the rate of 1.6225 British Pounds Sterling to one U.S. Dollar,
the noon exchange rate reported by the Federal Reserve Bank of New York on
April 16, 1997.
(4) All options granted to Mr. Basi expired upon termination of his employment
in December 1996.
EMPLOYMENT AGREEMENTS
In 1994, the Company and Mr. Maunder entered into an agreement regarding Mr.
Maunder's employment with the Company, the principal terms of which were set
forth in a definitive employment agreement executed on February 10, 1995.
Pursuant to this agreement, the Company agreed to employ Mr. Maunder as Chief
Executive Officer subject to the right of the Company to terminate the
employment relationship immediately for cause or at any time without cause upon
12 months prior written notice.
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Mr. Maunder has the right to terminate the agreement upon six months prior
notice to the Company. The agreement provides that the Company pay Mr. Maunder
an annual base salary which is subject to annual review. Mr. Maunder is entitled
to participate in an incentive bonus program pursuant to which cash payments are
calculated based upon performance of the Company and upon individual performance
targets and are subject to a maximum payment of 40% of his annual salary. The
agreement also entitles Mr. Maunder to standard health and other insurance
benefits and an allowance for automobile expenses. The agreement also specifies
that Mr. Maunder will be entitled to participate in certain equity compensation
programs established by 3Net. As part of his employment agreement, Mr. Maunder
is required not to disclose any proprietary information at any time and agreed
to non-competition and non-interference covenants that expire 12 months after
the termination of his employment. Mr. Maunder's agreement also contains a
covenant restricting him from soliciting the Company's customers for a period of
six months after termination of his employment.
The Company has also entered into employment agreements with Messrs.
Hoffman, Rahe, Gorecki and Farina pursuant to which the Company has agreed to
employ each of them, subject to the Company's right to terminate the employee's
employment immediately for cause or without cause upon specified prior written
notice (between three months and one year). The agreements also are terminable
by the employee upon specified prior notice (between three and six months). Each
of the agreements specifies that the employee shall be paid an annual base
salary that is subject to review by the Company on an annual basis. The
agreements also entitle the employees to incentive compensation, standard health
and other insurance benefits and an allowance for automobile expenses. As part
of the agreement, each of the officers agreed to non-disclosure,
non-interference and non-competition covenants, which in the case of Messrs.
Rahe, Farina and Gorecki expire 12 months after termination of employment and in
the case of Mr. Hoffman six months after termination. Each agreement also
contains a covenant restricting the employee from soliciting the Company's
customers for a period of six months after the termination of employment. In
February 1997, the Company and Mr. Hoffman agreed that beginning in July 1997,
either the Company or Mr. Hoffman may terminate Mr. Hoffman's employment upon
one month's prior notice to the other.
1997 STOCK INCENTIVE PLAN
Under the Company's 1997 Stock Incentive Plan (the "Plan"), a variety of
awards, including stock options, stock appreciation rights and restricted and
unrestricted stock grants may be made to the Company's employees, officers,
consultants and advisors who are expected to contribute to the Company's future
growth and success. The Company has reserved 450,000 shares of Common Stock for
issuance under the Plan. The Compensation Committee will administer the Plan and
determine the price and other terms upon which awards shall be made. Stock
options may be granted either in the form of incentive stock options or
non-qualified stock options. The option exercise price of incentive stock
options may not be less than the fair market value of the Common Stock on the
date of the grant. While the Company currently anticipates that most grants
under this Plan will consist of stock options, the Company may grant stock
appreciation rights, which represent rights to receive any excess in value of
shares of Common Stock over the exercise price; restricted stock awards, which
entitle recipients to acquire shares of Common Stock, subject to the right of
the Company to repurchase all or a part of such shares at their purchase price
in the event that the conditions specified in the award are not satisfied; or
unrestricted stock awards, which represent grants of shares to participants free
of any restrictions under the Plan. Options or other awards that are granted
under the Plan but expire unexercised are available for future grants. Under the
terms of the Plan, the Company may not grant options to purchase in excess of
150,000 shares of Common Stock to any one grantee during any fiscal year. It is
expected that prior to the completion of the Offering, options to purchase
325,000 shares of Common Stock will be granted under the Plan to the employees,
officers and directors of the Company at an exercise price equal to the initial
public offering price per share. One third of these options will become
exercisable immediately and the remaining two-thirds will become exercisable in
equal installments on the first and second anniversaries of the date of grant,
respectively. No options to purchase Common Stock have been granted to date.
44
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the ownership
of the Common Stock as of April 15, 1997 as adjusted to reflect the sale of
shares offered pursuant to this Prospectus, (i) by each of the Company's Named
Executive Officers and directors; (ii) all of the Company's executive officers
and directors as a group; and (iii) each person known to the Company to own more
than five percent of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
PRIOR TO
THE OFFERING(2) PERCENT BENEFICIALLY
------------------------------ OWNED AFTER
NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT THE OFFERING(2)
- ------------------------------------------------------------------ ----------------- ----------- ---------------------
<S> <C> <C> <C>
Securicor Communications(1)....................................... 3,476,900 100% 57.2%
Edmund A. Hough (1)............................................... -0- -- --
Trevor Sokell (1)................................................. -0- -- --
Michael G. Wilkinson (1).......................................... -0- -- --
Andrew P. Maunder................................................. -0- -- --
Donald Hoffman.................................................... -0- -- --
William J. Rahe, Jr............................................... -0- -- --
Joseph F. Gorecki................................................. -0- -- --
Sammy W. Pearson.................................................. -0- -- --
All Directors and executive officers as a group (10 persons)...... -0- --% --%
</TABLE>
- ------------------------
(1) The address of Securicor Communications is 351 New Albany Road, Moorestown,
New Jersey 08057-1177. Dr. Hough and Messrs. Sokell and Wilkinson may be
deemed to own beneficially the shares owned by Securicor Communications by
virtue of their role as directors of Securicor Communications. Each of Dr.
Hough and Messrs. Sokell and Wilkinson disclaim beneficial ownership of
these shares. Securicor Communications is an indirect wholly-owned
subsidiary of Securicor.
(2) The Company expects to grant options to purchase an aggregate of 325,000
shares of Common Stock to employees pursuant to the 1997 Stock Incentive
Plan prior to the completion of the Offering. One third of these options
will become exercisable immediately on the date of the grant and the
remaining two-thirds will become exercisable in two equal installments on
the first and second anniversaries of the date of grant, respectively. See
"1997 Stock Incentive Plan".
CERTAIN TRANSACTIONS
Prior to the completion of the Offering, the Company has operated as an
indirect wholly-owned subsidiary of Securicor and has been a member of the
Telecoms Sector of the Communications Division of Securicor. Accordingly,
Securicor has assessed the Company intercompany charges related to group and
divisional costs and sales and marketing activities. The Company has paid to
Securicor total charges of $386,000 and $403,000 in fiscal 1995 and fiscal 1996,
respectively. No charges were incurred during the period from July 1, 1994 to
September 30, 1994. Until the Offering is completed, the Company will pay to
Securicor charges at an annualized rate of $540,000 pro-rated to the date of
completion of the Offering. Securicor has agreed that the Company will no longer
be liable for any group or divisional charges after the completion of the
Offering. The Company and Securicor have entered into a one-year agreement
effective as of the completion of the Offering pursuant to which Securicor will
continue to provide certain international marketing services to the Company in
consideration of the payment of $160,000 per year.
From time to time, Securicor has advanced funds to the Company to meet the
Company's needs for working capital and for other corporate purposes. Such
advances are treated as indebtedness of the Company to Securicor, a portion of
which bears interest that has accrued at varying rates ranging from a
45
<PAGE>
low of 6.25% per annum to a high of 7.75% per annum. This interest rate was 7.0%
per annum at March 31, 1997. The principal amount of such indebtedness was $10.6
million at March 31, 1997, $9.0 million of which is interest bearing. The
highest balance of such principal amount owing at any time since the time of the
first Securicor advance in August 1994 was $12.2 million at September 30, 1996.
With respect to such indebtedness, the Company incurred interest expense in the
amount of $141,000 and $578,000 in fiscal 1995 and fiscal 1996, respectively. At
the completion of the Offering, all outstanding principal and interest with
respect to this indebtedness will be repaid and the Company will pay a special
dividend of approximately $10.9 million to Securicor. See "Use of Proceeds."
During fiscal 1995 and fiscal 1996, the Company was engaged by Securicor
Radiocoms, Ltd., a manufacturer of radio telecommunications devices affiliated
with Securicor ("Radiocoms"), to build base stations to be included in radio
communications equipment sold by Radiocoms to its customers. In January 1995,
Radiocoms purchased 125 base stations from the Company, for which the Company
billed Radiocoms for its costs and a specified profit percentage. In July 1995,
Radiocoms purchased an additional 230 base stations and paid the Company a fixed
price per unit and reimbursed it for certain of its costs. The Company earned
revenues of $1.4 million and $2.3 million from Radiocoms in fiscal 1995 and
fiscal 1996, respectively. The Company completed all work related to the
Radiocoms purchases by April 1996.
During fiscal 1996, the Company sold certain products of 3Net, an affiliate
of Securicor, and recognized certain costs and realized all of the revenue
related to these activities. During that period the Company earned $792,000 in
revenues attributable to these activities. As of October 1, 1996, Securicor
organized 3Net Delaware and caused the Company to transfer certain technology
and other assets related to these 3Net activities to 3Net Delaware. In
consideration of this transfer, 3Net Delaware issued to the Company $1.3 million
of its indebtedness, which did not bear interest. The principal amount of this
receivable from 3Net Delaware outstanding at March 31, 1997 was $1.0 million. It
is expected that all amounts owed by 3Net Delaware will be paid prior to the
completion of the Offering.
3Net Delaware utilizes certain office space and systems of the Company for
which it has been charged approximately $7,000 per month since its formation.
The Company will enter into an agreement with 3Net Delaware pursuant to which
the Company will continue to make available such space and systems in
consideration of the payment of $5,000 per month for administrative services and
$800 per month for each 3Net Delaware employee located on the Company's
premises. This agreement will be effective as of March 1, 1997 and is terminable
on September 30, 1997, subject to annual extentions if not terminated by either
party.
In addition, the Company has entered into the Registration Rights Agreement
pursuant to which Securicor has the right, subject to customary limitations, to:
(i) demand registration of the resale of its Common Stock once during each
twelve-month period at the expense of Securicor for so long as Securicor
Communications owns at least 10% of the outstanding Common Stock; and (ii)
include its Common Stock in registration statements filed by the Company.
DESCRIPTION OF CAPITAL STOCK
Upon the filing of the Certificate of Incorporation the authorized capital
stock of the Company will consist of 25,000,000 shares of Common Stock, $.01 par
value, and 5,000,000 shares of preferred stock, $.01 par value. No shares of
preferred stock are currently outstanding.
The holders of Common Stock are entitled to receive dividends, when and as
declared by the Board of Directors, out of funds legally available therefor and
to receive pro rata the assets of the Company legally available for distribution
upon liquidation after payment to holders of preferred stock having a
liquidation preference over the Common Stock. In addition, holders of Common
Stock are entitled to one vote per share on all matters voted on by stockholders
generally, including the election of directors, and do not have cumulative
voting rights. There are no preemptive, conversion or redemption rights
applicable to the shares of the Common Stock. The currently outstanding shares
of Common Stock are, and the shares of
46
<PAGE>
Common Stock offered by the Company hereby, upon issuance by the Company against
receipt of the purchase price therefor, will be, fully paid and non-assessable.
The By-laws provide that any action requiring stockholder approval, other than
the election of directors, shall require the affirmative vote of two-thirds of
the outstanding shares of Common Stock.
The Board of Directors is empowered by the Certificate of Incorporation to
designate and issue from time to time one or more classes or series of preferred
stock without any action of the stockholders. The Board of Directors may fix and
determine the designations, preferences and relative, participating, optional
and other special rights, or the qualifications, limitations or restrictions of
each class or series so authorized. The issuance of, or the ability to issue,
the preferred stock could adversely affect the voting power and other rights of
the holders of the Common Stock or could have the effect of decreasing the
market price of the Common Stock or of discouraging or making difficult any
attempt by a person or group to obtain control of the Company, including any
attempt involving a bid for the Common Stock at a premium over the then market
price. The Company does not presently contemplate the issuance of any preferred
stock.
The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. In general, Section 203 prohibits a Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the time that such person
became an interested stockholder, unless the business combination is approved in
a prescribed manner or unless upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the corporation's voting stock outstanding at
the time the transaction commenced (excluding shares held by certain designated
stockholders). A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within the previous three
years did own, 15% or more of the corporation's voting stock.
The Certificate of Incorporation and By-laws contain certain provisions
relating to the limitation of liability and indemnification of directors and
officers. The Certificate of Incorporation provides that directors of the
Company may not be held personally liable to the Company or its stockholders for
monetary damages for a breach of fiduciary duty, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law, relating to prohibited dividends,
distributions and repurchases or redemptions of stock, or (iv) for any
transaction from which the director derives an improper benefit. However, such
limitation does not limit the availability of non-monetary relief in any action
or proceeding against a director. In addition, the By-laws provide that the
Company shall indemnify its directors and officers to the fullest extent
authorized by Delaware law.
The registrar and transfer agent for the Commmon Stock is StockTrans, Inc.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock.
Sales of substantial amounts of shares of the Common Stock in the public market
following the Offering could adversely affect the market price of the Common
Stock, making it more difficult for the Company to sell equity securities in the
future at a time and price which it deems appropriate.
Upon the completion of the Offering, assuming no exercise of the
overallotment options, the Company will have outstanding 6,076,900 shares of
Common Stock. Of these shares, the 2,600,000 shares of Common Stock to be sold
in the Offering will be freely tradeable without restriction or further
registration under the Securities Act. The remaining 3,476,900 shares of Common
Stock outstanding as of the date of this Prospectus, all of which are held by
Securicor, are "restricted securities" as defined by
47
<PAGE>
Rule 144 and will be eligible for sale in accordance with the provisions of Rule
144 beginning 180 days after the date of this Prospectus. In addition, the
Company has entered into the Registration Rights Agreement pursuant to which
Securicor has the right, subject to customary limitations, to: (i) demand
registration of the resale of its Common Stock once during each twelve month
period at Securicor's expense for so long as Securicor owns at least 10% of the
outstanding Common Stock; and (ii) include its Common Stock in registration
statements filed by the Company.
In general, under Rule 144 as amended effective April 29, 1997, a person who
has beneficially owned shares for at least one year, including an "affiliate,"
as that term is defined in the Securities Act, is entitled to sell within any
three-month period a number of shares that does not exceed the greater of one
percent of the then outstanding shares of Common Stock (approximately 60,769
shares after the completion of the Offering) or the average weekly trading
volume during the four calendar weeks preceding filing of notice of such sale,
subject to certain requirements concerning availability of public information,
manner and notice of sale.
In addition, affiliates must comply with the restrictions and requirements
of Rule 144, other than the one-year holding period requirements, in order to
sell shares of Common Stock which are not restricted securities. Under Rule
144(k), a person who is not an affiliate and has not been an affiliate for at
least three months prior to the sale and who has beneficially owned restricted
shares for at least a two year holding period may resell such shares without
compliance with the foregoing requirements.
Upon the completion of the Offering, it is expected that there will be
325,000 shares of Common Stock issuable upon exercise of options granted under
the 1997 Stock Incentive Plan, one-third of which will become exercisable
immediately and the remainder of which will become exercisable in two equal
annual installments on the first and second anniversaries of the date of grant,
respectively. The Company intends to file a Form S-8 registration statement
covering a portion of these shares within one year from the date of this
Prospectus. The shares registered under such registration statement will be
available for resale in the open market upon the exercise of vested options,
subject to Rule 144 volume limitations applicable to affiliates.
The Company and Securicor have agreed that, for a period of 180 days after
the date of this Prospectus, they will not, without the prior written consent of
Lehman Brothers Inc., offer, sell, contract to sell or otherwise dispose of any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for any shares of Common Stock except, in the case of the Company,
in certain limited circumstances.
48
<PAGE>
UNDERWRITING
Under the terms of, and subject to the conditions contained in, the U.S.
Underwriting Agreement, the form of which is filed as an Exhibit to the
Registration Statement (the "Registration Statement") of which this Prospectus
forms a part, the underwriters named below (the "U.S. Underwriters"), for whom
Lehman Brothers Inc. and J.P. Morgan Securities Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions of the U.S. Underwriting Agreement, to purchase from the
Company, and the Company has agreed to sell to each U.S. Underwriter, the
aggregate number of shares of Common Stock set forth opposite the name of each
such U.S. Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
U.S. UNDERWRITERS COMMON STOCK
- ------------------------------------------------------------------------------ --------------
<S> <C>
Lehman Brothers Inc. .........................................................
J.P. Morgan Securities Inc. ..................................................
--------------
Total...................................................................
</TABLE>
Under the terms of, and subject to the conditions contained in, the
International Underwriting Agreement, the form of which is filed as an Exhibit
to the Registration Statement, the managers named below of the concurrent
offering of the shares of Common Stock outside the U.S. and Canada (the
"International Managers"), for whom Lehman Brothers International (Europe) and
J.P. Morgan Securities Ltd. are acting as lead managers (the "Lead Managers"),
have severally agreed, subject to the terms and conditions of the International
Underwriting Agreement, to purchase from the Company, and the Company has agreed
to sell to each International Manager, the aggregate number of shares of Common
Stock set forth opposite the name of each International Manager below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
INTERNATIONAL MANAGERS COMMON STOCK
- ------------------------------------------------------------------------------ --------------
<S> <C>
Lehman Brothers International (Europe)........................................
J.P. Morgan Securities Ltd. ..................................................
--------------
Total...................................................................
</TABLE>
The U.S. Underwriting Agreement and the International Underwriting Agreement
(collectively, the "Underwriting Agreements") provide that the obligations of
the U.S. Underwriters and the International Managers to purchase shares of
Common Stock are subject to certain conditions, and that if any of the foregoing
shares of Common Stock are purchased by the U.S. Underwriters pursuant to the
U.S. Underwriting Agreement or by the International Managers pursuant to the
International Underwriting Agreement, then all the shares of Common Stock agreed
to be purchased by the U.S. Underwriters and the International Managers, as the
case may be, pursuant to their respective Underwriting Agreements, must be so
purchased. The offering price and underwriting discounts and commissions per
share for the U.S. Offering and the International Offering are identical. The
closing of the U.S. Offering is a condition to the closing of the International
Offering and the closing of the International Offering is a condition to the
closing of the U.S. Offering.
The Company has been advised by the Representatives and the Lead Managers
that the U.S. Underwriters and the International Managers propose to offer the
shares of Common Stock directly to the public at the public offering price set
forth on the cover page of this Prospectus, and to certain selected dealers (who
may include the U.S. Underwriters and the International Managers) at such public
offering price less a selling concession not in excess of $ per Share.
The selected dealers may reallow a concession not in excess of $ per
share to certain brokers and dealers. After the Offering, the public offering
price, the concession to selected dealers and the reallowance may be changed by
the U.S. Underwriters and the International Managers.
49
<PAGE>
The Company and Securicor have agreed to indemnify, under certain
circumstances, the U.S. Underwriters and the International Managers against
certain liabilities, including liabilities under the Securities Act, and to
contribute, under certain circumstances, to payments that the U.S. Underwriters
and the International Managers may be required to make in respect thereof.
The Company has granted to the U.S. Underwriters and the International
Managers options to purchase up to an aggregate of and additional
shares of Common Stock, respectively, exercisable solely to cover
over-allotments, at the public offering price less the underwriting discounts
and commissions shown on the cover page of this Prospectus. Such options may be
exercised at any time until 30 days after the date of the Underwriting
Agreements. To the extent that either option is exercised, each U.S. Underwriter
or International Manager, as the case may be, will be committed, subject to
certain conditions, to purchase a number of additional shares of Common Stock
proportionate to such U.S. Underwriter's or International Manager's initial
commitment as indicated in the preceding tables.
Prior to the Offering, there has been no public market for the shares of
Common Stock The initial public offering price will be negotiated between the
Company and the Representatives. Among the factors to be considered in
determining the initial public offering price of the shares of Common Stock, in
addition to prevailing market conditions, will be the Company's historical
performance and capital structure, estimates of business potential and earnings
prospects of the Company, an overall assessment of the Company, an assessment of
the Company's management and the consideration of the above factors in relation
to market valuation of companies in related businesses.
The U.S. Underwriters and the International Managers have entered into an
Agreement Between U.S. Underwriters and International Managers pursuant to which
each U.S. Underwriter has agreed that, as part of the distribution of the shares
of Common Stock offered in the U.S. Offering, (i) it is not purchasing any such
shares for the account of anyone other than a U.S. Person (as defined below),
and (ii) it has not offered or sold, will not offer, sell, resell or deliver,
directly or indirectly, any such shares or distribute any prospectus relating to
the U.S. Offering to anyone other than a U.S. Person. In addition, pursuant to
such Agreement, each International Manager has agreed that, as part of the
distribution of the shares of Common Stock offered in the International
Offering, (a) it is not purchasing any such shares for the account of a U.S.
Person, and (b) it has not offered or sold, and will not offer, sell, resell or
deliver, directly or indirectly, any of such shares or distribute any prospectus
relating to the International Offering to any U.S. Person.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the Underwriting Agreements and the
Agreement Between U.S. Underwriters and International Managers, including (i)
certain purchases and sales between U.S. Underwriters and the International
Managers, (ii) certain offers, sales, resales, deliveries or distributions to or
through investment advisors or other persons exercising investment discretion,
(iii) purchases, offers or sales by a U.S. Underwriter who is also acting as an
International Manager or by an International Manager who is also acting as a
U.S. Underwriter and (iv) other transactions specifically approved by the
Representatives and the Lead Managers. As used herein, the term "U.S. Person"
means any resident or national of the United States or Canada and its provinces,
any corporation, partnership or other entity created or organized in or under
the laws of the United States or Canada and its provinces, or any estate or
trust the income of which is subject to United States or Canadian federal income
taxation regardless of the source, and the term "United States" means the United
States of America (including the District of Columbia) and its territories, its
possessions and other areas subject to its jurisdiction.
Pursuant to the Agreement Between the U.S. Underwriters and the
International Managers, sales may be made between the U.S. Underwriters and the
International Managers of such a number of shares of Common Stock as may be
mutually agreed. The price of any shares so sold shall be the public offering
price as then in effect for the shares of Common Stock being sold by the U.S.
Underwriters and the International Managers, less an amount equal to the selling
concession allocable to such shares of
50
<PAGE>
Common Stock, unless otherwise determined by mutual agreement. To the extent
that there are sales between the U.S. Underwriters and the International
Managers pursuant to the Agreement Between the U.S. Underwriters and the
International Managers, the number of shares of Common Stock available for sale
by the U.S. Underwriters or by the International Managers may be more or less
than the amount specified on the cover page of the Prospectus.
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the U.S.
Underwriters and certain selling group members to bid for and purchase shares of
Common Stock. As an exception to these rules, the Representatives are permitted
to engage in certain transactions that stabilize the price of the Common Stock.
Such transactions may consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Common Stock.
If the U.S. Underwriters create a short position in the Common Stock in
connection with the Offering (I.E., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus), the Representatives
may reduce that short position by purchasing Common Stock in the open market.
The Representatives also may elect to reduce any short position by exercising
all or part of the over-allotment options described herein.
The Representatives also may impose a penalty bid on certain U.S.
Underwriters and selling group members. This means that, if the Representatives
purchase shares of Common Stock in the open market to reduce the U.S.
Underwriters' short position or to stabilize the price of the Common Stock, they
may reclaim the amount of the selling concession from the U.S. Underwriters and
selling group members who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offering.
Neither the Company nor any of the U.S. Underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the Common Stock. In
addition, neither the Company nor any of the U.S. Underwriters makes any
representation that the Representatives will engage in such transactions or that
such transactions, once commenced, will not be discontinued without notice.
Each International Manager has represented and agreed that (i) it has not
offered or sold and, prior to the date six months after the date of issue of the
shares of Common Stock, will not offer or sell any shares of Common Stock to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995, (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the shares of Common Stock in, from or
otherwise involving the United Kingdom, and (iii) it has only issued or passed
on, and will only issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the shares of Common
Stock if that person is of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1995.
Application has been made to have the shares of Common Stock approved for
quotation on The Nasdaq National Market under the symbol "STIQ."
The Company and Securicor have agreed that they will not, subject to certain
limited exceptions, for a period of 180 days from the date of this Prospectus,
directly or indirectly, offer, sell or otherwise dispose of
51
<PAGE>
any shares of Common Stock or any securities convertible into or exchangeable or
exercisable for any such shares of Common Stock, without the prior written
consent of Lehman Brothers Inc.
At the request of the Company, the Underwriters have reserved approximately
5% of the shares of Common Stock offered hereby for sale at the initial public
offering price to employees of the Company and other persons associated with the
Company.
Any offers in Canada will be made only pursuant to an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
such offer is made.
Purchasers of the shares of Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices of
the country of purchase, in addition to the offering price set forth on the
cover hereof.
The U.S. Underwriters and the International Managers have informed the
Company that they do not intend to sell to, and therefore will not confirm the
sales of shares of Common Stock offered hereby to, any accounts over which they
exercise discretionary authority.
LEGAL MATTERS
Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pennsylvania, has
rendered an opinion that the shares of Common Stock offered hereby will be
legally issued, fully paid and non-assessable. Certain legal matters relating to
the Offering will be passed upon for the Underwriters by Chadbourne & Parke LLP,
New York, New York.
EXPERTS
The financial statements included in this Prospectus and elsewhere in the
Registration Statement, to the extent and for the periods indicated on their
reports, have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said firm
as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a Registration
Statement on Form S-1 under the Securities Act with respect to the shares of
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
shares of Common Stock, reference is hereby made to the Registration Statement
and the exhibits and schedules filed as a part thereof. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement, including exhibits and schedules thereto, may be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials may also be obtained at
prescribed rates from the Public Reference Section of the Commission,
Washington, D.C. 20549. In addition, registration statements and certain other
filings made with the Commission through its Electronic Data Gathering, Analysis
and Retrieval ("EDGAR") systems are publicly available through the Commission's
site on the Internet's World Wide Web, located at http:// www.sec.gov. The
Registration Statement, including all exhibits thereto and amendments thereof,
has been filed with the Commission through EDGAR.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
FINANCIAL STATEMENTS OF SECURICOR TELESCIENCES INC.:
Report of Independent Public Accountants................................................................. F-2
Balance Sheets........................................................................................... F-3
Statements of Operations................................................................................. F-4
Statements of Stockholder's Equity....................................................................... F-5
Statements of Cash Flows................................................................................. F-6
Notes to Financial Statements............................................................................ F-7
FINANCIAL STATEMENTS OF PREDECESSOR BUSINESS:
Report of Independent Public Accountants................................................................. F-20
Statement of Revenues and Certain Expenses............................................................... F-21
Notes to Statement of Revenues and Certain Expenses...................................................... F-22
</TABLE>
F-1
<PAGE>
After the 34,769-for-one stock split of each outstanding share of Common
Stock and the authorization of 5,000,000 shares of Preferred Stock and
25,000,000 shares of Common Stock as discussed in Note 1 of Notes to Financial
Statements is effected, we expect to be in a position to render the following
report of independent public accountants.
Philadelphia, Pa.,
April 18, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Securicor Telesciences Inc.:
We have audited the accompanying balance sheets of Securicor Telesciences
Inc. (a Delaware corporation) as of September 30, 1995 and 1996, and the related
statements of operations, stockholder's equity and cash flows for the period
from July 1, 1994 to September 30, 1994 and for each of the two years in the
period ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Securicor Telesciences Inc.
as of September 30, 1995 and 1996, and the results of its operations and its
cash flows for the period from July 1, 1994 to September 30, 1994 and for each
of the two years in the period ended September 30, 1996, in conformity with
generally accepted accounting principles.
F-2
<PAGE>
SECURICOR TELESCIENCES INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------- MARCH 31,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................................... $ 1,449 $ 3,326 $ 1,279
Accounts receivable.......................................................................... 7,394 15,740 8,031
Inventories.................................................................................. 4,244 3,167 4,472
Deferred tax assets.......................................................................... 345 458 495
Income tax receivable........................................................................ -- -- 2,592
Other........................................................................................ 442 354 578
--------- --------- -----------
Total current assets..................................................................... 13,874 23,045 17,447
--------- --------- -----------
PROPERTY AND EQUIPMENT:
Computer hardware and software............................................................... 1,581 2,417 2,853
Production and test equipment................................................................ 980 1,329 1,642
Furniture, fixtures and leasehold improvements............................................... 501 531 532
--------- --------- -----------
3,062 4,277 5,027
Less-Accumulated depreciation and amortization............................................... (670) (1,541) (2,102)
--------- --------- -----------
Net property and equipment............................................................... 2,392 2,736 2,925
DEFERRED TAX ASSETS............................................................................ 2,825 2,959 2,879
OTHER ASSETS................................................................................... 1,901 1,207 81
INTANGIBLE ASSETS, net......................................................................... 1,153 389 187
--------- --------- -----------
$ 22,145 $ 30,336 $ 23,519
--------- --------- -----------
--------- --------- -----------
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt............................................................ $ -- $ 185 $ 185
Obligations to parent and affiliates......................................................... 7,611 12,441 9,592
Accounts payable............................................................................. 2,332 2,293 2,224
Accrued compensation and related benefits.................................................... 1,179 1,206 974
Accrued agent commissions.................................................................... 1,116 806 427
Other accrued expenses....................................................................... 769 1,268 712
Accrued tax payable.......................................................................... 284 1,348 --
Deferred tax liabilities..................................................................... 24 9 54
Deferred revenues............................................................................ 1,684 1,232 2,414
--------- --------- -----------
Total current liabilities................................................................ 14,999 20,788 16,582
--------- --------- -----------
LONG-TERM LIABILITIES:
Deferred tax liabilities..................................................................... 27 90 130
Long-term debt............................................................................... -- 147 --
--------- --------- -----------
Total long-term liabilities.............................................................. 27 237 130
--------- --------- -----------
COMMITMENTS AND CONTINGENCIES (Note 16)
STOCKHOLDER'S EQUITY:
Preferred Stock, $0.01 par value, 5,000,000 shares authorized,...............................
no shares issued and outstanding........................................................... -- -- --
Common Stock, $0.01 par value, 25,000,000 shares authorized,
3,476,900 shares issued and outstanding.................................................... 35 35 35
Additional paid-in capital................................................................... 10,815 10,815 10,815
Accumulated deficit.......................................................................... (3,731) (1,539) (4,043)
--------- --------- -----------
Total stockholder's equity............................................................... 7,119 9,311 6,807
--------- --------- -----------
$ 22,145 $ 30,336 $ 23,519
--------- --------- -----------
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
SECURICOR TELESCIENCES INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1994 YEAR ENDED SEPTEMBER SIX MONTHS ENDED
TO 30, MARCH 31,
SEPTEMBER 30, -------------------- --------------------
1994 1995 1996 1996 1997
------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES:
Unrelated third parties.............................. $ 5,606 $ 24,147 $ 31,641 $ 8,740 $ 10,921
Related parties...................................... -- 1,421 2,323 2,040 --
------------- --------- --------- --------- ---------
5,606 25,568 33,964 10,780 10,921
------------- --------- --------- --------- ---------
COST OF REVENUES:
Unrelated third parties.............................. 3,357 12,365 16,433 6,264 7,102
Related parties...................................... -- 1,112 1,732 1,488 --
------------- --------- --------- --------- ---------
3,357 13,477 18,165 7,752 7,102
------------- --------- --------- --------- ---------
Gross profit..................................... 2,249 12,091 15,799 3,028 3,819
------------- --------- --------- --------- ---------
OPERATING EXPENSES:
Research, development and engineering................ 1,348 5,948 7,003 3,209 3,790
Selling, general and administrative.................. 1,072 5,206 6,308 2,970 3,875
Parent charges....................................... -- 386 403 213 193
Charge for purchased research and development........ 6,700 -- -- -- --
------------- --------- --------- --------- ---------
Total operating expenses......................... 9,120 11,540 13,714 6,392 7,858
------------- --------- --------- --------- ---------
Operating income (loss).......................... (6,871) 551 2,085 (3,364) (4,039)
INTEREST EXPENSE, net (including related party
interest)............................................ 9 112 514 227 279
OTHER INCOME........................................... 66 148 1,979 413 54
------------- --------- --------- --------- ---------
Income (loss) before income taxes................ (6,814) 587 3,550 (3,178) (4,264)
INCOME TAX (EXPENSE) BENEFIT........................... 2,716 (220) (1,358) 1,215 1,760
------------- --------- --------- --------- ---------
NET INCOME (LOSS)...................................... $ (4,098) $ 367 $ 2,192 $ (1,963) $ (2,504)
------------- --------- --------- --------- ---------
------------- --------- --------- --------- ---------
PRO FORMA NET INCOME (LOSS) PER COMMON SHARE
(unaudited).......................................... $ 0.49 $ (0.45)
--------- ---------
--------- ---------
SHARES USED IN COMPUTING PRO FORMA NET INCOME (LOSS)
PER COMMON SHARE (unaudited)......................... 5,180 5,180
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
SECURICOR TELESCIENCES INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
----------------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE, JULY 1, 1994........................................ $ -- $ -- $ -- $ --
Initial capitalization..................................... 35 10,815 -- 10,850
Net loss................................................... -- -- (4,098) (4,098)
--- ----------- ------------ ---------
BALANCE, SEPTEMBER 30, 1994.................................. 35 10,815 (4,098) 6,752
Net income................................................. -- -- 367 367
--- ----------- ------------ ---------
BALANCE, SEPTEMBER 30, 1995.................................. 35 10,815 (3,731) 7,119
Net income................................................. -- -- 2,192 2,192
--- ----------- ------------ ---------
BALANCE, SEPTEMBER 30, 1996.................................. 35 10,815 (1,539) 9,311
Net loss (unaudited)....................................... -- -- (2,504) (2,504)
--- ----------- ------------ ---------
BALANCE, MARCH 31, 1997 (unaudited).......................... $ 35 $ 10,815 $ (4,043) $ 6,807
--- ----------- ------------ ---------
--- ----------- ------------ ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
SECURICOR TELESCIENCES INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX
PERIOD FROM MONTHS
JULY 1, 1994 YEAR ENDED SEPTEMBER ENDED
TO 30, MARCH 31,
SEPTEMBER 30, -------------------- ---------
1994 1995 1996 1996
------------- --------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................ $ (4,098) $ 367 $ 2,192 $ (1,963)
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities-
Depreciation and amortization............................................ 307 1,318 1,885 759
Charge for purchased research and development............................ 6,700 -- -- --
Changes in assets and liabilities, net-
Decrease (increase) in-
Accounts receivable.................................................. (1,131) (2,131) (8,346) 1,882
Inventories.......................................................... 583 (2,392) 1,077 (215)
Other current assets................................................. (428) 419 162 (445)
Other assets......................................................... (24) (3) (68) (71)
Deferred taxes....................................................... (2,739) (61) (199) --
Increase (decrease) in-
Accounts payable..................................................... 683 1,102 (39) (1,092)
Accrued compensation and related benefits............................ (28) 498 27 (44)
Accrued agent commissions............................................ 39 662 (310) (244)
Accrued tax payable.................................................. 23 261 1,064 (1,721)
Deferred revenues.................................................... (1,116) (691) (452) 1,282
Other accrued expenses............................................... 77 (1,258) 499 (351)
------------- --------- --------- ---------
Net cash provided by (used in) operating activities................ (1,152) (1,909) (2,508) (2,223)
------------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business.................................................. (10,850) -- -- --
Purchases of property and equipment...................................... (135) (877) (818) (270)
Sale (purchase) of investment............................................ -- (512) 512 62
Transfer (purchase) of product development costs......................... -- (1,336) -- --
------------- --------- --------- ---------
Net cash provided by (used in) investing activities................ (10,985) (2,725) (306) (208)
------------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Initial capitalization................................................... 10,850 -- -- --
Payments on long-term debt............................................... -- -- (139) (98)
Advances (repayments) on obligations to parent and affiliates............ 1,512 5,858 4,830 1,963
------------- --------- --------- ---------
Net cash provided by (used in) financing activities................ 12,362 5,858 4,691 1,865
------------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... 225 1,224 1,877 (566)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............................... -- 225 1,449 1,449
------------- --------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR..................................... $ 225 $ 1,449 $ 3,326 $ 883
------------- --------- --------- ---------
------------- --------- --------- ---------
<CAPTION>
1997
---------
<S> <C>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................................ $ (2,504)
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities-
Depreciation and amortization............................................ 764
Charge for purchased research and development............................ --
Changes in assets and liabilities, net-
Decrease (increase) in-
Accounts receivable.................................................. 7,709
Inventories.......................................................... (1,305)
Other current assets................................................. (224)
Other assets......................................................... 40
Deferred taxes....................................................... 128
Increase (decrease) in-
Accounts payable..................................................... (69)
Accrued compensation and related benefits............................ (232)
Accrued agent commissions............................................ (379)
Accrued tax payable.................................................. (3,940)
Deferred revenues.................................................... 1,182
Other accrued expenses............................................... (556)
---------
Net cash provided by (used in) operating activities................ 614
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business.................................................. --
Purchases of property and equipment...................................... (751)
Sale (purchase) of investment............................................ --
Transfer (purchase) of product development costs......................... 1,086
---------
Net cash provided by (used in) investing activities................ 335
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Initial capitalization................................................... --
Payments on long-term debt............................................... (147)
Advances (repayments) on obligations to parent and affiliates............ (2,849)
---------
Net cash provided by (used in) financing activities................ (2,996)
---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... (2,047)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............................... 3,326
---------
CASH AND CASH EQUIVALENTS, END OF YEAR..................................... $ 1,279
---------
---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
1. BACKGROUND:
THE COMPANY
Securicor Telesciences Inc. ("the Company") is incorporated in Delaware. The
Company is a wholly owned subsidiary of Securicor Communications Inc. ("SCI"), a
company incorporated in Delaware. SCI is a wholly-owned subsidiary of Securicor
Communications Limited ("SCL"), an entity incorporated in the United Kingdom and
a wholly-owned subsidiary of Securicor plc ("Securicor"), a company incorporated
in the United Kingdom. In November 1996, the Company formed a foreign sales
subsidiary which has had limited activity. All intercompany activity has been
eliminated.
Effective July 1, 1994, the Company purchased the net assets of the wireline
division of TeleSciences, Inc. The Company had no operating activities prior to
this acquisition. The acquisition was accounted for as a purchase transaction.
The total purchase price of $12,202,000, including $241,000 of transaction
costs, was allocated to the assets acquired and liabilities assumed based on
their respective fair values. As discussed further in Note 2, the Company
recorded $6,700,000 of the purchase price as a charge to the statement of
operations on the acquisition date as it was related to the fair value of
incomplete research and development projects. The excess of the purchase price
over the fair value of the net assets acquired was $2,108,000. Of such amount,
$1,800,000 was allocated to developed technology and $308,000 was allocated to
goodwill. Developed technology and goodwill are being amortized over 2 1/2 and 7
years, respectively, on a straight-line basis (see Note 6).
The following table displays the noncash assets and liabilities that were
acquired as a result of the acquisition:
<TABLE>
<S> <C>
Noncash assets (liabilities):
Accounts receivable........................................... $4,132,000
Inventories................................................... 2,435,000
Other current assets.......................................... 433,000
Property and equipment........................................ 2,050,000
Other assets.................................................. 26,000
Intangible assets............................................. 2,108,000
Deferred tax asset............................................ 319,000
Charge for purchased research and development................. 6,700,000
Accounts payable.............................................. (547,000)
Other accrued expenses and deferred revenues.................. (6,806,000)
----------
Cash paid................................................... $10,850,000
----------
----------
</TABLE>
INITIAL PUBLIC OFFERING AND STOCK SPLIT
On April 18, 1997, the Company filed a registration statement with the
Securities and Exchange Commission to register 2,600,000 shares of Common Stock
being offered for sale in its initial public offering. There can be no assurance
that this initial public offering will be completed. The Company plans to use a
portion of the net proceeds of this initial public offering to repay its
obligations to parent and affiliates and to pay a special dividend (see Note 2).
F-7
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
1. BACKGROUND: (CONTINUED)
On , 1997, the Company effected a 34,769-for-one stock split of
each outstanding share of Common Stock and authorized 5,000,000 shares of
Preferred Stock and 25,000,000 shares of Common Stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL STATEMENTS
The financial statements as of March 31, 1997 and for the six months ended
March 31, 1996 and 1997 are unaudited and, in the opinion of management, include
all adjustments (consisting only of normal recurring adjustments) necessary for
the fair presentation of results for these interim periods. The results for the
six months ended March 31, 1997 are not necessarily indicative of the results to
be expected for the entire year.
CASH AND CASH EQUIVALENTS
For the purposes of the Statement of Cash Flows, the Company considers all
highly liquid investment instruments purchased with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents are
comprised of investments in various money market funds. Included in cash and
cash equivalents on the accompanying balance sheets is $175,000, $271,000 and $0
of restricted cash as of September 30, 1995, 1996 and March 31, 1997,
respectively.
INVENTORIES
Inventories are valued at the lower of cost, determined on the first-in,
first-out method or market.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Significant improvements are
capitalized and expenditures for maintenance and repairs are charged to expense
as incurred. Upon the sale or retirement of these assets, the applicable cost
and related accumulated depreciation are removed from the accounts and any gain
or loss is included in the statement of operations.
Depreciation and amortization are provided on a straight-line basis over the
estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Computer hardware and software..................................... 3 years
Production and test equipment...................................... 5 years
Furniture, fixtures and leasehold improvements..................... 5 years
</TABLE>
INTANGIBLE ASSETS
Intangible assets consist of developed technology and goodwill which are
being amortized over 2 1/2 and 7 years, respectively, on a straight-line basis
(see Note 6). The Company evaluates the realizability of intangible assets based
on estimates of undiscounted future cash flows over the remaining useful life of
the
F-8
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
asset. If the amount of such estimated undiscounted future cash flows is less
than the net book value of the asset, the asset is written down to its net
realizable value. As of March 31, 1997, no such write-down was required.
DEFERRED REVENUES
Deferred revenues represent amounts collected from the Company's customers
in excess of revenues recognized. This is primarily due to annual customer
support contracts. Such amounts are recognized as revenues over the contract
term.
PRODUCT WARRANTY
The Company provides for the estimated cost to repair or replace products
under warranty when the revenues from product sales are recorded.
AGENT COMMISSIONS
In certain contracts, particularly large international contracts, the
Company may utilize an agent, who will work directly with the customer. The
Company is typically charged a commission based on the total revenues of the
contract. These charges are recorded when the revenues are recognized and
included in cost of revenues. Any earned but unpaid commissions are recorded in
accrued agent commissions.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentration
of credit risk are accounts receivable. The Company's customer base principally
comprises the regional Bell operating companies, as well as international
telephone companies. The Company typically does not require collateral from its
customers (see Note 15).
REVENUE RECOGNITION
Revenues are generally recognized upon shipment of the equipment and, if
recognized prior to shipment, upon completion of customer acceptance where risks
of ownership are transferred to the customer. Under the Company's long-term
contracts, the Company recognizes revenues upon shipment of the equipment, which
approximates the percentage of completion method. Revenues from installation and
customer support activities are recognized as services are provided. Software
license revenues are recognized upon installation or shipment depending upon the
terms of the agreement.
RESEARCH, DEVELOPMENT AND ENGINEERING EXPENSES
Research, development and engineering expenses are charged to expense as
incurred. Engineering expenses consist of costs related to the development of
new products, enhancements to existing products and the integration of existing
products into application specific systems.
F-9
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PARENT CHARGES
Parent charges are allocated to the Company from Securicor and consist of
charges for certain support and services.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." SFAS No.
109 requires the liability method of accounting for deferred income taxes.
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities.
Deferred tax assets or liabilities at the end of each period are determined
using the enacted tax rates.
PRO FORMA NET INCOME (LOSS) PER COMMON SHARE
Pro Forma net income (loss) per common share was calculated by dividing net
income (loss) by the weighted average number of common shares outstanding for
the respective period. Pursuant to the requirements of the Securities and
Exchange Commission, the calculation of pro forma net income (loss) per common
share includes the number of shares that would be required to be sold in the
initial public offering to fund the payment of the (i) $9,592,000 obligations to
parent and affiliates (see Note 8) and (ii) the $10,850,000 special dividend to
SCL. In addition, the pro forma net income (loss) per common share for the year
ended September 30, 1996 and the six months ended March 31, 1997 excludes
interest expense on the obligations to parent and affiliates of $578,000 and
$322,000, respectively, net of income taxes. Stock options to be granted prior
to the intitial public offering have been excluded from the calculation since
the option prices will be equal to the initial public offering price and will
therefore not be dilutive (See Note 11).
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
The Company is required to adopt SFAS 128 during its fiscal year ending
September 30, 1998. The adoption of SFAS 128 is not expected to have a material
impact on the Company's calculation of net income (loss) per common share.
FOREIGN CURRENCY
The Company's sales arrangements with international customers are fixed in
the amount of U.S. dollars to be received. Relative to the activity with
obligations to parent and affiliates, the Company charges the related foreign
exchange gains and losses to the statements of operations.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-10
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CHARGE FOR PURCHASED RESEARCH AND DEVELOPMENT
In connection with the acquisition of the Company (see Note 1) on July 1,
1994, $6,700,000 of the purchase price was allocated to incomplete research and
development projects. Accordingly, these costs were charged to expense as of the
acquisition date. The development of these projects had not yet reached
technological feasibility and the technology had no alternative future use. The
technology acquired in the acquisition required substantial additional
development by the Company.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For the period from July 1, 1994 to September 30, 1994, the years ended
September 30, 1995 and 1996, and for the six months ended March 31, 1996 and
1997, the Company paid interest of $0, $120,000, $459,000, $161,000 and
$353,000, respectively. For the period from July 1, 1994 to September 30, 1994,
the years ended September 30, 1995 and 1996, and for the six months ended March
31, 1996 and 1997, the Company paid income taxes of $0, $21,000, $495,000,
$495,000 and $2,049,000, respectively.
STOCK-BASED COMPENSATION PLANS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 establishes financial accounting and
reporting standards for stock-based employee compensation plans. This statement
also applies to transactions in which an entity issues its equity instruments to
acquire goods or services from non-employees. The Company is required to adopt
SFAS 123 in its annual financial statements for the fiscal year ended September
30, 1997. The Company has elected to adopt the disclosure requirement of this
pronouncement. The adoption of the disclosure requirements is expected to have
no impact on the Company's financial position or results of operation.
3. ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------- MARCH 31,
1995 1996 1997
------------ ------------- ------------
<S> <C> <C> <C>
Billed................................................................ $ 4,634,000 $ 13,223,000 $ 7,515,000
Unbilled.............................................................. 2,860,000 2,617,000 666,000
------------ ------------- ------------
7,494,000 15,840,000 8,181,000
Less--allowance for doubtful accounts................................. (100,000) (100,000) (150,000)
------------ ------------- ------------
$ 7,394,000 $ 15,740,000 $ 8,031,000
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
Unbilled accounts receivable includes costs and estimated earnings on
contracts in progress which have been recognized as revenues but not yet billed
to customers under the provisions of specified contracts. Substantially, all
unbilled accounts receivables are expected to be billed and collected within one
year.
F-11
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
4. INVENTORIES:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------- MARCH 31,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Raw materials........................................................... $ 3,362,000 $ 2,779,000 $ 3,533,000
Work-in-process......................................................... 882,000 199,000 629,000
Finished goods.......................................................... -- 189,000 310,000
------------ ------------ ------------
$ 4,244,000 $ 3,167,000 $ 4,472,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
5. OTHER ASSETS:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------- MARCH 31,
1995 1996 1997
------------ ------------ -----------
<S> <C> <C> <C>
Acquired product development costs, net.................................. $ 1,336,000 $ 1,086,000 $ --
Investment............................................................... 512,000 -- --
Other.................................................................... 53,000 121,000 81,000
------------ ------------ -----------
$ 1,901,000 $ 1,207,000 $ 81,000
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
The acquired product development costs relate to the development of an
Integrated Services Digital Network ("ISDN") product which is sold in the United
States. This asset was purchased from Securicor 3Net Ltd. ("3Net"), an affiliate
of Securicor. Completion of this ISDN product occurred in October 1995.
Therefore, as of September 30, 1995, the Company did not have any amortization
expense related to these costs. Amortization was computed by multiplying the
ratio of current revenues for the product to total and anticipated future
revenues for the product by acquired costs. Amortization expense was $250,000
for the year ended September 30, 1996. During the year ended September 30, 1996,
the Company sold certain products related to this technology and recognized
certain costs and realized all of the revenues related to such activities. For
the year ended September 30, 1996, the Company recognized revenues of $792,000
and cost of revenues of $464,000 relating to such activities. These amounts are
included in unrelated third party revenues and cost of revenues. As of September
30, 1995, 1996 and March 31, 1997, related to these activities, the Company had
no receivables and $994,000, $296,000 and $0, respectively, of payables to this
entity which are included in obligations to parent and affiliates. Additionally,
as of September 30, 1995, 1996 and March 31, 1997, the Company had receivables
of $0, $610,000 and $0 from the one unrelated third party who purchased this
product. As of October 1, 1996, Securicor organized Securicor 3Net, Inc. ("3Net
Delaware") as a Delaware corporation and caused the Company to transfer the
above acquired product development costs and other assets related to 3Net to
3Net Delaware. The assets were transferred at net book value; accordingly, no
gain or loss was recorded by the Company. As of March 31, 1997, the Company had
a receivable of $1,035,000 from this entity which is included in obligations to
parent and affiliates (see Note 8).
In January 1995, the Company made a $512,000 minority investment in a
business. In addition, in September 1995, the Company provided a credit facility
to this entity. As of September 30, 1995, no amounts were outstanding under this
credit facility. On May 2, 1996, the Company sold this investment for proceeds
of $2,061,000 plus the repayment of the balance on the credit facility which was
approximately
F-12
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
5. OTHER ASSETS: (CONTINUED)
$600,000 on May 2, 1996. These proceeds included a $1,500,000 technology
transfer fee, $561,000 as repayment for the Company's initial investment
($512,000) and amounts due from this entity under the credit facility, which was
terminated at this date. The Company recognized a gain on the sale of this
investment of $1,549,000 (see Note 10). Due to the temporary nature and
percentage ownership of this investment, this investment was accounted for under
the cost method of accounting. Additionally, the Company did not exercise
significant influence over this investment nor did it direct this entity's
financial or operating activities. For the years ended September 30, 1995 and
1996 and the six months ended March 31, 1996 and 1997, revenues recognized by
the Company from this entity were $381,000, $2,166,000, $376,000 and $1,120,000,
respectively, and are included in unrelated third party revenues. For the years
ended September 30, 1995 and 1996 and the six months ended March 31, 1996 and
1997, other income from this entity was $37,000, $1,549,000, $0 and $0,
respectively. Additionally, amounts due from this entity of $165,000, $258,000
and $854,000 are included in accounts receivable and amounts due to this entity
of $50,000, $0 and $0 are included in other accrued expenses as of September 30,
1995, 1996 and March 31, 1997, respectively.
6. INTANGIBLE ASSETS:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------- MARCH 31,
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Developed technology.................................................... $ 1,800,000 $ 1,800,000 $ 1,800,000
Goodwill................................................................ 308,000 308,000 308,000
------------ ------------ ------------
2,108,000 2,108,000 2,108,000
Less--Accumulated amortization.......................................... (955,000) (1,719,000) (1,921,000)
------------ ------------ ------------
$ 1,153,000 $ 389,000 $ 187,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
7. LONG-TERM DEBT:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------- MARCH 31,
1995 1996 1997
--------- ---------- -----------
<S> <C> <C> <C>
Term note payable, payable in annual installments of $98,000 plus interest at
5.3% through 1998........................................................... $ -- $ 196,000 $ 98,000
Capitalized lease obligations, payable in monthly installments of $8,500
including interest at 15% through 1998...................................... -- 136,000 87,000
--------- ---------- -----------
-- 332,000 185,000
--------- ---------- -----------
Less--Current portion......................................................... -- (185,000) (185,000)
--------- ---------- -----------
$ -- $ 147,000 $ --
--------- ---------- -----------
--------- ---------- -----------
</TABLE>
F-13
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
7. LONG-TERM DEBT: (CONTINUED)
Maturities of long-term debt as of September 30, 1996, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
- ----------------------------------------------------------------------------------
<S> <C>
1997.............................................................................. $ 185,000
1998.............................................................................. 147,000
----------
$ 332,000
----------
----------
</TABLE>
In March 1996, the Company entered into a $294,000 term note payable with an
equipment vendor for the purchase of computer hardware and software and the
related maintenance agreements. Included in this amount is $249,000 of computer
hardware and software which has been recorded in property and equipment and the
related $45,000 maintenance contract prepayment which has been recorded in other
current assets. This term note payable is payable in three equal annual
installments of $98,000. The first of these three payments was paid in fiscal
1996. The interest rate charged on this term note payable is 5.3%. Interest
expense for the year ended September 30, 1996 and the six months ended March 31,
1997 was $6,000 and $6,000 respectively.
In April 1996, the Company entered into a $177,000 lease obligation that
qualified as a capital lease for the purchase of computer hardware and software
and the related maintenance agreements. Included in this amount is $148,000 of
computer hardware and software which has been recorded in property and equipment
and the related $29,000 maintenance contract prepayment which has been recorded
in other current assets. This lease is payable in 24 equal monthly installments
of $8,500. The implicit interest rate charged on this obligation is 15%.
Interest expense for the year ended September 30, 1996 and the six months ended
March 31, 1997 was $10,000 and $11,000, respectively. Assets acquired under
capital leases at a cost of $148,000 and $148,000 less accumulated amortization
of $24,000 and $49,000 are included in property and equipment at September 30,
1996 and March 31, 1997, respectively.
8. OBLIGATIONS TO PARENT AND AFFILIATES:
Information relative to the Company's obligations to parent and affiliates
is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------- MARCH 31,
1995 1996 1997
------------ ------------- -------------
<S> <C> <C> <C>
Obligations to parent:
Interest free...................................................... $ 3,577,000 $ 1,476,000 $ 1,476,000
Interest bearing................................................... 2,712,000 10,512,000 8,972,000
Other.............................................................. 237,000 190,000 177,000
------------ ------------- -------------
Total obligations to parent...................................... 6,526,000 12,178,000 10,625,000
------------ ------------- -------------
Obligation to affiliates:
Receivable from affiliates......................................... (319,000) (33,000) (1,061,000)
Payables to affiliates............................................. 1,404,000 296,000 28,000
------------ ------------- -------------
Total obligations to affiliates, net............................. 1,085,000 263,000 (1,033,000)
------------ ------------- -------------
Total obligations to parent and affiliates........................... $ 7,611,000 $ 12,441,000 $ 9,592,000
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
F-14
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
8. OBLIGATIONS TO PARENT AND AFFILIATES: (CONTINUED)
The Company has been funded through advances from its parent (Securicor).
Certain advances are interest bearing and are loaned to the Company at a base
rate plus 1%. For the period from July 1, 1994 to September 30, 1994 and the
years ended September 30, 1995 and 1996, the interest rate charged on these
obligations ranged from 6.25% to 6.75%, 6.75% to 7.75% and 6.75% to 7.75%,
respectively. Interest expense for the period from July 1, 1994 to September 30,
1994, the years ended September 30, 1995 and 1996 and the six months ended March
31, 1996 and 1997, was $9,000, $141,000, $578,000, $262,000 and $322,000,
respectively. As these obligations to parent and affiliates are due on demand,
this net amount is included in current liabilities. In connection with the
initial public offering, the net balance of $9,592,000 will be paid (see Note
1).
9. INTEREST EXPENSE, NET:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1994 YEAR ENDED SEPTEMBER SIX MONTHS ENDED MARCH
TO 30, 31,
SEPTEMBER 30, ---------------------- ----------------------
1994 1995 1996 1996 1997
------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Interest expense on obligations to parent......... $ 9,000 $ 141,000 $ 578,000 $ 262,000 $ 322,000
Interest expense.................................. -- -- 16,000 5,000 17,000
Interest income................................... -- (29,000) (80,000) (40,000) (60,000)
------ ---------- ---------- ---------- ----------
$ 9,000 $ 112,000 $ 514,000 $ 227,000 $ 279,000
------ ---------- ---------- ---------- ----------
------ ---------- ---------- ---------- ----------
</TABLE>
10. OTHER INCOME:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1994 SIX MONTHS ENDED MARCH
TO YEAR ENDED SEPTEMBER 30, 31,
SEPTEMBER 30, ------------------------ ----------------------
1994 1995 1996 1996 1997
------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Litigation settlement gain...................... $ -- $ -- $ 350,000 $ 350,000 $ --
Gain on sale of investment (see Note 5)......... -- -- 1,549,000 -- --
Miscellaneous................................... 66,000 148,000 80,000 63,000 54,000
------------- ---------- ------------ ---------- ----------
$ 66,000 $ 148,000 $ 1,979,000 $ 413,000 $ 54,000
------------- ---------- ------------ ---------- ----------
------------- ---------- ------------ ---------- ----------
</TABLE>
On December 6, 1995, the Company entered into a litigation settlement
agreement whereby the Company was awarded $350,000. This settlement is to be
paid over three years. The Company received $164,000 in 1996 and $118,000 during
the six months ended March 31, 1997. The remaining balance of $68,000 is
included in other current assets.
11. STOCKHOLDER'S EQUITY:
In July 1994, SCI contributed $10,850,000 as its initial capitalization of
the Company (see Note 1). In connection with the initial public offering, a
special dividend of $10,850,000 will be paid (see Note 1).
F-15
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
11. STOCKHOLDER'S EQUITY: (CONTINUED)
1997 STOCK INCENTIVE PLAN
On April 15, 1997, the Company established the 1997 Stock Incentive Plan
(the "1997 Plan") which authorized 450,000 shares of Common Stock to be issued
under the 1997 Plan. Under the 1997 Plan, a variety of awards, including stock
options, stock appreciation rights and restricted and unrestricted stock grants
may be made to the Company's employees, officers, consultants and advisors.
Common stock options may be granted either in the form of incentive stock
options or non-statutory stock options. The option exercise price of incentive
stock options may not be less than the fair market value of the Common Stock on
the date of the grant. It is expected that prior to the completion of the
initial public offering (see Note 1) options to purchase 325,000 shares of
Common Stock will be granted under the 1997 Plan to the employees, officers and
directors of the Company at an exercise price equal to the initial public
offering price per share. One third of these options will vest immediately and
the remaining two-thirds will vest on the first and second anniversaries of the
date of grant, respectively. No additional options to purchase Common Stock have
been granted to date.
12. EMPLOYEE BENEFIT PLAN:
Prior to July 1994, TeleSciences, Inc. had a profit-sharing retirement plan
and a thrift plan which covered substantially all employees. In connection with
the acquisition on July 1, 1994, all balances in the profit-sharing retirement
plan were transferred into the thrift plan. The thrift plan's name is now
Securicor Telesciences Thrift/401(k) Plan (the "Plan"). Upon this transfer, all
balances were 100% vested. With respect to the Plan, eligible employees must
have one year of service with the Company and be 18 years of age. An employee
may contribute both pre- and post-tax dollars to the Plan, subject to certain
limitations, as defined by the Plan. The employer contributions to the Plan are
equal to 75% of the employee's basic pre-tax contribution up to certain limits,
as defined. The Company's contribution to the Plan for the period from July 1,
1994 to September 30, 1994, and for the years ended September 30, 1995 and 1996
was $60,000, $245,000, and $277,000, respectively.
13. RELATED PARTY TRANSACTIONS:
The Company entered into two separate agreements with Securicor Radiocoms
Ltd., an affiliate of Securicor. The first agreement provided that the Company
construct product for Securicor Radiocoms Ltd. and bill for all costs incurred
in addition to a certain profit percentage, as defined. The second agreement
provided for the construction of additional product for Securicor Radiocoms
Ltd., which was billed at a fixed price per unit. The Company recognized
revenues from Securicor Radiocoms Ltd. for the period from July 1, 1994 to
September 30, 1994, the years ended September 30, 1995 and 1996 and the six
months ended March 31, 1996 and 1997 of $0, $1,421,000, $2,323,000, $2,040,000
and $0, respectively. The Company recognized cost of revenues related to these
revenues for the period from July 1, 1994 to September 30, 1994, the years ended
September 30, 1995 and 1996 and the six months ended March 31, 1996 and 1997 of
$0, $1,112,000, $1,732,000, $1,488,000 and $0, respectively. As of September 30,
1995, 1996 and March 31, 1997, related to these agreements, the Company had
receivables of $319,000, $31,000 and $22,000, respectively, which are included
in obligations to parent and affiliates and $410,000, $0 and $0, respectively,
of advances from Securicor Radiocoms Ltd. which are included in obligations to
parent
F-16
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
13. RELATED PARTY TRANSACTIONS: (CONTINUED)
and affiliates. As of September 30, 1995, 1996 and March 31, 1997, $99,000, $0
and $0, respectively, of costs were included in other current assets related to
these agreements.
In October 1996, 3Net Delaware (an affiliate of Securicor--see Note 5) began
utilizing certain office space and systems of the Company for which it has been
charged approximately $7,000 per month since its formation. In April 1997, the
Company entered into a one-year agreement with 3Net Delaware pursuant to which
the Company will continue to make available such space and systems in
consideration of the payment of $5,000 per month for administrative services and
$800 per month for each 3Net Delaware employee located on the Company's
premises. See Notes 5 and 8 for other related party transactions.
During the year ended September 30, 1996, certain key executive officers
were granted options to purchase the common stock of Securicor. The aggregate
number of options granted to these executive officers was 104,050. The exercise
price of these options was L2.45 per share, which was the fair market value of
Securicor common stock on the date of grant. These options vest on the third
anniversary of the date of grant. These options expire in June 2006 which is ten
years from the date of grant.
14. INCOME TAXES:
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1994 YEAR ENDED
TO SEPTEMBER 30,
SEPTEMBER 30 ------------------------
1994 1995 1996
------------- ---------- ------------
<S> <C> <C> <C>
Current:
Federal............................................................... $ 18,000 $ 207,000 $ 1,183,000
State................................................................. 5,000 74,000 374,000
------------- ---------- ------------
23,000 281,000 1,557,000
------------- ---------- ------------
Deferred:
Federal............................................................... (2,328,000) (52,000) (169,000)
State................................................................. (411,000) (9,000) (30,000)
------------- ---------- ------------
(2,739,000) (61,000) (199,000)
------------- ---------- ------------
$(2,716,000) $ 220,000 $ 1,358,000
------------- ---------- ------------
------------- ---------- ------------
</TABLE>
Income tax expense differs from the amount currently payable because certain
expenses, primarily depreciation and accruals, are reported in different periods
for financial reporting and income tax purposes.
F-17
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
14. INCOME TAXES: (CONTINUED)
The federal statutory income tax is reconciled to the effective income tax
rate as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1994 YEAR ENDED SEPTEMBER
TO 30,
SEPTEMBER 30 --------------------
1994 1995 1996
--------------- --------- ---------
<S> <C> <C> <C>
Federal statutory rate......................................................... (34.0)% 34.0% 34.0%
State income taxes, net of federal benefit..................................... (5.9 ) 5.9 5.9
Other.......................................................................... -- (2.4) (1.6)
----- --------- ---------
(39.9 )% 37.5% 38.3%
----- --------- ---------
----- --------- ---------
</TABLE>
The components of the net current and long-term deferred tax assets and
liabilities, measured under SFAS No. 109, are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
<S> <C> <C>
1995 1996
------------ ------------
Deferred tax assets--
Charge for purchased research and development................... $ 2,825,000 $ 2,910,000
Accruals........................................................ 314,000 408,000
Other........................................................... 31,000 99,000
------------ ------------
3,170,000 3,417,000
Deferred tax liabilities--
Depreciation.................................................... 10,000 90,000
Other........................................................... 41,000 9,000
------------ ------------
51,000 99,000
------------ ------------
Net deferred tax assets....................................... $ 3,119,000 $ 3,318,000
------------ ------------
------------ ------------
</TABLE>
15. CUSTOMER AND GEOGRAPHIC INFORMATION:
The Company's operations are conducted in one business segment. The
Company's revenues originated from the following geographic destinations:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1994 YEAR ENDED SIX MONTHS
TO SEPTEMBER 30, ENDED MARCH 31,
SEPTEMBER 30, ---------------------------- ----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
North America........................ $ 2,927,000 $ 15,541,000 $ 28,282,000 $ 7,224,00 $ 9,809,000
South America........................ 2,666,000 7,604,000 2,471,000 817,000 410,000
United Kingdom (related party)....... -- 1,421,000 2,323,000 2,040,000 --
Other................................ 13,000 1,002,000 888,000 699,000 702,000
------------- ------------- ------------- ------------- -------------
$ 5,606,000 $ 25,568,000 $ 33,964,000 $ 10,780,000 $ 10,921,000
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
</TABLE>
F-18
<PAGE>
SECURICOR TELESCIENCES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 1997 AND FOR THE SIX MONTHS ENDED
MARCH 31, 1996 AND 1997 IS UNAUDITED)
15. CUSTOMER AND GEOGRAPHIC INFORMATION: (CONTINUED)
The following table summarizes significant customers with revenues in excess
of 10% of the Company's revenues in any given period presented:
<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1994 YEAR ENDED SIX MONTHS
TO SEPTEMBER 30, ENDED MARCH 31,
SEPTEMBER 30, -------------------------- --------------------------
CUSTOMER 1994 1995 1996 1996 1997
- ------------------------------------------ ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Ameritech Corporation..................... $ 1,509,000 $ 4,277,000 $ 4,431,000 $ 912,000 $ 1,028,000
Puerto Rico Telephone Co. ................ -- 101,000 3,199,000 2,197,000 6,000
Southwestern Bell Telephone Company....... 28,000 1,478,000 6,289,000 1,628,000 1,786,000
Telecom Argentina......................... 2,642,000 4,353,000 1,170,000 38,000 379,000
Telecommunications of Jamaica, Ltd........ -- 930,000 823,000 685,000 100,000
U S West, Inc............................. 1,143,000 7,349,000 10,219,000 1,905,000 3,890,000
</TABLE>
The failure of any of the Company's significant customers to continue to
purchase products and services from the Company, or any significant delay in
orders from such customers, could have a material adverse effect on the
Company's results of operations and financial condition.
16. COMMITMENTS AND CONTINGENCIES:
The Company has entered into noncancelable operating leases for its office
and manufacturing facilities, production and test equipment and fixtures. The
total rental for production and test equipment and fixtures for the period from
July 1, 1994 to September 30, 1994 and for the years ended September 30, 1995
and 1996 was $56,000, $267,000 and $266,000, respectively. These lease
agreements provide that the Company will pay all insurance, maintenance and
repairs.
In addition, the Company leases its office and manufacturing facilities
under long-term operating leases. The rental on the office and manufacturing
facilities for the period from July 1, 1994 to September 30, 1994 and for the
years ended September 30, 1995 and 1996 was $117,000, $334,000 and $322,000,
respectively. The amounts payable under these leases are subject to
renegotiation at various intervals specified in the leases.
Future minimum rental payments as of September 30, 1996 are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
- ----------------------------------------------------------------------------------
<S> <C>
1997.............................................................................. $ 341,000
1998.............................................................................. 227,000
----------
$ 568,000
----------
----------
</TABLE>
The Company is obligated to make certain payments, as defined, to certain
key Company employees if these employees are terminated. In addition, certain
key employees have performance incentives in the form of cash and equity (in the
parent or an affiliate) related compensation. The Company does not expect to
make these payments other than in the normal course of business.
F-19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Securicor Telesciences Inc.:
We have audited the accompanying statement of revenues and certain expenses
for the year ended June 30, 1994 of the Predecessor Business (see Note 1). This
statement of revenues and certain expenses is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
statement of revenues and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenues and certain
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement of
revenues and certain expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
The statement of revenues and certain expenses has been prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission (for inclusion in the Form S-1 filing of Securicor
Telesciences Inc.) as described in Note 1 and is not intended to be a complete
presentation of the financial results of the Predecessor Business.
In our opinion, the statement of revenues and certain expenses referred to
above presents fairly, in all material respects, the revenues and certain
expenses of the Predecessor Business for the year ended June 30, 1994, in
conformity with generally accepted accounting principles.
Philadelphia, Pa.,
March 7, 1997
F-20
<PAGE>
PREDECESSOR BUSINESS (NOTE 1)
STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED JUNE 30, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES.......................................................................... $ 20,229
COST OF REVENUES.................................................................. 12,803
---------
Gross profit................................................................ 7,426
---------
OPERATING EXPENSES:
Research, development and engineering........................................... 5,450
Selling, general and administrative............................................. 4,985
---------
Total operating expenses.................................................... 10,435
---------
OPERATING LOSS.................................................................... $ (3,009)
---------
---------
</TABLE>
The accompanying notes are an integral part of this statement.
F-21
<PAGE>
PREDECESSOR BUSINESS
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED JUNE 30, 1994
1. BASIS OF PRESENTATION:
On July 1, 1994, Securicor Telesciences Inc. (the "Company") purchased the
net assets of the wireline division of TeleSciences, Inc. ("TeleSciences"). The
net assets acquired are referred to as the "Predecessor Business." In connection
with the Company's initial public offering as contemplated in this Prospectus,
the accompanying financial statement has been prepared to comply with the rules
and regulations of the Securities and Exchange Commission. These rules and
regulations require a statement of revenues and certain expenses of the
Predecessor Business. This statement does not include interest, income taxes and
TeleSciences' corporate management fees.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
REVENUE RECOGNITION
Revenues are generally recognized upon shipment of the equipment and, if
recognized prior to shipment, upon completion of customer acceptance where risks
of ownership are transferred to the customer. Under the Predecessor Business'
long-term contracts, the Predecessor Business recognizes revenues upon shipment
of the equipment, which approximates the percentage of completion method.
Revenues from installation and customer support activities are recognized as
services are provided. Software license revenues are recognized upon
installation or shipment depending upon the terms of the agreement.
AGENT COMMISSIONS
In certain contracts, particularly large international contracts, the
Predecessor Business may utilize an agent, who will work directly with the
customer. The Predecessor Business is typically charged a commission based on
the total revenues of the contract. These charges are recorded when the revenues
are recognized and included in cost of revenues.
RESEARCH, DEVELOPMENT AND ENGINEERING EXPENSES
Research, development and engineering expenses are charged to expense as
incurred. Engineering expenses consist of costs related to the development of
new products, enhancements to existing products and the integration of existing
products into application specific systems.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-22
<PAGE>
PREDECESSOR BUSINESS
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES (CONTINUED)
FOR THE YEAR ENDED JUNE 30, 1994
3. CUSTOMER AND GEOGRAPHIC INFORMATION:
The Predecessor Business' operations were conducted in one business segment.
The Predecessor Business' revenues originated from the following geographic
destinations:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
1994
-------------
<S> <C>
North America.................................................................. $ 12,366,000
South America.................................................................. 7,388,000
Other.......................................................................... 475,000
-------------
$ 20,229,000
-------------
-------------
</TABLE>
The following table summarizes significant customers with revenues in excess
of 10% of the Predecessor Business' revenues for the year ended June 30, 1994:
<TABLE>
<CAPTION>
CUSTOMER AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
Ameritech Corporation........................................................... $ 4,949,000
Telecom Argentina............................................................... 3,945,000
U S West, Inc................................................................... 4,872,000
</TABLE>
F-23
<PAGE>
[Description of graphics to be inserted:
Inside Back Cover: As a background a light shaded photo of the Company's
headquarters with several photos arranged in the foreground showing the
Company's products being used by the Company's customers].
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 6
Use of Proceeds................................. 12
Dividend Policy................................. 12
Capitalization.................................. 12
Selected Financial Data......................... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 16
Business........................................ 23
Management...................................... 40
Principal Stockholders.......................... 45
Certain Transactions............................ 45
Description of Capital Stock.................... 46
Underwriting.................................... 49
Legal Matters................................... 52
Experts......................................... 52
Additional Information.......................... 52
Index to Financial Statements................... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,600,000 SHARES
SECURICOR
TELESCIENCES INC.
COMMON STOCK
----------------
PROSPECTUS
, 1997
------------------------
LEHMAN BROTHERS
J.P. MORGAN & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ALTERNATE INTERNATIONAL COVER
SUBJECT TO COMPLETION, DATED APRIL , 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
P R O S P E C T U S
2,600,000 SHARES
SECURICOR TELESCIENCES INC.
COMMON STOCK
-------------
All of the shares of Common Stock, par value $.01 per share (the "Common
Stock") offered hereby are being sold by Securicor Telesciences Inc. (the
"Company"). Of the 2,600,000 shares of Common Stock offered hereby, are
initially being offered outside the United States and Canada by the
International Managers (the "International Offering") and are initially
being offered in the United States and Canada by the U.S. Underwriters (the
"U.S. Offering" and, together with the U.S. Offering, the "Offering"). Of the
net proceeds from the sale by the Company of the Common Stock, approximately
$20.5 million will be used to repay certain indebtedness from, and pay a special
dividend to, the Company's sole stockholder. See "Use of Proceeds" and "Certain
Transactions."
Prior to the Offering, there has been no public market for the Common Stock.
