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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________________
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __TO __
COMMISSION FILE NUMBER 0-22601
AXIOM INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0356153
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification Number)
4000 MIDLANTIC DRIVE,
MT. LAUREL, NJ 08054-5476
(Address of principal executive offices) (Zip Code)
(609) 866-1000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each Class on which registered
------------------- ---------------------
None None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.__
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing price of such stock as reported by the Nasdaq
National Market ("Nasdaq") as of December 24, 1998 was $5,264,611. For
purposes of making this calculation only, registrant has defined affiliates as
including all directors, executive officers and beneficial owners of more than
ten percent of the common stock of the registrant.
The number of outstanding shares of the registrant's Common Stock, par value
$.01 per share ("the Common Stock"), on December 24, 1998 was 7,775,249.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Notice and Proxy Statement for the 1999 Annual Meeting of
Shareholders (the "1999 Proxy Statement") to be filed within 120 days after the
end of the fiscal year covered by this annual report are incorporated by
reference in Part III hereof.
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TABLE OF CONTENTS
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ITEM PAGE
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PART I
1. Business 3
2. Properties 9
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 10
PART II
5. Market for Registrant's Common Equity and Related Shareholder Matters 10
6. Selected Financial Data 12
7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14
7A. Quantitative and Qualitative Disclosures About Market Risk 20
8. Financial Statements and Supplementary Data 21
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 42
PART III
10. Directors and Executive Officers of the Registrant 42
11. Executive Compensation 43
12. Security Ownership of Certain Beneficial Owners and Management 43
13. Certain Relationships and Related Transactions 43
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 44
Signatures 46
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PART I
ITEM 1. BUSINESS
DISCLOSURE CONCERNING FORWARD-LOOKING STATEMENTS
From time to time, the Company may publish statements which are not historical
facts but are forward-looking statements relating to such matters as anticipated
financial performance, business prospects, technological developments, new
products, research and development activities and similar matters. Such
statements are generally identified by the use of forward-looking words and
phrases such as "intended," "expects," "anticipates," and "is (or are) expected
(or anticipated)." The Private Securities Litigation Reform Act of 1995 provides
a safe harbor for forward-looking statements. In order to comply with the terms
of the safe harbor, the Company notes that a variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's forward-
looking statements. The risks and uncertainties that may affect the operations
performance development and results of the Company's business include, but are
not limited to: (i) reliance on a limited number of significant customers and
dependence on Sterling Series products; (ii) difficulty in predicting quarterly
revenues because of long sales cycles and customer budgetary constraints; (iii)
competition in the market for billing data collection and traffic management
systems; (iv) rapid and unexpected changes in the telecommunications markets and
technologies; (v) the success of the Company's sales and marketing strategies;
(vi) the ability of the Company to manage its growth; (vii) the ability of the
Company to obtain financing for operations and growth; (viii) the ability of the
Company to motivate, and retain the services of, its key management and
technical personnel and continue to hire additional qualified personnel to meet
the Company's evolving staffing needs; and (ix) risks related to sales to
international customers, including, but not limited to, currency fluctuations,
instability in financial markets and unanticipated shifts in economic policies
of foreign governments.
DEVELOPMENT OF THE BUSINESS
The Company is the successor to a corporation formed in 1967. The Company was
formed as a Delaware corporation in June 1994 in connection with the acquisition
of the wireline division of TeleSciences, Inc. (the "Predecessor Business"). In
May 1997, the Company changed its name from Securicor Communications Inc. to
Axiom Inc. Through May 1997, the Company's business was conducted through its
wholly-owned subsidiary, Securicor TeleSciences Inc. ("STI"). In May 1997, STI
merged into the Company. The Company completed an initial public offering of
its Common Stock in July 1997 (the "Offering"). Prior to the completion of the
Offering, the Company was a wholly-owned subsidiary of Securicor Communications
Limited ("SCL"), a company based in the United Kingdom, and an indirect wholly-
owned subsidiary of Securicor plc, a multinational company based in the United
Kingdom (collectively with Securicor Communications and other wholly-owned
subsidiaries, other than the Company and its subsidiary, "Securicor"). SCL
currently owns approximately 44.6% of the Company's outstanding Common stock.
Axiom provides systems for billing data collection, transaction data
management, revenue assurance, fraud management and traffic management to
telecommunications service providers. These systems allow telecommunications and
information service providers to maximize the value of the information passing
through their communication networks, providing management of customer
transaction data, network performance, and the reliability of network revenues.
During the twelve months ended September 30, 1998 ("fiscal 1998"), Axiom
expanded its product and systems offerings, as well as its customer base,
through two acquisitions.
. In February 1998, the Company acquired Greendown Software Ltd. ("GSL") in the
UK, a provider of fraud management systems to telecommunications service
providers. In August 1998, the Company changed the name of GSL to Axiom
(Europe) Limited.
. In May 1998, the Company acquired Innovative Data Technology ("IDT"), a
company selling billing data collection systems and other related products to
telecommunications service providers, primarily through strategic
partnerships with companies such as Digital Equipment Corporation (now a part
of Compaq Computer Corporation), IBM, Alcatel and Siemens.
The Company is ISO9001 certified, has 182 employees and is headquartered in
Mount Laurel, New Jersey. The Company also has offices in San Diego and Denver
in the U.S., in Winchester in the UK, Buenos Aires in Argentina and Jakarta in
Indonesia.
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PRODUCTS AND RELATED SERVICES
General
The Company's principal products are billing data collection, transaction
data management systems, revenue assurance, fraud management systems and traffic
management systems. The Company also provides professional engineering services
for telecommunications service providers.
The Company's billing data collection and transaction data management systems
collect and normalize data from telecommunications switches that connect users
of telecommunications networks. These systems provide data to applications
including billing, customer care, marketing, fraud management, data warehousing,
and network management. The Company's systems interface with all major switch
types.
The Company's revenue assurance and fraud management systems help ensure
carriers' ability to bill accurately and completely for the services they render
and guard against fraudulent use of their networks. The need for such systems is
increasing as a result of the complexity in the marketplace introduced by the
growing number of telecommunications carriers and their interconnections. The
Company provides revenue assurance capabilities through its Sterling Fraud
Management System and through certain of its Specialized Processing Modules
("SPMs") running on the Sterling Billing Mediation System.
The Company's traffic management systems capture information on trunk usage.
This information is transmitted to the customer's network planners who use the
information to optimize network performance. This capability helps carriers
avoid problems of too many available trunks, resulting in increased costs, and
too few available trunks, resulting in disconnected calls, poor service and lost
revenue.
The Company provides professional engineering services to integrate the
Company's product lines into customer networks and applications.
Billing Data Collection
The Company offers a wide range of billing data collection (mediation) and
transaction data management products that serve all major switch types with
functions that extend from tape drives for electromechanical switches through
real-time data collection and management systems for all advanced switch types.
These systems also vary from stand-alone systems to fully-integrated, centrally
managed and remotely updated systems.
The Sterling Solution
The "Sterling Solution" is an integrated suite of transaction data
collection products marketed under the Sterling name and additional products
tailored for use on other platforms. The individual products that comprise the
Sterling Solution 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 core components of the Sterling Solution are the Sterling 5XX series of
Data Servers and the Sterling 5000 Host Collector, each of which can be
configured with a variety of SPMs. The Sterling Solution is controlled through
the Company's Sterling Manager software that runs on the Sterling 5001
workstation. The Sterling Manager enables centralized, remote management of the
full Sterling system including remote software upgrades for units in the field.
The Sterling Solution also includes the Sterling 5410 data distribution platform
and a collection of SPMs. These components of the Sterling Solution are
described in further detail below.
5XX Series. Each model of the Sterling 5XX data server series consists of a
processor unit equipped with a UNIX-based operating system. The flagship
product in the series, 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 run SPMs. Other data servers in
the series are tailored for specific switch interfaces, are single input, and
have varying degrees of processing capacity. They offer varying levels of
redundancy and backup tailored to complement specific capabilities in particular
switches and offer more scalability and pricing flexibility for data server
technology. All data server products are compatible with a wide range of
switch inputs and interface to many different local and wide area network
environments.
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One example of the series is the Sterling 510, a new entry-level data server.
This system is designed specifically to reach emerging and competitive markets,
including Competitive Local Exchange Carriers ("CLECs") and international
carriers, that generally require a single-input, low volume, data collection and
processing solution. The Sterling 510 will also be applicable to larger
carriers for low volume exchanges. Like all Sterling Data Servers, the Sterling
510 is a duplex, fully redundant system, and is designed to comply with industry
standards for international and U.S. markets.
Sterling 5000. The Sterling 5000 is a centralized billing data collector that
collects transactional data, primarily call detail records ("CDRs"), from data
servers, such as the Sterling 500, or directly from multiple 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 SPMs that the Company sells separately.
Sterling Manager; Sterling 5001. The Sterling Manager is a workstation
equipped with a graphical-user interface ("GUI") that provides communication,
command and control capabilities for a network of one or more Sterling 5000s and
Sterling 5XXs. 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 Manager
optimizes systems control and enables remote management of 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 provides a UNIX-based data distribution
platform designed to receive CDR data from other Sterling Solution 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 Solution products. The platform has the further
advantage of being able to aggregate data from several Sterling 5000s and 5XXs
by communication through a provider's own network file servers. Currently, the
primary application of the Sterling 5410 permits local exchange companies
("LECs") to provide call detail data to their customers using dedicated
switching facilities (generally referred to as Centrex systems). Together, as
part of the overall Sterling Solution, these products provide the Company's
customers with access to near-real time data for both internal and external end-
users.
Specialized Processing Modules. The Company offers purchasers of the Sterling
500 and 5000 the power to build quickly and easily their own applications by
using Company-designed SPMs. SPMs are user-defined transaction processing
functions for use on the Sterling Solution 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.
Traffic Management Products
The Company provides a comprehensive traffic management system under the name
Manifest(TM) (formerly Autrax 5000). This product provides telecommunications
companies with real-time traffic data to quickly detect and locate exchange and
network problems, strategically plan and route traffic through the network,
improve the over-all quality of service and significantly reduce customer
complaints. The Manifest(TM) traffic management system features a GUI-based
system, 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 ininterfacing with new switch types.
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. The system interfaces directly
with the switches to collect traffic data and generate maintenance reports in a
standard database format. The Manifest(TM) traffic management system
centralizes the raw or formatted data into database tables so that standard and
customized reports can be generated. As
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with the Sterling Series billing data collection products, the Manifest(TM)
traffic management system is fully scaleable, permitting easy upgrades to meet
rising system demands.
Professional Engineering Services
The Company's engineers assist telecommunications services providers by
developing customized application programs integrating any of the Company's
products into customer's networks. 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
enabling its customers to fully utilize the range of the Company's products,
helping new CLECs and international customer segments adapt products, and
demonstrating the Company's responsiveness. Work done through professional
services can also lead to feature enhancements in the Company's basic products.
NEW PRODUCTS AND SERVICES
While most of the world's telecommunications needs are being served by the
"public switched network", new telecommunications technologies are emerging.
These include Asynchronous Transfer Mode ("ATM") switching and transmission
technologies in addition to Internet Protocol ("IP") based technologies. As
switching technology evolves, there is a greater need for mediation to assemble
fragmented data into data records meaningful for billing and other business
processes. The Company is currently developing, in cooperation with leading
hardware and software vendors, mediation solutions for these new switching
technologies.
In the area of revenue assurance, the Company is developing a case management
module for its Fraud Management System in response to the growing need for tools
for prosecution and other applications among fraud management professionals.
In conjunction with its acquisition of IDT in May 1998, the Company acquired
several new billing data collection and related products previously offered by
IDT, including:
DCMD (Data Collection Mediation Device), a system designed to interface
directly to local data ports (X.25, Ethernet 802.3 and RS232) to collect data in
near real time or batch mode from digital telephone exchanges (wireline and
wireless) or other network elements.
LTBS (Local Toll Billing System), which provides call detail recording for
electro-mechanical/analog switching systems without modification of the
exchange hardware and allows upgrades of the capabilities of these older
exchanges.
MTE (Magnetic Tape Emulator System) is designed to replace magnetic tape units
and tape media in the telephone company environment and provide a platform for
full automation of data collection from exchange switches.
Magnetic Tape Unit, which provides for collection of call detail records on
tape for applications in which there are no data networking or teleprocessing
capabilities.
Remote Management and Monitoring System, a single point platform that provides
monitoring and management of an entire data collection network consisting of
MTE, DCMD, LTBS, and other SNMP devices.
In the future, the Company will consider introducing new software applications
that are compatible with its other transaction data management, fraud
management, and traffic management products. 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. There is no assurance, however, that any of these
products will be successfully developed or marketed.
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-Time
Systems, Inc., software for its traffic management product from Informix
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Software, Inc. and uses software for the Sterling 7000 fraud management system
from Oracle Corp. The Company also purchases processing boards for its Sterling
5XXs and other products from Motorola, Inc. through a distributor. The Company
believes its relationships with its suppliers are good and there are no issues
related to obtaining product.
CUSTOMERS
The Company has a customer base in many regions of the world. The Company's
domestic U.S. customers include major telecommunications service providers such
as US West, Ameritech, Southwestern Bell, MCI Worldcom and Nextlink. Both US
West and Ameritech have installed the Company's systems extensively throughout
their networks. Both have a combination of many Sterling data servers at central
office sites and a number of Sterling 5000 host collectors at operations centers
in their multi-state regions.
Internationally, the Company's customers include Telecom Argentina, Telesp
of Brazil, Bell Canada, Puerto Rico Telephone Company, CANTV in Venezuela, PT
Telkom of Indonesia, Digitel in the Philippines, Cegetel in France and Cable and
Wireless in Jamaica and the UK, a market where the Company's fraud management
systems have been in place for many years. In many international situations, the
Company works with local agents or distributors.
The Company is adding customers from new market segments including Eastern
Europe and the CLECs. Major CLECs are looking to the Company's Operations
Support Systems and Billing and Customer Care.
In the U.S., most sales are made through a direct sales force.
Internationally, the Company uses a mix of direct sales staff and local
distributors and/or agents. The Company also has relationships with strategic
partners who generally provide a wider solution to the market. The Company's
systems are then incorporated as a part of this solution. These strategic
partners include:
Cisco Systems. The Company and Cisco have developed a solution for billing data
collection for Cisco's ATM switch products.
Steria. Based in France, this major international systems integrator provides
software solutions to a range of markets including telecommunications. The
Company and Steria have partnered successfully in providing billing mediation
and pre-processing solutions into both wireless and long distance
telecommunications providers. Both companies are now actively marketing similar
solutions to other potential customers, particularly in Europe.
Alcatel Telecom Norway. As part of the Alcatel organization, Alcatel Telecom
Norway provides billing and customer care solutions around the globe. In
particular, Alcatel has installed solutions in Eastern Europe which allows
access to greater functionality from older electro-mechanical exchanges. Most of
the technology supplied for this solution is sold by the Company through Alcatel
Telecom Norway.
Digital Equipment Corporation (now part of Compaq Computer Corporation). The
Company supplies its MTE and DCMD products through Digital in Brazil to
telecommunications service providers there as part of a wider operations support
system.
AG Communication Systems, a joint venture of Lucent Technologies and GTE,
resells the Sterling Solution in domestic and international markets.
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The following tables set forth information with respect to sales to certain
major customers during fiscal 1998 and the year ended September 30, 1997
("fiscal 1997"):
FISCAL 1998
PERCENTAGE OF
CUSTOMER REVENUES TOTAL REVENUES
Ameritech Corporation (1)........... $10.1 million 33%
US West, Inc......................... $ 9.3 million 30%
FISCAL 1997
US West, Inc.......................... $13.8 million 42%
Southwestern Bell Telephone Company.... $ 3.2 million 10%
PT. Telekomunikasi, Indonesia.......... $ 3.1 million 10%
Ameritech Corporation.................. $ 2.9 million 9%
(1) The fiscal 1998 amount for Ameritech Corporation includes $1.0 million of
sales to a subcontractor which was performing work for Ameritech
Corporation.
BACKLOG
The Company's backlog (firm purchase orders for products and services that
have not yet been recognized as revenue) was approximately $8.5 million and $7.5
million at December 1, 1998 and December 1, 1997, respectively. Additionally,
the Company had $7.2 million and $0 in the form of letters of intent at December
1, 1998 and December 1, 1997, 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 December 1, 1998 prior to the end of
the twelve months ending September 30, 1999 ("fiscal 1999").
RESEARCH AND DEVELOPMENT
The Company's research and development efforts are directed towards developing
new products 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 maintaining its leadership position in its
current marketplace and in gaining penetration in new markets. During fiscal
1998 and 1997 and the twelve months ended September 30, 1996 (fiscal 1996"),
development and engineering expenses were $8.0 million, $7.6 million and $7.0
million, respectively.
During fiscal 1998, the Company embarked upon a rearchitecture of its core
systems, principally for the Sterling Host Collector. This work is expected to
enable the Company to further enhance its product offerings to its existing
customer base, as well as new and multi-service providers, which will include
companies using new technology such as ATM and IP. The new technology is
expected to use object oriented design tools and the latest proven software
tools and methods.
Due to the nature of this rearchitecture project, the Company is
capitalizing the costs of the effort required and for the fiscal year ended
September 30, 1998, the total amount capitalized was $363,000. Note that those
software development costs are accounted for under Statement of Financial
Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed." No costs were capitalized in
fiscal 1997. In fiscal 1999, the Company expects to capitalize approximately
$3.0 million of costs under SFAS No. 86 associated with this project.
COMPETITION
The markets for billing data collection (mediation), revenue assurance, fraud
management and traffic management systems 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 competitors have significantly greater
financial, technical and marketing resources than the Company.
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The Company believes that the principal basis of competition in the sale 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 and transaction data processing
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., Comptel, ICL,
Lucent 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 Hewlett-Packard and IBM.
In the market for its fraud management systems, the Company's competitors
include: (i) large telecommunications service providers that internally develop
systems for their own use; (ii) companies such as Digital Equipment Corporation
and Northern Telecom that provide fraud management systems as part of a wider
solution; and (iii) companies such as HNC Corporation, Dynamics Research
Corporation and Applied IT who provide separate fraud solutions.