See "Underwriting" for a discussion of the factors considered in determining the
initial public offering price. It is currently estimated that the initial public
offering price will be between $11.00 and $13.00 per share. The initial public
offering price and underwriting discounts and commissions per share are
identical for the International Offering and the U.S. Offering. Application has
been made to have the Common Stock approved for quotation on The Nasdaq Stock
Market's National Market ("Nasdaq") under the symbol "STIQ."
---------------------
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Discount and
Price to Underwriting Proceeds to
Public Commissions (1) Company (2)
<S> <C> <C> <C>
Per Share..................... $ $ $
Total (3)..................... $ $ $
</TABLE>
(1) The Company and its sole stockholder have agreed to indemnify the
International Managers and the U.S. Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $775,000 payable by the Company.
(3) The Company has granted the International Managers and the U.S. Underwriters
30-day options to purchase up to an aggregate of 390,000 additional shares
of Common Stock on the same terms and conditions as set forth above solely
to cover over-allotments, if any. If such options are exercised in full, the
total Price to Public, Underwriting Discounts and Commissions and Proceeds
to Company will be $ , $ and $ , respectively. See
"Underwriting."
---------------------
The shares of Common Stock offered by this Prospectus are offered by the
International Managers, subject to prior sale, withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
International Managers and to certain further conditions. It is expected that
delivery of certificates for the shares of Common Stock will be made at the
offices of Lehman Brothers Inc., New York, New York, on or about ,
1997.
---------------------
LEHMAN BROTHERS J.P. MORGAN SECURITIES LTD.
, 1997.
<PAGE>
ALTERNATE INTERNATIONAL BACK COVER
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................................ 3
Risk Factors...................................... 6
Use of Proceeds................................... 12
Dividend Policy................................... 12
Capitalization.................................... 12
Selected Financial Data........................... 14
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 16
Business.......................................... 23
Management........................................ 40
Principal Stockholders............................ 45
Certain Transactions.............................. 45
Description of Capital Stock...................... 46
Underwriting...................................... 49
Legal Matters..................................... 52
Experts........................................... 52
Additional Information............................ 52
Index to Financial Statements..................... F-1
</TABLE>
---------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,600,000 SHARES
SECURICOR
TELESCIENCES INC.
COMMON STOCK
--------------
PROSPECTUS
, 1997
---------------------
LEHMAN BROTHERS
J.P. MORGAN
SECURITIES LTD.
- ---------------------------------------------
---------------------------------------------
- ---------------------------------------------
---------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth expenses in connection with the issuance and
distribution of the securities being registered, all of which are being borne by
the Registrant.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............... $ 11,779
---------
National Association of Securities Dealers, Inc. fee.............. 4,387
---------
Nasdaq Stock Market Inc./National Market listing fee.............. 36,667
---------
Printing and engraving expenses................................... 125,000
Accountants' fees and expenses.................................... 285,000
Legal fees and expenses........................................... 200,000
Blue Sky qualification fees and expenses.......................... 25,000
Transfer agent's fees and expenses................................ 25,000
---------
Miscellaneous..................................................... 62,167
---------
TOTAL....................................................... $ 775,000
---------
---------
</TABLE>
The foregoing, except for the Securities and Exchange Commission
registration fee, the National Association of Securities Dealers, Inc. fee, and
the Nasdaq Stock Market fee, are estimates.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of the State of Delaware,
as amended, the Registrant has the power to indemnify directors and officers
under certain prescribed circumstances and subject to certain limitations
against certain costs and expenses, including attorneys' fees actually and
reasonably incurred in connection with any action, suit or proceeding, whether
civil, criminal, administrative or investigative, to which any of them is a
party by reason of his being a director or officer of the Registrant if it is
determined that he acted in accordance with the applicable standard of conduct
set forth in such statutory provision.
Article VII of the Registrant's Amended and Restated By-laws filed as
Exhibit 3.2 hereto, provides that the Registrant shall indemnify directors and
officers of the Registrant against all expenses, liability and loss incurred as
a result of such person's being a party to, or threatened to be made a party to,
any action, suit or proceeding by reason of the fact that he or she is or was a
director or officer of the Registrant or is or was serving at the request of the
Registrant as a director, officer, employee or agent of another enterprise, to
the fullest extent authorized by the General Corporation Law of the State of
Delaware. Article VII further permits the Registrant to maintain insurance, at
its expense, to protect itself and any such director or officer of the
Registrant or another enterprise against any such expenses, liability or loss,
whether or not the Registrant would have the power to indemnify such person
against such expense, liability or loss under the General Corporation Law of the
State of Delaware. Article VII of the Registrant's By-laws, also generally
permits the Registrant, at its discretion, to indemnify other employees and
agents to the fullest extent authorized by the General Corporation Law of the
State of Delaware.
The Registrant intends to purchase directors' and officers' liability
insurance.
See Section 9 of the U.S. Underwriting Agreement and Section of the
International Underwriting Agreement, filed as Exhibits 1.1 and 1.2 hereto,
respectively, pursuant to which the Underwriters agree to indemnify the
Registrant, its directors, officers and controlling persons against certain
liabilities, including liabilities under the Securities Act of 1933.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
*1.2 Form of International Underwriting Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation of the Company.
3.2 Form of Amended and Restated By-laws of the Company.
*5 Opinion of Wolf, Block, Schorr and Solis-Cohen with respect to the legality of the securities being
offered.
10.1 1997 Stock Incentive Plan.
10.2 Employment Agreement between the Company and Andrew Maunder, dated July 1, 1994.
10.3 Employment Agreement between the Company and Donald Hoffman, dated July 1, 1994.
10.4 Employment Agreement between the Company and William J. Rahe, Jr., dated February 15, 1995.
10.5 Employment Agreement between the Company and Joseph F. Gorecki, dated March 10, 1995.
10.6 Employment Agreement between the Company and Michael S. Farina, dated January 31, 1997.
10.7 Agreement between Ameritech Services, Inc. and the Company, dated October 11, 1989, as amended.
10.8 General Procurement Agreement between U S West Communications, Inc. and the Company dated May 1, 1991, as
amended.
10.9 General Procurement Contract for Computer Equipment Software and Services between Southwestern Bell
Telephone Company and the Company, dated June 1, 1995.
10.10 Lease Agreement between the Company and Line Lexington Management Corp. dated June 13, 1988, as amended
effective September 1, 1993.
10.11 Form of International Marketing Services Agreement between the Company and Securicor.
10.12 Form of Services Agreement between the Company and 3Net Delaware.
10.13 Form of Registration Rights Agreement by and between the Company and Securicor.
11 Statement regarding Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Wolf, Block, Schorr and Solis-Cohen (included as part of Exhibit 5).
24 Power of Attorney (included on signature page of this Registration Statement).
27 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
II-2
<PAGE>
(b) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable or the required information is given in
the Financial Statements or Notes thereto, and therefore have been omitted.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to Item 14 above, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Moorestown, New Jersey, on the 15th
day of April, 1997.
SECURICOR TELESCIENCES INC.
By: /s/ ANDREW P. MAUNDER
-----------------------------------------
Andrew P. Maunder
PRESIDENT AND CHIEF EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Andrew P. Maunder and Mark J. Kadish, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection herewith, with authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitutes, may
lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
DATE
-------------------
/s/ EDMUND A. HOUGH
- ------------------------------ Chairman April 15, 1997
Edmund A. Hough
Director, President and
/s/ ANDREW P. MAUNDER Chief Executive Officer
- ------------------------------ (principal executive April 15, 1997
Andrew P. Maunder officer)
/s/ MARK J. KADISH Chief Financial Officer
- ------------------------------ (principal financial and April 15, 1997
Mark J. Kadish accounting officer)
/s/ SAMMY W. PEARSON
- ------------------------------ Director April 15, 1997
Sammy W. Pearson
/s/ TREVOR SOKELL
- ------------------------------ Director April 15, 1997
Trevor Sokell
/s/ MICHAEL G. WILKINSON
- ------------------------------ Director April 15, 1997
Michael G. Wilkinson
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement.
*1.2 Form of International Underwriting Agreement.
3.1 Form of Amended and Restated Certificate of Incorporation of the Company.
3.2 Form of Amended and Restated By-laws of the Company.
*5 Opinion of Wolf, Block, Schorr and Solis-Cohen with respect to the legality of the securities being
offered.
10.1 1997 Stock Incentive Plan.
10.2 Employment Agreement between the Company and Andrew Maunder, dated July 1, 1994.
10.3 Employment Agreement between the Company and Donald Hoffman, dated July 1, 1994.
10.4 Employment Agreement between the Company and William J. Rahe, Jr., dated February 15, 1995.
10.5 Employment Agreement between the Company and Joseph F. Gorecki, dated March 10, 1995.
10.6 Employment Agreement between the Company and Michael S. Farina, dated January 31, 1997.
10.7 Agreement between Ameritech Services, Inc. and the Company, dated October 11, 1989, as amended.
10.8 General Procurement Agreement between U S West Communications, Inc. and the Company dated May 1, 1991, as
amended.
10.9 General Procurement Contract for Computer Equipment Software and Services between Southwestern Bell
Telephone Company and the Company, dated June 1, 1995.
10.10 Lease Agreement between the Company and Line Lexington Management Corp. dated June 13, 1988, as amended
effective September 1, 1993.
10.11 Form of International Marketing Services Agreement between the Company and Securicor.
10.12 Form of Services Agreement between the Company and 3Net Delaware.
10.13 Form of Registration Rights Agreement by and between the Company and Securicor.
11 Statement regarding Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Wolf, Block, Schorr and Solis-Cohen (included as part of Exhibit 5).
24 Power of Attorney (included on signature page of this Registration Statement).
27 Financial Data Schedule.
</TABLE>
- ------------------------
* To be filed by amendment.
<PAGE>
Exhibit 1.1
__________ Shares
Securicor Telesciences Inc.
Common Stock
U.S. UNDERWRITING AGREEMENT
April , 1997
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
As Representatives of the several
U.S. Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285
Dear Sirs:
Securicor Telesciences Inc., a Delaware corporation (the "Company")
and an indirect wholly owned subsidiary of Securicor PLC, a corporation
organized under the laws of the United Kingdom (the "Parent"), proposes to sell
shares (the "Firm Stock") of the Company's Common Stock, par value
$0.01 per share (the "Common Stock"), to the several U.S. Underwriters named in
Schedule 1 hereto (together, the "U.S. Underwriters"). In addition, the Company
proposes to grant to the U.S. Underwriters options to purchase up to an
additional shares of the Common Stock on the terms and for the purposes
set forth in Section 2 (the "Option Stock"). The Firm Stock and the Option
Stock, if purchased, are hereinafter collectively called the "U.S. Stock." This
is to confirm the agreement concerning the purchase of the U.S. Stock from the
Company by the U.S. Underwriters.
It is understood by all parties that the Company and the Parent are
concurrently entering into an agreement dated the date hereof (the
"International Underwriting Agreement") providing for the sale by the Company of
an aggregate of ____ shares of the Common Stock (including the over-allotments
option thereunder, the "International Stock") through arrangements with certain
U.S. Underwriters outside the United States (the "International Managers"), for
whom Lehman Brothers International (Europe) and J.P. Morgan Securities Ltd. are
acting as lead managers. Except as used in Sections 2, 3, 4, 10 and 11 herein,
and except as the context may otherwise require,
<PAGE>
references herein to the "Stock" shall include all the Common Stock that may
be sold pursuant to either this Agreement or the International Underwriting
Agreement. The U.S. Underwriters and the International Managers
simultaneously are entering into an agreement among the U.S. and
international underwriting syndicates (the "Agreement Between U.S.
Underwriters and International Managers") which provides for, among other
things, the transfer of the Stock between the two syndicates. Two forms of
prospectus are to be used in connection with the offering and sale of the
Stock contemplated by the foregoing, one relating to the U.S. Stock and one
relating to the International Stock. The international form of prospectus
will be identical to the U.S. prospectus except for certain substitute pages
as included in the registration statement and amendments thereto referred to
below. References herein to any prospectus whether in preliminary or final
form, and whether as amended or supplemented, shall include both the U.S. and
international versions thereof.
1. Representations, Warranties and Agreements of the Company and
the Parent. The Company and the Parent represent, warrant and agree,
severally and jointly, that:
(a) A registration statement on Form S-1 (File No. 333- ),
including all amendments thereto, with respect to the Stock has (i) been
prepared by the Company in conformity with the requirements of the United
States Securities Act of 1933, as amended (the "Securities Act"), and the
rules and regulations (the "Rules and Regulations") of the United States
Securities and Exchange Commission (the "Commission") thereunder, (ii) been
filed with the Commission under the Securities Act and (iii) become
effective under the Securities Act. Copies of such registration statement
and of the amendments thereto have been delivered by the Company to you as
the representatives (the "Representatives") of the U.S. Underwriters. As
used in this Agreement, "Effective Time" means the date and the time as of
which such registration statement, or the most recent post-effective
amendment thereto, if any, was declared effective by the Commission;
"Effective Date" means the date of the Effective Time; "Preliminary
Prospectus" means each prospectus included in such registration statement,
or amendments thereof, before it became effective under the Securities Act
and any prospectus filed with the Commission by the Company with the
consent of the Representatives pursuant to Rule 424(a) of the Rules and
Regulations; "Registration Statement" means such registration statement, as
amended, at the Effective Time, including all information contained in the
final prospectus filed with the Commission pursuant to Rule 424(b) of the
Rules and Regulations in accordance with Section 5(a) hereof and deemed to
be a part of the registration statement as of the Effective Time pursuant
to paragraph (b) of Rule 430A of the Rules and Regulations; and
"Prospectus" means such final prospectus, as first filed with the
Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules and
Regulations. Neither the Commission nor the securities authority of any
jurisdiction has issued any order suspending the effectiveness of the
Registration Statement, preventing or suspending the use of any Preliminary
Prospectus, the Prospectus, the Registration Statement, or any amendment or
supplement thereto, refusing to permit the effectiveness of the
Registration Statement, or suspending the registration or qualification of
the Stock, nor has any of such authorities instituted or threatened to
institute any proceeding with respect to such an order.
2
<PAGE>
(b) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all respects to the requirements
of the Securities Act and the Rules and Regulations and do not and will
not, as of the applicable Effective Date (as to the Registration Statement
and any amendment or supplement thereto) and as of the applicable filing
date (as to the Prospectus and any amendment or supplement thereto) contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading; provided that no representation or warranty is made as to
information contained in or omitted from the Registration Statement or the
Prospectus in reliance upon and in conformity with written information
furnished to the Company through the Representatives by or on behalf of any
U.S. Underwriter specifically for inclusion therein.
(c) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are duly
qualified to do business and are in good standing as foreign corporations
in each jurisdiction in which their ownership or lease of property or the
conduct of their respective businesses requires such qualification, except
where the failure to so qualify would not have a material adverse effect on
the general affairs, management, financial position, stockholders' equity,
results of operations, properties, assets, liabilities, future prospects or
business of the Company (herein, a "Material Adverse Effect"), and have all
power and authority necessary to own or hold their respective properties
and to conduct the businesses in which they are engaged; and none of the
subsidiaries of the Company is a "significant subsidiary," as such term is
defined in Rule 405 of the Rules and Regulations.
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(d) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus; and except as otherwise set forth in the Prospectus, are owned
directly or indirectly by the Parent, free and clear of all liens,
encumbrances, equities or claims and there are no preemptive rights or
other rights to subscribe for or to purchase or any restriction upon the
voting or transfer of any Common Stock pursuant to the Company's articles
of incorporation, by-laws or other governing documents or any agreement or
other instrument to which the Company is a party or by which it may be
bound.
(e) The Stock to be issued and sold by the Company to the U.S.
Underwriters hereunder and under the International Underwriting Agreement
have been duly and validly authorized and, when issued and delivered
against payment therefor as provided herein and under the International
Underwriting Agreement, will be duly and validly issued, fully paid and
non-assessable and the Stock will conform to the description thereof
contained in the Prospectus; and the issuance of the Stock is not subject
to preemptive or other similar rights that have not been waived.
(f) Upon payment for and delivery of the Common Stock pursuant to
this Agreement, the U.S. Underwriters, or other persons in whose names
Common Stock is registered, will acquire good and valid title to such
Common Stock, in each case free and clear of all liens, encumbrances,
equities, preemptive rights and other claims arising through the Company.
(g) The Company and the Parent have all requisite corporate power and
authority to execute and deliver this Agreement and to perform their
obligations hereunder. This Agreement has been duly authorized, executed
and delivered by the Company and the Parent.
(h) The execution, delivery and performance of this Agreement by the
Company and the Parent and the consummation of the transactions
contemplated hereby will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or the Parent is a party or by
which the Company or the Parent is bound or to which any of the property or
assets of the Company or the Parent is subject, nor will such actions
result in any violation of the provisions of the articles of association,
charter, certificate of incorporation, by-laws or other organizational
documents of the Company or the Parent or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or the Parent or any of their properties or assets; and
except for the registration of the Stock under the Securities Act and such
consents, approvals, authorizations, registrations or qualifications as may
be required under the United States Securities Exchange Act of 1934, as
amended (the "Exchange Act") and applicable state securities laws in
connection with the purchase and distribution of the Stock by the U.S.
Underwriters, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body is
required for the execution, delivery and performance of this Agreement by
the Company and the Parent and the consummation of the transactions
contemplated hereby.
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(i) Except as described in the Prospectus, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company owned or to be owned by such person or the right (other than rights
which have been waived or satisfied) to require the Company to include such
securities in the securities registered pursuant to the Registration
Statement or in any securities being registered pursuant to any other
registration statement filed by the Company under the Securities Act.
(j) Except as described in the Prospectus, the Company has not sold
or issued any shares of Common Stock during the six-month period preceding
the date of the Prospectus, including any sales pursuant to Rule 144A
under, or Regulations D or S of, the Securities Act, other than shares
issued pursuant to employee benefit plans, qualified stock options plans or
other employee compensation plans or pursuant to outstanding options,
rights or warrants outstanding prior to the commencement of such six-month
period.
(k) Neither the Company nor any of its subsidiaries have
sustained, since the date of the latest audited financial statements
included in the Prospectus, any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus; and, since such date, there has not been any change in the
capital stock or long-term debt of the Company or any of its subsidiaries
or any material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, management,
financial position, stockholders' equity, results of operations,
properties, assets, liabilities, future prospects or business of the
Company and its subsidiaries, otherwise than as set forth or contemplated
in the Prospectus.
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(l) The financial statements (including the related notes and
supporting schedules) filed as part of the Registration Statement or
included in the Prospectus present fairly the financial condition and
results of operations of the entities purported to be shown thereby, at the
dates and for the periods indicated, and have been prepared in conformity
with generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
(m) Arthur Andersen LLP, who have certified certain financial
statements of the Company, whose report appears in the Prospectus and who
have delivered the initial letter referred to in Section 8(g) hereof, are
independent public accountants as required by the Securities Act and the
Rules and Regulations.
(n) The Company and each of its subsidiaries have good and marketable
title to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Prospectus or
such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and all real and personal
property and buildings held under lease by the Company and its subsidiaries
are held by them under valid, subsisting and enforceable leases, with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries.
(o) The Company and each of its subsidiaries carry, or are covered
by, insurance in such amounts and covering such risks as is adequate for
the conduct of their respective businesses and the value of its properties
and as is customary for companies engaged in similar businesses in similar
industries.
(p) The Company and each of its subsidiaries own or possess adequate
rights to use all material patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights and licenses necessary for the conduct of their
respective businesses and have no reason to believe that the conduct of
their respective businesses will conflict with, and has not received any
notice of any claim of conflict with, any such rights of others.
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(q) There are no legal or governmental proceedings pending to which
the Company is a party or of which any property or assets of the Company is
the subject which, if determined adversely to the Company, might have a
Material Adverse Effect; and to the best of the Company's and the Parent's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others.
(r) There are no contracts or other documents which are required to
be described in the Prospectus or filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have
not been described in the Prospectus or filed as exhibits to the
Registration Statement.
(s) No relationship, direct or indirect, exists between or among the
Company on the one hand, and any director, nominee for election as a
director, officer, stockholder, customer or supplier of the Company on the
other hand, which is required to be described in the Prospectus which is
not so described.
(t) No labor disturbance by the employees of the Company exists or,
to the knowledge of the Company or the Parent, is imminent which might be
expected to have a Material Adverse Effect.
(u) The Company is in compliance in all material respects with all
presently applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended, including the regulations and published
interpretations thereunder ("ERISA"); no "reportable event" (as defined in
ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company would have any liability; the Company has not
incurred and does not expect to incur liability under (i) Title IV of ERISA
with respect to termination of, or withdrawal from, any "pension plan" or
(ii) Section 412 or 4971 of the Internal Revenue Code of 1986, as amended,
including the regulations and published interpretations thereunder (the
"Code"); and each "pension plan" for which the Company would have any
liability that is intended to be qualified under Section 401(a) of the Code
is so qualified in all material respects and nothing has occurred, whether
by action or by failure to act, which would cause the loss of such
qualification.
(v) The Company has filed all federal, state and local income and
franchise tax returns required to be filed through the date hereof and has
paid all taxes due thereon, and no tax deficiency has been determined
adversely to the Company or any of its subsidiaries which has had, nor do
the Company or the Parent have any knowledge of any tax deficiency which,
if determined adversely to the Company, might have, a Material Adverse
Effect.
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(w) Since the date as of which information is given in the Prospectus
through the date hereof, and except as may otherwise be disclosed in the
Prospectus, the Company has not (i) issued or granted any securities other
than securities issued pursuant to employee benefit plans, qualified stock
or equity option plans or other employee compensation plans, (ii) incurred
any liability or obligation, direct or contingent, other than liabilities
and obligations which were incurred in the ordinary course of business,
(iii) entered into any transaction not in the ordinary course of business
or (iv) declared or paid any dividend on its capital stock.
(x) The Company (i) makes and keeps accurate books and records and
(ii) maintains internal accounting controls which provide reasonable
assurance that (A) transactions are executed in accordance with
management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain
accountability for its assets, (C) access to its assets is permitted only
in accordance with management's authorization and (D) the reported
accountability for its assets is compared with existing assets at
reasonable intervals.
(y) Neither the Company nor any of its subsidiaries (i) is not in
violation of its certificate of incorporation or by-laws, (ii) is not in
default in any material respect, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in the
due performance or observance of any term, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which it is a party or by which it is bound or
to which any of its properties or assets is subject and (iii) is not in
violation in any material respect of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may be
subject or has failed to obtain any material license, permit, certificate,
franchise or other governmental authorization or permit necessary to the
ownership of its property or to the conduct of its business.
(z) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company, has used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expense
relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment.
8
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(aa) There has been no storage, disposal, generation, manufacture,
refinement, transportation, handling or treatment of toxic wastes, medical
wastes, hazardous wastes or hazardous substances by the Company (or, to the
knowledge of the Company, any of its predecessors in interest) at, upon or
from any of the property now or previously owned or leased by the Company
in violation of any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit or which would require remedial action under any
applicable law, ordinance, rule, regulation, order, judgment, decree or
permit, except for any violation or remedial action which would not have,
or could not be reasonably likely to have, singularly or in the aggregate
with all such violations and remedial actions, a Material Adverse Effect;
there has been no material spill, discharge, leak, emission, injection,
escape, dumping or release of any kind onto such property or into the
environment surrounding such property of any toxic wastes, medical wastes,
solid wastes, hazardous wastes or hazardous substances due to or caused by
the Company or with respect to which the Company has knowledge, except for
any such spill, discharge, leak, emission, injection, escape, dumping or
release which would not have or would not be reasonably likely to have,
singularly or in the aggregate with all such spills, discharges, leaks,
emissions, injections, escapes, dumpings and releases, a Material Adverse
Effect; and the terms "hazardous wastes", "toxic wastes", "hazardous
substances" and "medical wastes" shall have the meanings specified in any
applicable local, state, federal and foreign laws or regulations with
respect to environmental protection.
(bb) Neither the Company nor any subsidiary is an "investment company"
within the meaning of such term under the Investment Company Act of 1940
and the rules and regulations of the Commission thereunder.
(cc) Neither the Company nor any of its officers, directors, or
affiliates (as defined in the Rules and Regulations) has taken or will
take, directly or indirectly, any action which is designed to or which has
constituted or which might reasonably be expected to cause or result in the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the shares of the Stock.
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(dd) None of the Company or its affiliates does business with the
government of Cuba or any person located in Cuba.
2. Purchase of the Stock by the U.S. Underwriters. On the basis of
the representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell [ ] shares of
the Firm Stock to the several U.S. Underwriters and each of the U.S.
Underwriters, severally and not jointly, agrees to purchase the number of shares
of the Firm Stock set opposite that U.S. Underwriter's name in Schedule l
hereto. Each U.S. Underwriter shall be obligated to purchase from the Company
that number of shares of the Firm Stock which represents the same proportion of
the number of shares of the Firm Stock to be sold by the Company as the number
of shares of the Firm Stock set forth opposite the name of such U.S. Underwriter
in Schedule l represents of the total number of shares of the Firm Stock to be
purchased by all of the U.S. Underwriters pursuant to this Agreement. The
respective purchase obligations of the U.S. Underwriters with respect to the
Firm Stock shall be rounded among the U.S. Underwriters to avoid fractional
shares, as the Representatives may determine.
In addition, the Company grants to the U.S. Underwriters an option to
purchase up to [ ] shares of Option Stock. Such option is granted solely
for the purpose of covering overallotments in the sale of Firm Stock and is
exercisable as provided in Section 4 hereof. Shares of Option Stock shall be
purchased severally for the account of the U.S. Underwriters in proportion to
the number of shares of Firm Stock set opposite the name of such U.S.
Underwriters in Schedule l hereto. The respective purchase obligations of each
U.S. Underwriter with respect to the Option Stock shall be adjusted by the
Representatives so that no U.S. Underwriter shall be obligated to purchase
Option Stock other than in l00 share amounts. The price of both the Firm Stock
and any Option Stock shall be $ per share.
The Company shall not be obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date as provided herein and under the International
Underwriting Agreement.
3. Offering of Stock by the U.S. Underwriters. Upon authorization by
the Representatives of the release of the Firm Stock, the several U.S.
Underwriters propose to offer the Firm Stock for sale upon the terms and
conditions set forth in the Prospectus.
[It is understood that [ ] shares of the Firm Stock will
initially be reserved by the several U.S. Underwriters and International
Managers for offer and sale upon the terms and conditions set forth in the
Prospectus and in accordance with the rules and regulations of the National
Association of Securities Dealers, Inc. to employees and persons having business
relationships with the Company who have heretofore delivered to the
Representatives offers or indications of interest to purchase shares of Firm
Stock in form satisfactory to the Representatives, and that any allocation of
such Firm Stock among such persons will be made in accordance with timely
directions received by the Representatives from the Company; provided, that
under no circumstances will the Representatives or any U.S. Underwriter be
liable to the Company or to any such person for any action taken or omitted in
good faith in connection with such offering to employees and persons having
business relationships with the Company. It is further understood that any
shares of such Firm Stock which are not purchased by such persons will be
offered by the U.S. Underwriters to the public upon the terms and conditions set
forth in the Prospectus.]
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4. Delivery of and Payment for the Stock. Delivery of and payment
for the Firm Stock shall be made at the office of Chadbourne & Parke LLP, 30
Rockefeller Plaza, New York, NY 10112, at 10:00 A.M., New York City time, on the
third full business day following the date of this Agreement or at such other
date or place as shall be determined by agreement between the Representatives
and the Company. This date and time are sometimes referred to as the First
Delivery Date. On the First Delivery Date, the Company shall deliver or cause
to be delivered certificates representing the Firm Stock to the Representatives
for the account of each U.S. Underwriter against payment to or upon the order of
the Company of the purchase price by certified or official bank check or checks
payable in immediately available funds. Time shall be of the essence, and
delivery at the time and place specified pursuant to this Agreement is a further
condition of the obligation of each U.S. Underwriter hereunder. Upon delivery,
the Firm Stock shall be registered in such names and in such denominations as
the Representatives shall request in writing not less than two full business
days prior to the First Delivery Date. For the purpose of expediting the
checking and packaging of the certificates for the Firm Stock, the Company shall
make the certificates representing the Firm Stock available for inspection by
the Representatives in New York, New York, not later than 2:00 P.M., New York
City time, on the business day prior to the First Delivery Date.
At any time on or before the thirtieth day after the date of this
Agreement the option granted in Section 2 may be exercised in whole or in part,
at any time and from time to time, upon written notice being given to the
Company by the Representatives. Such notice shall set forth the aggregate
number of shares of Option Stock as to which the option is being exercised, the
names in which the shares of Option Stock are to be registered, the
denominations in which the shares of Option Stock are to be issued and the date
and time, as determined by the Representatives, when the shares of Option Stock
are to be delivered; provided, however, that this date and time shall not be
earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than the
fifth business day after the date on which the option shall have been exercised.
The date and time the shares of Option Stock are delivered are sometimes
referred to as the "Second Delivery Date" and the First Delivery Date and the
Second Delivery Date are sometimes each referred to as a "Delivery Date".
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Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 4
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the certificates representing the Option Stock to the
Representatives for the account of each U.S. Underwriter against payment to or
upon the order of the Company of the purchase price by certified or official
bank check or checks payable in immediately available funds. Time shall be of
the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each U.S. Underwriter
hereunder. Upon delivery, the Option Stock shall be registered in such names
and in such denominations as the Representatives shall request in the aforesaid
written notice. For the purpose of expediting the checking and packaging of the
certificates for the Option Stock, the Company shall make the certificates
representing the Option Stock available for inspection by the Representatives in
New York, New York, not later than 2:00 P.M., New York City time, on the
business day prior to the Second Delivery Date.
5. Further Agreements of the Company. The Company agrees:
(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b) under
the Securities Act not later than Commission's close of business on the
second business day following the execution and delivery of this Agreement
or, if applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Securities Act; to make no further amendment or any supplement to
the Registration Statement or to the Prospectus except as permitted herein;
to advise the Representatives, promptly after it receives notice thereof,
of the time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with copies
thereof; to advise the Representatives, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or the
Prospectus, of the suspension of the qualification of the Stock for
offering or sale in any jurisdiction, of the initiation or threatening of
any proceeding for any such purpose, or of any request by the Commission
for the amending or supplementing of the Registration Statement or the
Prospectus or for additional information; and, in the event of the issuance
of any stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its withdrawal;
12
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(b) To furnish promptly to each of the Representatives and to counsel
for the U.S. Underwriters a signed copy of the Registration Statement as
originally filed with the Commission, and each amendment thereto filed with
the Commission, including all consents and exhibits filed therewith;
(c) To deliver promptly to the Representatives such number of the
following documents as the Representatives shall reasonably request: (i)
conformed copies of the Registration Statement as originally filed with the
Commission and each amendment thereto and (ii) each Preliminary Prospectus,
the Prospectus and any amended or supplemented Prospectus; and, if the
delivery of a prospectus is required at any time after the Effective Time
in connection with the offering or sale of the Stock or any other
securities relating thereto and if at such time any events shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made when
such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary to amend or supplement the Prospectus in order to
comply with the Securities Act, to notify the Representatives and, upon
their request, to file such document and to prepare and furnish without
charge to each U.S. Underwriter and to any dealer in securities as many
copies as the Representatives may from time to time reasonably request of
an amended or supplemented Prospectus which will correct such statement or
omission or effect such compliance;
(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the judgment of the Company or the Representatives,
be required by the Securities Act or requested by the Commission;
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(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any Prospectus
pursuant to Rule 424 of the Rules and Regulations, to furnish a copy
thereof to the Representatives and counsel for the U.S. Underwriters and
obtain the consent of the Representatives to the filing;
(f) As soon as practicable after the Effective Date (but in no event
later than 15 months after the Effective Date), to make generally available
to the Company's security holders and to deliver to the Representatives an
earnings statement of the Company (which need not be audited) complying
with Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158);
(g) For a period of five years following the Effective Date, to
furnish to the Representatives copies of all materials furnished by the
Company to its shareholders and all public reports and all reports and
financial statements furnished by the Company to the principal national
securities exchange upon which the Common Stock may be listed pursuant to
requirements of or agreements with such exchange or to the Commission
pursuant to the Exchange Act or any rule or regulation of the Commission
thereunder;
(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for offering
and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit
the continuance of sales and dealings therein in such jurisdictions for as
long as may be necessary to complete the distribution of the Stock;
(i) For a period of 180 days from the date of the Prospectus, not to,
directly or indirectly, offer for sale, sell or otherwise dispose of (or
enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the
future of) any shares of Common Stock (other than the Stock and shares
issued pursuant to employee benefit plans, qualified stock option plans or
other employee compensation plans existing on the date hereof or pursuant
to currently outstanding options, warrants or rights), or sell or grant
options, rights or warrants with respect to any shares of Common Stock
(other than the grant of options pursuant to option plans existing on the
date hereof), without the prior written consent of Lehman Brothers Inc. on
behalf of the Representatives; and to cause each officer and director of
the Company to furnish to the Representatives, prior to the First Delivery
Date, a letter or letters, in form and substance satisfactory to counsel
for the U.S. Underwriters, pursuant to which each such person shall agree
not to, directly or indirectly, offer for sale, sell or otherwise dispose
of (or enter into any transaction or device which is designed to, or could
be expected to, result in the disposition by any person at any time in the
future of) any shares of Common Stock for a period of 180 days from the
date of the Prospectus, without the prior written consent of Lehman
Brothers Inc.;
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(j) Prior to the Effective Date, to apply for the inclusion of the
Stock for quotation on the Nasdaq National Market and to use its best
efforts to effect such quotation, subject only to official notice of
issuance, prior to the First Delivery Date;
(k) To apply the net proceeds from the sale of the Stock being sold
by the Company as set forth in the Prospectus; and
(l) To take such steps as shall be necessary to ensure that the
Company shall not become an "investment company" within the meaning of such
term under the Investment Company Act of 1940 and the rules and regulations
of the Commission thereunder.
6. Further Agreement of the Parent. The Parent agrees:
For a period of 180 days from the date of the Prospectus, not to, and
not to allow Securicor Communications, Inc. to directly or indirectly,
offer for sale, sell or otherwise dispose of (or enter into any transaction
or device which is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any shares of
Common Stock, or sell or grant options, rights or warrants with respect to
any shares of Common Stock, without the prior written consent of Lehman
Brothers Inc. on behalf of the Representatives; and to cause each officer
and director of Securicor Communications, Inc. and the Parent to furnish to
the Representatives, prior to the First Delivery Date, a letter or letters,
in form and substance satisfactory to counsel for the U.S. Underwriters,
pursuant to which each such person or entity shall agree not to, directly
or indirectly, offer for sale, sell or otherwise dispose of (or enter into
any transaction or device which is designed to, or could be expected to,
result in the disposition by any person at any time in the future of) any
shares of Common Stock for a period of 180 days from the date of the
Prospectus, without the prior written consent of Lehman Brothers Inc.
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7. Expenses. The Company agrees to pay (a) the costs incident to the
authorization, issuance, sale and delivery of the Stock and any taxes payable in
that connection; (b) the costs incident to the preparation, printing and filing
under the Securities Act of the Registration Statement and any amendments and
exhibits thereto; (c) the costs of distributing the Registration Statement as
originally filed and each amendment thereto and any post-effective amendments
thereof (including, in each case, exhibits), any Preliminary Prospectus, the
Prospectus and any amendment or supplement to the Prospectus, all as provided in
this Agreement; (d) the costs of producing and distributing this Agreement, the
International Underwriting Agreement, the Agreement Between U.S. Underwriters
and International Managers, any Supplemental Agreement Among U.S. Underwriters,
the Agreement Among International Managers, the International Selling Agreement
and any other related documents in connection with the offering, purchase, sale
and delivery of the Stock; (e) the costs of distributing the terms of agreement
relating to the organization of the underwriting syndicate and selling group to
the members thereof by mail, telex, facsimile or other means of communication;
(f) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of sale of the Stock;
(g) any applicable listing or other fees including the fees for quotation of the
Common Stock on the Nasdaq National Market; (h) the fees and expenses of
qualifying the Stock under the securities laws of the several jurisdictions as
provided in Section 5(h) and of preparing, printing and distributing a Blue Sky
Memorandum (including related fees and expenses of counsel to the U.S.
Underwriters); (i) all costs and expenses of the U.S. Underwriters, including
the fees and disbursements of counsel for the U.S. Underwriters, incident to the
offer and sale of Common Stock by the U.S. Underwriters to employees and persons
having business relationships with the Company, as described in Section 3; and
(j) all other costs and expenses incident to the performance of the obligations
of the Company and the Parent under this Agreement, including any transfer taxes
payable in connection with the sale of Stock to the U.S. Underwriters; provided
that, except as provided in this Section 7 and in Section 12 the U.S.
Underwriters shall pay their own costs and expenses, including the costs and
expenses of their counsel, any transfer taxes on the Stock which they may sell
and the expenses of advertising any offering of the Stock made by the U.S.
Underwriters.
8. Conditions of U.S. Underwriters' Obligations. The respective
obligations of the U.S. Underwriters hereunder are subject to the accuracy, when
made and on each Delivery Date, of the representations and warranties of the
Company and the Parent contained herein, to the performance by the Company and
the Parent of their respective obligations hereunder, and to each of the
following additional terms and conditions:
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(a) The Prospectus shall have been timely filed with the Commission
in accordance with Section 5(a); no stop order suspending the effectiveness
of the Registration Statement or any part thereof shall have been issued
and no proceeding for that purpose shall have been initiated or threatened
by the Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement or the Prospectus or
otherwise shall have been complied with.
(b) No U.S. Underwriter shall have discovered and disclosed to the
Company on or prior to such Delivery Date that the Registration Statement
or the Prospectus or any amendment or supplement thereto contains an untrue
statement of a fact which, in the opinion of Chadbourne & Parke LLP,
counsel for the U.S. Underwriters, is material or omits to state a fact
which, in the opinion of such counsel, is material and is required to be
stated therein or is necessary to make the statements therein not
misleading.
(c) All corporate proceedings and other legal matters incident to the
authorization, form and validity of this Agreement, the Stock, the
Registration Statement and the Prospectus, and all other legal matters
relating to this Agreement and the transactions contemplated hereby shall
be reasonably satisfactory in all material respects to counsel for the U.S.
Underwriters, and the Company and the Parent shall have furnished to such
counsel all documents and information that they may reasonably request to
enable them to pass upon such matters.
(d) Wolf, Block, Schorr & Solis-Cohen shall have furnished to the
Representatives its written opinion, as counsel to the Company [and the
Parent], addressed to the U.S. Underwriters and dated such Delivery Date,
in form and substance reasonably satisfactory to the Representatives, to
the effect that:
(i) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation, are
duly qualified to do business and are in good standing as foreign
corporations in each jurisdiction in which their respective ownership
or lease of property or the conduct of their respective businesses
requires such qualification and have all power and authority necessary
to own or hold their respective properties and conduct the businesses
in which they are engaged;
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(ii) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued shares of capital stock of the Company
(including the shares of Stock being delivered on such Delivery Date) have
been duly and validly authorized and issued, are fully paid and
non-assessable and conform to the description thereof contained in the
Prospectus;
(iii) There are no preemptive or other rights to subscribe for or
to purchase, nor any restriction upon the voting or transfer of, any shares
of the Stock pursuant to the Company's certificate of incorporation or
by-laws to such counsel's knowledge, or any agreement or other instrument
to which the Company is a party or by which the Company may be bound;
(iv) The Company and each of its subsidiaries have good and marketable
title to all real property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not materially interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries; and all real property
and buildings held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases, with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries;
(v) To such counsel's knowledge and other than as set forth in the
Prospectus, there are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or of which any property
or assets of the Company or any of its subsidiaries is the subject which,
if determined adversely to the Company or any of its subsidiaries, might
have a Material Adverse Effect; and, to such counsel's knowledge, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(vi) The Registration Statement was declared effective under the
Securities Act as of the date and time specified in such opinion, the
Prospectus was filed with the Commission pursuant to the subparagraph of
Rule 424(b) of the Rules and Regulations specified in such opinion on the
date specified therein and to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued
and, no proceeding for that purpose is pending or threatened by the
Commission;
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(vii) The Registration Statement and the Prospectus and any
further amendments or supplements thereto made by the Company prior to such
Delivery Date (other than the financial statements and schedules and other
financial data contained therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the requirements
of the Securities Act and the Rules and Regulations;
(viii) To such counsel's knowledge, there are no contracts or other
documents which are required to be described in the Prospectus or filed as
exhibits to the Registration Statement by the Securities Act or by the
Rules and Regulations which have not been described or filed as exhibits to
the Registration Statement or incorporated therein by reference as
permitted by the Rules and Regulations;
(ix) The Company and the Parent have all requisite corporate power and
authority to execute and deliver this Agreement and the International
Underwriting Agreement and to perform their obligations hereunder and
thereunder and this Agreement and the International Underwriting Agreement
have each been duly authorized, executed and delivered by the Company and
the Parent;
(x) The issue and sale of the shares of Stock being delivered on such
Delivery Date by the Company and the compliance by the Company and the
Parent with all of the provisions of this Agreement will not conflict with
or result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument listed as an exhibit to the
Registration Statement, nor will such actions result in any violation of
the provisions of the certificate of incorporation or by-laws of the
Company or the Parent or any statute or any order, rule or regulation known
to such counsel of any court or governmental agency or body having
jurisdiction over the Company or the Parent or any of their properties or
assets; and, except for the registration of the Stock under the Securities
Act and such consents, approvals, authorizations, registrations or
qualifications as may be required by the National Association of Securities
Dealers, Inc. (the "NASD") or under the Exchange Act and applicable state
securities laws in connection with the purchase and distribution of the
Stock by the U.S. Underwriters, no consent, approval, authorization or
order of, or filing or registration with, any such court or governmental
agency or body is required for the execution, delivery and performance of
this Agreement by the Company or the Parent and the consummation of the
transactions contemplated hereby; and
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<PAGE>
(xi) Except as described in the Prospectus, to such counsel's
knowledge, there are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the
Company to file a registration statement under the Securities Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement
filed by the Company under the Securities Act.
In rendering such opinion, such counsel may state that its opinion is
limited to matters governed by the Federal laws of the United States of
America, the laws of Delaware and the General Corporation Law Statute of
the State of Delaware. Such counsel shall also have furnished to the
Representatives a written statement, addressed to the U.S. Underwriters and
dated such Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted as counsel
to the Company in connection with the preparation of the Registration
Statement, and (y) based on the procedures set forth therein but without
independent check or verification, no facts have come to the attention of
such counsel which lead it to believe that the Registration Statement, as
of the Effective Date, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein not misleading. The foregoing
statement may be qualified by a statement to the effect that such counsel
does not (i) assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus or (ii) express any views to the financial statements and
schedules and other financial data contained therein.
(e) The Representatives shall have received from Chadbourne & Parke
LLP, counsel for the U.S. Underwriters, such opinion or opinions, dated
such Delivery Date, with respect to the issuance and sale of the Stock, the
Registration Statement, the Prospectus and other related matters as the
Representatives may reasonably require, and the Company and the Parent
shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.
20
<PAGE>
(f) At the time of execution of this Agreement, the Representatives
shall have received from Arthur Andersen LLP a letter, in form and
substance satisfactory to the Representatives, addressed to the U.S.
Underwriters and dated the date hereof (i) confirming that they are
independent public accountants within the meaning of the Securities Act and
are in compliance with the applicable requirements relating to the
qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission, (ii) stating, as of the date hereof (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date hereof), the conclusions and
findings of such firm with respect to the financial information and other
matters ordinarily covered by accountants' "comfort letters" to U.S.
Underwriters in connection with registered public offerings.
(g) With respect to the letter of Arthur Andersen LLP referred to in
the preceding paragraph and delivered to the Representatives concurrently
with the execution of this Agreement (the "initial letter"), the Company
shall have furnished to the Representatives a letter (the "bring-down
letter") of such accountants, addressed to the U.S. Underwriters and dated
such Delivery Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance
with the applicable requirements relating to the qualification of
accountants under Rule 201 of Regulation S-X of the Commission, (ii)
stating, as of the date of the bring-down letter (or, with respect to
matters involving changes or developments since the respective dates as of
which specified financial information is given in the Prospectus, as of a
date not more than five days prior to the date of the bring-down letter),
the conclusions and findings of such firm with respect to the financial
information and other matters covered by the initial letter and (iii)
confirming in all material respects the conclusions and findings set forth
in the initial letter.
(h) The Company and the Parent shall have furnished to the
Representatives certificates, dated such Delivery Date, of their respective
Chairman of the Board, President or a Vice President and their chief
financial officers stating that:
(i) The representations, warranties and agreements of the Company
and the Parent in Section 1 are true and correct as of such Delivery
Date; the Company has complied with all its agreements contained
herein; and the conditions set forth in Sections 8(a) and 8(i) have
been fulfilled; and
21
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(ii) They have carefully examined the Registration Statement and
the Prospectus and, in their opinion (A) as of the Effective Date, the
Registration Statement and Prospectus did not include any untrue
statement of a material fact and did not omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (B) since the Effective Date no event has
occurred which should have been set forth in a supplement or amendment
to the Registration Statement or the Prospectus and is not so set
forth.
(i) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order
or decree, otherwise than as set forth or contemplated in the Prospectus or
(ii) since such date there shall not have been any change in the capital
stock or long-term debt of the Company or any of its subsidiaries or any
change, or any development involving a prospective change, in or affecting
the general affairs, management, financial position, stockholders' equity,
results of operations, properties, assets, liabilities, future prospects or
business of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is, in the judgment of the
Representatives, so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Stock being delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
(j) Subsequent to the execution and delivery of this Agreement there
shall not have occurred any of the following: (i) trading in securities
generally on the New York Stock Exchange or the American Stock Exchange or
in the over-the-counter market, or trading in any securities of the Company
on any exchange or in the over-the-counter market, shall have been
suspended or minimum prices shall have been established on any such
exchange or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, (ii) a
banking moratorium shall have been declared by Federal or state
authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities involving
the United States or there shall have been a declaration of a national
emergency or war by the United States or (iv) there shall have occurred
such a material adverse change in general economic, political or financial
conditions (or the effect of international conditions on the financial
markets in the United States shall be such) as to make it, in the judgment
of a majority in interest of the several U.S. Underwriters, impracticable
or inadvisable to proceed with the public offering or delivery of the Stock
being delivered on such Delivery Date on the terms and in the manner
contemplated in the Prospectus.
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<PAGE>
(k) The Nasdaq National Market shall have approved the Stock for
inclusion, subject only to official notice of issuance and evidence of
satisfactory distribution.
(l) The closing under the International Underwriting Agreement shall
have occurred concurrently with the Closing hereunder on the Delivery Date.
(m) You shall have been furnished such additional documents and
certificates as you or counsel for the U.S. Underwriters may reasonably
request related to this Agreement and the transactions contemplated hereby.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the U.S. Underwriters.
9. Indemnification and Contribution.
(a) The Company and the Parent, severally and jointly, shall
indemnify and hold harmless each U.S. Underwriter, its officers and employees
and each person, if any, who controls any U.S. Underwriter within the meaning of
the Securities Act, from and against any loss, claim, damage or liability, joint
or several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of
Stock), to which that U.S. Underwriter, officer, employee or controlling person
may become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, the Registration Statement or the Prospectus or in
any amendment or supplement thereto or (B) in any blue sky application or other
document prepared or executed by the Company (or based upon any written
information furnished by the Company) specifically for the purpose of qualifying
any or all of the Stock under the securities laws of any state or other
jurisdiction (any such application, document or
23
<PAGE>
information being hereinafter called a "Blue Sky Application"), (ii) the
omission or alleged omission to state in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or in any amendment or supplement
thereto, or in any Blue Sky Application any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(iii) any act or failure to act or any alleged act or failure to act by any
U.S. Underwriter in connection with, or relating in any manner to, the Stock
or the offering contemplated hereby, and which is included as part of or
referred to in any loss, claim, damage, liability or action arising out of or
based upon matters covered by clause (i) or (ii) above (provided that neither
the Company nor the Parent shall be liable under this clause (iii) to the
extent that it is determined in a final judgment by a court of competent
jurisdiction that such loss, claim, damage, liability or action resulted
directly from any such acts or failures to act undertaken or omitted to be
taken by such U.S. Underwriter through its gross negligence or willful
misconduct), and shall reimburse each U.S. Underwriter and each such officer,
employee or controlling person promptly upon demand for any legal or other
expenses reasonably incurred by that U.S. Underwriter, officer, employee or
controlling person in connection with investigating or defending or preparing
to defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that neither the Company nor the
Parent shall be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of, or is based upon, any
untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or in any such amendment or supplement, or in any Blue Sky
Application, in reliance upon and in conformity with written information
concerning such U.S. Underwriter furnished to the Company through the
Representatives by or on behalf of any U.S. Underwriter specifically for
inclusion therein. The foregoing indemnity agreement is in addition to any
liability which the Company or the Parent may otherwise have to any U.S.
Underwriter or to any officer, employee or controlling person of that U.S.
Underwriter.
(b) Each U.S. Underwriter, severally and not jointly, shall indemnify
and hold harmless the Company, its officers and employees, each of its directors
(including any person who, with his or her consent, is named in the Registration
Statement as about to become a director of the Company), and each person, if
any, who controls the Company within the meaning of the Securities Act, from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof, to which the Company or any such director, officer or
controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, the Registration Statement or
the Prospectus or in any amendment or supplement thereto, or (B) in any Blue Sky
Application or (ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact required to
be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information concerning such U.S. Underwriter furnished
to the Company through the Representatives by or on behalf of that U.S.
Underwriter specifically for inclusion therein, and shall reimburse the Company
and any such director, officer or controlling person for any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred. The foregoing indemnity agreement is in addition to any
liability which any U.S. Underwriter may otherwise have to the Company or any
such director, officer, employee or controlling person.
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<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
9 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 9 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 9.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 9 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Representatives shall have the right to employ counsel to represent jointly
the Representatives and those other U.S. Underwriters and their respective
officers, employees and controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the U.S.
Underwriters against the Company or the Parent under this Section 9 if, in the
reasonable judgment of the Representatives, it is advisable for the
Representatives and those U.S. Underwriters, officers, employees and controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the Company or the
Parent. No indemnifying party shall (i) without the prior written consent of
the indemnified parties (which consent shall not be unreasonably withheld),
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless, such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding, or (ii) be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if there
be a final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment.
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<PAGE>
(d) If the indemnification provided for in this Section 9 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 9(a) or 9(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Parent on the one hand and the U.S. Underwriters
on the other from the offering of the Stock or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company and the Parent on the one hand
and the U.S. Underwriters on the other with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative benefits received by the Company and the Parent on the one hand and the
U.S. Underwriters on the other with respect to such offering shall be deemed to
be in the same proportion as the total net proceeds from the Stock purchased
under this Agreement received by the Company, on the one hand, and the total
underwriting discounts and commissions received by the U.S. Underwriters with
respect to the shares of the Stock purchased under this Agreement, on the other
hand, bear to the total gross proceeds from the offering of the shares of the
Stock under this Agreement, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault shall be determined by reference to
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by the
Company, the Parent or the U.S. Underwriters, the intent of the parties and
their relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company, the Parent and the U.S.
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section were to be determined by pro rata allocation (even if
the U.S. Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section shall be deemed to include, for
purposes of this Section 9(d), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 9(d), no U.S.
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Stock underwritten by it and distributed
to the public was offered to the public exceeds the amount of any damages which
such U.S. Underwriter has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The U.S. Underwriters'
obligations to contribute as provided in this Section 9(d) are several in
proportion to their respective underwriting obligations and not joint.
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<PAGE>
(e) The U.S. Underwriters severally confirm and the Company
acknowledges that the statements with respect to the public offering of the
Stock by the U.S. Underwriters set forth on the cover page of, the legend
concerning over-allotments on the inside front cover page of and the concession
and reallowance figures appearing under the caption "Underwriting" in, the
Prospectus are correct and constitute the only information concerning such U.S.
Underwriters furnished in writing to the Company by or on behalf of the U.S.
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.
10. Defaulting U.S. Underwriters. If, on either Delivery Date, any
U.S. Underwriter defaults in the performance of its obligations under this
Agreement, the remaining non-defaulting U.S. Underwriters shall be obligated to
purchase the Stock which the defaulting U.S. Underwriter agreed but failed to
purchase on such Delivery Date in the respective proportions which the number of
shares of the Firm Stock set opposite the name of each remaining non-defaulting
U.S. Underwriter in Schedule 1 hereto bears to the total number of shares of the
Firm Stock set opposite the names of all the remaining non-defaulting U.S.
Underwriters in Schedule 1 hereto; provided, however, that the remaining
non-defaulting U.S. Underwriters shall not be obligated to purchase any of the
Stock on such Delivery Date if the total number of shares of the Stock which the
defaulting U.S. Underwriter or U.S. Underwriters agreed but failed to purchase
on such date exceeds 9.09% of the total number of shares of the Stock to be
purchased on such Delivery Date, and any remaining non-defaulting U.S.
Underwriter shall not be obligated to purchase more than 110% of the number of
shares of the Stock which it agreed to purchase on such Delivery Date pursuant
to the terms of Section 2. If the foregoing maximums are exceeded, the
remaining non-defaulting U.S. Underwriters, or those other underwriters
satisfactory to the Representatives who so agree, shall have the right, but
shall not be obligated, to purchase, in such proportion as may be agreed upon
among them, all the Stock to be purchased on such Delivery Date. If the
remaining U.S. Underwriters or other underwriters satisfactory to the
Representatives do not elect to purchase the shares which the defaulting U.S.
Underwriter or U.S. Underwriters agreed but failed to purchase on such Delivery
Date, this Agreement (or, with respect to the Second Delivery Date, the
obligation of the U.S. Underwriters to purchase, and of the Company to sell, the
Option Stock) shall terminate without liability on the part of any
non-defaulting U.S. Underwriter or the Company or the Parent, except that the
Company and the Parent will continue to be liable for the payment of expenses to
the extent set forth in Sections 7 and 12. As used in this Agreement, the term
"U.S. Underwriter" includes, for all purposes of this Agreement unless the
context requires otherwise, any party not listed in Schedule 1 hereto who,
pursuant to this Section 10, purchases Firm Stock which a defaulting U.S.
Underwriter agreed but failed to purchase.
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Nothing contained herein shall relieve a defaulting U.S. Underwriter
of any liability it may have to the Company and the Parent for damages caused by
its default. If other underwriters are obligated or agree to purchase the Stock
of a defaulting or withdrawing U.S. Underwriter, either the Representatives or
the Company may postpone the Delivery Date for up to seven full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the U.S. Underwriters may be necessary in the Registration
Statement, the Prospectus or in any other document or arrangement.
11. Termination. The obligations of the U.S. Underwriters hereunder
may be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Sections 8(i) or 8(j), shall have occurred
or if the U.S. Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.
12. Reimbursement of U.S. Underwriters' Expenses. If (a) the Company
shall fail to tender the Stock for delivery to the U.S. Underwriters by reason
of any failure, refusal or inability on the part of the Company or the Parent to
perform any agreement on its part to be performed, or because any other
condition of the U.S. Underwriters' obligations hereunder required to be
fulfilled by the Company or the Parent is not fulfilled, the Company and the
Parent, severally and jointly, will reimburse the U.S. Underwriters for all
reasonable out-of-pocket expenses (including fees and disbursements of counsel)
incurred by the U.S. Underwriters in connection with this Agreement and the
proposed purchase of the Stock, and upon demand the Company and the Parent,
severally and jointly, shall pay the full amount thereof to the Representatives.
If this Agreement is terminated pursuant to Section 10 by reason of the default
of one or more U.S. Underwriters, neither the Company nor the Parent shall be
obligated to reimburse any defaulting U.S. Underwriter on account of those
expenses.
28
<PAGE>
13. Notices, etc. All statements, requests, notices and agreements
hereunder shall be in writing, and:
(a) if to the U.S. Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-526-6588), with a copy, in the case of any notice
pursuant to Section 9(c), to the Director of Litigation, Office of the
General Counsel, Lehman Brothers Inc., 3 World Financial Center, 10th
Floor, New York, NY 10285;
(b) if to the Company, shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Andrew P. Maunder (Fax: 609-778-0836);
and
(c) if to the Parent, shall be delivered or sent by mail, telex or
facsimile transmission to Securicor PLC, [Address], Attention:
[ ] (Fax: );
provided, however, that any notice to an U.S. Underwriter pursuant to Section
9(c) shall be delivered or sent by mail, telex or facsimile transmission to such
U.S. Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company and
the Parent shall be entitled to act and rely upon any request, consent, notice
or agreement given or made on behalf of the U.S. Underwriters by Lehman Brothers
Inc. on behalf of the Representatives.
14. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the U.S. Underwriters, the Company,
the Parent and their respective representatives and successors. This Agreement
and the terms and provisions hereof are for the sole benefit of only those
persons, except that (A) the representations, warranties, indemnities and
agreements of the Company and the Parent contained in this Agreement shall also
be deemed to be for the benefit of the person or persons, if any, who control
any U.S. Underwriter within the meaning of Section 15 of the Securities Act and
(B) the indemnity agreement of the U.S. Underwriters contained in Section 9(b)
of this Agreement shall be deemed to be for the benefit of directors of the
Company, officers of the Company who have signed the Registration Statement and
any person controlling the Company within the meaning of Section 15 of the
Securities Act. Nothing in this Agreement is intended or shall be construed to
give any person, other than the persons referred to in this Section 13, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein.
29
<PAGE>
15. Survival. The respective indemnities, representations,
warranties and agreements of the Company, the Parent and the U.S. Underwriters
contained in this Agreement or made by or on behalf on them, respectively,
pursuant to this Agreement, shall survive the delivery of and payment for the
Stock and shall remain in full force and effect, regardless of any investigation
made by or on behalf of any of them or any person controlling any of them.
16. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations.
17. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of New York applicable to agreements made and
performed in the State of New York without regard to the conflict of laws
provision.
18. Consent to Jurisdiction. Each party irrevocably agrees that any
legal suit, action or proceeding arising out of or based upon this Agreement or
the transactions contemplated hereby ("Related Proceedings") may be instituted
in the federal courts of the United States of America located in the City of New
York or the courts of the State of New York in each case located in the Borough
of Manhattan in the City of New York (collectively, the "Specified Courts"), and
irrevocably submits to the exclusive jurisdiction (except for proceedings
instituted in regard to the enforcement of a judgment of any such court (a
"Related Judgment"), as to which such jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. The parties further agree that
service of any process, summons, notice or document by mail to such party's
address set forth above shall be effective service of process for any lawsuit,
action or other proceeding brought in any such court. The parties hereby
irrevocably and unconditionally waive any objection to the laying of venue of
any lawsuit, action or other proceeding in the Specified Courts, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such lawsuit, action or other proceeding brought in any
such court has been brought in an inconvenient forum. Each party not located in
the United States hereby irrevocably appoints CT Corporation System, which
currently maintains a New York City office at 1633 Broadway, New York, New York
10019, United States of America, as its agent to receive service of process or
other legal summons for purposes of any such action or proceeding that may be
instituted in any state or federal court in the City and State of New York.
30
<PAGE>
19. Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment, including, without limitation, any immunity
pursuant to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
20. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.
21. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.
If the foregoing correctly sets forth the agreement among the Company,
the Parent and the U.S. Underwriters, please indicate your acceptance in the
space provided for that purpose below.
31
<PAGE>
Very truly yours,
SECURICOR TELESCIENCES INC.
By:_________________________
Name:
Title:
SECURICOR PLC
By:________________________
Name:
Title:
Accepted:
LEHMAN BROTHERS INC.
J.P. MORGAN SECURITIES INC.
For themselves and as Representatives of the
several U.S. Underwriters named in Schedule 1
hereto
By: LEHMAN BROTHERS INC.
By:_______________________________
Authorized Representative
32
<PAGE>
SCHEDULE 1
U.S. Underwriters Number of
Shares
Lehman Brothers Inc.................................
J.P. Morgan Securities Inc. ........................
_________
Total..........................................
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SECURICOR TELESCIENCES INC.
Securicor Telesciences Inc., a corporation organized and existing under,
and by virtue of, the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
1. That the name of the Corporation is Securicor Telesciences Inc. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the State of Delaware on July 1, 1994 and was amended by a
Certificate of Amendment filed with the Secretary of State of the State of
Delaware on July 15, 1994.
2. That the original Certificate of Incorporation of the Corporation, as
amended, is hereby amended in its entirety and restated, pursuant to Section 245
of the General Corporation Law of the State of Delaware, as follows:
FIRST: The name of the Corporation is:
Securicor Telesciences Inc.
SECOND: The address of its registered office in the State of Delaware is:
Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County,
Delaware, 19801. The name of its registered agent at such address is: THE
CORPORATION TRUST COMPANY.
THIRD: The nature of the business or purposes to be conducted or promoted
is:
<PAGE>
To have unlimited power to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of the
State of Delaware.
FOURTH:
Section 1. Capital Stock Authorized. The total number of shares
of stock which the Corporation shall have authority to issue is 30,000,000
consisting of: (i) 25,000,000 shares of Common Stock, par value $.01 per
share; and (ii) [5,000,000] shares of Preferred Stock, par value $.01 per
share (the "Preferred Stock").
Section 2. Provisions Applicable to All Classes and Series of
Preferred Stock. Shares of Preferred Stock may be issued from time to time in
one or more classes or series. The Board of Directors of the Corporation is
hereby expressly granted authority to fix, by resolution or resolutions adopted
prior to the issuance of any shares of a particular class or series of Preferred
Stock, the designations, preferences and relative, participating, optional and
other special rights, or the qualifications, limitations or restrictions
thereof, of such class or series.
Section 3. Provisions Applicable to Common Stock
(a) After the requirements with respect to preferential
dividends upon the Preferred Stock of all classes and series thereof shall have
been met and after the Corporation shall have complied with all requirements, if
any, with respect to the setting aside of sums as a sinking fund or redemption
or purchase account for the benefit of any class or series thereof, then, and
not otherwise, the holders of Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board of Directors.
(b) After distribution in full of the preferential amounts to
be distributed to the holders of all classes and series thereof of Preferred
Stock then outstanding in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of the Common Stock
shall be entitled to receive all the remaining assets of the Corporation
available for distribution to its stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(c) Each holder of Common Stock shall have one vote in respect
of each share of such stock held by him.
-2-
<PAGE>
FIFTH: The Board of Directors is expressly authorized to make, alter or
repeal the by-laws of the Corporation; provided that the Board of Directors
shall not be permitted to amend Section 2-7, Section 3-10 or Article X of the
by-laws without the affirmative vote of shares entitled to cast two-thirds of
all votes entitled to be cast in an election of directors (whether or not
holders of such shares are present in person or represented by proxy at the
meeting).
SIXTH: Elections of directors need not be by written ballot.
SEVENTH: Any action to be taken by the stockholders of the Corporation
shall be taken at an annual or special meeting of the stockholders and shall not
be effected without a meeting by consent in writing under Section 228 of the
General Corporation Law of the State of Delaware or otherwise.
EIGHTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
NINTH: A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director;
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<PAGE>
provided, however, that this shall not exempt a director from liability (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which a director derived an improper personal benefit. If the
General Corporation Law of the State of Delaware is hereafter amended to
authorize the further elimination or limitation of liability of directors, then
the liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be eliminated or limited to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders
of the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
3. That the foregoing Amended and Restated Certificate of Incorporation
has been duly adopted in accordance with the provisions of Sections 242 and 245
of the General Corporation Law of the State of Delaware and that written consent
thereto was given by the sole stockholder of the Corporation in accordance with
the provisions of Section 228 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, SECURICOR TELESCIENCES INC. has caused this Amended
and Restated Certificate of Incorporation to be executed in its name by its
President this ____ day of _____ 1997.
___________________________________
Andrew P. Maunder
President
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<PAGE>
AMENDED AND RESTATED
BY-LAWS OF
SECURICOR TELESCIENCES INC.
ARTICLE I - OFFICES
Section 1-1. Registered Office and Registered Agent. The Corporation shall
maintain a registered office and registered agent within the State of Delaware,
which may be changed by the Board of Directors from time to time.
Section 1-2. Other Offices. The Corporation may also have offices at such
other places, within or without the State of Delaware, as the Board of Directors
may from time to time determine.
ARTICLE II - STOCKHOLDERS' MEETINGS
Section 2-1. Place of Stockholders' Meetings. Meetings of stockholders may
be held at such place, either within or without the State of Delaware, as may be
designated by the Board of Directors from time to time. If no such place is
designated by the Board of Directors, meetings of the stockholders shall be held
at the principal executive offices of the Corporation.
Section 2-2. Annual Meeting. A meeting of the stockholders of the
Corporation shall be held in each calendar year, commencing with the year 1998,
at such date and time as shall be designated by the Board of Directors.
<PAGE>
At such annual meeting, there shall be held an election for a Board of
Directors to serve for the ensuing year and until their respective successors
are elected and qualified, or until their earlier resignation or removal.
Section 2-3. Special Meetings. Except as otherwise specifically provided
by law, special meetings of the stockholders may be called at any time:
(a) By the Board of Directors; or
(b) By the Chairman or President of the Corporation.
Upon the written request of any person entitled to call a special meeting,
which request shall set forth the purpose for which the meeting is desired, it
shall be the duty of the Secretary to give prompt written notice of such meeting
to be held at such time as the Secretary may fix, subject to the provisions of
Section 2-4 hereof. If the Secretary shall fail to fix such date and give notice
within ten (10) days after receipt of such request, the person or persons making
such request may do so.
Section 2-4. Notice of Meetings and Adjourned Meetings. Written notice
stating the place, date and hour of any meeting shall be given, to the extent
required by law, not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting. If
mailed, notice is given when deposited in the United States
-2-
<PAGE>
Mail, postage prepaid, directed to the stockholder at his address as it appears
on the records of the Corporation. Such notice may be given by or at the
direction of the person or persons authorized to call the meeting.
When a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 2-5. Quorum. The presence, in person or by proxy, of the holders
of a majority of the outstanding shares entitled to vote shall constitute a
quorum. The stockholders present at a duly organized meeting can continue to do
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. If a meeting cannot be organized
because of the absence of a quorum, those present may, except as otherwise
provided by law, adjourn the meeting to such time and place as they may
determine. In the case of any meeting for the election of Directors, those
stockholders who attend the second of such adjourned meetings, although less
than a quorum as fixed in this Section, shall nevertheless constitute a quorum
for the purpose of electing Directors.
-3-
<PAGE>
Section 2-6. Voting List; Proxies. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Upon the willful neglect or refusal of the Directors to produce such a
list at any meeting for the election of Directors, they shall be ineligible to
any office at such meeting.
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy in any manner
permitted by law. All proxies shall be filed with the Secretary of the
Corporation not later than the day on which exercised. No proxy shall be
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<PAGE>
voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period.
Section 2-7. Action at Meetings. When a quorum is present at any meeting
of adjournment thereof, action on any matter properly before the meeting, other
than the election of directors, shall be by the affirmative vote of shares
entitled to cast two-thirds (2/3) of all votes entitled to be cast at the
meeting (whether or not holders of such shares are present in person or
represented by proxy at the meeting), unless the matter is one upon which by
express provision of law, the Certificate of Incorporation or these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such matter. Directors shall be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of directors.
Except for the election of directors and as otherwise specifically
provided by law, all other votes may be taken by voice unless a stockholder
demands that it be taken by ballot, in which latter event the vote shall be
taken by written ballot.
Section 2-8. Business at Meetings of Stockholders. Except as otherwise
provided by law (including but not limited to Rule 14a-8 of the Securities and
Exchange Act of 1934, as amended, or any successor provision thereto) or in
these By-laws, the business which shall be conducted at any meeting of the
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<PAGE>
stockholders shall (a) have been specified in the written notice of the meeting
(or any supplement thereto) given by the Corporation, or (b) be brought before
the meeting at the direction of the Board of Directors, or (c) be brought before
the meeting by the presiding officer of the meeting unless a majority of the
Directors then in office object to such business being conducted at the meeting,
or (d) have been specified in a written notice given to the Secretary of the
Corporation, by or on behalf of any stockholder who shall have been a
stockholder of record on the record date for such meeting and who shall continue
to be entitled to vote thereat (the "Stockholder Notice"), in accordance with
all of the following requirements:
(1) Each Stockholder Notice must be delivered to, or mailed and
received at, the offices of the Corporation (i) in the case of an annual meeting
that is called for a date that is within 30 days before or after the anniversary
date of the immediately preceding annual meeting of stockholders, not less than
120 days prior to the anniversary of the date the Corporation's proxy statement
was released to stockholders in connection with the Corporation's immediately
preceding annual meeting, and (ii) in the case of an annual meeting that is
called for a date that is not within 30 days before or after the anniversary
date of the immediately preceding annual meeting, not later than the close of
business on the tenth day following the day on which notice of the date of
meeting was mailed or public
-6-
<PAGE>
disclosure of the date of the meeting was made, whichever occurs first, except
that, for the 1998 Annual Meeting of Stockholders, the Stockholder Notice must
be received by the Corporation not later than the close of business on November
30, 1997.
(2) Each such Stockholder Notice must set forth: (i) the name and
address of the stockholder who intends to bring the business before the meeting;
(ii) the general nature of the business which such stockholder seeks to bring
before the meeting and, if a specific action is to be proposed, the text of the
resolution or resolutions which the proposing stockholder proposes that the
stockholders adopt; and (iii) a representation that the stockholder is a holder
of record of the stock of the Corporation entitled to vote at such meeting and
intends to bring the business specified in the notice before the meeting. The
presiding officer of the meeting may, in his or her sole discretion, refuse to
acknowledge any business proposed by a stockholder not made in compliance with
the foregoing procedure.
ARTICLE III - BOARD OF DIRECTORS
Section 3-1. Number. The entire Board shall consist of that number of
Directors, not less than one (1) nor more than nine (9), as may from time to
time be prescribed by the Board. The number of Directors shall initially consist
of that number of directors serving at the time of adoption of this Section 3-1.
No decrease in the number of authorized Directors constituting
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<PAGE>
the entire Board of Directors shall shorten the term of any incumbent Director.
Section 3-2. Place of Meeting. Meetings of the Board of Directors may be
held at such place either within or without the State of Delaware, as a majority
of the Directors may from time to time designate or as may be designated in the
notice calling the meeting.
Section 3-3. Regular Meetings. A regular meeting of the Board of Directors
shall be held annually, immediately following the annual meeting of
stockholders, at the place where such meeting of the stockholders is held or at
such other place, date and hour as a majority of the newly elected Directors may
designate. At such meeting the Board of Directors shall elect officers of the
Corporation. In addition to such regular meeting, the Board of Directors shall
have the power to fix, by resolution, the place, date and hour of other regular
meetings of the Board.
Section 3-4. Special Meetings. Special meetings of the Board of Directors
shall be held whenever ordered by the President, by a majority of the members of
the executive committee, if any, or by a majority of the Directors in office.
Section 3-5. Notices of Meetings of Board of Directors.
(a) Regular Meetings. No notice shall be required to be given of any
regular meeting, unless the same be
-8-
<PAGE>
held at other than the time or place for holding such meetings as fixed in
accordance with Section 3-3 of these by-laws, in which event one (1) day's
notice shall be given of the time and place of such meeting.
(b) Special Meetings. At least one (1) day's notice shall be given
of the time, place and purpose for which any special meeting of the Board of
Directors is to be held.
Section 3-6. Quorum. A majority of the total number of Directors shall
constitute a quorum for the transaction of business, and the vote of a majority
[of the Directors present at a meeting at which a quorum is present] shall be
the act of the Board of Directors. If there be less than a quorum present, a
majority of those present may adjourn the meeting from time to time and place to
place and shall cause notice of each such adjourned meeting to be given to all
absent Directors.
Section 3-7. Informal Action by the Board of Directors. Any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee.
Section 3-8. Powers.
(a) General Powers. The Board of Directors shall have all powers
necessary or appropriate to the management of the
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<PAGE>
business and affairs of the Corporation, and, in addition to the power and
authority conferred by these by-laws, may exercise all powers of the Corporation
and do all such lawful acts and things as are not by statute, these by-laws or
the Certificate of Incorporation directed or required to be exercised or done by
the stockholders.
(b) Specific Powers. Without limiting the general powers conferred
by the last preceding clause and the powers conferred by the Certificate of
Incorporation and by-laws of the Corporation, it is hereby expressly declared
that the Board of Directors shall have the following powers:
(i) To confer upon any officer or officers of the Corporation
the power to choose, remove or suspend assistant officers, agents or servants.
(ii) To appoint any person, firm or corporation to accept and
hold in trust for the Corporation any property belonging to the Corporation or
in which it is interested, and to authorize any such person, firm or corporation
to execute any documents and perform any duties that may be requisite in
relation to any such trust.
(iii) To appoint a person or persons to vote shares of another
corporation held and owned by the Corporation.
(iv) To designate, by resolution adopted by a majority of the
full Board of Directors, one (1) or more of its number to constitute an
executive committee which, to the extent
-10-
<PAGE>
provided in such resolution, subject to the limitations of applicable law, shall
have and may exercise the power of the Board of Directors in the management of
the business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed.