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; and (ii) companies such as Hewlett-
Packard and Objective Systems Integrators, Inc. that provide integrated network
management systems.
EMPLOYEES
As of December 28, 1998, the Company had a total of 182 employees. At that
date, the Company also engaged 11 individuals on a consulting basis. None of the
Company's employees is represented by a labor union. The Company believes that
its relations with its employees are good.
ITEM 2. PROPERTIES
In May 1998, the Company relocated its headquarters to a 63,000 square foot
facility in Mount Laurel, New Jersey for which it has signed a 10-year lease
agreement with a renewal option for five additional years. The Company believes
this facility is suitable and adequate for the Company's present and foreseeable
future needs.
The Company's manufacturing group is located in a nearby 34,000 square foot
facility. The Company's lease on this facility expires in August 2003. This
facility is well maintained, in good condition, and, in the Company's opinion,
is suitable and adequate for the Company's present and foreseeable future needs.
The Company is currently leasing a 26,000 square feet facility in San Diego,
California. The lease will terminate in August 1999. This facility is the former
headquarters of IDT which was acquired by the Company in May 1998 (see Note 3 of
Notes to Consolidated Financial Statements). The facility is not fully utilized
and the Company has reserved for its future lease obligations. The Company is
attempting to sublease this facility.
The Company also has offices in Denver in the U.S., in Winchester in the UK,
Buenos Aires in Argentina and Jakarta in Indonesia.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various claims arising in the ordinary course of
business. Although the ultimate outcome of these matters is presently not
determinable, management believes that the resolution of these matters is not
reasonably likely to have a material adverse effect on the Company's financial
position or results of operations.
In August 1997, Acxiom Corporation ("Acxiom") filed suit against the Company
in the United States District Court for the District of Delaware alleging
trademark infringement and dilution under the Lanham Act, as well as related
state law causes of action. Acxiom sought a judgment against the Company
enjoining any future use of the Axiom name and Axiom tradenames and future acts
of unfair competition in the United States, mandating the destruction of all
Company advertising and promotional material using the Axiom name and awarding
treble damages in an unspecified amount because of the alleged willfulness of
the Company's infringement, as well as attorneys' fees.
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On November 16, 1998, the United States District Court for the District of
Delaware rendered its decision that Acxiom was entitled to an order enjoining
the Company from making further use of the Axiom name and related injunctive
relief. The court also concluded that Acxiom is not entitled to any money
damages. The Company and Acxiom have agreed that neither will appeal the court's
decision, and the Company has agreed to reimburse Acxiom for auxiliary costs in
the amount of $50,000. The Company will change its name by the end of March
1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of its security holders during
the fourth quarter of fiscal 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS
(a) Market Information.
The Common Stock is traded in the Nasdaq National Market under the symbol
"AXIM." As a result of the Acxiom lawsuit (see Item 3 of this Form 10-K and
Note 16 of Notes to Consolidated Financial Statements), the Company is required
to change its name by March 31, 1999. Accordingly, the Company's symbol on the
Nasdaq National Market will also change. The new Company name and Nasdaq symbol
have not been determined. The following table sets forth, for the period
indicated, the high and low closing sales prices per share of Common Stock as
reported by Nasdaq. Regular-way trading in the Common Stock commenced in the
Nasdaq National Market on July 8, 1997.
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FISCAL 1998: HIGH LOW
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First Quarter................................... $15 1/8 $4
Second Quarter.................................. 6 3/8 3 15/16
Third Quarter................................... 4 7/16 2 3/4
Fourth Quarter.................................. 3 1 1/4
FISCAL 1997:
Fourth Quarter.................................. $14 1/2 $9
(from July 8, 1997)
</TABLE>
(b) Holders.
As of December 24, 1998, there were approximately thirty-five record holders
of the Common Stock. This figure does not reflect beneficial ownership of
shares held in street or nominee name.
(c) Dividends.
The Company has not paid any dividends on the Common Stock in the past and
does not anticipate paying dividends in the foreseeable future. The Loan and
Security Agreement, dated December 7, 1998, by and between the Company and
Silicon Valley Bank, prohibits the Company from paying dividends on its stock
(except for dividends paid solely in shares of the Company's stock) without the
consent of Silicon Valley Bank.
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(d) Recent Sales of Unregistered Securities
On May 15, 1998, pursuant to an Agreement of Merger and Plan of Reorganization
(the "Agreement of Merger and Plan of Reorganization"), by and among the
Company, AV Technology, Inc., a Delaware corporation ("Technology") and a
wholly-owned subsidiary of the Company, IDT, and the Shareholders of IDT (the
"Shareholders"), IDT was merged into Technology in accordance with the relevant
provisions of the California General Corporation Law and the Delaware General
Corporation Law (the "Merger"). In connection with the Merger, the Company
issued to the Shareholders, in exchange for their shares of common stock of IDT,
$1.00 par value, which constituted in the aggregate all of the issued and
outstanding common stock of IDT, an aggregate of 1,290,000 shares of the Common
Stock. In November 1998, this number of shares was reduced by 15,056 to
1,274,944 based on certain post closing adjustments, and may be subject to
further adjustment. The Company issued the shares of Common Stock to the
Shareholders without registration under the Securities Act of 1933, as amended
(the "Securities Act"), in reliance upon the exemption from the registration
requirements of the Securities Act contained in Section 4(2) of the Securities
Act and Regulation D promulgated thereunder.
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ITEM 6. SELECTED FINANCIAL DATA
The information set forth below should be read in conjunction with the
consolidated financial statements and notes thereto, and the other financial
information included elsewhere in this Form 10-K, as well as "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The following table summarizes selected financial data of the Company and the
Predecessor Business:
<TABLE>
<CAPTION>
AXIOM INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA )
PERIOD FROM PREDECESSOR
JULY 1, 1994 BUSINESS (1)
YEAR ENDED SEPTEMBER 30, TO YEAR ENDED
-------------------------------------------------- SEPTEMBER, 30, JUNE 30,
STATEMENTS OF OPERATIONS DATA: 1998 1997 1996 1995 1994 1994
---------- ----------- ----------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES:
Unrelated third parties:
Equipment.................................. $ 20,429 $25,049 $23,358 $18,000 $ 4,242 $13,963
Services................................... 10,250 7,958 7,739 5,766 1,364 6,266
-------- ------- ------- ------- ------- -------
30,679 33,007 31,097 23,766 5,606 20,229
Related parties............................. -- -- 2,867 1,802 -- --
-------- ------- ------- ------- ------- -------
Total revenues............................. 30,679 33,007 33,964 25,568 5,606 20,229
-------- ------- ------- ------- ------- -------
COST OF REVENUES:
Unrelated third parties:
Equipment.................................. 11,664 13,202 11,639 9,110 2,271 8,785
Services................................... 7,679 4,697 4,580 3,093 1,086 4,018
-------- ------- ------- ------- ------- -------
19,343 17,899 16,219 12,203 3,357 12,803
Related parties............................. -- -- 1,946 1,274 -- --
-------- ------- ------- ------- ------- -------
Total cost of revenues..................... 19,343 17,899 18,165 13,477 3,357 12,803
-------- ------- ------- ------- ------- -------
Gross profit............................... 11,336 15,108 15,799 12,091 2,249 7,426
-------- ------- ------- ------- ------- -------
OPERATING EXPENSES:
Research, development and engineering....... 8,023 7,580 7,003 5,948 1,348 5,450
Selling, general and administrative......... 16,853 9,026 6,711 5,592 1,072 4,985
Charge for purchased research
and development (2)......................... 2,387 -- -- -- 6,700 --
-------- ------- ------- ------- ------- -------
Total operating expenses................... 27,263 16,606 13,714 11,540 9,120 10,435
-------- ------- ------- ------- ------- -------
Operating income (loss).................... (15,927) (1,498) 2,085 551 (6,871) $(3,009)
=======
INTEREST (EXPENSE) INCOME
(includes related party)................... 232 (327) (514) (112) (9)
OTHER INCOME................................. 16 1 430 148 66
EQUITY IN LOSS OF INVESTEE................... -- -- (18) (494) --
GAIN ON SALE OF INVESTMENT................... -- -- 2,061 -- --
-------- ------- ------- ------- -------
Income (loss) before income taxes.......... (15,679) (1,824) 4,044 93 (6,814)
INCOME TAX (EXPENSE) BENEFIT................. -- 645 (1,543) (35) 2,716
-------- ------- ------- ------- -------
NET INCOME (LOSS)............................ $(15,679) $(1,179) $ 2,501 $ 58 $(4,098)
======== ======= ======= ======= =======
BASIC AND DILUTED NET INCOME
(LOSS) PER COMMON SHARE.................... $ (2.25) $ (0.28) $ 0.72 $ 0.02 $ (1.18)
======== ======= ======= ======= =======
SHARES USED IN COMPUTING
BASIC AND DILUTED NET INCOME
(LOSS) PER COMMON SHARE.................... 6,960 4,144 3,477 3,477 3,477
======== ======= ======= ======= =======
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
AXIOM INC.
(IN THOUSANDS) PREDECESSOR
SEPTEMBER 30, BUSINESS (1)
------------------------------------------------------------------ JUNE 30,
1998 1997 1996 1995 1994 1994
------- -------- ------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents $ 1,093 $ 7,206 $ 3,326 $ 1,449 $ 225 $ --
Total assets 29,799 37,023 30,336 21,849 15,302 9,027
Working capital, excluding
obligations to Securicor and affiliates (3) 10,344 23,925 14,698 6,671 1,742 330
Obligations to Securicor and affiliates (3) 64 183 23,291 18,461 12,603 --
Long-term debt 499 -- 147 -- -- --
Stockholders' equity (deficit) (3) 18,831 29,687 (1,539) (4,040) (4,098) 2,330
- ---------------------------------------------------
</TABLE>
(1) The statement of operations and balance sheet data presented for the
Predecessor Business represent the information for the Wireline Division of
TeleSciences, Inc. The Predecessor Business data excludes any intercompany
information with its former owner.
(2) Purchased research and development of $2,387 in fiscal 1998 represents a
one-time charge for in-process research and development which was purchased
in the acquisition of IDT by the Company on May 15, 1998. The acquisition
was accounted for under the purchase method of accounting. Purchased
research and development of $6,700 in fiscal 1994 represents a one-time
charge for in-process research and development which was purchased in the
acquisition of the Predecessor Business by the Company on July 1, 1994. The
acquisition was accounted for under the purchase method of accounting.
(3) The Company's acquisition of the Predecessor Business and other financing
requirements through the date of the Offering have been primarily funded
from borrowings from Securicor rather than equity investment. These
borrowings are classified as obligations to Securicor and affiliates.
Additionally, these borrowings were substantially repaid with the proceeds
from the Company's intial public offering of its Common Stock, completed in
July 1997 (the "Offering").
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company's principal products are billing data collection, transaction data
management, revenue assurance, fraud management systems and traffic management
systems. The Company also provides professional engineering services for
telecommunications service providers.
The Company's billing data collection and transaction data management systems
collect and normalize data from telecommunications switches that connect users
of telecommunications networks. They provide data to applications including
billing, customer care, marketing, fraud management, data warehousing, and
network management applications. The Company's systems interface with all major
switch types.
The revenue assurance and fraud management systems help ensure carriers'
ability to bill accurately and completely for the services they render and guard
against fraudulent use of their networks. The need for such systems is
increasing as a result of the complexity in the marketplace introduced by the
growing number of telecommunications carriers and their interconnections. The
Company provides revenue assurance capabilities through its Sterling Fraud
Management System and in SPMs running on the Sterling Billing Mediation System.
The Company's traffic management systems capture information on trunk usage.
This information is transmitted to the customer's network planners who use the
information to optimize network performance. This capability helps carriers
avoid problems of too many available trunks, resulting in increased costs, and
too few available trunks, resulting in disconnected calls, poor service and lost
revenue.
The Company provides professional engineering services to integrate the
Company's product lines into customer networks and applications.
During fiscal 1998, the Company expanded its product and systems offerings, as
well as its customer base, through two acquisitions.
. In February 1998, the Company acquired Greendown Software Ltd. ("GSL") in the
UK, a provider of fraud management systems to telecommunications service
providers. In August 1998, the Company changed the name of GSL to Axiom
(Europe) Limited.
. In May 1998, the Company acquired Innovative Data Technology ("IDT"), a
company selling billing data collection systems and other related products to
telecommunications service providers, primarily through strategic
partnerships with companies such as Digital Equipment Corporation (now a part
of Compaq Computer Corporation), IBM, Alcatel and Siemens.
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 Regional Bell Operating Companies ("RBOCs"). Aggregate
revenues from U S West, Inc. , Southwestern Bell Telephone Company and Ameritech
Corporation accounted for 65.2%, 60.2% and 61.6% of the Company's total revenues
for fiscal 1998, 1997 and 1996, respectively. During fiscal 1997, an additional
9.5% of the Company's revenues was attributable to sales to PT Telekomunikasi,
Indonesia. During fiscal 1996, 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. All sales
arrangements with international customers are denominated in U.S. dollars. Since
the acquisition of Axiom (Europe) Limited in February 1998, its sales are
denominated in pounds Sterling. However, this activity has been insignificant to
date. 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.
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, in part, dependent on the timing of the Company's
customers' annual budget process. Prior to fiscal 1998, 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
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<PAGE>
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, any significant decline in revenues would likely have a significant
adverse effect on margins.
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. The majority of these costs are charged to expense
as incurred. During fiscal 1998, the Company embarked upon a rearchitecture of
its core systems, principally for the Sterling Host Collector. This work will
enable the Company to further enhance its product offerings to its existing
customer base, as well as new and multi-service providers, which will include
companies using new technology such as ATM and IP. The new technology will use
object oriented design tools and the latest proven software tools and methods.
Due to the nature of this rearchitecture project, the Company is capitalizing
the costs of the effort required and for the fiscal year ended September 30,
1998, the total amount capitalized was $363,000. Note that these software
development costs are accounted for under SFAS No. 86, Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed." No costs were
capitalized in fiscal 1997. In fiscal 1999, the Company expects to capitalize
approximately $3.0 million of costs under SFAS No. 86 associated with this
project.
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.
Certain prior year amounts have been reclassified to conform with current
year presentation.
RESULTS OF OPERATIONS
Fiscal 1998 Compared to Fiscal 1997
Revenues
Revenues decreased 7.1% from $33.0 million in fiscal 1997 to $30.1 million
in fiscal 1998. Equipment revenues decreased 18.4% from $25.0 million in fiscal
1997 to $20.4 million in fiscal 1998. This decrease resulted primarily from the
economic instability related to the Company's international business. Services
revenues increased 28.8% from $8.0 million in fiscal 1997 to $10.3 million in
fiscal 1998 primarily due to certain engineering services provided to one of the
RBOCs.
Gross Profit
Gross profit was 37.0% of revenues in fiscal 1998, reflecting a decrease
from 45.8% of revenues in fiscal 1997. Gross profit related to equipment
revenues was 42.9% in fiscal 1998 and 47.3% in fiscal 1997. The decrease in
equipment gross margin was due to the Company's fixed cost base and the decrease
in equipment revenues. Gross profit related to service revenues was 25.1% and
41.0% in fiscal 1998 and fiscal 1997, respectively. The decrease in gross profit
related to service revenues was affected by an engineering service project at a
lower than normal margin.
Research, Development and Engineering
Research, development and engineering expenses increased 5.8% from $7.6
million in fiscal 1997 to $8.0 million in fiscal 1998 and increased as a
percentage of revenues from 23.0% in fiscal 1997 to 26.2% in fiscal 1998. The
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.
15
<PAGE>
Selling, General and Administrative
Selling, general and administrative expenses increased 86.7% from $9.0 million
in fiscal 1997 to $16.9 million in fiscal 1998. As a percentage of revenues,
selling, general and administrative expenses increased from 27.3% in fiscal 1997
to 54.9% in fiscal 1998. This increase is largely attributable to an increase
in the Company's accounts receivable reserve of $4.0 million as a result of the
continued uncertainty surrounding the Company's Asian and other international
customer base. In addition, the increase is attributable to legal costs of
$600,000 related to the lawsuit filed by Acxiom (see Item 3 of this Form 10-K
and Note 16 of Notes to Consolidated Financial Statements). The increase is
also the result of additional personnel brought on earlier in fiscal 1998,
increased sales and marketing efforts and the costs associated with being a
public company.
Charge for Purchased Research and Development
The charge for purchased research and development of $2.4 million for the year
ended September 30, 1998 represents a one-time charge related to purchased
research and development in connection with the acquisition of IDT. This charge
relates to incomplete development projects which had not yet reached
technological feasibility as of the acquisition date and had no alternate future
uses.
Interest Income and Expense
Net interest income was $232,000 in fiscal 1998. Net interest expense was
$327,000 in fiscal 1997. Interest expense has decreased as a result of the
repayment of the Company's outstanding borrowings from Securicor with the
proceeds of the Offering. Interest income is the result of the investment of
the cash proceeds from the Company's initial public offering in July 1997.
Income Taxes
Due to continued losses throughout 1998, the Company did not record an income
tax benefit during fiscal 1998. However, as of September 30, 1998, the Company
has recorded net deferred tax assets of $2,718,000. Based on an assessment of
the Company's taxable earnings history and expected future taxable income,
management has determined that it is more likely than not that the net deferred
tax assets will be realized in future periods. The Company may be required to
provide an additional valuation allowance for this asset in the future if it
does not generate sufficient taxable income as planned. Additionally, the
ultimate realization of this asset could be negatively impacted by market
conditions and other variables not known or anticipated at this time.
The Company's effective tax rate was 35.4% for fiscal 1997. An income tax
benefit of $645,000 was recorded in fiscal 1997.
Fiscal 1997 Compared to Fiscal 1996
Revenues
All revenues during fiscal 1997 were revenues attributable to unrelated third
parties ("Third-party Revenues"). Third-party Revenues increased by 6.1% from
$31.1 million in fiscal 1996 to $33.0 million in fiscal 1997. Equipment revenues
increased 7.2% from $23.4 million in fiscal 1996 to $25.0 million in fiscal
1997. This increase resulted primarily from the addition of several new
customers in Asia and Europe. Services revenues increased 2.8% from $7.7 million
in fiscal 1996 to $8.0 million in fiscal 1997. This increase is mainly due to
increased system installation services during the year. Additionally, the
Company generated $1.2 million and $792,000 of Third-party Revenues in fiscal
1997 and fiscal 1996, respectively, related to sales of an affiliate's products
which are not expected to recur in the future. See Note 13 of Notes to
Consolidated Financial Statements. For fiscal 1996, the Company recognized $2.3
million of one-time related-party revenues attributable to sales to a Securicor
affiliate. The remaining $544,000 of related-party revenues for fiscal 1996 are
from the sale of equipment to an entity in which the Company had an equity
investment from January 1995 to May 1996. See Note 13 of Notes to Consolidated
Financial Statements.
16
<PAGE>
Gross Profit
Gross profit was 45.8% of Third-party Revenues in fiscal 1997, reflecting a
decrease from 47.8% of such revenues in fiscal 1996. Gross profit related to
equipment revenues was 47.3% in fiscal 1997 and 50.2% in fiscal 1996. Gross
profit was 41.0% of services revenues in fiscal 1997 and 40.8% of such revenues
in fiscal 1996. The decrease in gross profit as a percentage of Third-party
Revenues and of equipment revenues is primarily due to increases in fixed costs
incurred in order to support the Company's growing customer base. 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. The
increase in gross profit related to services revenues is attributable to the
benefit of spreading higher revenues over the Company's fixed cost base. Total
gross profit as a percentage of total revenues was 45.8% for fiscal 1997 and
46.5% in fiscal 1996.
Research, Development and Engineering
Research, development and engineering expenses increased 8.2% from $7.0
million in fiscal 1996 to $7.6 million in fiscal 1997 and increased as a
percentage of Third-party Revenues from 22.5% in fiscal 1996 to 23.0% in fiscal
1997. The 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 34.5% from $6.7 million
in fiscal 1996 to $9.0 million in fiscal 1997. As a percentage of Third-party
Revenues, selling, general and administrative expenses increased from 21.6% in
fiscal 1996 to 27.3% in fiscal 1997. The 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.
Interest Income and Expense
Interest expense in fiscal 1997 and fiscal 1996 was $327,000 and $514,000,
respectively. This decrease resulted from the repayment of the Company's
outstanding borrowings from Securicor with the proceeds of the Offering.
Other Income
Other income decreased from $430,000 in fiscal 1996 to $1,000 in fiscal 1997.
A litigation settlement gain of $350,000 was recognized in the first quarter of
fiscal 1996.
Equity In Loss of Investee
The Company recorded a $18,000 loss in fiscal 1996 as a result of its
investment in Metapath Corporation which was accounted for under the equity
method. This investment was sold in May 1996 and resulted in a gain on sale of
this investment of $2,061,000. See Note 13 of Notes to Consolidated Financial
Statements.
Gain On Sale of Investment
In May 1996, the Company sold its interest in Metapath Corporation in which it
had made an initial investment of $512,000. A gain of $2,061,000 was reported
related to this sale. See Note 13 of Notes to Consolidated Financial
Statements.
Income Taxes
The Company's effective tax rate was 35.4% for fiscal 1997 and was 38.2% for
fiscal 1996. An income tax benefit was recorded in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company completed the Offering in July 1997. Prior to the Offering, the
Company financed its operations primarily with cash generated from operations
and borrowings from Securicor. In July 1997, the Company realized net proceeds
from the Offering of approximately $32.4 million (after
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<PAGE>
deducting underwriters' discounts and commissions and other offering expenses).
In August 1997, the Company repaid $28.5 million in Company borrowings from
Securicor. As of September 30, 1998, the Company had $1.1 million of cash, $11.3
million in net trade accounts receivable and $10.3 million of working capital.
Net cash used in operating activities was $2.0 million, $3.7 million and $4.1
in fiscal 1998, 1997 and 1996, respectively. In fiscal 1998, the net loss of
$15.7 million, offset by $8.5 million in non-cash charges, a $2.1 million
decrease in accounts receivable, a $1.8 million decrease in inventories and a
$1.7 million increase in accounts payable were the primary reasons for the $2.0
million used in operating activities. In fiscal 1997, the net loss, an increase
in inventories of $4.2 million, a decrease in accrued tax payable of $2.3
million and a decrease of $655,000 in other accrued expenses were only partially
offset by $1.5 million decrease in accounts receivable and a $764,000 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 $158,000 in non-cash charges, and a $1.1 million increase
in accrued tax payable.
Net cash used in investing activities was $3.7 million and $1.5 million in
fiscal 1998 and 1997, respectively. Net cash provided by investing activities
was $1.2 million in fiscal 1996. In fiscal 1998, 1997 and 1996, purchases of
property and equipment were $1.9 million, $1.5 million and $818,000,
respectively. In fiscal 1998, the Company used $1.9 million in cash to acquire
IDT and GSL. In fiscal 1996, the cash provided was the result of the Company
completing a sale of an investment.
Net cash used in financing activities was $372,000 in fiscal 1998 primarily as
a result of the repayment of the Company's long-term debt. Net cash provided by
financing activities was $9.1 million and $4.7 million in fiscal 1997 and fiscal
1996, respectively. In fiscal 1997, the net cash provided by financing
activities resulted primarily from the proceeds of the Offering after repayment
of outstanding borrowings from Securicor. In fiscal 1996, the net cash provided
by financing activities resulted primarily from funding which the Company
received from Securicor.
As discussed above, as of September 30, 1998, the Company had $1.1 million of
cash, incurred a significant net loss and utilized $2.0 million in operating
activities in fiscal 1998. As a result, on December 7, 1998, the Company entered
into an agreement with Silicon Valley Bank to establish a $5,000,000 line of
credit which the Company anticipates using to meet short-term borrowing
requirements. The amount available under the line of credit will be based upon a
percentage of eligible accounts receivable, as defined. Interest will be charged
at Silicon Valley Bank's prime rate plus 1%. Borrowings under the agreement are
secured by an interest in substantially all of the Company's assets and require
the Company to comply with specified financial and nonfinancial covenants.
The Company believes that its existing cash balances, cash generated from
operations and borrowings under its line of credit will be sufficient to meet
the Company's cash requirements into fiscal 2000. However, depending upon
profitability, its rate of growth and the timing of its collections and other
operating factors, 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.
Year 2000 Readiness Disclosure
Background
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, date-sensitive
computer software may recognize a date using "00" as the year 1900 rather than
the year 2000. This is generally referred to as the Year 2000 issue. If this
situation occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.
Approach
The Company has established a group to coordinate the Company's response to
the Year 2000 issue, both as to its internal systems and as to its products.
This group includes the Company's Vice President - Operations Support, Director
of Quality, Director of Product Line Management, Manager of Engineering
Operations, Purchasing Manager and Manager of Information Technology, as well as
support staff. The Company is in the process of implementing a Year 2000
compliance program consisting of the following: (i) compiling a list of internal
information technology ("IT") and non-IT systems, as well as Company products,
that may require adaptation, remediation or replacement with respect to the Year
2000 issue; (ii) identifying and prioritizing critical systems and products from
the list compiled in part (i) and making inquiries of third parties with whom
the Company does significant business (i.e., vendors and service providers) as
to the
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<PAGE>
state of their Year 2000 readiness; (iii) analyzing critical systems and
products to determine which systems or products are not Year 2000 compliant and
evaluating the costs of adapting, repairing or replacing those systems; and (iv)
adapting, repairing or replacing noncompliant systems or products and testing of
the adapted, repaired or replaced systems.
The Company intends to complete the above process and to be Year 2000
compliant in all material respects by mid-1999. The Company has not yet
formulated contingency plans for use if such goal is not met.
Status
The Company believes that all of its internal systems are currently Year
2000 compliant or will be Year 2000 compliant by mid-1999. It has recently
replaced the hardware and software comprising its internal business systems and
has successfully tested the new systems for Year 2000 compliance.
The Company believes that its internal telephone system is Year 2000
compliant. The Company expects to complete Year 2000 compliance testing on the
telephone system by March 1999. The Company does not expect that there will be
a material cost to the Company in the event that software must be upgraded.
The Company believes that the products which will be supported beyond the
year 2000 are currently Year 2000 compliant. It continues to test all such
products on an ongoing basis. Certain products sold by the Company in the past
that have been discontinued are not Year 2000 compliant. Most customers of these
products have been notified of such noncompliance. The Company does not intend
to repair or replace such products. The Company does not expect any of such
customers to assert that the Company has an obligation to repair or replace such
products, but there can be no assurance that such an assertion will not be made.
Costs
The total cost to the Company of making its systems Year 2000 compliant is
currently estimated to be less than $500,000, of which the Company has already
incurred approximately $250,000. The cost for replacement of the equipment and
software will be capitalized and depreciated over their respective expected
useful lives. The Company will recognize a loss currently for any undepreciated
balance of existing hardware or software to the extent they are replaced. This
loss is included in the above cost estimate. Furthermore, all costs related to
software modification, as well as all costs associated with the Company's
administration of its Year 2000 project, are being expensed as incurred and are
likewise included in the cost estimate above.
Risks Associated with the Year 2000 Problem
The Company utilizes computer systems in many aspects of its business. As
noted, the Company's critical systems are Year 2000 compliant, or are expected
to be so no later than mid-1999.
The Company is also exposed to the risk that one or more of its vendors or
service providers could experience Year 2000 problems that impact the ability of
such vendor or service provider to provide goods and services. Though this is
not considered as significant a risk with respect to the suppliers of goods, due
to the availability of alternative suppliers, the disruption of certain
services, such as utilities, could, depending upon the nature and extent of the
disruption, have a material adverse impact on the Company's operations. The
Company is in the process of contacting all vendors and suppliers with whom the
Company has a material relationship to determine whether they will be
sufficiently Year 2000 compliant so as not to cause any material adverse effect
on the Company. To date, the Company is not aware of any vendor or service
provider Year 2000 issue that management believes would have a material adverse
impact on the Company's operations. However, the Company has no means of
guaranteeing that its vendors or service providers will be Year 2000 ready. The
inability of vendors or service providers to complete their Year 2000 resolution
process in a timely fashion could have a material adverse impact on the Company.
The effect of non-compliance by vendors or service providers is not determinable
at this time.
Widespread disruptions in the national or international economy, including
disruptions affecting the financial markets, resulting fromYear 2000 issues or
in certain industries, such as disruptions affecting the financial industry and
commercial or investment banks, could also have a material adverse impact on the
Company. The likelihood and effect of such disruptions is not determinable at
this time.
19
<PAGE>
INFLATION
To date, inflation has not had a material impact on the Company's
financial condition and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's investment portfolio. The Company does not
have any derivative financial instruments in its portfolio. The Company places
its investments in instruments that meet high credit quality standards. The
Company is adverse to principal loss and ensures the safety and preservation of
its invested funds by limiting default risk, market risk and reinvestment risk.
As of September 30, 1998, the Company's investments consisted of a money market
account and an overnight repurchase agreement. The Company does not expect any
material loss with respect to its investment portfolio.
FOREIGN CURRENCY RISK
The Company does not use foreign currency forward exchange contracts or
purchased currency options to hedge local currency cash flows or for trading
purposes. All sales arrangements with international customers are denominated in
U.S. dollars. Since the acquisition of Axiom (Europe) Limited in February 1998,
its sales are denominated in pounds Sterling. However, this activity has been
insignificant to date.
Through its subsidiary, Axiom (Europe) Limited, the Company has limited
operations in the United Kingdom. Due to this limited activity, the Company
does not expect any material loss with respect to foreign currency risk.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS OF AXIOM INC. AND SUBSIDIARIES:
<S> <C>
Report of Independent Public Accountants................................................................... 22
Consolidated Balance Sheets................................................................................ 23
Consolidated Statements of Operations...................................................................... 24
Consolidated Statements of Stockholders' Equity (Deficit).................................................. 25
Consolidated Statements of Cash Flows...................................................................... 26
Notes to Consolidated Financial Statements................................................................. 27
Schedule II-Valuation and Qualifying Accounts.............................................................. 42
</TABLE>
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the Consolidated
Financial Statements or notes thereto.
21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Axiom Inc.:
We have audited the accompanying consolidated balance sheets of Axiom Inc. and
subsidiaries as of September 30, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended September 30, 1998. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule 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 Axiom Inc. and subsidiaries as
of September 30, 1998 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 1998,
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to the
Consolidated Financial Statements is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not a required part of the
basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, PA
November 17, 1998
22
<PAGE>
AXIOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
September 30,
--------------------------------------------
1998 1997
----------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................ $ 1,093 $ 7,206
Accounts receivable, net of allowance
for doubtful accounts of $3,985 and $100.......................................... 11,325 14,241
Inventories.......................................................................... 6,561 7,374
Deferred tax assets.................................................................. 436 630
Income tax receivable................................................................ 722 968
Other................................................................................ 392 473
-------- -------
Total current assets.............................................................. 20,529 30,892
-------- -------
PROPERTY AND EQUIPMENT:
Computer hardware and software....................................................... 4,354 3,229
Production and test equipment........................................................ 3,016 1,995
Furniture, fixtures and leasehold improvements....................................... 1,636 553
-------- -------
9,006 5,777
Less--Accumulated depreciation and amortization...................................... (4,569) (2,785)
-------- -------
Net property and equipment........................................................ 4,437 2,992
DEFERRED TAX ASSETS.................................................................... 2,502 2,704
RESTRICTED CASH........................................................................ 548 --
OTHER ASSETS........................................................................... 334 267
SOFTWARE DEVELOPMENT COSTS............................................................. 363 --
INTANGIBLE ASSETS, net................................................................. 1,086 168
-------- -------
$ 29,799 $37,023
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt.................................................... $ 330 $ 147
Obligations to Securicor and affiliates.............................................. 64 183
Accounts payable..................................................................... 4,930 3,057
Accrued compensation and related benefits............................................ 1,085 1,066
Accrued agent commissions............................................................ 353 638
Other accrued expenses............................................................... 1,885 646
Deferred revenues.................................................................... 1,602 1,413
-------- -------
Total current liabilities 10,249 7,150
-------- -------
LONG-TERM LIABILITIES:
Deferred tax liabilities............................................................. 220 186
Long-term debt....................................................................... 499 --
-------- -------
Total long-term liabilities....................................................... 719 186
-------- -------
COOMMITMENTS AND CONTINGENCIES (NOTE 16)
STOCKHOLDERS' 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, 7,790,305 and 6,466,900
shares issued and outstanding....................................................... 78 65
Additional paid-in capital........................................................... 37,156 32,340
Accumulated deficit.................................................................. (18,397) (2,718)
Cumulative translation adjustment.................................................... (6) --
-------- -------
Total stockholders' equity........................................................ 18,831 29,687
-------- -------
$ 29,799 $37,023
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE>
AXIOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------
1998 1997 1996
---------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Unrelated third parties:
Equipment................................ $ 20,429 $25,049 $23,358
Services................................. 10,250 7,958 7,739
-------- ------- -------
30,679 33,007 31,097
Related parties............................. -- -- 2,867
-------- ------- -------
Total revenues........................... 30,679 33,007 33,964
-------- ------- -------
COST OF REVENUES:
Unrelated third parties:
Equipment................................ 11,664 13,202 11,639
Services................................. 7,679 4,697 4,580
-------- ------- -------
19,343 17,899 16,219
Related parties............................. -- -- 1,946
-------- ------- -------
Total cost of revenues................... 19,343 17,899 18,165
-------- ------- -------
Gross profit............................. 11,336 15,108 15,799
-------- ------- -------
OPERATING EXPENSES:
Research, development and engineering....... 8,023 7,580 7,003
Selling, general and administrative......... 16,853 9,026 6,711
Charge for purchased research and
development................................ 2,387 -- --
-------- ------- -------
Total operating expenses................. 27,263 16,606 13,714
-------- ------- -------
Operating income (loss).................. (15,927) (1,498) 2,085
INTEREST (EXPENSE) INCOME, net
(including related party)................... 232 (327) (514)
OTHER INCOME.................................. 16 1 430
EQUITY IN LOSS OF INVESTEE.................... -- -- (18)
GAIN ON SALE OF INVESTMENT.................... -- -- 2,061
-------- ------- -------
Income (loss) before income taxes........... (15,679) (1,824) 4,044
INCOME TAX (EXPENSE) BENEFIT.................. -- 645 (1,543)
-------- ------- -------
NET INCOME (LOSS)............................. (15,679) (1,179) 2,501
======== ======= =======
NET INCOME (LOSS) PER COMMON SHARE............ $ (2.25) $ (0.28) $ 0.72
======== ======= =======
SHARES USED IN COMPUTING BASIC AND DILUTED
NET INCOME (LOSS) PER COMMON SHARE........... 6,960 4,144 3,477
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
24
<PAGE>
AXIOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN ACCUMULATED TRANSLATION
STOCK CAPITAL DEFICIT ADJUSTMENTS TOTAL
------ ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1995........................ $-- $ -- $ (4,040) $-- $ (4,040)
Net income....................................... -- -- 2,501 -- 2,501
--- ------- -------- --- --------
BALANCE, SEPTEMBER 30, 1996........................ -- -- (1,539) -- (1,539)
Stock split and initial public offering,
net of expenses................................. 65 32,340 -- -- 32,405
Net loss......................................... -- -- (1,179) -- (1,179)
--- ------- -------- --- --------
BALANCE, SEPTEMBER 30, 1997........................ 65 32,340 (2,718) -- 29,687
Issuance of Common Stock under employee
Stock purchase plan............................. -- 43 -- -- 43
Issuance of Common Stock in connection with
Acquisition of Innovative Data Technology....... 13 4,773 -- -- 4,786
Cumulation translation adjustments............... -- -- -- (6) (6)
Net loss......................................... -- -- (15,679) -- (15,679)
--- ------- -------- --- --------
BALANCE, SEPTEMBER 30, 1998........................ $78 $37,156 $(18,397) $(6) $ 18,831
=== ======= ======== === ========
</TABLE>
The accompanying notes are an integral part of these statements.