(v) To designate, by resolution adopted by a majority of the
full Board of Directors, one (1) or more additional committees, each to consist
of one (1) or more Directors, to have such duties, powers and authority as the
Board of Directors shall determine. All committees of the Board of Directors,
including the executive committee, shall have the authority to adopt their own
rules of procedure. Absent the adoption of specific procedures, the procedures
applicable to the Board of Directors shall also apply to committees thereof.
(vi) To fix the place, time and purpose of meetings of
stockholders.
(vii) To purchase or otherwise acquire for the Corporation any
property, rights or privileges which the Corporation is authorized to acquire,
at such prices, on such terms and conditions and for such consideration as it
shall from time to time see fit, and, at its discretion, to pay any property or
rights acquired by the Corporation, either wholly or partly in money or in
stocks, bonds, debentures or other securities of the Corporation.
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<PAGE>
(viii) To create, make and issue mortgages, bonds, deeds of
trust, trust agreements and negotiable or transferable instruments and
securities, secured by mortgage or otherwise, and to do every other act and
thing necessary to effectuate the same.
(ix) To appoint and remove or suspend such subordinate
officers, agents or servants, permanently or temporarily, as it may from time to
time think fit, and to determine their duties, and fix, and from time to time
change, their salaries or emoluments, and to require security in such instances
and in such amounts as it thinks fit.
(x) To determine who shall be authorized on the Corporation's
behalf to sign bills, notes, receipts, acceptances, endorsements, checks,
releases, contracts and documents.
Section 3-9. Compensation of Directors. Compensation of Directors and
reimbursement of their expenses incurred in connection with the business of the
Corporation, if any, shall be as determined from time to time by resolution of
the Board of Directors.
Section 3-10. Removal of Directors by Stockholders. The entire Board of
Directors or any individual Director may be removed from office without
assigning any cause by the holders of shares entitled to cast two-thirds (2/3)
of all votes entitled to be cast at a meeting duly called for that purpose
(whether or not
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<PAGE>
holders of such shares are present in person or represented by proxy at the
meeting). In case the Board of Directors or any one (1) or more Directors be so
removed, new Directors may be elected at the same time.
Section 3-11. Resignations. Any Director may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation unless another time be
fixed in the resignation, in which case it shall become effective at the time so
fixed. The acceptance of a resignation shall not be required to make it
effective.
Section 3-12. Vacancies. Vacancies and new created directorships resulting
from any increase in the authorized number of Directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the Directors then in office, although less than a quorum, or by a
sole remaining Director, and each person so elected shall be a Director until
his successor is elected and qualified or until his earlier resignation or
removal.
Section 3-13. Participation by Conference Telephone. Directors may
participate in regular or special meetings of the Board by telephone or similar
communications equipment by means of which all other persons participating in
the meeting can hear each other, and such participation shall constitute
presence at the meeting.
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Section 3-14. Nominations. Notwithstanding the provisions of Section 2-8
of these by-laws (dealing with business at meetings of stockholders),
nominations for the election of Directors may be made by the Board of Directors,
a committee appointed by the Board of Directors or by any stockholder of record
entitled to vote on the election of Directors who is a stockholder at the record
date of the meeting and also on the date of the meeting at which Directors are
to be elected; provided, however, that with respect to a nomination made by a
stockholder, which stockholder must provide timely written notice to the
Secretary of the Corporation, in accordance with the following requirements:
(1) To be timely, a stockholder's written notice must be delivered
to, or mailed and received at, the principal executive offices of the
Corporation (i) in the case of an annual meeting that is called for a date that
is within 30 days before or after the anniversary date of the immediately
preceding annual meeting of stockholders, not less than 120 days prior to the
anniversary of the date that the Corporation's proxy statement was released to
shareholders in connection with the Corporation's immediately preceding annual
meeting, and (ii) in the case of an annual meeting that is called for a date
that is not within 30 days before or after the anniversary date of the
immediately preceding annual meeting, or in the case of a special meeting of
stockholders called for the purpose of electing
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Directors, not later than the close of business on the tenth day following the
day on which notice of the date of the meeting was mailed or public disclosure
of the date of the meeting was made, whichever occurs first, except that for the
1998 Annual Meeting of Stockholders, such notice must be received by the
Corporation no later than the close of business of November 30, 1997; and
(2) Each such written notice must set forth: (i) the name and
address of the stockholder who intends to make the nomination; (ii) the name and
address of the person or persons to be nominated; (iii) a representation that
the stockholder is a holder of record of the stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (iv) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (v) such other information regarding each nominee proposed by such
stockholder as would have been required to be included in a proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission had
the nominee been nominated, or intended to be nominated, by the Board of
Directors, and (vi) the consent of each nominee to serve as a Director of the
Corporation if so elected. The presiding officer of the meeting may refuse, in
his
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or her sole discretion, to acknowledge the nomination of any persons as not made
in compliance with the foregoing procedure.
ARTICLE IV - OFFICERS
Section 4-1. Election and Office. The Corporation shall have a President,
a Secretary and a Treasurer who shall be elected by the Board of Directors. The
Board of Directors may elect such additional officers as it may deem proper,
including a Chairman and a Vice Chairman of the Board of Directors, one (1) or
more Vice Presidents, and one (1) or more assistant or honorary officers. Any
number of offices may be held by the same person.
Section 4-2. Term. The President, the Secretary and the Treasurer shall
each serve for a term of one (1) year and until their respective successors are
chosen and qualified, unless removed from office by the Board of Directors
during their respective tenures. The term of office of any other officer shall
be as specified by the Board of Directors.
Section 4-3. Powers and Duties of the President. Unless otherwise
determined by the Board of Directors, the President shall have the usual duties
of an executive officer with general supervision over and direction of the
affairs of the Corporation. In the exercise of these duties and subject to the
limitations of the laws of the State of Delaware, these by-laws, and the actions
of the Board of Directors, he may appoint, suspend and discharge employees and
agents, shall preside at all
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meetings of the stockholders at which he shall be present, and, unless there is
a Chairman of the Board of Directors, shall preside at all meetings of the Board
of Directors and, unless otherwise specified by the Board of Directors, shall be
a member of all committees. He shall also do and perform such other duties as
from time to time may be assigned to him by the Board of Directors.
Unless otherwise determined by the Board of Directors, the President shall
have full power and authority on behalf of the Corporation to attend and to act
and to vote at any meeting of the stockholders of any corporation in which the
Corporation may hold stock, and, at any such meeting, shall possess and may
exercise any and all of the rights and powers incident to the ownership of such
stock and which, as the owner thereof, the Corporation might have possessed and
exercised.
Section 4-4. Powers and Duties of the Secretary. Unless otherwise
determined by the Board of Directors, the Secretary shall record all proceedings
of the meetings of the Corporation, the Board of Directors and all committees,
in books to be kept for that purpose, and shall attend to the giving and serving
of all notices for the Corporation. He shall have charge of the corporate seal,
the certificate books, transfer books and stock ledgers, and such other books
and papers as the Board of Directors may direct. He shall perform all other
duties ordinarily incident to the office of Secretary and shall have
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such other powers and perform such other duties as may be assigned to him by the
Board of Directors.
Section 4-5. Powers and Duties of the Treasurer. Unless otherwise
determined by the Board of Directors, the Treasurer shall have charge of all the
funds and securities of the Corporation which may come into his hands. When
necessary or proper, unless otherwise ordered by the Board of Directors, he
shall endorse for collection on behalf of the Corporation checks, notes and
other obligations, and shall deposit the same to the credit of the Corporation
in such banks or depositories as the Board of Directors may designate and shall
sign all receipts and vouchers for payments made to the Corporation. He shall
sign all checks made by the Corporation, except when the Board of Directors
shall otherwise direct. He shall enter regularly, in books of the Corporation to
be kept by him for that purpose, a full and accurate account of all moneys
received and paid by him on account of the Corporation. Whenever required by the
Board of Directors, he shall render a statement of the financial condition of
the Corporation. He shall at all reasonable times exhibit his books and accounts
to any Director of the Corporation, upon application at the office of the
Corporation during business hours. He shall have such other powers and shall
perform such other duties as may be assigned to him from time to time by the
Board of Directors. He shall give such bond, if any, for the faithful
performance of his duties as shall be required by the
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Board of Directors and any such bond shall remain in the custody of the
President.
Section 4-6. Powers and Duties of the Chairman of the Board of Directors.
Unless otherwise determined by the Board of Directors, the Chairman of the
Board, if any, shall preside at all meetings of Directors. The Chairman of the
Board shall have such other powers and perform such further duties as may be
assigned to such officer by the Board of Directors. To be eligible to serve, the
Chairman of the Board must be a Director of the Corporation.
Section 4-7. Powers and Duties of Vice Presidents and Assistant Officers.
Unless otherwise determined by the Board of Directors, each Vice President and
each assistant officer shall have the powers and perform the duties of his
respective superior officer. Vice Presidents and assistant officers shall have
such rank as shall be designated by the Board of Directors and each, in the
order of rank, shall act for such superior officer in his absence, or upon his
disability or when so directed by such superior officer or by the Board of
Directors. Vice Presidents may be designated as having responsibility for a
specific aspect of the Corporation's affairs, in which event each such Vice
President shall be superior to the other Vice Presidents in relation to matters
within his aspect. The President shall be the superior officer of the Vice
Presidents. The Treasurer and
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the Secretary shall be the superior officers of the Assistant Treasurers and
Assistant Secretaries, respectively.
Section 4-8. Delegation of Office. The Board of Directors may delegate the
powers or duties of any officer of the Corporation to any other officer or to
any Director from time to time.
Section 4-9. Vacancies. The Board of Directors shall have the power to
fill any vacancies in any office occurring from whatever reason.
Section 4-10. Resignations. Any officer may resign at any time by
submitting his written resignation to the Corporation. Such resignation shall
take effect at the time of its receipt by the Corporation, unless another time
be fixed in the resignation, in which case it shall become effective at the time
so fixed. The acceptance of a resignation shall not be required to make it
effective.
ARTICLE V - CAPITAL STOCK
Section 5-1. Stock Certificates. Shares of the Corporation shall be
represented by certificates signed by or in the name of the Corporation by (a)
the Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice President, and (b) the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary, representing the number of shares
registered in certificate form. If such certificate is countersigned (i) by a
transfer agent other than the Corporation
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or its employee, or (ii) by a registrar other than the Corporation or its
employee, the signatures of the officers of the Corporation may be facsimiles.
In case any officer who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer at the date of issue.
Section 5-2. Determination of Stockholders of Record. The Board of
Directors may fix, in advance, a record date to determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action. Such date shall be not more than sixty (60) nor less than
ten (10) days before the date of any such meeting, nor more than sixty (60) days
prior to any other action.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.
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The record date for determining stockholders for any other purpose shall
be at the close of business on the day on which the Board of Directors adopts
the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 5-3. Transfer of Shares. Transfer of shares shall be made on the
books of the Corporation only upon surrender of the share certificate, duly
endorsed and otherwise in proper form for transfer, which certificate shall be
canceled at the time of the transfer. No transfer of shares shall be made on the
books of this Corporation if such transfer is in violation of a lawful
restriction noted conspicuously on the certificate.
Section 5-4. Lost, Stolen or Destroyed Share Certificates. The Corporation
may issue a new certificate of stock or uncertified shares in place of any
certificate therefore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen, or
destroyed certificate, or his legal representative to give the Corporation a
bond sufficient to indemnify it against claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
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ARTICLE VI - NOTICES
Section 6-1. Contents of Notice. Whenever any notice of a meeting is
required to be given pursuant to these by-laws or the Certificate of
Incorporation or otherwise, the notice shall specify the place, day and hour of
the meeting and, in the case of a special meeting of stockholders or where
otherwise required by law, the purpose or purposes for which such meeting is
called.
Section 6-2. Method of Notice. All notices shall be given to each person
entitled thereto, either personally or by sending a copy thereof through the
mail or by telegraph or telecopier, charges prepaid, to his address as it
appears on the records of the Corporation, or supplied by him to the Corporation
for the purpose of notice. If notice is sent by mail, telegraph or telecopier,
it shall be deemed to have been given to the person entitled thereto when
deposited in the United States Mail or with the telegraph office for
transmission or when confirmation of receipt by telecopier is received. If no
address for a stockholder appears on the books of the Corporation and such
stockholder has not supplied the Corporation with an address for the purpose of
notice, notice deposited in the United States Mail addressed to such stockholder
care of General Delivery in the city in which the principal office of the
Corporation is located shall be sufficient.
Section 6-3. Waiver of Notice. Whenever notice is required to be given
under any provision of law or of the
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Certificate of Incorporation or by-laws of the Corporation, a written waiver,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, Directors, or
members of a committee of Directors need be specified in any written waiver of
notice unless so required by the Certificate of Incorporation.
ARTICLE VII - INDEMNIFICATION OF DIRECTORS AND
OFFICERS AND OTHER PERSONS
Section 7-1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding")(other than an action by or in the right of the
Corporation), by reason of the fact that he or she, or a person for whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such
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proceeding is alleged action in an official capacity as a director or officer or
in any other capacity while serving as a director or officer of the Corporation,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exist or may
hereafter be amended (but, in the case of any such amendment, the rights of
indemnification provided hereby shall continue as theretofore notwithstanding
such amendment unless such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors, administrators and personal
representatives, provided, however, that the Corporation shall indemnify any
such indemnitees in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.
The right to indemnification conferred in this Section shall be a contract
right and shall include the right to be paid by the Corporation the expenses
incurred in defending any such
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proceeding in advance of its final disposition; provided, however, that, if the
Delaware General Corporation Law requires, the payment of such expenses incurred
by a director or officer in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The Corporation may, by action of
the Board of Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
Section 7-2. Right of Claimant to Bring Suit. A claimant may bring suit
against the Corporation under Section 7-1 only if the Corporation fails to pay
in full within 30 days of its receipt of a written claim for payment hereunder.
If successful in whole or in part, the claimant shall be entitled to be paid
also the expense of prosecuting such claim (including, but not limited to,
attorneys' fees). It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any proceeding in
advance of
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its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of providing such defense shall be on the Corporation. Neither the failure of
the Corporation (including the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including the Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
Section 7-3. Non-Exclusivity of Rights. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any other
right that any person may have or hereafter acquire under any statute, provision
of the Certificate of Incorporation, by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
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Section 7-4. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
ARTICLE VIII - SEAL
The form of the seal of the
Corporation, called the corporate seal [Form of Seal]
of the Corporation, shall be as im-
pressed adjacent hereto.
ARTICLE IX - FISCAL YEAR
The fiscal year of the Corporation shall end on September 30.
ARTICLE X - AMENDMENTS
These or other by-laws may be adopted, amended or repealed by the
affirmative vote of shares entitled to cast two-thirds (2/3) of all votes
entitled to cast at any regular or special meeting of the stockholders (whether
or not holders of such shares are present in person or represented by proxy at
such meeting). Notwithstanding the foregoing, the Board of Directors shall have
the power to adopt, amend or repeal these or other by-laws, except that the
Board of Directors shall not have the power
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to amend Section 2-7, Section 3-10 or Article X of these by-laws unless such
amendment is adopted by the stockholders in accordance with the previous
sentence. The fact that such power has been so conferred upon the Board of
Directors shall not divest the stockholders of the power nor limit their power
to adopt, amend or repeal by-laws.
ARTICLE XI - INTERPRETATION OF BY-LAWS
All words, terms and provisions of these by-laws shall be interpreted and
defined by and in accordance with the General Corporation Law of the State of
Delaware, as amended, and as amended from time to time hereafter. Any
determination involving interpretation or application of these by-laws made in
good faith by the Board of Directors in a manner consistent with the previous
sentence shall be final, binding and conclusive on all parties in interest.
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Securicor Telesciences Inc.
1997 STOCK INCENTIVE PLAN
1. Purpose. Securicor Telesciences Inc., a Delaware corporation (the
"Company"), hereby adopts the Securicor Telesciences Inc. 1997 Stock Incentive
Plan (the "Plan"). The Plan is intended to recognize the contributions made to
the Company by employees (including employees who are members of the Board of
Directors) of the Company or any Affiliate, to provide such persons with
additional incentive to devote themselves to the future success of the Company
or an Affiliate, and to improve the ability of the Company or an Affiliate to
attract, retain, and motivate individuals upon whom the Company's sustained
growth and financial success depend, by providing such persons with an
opportunity to acquire or increase their proprietary interest in the Company
through receipt of rights to acquire the Company's Common Stock, $.01 par value
(the "Common Stock"), and through the transfer or issuance of Common Stock. In
addition, the Plan is intended as an additional incentive to directors of the
Company who are not employees of the Company or an Affiliate to serve on the
Board of Directors and to devote themselves to the future success of the Company
by providing them with an opportunity to acquire or increase their proprietary
interest in the Company through the receipt of rights to acquire Common Stock.
Furthermore, the Plan may be used to encourage consultants and advisors of the
Company to further the success of the Company.
2. Definitions. Unless the context clearly indicates otherwise, the
following terms shall have the following meanings:
"Act" shall mean the Securities Act of 1933.
"Affiliate" shall mean a corporation which is a parent corporation
or a subsidiary corporation with respect to the Company within the meaning of
Section 424(e) or (f) of the Code.
"Award" shall mean a transfer of Common Stock made pursuant to the
terms of the Plan.
"Award Agreement" shall mean the agreement between the Company and a
Grantee with respect to an Award made pursuant to the Plan.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Change of Control" shall have the meaning as set forth in Section 9
of the Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall have the meaning set forth in Section 3 of the
Plan.
<PAGE>
"Common Stock" shall have the meaning set forth in Section 1 of the
Plan.
"Company" shall mean Securicor Telesciences Inc., a Delaware
corporation.
"Disability" shall have the meaning set forth in Section 22(e)(3) of
the Code.
"Employee" shall mean an employee of the Company or an Affiliate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall have the meaning set forth in Subsection
8(b) of the Plan.
"Grantee" shall mean a person to whom an Award has been granted
pursuant to the Plan.
"ISO" shall mean an Option granted under the Plan which is intended
to qualify as an "incentive stock option" within the meaning of Section 422(b)
of the Code.
"Non-Employee Director" shall mean a member of the Board of
Directors of the Company who is a "non-employee" of the Company within the
meaning of Rule 16b-3.
"Non-qualified Stock Option" shall mean an Option granted under the
Plan which is not intended to qualify, or otherwise does not qualify, as an
"incentive stock option" within the meaning of Section 422(b) of the Code.
"Option" shall mean either an ISO or a Non-qualified Stock Option
granted under the Plan.
"Optionee" shall mean a person to whom an Option has been granted
under the Plan, which Option has not been exercised and has not expired or
terminated.
"Option Document" shall mean the document described in Section 8 of
the Plan, as applicable, which sets forth the terms and conditions of each grant
of Options.
"Option Price" shall mean the price at which Shares may be purchased
upon exercise of an Option, as calculated pursuant to Subsection 8(b) of the
Plan.
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"Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange
Act.
"SAR" shall have the meaning set forth in Section 11 of the Plan.
"Section 16 Person" shall mean any person who is an "officer" or
"director" within the meaning of Rule 16a-1(f) promulgated under the Exchange
Act or any successor rule.
"Shares" shall mean the shares of Common Stock of the Company which
are the subject of Options or granted as Awards under the Plan.
3. Administration of the Plan. The Board of Directors may administer the
Plan itself or may designate a committee or committees composed of two or more
of members of the Board of Directors. At the discretion of the Board of
Directors, a separate committee may be designated consisting of two or more
Non-Employee Directors to operate and administer the Plan with respect to only
Section 16 Persons, while appointing another committee or itself to administer
the Plan with respect to all other persons eligible to participate in the Plan.
Any such committee or committees designated by the Board of Directors, and the
Board of Directors itself in its administrative capacity with respect to the
Plan, is referred to as the "Committee."
(a) Meetings. The Committee shall hold meetings at such times and
places as it may determine, shall keep minutes of its meetings, and shall adopt,
amend and revoke such rules or procedures as it may deem proper; provided,
however, that it may take action only upon the agreement of a majority of the
whole Committee. Any action which the Committee shall take through a written
instrument signed by a majority of its members shall be as effective as though
it had been taken at a meeting duly called and held.
(b) Indemnification. Service on the Committee shall constitute
service as a member of the Board of Directors of the Company. Each member of the
Committee shall be entitled, without further act on his or her part, to
indemnity from the Company and limitation of liability to the fullest extent
provided by applicable law and by the Company's Certificate of Incorporation
and/or By-laws in connection with or arising out of any action, suit or
proceeding with respect to the administration of the Plan or the granting of
Options thereunder in which he or she may be involved by reason of his or her
being or having been a member of the Committee, whether or not he or she
continues to be such member of the Committee at the time of the action, suit or
proceeding.
(c) Interpretation. The Committee shall have the power and authority
to interpret the Plan and to adopt rules and regulations for its administration
that are not inconsistent with the express terms of the Plan. Any such actions
by the Committee shall be final, binding and conclusive on all parties in
interest.
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4. Grants under the Plan. Grants under the Plan may be in the form of a
Non-qualified Stock Option, an ISO or a combination thereof, at the discretion
of the Committee.
5. Eligibility. All Employees, members of the Board of Directors and
consultants and advisors to the Company shall be eligible to receive Options and
Awards hereunder. Consultants and advisors shall be eligible only if they render
bona fide services to the Company unrelated to the offer or sale of securities;
provided, however, that the limitation contained in this sentence shall not
apply to the extent that the inapplicability of such limitation will not
disqualify the Common Stock from being eligible for registration on Form S-8 (or
any successor form) under the Act. The Committee, in its sole discretion, shall
determine whether an individual qualifies as an employee.
6. Shares Subject to Plan. The aggregate maximum number of Shares for
which Awards or Options may be granted pursuant to the Plan is Four Hundred
Fifty Thousand (450,000). The number of Shares which may be issued under the
Plan shall be further subject to adjustment in accordance with Section 10. The
Shares shall be issued from authorized and unissued Common Stock or Common
Stock held in or hereafter acquired for the treasury of the Company. If an
Option terminates or expires without having been fully exercised for any
reason or if Shares subject to an Award have been conveyed back to the Company
pursuant to the terms of an Award Agreement, the Shares for which the Option
was not exercised or the Shares that were conveyed back to the Company may
again be the subject of one or more Options or Awards granted pursuant to the
Plan.
7. Term of the Plan. The Plan is effective as of April 15, 1997, the
date on which it was adopted by the Board of Directors and approved by its
sole stockholder. No ISO may be granted under the Plan after April 15, 2007.
8. Option Documents and Terms. Each Option granted under the Plan shall be
a Non-qualified Stock Option unless the Option shall be specifically designated
at the time of grant to be an ISO for Federal income tax purposes. If any Option
designated an ISO is determined for any reason not to qualify as an incentive
stock option within the meaning of Section 422 of the Code, such Option shall be
treated as a Non-qualified Stock Option for all purposes under the provisions of
the Plan. Options granted pursuant to the Plan shall be evidenced by the Option
Documents in such form as the Committee shall from time to time approve, which
Option Documents shall comply with and be subject to the following terms and
conditions and such other terms and conditions as the Committee shall from time
to time require which are not inconsistent with the terms of the Plan.
(a) Number of Option Shares. Each Option Document shall state the
number of Shares to which it pertains. An Optionee may receive more than one
Option, which may include Options which are intended to be ISO's and Options
which are not intended to be ISO's, but only on the terms and subject to the
conditions and restrictions of the Plan. Notwithstanding anything herein to the
contrary, no Optionee shall be granted Options during
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one fiscal year of the Company for more than One Hundred Fifty Thousand
(150,000) Shares (such number to be subject to adjustment in accordance with
Section 10).
(b) Option Price. Each Option Document shall state the Option Price
which, for a Non-qualified Stock Option, may be less than, equal to, or greater
than the Fair Market Value of the Shares on the date the Option is granted and,
for an ISO, shall be at least 100% of the Fair Market Value of the Shares on the
date the Option is granted as determined by the Committee in accordance with
this Subsection 8(b); provided, however, that if an ISO is granted to an
Optionee who then owns, directly or by attribution under Section 424(d) of the
Code, shares possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or an Affiliate, then the Option Price
shall be at least 110% of the Fair Market Value of the Shares on the date the
Option is granted. If the Common Stock is traded in a public market, then the
Fair Market Value per share shall be, if the Common Stock is listed on a
national securities exchange or included in the NASDAQ System, the last reported
sale price thereof for the "Valuation Date" (as hereinafter defined), or, if the
Common Stock is not so listed or included, the mean between the last reported
"bid" and "asked" prices thereof on the Valuation Date, as reported on NASDAQ
or, if not so reported, as reported by the National Daily Quotation Bureau, Inc.
or as reported in a customary financial reporting service, as applicable and as
the Committee determines. If the Common Stock is not traded in a public market,
Fair Market Value shall be determined in good faith by the Committee. For
purposes of the determination of Fair Market Value under this Section 8(b), the
Valuation Date shall be the immediately preceding business day unless the
transaction with respect to which Fair Market Value is being determined occurs
following the closing of the exchange, the NASDAQ System, NASDAQ or the
financial reporting service, as applicable, in which case the Valuation Date
shall be the date on which the transaction occurs.
(c) Exercise. No Option shall be deemed to have been exercised prior
to the receipt by the Company of written notice of such exercise and (unless
arrangements satisfactory to the Company have been made for payment through a
broker in accordance with procedures permitted by Regulation P of the Federal
Reserve Board) of payment in full of the Option Price for the Shares to be
purchased. Each such notice shall specify the number of Shares to be purchased
and shall (unless the Shares are covered by a then current registration
statement or a Notification under Regulation A under the Act), contain the
Optionee's acknowledgment in form and substance satisfactory to the Company that
(a) such Shares are being purchased for investment and not for distribution or
resale (other than a distribution or resale which, in the opinion of counsel
satisfactory to the Company, may be made without violating the registration
provisions of the Act), (b) the Optionee has been advised and understands that
(i) the Shares have not been registered under the Act and are "restricted
securities" within the meaning of Rule 144 under the Act and are subject to
restrictions on transfer and (ii) the Company is under no obligation to register
the Shares under the Act or to take any action which would make available to the
Optionee any exemption from such registration, (c) such Shares may not be
transferred without compliance with all applicable federal and state securities
laws, and (d) an appropriate legend referring to the foregoing restrictions on
transfer and any other restrictions imposed under the Option Documents may be
endorsed on the certificates. Notwithstanding the foregoing, if the
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Company determines that issuance of Shares should be delayed pending (A)
registration under federal or state securities laws, (B) the receipt of an
opinion of counsel satisfactory to the Company that an appropriate exemption
from such registration is available, (C) the listing or inclusion of the Shares
on any securities exchange or an automated quotation system or (D) the consent
or approval of any governmental regulatory body whose consent or approval is
necessary in connection with the issuance of such Shares, the Company may defer
exercise of any Option granted hereunder until any of the events described in
this sentence has occurred.
(d) Medium of Payment. Subject to the terms of the applicable Option
Document, an Optionee shall pay for Shares (i) in cash, (ii) by certified or
cashier's check payable to the order of the Company, or (iii) by such other mode
of payment as the Committee may approve, including payment through a broker in
accordance with procedures permitted by Regulation P of the Federal Reserve
Board. The Optionee may also exercise the Option in any manner contemplated by
Section 11. Furthermore, the Committee may provide in an Option Document that
payment may be made in whole or in part in shares of the Company's Common Stock
held by the Optionee. If payment is made in whole or in part in shares of the
Company's Common Stock, then the Optionee shall deliver to the Company
certificates registered in the name of such Optionee representing the shares
owned by such Optionee, free of all liens, claims and encumbrances of every kind
and having an aggregate Fair Market Value on the date of delivery that is at
least as great as the Option Price of the Shares (or relevant portion thereof)
with respect to which such Option is to be exercised by the payment in shares of
Common Stock, endorsed in blank or accompanied by stock powers duly endorsed in
blank by the Optionee. In the event that certificates for shares of the
Company's Common Stock delivered to the Company represent a number of shares in
excess of the number of shares required to make payment for the Option Price of
the Shares (or relevant portion thereof) with respect to which such Option is to
be exercised by payment in shares of Common Stock, the stock certificate or
certificates issued to the Optionee shall represent (i) the Shares in respect of
which payment is made, and (ii) such excess number of shares. Notwithstanding
the foregoing, the Committee may impose from time to time such limitations and
prohibitions on the use of shares of the Common Stock to exercise an Option as
it deems appropriate.
(e) Termination of Options.
(i) No Option shall be exercisable after the first to occur of
the following:
(A) Expiration of the Option term specified in the
Option Document, which, in the case of an ISO, shall not occur after (1) ten
years from the date of grant, or (2) five years from the date of grant if the
Optionee on the date of grant owns, directly or by attribution under Section
424(d) of the Code, shares possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of an Affiliate;
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<PAGE>
(B) Except to the extent otherwise provided in an
Optionee's Option Document, a finding by the Committee, after full consideration
of the facts presented on behalf of both the Company and the Optionee, that the
Optionee has been engaged in disloyalty to the Company or an Affiliate,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of the Optionee's employment or
service, or has disclosed trade secrets or confidential information of the
Company or an Affiliate. In such event, in addition to immediate termination of
the Option, the Optionee shall automatically forfeit all Shares for which the
Company has not yet delivered the share certificates upon refund by the Company
of the Option Price. Notwithstanding anything herein to the contrary, the
Company may withhold delivery of share certificates pending the resolution of
any inquiry that could lead to a finding resulting in a forfeiture;
(C) The date, if any, set by the Board of Directors as
an accelerated expiration date in the event of the liquidation or dissolution of
the Company;
(D) The occurrence of such other event or events as may
be set forth in the Option Document as causing an accelerated expiration of the
Option; or
(E) Except as otherwise set forth in the Option Document
and subject to the foregoing provisions of this Subsection 8(e), three months
after the Optionee's employment or service with the Company or its Affiliates
terminates for any reason other than Disability or death or one year after such
termination due to Optionee's Disability or death. With respect to this
Subsection 8(e)(i)(E), the only Options that may be exercised during the
three-month or one-year period, as the case may be, are Options which were
exercisable on the last date of such employment or service and not Options
which, if the Optionee were still employed or rendering service during such
three-month or one-year period, would become exercisable, unless the Option
Document specifically provides to the contrary. The terms of an executive
severance agreement or other agreement between the Company and an Optionee,
approved by the Committee, whether entered into prior or subsequent to the grant
of an Option, which provide for Option exercise dates later than those set forth
in Subsection 8(e)(i) shall be deemed to be Option terms approved by the
Committee and consented to by the Optionee.
(ii) Notwithstanding the foregoing, the Committee may extend
the period during which all or any portion of an Option may be exercised to a
date no later than the Option term specified in the Option Document pursuant to
Subsection 8(e)(i)(A), provided that any change pursuant to this Subsection
8(e)(ii) which would cause an ISO to become a Non-qualified Stock Option may be
made only with the consent of the Optionee.
(iii) Notwithstanding anything to the contrary contained in
the Plan or an Option Document, an ISO shall be treated as a Non-qualified Stock
Option to the extent such ISO is exercised at any time after the expiration of
the time period permitted under the Code for the exercise of an ISO.
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<PAGE>
(f) Transfers. No Option granted under the Plan may be
transferred, except by will or by the laws of descent and distribution except as
otherwise set forth in the Option Document or to the extent that the Committee
otherwise determines.
(g) Limitation on ISO Grants. To the extent that the aggregate
fair market value of the shares of Common Stock (determined at the time the ISO
is granted) with respect to which ISO's under all incentive stock option plans
of the Company or its Affiliates are exercisable for the first time by the
Optionee during any calendar year exceeds $100,000, such ISO's shall, to the
extent of such excess, be treated as Non-qualified Stock Options.
(h) Other Provisions. Subject to the provisions of the Plan,
the Option Documents shall contain such other provisions including, without
limitation, provisions authorizing the Committee to accelerate the
exercisability of all or any portion of an Option granted pursuant to the Plan,
additional restrictions upon the exercise of the Option or additional
limitations upon the term of the Option, as the Committee shall deem advisable.
(i) Amendment. Subject to the provisions of the Plan, the
Committee shall have the right to amend any Option Document or Award Agreement
issued to an Optionee or Award holder, subject to the Optionee's or Award
holder's consent if such amendment is not favorable to the Optionee or Award
holder, or if such amendment has the effect of changing an ISO to a
Non-Qualified Stock Option, except that the consent of the Optionee or Award
holder shall not be required for any amendment made pursuant to Subsection
8(e)(i)(C) or Section 9 of the Plan, as applicable.
9. Change of Control. In the event of a Change of Control, the Committee
may take whatever actions it deems necessary or desirable with respect to any of
the Options outstanding which need not be treated identically, including,
without limitation, accelerating (a) the expiration or termination date in the
respective Option Documents to a date no earlier than thirty (30) days after
notice of such acceleration is given to the Optionees, and/or (b) the
exercisability of the Option.
A "Change of Control" shall be deemed to have occurred upon
the earliest to occur of the following events:
(i) any "person" as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company, any subsidiary of the Company, any
"person" (as hereinabove defined) acting on behalf of the Company as underwriter
pursuant to an offering who is temporarily holding securities in connection with
such offering, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any "person" (as hereinabove defined)
who, on the date the Plan is effective, shall have been the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of or have voting control over
shares of capital stock of the Company possessing more than twenty-five percent
(25%) of the
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<PAGE>
combined voting power of the Company's then outstanding securities) is or
becomes the "beneficial owner" (as hereinabove defined), directly or indirectly,
of securities of the Company representing twenty-five percent (25%) or more of
the combined voting power of the Company's then outstanding securities;
(ii) during any period of not more than two consecutive years (not
including any period prior to the date the Plan is effective), individuals who
at the beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a "person" (as hereinabove
defined) who has entered into an agreement with the Company to effect a
transaction described in clause (i), (iii) or (iv) of this Section 9) whose
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation or other legal entity, other than (1) a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (2) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) (other than a "person" who, on the
date the Plan is effective, shall have been the "beneficial owner" (as
hereinabove defined) of or have voting control over shares of capital stock of
the Company possessing more than twenty five percent (25%) of the combined
voting power of the Company's then outstanding securities) acquires more than
twenty-five percent (25%) of the combined voting power of the Company's then
outstanding securities;
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets (or any transaction
having a similar effect); or
(v) a "change of control" (as may hereinafter be defined by the Board of
Directors for the express purposes of this Plan) has occurred.
10. Adjustments on Changes in Capitalization.
(a) In the event that the outstanding Shares are changed by reason
of a reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, combination or exchange of shares and the like (not including
the issuance of Common Stock on
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<PAGE>
the conversion of other securities of the Company which are convertible into
Common Stock) or dividends payable in Shares, an equitable adjustment shall be
made by the Committee in the aggregate number of shares available under the Plan
and in the number of Shares and price per Share subject to outstanding Options.
Unless the Committee makes other provisions for the equitable settlement of
outstanding Options, if the Company shall be reorganized, consolidated, or
merged with another corporation or other legal entity, or if all or
substantially all of the assets of the Company shall be sold or exchanged, an
Optionee shall at the time of issuance of the stock under such corporate event
be entitled to receive upon the exercise of his or her Option the same number
and kind of shares of stock or the same amount of property, cash or securities
as he or she would have been entitled to receive upon the occurrence of any such
corporate event as if he or she had been, immediately prior to such event, the
holder of the number of Shares covered by his or her Option.
(b) Any adjustment under this Section 10 in the number of Shares
subject to Options shall apply proportionately to only the unexercised portion
of any Option granted hereunder. If fractions of a Share would result from any
such adjustment, the adjustment shall be revised to the next lower whole number
of Shares.
(c) The Committee shall have authority to determine the adjustments
to be made under this Section, and any such determination by the Committee shall
be final, binding and conclusive.
11. Stock Appreciation Rights (SARs).
(a) In General. Subject to the terms and conditions of the Plan, the
Committee may, in its sole and absolute discretion, grant to an Optionee the
right to surrender an Option to the Company, in whole or in part, and to receive
in exchange therefor payment by the Company of an amount equal to the excess of
the Fair Market Value of the shares of Common Stock subject to such Option, or
portion thereof, so surrendered (determined in the manner described in section
8(b) as of the date the SARs are exercised) over the exercise price to acquire
such shares (which right shall be referred to as an "SAR"). Except as may
otherwise be provided in an Option Document, such payment may be made, as
determined by the Committee in accordance with subsection 11(c) below and set
forth in the Option Document, either in shares of Common Stock or in cash or in
any combination thereof.
(b) Grant. Each SAR shall relate to a specific Option granted under
the Plan and shall be granted to the Optionee concurrently with the grant of
such Option by inclusion of appropriate provisions in the Option Document
pertaining thereto. The number of SARs granted to an Optionee shall not exceed
the number of shares of Common Stock which such Optionee is entitled to purchase
pursuant to the related Option. The number of SARs held by an Optionee shall be
reduced by (i) the number of SARs exercised under the provisions of the
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<PAGE>
Option Document pertaining to the related Option, and (ii) the number of shares
of Common Stock purchased pursuant to the exercise of the related Option.
(c) Payment. The Committee shall have sole discretion to determine
whether payment in respect of SARs granted to any Optionee shall be made in
shares of Common Stock, or in cash, or in a combination thereof. If payment is
made in Common Stock, the number of shares of Common Stock which shall be issued
pursuant to the exercise of SARs shall be determined by dividing (i) the total
number of SARs being exercised, multiplied by the amount by which the Fair
Market Value (as determined under section 8(b)) of a share of Common Stock on
the exercise date exceeds the exercise price for shares covered by the related
Option, by (ii) the Fair Market Value of a share of Common Stock on the exercise
date of the SARs. No fractional share of Common Stock shall be issued on
exercise of an SAR; cash may be paid by the Company to the individual exercising
an SAR in lieu of any such fractional share. If payment on exercise of an SAR is
to be made in cash, the individual exercising the SAR shall receive in respect
of each share to which such exercise relates an amount of money equal to the
difference between the Fair Market Value of a share of Common Stock on the
exercise date and the exercise price for shares covered by the related Option.
(d) Limitations. SARs shall be exercisable at such times and under
such terms and conditions as the Committee, in its sole and absolute discretion,
shall determine; provided, however, that an SAR may be exercised only at such
times and by such individuals as the related Option under the Plan and the
Option Agreement may be exercised.
12. Terms and Conditions of Awards. Awards granted pursuant to the Plan
shall be evidenced by written Award Agreements in such form as the Committee
shall from time to time approve, which Award Agreements shall comply with and be
subject to the following terms and conditions and such other terms and
conditions which the Committee may from time to time require which are not
inconsistent with the terms of the Plan.
(a) Number of Shares. Each Award Agreement shall state the number of
shares of Common Stock to which it pertains.
(b) Purchase Price. Each Award Agreement shall specify the purchase
price, if any, which applies to the Award. If the Board specifies a purchase
price, the Grantee shall be required to make payment on or before the date
specified in the Award Agreement. A Grantee shall pay for Shares (i) in cash,
(ii) by certified check payable to the order of the Company, or (iii) by such
other mode of payment as the Committee may approve.
(c) Grant. In the case of an Award which provides for a grant of
Shares without any payment by the Grantee, the grant shall take place on the
date specified in the Award Agreement. In the case of an Award which provides
for a payment, the grant shall take place on the date the initial payment is
delivered to the Company, unless the Committee or the Award Agreement otherwise
specifies. Stock certificates evidencing Shares granted pursuant to
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<PAGE>
an Award shall be issued in the sole name of the Grantee. Notwithstanding the
foregoing, as a precondition to a grant, the Company may require an
acknowledgment by the Grantee as required with respect to Options under Section
8.
(d) Conditions. The Committee may specify in an Award Agreement any
conditions under which the Grantee of that Award shall be required to convey to
the Company the Shares covered by the Award. Upon the occurrence of any such
specified condition, the Grantee shall forthwith surrender and deliver to the
Company the certificates evidencing such Shares as well as completely executed
instruments of conveyance. The Committee, in its discretion, may provide that
certificates for Shares transferred pursuant to an Award be held in escrow by
the Company or an officer of the Company until such time as each and every
condition has lapsed and that the Grantee be required, as a condition of the
Award, to deliver to such escrow agent or Company officer stock powers covering
the Award Shares duly endorsed by the Grantee. Unless otherwise provided in the
Award Agreement, distributions made on Shares held in escrow will be deposited
in escrow, to be distributed to the party becoming entitled to the Shares on
which the distribution was made. Stock certificates evidencing Shares subject to
conditions shall bear a legend to the effect that the Common Stock evidenced
thereby is subject to repurchase or conveyance to the Company in accordance with
an Award made under the Plan and that the Shares may not be sold or otherwise
transferred.
(e) Lapse of Conditions. Upon termination or lapse of each and every
forfeiture condition, if any, the Company shall cause certificates without the
legend referring to the Company's repurchase right (but with any other legends
that may be appropriate) evidencing the Shares covered by the Award to be issued
to the Grantee upon the Grantee's surrender of the legended certificates held by
him or her to the Company.
(f) Rights as Stockholder. Upon payment of the purchase price, if
any, for Shares covered by an Award and compliance with the acknowledgment
requirement of subsection 12(c), the Grantee shall have all of the rights of a
stockholder with respect to the Shares covered thereby, including the right to
vote the Shares and receive all dividends and other distributions paid or made
with respect thereto, except to the extent otherwise provided by the Committee
or in the Award Agreement.
13. Amendment of the Plan. The Board of Directors of the Company may amend
the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an ISO or increase the maximum number of Shares
as to which Options may be granted or the maximum number of Shares as to which
Options may be granted to any one employee during one fiscal year of the Company
without obtaining approval, within twelve months before or after such action, by
the stockholders in the manner required by applicable state law. Notwithstanding
anything herein to the contrary, the Committee may, at its sole discretion,
amend the Plan and any outstanding Option or Award to (i) eliminate any
provision it determines is no longer
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<PAGE>
required to comply with Rule 16b-3 as a result of revisions to Rule 16b-3 which
are generally effective after the date the Plan is effective or (ii) provide the
holder of the Option or Award an exemption from potential liability under
Section 16(b) of the Exchange Act and the rules and regulations thereunder.
14. No Commitment to Retain. The grant of an Option or Award pursuant to
the Plan shall not be construed to imply or to constitute evidence of any
agreement, express or implied, on the part of the Company or any Affiliate to
retain the Optionee or Grantee as an employee, consultant or advisor of the
Company or any Affiliate, as a member of the Board of Directors or in any other
capacity.
15. Withholding of Taxes. In connection with any event relating to an
Option or Award, the Company shall have the right to (a) require the recipient
to remit or otherwise make available to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements prior to
the delivery or transfer of any certificate or certificates for such Shares or
(b) take whatever other action it deems necessary to protect its interests with
respect to tax liabilities. The Company's obligations under the Plan shall be
conditioned on the Optionee's or Grantee's compliance, to the Company's
satisfaction, with any withholding requirement.
16. Interpretation. The Plan is intended to enable transactions under the
Plan with respect to directors to satisfy the conditions of Rule 16b-3; to the
extent that any provision of the Plan would cause a conflict with such
conditions or would cause the administration of the Plan as provided in Section
3 to fail to satisfy the conditions of Rule 16b-3, such provision shall be
deemed null and void to the extent permitted by applicable law. This section
shall not be applicable if no class of the Company's equity securities is then
registered pursuant to Section 12 of the Exchange Act.
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<PAGE>
(EMPLOYMENT AGREEMENT)
--------------------
This AGREEMENT made this lst day of July, 1994, between SECURICOR
TELESCIENCES INC. (the "Company") and ANDREW PHILIP MAUNDER (the "Employee").
WHEREAS, the Employee is desirous of obtaining the protections and
benefits contained in this Agreement, in return for which he agrees to the
restrictive covenants contained herein.
NOW, THEREFORE, in consideration of the facts, mutual promises, and
covenants contained herein, and intending to be legally bound hereby, the
Company and the Employee agree as follows:
1. Employment and Duties.
The Company hereby employs the Employee and the Employee hereby
accepts employment by the Company, to serve as President and Chief Executive
Officer reporting to the Chairman of the Company. In such capacity, the Employee
shall have such powers and shall perform duties and services consistent with
such capacity as may be assigned or delegated to him from time-to-time by the
President of the Company. The Employee shall devote his full business time and
attention to the business and affairs of the Company exclusively and will use
his best efforts to promote the interests of the Company.
<PAGE>
2. Compensation and Benefits.
(a) The Company shall pay the Employee a base salary of $150,000 per
annum, payable in accordance with the regular payroll practices in effect from
time-to-time. This base salary will be reviewed annually, beginning on July 1,
1995.
(b) The Employee shall participate in any health insurance, life
insurance, accident or disability insurance, profit sharing, or retirement plans
or programs currently in effect or that may hereafter be established by the
Company, in accordance with and to the extent so provided by these plans or
programs, and to the extent that other senior management employees are eligible
to so participate. Nothing in this Agreement shall preclude the Company from
amending or terminating any such insurance, program, or plan on the condition
that such amendment or termination is applicable to the Company's senior
management employees generally.
(c) The Employee shall be entitled to paid vacation per year in
accordance with the Company's general policy for senior management employees.
3. Automobile Allowance.
The Employee shall receive an automobile allowance of $625 per
month.
4. Termination of Employment by the Company.
Notwithstanding any other provision of this
<PAGE>
Agreement, Employee's employment and any and all of the Company's obligations or
liabilities under this Agreement shall be terminated immediately, in any of the
following circumstances:
(a) Death:
If the Employee dies, the further accrual of all payments and
benefits hereunder shall cease at the end of the month in which Employee's death
shall occur. All payments and benefits hereunder which have accrued prior to the
end of such month shall be promptly paid to the executor or administrator of
Employee's estate or pursuant to such other specific directions as Employee has
previously provided to the Company in writing.
(b) Discharge for Cause:
The Company may discharge the Employee at any time, for
"cause", which shall include but not be limited to criminal conduct (whether or
not related to the Employee's employment) other than minor traffic offenses; any
material breach by the Employee of this Agreement; gross negligence or
malfeasance by the Employee in the performance of his duties for the Company;
self-dealing; and/or any violation of any expressed direction or any reasonable
rule or regulation established by the Company from time-to-time regarding the
conduct of its business.
(c) Discharge for Other Reasons:
The Company may discharge the Employee at any time, for any or
no reason, by providing twelve (12) months'
<PAGE>
prior written notice. At the Company's option, the Company may elect to sever
the employment relationship with the Employee at any time during this twelve
(12) month period, in which event the Employee shall be compensated for the
remainder of said twelve (12) month period.
5. Termination of Employment by the Employee.
This Agreement may be terminated by the Employee upon not less than six (6)
months written notice to the Company. Upon the effective date of such
voluntary termination, any and all of the Company's obligations under this
Agreement shall terminate.
6. Proprietary Rights, Confidentiality, Non-Competition, Inventions, etc.
As did its predecessor, TeleSciences, the Company designs and manufactures
various electronic equipment and systems (hereinafter referred to as
"Products"), and the Company is unique in that it possesses expertise and
"Know-How" in the design, manufacture, and sale of Products. As he did while
employed by TeleSciences, during the course of Employee's employment with the
Company he will have access to trade secrets, and proprietary and
confidential information pertaining to the Company and its Products, such as,
but not limited to, its short and long range business plans, its processes
and procedures, sales and distribution methods, suppliers and customer lists,
<PAGE>
customer prospects, personnel records, research and development projects,
manufacturing processes, and "Know-How" (all the foregoing hereinafter referred
to as "Proprietary Information"). This Proprietary Information was designed and
developed by the Company, or TeleSciences, at great expense and over lengthy
periods of time, is unique, secret, and confidential, and constitutes the
exclusive property and trade secrets of the Company, and any use of such
property and trade secrets by the Employee, other than for the sole benefit of
the Company, would be wrongful and would cause irreparable injury to the
Company.
However, Proprietary Information shall not include information which
has become publicly known through no wrongful act of Employee, information which
has been rightfully received from a third party authorized to make such
information available without restriction, information which has been approved
for release by written authorization of the Company, and information which must
be disclosed pursuant to applicable law or in connection with the enforcement of
the Agreement.
(a) The Employee shall not, at any time, without the express written
consent of the Company, publish, disclose or divulge to any person, firm,
corporation, or use directly, indirectly or for his own benefit or the benefit
of any person, firm, or corporation other than the Company, any Proprietary
Information, property, trade secrets, or confidential information
<PAGE>
of the Company, its subsidiaries, and its affiliates learned or obtained by the
Employee from the Company or TeleSciences, including, but not limited to, the
information and things set forth above. This obligation shall be continuing and
shall not end with the cessation of Employee's employment with the Company.
Employee further agrees that, immediately upon cessation of his employment with
the Company, whether voluntary or involuntary, he shall return to the Company
all property of the Company including, but not limited to, Proprietary
Information.
(b) The Employee shall not, during the course of his employment and
for twelve (12) months after:
(i) Directly or indirectly induce or attempt to influence any
employee of the Company to terminate his employment with the Company, who was
employed by the Company at the time of the termination of Employee's employment
or who terminated his employment for any reason during the six (6) months
preceding the termination of Employee's employment with the Company.
(ii) Engage in (as a principal, partner, director, officer,
agent, employee, consultant, independent contractor, or otherwise) or be
financially interested in, any business which is involved in business activities
which are the same as, similar to, or in competition with the Products.
<PAGE>
However, nothing contained in this sub-paragraph shall prevent the Employee from
being the holder or beneficial owner for investment purposes only of any class
of equity securities of a company whose securities are traded on a national
securities exchange or NASDAQ if the Employee (together with his spouse,
children, siblings, and parents) neither holds, nor is beneficially interested
in, more than five percent (5 %) of any single class of the securities in that
Company.
(c) The Employee shall not, for six (6) months after the cessation
of his employment, whether voluntary or involuntary, without the prior written
approval of the Company, either solely or jointly with, or as manager or agent
for, any person, corporation, trust, joint venture, partnership, or other
business entity, directly or indirectly, solicit any customers or accounts that
were customers or accounts (or legal successors to customers or accounts) of the
Company during any period of time that the Employee was employed by the Company.
(d) The Employee shall fully and promptly disclose and assign to the
Company for its sole benefit, to be utilized in any manner it sees fit, and
without additional compensation, all ideas, discoveries, inventions and
improvements, patentable or not, and all writings (including the copyright)
which are made, conceived or reduced to practice by the Employee, alone or with
others, during or after working
<PAGE>
hours, either on or off the job during the term of his employment, or within six
(6) months thereafter, which are related to the Products, or which results from
tasks assigned to the Employee by the Company. The Company may, but it shall not
be required to, obtain at its own expense and for its sole benefit, patents or
statutory copyright for any patentable idea or copyrightable writing referred to
above, and he shall co-operate with the Company in executing any documents
required in connection therewith.
(e) Except as delegated to do so by the President of the Company,
the Employee shall not make any statements to the media concerning the Company's
business.
(f) The Employee acknowledges that the restrictions contained in
this Paragraph 6, in view of the nature of the business in which the Company is
engaged, are reasonable and necessary to protect the legitimate interests of the
Company, and that any violation of those restrictions would result in
irreparable injury to the Company. The Employee therefore agrees that, in the
event of his violation of any of those restrictions, the Company shall be
entitled to obtain from any court of competent jurisdiction preliminary and
permanent injunctive relief against the Employee, in addition to damages from
the Employee and an equitable accounting of all Commissions, earnings, profits,
and other benefits arising from such
<PAGE>
violation, which rights shall be cumulative and in addition to any other rights
or remedies to which the Company may be entitled.
(g) The Employee agrees that if any or any portion of the foregoing
covenants or the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants or the application
thereof shall not be affected and the remaining covenant or covenants will then
be given full force and effect without regard to the invalid or unenforceable
portions. If any covenant is held to be unenforceable because of the area
covered, the duration thereof, or the scope thereof, the employee agrees that
the Court making such determination shall have the power to reduce the area
and/or the duration, and/or limit the scope thereof, and the covenant shall then
be enforceable in its reduced form.
7. Complete Understanding.
This Agreement constitutes the complete understanding between the
parties in respect to the subject matter hereof and supersedes all prior and
contemporary agreements and understandings, inducements or conditions, expressed
or implied, written or oral, between the Company and the Employee, and cannot be
changed or modified except by written agreement signed by the parties.
<PAGE>
8. Binding Effect.
This Agreement shall be binding upon and shall inure to the benefit of the
Company and its successors, and shall be binding upon the Employee, his heirs
and legal representatives.
9. No Assignment by the Employee.
This Agreement is personal to the Employee, and the Employee may not assign
or delegate any of his rights or obligations hereunder without first
obtaining the express written consent of the Company.
10. Waiver or Rights.
If in one or more instances either party fails to insist that the other party
perform any of the terms of this Agreement, such failure shall not be
construed as a waiver by such party of any past, present, or future right
granted under this Agreement; the obligations of both parties under this
Agreement shall continue in full force and effect.
11. Presumptions.
This Agreement shall be interpreted without regard to any presumption or rule
requiring construction against the party who caused this Agreement to be
drafted.
<PAGE>
12. Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance, and enforcement shall be governed by
and construed in accordance with the law of New Jersey. <PAGE>
IN WITNESS WHEREOF, the parties hereto intending to be legally
bound, have executed this Agreement as of the date first above written.
For Securicor TeleSciences, Inc.
/s/ Andrew Maunder Feb 10 '95 /s/ T. Sokell 14 Feb 1995
___________________ __________ __________________ ____________
Andrew Maunder Date Date
<PAGE>
EMPLOYMENT AGREEMENT
This AGREEMENT made this 1st day of July, 1994, between SECURICOR TELESCIENCES
INC. (the "Company") and DON HOFFMAN (the "Employee").
WHEREAS, the Employee was an employee of TeleSciences Inc. ("TeleSciences"), the
Company's predecessor, and the Company now wishes to employ Employee and
Employee wishes to enter into the employ of the Company on the terms and
conditions contained in this Agreement' and
WHEREAS, the Employee is desirous of obtaining the protections and benefits
contained in this Agreement, in return for which he agrees to the restrictive
covenants contained herein.
NOW, THEREFORE, in consideration of the facts, mutual promises, and covenants
contained herein, and intending to be legally bound hereby, the Company and the
Employee agree as follows:
1. Employment and Duties.
The Company hereby employs the Employee and the Employee hereby accepts
employment by the Company, to serve as Vice President reporting to the
President of the Company. In such capacity, the Employee shall have such
powers and shall perform duties and services consistent with such capacity
as may be assigned or delegated to him from time-to-time by the President
of the Company. The Employee shall devote his full business time and
attention to the business and affairs of the Company exclusively and will
use his best efforts to promote the interests of the Company.
<PAGE>
2. Compensation and Benefits.
(a) The Company shall pay the Employee a base salary of $156,502.40 per
annum, payable in accordance with the regular payroll practices in
effect from time-to-time. This base salary will be reviewed on
October 1, 1994 and reviewed annually thereafter, beginning on July
1, 1995.
(b) The Employee shall participate in any health insurance, life
insurance, accident or disability insurance, profit sharing, or
retirement plans or programs currently in effect or that may
hereafter be established by the Company, in accordance with and to
the extent so provided by these plans or programs, and to the extent
that other senior management employees are eligible to so
participate. Nothing in this Agreement shall preclude the Company
from emending or terminating any such insurance, program, or plan on
the condition that such amendment or termination is applicable to
the Company's senior management employees generally.
(c) The Employee shall be entitled to paid vacation per year in
accordance with the Company's general policy for senior management
employees.
3. Automobile Allowance.
The Employee shall receive an automobile allowance of $625 per month.
4. Termination of Employment by the Company.
Notwithstanding any other provision of this Agreement, Employee's
employment and any and all of the Company's obligations or liabilities
under this Agreement shall be terminated immediately, in any of the
following circumstances:
(a) Death: If the Employee dies, the further accrual of all payments and
benefits hereunder shall cease at the end of the month in which
Employee's death shall occur. All payments
<PAGE>
and benefits hereunder which have accrued prior to the end of such
month shall be promptly paid to the executor or administrator of
Employee's estate or pursuant to such other specific directions as
Employee has previously provided to the Company in writing.
(b) Discharge for Cause:
The Company may discharge the Employee at any time, for "cause,"
which shall include but not be limited to criminal conduct (whether
or not related to the Employee's employment) other than minor
traffic offenses; any material breach by the Employee of this
Agreement; gross negligence or malfeasance by the Employee in the
performance of his duties for the Company; self-dealing; and/or any
violation of any expressed direction or any reasonable rule or
regulation established by the Company from time-to-time regarding
the conduct of its business.
(c) Discharge for Other Reasons:
The Company may discharge the Employee at any time, for any or no
reason, by providing six (6) months' prior written notice. At the
Company's option, the Company may elect to sever the employment
relationship with the Employee at any time during this six (6) month
period, in which event the Employee shall be compensated for the
remainder of said six (6) month period.
5. Termination of Employment by the Employee.
This Agreement may be terminated by the Employee upon not less than three
(3) months written notice to the Company. Upon the effective date of such
voluntary termination, any and all of the Company's obligations under this
Agreement shall terminate.
6. Proprietary Rights, Confidentiality, Non-Competition, Inventions, etc.
<PAGE>
As did its predecessor, TeleSciences, the Company designs and manufactures
various electronic equipment and systems (hereinafter referred to as
"Products"), and the Company is unique in that it possesses expertise and
"Know-How" in the design, manufacture, and sale of Products. As he did
while employed by TeleSciences, during the course of Employee's employment
with the Company he will have access to trade secrets, and proprietary and
confidential information pertaining to the Company and its Products, such
as, but not limited to, its short and long range business plans, its
processes and procedures, sales and distribution methods, suppliers and
customer lists, customer prospects, personnel records, research and
development projects, manufacturing processes, and "Know-How" (all the
foregoing hereinafter referred to as "Proprietary Information"). This
Proprietary Information was designed and developed by the Company, or
TeleSciences, at great expense and over lengthy periods of time, is
unique, secret, and confidential, and constitutes the exclusive property
and trade secrets of the Company, and any use of such property and trade
secrets by the Employee, other than for the sole benefit of the Company,
would be wrongful and would cause irreparable injury to the Company.
However, Proprietary Information shall not include information which has
become publicly known through no wrongful act of Employee, information
which has been rightfully received from a third party authorized to make
such information available without restriction, information which has been
approved for release by written authorization of the Company, and
information which must be disclosed pursuant to applicable law or in
connection with the enforcement of the Agreement.
(a) The Employee shall not, at any time, without the express written
consent of the Company, publish, disclose or divulge to any person,
firm, corporation, or use directly, indirectly or for his own
benefit or the benefit of any person, firm, or
<PAGE>
corporation other than the Company, any Proprietary Information,
property, trade secrets, or confidential information of the Company,
its subsidiaries, and its affiliates learned or obtained by the
Employee from the Company or TeleSciences, including, but not
limited to, the information and things set forth above. This
obligation shall be continuing and shall not end with the cessation
of Employee's employment with the Company. Employee further agrees
that, immediately upon cessation of his employment with the Company,
whether voluntary or involuntary, he shall return to the Company all
property of the Company including, but not limited to, Proprietary
Information.
(b) The Employee shall not, during the course of his employment and for
six (6) months after:
(i) Directly or indirectly induce or influence any employee of the
Company to terminate his employment with the Company, who was
employed by the Company at the time of the termination of
Employee's employment or who terminated his employment for any
reason during the six (6) months preceding the termination of
Employee's employment with the Company.
(ii) Engage in (as a principal, partner, director, officer, agent,
employee, consultant, independent contractor, or otherwise) or
be financially interested in, any business which is involved
in business activities which are the same as, similar to, or
in competition with the Products. However, nothing contained
in this sub-paragraph shall prevent the Employee from being
the holder or beneficial owner for investment purposes only of
any class of equity securities of a company whose securities
are traded on a national securities exchange or NASDAQ if the
Employee (together with his spouse, children,
<PAGE>
siblings, and parents) neither holds, nor is beneficially interested
in, more than five percent (5%) of any single class of the
securities in that company.
(c) The Employee shall not, for six (6) months after the cessation of
his employment, whether voluntary or involuntary, without the prior
written approval of the Company, either solely or jointly with, or
as manager or agent for, any person, corporation, trust, joint
venture, partnership, or other business entity, directly or
indirectly, solicit any customers or accounts that were customers or
accounts (or legal successors to customers or accounts) of the
Company during any period of time that the Employee was employed by
the Company.
(d) The Employee shall fully and promptly disclose and assign to the
Company for its sole benefit, to be utilized in any manner it sees
fit, and without additional compensation, all ideas, discoveries,
inventions and improvements, patentable or not, and all writings
(including the copyright) which are made, conceived or reduced to
practice by the Employee, alone or with others, during or after
working hours, either on or off the job during the term of his
employment, or within six (6) months thereafter, which are related
to the Products, or which results from tasks assigned to the
Employee by the Company. The Company may, but it shall not be
required to, obtain at its own expense and for its sole benefit,
patents or statutory copyright for any patentable idea or
copyrightable writing referred to above, and he shall co-operate
with the Company in executing any documents required in connection
therewith.
(e) Except as delegated to do so by the President of the Company, the
Employee shall not make any statements to the media concerning the
Company's business.
(f) The Employee acknowledges that the restrictions contained in this
Paragraph 6, in view of the nature of the business in which the
Company is engaged, are reasonable
<PAGE>
and necessary to protect the legitimate interests of the Company,
and that any violation of those restrictions would result in
irreparable injury to the Company. The Employee therefore agrees
that, in the event of his violation of any of those restrictions,
the Company shall be entitled to obtain from any court of competent
jurisdiction preliminary and permanent injunctive relief against the
Employee, in addition to damages from the Employee and an equitable
accounting of all commissions, earnings, profits, and other benefits
arising from such violation, which rights shall be cumulative and in
addition to any other rights or remedies to which the Company may be
entitled.
(g) The Employee agrees that if any or any portion of the foregoing
covenants or the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants or the
application thereof shall not be affected and the remaining covenant
or covenants will then be given full force and effect without regard
to the invalid or unenforceable portions. If any covenant is held to
be unenforceable because of the area covered, the duration thereof,
or the scope thereof, the employee agrees that the Court making such
determination shall have the power to reduce the area and/or the
duration, and/or limit the scope thereof, and the covenant shall
then be enforceable in its reduced form.
7. Complete Understanding.
This Agreement constitutes the complete understanding between the parties
in respect to the subject matter hereof and supersedes all prior and
contemporary agreements and understandings, inducements or conditions,
expressed or implied, written or oral, between the Company and the
Employee, and cannot be changed or modified except by written agreement
signed by the parties.
<PAGE>
8. Binding Effect.
This Agreement shall be binding upon and shall inure to the benefit of the
Company and its successors, and shall be binding upon the Employee, his
heirs and legal representatives.
9. No Assignment by the Employee.
This Agreement is personal to the Employee, and the Employee may not
assign or delegate any of his rights or obligations hereunder without
first obtaining the express written consent of the Company.
10. Waiver or Rights.
If in one or more instances either party fails to insist that the other
party perform any of the terms of this Agreement, such failure shall not
be construed as a waiver by such party of any past, present, or future
right granted under this Agreement; the obligations of both parties under
this Agreement shall continue in full force and effect.
11. Presumptions.
This Agreement shall be interpreted without regard to any presumption or
rule requiring construction against the party who caused this Agreement to
be drafted.
12. Governing Law.
This Agreement and all questions relating to its validity, interpretation,
performance, and enforcement shall be governed by and construed in
accordance with the law of New Jersey.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound, have
executed this Agreement as of the date first above written.
For Securicor TeleSciences Inc.
<PAGE>
/s/ Don Hoffman Sept. 7, 1994 /s/ T. Sokell Sept. 7, 1994
_______________ _______________ ___________________ _____________
Don Hoffman Date T. Sokell Date
<PAGE>
EMPLOYMENT AGREEMENT
This AGREEMENT made this 15th day of February 1995, between SECURICOR
TELESCIENCES INC. (the Company) and WILLIAM J. RAHE JR. (the Employee).
WHEREAS, the Employee is desirous of obtaining the protections and benefits
contained in this Agreement, in return for which he agrees to the restrictive
covenants contained herein.
NOW THEREFORE in consideration of the facts, mutual promises, and covenants
contained herein, and intending to be legally bound hereby, the Company and the
Employee agree as follows:
1. Employment and Duties.
The Company hereby employs the Employee and the Employee hereby
accepts employment by the Company, to serve as Vice President
reporting to the President of the Company. In such capacity, the
Employee shall have such powers and shall perform duties and
services consistent with such capacity as may be assigned or
delegated to him from time-to-time by the President of the Company.
The Employee shall devote his full business time and attention to
the business and affairs of the Company exclusively and will use his
best efforts to promote the interests of the Company.
2. Compensation and Benefits.
(a) The Company shall pay the Employee a base salary of $130,000 per
annum, payable in accordance with the regular payroll practices in
effect from time-to-time. This base salary will be reviewed annually
beginning on July 1, 1996.
(b) The Employee shall participate in any health insurance, life
insurance, accident or disability insurance, profit sharing, or
retirement plans or programs currently in effect or that may
hereafter be established by the Company, in accordance with and to
the extent so provided by these plans or programs, and to the extent
that other senior management employees are eligible to so
participate. Nothing in this Agreement shall preclude the Company
from emending or terminating any such insurance, program, or plan on
the condition that such amendment or termination is applicable to
the Company's senior management employees generally.
(c) The Employee shall be entitled to paid vacation per year in
accordance with the Company's general policy for senior management
employees.
<PAGE>
3. Automobile allowance.
The Employee shall receive an automobile allowance of $625 per
month.
4. Termination of Employment by the Company.
Notwithstanding any other provision of this Agreement, Employee's
employment and any and all of the Company's obligations or
liabilities under this Agreement shall be terminated immediately, in
any of the following circumstances:
(a) Death:
If the Employee dies, the further accrual of all payments and
benefits thereunder shall cease at the end of the month in which
Employee's death shall occur. All payments and benefits thereunder
which have accrued prior to the end of such month shall be promptly
paid to the executor or administrator of Employee's estate or
pursuant to such other specific directions as Employee has
previously provided to the Company in writing.
(b) Discharge for Cause:
The Company may discharge the Employee at any time, for "cause",
which shall include but not be limited to criminal conduct (whether
or not related to the Employee's employment) other that minor
traffic offenses; any material breach by the Employee of this
Agreement; gross negligence or malfeasance by the Employee in the
performance of his duties for the Company; self-dealing; and/or any
violation of any expressed direction or any reasonable rule or
regulation established by the Company from time-to-time regarding
the conduct of its business.
(c) Discharge for Other Reasons:
The Company may discharge the Employee at any time, for any or no
reason, by providing twelve (12) months' prior written notice. At
the Company's option, the Company may elect to sever the employment
relationship with the Employee at any time during this twelve (12)
month period, in which event the Employee shall be compensated for
the remainder of said twelve (12) month period.
<PAGE>
5. Termination of Employment by the Employee.
This Agreement may be terminated by the Employee upon not less than
six (6) months written notice to the Company. Upon the effective
date of such voluntary termination, any and all of the Company's
obligations under this Agreement shall terminate.
6. Proprietary Rights, Confidentiality, Non-Competition, Inventions,
etc..
The Company designs and manufactures various electronic equipment
and systems (hereinafter referred to as "Products"), and the Company
is unique in that it possesses expertise and "Know-How" in the
design, manufacture, and sale of Products. During the course of
Employee's employment with the Company he will have access to trade
secrets, and proprietary and confidential information pertaining to
the Company and its Products, such as, but not limited to, its short
and long range business plans, its processes and procedures, sales
and distribution methods, suppliers and customer lists, customer
prospects, personnel records, research and development projects,
manufacturing processes, and "Know-How" (all the foregoing
hereinafter referred to as "Proprietary Information"). This
Proprietary Information was designed and developed by the Company,
at great expense and over lengthy periods of time, is unique,
secret, and confidential, and constitutes the exclusive property and
trade secrets of the Company, and any use of such property and trade
secrets by the Employee, other than for the sole benefit of the
Company, would be wrongful and would cause irreparable injury to the
Company.
However, Proprietary Information shall not include information which
has become publicly known through now wrongful act of Employee,
information which has been rightfully received from a third party
authorized to make such information which has been rightfully
received from a third party authorized to make such information
available without restriction, information which has been approved
for release by written authorization of the Company, and information
which must be disclosed pursuant to applicable law or in connection
with the enforcement of the Agreement.
(a) The Employee shall not, at any time, without the expressed
written consent of the Company, publish, disclose or divulge
to any person, firm, corporation, or use directly, indirectly
or for his own benefit or the benefit of any person, firm, or
corporation other than the Company, and Proprietary
Information, property, trade secrets, or confidential
information of the Company, its subsidiaries, and its
affiliates learned or obtained by the Employee from the
Company, including, but not limited to, the information and
things set forth above. This obligation
<PAGE>
shall be continuing and shall not end with the cessation of
Employee's employment with the Company. Employee further
agrees that, immediately upon cessation of his employment with
the Company, whether voluntary or involuntary, he shall return
to the Company all property of the Company including, but not
limited to, Proprietary Information.
(b) The Employee shall not, during the course of his employment
and for twelve (12) months after:
(i) Directly or indirectly induce or attempt to influence
any employee of termination of Employee's employ the
Company to terminate his employment with the Company,
who was employed by the Company at the time of the
termination of Employee's employment or who terminated
his employment for any reason during the six (6) moths
preceding the termination of Employee's employment with
the Company.
(ii) Engage in (as a principal, partner, director, officer,
agent, employee, consultant, independent contractor, or
otherwise) or be financially interested in, any business
which is involved in business activities which are the
same as, similar to, or in competition with the
Products. However, nothing contained in this
sub-paragraph shall prevent the Employee from being the
holder or beneficial owner for investment purposes only
of any class of equity securities of a company whose
securities are traded on a national securities exchange
or NASDAQ if the Employee (together with his spouse,
children, siblings, and parents) neither holds, nor is
beneficially interested in, more that five percent (5%)
of any single class of the securities in the company.
(c) The Employee shall not, for six (6) months after the cessation
of his employment, whether voluntary or involuntary, without
the prior written approval of the Company, either solely or
jointly with, or as manager or agent for, any person,
corporation, trust, joint venture, partnership, or other
business entity, directly or indirectly, solicit any customers
or accounts that were customers or accounts (or legal
successors to customers or accounts) of the Company during any
period of time that the Employee was employed by the Company.
(d) The Employee shall fully and promptly disclose and assign to
the Company for its sole benefit, to be utilized in any manner
it sees fit, and without additional compensation, all ideas,
discoveries, inventions
<PAGE>
and improvements, patentable or not, and all writings
(including the copyright) which are made, conceived or reduced
to practice by the Employee, alone or with others, during or
after working hours, either on or off the job during the term
of his employment, or within six (6) months thereafter, which
are related to the Products, or which results from tasks
assigned to the Employee by the Company. The Company may, but
it shall not be required to, obtain at its own expense and for
its sole benefit, patents or statutory copyright for any
patentable idea or copyrightable writing referred to above,
and he shall cooperate with the Company in executing any
documents required in connection therewith.
(e) Except as delegated to do so by the President of the Company,
the Employee shall not make any statements to the medial
concerning the Company's business.
(f) The Employee acknowledges that the restrictions contained in
this Paragraph 6, in view of the nature of the business in
which the Company is engaged, are reasonable and necessary to
protect the legitimate interests of the Company, and that any
violation of those restrictions would result in irreparable
injury to the Company. The Employee therefore agrees that, in
the event of his violation of any of those restrictions, the
Company shall be entitled to obtain from any court of
competent jurisdiction preliminary and permanent injunctive
relief against the Employee, in addition to damages from the
Employee and an equitable accounting of all commissions,
earnings, profits, and other benefits arising from such
violation, which rights shall be cumulative and in addition to
any other rights or remedies to which the Company may be
entitled.
(g) The Employee agrees that if any or any portion of the
foregoing covenants or the application thereof, is construed
to be invalid or unenforceable, the remainder of such covenant
or covenants or the application thereof shall not be affected
and the remaining covenant or covenants will then be given
full force and effect without regard to the invalid or
unenforceable portions. If any covenant is held to be
unenforceable because of the area covered, the duration
thereof, or the scope thereof, the Employee agrees that the
Court making such determination shall have the power to reduce
the area and/or the duration, and/or limit the scope thereof,
and the covenant shall then be enforceable in its reduced
form.
7. Complete Understanding.
<PAGE>
This Agreement constitutes the complete understanding between the
parties in respect to the subject matter hereof and supersedes all
prior and contemporary agreements and understandings, inducements or
conditions, expressed or implied, written or oral, between the
Company and the Employee, and cannot be changed or modified except
by written agreement signed by the parties.
8. Binding Effect.
This Agreement shall be binding upon and shall inure to the benefit
of the Company and its successors, and shall be binding upon the
Employee, his heirs and legal representatives.
9. No Assignment by the Employee.
This Agreement is personal to the Employee, and the Employee may not
assign or delegate any of his rights or obligations hereunder
without first obtaining the express written consent of the Company.
10. Waiver of Rights.
If in one or more instances either party fails to insist that the
other party perform any of the terms of this Agreement, such failure
shall not be construed as a waiver by such party of any past,
present, or future right granted under this Agreement; the
obligations of both parties under this Agreement shall continue in
full force and effect.
11. Presumptions.
This Agreement shall be interpreted without regard to any
presumption or rule requiring construction against the party who
caused this Agreement to be drafted.