25
<PAGE>
<TABLE>
<CAPTION>
AXIOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------
1998 1997 1996
---------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)....................................................... $(15,679) $ (1,179) $ 2,501
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization........................................... 2,020 1,465 1,885
Provision for doubtful accounts......................................... 4,048 -- --
Charge for purchased research and development........................... 2,387 -- --
Equity in loss of investee.............................................. -- -- 18
Gain on sale of investment.............................................. -- -- (2,061)
Changes in assets and liabilities, net-
Decrease (increase) in-
Accounts receivable................................................. 2,095 1,499 (8,346)
Inventories......................................................... 1,749 (4,207) 1,077
Other current assets................................................ 180 (119) 162
Other assets........................................................ (963) 940 (68)
Deferred taxes...................................................... 430 203 (1)
Income tax receivable............................................... 246 -- --
Increase (decrease) in-
Accounts payable.................................................... 1,708 764 (39)
Accrued compensation and related benefits........................... 19 (140) 27
Accrued agent commissions........................................... (285) (168) (310)
Other accrued expenses.............................................. 112 (655) 402
Accrued tax payable................................................. -- (2,316) 1,148
Deferred revenues................................................... (60) 181 (452)
-------- -------- -------
Net cash used in operating activities............................... (1,993) (3,732) (4,057)
-------- -------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment..................................... (1,883) (1,500) (818)
Sale of investment...................................................... -- -- 2,061
Cash paid for acquisitions, net......................................... (1,859) -- --
-------- -------- -------
Net cash provided by (used in) investing activities................. (3,742) (1,500) 1,243
-------- -------- -------
FINANCING ACTIVITIES:
Proceeds from the issuance of common stock under the
employee stock purchase plan.......................................... 43 -- --
Proceeds from sale of common stock...................................... -- 32,405 --
Payments on long-term debt.............................................. (296) (185) (139)
Advances on obligations to Securicor and affiliates..................... 510 5,388 12,743
Repayment on obligations to Securicor and affiliates.................... (629) (28,496) (7,913)
-------- -------- -------
Net cash provided by (used in) financing activities..................... (372) 9,112 4,691
-------- -------- -------
Effect of exchange rate changes on cash................................. (6) -- --
-------- -------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.................... (6,113) 3,880 1,877
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............................ 7,206 3,326 1,449
-------- -------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR.................................. $ 1,093 $ 7,206 $ 3,326
======== ======== =======
The accompanying notes are an integral part of these statements.
</TABLE>
26
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND:
THE COMPANY
Axiom Inc. (the "Company"), a Delaware corporation, changed its name from
Securicor Communications Inc. in May 1997. Through May 1997, the Company's
business was conducted through its wholly-owned subsidiary, Securicor
TeleSciences Inc. ("STI"). On that date, STI merged into the Company. Prior to
May 1998, the Company was a majority-owned subsidiary of Securicor
Communications Limited ("SCL"), an entity organized under the laws of the United
Kingdom and a wholly-owned subsidiary of Securicor plc ("Securicor"), a company
organized under the laws of the United Kingdom. As the merger represented a
transaction between entities under common control, the net assets of STI were
transferred at net book value. SCL's capital contribution was $100. As the
financial statements are presented in "thousands," no amounts are presented in
Common Stock and additional paid-in capital at September 30, 1996. Prior to the
completion of the Company's initial public offering, Securicor provided the
financing requirements for the Company through advances (See Note 8). SCL
currently owns 44.6% of the Company's outstanding Common Stock.
STOCK SPLIT AND INITIAL PUBLIC OFFERING
On June 27, 1997, the Company amended its Certificate of Incorporation to
authorize 5,000,000 shares of Preferred Stock and 25,000,000 shares of Common
Stock. On July 2, 1997, the Company effected a 34,769-for-one stock split of
each outstanding share of Common Stock by means of a stock dividend. All share
and stock option data have been restated to reflect this stock split.
On July 8, 1997, the Company completed its initial public offering of
2,600,000 shares of Common Stock at a price of $12.00 per share. The Company
received net cash proceeds of approximately $28,053,000 from the public
offering. In addition, on August 6, 1997, the underwriters exercised their over
allotment option to acquire 390,000 shares of Common Stock at a price of $12.00
per share. The Company received net cash proceeds of approximately $4,352,000.
Collectively, both transactions are herein referred to as the "Offering".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
CASH AND CASH EQUIVALENTS
For the purposes of the Statements 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 include
investments in various money market funds.
RESTRICTED CASH
Restricted cash consists of funds to support a standby letter of credit
required under a contractual arrangement with one of the Company's customers.
Based upon the contractual agreement, this amount will be released on December
31, 1999.
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
27
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
cost and related accumulated depreciation are removed from the accounts and any
gain or loss is included in the statements of operations.
Depreciation and amortization are provided on a straight-line basis over the
estimated useful lives of the assets as follows:
Computer hardware and software................................ 3 years
Production and test equipment................................. 4 to 5 years
Furniture, fixtures and leasehold improvements................ 5 years
SOFTWARE DEVELOPMENT COSTS
The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed". Under
SFAS No. 86, costs incurred to create a computer software product are charged to
research and development expense as incurred until technological feasibility has
been established. The Company establishes technological feasibility upon
completion of a detailed program design. At that point, computer software costs
are capitalized until the product is available for general release to customers.
The establishment of technological feasibility and the ongoing assessment of
recoverability of capitalized software development costs require considerable
judgment by management with respect to certain external factors, including, but
not limited to, anticipated future revenues, estimated economic life, and
changes in technology.
Amortization will begin when the product is released. Capitalized software
development costs are amortized on a product-by-product basis using the
straight-line method over the estimated life of the product or the enhancement.
Capitalized software development costs consist primarily of salary,
consulting, and computer costs incurred to develop new products and enhancements
to existing products. During the year ended September 30, 1998, software
development costs of $363,000 were capitalized. No costs were capitalized in
fiscal 1997 or fiscal 1996. Amortization has not yet begun.
INTANGIBLE ASSETS
Intangible assets consist of acquired technology, a non-compete agreement and
goodwill. Acquired technology, the non-compete agreement and goodwill are
amortized over 2 1/2 to 4, 2 and 2 to 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 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 September 30, 1998, 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.
28
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
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.
The Company has significant activity with international customers,
particularly in Asia. The current economic and currency situation affecting
certain Asian countries, which includes currency devaluation, external support
and economic reorganization programs to reduce growth and credit demand could
have a material adverse effect on the Company's operating results. See Note 4.
REVENUE RECOGNITION
Revenues are generally recognized upon shipment of the equipment. In "bill and
hold" transactions, the Company recognizes revenues when the following
conditions are met: the equipment is complete, ready for shipment and segregated
from other inventory; the Company has no further significant performance
obligations in connection with the completion of the transaction; the commitment
and delivery schedule is fixed; the customer requested the transaction be
completed on this basis; and the risks of ownership have passed to the customer.
There were no outstanding accounts receivable balances relating to "bill and
hold" transactions at September 30, 1998 or 1997. Revenues from installation and
engineering activities are recognized as services are provided.
Depending on contract terms and conditions, software license fees are
recognized upon delivery of the product if no significant vendor obligations
remain and collection of the resulting receivable is deemed probable. The
Company had nominal separate software license fee revenues for the year ended
September 30, 1998 and 1997, and these amounts are included in equipment
revenues. The Company did not have any separate software license fee revenues
for the year ended September 30, 1996. If significant vendor obligations exist
at delivery and/or the product is subject to customer acceptance, revenue is
deferred until no significant obligations remain and/or acceptance has occurred.
If the payment of the license fee is coincident to services which are deemed to
be essential to the transaction, the license fee is deferred and recognized
using contract accounting over the period during which the services are
performed. The Company's software licensing agreements provide for customer
support (typically 90 days). The portion of the license fee associated with this
customer support is unbundled from the license fee and is recognized ratably
over the warranty period as services revenue.
The Company offers support agreements to its customers. Revenues from
customer support are recognized as services are provided. Services are
generally provided ratably over the term of the customer support agreement and
are included in services revenue in the accompanying statements of operations.
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. Beginning in fiscal 1998, certain
costs were capitalized. See "Software Development Costs."
CHARGE FOR PURCHASED RESEARCH AND DEVELOPMENT
In connection with the acquisition of Innovative Data Technology, $2,387,000
of the purchase price was allocated to incomplete research and development
projects. Accordingly, these costs were charged to expense as of the
acquisition
29
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
date. The development of the 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.
INCOME TAXES
The Company accounts for income taxes under 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 year are
determined using the enacted tax rates.
NET INCOME (LOSS) PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share", which superseded Accounting Principles Board Opinion
("APB") No. 15 , "Earnings per Share". SFAS No. 128 requires dual presentation
of basic and diluted net income (loss) per common share for complex capital
structures on the face of the statements of operations. According to SFAS No.
128, basic net income (loss) per common share, which replaced primary earnings
per share, is calculated by dividing net income by the weighted-average number
of common shares outstanding for the period. Diluted net income (loss) per
common share, which replaced fully diluted earnings per share, reflects the
potential dilution from the exercise or conversion of securities into common
stock, such as stock options. The Company was required to and did adopt SFAS
No. 128 during the quarter ended December 31, 1997; as earlier application was
not permitted. As required by SFAS No. 128, all prior-period income (loss) per
common share data has been restated to conform with the provisions of this
statement.
The following is a reconciliation of the numerators and denominators of the
basic and the diluted net income (loss) per Common share computations:
<TABLE>
<CAPTION>
For the Year Ended September 30,
Income (Loss) Shares Per Share
1998 (Numerator) (Denominator) Amount
- ---------------------------------------------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C>
Basic net loss per Common share........................... $(15,679,000) 6,960,000 $(2.25)
------------------
Dilutive effect of stock options........................ -- --
------------------- -------------------
Diluted net loss per Common share......................... $(15,679,000) 6,960,000 $(2.25)
=================== =================== ===================
</TABLE>
<TABLE>
<CAPTION>
1997
- ----------------------------------------------------------
<S> <C> <C> <C>
Basic net loss per Common share........................... $(1,179,000) 4,144,000 $(0.28)
-------------------
Dilutive effect of stock options........................ -- --
------------------- -------------------
Diluted net loss per Common share......................... $(1,179,000) 4,144,000 $(0.28)
=================== =================== ===================
</TABLE>
<TABLE>
<CAPTION>
1996
- ----------------------------------------------------------
<S> <C> <C> <C>
Basic net income per Common share......................... $2,501,000 3,477,000 $0.72
-------------------
Dilutive effect of stock options........................ -- --
------------------- -------------------
Diluted net income per Common share....................... $2,501,000 3,477,000 $0.72
=================== =================== ===================
</TABLE>
For the years ended September 30,1998 and 1997, diluted net loss per Common
share is the same as basic net loss per Common share as no additional shares for
the potential dilution from the exercise or conversion of securities into Common
stock are included in the denominator as the result is anti-dilutive due to the
Company's losses. Options to purchase 552,246 and 107,122 shares of Common stock
with a weighted average exercise price of $5.03 and $12.00 per share were
outstanding during the years ended September 30, 1998 and 1997, respectively,
but were not included in the computation of diluted net loss per Common share.
No options were outstanding during the year ended September 30, 1996.
30
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
COMPREHENSIVE INCOME:
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income." SFAS
No. 130 establishes standards for reporting and presentation of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements and requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is presented with
equal prominence as other financial statements. The comprehensive loss for 1998
was $15,685,000. There were no comprehensive income adjustments in 1997 or 1996.
Cumulative
Translation
Adjustments
------------
Beginning balance............................. $--
Current period change......................... (6)
------------
Ending Balance................................ $(6)
============
FOREIGN CURRENCY
The Company's sales arrangements with international customers are fixed in the
amount of U.S. dollars to be received. Since the acquisition of Axiom (Europe)
Limited in February 1998, its sales are denominated in pounds Sterling. However,
this activity has been insignificant to date. Relative to the activity with
obligations to Securicor and affiliates, the Company charges the related foreign
exchange gains and losses to the statements of operations.
The assets and liabilities of foreign operations are translated in U.S.
dollars using the rates of exchange at year end. The results of operations are
translated in U.S. dollars at the average daily exchange rates for the period.
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.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
For the years ended September 30, 1998, 1997 and 1996, the Company paid
interest of $56,000, $686,000 and $459,000, respectively. For the years ended
September 30, 1998, 1997 and 1996, the Company paid income taxes, net of
refunds, of $0, $2,066,000 and $495,000, respectively. In 1998, the Company was
refunded $667,000 relating to income taxes. The Company entered into capital
lease obligations of $978,000, $148,000 and $177,000 for the years ended
September 30, 1998, 1997 and 1996, respectively.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with current year
presentation.
3. ACQUISITIONS:
Innovative Data Technology
On May 15, 1998, the Company acquired Innovative Data Technology ("IDT") in
a business combination accounted for as a purchase. IDT is primarily engaged in
the manufacture and sale of telecommunications switch interface technology.
The Company (i) issued 1,290,000 shares of its Common stock valued at
$4,434,000, (ii) cash of $2,707,000 and (iii) options to purchase 132,000 shares
of Common stock (issued in connection with certain employment agreements)
31
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS (CONTINUED):
valued at $352,000 using the Black-Scholes option pricing model. The results of
the operations of IDT have been included in the accompanying consolidated
financial statements from the date of acquisition. The total purchase price of
$8,272,000 (subject to adjustment), including transaction costs of $779,000, was
allocated to the assets acquired and liabilities assumed based on their
respective fair values. The Company recorded $2,387,000 of the purchase price as
a charge to the consolidated statement of operations on the acquisition date as
it was related to the fair value of incomplete research and development
projects. The remaining amount by which the purchase price exceeded the net
assets purchased was allocated to the following intangible assets and each is
being amortized on a straight-line basis over the period indicated:
<TABLE>
<CAPTION>
Amortization
Amount Period (yrs.)
-------------------- --------------------
<S> <C> <C>
Non-compete............................... $500,000 2
Acquired technology....................... 432,000 3 to 4
Goodwill.................................. 31,000 7
--------------------
$963,000
====================
</TABLE>
The following table presents the non-cash assets and liabilities that were
consolidated as a result of the acquisition of IDT:
<TABLE>
<CAPTION>
1998
-----------------
<S> <C>
Non-cash assets (liabilities):
Accounts receivable.......................................... $ 3,147,000
Inventories.................................................. 936,000
Other current assets......................................... 99,000
Property and equipment....................................... 341,000
Other assets................................................. 15,000
Charge for purchased research and development................ 2,387,000
Intangible assets............................................ 1,005,000
Accounts payable............................................. (122,000)
Other accrued expenses....................................... (1,074,000)
Deferred revenues............................................ (184,000)
-----------------
Non-cash assets acquired....................................... 6,550,000
Less--Common stock and options issued.......................... (4,786,000)
-----------------
Cash paid, net of cash acquired................................ $ 1,764,000
=================
</TABLE>
If the acquisition of IDT had occurred on October 1, 1996, the unaudited
pro forma information, after giving effect to the pro forma adjustments
described below, would have been as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT SHARE DATA) Year Ended
September 30,
---------------------------------------------
1998 1997
----------------- ---------------------
<S> <C> <C>
Unaudited pro forma revenues............................. $ 38,400 $45,421
======== =======
Unaudited pro forma net income (loss).................... $(13,053) $ 370
======== =======
Unaudited pro forma net income (loss) per common share... $ (1.68) $ 0.07
======== =======
</TABLE>
The unaudited pro forma information does not purport to be indicative of
the results that would have been attained if the operations had actually been
combined for the periods presented and is not necessarily indicative of the
operating results to be expected in the future.
32
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. ACQUISITIONS (CONTINUED):
The unaudited pro forma adjustments consist of compensation adjustments
for certain executive officers of IDT who are now employed by the Company under
specified employment contracts, interest income adjustments for the aggregate
net cash used to acquire IDT, interest expense adjustments relating to repayment
of an IDT note payable to a shareholder and the amortization of the intangible
assets. The amount of the compensation pro forma adjustment was $121,000 and
$2,179,000 for the years ended September 30, 1998 and 1997, respectively. The
amount of the interest income pro forma adjustment was $85,000 and $135,000 for
the years ended September 30, 1998 and 1997, respectively. The amount of the
interest expense pro forma adjustment was $50,000 and $7,000 for the years ended
September 30, 1998 and 1997, respectively. The amount of the intangible
amortization pro forma adjustment was $71,000 and $112,000 for the years ended
September 30, 1998 and 1997, respectively. Additionally, the above pro forma
information excludes the one-time charge of $2,387,000 associated with the
write-off of purchased research and development costs in connection with the IDT
acquisition.
Greendown Software Limited
On February 17, 1998, the Company acquired Greendown Software Limited
("GSL") in a business combination accounted for as a purchase. In August 1998,
the Company changed the name of GSL to Axiom (Europe) Limited. Axiom (Europe)
Limited is primarily engaged in the development of fraud management software.
The results of the operations of Axiom (Europe) Limited are included in the
accompanying consolidated financial statements since the date of acquisition.
The total purchase price of $194,000 was allocated to the assets acquired and
liabilities assumed based on their respective fair values. The excess of the
purchase price over the fair value of the net assets acquired (goodwill) was
$149,000 and is being amortized on a straight-line basis over 2 years.
The following table presents the non-cash assets and liabilities that were
consolidated as a result of the acquisition of Axiom (Europe) Limited :
<TABLE>
<CAPTION>
Non-cash assets (liabilities):
<S> <C>
Accounts receivable....................................... $ 80,000
Property and equipment.................................... 27,000
Goodwill.................................................. 149,000
Accounts payable.......................................... (43,000)
Other accrued expenses.................................... (53,000)
Deferred revenues......................................... (65,000)
-----------
Cash paid, net of cash acquired............................. $ 95,000
===========
</TABLE>
Pro forma information for the acquisition of Axiom (Europe) Limited is not
presented as its activity was immaterial to the consolidated financial
statements of the Company.
4. ACCOUNTS RECEIVABLE:
<TABLE>
<CAPTION>
September 30,
------------------------------------------
1998 1997
------------------ -------------------
<S> <C> <C>
Billed.............................................................. $13,970,000 $12,265,000
Unbilled............................................................ 1,340,000 2,076,000
------------------ -------------------
15,310,000 14,341,000
Less-allowance for doubtful accounts................................ (3,985,000) (100,000)
------------------ -------------------
$11,325,000 $14,241,000
================== ===================
</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. The increase in the
allowance for doubtful accounts relates to the uncertainty surrounding the
Company's Asian and other international customer base.