12. Governing Law.
This Agreement and all questions relating to its validity,
interpretation, performance, and enforcement shall be governed by
and construed in accordance with the law of New Jersey.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound, have
executed this Agreement as of the date first above written.
For Securicor Telesciences Inc.
<PAGE>
/s/ William J. Rahe, Jr. /s/ A. P. Maunder
_______________________________ _______________________________
William J. Rahe, Jr. Andrew P. Maunder
<PAGE>
EMPLOYMENT AGREEMENT
This AGREEMENT made this 10th day of March 1995, between SECURICOR TELESCIENCES
INC. (the Company) and JOSEPH F. GORECKI, (the Employee).
WHEREAS, the Employee is desirous of obtaining the protections and benefits
contained in this Agreement, in return for which he agrees to the restrictive
covenants contained herein.
NOW THEREFORE in consideration of the facts, mutual promises, and covenants
contained herein, and intending to be legally bound hereby, the Company and the
Employee agree as follows:
1. Employment and Duties.
The Company hereby employs the Employee and the Employee hereby accepts
employment by the Company, to serve as Vice President reporting to the
President of the Company. In such capacity, the Employee shall have such
powers and shall perform duties and services consistent with such capacity
as may be assigned or delegated to him from time-to-time by the President
of the Company. The Employee shall devote his full business time and
attention to the business and affairs of the Company exclusively and will
use his best efforts to promote the interests of the Company.
2. Compensation and Benefits.
(a) The Company shall pay the Employee a base salary of $105,000 per
annum, payable in accordance with the regular payroll practices in
effect from time-to-time. This base salary will be reviewed annually
beginning on July 1, 1996.
(b) The Employee shall participate in any health insurance, life
insurance, accident or disability insurance, profit sharing, or
retirement plans or programs currently in effect or that may
hereafter be established by the Company, in accordance with and to
the extent so provided by these plans or programs, and to the extent
that other senior management employees are eligible to so
participate. Nothing in this Agreement shall preclude the Company
from emending or terminating any such insurance, program, or plan on
the condition that such amendment or termination is applicable to
the Company's senior management employees generally.
(c) The Employee shall be entitled to paid vacation per year in
accordance with the Company's general policy for senior management
employees.
<PAGE>
3. Automobile allowance.
The Employee shall receive an automobile allowance of $625 per month.
4. Termination of Employment by the Company.
Notwithstanding any other provision of this Agreement, Employee's
employment and any and all of the Company's obligations or liabilities
under this Agreement shall be terminated immediately, in any of the
following circumstances:
(a) Death:
If the Employee dies, the further accrual of all payments and
benefits thereunder shall cease at the end of the month in which
Employee's death shall occur. All payments and benefits thereunder
which have accrued prior to the end of such month shall be promptly
paid to the executor or administrator of Employee's estate or
pursuant to such other specific directions as Employee has
previously provided to the Company in writing.
(b) Discharge for Cause:
The Company may discharge the Employee at any time, for "cause", which
shall include but not be limited to criminal conduct (whether or not
related to the Employee's employment) other than minor traffic offenses;
any material breach by the Employee of this Agreement; gross negligence or
malfeasance by the Employee in the performance of his duties for the
Company; self-dealing; and/or any violation of any expressed direction or
any reasonable rule or regulation established by the Company from
time-to-time regarding the conduct of its business.
(c) Discharge for Other Reasons:
The Company may discharge the Employee at any time, for any or no
reason, by providing three (3) months' prior written notice. At the
Company's option, the Company may elect to sever the employment
relationship with the Employee at any time during this three (3)
month period, in which event the Employee shall be compensated for
the remainder of said three (3) month period.
5. Termination of Employment by the Employee.
<PAGE>
This Agreement may be terminated by the Employee upon not less than six
(6) months written notice to the Company. Upon the effective date of such
voluntary termination, any and all of the Company's obligations under this
Agreement shall terminate.
6. Proprietary Rights, Confidentiality, Non-Competition, Inventions, etc..
The Company designs and manufactures various electronic equipment and
systems (hereinafter referred to as "Products"), and the Company is unique
in that it possesses expertise and "Know-How" in the design, manufacture,
and sale of Products. During the course of Employee's employment with the
Company he will have access to trade secrets, and proprietary and
confidential information pertaining to the Company and its Products, such
as, but not limited to, its short and long range business plans, its
processes and procedures, sales and distribution methods, suppliers and
customer lists, customer prospects, personnel records, research and
development projects, manufacturing processes, and "Know-How" (all the
foregoing hereinafter referred to as "Proprietary Information"). This
Proprietary Information was designed and developed by the Company, at
great expense and over lengthy periods of time, is unique, secret, and
confidential, and constitutes the exclusive property and trade secrets of
the Company, and any use of such property and trade secrets by the
Employee, other than for the sole benefit of the Company, would be
wrongful and would cause irreparable injury to the Company.
However, Proprietary Information shall not include information which has
become publicly known through now wrongful act of Employee, information
which has been rightfully received from a third party a authorized to make
such information which has been rightfully received from a third party
authorized to make such information available without restriction,
information which has been approved for release by written authorization
of the Company, and information which must be disclosed pursuant to
applicable law or in connection with the enforcement of the Agreement.
(a) The Employee shall not, at any time, without the expressed written
consent of the Company, publish, disclose or divulge to any person,
firm, corporation, or use directly, indirectly or for his own
benefit or the benefit of any person, firm, or corporation other
than the Company, and Proprietary Information, property, trade
secrets, or confidential information of the Company, its
subsidiaries, and its affiliates learned or obtained by the Employee
from the Company, including, but not limited to, the information and
things set forth above. This obligation shall be continuing and
shall not end with the cessation of Employee's
<PAGE>
employment with the Company. Employee further agrees that,
immediately upon cessation of his employment with the Company,
whether voluntary or involuntary, he shall return to the Company all
property of the Company including, but not limited to, Proprietary
Information.
(b) The Employee shall not, during the course of his employment and for
twelve (12) months after:
(i) Directly or indirectly induce or attempt to influence any
employee of termination of Employee's employ the Company to
terminate his employment with the Company, who was employed by
the Company at the time of the termination of Employee's
employment or who terminated his employment for any reason
during the six (6) months preceding the termination of
Employee's employment with the Company.
(ii) Engage in (as a principal, partner, director, officer, agent,
employee, consultant, independent contractor, or otherwise) or
be financially interested in, any business which is involved
in business activities which are the same as, similar to, or
in competition with the Products. However, nothing contained
in this sub-paragraph shall prevent the Employee from being
the holder or beneficial owner for investment purposes only of
any class of equity securities of a company whose securities
are traded on a national securities exchange or NASDAQ if the
Employee (together with his spouse, children, siblings, and
parents) neither holds, nor is beneficially interested in,
more that five percent (5%) of any single class of the
securities in the company.
(c) The Employee shall not, for six (6) months after the cessation of
his employment, whether voluntary or involuntary, without the prior
written approval of the Company, either solely or jointly with, or
as manager or agent for, any person, corporation, trust, joint
venture, partnership, or other business entity, directly or
indirectly, solicit any customers or accounts that were customers or
accounts (or legal successors to customers or accounts) of the
Company during any period of time that the Employee was employed by
the Company.
(d) The Employee shall fully and promptly disclose and assign to the
Company for its sole benefit, to be utilized in any manner it sees
fit, and without additional compensation, all ideas, discoveries,
inventions and improvements, patentable or not, and all writings
(including the
<PAGE>
copyright) which are made, conceived or reduced to practice by the
Employee, alone or with others, during or after working hours,
either on or off the job during the term of his employment, or
within six (6) months thereafter, which are related to the Products,
or which results from tasks assigned to the Employee by the Company.
The Company may, but it shall not be required to, obtain at its own
expense and for its sole benefit, patents or statutory copyright for
any patentable idea or copyrightable writing referred to above, and
he shall cooperate with the Company in executing any documents
required in connection therewith.
(e) Except as delegated to do so by the President of the Company, the
Employee shall not make any statements to the medial concerning the
Company's business.
(f) The Employee acknowledges that the restrictions contained in this
Paragraph 6, in view of the nature of the business in which the
Company is engaged, are reasonable and necessary to protect the
legitimate interests of the Company, and that any violation of those
restrictions would result in irreparable injury to the Company. The
Employee therefore agrees that, in the event of his violation of any
of those restrictions, the Company shall be entitled to obtain from
any court of competent jurisdiction preliminary and permanent
injunctive relief against the Employee, in addition to damages from
the Employee and an equitable accounting of all commissions,
earnings, profits, and other benefits arising from such violation,
which rights shall be cumulative and in addition to any other rights
or remedies to which the Company may be entitled.
(g) The Employee agrees that if any or any portion of the foregoing
covenants or the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants or the
application thereof shall not be affected and the remaining covenant
or covenants will then be given full force and effect without regard
to the invalid or unenforceable portions. If any covenant is held to
be unenforceable because of the area covered, the duration thereof,
or the scope thereof, the Employee agrees that the Court making such
determination shall have the power to reduce the area and/or the
duration, and/or limit the scope thereof, and the covenant shall
then be enforceable in its reduced form.
7. Complete Understanding.
This Agreement constitutes the complete understanding between the parties
in respect to the subject matter hereof and supersedes all prior and
contemporary agreements and understandings, inducements or conditions,
expressed or implied, written or oral, between the Company and the
Employee, and cannot be changed or modified except by written agreement
signed by the parties.
8. Binding Effect.
<PAGE>
This Agreement shall be binding upon and shall inure to the benefit of the
Company and its successors, and shall be binding upon the Employee, his
heirs and legal representatives.
9. No Assignment by the Employee.
This Agreement is personal to the Employee, and the Employee may not
assign or delegate any of his rights or obligations hereunder without
first obtaining the express written consent of the Company.
10. Waiver of Rights.
If in one or more instances either party fails to insist that the other
party perform any of the terms of this Agreement, such failure shall not
be construed as a waiver by such party of any past, present, or future
right granted under this Agreement; the obligations of both parties under
this Agreement shall continue in full force and effect.
11. Presumptions.
This Agreement shall be interpreted without regard to any presumption or
rule requiring construction against the party who caused this Agreement to
be drafted.
12. Governing Law.
This Agreement and all questions relating to its validity, interpretation,
performance, and enforcement shall be governed by and construed in
accordance with the law of New Jersey.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound, have
executed this Agreement as of the date first above written.
For Securicor Telesciences Inc.
/s/ Joseph F. Gorecki /s/ A.P. Maunder
- --------------------- ---------------------
Joseph F. Gorecki Andrew P. Maunder
<PAGE>
EMPLOYMENT AGREEMENT
This AGREEMENT made this 31st day of January 1997, between SECURICOR
TELESCIENCES INC. (the Company) and Michael S. Farina, (the Employee).
WHEREAS, the Employee is desirous of obtaining the protections and benefits
contained in this Agreement, in return for which he agrees to the restrictive
covenants contained herein.
NOW THEREFORE in consideration of the facts, mutual promises, and covenants
contained herein, and intending to be legally bound hereby, the Company and the
Employee agree as follows:
1. Employment and Duties.
The Company hereby employs the Employee and the Employee hereby accepts
employment by the Company, to serve as Vice President, Sales and
Marketing, reporting to the President and CEO of the Company. In such
capacity, the Employee shall have such powers and shall perform duties and
services consistent with such capacity as may be assigned or delegated to
him from time-to-time by the President of the Company. The Employee shall
devote his full business time and attention to the business and affairs of
the Company exclusively and will use his best efforts to promote the
interests of the Company.
2. Compensation and Benefits.
(a) The Company shall pay the Employee a base salary of $135,000 per
annum, payable in accordance with the regular payroll practices in
effect from time-to-time. This base salary will be reviewed annually
beginning on July 1, 1998.
(b) The Employee shall participate in any health insurance, life
insurance, accident or disability insurance, profit sharing, or
retirement plans or programs currently in effect or that may
hereafter be established by the Company, in accordance with and to
the extent so provided by these plans or programs, and to the extent
that other senior management employees are eligible to so
participate. Nothing in this Agreement shall preclude the Company
from emending or terminating any such insurance, program, or plan on
the condition that such amendment or termination is applicable to
the Company's senior management employees generally.
<PAGE>
(c) The Employee shall be entitled to paid vacation per year in
accordance with the Company's general policy for senior management
employees.
(d) The Employee shall be entitled to payments under an approved
Incentive Scheme as agreed by the Company.
3. Automobile Allowance.
The Employee shall receive an automobile allowance of $625.00 per month.
4. Termination of Employment by the Company.
Notwithstanding any other provision of this Agreement, Employee's
employment and any and all of the Company's obligations or liabilities
under this Agreement shall be terminated immediately, in any of the
following circumstances:
(a) Death:
If the Employee dies, the further accrual of all payments and
benefits thereunder shall cease at the end of the month in which
Employee's death shall occur. All payments and benefits thereunder
which have accrued prior to the end of such month shall be promptly
paid to the executor or administrator of Employee's estate or
pursuant to such other specific directions as Employee has
previously provided to the Company in writing.
(b) Discharge for Cause:
The Company may discharge the Employee at any time, for "cause",
which shall include but not be limited to criminal conduct (whether
or not related to the Employee's employment) other that minor
traffic offenses; any material breach by the Employee of this
Agreement; gross negligence or malfeasance by the Employee in the
performance of his duties for the Company; self-dealing; and/or any
violation of any expressed direction or any reasonable rule or
regulation established by the Company from time-to-time regarding
the conduct of its business.
(c) Discharge for Other Reasons:
The Company may discharge the Employee at any time, for any or no
reason, by providing three (3) months' prior written notice. At the
Company's option, the Company may elect to sever the employment
relationship with the
<PAGE>
Employee at any time during this three (3) month period, in which
event the Employee shall be compensated for the remainder of said
three (3) month period.
5. Termination of Employment by the Employee:
This Agreement may be terminated by the Employee upon not less than
three (3) months written notice to the Company. Upon the effective date
of such voluntary termination, any and all of the Company's obligations
under this Agreement shall terminate.
6. Proprietary Rights, Confidentiality, Non-Competition, Inventions, etc..
The Company designs and manufactures various electronic equipment and
systems (hereinafter referred to as "Products"), and the Company is unique
in that it possesses expertise and "Know-How" in the design, manufacture,
and sale of Products. During the course of Employee's employment with the
Company he will have access to trade secrets, and proprietary and
confidential information pertaining to the Company and its Products, such
as, but not limited to, its short and long range business plans, its
processes and procedures, sales and distribution methods, suppliers and
customer lists, customer prospects, personnel records, research and
development projects, manufacturing processes, and "Know-How" (all the
foregoing hereinafter referred to as "Proprietary Information"). This
Proprietary Information was designed and developed by the Company, at
great expense and over lengthy periods of time, is unique, secret, and
confidential, and constitutes the exclusive property and trade secrets of
the Company, and any use of such property and trade secrets by the
Employee, other than for the sole benefit of the Company, would be
wrongful and would cause irreparable injury to the Company.
However, Proprietary Information shall not include information which has
become publicly known through now wrongful act of Employee, information
which his been rightfully received from a third party authorized to make
such information which has been rightfully received from a third party
authorized to make such information available without restriction,
information which has been approved for release by written authorization
of the Company, and information which must be disclosed pursuant to
applicable law or in connection with the enforcement of the Agreement.
(a) The Employee shall not, at any time, without the expressed written
consent of the Company, publish, disclose or divulge to any person,
firm, corporation, or use directly, indirectly or for his own
benefit or the benefit of any person, firm, or corporation other
than the Company,
<PAGE>
and Proprietary Information, property, trade secrets, or
confidential information of the Company, its subsidiaries, and its
affiliates learned or obtained by the Employee from the Company,
including, but not limited to, the information and things set forth
above. This obligation shall be continuing and shall not end with
the cessation of Employee's employment with the Company. Employee
further agrees that, immediately upon cessation of his employment
with the Company, whether voluntary or involuntary, he shall return
to the Company all property of the Company including, but not
limited to, Proprietary Information.
(b) The Employee shall not, during the course of his employment and for
twelve (12) months after:
(i) Directly or indirectly induce or attempt to influence any
employee of termination of Employee's employ the Company to
terminate his employment with the Company, who was employed by
the Company at the time of the termination of Employee's
employment or who terminated his employment for any reason
during the six (6) moths preceding the termination of
Employee's employment with the Company.
(ii) Engage in (as a principal, partner, director, officer, agent,
employee, consultant, independent contractor, or otherwise) or
be financially interested in, any business which is involved
in business activities which are the same as, similar to, or
in competition with the Products. However, nothing contained
in this subparagraph shall prevent the Employee from being the
holder or beneficial owner for investment purposes only of any
class of equity securities of a company whose securities are
traded on a national securities exchange or NASDAQ if the
Employee (together with his spouse, children, siblings, and
parents) neither holds, nor is beneficially interested in,
more that five percent (5%) of any single class of the
securities in the company.
(c) The Employee shall not, for six (6) months after the cessation of
his employment, whether voluntary or involuntary, without the prior
written approval of the Company, either solely or jointly with, or
as manager or agent for, any person, corporation, trust, joint
venture, partnership, or other business entity, directly or
indirectly, solicit any customers or accounts that were customers or
accounts (or legal successors to customers or accounts) of the
Company during any period of time that the Employee was employed by
the Company.
<PAGE>
(d) The Employee shall fully and promptly disclose and assign to the
Company for its sole benefit, to be utilized in any manner it sees
fit, and without additional compensation, all ideas, discoveries,
inventions and improvements, patentable or not, and all writings
(including the copyright) which are made, conceived or reduced to
practice by the Employee, alone or with others, during or after
working hours, either on or off the job during the term of his
employment, or within six (6) months thereafter, which are related
to the Products, or which results from tasks assigned to the
Employee by the Company. The Company may, but it shall not be
required to, obtain at its own expense and for its sole benefit,
patents or statutory copyright for any patentable idea or
copyrightable writing referred to above, and he shall cooperate with
the Company in executing any documents required in connection
therewith.
(e) Except as delegated to do so by the President of the Company, the
Employee shall not make any statements to the media concerning the
Company's business.
(f) The Employee acknowledges that the restrictions contained in this
Paragraph 6, in view of the nature of the business in which the
Company is engaged, are reasonable and necessary to protect the
legitimate interests of the Company, and that any violation of those
restrictions would result in irreparable injury to the Company. The
Employee therefore agrees that, in the event of his violation of any
of those restrictions, the Company shall be entitled to obtain from
any court of competent jurisdiction preliminary and permanent
injunctive relief against the Employee, in addition to damages from
the Employee and an equitable accounting of all commissions,
earnings, profit, and other benefits arising from such violation,
which rights shall be cumulative and in addition to any other rights
or remedies to which the Company may be entitled.
(g) The Employee agrees that if any or tiny portion of the foregoing
covenants of the application thereof, is construed to be invalid or
unenforceable, the remainder of such covenant or covenants or the
application thereof shall not be affected and the remaining covenant
or covenants will then be given full force and effect without regard
to the invalid or unenforceable portions. If any covenant is held to
be unenforceable because of the area covered, the duration thereof,
or the scope thereof, the Employee agrees that the Court making such
determination shall have the power to reduce the area and/or the
duration, and/or limit the scope thereof, and the covenant shall
then be enforceable in its reduced form.
<PAGE>
7. Complete Understanding.
This Agreement constitutes the complete understanding between the parties
in respect to the subject matter hereof and supersedes all prior and
contemporary agreements and understandings, inducements or conditions,
expressed or implied, written or oral, between the Company and the
Employee, and cannot be changed or modified except by written agreement
signed by the parties.
8. Binding Effect.
This Agreement shall be binding upon and shall inure to the benefit of the
Company and its successors, and shall be binding upon the Employee, his
heirs and legal representatives.
9. No Assignment by the Employee.
This Agreement is personal to the Employee, and the Employee may not
assign or delegate any of his rights or obligations hereunder without
first obtaining the express written consent of the Company.
10. Waiver of Rights.
If in one or more instances either party fails to insist that the other
party perform any of the terms of this Agreement, such failure shall not
be construed as a waiver by such party of any past, present, or future
right granted under this Agreement; the obligations of both parties under
this Agreement shall continue in full force and effect.
11. Presumptions.
This Agreement shall be interpreted without regard to any presumption or
rule requiring construction against the party who caused this Agreement to
be drafted.
<PAGE>
12. Governing Law.
This Agreement and all questions relating to its validity, interpretation,
performance, and enforcement shall be governed by and construed in
accordance with the law of New Jersey.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound, have
executed this Agreement as of the date first above written.
For Securicor Telesciences Inc.
/s/ Michael Farina /s/ A.P. Maunder
- ------------------------------- -----------------------------------
Michael S. Farina 1/31/97 Andrew P. Maunder 2/5/97
<PAGE>
AGREEMENT RG49509
BETWEEN
AMERITECH SERVICES, INC.
AND
TELESCIENCES, INC.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
GENERAL TERMS AND CONDITIONS
SECTION A: BASIC PROVISIONS
1. PARTIES
2. PURPOSE
3. DEFINITIONS
4. PARTIES WHO MAY PLACE ORDERS UNDER THIS AGREEMENT
5. TERM OF AGREEMENT
6. PRICES, CHARGES AND FEES
7. ACCEPTANCE
8. ARBITRATION
9. ASSIGNMENT
10. BELLCORE DOCUMENT COMPLIANCE
11. BILLING
12. BILLING RECORDS
13. CHOICE OF LAW
14. COMPLIANCE WITH EQUAL OPPORTUNITY REQUIREMENTS
15. COMPLIANCE WITH LAWS AND REGULATIONS
16. DEFAULT
17. DELAYS IN DELIVERY OR COMPLETION
18. DOCUMENTATION
19. EQUIPMENT CLASSIFICATION
20. FORCE MAJEURE
21. FREIGHT TERMS
22. GOVERNMENT CONTRACT PROVISIONS
23. HAZARDOUS/TOXIC MATERIAL
24. HEADINGS NOT CONTROLLING
25. IMPLEADER
26. INDEMNITY
27. INDEPENDENT CONTRACTOR
28. INFRINGEMENT
29. INSIGNIA
30. INSOLVENCY
31. INSPECTION
32. INSURANCE
33. INVOICING AND TERMS OF PAYMENT
34. LICENSES
-i-
<PAGE>
35. LIMITATION OF ACTIONS
36. LIMITATION OF LIABILITY
37. MARKING
38. MEDIA
39. MONTHLY REPORTS
40. NEW OR CHANGED ROUTINES, PROCEDURES OR SERVICES
41. NON-EXCLUSIVE MARKET RIGHTS
42. NON-WAIVER
43. NOTICE AND NOTIFICATION PROCEDURES
44. ORDERING PROCEDURES
45. PACKING
46. PRICE WARRANTY
47. PUBLICITY
48. REGULATORY PROCEEDINGS
49. RELEASES VOID
50. REMEDIES
51. RIGHT OF ACCESS
52. SERVABILITY
53. SHIPPING INSTRUCTIONS
54. SPECIFICATIONS
55. STANDARD INTERVAL
56. SURVIVAL OF OBLIGATIONS
57. TAX
58. TERMINATION OF ORDER
59. TIME OF THE ESSENCE
60. USE OF INFORMATION
61. WORK PERFORMED ON BUYER'S PREMISES
SECTION B - SUPPORT AND WARRANTIES
62. CHANGES TO GOODS
63. CONTINUING AVAILABILITY OF PRODUCT SUPPORT
64. EMERGENCY REPLACEMENT SERVICE
65. ENGINEERING COMPLAINTS
66. EXTRAORDINARY SUPPORT
67. RADIO FREQUENCY ENERGY STANDARDS
68. REGISTRATION
69. REPAIRS NOT COVERED UNDER WARRANTY
70. RESTOCKING
71. TECHNICAL SUPPORT
72. TRAINING
73. WARRANTIES
-ii-
<PAGE>
ARTICLE 11
SERVICES
SECTION A: ENGINEERING
SECTION B: INSTALLATION
ARTICLE III
SOFTWARE
1. SOFTWARE LICENSE
2. CHANGES TO LICENSED SOFTWARE
3. SOFTWARE DOCUMENTATION
4. SOFTWARE QUALITY
5. SOFTWARE SUPPORT
6. SOFTWARE ESCROW ACCOUNT
7. SOFTWARE FEATURE DEVELOPMENT
8. GENERIC UPGRADES
APPENDICES
APPENDIX A: PRODUCTS, PRICES AND DISCOUNTS
APPENDIX B: SUPPORT SERVICES AND CHARGES
APPENDIX C: SOFTWARE SUPPORT TERMS AND CONDITIONS
APPENDIX D: HARDWARE MAINTENANCE TERMS AND CONDITIONS
APPENDIX E: SOFTWARE LICENSE TERMS AND CONDITION
APPENDIX F: ESCROW AGREEMENT
APPENDIX G: DOCUMENTS LISTING
APPENDIX H: NON-DISCRIMINATION PROVISIONS
-iii-
<PAGE>
ALPHABETICAL LISTING
TABLE OF CONTENTS
CLAUSE
CLAUSE ARTICLE SECTION NUMBER
- ------ ------- ------- ------
ACCEPTANCE I A 7
ARBITRATION I A 8
ASSIGNMENT I A 9
BELLCORE DOCUMENT COMPLIANCE I A 10
BILLING I A 11
BILLING RECORDS I A 12
CHANGES TO GOODS I B 62
CHANGES TO LICENSED SOFTWARE III B 2
CHOICE OF LAW I A 13
COMPLIANCE WITH EQUAL OPPORTUNITY
REQUIREMENTS I A 14
COMPLIANCE WITH LAWS AND REGULATIONS I A 15
CONTINUING AVAILABILITY OF
PRODUCT SUPPORT I B 63
DEFAULT I A 16
DEFINITIONS I A 3
DELAYS IN DELIVERY OR COMPLETION I A 17
DOCUMENTATION I A 18
EMERGENCY REPLACEMENT SERVICE I B 64
ENGINEERING II A
ENGINEERING COMPLAINTS I B 65
ENTIRE AGREEMENT SIGNATURE PAGE
EQUIPMENT CLASSIFICATION I A 19
EXTRAORDINARY SUPPORT I B 66
FREIGHT TERMS I A 21
FORCE MAJEURE I A 20
GENERICS III 8
GOVERNMENT CONTRACT PROVISIONS I A 22
-iv-
<PAGE>
AGREEMENT RG49509
ALPHABETICAL LISTING
TABLE OF CONTENTS
CLAUSE
CLAUSE ARTICLE SECTION NUMBER
- ------ ------- ------- ------
HAZARDOUS/TOXIC MATERIAL I A 23
HEADINGS NOT CONTROLLING I A 24
IMPLEADER I A 25
INDEMNITY I A 26
INDEPENDENT CONTRACTOR I A 27
INFRINGEMENT I A 28
INSIGNIA I A 29
INSOLVENCY I A 30
INSPECTION I A 31
INSTALLATION II B
INSURANCE I A 32
INVOICING AND TERMS OF PAYMENT I A 33
LICENSES I A 34
LIMITATION OF ACTIONS I A 35
LIMITATION OF LIABILITY I A 36
MARKING I A 37
MEDIA I A 38
MONTHLY REPORTS I A 39
NEW OR CHANGED ROUTINES, PROCEDURES
OR SERVICES I A 40
NON-EXCLUSIVE MARKET RIGHTS I A 41
NON-WAIVER I A 42
NOTICES AND NOTIFICATION PROCEDURES I A 43
ORDERING PROCEDURES I A 44
PACKING I A 45
PARTIES I A 1
PARTIES WHO MAY PLACE ORDERS
-v-
<PAGE>
AGREEMENT RG49509
ALPHABETICAL LISTING
TABLE OF CONTENTS
CLAUSE
CLAUSE ARTICLE SECTION NUMBER
- ------ ------- ------- ------
UNDER THIS AGREEMENT I A 4
PRICES, CHARGES AND FEES I A 6
PRICE WARRANTY I A 46
PUBLICITY I A 47
PURPOSE I A 2
RADIO FREQUENCY ENERGY STANDARDS I B 68
REGISTRATION I B 69
REGULATORY PROCEEDINGS I A 48
RELEASES VOID I A 49
REMEDIES I A 50
REPAIRS NOT COVERED UNDER WARRANTY I B 69
RESTOCKING I B 70
RIGHT OF ACCESS I A 51
SERVABILITY I A 52
SHIPPING INSTRUCTIONS I A 53
SOFTWARE DOCUMENTATION III 3
SOFTWARE ESCROW ACCOUNT III 6
SOFTWARE FEATURE DEVELOPMENT III 7
SOFTWARE LICENSE III 1
SOFTWARE QUALITY III 4
SOFTWARE SUPPORT III 5
SPECIFICATIONS I A 54
STANDARD INTERVAL I A 55
SURVIVAL OF OBLIGATIONS I A 56
TAX I A 57
TECHNICAL SUPPORT I B 71
TERMINATION OF ORDER I A 58
TERM OF AGREEMENT I A 5
-vi-
<PAGE>
AGREEMENT RG49509
ALPHABETICAL LISTING
TABLE OF CONTENTS
CLAUSE
CLAUSE ARTICLE SECTION NUMBER
- ------ ------- ------- ------
TIME OF THE ESSENCE I A 59
TRAINING I B 72
USE OF INFORMATION I A 60
WARRANTIES I B 73
WORK PERFORMED ON BUYER'S PREMISES I A 61
-vii-
<PAGE>
ARTICLE I
GENERAL TERMS AND CONDITIONS
SECTION A: BASIC PROVISIONS
1.0 PARTIES
1.1 This Agreement is entered into between Ameritech Services, Inc., a
Delaware corporation, with principal offices at 1900 East Golf Road,
Schaumburg, Illinois 60173, and TeleSciences, Inc. (hereinafter
"Supplier"), a Delaware corporation, with principal offices at 351
New Albany Road, Moorestown, New Jersey.
2.0 PURPOSE
2.1 This Agreement is for the purchase of various computer hardware and
software systems, related Services, and the licensing of Software,
all as hereinafter defined, as may be ordered by Ameritech Services,
Inc. and certain companies in accordance with the terms stated
herein.
3.0 DEFINITIONS
For purposes of this Agreement, the following words shall be defined as
below:
3.1 "Goods" as used herein shall mean Supplier's various computer
hardware and software systems as listed in Appendix A to this
Agreement, which is hereby incorporated by reference and made a part
hereof. "Goods" shall be deemed to include any related Software as
hereinafter defined.
3.2 "Services", as applicable, means such work as engineering,
installation, repair, replacement, programming, maintenance,
training, consulting or other services ordered by Buyer under this
Agreement or furnished by Supplier in conformance with its
obligations under this Agreement.
3.3 "Software" shall mean software products, computer programs, and
associated documentation relating to Goods purchased hereunder.
3.4 "Order" shall mean Buyer's form of order for Goods, Software and
Services placed hereunder.
3.5 "Buyer" shall mean a party placing an Order hereunder as specified
in the clause "PARTIES WHO MAY PLACE ORDERS UNDER THIS AGREEMENT."
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3.6 "Furnish Only" shall mean the supplying of Goods by Supplier with no
engineering and/or installation Services required from Supplier.
3.7 "E&F" (Engineer and Furnish) shall mean the engineering and
furnishing of Goods by Supplier with no installation Services
required from Supplier.
3.8 "F&I" (Furnish and Install) shall mean the furnishing of Goods with
installation performed by Supplier.
3.9 "EF&I" (Engineer, Furnish and Install) shall mean the engineering
and furnishing of Goods with installation performed by Supplier.
3.10 "Installation Only" shall mean the installation by Supplier of
products obtained from another source from Supplier under separate
order.
3.11 "FPP" (Firm Price Proposal) shall mean, as applicable, a listing of
Goods and/or description of Services, technical configuration of the
Goods, performance calculations and the charges therefor, based on
the prices, charges and fees quoted by Supplier.
3.12 "Supplier Manufactured Goods" shall include all Goods (including
Software) as listed in Appendix A except for:
Hewlett Packard Diagnostic Software.
Hewlett Packard Operating Software.
SEBX Host Basic Unit (as specified in Appendix A, Part III).
All other Goods are considered Non-Supplier Manufactured Goods.
4.0 PARTIES WHO MAY PLACE ORDERS UNDER THIS AGREEMENT
4.1 In addition to Ameritech Services, Inc., Illinois Bell Telephone
Company, Indiana Bell Telephone Company, Incorporated, Michigan Bell
Telephone Company, The Ohio Bell Telephone Company and Wisconsin
Bell, Inc. may place Orders under this Agreement in accordance with
the terms and conditions of this Agreement as if each of said
companies had signed an individual agreement with Supplier.
"Buyer", whenever it appears in the terms and conditions of this
Agreement, shall be deemed to apply to each of said companies or to
Ameritech Services, Inc. with respect to Orders placed by it and to
each of said companies with respect to Goods (including related
Services and Software, if any) purchased under Orders placed by
Ameritech Services, Inc. which are resold to such company. With
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respect to matters affecting the entire Agreement, "Buyer" shall be
deemed to apply to Ameritech Services, Inc. Each of the above-listed
companies shall be solely liable for all obligations of Buyer
including, without limitation, claims for payment, arising from any
Orders it may place under this Agreement, and each company shall
have the benefit of all obligations of Supplier established in this
Agreement in connection with the purchase of Goods and related
Services under any Order it may place or under any Order Ameritech
Services, Inc. may place covering Goods resold to such company.
5.0 TERM OF AGREEMENT
5.1 This Agreement is effective for the placement of Orders from July 1,
1989 through June 30, 1992 unless terminated as provided for herein.
6.0 PRICES, CHARGES AND FEES
6.1 Prices, charges and fees (and applicable discounts) for Goods and
Services ordered hereunder shall be in conformance with the prices,
charges and fees (and applicable discounts) specified in Appendices
A, B and C attached hereto and incorporated herein.
6.2 Following the first anniversary of the commencement of the term of
this Agreement, the prices, charges and fees set out in Appendices
A, B and C may be increased by Supplier from time to time, but not
more often than once during any twelve (12) month period, by means
of a written notice to Ameritech Services, Inc. given not later than
ninety (90) days before the proposed effective date of such
increase. Supplier shall not, in any successive twelve (12) month
period, raise the prices of Goods more than the percent equal to the
increase in the Producer Price Index (PPI) for Electrical Machinery
and Equipment (117) or five percentum (5%), whichever is greater.
The indices shall be those provided in the U.S. Department of
Commerce publication of the PPI. The new prices, charges and fees
shall apply to all Orders placed on or after said effective date or
to Orders placed prior thereto for Goods scheduled for shipment more
than six (6) months after the effective date of the price change. If
an Order originally scheduled for shipment within the aforementioned
six (6) month period is deferred by Buyer in accordance with
paragraph 44.6 herein until a date in excess of the said six (6)
month period, that Order shall be invoiced at the new prices. Such
increase shall be based on changes in either the PPI or Supplier's
costs and shall be explained in the written notice of the proposed
increase in prices. If Ameritech Services, Inc. and Supplier fail to
agree upon increased prices by the proposed effective date, no
further Orders will be placed against this Agreement for Goods
affected by the price increases.
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6.3 The discounts specified in Appendix A shall apply only to Supplier
Manufactured Goods (excluding Software).
6.4 Supplier may reduce prices hereunder at any time by giving written
notice to Ameritech Services, Inc. Said reduced prices shall apply
to all Orders placed on or after the effective date, and if agreed
to by Supplier, they will also apply to Orders unshipped as of the
effective date, in which event Supplier agrees to notify Ameritech
Services, Inc. of those specific Orders affected by the proposed
price reduction.
7.0 ACCEPTANCE
7.1 For Goods which are acquired from but not installed by Supplier,
Buyer shall have thirty (30) days after receipt from Supplier of the
applicable Goods to inventory and inspect such Goods for shipment
deficiencies, defects and/or damage. Failure of Buyer to notify
Supplier in writing of any shipment deficiencies, defects and/or
damage to the Goods within that thirty (30) day period shall be
deemed acceptance.
7.2 For EF&I and F&I, acceptance shall be in accordance with Section B
(INSTALLATION) of Article II hereto.
7.3 All required documentation (as set forth in clauses entitled
"DOCUMENTATION", "ACCEPTANCE", and "ORDERING PROCEDURES"),
including but not limited to, "as installed" office drawings,
schematic and wiring drawings, circuit descriptions and fuse
records, and the like shall be provided to Buyer prior to and as a
condition of Buyer's final acceptance. Final office drawings shall
be provided to Buyer within two (2) weeks after Supplier's issuance
of the Completion Report.
7.4 Buyer shall have no obligation to accept and pay for Goods and/or
Services which do not conform to Supplier's specifications or
requirements established in this Agreement.
7.5 Acceptance in no way relieves Supplier of its responsibilities under
the clause "WARRANTIES."
8.0 ARBITRATION
8.1 Any dispute, controversy or claim related to or arising out of this
Agreement shall be settled by arbitration, conducted on a
confidential basis under the then current Commercial Arbitration
Rules of the American Arbitration Association ("Association") in
accordance with the terms of this Agreement. The arbitration shall
be conducted at the Association's regional office in Chicago,
Illinois, by
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three (3) arbitrators, one to be appointed by each of the parties to
the dispute, controversy or claim, and the third arbitrator, who
shall be knowledgeable in equipment used in the telephony industry,
shall be appointed by the other two within thirty (30) days of their
appointment. Judgement upon the arbitrator's award shall be entered
and enforced in any court of competent jurisdiction. Neither party
shall institute a proceeding hereunder unless sixty (60) days prior
thereto such party shall have furnished to the other party written
notice by registered mail of its intent to do so, specifically
stating the facts it will be relying on in support of its position
at arbitration.
8.2 Neither party shall be precluded hereby from seeking provisional
remedies in the courts of any jurisdiction including but not limited
to temporary restraining orders and preliminary injunctions to
protect its rights and interests, but such shall not be sought as a
means to avoid or stay arbitration.
8.3 In the event of an arbitration proceeding pursuant to this
Agreement, each party shall bear its own costs in said proceeding.
Should the matter disputed be settled before a final decision of the
arbitrators or should it be found that neither party has prevailed,
all expenses relating to said arbitration shall be borne equally by
the parties.
9.0 ASSIGNMENT
9.1 The parties shall not assign any right or interest under this
Agreement or any Order issued hereunder, excepting monies due or to
become due, nor delegate any obligation or work in whole or in part
to be performed by either party under this Agreement or any Order
hereunder, without the other party's prior written consent. Any
attempted assignment or delegation in contravention of the above
provisions shall be void and ineffective. Any assignment of monies
shall be void and ineffective to the extent that (1) Supplier shall
not have given Buyer at least thirty (30) days prior written notice
of such assignment and (2) such assignment attempts to impose upon
Buyer obligations to the assignee additional to the payment of such
monies, or to preclude Buyer from dealing solely and directly with
Supplier in all matters pertaining to this Agreement.
Notwithstanding the foregoing, Buyer may assign any Order for Goods
under this Agreement in whole or in part to any other entity named
in the clause entitled "PARTIES WHO MAY PLACE ORDERS UNDER THIS
AGREEMENT" upon written notice to Supplier. Upon such permitted
assignment and assumption of liability thereto by the assignee, the
assigning party shall be discharged of any liability pursuant to
this Agreement or any assigned Order.
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10.0 BELLCORE DOCUMENT COMPLIANCE
10.1 If Supplier is not currently in compliance with the Bellcore
documents referenced in the clauses entitled "BILLING", "EQUIPMENT
CLASSIFICATION" and "MARKING" and with the requirements of paragraph
44.2 D(4), herein, Supplier agrees to use its best efforts to meet
these requirements by the end of the first anniversary of the
commencement of the term of this Agreement. Progress toward
compliance will be reviewed at six (6) month intervals from the
commencement of the term of this Agreement. Until Supplier is in
full compliance, Supplier shall provide Buyer up-to-date,
cross-referenced guides to the Goods at no additional charge. Such
guides will include all available and applicable information
including, but not limited to, CPR numbers, CLEI codes and the break
down of systems and conversion kits.
11.0 BILLING
11.1 When applicable, Supplier's billing for Goods and/or Services
furnished hereunder shall be in accordance with the standard
specified in Bellcore document TR-ISD-000152, Issue 2, dated May,
1987, Guidelines For Mechanized Invoicing. Such standards permit
Buyer to identify equipment retirement units for inclusion into
mechanized Property Records Systems and classification of central
office equipment in accordance with Uniform System of Accounts.
12.0 BILLING RECORDS
12.1 Supplier agrees to maintain in accordance with generally accepted
accounting principles complete and accurate records concerning
amounts billed hereunder. Supplier shall retain such records for a
minimum of six (6) years from the date of final payment for Goods
covered by this Agreement or for such length of time as may be
required by any applicable federal, state, or local law, ordinance
or regulation, whichever is longer.
12.2 In the event Buyer, in good faith, disputes the amount of any
invoice, Supplier agrees to provide supporting documentation
concerning such disputed amount as mutually agreed upon within
thirty (30) days after Buyer provides written notification of the
dispute to Supplier. If such supporting documentation is not
received within thirty (30) days, Buyer reserves the right to deduct
the amount in question from a current invoice. Payment of any
disputed amount under this Agreement shall be subject to final
adjustment as determined during the review of the supporting
documentation.
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13.0 CHOICE OF LAW
13.1 The construction, interpretation and performance of this Agreement
shall be governed by and construed in accordance with the domestic
laws of the State of Illinois, or with respect to any Order, the
domestic laws of the State to which the Goods are shipped or to be
shipped, or, in the case of Services, the State in which the related
Goods are used.
14.0 COMPLIANCE WITH EQUAL OPPORTUNITY REQUIREMENTS
14.1 Supplier shall comply, whenever applicable, with
the"NONDISCRIMINATION PROVISIONS" contained in Appendix H of this
Agreement.
15.0 COMPLIANCE WITH LAWS AND REGULATIONS
15.1 Supplier and all persons furnished by Supplier shall comply with the
Fair Labor Standards Act, the Occupational Safety and Health Act,
and all other federal, state and local laws, ordinances, regulations
and codes (including procurement of required permits and
certificates in performance hereunder). Supplier agrees to indemnify
and hold harmless Buyer from and against any loss, damage or expense
that may be sustained by reason of Supplier's failure to so comply.
16.0 DEFAULT
16.1 In the event either party shall be in breach or default of any term,
condition or covenant of this Agreement or any Order placed
hereunder and such breach or default shall continue for a period of
thirty (30) days after the giving of written notice to the party in
breach or default by the other, the aggrieved party may avail itself
of any and all remedies at law or in equity or otherwise, including,
without limitation, the right to cancel any affected Order(s)
without any charge, obligation or liability whatsoever, except as to
the payment for Services completed and/or for Goods already received
and accepted by Buyer. Failure by Buyer to pay any amount allegedly
due under any invoice which is the subject of a good faith dispute
as provided for in paragraph 12.2, shall not be deemed to be a
breach or default by Buyer.
16.2 Notwithstanding the above, each party shall cooperate with the other
in every reasonable way to facilitate the remedy of a breach or
default hereunder.
17.0 DELAYS IN DELIVERY OR COMPLETION
17.1 Supplier agrees to notify Buyer in writing prior to delivery or
completion date of any possible delays in the agreed upon delivery
or completion schedule of the Goods. Buyer shall review such notice
and if Buyer determines it is not adversely
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affected by such delay then Buyer will consent to such delay. In the
event Buyer determines it will be adversely affected by such delay
and such delay continues for a period of more than ten (10) working
days from the agreed upon delivery or completion schedule, then
Buyer may cancel the affected Order without penalty or obligation of
any kind.
18.0 DOCUMENTATION
18.1 Supplier agrees to furnish, at no charge, one (1) complete set of
documentation with Goods purchased hereunder, which shall include,
but not be limited to; maintenance, operation, installation and
Software manuals and information. Additional master sets of
documentation, and any succeeding changes thereto, shall be provided
at no charge to the locations specified by Buyer to Supplier.
Supplier shall provide such original documentation either prior to
or with each shipment of Goods and shall maintain a mailing list of
recipients of such documentation to whom all subsequent changes and
updates shall be sent. Such documentation shall be in accordance
with Bellcore document TR-TSY-000454 Issue 1 dated July 1988,
Supplier Documentation For Network Elements.
18.2 Documentation and any subsequent changes or updates shall reference
Supplier's serialized numbers, issue numbers and date of issue.
Buyer may reproduce such documentation for its internal use.
18.3 Supplier shall provide access to all documentation including
installation procedures, tooling and training material necessary to
install purchased Goods. Such documentation shall, at the sole
discretion of Buyer, be made available to a third party
(installation vendor) under contract by the Buyer to install such
Goods. Such a third party will be required to sign a non-disclosure
statement and will also be held to the stipulations in clause "USE
OF INFORMATION."
18.4 Further, engineering and job site documentation is specified in
clauses, "ORDERING PROCEDURES", "INSTALLATION" and "ACCEPTANCE."
19.0 EQUIPMENT CLASSIFICATION
19.1 At no charge to Buyer, Supplier shall request from Bellcore Common
Language Equipment Identification (CLEI) codes for Goods and utilize
such codes prior to making the Goods available to Buyer in
accordance with Bellcore documents TR-ISD-000325 Issue 1, dated
September 1988, Equipment Information Required From Suppliers for
Operations System and TR-TAP-000485, Issue I, dated April 1987,
Common Language\ CLEI Code Assignment and Equipment Marking
Requirements, and future revisions.
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20.0 FORCE MAJEURE
20.1 Notwithstanding anything to the contrary contained herein, neither
party shall be responsible for any delay or failure in performance
of an Order placed hereunder caused by fires, strikes, embargoes,
requirements imposed by Government Regulations, civil or military
authorities, acts of God or the public enemy or other causes beyond
the control and without the fault or negligence of the party unable
to perform ("Force Majeure condition"). If any such Force Majeure
condition occurs, the party delayed or unable to perform shall give
immediate notice to the other party and the party affected by the
other's inability to perform may elect to: (a) terminate any Order
or part thereof as to Goods or Services not already received and
accepted; (b) suspend any Order for the duration of the Force
Majeure condition, buy or sell elsewhere the Goods or Services to be
bought or sold under such Order and deduct from such Order the
quantity bought or sold or for which such commitments have been made
elsewhere, and resume performance of any outstanding Order(s) once
the Force Majeure condition ceases, with an option in the affected
party to extend the delivery and/or completion date up to the length
of time the Force Majeure condition endured; or (c) take other
action as agreed to by the parties. Unless written notice is given
within thirty (30) days after the affected party is apprised of the
Force Majeure condition, (b) shall be deemed selected.
21.0 FREIGHT TERMS
21.1 Goods shipped to Ameritech Services, Inc. shall be F.O.B.
Moorestown, NJ. Shipments weighing more than 200 pounds should be
freight collect. Shipments weighing 200 pounds or less should be
freight prepaid, and freight charges added to Supplier's invoice.
21.2 For Goods shipped to other parties pursuant to the clause entitled
"PARTIES WHO MAY PLACE ORDERS UNDER THIS AGREEMENT" shall be F.O.B.
destination, freight prepaid, and freight charges added as a
separate item to Supplier's invoice, or as otherwise indicated on
Buyer's Order.
21.3 In preparing bills of lading for shipment under this Agreement, the
Goods shall be described in accordance with the National Motor
Freight Classification in effect on the date of shipment, Buyer
reserves the right to review the application of such description.
21.4 Notwithstanding the foregoing, when Services (such as unloading or
installation) are to be performed by Supplier after Buyer's receipt
of the Goods, Supplier shall retain risk of loss and damage to the
Goods until the Goods and Services have been accepted by Buyer.
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21.5 Supplier shall bear transportation charges for shipments of Goods
from outside of the United States of America to Buyer.
22.0 GOVERNMENT CONTRACT PROVISIONS
22.1 Order(s) placed hereunder containing a notation that the Goods and
Services are intended for use under a Government Contract shall be
subject to the then current Government Provisions referenced thereon
or in attachments thereto. Supplier shall have the right to accept
or reject any such Order(s).
23.0 HAZARDOUS/TOXIC MATERIAL
23.1 Supplier shall identify to Buyer in advance of delivering any toxic
substances or hazardous material incorporated in or associated with
the Goods or Services purchased hereunder and shall advise Buyer of
all precautions to be taken for their use and disposal. When
applicable, Supplier shall furnish Buyer with a completed material
safety data sheet on any Goods or Services as required by any
federal, state or local laws, ordinances or regulations. Any
transportation or other handling of the hazardous or toxic material
by Supplier shall be performed in accordance with all applicable
federal, state and local laws, ordinances and regulations.
24.0 HEADINGS NOT CONTROLLING
24.1 The clause headings inserted in this Agreement are for convenience
only and are not intended to affect the meaning or interpretation of
this Agreement.
25.0 IMPLEADER
25.1 Supplier will not implead or bring any action against Buyer or
Ameritech Services, Inc. or their employees based on any claim by
any person for personal injury or death that occurs in the course or
scope of employment of such person by Supplier that arises out of
Goods or Services provided under this Agreement.
26.0 INDEMNITY
26.1 Supplier agrees to indemnify and save harmless Buyer and Ameritech
Services, Inc., their employees, officers and agents from and
against any losses, damages, expenses, claims, demands, suits and
liabilities (including attorney's fees) that arise out of or result
from (1) injuries or death to persons or damage to property
resulting from defective Goods and Services furnished hereunder or
Supplier's acts or omissions, or those of persons furnished by it,
or (2) assertions under Workers' Compensation or similar acts made
by persons furnished by Supplier or by any subcontractor. Supplier
agrees to defend Buyer and Ameritech Services,
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Inc., their employees, officers and agents, at Buyer's or Ameritech
Services, Inc.'s request, against any such claim, demand or suit.
Buyer or Ameritech Services, Inc. shall notify Supplier within a
reasonable time of any written claims or demands for which Supplier
is responsible under this clause.
27.0 INDEPENDENT CONTRACTOR
27.1 All Services performed under this Agreement shall be performed by
Supplier as an independent contractor and not as an agent of Buyer.
No persons furnished by Supplier shall be considered Buyer's
employees or agents, and Supplier shall be responsible for its
employees' compliance with all laws, rules, and regulations
involving employment of labor, hours of labor, working conditions,
payment of wages, and payment of taxes, such as unemployment, social
security and other payroll taxes, including applicable contributions
from such persons when required by law.
28.0 INFRINGEMENT
28.1 Supplier shall indemnify and hold harmless Buyer from and against
any loss, damage, expense (including, without limitation,
replacement expense) or liability that may result by reason of any
infringement or claim of any infringement of any patent, trademark
or copyright, or by reason of misappropriation or claim of
misappropriation of any trade secret or other proprietary interest
based on Buyer's use of Goods or Services purchased under this
Agreement. Supplier shall defend or settle, at its own expense, any
action or suit for which it is responsible under this clause. Buyer
shall promptly notify Supplier of any claim of infringement or
misappropriation for which Supplier is responsible, and shall
cooperate with Supplier in every reasonable way to facilitate the
defense of any such claim.
28.2 If the use of Goods or furnishing of Services shall be prevented or
appears likely to be prevented by injunction or court order on
account of any such infringement or misappropriation, Supplier
shall, at no expense to Buyer, 1) remove such Goods from the
premises of Buyer and replace same with equally suitable Goods free
from claim of infringement or misappropriation; (2) modify any such
Goods or Services so that they will be free from claim of
infringement or misappropriation provided they remain functionally
equivalent to the original Goods or Services; or (3) by license or
release from claim of infringement or misappropriation, procure for
Buyer the right to use such Goods or receive such Services. Unless
otherwise agreed in writing by Buyer, Supplier shall use its best
efforts to procure the right for Buyer to use the Goods or receive
the Services as provided in (3) above. If none of the foregoing
alternatives are available to Supplier or acceptable to Buyer, Buyer
shall have the right to return, at Buyer's option, the affected
Goods or portion thereof for a refund in the amount of the
depreciated value, using straight line depreciation (ten (10) year
useful life), or to
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discontinue the affected Services and receive any prepaid amounts
therefor. In the event of any removal of Goods from Buyer's
premises, Supplier shall use reasonable care in the removal thereof
and shall, at Supplier's own expense, restore the premises as nearly
to their original condition as is reasonably possible. Supplier
shall be responsible for all expense associated with the removal and
return of the affected Goods and installation of substitute or
replacement equipment.
29.0 INSIGNIA
29.1 Upon Buyer's written request, any of Buyer's trademarks, trade
names, insignia, symbols, decorative designs, or evidence of Buyer's
inspection (hereafter "Insignia") will be affixed by Supplier to the
Goods furnished. Charges, if any, shall be mutually agreed upon.
Such Insignia will not be otherwise affixed, used or displayed on
the Goods furnished or in connection therewith without Buyer's
written approval. The manner in which such Insignia will be affixed
shall be as mutually agreed.
29.2 Goods rejected or not purchased by Buyer which utilized such
Insignia shall have all such Insignia removed prior to any sale, use
or disposition thereof. Supplier agrees to indemnify and hold Buyer
harmless from any claim, loss or damage arising out of Supplier's
failure to do so.
30.0 INSOLVENCY
30.1 Buyer may terminate this Agreement or any Order immediately upon
written notice in the event that Supplier makes an assignment for
the benefit of creditors, admits in writing its inability to pay
debts as they come due, ceases doing business as a going concern, or
a proceeding is instituted seeking reorganization, arrangement,
readjustment, liquidation, dissolution or other similar relief under
any law affecting the rights of creditors, and such proceeding is
acquiesced in or is not dismissed within sixty (60) days.
31.0 INSPECTION
31.1 Ordinarily, shipments will be made without Buyer's or its Agent's
inspection at the source. However, Buyer reserves the right to
inspect any Goods prior to shipment upon written notice to Supplier.
In such event, Supplier shall notify Buyer's agent or, if unknown,
Buyer (at 312-394-6409), that the Goods are ready for inspection at
the source. Supplier shall make available, without charge, any
production testing facilities and personnel required by Buyer or its
agent to inspect the Goods. Prior to shipment, Buyer or its agent
shall inspect the Goods in accordance with the following Quality
Program Specifications, copies of which
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are in Supplier's possession. Buyer reserves the right to change the
Quality Program Specifications upon written notice to Supplier.
QPS NUMBER ISSUE TITLE
82.040 4 Quality Program Specification For
Transmission Products
(General)
90.176 4 Quality Program Specification For
Traffic Measuring & Recording
Devices (SPL TeleSciences)
93.168 3 Quality Program Specification For
System: Automatic Message Accounting
Teleprocessing (AMATPS) (SPL
Telematic Products)
32.0 INSURANCE
32.1 Supplier shall maintain and cause Supplier's subcontractors to
maintain during the term of this Agreement: (1) Worker's
Compensation insurance as prescribed by the law of the state in
which Supplier's obligations under this Agreement are performed, (2)
employer's liability insurance with limits of at least $1,000,000
each occurrence, (3) comprehensive general liability insurance and
comprehensive automobile liability insurance if the use of motor
vehicles is required, each with limits of at least $1,000,000 for
bodily injury, including death, to any one person and $3,000,000 for
any one occurrence, and $1,000,000 for each occurrence of property
damage, and (4) specific contractual liability insurance to cover
Supplier's indemnity obligations under this Agreement with limits as
specified in (3) above. Supplier agrees that Supplier, Supplier's
insurer(s) and anyone claiming by, through, under or in Supplier's
behalf shall have no claim, right of action or right of subrogation
against Buyer and Ameritech Services, Inc. based on any loss or
liability insured against under the foregoing insurance. Supplier
and Supplier's subcontractors shall furnish prior, to the start of
Services and furnishing of Goods, certificates or adequate proof of
the foregoing insurance. Certificates furnished by Supplier and
Supplier's subcontractors shall contain a clause stating: "Ameritech
Services, Inc. is to be notified in writing at least thirty (30)
days prior to cancellation of or any material change in this
policy." Said insurance provisions shall not, in any way, limit
Supplier's liability under this Agreement.
33.0 INVOICING AND TERMS OF PAYMENT
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33.1 Payment of invoices shall be due net thirty (30) days after receipt
of detailed invoicing, provided, however, that Buyer may withhold
payment of any invoice for a partial shipment of an Order if a delay
in the shipment of the remainder of the Order causes the Goods to be
nonfunctional.
33.2 Supplier shall render detailed invoices for Goods and Services upon
delivery of Goods at Buyer's designated destination and upon 100%
completion of Services except when other arrangements have been made
through separate agreements for the providing of Services.
34.0 LICENSES
34.1 No licenses, express or implied, under any patents, trademarks,
copyrights or other proprietary rights are granted by Buyer to
Supplier under this Agreement; provided, however, that in the event
any Goods or Services covered by this Agreement use or are impacted
by patents owned or controlled by American Telephone and Telegraph
Company or its affiliates, ("AT&T") or in the event any royalty is
paid by Supplier to AT&T for the sale of Goods or Services of the
type covered by this Agreement, Supplier shall promptly notify
Ameritech Services, Inc. in writing and shall accept from Ameritech
Services, Inc. a sublicense with respect to such Goods or Services
which requires payment of royalties to Ameritech Services, Inc. in
lieu of AT&T.
35.0 LIMITATION OF ACTIONS
35.1 No action, regardless of form, related to or arising out of this
Agreement may be brought by either party more than two (2) years
after the cause of action has been recognized.
36.0 LIMITATION OF LIABILITY
36.1 IN NO EVENT SHALL SUPPLIER BE LIABLE FOR: (1) ANY INCIDENTAL,
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OR
PERFORMANCE OF GOODS OR SOFTWARE HEREUNDER INCLUDING, BUT NOT
LIMITED TO ANY DAMAGES RESULTING FROM LOST COMPUTER TIME, THE
DESTRUCTION OR DAMAGE OF RECORDS, OR ANY LOST REVENUES OR PROFITS OF
BUYER OR ANY THIRD PARTY, EVEN IF SUPPLIER HAS BEEN ADVISED, KNEW OR
SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES; (2) DAMAGES
CAUSED BY THE BUYER'S FAILURE TO PERFORM ITS OBLIGATIONS UNDER THIS
AGREEMENT; OR, (3) CLAIMS, DEMANDS, OR ACTIONS AGAINST THE BUYER BY
ANY OTHER PARTY, EXCEPT AS MAY BE PROVIDED IN CLAUSE 26.0
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"INDEMNITY" OR CLAUSE 28.0 "INFRINGEMENT" IN THE EVENT OF LOSS OF OR
DAMAGE TO THE GOODS PURCHASED HEREUNDER WHICH NECESSITATES
REPLACEMENT THEREOF, SUPPLIER'S LIABILITY FOR SUCH LOSS OR DAMAGE
SHALL BE LIMITED TO SAID REPLACEMENT AT ITS EXPENSE WITH IDENTICAL
OR EQUIVALENT GOODS OR REIMBURSEMENT OF THE COST OF SUCH
REPLACEMENT, INCLUDING ALL INSTALLATION EXPENSE.
37.0 MARKING
37.1 All Goods furnished hereunder shall be marked, at no charge to
Buyer, in accordance with the requirements outlined in the following
Bellcore documents:
TR-TSY-000081 Issue 1 dated December 1984, Packaging, Packing,
Palletization and Marking Requirements.
TR-ISD-000325 Issue 1 dated September 1986, Equipment Information
Required From Suppliers for Operations System.
TR-TAP-000383 Issue 3 dated December 1987, Generic Requirements for
Common Language Bar Code Labels.
TR-TAP-000485 Issue 1 dated April 1987, Common Language CLEI Code
Assignment and Equipment Marking Requirements.
TR-795-25540-84-02 Issue 1 dated January 1984, Common Language
Identification of Manufacturers of Telecommunications Products
37.2 In addition, Supplier agrees to include, at no charge to Buyer,
Buyer's PRODUCT IDENTIFIER (PID), the nine-digit number for Goods,
as applicable, on all preliminary and final packaging and packing
slips, and any other identification which might be requested by
Buyer.
37.3 All Goods furnished hereunder shall be marked for identification
purposes with Supplier's coded Name, Model, Serial Number and month
and year of manufacture.
37.4 If Buyer requires identification marking in addition to the above,
the parties shall mutually agree to the charges, if any, for such
additional marking.
38.0 MEDIA
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38.1 Unless Buyer otherwise agrees, requested or required documentation,
information and copies shall be provided in "hard copy" (paper) by
the Supplier.
39.0 MONTHLY REPORTS
39.1 Supplier agrees to render to Ameritech Services, Inc. monthly
reports containing the following information concerning each
shipment to Buyers under this Agreement made during each month, not
later than the tenth day of the following month:
Supplier Name & Address
Agreement Number
Month/Year
Shipped to Location (City and State)
Material Description (with PID if applicable and
Supplier's part number.)
Quantity Shipped
Date Shipped
Net Unit Price
Total Value of Quantity Shipped
Engineering and Installation Services Performed and Invoiced
Reports are to be sent to:
Ameritech Services, Inc.
3040 West Salt Creek Lane, 3-15
Arlington Heights, IL 60005
Attn: Manager Transmission Products
40.0 NEW OR CHANGED ROUTINES, PROCEDURES OR SERVICES
40.1 Supplier shall not implement or distribute to Buyer any information
regarding new or changed routines, procedures, or Services, if any,
for Goods purchased under this Agreement without sixty (60) days
prior written notice to:
Ameritech Services, Inc.
3040 Salt Creek Lane, 3-15
Arlington Heights, IL 60005
Attn: Manager - Transmission Products
41.0 NON-EXCLUSIVE MARKET RIGHTS
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41.1 It is expressly understood and agreed that this Agreement does not
grant Supplier an exclusive privilege to sell to Buyer any Goods
and/or Services which Buyer may require.
42.0 NON-WAIVER
42.1 No course of dealing or failure of either party to enforce strictly
any provision, term, right or condition of this Agreement shall be
construed as a waiver of such provision, term, right or condition.
43.0 NOTICES AND NOTIFICATION PROCEDURES
43.1 Any notice or demand which under the terms of this Agreement or
under any statute must or may be given or made by any party
hereunder shall, be in writing and shall be hand delivered or shall
be given or made by telegram or recognized express delivery service
or certified or registered mail addressed to the appropriate party
or parties as follows:
To Buyer:
Ameritech Services, Inc. Ameritech Services, Inc.
as Buyer or notices 3040 W. Salt Creek Lane
affecting entire Agreement: Arlington Heights, IL 60005
Attn: Manager - Transmission Products
Changes to Goods only: Ameritech Services, Inc.
3040 W. Salt Creek Lane
Arlington Heights, IL 60005
Attn: Manager - Transmission
Illinois Bell Telephone Illinois Bell Telephone Company
Company as Buyer: Assistant Vice President
Planning and Engineering
225 W. Randolph, HQ19F
Chicago, IL 60606
Changes to Goods only:
Illinois Bell Telephone Company
225 W. Randolph Street
Chicago, IL 60606
Attn: Product Change Notice Coordinator
HQ24C
Indiana Bell Telephone Indiana Bell Telephone Company,
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Company, Incorporated Assistant Vice President
as Buyer: Planning, Design and Engineering.
220 N. Meridian Street, Room 924
Indianapolis, IN 46204
Changes to Goods only:
Indiana Bell Telephone Company,
Incorporated
240 N. Meridian Street
Indianapolis, IN 45204
Attn: District Manager -
Implementation & Planning
Michigan Bell Telephone Michigan Bell Telephone Company
Company as Buyer: Assistant Vice President
Network Engineering
29777 Telegraph Road, Room 3100
Southfield, MI 48034
Changes to Goods only:
Michigan Bell Telephone Company
Room 48034
29777 Telegraph Road
Southfield, MI 48034
Attn: CN Administrator Maintenance
Engineering - Switching
The Ohio Bell Telephone The Ohio Bell Telephone Company
Company as Buyer: General Manager
Planning and Engineering
45 Erieview Plaza, Room 1500
Cleveland, OH 44114
Changes to Goods only:
The Ohio Bell Telephone Company
65 Erieview Plaza, Room 302
Cleveland, OH 44114
Attn: District Manager - Transmission
Engineering Center (TEC)
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Wisconsin Bell, Inc. Wisconsin Bell, Inc.
as Buyer General Manager
Network Planning and Engineering
722 N. Broadway, 14th Floor
Milwaukee, WI 53202
Changes to Goods only:
Wisconsin Bell, Inc.
125 N. Executive Drive, 2nd Floor
Brookfield, WI 53005
Attn: Staff Manager - Maintenance
Engineering (LN)
To Supplier: TeleSciences, Inc.
351 New Albany Road
Moorestown, NJ 08057-1177
Attn: Contract Administration
43.2 Notwithstanding the above, documentation pursuant to the clause
"DOCUMENTATION" and other information required by Buyer shall be
disseminated by Supplier to those on the applicable distribution
lists provided by each Buyer.
43.3 Notices will be deemed to have been received as of the earlier of
the date of actual receipt or three (3) days after being sent.
44.0 ORDERING PROCEDURES
44.1 Buyer shall place Orders under this Agreement in accordance with
Supplier's standard intervals. No prepayment or minimum ordering
quantities or amounts shall apply to any Order.
44.2 EF&I (Engineer, Furnish and Install), F&I (Furnish and Install), and
E&F (Engineer and Furnish) Orders:
A. Orders shall be in writing or transmitted electronically and
shall specify: (a) description of Goods, inclusive of any
numerical/alphabetical identifications and/or Services, if
any, referenced in the price list herein; (b) required
delivery or completion and in-service date as applicable; (c)
location to which the Goods are to be shipped and/or Services
are to be performed; (d) location to which invoices shall be
rendered for payment; (e) Buyer's Order number; (f) price or
Buyer's Request For Quotation number, if applicable; (g) this
Agreement number; and for an Order for Goods which includes
licenses for Software, in addition to the above; (h) a
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list and description of the Software to be licensed; (i) the
description, serial number, if known, and location of the
processor for which Software is being furnished.
B. (1) Supplier shall acknowledge receipt of Buyer's Order
within ten (10) workdays of receipt of such Order.
Supplier shall accept or reject in writing Buyer's
Order, including delivery and/or completion date, within
four (4) weeks (three (3) weeks for F&I Orders) from
receipt of Order or four (4) weeks prior to ship date,
whichever is earlier. In the event Supplier fails to
accept or reject any such Order within the aforesaid
period, such Order shall be deemed accepted.
(2) Should Buyer require Supplier's acceptance or rejection
of an Order in less than four (4) weeks (three (3) weeks
for F&I Orders), Supplier shall use its best efforts to
respond in the interval requested by Buyer.
C. In the event that Supplier cannot meet the specified delivery
and/or completion date, Buyer may cancel said Order in writing
without penalty or obligation of any kind or negotiate a new
delivery and/or completion date mutually acceptable to both
parties, which date shall be acknowledged in writing by
Supplier within ten (10) workdays of such agreement.
D. For Orders scheduled in accordance with Supplier's standard
intervals, Supplier shall at no charge, provide no later than
five (5) weeks prior to main ship date, the following
documentation to Buyer's engineering department and job site:
(1) engineering specifications (except F&I), (1-Job Site, l-
Engineering)
*(2) central office base drawings (except F&I), (1-Job Site,
1-Engineering)
(3) Software documentation, if any, (1-Job Site,
l-Engineering)
- ----------
* Suppliers which do not provide a drawing maintenance function should be
providing two (2) copies of the red line drawings to engineering.
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(4) list of required Goods classified in accordance with the
Uniform System of Accounts, and in sufficient detail to
enable Buyer to identify equipment retirement units for
inclusion into mechanized Property Record Systems, and
in the format required for direct entry into Buyer's
Detailed Continuing Property Record (DCPR) system (See
clauses entitled "EQUIPMENT CLASSIFICATION", "BILLING"
and "MARKING"), (1-Engineering),
(5) installation requirements (I-Engineering), and
(6) FPP, where applicable, showing detailed individual cost
for engineering, Goods, installation and other Services
as applicable (1-Engineering).
E. Within four (4) weeks following receipt of the engineering
specifications (except on F&I Orders) and the FPP, Buyer shall
accept or reject said FPP and notify Supplier accordingly. In
the event Buyer rejects Supplier's FPP and Buyer and Supplier
are unable to subsequently agree to a revised FPP, then the
Order will be deemed void.
44.3 Furnish Only Orders:
In addition to paragraphs 44.2A and 44.2C in this clause, the
following shall apply for Furnish Only Orders. Within ten (10)
workdays after receipt of such Order, Supplier shall acknowledge, in
writing, acceptance or rejection of the Order and delivery date. In
the event Supplier fails to accept or reject any such Order within
the aforesaid period, such Order shall be deemed accepted. Upon
shipment of the Goods, Supplier shall provide copies of applicable
information as specified in paragraph 44.2D herein and applicable
prices and fees.
44.4 Installation Only Orders:
A. Buyer shall provide Supplier its specifications and
installation requirements which shall include Buyer's required
job completion date. Within two (2) weeks of Supplier's
receipt of such information, Supplier shall provide either
notice of rejection or an FPP, which details prices for the
installation Services requested by the Buyer.
B. Within four (4) weeks following receipt of the Supplier's FPP,
Buyer shall accept or reject said FPP. Buyer's acceptance of
the FPP will be confirmed by placement of an Order during this
four (4) week period. Supplier shall acknowledge receipt of
said Order within ten (10) workdays following placement of
said Order. In the event Buyer rejects Supplier's
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FPP, Supplier will return all Buyer's specifications and
installation requirements within ten (10) workdays of such
rejection.
44.5 Change Orders:
Any changes to the original Order and any resulting adjustment,
including but not limited to schedules and price, shall be mutually
agreed upon and subsequently detailed in a written change Order
referencing the original Order. Supplier shall provide a list of all
Goods required for such change(s) in accordance with paragraph
44.2D(4) in this clause and a supplemental FPP indicating all
changes to the original FPP.
44.6 In addition to changes in delivery dates as described in paragraph
44.5 hereinabove, Buyer may unilaterally defer a delivery date of
any purchase Order for a period not to exceed sixty (60) days
without charge.
44.7 Orders placed by Buyer hereunder shall be sent to the following
address: TeleSciences, C O Systems, Inc.
351 New Albany Road
Moorestown, N.J. 08057
Attn: Domestic Order Entry Department
45.0 PACKING
45.1 Goods purchased, modified, repaired, or replaced hereunder shall be
packed by Supplier at no additional charge in suitably designed
containers adequate to prevent damage under normal handling during
loading/unloading, shipping and storage in accordance with Ameritech
document SHP92706AM Issue 1, dated May 1988, Packing, Packaging and
Palletization and Bellcore document TR-TSY-000081 Issue 1, dated
December 1984, Packaging, Packing, Palletization and Marking
Requirements. In the event of a conflict or inconsistency between
the Bellcore document TR-TSY-000081 and the Ameritech document
SHP92706AM the Ameritech document shall prevail.
45.2 All Goods supplied hereunder shall be protected against
electrostatic discharge in accordance with Bellcore documents
TR-EOP-000063, Issue 3, dated March 1988, Network Equipment Building
System (NEBS) Generic Equipment Requirements, TR-TSY-000078, Issue 2
, dated December 1988, Generic Physical Design Requirements for
Telecommunications Products and Equipment and TR-TSY-000382, Issue
1, dated July 1986, Triboelectric Charge Testing of Bags and
Pouches.
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A. All packages containing circuit packs with sensitive
integrated circuitry shall have warning labels. The labels
shall indicate that special handling is required.
B. All circuit packs should be properly protected before
shipment. In addition to antistatic packaging, cushioning
material shall be used to assure that the circuit packs are
protected from mechanical damage. Defective circuit packs
shall be handled with the same precautions as a new circuit
pack, thereby reducing the possibility of added damage.
C. Antistatic packing material shall be used to prevent the
circuit packs from shifting inside the carton or shipping
container.
D. All static-sensitive devices and components must be handled in
a static-safeguarded work area. Such an area should be
equipped with the necessary protective material and equipment
to limit and control static charge accumulation to levels
which will not damage sensitive devices.
46.0 PRICE WARRANTY
46.1 Supplier warrants that the prices for Goods sold to Buyer under this
Agreement are not less favorable than those currently extended to
any other customer for the same or like goods and services in equal
or less quantities under similar terms. In the event Supplier
reduces its price for such goods or services during the term of this
Agreement, Supplier agrees to reduce the prices hereunder
correspondingly.
47.0 PUBLICITY
47.1 Each party shall submit to the other party all advertising, sales
promotion, press releases and other publicity matters relating to
the Goods furnished and/or Services performed hereunder by Supplier
where the name or mark of the other party is mentioned or language
from which the connection of that name or mark therewith may be
inferred or implied. Each party further agrees not to publish or use
such advertising, sales promotion, press releases, or publicity
matters without the other party's prior written approval.
48.0 REGULATORY PROCEEDINGS
48.1 If requested by Buyer, Supplier will provide information concerning
this Agreement and purchases hereunder which Buyer requires to
respond to regulatory requests and proceedings.
49.0 RELEASES VOID
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49.1 Neither party shall require waivers or releases of any personal
rights from representatives of the other in connection with visits
to either party's respective premises and both parties agree that no
such releases or waivers shall be pleaded by them, their employees,
or agents in any action or proceeding.
50.0 REMEDIES
50.1 No right or remedy herein conferred upon or reserved to any party
herein is exclusive of any right or remedy herein or at law or in
equity provided or permitted, but each shall be cumulative of every
other right or remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise, and may be enforced
concurrently therewith or from time to time.
51.0 RIGHT OF ACCESS
51.1 Each party shall normally permit access to its facilities by the
other in connection with Goods and Services provided hereunder. No
charge shall be made for such access. It is agreed that prior
notification will be given when access is required.
52.0 SEVERABILITY
52.1 If any provision, term, right or condition of this Agreement shall
be declared invalid or unenforceable by a court of competent
jurisdiction, all other provisions, terms, rights and conditions of
this Agreement shall remain valid and binding upon the parties.
53.0 SHIPPING INSTRUCTIONS
53.1 Supplier shall (1) ship Goods complete unless otherwise agreed upon,
(2) ship to the destination designated in the Order, (3) ship
according to routing instructions given by Buyer, (4) place the
Order number on all subordinate documents, (5) enclose a packing
memorandum with each shipment, and when more than one package is
shipped, identify the one containing the memorandum, (6) mark the
Order number on all packages and shipping papers, (7) render
invoices in duplicate, or as otherwise specified in the Order,
showing the Order number, through routing and weight, (8) render
separate invoices for each shipment within ten (10) working days
after shipment or job acceptance as appropriate as shown in the
clause entitled "INVOICING AND TERMS OF PAYMENT," (9) forward bills
of lading and shipping notices with Supplier's invoices and (10)
mail invoices, bills, and notices to the address shown on the Order.
If prepayment of transportation charges is authorized, Supplier
shall include the transportation charges as a separate item on
Supplier's invoice. Adequate
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protective packing shall be furnished by Supplier at no additional
charge. Shipping and routing instructions may be altered as mutually
agreed.
54.0 SPECIFICATIONS
54.1 The Goods furnished hereunder shall comply with Supplier's technical
specifications in effect on the date of this Agreement. Such
technical specifications are hereby made a part of this Agreement
and incorporated herein by reference.
Such technical specifications shall: A.) include standard interfaces
for support systems (operation, administrative and maintenance) in
accordance with Bellcore document TA-TSY-000200 Issue 4, dated
September 1988, Specification of System Maintenance Messages at the
OS/NE-Interface which contains requirements for such interfaces; B.)
be in compliance with Bellcore document TA-TSY-000870 Issue 1, dated
April 1988, Electrostatic Discharge Control in the Manufacture of
Telecommunications Equipment.
54.2 In accordance with the provisions set forth in the clauses entitled
"CHANGES TO GOODS", "DOCUMENTATION", and "NOTICES AND NOTIFICATION
PROCEDURES", Supplier shall notify Buyer of any change to be made in
Supplier's technical specifications. Supplier agrees to provide
Buyer, at no charge, a copy of all such technical specifications and
updates thereto.
55.0 STANDARD INTERVAL
55.1 Goods shall be shipped according to Suppliers standard interval;
provided however, Supplier and Buyer may agree to the delivery
schedule applicable to each Order in accordance with the clause
entitled "ORDERING PROCEDURES."
55.2 Suppliers standard interval for Furnish Only Orders shall be one
hundred and twenty (120) days from receipt of Order.
56.0 SURVIVAL OF OBLIGATIONS
56.1 Either party's Obligations under this Agreement which by their
nature would continue beyond the termination, expiration or
cancellation of this Agreement shall survive termination, expiration
or cancellation of this Agreement.
57.0 TAX
57.1 Federal manufacturers or retailers excise taxes, and state and local
sales or use taxes, when applicable, shall be billed as separate
items on Supplier's invoice. If indicated on the front of the Order,
Goods purchased are tax exempt under one of
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the following tax exempt certificate numbers: Illinois, 17097312;
Indiana, 36-3258076-0013; Michigan, 36-3258076; Ohio, 97-121569,
(Ameritech Services, Inc.), Ohio Bell, 98-001120 (The Ohio Bell
Telephone Company); and Wisconsin, 368774.
57.2 Supplier shall invoice taxes as determined by shipment destinations
specified in Buyer's Orders. In the event Buyer elects to contest,
to the extent permitted by applicable law, the nature or extent of
taxes which it is obligated to pay to Supplier, Supplier agrees that
any action taken by Buyer for refund of such taxes shall be at
Buyer's expense, provided that Supplier shall reasonably assist
Buyer therein if requested by Buyer.
58.0 TERMINATION OF ORDER
58.1 Buyer may at any time terminate any Order(s) placed by it hereunder
in whole or in part. Buyer shall notify Supplier as soon as Buyer
knows of the need to terminate any Order or portion thereof.
58.2 Buyer's liability to Supplier with respect to an Order terminated
more than ninety (90) days prior to its scheduled delivery date
shall be limited to actual engineering charges, if any, incurred by
Supplier in regard to any such Order(s) or terminated portion
thereof, prior to the date of notice of termination. In addition,
Buyer shall be liable for the price of any hardware which is unique
to the Goods ordered hereunder provided that such hardware cannot be
applied to Supplier's other customers' order(s) within twelve (12)
months from the notice of termination. In the event Buyer pays
termination charges for hardware which is unique to Goods ordered
hereunder, Buyer, at its option, may request and receive delivery of
such hardware in its present state of completion. Supplier agrees to
substantiate such termination charges with proof satisfactory to
Buyer. Such termination charges shall not be applicable to
termination under any other provision of this Agreement. If an Order
is terminated ninety (90) days or less prior to its scheduled
delivery date, and in the event that Goods cannot be applied to
Supplier's other orders, Buyer agrees to pay Supplier a termination
charge in accordance with the following schedule:
DAYS TERMINATION NOTICE RECEIVED TERMINATION CHARGE
BEFORE SCHEDULED DELIVERY DATE
90-61 25% of dollar value of
terminated Goods;
60-31 50% of dollar value of
terminated Goods;
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30-0 75% of dollar value of
terminated Goods;
59.0 TIME OF THE ESSENCE
59.1 Time is of the essence in Supplier's delivery of Goods and
performance of Services pursuant to Orders placed under this
Agreement.
60.0 USE OF INFORMATION
60.1 All specifications, drawings, sketches, models, samples, tools,
computer programs, technical information, business information or
other documentation furnished by one party to the other under or in
contemplation of this Agreement or an Order, whether in writing,
orally, or otherwise, shall, for purposes of this clause be
hereinafter designated "Information". For purposes of this clause,
all companies named in the clause "PARTIES WHO MAY PLACE ORDERS
UNDER THIS AGREEMENT" shall constitute a single party.
60.2 Each party agrees that all Information shall be and remain the
exclusive property of the party furnishing such Information and that
the party receiving such Information will take all reasonable steps
to safeguard all such Information against misuse, espionage, loss
and theft. Each party further agrees that such Information shall not
be published, released or otherwise communicated in any manner to
any other person, firm or corporation except with the prior written
consent of the other party or to the extent such disclosure is
required by its employees who have a need to know, the lawful
request of a governmental agency or by valid court order. The
requirements set forth herein shall apply to all employees,
officers, directors and agents of each party, and each party shall
take all reasonable steps to assure that such persons comply
therewith.
60.3 Notwithstanding the provisions of this clause, neither party shall
be required to keep confidential any Information which it can
demonstrate:
A. was previously known to it free of any obligation to keep it
confidential; or
B. is disclosed to others by the furnishing party without
restriction; or
C. becomes publicly available, by other than an unauthorized
disclosure hereunder; or
D. is obtained from a third party, having an apparent bona fide
right to provide same and without breach of this Agreement; or
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E. is approved for release by written authorization of the
furnishing party.
60.4 When the Information is no longer needed, the receiving party shall
return the Information and all copies thereof to the furnishing
party or insure that such Information and all copies are destroyed.
61.0 WORK PERFORMED ON BUYER'S PREMISES
61.1 Supplier shall be entirely responsible for all persons furnished by
Supplier working in harmony with all others when working on Buyer's
premises. Supplier is required to have such persons comply with all
plant rules and regulations, and where required by government
regulations, submit satisfactory clearance from the U.S. Department
of Defense and other federal authorities concerned. Supplier shall
not stop, delay or interfere with the normal work schedule on
Buyer's premises without prior approval of Buyer.
-------------------- END OF SECTION A, ARTICLE I -------------------
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SECTION B: SUPPORT AND WARRANTIES
62.0 CHANGES TO GOODS
62.1 Supplier may, at any time, make changes to the Goods, or modify the
drawings and specifications relating thereto, or substitute products
of later design to fill an Order, provided that the changes,
modifications or substitutions, under normal and proper use, do not
impact upon the technical specifications or the form, fit or
function of the Goods. Supplier shall notify Buyer in writing of
such changes. With respect to other changes, modifications, or
substitutions, Supplier shall notify Buyer in writing ninety (90)
days prior to their effective dates. The exact method and schedule
of implementation shall be as mutually agreed. Where an extremely
unsatisfactory condition requires immediate action, Supplier will
immediately advise Buyer.
62.2 All notifications of such changes shall be provided, at no charge,
to parties designated by Buyer in the clause "NOTICE AND
NOTIFICATION PROCEDURES" and shall contain the following
information;
1. Supplier Information: Supplier's name, address, technical
contact name and phone number.
2. Product Change Notice Number: Number conforming to a single
sequential numbering scheme used by Supplier.
3. Issue Date of Change: Date Product Change Notice is
transmitted.
4. Product Description: Description of the product affected
(e.g., BMS 700, 2W Line Card or 24 foot aluminum ladder).
5. New Product Code: Unique identity of the changed product
(e.g., Circuit Pack CP 11101, Series 1, List 4).
6. Old Product Code: Unique identity of the product being
changed. (e.g., Circuit Pack CP 11101, Series 1, List 3).
7. New CLEI Code(s): The alpha-numeric CLEI code(s) assigned to
the changed product.
8. Old CLEI Code(s): CLEI codes of all equipment associated with
this change (see Item 9).
9. Associated Products or Changes Affected: Coordinated product
changes that must be applied in conjunction with, or prior to,
this change.
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10. Drawing Number: The circuit (schematic) drawing number and
issue that incorporates the change. (e.g., SD 11101-01, issue
11).
11. Change Classification: Classification of the change (A, B, or
D).
12. Classification Substantiation: Details of why the proposed
Classification is appropriate.
13. Reason For Change: Detailed explanation of why the change is
necessary, for example:
a. Is change a manufacturing change or does it fix a
service trouble condition?
b. What are the symptoms of the condition being corrected?
14. Description of Change: Installation details of change, for
example:
a. What is to be changed?
b. How is it to be changed?
c. How can change be tested/verified?
15. Effect of Change: Description of the effect of the change on:
a. Service
b. Transmission
c. Traffic
d. Maintenance
e. Reliability
f. Commercial Specifications (Commercial Specifications are
specifications or documentation requirements which are
placed on a product by the Supplier).
g. Control Specifications (Control Specifications are
mandatory requirements imposed by the Buyer upon a
particular product due to its critical nature and risk
factor. These specifications must be clearly stated by
the Buyer and agreed to by the Supplier).
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h. Safety
16. Material Affected: Apparatus, wiring, circuit packs, etc.,
affected by change.
17. Documentation Affected: List of associated drawings, programs,
practices, manuals, nomenclature, etc. , affected by the
change.
18. Supplier Implementation Date: Date after which all newly
manufactured products will incorporate the change.
19. Modification Expiration Date (for Class A changes only): Date
after which Supplier terminates responsibility for applying
the change, providing modification material, etc., on a
non-billable basis.
20. Modification Location: Supplier recommendation for field or
factory installation of the change.
21. Modification Cost (Class B and D only): Cost per unit or other
pricing information.
22. Location and Quantity of Equipment (if the Supplier has these
records): The location and quantity of working or spare
equipment, in the hands of the Buyer, that requires the
change.
23. Attachments: Any supplementary reference information relative
to the change.
24. Comments: Additional comments or recommendations of the
Supplier.
25. Implementation Schedule: Supplier shall provide as applicable.
In the event that Buyer and Supplier fail to reach agreement on any
such changes to be made by Supplier, then Buyer shall have the right
to terminate any or all Orders for Goods affected by such change
without penalty or obligation of any kind.
62.3 If the equipment being changed requires a CLEI code change, Supplier
will contact Bell Communications Research, Inc. Language Standards
Division, directly for the new code. A CLEI code change is required
if:
1. A changed plug-in product is not bidirectionally
interchangeable physically, electrically or functionally, with
its predecessor.
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2. A changed hard-wired product is functionally different
(features added, deleted or changed) than its predecessor.
3. A manufacturer's part, model, drawing or identification number
is changed for that product.
4. A manufacturer's company name is changed.
62.4 Notifications shall be classified as follows:
A. CLASS A CHANGE
(1.) The Class A designation applies to changes required to correct
a product deficiency, for example:
- Safety or fire hazard
- Electrically or mechanically inoperative
- Design defects
- Product does not operate as documented by Supplier.
All Buyers shall be informed immediately of all Class A
changes since they could affect installation dates or require
changes to Goods which have been delivered to one or more
Buyers for installation. For Class A changes, Supplier shall
replace or modify, at no charge to Buyer, all affected Goods
either prior to delivery or for a ten (10) year period from
the shipment of such Goods.
(2.) Class A changes require immediate action by the Supplier to
correct the condition of all affected Goods (except as
indicated in 3.) in the hands of Supplier or Buyer. This
includes all working and spare Goods. The Class A designation
causes shipment, and in many cases, factory production of the
Goods to be stopped. The Supplier-owned Goods will be modified
immediately. Buyers with pending Order(s) must be informed of
the change immediately since it could affect installation
dates or require changes to Goods which have already been
delivered to Buyer for installation.
(3.) In some cases it may be necessary to make a change on a
limited number of a particular type of Goods. This would occur
when it is necessary to correct a condition that occurs only
in certain product combinations or with the use of certain
options. These conditions shall be described on the Product
Change Notice.
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(4.) Supplier will furnish monthly status reports to the Buyer for
all Class A changes on non-deferrable plug-ins and hard-wired
equipment that are to be installed or tracked to completion by
the Supplier. This report will contain the following 10 items:
1. Product Change Notice Number
2. Identity of the product
3. Model or part number and issue
4. CLEI code, if applicable
5. Date Product Change Notice sent to the parties
designated by the Buyer.
6. Product ship date
7. Installation or application responsibility
8. Locations at which change is to be made, (if the
Supplier maintains these records)
9. Date completed, by location
10. Changes on hold at any location. Are they being held by
Supplier or Buyer?
B. CLASS B CHANGE
The Class B designation applies to changes made to incorporate
improvements in design resulting in better operation, improved
testing, better maintenance, longer life, service
improvements, cost reductions, addition of essential features,
and the like. These Class B changes are applied to
manufactured Goods and are suggested for application to
existing equipment in the field. The decision to purchase and
apply Class B changes belongs to the Buyer.
C. CLASS D CHANGE
(1.) The Class D designation applies to design improvements,
component changes, new features, or other minor service
improvement capabilities not sufficiently significant as
to require a Class B change. This class is also used
when a change is required
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to facilitate manufacture or to effect a cost reduction
not sufficiently important to justify a Class B
application.
Routine changes in status/availability titles and
clarification of notes would normally be Class D. Class
D changes are applied to Supplier-owned Goods and are
not suggested for application to existing equipment in
the field.
(2.) If Supplier changes the Status/Availability of a
product, the change must be announced in a Class D
Product Change Notice.
62.5 Supplier shall determine the classification of proposed changes. If
Buyer disagrees with any classification assigned by Supplier, Buyer
shall have the right to challenge such classification and Supplier
shall, in good faith, reevaluate its classification.
62.6 For those changes classified as Class A, Supplier shall promptly
advise Buyer and shall, no later than thirty (30) days from the date
of the change notice or as mutually agreed to, implement such
changes with respect to Goods in Buyer's possession at Supplier's
Expense. Such implementation shall include the de-installation, if
necessary, of existing Goods and the engineering and installation of
the replacement or modified Goods or any additional materials. Such
obligation shall apply to all Class A changes made within a ten (10)
year period following the shipment of the affected Goods.
62.7 For Class A changes which involve only an exchange of circuit packs,
Supplier may, at Buyer's option, provide such circuit packs and
Buyer shall implement such change and invoice Supplier for
associated costs. Unless otherwise agreed to between the parties,
Supplier shall not furnish component parts for Class A changes to
Buyer for Buyer's assembly into circuit packs or printed wiring
boards.
62.8 Supplier will furnish the parties designated by Buyer a quarterly
summary report listing all Product Change Notices released to the
Buyer during the previous 12 months. This report will contain the
following 5 items:
1. Product Change Notice Number
2. Issue date of Change
3. Drawing Number
4. Supplier Change Classification
5. Modification Expiration Date.
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62.9 If Supplier cancels a change, the Buyer must be notified pursuant to
the clause "NOTICE AND NOTIFICATION PROCEDURES". The Supplier must
state the reason for cancellation and what action is to be taken in
locations where the change may already have been implemented.
62.10 Equipment or product discontinued information must be available to
the Buyer for ongoing and future Product Change Notice
implementation plans.
62.11 Defects found by Buyer in an installed product change will be
corrected by the Supplier within 30 days of notification of the
defect. Defects that are serious and/or service affecting will, be
corrected immediately.
62.12 In no case shall Supplier ship Goods subject to a Class A, B or D
change without the prior written approval of Buyer.
63.0 CONTINUING AVAILABILITY OF PRODUCT SUPPORT
63.1 Supplier agrees to offer for sale to Buyer, for a period of ten (10)
years after the shipment of the affected Goods, full maintenance
Services, replacements and repair parts for Supplier Manufactured
Goods and functionally equivalent replacements and repair parts for
Non-Supplier manufactured Goods.
63.2 In the event Supplier fails or is unable to offer such Services,
Goods or parts and Supplier is unable to obtain another source of
supply for Buyer, then such failure or inability shall be considered
noncompliance with this clause and, in addition to whatever other
rights and remedies Buyer may have at law or in equity, Supplier
shall be required to provide to Buyer the technical information or
any other rights required, so that Buyer can obtain such Services,
Goods and/or parts from other sources. The technical information
includes, by example and not by way of limitation: (a)
documentation, manuals, procedures and the like, fully describing
the maintenance Services; (b) manufacturing drawings and
specifications of raw materials, parts and components comprising the
Goods; (c) manufacturing drawings and specifications covering
special tooling and the operation thereof; (d) a detailed list of
all commercially available parts and components purchased by
Supplier on the open market disclosing the part number, name and
location of the supplier and price lists for the purchase thereof;
and (e) one (1) complete copy of the then current source code and
object code, including all related documentation, used in the
preparation of any Software licensed or otherwise acquired by Buyer
from Supplier hereunder. Buyer shall not disclose any such technical
information to any third party unless such third party agrees to
enter into a nondisclosure agreement with Buyer.
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63.3 Supplier shall provide advance written notification two (2) years
prior to entirely discontinuing maintenance services and/or the
manufacture of replacement Goods/repair parts.
64.0 EMERGENCY REPLACEMENT SERVICE
64.1 Supplier agrees, in the event of an emergency or an out-of-service
condition attributed to Goods furnished hereunder, to ship
replacement Goods within twenty-four (24) hours of verbal
notification by Buyer for a period of ten (10) years after the
delivery of such Goods. If replacement Goods will not be available
for shipment within twenty-four (24) hours, Supplier shall notify
Buyer immediately by telephone and arrange with Buyer for: (a) an
alternate shipping schedule; (b) telephonically assisting Buyer in
repair of the defect; and (c) supplying field engineering assistance
to restore service. In order to use this emergency replacement
service, Buyer shall call: (609) 866-0015.
64.2 This service shall be available twenty-four (24) hours a day seven
(7) days a week as specified in Appendix B attached to this
Agreement.
65.0 ENGINEERING COMPLAINTS
65.1 Buyer shall issue engineering complaints to report unsatisfactory
conditions and improper performance of Supplier's Goods and
Services. Supplier shall acknowledge Buyer's engineering complaint
within fourteen (14) days of the date an engineering complaint is
mailed to Supplier as indicated on Buyer's Engineering Complaint
Acknowledgment form. Supplier shall indicate in said acknowledgment
the date of final resolution of the engineering complaint. The date
of final resolution shall not exceed sixty (60) days from the date
the engineering complaint is mailed to Supplier or as otherwise
agreed to by the parties.
65.2 Supplier agrees to comply with applicable sections of Ameritech
document AM 010-700-010, Issue D, dated July 1987, Ameritech
Engineering Complaint Practices as revised from time to time. Such
practices are hereby incorporated by
reference and made a part of this Agreement.
65.3 In all cases, Supplier agrees to take such action as may be
necessary to resolve Buyer's engineering complaint in a timely
manner and to the Buyer's satisfaction. Issuance of the engineering
complaint shall not be a precondition for the resolution of claims
under normal warranty procedures.
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66.0 EXTRAORDINARY SUPPORT
66.1 Supplier agrees to make its best efforts to provide immediate
extraordinary support (materials, manpower, etc.) at Supplier's
current prices or premiums as mutually agreed to assist Buyer in
restoring service which has been disrupted due to catastrophic
condition (fire, flood, etc.). Such obligation of Supplier shall
continue for a period of ten (10) years after the shipment of Goods.
66.2 If such disaster or extraordinary condition occurs, Supplier agrees
to waive any delivery schedule priorities, to the extent permitted
by law and Supplier's other contractual commitments.
66.3 This clause shall not be construed to require Supplier to maintain
any inventories whatsoever nor to maintain any position or status of
readiness to perform in the future.
67.0 RADIO FREQUENCY ENERGY STANDARDS
67.1 Goods furnished hereunder shall comply, to the extent applicable,
with the requirements of Subpart J of Part 15 of the Federal
Communications Commission's (FCC) Rules and Regulations in effect on
the date of shipment of the Goods. In the event the goods generate
harmful interference to radio communications, Supplier shall provide
Buyer with information relating to methods of suppressing such
interference. If such interference cannot be suppressed during the
twelve (12) month period after the Goods are placed into service and
such interference constitutes a violation of Part 15 of the FCC
Rules and Regulations, Supplier shall, upon request by Buyer, accept
return of the Goods and render to Buyer an appropriate refund or
credit for the Goods. Nothing herein shall be deemed to diminish or
otherwise limit Supplier's obligations under the clause entitled
"WARRANTY."
68.0 REGISTRATION
68.1 When Goods furnished under this Agreement are subject to Part 68 of
the Federal Communications Commission's (FCC) Rules and Regulations,
as may be amended from time to time, Supplier warrants that such
Goods shall comply with, unless otherwise exempt , Part 68 of the
FCC'S Rules and Regulations, to the extent applicable at the time of
delivery, including, but not limited to, all labeling and customer
instruction requirements.
68.2 Supplier shall defend any suit alleging noncompliance with such
applicable FCC rules and Regulations which is brought against Buyer
with respect to the use of Goods and shall pay all costs and
expenses incurred and satisfy all judgments and decrees against
Buyer in such actions, provided that Buyer shall promptly advise
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Supplier, in writing, of such suit and shall cooperate fully with
Supplier in the defense or settlement of such suit.
69.0 REPAIRS NOT COVERED UNDER WARRANTY
69.1 With respect to repairs not covered under the clause entitled
"WARRANTIES," Supplier agrees to provide repair Services at
Supplier's then prevailing rates on all Goods ordered hereunder for
a period of ten (10) years from the shipment of such Goods. Goods to
be repaired or replaced under this clause will be returned to a
location designated by Supplier. Goods returned to Supplier must be
accompanied by Supplier's RETURN/REPAIR form. Unless otherwise
agreed upon by Supplier and Buyer, Supplier shall ship the repaired
or replacement Goods within twenty-one (21) days after receipt of
the defective Goods. With the concurrence of Buyer, repair may be
made by Supplier on site as scheduled by Buyer.
69.2 All Systems not covered by warranty will be subject to an evaluation
by Supplier when returned for repair, to determine if said Goods are
repairable. For the purpose of this clause, Systems shall mean
PDU-20's (simplex or duplex) and UTS-4000's (simplex or duplex). The
evaluation will include and will not be limited to, diagnostic,
environmental and live System testing.
69.3 Repair, replacement and evaluation charges for Goods not covered by
warranty are those listed in Appendix B of this Agreement.
69.4 If Goods are returned to Supplier for repair as provided for in this
clause, and they are determined to be beyond repair, or repair costs
are expected to exceed 50% of the cost of a replacement, Supplier
shall so notify Buyer. If requested by Buyer, Supplier shall sell
Buyer a replacement at the current Agreement price or at a price
agreed upon by Supplier and Buyer. Supplier will either return
unrepairable Goods to the Buyer or dispose of them, as directed by
Buyer.
69.5 Repaired Goods shall be warranted as provided in the clause entitled
"WARRANTIES" for three (3) months from the date received by Buyer.
Replacement Goods shall be warranted as provided in said clause for
the Warranty Period.
69.6 It is expressly understood and agreed that this Agreement does not
grant Supplier an exclusive privilege to repair or replace any or
all of the Goods purchased hereunder. Buyer may contract with others
for these services, or perform them itself.
69.7 Buyer shall bear all transportation costs and risk of in-transit
loss or damage in connection with all Goods returned to Supplier
under this clause. Supplier shall
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bear all the transportation costs and risk of in-transit loss or
damage in connection with all Goods shipped to Buyer under this
clause.
70.0 RESTOCKING
70.1 Surplus Goods resulting from Supplier's overshipments shall be
returned to Supplier at no charge to Buyer and Supplier shall render
Buyer a full refund for such Goods for which payment has been made.
Supplier shall bear total risk of loss, damage and transportation
charges for such Goods. Buyer shall promptly notify Supplier of
receipt of surplus Goods and shall exercise reasonable care in
handling such surplus Goods.
70.2 Surplus spare or replacement parts attributable to an error on the
part of Buyer may be returned, by mutual agreement of Buyer and
Supplier, to Supplier. Buyer shall pay transportation costs and bear
risk of loss and damage until such Goods have been delivered to the
location designated by Supplier. Supplier shall render Buyer a
refund less a restocking charge, if applicable, for such Goods for
which payment has been made.
71.0 TECHNICAL SUPPORT
71.1 Supplier shall provide ongoing technical support for a minimum
period of ten (10) years, including field service and assistance;
provided however, this technical support service shall not be
construed as altering or affecting any of Supplier's other
obligations hereunder. Such support services and the charges
therefor are specified in Appendix B and C, attached to the
Agreement hereto.
72.0 TRAINING
72.1 If requested by Buyer, Supplier will, at the rates specified in
Appendix B of this Agreement:
A) Provide instructors and the necessary instructional material
in Supplier's standard format to train Buyer's personnel in
the installation, planning, operation, maintenance and repair
of Goods furnished hereunder.
B) Schedule and conduct classes at reasonable intervals at
locations mutually agreed upon by Supplier and Buyer.
C) Provide training programs conducted at Supplier's training
facility to train Buyer's personnel in troubleshooting skills.
Travel and living expenses for Buyer's personnel shall be
borne by Buyer.
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D) Develop additional training programs or modify existing
program content to meet new or specific requirements of the
Buyer upon Buyer's request.
73.0 WARRANTIES
73.1 Supplier warrants to the Buyer that:
A. (1) Supplier has good and valid title to the Goods (except
Software) in which ownership is transferred under this
Agreement free and clear of any liens or encumbrances,
and with respect to any Software license rights granted,
Supplier has the right and the power to grant such
rights hereunder.
(2) During the Warranty Period, the Goods will be free from
defects in design, material and workmanship; will
perform and be in conformity with the technical
specifications, drawings and representations of
Supplier; and will function properly when installed.
(3) Buyer shall have quiet enjoyment and use of licensed
Software as long as such license(s) shall remain in
effect.
B. Services will be performed in a workmanlike manner and in
accordance with the requirements and standards specified
elsewhere in the Agreement and the accepted practices for the
telecommunications industry in the community in which the
Services are performed. Services not meeting the warranties
shall, at Buyer's option, be reperformed by Supplier at no
cost to Buyer.
C. Supplier shall repair or replace Goods discovered to be
defective during the Warranty Period without any additional
charge (including transportation), provided Buyer provides a
REPAIR/RETURN form dated during the Warranty Period and sent
to Supplier within ten (10) days. Such repair or replacement,
and shipment if required, shall be completed within three (3)
weeks from receipt by Supplier or notification by Buyer unless
Buyer agrees otherwise.
D. During the Warranty Period, all changes, corrections and fixes
to correct errors or deficiencies in licensed Software shall
be provided by Supplier at no charge.
73.2 The term "Warranty Period," as used in this Agreement, means the
period of time listed below unless the parties agree to a longer
applicable period.
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A. Supplier Manufactured Goods, including Software, exclusive of
converted PDU-20 units, whichever of the following periods
concludes first: (i) thirteen (13) months from the mutually
agreed upon date of the completion of installation, or (ii)
fifteen (15) months from the date of shipment of Goods;
provided, however, if Supplier is responsible for delaying the
completion date of installation, the Warranty Period shall be
thirteen (13) months from the actual completion date of
installation.
B. Non-Supplier Manufactured Goods, including Software, whichever
of the following periods concludes first: (i) ninety (90) days
from the mutually agreed upon date of the completion of
installation or (ii) one hundred and eighty (180) days from
the date of shipment of Goods; provided however, if Supplier
is responsible for delaying the completion date of
installation, the Warranty Period shall be ninety (90) days
from the actual completion date of installation.
C. Converted PDU-20 units - twelve (12) months following the
completion of the installation of the PDU-20 conversion kit.
D. Engineering and Installation Services - ninety (90) days
commencing as follows:
(1.) For engineering and installation Services performed in
connection with EF&I, F&I and Installation Only Orders,
on the date of Buyer's acceptance via the Completion
Report and Certification of Acceptance.
(2.) For engineering Services performed in connection with
E&F Orders, on the date of Buyer's acceptance of the
Goods engineered by Supplier.
E. All repaired or replacement Goods shall be warranted as
provided above from the date received by Buyer for the
remainder of the original unexpired Warranty Period or for a
period of three (3) months from the date received by Buyer,
whichever is longer.
73.3 Hewlett Packard furnished equipment such as CRTs may be used in
conjunction with the Goods without violation of any of the
conditions of this Agreement. Such equipment shall be limited to
models approved by Supplier or as listed in Appendix A.
73.4 All warranties shall survive inspection, acceptance and payment.
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73.5 These warranties shall not apply to defects caused by or
attributable to modifications made to the Goods without Suppliers
approval or misuse of the Goods by Buyer.
73.6 Supplier shall bear all transportation costs and risk of in-transit
loss or damage in connection with all Goods returned to Supplier and
all Goods shipped to Buyer under this clause. Goods returned to
Supplier must be accompanied by Supplier's RETURN/REPAIR form.
73.7 SUPPLIER MAKES NO OTHER WARRANTY WITH RESPECT TO GOODS AND THIS
WARRANTY IS IN LIEU OF ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
BUT NOT LIMITED TO ANY EXPRESS OR IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
-------------------- END OF ARTICLE I -------------------
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ARTICLE II
SERVICES
SECTION A: ENGINEERING
1.0 ENGINEERING
1.1 Engineering Services
Supplier agrees to perform engineering Services and to provide
related documentation in accordance with Ameritech document
AM-TR-EEN-000015, Issue 1, dated June 1987, Ameritech Central Office
Equipment and Engineering Requirements. Such engineering standards
are made a part ot this Agreement and hereby incorporated by
reference.
1.2 Engineering Errors
When Supplier furnishes engineering Services, Supplier shall be
responsible for engineering errors and correct such errors without
charge to Buyer.
1.3 Engineered Performance
If the Goods fail to deliver the quoted engineered performance
immediately following placement of Goods into service, Supplier
shall reimburse Buyer for all costs associated with rearrangements,
deloading of traffic and the like, which are required to reestablish
the original traffic handling capacity of the facility. Supplier
further agrees to reimburse Buyer for capital cost and expense
required to establish engineered service levels. Such costs may
include the cost of hardware, software,, Buyer's engineering and any
other costs reasonably incurred.
-------------------- END OF SECTION A, ARTICLE II --------------------
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SECTION B: INSTALLATION
The following general provisions shall apply when Supplier provides installation
Services hereunder.
1.0 INSTALLATION
1.1 Installation Requirements
A. Supplier agrees to perform installation Services and to provide
related documentation in accordance with the installation standards
provided and/or approved by Buyer which are hereby made a part of
and incorporated into this Agreement by reference. These standards
shall meet the requirements contained in the provisions of Ameritech
document AM-TR-EEN-000011, Issue C, dated December 1988, Ameritech
Installation Administrative and Workmanship Requirements, as revised
from time to time.
B. Where Supplier's Installation Specifications conflict with the
requirements set forth in Buyer's installation requirements, the
requirements contained in Ameritech document AM-TR-EEN-000011, Issue
C, dated December 1988, Ameritech Installation Administrative and
Workmanship Requirements shall apply.
1.2 Changes to Installation Requirements (1.1 Above)
Any changes to the installation requirements shall be mutually agreed upon
and detailed in a change Order referencing the original Order. Changes to
the installation schedule, resulting from such change in requirements,
shall be as mutually determined.
1.3 Installation Services Warranty
Supplier warrants to Buyer that the installation Services provided
hereunder shall be performed in a workmanlike manner in accordance with
Supplier's applicable specifications and the installation requirements set
forth herein. Nothing herein shall be deemed to diminish or otherwise
limit Supplier's obligation under the clause "WARRANTIES."
1.4 Testing and Acceptance of EF&I and F&I Orders
A. Upon receipt of-Supplier's written notification (via the Completion
Report and Certification of Acceptance form furnished by Buyer) of
completion of installation for Goods acquired from and installed by
Supplier, Buyer may
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perform acceptance tests to verify that the Goods perform and are
installed in accordance with the applicable specifications and
installations standards. Upon successful completion of its
acceptance testing, Buyer shall provide Supplier written
notification of its final acceptance by executing the Installation
Completion Notice.
B. Buyer shall have the right to observe all phases of installation
Services and shall be advised of job progress by Supplier. Supplier
or Buyer and Supplier at Buyer's option shall test the Goods and
installation Services for conformity with Supplier's applicable
specifications and the installation standards herein, utilizing the
applicable test sheets. At such time as all such tests have been
completed to Supplier's satisfaction, Supplier shall give Buyer
written notice thereof via the Completion Report and Certification
of Acceptance together with copies of all test results. Supplier
warrants to Buyer 100% conformance of Goods to Supplier's technical
specifications on an "end to end" system basis. Supplier shall
perform appropriate test(s) to insure such conformance on EF&I, F&I,
and Installation Only Orders and shall also perform such test(s) on
all other orders upon Buyer's request.
C. If Buyer's testing indicates that the Goods and/or installation
Services fail to meet all specifications and installation standards,
Buyer shall promptly give Supplier written notice of nonacceptance,
specifying the reasons for such nonacceptance. Supplier and Buyer
shall cooperate with each other in promptly resolving or correcting
any deficiencies noted. Supplier's correction of such deficiencies
shall be done at no charge to Buyer and shall be completed within
seven (7) days. When such deficiencies have been resolved or
corrected, Buyer shall sign and return the Completion Report and
Certification of Acceptance and shall be deemed to have accepted the
Goods and installation Services. Such acceptance shall not be
unreasonably withheld.
1.5 Premium Time Allowances and Nightshift Bonuses - Premium time allowances
and nightshirt bonuses incurred by Supplier shall be billable to Buyer
when such expenses are necessary due to Buyer's requirements and such
premium time allowance or nightshift bonuses have been authorized by Buyer
prior to commencement of such work.
1.6 Acceptance Of Multi-site Systems - In Multi-site systems, acceptance of
Goods and associated installation Services will take place on a per
switching section basis (and span basis in fiber optic cable) as
identified during engineering of the system, provided in the Request For
Proposal and approved by Buyer at acceptance of the Request For Proposal
or Request For Quotation as applicable.
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2.0 INSTALLATION ENVIRONMENT
2.1 The Buyer shall provide at its sole cost, by the date of the actual
delivery of Goods, a suitable installation environment for said
Goods. It is understood that any installation of Supplier's Goods in
an environment which does not meet such parameters is at Buyer's
risk, and Supplier will not be responsible for any defects,
malfunctions or other problems, whether or not covered by Supplier's
warranty, that are caused directly or indirectly by the unsuitable
environment.
-------------------- END OF ARTICLE II --------------------
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ARTICLE III
SOFTWARE
1.0 SOFTWARE LICENSE
1.1 Buyer will execute Supplier's Software License Agreement, a copy of
which is attached as Appendix E of this Agreement, covering
applicable Software. In addition, Buyer may be requested to sign
Software license(s) or Software sublicense agreements(s) for
Software supplied to Supplier or directly to Buyer by other vendors
as may be requested by these other vendors.
1.2 With respect to Software which Supplier licenses and which is
supplied hereunder, the word "purchase" or similar or derivative
words are understood to mean "license" and "Buyer" or similar or
derivative words are understood to mean "Licensee." Title to such
Software shall remain with Supplier or other vendor, as appropriate.
2.0 CHANGES TO LICENSED SOFTWARE
2.1 Supplier may at any time modify the specifications relating to its
Software, or with Buyer's approval, substitute updated licensed
Software to fill an order for Goods, provided the modifications or
substitutions, under normal and proper use, do not affect functional
interchangeability or performance. Such modifications or
substitutions shall not result in any additional charges to Buyer.
3.0 SOFTWARE DOCUMENTATION
3.1 Supplier shall, at no additional charge, furnish related
documentation, which includes, but shall not be limited to,
functional specifications, user manuals, flow diagrams, file
descriptions and data base layouts to Buyer with respect to the
Software provided hereunder.
4.0 SOFTWARE QUALITY
4.1 Supplier shall establish tests which utilize feature interaction at
the engineered full load condition to demonstrate to Buyer, or its
designated agent prior to delivery, verification of the load
handling capacity.
4.2 Supplier shall demonstrate feature operation that complies with the
Supplier's technical specifications and requirement of the Order.
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5.0 SOFTWARE SUPPORT
5.1 Supplier will provide support for Software licensed by Buyer
pursuant to the terms and conditions contained in Appendix C
attached to this Agreement, which will be separately executed by
Buyer and Supplier.
6.0 SOFTWARE ESCROW ACCOUNT
6.1 Supplier agrees to keep and maintain current a copy of the Software
source code in escrow with a mutually acceptable escrow agent. The
escrow account shall be for the sole benefit of all Buyers hereunder
and the contents of the account shall be obtainable as specified in
Appendix F of this Agreement.
6.2 The yearly cost of the account shall be paid for by Supplier up to a
limit of $1,000.00 per year. Any cost of the account over $1,000.00
per year shall be paid by Buyer.
6.3 Any and all information which is placed into the escrow account by
Supplier shall remain the property of the Supplier and is
confidential and/or trade secret material, and shall remain
confidential and/or trade secret material even though Buyer may
possess some or all of said information sometime in the future
pursuant to this Agreement.
7.0 SOFTWARE FEATURE DEVELOPMENT
7.1 Supplier agrees to provide feature(s) beyond those provided under
the terms of Appendix C of this Agreement, if requested by Buyer.
The cost and time frame for providing such feature(s) will be
mutually agreed upon by the parties. Unless otherwise agreed, all
rights in such features shall be owned by Supplier. In the event
Buyer funds the development of such feature(s), Supplier shall pay
Buyer applicable fees, to be mutually agreed upon at the time the
feature is developed, if such feature(s) or any portion thereof are,
after notice to Buyer, sold, licensed or granted to other. In the
event Supplier provides others any updates to such feature(s)
Supplier shall furnish Buyer such updates at fees mutually agreed
upon. Any amounts due Buyer from Supplier hereunder shall be paid to
Buyer within thirty (30) days of Supplier's receipt of such fee from
other(s).
8.0 GENERIC UPGRADES
8.1 Supplier has entered into separate licensing agreements with various
electronic switch manufacturers for the following switch types: #3
ESS, DMS-10, DMS-100, #2 ESS, #2B ESS, #1 AESS, #1 ESS and #5 ESS,
and for the current generics of these switch types located at
Buyer's sites at the time of execution of this Agreement with which
Supplier's Goods and Software are fully compatible, and is
authorized pursuant to these licensing agreements to receive
information
-48-
<PAGE>
from electronic switch manufacturers. As new switch types or switch
upgrades are introduced at Buyer's sites, Supplier will make best
efforts to obtain a switch licensing agreement for the applicable
switch type or switch upgrade with such switch vendor, and Buyer
will make best efforts to cooperate in any efforts to obtain such a
license for such applicable switch type or switch upgrade. Should
Buyer's licensed switch type location receive an authorized software
generic change of any of the above from an electronic switch
manufacturer, Supplier will:
A. For Minor Changes
1. During Warranty Period of Software - Supplier will upgrade
existing Goods or Software to maintain billing terminal integrity as
prescribed in TR-TSY-000064, Issue 2, Dated July 1987, LATA
Switching Systems Generic Requirements ("LSSGR") for the affected
switch types as soon as possible at no charge to Buyer; or
II. After Expiration of Software Warranty Period - Supplier
will upgrade Goods or Software to maintain billing terminal
integrity as prescribed in the LSSGR for the affected switch types
at a software maintenance charge as specified in Appendix C of this
Agreement.
B. Significant Changes During and After Warranty Period -
Should the generic upgrade significantly change application
requirements, Supplier will provide Buyer with price quotation for
upgrading existing Software to maintain integrity with the switch as
prescribed in the LSSGR for the affected switch types. An example of
a significant change is a departure from currently-defined standard
"V" or new standard format record structures as specified
hereinabove. Supplier will make best efforts to provide updates of
Software as soon as possible.
------------------------- END OF ARTICLE III --------------------------
-49-
<PAGE>
ENTIRE AGREEMENT
The terms contained in this Agreement shall constitute the entire
agreement between Buyer and Supplier with respect to Goods and Services,
if any, purchased hereunder and may not be modified or rescinded other
than by a written instrument signed by both Supplier and Ameritech
Services, Inc. Buyer shall not be bound by terms additional to or
different from those in this Agreement that may appear in Supplier's
quotation, acknowledgment, invoice or in any other communication from
Supplier. Acceptance of Goods and Services, if any, payment or any
inaction shall not constitute the consent of Buyer to or the acceptance of
any such terms. An Order placed by Buyer hereunder shall incorporate the
typed, stamped or written provisions or data found thereon and in
subordinated documents (such as shipping releases) so long as the typed,
stamped or written provisions or data merely supply information
contemplated by this Agreement but do not vary the provisions of this
Agreement. Whenever typed, stamped, or written provisions of an accepted
Order conflicts with this Agreement, this Agreement shall control.
IN WITNESS WHEREOF, this Agreement, consisting of forty-nine (49) pages and
eight (8) Appendices has been executed by a duly authorized representative of
each Party on the date indicated below.
TELESCIENCES, INC AMERITECH SERVICES, INC.
By: /s/ By: /s/
-------------------------------- -------------------------------
Title: President Title: Exec. Director - Purchasing
------------------------- ---------------------------
Date: 10/11/8 9
-50-
<PAGE>
APPENDIX F
ESCROW AGREEMENT
This Appendix is to be attached to the Agreement within ninety (90) days
of the execution of RG49509.
-51-
<PAGE>
APPENDIX G
DOCUMENTS LISTING
DOCUMENT NUMBER DOCUMENT DESCRIPTION CLAUSE
AM-010-700-010 Ameritech Engineering Complaint ENGINEERING
Issue D, July, 1987. Practices COMPLAINTS
AM-TR-EEN-000011 Ameritech Installation Administrative ARTICLE II
Issue C, Dec. 1988. and Workmanship Requirements SECTION B
INSTALLATION
AM-TR-EEN-000015 Ameritech Central Office Equipment ARTICLE II
Issue 1, June, 1987. and Engineering Requirements SECTION A
ENGINEERING
TR-EOP-000063 Network Equipment Building System PACKING
Issue 3, March, 1988. (NEBS) Generic Equipment Requirements
TR-TSY-000064 Lata Switching Systems GENERIC
Issue 2, July, 1987. Generic Requirements UPGRADES
TR-TSY-000078 Generic Physical Design Requirements PACKING
Issue 2, Dec. 1988. for Telecommunications Products and
Equipment
TR-TSY-000081 Packaging, Packing Palletization PACKING
Issue 1, Dec. 1984. and Marking Requirements AND MARKING
TR-ISD-000152 Guidelines for Mechanized Invoicing BILLING
Issue 2, May, 1987.
TA-TSY-000200 Specification of System Maintenance SPECIFICATIONS
Issue 4, Sept. 1988. Messages at the OS/NE Interface
TR-ISD-000325 Equipment Information Required from EQUIPMENT
Issue 1, Sept. 1986. Suppliers for Operations Systems CLASSIFICATION
AND MARKING
TR-TSY-000382 Triboelectric Charge Testing of PACKING
Issue 1, July, 1986. Bags and Pouches
-52-
<PAGE>
TR-TAP-000383 Generic Requirements for Common MARKING
Issue 3, Dec. 1987. Language Bar Code Labels
TR-TSY-000454 Supplier Documentation For DOCUMENTATION
Issue 1, July, 1988. Network Elements
TR-TAP-000485 Common Language\ CLEI CODE ASSIGNMENT EQUIPMENT
Issue 1, April, 1987. AND EQUIPMENT MARKING CLASSIFICATION
REQUIREMENTS AND MARKING
-53-
<PAGE>
APPENDIX G
DOCUMENTS LISTING
DOCUMENT NUMBER DOCUMENT DESCRIPTION CLAUSE
TA-TSY-000870 Electrostatic Discharge Control SPECIFICATIONS
Issue 1, April, 1988. in the Manufacture of Telecommunication
Equipment
TR-795-25540-84-02 Common Language Identification of MARKING
Issue 1, Jan. 1984. Manufacturers of Telecommunications
Products
SHP92706AM Ameritech Specification. PACKING
Issue 1, May, 1988. Packing, Packaging and
Palletization
QPS 82.040, Quality Program Specification INSPECTION
Issue 4 For Transmission Products (General)
QPS 90.176, Quality Program Specification INSPECTION
Issue 4 For Traffic Measurement & Recording
Devices
(SPL TeleSciences)
QPS 93.168, Quality Program Specification INSPECTION
Issue 3 For System: Automatic Message
Accounting Teleprocessing (AMATPS)
(SPL Telematic Products)
-54-
<PAGE>
AMENDMENT
WHEREAS, Ameritech Services, Inc., and Securicor Telesciences, Inc., desire to
amend Agreement RG49509, dated October 11, 1989;
WHEREAS, each party acknowledges that it has read this Amendment and agrees to
be bound by its terms and conditions;
NOW, THEREFORE, in consideration of these premises and the mutual promises set
forth herein, the parties hereby agree as follows:
The TERM OF AGREEMENT Clause is hereby deleted and replaced with the following:
TERM OF-AGREEMENT
This Agreement is effective for Purchase orders placed during an initial
period from January 1, 1996, through December 31, 1997, and shall continue
to be effective for Purchase Orders placed during successive period(s) of
one year each unless terminated at the expiration of the initial or any
successive period by either party on not less than one hundred-twenty
(120) days prior written notice to the other.
All other terms and conditions remain unchanged.
This Amendment is Effective January 1, 1996.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed
by their duly authorized representatives.
AMERITECH SERVICES, INC. SECURICOR TELESCIENCES, INC.
Signature: __________________ Signature: __________________
Printed Name: _______________ Printed Name: _______________
Title: ______________________ Title: ______________________
Date: _______________________ Date: _______________________
-55-
<PAGE>
General Procurement Agreement
No. RPHCR43421
BETWEEN
TELESCIENCES INC.
AND
U S WEST Communications, Inc.
<PAGE>
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A1. SCOPE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A2. ACCEPTANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A3. ACCEPTANCE DATE . . . . . . . . . . . . . . . . . . . . . . . . 2
A4. ACCEPTANCE PERIOD . . . . . . . . . . . . . . . . . . . . . . . 2
A5. COMMENCEMENT DATE . . . . . . . . . . . . . . . . . . . . . . . 2
A6. COMPLETION DATE . . . . . . . . . . . . . . . . . . . . . . . . 2
A7. DELIVER (DELIVERY). . . . . . . . . . . . . . . . . . . . . . . 3
A8. DELIVERY DATE . . . . . . . . . . . . . . . . . . . . . . . . . 3
A9. FIRMWARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A10. MATERIEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A11. ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
A12. PROGRAM MATERIAL. . . . . . . . . . . . . . . . . . . . . . . . 3
A13. RELATED ORDER . . . . . . . . . . . . . . . . . . . . . . . . . 3
A14. SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A15. SHIPMENT DATE . . . . . . . . . . . . . . . . . . . . . . . . . 4
A16. SOFTWARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
A17. SPECIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 4
A18. LICENSED SOFTWARE . . . . . . . . . . . . . . . . . . . . . . . 4
A19. SUPPORT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 4
GENERAL TERMS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . 5
B2. NONEXCLUSIVE NATURE OF AGREEMENT. . . . . . . . . . . . . . . . 5
B3. TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 5
B4. ORDER PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 5
B5. ORDER ACCEPTANCE, MODIFICATION AND TERMINATION. . . . . . . . . 6
B6. UNCONFIRMED ORDERS. . . . . . . . . . . . . . . . . . . . . . . 7
B7. SUPPLIER PROVIDED INFORMATION . . . . . . . . . . . . . . . . . 7
B8. PRICE PROTECTION. . . . . . . . . . . . . . . . . . . . . . . . 8
B9. INVOICES AND PAYMENTS . . . . . . . . . . . . . . . . . . . . . 9
B10. REIMBURSABLE EXPENSES . . . . . . . . . . . . . . . . . . . . .10
B11. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
B12. RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
B13. WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . .11
B14. ENGINEERING COMPLAINTS. . . . . . . . . . . . . . . . . . . . .13
B15. TIME OF ESSENCE . . . . . . . . . . . . . . . . . . . . . . . .14
B16. TRAINING. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
B17. MANUALS AND DOCUMENTATION . . . . . . . . . . . . . . . . . . .14
B18. COMPATIBILITY INFORMATION . . . . . . . . . . . . . . . . . . .15
B19. CUSTOMER'S INFORMATION. . . . . . . . . . . . . . . . . . . . .15
B20. RIGHTS TO INVENTIONS, DISCOVERIES AND OTHER
DEVELOPED INFORMATION . . . . . . . . . . . . . . . . . . . . .16
B21. PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . .16
B22. SUPPLIER'S INFORMATION. . . . . . . . . . . . . . . . . . . . .17
B23. PATENT, TRADEMARK, COPYRIGHT INFRINGEMENT . . . . . . . . . . .17
B24. PATENT LICENSES . . . . . . . . . . . . . . . . . . . . . . . .18
B25. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . .18
B26. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .18
<PAGE>
B27. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . .20
B28. RESTRUCTURE . . . . . . . . . . . . . . . . . . . . . . . . . .20
B29. SUBCONTRACTORS. . . . . . . . . . . . . . . . . . . . . . . . .20
B30. INDEPENDENT CONTRACTOR. . . . . . . . . . . . . . . . . . . . .20
B31. NONDISCRIMINATION AND COMPLIANCE. . . . . . . . . . . . . . . .21
B32. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . .21
B33. RIGHT TO INSPECT. . . . . . . . . . . . . . . . . . . . . . . .21
B34. RIGHT OF ACCESS . . . . . . . . . . . . . . . . . . . . . . . .21
B35. DAMAGE TO PROPERTY. . . . . . . . . . . . . . . . . . . . . . .22
B36. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . .22
B38. REMEDIES CUMULATIVE . . . . . . . . . . . . . . . . . . . . . .24
B39. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . .24
B40. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . .24
B41. WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
B42. SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
B43. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
B44. PROHIBITED RELATIONSHIPS AND GRATUITIES . . . . . . . . . . . .25
B45. USE NOT ACCEPTANCE. . . . . . . . . . . . . . . . . . . . . . .25
B46. SEVERAL LIABILITY . . . . . . . . . . . . . . . . . . . . . . .25
B47. DISCOUNTS/CREDITS . . . . . . . . . . . . . . . . . . . . . . .25
ACQUISITION OF MATERIEL. . . . . . . . . . . . . . . . . . . . . . . . .26
C1. SCOPE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
C2. DETAILED ORDER ACKNOWLEDGMENT. . . . . . . . . . . . . . . . . .26
C3. QUALITY ASSURANCE AND INSPECTION . . . . . . . . . . . . . . . .26
C4. SPECIFICATIONS OR DRAWINGS . . . . . . . . . . . . . . . . . . .27
C5. PACKING AND CONTAINERS . . . . . . . . . . . . . . . . . . . . .28
C6. TRANSPORTATION AND SHIPPING. . . . . . . . . . . . . . . . . . .28
C7. DELIVERY . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
C8. ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .29
C9. TITLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
C10. RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . .30
C11. FUTURE AVAILABILITY OF REPAIRS, REPLACEMENT PARTS,
AND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
C12. CHANGE NOTICES . . . . . . . . . . . . . . . . . . . . . . . . .31
C13. TECHNICAL SUPPORT. . . . . . . . . . . . . . . . . . . . . . . .31
C14. MARKING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
C15. HAZARDOUS MATERIALS AND SUBSTANCES . . . . . . . . . . . . . . .33
C16. RADIO FREQUENCY ENERGY STANDARDS . . . . . . . . . . . . . . . .33
C17. LIGHTWAVE RADIATION. . . . . . . . . . . . . . . . . . . . . . .33
ENGINEERING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . .34
D1. SCOPE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
D2. DEFINITION . . . . . . . . . . . . . . . . . . . . . . . . . . .34
D3. GENERAL CONDITIONS OF ENGINEERING SERVICES . . . . . . . . . . .34
D4. ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .34
D5. TITLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
D6. ENGINEERING SERVICES SUPPORT . . . . . . . . . . . . . . . . . .35
INSTALLATION AND REMOVAL SERVICES. . . . . . . . . . . . . . . . . . . .36
E1. SCOPE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
E2. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .36
<PAGE>
E3. GENERAL CONDITIONS OF INSTALLATION AND REMOVAL
SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
E4. ENVIRONMENTAL COMPLIANCE . . . . . . . . . . . . . . . . . . . .37
E5. ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .37
E6. TITLE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
E7. INVOICES AND PAYMENTS. . . . . . . . . . . . . . . . . . . . . .38
F1. SCOPE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
F2. DEFINITION . . . . . . . . . . . . . . . . . . . . . . . . . . .39
F3. GENERAL CONDITIONS OF REPAIR SERVICES. . . . . . . . . . . . . .39
F4. TRANSPORTATION . . . . . . . . . . . . . . . . . . . . . . . . .40
F5. ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .40
G1. SCOPE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
G2. DEFINITION . . . . . . . . . . . . . . . . . . . . . . . . . . .42
G3. LICENSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
G4. LICENSE TERM . . . . . . . . . . . . . . . . . . . . . . . . . .43
G5. SOFTWARE TRAPS . . . . . . . . . . . . . . . . . . . . . . . . .43
G6. TRANSPORTATION . . . . . . . . . . . . . . . . . . . . . . . . .43
G7. RISK OF LOSS . . . . . . . . . . . . . . . . . . . . . . . . . .43
G8. DELIVERY AND INSTALLATION. . . . . . . . . . . . . . . . . . . .44
G9. ACCEPTANCE . . . . . . . . . . . . . . . . . . . . . . . . . . .44
G10. LICENSED SOFTWARE RELEASES . . . . . . . . . . . . . . . . . . .44
G11. MAINTENANCE SERVICES AND SUPPORT . . . . . . . . . . . . . . . .45
G12. TECHNICAL SERVICES . . . . . . . . . . . . . . . . . . . . . . .46
G13. SOFTWARE EVALUATION. . . . . . . . . . . . . . . . . . . . . . .46
G14. SOFTWARE QUALITY ASSURANCE . . . . . . . . . . . . . . . . . . .47
TRAINING SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . . .48
H2. DEFINITION . . . . . . . . . . . . . . . . . . . . . . . . . . .48
H3. GENERAL CONDITIONS OF TRAINING SERVICES. . . . . . . . . . . . .48
ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
I1. LIMITED LIABILITY OF U S WEST Business Resources,
Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
I2. AMENDMENTS, MODIFICATIONS AND SUPPLEMENTS. . . . . . . . . . . .49
I3. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . .49
I4. SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . .49
EXHIBIT A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
Materiel and Price List . . . . . . . . . . . . . . . . . . . . . . .50
EXHIBIT B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
Discounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
EXHIBIT C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .53
Service Repair and Return Order . . . . . . . . . . . . . . . . . . .53
EXHIBIT D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
Nondiscrimination and Compliance Agreement. . . . . . . . . . . . . .54
<PAGE>
ESCALATION PROCEDURE AND PROBLEM CLASSIFICATION. . . . . . . . . . . . .55
SEVERITY LEVEL 1. . . . . . . . . . . . . . . . . . . . . . . . . . .56
SEVERITY LEVEL 2. . . . . . . . . . . . . . . . . . . . . . . . . . .56
SEVERITY LEVEL 3. . . . . . . . . . . . . . . . . . . . . . . . . .57
<PAGE>
PREAMBLE
This Agreement number RPHCR43421 is made this 1st day of May, 1991 by and
between U S WEST Business Resources, Inc., a Colorado corporation, with its
principal address at 188 Inverness Drive, Englewood, Colorado, 80112, as agent
for U S WEST Communications, Inc. (hereinafter "Customer"), and TeleSciences CO
Systems, a Delaware corporation, with its principal address at 351 New Albany
Road, Moorestown, New Jersey 08057-1177, (hereinafter "Supplier").
In consideration of the promises, mutual covenants and agreements contained
herein, the receipt and sufficiency of which are hereby acknowledged, Customer
and Supplier agree as follows:
<PAGE>
DEFINITIONS
A1. SCOPE
This Section defines terms used throughout this document. Defined terms are
capitalized and will be read in the singular or the plural as the context
requires. Defined terms may be used in various contexts in the Agreement as
nouns, adjectives, adverbs or other forms and shall be interpreted
appropriately in the context in accordance with their stated definitions.
A2. ACCEPTANCE
"Acceptance" means Customer's acknowledgment that Materiel, Licensed
Software and Services procured hereunder conform to specifications and the
requirements of the applicable Order.
A3. ACCEPTANCE DATE
"Acceptance Date" means the date that Customer acknowledges Acceptance or,
if Customer does not so acknowledge, the last day of the Acceptance Period.
A4. ACCEPTANCE PERIOD
"Acceptance Period" means that time during which Customer determines if
Materiel, Licensed Software and Services conform to the Specifications and
the requirements of an Order and shall be as follows:
a. For Services, thirty (30) days after the Completion Date; and
b. For Materiel and Licensed Software, thirty (30) days after receipt; or
if installed by Supplier, thirty (30) days after the Completion Date.
The passage of thirty (30) days shall not be deemed Acceptance for Materiel
or Licensed Software delivered prior to the Delivery Date, or Services
completed prior to the Completion Date, without Customer's consent.
A5. COMMENCEMENT DATE
"Commencement Date" means the date stated in an Order on which Services
are to begin.
A6. COMPLETION DATE
"Completion Date" means the date stated in an Order on which Services
are to be concluded.
2
<PAGE>
A7. DELIVER (DELIVERY)
"Deliver" ("Delivery") means Customer's receipt of Materiel and Licensed
Software at the location specified in the Order. If Customer specifies the
common carrier to be used, "Delivery" means receipt of such Materiel and
Licensed Software by the common carrier.
A8. DELIVERY DATE
"Delivery Date" means the date stated in an Order by which Materiel and
Licensed Software are required to be Delivered.
A9. FIRMWARE
"Firmware" means a set of logical instructions represented by a pattern
of bits contained in hardware.
A10. MATERIEL
"Materiel" means goods, including but not limited to, equipment, apparatus,
components, tools and supplies procured from Supplier under an Order, and
any associated Software and Firmware integral to its function. When Supplier
is performing Services associated with products not procured from Supplier,
"Materiel" shall also include goods of the same kind wherever procured.
A11. ORDER
"Order" means a written offer, whether or not identified as an offer, issued
and executed by Customer for Materiel, Licensed Software and Services and
shall be deemed to incorporate all provisions of this Agreement.
A12. PROGRAM MATERIAL
"Program Material" means information, whether tangible or intangible,
associated with Licensed Software or Software, such as: test data, flow
charts, data file listings, input/output formats, user instructions,
Specifications, loading and unloading procedures, machine configuration
information, programs, routines, subroutines, or related information
necessary for the operation and maintenance of Licensed Software or
Software. "Program Material" does not include source codes.
A13. RELATED ORDER
"Related Order" means an Order identified as being associated with other
interdependent Orders, under the provisions of this Agreement and said
Related Orders.
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A14. SERVICES
"Services" means Engineering Services, Installation and Removal
Services, Self-Maintenance Support Services, Repair Services or other
work specified in an Order.
A15. SHIPMENT DATE
"Shipment Date" means the date stated in an Order by which Materiel and
Licensed Software is to be shipped.
A16. SOFTWARE
"Software" means a set of logical instructions and tables of information
which guide the functioning of a processor.
A17. SPECIFICATIONS
"Specifications" means criteria, technical or otherwise, for Materiel,
Licensed Software and Services which is referenced in or made a part of this
Agreement or an Order.
A18. LICENSED SOFTWARE
"Licensed Software" means standard Software programs, whether or not
associated with Materiel, for which Supplier has the right to grant licenses
or sublicenses to Customer. Licenses listed below are granted as either
perpetual or periodic, exclusive or nonexclusive, for which Supplier may or
may not receive a license fee.
A19. SUPPORT AGREEMENT
"Support Agreement" means the existing Licensed Software and Maintenance
Support Services Agreement between Customer and Supplier.
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GENERAL TERMS AND CONDITIONS
B1. SCOPE2
This Agreement sets forth the terms and conditions under which Customer may
procure Materiel, Licensed Software and Services, through issuance of an
Order.
The terms and conditions of this Section shall control unless modified by
subsequent Sections of this Agreement or an Order. This Agreement covers all
purchases with the exception of Licensed Software or Maintenance Support
Services as referenced in the Support Agreement.
B2. NONEXCLUSIVE NATURE OF AGREEMENT
This Agreement does not grant to Supplier any exclusive privileges or rights
to provide Materiel, Licensed Software and Services to Customer.
Customer makes no guarantee of any minimum or maximum amount of Materiel,
Licensed Software and Services to be procured hereunder.
B3. TERM OF AGREEMENT
a. This Agreement shall commence on May 1, 1991, and continue in effect
thereafter until May 1, 1993. Either BRI or Supplier may terminate
this Agreement by providing the other party written notice of
termination at least ninety (90) days prior to the effective date of
termination.
b. The termination of this Agreement shall not affect the rights or
obligations of either party to the other under any then existing
Order.
c. Neither Customer nor Supplier shall be liable to the other for damages
of kind including incidental and consequential damages or any other
losses or claims whatsoever on account of or arising out of
termination of this Agreement.
B4. ORDER PROVISIONS
a. All Orders shall be signed by Customer.
b. When provisions of an Order conflict with or supplement this
Agreement, provisions of the Order which are not pre-printed shall
control. This Agreement shall control over pre-printed provisions of
the Order.
c. If one Related Order references this Agreement, all Related Orders
shall be deemed to incorporate this Agreement, whether referenced or
not. In the event of a conflict between the provisions of Related
Orders, the provisions of this Agreement shall control.
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d. If an Order is issued in connection with a government contract, the
Order shall reference the contract and Supplier shall comply with all
mandatory provisions of said contract and procurement regulations.
Supplier shall be provided an opportunity to review such contracts
prior to its Acceptance of an Order.
e. Warranties or representations made by Supplier under an Order or in
contemplation of an Order, shall be binding upon Supplier, for
purposes of that Order.
B5. ORDER ACCEPTANCE, MODIFICATION AND TERMINATION
a. Acknowledgment or performance, in whole or in part, shall constitute
Supplier's acceptance of the Order. Acceptance of an Order binds the
parties to honor all dates, amounts and other requirements of an
Order. The passage of ten (10) working days shall constitute
Acceptance, however, the delivery interval shall begin on the day
Supplier receives an Order.
b. If Supplier is unable to accept an Order as received Supplier shall
provide Customer with a notice of non-acceptance within five (5)
working days of receipt of the Order. The notice shall state the
modifications necessary to make it acceptable. The proposed
modifications shall not be binding on Customer until accepted by
Customer in writing.
c. Customer may modify Orders subject to clause B5, paragraphs a and b
above.
d. Customer may, at any time prior to Supplier's acceptance, withdraw
an Order, in whole or in part, with no liability.
e. Following Supplier's acceptance, Customer may terminate an Order in
whole or in part, for its convenience, upon written notice, specifying
the effective date. Cancellation charges will not be assessed if
replaced by an Order for like Materiel or value within sixty (60)
days.
f. For Orders terminated by Customer after Supplier's Acceptance in
writin, between forty-six (46) and ninety (90) days prior to the
delivery date as agreed to in an Order, the cancellation fee shall be
twenty-five (25) percent of the value of the Materiel cancelled. For
Orders terminated by Customer after Supplier's acceptance, between one
(1) and forty-five (45) days prior to the delivery date as agreed to
in an Order, the cancellation fee shall be thirty- seven and one half
(37.5) percent of the value of the Materiel cancelled. Customer
reserves the right to cancel any Order, or any portion thereof, which
is not delivered within one (1) calender day after the date as agreed
to in an Order incurring no liability whatsoever.
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B6. UNCONFIRMED ORDERS
Customer may designate an Order, before Supplier's acceptance, as an
unconfirmed Order. The unconfirmed Order shall establish Customer's position
in supplier's manufacturing, delivery and Services schedule, and shall
establish prices. Customer shall confirm, extend or withdraw the unconfirmed
Order within thirty (30) days of issuance. Any Order not confirmed or
extended shall be deemed to be terminated. Customer shall be under no
obligation to Supplier until an unconfirmed Order has been confirmed.
B7. SUPPLIER PROVIDED INFORMATION
Upon execution of this Agreement Supplier shall provide the following to
Customer:
a. A complete listing and description of Materiel, Licensed Software
and Services including training courses and materials, associated
prices, rates, charges and fees therefor;
b. Supplier's current schedule of Materiel, Licensed Software and
Services lead-time (the interval between Supplier's receipt of
Customer's Order and Shipment Date of Materiel and Licensed
Software, or Completion Date of Service);
c. Literature regarding the availability of improvements, upgrades and
field modifications to Materiel, Licensed Software and Services
describing their features and advantages; and
d. A Monthly Order and Shipment Report, mailed to BRI containing the
following information:
1) Supplier's name (including subsidiary) and address;
2) This Agreement number;
3) Time period covered;
4) A description, by noun and part numbers, of Materiel and
Licensed Software shipped including
a) The quantity ordered and the quantity shipped;
b) The ship-to location;
5) A description of Services performed;
6) The dollar value of each shipment of Materiel or Licensed
Software and Service performed; and
7) The total dollar value (i.e., summary) of Materiel or Licensed
Software shipped and Services performed.
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Any updates to this information by Supplier shall be provided to Customer
within fifteen (15) days after publication.
B8. PRICE PROTECTION
a. For Orders issued and dated on or after the 1st day of May 1991,
through the 30th day of June, 1991, the prices, rates, charges or fees
payable by Customer for Materiel, Licensed Software and Services
purchased under this Agreement shall be, regardless of the Shipment
Date or Commencement Date, prices as set forth in Exhibit A entitled
"Materiel and Price List," attached hereto, and by this reference
incorporated herein, less any applicable discounts as described in
Exhibit B entitled "Discounts", attached hereto, and by this reference
incorporated herein. Supplier agrees to automatically extend at least
the level two (2) discount to any Orders placed under this Agreement,
during the time that Customer is making payment under the Support
Agreement.
b. Thereafter, Supplier may increase prices once in each calendar year by
notifying Customer in writing at least ninety (90) days in advance of
the effective date of any proposed price increase, with the exception
of pricing for the SEBX II (SX-5000) Materiel, for which pricing will
remain firm, and in effect, less any applicable discounts, until June
30, 1993. Increases for Materiel shall not exceed five (5) percent.
d. Increases for labor shall not exceed the U. S. Department of Labor,
Bureau of Labor Statistics, "Consumer Price Index-W for Urban Wage
Earners" for the previous twelve (12) month period for Services listed
in this Agreement.
Customer shall not be required to pay for Materiel, Licensed Software
and Services at prices other than those specified in an Order unless
previously agreed to by Customer in a written confirmation.
e. If Supplier's published prices, rates, charges or fees on the Shipment
Date of Materiel and Licensed Software or the Commencement Date for
Services are less than any prices, rates, charges or fees set forth in
the Order, Customer shall have benefit of the lesser prices, rates,
charges or fees.
f. Should the parties elect to extend this Agreement, Customer reserves
the right to determine whether any Supplier proposed price increase is
commercially reasonable. Such right may include Customer's employment
of an independent auditor.
B9. INVOICES AND PAYMENTS
a. Supplier shall issue invoices in the format required by Customer
within thirty (30) days following the Shipment Date or the Completion
Date. For Materiel and Services provided on an ongoing
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basis, invoices shall be issued no more often than monthly. All
invoices shall be sent to the billing address noted on the Order and
shall contain where applicable: Order number, ship-to location,
description and serial/part number of Materiel and Services, Common
Language Equipment Identification (CLEI(TM)) information, direct hours
charged, classification or employee, hourly labor rates chargeable,
other applicable charges and other details required by Customer. Any
taxes, transportation costs or other associated costs are to be stated
separately. Licensed Software shall be invoiced separately. Each
invoice shall specify whether it is partial or final. No term or
condition of any invoice shall be binding upon Customer.
All invoices for Materiel shall contain applicable Common Language
Equipment Coding (CLEI(TM)) for each item invoiced in accordance
with U S WEST Reference Publication 77361, entitled "Common Language
Equipment Classification and Bar Code Labeling Requirements for
Central Office Equipment" which by this reference is incorporated
herein. CLEI(TM) is a Trademark of Bell
Communications Research, Inc.
b. Invoices shall be paid within forty-five (45) days following
receipt of the invoice; and
1) Receipt of the Materiel; and/or
2) Receipt of Licensed Software; provided, however, the subject
Licensed Software has received Customer's First Office
Application ("FOA") Acceptance for a particular type central
office application; and/or
3) Completion of Services.
c. Customer is not required to pay amounts that are in dispute until
forty-five (45) days after resolution. Supplier shall substantiate the
disputed amount in writing.
d. Credits due Customer may be applied against amounts owed to Supplier.
Credits shall be stated on separate invoices and at Customer's
request, paid within thirty (30) days.
e. Payment shall not be considered Acceptance of nonconforming
Materiel, Licensed Software and Services.
f. Supplier shall provide Materiel, Licensed Software and Services
without interruption in the event of disputes concerning payment or
other provisions of this Agreement.
g. Supplier shall promptly notify Customer in writing of any claims,
liens or causes of action against Supplier of which Supplier is aware,
affecting Supplier's performance of an Order. Customer may,
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prior to making any payments for Materiel, Licensed Software and
Services or during the progress of Services, require Supplier to
furnish satisfactory evidence that all such claims, liens and causes
of action have been satisfied, released or settled. Until such
satisfactory evidence is furnished, the amount of such claims, liens
and causes of action may be retained from any monies otherwise due
Supplier.
B10. REIMBURSABLE EXPENSES
Customer will reimburse Supplier only for those expenses authorized in
writing. Only those expenses stated below will be considered.
a. Reasonable lodging expenses.
b. Airline fares at lowest rate available, not to exceed coach.
c. Car rentals, when necessary for the performance of Services.
d. Meals, not to exceed thirty (30) dollars per day.
e. Telephone calls, when necessary for performance of Services.
Personal calls are not reimbursable.
In all cases, receipts must accompany invoices requesting reimbursement for
all expenses over $25.00.
B11. TAXES
a. All taxes designated, levied or based on the prices, rates, charges or
fees or on this Agreement or the Materiel, Licensed Software and
Services provided hereunder, including sales, use, personal property,
privilege or excise taxes based on gross revenue and taxes and amounts
in lieu thereof, paid or payable by Supplier shall be added to the
invoice and paid by the Customer.
b. Both parties agree to comply with all federal, state and local laws as
they pertain to each party and shall make no claim on the other party
for such taxes except as otherwise provided in B11 a., above.
c. If Customer determines that any taxes are not payable or should be
paid on a basis less than the full price or at rates less than the
full tax rate, Supplier shall comply with such determination. Customer
shall reimburse Supplier for any taxes, interest or penalties which
Supplier may be required to pay on account of Supplier's compliance
with Customer's determinations.
d. If any taxing authority advises Supplier that it intends to audit or
assess Supplier with respect to taxes for which Customer is obligated
to reimburse Supplier, Supplier shall:
1) Promptly notify Customer; and
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2) Afford Customer an opportunity to participate on an equal basis
with Supplier in such audit or assessment proceedings and keep
Customer fully informed as to the progress of the audit or
assessment proceedings.
Each party shall bear its own expenses with respect to any such audit
or assessment proceedings.
e. Following a determination by any taxing authority that additional tax
is due for Materiel, Licensed Software and Services, Supplier shall
provide to Customer full supporting documentation for the Materiel,
Licensed Software and Services for which such taxes are assessed. If
Customer has otherwise paid the assessed taxes, Customer shall not
reimburse Supplier for such assessment.