33
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. INVENTORIES:
<TABLE>
<CAPTION>
September 30,
----------------------------------------
1998 1997
---------------- ------------------
<S> <C> <C>
Raw materials.................................................. $4,323,000 $4,718,000
Work-in-process................................................ 581,000 538,000
Finished goods................................................. 1,657,000 2,118,000
---------------- ------------------
$6,561,000 $7,374,000
================ ==================
</TABLE>
6. INTANGIBLE ASSETS:
<TABLE>
<CAPTION>
September 30,
-------------------------------------------
1998 1997
----------------- -------------------
<S> <C> <C>
Acquired technology............................................ $ 2,274,000 $ 1,800,000
Non-compete.................................................... 500,000 --
Goodwill....................................................... 488,000 308,000
----------------- -------------------
3,262,000 2,108,000
Less-Accumulated amortization.................................. (2,176,000) (1,940,000)
----------------- -------------------
$ 1,086,000 $ 168,000
================= ===================
</TABLE>
7. DEBT:
LONG-TERM DEBT
<TABLE>
<CAPTION>
September 30,
--------------------------------------------
1998 1997
----------------- --------------------
<S> <C> <C>
Term note payable............................................... $ -- $ 98,000
Capitalized lease obligations................................... 829,000 49,000
----------------- --------------------
829,000 147,000
Less: Current portion........................................... (330,000) (147,000)
----------------- --------------------
$ 499,000 $ --
================= ====================
</TABLE>
The Company entered into four capital lease obligations during fiscal 1998
totaling $978,000 for computer hardware and furniture and fixtures. The leases
are payable over two to three years. The interest rates charged on these
obligations range from 6.8% to 11.8%. Interest expense for the years ended
September 30, 1998, 1997 and 1996 was $30,000, $15,000 and $10,000,
respectively. Assets acquired under capital leases at a cost of $1,126,000 and
$148,000 less accumulated amortization of $271,000 and $74,000 are included in
property and equipment at September 30, 1998 and 1997, respectively. The
principal payments on these capital lease obligations as of September 30, 1998
are as follows: $330,000 in 1999, $297,000 in 2000 and $202,000 in 2001.
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 was payable in three equal annual
principal installments of $98,000. The interest rate charged on this term note
payable was 5.3%. Interest expense for the years ended September 30, 1998, 1997
and 1996 was $5,000, $7,000 and $6,000, respectively. The final installment
payment of $98,000 was made in May 1998.
LINE OF CREDIT
Subsequent to September 30, 1998, the Company entered into an agreement with
Silicon Valley Bank to establish a $5,000,000 line of credit which the Company
anticipates using to meet short-term borrowing requirements. The amount
available under the line of credit will be based upon a percentage of eligible
accounts receivable, as defined. Interest will
34
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. DEBT (CONTINUED):
be charged at Silicon Valley Bank's prime rate plus 1%. Borrowings under the
agreement are secured by an interest in substantially all of the Company's
assets and require the Company to comply with specified financial and
nonfinancial covenants, as defined. Additionally, the line of credit prohibits
the Company from paying dividends on its Common Stock (except for dividends paid
solely in shares of Common Stock) without the consent of Silicon Valley Bank.
8. OBLIGATIONS TO SECURICOR AND AFFILIATES:
Information relative to the Company's obligations to Securicor and affiliates
is as follows:
<TABLE>
<CAPTION>
September 30,
--------------------------------------
1998 1997
---------------- -----------------
<S> <C> <C>
Obligations to Securicor:
Interest free............................................... $ -- $ --
Interest bearing............................................ -- --
Other....................................................... 64,000 289,000
---------------- -----------------
Total obligations to Securicor............................ 64,000 289,000
---------------- -----------------
Obligation to affiliates:
Receivables from affiliates................................. -- (119,000)
Payables to affiliates...................................... -- 13,000
---------------- -----------------
Total obligations to affiliates, net...................... -- (106,000)
---------------- -----------------
Total obligations to Securicor and affiliates................. $64,000 $ 183,000
================ =================
</TABLE>
Prior to the completion of the Offering, the Company was funded through
advances from Securicor. Certain advances were interest bearing and were loaned
to the Company at a base rate plus 1%. For the years ended September 30, 1997
and 1996, the interest rate charged on these obligations ranged from 6.75% to
7.50% and 6.75% to 7.75%, respectively. Interest expense for the years ended
September 30, 1997 and 1996 was $552,000 and $578,000, respectively. As these
obligations to Securicor and affiliates are due on demand, this net amount is
included in current liabilities. In connection with the Offering, a significant
portion of the total obligations to Securicor and affiliates was repaid.
9. INTEREST INCOME (EXPENSE), NET:
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------------
1998 1997 1996
----------------- --------------- ---------------
<S> <C> <C> <C>
Interest expense on obligations to Securicor................. $ -- $(552,000) $(578,000)
Interest expense............................................. (56,000) (22,000) (16,000)
Interest income.............................................. 288,000 247,000 80,000
----------------- --------------- ---------------
$232,000 $(327,000) $(514,000)
================= =============== ===============
</TABLE>
10. OTHER INCOME:
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------------------
1998 1997 1996
----------------- --------------- ---------------
<S> <C> <C> <C>
Litigation settlement gain.................................... $ -- $ -- $350,000
Miscellaneous................................................. 16,000 1,000 80,000
----------------- --------------- ---------------
$16,000 $1,000 $430,000
================= =============== ===============
</TABLE>
On December 6, 1995, the Company entered into a litigation settlement
agreement whereby the Company was awarded $350,000. This settlement was paid
over three years.
35
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCKHOLDERS' EQUITY:
1997 STOCK INCENTIVE PLAN
In May 1997, the Company established the 1997 Stock Incentive Plan (the "1997
Plan") which authorized 450,000 shares of Common Stock to be issued. The 1997
Plan was amended in May 1998 to authorize the issuance of 1,050,000 shares of
Common Stock and again in December 1998 to authorize the issuance of 2,000,000
shares of Common stock (both such amendments subject to shareholders approval at
the Annual Meeting of Shareholders in 1999). 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. In general, one third of
granted options are exercisable six months from the date of grant. The
remaining two-thirds vest on the first and second anniversaries of the date of
grant, respectively. The maximum term of the options is ten years.
Information with respect to the stock options granted under the 1997 Plan is
summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE PRICE
----------------- --------------------
<S> <C> <C>
Balance, September 30, 1996................................. -- $ --
Granted..................................................... 321,366 12.00
Exercised................................................... -- --
Cancelled................................................... -- --
----------------- --------------------
Balance, September 30, 1997................................. 321,366 $12.00
Granted..................................................... 994,675 4.20
Exercised................................................... -- --
Cancelled................................................... (386,627) 10.79
----------------- --------------------
Balance, September 30, 1998................................. 929,414 $ 4.16
================= ====================
</TABLE>
In January 1998, all of the outstanding options, or 300,433 of the 321,366
granted in fiscal 1997, were cancelled and new options were granted at an
exercise price of $5.50 per share, which was equal to the fair market value on
the grant date. In addition, these 300,433 options can only be exercised if the
fair market value of the Company's Common stock is equal to or greater than
$9.00 per share. The expiration dates for options at September 30, 1998 range
from May 29, 2007 to July 23, 2008.
The following table summarizes information about options outstanding at
September 30, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------------------------------------- -----------------------------------
RANGE WEIGHTED AVERAGE WEIGHTED WEIGHTED
OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL LIFE EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING IN YEARS PRICE EXERCISABLE PRICE
- ------------------- ---------------- -------------------- ---------------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
$2.31-$5.50 929,414 9.5 $4.16 25,622 $5.50
=================== ================ ==================== ================ =================== ===========
</TABLE>
As of September 30, 1998, 120,586 options were available for future grant
under the Plan.
The Company accounts for the 1997 Plan under APB No. 25, "Accounting for Stock
Issued to Employees", under which deferred compensation expense would be
recorded for options granted with exercise prices below fair value. The
deferred compensation would then be charged to expense ratably over the vesting
period. As the Company has not granted options with exercise prices below fair
value, no compensation expense has been recognized. In 1995, the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a fair value based method of accounting
for stock-based employee compensation arrangements regardless
36
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCKHOLDERS' EQUITY (CONTINUED):
of the method used to account for the plan. Had compensation cost for the
Company's 1997 Plan been determined consistent with SFAS No. 123 , the Company's
net loss for the years ended September 30, 1998 and 1997 would have been
$16,466,000 and $2,419,000, respectively, and the basic and diluted net loss per
Common share would have been $2.37 and $0.58, respectively. The weighted average
fair value of the options granted during 1998 and 1997 was $2.92 and $7.96 per
share, respectively. The fair value of each option grant is estimated on the
date of grant using the Black- Scholes option pricing model with the following
weighted average assumptions: risk- free interest rate of 5.60% in 1998 and
6.73% in 1997; expected dividend yield of 0% in 1998 and 1997; expected life of
5 years in 1998 and 1997; and expected volatility of 75% in 1998 and 1997.
EMPLOYEE STOCK PURCHASE PLAN
In September 1997, the Company established the Axiom Inc. Employee Stock
Purchase Plan ("the Purchase Plan"). The number of shares available to purchase
under the Purchase Plan is 300,000 shares of Common stock. As of September 30,
1998, the Company has issued 35,071 shares under the Purchase Plan. The
employee's purchase price is the lower of (a) 85% of the fair market value of a
share of the Company's Common stock on the first day of the Purchase period (as
defined) and (b) 85% of the fair market value of a share of the Company's Common
stock on the last day of the Purchase period (as defined).
12. EMPLOYEE BENEFIT PLAN:
Prior to July 1994, the Predecessor Business 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 Axiom Inc. 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
years ended September 30, 1998, 1997 and 1996 was $365,000, $264,000 and
$277,000, respectively.
13. RELATED PARTY TRANSACTIONS:
Prior to the Offering, charges were allocated to the Company from Securicor
and consisted of charges for certain support and services. These charges were
based on Securicor's estimate of its total relevant costs for the applicable
fiscal year, allocated pro rata based on estimated revenues of each applicable
business unit. Management believed the method of allocation was reasonable.
For the years ended September 30, 1997 and 1996, Securicor charged the Company
$295,000 and $403,000, respectively. These charges are included in selling,
general and administrative expenses on the accompanying consolidated statements
of operations. The Company did not incur any parent charges subsequent to the
Offering. The Company and Securicor have entered into an agreement for
international marketing services (see below).
During and prior to the year ended September 30, 1996, 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 year ended September 30, 1996 of $2,323,000.
The Company recognized cost of revenues related to these revenues for the year
ended September 30, 1996 of $1,732,000.
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 which are outstanding as of
September 30, 1998 is 85,690. The exercise price of these options is
(Pounds)2.45 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.
37
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. RELATED PARTY TRANSACTIONS (CONTINUED):
In May 1997, the Company and Securicor entered into an agreement pursuant to
which Securicor will provide international sales and marketing services to the
Company. For the years ended September 30, 1998 and 1997, total charges from
Securicor for these services were $74,000 and $149,000, respectively. In
addition, the Company pays each of its directors an annual directors fee of
$20,000 each. The directors fees paid to employees of Securicor are remitted to
Securicor. For the years ended September 30, 1998 and 1997, the Company paid
$20,000 and $5,000, respectively, related to such fees.
The Company obtains its Directors and Officers insurance through Securicor.
Total Director and Officer insurance expense for the years ended September 30,
1998 and 1997 was $65,000 and $46,000, respectively.
From time to time, the Company and Securicor process miscellaneous
transactions on behalf of each other, which are payable the month following the
month incurred. These transactions have been immaterial to date.
In October 1995, the Company purchased the rights to an Integrated Services
Digital Network ("ISDN") product, which was sold in the United States, from
Securicor 3Net Ltd. ("3Net"), an affiliate of Securicor. 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 $386,000 and $250,000 for the years ended September 30, 1997 and
1996, respectively. The Company's business activities related to the ISDN
product were performed through its wholly-owned subsidiary, Securicor 3Net, Inc.
During the years ended September 30, 1997 and 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,
1997, the Company recognized revenues of $1,167,000 and cost of revenues of
$794,000 relating to such activities. For the year ended September 30, 1996,
the Company recognized revenues of $792,000 and cost of revenues of $714,000
relating to such activities. These amounts are included in unrelated third
party revenues and cost of revenues. In May 1997, the Company transferred all
of its stock in Securicor 3Net, Inc. to an affiliate of Securicor at net book
value due to the related party nature of the transaction.
On January 20, 1995, the Company invested approximately $500,000 in exchange
for an initial 44.4% ownership interest in Metapath Corporation ("Metapath").
In a series of transactions which took place from January 20, 1995 through May
2, 1996, the Company's ownership interest was reduced, first to 23.7%, then to
19.9%, and on May 2, 1996, its ownership interest was purchased by Metapath for
the original amount of approximately $500,000. In addition, on May 2, 1996,
Metapath acquired certain technology from the Company for $1,500,000. This
investment was accounted for using the equity method of accounting.
Accordingly, the Company reduced the carrying value of its investment for its
portion of the investee's loss. The Company's equity in loss of Metapath was $0
and $18,000 for the years ended September 30, 1997 and 1996, respectively. The
Company had related party sales to Metapath for the time periods during which
the investment was held of $544,000 for the period from October 1, 1995 to May
2, 1996.
14. INCOME TAXES:
The components of income tax expense (benefit) are as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------------------------------
1998 1997 1996
------------------ ------------------ ------------------
<S> <C> <C> <C>
Current:
Federal.......................................... $ (335,000) $(605,000) $1,170,000
State............................................ (62,000) (114,000) 374,000
------------------ ------------------ ------------------
(397,000) (719,000) 1,544,000
------------------ ------------------ ------------------
Deferred:
Federal.......................................... (4,342,000) 62,000 (1,000)
State............................................ (806,000) 12,000 --
------------------ ------------------ ------------------
(5,148,000) 74,000 (1,000)
------------------ ------------------ ------------------
(5,545,000) (645,000) 1,543,000
Increase in valuation allowance provision.......... 5,545,000 -- --
------------------ ------------------ ------------------
$ -- $(645,000) $1,543,000
================== ================== ==================
</TABLE>
38
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. INCOME TAXES (CONTINUED):
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.
The federal statutory income tax is reconciled to the effective income tax
rate as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------
1998 1997 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................................................. -- 4.5 (1.7)
Increase in net operating loss carryforwards.......... 39.9 -- --
----------------- -------------- ----------------
-- % (35.4)% 38.2%
================= ============== ================
</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,
---------------------------------------
1998 1997
---------------- -----------------
<S> <C> <C>
Deferred tax assets
Charge for purchased research and development.............. $ 2,502,000 $2,704,000
Allowance for doubtful accounts............................ 1,554,000 --
Inventories................................................ 708,000 --
Net operating loss......................................... 3,123,000 --
Accrued expenses........................................... 577,000 375,000
Other...................................................... 19,000 255,000
---------------- -----------------
8,483,000 3,334,000
Deferred tax liabilities
Depreciation and amortization.............................. (220,000) (186,000)
Other...................................................... -- (33,000)
---------------- -----------------
(220,000) (219,000)
Valuation allowance.......................................... (5,545,000) --
---------------- -----------------
Net deferred tax assets...................................... $ 2,718,000 $3,115,000
================ =================
</TABLE>
Due to continued losses throughout 1998, the Company did not record an income
tax benefit during the year ended September 30, 1998. However, as of September
30, 1998, the Company has recorded net deferred tax assets of $2,718,000. Based
on an assessment of the Company's taxable earnings history and expected
future taxable income, management has determined that it is more likely than not
that the net deferred tax assets will be realized in future periods. The
Company may be required to provide an additional valuation allowance for this
asset in the future if it does not generate sufficient taxable income as
planned. Additionally, the ultimate realization of this asset could be
negatively impacted by market conditions and other variables not known or
anticipated at this time.
39
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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>
Year Ended September 30,
----------------------------------------------------------------
1998 1997 1996
----------------- ------------------ ------------------
<S> <C> <C> <C>
North America............................................ $25,142,000 $25,889,000 $28,282,000
Asia..................................................... 2,130,000 3,741,000 --
South America............................................ 1,700,000 2,241,000 2,471,000
Europe................................................... 1,707,000 1,136,000 --
United Kingdom (related party)........................... -- -- 2,323,000
Other.................................................... -- -- 888,000
----------------- ------------------ ------------------
$30,679,000 $33,007,000 $33,964,000
================= ================== ==================
</TABLE>
The following table summarizes significant customers with revenues which are
at least 10% of the Company's revenues:
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------------------------
Customer 1998 1997 1996
------------------ ------------------- -------------------
<S> <C> <C> <C>
U S West, Inc............................................ $ 9,268,000 $13,812,000 $10,219,000
Ameritech Corporation.................................... 10,097,000 * 4,431,000
PT Telekomunikasi, Indonesia............................. * 3,128,000 --
Puerto Rico Telephone Co................................. * * 3,199,000
Southwestern Bell Telephone Company...................... * 3,169,000 6,289,000
- ------
* Less than 10%
</TABLE>
The fiscal 1998 amount for Ameritech Corporation includes $1,029,000 of sales
to a subcontractor which was performing work for Ameritech Corporation. 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 years ended
September 30, 1998, 1997 and 1996 was $97,000, $153,000 and $266,000,
respectively.
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 years ended September 30, 1998, 1997 and 1996 was $908,000,
$342,000 and $322,000, respectively. The amounts payable under these leases are
subject to renegotiation at various intervals specified in the leases.
In May 1998, the Company entered into a lease agreement for new office space
for an initial period of ten years with a renewal option for an additional five
years. The 63,000 square foot facility, located in Mount Laurel, New Jersey,
serves as the Company's headquarters.
40
<PAGE>
AXIOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. COMMITMENTS AND CONTINGENCIES (CONTINUED):
Future minimum rental payments as of September 30, 1998 are as follows:
FISCAL YEAR
- -----------
1999......................................... $ 1,648,000
2000......................................... 1,581,000
2001......................................... 1,351,000
2002......................................... 1,363,000
2003......................................... 1,373,000
Thereafter................................... 5,119,000
-----------
$12,435,000
===========
The Company is obligated to make certain payments, as defined, to certain key
ACompany employees if these employees are terminated. In addition, certain key
employees have performance incentives in the form of cash and equity (in
Securicor or an affiliate) related compensation. The Company does not expect to
make these payments other than in the normal course of business.