B12. RECORDS
a. Supplier shall maintain complete and accurate records including hours,
prices, expenses and other matters which relate to Supplier's rights
and obligations hereunder in accordance with generally accepted
accounting principles. Supplier shall retain such records for not less
than seven (7) years from the date of final payment under an Order to
which such records relate.
b. Customer shall have access to such records during normal business
hours during the term of this Agreement or during the respective
periods in which Supplier is otherwise required to maintain such
records. At Customer's request, such records, or complete and legible
copies thereof, shall be made available to Customer.
B13. WARRANTIES
a. Supplier warrants that it has title, free of all liens and
encumbrances, to all Materiel and Licensed Software that is sold,
leased or licensed to Customer. However, for Licensed Software which
is not owned by Supplier, Supplier warrants that it has the right to
grant a license to Customer.
b. Supplier warrants that Materiel shall be free from defects in design,
materials and workmanship and shall conform to and perform in
accordance with Specifications and requirements of the Order.
c. Supplier warrants that Licensed Software shall conform to
Specifications and requirements of an Order.
d. If Supplier is not the manufacturer or licensor, Supplier shall obtain
the same warranty as specified herein from the manufacturer or
licensor and the complete warranty will pass to Customer. Supplier
shall assist and cooperate with Customer in making claims under such
warranty. If Supplier is a distributor of Materiel and Licensed
Software, Supplier shall process such claims.
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e. The warranty will not be affected by installation, removal, hardware
self-maintenance, or relocation of Materiel regardless of whether
performed by Supplier or Customer.
f. The warranty period for Materiel shall be twelve (12) months from the
Acceptance Date. The warranty period for Materiel installed by
Supplier shall be twelve (12) months from the Completion Date.
g. The warranty period for replacement Materiel shall be the same as for
new Materiel in clause B13 f. above.
h. The warranty period for repaired Materiel, Software and Services,
shall be one-hundred-twenty (120) days from completion of repairs, or
the remainder of the original warranty, whichever is greater.
i. The warranty period for Licensed Software shall be twelve (12) months
from the Acceptance Date.
j. The warranty period for Services shall be twelve (12) months from the
Completion Date.
1) Services provided hereunder shall be in accordance with
Specifications and the requirements of the Order, to the
highest standards of the industry.
2) Supplier's personnel shall be qualified to perform the tasks and
functions for which they are assigned in a workmanlike manner.
If personnel are, in Customer's opinion, unsuitable, Supplier
shall provide, at Customer's request, replacement personnel.
Supplier shall bear all associated costs to train and qualify
such personnel.
k. Warranties shall survive inspection, Acceptance and payment and shall
run to Customer, its agents, successors in interest, assigns and
customers.
l. If Materiel, Licensed Software and Services do not meet Specifications
and the requirements of the Order, Customer shall notify Supplier to
that effect during the warranty period. Supplier shall promptly remedy
such nonconformities at no additional charge.
1) Nonconforming Materiel, Licensed Software and Services shall
be either corrected on-site or returned to Supplier for
correction in accordance with the following schedule:
PDU-20 (CO Products) Returned to Supplier
Licensed Software Returned to Supplier
Installation Services On-Site
HP Host Computer Systems On-Site
All other Materiel/Software Returned to Supplier
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Supplier agrees that emergency repairs, as identified by
Customer, will be completed within twenty-four (24) hours of
Supplier's receipt of Materiel or Software, or within
twenty-four (24) hours of Supplier's notification of
nonconforming Services.
2) If the nonconformity has not been corrected within seven (7)
days from Supplier's receipt of Materiel and products resulting
from Services, or within the agreed upon time for on-site
corrections, or if two or more such nonconformities occur within
any thirty (30) day period, then Customer may terminate, in
whole or in part, the affected Orders. If Customer so
terminates, Supplier shall promptly remove Materiel and Licensed
Software or bear the expenses for removal. Supplier shall
restore or bear the expenses of restoration, of Customer's
engineering Specifications, drawings and property to its
original condition at the direction of Customer, and refund to
Customer all monies previously paid for such Materiel, Licensed
Software and Services.
m. Customer shall attach to all returned Materiel a repair requisition
similar to that included in Exhibit C, entitled "Service Repair and
Return Order," attached hereto.
n. Out of warranty Materiel repaired by Supplier shall be warranted for a
period of one-hundred-twenty (120) days. Out of warranty Materiel
shall be repaired at a cost of 40 (forty) percent of the then current
list price.
B14. ENGINEERING COMPLAINTS
a. Supplier shall comply with the provisions in U S WEST Technical
Publication 77357, entitled "Guidelines for Engineering Complaints and
Operational Trouble Reports", which by this reference is incorporated
herein.
b. Supplier shall submit one copy of all documentation pertaining to
engineering complaints, including acknowledgment of their receipt,
related correspondence and/or reports, and final resolution of
complaints to:
U S WEST Communications
Engineering Complaint Coordinator
P.O. Box 8976
Denver, Colorado 80201
B15. TIME OF ESSENCE
Time is of the essence in the Delivery of Materiel and Licensed Software and
in the performance of Services.
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B16. TRAINING
a. Supplier shall provide sufficient training, training materials and
support to Customer to enable Customer to use Materiel, Licensed
Software and Services and to train Customer's training instructors.
b. Supplier shall provide a list of prices for training, manuals, courses
and support.
c. Customer shall have the right to reproduce training material for the
purpose of training Customer's employees. Such rights shall include
photographic, video, and audio recordings of any training or training
material.
B17. MANUALS AND DOCUMENTATION
a. Supplier shall provide, at no additional charge, one complete set of
current manuals and documentation ("Manuals") for each type of
Materiel, Licensed Software and Services purchased by Customer to:
U S WEST
IRM - Documentation Distribution Manager
1801 California Street, Room 1320
Denver, Colorado 80202
Supplier shall Deliver one (1) set of Order-specific Manuals, at no
additional charge, for each item of Materiel ordered.
b. Manuals will describe in detail the engineering, installation,
maintenance, repair and operation of Materiel, Licensed Software and
Services.
c. With Licensed Software Supplier shall Deliver, at no additional
charge, two (2) sets of Program Materiel to the locations specified by
Customer.
d. Supplier shall, at no additional charge, provide all future updates,
revisions and corrections of Manuals and Program Materiel.
e. Customer shall have the right to reproduce Manuals and Program
material for the purpose of engineering, installing, maintaining,
repairing and operating Materiel, Licensed Software and Services.
Reproduction shall include the copyright or similar proprietary
notices.
B18. COMPATIBILITY INFORMATION
a. Upon request by Customer during the term of this Agreement or
within three (3) years following its termination or expiration,
Supplier shall provide Customer with interface specifications
describing the electrical, functional, physical and Software
interfaces of Supplier's Materiel and Licensed Software. This
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excludes Supplier's proprietary PDU-20 SEBX Host compressed
transmission protocol. Upon Customer's request, Supplier shall
provide such data and information to other suppliers with whose
products Customer requires Supplier's Materiel and Licensed
Software to interface.
b. Compatibility information which is proprietary and confidential shall
be treated in accordance with clause B22., entitled "Supplier's
Information."
B19. CUSTOMER'S INFORMATION
a. Any confidential and proprietary information, marked as such,
including, but not limited to, programs, files, Specifications,
drawings, sketches, models, samples, tools, business information,
technical information or other data, written or otherwise
("Information") whether or not protected by patent or copyright, owned
by Customer and which has been furnished or disclosed to Supplier
shall remain Customer's property. Supplier shall treat Information as
proprietary and confidential and said Information shall not be
reproduced, published, or disclosed to any third party without the
prior written consent of Customer. All copies of Information shall be
returned to Customer immediately upon request. Supplier agrees to take
all necessary precautions, including but not limited to, informing its
employees of the proprietary nature of Information and the need to
guard its secrecy.
b. Any third party Information, provided under this Agreement, marked as
confidential shall be treated by Supplier in the same manner as
required for Customer's Information in clause B19 a. above. If
Supplier makes an unauthorized disclosure of such Information,
Supplier shall hold Customer harmless and indemnify Customer against
any resulting claims of any nature.
B20. RIGHTS TO INVENTIONS, DISCOVERIES AND OTHER DEVELOPED INFORMATION
In the course of, or as a result of, providing Materiel, Licensed Software
and Services under this Agreement or any Order, inventions, discoveries or
improvements or proprietary and secret concepts, methods, techniques,
processes, adaptations, ideas, specifications, business and technical
information, computer or other apparatus programs (Software), and other
ideas, knowledge or data ("Intellectual Property") whether written or not,
may be originated, discovered or developed by the parties. Such Intellectual
Property originated, discovered or developed by employees of Supplier, shall
belong to Supplier, and such originated, discovered or developed by
employees of Customer shall belong to Customer. The Intellectual Property
originated, discovered or developed jointly by employees of both parties
shall belong jointly to both; provided, however, that each party shall give
the other a royalty free, irrevocable, non-exclusive, world-wide license to
practice such Intellectual Property, whether individually or jointly
originated, discovered or developed. Each shall sign all papers and perform
all
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acts which may be necessary, desirable or convenient to the other at its own
expense, to file and prosecute applications for patents on such Intellectual
Property and to maintain patents granted thereon. Each shall acquire from
its employees, consultants, representatives or agents who perform the work
such assignments, rights and covenants to ensure that the other shall
receive the rights provided for in this clause. Each shall assist the other
in executing any other applicable documents showing ownership.
B21. PUBLICITY
a. Supplier shall submit to Customer for prior written approval all
proposed advertising, sales promotion, press releases and other
publicity, including all media relating to this Agreement where
Customer's name, marks, or other Customer identification or
Specifications are mentioned or language from which the connection of
such names or marks therewith may, in Customer's judgement, be
inferred or implied.
b. Supplier shall remove any identification, trade names, trademarks,
insignia, symbols or evidences of Customer's inspection prior to any
sale, use or disposition of Materiel rejected by Customer.
c. This provision shall appear in all subcontracts entered into by
Supplier in the performance of this Agreement.
d. Supplier shall indemnify Customer and any third parties against any
claim arising out of Supplier's failure to comply with this clause.
B22. SUPPLIER'S INFORMATION
a. Specifications, drawings, sketches, models, samples, tools, computer
programs, technical information, business information, or data,
written, oral or otherwise, furnished to Customer, shall not be
considered to be confidential, unless marked conspicuously as such. To
the extent that Supplier's data and information is of a confidential
nature and is marked conspicuously as such, Customer agrees to treat
such data and information in confidence; provided however that
Customer shall have no liability for disclosure if the data and
information:
1) is or has become in the public domain;
2) was known to Customer before receipt from Supplier;
3) is received from third parties without breach of this Agreement;
4) is independently developed by Customer without breach of this
Agreement;
5) is disclosed more than two (2) years after receipt by
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Customer; or
6) is disclosed inadvertently despite the exercise of the same
degree of care that Customer uses to protect its own
confidential information.
b. Notwithstanding clause B22 a. above, such information may be used
without the prior written consent of Supplier by Customer's
subcontractors for the installation, engineering, maintenance, repair
and operation of Materiel and Licensed Software, provided such
subcontractors contractually agree to the same limitations as referred
to in clause B22 a. above.
B23. PATENT, TRADEMARK, COPYRIGHT INFRINGEMENT
Supplier shall defend, indemnify and save Customer harmless, at Supplier's
own expense, against any action or suit brought for any loss, damage,
expense or liability including legal costs and attorneys' fees that may
result by reason of any infringement, or alleged infringement, of any
patent, trademark or copyright based upon the use or installation of any
Materiel, Licensed Software and Services furnished to Customer hereunder.
Should any of the Materiel, Licensed Software and Services furnished to
Customer hereunder or the operation thereof, become the subject of a claim
of any infringement of a U.S. patent, trademark or copyright, Supplier
shall, at its expense, procure for Customer the right to continue using the
Materiel, Licensed Software and Service; replace or modify the same in a
reasonable manner so that they become noninfringing; or, at Customer's
option, refund to Customer the full purchase price and associated cost of
the infringing items. Further, Supplier shall bear all expenses for such
removal, replacement and modification.
B24. PATENT LICENSES
Customer does not hereby grant to Supplier any licenses, express or implied,
under any Customer patents, copyrights, or trademarks, except to the extent
necessary for Supplier to fulfill its obligations to Customer pursuant to
this Agreement or an Order.
B25. INDEMNITY
Supplier assumes full responsibility for and shall indemnify and hold
Customer harmless from and against any claims, losses, actions, damages,
expenses and all other liabilities whether sounding in contract or in tort,
and whether at law or in equity, including, but not limited to, legal costs
and attorneys' fees, arising out of or resulting from:
a. Providing, installing and using Supplier's Materiel and the
performance of or failure to perform Services, if any such claim,
loss, action, damage, expense, or other liability is attributable to
bodily injury or to death of any person, or to damage to or
destruction or theft of any property, whether belonging to Customer
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or another, excepting only injury, death, damage or destruction to the
extent caused by the sole negligence (except to the extent prohibited
by local law) of Customer;
b. Assertions made by Supplier under Workers' Compensation or similar
statutes; and
c. Noncompliance with all federal, state and local laws and regulations.
Customer shall give reasonable notice to Supplier of any such claim, loss,
action, damage, expense or other liability.
B26. INSURANCE
a. Notwithstanding the provisions of Section II, clause 24., entitled
"Indemnity", Supplier shall obtain and maintain, at its own expense,
all insurance and bonds whether required by law or otherwise,
including, but not limited to:
1) Workers' Compensation insurance (including the Broad Form All
States endorsement) as prescribed by law of the state in which
the Services are performed; and
2) Employers' liability insurance with limits of at least One
Million (1,000,000.00) dollars for each occurrence; and
3) Comprehensive general liability insurance with a broad form
endorsement which includes, but is not limited to, coverage for
products liability, personal injury, broad form property damage,
coverage for completed operations, and contractual liability,
with respect to the liability assumed by Supplier hereunder.
Limits shall be not less than Five Millions (5,000,000.00)
combined single limit for each occurrence; and
4) Comprehensive automobile liability insurance covering the use
and maintenance of owned, not-owned, hired and rented vehicles
with limits of not less than One Million (1,000,000.00) dollars
combined single limit coverage for each occurrence; and
5) Umbrella liability insurance which includes, but is not limited
to, coverage for products liability, personal injury, broad form
property damage, coverage for completed operations, and
contractual liability, with respect to the liability assumed by
Supplier hereunder in a format acceptable to Customer with
limits of at least Five Million (5,000,000.00) dollars for each
occurrence.
b. Supplier, its insurer and anyone claiming by, through or under them or
in its own behalf, shall have no claims, rights of action, or right of
subrogation against Customer based on any loss or
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liability under the foregoing insurance.
c. At Customer's request, Customer shall be an additional named insured
in such insurance.
d. Supplier shall furnish a certificate or adequate proof of the
foregoing insurance. After receiving adequate proof of self-insurance,
Customer shall allow Supplier to self-insure the requirements
contained in this clause.
e. Supplier shall either require subcontractors who may enter upon
Customer's premises to maintain insurance as described herein and to
furnish certificates or adequate proof of such insurance, or provide
such insurance for the subcontractors.
f. Insurance policies shall state that Customer shall be notified in
writing at least sixty (60) days prior to cancellation of, or any
material change in, the insurance policies.
B27. ASSIGNMENT
a. Supplier shall not assign its rights or delegate its obligations
hereunder without the prior written consent of Customer. Customer may
assign its rights or delegate its obligations hereunder, in whole or
in part, to any parent, subsidiary of parent, subsidiary, affiliate,
successor or related company of Customer upon prior written notice to
Supplier. Such assignment shall not diminish any rights or obligations
that Supplier or Customer may have prior to the effective date of
assignment. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto, their respective successors and
assigns.
b. The limitation on assignment does not apply to an assignment confined
solely to monies due or to become due. Assignment of monies shall be
void to the extent that it attempts to impose upon Customer
obligations to the assignee additional to the payment of such monies,
or to preclude Customer from dealing solely and directly with Supplier
in all matters pertaining thereto, including the negotiation of
amendments or settlements of amounts due.
B28. RESTRUCTURE
If Customer restructures through legislation, court order, government
regulation or otherwise, Customer may terminate without any penalty or
assign as set forth in clause B26., entitled "Assignment," any Order no
longer required due to the restructure.
B29. SUBCONTRACTORS
Supplier shall obtain Customer's written consent prior to subcontracting any
Services hereunder. Such requirement shall not apply to purchases of
standard commercial supplies or raw materials incidental to the
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Services. Customer's approval of such will not be unreasonably withheld.
B30. INDEPENDENT CONTRACTOR
Persons furnished by Supplier shall be solely Supplier's employees or agents
who shall be under the sole and exclusive direction and control of Supplier.
B31. NONDISCRIMINATION AND COMPLIANCE
Unless exempt under the rules and regulations of the Secretary of Labor or
other proper authority, this Agreement is subject to applicable laws and
executive orders relating to equal opportunity and nondiscrimination in
employment. The parties hereto shall not discriminate in their employment
practices against any person by reason of race, religion, color, age, sex or
national origin and agree to comply with the provisions of such laws and
orders, as well as all laws and orders relating to the employment of the
handicapped, the employment of veterans, the use of women's and minority
business enterprises, and other laws and orders applicable in the
performance of Services or furnishing of Materiel hereunder. Supplier agrees
to comply with laws and orders listed in Exhibit D, entitled
"Nondiscrimination and Compliance Agreement," attached hereto, as
applicable, and as hereinafter amended.
B32. COMPLIANCE WITH LAWS
a. Supplier shall comply with all federal, state and local laws and
regulations which may be applicable to Supplier as an employer of
labor. Supplier shall comply with all other applicable federal, state,
county and local laws, ordinances, regulations and codes in the
performance of this Agreement, including but, not limited to the
Immigration Reform and Control Act of 1986, the procurement of
permits, licenses and certificates where needed, and shall comply with
all laws as to packing, labeling and shipping, whether the shipment or
Services are interstate or intrastate. Supplier shall bear all costs
associated with such compliance.
b. If any Materiel and Services are determined not to conform to health,
safety, or environmental standards of any governmental authority
having or asserting jurisdiction thereof, then Supplier shall bear the
cost to bring that Materiel and Services into conformity.
B33. RIGHT TO INSPECT
Customer may inspect Services performed by Supplier in progress or completed
whether such Services are performed on Customer's premises or elsewhere. The
inspection or failure to inspect shall not be construed by Supplier as
Acceptance, or as a waiver of any Customer rights hereunder.
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B34. RIGHT OF ACCESS
a. Customer shall permit Supplier access to Customer's and others'
facilities in connection with the performance of Services. Supplier
shall assure that only trustworthy employees are allowed to enter
Customer's and others' facilities. Supplier shall give Customer
reasonable advance notice when access to Customer's or others'
facilities is required. At Customer's request, Supplier shall furnish
a personnel sheet containing the employee name, address, telephone
number, job duties, key assignment and any other information Customer
deems necessary to safeguard its property and operations.
b. Supplier and Customer, while on the premises of the other, shall
comply with all rules and regulations, including government
regulations. Supplier shall become familiar with Customer's or others'
procedures for Delivery, receipt, and storage of Materiel and other
applicable operations.
B35. DAMAGE TO PROPERTY
Supplier shall immediately notify Customer and third party owners of real or
personal property of any loss of or damage to such property caused by
Supplier. Supplier shall take precautions and necessary measures to prevent
further damage, and at Customer's option and direction, Supplier shall
replace or temporarily repair such property. At Customer's or third party
owner's option and direction, Supplier shall restore or replace Customer's
or others' property to its original condition, place such property in
operational condition or bear the cost of such restoration or replacement.
B36. FORCE MAJEURE
a. Neither party shall be held responsible to the other for delays or
failures to perform caused by fires, strikes or similar labor
difficulties, embargoes, Government requirements, civil or military
authorities, acts of God or the public enemy or other similar
unforeseeable causes beyond the control of either party. If such
contingency occurs to one party, the other party may elect to:
1) Terminate the Order, in whole or part, as to Materiel and
Licensed Software not received or Services not completed;
2) Suspend the Order for the duration of the delaying cause, buy or
sell elsewhere the items to be bought or sold thereunder, and
deduct from any Order commitment that quantity bought or sold or
for which such commitments have been made elsewhere; or
3) Resume performance under the Order once the delaying cause
ceases and, at the option of such other party, extend the
affected dates up to the length of time the contingency
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endures. Such Order shall continue in full force and effect with
respect to all other rights and obligations.
Subparagraph B36. a. 2) above shall be deemed selected unless
written notice is given within fifteen (15) days after such other
party is apprised of the contingency.
b. Supplier shall not be relieved of liability under this clause if the
delay results from failure of Supplier's subcontractor to make a
timely delivery of material, or perform services in a timely manner if
the material or services are available from another source.
B37. DEFAULT
a. In addition to all other rights and remedies herein or at law or in
equity, Customer shall have the right to terminate an Order, in whole
or in part, without any obligation on the part of Customer, if
Supplier is in breach or default of an Order and such breach continues
for ten (10) days after Customer has notified Supplier in writing.
Customer shall have the right to retain or return Materiel and
Licensed Software already received and Accepted; provided, however,
that Customer shall pay for Materiel and Licensed Software retained.
Supplier shall reimburse Customer amounts previously paid for returned
Materiel and Licensed Software and shall bear all expenses for its
removal and return.
b. If Supplier is in breach or default of any provision of this Agreement
and the breach or default continues for fifteen (15) days after
Customer has notified Supplier, then, in addition to all other rights
and remedies at law or in equity, Customer may terminate this
Agreement without any obligation or liability on the part of Customer
whatsoever, unless otherwise agreed.
B38. REMEDIES CUMULATIVE
Any rights of termination or other remedies prescribed in this Agreement are
cumulative and are not exclusive of any other remedies to which the injured
party may be entitled herein or at law or in equity. In addition to all
other rights and remedies of Customer herein or at law or in equity,
Supplier shall reimburse Customer for those costs resulting from Supplier's
breach or default of any provisions of this Agreement.
B39. GOVERNING LAW
This Agreement shall be governed by and construed in all respects in
accordance with the laws of the State of Colorado as to both substance and
procedure. Venue and adjudication shall be Denver, Colorado.
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B40. SEVERABILITY
If any provisions of this Agreement are deemed to be invalid or
unenforceable, the remaining provisions shall nevertheless continue in full
force and effect.
B41. WAIVER
For any waiver to be binding it shall be made in writing and signed by both
parties. No waiver of the terms of this Agreement or failure by Customer to
exercise any option, right or privilege on any occasion, or through the
course of dealing, shall be construed to be a waiver of the same, or of any
other option, right or privilege on any other occasion.
B42. SURVIVAL
Provisions of this Agreement that by their sense and context are intended to
survive performance by either or both parties, shall so survive the
completion, expiration or termination of this Agreement or an Order.
B43. NOTICES
Where notices, demands or other communications are required under this
Agreement to be made in writing, they shall be deemed duly given when
delivered in-hand, or upon receipt when properly addressed return-
receipt-requested and delivered by the United States Postal Service or other
letter delivery service to the address listed below.
Customer: Supplier:
U S WEST Business Resources TeleSciences Inc.
1801 California St. Rm. 650 351 New Albany Road
Denver Co. 80202 Moorestown, NJ 08057-1177
Attn: TeleSciences Inc. Attn: Nancy Rivera
Contract Agent
Agreement No. RPHCR43421
B44. PROHIBITED RELATIONSHIPS AND GRATUITIES
Each party represents and warrants that no officer, employee or agent of the
other party has been or will be employed, retained, paid a fee or otherwise
receive personal compensation or consideration from any of that party's
employees or agents in connection with the obtaining, arranging or
negotiating of this Agreement or Orders executed hereunder. The exchange or
offering of any gift, personal service, or unusual hospitality
("Gratuities") by one party of this Agreement to the other is expressly
prohibited. This prohibition is equally applicable to either party's
officers, employees, agents, or immediate family members. Either party may,
by written notice, terminate the right of the other to proceed with any
Order if it is found that Gratuities are offered or
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have been given in connection with the execution of this Agreement or an
Order.
B45. USE NOT ACCEPTANCE
The use of Materiel and Licensed Software by Customer for business, profit,
revenue or any other purpose shall not constitute Acceptance of Materiel and
Licensed Software prior to the Acceptance Date.
B46. SEVERAL LIABILITY
All rights and obligations contained herein or in an Order shall run solely,
individually and severally between Supplier and the company of Customer
which placed an Order accepted by Supplier hereunder.
B47. DISCOUNTS/CREDITS
Any and all applicable discounts and credits shall be based upon the
combined forecasts, commitments and purchases made by all of the companies
comprising Customer.
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ACQUISITION OF MATERIAL
C1. SCOPE
This Section sets forth the terms and conditions under which Customer may
procure Materiel through issuance of an Order and takes precedence over,
supplements and modifies those terms and conditions set forth in Section II
entitled, "GENERAL TERMS AND CONDITIONS."
C2. DETAILED ORDER ACKNOWLEDGMENT
a. Within five (5) days following acceptance of an Order or as agreed,
Supplier shall provide a detailed Order Acknowledgment which shall
include the following.
1) A detailed list of Materiel categorized by specification number
and item number;
2) The quantity of each item, unit price and extended price;
3) CLEI(TM) information;
4) The Order number;
5) The total cost of Materiel by specification number and Order;
and
6) other information, as agreed;
b. The detailed Order Acknowledgment shall be delivered to the site
specified by Customer.
C3. QUALITY ASSURANCE AND INSPECTION
a. If Supplier is the manufacturer, Supplier shall test and inspect
ordered Materiel prior to shipment to Customer in accordance with
quality assurance procedures furnished by Supplier and reviewed and
accepted by Customer.
b. Supplier agrees to inform Customer in advance in writing of any
scheduled change(s) in Supplier's manufacturing processes, quality
assurance procedures or practices when such change(s) may affect form,
fit, function, quality or reliability of Materiel.
c. Customer or Customer's agent reserves the right to inspect
manufacturing facilities, processes and finished Materiel prior to the
Shipment Date to verify compliance with the Order and adherence by
Supplier to its own quality assurance policies and procedures. Such
inspection shall not relieve Supplier of any obligations under
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this Agreement or an Order nor shall such inspection be deemed
Acceptance.
d. Customer or Customer's authorized agent reserves the right to stop
shipment of ordered Materiel if it fails inspection as referred to in
3. C. above.
e. Supplier will provide, at the option of Customer or Customer's
authorized agent, access to its quality assurance activity results,
data, reports, charts, procedures, manuals, requirements, practices
and methods for incoming or in-process material.
f. If Customer or Customer's authorized agent observes Supplier's
deviation from Supplier's quality assurance procedures or observes
quality assurance activity results which may indicate worsening
Materiel quality or reliability, Supplier will, upon written request,
formulate a corrective action plan and submit it to Customer for
review and acceptance.
C4. SPECIFICATIONS OR DRAWINGS
a. Supplier's Specifications and drawings relating to Materiel procured
under an Order are hereby made a part of this Agreement for purposes
of that Order.
b. Supplier shall provide, at no charge, one copy of all drawings and
updates thereof, in accordance with U S WEST Technical Publications
77352, entitled "Central Office Telecommunications Equipment Standard
Drawing Requirements" and 77002, entitled "Technical Drawing Media
Standards," which are hereby incorporated by reference and made a part
hereof, to Customer's Central Office Record Center, 6912 South
Quentin, Englewood, Colorado, 80112. Supplier shall also provide, at
no charge, and on an ongoing basis, a current index of all drawings,
showing latest issue numbers, as well as complete descriptive
information, to Customer's Central Office Record Center. Such index
shall be furnished in accordance with U S WEST Technical Publication
77002, referenced above. If Customer requires additional copies of
Supplier's drawings and index, such drawings and index shall be made
available to Customer.
c. Supplier shall promptly furnish for each item of Materiel ordered,
standard site preparation Specifications, if applicable, in such
detail to ensure that Materiel can be properly installed. Customer
shall prepare the site at its own expense. Any alterations or
modifications required in site preparation attributable to Supplier's
incomplete or erroneous Specifications shall be made at Supplier's
expense.
d. Supplier shall provide with each item of Materiel ordered, current
applicable drawings in accordance with U S WEST Technical Publication
77352, entitled "Central Office Telecommunications Equipment Standards
Drawing Requirements" and in the type of media
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as specified by Customer. Such drawings shall be Delivered to the
Materiel Delivery location and to the engineering location specified
in the Order.
e. Customer shall have the right to reproduce Specifications and drawings
and updates thereof for the purposes of engineering, installing,
maintaining, repairing and operating Materiel.
C5. PACKING AND CONTAINERS
a. Materiel shall be packaged by Supplier in packages, containers, reels
or other enclosures or receptacles to ensure adequate protection
against corrosion, static charge, discharge, deterioration and
physical damage to ensure safe delivery.
b. If Supplier uses any reusable containers, title shall remain with
Supplier. Customer shall return containers to Supplier, freight
collect, upon completion of use. No deposit or other fees will paid
for any reusable containers.
C6. TRANSPORTATION AND SHIPPING
Unless Supplier's published price includes freight charges, Customer shall
bear transportation charges as follows:
a. Supplier shall ship Materiel in accordance with Customer's
instructions with transportation charges prepaid by Supplier. Unless
otherwise agreed, transportation charges shall be limited to actual
common carrier charges which shall be stated separately on the invoice
for Materiel. Invoices reflecting transportation charges shall be
accompanied by legible copies of prepaid freight bills, express
receipts or bills of lading or other supporting documentation.
b. Customer may specify Materiel freight classifications in its Orders.
If not so specified, Supplier shall classify Materiel and invoice
Customer for freight charges in accordance with the current National
Motor Freight classifications.
c. Unless otherwise agreed, transportation charges payable by Customer
shall not exceed the lowest available cost of shipment between the
Delivery location and Supplier's nearest facility from which Materiel
can normally be shipped. Nothing herein shall be construed to alter or
amend the Delivery schedule contained in the Order.
d. Customer will reimburse Supplier only those costs for rigging and
drayage performed at Customer's site, made at Customer's request, if
the costs thereof are not part of the price in an Order.
e. Supplier shall obtain and maintain, at its expense, cargo and riggers
insurance to cover the value of Materiel being shipped.
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C7. DELIVERY
Supplier shall Deliver Materiel listed in Exhibit A within one-hundred-
twenty (120) calendar days After Receipt of Order (ARO); provided, however:
a. Supplier shall not Deliver any Materiel prior to the Delivery Date
without Customer's consent; and
b. Customer and Supplier may agree in writing to change any Delivery
Date.
c. Materiel listed in Exhibit A sent to Supplier for repair shall be
returned to Customer within thirty (30) calendar days (ARO).
d. If Materiel or Software is not delivered within one-hundred-twenty
(120) calendar days, or by the date as agreed to in an Order, Supplier
agrees to discount the total invoice by 1% for each day the Materiel
is late, beginning thirty (30) calendar days after the due date as
agreed to in an Order, up to a maximum of thirty (30) percent.
C8. ACCEPTANCE
a. Customer may perform tests during the Acceptance Period to assure that
Materiel conforms to Specifications and requirements of the Order.
Should Materiel fail to conform, Customer may reject the Materiel.
1) If Materiel is not installed, Supplier shall, at no cost to
Customer:
a) correct any nonconformance; or
b) replace Materiel.
If subparagraphs 8. A. 1) a) or b) above fail to make Materiel
conforming, Customer may terminate the applicable Order for such
Materiel and Supplier shall refund to Customer amounts paid for
returned Materiel including transportation costs.
2) If Materiel is installed, Supplier shall, at no cost to
Customer:
a) correct any nonconformance;
b) replace Materiel; or
c) replace Materiel with equivalent Materiel that meets
Specifications and the requirements of the Order.
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If subparagraphs 8a 2) a), b) or c) above fail to make Materiel
conforming, Supplier shall remove the nonconforming Materiel and
reimburse Customer for related costs.
The selection of any of these options shall be at the sole discretion
of Customer and shall be accomplished in a time-frame suitable to
Customer. Repaired or replacement Materiel shall be subject to this
clause.
b. Acceptance shall be deemed to have occurred on the Acceptance Date
unless Customer has rejected Materiel prior to that date.
C9. TITLE
Title to Materiel shall vest in Customer when Materiel has been Delivered.
C10. RISK OF LOSS
a. Supplier shall bear risk of loss until title passes.
b. This clause shall not be deemed to limit the liability of Supplier.
C11. FUTURE AVAILABILITY OF REPAIRS, REPLACEMENT PARTS, AND MAINTENANCE NOT
COVERED UNDER WARRANTY
a. Supplier shall maintain the capability to repair or replace Materiel
for ten (10) years after the last purchase of such. Replacement
Materiel shall conform to the original Materiel in form, fit and
function. Repair or replacement shall be accomplished within
Supplier's published repair intervals or as agreed.
b. Supplier shall perform repair or replacement of Materiel as set forth
in section F entitled, "Repair Services."
c. If Supplier is unable to maintain the capability to repair or replace
Materiel pursuant to C11 a. above, supplier shall provide
Specifications to enable other Customer contractors to manufacture or
Customer to obtain parts from third parties. Such Specifications shall
include, the following.
1) Manufacturing drawings and Specifications of raw materials and
components comprising such parts.
2) Manufacturing drawings and Specifications covering tooling and
the operation thereof.
3) A detailed list of all commercially available parts and
components including the part number, name and location of
supplier, prices and functional descriptions.
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d. Supplier shall provide written notification one (1) year prior to
discontinuing the manufacture of items of Materiel.
C12. CHANGE NOTICES
a. Changes to Materiel shall be made in accordance with U S WEST
Technical Publication 77354, entitled "Guidelines for Product Change
Notices," incorporated by this reference and made a part hereof.
b. Supplier shall distribute one copy of each change notice to:
U S WEST Communications
Product Change Notice Coordinator
P.O. Box 8985
Denver, Colorado 80201
C13. TECHNICAL SUPPORT
a. Supplier shall provide for a period of ten (10) years after the last
purchase of Materiel, technical support to assist Customer in the
engineering, installation, operation and maintenance of Materiel.
b. Supplier shall make such technical support available at no charge
during the warranty period.
c. After expiration of the warranty period such technical support shall
be available at Supplier's then current rates plus reimbursable
expenses.
C14. MARKING
a. Materiel shall be marked by Supplier with the following information,
at no additional charge:
1) Supplier model and serial numbers, if applicable;
2) Date of shipment or manufacture; and
3) CLEI(TM) codes in accordance with U S WEST Reference Publication
77361, entitled "Common Language Equipment Classification and
Bar Code Labeling Requirements for Central Office Equipment."
b. Supplier shall add any other identification which Customer may
request, at Supplier's expense.
c. Supplier shall utilize the following guidelines for packages and
containers for Materiel.
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1) Definitions:
a) Unit Package. The first tie, wrap, bag or container
applied to a unit of Materiel (e.g., Box of 1, Bag of 10,
etc.). A unit package will be used for storing and not
for shipment of Materiel. All Materiel enclosed in a unit
package shall be identical.
b) Intermediate Package. A container, bundle or wrap which
contains two or more unit packages which is enclosed in a
shipping container. An intermediate package will be used
for storing and not for shipment of Materiel. An
intermediate package is not required unless mixed
Materiel is being enclosed in a shipping container. All
unit packages enclosed within an intermediate package
shall contain identical Materiel.
c) Shipping Container. Final package or container which is
used to ship Materiel. Shipping containers may enclose
unit packages and intermediate packages. A shipping
container may also be used for the storage of Materiel.
2) Packages and containers shall be marked as follows:
a) Each unit package shall clearly display the following
information:
(1) Quantity;
(2) Part number and description;
(3) CLEI(TM) and bar code;
(4) Month and year of manufacture; and
(5) Supplier's name or trademark.
b) Each intermediate package shall clearly display the
following information:
(1) Quantity;
(2) Part number and description;
(3) CLEI(TM) and bar code;
(4) Month and year of manufacture; and
(5) Supplier's name or trademark.
c) Each shipping container shall clearly display the
following information:
(1) Quantity;
(2) Part number and description;
(3) Supplier's name or trademark; and
(4) Gross weight in pounds.
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d) All containers of delicate, hazardous or fragile items
shall be clearly identified as such.
C15. HAZARDOUS MATERIALS AND SUBSTANCES
a. Hazardous materials shall be shipped by Supplier in accordance with
the requirements of the Hazardous Materiels Transportation Act (49
U.S.C. 1801, et. seq.), and any other federal, state and local laws
and regulations governing conveyance of hazardous materials.
b. Supplier shall identify Materiel containing a hazardous material or
substance including, but not limited to, those governed by the
Resources Conservation and Recovery Act (42 U.S.C. 6901, et. seq.),
Hazardous Materiels Transportation Act (49 U.S.C. 1801, et. seq.) ,
Toxic Substances Control Act (15 U.S.C. 2601, et. seq.) and any
similar acts and regulations promulgated pursuant to these Acts. Each
component, self-contained unit and carrier and shipping container
shall be marked identifying the hazardous material by name.
C16. RADIO FREQUENCY ENERGY STANDARDS
Appropriate Materiel shall comply with the requirements of the Federal
Communication Commission's Rules and Regulations, Part 15, Subpart J, as
amended, including those sections concerning the labeling of such Materiel
and the suppression of radiation to specified levels.
C17. LIGHTWAVE RADIATION
Materiel containing laser devices must meet the requirements of the United
States Department of Health and Human Services, and the Bureau of
Radiological Health regulations, including, but not limited to, those
sections concerning the labeling of Materiel and the suppression of
lightwave radiation to specified levels.
C18. REGISTRATION
Appropriate Materiel shall comply with the Federal Communication
Commission's Rules and Regulations, Part 68.
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ENGINEERING SERVICES
D1. SCOPE
This Section sets forth the terms and conditions under which Customer may
procure Engineering Services and associated Materiel through issuance of an
Order, and takes precedence over, supplements and modifies those terms and
conditions set forth in Section B entitled, "General Terms and Conditions."
D2. DEFINITION
"Engineering Services" means analyzing, planning, designing, pricing,
detailing, drafting, creating specifications, ordering and otherwise
technically describing or specifying Materiel as ordered.
D3. GENERAL CONDITIONS OF ENGINEERING SERVICES
a. Supplier shall perform Engineering Services in accordance with
Specifications and the requirements of the Order.
b. Engineering Services associated with central office equipment shall be
performed in accordance with the requirements of U S WEST Technical
Publication 77351, entitled "Central Office Telecommunications
Equipment Engineering Standards," incorporated by this reference and
made a part hereof.
c. Drafting of Customer's central office drawings shall be performed in
accordance with U S WEST Technical Publication 77353, entitled
"Central Office Drawing Standards," incorporated by this reference and
made a part hereof.
D4. ACCEPTANCE
a. When Engineering Services are associated with other Services or
Materiel procured from Supplier, Acceptance shall not occur until such
Materiel and services are accepted.
b. Customer may, during the Acceptance Period, determine whether
Engineering Services conform to Specifications and the requirements of
the Order. If such Services are nonconforming, Customer may:
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1) Direct Supplier to re-engineer, re-design, revise and correct
specifications and associated drawings, installation
instructions and any other related documents at no cost to
Customer; or
2) If subparagraph 4. B. 1) above cannot be accomplished within a
period suitable to Customer, Customer may terminate the Order
and any Related Order, in whole or in part, and direct Supplier
to restore Customer's documentation and drawings to their
original condition at no cost to Customer. Corrected Engineering
Services shall be subject to this clause.
c. Acceptance shall be deemed to have occurred on the Acceptance Date
unless Customer has rejected Engineering Services prior to that date.
D5. TITLE
Results of Engineering Services including, but not limited to, equipment
specifications, office records, drawings and summaries of Materiel shall
become the exclusive property of Customer upon Delivery, and shall not be
used by Supplier for any other purposes.
D6. ENGINEERING SERVICES SUPPORT
Notwithstanding Acceptance, Supplier's obligation to provide Engineering
Services shall include support for such Services until the expiration of the
warranty period. Such support shall be available to Customer on-site, as
mutually agreed at no additional charge and shall not be limited to
Supplier's normal working hours.
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INSTALLATION AND REMOVAL SERVICES
E1. SCOPE
This Section sets forth the terms and conditions under which Customer may
procure Installation and Removal Services and associated Materiel through
issuance of an Order and takes precedence over, supplements and modifies
those terms and conditions set forth in Section B entitled, "General Terms
and Conditions."
E2. DEFINITIONS
a. "Installation Services" means constructing, erecting, placing, moving,
modifying, unpacking, connecting, wiring, cabling, inspecting and
testing Materiel or performing similar work as ordered.
b. "Removal Services" means disconnecting, de-cabling, dismantling,
mining, packing or performing similar work affecting Customer's
Materiel as ordered.
E3. GENERAL CONDITIONS OF INSTALLATION AND REMOVAL SERVICES
a. For Services performed in central offices, Supplier shall perform such
Services in accordance with U S WEST Technical Publication 77350,
entitled "Central Office Telecommunications Equipment Installation
Guidelines," incorporated by this reference and made a part hereof.
b. Supplier shall provide all labor, tools (including portable tools and
test sets) portable buildings and toilets, trailers, storage
facilities, vehicles, equipment and other materials required.
c. Supplier shall receive, uncrate, unpack and inspect for damage, all
Materiel to be installed, and shall promptly notify Customer of any
shortage or damage. If Supplier fails to make such notations, Supplier
shall be responsible for all loss of or damage to Materiel. When
Supplier is also providing the Materiel, Supplier shall be solely
responsible for all claims, reordering and replacement of affected
Materiel.
d. When necessary, Supplier shall arrange for warehousing, hauling and
hoisting, or other services.
e. When requested by Customer, Supplier shall pack, crate and otherwise
prepare Customer's removed Materiel for shipment.
f. Supplier shall provide its current installation quality standards,
including workmanship standards, test and inspection methods, sampling
plans, test equipment calibration methods and requirements, methods
for determining acceptance quality levels and
35
<PAGE>
similar criteria for administering Supplier's quality assurance
program.
g. Customer may review the results of Supplier's quality assurance
inspections and observe a sample of Supplier's inspections at times
and places determined by Customer.
h. Supplier shall conduct tests and analysis of installed Materiel, in
accordance with Specifications and the Order, prior to the Completion
Date.
i. At least one week prior to the Commencement Date, Supplier shall
provide for Customer's approval, a proposed method of procedures and
shall notify Customer of any known errors and omissions in
specifications.
j. Customer reserves the right to perform installation and removal of
Materiel or Software using personnel internal to Customer's
corporation, or other agents of Customer.
k. When installation costs are provided by supplier, those costs shall be
unbundled and listed as separate from all other costs.
E4. ENVIRONMENTAL COMPLIANCE
Supplier warrants and certifies that Services shall conform and comply with
all applicable federal, state, county and municipal laws, statutes,
regulations and codes, governing the environment or ecology, including
without limitation the Toxic Substances Control Act (15 U.S.C. 2601, et.
seq.), Resources Conservation and Recovery Act (42 U.S.C. 6901, et. seq.),
Hazardous Materiels Transportation Act (49 U.S.C. 1801, et. seq.) and
similar governmental acts and regulations promulgated pursuant thereto.
Supplier shall recertify compliance therewith at Customer's request.
Supplier shall provide a copy of all hazardous material disposition and
transportation forms issued.
E5. ACCEPTANCE
a. At least seven (7) days prior to completion of any Installation and
Removal Services or portions thereof, Supplier shall notify Customer
that Services will be available for inspection. Customer may audit
such Services to ensure that Services are performed in accordance with
Specifications and Orders. Such inspections shall not constitute
Acceptance.
b. Installation and Removal Services shall not be deemed complete until
all associated Materiel is ready for Acceptance.
c. Customer may, during the Acceptance Period, determine if Installation
and Removal Services conform to Specifications and the requirements of
the Order. If such Services are nonconforming, Customer may direct
Supplier to:
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1) Repair, modify and otherwise correct nonconformities, at no cost
to Customer;
2) Remove or replace nonconforming Materiel and Licensed Software
and install new Materiel, at no cost to Customer, if Supplier
provided Materiel and Licensed Software; or
3) Correct Engineering services nonconformities, at no cost to
Customer, if Supplier provided Engineering Services.
The above shall be accomplished in a time suitable to Customer.
Corrected Installation and Removal Services shall be subject to this
clause.
d. Acceptance shall be deemed to have occurred on the Acceptance Date
unless Customer has rejected Installation and Removal Services prior
to that date.
E6. TITLE
Title to any Materiel furnished by Supplier as a part of the Installation
Services shall vest in Customer upon Delivery. Title to Customer's removed
Materiel shall remain with Customer.
E7. INVOICES AND PAYMENTS
a. Supplier shall submit invoices as follows:
1) Installation and Removal Services, which are scheduled to be
completed in twelve (12) weeks or less, shall be invoiced
within thirty (30) days following the Completion Date; and
2) Installation and Removal Services which are scheduled to be
completed in more than twelve (12) weeks shall be invoiced on a
monthly basis for charges accrued during the preceding month.
37
<PAGE>
REPAIR SERVICES
F1. SCOPE
a. This Section sets forth the terms and conditions by which Customer may
procure Repair Services through issuance of an Order and takes
precedence over, supplements and modifies those terms and conditions
set forth in Section B entitled, "General Terms and Conditions."
b. Repair Services does not include maintenance services or repairs to
Materiel under warranty.
F2. DEFINITION
"Repair Services" means inspecting for damages, repairing, cleaning,
lubricating, adjusting, calibrating, restoring or rebuilding, refurbishing,
testing and retrofitting engineering changes and updates, and performing
similar Services.
F3. GENERAL CONDITIONS OF REPAIR SERVICES
a. Supplier shall perform in accordance with Specifications and the
requirements of the Order.
b. Replacement Materiel shall conform to the original Materiel in form,
fit and function.
c. Unless otherwise specified in an Order, Supplier shall perform and
Deliver repaired or replaced Materiel within thirty (30) days of
receipt of Materiel.
d. Customer shall attach to all returned Materiel a repair requisition
similar to that included in Exhibit C, entitled "Service Repair and
Return Order."
e. Supplier shall package Materiel in compliance with all federal, state
and local laws and regulations.
f. New or equivalent parts shall be used in effecting repairs or
replacement. Parts which have been removed from Materiel shall become
Supplier's property. Parts which are installed in Materiel shall
become Customer's property.
g. If Materiel returned to Supplier for is irreparable, Supplier shall
notify Customer and request disposition instructions for such
Materiel. Customer's liability with regard to irreparable Materiel
shall be limited to transportation charges associated with the return
of Materiel. If requested by Customer, Supplier shall dispose of the
irreparable Materiel and pay Customer the salvage
38
<PAGE>
value.
h. Supplier shall be strictly liable for loss of or damage to all
Materiel in its care, custody or control.
i. In the event of an emergency or out-of-service condition attributable
to Materiel or Software furnished hereunder, Supplier agrees to ship
replacement Materiel or Software within twenty-four (24) hours of
verbal notification from Customer, for a period of ten (10) years
after the delivery of such Materiel or Software. If replacement
Materiel will not be available for shipment within twenty-four (24)
hours, Supplier shall notify Customer immediately by telephone and
arrange at Customer's option and at Supplier's expense, for: (a) an
alternate shipping schedule; or (b) telephonically assisting Customer
in repair of the defective Materiel or Software at no charge to
Customer. The phone number to call for emergency replacement service
is (609)866-0015. This services shall be available twenty-four hours a
day, seven days a week.
j. Materiel on which have been performed shall have the repair warranty
expiration date identified in a permanent manner at a readily visible
location. Repaired Materiel shall be returned with a tag or other
papers describing the and any modifications and improvements which
have been made.
F4. TRANSPORTATION
Supplier shall ship repaired Materiel to Customer using the lowest available
cost of shipment with transportation charges prepaid by Supplier and added
as a separate item to the invoice. At Customer's request, Supplier shall
substantiate charges by providing Customer with a legible copy of the
freight bill. Risk of loss of and damage to repaired Materiel during
shipment to Customer shall be borne by Supplier.
F5. ACCEPTANCE
a. Customer may, during Acceptance Period, inspect repaired Materiel to
determine that have been performed in accordance with Specifications
and requirements of the Order. Repaired Materiel which is
nonconforming may be rejected by Customer.
39
<PAGE>
1) If Materiel is not installed, Customer may either:
a) Request Supplier to correct any nonconformity at no cost
to Customer, in a period of time suitable to Customer; or
b) Terminate the Order. In such case any monies previously
paid to Supplier for such shall be refunded.
2) If Materiel is installed, Customer may:
a) Require Supplier to correct any nonconformity or repair
Materiel in place, at Customer's convenience and at no
cost to Customer;
b) Require Supplier to remove and repair rejected Materiel
at no cost to Customer, and reimburse or credit Customer
for costs incurred in the removal and reinstallation of
nonconforming Materiel; or
c) Terminate the Order. In such case any monies previously
paid to Supplier for such shall be refunded.
b. Acceptance shall be deemed to have occurred on the Acceptance Date
unless Customer has rejected repaired Materiel prior to that date.
40
<PAGE>
LICENSED SOFTWARE1
G1. SCOPE
This Section sets forth the terms and conditions under which Customer may
procure Licensed Software through issuance of an Order and takes precedence
over, supplements and modifies those terms and conditions set forth in
Section B entitled, "General Terms and Conditions."
G2. DEFINITION
"Licensed Software" means standard Software programs, whether or not
associated with Materiel, for which Supplier has the right to grant licenses
or sublicenses to Customer. Licenses listed below are granted as either
perpetual or periodic, exclusive or nonexclusive, for which Supplier may or
may not receive a license fee.
Corporate License. A corporate license is a license which grants to
Customer the right to use and duplicate Licensed Software for use at
as many Customer sites and on as many Customer owned, leased or
operated Central Processing Units (CPU) as Customer desires for a
single license fee.
Site License. A site license is a license which grants to Customer the
right to use Licensed Software on any and all computer systems owned,
leased, or operated. by Customer at a single location or installation
known or identified by a single street or mailing address.
CPU License. A CPU license is a license which grants to Customer the
right to use Licensed Software on a single designated CPU. Any CPU
license may be temporarily transferred to a backup CPU which may be at
the same Customer site, another Customer site or at a site owned by a
third party.
G3. LICENSE
a. By acceptance of the Order, Supplier grants to Customer a license, as
specified in the Order, to use Licensed Software, including all future
releases or versions, patches, fixes, corrections, enhancements,
improvements, system modifications and updates relating to such
Licensed Software which are developed or acquired by Supplier and
which have been purchased by Customer or provided under the Support
Agreement or this Agreement. Further, Supplier agrees that no other
license agreement for the same subject matter, executed by Customer
contemporaneously with, or purporting to become effective upon opening
the delivery wrapper, shall alter, modify or amend the terms hereof
and the applicable Order. If Customer does not specify the type or the
term of the license in an Order, the license shall be deemed to be a
perpetual, nonexclusive, site license.
41
<PAGE>
b. Supplier shall provide Program Material prior to the Delivery Date at
no additional charge. Program Material shall comply with Customer's
Specifications and the highest standards of the industry with respect
to content, size, legibility and reproducibility.
c. Licensed Software provided by Supplier for use with Materiel acquired
under this Agreement may be sublicensed to any subsequent third party
purchaser of such Materiel, provided such third party purchaser agrees
to assume the obligations contained herein.
d. Customer may transfer, assign or sublicense any license granted by
Supplier hereunder, to any parent, subsidiary of parent, subsidiary,
affiliate, successor or related company of Customer upon prior written
notice.
G4. LICENSE TERM
The license for Licensed Software shall be effective on the Acceptance Date
and shall continue for the term specified in the Order. Notwithstanding the
above, Customer may, at any time, terminate the license upon thirty (30)
days prior written notice.
G5. SOFTWARE TRAPS
a. If Supplier installs in its Licensed Software any software "traps" or
other instructions designed to terminate or disrupt the operation of
the Licensed Software for any purpose, Supplier shall give Customer
notification of such devices in its acceptance of the Order.
b. If Supplier fails to notify Customer, Supplier shall be liable for all
damages, whether consequential, incidental or special damage,
including but not limited to lost income or lost revenue, resulting
from any failure of operation caused by such traps.
G6. TRANSPORTATION
Supplier shall bear transportation charges of Licensed Software to the
address stated in the Order. Customer shall bear transportation charges for
Licensed Software returned to Supplier.
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G7. RISK OF LOSS
Supplier shall bear the risk of loss of or damage to the Licensed Software
medium during shipment to Customer and Customer shall bear the risk of loss
of or damage to Licensed Software medium in its possession except to the
extent such loss or damage is attributable to Supplier.
G8. DELIVERY AND INSTALLATION
a. If Licensed Software is installed by Customer, Supplier shall provide
at no additional charge technical support and Specifications including
installation instructions and acceptance test procedures, to allow
Customer to properly install, test and accept Licensed Software.
b. If Licensed Software is installed by Supplier, Supplier shall perform
tests to determine if Licensed Software meets Specifications and the
requirements of the Order prior to completion of Installation
Services. Supplier shall provide copies of all test results.
c. Supplier shall, at shipment, notify Customer of any known defects in
Licensed Software, their criticality and impact on the operation of
the Licensed Software and associated Materiel. Supplier shall also
provide its written plans and schedule for corrective action. Use or
operation of Licensed Software pursuant to this provision shall not be
construed to be Acceptance or a waiver of any Customer rights under
this Agreement or applicable Order.
G9. ACCEPTANCE
a. Customer may, during the Acceptance Period, determine if Licensed
Software conforms to Specifications and the requirements of the Order.
If such Licensed Software is nonconforming, Customer may:
1) Direct Supplier to correct the nonconformance;
2) Direct Supplier to replace the Licensed Software with Licensed
Software which meets the applicable Specifications and conforms
to the Order; or
3) If neither 9. A. 1) nor 2) above can be accomplished within a
reasonable time suitable to Customer, Customer may terminate the
Order and direct Supplier to remove the Licensed Software and
render full credit to Customer.
b. Acceptance shall be deemed to have occurred on the Acceptance Date
unless Customer has rejected Licensed Software prior to that date.
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<PAGE>
G10. LICENSED SOFTWARE RELEASES
a. Maintenance releases are patches, fixes and corrections provided by
Supplier to correct Licensed Software defects or malfunctions. During
the warranty period Supplier shall notify Customer of the availability
of such releases. The notice shall describe the defects or
malfunctions to be corrected and the criticality of each. Maintenance
releases shall be made available to Customer at no additional charge
during the warranty period.
b. New releases are releases which incorporate new features or
enhancements to the Licensed Software. Supplier shall notify Customer
of the availability of such releases. The notice shall include a
description of the features and enhancements to be provided and the
cost for each release.
c. Supplier shall support each Licensed Software maintenance release for
a minimum of two (2) years from the release date and shall support
each new release for a minimum of eight (8) years from the release
date.
d. Supplier shall, at no charge to Customer, keep and maintain current, a
copy of the Licensed Software source code in escrow with the Citibank
of New York, as escrow agent. If supplier is unable, for any reason,
to continue to support Licensed Software pursuant to 10. C. above,
Supplier or Supplier's authorized trustees or receivers acting on
behalf of Supplier shall provide, at no charge, all technical
information, including source code, to enable Customer or others to
support Licensed Software. Supplier shall, at the earliest possible
time, provide written notification of Supplier's inability to continue
Licensed Software support. Such written notification shall include the
means by which Customer may obtain such technical information,
including source code.
G11. MAINTENANCE SERVICES AND SUPPORT
a. Supplier shall provide Licensed Software maintenance as ordered to
assure that such Licensed Software meets Specifications and remains in
good operating order. Maintenance services shall include but not be
limited to such items as:
1) Maintenance releases, which correct defects or malfunctions;
2) Periodically published reports describing known "bugs" and
solutions therefor; except that Supplier all immediately notify
Customer of known service and/or revenue affecting bugs and, if
known, the solutions therefore;
3) Issuing, maintaining and revising manuals and documentation to
incorporate new or revised operating procedures resulting from
corrections to and revisions of the Licensed Software pursuant
to Section B, clause B17., entitled "Manuals and Documentation."
4) Assisting in problem identification;
44
<PAGE>
5) Returning inoperable Licensed Software to operating condition by
providing local or temporary patches and fixes; and
6) Correcting defects in Licensed Software.
b. Supplier shall provide twenty-four (24) hours a day and seven (7) days
a week telephone support for Licensed Software maintenance as set
forth in clause F3. entitled "General Conditions of Repair Services".
G12. TECHNICAL SERVICES
Supplier will provide technical services associated with Licensed Software
pursuant to an Order. Technical services are services which Customer
requires to meet its own customized uses for the Licensed Software and which
are beyond the warranty, maintenance, and support services provided under
this Agreement.
G13. SOFTWARE EVALUATION
a. Supplier may bail Licensed Software to Customer, at no charge, to
allow Customer to evaluate the applicability of such Licensed Software
to its business, subject to the following:
1) Customer shall issue an Order to Supplier;
2) The term of the evaluation shall be forty-five (45) days, unless
otherwise stated in the Order; and
3) Customer will use Licensed Software provided under this clause
for the purpose of evaluation. Such evaluation shall not
obligate Customer to procure Licensed Software for future use.
b. Customer shall promptly return Licensed Software and accompanying
documentation to Supplier upon completion of the evaluation period or
shall notify Supplier of its intent to procure the Licensed Software
and shall then issue an Order for the Licensed Software. customer is
under no obligation to reveal the results of the evaluation to
Supplier.
c. Customer shall not duplicate the Licensed Software, any portion
thereof, or any associated documentation, unless necessary for the
evaluation.
d. Notwithstanding the fact the term "Order" is used in this provision,
the relationship between Supplier and Customer shall be that of Bailor
(Supplier) and Bailee (Customer) and the provisions of Sections I and
II shall not apply, excepting Section II, clause 21., entitled
"SUPPLIER INFORMATION." Upon giving Customer possession, Supplier
shall give notice in writing of the value of the bail property and
Customer shall have no liability for loss, damage, or other claims of
any nature respecting said property
45
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beyond said value.
G14. SOFTWARE QUALITY ASSURANCE
a. The term Software as used in this clause includes, but is not limited
to, computer programs, including firmware, data related to these
programs, associated documentation and all associated support and
control activities.
b. Supplier shall test the Software prior to shipment to Customer or
incorporation into a hardware system in accordance with quality
assurance procedures developed by the Supplier and reviewed and
accepted by the Customer.
c. Under an Order or in contemplation of an Order, Supplier shall grant
to Customer or Customer's authorized agent the right to perform a
Software quality program analysis of Supplier' s Software development
and support processes.
d. Customer or Customer's authorized agent may monitor the process by
which the Supplier controls the quality of the Software by means of
periodic on-site analysis and verification. If problems or
deficiencies are noted insofar as the Supplier's adherence to its own
quality assurance procedures, the Customer may require the Supplier to
formulate a corrective action plan and submit it to Customer for
review and acceptance.
46
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TRAINING SERVICES
H1. SCOPE
This Section sets forth the terms and conditions under which Customer may
procure Training Services through issuance of an Order and takes precedence
over, supplements and modifies those terms and conditions set forth in
Section B entitled, "General Terms and Conditions."
H2. DEFINITION
"Training Services" means instructing, teaching, qualifying, or certifying
Customer's or others' employees or providing other related services.
H3. GENERAL CONDITIONS OF TRAINING SERVICES
a. Supplier shall provide, as required by an Order personnel to conduct
training and instructional aids appropriate for each course, including
books, pamphlets and diagrams.
b. Customer may, without liability, terminate any Training Services by
giving Supplier written notice fourteen (14) days prior to the
Commencement Date.
c. Customer shall have the right to reproduce all Training material for
internal use subject to Section B, clause B22., entitled "Supplier's
Information".
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<PAGE>
ENTIRE AGREEMENT
I1. LIMITED LIABILITY OF U S WEST Business Resources, Inc.
BRI is acting as agent in the negotiation, execution and administration of
this Agreement, but BRI shall not in any event be liable for the performance
or nonperformance of this Agreement or any Order by Customer, except where
BRI is Customer.
I2. AMENDMENTS, MODIFICATIONS AND SUPPLEMENTS
Amendments, modifications and supplements to this Agreement shall be binding
upon Customer and Supplier after the effective date, provided that such are
in writing, signed by an authorized representative of both parties and, by
reference, incorporate this Agreement and identify the specific sections
or clauses contained herein, which are amended, modified or supplemented.
I3. ENTIRE AGREEMENT
This Agreement, together with all Exhibits and subordinate documents
incorporated by reference constitute the entire agreement between the
parties. This Agreement supersedes all prior oral and written
communications, agreements and understandings of the parties.
48
<PAGE>
I4. SIGNATURES
In WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers or representatives on the date
first above written.
U S WEST Business Resources, Telesciences Inc.
Inc., as agent for U S WEST
Communications
By: Sharon Huff By: Donald Hoffman
_________________________ _________________________
Signature: Signature:
/s/ Sharon Huff /s/ Donald Hoffman
_________________________ _________________________
Title: Title:
Contract Agent V.P., Mkt. & Sales
_________________________ _________________________
Date Signed: Date Signed:
April 25, 1991 5/30/91
_________________________ _________________________
49
<PAGE>
RPHCR43421
Amendment No. 7
This Amendment No. 7 is entered into effective as of the twenty-eighth day of
April, 1995, by and between U S WEST Business Resources, Inc., a Colorado
corporation, with its principal place of business located at 188 Inverness Drive
West, Englewood, Colorado 80112, as agent for U S WEST Communications, Inc.,
("Customer") and Securicor Communications Ltd., a United Kingdom company
formerly doing business as TeleSciences CO Systems, with offices for transaction
of business located at Sutton Park House, 15 Carshalton Road, Sutton Surrey,
England SM1 4LD ("Supplier").
RECITALS
Customer and Supplier entered into a General Procurement Agreement No.
RPHCR43421 dated the 1st day of May, 1991, (the "GPA");
The GPA has been previously amended under instruments dated September 13, 1991
(Amendment No. 1), November 15, 1991 (Amendment No. 2), October 23, 1992
(Amendment No. 3), april 1, 1993 (Amendment No. 4), July 1, 1993 (Amendment No.
5) and July 1, 1994 (Amendment No. 6.);
The term of the GPA will automatically expire on May 1, 1995 (the "Expiration
Date"); and
Customer and Supplier wish to further amend the GPA under the terms and
conditions contained herein.
AGREEMENT
In consideration of the mutual promises and advantages to the parties, the
parties incorporate by reference and agree to the accuracy of the above recitals
and further agree as follows:
1.0 DESCRIPTION OF AMENDMENTS AND MODIFICATIONS
1.1 The parties agree that the GPA shall not expire on the
Expiration Date, but shall automatically renew and
automatically expire on December 31, 1997.
1.2 Exhibit B of the GPA entitled "Discounts": delete the text in
its entirety and replace with the text appearing in Exhibit B
entitled "Discounts" dated April 28, 1995 attached hereto and
which by this reference is incorporated herein.
2.0 EFFECTIVE DATE
2.1 This Amendment No. 7 shall be deemed effective the twenty-
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RPHCR43421
Amendment No. 7
eighth of April, 1995.
3.0 SEVERAL LIABILITY
3.1 The term Customer as used herein may be applicable to one or
more parties and the singular shall include the plural. If there
shall be more than one party referred to as Customer herein,
then their obligations and liabilities shall be several, not
joint.
4.0 FURTHER AMENDMENTS
4.1 Except as modified herein, the provisions of the GPA shall
remain in full force and effect. Neither the GPA nor this
Amendment No. 7 may be further amended except by written
instrument executed by an authorized representative of both
parties.
The parties intending to be legally bound have executed this Amendment No. 7 in
multiple counterparts, each of which is deemed an original, but all of which
shall constitute one and the same instrument.
Securicor Communications Ltd. U S WEST Business Resources,
Inc. as agent for U S WEST
Communications, Inc.
/s/ Donald L. Hoffman /s/ Timothy P. Ford
Signature: _________________________ Signature: _______________________
Donald L. Hoffman Timothy P. Ford
By: ________________________________ By: ______________________________
V.P. Sales Contract Agent
Title: _____________________________ By: ______________________________
4/30/95 4/28/95
Date Signed: ______________________ Date Signed: _____________________
51
<PAGE>
GENERAL PROCUREMENT CONTRACT
FOR COMPUTER EQUIPMENT, SOFTWARE AND SERVICES
BETWEEN
SOUTHWESTERN BELL TELEPHONE COMPANY
AND
SECURICOR TELESCIENCES, INC.
This General Procurement Contract (the "Contract") is made and entered into as
of the 1st day of June, 1995 by and between Securicor Telesciences, Inc.
("VENDOR"), a Delaware corporation, with offices located at 351 New Albany Road,
Moorestown. New Jersey 08057-1177, and Southwestern Bell Telephone Company
("SWBT"), a Missouri corporation, with offices located at 1010 Pine Street, St.
Louis, Missouri, 63101. This Contract consists of the following Sections and
Appendices:
Section A Definitions
Section B Terms and Conditions Applicable to the Entire Contract
Section C Equipment Acquisition
Section D Equipment Maintenance
Section E Software License
Section F Software Maintenance
Section G Entire Contract
Appendix I Material Description and Prices
Appendix II Non-Discrimination Compliance Contract (SW9368)
Appendix III Training
Appendix IV Documentation
Appendix V Quality Assurance
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
<PAGE>
TABLE OF CONTENTS-NUMERIC ORDER
SECTION A - DEFINITIONS
A1. SCOPE..................................................................1
A2. DEFINITIONS............................................................1
SECTION B - TERMS AND CONDITIONS APPLICABLE TO THE ENTIRE CONTRACT
Bl. SCOPE OF CONTRACT.....................................................7
B2. TERM OF CONTRACT......................................................7
B3. PURCHASE ORDER........................................................7
B4. ORDER ACCEPTANCE......................................................8
B5. ASSIGNMENT............................................................8
B6. BREACH OF CONTRACT....................................................9
B7. CHOICE OF LAW.........................................................9
B8. CLEAN UP..............................................................9
B9. COMPLIANCE WITH LAWS..................................................9
B10. CONFLICT OF INTEREST..................................................9
B11. HARMONY...............................................................10
B12. HEADINGS NOT CONTROLLING..............................................10
B13. PATENT AND COPYRIGHT INDEMNITY........................................10
B14. INSPECTION............................................................11
B15. INVOICING STANDARD....................................................11
B16. INSURANCE.............................................................12
B17. LIABILITY.............................................................12
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
-i-
<PAGE>
SECTION B - TERMS AND CONDITIONS APPLICABLE TO THE ENTIRE CONTRACT (Cont'd)
B18. LICENSES..............................................................13
B19. REPORTS...............................................................14
B20. NON-EXCLUSIVE MARKET RIGHTS...........................................14
B21. NON-WAIVER............................................................14
B22. NOTICES...............................................................14
B23. PLANT AND WORK RULES..................................................15
B24. PRICE PROTECTION......................................................15
B25. PUBLICITY.............................................................15
B26. RECORDS AND AUDIT.....................................................16
B27. RELEASES VOID.........................................................16
B28. RIGHT OF ACCESS.......................................................16
B29. SEVERABILITY..........................................................16
B30. SHIPPING AND BILLING..................................................17
B31. SURVIVAL OF OBLIGATIONS...............................................17
B32. TAXES.................................................................18
B33. USE OF INFORMATION....................................................18
B34. WORK DONE BY OTHERS...................................................18
B35. ORDER OF PRECEDENCE...................................................18
B36. CONVERSION OF FINANCIAL ARRANGEMENT...................................19
B37. TRANSFER OF TITLE TO A THIRD PARTY....................................19
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
-ii-
<PAGE>
SECTION B - TERMS AND CONDITIONS APPLICABLE TO THE ENTIRE CONTRACT (Cont'd.)
B38. TERMINATION OF ORDER..................................................19
B39. TRAINING..............................................................19
B40. SWBT'S TECHNICAL INFORMATION..........................................21
B41. AFFILIATED COMPANY....................................................22
B42. FORCE MAJEURE.........................................................23
B43. HAZARDOUS MATERIALS/REGULAR SUBSTANCE.................................23
B44. CHANGES TO MATERIAL...................................................24
B45. QUALITY ASSURANCE.....................................................25
B46. QUALITY ASSURANCE RELIABILITY.........................................26
B47. COMPLAINTS............................................................27
B48. EMERGENCY SUPPORT SERVICE.............................................28
B49. MOST FAVORED CUSTOMER.................................................29
SECTION C - EQUIPMENT ACQUISITION
C1. GENERAL...............................................................30
C2. FORM OF ORDER.........................................................30
C3. TITLE AND RISK OF LOSS................................................30
C4. WARRANTY..............................................................30
C5. SITE PREPARATION......................................................31
C6. DELIVERY..............................................................31
C7. TRANSPORTATION........................................................32
C8. INSTALLATION..........................................................32
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
-iii-
<PAGE>
SECTION C - EQUIPMENT ACQUISITION (Cont'd.)
C9. INSTALLATION QUALIFICATION STANDARDS..................................32
C10. ACCEPTANCE............................................................33
C11. SUPPLIES..............................................................34
C12. RELOCATION............................................................34
C13. TRADE-INS.............................................................34
C14. CABLES AND RELATED ITEMS..............................................34
SECTION D - EQUIPMENT MAINTENANCE
D1. GENERAL...............................................................35
D2. FORM OF ORDER.........................................................35
D3. TERM OF ORDER.........................................................35
D4. BASIC SERVICE.........................................................35
D5. REMEDIAL MAINTENANCE..................................................37
D6. PARTS.................................................................37
D7. PARTS INVENTORY.......................................................37
D8.. ENGINEERING CHANGES...................................................38
D9. MAINTENANCE LOG.......................................................38
D10. ACCESS................................................................38
D11. STORAGE AND WORK SPACE................................................39
D12. MAINTENANCE BY OTHER..................................................39
D13. ESCALATION PROCEDURE..................................................39
D14. WARRANTY..............................................................39
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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SECTION D - EQUIPMENT MAINTENANCE (Cont'd.)
D15. TIME AND MATERIAL.....................................................39
SECTION E - SOFTWARE LICENSE
E1. LICENSE...............................................................41
E2. DELIVERY..............................................................41
E3. OWNERSHIP.............................................................41
E4. COPYRIGHT AND TRADEMARK NOTICES.......................................42
E5. TERM..................................................................42
E6. REPRESENTATIONS AND WARRANTIES OF VENDOR..............................42
E7. CONFIDENTIALITY.......................................................42
SECTION F - SOFTWARE MAINTENANCE
F1. SUPPORT AND MAINTENANCE SUPPORT SERVICES..............................45
F2. RESPONSIBILITIES......................................................46
F3. PRICING...............................................................47
F4. FORM OF PAYMENT.......................................................47
F5. CUSTOMS DUTY AND TAXES................................................47
F6. TERM..................................................................47
F7. WARRANTIES............................................................47
SECTION G - ENTIRE CONTRACT
G1. ENTIRE CONTRACT.......................................................49
G2. SIGNATURES............................................................49
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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DEFINITIONS
A1. SCOPE
For the purposes of this Contract, all terms defined herein will have the
meanings so defined, unless the context clearly indicates otherwise. A term
defined in the singular will include the plural and vice versa when the context
so indicates.
A2. DEFINITIONS
A. ACCEPTANCE DATE
"Acceptance Date" means the last day of an Acceptance Period in which a Product
has successfully completed the Acceptance Test(s) therefor. If Product is put in
use by SWBT, it shall be deemed Accepted. If SWBT waives the Acceptance Test(s)
of any Product in writing, the Acceptance Date for such Product will be the same
as the Installation Date therefor. For any maintenance, support or other Service
for which an Acceptance Test is not required, the Acceptance Date will be the
Effective Date.
B. ACCEPTANCE PERIOD
"Acceptance Period" means a period of thirty (30) consecutive calendar days (or
the period specified in the Order) during which the Acceptance Test(s) for a
Product is/are performed.
C. ACCEPTANCE TEST
"Acceptance Test" means the performance and reliability demonstrations and
tests, mutually agreed between the parties, that must be successfully completed
by a Product during the Acceptance Period which may include but not be limited
to: (1) SWBT's routine business transactions, (2) tests, demonstrations or
transactions performed during any VENDOR benchmarking, and (3) any other tests,
demonstrations or transactions included or referenced in the applicable Order or
which are appropriate to determine whether the Product conforms to the
requirements of the Order.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
<PAGE>
D. AVERAGE OPERATIONAL LEVEL ("AOL")
"Average Operational Level" ("AOL") means the percentage of time during a
specified period during which a Product is operating in accordance with the
requirements of the applicable Order.
AOL will be determined in accordance with the following formula:
AOL = TT = SUT = D x 100
-- --- - ---
TT - SUT
Where: TT= Total Time (in hours) during the specified period.
SUT = Scheduled Unavailability Time (in hours) during
which SWBT has not scheduled the Product for
operation during the specified period.
D = Downtime (in hours) during the specified period.
E. CENTRALLY DEVELOPED SYSTEM
"Centrally Developed System" means a computer-based information system whose
development project was managed and/or is being supported by SWBT.
F. CUSTOM SOFTWARE
"Custom Software" means the unique or specialized computer programs which are
listed as "Custom Software" in the applicable Order. Custom Software also
includes all associated Program Material.
G. DELIVERY DATE
"Delivery Date" means the date by which all items and parts of the Product as
ordered are delivered to the destination specified in the applicable Order.
H. DOCUMENTATION
"Documentation" will include, but not be limited to, user and system manuals,
and training materials in machine readable or printed form.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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I. DOWNTIME
"Downtime" means that period of time during which a Product is not operating in
accordance with the requirements of an Order through no fault or negligence of
SWBT. Downtime for each malfunction will start one (1) hour after SWBT attempts
to contact VENDOR's designated representative at a prearranged contact point and
will end when the Product is operating in accordance with the requirements of
the Order.
J. EFFECTIVE DATE
"Effective Date" means the date shown on an Order which is the beginning date
for such Order.
K. EQUIPMENT
"Equipment" means a unit of hardware, including spare parts, acquired or
maintained hereunder.
L. EXTENDED MAINTENANCE PERIOD
"Extended Maintenance Period" means any period of maintenance service outside of
the Principal Period of Maintenance which may be selected by SWBT.
M. FIELD ENGINEER
"Field Engineer" means a person in VENDOR's employ qualified to repair Products
in a timely and professional manner.
N. INSTALLATION DATE
"Installation Date" means the date by which all components of a Product or
System are installed and prepared for Acceptance Tests at the location specified
in the applicable Order. The Installation Date for Software and Equipment
includes delivery of Program Material, manuals and supporting Documentation.
O. INSTALLATION SITE
"Installation Site" means the location, established by SWBT, at which the
Product will reside. The Installation Site for each Product will be identified
in the applicable Order.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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P. LICENSED SOFTWARE
"Licensed Software" means a standard computer program with respect to which
VENDOR has the right to grant to SWBT a license or sublicense to use same.
Licenses are granted as either perpetual or periodic, exclusive or
non-exclusive, for which VENDOR may or may not receive a license fee. Licensed
Software also includes all associated Program Material and Documentation.
Q. ORDER
"Order" means a SWBT document executed hereunder ordering Products and/or
Services and will be deemed to incorporate (1) the provisions of this Contract
(including the Appendices attached hereto), as it may from time to time be
amended, (2) the Specifications applicable to such Order and (3) any subordinate
documents attached to or referenced in this Contract, such Specifications or
such Order. Each Order will be deemed to be a separate and independent Contract
between the parties with respect to the subject matter thereof.
R. PREVENTIVE MAINTENANCE
"Preventive Maintenance" means maintenance performed or required to be performed
by VENDOR on a scheduled basis to keep a Product in good operating condition in
accordance with the requirements of the applicable Order. Preventive Maintenance
will include (1) calibration, testing, adjustments, cleaning, lubrication,
replacement of worn, defective or questionable parts, and minor circuit updating
and modifications; (2) maintenance and engineering services necessary to
retrofit or otherwise install engineering changes, modifications and
improvements (including the latest engineering revision and all reliability
improvements) made to any Product by VENDOR at any time during the maintenance
term for that Product; and (3) automatic update services for all manuals and
Documentation furnished with any Product.
S. PRINCIPAL PERIOD OF MAINTENANCE
"Principal Period of Maintenance" means a consecutive ten (10)-hour period
daily, Monday through Friday, excluding New Year's Day, Washington's Birthday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Unless otherwise specified in the Order, such ten (10)-hour period will be from
7:00 a.m. to 5:00 p.m. Eastern Standard Time.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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T. PRODUCT
"Product" means any Equipment, Software or System acquired by SWBT hereunder.
U. PROGRAM MATERIAL
"Program Material" means all material associated with Software ordered hereunder
including, but not limited to, test data, flow charts, Documentation, data file
listings, input and output formats.
V. REMEDIAL MAINTENANCE
"Remedial Maintenance" means maintenance performed by VENDOR which is necessary
to return an inoperative or malfunctioning Product to good operating condition.
W. REMOTE JOB PROCESSING
"Remote Job Processing" means computer processing services, such as input/output
capability through remote terminal devices, central processing time, program
storage capacity, the use of proprietary computer programs furnished by VENDOR
and such other Services as may be described in VENDOR's current published price
list describing such Services.
X. SERVICES
"Services" means any service specified in an Order including, but not limited
to, any programming service, Preventive Maintenance, Remedial Maintenance,
Software Maintenance, technical consultation services, and support services.
Y. SOFTWARE
"Software" means Custom Software and Licensed Software, including any associated
program, programming aid, routine, subroutine translation, compiler, diagnostic
routine, control software, and firmware.
Z. SPECIFICATIONS
"Specifications" means (1) VENDOR's proposals, (2) VENDOR's published
literature, descriptions, drawings and other specifications, including physical,
operating, timing and maintenance characteristics, site, space, power and memory
requirements, run times, compatibility, and modularity, (3) the Product
manufacturer's or developers specifications (if
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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Vendor is not the Product manufacturer or developer) and (4) any other
specifications for the Products or Services which are attached to or referenced
in and made a part of the applicable Order.
AA. SYSTEM
"System" means any collection or aggregation of two (2) or more Products
designed to function, or represented by VENDOR as being capable of functioning,
as an entity. A System may be offered by VENDOR or any other source and may
include products offered by other vendors.
BB. SYSTEM CHANGE REQUEST
"System Change Request" means a SWBT document requesting modifications to
Software licensed hereunder.
CC. TURN-KEY SYSTEM
See "System".
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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TERMS AND CONDITIONS APPLICABLE TO THE ENTIRE CONTRACT
Bl. SCOPE OF CONTRACT
This General Contract (the "Contract") is applicable to the procurement by SWBT
from VENDOR of any Software System and Services that have been announced on or
before the effective date hereof and, unless VENDOR notifies SWBT to the
contrary, Software, Systems and Services (MATERIAL) available after such
effective date. The terms and conditions of this Section B will apply to all
other sections of this Contract.
B2. TERM OF CONTRACT
This Contract will become effective as of the date first set forth above and
will continue in effect thereafter unless sooner terminated as provided herein.
The amendment or termination of this Contract will not affect the obligations of
either party hereto to the other party hereto under any then existing Order
issued under this Contract, but said Order will continue in effect as though
this Contract had not been amended or terminated, as the case may be, and was
still in effect with respect thereto.
B3. PURCHASE ORDER
Purchase orders submitted by SWBT against this Contract will be placed on
Purchase Order Form SW-6531 (the "Order"). The typed or written provisions on
SWBT's Orders will be incorporated into this Contract, but printed provisions on
the reverse side thereof will be deemed deleted. Such Orders will specify:
(a) A description of the MATERIAL, including any numerical/alphabetical
identification referenced in the price list attached hereto as Appendix I
and by this reference made a part hereof.
(b) The requested delivery date.
(c) The applicable price(s).
(d) The location to which the MATERIAL is to be shipped.
(e) The location to which invoices are to be rendered for payment.
(f) SWBTs Order number.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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Orders will be deemed accepted by VENDOR unless written notice to the contrary
is received by SWBT within thirty (30) days from VENDOR's receipt thereof. Such
notice will be given to SWBT in care of the address indicated on the
acknowledgment copy of the Order.
B4. ORDER ACCEPTANCE
VENDOR agrees to acknowledge in writing to SWBT receipt of each Order within
thirty (30) days of such receipt. VENDOR will have the right to all ordering
information required by this Contract or (b) allow VENDOR reasonable time to
supply the items requested. VENDOR will also have the right to reject an Order
which includes additional unagreed to special terms and conditions. VENDOR will
indicate in its written acknowledgment to SWBT whether the Order was accepted or
rejected and, if rejected, the reasons therefor. Acceptance of any Order by
VENDOR will bind both parties to honor dates, amounts and other ordering
information shown thereon, including supplemental provisions contained therein.
Any Order not accepted or rejected within such thirty (30)-day period of receipt
will be deemed accepted.
B5. ASSIGNMENT
Neither party hereto may assign, subcontract or otherwise transfer its rights or
obligations under this Contract except with the prior written consent of the
other party hereto, which consent will not be unreasonably withheld; provided,
however, both parties will have the right to assign this Contract to any present
or future affiliate, subsidiary or parent corporation of either party, without
securing the consent of the other party, and may grant to any such assignee the
same rights and privileges each party enjoys hereunder. Any attempted assignment
not assented to in the manner prescribed herein, except an assignment confined
solely to money due or to become due, will be void. It is expressly agreed that
any assignment of money will be void if (a) one party fails to give the other
party at least thirty (30) days' prior written notice thereof, or (b) such
assignment attempts to impose upon SWBT obligations to the assignee in addition
to the payment of such money or preclude VENDOR from dealing solely and directly
with SWBT in all matters pertaining to this Contract, including the negotiation
of amendments or settlement of charges due.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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B6. BREACH OF CONTRACT
In the event VENDOR or SWBT is in breach or default of any term, condition or
covenant of this Contract, and said breach or default continues for a period of
thirty (30) days after the giving of written notice thereof, then, in addition
to all other rights and remedies available at law or in equity, the
non-breaching party will have the right to cancel this Contract.
B7. CHOICE OF LAW
This Contract will be governed by the laws of the State of Missouri.
B8. CLEAN UP
Upon completion of the installation of any Product hereunder, VENDOR will remove
promptly all VENDOR's tools, equipment, materials and debris from SWBT's
premises.
B9. COMPLIANCE WITH LAWS
VENDOR agrees to comply with the provisions of the Fair Labor Standards Act, the
Occupational Safety and Health Act, the National Electric Safety Code ("NESC"),
and all other applicable federal, state, county and local laws, ordinances,
regulations and codes (including the identification and procurement of required
permits, certificates, approvals and inspections) in VENDOR's performance under
this Contract. VENDOR further agrees, during the term hereof, to comply with all
applicable Executive and Federal regulations as set forth in Form SW9368, a copy
of which is attached hereto as Appendix II and by this reference made a part
hereof. VENDOR will defend, indemnify and hold SWBT harmless from and against
any loss, liability, damage or expense (including attorneys' fees and court
costs) sustained by SWBT because of VENDOR's noncompliance herewith.
B10. CONFLICT OF INTEREST
VENDOR represents and warrants that no officer, director, employee or agent of
SWBT has been or will be employed, retained or paid a fee, or otherwise has
received or will receive any personal compensation or consideration, by or from
VENDOR or any of VENDOR's officers, directors, employees or agents in connection
with the obtaining, arranging or negotiation of this Contract or other documents
or Contracts entered into or executed in connection herewith.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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B11. HARMONY
VENDOR will be entirely responsible for all persons furnished by VENDOR working
in harmony with all others when on SWBT's premises.
B12. HEADINGS NOT CONTROLLING
The headings of the clauses in each Section are inserted for convenience only
and are not intended to affect the meaning or interpretation of this Contract.
B13. PATENT AND COPYRIGHT INDEMNITY
VENDOR agrees to indemnify and hold SWBT harmless from and against any loss,
liability, damage or expense (including increased damages for willful
infringement, punitive damages, attorneys' fees and court costs) that may result
by reason of any infringement, or claim of infringement, of any trade secret,
patent, trademark, copyright or other proprietary interest of any third party
based on the normal use or installation of any MATERIAL, Software Documentation,
program or Services furnished to SWBT hereunder, except to the extent that such
claim arises from VENDOR's compliance with SWBT's detailed specifications or
instructions for which SWBT agrees to indemnify VENDOR. Such exception will not,
however, include:
(a) Merchandise available on the open market or the same as such merchandise.
(b) Items of VENDOR's origin, design or selection.
VENDOR warrants that it has made reasonable independent investigation (including
obtaining legal opinions) to determine the legality of its right to produce and
sell the Material/Equipment/Services provided herein.
If an injunction or order is obtained against SWBT's use of any MATERIAL,
Software, Documentation, program or Services, or if in VENDOR's opinion any
MATERIAL, Software, Documentation, program or SERVICE is likely to become the
subject of a claim of infringement, VENDOR will, at its expense:
(i) Procure for SWBT the right to continue using the MATERIAL,
software, documentation, program or SERVICE; or
(ii) After consultation with SWBT, replace or modify the
MATERIAL, Software, Documentation, program or SERVICE to
make it a substantially similar, functionally equivalent,
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The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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noninfringing MATERIAL, software, documentation, program or
SERVICE.
If the MATERIAL, Software, Documentation, program or SERVICE is purchased or
licensed and neither (i) nor (ii) above is possible, SWBT may cancel the
applicable Order and require VENDOR to remove such MATERIAL, Software,
Documentation, program or SERVICE from SWBT's location and refund any charges
paid therefore by SWBT.
In no event will SWBT be liable to VENDOR for any charges after the date that
SWBT no longer uses any MATERIAL, Software, Documentation, program or SERVICE
because of actual or claimed infringement.
Each party hereto agrees to defend or settle, at its own expense, any action or
suit against the other party hereto for which it is responsible under this
clause. Each party further agrees to notify the other party promptly of any
claim of infringement for which the other party is responsible hereunder and
cooperate with the other party in every reasonable way to facilitate the defense
thereof.
In the event that VENDOR, after notification of any claim for which VENDOR is
responsible, does not assume the defense of such action, VENDOR will reimburse
SWBT for all of its costs incurred in the defense of the claim, including, but
not limited to attorneys' fees and interest on such SWBT's payment of said
amounts from the date of SWBT's payment of said amounts.
B14. INSPECTION
When so stated in SWBT's Order, VENDOR agrees to (a) notify SWBT or SWBT's agent
when Equipment is ready for inspection, (b) give SWBT such reasonable
opportunity to inspect such Equipment at any time prior to the scheduled
shipment date, and (c) provide without charge any production testing facilities
and personnel required to inspect the Equipment under the inspection
instructions specified. Purchase of any Equipment under this Contract is subject
to SWBT's inspection and acceptance after delivery. It is mutually agreed that
SWBT or SWBT's agent may develop inspection instructions which will be made a
part of this Contract at a later date by written Contract of the parties.
Inspection or failure to inspect on any occasion will not affect SWBT's rights
under warranty or other provisions of this Contract.
B15. INVOICING STANDARD
VENDOR agrees to render invoices in not less than three (3) copies, and no later
than the month following the month in which the charges on the invoice accrued.
Provided that the amounts covered by the invoice are in fact due and payable by
SWBT hereunder, SWBT agrees to pay
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The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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each invoice no later than thirty (30) days from the invoice date of the
invoiced Software or Services. Discounts may be taken where allowed.
Invoices for each Order will be rendered on the Shipment Date.
B16. INSURANCE
With respect to performance hereunder, VENDOR agrees to maintain, at all times
during the term of this Contract, the following insurance coverage and any
additional insurance and/or bonds required by law:
(a) Workers' Compensation insurance with benefits afforded under the laws of
the state in which the work is to be performed.
(b) Employer's Liability insurance with minimum limits of $100,000 for bodily
injury by accident, $100,000 for bodily injury by disease per employee and
$500,000 for bodily injury by disease policy aggregate.
(c) General Liability insurance with minimum limits of $1,000,000 per
occurrence for bodily injury and property damage arising out of
Premises/Operations, $1,000,000 per occurrence Personal Injury and $
1,000,000 General Policy Aggregate (applicable to Commercial General
Liability Policies), and $1,000,000 per occurrence/aggregate for
Products/Completed Operations. Coverage must include Blanket Contractual,
Independent VENDOR's Liability and Broad Form Property Damage and name
SWBT as an "Additional Insured".
(d) If use of motor vehicles is required, Automobile Liability insurance with
minimum limits of $1,000,000 per occurrence for bodily injury and property
damage, which coverage will extend to all owned, hired and non-owned
autos.
Insurance companies affording coverage hereunder must have a Best's Rating of
B+Vll or better.
Upon SWBT's request, VENDOR agrees to furnish certificates or other acceptable
proof of the foregoing insurance. SWBT is to be notified in writing at least
thirty (30) days prior to cancellation of any material change of the foregoing
insurance.
B17. LIABILITY
VENDOR agrees to indemnify and save SWBT harmless (including its officers,
directors, agents and employees) from and against any and all liability, loss,
damage or expense (including
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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attorneys' fees and court costs) incurred by SWBT in connection with any claim,
demand or suit for damages, injunction or other relief caused by, resulting from
or attributable to the MATERIAL or the acts or omissions of VENDOR (including
any of its suppliers, agents or subcontractors but excepting the negligent acts
or omissions solely of SWBT) in furnishing the MATERIAL or performing services
hereunder. This indemnity will survive the delivery, inspection and acceptance
of MATERIAL or performance of services hereunder.
VENDOR further agrees to defend SWBT, at SWBT's request, against any such claim,
demand or suit, and SWBT agrees to promptly notify VENDOR of any claim or demand
against SWBT for which VENDOR is or may be responsible under this clause.
VENDOR's foregoing Contract to indemnify and save SWBT harmless and defend
includes, but is not limited to, any claim, suit or action of infringement of
any patent, trademark, copyright, trade secret or any other intellectual
property of any third party.
VENDOR agrees not to implead or bring any action against SWBT or SWBT'S
employees based on any claim by any person for personal injury or death that
occurs in the course or scope of employment of such person by VENDOR and that
arises out of MATERIAL or services furnished under this Contract.
B18. LICENSES
No licenses, express or implied, under any patents are granted by SWBT to VENDOR
under this Contract.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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B19. REPORTS
Upon request by SWBT, VENDOR agrees to render reports on or before the fifth
working day of each month containing information mutually agreed to by SWBT and
VENDOR.
B20. NON-EXCLUSIVE MARKET RIGHTS
It is expressly understood and agreed that this Contract does not grant VENDOR
an exclusive privilege to sell to SWBT any or all products of the type described
in the clause entitled "MATERIAL" which SWBT may require, nor require the
purchase of any products from VENDOR by SWBT. It is, therefore, understood that
SWBT may contract with other manufacturers and suppliers for the procurement of
comparable products or services.
B21. NON-WAIVER
No course of dealing or failure of either party to strictly enforce any term,
right or condition of this Contract will be construed as a waiver of such term,
right or condition. The waiver by SWBT in one instance of any default of VENDOR
hereunder will not be deemed a waiver of any other default of VENDOR. The
express provision herein for certain rights and remedies of SWBT are in addition
to any other legal and equitable rights and remedies to which SWBT would
otherwise be entitled.
B22. NOTICES
Any notice or demand which under the terms of this Contract or otherwise must or
may be given or made by VENDOR or SWBT will be in writing and given or made by
facsimile, telegram or similar communication or by certified or registered mail,
return receipt requested, addressed to the respective parties as shown:
(a) If to SWBT: 1010 Pine
Room 9-E-80
St. Louis, Missouri 63101
Attn: Contract Manager- AMADNS
(b) If to Affiliated Address set forth in the applicable order Company: ATTN:
Signer of the Order
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The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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(c) If to VENDOR: Securicor Telesciences, Inc.
351 New Albany Road
Moorestown, New Jersey 08057-1177
Attn: VP-Program Management
Such notice or demand will be deemed to have been given or made when sent, if
sent by facsimile, telegram or similar communication, or when deposited, postage
prepaid, in the U.S. mail.
The above addresses may be changed at any time by giving thirty (30) days' prior
written notice as above provided.
B23. PLANT AND WORK RULES
VENDOR's employees and agents and those of SWBT will, while on the premises of
the other, comply with all plant rules and regulations and, where required by
government regulations, submit satisfactory clearance from the U.S. Department
of Defense and/or other federal authorities concerned.
B24. PRICE PROTECTION
VENDOR agrees that it will not increase maintenance charges for a period of one
(1) year after the Acceptance Date applicable to Software licensed hereunder.
Thereafter, upon ninety (90) days' prior written notice to SWBT, such charges
may be increased to the price level prevailing in VENDOR's standard price list,
provided, however, such prices may not be increased more than ten (10%) percent
in any one year nor exceed the prices charged to other similarly situated
customers.
If VENDOR's price for any item ordered hereunder on the date of installation, or
if a Service on the date of delivery thereof is less than the price specified on
the applicable Order, the lower price will prevail. VENDOR will notify SWBT of
the fact, amount and effective date of the reduced price which will be applied
to such Order from and after such effective date.
B25. PUBLICITY
VENDOR agrees not to advertise, or otherwise make known to others, any
information regarding this Contract. VENDOR further agrees not to use in any
advertising or sales promotion, press releases or other publicity matters any
endorsements, direct or indirect quotes, or pictures implying endorsement by
SWBT or any of its employees without SWBT's prior written
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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approval. VENDOR will submit to SWBT for written approval, prior to publication,
all publicity matters that mention or display SWBT's name and/or marks or
contain language from which a connection to said name and/or marks may be
inferred or implied.
B26. RECORDS AND AUDIT
VENDOR agrees that it will:
(a) Maintain complete and accurate records of all amounts billable to
and payments made by SWBT hereunder in accordance with standard
recognized accounting practices.
(b) Retain such records and reasonable billing detail for a period of
three (3) years from the date of final payment for Services.
(c) Provide reasonable supporting documentation to SWBT concerning any
disputed invoice amount within thirty (30) calendar days after
receipt of written notification of such dispute.
(d) Permit SWBT, through its accredited representatives, to inspect and
audit during normal business hours the charges invoiced to SWBT.
Should SWBT request an audit, VENDOR will make available any
pertinent records and files excluding any VENDOR cost information.
B27. RELEASES VOID
Neither party will require waivers or releases of any personal rights from
representatives of the other in connection with visits to each other's
respective premises, and no such releases or waivers will be pleaded by VENDOR,
SWBT or third persons in any action or proceeding.
B28. RIGHT OF ACCESS
Both VENDOR and SWBT will permit reasonable access to the other's facilities in
connection with work hereunder. No charge will be made for such visits. It is
agreed that prior notification will be given when access is required. VENDOR
agrees to remove any of its employees at SWBTs request.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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B29. SEVERABILITY
If any provision of this Contract is determined to be invalid or unenforceable,
such invalidity or unenforceability will not invalidate or render unenforceable
the entire Contract, but rather the entire Contract will be construed as if it
did not contain the particular invalid or unenforceable provision(s) and the
rights and obligations of VENDOR and SWBT will be construed and enforced
accordingly.
B30. SHIPPING AND BILLING
VENDOR will at its expense:
(a) Ship Orders complete unless instructed otherwise by SWBT.
(b) Ship to the destination designated in an Order in accordance with
specific routing instructions. All products are shipped FOB VENDOR's
premises.
(c) Enclose a packing memorandum with each shipment and, when more than
one (1) package is shipped, identify the one containing the
memorandum.
(d) Mark the Order number and Product identification on all packages,
subordinate documents and shipping papers.
(e) Render invoices showing the Order number, through routing and
weight.
(f) Render separate invoices for each shipment or Order.
On written request of SWBT, VENDOR will mail Bills of Lading, shipping notices
and copies of transportation bills with copies of VENDOR's invoices to the
address indicated on said request.
VENDOR will limit billing on repair invoices to one (1) invoice per repair
Order.
If prepayment of transportation charges is authorized, VENDOR will include the
transportation charges from the F.O.B. point to the destination as a separate
charge on VENDOR's invoice. Adequate protective packaging will be furnished by
VENDOR at no additional charge. Shipping and routing instructions may be altered
as mutually agreed upon by VENDOR and SWBT without written notice. C.O.D.
shipments will not be accepted.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
B31. SURVIVAL OF OBLIGATIONS
VENDOR's obligations under this Contract which by their nature would continue
beyond the termination, cancellation or expiration hereof, including, by way of
illustration only and not limitation, those in the clauses entitled "COMPLIANCE
WITH LAWS", "INFRINGEMENT", "LIABILITY", "PUBLICITY", "RELEASES VOID",
"SEVERABILITY", "USE OF INFORMATION" and "WARRANTY", will survive the
termination, cancellation or expiration of this Contract.
B32. TAXES
In the event that SWBT is liable under federal law for excise taxes or under
state or local law for sales taxes collected by VENDOR on the MATERIAL provided
hereunder, VENDOR agrees to bill such taxes as separate items, listing each tax
jurisdiction involved. SWBT will have the right to require VENDOR to contest
with the imposing jurisdiction, at SWBT's expense, any taxes or assessments
which SWBT may deem to be improperly levied. VENDOR further agrees, on request
of SWBT, to furnish statements evidencing that taxes and assessments for which
SWBT is responsible hereunder have been paid.
B33. USE OF INFORMATION
Any specifications, drawings, sketches, models, samples, tools, computer or
other apparatus programs, technical information or business information or data,
written, oral or otherwise (all hereinafter designated "Information"), furnished
to by one party to the other under this Contract or in contemplation hereof will
remain the disclosing party's property. All copies of such Information in
written, graphic or other tangible form will be returned to the other party upon
request. Information will be kept confidential by the other party in performing
under this Contract and may not be used for any other purposes except upon such
terms as may be agreed upon between VENDOR and SWBT in writing.
B34. WORK DONE BY OTHERS
If any part of the Services or other work performed by VENDOR is dependent upon
work done by others, VENDOR will inspect such work and promptly report to SWBT
any defect therein that renders such other work unsuitable for VENDOR's proper
performance hereunder. VENDOR's silence will constitute approval of such other
work as being fit, proper and suitable for VENDOR's performance of the Services
or other work.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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B35. ORDER OF PRECEDENCE
In the event of any conflict or inconsistency between any provisions of this
Contract and the provisions of any Order, the provisions of such Order will
control but only for the purpose of such Order, and, except for such Order, the
terms and conditions of this Contract will not be deemed to be waived, amended
or modified.
B36. CONVERSION OF FINANCIAL ARRANGEMENT
SWBT reserves the right at any time prior to completion of the Acceptance Test
and at no additional cost to SWBT to convert any part or all of an Order for
Equipment to a third-party lease, or to any purchase, lease, rental plan, or
other marketing pricing policy available from VENDOR and may do so with no
additional cost to SWBT.
B37. TRANSFER OF TITLE TO A THIRD PARTY
In connection with the financing of Equipment, SWBT may request VENDOR to pass
title to the Equipment directly to a third party designated by SWBT, who will
then purchase the Equipment on SWBT's behalf. In such event VENDOR agrees to
execute a Bill of Sale conveying title to the Equipment to such third party and
such third party will succeed to all of SWBT's rights under the applicable Order
with respect to such Equipment, although SWBT will continue to exercise such
rights directly with VENDOR on behalf of such third party unless and until
VENDOR is otherwise notified by said third party and SWBT. Notwithstanding the
foregoing, SWBT guarantees payment of the purchase price for such Equipment to
VENDOR. The right of SWBT to request VENDOR to pass title to Equipment to a
third party will include the right to sublicense any Software relating thereto
without payment of any additional license fees to VENDOR.
B38. TERMINATION OF ORDER
SWBT may terminate any or all Orders placed by it hereunder within thirty (30)
days of scheduled ship date. Unless otherwise specified herein, SWBT's liability
to VENDOR with respect to any such terminated Order will be limited to (a)
VENDOR's purchase price of all components (not usable in VENDOR's other
operations or salable to VENDOR's other customers), to be used in ordered, but
not yet manufactured MATERIAL, plus (b) the actual costs incurred by VENDOR in
procuring and manufacturing MATERIAL (not usable in VENDOR's other operations or
salable to VENDOR's other customers) in process as of the date of SWBTs notice
of termination, less any salvage value thereof, and (c) the actual engineering
costs incurred by VENDOR in providing equipment engineering services hereunder.
If requested, VENDOR agrees to substantiate such costs with proof satisfactory
to SWBT.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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B39. TRAINING
If requested by SWBT, VENDOR agrees to provide at the prices prevailing under
Appendix I to SWBT:
(a) One (1) complete copy of training material and/or five (5) seats in each
training class offered by VENDOR for SWBT's personnel.
(b) Instructors and the necessary equipment and material to train SWBT's
personnel in the engineering, installation, operation, maintenance, repair
and marketing of MATERIAL purchased under this Contract. Classes will be
scheduled to meet SWBT's initial and on-going training requirements with
the locations to be agreed upon by SWBT and VENDOR.
(c) Training material, documentation and assistance with respect to those
areas of interest outlined in paragraph (b) above sufficient in detail,
content, format and quantity to allow SWBT to train SWBT's own personnel
or any other users of MATERIAL or equipment of the type purchased by SWBT
hereunder. SWBT may, at its discretion, reproduce VENDOR's training
material and documentation for use in connection with such training.
(d) Any combination of those items set forth in paragraphs (a), (b) and (c)
above to meet SWBT's training needs.
VENDOR will be responsible for changing and updating training material as such
changes and updates become known to VENDOR. If SWBT determines that any part of
the training does not meet SWBT'S needs, VENDOR agrees to make any changes
requested by SWBT in a mutually agreed upon time frame. If new training material
is developed by VENDOR in accordance with SWBT's request, such training material
will be subject to SWBTs approval.
A complete list and description of VENDOR's training courses/materials, are
included in Appendix III, attached hereto and by this reference made a part
hereof.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
B40. SWBT'S TECHNICAL INFORMATION
VENDOR agrees to comply with the following technical requirements documents of
SWBT. In instances where it is determined that the VENDOR is in noncompliance
with the technical requirements documents, which causes SWBT harm in any way, it
shall be the responsibility of VENDOR to bring their product/service into
compliance with the technical requirements documents at no cost to SWBT.
Generic TRs to be included in this clause for all transmission and
switching products are:
- GR-137-CORE, Issue 1, June 1, 1994. "Generic Requirements for
Central Office Cable"
- GR-1089-CORE, Issue 1, November 1994. "Electromagnetic Compatibility
and Electrical Safety - Generic Criteria for Network
Telecommunications Equipment"
- GR-1421-CORE, Issue 1, 7-1-94,. "Generic Requirements for
ESD-Protective Circuit Pack Containers"
- GR-1502-CORE, Issue 1, June 1994. "Central Office Environment Detail
Engineering Generic Requirements"
- SR-3158, Issue 1, May, 1994: "NEBS 2000 Physical Protection
Guidelines for Operations Systems Hardware"
- SR-NWT-002910, Issue 1, December 1993, Part 2. "NEBS 2000
Technologies Mechanical Protection for Floor Mounted Equipment"
- SWBT Practice 790-10-322SW, March 1, 1990. "Detail Engineering Guide
Telephone Company Engineered (TCE) Orders Preparation Instructions"
- TP 76300, December 1, 1994. "Installation Guidelines"
- TP 76310, April 1, 1992. "Earthquake Engineering Guidelines"
- TR-EOP-000066, Issue 1, February 1987. "Space Planning Documentation
Requirements"
- TR-NWT-000063, Issue 5, September 1993. "Network Equipment Building
Systems General Equipment Requirements (NEBS)"
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
- TR-NWT-000078, Issue 3, December 1991. "Generic Physical Design
Requirements for Telecommunications Products and Equipment"
- TR-NWT-000295, Issue 2, 1992. "Central Office Grounding (Isolated
Ground Plane)"
- TR-NWT-000513 "Generic Requirements for Power Systems"
- TR-NWT-000833, Issue 5, December 1992, Revision 1, April 1993,
Revision 2, June 1994. "Operations Application Messages - Network
Maintenance: Network Elements and Transport Surveillance Messages".
- TR-NWT-000840, Issue 1, December 1991. "Supplier Support Generic
Requirements (SSGR)"
- TR-NWT-000928 "Generic Requirements for Fuse Panels used in Central
Offices"
- TR-OPT-000209, Issue 5, October 1991. "Guidelines for Product Change
Notices"
- TR-OPT-000230, Issue 2, September 1993. "Engineering Complaints and
Service Failure Analysis Reports
- TR-TSY-000454, Issue 1, July 1988. Supplier Documentation for
Network Elements
- TR-TSY-000513, Issue 2, July 1987. "LSSGR:Power, Section 13"
B41. AFFILIATED COMPANY
"Affiliated Company" as used herein means any present or future affiliate,
subsidiary or parent corporation of SWBT.
An Affiliated Company that places an Order with VENDOR hereunder will
incorporate into such Order the terms and conditions of this Contract. Such
Affiliated Company will be responsible for its own obligations including, but
not limited to, all charges incurred in connection with such Order. Nothing in
this Contract will be construed as requiring SWBT to indemnify VENDOR for any
acts or omissions of an Affiliated Company.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
B42. FORCE MAJEURE
Neither party hereto will be held responsible for any delay or failure in
performance of any part of this Contract to the extent that such delay or
failure is caused by fire, flood, explosion, war, strike, embargo, government
requirement, civil or military authorities, Act of God or by the public enemy,
acts or omissions of carriers, or any other cause beyond the control of VENDOR
or SWBT. If any force majeure condition occurs, the party delayed or unable to
perform will give immediate notice thereof to the other party and the party
affected by the other's inability to perform may elect to:
(a) Terminate this Contract or any Order or part of either as to MATERIAL not
already shipped or services not already performed.
(b) Suspend this Contract for the duration of the force majeure condition, buy
or sell elsewhere MATERIAL to be bought or sold hereunder, and deduct from
any commitment the quantity bought or sold or for which such commitments
have been made elsewhere.
(c) Resume performance hereunder once the force majeure condition ceases with
an option in the affected party to extend the term of this Contract up to
the length of time the force majeure condition endured.
Unless written notice to the contrary is given within thirty (30) days after
such affected party is notified of the force majeure condition, option (b) above
will be deemed selected.
B43. HAZARDOUS MATERIALS/REGULATED SUBSTANCE
A "REGULATED SUBSTANCE," as referenced in this clause, is a generic term used to
describe all materials that are regulated by the federal or any state or local
government during transportation, handling and/or disposal. This includes, but
is not limited to, materials that are regulated as (a) "hazardous materials"
under the Hazardous Materials Transportation Act, (b) "chemical hazards" under
Occupational Safety and Health Administration standards, (c) "chemical
substances or mixtures" under the Toxic Substances Control Act, (d) "pesticides"
under the Federal Insecticide, Fungicide and Rodenticide Act, and (e) "hazardous
wastes" as defined or listed under the Resource Conservation and Recovery Act.
If any MATERIAL purchased under this Contract contains a REGULATED SUBSTANCE,
VENDOR agrees to notify SWBT immediately and provide to SWBT all necessary
notification and other information (including but not limited to OSHA Material
Safety Data Sheets) regarding said REGULATED SUBSTANCE required by law. VENDOR
further agrees to defend, indemnify and hold SWBT harmless from and against
any loss, liability, damage or expense (including attorneys' fees and court
costs) sustained by SWBT because of VENDOR's noncompliance herewith.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
B44. CHANGES TO MATERIAL
VENDOR agrees to notify SWBT, in advance, of any change to be made in the
MATERIAL furnished in accordance with the Specifications, Software Related
Documentation and/or Documentation that would impact upon either reliability or
the form, fit or function of the MATERIAL. VENDOR further agrees, at the time of
such notification, to provide SWBT with (a) a MATERIAL change number; (b) a
description of the change; (c) the reason for the change; (d) a description of
the impact of the change upon the following: (i) reliability, (ii) VENDOR's
revised Specifications, and (iii) form, fit or function; (e) the name of a
designated person and phone number to contact for information regarding the
change; (f) a date after which all newly manufactured MATERIAL will have the
change applied in the manufacturing process; (g) a date by which all changes are
expected to be completed by VENDOR for all MATERIAL; and (h) the recommended
repair location (SWBT's or VENDOR's facility).
It will be VENDOR's responsibility to furnish MATERIAL change notices for all
MATERIAL provided hereunder in accordance with TR-TAP-000209, Issue 5, "Product
Change Notices". Such MATERIAL change notices will be forwarded to the addresses
contained in Appendix IV, attached hereto, and by this reference made a part
hereof, or as otherwise specified in writing only by:
Area Manager-Maintenance Engineering
Southwestern Bell Telephone Company
One Bell Center, Room 13-E-04
St. Louis, Missouri 63101-3099
In order for SWBT to review MATERIAL changes, a minimum of thirty (30) days'
advance notice will be required except for those cases where an extremely
unsatisfactory condition requires immediate action. The final classification of
any MATERIAL change proposed by VENDOR will be by mutual Contract between VENDOR
and SWBT.
For changes classified as "A" or "AC", VENDOR agrees to promptly modify or
replace, at no charge, all affected MATERIAL provided hereunder and the
Documentation relevant thereto. SWBT will have the right to invoice VENDOR for
any labor expenses incurred by SWBT attributable to the replacement of such
MATERIAL.)
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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For changes classified as "B" or "D", VENDOR agrees to notify SWBT of the exact
nature thereof and discuss with SWBT details regarding the proposed
implementation procedure for affected MATERIAL which is being or will be
manufactured. SWBT will determine, at its option, if MATERIAL previously shipped
will be modified or replaced. Should such modification or replacement be deemed
necessary, VENDOR will arrange therefor at prices and schedules to be mutually
agreed upon with SWBT prior to implementation. Relevant Documentation for such
affected MATERIAL will also be provided by VENDOR at no charge.
In the event that SWBT and VENDOR fail to reach Contract on any change in
MATERIAL proposed by VENDOR, SWBT will have the right without penalty to
terminate this Contract and any or all Orders for MATERIAL affected by such
change(s) that may have been issued by SWBT.
B45. QUALITY ASSURANCE
VENDOR hereby agrees that MATERIAL and Services furnished hereunder by VENDOR
will be subject to:
I. VENDOR's quality control activities and procedures, including any
performance measurements, testing, quality process reviews or inspections
to implement such procedures.
II. The requirements contained in the current issues of the following Bellcore
documents and subsequent issues thereof:
TR-TSY-000179 - "Software Quality Program Generic Requirements"
TR-TSY-000282 - "Software Reliability and Quality Acceptance Criteria"
TR-TSY-000332 - "Reliability Prediction Procedure for Electronic
Equipment"
TR-TSY-000357 - "Component Reliability Assurance Requirements for
Telecommunications Equipment"
TR-NWT-001037 - "Statistical Process Control Program Generic Requirements"
TR-NWT-001252 - "Quality System Generic Requirements"
TR-NWT-001323 - "Supplier Data - Comprehensive Generic Requirements"
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
Requirements listed in the MARKING Clause, as specified in QPS No. 94.890,
Issue 4, "Common Language Equipment Identification (CLEI)/Bar Code Labels"
attached hereto as Appendix V.
VENDOR further agrees that it will:
(a) Notify SWBT or SWBT's Agent when MATERIAL and/or Services is ready for
examination and give SWBT or SWBT's Agent reasonable opportunity to
examine MATERIAL at any time prior to the scheduled shipment date and
Services at any time prior to the scheduled completion date. At SWBT's
option, examination of MATERIAL and/or Services may be performed prior to
final assembly and/or completion of manufacturing or repair processes in
accordance with the above-referenced QPS and/or MOP.
(b) Provide SWBT or SWBT's Agent with copies of VENDOR's Quality Manual,
current inspection procedures and product specifications for the MATERIAL
and Services furnished hereunder.
(c) Maintain and make available to SWBT or SWBT's Agent the data obtained
through VENDOR's quality control procedures which demonstrate that the
MATERIAL and Services meet the specified quality and reliability
requirements.
(d) Provide SWBT or SWBT's Agent, at no charge, with access to VENDOR's test
equipment, facilities, data and specifications, assistance from VENDOR's
personnel and sufficient working space to enable SWBT or SWBT's Agent to
perform said Quality Assurance Examination and/or Process Surveillance
and/or a review of VENDOR's total quality program at VENDOR's facilities.
(e) Only MATERIAL subject to review by SWBT or SWBT's Agent will be accepted
for delivery to SWBT. Where VENDOR is authorized by SWBT to establish a
stock of MATERIAL for future shipment, such MATERIAL will be available for
examination by SWBT or SWBT's Agent prior to reserving same for SWBT and
such reserved MATERIAL will not be shipped on orders to anyone other than
SWBT.
Nothing contained herein will affect SWBT's rights hereunder, under any
warranty, or under other provisions of this Contract. The purchase of any
MATERIAL and/or Services hereunder is subject to SWBT's inspection and
acceptance after delivery thereof.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
B46. QUALITY ASSURANCE RELIABILITY
VENDOR hereby agrees that MATERIAL furnished hereunder by VENDOR will, at the
time of shipment:
a. Have sufficient burn-in operating time at the component, circuit pack
and/or system level to assure an Infant Mortality Factor ("IMF") of not
more than 2.5. The IMF is the ratio of the failures experienced in the
first year of operation (8760 hours) to the failures experienced in a year
of operation at Steady State Reliability ("SSR") assuming a Weibull Infant
Mortality Model with a slope of 0.75 and 10,000 hours to reach SSR.
b. Meet the Quality and Reliability requirements specified in TR-NWT-000499,
Issue 5, "Transport Systems Generic Requirements: Common Requirements",
Section 3.
Nothing contained herein will affect SWBT's rights hereunder, under any
warranty, or under any other provisions of this Contract.
B47. COMPLAINTS
SWBT reserves the right to notify VENDOR in cases where SWBT has identified
current or potential problems or service areas concerning the operation,
maintenance, engineering, installation or design of MATERIAL furnished
hereunder. Whenever SWBT exercises such right, VENDOR agrees to:
(a) Accept such notice (hereinafter referred to as an "Engineering Complaint")
and handle it in accordance with Bell Communications Research, Inc.
("Bellcore") technical publication TA-OPT-00230, Issue 2, September, 1993,
entitled "Engineering Complaints and Service Failure Analysis Reports."
(b) Acknowledge receipt of such Engineering Complaint and advise SWBT of
VENDOR's proposed organization responsible for resolving it within ten
(10) working days of VENDOR's receipt thereof.
(c) Resolve such Engineering Complaint within ninety (90) calendar days of the
date of SWBT's notice, unless a later date is mutually agreed upon by the
parties. If unable to resolve an Engineering Complaint within said ninety
(90) day period, VENDOR will issue an "interim report" as defined in
TA-OPT-00230.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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(d) Furnish to SWBT a monthly report of the status of open Engineering
Complaints, in a mutually agreed upon medium, together with a proposed
schedule for their resolution.
(e) Notify SWBT in writing when an Engineering Complaint has been resolved.
B48. EMERGENCY SUPPORT SERVICE
In the event any natural or other emergency/disaster occurs whereby MATERIAL
and/or SERVICE provided pursuant to this Contract is/are rendered inoperative
and such a condition materially affects SWBT's ability to provide
telecommunications services to its subscribers, VENDOR agrees, at SWBT's
request, to assist SWBT as follows:
(a) VENDOR will locate backup or replacement MATERIAL and/or SERVICE for
SWBT's use.
(b) VENDOR will provide SWBT with a periodically updated current listing of
technical support personnel, together with after-hours telephone contact
procedures, to assist SWBT in resolving out-of-service conditions.
(c) If MATERIAL is available from VENDOR's stock, VENDOR will make every
effort to ship replacement MATERIAL in a manner specified by SWBT within
twenty-four (24) hours of receipt of SWBT's request therefor.
(d) When MATERIAL required by SWBT is not available from stock for immediate
shipment, VENDOR agrees to pursue the following alternative courses of
action:
(i) Assist SWBT in locating functionally equivalent substitute MATERIAL.
(ii) If requested by SWBT, schedule the repair or new manufacture of
MATERIAL on a priority basis. SWBT will indemnify VENDOR for any
penalties incurred by VENDOR as a result of such priority efforts
due to contractual obligations with third parties.
(iii) Assist SWBT by providing field technical personnel to make temporary
modifications and arrangements to mitigate the effects of
out-of-service conditions. If requested by SWBT, VENDOR will
document such efforts and associated charges.
Charges for replacement MATERIAL will be at the current Contract price or, if no
such Contract exists, VENDOR's then current published selling price. Additional
charges, if any, for
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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VENDOR's authorized use of overtime and premium transportation necessary to
alleviate the out-of-service condition will be included as a separate item on
VENDOR's invoice.)
VENDOR will make available the individual whose title, phone number and location
are listed below to provide assistance and information on a twenty-four (24)
hour basis for all of the support service described above:
Director of Support Services
----------------------------
TITLE
Jay Finnigan
----------------------------
NAME
Moorestown, NJ
----------------------------
LOCATION
609-866-0015
----------------------------
PHONE
B49. MOST FAVORED CUSTOMER
VENDOR hereby represents and warrants that all prices, benefits, warranties and
terms contained herein and in Orders issued pursuant hereto are and will
continue to be during the term of this Contract at least as favorable as those
currently being and which will be offered by VENDOR to any of its other
similarly situated customers.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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EQUIPMENT ACQUISITION
C1. GENERAL
VENDOR agrees to sell to SWBT, upon the terms and conditions set forth in this
Contract, Equipment specified in Orders submitted by SWBT pursuant to this
Section and accepted by VENDOR.
C2. FORM OF ORDER
Orders for equipment will be written on SWBT's forms and contain the following
information:
a. The incorporation by reference of this Contract.
b. A complete list of the Equipment to be purchased, specifying
quantity, type and description.
c. The purchase price, net of any purchase option or trade-in credit.
d. The Delivery Date.
e. The Installation Date.
f. The delivery location including floor, street, city, state and zip
code.
g. The installation Site.
h. Any special terms and conditions agreed upon by the parties.
C3. TITLE AND RISK OF LOSS
Title and Risk of Loss to Equipment purchased pursuant to this Contract will
pass to SWBT at FOB point. Upon receipt of payment, VENDOR will furnish SWBT a
Bill of Sale and all other documents requested by SWBT to enable it to perfect
unencumbered title to the Equipment.
C4. WARRANTY
VENDOR warrants to SWBT that Equipment furnished hereunder will be free from
defects in material and workmanship, free from all security interests, liens and
encumbrances for a period of ninety (90) days for Software and one (1) year for
Equipment and will conform to and perform in accordance with VENDOR's published
specifications, drawings and samples. These warranties will be in addition to
all other warranties, express, implied or statutory. In addition, if any such
Equipment contains one or more manufacturer's warranties, VENDOR hereby
assign(s) such warranties to SWBT. Equipment not meeting the warranties will, at
SWBT's option, be repaired, adjusted or replaced by VENDOR at no cost to SWBT.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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VENDOR also warrants to SWBT that Services will be performed in a first-class,
workmanlike manner. All warranties will survive inspection, acceptance, payment,
and use.
C5. SITE PREPARATION
VENDOR agrees to furnish to SWBT, in writing, Equipment specifications,
Installation Site requirements and VENDOR's recommendations for Site preparation
in line with a mutually agreed program schedule prior to the Delivery Date
specified in the applicable Order. The specifications will contain sufficient
detail to ensure that the Equipment to be installed will operate efficiently in
accordance therewith. Any changes in specifications or Installation Site
requirements will be sent to SWBT, in writing, at least ninety (90) calendar
days prior to the delivery of any additional units of Equipment which may be
ordered after the initial Order. SWBT will have the Installation Site prepared
at no expense to VENDOR in accordance with the Equipment specifications
furnished by VENDOR. Installation Site preparation will be scheduled to be
completed at least ten (10) calendar days prior to the Delivery Date specified
in the applicable Order, subject to the delay provisions of Clause C7, DELIVERY
of this Section, VENDOR may inspect the Site on the scheduled date for
completion of preparation or immediately after SWBT informs VENDOR that
Installation Site preparation is complete. VENDOR will promptly report to SWBT
in writing, the date of the inspection and any nonconforming conditions.
Any alterations or modifications in Installation Site preparation which are
attributable to incomplete or erroneous Equipment specifications, Installation
Site requirements or Installation Site recommendations provided by VENDOR will
be made by SWBT at VENDOR's expense.
C6. DELIVERY
VENDOR agrees to deliver all Equipment on the Delivery Dates and to the
Installation Sites specified in the applicable Orders. SWBT may request delivery
in advance of the Delivery Date specified in an Order by notifying VENDOR in
writing to that effect at least thirty (30) days prior to the specified Delivery
Date. If such advanced delivery is accepted by VENDOR, SWBT will amend the Order
accordingly.
At any time, but not less than thirty (30) days prior to the Delivery Date
specified in an Order, SWBT, by written notification to VENDOR, may delay such
Date, for a period not to exceed thirty (30) days.
VENDOR will assume full responsibility for dealing with carriers to insure
timely delivery of its shipments, locate missing or late shipments, resolve
billing for transportation charges and submit and resolve all insurance claims
arising from damage to its shipments.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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C7. TRANSPORTATION
The transportation charges applicable to Equipment to VENDOR's plant will be
paid by SWBT. VENDOR will bear the cost of transportation back to SWBT for
Equipment (a) shipped for mechanical replacement purposes, (b) removed as a
result of Equipment failure, whether for the convenience of VENDOR or pursuant
to a demand by SWBT as provided herein, and (c) removed as a result of a default
by VENDOR of any of the terms and conditions of this Contract or any Order.
Transportation charges to ship empty packing cases will be paid by VENDOR except
when the Equipment is moved at SWBT's request from one SWBT Installation Site to
another.
Transportation charges payable by SWBT will not exceed the cost of shipment
between SWBT's location and the location of VENDOR's nearest plant of
manufacture of the Equipment being shipped, regardless of the actual point of
origin or destination of the Equipment.
SWBT will pay only those rigging or drayage costs incurred at SWBT's
Installation Site, except when VENDOR is responsible for payment of
transportation charges as stated above.
C8. INSTALLATION
VENDOR agrees to install at the prices listed in Appendix 1, all Equipment
ordered hereunder, including all necessary cabling, connection with SWBT-
supplied power, utility and communications services, and in all other respects
make the Equipment ready for operational use.
The Equipment will be deemed installed and ready for operational use at the
conclusion of a successful Acceptance Test performed at the Installation Site.
VENDOR will provide SWBT with written documentation of the successful Acceptance
Test and certify, by the Installation Date, that the Equipment is ready for
operational use in accordance with SWBT's Order.
C9. INSTALLATION QUALIFICATION STANDARDS
SWBT, at its sole discretion, may elect to have VENDOR install the MATERIAL, in
which case VENDOR will obtain prior approval from SWBT's local Vendor
Certification Committee and install the MATERIAL in accordance with SWBT's
Technical Publication No. TP 76300, "Installation Guide", dated October, 1993
and future revisions thereof. In addition, VENDOR agrees to adhere to VENDOR's
own installation standards to the extent such standards do not reduce or detract
from SWBT's installation requirements or impair or impact the design or
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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operation of the MATERIAL. VENDOR's intended use of any subcontractor or agent
to install MATERIAL will likewise be subject to SWBT's prior approval.
C10. ACCEPTANCE
SWBT will conduct an Acceptance Test of the Equipment during the Acceptance
Period starting the day after VENDOR certifies in writing that the Equipment
is ready for Acceptance Testing, if VENDOR installs the Equipment, or the day
following completion of installation by SWBT. Testing will be performed to
determine whether:
a) The Equipment performs the functions and operates in conformance
with VENDOR's representations and then current published performance
specifications applicable to such Equipment.
b) The Documentation for the Equipment meets the requirements of this
Contract and the applicable Order.
If the Equipment fails to successfully complete the Acceptance Tests within
thirty (30) calendar days after the Installation Date, SWBT may at its sole
option, upon written notice to VENDOR, elect one or more of the following
options:
(i) Extend such ninety (90) calendar day period to permit SWBT to
continue the Acceptance Test(s).
(ii) Direct VENDOR to promptly remove the defective Equipment and install
replacement Equipment which will be subject to the same Acceptance
Test(s).
Installation of the replacement Equipment will be within the time period
mutually agreed upon by the parties in writing. SWBT may terminate the
applicable Order and request the removal of the Equipment with no charges or
penalties.
In the event the Equipment fails to meet the Standard of Performance ("SOP")
defined below during the initial thirty (30) consecutive calendar days, the
performance period will continue on a day-to-day basis until the SOP is met for
a total of thirty (30) consecutive working days.
Where Equipment is ordered for use in or as part of the installation of a
Centrally Developed System, the Acceptance of such Equipment will also be
subject to the successful completion of any and all performance criteria,
Equipment exercises and/or Acceptance Tests that are designed by the central
developers for the purpose of insuring that such Equipment operates in
accordance with the design specifications of the Centrally Developed System.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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The Equipment will not be Accepted nor will any obligation for payment exist
unless and until the SOP is met. Acceptance of the Equipment will be made in
writing by SWBT.
C11. SUPPLIES
VENDOR agrees to provide SWBT with specifications for all supplies, such as
cards, paper, inked ribbons, magnetic tape or other magnetic storage media, and
other related items, if any, which are used or required to operate the Equipment
acquired hereunder. Such specifications will be provided on or before the
Delivery Date of such Equipment.
If such supplies are requested by SWBT from VENDOR, SWBT will issue an
appropriate Order therefor. Rental and maintenance charges do not include
supplies. SWBT reserves the right to obtain such supplies from sources other
than VENDOR.
C12. RELOCATION
Upon thirty (30) days' prior written notice from SWBT, VENDOR agrees to prepare
for relocation and reinstall Equipment purchased hereunder at any other site at
SWBT's expense. Charges will be at the prices listed in Appendix 1.
C13. TRADE-INS
SWBT may at any time request VENDOR to substitute any upgraded or
later-developed Equipment for Equipment purchased pursuant to this Contract. In
such event, VENDOR may, at its option, allow a trade-in credit for the old
Equipment toward the purchase price of the new Equipment equal to its
depreciated value using straight-line depreciation and a seven (7)-year life.
C14. CABLES AND RELATED ITEMS
Each Order will be deemed to include, at no additional charge unless otherwise
specified, all cables necessary to operate all ordered Equipment at SWBT's
Installation Site, as well as all maintenance racks, terminators, logics,
diagnostic programs, software, firmware, Documentation, and any other components
or materials necessary to enable the Equipment to be operated in accordance with
VENDOR's published specifications and any additional specifications set forth in
the applicable Order. Site specific materials will be added at the prevailing
charges in Appendix I.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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EQUIPMENT MAINTENANCE
D1. GENERAL
VENDOR agrees to provide maintenance service on Equipment acquired hereunder by
SWBT upon the terms and conditions set forth in this Contract and in Orders
placed by SWBT pursuant to this Section and accepted by VENDOR. Such Orders will
be deemed accepted by VENDOR provided the Orders are in conformance with this
Section.
D2. FORM OF ORDER
Orders for Equipment maintenance will be written on SWBT's forms and will
contain the following information:
(a) The incorporation by reference of this Contract.
(b) A complete list of the Equipment to be serviced, specifying
quantity, type, description, the monthly maintenance charge for each
item of Equipment, the term of the Order and the total
annual/monthly maintenance charges payable by SWBT.
(c) The location at which the Equipment is installed, including floor,
street, city, state and zip code.
(d) The designation of a point of contact at which VENDOR's maintenance
representative will receive notification of Equipment failure.
(e) The Principle Period of Maintenance, or extension thereof, selected
by SWBT.
(f) Any special terms and conditions agreed upon between the parties.
D3. TERM OF ORDER
The maintenance term will commence on the date set forth in the applicable Order
(but in no event earlier than the expiration of the warranty period for the
Equipment involved) and continue for the initial maintenance term specified
therein and thereafter until canceled or terminated by SWBT as provided herein.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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D4. BASIC SERVICE
VENDOR agrees to perform the following basic maintenance service: accomplish
regularly scheduled Preventive Maintenance, if applicable; update the Equipment
to provide the latest reliability improvements; respond to requests for and
accomplish Remedial Maintenance during the Principal Period of Maintenance;
supervise the preparation of the Equipment for movement and set-up after
movement; and provide all tools and test equipment necessary for the maintenance
of the Equipment. There will be no additional maintenance charges for:
(a) Preventive Maintenance, unless performed outside the Principal
Period of Maintenance, which will include, for purposes of this
paragraph, the mutually agreed to scheduled time for Preventive
Maintenance.
(b) Remedial Maintenance which was begun during the Principal Period of
Maintenance or an extension thereof or when VENDOR was notified
during the Principal Period of Maintenance or extension thereof of
the need for Remedial Maintenance.
(c) Remedial Maintenance required within a thirty (30)-day period due to
a recurrence of the same malfunction.
(d) Time spent by maintenance personnel after arrival at SWBT's Site
awaiting the arrival of additional maintenance personnel and/or
delivery of parts, etc., after a service call has commenced.
(e) Remedial Maintenance required when the scheduled Preventive
Maintenance preceding the malfunction had not been performed.
(f) Parts required for Preventive or Remedial Maintenance, including
replacement parts.
(g) Remedial Maintenance performed outside the Contracted Period of
Coverage, unless specifically agreed otherwise by SWBT in writing.
When so agreed, SWBT will pay for Remedial Maintenance requested to be performed
outside of the Contracted Period of Coverage at VENDOR's published rates;
relocation of Equipment within a SWBT location during the Contracted Period of
Coverage; unpacking, installation and Acceptance Tests, any Equipment
certification for maintenance, and packing, removal and supervising the removal
or moving of any Equipment.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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Preventive Maintenance, if applicable, will be performed at mutually agreed upon
times which do not unreasonably interfere with SWBT's use of the Equipment.
VENDOR will specify in writing the frequency and duration of the Preventive
Maintenance required for the Equipment, and SWBT will specify the Preventive
Maintenance schedule which may be modified by mutual Contract.
D5. REMEDIAL MAINTENANCE
Remedial Maintenance will be performed after notification to VENDOR that the
Equipment is inoperative. VENDOR will furnish SWBT with a designated point of
contact for such notification. During the Principal Period of Maintenance, or
extension thereof, set forth in the applicable Order, VENDOR agrees to have a
Field Engineer arrive at SWBT's Site within two (2) hours after notification
that Service is required. Outside such Principal Period of Maintenance, or
extension thereof, VENDOR will use its best efforts to have its Field Engineer
arrive at SWBT's Site within two (2) hours after notification that Service is
required. Such Service calls will be made at VENDOR's then current standard
per-call rates.
Only one (1) Field Engineer will respond to a request for maintenance outside of
the Principal Period of Maintenance or extension thereof, unless it is mutually
agreed that more than one (1) Field Engineer is required.
The Principal Period of Maintenance or extension thereof may be changed by SWBT
upon thirty (30) days' prior written notice to VENDOR. Separate Principal
Periods of Maintenance may be specified when there are two (2) or more
installations of VENDOR provided Equipment at the same Site.
In the event that VENDOR finds itself unable to meet the standards set forth
above in responding to SWBT's maintenance requests, VENDOR will, in
consideration of the size of the installed base, locate a Field Engineer within
a fifty (50) mile radius of SWBT or, upon the reasonable request of VENDOR, SWBT
may provide office space for such Field Engineer at SWBT's Site.
D6. PARTS
There will be no additional charges for replacement parts. Only new standard
parts or parts of equal quality will be used in effecting repairs. Parts which
have been replaced will become the property of VENDOR and will be removed from
SWBT's Site. Parts which are installed on purchased Equipment will become the
property of SWBT.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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D7. PARTS INVENTORY
VENDOR agrees to maintain a sufficient supply of spare parts at SWBT's site to
make emergency repairs. VENDOR will use its best efforts to maintain all other
parts necessary for the repair of the Equipment within a fifty (50) mile radius
of SWBT's site.
D8. ENGINEERING CHANGES
Engineering changes which are made to Equipment after its manufacture will be
incorporated by VENDOR into the Equipment at SWBT's site. These changes will be
incorporated only after consultation with and scheduling by SWBT. Time required
for any modifications or engineering changes will be subject to the provisions
hereof relating to maintenance credit for downtime. In addition, VENDOR will,
during such consultation, specify any related products which may be affected by
such engineering changes. All modifications will be subject to the provisions of
Clause C11, ACCEPTANCE, of Section C hereof.
There will be no charge for the installation of engineering changes.
D9. MAINTENANCE LOG
VENDOR agrees to maintain a legible maintenance log at each installation site
which will be made available to SWBT for inspection upon request. This log will
include, at a minimum, the following:
(a) The date and the time VENDOR was notified.
(b) The date and time of VENDOR's arrival.
(c) The time the Equipment was made available to VENDOR.
(d) The type and model number(s) of the Equipment.
(e) A description of the malfunction.
(f) The time spent for repair.
(g) The corrective action taken, including parts used.
(h) The time the Equipment was made available to SWBT.
(i) Applicable charges, if any.
(j) Identification of VENDOR's representative.
(k) SWBT's representative's signature.
D10. ACCESS
SWBT will provide VENDOR with reasonable access to the Equipment to perform
maintenance service.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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D11. STORAGE AND WORK SPACE
SWBT will provide, at no charge to VENDOR, space for spare parts and working
space, including heat, light, ventilation, electric current and outlets for use
by VENDOR's maintenance personnel. These facilities will be located at SWBT's
site within a reasonable distance of the Equipment to be maintained. VENDOR will
maintain this space in an orderly manner, consistent with SWBT's site rules.
SWBT will not be liable for loss or damage to VENDOR's equipment or materials
stored on SWBT's site.
D12. MAINTENANCE BY OTHER
SWBT will not knowingly permit persons other than authorized representatives of
VENDOR to perform maintenance or attempt repairs to any Equipment while that
Equipment is covered by maintenance provided by VENDOR hereunder, unless
otherwise agreed by VENDOR.
D13. ESCALATION PROCEDURE
VENDOR will endeavor to initiate on-site remedial Service at SWBT's site within
the specified response time. If the trouble has not been corrected within six
(6) hours after SWBT's request for Service, VENDOR's support center personnel
will initiate an escalation process to provide VENDOR's regional engineering
assistance. If the trouble has not been corrected within twelve (12) hours after
SWBT's request, the problem will be escalated to VENDOR's engineering control
center. No charge will be made for any such escalation.
D14. WARRANTY
VENDOR warrants to SWBT that Equipment maintained hereunder will be of the same
quality, material and workmanship that of the original equipment manufacturer
(the "OEM") and will conform to and perform in accordance with the OEM's
specifications, drawings and samples. VENDOR also warrants to SWBT that Services
will be performed in a first-class, workmanlike manner. In addition, if material
furnished hereunder contains one or more manufacturers' warranties, VENDOR
hereby assigns such warranties to SWBT. All warranties will survive inspection,
acceptance and payment. Equipment not meeting the foregoing warranties will, at
SWBT's option, be repaired, adjusted or replaced by VENDOR at no cost to SWBT.
D15. TIME AND MATERIAL
From time to time SWBT may require Maintenance on Equipment not covered under a
Maintenance Order. In these cases SWBT will notify VENDOR of the problem and
VENDOR
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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will provide assistance on a time and material basis. VENDOR will provide an
invoice to SWBT for the services performed and SWBT will make payment 30 days
from the receipt of the invoice.
The "Time and Material" (Per-call Equipment or Per-Call Software Support) rate
will be at the prices listed in Appendix I. The time for on-site support will
begin upon the arrival of VENDOR's support personnel at the SWBT site.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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SOFTWARE LICENSE
E1. LICENSE
(a) Subject to the terms and conditions of this Agreement, VENDOR grants to
SWBT and SWBT hereby accepts from VENDOR a royalty-free, fully-paid
license (the "License") to use the Software at the Sites in connection
with the Products and Services.
(b) The License shall be non-exclusive.
(c) The License may not be sublicensed, transferred or assigned by SWBT
without the prior written consent of VENDOR provided, however SWBT shall
have the right to assign the License to any present or future affiliate,
subsidiary or parent corporation of SWBT without VENDOR's consent.
E2. DELIVERY
Upon the execution of this Contract, VENDOR shall deliver to SWBT copies of all
available records, schematics, source codes, documentation and other technical
information relating to the Software (the "Software Documentation").
E3. OWNERSHIP
(a) VENDOR shall retain all right, title and ownership interest in and to the
Software, the Software Documentation, the accompanying source and object
codes and all supplementary materials relating thereto, including, without
limitation, patent, copyright, trademark, service mark and other rights
inherent thereto, in the form in which the same are delivered to SWBT and
in and to any customizations, modifications or enhancements thereto
prepared or otherwise developed solely by VENDOR.
(b) In the event that VENDOR grants to SWBT written permission to make any
customizations, enhancements and/or modifications in the Software, the
accompanying source and object codes and any supplementary materials
relating thereto, VENDOR shall have, without the requirement of any
additional documentation or action, and SWBT hereby grants to VENDOR, a
royalty-free, non-exclusive, worldwide license to use such permitted
customizations, enhancements and/or modifications including, without
limitation, all patent, copyright, trademark, service mark and other
rights inherent thereto. For purposes of this Section 3(b),
customizations, enhancements and/or modifications shall mean any
alteration of the source code of the Software which alters or changes the
"visible" operation of the program.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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(c) SWBT agrees that it shall keep the Software and the Software Documentation
in a secure place, under access and use restrictions which are designed to
prevent disclosure of the Software and the Software Documentation to
unauthorized persons, and which are not less secure than those applicable
to SWBT's trade secrets.
E4. COPYRIGHT AND TRADEMARK NOTICES
SWBT agrees to ensure that copyright and trademark notices identifying VENDOR as
the owner of the Software will be included in all copies of the Software and in
the Software Documentation so as to be readily visually perceptible by users
thereof.
E5. TERM
The term of the License shall commence upon the date hereof and shall remain in
effect perpetually thereafter unless terminated as set forth in this Contract.
E6. REPRESENTATIONS AND WARRANTIES OF VENDOR
(a) VENDOR represents and warrants to SWBT that:
(i) VENDOR has the full right, power and authority to enter into and
perform its obligations under this Contract;
(ii) VENDOR is the owner of the Software and the Software
Documentation, subject to non-exclusive licenses granted to third parties;
(iii) to VENDOR's knowledge, no claims have been made by third
parties that the Software infringes the intellectual property rights of others.
(b) VENDOR SHALL NOT BE LIABLE TO THE SWBT FOR ANY INDIRECT, SPECIAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT,
RESULTING FROM THE USE OF THE SOFTWARE (OR ANY COMPONENT THEREOF) BY SWBT.
E7. CONFIDENTIALITY
(a) The parties agree that all Confidential Information (as defined below) of
the other party will be kept confidential and will not, without the prior
written consent of the disclosing party, be disclosed by the recipient or
its Representatives (as defined below), in any
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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manner whatsoever, in whole or in part, to any person other than the
recipient Representatives; provided, however, the provisions of this
Section 7 shall in no way restrict any disclosure by the recipient as
required by law, court order or order of a governmental agency or
government regulation, or if the recipient in its reasonable judgment
determines that such disclosure is necessary to comply with or avoid
violation of any court or governmental order, regulation or statute. In
the event the recipient is required to disclose Confidential Information
as contemplated by the provision in the immediately preceding sentence,
the recipient shall notify the disclosing party in writing of such
requirement prior to making any such disclosure.
(b) "Confidential Information" means any information or material which is
proprietary to the parties or designated as Confidential Information by
the disclosing party, whether or not owned or developed by the disclosing
party, and which the recipient obtains knowledge of through or as a result
of the relationship established hereunder, or as a result of access to the
disclosing party's premises, or as a result of communications with the
disclosing party's employees or independent contractors, including,
without limitation, the following types of information, and other
information of a similar nature (whether or not reduced to writing still
in development or otherwise fixed in tangible form), designs, concepts,
drawings, ideas, inventions, specifications, techniques, discoveries,
models, data, source codes, object code documentation, diagrams, flow
charts, research, development, processes, procedures, know-how, new
product or new technology information, marketing techniques and materials,
marketing plans, timetables, strategies and development plans (including
prospective trade names or trademarks), customer names and other
information related to customers, pricing policies, and financial
information. Confidential Information shall not include information that
(i) is now or later becomes generally known to the telecommunications or
computer software industry (other than as a result of a breach of this
Contract), (ii) is independently developed by the recipient, (iii) the
recipient lawfully obtains from any third party who has obtained such
information lawfully and not in violation of this Contract, or (iv) is
later published or generally disclosed to the public.
(c) "Representatives" shall mean (i) all officers, directors, and employees of
the parties who in the ordinary course and scope of performing their
duties reasonably require disclosure of the terms and conditions of this
Contract, and (ii) agents, consultants and advisors of the parties,
including legal counsel, accountants, and management consultants or
investment advisors, whose assigned duties reasonably require that
disclosure of the terms and conditions of this Contract be made to such
persons or to whom such disclosure is reasonably necessary to carry out
the provisions of this Contract.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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(d) SWBT acknowledges that the Software Documentation and the Software
constitute Confidential Information of VENDOR. SWBT agrees that it will
not sell, rent, license, distribute, transfer or, directly or indirectly,
disclose or permit the sale, rental, licensing, distribution, transfer or
disclosure of the Software Documentation and the Software or its contents
except in accordance with the terms and conditions hereof.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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SOFTWARE MAINTENANCE
F1. SUPPORT AND MAINTENANCE SUPPORT SERVICES
Support Services.
VENDOR will provide the Support Services subject to the payment by
SWBT of the fees set forth in Appendix I.
Technical Support Services.
VENDOR will provide Technical Support Services to SWBT between 9:00
A.M. and 7:00 P.M. from Monday to Friday, [Philadelphia,
Pennsylvania, USA] (excluding holidays) for problems related to the
Products and Services.
Documentation.
VENDOR will document all problems and their resolution in a
technical bulletin. If appropriate, VENDOR will provide SWBT, at no
additional charge, with a technical bulletin each time Support
Services are performed for SWBT.
Excluded Support Services.
Support Services shall not include repair or service required as a
result of: (a) modification of the Products and Services performed
by other than VENDOR and without VENDOR's prior approval, or
installation contrary to VENDOR's recommended procedures, including
the attachment of a Non-Qualified Device; (b) Products or Services
which have been subjected to unusual physical or electrical stress;
(c) damages or defects resulting from repairs made by someone other
than VENDOR; (d) improper or inadequate maintenance by SWBT; (e) use
of any of the Products and Services not in accordance with the
VENDOR's guidelines, specifications and Documentation; (f) use in
conjunction with SWBT-supplied software, hardware or firmware not
approved by VENDOR, including a Non-Qualified Device; (g) improper
Site preparation and maintenance; (h) negligence of the SWBT or
SWBT's agents or employees; (i) the negligent, willful or reckless
acts of any third party; or (j) force majeure, as described herein.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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If VENDOR performs services at SWBT's request beyond the scope of
Support Services contemplated by this Agreement, VENDOR will bill
SWBT at VENDOR's then applicable rates and terms.
Additional Support Services.
In the event that on-site Support Services are required as a result
of Equipment failure or malfunction, SWBT and VENDOR will mutually
agree on the terms on which such on-site Support Services will be
performed. Following the resolution of the problem, if the on-site
Support Services were required as a result of a Product and Services
malfunction covered by the warranties described herein or in the
Purchase Agreement, then the Support Services provided will be at no
charge to SWBT; otherwise such Support Services shall be separately
invoiced in accordance with the Pricing Schedule.
F2. RESPONSIBILITIES
General. VENDOR will supply SWBT with all appropriate documentation and
assistance necessary to demonstrate and diagnose each problem with any
Products and Services, and will assist SWBT to implement promptly each
patch, work-around, or other solution to such problem provided by VENDOR.
Operator Training. SWBT is responsible for ensuring that the operation and
any maintenance of the Products and Services is performed by, or under the
direction of, an individual trained in the operation of the Products and
Services.
Access to Facilities. During normal working hours and subject to normal
security requirements, SWBT shall provide VENDOR with dial-in access, via
computer, to all facilities necessary to maintain the Products and
Services.
Products and Services Back-up. SWBT is responsible for maintaining a
current back-up copy of the Software.
Notification. SWBT shall notify VENDOR immediately in writing if SWBT
desires to locate additional products and services at any Site and of
SWBT's intention to relocate any Products and Services.
Periodic Reports. VENDOR will provide, upon written request, a quarterly
report describing (a) the Equipment that has been sent for repair and (b)
the status of repairs in process.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
F3. PRICING
Pricing Schedule. The price for the Support Services shall be as described
in Appendix I.
Discount. It is understood that the prices offered in this Agreement
reflect a discount provided by VENDOR to SWBT provided that a payment of
one hundred percent (100%) of the price for the Support Services is
received [prior to the commencement of said Support Services.] [In the
event that SWBT desires to pay for Support Services on a quarterly basis,
the price for the Support Services shall be increased by ten percent
(10%).]
F4. FORM OF PAYMENT
SWBT shall pay one hundred percent (100%) of the price for Support
Services rendered upon presentation of invoices by VENDOR.
F5. CUSTOMS DUTY AND TAXES
Taxes. SWBT acknowledges that VENDOR has prepared the Pricing Schedule
taking into account Taxes imposed by the Tax Laws as in effect on the date
hereof.
Increases: Additional Taxes. In the event that any Tax Law is amended or
new laws are promulgated after the date hereof and the effect thereof is
to impose additional or new Taxes on any of [the Products and Services,]
the Support Services or the activities of VENDOR in connection with the
Support Services, the Pricing Schedule shall be amended to the extent of
any amount that VENDOR or any subcontractor is obligated to pay as a
result of such additional or new Taxes.
F6. TERM
Discontinuance. SWBT understands and agrees that contractor reserves the
right to discontinue the support of Products and Services. VENDOR agrees
to provide SWBT with at least six (6) months advance written notice of any
such discontinuance.
F7. WARRANTIES
VENDOR warrants that it will render the Support Services in a good and
workmanlike manner. As VENDOR's sole responsibility and SWBT's exclusive
remedy in the event of any material failure to meet such standard, VENDOR
shall make a reasonable effort to
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
remedy any resulting discrepancies. Any claim based on the foregoing
warranty must be submitted in writing in accordance with the provisions
set forth.
The parts utilized for repairs or replacements will be new or refurbished
and will include a ninety (90) day warranty from the date of shipment as
reflected on the commercial invoice. This warranty does not apply to
electrical parts such as lights, fuses, switches, etc.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
ENTIRE CONTRACT
G1. ENTIRE CONTRACT
Is understood and agreed that estimates furnished by SWBT do not constitute
commitments. The terms contained in this Contract constitute the entire Contract
between VENDOR and SWBT and may not be modified except by a writing signed by
VENDOR and SWBT. Any terms contained in VENDOR's proposal or acceptance of
SWBT's offer, or that may appear in VENDOR's invoice, or in any other
communication, which add to, vary from, or conflict with the terms herein will
be void. The provisions of this Contract supersede all prior oral and written
quotations, communications, Contracts, and understandings of the parties in
respect of the subject matter hereof.