The Company is party to various claims arising in the ordinary course of
business. Although the ultimate outcome of these matters is presently not
determinable, management believes that the resolution of these matters will not
have a material adverse effect on the Company's financial position or results of
operations.
In August 1997, Acxiom Corporation ("Acxiom") filed suit against the Company
in the United States District Court for the District of Delaware alleging
trademark infringement and dilution under the Lanham Act, as well as related
state law causes of action. Acxiom sought a judgment against the Company
enjoining any future use of the Axiom name and Axiom tradenames and future acts
of unfair competition in the United States, mandating the destruction of all
Company advertising and promotional material using the Axiom name and awarding
treble damages in an unspecified amount because of the alleged willfulness of
the Company's infringement, as well as attorneys' fees.
On November 16, 1998, the United States District Court for the District of
Delaware rendered its decision that Acxiom was entitled to an order enjoining
the Company from making further use of the Axiom name and related injunctive
relief. The court also concluded that Acxiom is not entitled to any money
damages. The Company and Acxiom have agreed that neither will appeal the court's
decision, and the Company has agreed to reimburse Acxiom for auxiliary costs in
the amount of $50,000. The Company will change its name by the end of March
1999.
41
<PAGE>
<TABLE>
<CAPTION>
AXIOM INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED SEPTEMBER 30, 1998
ADDITIONS
----------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING OF COSTS AND OTHER AT
DESCRIPTION YEAR EXPENSES ACCOUNTS (DEDUCTIONS) END OF YEAR
- ----------------------------------------- --------------- -------------- -------------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
For the Year Ended September 30, 1996:
Allowance for doubtful accounts........ $100,000 $ -- $ -- $ -- $ 100,000
======== ========== ======= ========= ==========
For the Year Ended September 30, 1997:...
Allowance for doubtful accounts........ $100,000 $ -- $ -- $ -- $ 100,000
======== ========== ======= ========= ==========
For the Year Ended September 30, 1998:...
Allowance for doubtful accounts........ $100,000 4,048,000 48,000(1) (211,000) $3,985,000
======== ========== ======= ========= ==========
(1) Represents balance of the accounts receivable reserve of IDT on the
acquisition date.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS
Certain information to be provided under this item is hereby incorporated by
reference from the Company's 1999 Proxy Statement to be filed with the
Securities and Exchange Commission within 120 days after September 30, 1998
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended.
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
C. Thomas Faulders, III................................ 49 Chairman of the Board of Directors
Andrew P. Maunder...................................... 42 Chief Executive Officer, President and Treasurer
Michael L. Moore....................................... 42 Executive Vice President, Sales
William J. Rahe, Jr.................................... 52 Vice President, Engineering
Frances Penfold........................................ 54 Vice President, Finance
Greg R. Fegley......................................... 43 Vice President, Operations Support
</TABLE>
C. THOMAS FAULDERS, III was appointed Chairman of the Company's Board of
Directors in July 1998. Most recently, Mr. Faulders was Executive Vice
President, Treasurer and Chief Financial Officer for BDM International. Inc., as
well as President of its Integrated Supply Chain Solutions business unit. Mr.
Faulders directed the information technology company's first and second public
offerings, as well as several commercial acquisitions and subsequent merger with
TRW, Inc. From 1992 to 1995, Mr. Faulders was Vice President and Chief
Financial Officer for COMSAT Corporation, a global provider of satellite
services and digital networking services and technology. During a seven-year
tenure with MCI Communications Corporation beginning in 1985, Mr. Faulders
garnered senior level experience in finance, sales and management. His last
position was as a Senior Vice President in Business Marketing. Mr. Faulders
began his business career in 1981 at Satellite Business Systems where he rose to
the position of treasurer. Mr. Faulders earned an MBA from The Wharton School
and graduated from the University of Virginia with a BA in Economics. A former
42
<PAGE>
United States Navy officer with a distinguished eight-year service record, Mr.
Faulders also serves on the Board of Directors of MLC Group, Inc., James Martin
& Co., TruePoint, Inc., Roku Technologies, LLC., and Universal Systems &
Technology Corporation. Among his non-profit work, Mr. Faulders serves on the
board of the Ronald Reagan Institute for Emergency Medicine at George Washington
University Hospital, the Northside Hospital Advisory Board in Atlanta, and the
Leukemia Society of America.
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 was Chairman of the Board of Directors from August 1997 through July
1998 and 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., a communications company based in the United
Kingdom. From October 1996 to May 1997, Mr. Maunder also served as a Director
of Securicor 3Net, Inc.
MICHAEL L. MOORE was appointed Executive Vice President of Sales in July 1998.
Mr. Moore joined the Company from IDT, which was acquired by the Company in May
1998. Mr. Moore served as Chairman of IDT since 1997, as President and Chief
Executive Officer since 1994, and as Vice President of Sales from 1985 to 1994.
Previously, Mr. Moore held positions with Ampex, Applied Digital Data Systems,
and NCR Corporation. Mr. Moore has over twenty years experience in
telecommunications and extensive experience in billing mediation in
international markets.
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 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.
FRANCES PENFOLD was appointed Vice President of Finance in September 1998. Ms.
Penfold joined the Company from IDT, which was acquired by the Company in May
1998. Ms. Penfold served as Chief Financial Officer of IDT since 1988 and a
Director since 1990. From 1985 until 1988, Ms. Penfold was IDT's Vice President
of Finance. Ms. Penfold has thirty years experience in the manufacturing
industry.
GREG R. FEGLEY has been with the Company and the Predecessor Business since
January 1988 and was appointed Vice President, Operations Support in October
1997. From January 1988 to September 1997, he held several positions, most
recently Director, Operations. From January 1986 to December 1987, Mr. Fegley
served as Marketing Manager for Northern Telecom's Spectron Division.
ITEM 11. EXECUTIVE COMPENSATION
The information to be provided under this item is incorporated herein by
reference to the information set forth in the 1999 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information to be provided under this item is incorporated herein by
reference to the information set forth in the 1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information to be provided under this item is incorporated herein by
reference to the information set forth in the 1999 Proxy Statement.
43
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. The following is a list of the Consolidated
Financial Statements of the Company and its subsidiaries and
supplementary data filed as part of Item 8 hereof:
Report of Independent Public Accountants
Consolidated Balance Sheets as of September 30, 1998 and 1997
Consolidated Statements of Operations for the years ended September 30,
1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended September 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the years ended September 30,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
Schedule II Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the Consolidated
Financial Statements or notes thereto.
(2) List of Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------ -----
<C> <S>
2.1 Agreement and Plan of Merger between STI and the Company, dated May 23, 1997 (incorporated by
reference to Exhibit 2 to the Company's Registration Statement on form S-1, File No. 333-25439).
2.2 Agreement of Merger and Plan of Reorganization by and among the Company, Technology, IDT and the
Shareholders, dated May 15, 1998 (incorporated by reference to the Company's Current Reporting
Form 8-K, filed with the Securities and Exchange Commission on May 23, 1998.
3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit
3.1 to the Company's Registration Statement on form S-1, File No. 333-25439).
3.2 Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on form S-1, File No. 333-25439).
10.1 1997 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company's Registration
Statement on form S-1, File No. 333-25439).
10.2 Employment Agreement between STI and Andrew Maunder, dated July 1, 1994 (incorporated by reference to
Exhibit 10.2 to the Company's Registration Statement on form S-1, File No. 333-25439).
10.3 Employment Agreement between the Company and Michael L. Moore, dated May 15, 1998.
10.4 Employment Agreement between STI and William J. Rahe, Jr., dated February 15, 1995 (incorporated by
reference to Exhibit 10.4 to the Company's Registration Statement on form S-1, File No. 333-25439).
10.5 Employment Agreement between the Company and Frances Penfold, dated May 15, 1998.
10.6 Employment Agreement between the Company and John Lesinski, dated May 15, 1998.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE
------ -----
<C> <S>
10.7 Consultant agreement between the Company and C. Thomas Faulders III, dated July 23, 1998,
(incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1998, File No. 333-25439).
10.8 Lease agreement between the Company and Brandywine Operating Partnership, L.P., dated August 26, 1997
(incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998, File No. 333-25439).
10.9 Loan and Security Agreement by and between the Company and Silicon Valley Bank, dated December 7, 1998.
10.10 General Purchase Agreement between the Company and Ameritech Services, Inc. dated June 24, 1998.
10.11 General Procurement Agreement between the Company and US West Communications, Inc. dated March 31,
1998.
10.12 Revised Form of Services Agreement between the Company and 3Net Delaware (incorporated by reference to
Exhibit 10.12 to the Company's Registration Statement on form S-1, File No. 333-25439).
10.13 Form of Registration Rights Agreement by and between the Company and Securicor (incorporated by
reference to Exhibit 10.13 to the Company's Registration Statement on form S-1, File No. 333-25439).
10.14 Stock Purchase Agreement between the Company and Securicor 3Net Limited dated May 22, 1997
(incorporated by reference to Exhibit 10.14 to the Company's Registration Statement on form S-1, File
No. 333-25439).
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
(EDGAR version only)
</TABLE>
(b) Reports on Form 8-K. On May 27, 1998, the Company filed a Current Report
on Form 8-K and an amendment thereto on Form 8-K/A on July 29, 1998 announcing
under Item 2 (Acquisition or Disposition of Assets) and Item 7 (Exhibits, Pro
Forma Financial Information and Financial Statements) that the Company had
acquired all of the outstanding stock of IDT pursuant to the Agreement of
Merger and Plan of Reorganization.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
AXIOM INC.
<TABLE>
<CAPTION>
<S> <C>
Date: December 29, 1998 By: /s/ ANDREW P. MAUNDER
-----------------------------------------
Andrew P. Maunder
President and
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
Date: December 29, 1998 By: /s/ C. THOMAS FAULDERS, III
-----------------------------------------
C. Thomas Faulders, III
Chairman of the Board
Date: December 29, 1998 By: /s/ ANDREW P. MAUNDER
-----------------------------------------
Andrew P. Maunder
President and
Chief Executive Officer
(Principal Executive Officer)
Date: December 29, 1998 By: /s/ FRANCES PENFOLD
-----------------------------------------
Frances Penfold
Vice President, Finance
(Principal Financial and
(Accounting Officer)
Date: December 29, 1998 By: /s/ ROBERT J. KELLY
-----------------------------------------
Robert J. Kelly
Director
Date: December 29, 1998 By: /s/ SAMMY W. PEARSON
-----------------------------------------
Sammy W. Pearson
Director
Date: December 29, 1998 By: /s/ TREVOR SOKELL
-----------------------------------------
Trevor Sokell
Director
Date: December 29, 1998 By: /s/ MICHAEL J. WILKINSON
-----------------------------------------
Michael J. Wilkinson
Director
</TABLE>
46
<PAGE>
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT made this 15th day of May, 1998, between AXIOM INC. (the
"Company") and Michael L. Moore, (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 - Business
Development, 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 $140,000 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, 1999.
(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.
(d) The Employee shall be entitled to payments under an approved Incentive
Scheme as agreed by the Company.
<PAGE>
(e) The Employee shall be entitled to maintain life insurance and long
term disability insurance, at the Company's expense, at the rate prior
to becoming an Employee of the Company.
(f) The Employee shall be entitled to receive, on or about the date
hereof, pursuant to the Company's Stock Incentive Plan (the "Plan")
and as set forth in the Axiom, Inc. Non-Qualified Stock Option
attached as Exhibit A hereto, options (the "Options"), exercisable for
---------
ten years from the date of grant, to purchase 57,000 shares of the
Company's common stock, $0.01 par value (the "Common Stock"). The
exercise price of each Options shall be equal to the per share fair
market value of the Common Stock on the date of grant of the Options,
as determined by the Compensation Committee of the Company's Board of
Directors in accordance with the Plan. The Options shall vest, in
three equal installments, at six months, one year and two years from
the date of grant. Upon the Employee's termination by the Company,
other than as a result of Employee's breach of this Agreement, the
Options shall vest in full and be exercisable for 90 days following
such termination. The issuance or resale of the shares of Common
Stock issuable upon exercise of the Options shall be registered with
the Securities and Exchange Commission to permit resales of such
shares by such time as the Options become exercisable.
3. 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.
<PAGE>
(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.
4. 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.
5. 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 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 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 or entity 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
<PAGE>
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
twenty-four (24) months after termination of Employee's employ:
(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. 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 twenty-four (24) 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
<PAGE>
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 5, 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.
6. 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.
7. 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.
8. No Assignment by the Employee.
-----------------------------
<PAGE>
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.
9. 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.
10. 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.
11. 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.
AXIOM INC.
______________________________ By:______________________________
Michael L. Moore Andrew P. Maunder, President
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT made this 15th day of May, 1998, between AXIOM INC. (the
"Company") and Frances Penfold, (the "Employee").
WHEREAS, the Employee is desirous of obtaining the protections and benefits
contained in this Agreement, in return for which she 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 Senior Director, Finance
Administration, reporting to the Chief Financial Officer 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 her from time-to-time by the President of the Company. The
Employee shall devote her full business time and attention to the business
and affairs of the Company exclusively and will use her best efforts to
promote the interests of the Company.
2. Compensation and Benefits.
-------------------------
(a) The Company shall pay the Employee a base salary of $100,000 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, 1999.
(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.
(d) The Employee shall be entitled to payments under an approved Incentive
Scheme as agreed by the Company.
<PAGE>
(e) The Employee shall be entitled to maintain life insurance and long
term disability insurance, at the Company's expense, at the rate prior
to becoming an Employee of the Company.
(f) The Employee shall be entitled to receive, on or about the date
hereof, pursuant to the Company's Stock Incentive Plan (the "Plan")
and as set forth in the Axiom, Inc. Non-Qualified Stock Option
attached as Exhibit A hereto, options (the "Options"), exercisable for
---------
ten years from the date of grant, to purchase 40,000 shares of the
Company's common stock, $0.01 par value (the "Common Stock"). The
exercise price of each Options shall be equal to the per share fair
market value of the Common Stock on the date of grant of the Options,
as determined by the Compensation Committee of the Company's Board of
Directors in accordance with the Plan. The Options shall vest, in
three equal installments, at six months, one year and two years from
the date of grant. Upon the Employee's termination by the Company,
other than as a result of Employee's breach of this Agreement, the
Options shall vest in full and be exercisable for 90 days following
such termination. The issuance or resale of the shares of Common
Stock issuable upon exercise of the Options shall be registered with
the Securities and Exchange Commission to permit resales of such
shares by such time as the Options become exercisable.
3. 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 her
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.
<PAGE>
(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.
4. 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.
5. 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 she 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 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 expressed written
consent of the Company, publish, disclose or divulge to any person,
firm, corporation, or use directly, indirectly or for her own benefit
or the benefit of any person or entity 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
<PAGE>
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 her employment with the Company, whether voluntary
or involuntary, she 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 her employment and for
six (6) months after termination of Employee's employ:
(i) Directly or indirectly induce or attempt to influence any
employee of the Company to terminate her employment with the
Company, who was employed by the Company at the time of the
termination of Employee's employment or who terminated her
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 her 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 her
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 her
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
<PAGE>
copyright for any patentable idea or copyrightable writing referred to
above, and she 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 5, 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 her 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.
6. 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.
7. 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, her
heirs and legal representatives.
8. No Assignment by the Employee.
-----------------------------
<PAGE>
This Agreement is personal to the Employee, and the Employee may not assign
or delegate any of her rights or obligations hereunder without first
obtaining the express written consent of the Company.
9. 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.
10. 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.
11. 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.
AXIOM INC.
______________________________ By:______________________________
Frances Penfold Andrew P. Maunder, President
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
--------------------
This AGREEMENT made this 15th day of May, 1998, between AXIOM INC. (the
"Company") and John Lesinski, (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 Director, Sales, reporting to the
Executive Vice 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 $110,000 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, 1999.
(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.
<PAGE>
(d) The Employee shall be entitled to payments under an approved Incentive
Scheme as agreed by the Company.
(e) The Employee shall be entitled to maintain life insurance and long
term disability insurance, at the Company's expense, at the rate prior
to becoming an Employee of the Company.
(f) The Employee shall be entitled to receive, on or about the date
hereof, pursuant to the Company's Stock Incentive Plan (the "Plan")
and as set forth in the Axiom, Inc. Non-Qualified Stock Option
attached as Exhibit A hereto, options (the "Options"), exercisable for
---------
ten years from the date of grant, to purchase 26,000 shares of the
Company's common stock, $0.01 par value (the "Common Stock"). The
exercise price of each Options shall be equal to the per share fair
market value of the Common Stock on the date of grant of the Options,
as determined by the Compensation Committee of the Company's Board of
Directors in accordance with the Plan. The Options shall vest, in
three equal installments, at six months, one year and two years from
the date of grant. Upon the Employee's termination by the Company,
other than as a result of Employee's breach of this Agreement, the
Options shall vest in full and be exercisable for 90 days following
such termination. The issuance or resale of the shares of Common
Stock issuable upon exercise of the Options shall be registered with
the Securities and Exchange Commission to permit resales of such
shares by such time as the Options become exercisable.
3. 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
<PAGE>
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.
4. 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.
5. 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 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.
<PAGE>
(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 or entity 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 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
twenty-four (24) months after termination of Employee's employ:
(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. 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 twenty-four (24) 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 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 5, 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.
6. 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
<PAGE>
the Company and the Employee, and cannot be changed or modified except by
written agreement signed by the parties.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
AXIOM INC.
______________________________ By:_______________________________
John Lesinski Andrew P. Maunder, President
<PAGE>
Exhibit 10.9
-----------------------------------------------------------------------
Silicon Valley Bank
Loan and Security Agreement
Borrower: Axiom Inc.