G2. SIGNATURES
IN WITNESS WHEREOF, VENDOR and SWBT, pursuant to due corporate authority have
caused this Contract to be signed in their respective names, in duplicate, as of
the date set forth below.
ACCEPTED: ACCEPTED:
VENDOR SWBT
SECURICOR TELESCIENCES, INC. SOUTHWESTERN BELL TELEPHONE
COMPANY
By: /s/ Donald L. Hoffman By: /s/ Chris Vilcinskas
--------------------- --------------------
Title: V.P. Sales Title: Contract Manager
--------------- -----------------
Date: 8/4/95 Date: 7-26-95
---------------- ------------------
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
DISCOUNTS
This schedule applies to Contract No. C5790F0, effective June 1, 1995 between
Southwestern Bell Telephone Company and Securicor Telesciences, Inc.
Through the term of this Agreement, the discount for material shall be shown in
the schedule below:
Discount * Total Dollars UTS-4000 &
Level Forecasted Annually Sterling 500
- ----- ------------------- ------------
1 $0 - 1.5 million 0%
2 $1.5 mil - $4.0 mil 15%
3 $4.0 mil - $6.5 mil 20%
4 $6.5 mil - $8.0 mil 25%
5 $8.0 mil + 30%
Equipment eligible for discount.
New and Conversion Systems
UTS-4000 & Sterling 500 (hardware for simplex or duplex), cables internal to
UTS-4000 & Sterling 500.
Spares
Hardware associated with the UTS-4000 & Sterling 500 systems, cables internal to
UTS-4000 & Sterling 500.
* The discount will be based on total dollars forecasted for the contract
duration by Customer from Supplier. Unless otherwise agreed, the discount rates
will remain in effect for one contract year.
/s/ Chris Vilcinskas /s/ Donald L. Hoffman
- -------------------- ---------------------
Chris Vilcinskas Donald L. Hoffman
Southwestern Bell Telephone Co. Securicor Telesciences Inc.
RESTRICTED - PROPRIETARY INFORMATION
The information contained herein is for use by authorized employees
of the parties hereto only and is not for general distribution within
or outside their respective companies.
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<PAGE>
LEASE AGREEMENT
THIS AGREEMENT is made the 13th day of June, One Thousand Nine Hundred and
Eighty-Eight (1988), by and between
LINE LEXINGTON MANAGEMENT CORP. (a Pennsylvania Corporation) of
Gwynedd Plaza I, Suite 201, Spring House, PA 19477 (hereinafter called
Lessor), of the one part, and
TELESCIENCES C O SYSTEMS, INC. (a Delaware Corporation) of 351 New
Albany Road, Moorestown, N.J. 08057-1177 (hereinafter called Lessee), of the
other part (the "Parties").
Premises:
Lessor does hereby demise and let unto Lessee all that certain 34,000 sq.ft.
Building situate 800 Glen Avenue, Moorestown Township, Burlington County, New
Jersey, (Lot 3, Block 214F of the Tax Map) to be used and occupied as Office,
Light Manufacturing, Assembly and Storage and for no other purpose; said
building is fully heated and air conditioned.
Term and Commencement Date:
The term of this Agreement shall be five (5) years and eleven (11) days
commencing on the Twenty-First day of August, One Thousand Nine Hundred and
Eighty-Eight (1988) and ending the Thirty First day of August, One Thousand Nine
Hundred and Ninety-Three (1993). Lessee shall be responsible for procuring any
new or additional operating or occupancy Permits, if necessary, and to pay the
fee(s) for same. Lessee agrees also to apply for any such Permit(s) within 10
days of the execution of this Agreement. Rent shall not be waived or prorated as
a result of any delay or failure on the part of Lessee to procure necessary
Permits.
Upon the following Conditions and Covenants:
Payment 1st: The Tenant covenants and agrees to pay to the Landlord, as rent
of Rent for and during the term hereof, the sum of ONE HUNDRED AND TWENTY
THOUSAND DOLLARS ($120,000.00), lawful money of the United States of
America, payable in monthly installments in advance during the said
term of this Lease in sums of TEN THOUSAND DOLLARS ($10,000.00) on
the First day of each month, full rent to commence on September lst,
1988. The August 1988 rental payment shall be prorated between the
current Lease, which expires on August 20, 1988, and this new
Agreement; said payment in the amount of $6,748.39 shall be due on
August lst, 1988. The rental for the period September 1, 1991
through August 31, 1993 shall be increased to ONE HUNDRED AND TWENTY
EIGHT
<PAGE>
THOUSAND, FIVE HUNDRED AND TWENTY DOLLARS ($128,520.00) payable in
monthly installments of TEN THOUSAND, SEVEN HUNDRED AND TEN DOLLARS
($10,710.00).
Repairs 2nd: The Tenant has examined the premises and has entered into this
and Care lease without any representation on the part of the Landlord as to
the condition thereof. The Tenant shall take good care of the
premises and shall at the Tenant's own cost and expense, make all
repairs, including painting and decorating, and shall maintain the
premises in good condition and state of repair, and at the end or
other expiration of the term hereof, shall deliver up the rented
premises in good order and condition, wear and tear from a
reasonable use thereof, and damage by the elements not resulting
from the neglect or fault of the Tenant, excepted. The Tenant shall
neither encumber nor obstruct the sidewalks, driveways, yards,
entrances, hallways and stairs, but shall keep and maintain the same
in a clean condition, free from debris, trash, refuse, snow and ice.
Glass, etc. 3rd: In case of the destruction of or any damage to the glass in the
Damage leased premises, or the destruction of or damage of any kind
Repairs whatsoever to the said premises, the Tenant shall repair the said
damage or replace or restore any destroyed parts of the premises, as
speedily as possible, at the Tenant's own cost and expense.
Alterations 4th: No alterations, additions or improvements shall be made, and no
Improve- climate regulating, air conditioning, cooling, heating or sprinkler
ments systems, television or radio antennas, heavy equipment, apparatus
and fixtures, shall be installed in or attached to the leased
premises, without the written consent of the Landlord. Unless
otherwise provided herein, all such alterations, additions or
improvements and systems, when made, installed in or attached to the
said premises, shall belong to and become the property of the
Landlord and shall be surrendered with the premises and as part
thereof upon the expiration or sooner termination of this lease,
without hindrance, molestation or injury.
Signs 5th: The Tenant shall not place nor allow to be placed any signs of
any kind whatsoever, upon, in or about the said premises or any part
thereof, except of a design and structure and in or at such places
as may be indicated and consented to by the Landlord in writing. In
case the Landlord or the Landlord's agents, employees or
representatives shall deem it necessary to remove any such signs in
order to paint or make any repairs, alterations or improvements in
or upon said premises or any part thereof, they may be so removed,
but shall be replaced at the Landlord's expense when the said
repairs, alterations or improvements shall have been completed. Any
signs permitted by the Landlord shall at all times conform with all
municipal ordinances or other laws and regulations applicable
thereto.
Utilities 6th: The Tenant shall pay when due all the rents or charges for
water or other utilities used by the Tenant, which are or may be
assessed or imposed upon the leased premises or which are or may be
charged to the Landlord by the suppliers thereof during the term
hereof,
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<PAGE>
and if not paid, such rents or charges shall be added to and become
payable as additional rent with the installment of rent next due or
within 30 days of demand therefor, whichever occurs sooner.
Compliance 7th: The Tenant shall promptly comply with all laws, ordinances,
with Laws rules, regulations, requirements and directives of the Federal,
etc. State and Municipal Governments or Public Authorities and of all
their departments, bureaus and subdivisions, applicable to and
affecting the said premises, their use and occupancy, for the
correction, prevention and abatement of nuisances, violations or
other grievances in, upon or connected with the said premises,
during the term hereof; and shall promptly comply with all orders,
regulations, requirements and directives of the Board of Fire
Underwriters or similar authority and of any insurance companies
which have issued or are about to issue policies of insurance
covering the said premises and its contents, for the prevention of
fire or other casualty, damage or injury, at the Tenant's own cost
and expense.
Liability 8th: The Tenant, at Tenant's own cost and expense, shall obtain or
in provide and keep in full force for the benefit of the Landlord,
Insurance during the term hereof, general public liability insurance, insuring
See Par. 41 the Landlord against any and all liability or claims of liability
arising out of, occasioned by or resulting from any accident or
otherwise in or about the leased premises, for injuries to any
person or persons and for loss or damage to the property of any
person or persons. The policy or policies of insurance shall be of a
company or companies authorized to do business in this State and
shall be delivered to the Landlord, together with evidence of the
payment of the premiums therefor, not less than fifteen days prior
to the commencement of the term hereof or of the date when the
Tenant shall enter into possession, whichever occurs sooner. At
least fifteen days prior to the expiration or termination date of
any policy, the Tenant shall deliver a renewal or replacement policy
with proof of the payment of the premium therefor. The Tenant also
agrees to and shall save, hold and keep harmless and indemnify the
Landlord from and for any and all payments, expenses, costs,
attorney fees and from and for any and all claims and liability for
losses or damage to property or injuries to persons occasioned
wholly or in part by or resulting from any acts or omissions by the
Tenant or the Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors, or for any cause or
reason whatsoever arising out of or by reason of the occupancy by
the Tenant and the conduct of the Tenant's business.
Assignment 9th: The Tenant shall not, without the written consent of the
Landlord, assign this lease, nor sublet or sublease the premises or
any part thereof, which consent shall not be unreasonably withheld.
Restriction 10th: The Tenant shall not occupy or use the leased premises or any
of Use part thereof, nor permit or suffer the same to be occupied or used
for any purposes other than as herein limited, nor for any purpose
deemed unlawful, disreputable, or extra hazardous, on account of
fire or other casualty.
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<PAGE>
Mortgage 11th: This lease shall not be a lien against the said premises in
Priority respect to any mortgages that may hereafter be placed upon said
premises. The recording of such mortgage or mortgages shall have
preference and precedence and be superior and prior in lien to this
lease, irrespective of the date of recording and the Tenant agrees
to execute any instruments, without cost, which may be deemed
necessary or desirable, to further effect the subordination of this
lease to any such mortgage or mortgages. A refusal by the Tenant to
execute such instruments shall entitle the Landlord to the option of
cancelling this lease, and the term hereof is hereby expressly
limited accordingly.
Condemna- 12th: If the land and premises leased herein, or of which the leased
tion premises are a part, or any portion thereof, shall be taken under
Eminent eminent domain or condemnation proceedings, or if suit or other
Domain action shall be instituted for the taking or condemnation thereof,
or if in lieu of any formal condemnation proceedings or actions, the
Landlord shall grant an option to purchase and or shall sell and
convey the said premises or any portion thereof, to the governmental
or other public authority, agency, body or public utility, seeking
to take said land and premises or any portion thereof, then this
lease, at the option of the Landlord, shall terminate, and the term
hereof shall end as of such date as the Landlord shall fix by notice
in writing; and the Tenant shall have no claim or right to claim or
be entitled to any portion of any amount which may be awarded as
damages or paid as the result of such condemnation proceedings or
paid as the purchase price for such option, sale or conveyance in
lieu of formal condemnation proceedings; and all rights of the
Tenant to damages, if any, are hereby assigned to the Landlord. The
Tenant agrees to execute and deliver any instruments, at the expense
of the Landlord, as may be deemed necessary or required to expedite
any condemnation proceedings or to effectuate a proper transfer of
title to such governmental or other public authority, agency, body
or public utility seeking to take or acquire the said lands and
premises or any portion thereof. The Tenant covenants and agrees to
vacate the said premises, remove all the Tenant's personal property
therefrom and deliver up peaceable possession thereof to the
Landlord or to such other party designated by the Landlord in the
aforementioned notice. Failure by the Tenant to comply with any
provisions in this clause shall subject the Tenant to such costs,
expenses, damages and losses as the Landlord may incur by reason of
the Tenant's breach hereof.
Fire and 13th: In case of fire or other casualty, the Tenant shall give
other immediate notice to the Landlord. If the premises shall be partially
Casualty damaged by fire, the elements or other casualty, the Landlord shall
repair the same as speedily as practicable, but the Tenant's
obligation to pay the rent hereunder shall not cease. If, in the
opinion of the Landlord, the premises be so extensively and
substantially damaged as to render them untenantable, then the rent
shall cease until such time as the premises shall be made tenantable
by the Landlord. However, if, in the opinion of the Landlord, the
premises be totally destroyed or so extensively and substantially
damaged as to require practically a rebuilding thereof, then the
rent shall be paid up to the time of such destruction and then and
from thenceforth this lease shall come to an end. In no event
however, shall the provisions of this clause become effective or be
applicable, if the fire or other casualty and damage shall be the
result of the carelessness, negligence or improper conduct of the
Tenant or the Tenant's agents, employees, guests,
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<PAGE>
licensees, invitees, subtenants, assignees or successors. In such
case, the Tenant's liability for the payment of the rent and the
performance of all the covenants, conditions and terms hereof on the
Tenant's part to be performed shall continue and the Tenant shall be
liable to the Landlord for the damage and loss suffered by the
Landlord. If the Tenant shall have been insured against any of the
risks herein covered, then the proceeds of such insurance shall be
paid over to the Landlord to the extent of the Landlord's costs and
expenses to make the repairs hereunder, and such insurance carriers
shall have no recourse against the Landlord for reimbursement.
Reimburse- 14th: If the Tenant shall fail or refuse to comply with and perform
ment of any conditions and covenants of the within lease, the Landlord may,
Landlord if the Landlord so elects, carry out and perform such conditions and
covenants, at the cost and expense of the Tenant, and the said cost
and expense shall be payable on demand, or at the option of the
Landlord shall be added to the installment of rent due immediately
thereafter but in no case later than one month after such demand,
whichever occurs sooner, and shall be due and payable as such. This
remedy shall be in addition to such other remedies as the Landlord
may have hereunder by reason of the breach by the Tenant of any of
the covenants and conditions in this lease contained.
Inspection 15th: The Tenant agrees that the Landlord and the Landlord's agents,
and employees or other representatives, shall have the right to
Repair enter into and upon the said premises or any part thereof,
at all reasonable hours, for the purpose of examining the
same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause shall
not be deemed to be a covenant by the Landlord nor be construed to
create an obligation on the part of the Landlord to make such
inspection or repairs.
Right to 16th: The Tenant agrees to permit the Landlord and the Landlord's
Exhibit agents, employees or other representatives to show the premises to
persons wishing to rent or purchase the same, and Tenant agrees that
on and after 120 days next preceding the expiration of the term
hereof, the Landlord or the Landlord's agents, employees or other
representatives shall have the right to place notices on the front
of said premises or any part thereof, offering the premises for rent
or for sale; and the Tenant hereby agrees to permit the same to
remain thereon without hindrance or molestation.
Increase of 17th: If for any reason it shall be impossible to obtain fire and
Insurance other hazard insurance on the building and improvements on the
Rates leased premises, in an amount and in the form and in insurance
See companies acceptable to the Landlord, the Landlord may, if the
Par. 39 Landlord so elects at any time thereafter, terminate this lease and
the term hereof, upon giving to the Tenant fifteen days notice in
writing of the Landlord's intention so to do, and upon the giving of
such notice, this lease and the term thereof shall terminate.
Removal of 18th: Any equipment, fixtures, goods or other property of the
Tenant's Tenant, not removed by the Tenant upon the termination of this
lease, or upon any quitting, vacating or abandonment of the premises
by the Tenant, or upon the Tenant's eviction, shall be considered as
-5-
<PAGE>
Property abandoned and the Landlord shall have the right, without any notice
to the Tenant, to sell or otherwise dispose of the same, at the
expense of the Tenant, and shall not be accountable to the Tenant
for any part of the proceeds of such sale, if any.
Remedies 19th: If there should occur any default on the part of the Tenant in
upon the performance of any conditions and covenants herein contained, or
Tenant's if during the term hereof the premises or any part thereof shall be
Default or become abandoned or deserted, vacated or vacant, or should the
Tenant be evicted by summary proceedings or otherwise, the Landlord,
in addition to any other remedies herein contained or as may be
permitted by law, may either by force or otherwise, without being
liable for prosecution therefor, or for damages, re-enter the said
premises and the same have and again possess and enjoy; and as agent
for the Tenant or otherwise, re-let the premises and receive the
rents therefor and apply the same, first to the payment of such
expenses, reasonable attorney fees and costs, as the Landlord may
have been put to in re-entering and repossessing the same and in
making such repairs and alterations as may be necessary; and second
to the payment of the rents due hereunder. The Tenant shall remain
liable for such rents as may be in arrears and also the rents as may
accrue subsequent to the re-entry by the Landlord, to the extent of
the difference between the rents reserved hereunder and the rents,
if any, received by the Landlord during the remainder of the
unexpired term hereof, after deducting the aforementioned expenses,
fees and costs; the same to be paid as such deficiencies arise and
are ascertained each month.
Termination 20th: Upon the occurrence of any of the contingencies set forth in
on Default the preceding clause, or should the Tenant be adjudicated a
bankrupt, insolvent or placed in receivership, or should proceedings
be instituted by or against the Tenant for bankruptcy, insolvency,
receivership, agreement of composition or assignment for the benefit
of creditors, or if this lease or the estate of the Tenant hereunder
shall pass to another by virtue of any court proceedings, writ of
execution, levy, sale, or by operation of law, the Landlord may, if
the Landlord so elects, at any time thereafter, terminate this lease
and the term hereof, upon giving to the Tenant or to any trustee,
receiver, assignee or other person in charge of or acting as
custodian of the assets or property of the tenant, five days notice
in writing, of the Landlord's intention so to do. Upon the giving of
such notice, this lease and the term hereof shall end on the date
fixed in such notice as if the said date was the date originally
fixed in this lease for the expiration hereof; and the Landlord
shall have the right to remove all persons, goods, fixtures and
chattels therefrom, by force or otherwise, without liability for
damages.
Non-Liabil- 21st: The Landlord shall not be liable for any damage or injury
ity of which may be sustained by the Tenant or any other person, as a
Landlord consequence of the failure, breakage, leakage or obstruction of the
water, plumbing, steam, sewer, waste or soil pipes, roof, drains,
leaders, gutters, valleys, downspouts or the like or of the
electrical, gas, power, conveyor, refrigeration, sprinkler, air
conditioning or heating systems, elevators or hoisting equipment; or
by reason of the elements; or resulting from the carelessness,
negligence or improper conduct on the part of any other Tenant or of
the Landlord or the Landlord's or this or any other Tenant's agents,
employees, guests, licensees, invitees, subtenants,
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<PAGE>
assignees or successors; or attributable to any interference with,
interruption of or failure, beyond the control of the landlord, of
any services to be furnished or supplied by the Landlord.
Non-Waiver 22nd: The various rights, remedies, options and elections of the
by Landlord Landlord, expressed herein, are cumulative, and the failure of the
Landlord to enforce strict performance by the Tenant of the
conditions and covenants of this lease or to exercise any election
or option or to resort or have recourse to any remedy herein
conferred or the acceptance by the Landlord of any installment of
rent after any breach by the Tenant, in any one or more instances,
shall not be construed or deemed to be a waiver or a relinquishment
for the future by the Landlord of any such conditions and covenants,
options, elections or remedies, but the same shall continue in full
force and effect.
Non-Per- 23rd: This lease and the obligation of the Tenant to pay the rent
formance hereunder and to comply with the covenants and conditions hereof,
by Landlord shall not be affected, curtailed, impaired or excused because of the
Landlord's inability to supply any service or material called for
herein, by reason of any rule, order, regulation or preemption by
any governmental entity, authority, department, agency or
subdivision or for any delay which may arise by reason of
negotiations for the adjustment of any fire or other casualty loss
or because of strikes or other labor trouble or for any cause beyond
the control of the Landlord.
Validity 24th: The terms, conditions, covenants and provisions of this lease
of Lease shall be deemed to be severable. If any clause or provision herein
contained shall be adjudged to be invalid or unenforceable by a
court of competent jurisdiction or by operation of any applicable
law, it shall not affect the validity of any other clause or
provision herein, but such other clauses or provisions shall remain
in full force and effect.
Notices 25th: All notices required under the terms of this lease shall be
given and shall be complete by mailing such notices by certified or
registered mail, return receipt requested, to the address of the
parties as shown at the head of this lease, or to such other address
as may be designated in writing, which notice of change of address
shall be given in the same manner.
Title and 26th: The Landlord covenants and represents that the Landlord is the
Quiet owner of the premises herein leased and has the right and authority
Enjoyment to enter into, execute and deliver this lease; and does further
covenant that the Tenant on paying the rent and performing the
conditions and covenants herein contained, shall and may peaceably
and quietly have, hold and enjoy the leased premises for the term
aforementioned.
Entire 27th: This lease contains the entire contract between the parties.
Contract No representative, agent or employee of the Landlord has been
authorized to make any representations or promises with reference to
the within letting or to vary, alter or modify the terms hereof. No
additions, changes or modifications, renewals or extensions hereof,
shall be binding unless reduced to writing and signed by the
Landlord and the Tenant.
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<PAGE>
Mechanics' 30th: If any mechanics' or other liens shall be created or filed
Lien against the leased premises by reason of labor performed or
materials furnished for the Tenant in the erection, construction,
completion, alteration, repair or addition to any building or
improvement, the Tenant shall within fifteen days thereafter, at the
Tenant's own cost and expense, cause such lien or liens to be
satisfied and discharged of record together with any Notices of
Intention that may have been filed. Failure so to do, shall entitle
the Landlord to resort to such remedies as are provided herein in
the case of any default of this lease, in addition to such as are
permitted by law.
Waiver of 31st: The Tenant waives all rights of recovery against the Landlord
Subrogation or Landlord's agents, employees or other representatives, for any
Rights loss, damages or injury of any nature whatsoever to property or
persons for which the Tenant is insured. The Tenant shall obtain
from the Tenant's insurance carriers and will deliver to the
Landlord, waivers of the subrogation rights under the respective
policies.
Security 32nd: The Tenant has this day deposited with the Landlord the sum of
See $10,000.00 as security for the payment of the rent hereunder and the
Par. 36 full and faithful performance by the Tenant of the covenants and
conditions on the part of the Tenant to be performed. Said sum shall
be returned to the Tenant, without interest, after the expiration of
the term hereof, provided that the Tenant has fully and faithfully
performed all such covenants and conditions and is not in arrears in
rent. During the term hereof, the Landlord may, if the Landlord so
elects, have recourse to such security, to make good any default by
the Tenant, in which event the Tenant shall, on demand, promptly
restore said security to its original amount. Liability to repay
said security to the Tenant shall run with the reversion and title
to said premises, whether any change in ownership thereof be by
voluntary alienation or as the result of judicial sale, foreclosure
or other proceedings, or the exercise of a right of taking or entry
by any mortgagee. The Landlord shall assign or transfer said
security, for the benefit of the Tenant, to any subsequent owner or
holder of the reversion or title to said premises, in which case the
assignee shall become liable for the repayment thereof as herein
provided, and the assignor shall be deemed to be released by the
Tenant from all liability to return such security. This provision
shall be applicable to every alienation or change in title and shall
in no wise be deemed to permit the Landlord to retain the security
after termination of the Landlord's ownership of the reversion or
title. The Tenant shall not mortgage, encumber or assign said
security without the written consent of the Landlord.
33. Place of Payment:
All rent shall be payable without prior notice or demand at the
office of the Lessor, address listed above, or at such other place
as Lessor may designate from time to time by notice in writing.
Lessee shall be subject to a late penalty of three (3%) percent of
the monthly rental unless Lessee's payment is received by Lessor at
its offices before the close of business on the 12th day of each
month.
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<PAGE>
34. Agency:
It is hereby expressly agreed and understood that Leonard Eisner is
acting as Agent only, and shall not in any event be held liable to
the Lessor or to Lessee for the fulfillment or nonfulfillment of any
of the terms or conditions of this Lease or for any action or
proceedings that may be taken by the Lessor against Lessee or by
Lessee against the Lessor. Lessor agrees to pay agent, his successor
or assigns, a six (6%) percent commission on the net rental, as rent
is collected by Lessor. This provision shall be binding upon
Lessor's successors or assigns, and shall continue during any period
of renewal or extension in which Lessee continues to occupy the
Premises and pay rent.
35. Termination:
A. The Expiration Date of this Lease shall be August 31st,
1993, five years and eleven days from the Commencement Date hereof,
and the Lease shall expire without the necessity of any notice from
either party to the other.
B. In the event that Lessee shall fail or refuse to vacate on
the Expiration Date or any extension thereof, then it is expressly
agreed that, if rent is accepted by Lessor for any period after the
Expiration Date and only for so long as rent is accepted, such
holding over of the Premises by Lessee shall create a tenancy from
month to month subject to all the same terms and conditions as are
in effect on the last day of the preceding term -- except that the
monthly rent shall be increased to an amount equal to twice the
minimum monthly rent effective on the last day of the preceding
term. All powers granted to Lessor by this Lease may be exercised
and all obligations imposed upon Lessee by this Lease shall be
performed by Lessee as well, during any holding over or extension of
the original term of this Lease, as during the original term itself.
C. Lessee shall surrender the Premises to Lessor in good order
and condition. So long as Lessee is not in default hereinunder, all
furniture, trade fixtures and/or equipment installed in the Premises
at the expense of Lessee shall remain the property of Lessee, and
Lessee shall have the right to remove same during the term of this
Lease and any renewal or extension thereof; provided however that
Lessee agrees to repair at its cost and expense any damage done to
the Premises by reason of the removal of such furniture, fixtures or
equipment. Any improvements made hereunder by Lessee shall, only at
Lessor's option, remain upon the Premises at the termination of
this Lease. Otherwise, Lessee shall remove said improvements at its
expense, and return the Premises to substantially the same condition
that existed on the Date the Lease was executed, wear and tear from
a reasonable use thereof and damage by the elements not resulting
from the neglect or fault of Lessee excepted.
D. Lessee shall have the option of terminating the Lease
during the period extending from the first day of the Twenty-Fifth
month through the last day of the Thirty-Sixth month provided,
during said option period, Lessee gives Notice to lessor at least
six (6) months in advance of the Termination Date and prepays Lessor
the equivalent of six (6) months rent
-9-
<PAGE>
beyond the Termination Date; said payment shall be received by
Lessor at least ten (10) days prior to commencement of moving out
Lessee's property. The Termination Date shall be the Date upon which
Lessee has completely vacated the Premises.
36. Security Deposit:
Lessee does herewith deposit with Lessor the sum of Three Thousand,
One Hundred and Ninety-Nine Dollars and Thirty-One Cents ($3,199.31)
to be added to the current deposit of $4,175.00 plus accrued
interest in the amount of $2,625.69, together which equals one month
rent and shall be held by Lessor as security for the full and
faithful performance by Lessee of Lessee's obligations under this
Lease and for the payment of damages to the demised Premises. Except
for such sum(s) as shall be lawfully applied by Lessor to satisfy
valid claims against Lessee arising from defaults under this Lease
or by reason of damages to the demised Premises, the Security
Deposit shall be returned to Lessee at the expiration of the term or
any renewal or extension thereof. Lessee understands and agrees that
no part of the Security Deposit shall be used or construed by Lessee
as payment for any of its obligations hereinunder except as Security
Deposit. Simple interest at five percent per annum shall be credited
once annually to Lessee's Security Deposit Account.
37. Condition of Premises:
Lessee agrees to accept and occupy the Premises in its present "as
is" condition as of the date of execution of this Lease, and any
alterations which Lessee desires to make to the Premises shall be
done at Lessee's sole expense and liability in strict accordance
with the provisions of Paragraph 38 hereinunder. Lessor shall not be
held responsible or liable for the furnishing of any utility
services or for the failure of any utility company to furnish any
services to the Premises.
38. Alterations and Improvements by Lessee:
A. Provided that such installation shall not adversely affect
the roof and structural soundness of the Premises or any systems
contained therein, Lessee shall have the right to make reasonable
alterations, additions or improvements to its space during the term
of this Lease, provided Lessee shall first give written notice to
Lessor, including plans and specifications, fully describing its
needs and intentions, and Lessee shall not commence with any work
without first receiving from Lessor written approval, which shall
not be unreasonably withheld.
B. Any labor performed or materials furnished in or about the
demised Premises shall be performed or furnished in strict
compliance with all applicable laws, regulations, ordinances and
requirements of all duly constituted municipal authorities or other
governmental bodies having jurisdiction, and the requirements of any
Board of Fire Underwriters having jurisdiction.
-10-
<PAGE>
C. Prior to the commencement of any work on the Premises,
Lessee shall procure from each of its contractors and/or
subcontractors a Waiver of Mechanic's Liens in a form satisfactory
to Lessor, and shall record same in the Office of the Recording
Clerk of Burlington County. A copy of each such Waiver, bearing the
Date and Time Stamp of the Clerk, shall be given to Lessor. Lessee
shall procure also from its contractors and/or subcontractors
Certificates of Insurance, evidencing that General Liability and
Workmens Compensation Insurance is in force with minimum limits of
$500,000, and shall furnish copies of all Certificates to Lessor.
D. Any outside storage areas or facilities required by Lessee
shall be completely enclosed by means of a masonry wall, high grade
galvanized or aluminum chain link fence or other materials, as
approved by Lessor in accordance with Subparagraph A hereinabove,
and screened with landscaping, or stay in compliance with the
appropriate governmental authority.
E. In the course of designing, installing, operating and
maintaining its activities on the Premises, Lessee shall expressly
provide for the safe and careful handling, storing and disposing of
any noxious, corrosive, flammable or hazardous chemicals, vapors,
substances or byproducts or any material which might contaminate the
environment in violation of any covenant, public law or regulation.
In no event shall such items be permitted upon the Premises unless
same are strictly ancillary and incidental to Lessee's permitted
primary use.
1. Provisions hereunder shall include, but not be limited to,
such things as ample ventilation and continuously operated
exhaust systems, use of indirect fired (i.e., non-open flame)
heat sources, application of special paints or coatings,
frequent cleanings, and any other treatments reasonably
indicated in order to prevent damage to any part of the
demised Premises or systems appurtenant thereto. Exhaust
systems shall be regulated or isolated so that burner flames
in the heating equipment are not subjected to backdrafts.
2. Lessee acknowledges that the phrase, "reasonable wear and
tear" under Paragraph 36. hereof shall not be construed to
include material deterioration to the structural steel,
mechanical, plumbing or electrical systems resulting from
corrosive substances or damage to heating equipment from
excess exhaust pressure from any of Lessee's equipment or
machinery. Lessee also agrees that it shall indemnify and save
Lessor harmless from and against any and all claims, demands,
or liability arising from Lessee's use of any material which
could be subject to regulation under any law, including
without limitation any material classified as hazardous, toxic
or flammable by any governing agency having jurisdiction.
39. Operation, Maintenance and Repair Expense:
A. This Lease is a "NET" Lease whereby immediately upon
possession of the Premises and throughout the term, in addition to
the minimum annual rent specified in the 1st
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<PAGE>
Paragraph hereof and except as specifically excluded in Subparagraph
D. below, Lessee shall assume responsibility for all costs relative
to the operation, maintenance and repair of the demised Premises,
facilities and equipment, including but not limited to:
1. all utility services (e.g., electricity, public water and
sewerage, fuels for heating or production, refuse collection,
etc.).
2. all site maintenance (e.g., snow removal, lawnmowing,
spraying of diseased trees or replacement of dead trees,
weeding and mulching of beds, etc.).
3. reimbursement to Lessor of the cost of all real estate
taxes and premiums for fire insurance and extended coverage.
Lessee may place the fire and extended coverage of the
Premises as part of its own insurance package, provided (a)
the company with which coverage is placed has a Best's Key
Rating Guide (Property and Casualty) of A12 or better, (b)
coverage pertaining to the Premises alone shall be of an
amount satisfactory to Lessor, and (c) that Certificates of
Insurance, naming Lessor as Additional Insured, shall be
promptly given to Lessor as coverage is initially placed,
renewed or replaced.
4. all necessary or appropriate replacements, renewals and
repairs, except as provided in Subparagraph D., required to
keep and maintain the demised Premises and all systems,
equipment and apparatus appurtenant thereto or used in
connection therewith in good order and condition:
a. Lessee shall arrange directly for the performance of
regular/periodic inspections and service of the heating
and air conditioning equipment by a reputable company.
Verification, in the form of copies of executed
Maintenance Agreements or copies of paid Invoices, shall
be furnished to Lessor upon request. In the event Lessee
fails to procure and verify such service, Lessor shall
have the right, but not the duty, to procure these
services on behalf of the Lessee, and Lessee agrees to
reimburse Lessor within fifteen days of presentation of
bills for all costs thereof. In any event, it shall be
Lessee's obligation to place the heating and air
conditioning equipment in good operating condition as of
the termination of this Lease; in the absence of full
verification described herein, Lessee shall be obligated
to pay for final inspecting and servicing by Lessor's
contractor.
b. between inspections it shall be the sole
responsibility of Lessee to change all filters
appurtenant to the heating and air conditioning system
at regular intervals, based upon recommendations of the
manufacturer or service representative; said intervals
to be increased if indicated by Lessee's production
activities.
B. Lessor shall render Statements on a quarterly basis
pertaining to all applicable charges under this Paragraph, and shall
provide copies of all invoices or receipts in support
-12-
<PAGE>
thereof. Lessee agrees to reimburse Lessor within fifteen (15) days
of the Statement Date; any reimbursements not received by Lessor
within thirty (30) days of the Statement Date shall be subject to a
late penalty of three (3%) percent. Lessee understands and agrees
that billing by Lessor of Expenses hereunder in quarterly
installments is for convenience only and agrees, if Lessee defaults
in the payment of same and upon notice from Lessor, to immediately
increase its regular monthly base rental payment by an amount equal
to one-twelfth of the aggregate annual amount of the expenses, as
estimated by Lessor.
C. Lessee agrees that any repairs, replacements and renewals
and/or any labor or materials performed or furnished in or about the
demised Premises shall be governed by the same standards and
requirements specified in Paragraph 38 above.
D. Lessor shall be responsible for maintenance and repair of
the roof and structural portions of the building. Upon receipt of
written notice from Lessee, Lessor agrees to proceed with due
diligence to repair at its own expense any leaks in the roof or make
any repair to the structural portions of the building, provided such
repairs are not necessitated by any act or neglect on the part of
Lessee or any of its contractors or subcontractors.
E. Notwithstanding the fact that Lessor has no
responsibilities hereunder for the making of repairs to the demised
Premises, other than as specified in Subparagraph D. above, the
parties agree that if as a result of the emergency nature of certain
repairs Lessor should be required to enter the demised Premises and
make such repairs, then and in such event Lessee shall reimburse
Lessor within fifteen (15) days for the actual reasonable costs of
such repairs and Lessee agrees that Lessor's entry upon the demised
Premises without its consent in such emergency shall be permitted
under the terms hereof.
40. Fire Extinguishers:
Lessee shall provide at its own expense all fire extinguishers
required to meet the current O.S.H.A. and Moorestown Township or New
Jersey State Fire Code requirements.
41. Comprehensive General Liability Insurance:
Lessee shall provide and keep in force at its sole expense during
the term of this Lease Comprehensive General Liability insurance in
order to protect Lessee, and naming Lessor as an additional insured
therein, against any and all liability with a bodily injury and
property damage combined single limit of at least One Million
Dollars ($1,000,000.00) with respect to any one occurrence and an
aggregate limit of at least Two Million Dollars ($2,000,000.00).
Prior to taking possession of the Premises, Lessee shall provide
Lessor with a Certificate of the Insurer with whom coverage is in
force and effect, and shall furnish additional Certificates as
coverage is renewed and replaced.
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<PAGE>
42. Notice:
All Notices required to be given by the parties to this Lease shall
be sufficiently given if sent by Registered or Certified Mail,
postage prepaid, or hand delivered to Lessee at 351 New Albany Road,
Moorestown, NJ 08057, or to Lessor at Gwynedd Plaza I, Suite 201,
Spring House, PA 19477, with a copy to Leonard Eisner, P.O. Box
3541, Cherry Hill, NJ 08034; or such other address as the parties
may direct by subsequent Notice.
43. Access and Inspections by Lessor:
Lessor or a duly authorized agent of Lessor may enter the Premises
at all reasonable times in order to make inspections and/or make
necessary repairs, alterations or additions thereto or to the
building of which the Premises is a part. Lessor agrees however
that, without the consent of Lessee, no work will be done upon the
Premises except during business hours, unless such work is of
emergency nature.
44. Use and Occupancy:
A. Lessee hereby covenants and agrees that its business shall
be conducted in accordance with all applicable ordinances, laws,
orders, notices, rules, regulations and requirements of any
municipal, state or federal body, including any regulatory Agency,
Authority or Board of Underwriters having jurisdiction or setting
standards applicable to the Premises. Lessee shall comply at its
sole cost and expense with all such requirements governing Lessee's
occupancy and activities, including all requirements the Loss
Control/Safety Engineering staff of any Insurance Company(ies) with
whom coverage is in force.
1. This provision shall apply, in particular, to the
treatment, production, storage, handling, transfer,
processing, transporting, use, disposal and release of
hazardous substances, toxic or radioactive matter. Lessee
shall take all due precautions with any other material or
substance which, even if not regulated by law or requirements
as aforesaid, which could pose a hazard to the health and
safety of the current or future occupants of the Premises, or
the owners or occupants of property adjacent to or in the
vicinity of the Premises. Lessee shall be solely responsible
for compliance with the Comprehensive Environmental
Responsibility Compensation and Liability Act resulting from
its use and occupancy of the Premises.
2. Lessee hereby agrees to protect, indemnify and hold Lessor
harmless from and against any and all loss, damage, expense,
cause of action, suits, demands, judgements and claims of any
nature whatsoever, including removal, clean-up and restoration
work resulting from the breach of these covenants by Lessee,
its agents, contractors, employees, licensees, subtenants or
invitees.
-14-
<PAGE>
3. Lessee's obligations hereunder shall survive the
termination of this Lease, and it shall be the duty of Lessee
to notify Lessor immediately upon learning of any inquiry,
investigation or proceeding regarding any activity affected by
the provisions hereunder.
C. Lessee shall deposit no process waste into the sanitary
sewer system serving the Premises, and agrees that only sanitary
waste shall be inserted into the sanitary sewer system. Lessee shall
not maintain any "hazardous materials" (as such term is defined by
federal and state law) on the Premises or the lot of which the
Premises is a part, and shall be solely responsible for compliance
with the Comprehensive Environmental Responsibility Compensation and
Liability Act resulting from its use and occupancy of the Premises.
45. Lease Renewal Option:
Provided Lessee is not then in default hereinunder, On or before
March 1st, 1993, Lessee shall give Lessor written Notice of its
intention to renew this Agreement for an additional period of five
(5) years, subject to all the same terms and conditions as
hereinunder except that the minimum annual rent in the 1st Paragraph
hereinabove shall be increased by a factor equivalent to the
percentage increase in the U.S. Department of Commerce, Bureau of
Labor Statistics, Consumer Price Index [All Items (1982-84 = 100)]
for Philadelphia (SMSA), Pennsylvania for the period from September
1, 1988 through August 31, 1993. Retroactive adjustment of the
rental shall be made as needed, and in the event the Consumer Price
Index is discontinued it is agreed the Index taking its place shall
be used. In no event shall the minimum annual rent be less than the
rent which prevailed during the last year of the term hereof.
46. Authority:
Each party warrants and represents to the other that it has full
power and authority to enter into this Lease without approval by any
other person. All the terms, covenants and conditions herein
contained shall inure to the benefit of and shall bind the
respective parties hereto, and their heirs, executors,
administrators, personal or legal representatives, successors and
assigns.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals the day
and year first above written.
TELESCIENCES C O SYSTEMS, INC.
/s/ Robert Onraet V.P. /s/ Terry Stavropoulos
- ------------------------------------ --------------------------------------
Attest: ROBERT ONRAET Title Name Title (SEAL)
TERRY STAVROPOULOS, Vice President
LINE LEXINGTON MANAGEMENT CORP.
Witness: /s/ /s/ Manny J. Neff, Pres.
--------------------------- --------------------------------------
Manny J. Neff, President (SEAL)
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<PAGE>
August 6, 1993
Terry Stavropoulos, Vice President
TeleSciences CO Systems, Inc.
351 New Albany Road
Moorestown, NJ 08057
Reference: 800 Glen Avenue Facility
First Amendment to Lease Agreement dated June 13, 1988
Dear Mr. Stavropoulos:
Line Lexington Management Corp. is willing to extend the Lease Agreement in
accordance with the following provisions:
1. The Commencement Date of the renewal shall be September lst, 1993;
the Expiration Date shall be August 31st, 1998.
2. Beginning December 1st, 1993 Lessee shall have the option to
terminate the Agreement on any quarterly anniversary date upon [1]
the giving of notice to Lessor six (6) months in advance of the
Termination Date and [2] the prepayment of a penalty equivalent to
six (6) months of rent, which sum shall be delivered to Lessor no
less than ten (10) days prior to the Termination Date.
There shall be no grace period for the penalty payment. Failure to
deliver the penalty payment on time or any other breach of the terms
of the Lease Agreement, as amended, during the six-month period
following delivery to Lessor of Notice of Termination shall void the
Notice, and Lessee shall be liable for all payments and conditions
as if Notice had never been given.
3. The annual (monthly) rental for the premises shall conform with the
following schedule:
LINE LEXINGTON MANAGEMENT CORP.
GWYNEDD PLAZA I, SUlTE 201, SPRING HOUSE, PA 19477 - (215) 643-4600
<PAGE>
Terry Stavropoulos, V.P.
August 6, 1993
Page 2 rev
Year One: $180,000.00 ($15,000.00 monthly)
Year Two: $168,000.00 ($14,000.00 monthly)
Year Three: $156,000.00 ($13,000.00 monthly)
Year Four: $144,000.00 ($12,000.00 monthly)
Year Five: $132,000.00 ($11,000.00 monthly)
4. Lessee shall deposit with Lessor the sum of $13,500.00, which sum shall be
added to the existing deposit of $10,000.00, plus $2,500.00 of accrued
interest on the existing deposit, in order to equal a Security Deposit of
two months rent at the average monthly rent of $13,000.00. The last line
of Paragraph 36 shall be amended to provide that: "Simple interest at
regular commercial bank savings account rates shall be credited once
annually to Lessee's account."
5. Lessee agrees to add business rents insurance coverage for the benefit of
Lessor to its existing fire and general liability coverage of the
premises, and Lessor shall reimburse Lessee for the cost of this
endorsement or Lessee shall arrange for Lessor to be billed directly by
the carrier.
6. The grace period stipulated in Paragraph 33 of the Agreement for the
receipt of monthly rent shall be reduced from twelve (12) days to ten (10)
days after which Lessee shall be subject to a late charge equivalent to 3%
of the outstanding balance.
7. Lessee agrees to pay the cost of a Phase I Environmental Study of the
premises which shall include the taking of soil samples; said study to be
performed in accordance with a Proposal dated August 6, 1993 rendered by
Gilmore & Associates, Inc. Further, Lessee agrees to comply at its own
expense with all requirements of appropriate authorities or Underwriters
identified by the study as well as all reasonable recommendations of the
Engineer responsible for the study.
<PAGE>
Terry Stavropoulos, V.P.
August 6, 1993
Page 3
8. Provided Lessee has not been in default under this Agreement, as amended,
Lessee shall have the option of renewing the amended Agreement for an
additional period of five (5) years. The rent shall be adjusted in
accordance with the formula given in Paragraph 45, except that the formula
shall be applied to the average annual rent over the amended term hereof
and the period dates shall be amended to September 1, 1993 through August
31, 1998 respectively. The last sentence of Paragraph 45 shall be amended
to stipulate: "In no event shall the minimum annual rent be less than the
average annual rent which prevailed during the term under the First
Amendment to this Agreement."
9. All other terms and conditions of the existing Lease between the parties
hereto, dated 13 June 1988 shall remain the same.
In witness whereof, the parties hereto have hereunto set their hands and
seals the day and year written below.
Accepted:
TeleSciences CO Systems, Inc.
/s/ Greg Fegley 8/27/93 /s/ 8/27/93
--------------------------------------- -------------------------
By: Greg Fegley, Dir.- Materials Date Attest:
Accepted:
Line Lexington Management Corp.
/s/ Manny J. Neff 9/03/93 /s/
--------------------------------------- -------------------------
By: Manny J. Neff, Pres. Date Witness:
<PAGE>
INTERNATIONAL MARKETING SERVICES AGREEMENT
THIS INTERNATIONAL MARKETING SERVICES AGREEMENT (this
"Agreement"), effective as of ______________, 1997, is entered into by and
between SECURICOR TELESCIENCES INC., a Delaware corporation (the "Company"),
and SECURICOR COMMUNICATIONS LIMITED, an English corporation (together with
its subsidiaries, "Securicor").
RECITALS
WHEREAS, Securicor owns a substantial portion of the capital stock
of the Company; and
WHEREAS, Securicor desires to offer the Company the ability to
obtain certain international marketing services that Securicor is able to
provide to its portfolio companies in a cost effective manner.
NOW, THEREFORE, in consideration of the foregoing recitals and the
terms and conditions stated below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, Securicor and the
Company, intending to be legally bound, agree as follows:
SECTION 1: SERVICES TO BE PERFORMED BY SECURICOR
In consideration of the fees set forth in Section 2, Securicor
agrees to perform such international marketing services for the Company as the
Company may from time to time request, including, without limitation, business
development and other marketing services performed by designated Securicor
personnel as described more fully on Schedule A attached hereto. Securicor shall
be responsible for all out-of-pocket expenses incurred by it and its personnel
in connection with the performance of such services hereunder.
SECTION 2: FEES
The Company shall pay an annual fee of $160,000 to Securicor for the
services provided pursuant to this Agreement. Such fee shall be paid in twelve
equal monthly installments in arrears, with the first $13,333 installment being
due and payable on ________________, 1997. All payments shall be made by means
of inter-Company transfers through the payment system operated by Securicor.
SECTION 3: EXTRAORDINARY SERVICES.
In the event Securicor is required to perform any services not
specifically contemplated in Section 1 of this Agreement or undertake an
extraordinary project in carrying out those services, Securicor and the Company
shall, in good faith, negotiate an additional fee
<PAGE>
which shall be paid to Securicor by the Company, and in the event the parties
are unable to agree upon the amount of such extra fee, Securicor shall not be
obligated to perform such additional services.
SECTION 4: SECURICOR'S PERFORMANCE STANDARD.
Securicor shall perform all of its obligations set forth in Section
1 with all due care, in a commercially reasonable manner, and in a manner
consistent with its own administrative practices and standards or the standards
prevailing in the telecommunications industry, whichever standard of conduct is
more stringent.
SECTION 5: COMPLIANCE WITH LAW.
Each party represents, warrants and covenants to the other party
that all of its practices and acts in connection with this Agreement are and at
all times will be in compliance with all applicable federal, state and local
laws, statutes, rules and regulations.
SECTION 6: LIABILITY.
(a) Indemnification. The Company agrees to indemnify and hold
Securicor harmless from all claims and liabilities (including reasonable
attorney's fees) incurred or assessed against it in connection with the
performance of services, except such as may arise from Securicor's own negligent
action, negligent failure to act, willful misconduct or willful violation of
applicable law.
(b) No Personal Liability. No liability shall attain in favor
of one party to this Agreement against any officer, director or employee of the
other party. The party attaining such liability agrees to look solely to the
assets of the other party for satisfaction.
SECTION 7: TERM.
This Agreement shall extend for an initial term beginning on the
effective date of this Agreement and ending on September 30, 1997 and shall be
automatically renewed for additional six-month periods unless written notice of
termination is given by either party to the other at least 30 days prior to the
end of such initial period or any subsequent renewal period.
SECTION 8: INDEPENDENT CONTRACTOR STATUS OF SECURICOR.
The relationship of Securicor to the Company is that of independent
contractor. Nothing herein shall be construed as constituting a partnership,
joint venture or agency between Securicor and the Company.
SECTION 9: CONFIDENTIALITY.
<PAGE>
It is understood between the parties hereto that during the term of
this Agreement, each of the parties may be dealing with confidential information
and processes which are the other party's property, used in the course of its
respective business. Each of the parties agrees that it will not intentionally
disclose any such confidential information to anyone, directly or indirectly,
without the prior consent of the other party.
SECTION 10: MISCELLANEOUS.
(a) No Assignment. This Agreement may not be assigned by
either party without the prior written consent of the other party, which,
because of the nature of the parties' respective obligations hereunder, may be
declined by such party for any reason or no reason.
(b) Notices. Any notice or other communication required or
permitted to be given under this Agreement must be in writing and will be deemed
effective when delivered in person or sent by facsimile, cable, telegram or
telex, or by overnight courier or registered or certified mail, postage prepaid,
return receipt requested, to the following addresses:
If to Securicor:
Securicor Communications Limited
Sutton Park House
15 Carshalton Road
Sutton Surrey SM1 4LD
UNITED KINGDOM
Attention: Angus Gribbon
Telephone: 011-44-1-817-722-2710
Telecopier: 011-44-1-817-770-1145
If to the Company:
Securicor Telesciences Inc.
351 New Albany Road
Moorestown, New Jersey 080507-1177
USA
Attention: Andrew P. Maunder
Telephone: 1-609-866-1000
Telecopier: 1-609-778-0836
(c) Amendment. This Agreement may be amended, and the
observance of any term hereof may be waived (either prospectively or
retroactively and either generally or in a particular instance) only by a
written document signed by authorized representatives of the parties hereto.
<PAGE>
(d) Choice of Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New Jersey. Any and all
legal actions brought by one party against the other shall be brought in the
state or federal courts of the State of New Jersey.
(d) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any and all prior oral or
written understandings and agreements between the parties regarding the subject
matter addressed in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered, effective as of the date specified at the
beginning hereof.
SECURICOR TELESCIENCES INC.
By:___________________________________
Andrew P. Maunder, President
SECURICOR COMMUNICATIONS LIMITED
By:___________________________________
Name:
Title:
<PAGE>
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement"), effective as of March 1,
1997, is entered into by and between SECURICOR TELESCIENCES, INC., a Delaware
corporation (the "Company"), and SECURICOR 3NET, INC., a Delaware corporation
("Securicor 3Net").
RECITALS
WHEREAS, prior to the effective date of this Agreement, the Company
and Securicor 3Net were wholly-owned subsidiaries of Securicor plc (together
with its subsidiaries "Securicor");
WHEREAS, the Company is contemplating a public offering of its
Common Stock (the "Offering") and upon the completion of the Offering the
Company will no longer be a wholly-owned subsidiary of Securicor; and
WHEREAS, the Company leases a certain office building known as 351
New Albany Road, Moorestown, New Jersey 08057 (collectively with any new
headquarters offices, the "Premises"); and
WHEREAS, prior to the effective date of this Agreement, certain of
Securicor 3Net's employees and independent contractors ("3Net Personnel") have
used office facilities on the Premises and the Company has provided certain
administrative services (the "Services") to such personnel and to Securicor
3Net, including primarily accounting and financial, general management, human
resources, reception and secretarial assistance services, in consideration of
which Securicor 3Net has paid the Company varying amounts per month by means of
inter-company transfers through a payment system operated by Securicor (the
"Securicor Payment System"); and
WHEREAS, Securicor 3Net desires that 3Net Personnel be able to
continue to use the Premises and continue to benefit from the Services and the
Company desires to make available the Premises and the Services to Securicor
3Net and 3Net Personnel on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
terms and conditions stated below, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, Securicor 3Net and
the Company, intending to be legally bound, agree as follows:
SECTION 1: USE AND OCCUPANCY OF THE PREMISES
During the term of this Agreement, the Company shall permit 3Net
Personnel to use and occupy a portion of the Premises for general office
purposes in a manner consistent with
<PAGE>
the past practices of the parties. The Company shall operate and manage the
Premises, and shall have authority to establish reasonable operating procedures
concerning the use and occupancy of the Premises. 3Net Personnel shall conform
their use and occupancy of the Premises to such reasonable operating procedures
as the Company shall establish.
SECTION 2: ADMINISTRATIVE SERVICES TO BE PERFORMED BY THE COMPANY
The Company agrees to perform such Services as Securicor 3Net may
from time to time request in a manner consistent with the past practices of the
parties.
SECTION 3: FEES
(a) Use of Premises. In consideration of the use by 3Net
Personnel of the Premises, Securicor 3Net shall pay, in accordance with
subsection (c) below, the Company a fee of $800 per month for each 3Net
Personnel assigned to the Premises on the fifteenth (15th) day of each calendar
month. The fee shall include all allocable facilities costs including rent,
utilities, building services and telecommunications and Securicor 3Net shall not
be obligated to pay any additional amounts to the Company as reimbursement for
such costs.
(b) Administrative Services. In consideration of the Company
providing the Services specified in Section 2 above, Securicor 3Net shall pay
the Company a fee of $5,000 per month in accordance with subsection (c) below.
(c) Payment. All fees payable hereunder shall be chargeable in
arrears on the last day of each calendar month during the Term of this
Agreement. Payment shall be made by means of the Securicor Payment System. Any
amounts due to the Company that have not been credited to the Company through
the Securicor Payment System prior to thirty (30) days after the date on which
payment originally was due shall accrue interest at the standard rate in effect
with respect to inter-company borrowing through the Securicor Payment System.
(d) 3Net's Direct Expenditures. All expenditures specifically
authorized by 3Net Personnel shall be treated by the Company as expenses of
Securicor 3Net and shall be applied directly to the books of Securicor 3Net.
SECTION 4: EXTRAORDINARY SERVICES.
In the event the Company is required to perform any services not
specifically contemplated in Section 2 of this Agreement or undertake an
extraordinary project in carrying out those services, Securicor 3Net and the
Company shall, in good faith, negotiate an additional fee which shall be paid to
the Company by Securicor 3Net, and in the event the parties are unable to agree
upon the amount of such extra fee, the Company shall not be obligated to perform
such additional services.
SECTION 5: THE COMPANY'S PERFORMANCE STANDARD.
<PAGE>
The Company shall perform the administrative services set forth in
Section 2 with all due care, in a commercially reasonable manner, and in a
manner consistent with its own administrative practices and standards or the
standards.
SECTION 6: COMPLIANCE WITH LAW.
Each party represents, warrants and covenants to the other party
that all of its practices and acts in connection with this Agreement are and at
all times will be in compliance with all applicable federal, state and local
laws, statutes, rules and regulations.
SECTION 7: LIABILITY.
(a) Indemnification. Securicor 3Net agrees to indemnify and
hold the Company harmless from all claims and liabilities (including reasonable
attorney's fees) incurred or assessed against it in connection with its use of
the Premises and the Company's performance of Services, except such as may arise
from the Company's own negligent action, negligent failure to act, willful
misconduct or willful violation of applicable law.
(b) No Personal Liability. No liability shall attain in favor
of one party to this Agreement against any officer, director or employee of the
other party. The party attaining such liability agrees to look solely to the
assets of the other party for satisfaction.
SECTION 8: TERM.
The initial term of this Agreement shall begin on the effective date
of this Agreement and expire on September 30, 1997 and shall be automatically
renewed for additional one-year periods unless written notice of termination is
given by either party to the other at least 15 days prior to the end of the
initial period or any subsequent renewal period, subject to the right of either
party to terminate this Agreement at any time upon 90 days' prior written notice
to the other.
SECTION 9: INDEPENDENT CONTRACTOR STATUS OF THE COMPANY.
The relationship of the Company to Securicor 3Net is that of
independent contractor. Nothing herein shall be construed as constituting a
partnership, joint venture or agency between the Company and the Securicor 3Net.
SECTION 10: CONFIDENTIALITY.
It is understood between the parties hereto that during the term of
this Agreement, each of the parties may be dealing with confidential information
and processes which are the other party's property, used in the course of its
respective business. Each of the parties agrees that it will not intentionally
disclose any such confidential information to anyone, directly or indirectly,
without the prior consent of the other party.
<PAGE>
SECTION 11: MISCELLANEOUS.
(a) No Assignment. This Agreement may not be assigned by
either party without the prior written consent of the other party, which,
because of the nature of the parties' respective obligations hereunder, may be
declined by such party for any reason or no reason.
(b) Notices. Any notice or other communication required or
permitted to be given under this Agreement must be in writing and will be deemed
effective when delivered in person or sent by facsimile, cable, telegram or
telex, or by overnight courier or registered or certified mail, postage prepaid,
return receipt requested, to the following addresses:
If to Securicor 3Net:
c/o Securicor Communications Ltd.
Sutton Park House
15 Carshalton Road
Sutton Surrey SM1 4LD
UNITED KINGDOM
Attention: Angus Gribbon
Telephone: 011-44-1-817-722-2710
Telecopier: 011-44-1-817-770-1145
If to the Company:
Securicor Telesciences Inc.
351 New Albany Road
Moorestown, New Jersey 080507-1177
USA
Attention: Andrew P. Maunder
Telephone: 1-609-866-1000
Telecopier: 1-609-778-0836
(c) Amendment. This Agreement may be amended, and the
observance of any term hereof may be waived (either prospectively or
retroactively and either generally or in a particular instance) only by a
written document signed by authorized representatives of the parties hereto.
(d) Choice of Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New Jersey. Any and all
legal actions brought by one party against the other shall be brought in the
state or federal courts of the State of New Jersey.
<PAGE>
(d) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any and all prior oral or
written understandings and agreements between the parties regarding the subject
matter addressed in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered, effective as of the date specified at the
beginning hereof.
SECURICOR TELESCIENCES INC.
By:___________________________________
Andrew P. Maunder, President
SECURICOR 3NET, INC.
By:___________________________________
Name:
Title:
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT, effective as of the ___________
day of _____________, 1997, by and between SECURICOR TELESCIENCES INC., a
Delaware corporation (the "Company"), and SECURICOR COMMUNICATIONS, INC., a
Delaware corporation ("Securicor").
RECITALS
WHEREAS, prior to the effective date of this Agreement, the Company
was a wholly-owned subsidiary of Securicor; and
WHEREAS, concurrently with the effective date of this Agreement, the
Company has proposed to complete an initial public offering (the "Offering") of
its common stock, par value $0.01 per share (the "Common Stock"); and
WHEREAS, upon the completion of the Offering, Securicor will own
_______ shares of the Common Stock (the "Shares"), representing approximately
[60%] of the shares of Common Stock issued and outstanding; and
WHEREAS, the Company and Securicor desire that this Agreement govern
the rights of Securicor to cause the Company to register the Shares and certain
other matters as set forth herein.
1. Definitions. Unless the context otherwise requires, the following
terms shall have the respective meanings indicated:
(a) The term "Act" means the Securities Act of 1933, as
amended.
(b) The term "Holder" means Securicor and any assignee of the
registration rights set forth in this Agreement in accordance with Section 10 of
this Agreement.
(c) The term "1934 Act" means the Securities Exchange Act of
1934, as amended.
(d) The term "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Act, and the declaration or ordering by the SEC
of the effectiveness of such registration statement.
(e) The term "Registration Stock" means (i) the Shares and
(ii) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect
<PAGE>
to, or in exchange for or in replacement of the Shares, excluding in all cases,
however, any Registration Stock sold by a person in a transaction in which such
person's rights under this Agreement are not assigned.
(f) The term "SEC" means the United States Securities and
Exchange Commission.
2. Piggyback Registration.
If the Company shall seek to register under the Act any Common
Stock (except shares of Common Stock issued in connection with any stock option
plan, stock purchase plan, savings, dividend reinvestment or similar plan or an
acquisition, merger or exchange of stock) and if the form of registration
statement proposed to be used may be used for the registration of the
Registration Stock, then, on each such occasion, the Company shall furnish
Holder with at least twenty (20) days prior written notice thereof. At the
written request of Holder, given within twenty (20) days after the receipt of
such notice, the Company will use its best efforts to cause all of the
Registration Stock for which registration shall have been requested by Holder to
be included in such registration statement. In the event that the proposed
registration by the Company is, in whole or in part, an underwritten public
offering of the Common Stock of the Company, and the managing underwriter
determines and advises in writing that the inclusion of all Registration Stock
proposed to be included in the underwritten public offering and other issued and
outstanding shares of Common Stock proposed to be included therein by persons
other than holders of Registration Stock who have the contractual right to have
such shares included in such registration statement (the "Other Shares") would
interfere with the successful marketing (including pricing) of the securities,
then the number of shares of Registration Stock and Other Shares to be included
in such underwritten public offering shall be reduced first pro rata (based on
the total number of shares held by Holder and any holders of Other Shares) among
the holders of the Registration Stock and the Other Shares and, secondly, if
necessary, among the Company's shares requested by the Company to be registered.
3. Demand Registration.
(a) If the Company shall be requested in writing by Holder to
effect the registration under the Securities Act of any of the Registration
Stock, the Company, subject to the limitations set forth in subsection 3(b),
shall effect as soon as practicable after the receipt of such request, the
registration under the Act of all Registration Stock which Holder so requests to
be registered.
(i) If Holder intends to distribute the Registration
Stock covered by its request by means of an underwriting, it shall so advise the
Company as a part of its request made pursuant to this subsection 3(a). The
managing underwriter will be selected by Holder and shall be reasonably
acceptable to the Company. In such event, Holder shall (together with
2
<PAGE>
the Company as provided in subsection 4(e)) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting.
(ii) Notwithstanding the foregoing, the Company may
include in a registration requested under this subsection 3(a) any additional
authorized shares of the Common Stock, whether or not issued, for sale by the
Company or for sale by others; provided, however, that such shares shall not be
included to the extent that the managing underwriter chosen in accordance with
subsection (i) above concludes in good faith that the inclusion of such shares
will interfere with the successful marketing of the shares of Registration Stock
to be included therein.
(iii) Notwithstanding the foregoing, if the Company
shall furnish to Holder a certificate signed by the Chief Executive Officer or
the Chief Financial Officer of the Company stating that in the good faith
judgment of the Board of Directors of the Company, it would be detrimental for
such registration statement to be filed or would require the Company to make
public disclosure of information the premature disclosure of which would have an
adverse effect on the Company, and it is therefore beneficial to the Company to
defer the filing of such registration statement (or the intended sale of
Registration Stock pursuant to a then effective registration statement), the
Company shall have the right to defer taking action with respect to such filing,
or require Holder to refrain from selling Registration Stock, as the case may
be, for a period of not more than one hundred twenty (120) days.
(b) The Company shall not be obligated to effect, or to take
any action to effect, any registration pursuant to this Section 3:
(i) After the Company has effected one registration
pursuant to this Section 3 in the previous twelve (12) months and such
registration has been declared or ordered effective; or
(ii) During the period beginning on a date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration of Common Stock or other securities of the Company under the Act in
connection with a public offering of such securities (other than a registration
relating solely to the sale of securities to participants in a stock option or
other employee benefits plan of the Company); provided that the Company is
actively employing in good faith reasonable efforts to cause such registration
statement to become effective.
4. Obligations of the Company. Whenever required under Section 3 of
this Agreement to effect the registration of any Registration Stock, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registration Stock and use its best efforts to cause such
registration statement to become effective, and, upon the request of Holder,
keep such registration statement effective for a period
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<PAGE>
of up to ninety (90) days or until the distribution contemplated in the
registration statement is completed, whichever occurs first; provided, however,
that such 90-day period shall be extended for a period of time equal to the
period Holder refrains from selling Registration Stock included in such
registration at the request of an underwriter of Common Stock (or other
securities) of the Company.
(b) Consistent with the subsection (a) above, prepare and file
with the SEC such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement. Holder
shall delay any sale to the extent the Company informs Holder that an amendment
or supplement is required. Company shall promptly prepare and file such
amendment or supplement and, if applicable, use reasonable efforts to cause it
to become effective.
(c) Furnish to Holder such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as Holder may reasonably request in order to
facilitate the disposition of Registration Stock owned by it.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by Holder;
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Holder shall
also enter into and perform its obligations under such an agreement.
(f) Cause all such Registration Stock registered pursuant
hereto to be listed on each securities exchange or trading market on which
similar securities issued by the Company are then listed.
(g) Provide a transfer agent and registrar for all
Registration Stock registered pursuant hereunder and a CUSIP number for all such
Registration Stock, in each case not later than the effective date of such
registration.
5. Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 4 of this
Agreement with respect to the Registration Stock that Holder shall furnish to
the Company such information regarding Holder, the Registration Stock held, and
the intended method of disposition of such securities as shall be required to
effect the registration of Holder's Registration Stock.
4
<PAGE>
6. Expenses of Registration. Holder shall bear all expenses incurred
directly in connection with the registration, filing or qualification of the
Registration Stock requested under Section 3, including all registration, filing
and qualification fees, printers' and accounting fees and fees and disbursements
of counsel for the Company. All expenses related to the disposition of
Registration Stock, whether pursuant to a request under Section 2 or Section 3
of this Agreement, including all underwriting discounts, brokerage commissions
and transfer taxes also shall be borne by Holder.
7. Delay of Registration. Holder shall not have any right to obtain
or seek an injunction restraining or otherwise delaying any registration
pursuant to this Agreement as the result of any controversy that might arise
with respect to the interpretation or implementation of this Agreement.
8. Indemnification. In the event any Registration Stock is included
in a registration statement under the provisions of this Agreement:
(a) To the extent permitted by law, the Company shall
indemnify and hold harmless Holder, any underwriter (as defined in the Act) for
Holder and each person, if any, who controls Holder or underwriter within the
meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading (a "Violation"); and the Company shall pay to
Holder or any such underwriter or controlling person any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 8(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by Holder or any such underwriter or controlling person.
(b) To the extent permitted by law, Holder shall indemnify and
hold harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the Company
within the meaning of the Act, any underwriter, any other person selling
securities in such registration statement and any controlling person of any such
underwriter or other person, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or
5
<PAGE>
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by Holder expressly for use in connection with
such registration; and Holder shall pay any legal or other expenses reasonably
incurred by any person intended to be indemnified pursuant to this subsection
8(b), in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection 8(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of Holder, which consent shall not be unreasonably
withheld; provided further, that, in no event shall any indemnity under this
subsection 8(b) exceed the gross proceeds from the offering received by
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel
reasonably acceptable to the indemnifying party, with the fees and expenses to
be paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 8.
(d) If the indemnification provided for in this Section 8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations; provided, however, that in no event shall Holder's liability to
contribute under this subsection 8(b) exceed the gross proceeds from the
offering received by Holder. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying
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<PAGE>
party or by the indemnified party and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such statement or
omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holder under this
Section 8 shall survive the completion of any offering of Registration Stock
pursuant to a registration statement under this Agreement, and otherwise.
9. Assignment of Registration Rights. The right to cause the Company
to register Registration Stock pursuant to this Agreement may be assigned (but
only with all related obligations) by Holder to a single transferee of such
securities, provided that:
(a) Holder transfers a majority of the Registration Stock and
related registration rights to such transferee;
(b) the Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee; and
(c) such transferee agrees in writing to be bound by and
subject to the terms and conditions of this Agreement, including without
limitation the provisions of Sections 8 and 10 of this Agreement, whereupon such
transferee, consistent with the provisions of Section 11 of this Agreement,
shall have the exclusive power to exercise all rights of Holder under the terms
of this Agreement.
10. "Market Stand-Off" Agreement. Holder hereby agrees that, during
the period of duration (not to exceed 180 days) specified by the Company and an
underwriter of Common Stock or other securities of the Company, following the
effective date of a registration statement of the Company filed under the Act,
Holder shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any
securities of the Company held by Holder at any time during such period except
Common Stock included in such registration. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to the
Registration Stock of Holder (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 11 shall not apply to a registration relating solely to an employee
benefit plan of the Company on Form S-8 or a similar form which may be
promulgated in the future, or a registration relating solely to an SEC Rule 145
transaction.
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<PAGE>
11. Termination of Registration Rights.
This Agreement shall terminate at such time that Holder no
longer holds at least 10% of the Shares owned by Securicor at the effective date
of this Agreement.
12. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence.
(b) Controlling Law. This Agreement and all questions relating
to its validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the State of New Jersey,
notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary, and without the aid of any canon, custom or rule
of law requiring construction against the draftsman.
(c) Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly given, made and received only when
delivered (personally, by courier service such as Federal Express, or by other
messenger) or when deposited with a national postal service, registered or
certified mail, postage prepaid, return receipt requested, addressed as set
forth below:
(i) If to the Company:
Securicor Telesciences Inc.
351 New Albany Road
Moorestown, New Jersey 08057-1177
Attention: Andrew P. Maunder, President
with a copy, given in the manner prescribed above,
to:
Jason M. Shargel, Esquire
Wolf, Block, Schorr & Solis-Cohen
Twelfth Floor Packard Building
S.E. Corner 15th & Chestnut Streets
Philadelphia, PA 19102-2678
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<PAGE>
(ii) If to Holder:
Securicor Communications, Inc.
c/o Securicor plc
Sutton Park House
15 Carshalton Road
Sutton Surrey SM1 4LD
Attention: Angus Gribbon
In addition, notice by mail shall be by air mail if
posted outside of the continental United States.
Any party may alter the address to which communications
or copies are to be sent by giving notice of such change of address in
conformity with the provisions of this paragraph for the giving of notice.
(c) Binding Nature of Agreement; No Assignment. Except as
otherwise provided herein, the terms and conditions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns (including a transferee
of the Registration Stock). Nothing in this Agreement, express or implied, is
intended to confer upon any other party other than the parties hereto or their
respective successors and permitted assigns, any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
(d) Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
(e) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
(f) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing.
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(g) Paragraph Headings. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
(f) Gender, Etc. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
(g) Number of Days. In computing the number of days for
purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday or holiday on which federal banks are or may
elect to be closed, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or such holiday.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
SECURICOR TELESCIENCES INC.
By:_________________________________________
Andrew P. Maunder, President
SECURICOR COMMUNICATIONS, INC.
By:_________________________________________
Name:_________________________________
Title:________________________________
10
<PAGE>
EXHIBIT 11.1
SECURICOR TELESCIENCES INC.
PRO FORMA NET INCOME (LOSS) PER COMMON SHARE CALCULATION (A)
Year Ended Six Months Ended
September 30, 1996 March 31, 1997
------------------ ----------------
Pro forma net income (loss) per
common share:
Net income (loss) - adjusted (A) $2,549,000 $(2,314,000)
---------- ------------
---------- ------------
Weighted average number of shares
issued and outstanding 3,476,900 3,476,900
Number of shares that would be
required to be sold in the initial
public offering to fund (i) the
payment of the obligations to
parent and affiliates and (ii) the
special dividend 1,703,500 1,703,500
---------- -----------
Adjusted weighted average number
of shares outstanding 5,180,400 5,180,400
---------- -----------
Pro forma net income (loss) per
common share $ 0.49 $ (0.45)
---------- -----------
---------- -----------
- -----------
(A) Pro forma Net Income (Loss) Per Common Share (Unaudited)
Pro forma net income (loss) per common share was calculated by dividing net
income (loss) by the weighted average number of common shares outstanding for
the respective period. Pursuant to the requirements of the Securities and
Exchange Commission, the calculation of pro forma net income (loss) per
common share includes the number of shares that would be required to be sold
in the initial public offering to fund the payment of the (i) $9,592,000
obligations to parent and affiliates and (ii) the $10,850,000 special
dividend. In addition, the pro forma forma net income (loss) per
common share for the year ended September 30, 1996 and the six months ended
March 31, 1997 excludes interest expense on the obligations to parent and
affiliates of $578,000 and $322,000, respectively, net of income taxes. Stock
options to be granted prior to the initial public offering have been excluded
from the calculation since the option prices will be equal to the initial
public offering price and will therefore not be dilutive.
<PAGE>
Exhibit 21
Subsidiaries of the Registrant
Securicor Telesciences FSC, Inc.,
a Barbados corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Securicor Telesciences Inc.
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Philadelphia, PA
April 18, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1997
<PERIOD-START> OCT-01-1995 OCT-01-1996
<PERIOD-END> SEP-30-1996 MAR-31-1997
<CASH> 3,326 1,279
<SECURITIES> 0 0
<RECEIVABLES> 15,740 8,031
<ALLOWANCES> 0 0
<INVENTORY> 3,167 4,472
<CURRENT-ASSETS> 23,045 17,447
<PP&E> 4,277 5,027
<DEPRECIATION> 1,541 2,102
<TOTAL-ASSETS> 30,336 23,519
<CURRENT-LIABILITIES> 20,788 16,582
<BONDS> 147 0
0 0
0 0
<COMMON> 35 35
<OTHER-SE> 9,276 6,772
<TOTAL-LIABILITY-AND-EQUITY> 30,336 23,519
<SALES> 33,964 10,921
<TOTAL-REVENUES> 33,964 10,921
<CGS> 18,165 7,102
<TOTAL-COSTS> 18,165 7,102
<OTHER-EXPENSES> 13,714 7,858
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 514 279
<INCOME-PRETAX> 3,550 (4,264)
<INCOME-TAX> 1,358 (1,760)
<INCOME-CONTINUING> 2,192 (2,504)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,192 (2,504)
<EPS-PRIMARY> 0.49 (0.45)
<EPS-DILUTED> 0 0
</TABLE>