Address: 4000 Midlantic Drive
Mt. Laurel, New Jersey 08054-5476
Date: December 7, 1998
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK, COMMERCIAL FINANCE DIVISION ("Silicon"), whose address is
3003 a Drive, Santa Clara, California 95054 and the borrower(s) named above
(jointly and severally, the "Borrower"), whose chief executive office is located
at the above address ("Borrower's Address"). The Schedule to this Agreement (the
"Schedule") shall for all purposes be deemed to be a part of this Agreement, and
the same is an integral part of this Agreement. (Definitions of certain terms
used in this Agreement are set forth in Section 8 below.)
1. LOANS.
1.1 Loans. Silicon will make loans to Borrower (the "Loans"), in amounts
determined by Silicon in its sole discretion, up to the amounts (the "Credit
Limit") shown on the Schedule, provided no Default or Event of Default has
occurred and is continuing, and subject to deduction of any Reserves for accrued
interest and such other Reserves as Silicon deems proper from time to time.
1.2 Interest. All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the
contrary in this Agreement. Interest shall be payable monthly, on the last day
of the month. Interest may, in Silicon's discretion, be charged to Borrower's
loan account, and the same shall thereafter bear interest at the same rate as
the other Loans. Silicon may, in its discretion, charge interest to Borrower's
Deposit Accounts maintained with Silicon. Regardless of the amount of
Obligations that may be outstanding from time to time, Borrower shall pay
Silicon minimum monthly interest during the term of this Agreement in the amount
set forth on the Schedule (the "Minimum Monthly Interest").
1.3 Overadvances. If at any time or for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit (an
"Overadvance"), Borrower shall immediately pay the amount of the excess to
Silicon, without notice or demand. Without limiting Borrower's obligation to
repay to Silicon on demand the amount of any Overadvance, Borrower agrees to pay
Silicon interest on the outstanding amount of any Overadvance, on demand, at a
rate equal to the interest rate which would otherwise be applicable to the
Overadvance, plus an additional 2% per annum.
1.4 Fees. Borrower shall pay Silicon the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Silicon and are not
refundable.
1.5 Letters of Credit. At the request of Borrower, Silicon may, in its sole
discretion, issue or arrange for the issuance of letters of credit for the
account of Borrower, in each case in form and substance satisfactory to Silicon
in its sole discretion (collectively; "Letters of Credit"). The aggregate face
amount of all outstanding Letters of Credit from time to time shall not exceed
the amount shown on the Schedule (the "Letter of Credit Sublimit"), and shall be
reserved against Loans which would otherwise be available hereunder. Borrower
shall pay all bank charges (including charges of Silicon) for the issuance of
Letters of Credit, together with such additional fee as Silicon's letter of
credit department shall charge in connection with the issuance of the Letters of
Credit. Any payment by Silicon under or in connection with a Letter of Credit
shall constitute a Loan hereunder on the date such payment is made. Each Letter
of Credit shall have an expiry date no later than thirty days prior to the
Maturity Date. Borrower hereby agrees to indemnify, save, and hold Silicon
harmless from any loss, cost, expense, or liability, including payments made by
Silicon, expenses, and reasonable attorneys' fees incurred by Silicon arising
out of or in connection with any Letters of Credit. Borrower agrees to be bound
by the regulations and interpretations of the issuer of any Letters of Credit
guarantied by Silicon and opened for Borrower's account or by Silicon's
interpretations of any Letter of Credit issued by Silicon for Borrower's
account, and Borrower understands and agrees that Silicon shall not be liable
for any error, negligence, or mistake, whether of omission or commission, in
following Borrower's instructions or those contained in the Letters of Credit or
any modifications,
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amendments, or supplements thereto. Borrower understands that Letters of Credit
may require Silicon to indemnify the issuing bank for certain costs or
liabilities arising out of claims by Borrower against such issuing bank.
Borrower hereby agrees to indemnify and hold Silicon harmless with respect to
any loss, cost, expense, or liability incurred by Silicon under any Letter of
Credit as a result of Silicon's indemnification of any such issuing bank. The
provisions of this Loan Agreement, as it pertains to Letters of Credit, and any
other present or future documents or agreements between Borrower and Silicon
relating to Letters of Credit are cumulative.
2. SECURITY INTEREST.
2.1 Security Interest. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to Silicon a security interest in
all of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All Inventory,
Equipment, Receivables, and General Intangibles, including, without limitation,
all of Borrower's Deposit Accounts, and all money, and all property now or at
any time in the future in Silicon's possession (including claims and credit
balances), and all proceeds (including proceeds of any insurance policies,
proceeds of proceeds and claims against third parties), all products and all
books and records related to any of the foregoing (all of the foregoing,
together with all other property in which Silicon may now or in the future be
granted a lien or security interest, is referred to herein, collectively, as the
"Collateral").
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants:
3.1 Corporate Existence and Authority. Borrower, if a corporation, is and
will continue to be, duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation. Borrower is and will continue
to be qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), and (iii) do not violate Borrower's articles or certificate
of incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Silicon 30 days' prior written notice before changing its
name or doing business under any other name. Borrower has complied, and will in
the future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 Place of Business; Location of Collateral. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Silicon at least 30 days prior
written notice before opening any additional place of business, changing its
chief executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.
3.4 Title to Collateral; Permitted Liens. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Silicon now has, and will
continue to have, a first-priority perfected and enforceable security interest
in all of the Collateral, subject only to the Permitted Liens, and Borrower will
at all times defend Silicon and the Collateral against all claims of others.
None of the Collateral now is or will be affixed to any real property in such a
manner, or with such intent, as to become a fixture. Borrower is not and will
not become a lessee under any real property lease pursuant to which the lessor
may obtain any rights in any of the Collateral and no such lease now prohibits,
restrains, impairs or will prohibit, restrain or impair Borrower's right to
remove any Collateral from the leased premises. Whenever any Collateral is
located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by Silicon, use its best efforts to cause
such third party to execute and deliver to Silicon, in form acceptable to
Silicon, such waivers and subordinations as Silicon shall specify, so as to
ensure that Silicon's rights in the Collateral are, and will continue to be,
superior to the rights of any such third party. Borrower will keep in full force
and effect, and will comply with all the terms of, any lease of real property
where any of the Collateral now or in the future may be located.
3.5 Maintenance of Collateral. Borrower will maintain the Collateral in good
working condition, and Borrower will not use the Collateral for any unlawful
purpose. Borrower will immediately advise Silicon in writing of any material
loss or damage to the Collateral.
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3.6 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 Financial Condition, Statements and Reports. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of
Borrower, at the times and for the periods therein stated. Between the last date
covered by any such statement provided to Silicon and the date hereof, there has
been no material adverse change in the financial condition or business of
Borrower. Borrower is now and will continue to be solvent.
3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Silicon in
writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.
3.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to Borrower, including, but not limited to, those
relating to Borrower's ownership of real or personal property, the conduct and
licensing of Borrower's business, and all environmental matters.
3.10 Litigation. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmenta agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform Silicon in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of
$50,000 or more, or involving $100,000 or more in the aggregate.
3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."
4. RECEIVABLES.
4.1 Representations Relating to Receivables. Borrower represents and warrants
to Silicon as follows: Each Receivable with respect to which Loans are requested
by Borrower shall, on the date each Loan is requested and made, (i) represent an
undisputed bona fide existing unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services in the ordinary course of Borrower's business, and (ii) meet the
Minimum Eligibility Requirements set forth in Section 8 below.
4.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Silicon as follows: All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Receivables are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower's books and
records are and shall be genuine and in all respects what they purport to be,
and all signatories and endorsers have the capacity to contract. * All sales and
other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and endorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms.
* To the best of Borrower's knowledge, all
4.3 Schedules and Documents relating to Receivables. Borrower shall deliver to
Silicon transaction reports and loan requests, schedules and assignments of all
Receivables, and schedules of collections, all on Silicon's standard forms;
provided, however, that Borrower's failure to execute and deliver the same shall
not affect or limit Silicon's security interest and other rights in a11 of
Borrower's Receivables, nor shall Silicon's failure to advance or lend against a
specific Receivable affect or limit Silicon's security interest and other rights
therein. Loan requests received after 12:00 Noon will not be considered
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Silicon Valley Bank Loan and Security Agreement
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by Silicon until the next Business Day. Together with each such schedule and
assignment, or later if requested by Silicon, Borrower shall furnish Silicon
with copies (or, at Silicon's request, originals) of a11 contracts, orders,
invoices, and other similar documents, and a11 original shipping instructions,
delivery receipts, bills of lading, and other evidence of delivery, for any
goods the sale or disposition of which gave rise to such Receivables, and
Borrower warrants the genuineness of a11 of the foregoing. Borrower shall also
furnish to Silicon an aged accounts receivable trial balance in such form and at
such intervals as Silicon shall request. In addition, Borrower shall deliver to
Silicon the originals of a11 instruments, chattel paper, security agreements,
guarantees and other documents and property evidencing or securing any
Receivables, immediately upon receipt thereof and in the same form as received,
with a11 necessary indorsements, a11 of which shall be with recourse. Borrower
shall also provide Silicon with copies of a11 credit memos within two days after
the date issued.
4.4 Collection of Receivables. Borrower shall have the right to collect a11
Receivables, unless and until a Default or an Event of Default has occurred.
Borrower shall hold a11 payments on, and proceeds of, Receivables in trust for
Silicon, and Borrower shall immediately deliver all such payments and proceeds
to Silicon in their original form, duly endorsed in blank, to be applied to the
Obligations in such order as Silicon shall determine. Silicon may, in its
discretion, require that a11 proceeds of Collateral be deposited by Borrower
into a lockbox account, or such other "blocked account" as Silicon may specify,
pursuant to a blocked account agreement in such form as Silicon may specify.
Silicon or its designee may, * at any time, notify Account Debtors that the
Receivables have been assigned to Silicon.
* upon the occurrence or continuance of an Event of Default, or any event
or condition which, as determined by Silicon in its sole discretion, may give
rise to an Event of Default
4.5. Remittance of Proceeds. A11 proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in
such order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred, Borrower shall not be obligated to remit to Silicon the
proceeds of the sale of worn out or obsolete equipment disposed of by Borrower
in good faith in an arm's length transaction for an aggregate purchase price of
$25,000 or less (for all such transactions in any fiscal year). Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower's other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Silicon. Nothing in this
Section limits the restrictions on disposition of Collateral set forth elsewhere
in this Agreement.
4.6 Disputes. Borrower shall notify Silicon promptly of a11 disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (i) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Silicon on the regular reports provided to Silicon; (ii) no Default
or Event of Default has occurred and is continuing; and (iii) taking into
account a11 such discounts settlements and forgiveness, the total outstanding
Loans will not exceed the Credit Limit. Silicon may, at any time after the
occurrence of an Event of Default, settle or adjust disputes or claims directly
with Account Debtors for amounts and upon terms which Silicon considers
advisable in its reasonable credit judgment and, in a11 cases, Silicon shall
credit Borrower's Loan account with only the net amounts received by Silicon in
payment of any Receivables.
4.7 Returns. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to Silicon). In the event any attempted return occurs
after the occurrence of any Event of Default, Borrower shall (i) hold the
returned Inventory in trust for Silicon, (ii) segregate a11 returned Inventory
from a11 of Borrower's other property, (iii) conspicuously label the returned
Inventory as Silicon's property, and (iv) immediately notify Silicon of the
return of any Inventory, specifying the reason for such return, the location and
condition of the returned Inventory, and on Silicon's request deliver such
returned Inventory to Silicon.
4.8 Verification. Silicon may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.
4.9 No Liability. Silicon shall not under any circumstances be responsible
or liable for any shortage or discrepancy in, damage to, or loss or destruction
of, any goods, the sale or other disposition of which gives rise to a
Receivable, or for any error, act, omission, or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Silicon be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Silicon from liability for
its own gross negligence or willful misconduct.
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5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 Financial and Other Covenants. Borrower shall at a11 times comply with
the financial and other covenants set forth in the Schedule.
5.2 Insurance. Borrower shall, at a11 times insure a11 of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require, and Borrower shall provide evidence of such insurance to
Silicon, so that Silicon is satisfied that such insurance is, at a11 times, in
full force and effect. A11 such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole discretion, except that, provided no Default
or Event of Default has occurred and is continuing, Silicon shall release to
Borrower insurance proceeds with respect to Equipment totaling less than
$100,000, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Silicon may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Silicon copies of a11 reports made to insurance companies.
5.3 Reports. Borrower, at its expense, shall provide Silicon with the
written reports set forth in the Schedule, and such other written reports with
respect to Borrower (including budgets, sales projections, operating plans and
other financial documentation), as Silicon shall from time to time reasonably
specify.
5.4 Access to Collateral, Books and Records. At reasonable times, and on one
Business Day's notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy Borrower's books and records.
Silicon shall take reasonable steps to keep confidential a11 information
obtained in any such inspection or audit, but Silicon shall have the right to
disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
inspections and audits shall be at Borrower's expense and the charge therefor
shall be $500 per person per day (or such higher amount as shall represent
Silicon's then current standard charge for the same), plus reasonable out of
pocket expenses. Borrower will not enter into any agreement with any accounting
firm, service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining Silicon's
written consent, which may be conditioned upon such accounting firm, service
bureau or other third party agreeing to give Silicon the same rights with
respect to access to books and records and related rights as Silicon has under
this Loan Agreement. Borrower waives the benefit of any accountant-client
privilege or other evidentiary privilege precluding or limiting the disclosure,
divulgence or delivery of any of its books and records (except that Borrower
does not waive any attorney-client privilege).
5.5 Negative Covenants. Except as may be permitted in the Schedule, Borrower
shall not, without Silicon's prior written consent, do any of the following: (i)
merge or consolidate with another corporation or entity; (ii) acquire any
assets, except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Collateral, except for the sale of finished Inventory in the ordinary course of
Borrower's business, and except for the sale of obsolete or unneeded Equipment
in the ordinary course of business; (v) store any Inventory or other Collateral
with any warehouseman or other third party; (vi) sell any Inventory on a
sale-or-return, guaranteed sale, consignment, or other contingent basis; (vii)
make any loans of any money or other assets; (viii) incur any debts, outside the
ordinary course of business, which would have a material, adverse effect on
Borrower or on the prospect of repayment of the Obligations; (ix) guarantee or
otherwise become liable with respect to the obligations of another party or
entity; (x) pay or declare any dividends on Borrower's stock (except for
dividends payable solely in stock of Borrower); (xi) redeem, retire, purchase or
otherwise acquire, directly or indirectly, any of Borrower's stock; (xii) make
any change in Borrower's capital structure which would have a material adverse
effect on Borrower or on the prospect of repayment of the Obligations; or (xiii)
pay total compensation, including salaries, fees, bonuses, commissions, and a11
other payments, whether directly or indirectly, in money or otherwise, to
Borrower's executives, officers and directors (or any relative thereof) in an
amount in excess of the amount set forth on the Schedule; or (xiv) dissolve or
elect to dissolve. Transactions permitted by the foregoing provisions of this
Section are only permitted if no Default or Event of Default would occur as a
result of such transaction.
5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to Silicon, make available
Borrower and its officers, employees and agents and Borrower's books and
records, to the extent that Silicon may deem them reasonably necessary in order
to prosecute or defend any such suit or proceeding.
5.7 Further Assurances. Borrower agrees, at its expense, on request by
Silicon, to execute all documents and take a11 actions, as Silicon, may deem
reasonably necessary or useful in order to perfect and maintain Silicon's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.
6. TERM.
6.1 Maturity Date. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"); provided that the Maturity
Date shall
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Silicon Valley Bank Loan and Security Agreement
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automatically be extended, and this Agreement shall automatically and
continuously renew, for successive additional terms of one year each, unless one
party gives written notice to the other, not less than sixty days prior to the
next Maturity Date, that such party elects to terminate this Agreement effective
on the next Maturity Date.
6.2 Early Termination. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three Business Days after written
notice of termination is given to Silicon; or (ii) by Silicon at any time after
the occurrence of an Event of Default, without notice, effective immediately. If
this Agreement is terminated by Borrower or by Silicon *, under this Section
6.2, Borrower shall pay to Silicon a termination fee in an amount equal to **
two percent (2.0%)of the Maximum Credit Limit The termination fee shall be due
and payable on the effective date of termination and thereafter shall bear
interest at a rate equal to the highest rate applicable to any of the
Obligations.
* within one year of the date of this Agreement
** $25,000
6.3 Payment of Obligations. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full a11 Obligations,
whether evidenced by installment notes or otherwise, and whether or not a11 or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding Letters of
Credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of a11 such Letters of Credit plus a11 interest, fees
and cost due or to become due in connection therewith, to secure a11 of the
Obligations relating to said Letters of Credit, pursuant to Silicon's then
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, a11 of Silicon's security interests in a11 of the Collateral and a11
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Silicon, Silicon may, in its sole discretion, refuse to make any further Loans
after termination. No termination shall in any way affect or impair any right or
remedy of Silicon, nor shall any such termination relieve Borrower of any
Obligation to Silicon, until a11 of the Obligations have been paid and performed
in full. Upon payment and performance in full of a11 the Obligations and
termination of this Agreement, Silicon shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Silicon's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by Borrower or any
of Borrower's officers, employees or agents, now or in the future, shall be
untrue or misleading in a material respect; or (b) Borrower shall fail to pay
when due any Loan or any interest thereon or any other monetary Obligation; or
(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit; or (d) Borrower shall fail to comply with any of the financial
covenants set forth in the Schedule or shall fail to perform any other non-
monetary Obligation which by its nature cannot be cured; or (e) Borrower shall
fail to perform any other non-monetary Obligation, which failure is not cured
within 5 Business Days after the date due; or (f) Any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on a11 or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) Dissolution, termination of existence, insolvency
or business failure of Borrower; or appointment of a receiver, trustee or
custodian, for a11 or any part of the property of, assignment for the benefit of
creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is not cured
by the dismissal thereof within 30 days after the date commenced; or (k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under any
bankruptcy or insolvency law; or (l) revocation or termination of, or limitation
or denial of liability upon, any pledge of any certificate of deposit,
securities or other property or asset of any kind pledged by any third party to
secure any or a11 of the Obligations, or any attempt to do any of the foregoing,
or commencement of proceedings by or against any such third party under any
bankruptcy or insolvency law; or (m) Borrower makes any payment on account of
any indebtedness or obligation which has been subordinated to the Obligations
other than as permitted in the applicable subordination agreement, or if any
Person who has subordinated such indebtedness or obligations terminates or in
any way limits his subordination agreement; or (n) there shall be *a change in
the record or beneficial ownership of an aggregate or more than 20%
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Silicon Valley Bank Loan and Security Agreement
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of the outstanding shares of stock of Borrower, in one or more transactions,
compared to the ownership of outstanding shares of stock of Borrower in effect
on the date hereof, (o) Borrower shall generally not pay its debts as they
become due, or Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or (p) there shall be a
material adverse change in Borrower's business or financial condition; or (q)
Silicon, acting in good faith and in a commercially reasonable manner, deems
itself insecure because of the occurrence of an event prior to the effective
date hereof of which Silicon had no knowledge on the effective date or because
of the occurrence of an event on or subsequent to the effective date. Silicon
may cease making any Loans hereunder during any of the above cure periods, and
thereafter if an Event of Default has occurred.
* an acquisition by any Person
** or, without the prior written consent of Silicon, Securicor Communications
Ltd. transfers 20% or more of its record or beneficial ownership of the
outstanding shares of stock of Borrower, in one or more transactions, compared
to the ownership of outstanding shares of stock of Borrower in effect on the
date hereof, provided Borrower has knowledge of such proposed transfer by
--------
Securicor Communications Ltd.;
7.2 Remedies. Upon the occurrence of any Event of Default, and at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following: (a) Cease making Loans or otherwise extending credit to
Borrower under this Agreement or any other document or agreement; (b) Accelerate
and declare a11 or any part of the Obligations to be immediately due, payable,
and performable, notwithstanding any deferred or installment payments allowed by
any instrument evidencing or relating to any Obligation; (c) Take possession of
any or a11 of the Collateral wherever it may be found, and for that purpose
Borrower hereby authorizes Silicon without judicial process to enter onto any of
Borrower's premises without interference to search for, take possession of,
keep, store, or remove any of the Collateral, and remain on the premises or
cause a custodian to remain on the premises in exclusive control thereof,
without charge for so long as Silicon deems it reasonably necessary in order to
complete the enforcement of its rights under this Agreement or any other
agreement; provided, however, that should Silicon seek to take possession of any
of the Collateral by Court process, Borrower hereby irrevocably waives: (i) any
bond and any surety or security relating thereto required by any statute, court
rule or otherwise as an incident to such possession; (ii) any demand for
possession prior to the commencement of any suit or action to recover possession
thereof; and (iii) any requirement that Silicon retain possession of, and not
dispose of, any such Collateral until after trial or final judgment; (d) Require
Borrower to assemble any or a11 of the Collateral and make it available to
Silicon at places designated by Silicon which are reasonably convenient to
Silicon and Borrower, and to remove the Collateral to such locations as Silicon
may deem advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and a11 other property without
charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its
condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Silicon deems reasonable, or on Silicon's premises, or elsewhere and
the Collateral need not be located at the place of disposition. Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Receivables and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower's name on a11 collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon's sole discretion,
to grant extensions of time to pay, compromise claims and settle Receivables and
the like for less than face value; (h) Offset against any sums in any of
Borrower's general, special or other Deposit Accounts with Silicon; and (i)
Demand and receive possession of any of Borrower's federal and state income tax
returns and the books and records utilized in the preparation thereof or
referring thereto. A11 reasonable attorneys' fees, expenses, costs, liabilities
and obligations incurred by Silicon with respect to the foregoing shall be added
to and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional four percent per annum.
7.3 Standards for Determining Commercial Reasonableness. Borrower and Silicon
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclu-
-7-
<PAGE>
Silicon Valley Bank Loan and Security Agreement
----------------------------------------------------------------------
sively be deemed to be commercially reasonable: (i) Notice of the sale is given
to Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price
in cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from Borrower any and a11
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
7.4 Power of Attorney. Upon the occurrence of any Event of Default, without
limiting Silicon's other rights and remedies, Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to
Borrower, and at Borrower's expense, to do any or a11 of the following, in
Borrower's name or otherwise, but Silicon agrees to exercise the following
powers in a commercially reasonable manner: (a) Execute on behalf of Borrower
any documents that Silicon may, in its sole discretion, deem advisable in order
to perfect and maintain Silicon's security interest in the Collateral, or in
order to exercise a right of Borrower or Silicon, or in order to fully
consummate a11 the transactions contemplated under this Agreement, and a11 other
present and future agreements; (b) Execute on behalf of Borrower any document
exercising, transferring or assigning any option to purchase, sell or otherwise
dispose of or to lease (as lessor or lessee) any real or personal property which
is part of Silicon's Collateral or in which Silicon has an interest; (c) Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft
against any Account Debtor and any notice to any Account Debtor, any proof of
claim in bankruptcy, any Notice of Lien, claim of mechanic's, materialman's or
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of.any cash or non-cash items of payment or
proceeds of Collateral; endorse the name of Borrower upon any instruments, or
documents, evidence of payment or Collateral that may come into Silicon's
possession; (e) Endorse a11 checks and other forms of remittances received by
Silicon; (f) Pay, contest or settle any lien, charge, encumbrance, security
interest and adverse claim in or to any of the Collateral, or any judgment based
thereon, or otherwise take any action to terminate or discharge the same; (g)
Grant extensions of time to pay, compromise claims and settle Receivables and
General Intangibles for less than face value and execute a11 releases and other
documents in connection therewith; (h) Pay any sums required on account of
Borrower's taxes or to secure the release of any liens therefor, or both; (i)
Settle and adjust, and give releases of, any insurance claim that relates to any
of the Collateral and obtain payment therefor; (j) Instruct any third party
having custody or control of any books or records belonging to, or relating to,
Borrower to give Silicon the same rights of access and other rights with respect
thereto as Silicon has under this Agreement; and (k) Take any action or pay any
sum required of Borrower pursuant to this Agreement and any other present or
future agreements. Any and a11 reasonable sums paid and any and a11 reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by
Silicon with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the Obligations. In no event
shall Silicon's rights under the foregoing power of attorney or any of Silicon's
other rights under this Agreement be deemed to indicate that Silicon is in
control of the business, management or properties of Borrower.
7.5 Application of Proceeds. A11 proceeds realized as the result of any sale
of the Collateral shall be applied by Silicon first to the reasonable costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due upon
any of the Obligations, and third to the principal of the Obligations, in such
order as Silicon shall determine in its sole discretion. Any surplus shall be
paid to Borrower or other persons legally entitled thereto; Borrower shall
remain liable to Silicon for any deficiency. If, Silicon, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, Silicon shall
have the option, exercisable at any time, in its sole discretion, of either
reducing the Obligations by the principal amount of purchase price or deferring
the reduction of the Obligations until the actual receipt by Silicon of the cash
therefor.
7.6 Remedies Cumulative. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have a11 the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under a11 other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and Borrower, and a11 of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but a11 rights and remedies
shall continue in full force and effect until a11 of the Obligations have been
fully paid and performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
--------------
-8-
<PAGE>
Silicon Valley Bank Loan and Security Agreement
----------------------------------------------------------------------
"Affiliate" means, with respect to any Person, a relative, partner,
---------
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Business Day" means a day on which Silicon is open for business.
------------
"Code" means the Uniform Commercial Code as adopted and in effect in the
----
State of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
----------
"Default" means any event which with notice or passage of time or both, would
-------
constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
---------------
"Eligible Inventory" [NOT APPLICABLE].
------------------
"Eligible Receivables" means Receivables arising in the ordinary course of
--------------------
Borrower's business from the sale of goods or rendition of services, which
Silicon, in its sole judgment, shall deem eligible for borrowing, based on such
considerations as Silicon may from time to time deem appropriate. Without
limiting the fact that the determination of which Receivables are eligible for
borrowing is a matter of Silicon's discretion, the following (the "Minimum
-------
Eligibility Requirements") are the minimum requirements for a Receivable to be
- ------------------------
an Eligible Receivable: (i) the Receivable must not be outstanding for more than
90 days from its invoice date, (ii) the Receivable must not represent progress
billings, or be due under a fulfillment or requirements contract with the
Account Debtor, (iii) the Receivable must not be subject to any contingencies
(including Receivables arising from sales on consignment, guaranteed sale or
other terms pursuant to which payment by the Account Debtor may be conditional),
(iv) the Receivable must not be owing from an Account Debtor with whom the
Borrower has any dispute (whether or not relating to the particular Receivable),
(v) the Receivable must not be owing from an Affiliate of Borrower, (vi) the
Receivable must not be owing from an Account Debtor which is subject to any
insolvency or bankruptcy proceeding, or whose financial condition is not
acceptable to Silicon, or which, fails or goes out of a material portion of its
business, (vii) the Receivable must not be owing from the United States or any
department, agency or instrumentality thereof (unless there has been compliance,
to Silicon's satisfaction, with the United States Assignment of Claims Act),
(viii) the Receivable must not be owing from an Account Debtor located outside
the United States or Canada * (unless pre-approved by Silicon in its discretion
in writing, or backed by a letter of credit satisfactory to Silicon, or FCIA
insured satisfactory to Silicon), (ix) the Receivable must not be owing from an
Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise. Receivables owing from one Account Debtor will
not be deemed Eligible Receivables to the extent they exceed 25% of the total
eligible Receivables outstanding. In addition, if more than 50% of the
Receivables owing from an Account Debtor are outstanding more than 90 days from
their invoice date (without regard to unapplied credits) or are otherwise not
eligible Receivables, then a11 Receivables owing from that Account Debtor will
be deemed ineligible for borrowing. Silicon may, from time to time, in its
discretion, revise the Minimum Eligibility Requirements, upon written notice to
the Borrower.
* (a "Foreign Receivable")
"Equipment" means a11 of Borrower's present and hereafter acquired machinery,
---------
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures, motor vehicles, tools, parts, dyes, jigs, goods and other tangible
personal property (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and a11 attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.
"Events of Default" means any of the events set forth in Section 7.1
-----------------
of this Agreement.
"General Intangibles" means a11 general intangibles of Borrower, whether
-------------------
now owned or hereafter created or acquired by Borrower, including, without
limitation, a11 choses in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in a11
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and a11 judgments now or hereafter arising
therefrom, a11 claims of Borrower against Silicon, rights to purchase or sell
real or personal property, rights as a licensor or licensee of any kind,
royalties, telephone numbers, proprietary information, purchase orders, and a11
insurance policies and claims (including without limitation life insurance, key
man insurance, credit insurance, liability insurance, property insurance and
other insurance), tax refunds and claims, computer programs, discs, tapes and
tape files, claims under guaranties, security interests or other security held
by or granted to Borrower, a11 rights to indemnification and a11 other
intangible property of every kind and nature (other than Receivables).
"Inventory" means a11 of Borrower's now owned and hereafter acquired goods,
---------
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including without limitation
a11 raw materials, work in process, finished goods and goods in transit), and
a11 materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or
-9-
<PAGE>
Silicon Valley Bank Loan and Security Agreement
---------------------------------------------------------------------
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods, merchandise or other personal property, and all
warehouse receipts, documents of title and other documents representing any of
the foregoing.
"Obligations" means all present and future Loans, advances, debts,
-----------
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Silicon, whether evidenced by this Agreement or any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Silicon in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, collateral
monitoring fees, closing fees, facility fees, termination fees, minimum interest
charges and any other sums chargeable to Borrower under this Agreement or under
any other present or future instrument or agreement between Borrower and
Silicon.
"Permitted Liens" means the following: (i) purchase money security interests
---------------
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable; (iv) additional security interests and
liens consented to in writing by Silicon, which consent shall not be
unreasonably withheld; (v) security interests being terminated substantially
concurrently with this Agreement; (vi) liens of materialmen, mechanics,
warehousemen, carriers, or other similar liens arising in the ordinary course of
business and securing obligations which are not delinquent; (vii) liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. Silicon will have
the right to require, as a condition to its consent under subparagraph (iv)
above, that the holder of the additional security interest or lien sign an
intercreditor agreement on Silicon's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of Silicon,
and agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
------
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
------------
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.
"Reserves" means, as of any date of determination, such amounts as Silicon
--------
may from time to time establish and revise in good faith * reducing the amount
of Loans and Letters of Credit which would otherwise be available to Borrower
under the lending formula(s) provided in the Schedule: (a) to reflect events,
conditions, contingencies or risks which, as determined by Silicon in good
faith, do or may affect either (i) the Collateral or any other property which is
security for the Obligations or its value, (ii) the assets, business or
prospects of Borrower or any Guarantor or (iii) the security interests and other
rights of Silicon in the Collateral (including the enforceability, perfection
and priority thereof), or (b) to reflect Silicon's good faith belief that any
collateral report or financial information furnished by or on behalf of Borrower
or any Guarantor to Silicon is or may have been incomplete, inaccurate or
misleading in any material respect, or (c) in respect of any state of facts
which Silicon determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default.
* , after notifying Borrower,
Other Terms. All accounting terms used in this Agreement, unless otherwise
-----------
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Silicon (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Silicon on account of the Obligations three Business Days after
receipt by Silicon of immediately available funds, and, for purposes of the
foregoing, any such funds received after 12:00 Noon on any day shall be deemed
received on the next Business Day. Silicon shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to Silicon in its sole discretion, and Silicon may charge
Borrower's loan account for the amount of any item of payment which is returned
to Silicon unpaid.
9.2 Application of Payments. All payments with respect to the Obligations
may be applied, and in Silicon's
-10-
<PAGE>
Silicon Valley Bank Loan and Security Agreement
---------------------------------------------------------------------
sole discretion reversed and re-applied, to the Obligations, in such order and
manner as Silicon shall determine in its sole discretion.
9.3 Charges to Accounts. Silicon may, in its discretion, require that Borrower
pay monetary Obligations in cash to Silicon, or charge them to Borrower's Loan
account, in which event they will bear interest at the same rate applicable to
the Loans. Silicon may also, in its discretion, charge any monetary Obligations
to Borrower's Deposit Accounts maintained with Silicon.
9.4 Monthly Accountings. Silicon shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Silicon), unless Borrower
notifies Silicon in writing to the contrary within thirty days after each
account is rendered, describing the nature of any alleged errors or admissions.
9.5 Notices. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to Silicon or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. Notices to Silicon shall be directed to the Commercial Finance
Division, to the attention of the Division Manager or the Division Credit
Manager. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the private delivery service, or two Business Days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 Severability. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.7 Integration. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and Silicon and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
-----------------
understandings, representations or agreements between the parties which are not
- -------------------------------------------------------------------------------
set forth in this Agreement or in other written agreements signed by the parties
- --------------------------------------------------------------------------------
in connection herewith.
- -----------------------
9.8 Waivers. The failure of Silicon at any time or times to require Borrower
to strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and Silicon shall not waive or
diminish any right of Silicon later to demand and receive strict compliance
therewith. Any waiver of any default shall not waive or affect any other
default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an authorized officer of Silicon and
delivered to Borrower. Borrower waives demand, protest, notice of protest and
notice of default or dishonor, notice of payment and nonpayment, release,
compromise, settlement, extension or renewal of any commercial paper,
instrument, account, General Intangible, document or guaranty at any time held
by Silicon on which Borrower is or may in any way be liable, and notice of any
action taken by Silicon, unless expressly required by this Agreement.
9.9 No Liability for Ordinary Negligence. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Silicon, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Silicon, but nothing herein shall relieve Silicon from
liability for its own gross negligence or willful misconduct.
9.10 Amendment. The terms and provisions of this Agreement may not be waived
or amended, except in a writing executed by Borrower and a duly authorized
officer of Silicon.
9.11 Time of Essence. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement.
9.12 Attorneys Fees and Costs. Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or seek to enforce, any of
its rights; prosecute actions against, or defend actions by, Account Debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease,dispose of or otherwise enforce
Silicon's security interest in the Collateral; and otherwise represent Silicon
in any litigation relating to Borrower. In satisfying Borrower's
------------------------
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<PAGE>
Silicon Valley Bank Loan and Security Agreement
---------------------------------------------------------------------------
obligation hereunder to reimburse Silicon for attorneys fees. Borrower may, for
- -------------------------------------------------------------------------------
convenience, issue checks directly to Silicon's attorneys, Levy, Small & Lallas,
- -------------------------------------------------------------------------------
but Borrower acknowledges and agrees that Levy, Small & Lallas is representing
- -------------------------------------------------------------------------------
only Silicon and not Borrower in connection with this Agreement. If either
- ---------------------------------------------------------------
Silicon or Borrower files any lawsuit against the other predicated on a breach
of this Agreement, the prevailing party in such action shall be entitled to
recover its reasonable costs and attorneys' fees, including (but not limited to)
reasonable attorneys' fees and costs incurred in the enforcement of, execution
upon or defense of any order, decree, award or judgment. All attorneys' fees and
costs to which Silicon may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.
9.13 Benefit of Agreement. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Silicon; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release Borrower
from its liability for the Obligations.
9.14 Joint and Several Liability. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.15 Limitation of Actions. Any claim or cause of action by Borrower against
Silicon, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other
present or future document or agreement, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Silicon, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by the filing of a complaint
within one year after the first act, occurrence or omission upon which such
claim or cause of action, or any part thereof, is based, and the service of a
summons and complaint on an officer of Silicon, or on any other person
authorized to accept service on behalf of Silicon, within thirty (30) days
thereafter. Borrower agrees that such one-year period is a reasonable and
sufficient time for Borrower to investigate and act upon any such claim or cause
of action. The one-year period provided herein shall not be waived, tolled, or
extended except by the written consent of Silicon in its sole discretion. This
provision shall survive any termination of this Loan Agreement or any other
present or future agreement.
9.16 Paragraph Headings; Construction. Paragraph headings are only used in
this Agreement for convenience. Borrower and Silicon acknowledge that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. The term
"including", whenever used in this Agreement, shall mean "including (but not
limited to)". This Agreement has been fully reviewed and negotiated between the
parties and no uncertainty or ambiguity in any term or provision of this
Agreement shall be construed strictly against Silicon or Borrower under any rule
of construction or otherwise.
9.17 Governing Law; Jurisdiction; Venue. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and Borrower
shall be governed by the laws of the State of California. As a material part of
the consideration to Silicon to enter into this Agreement, Borrower (i) agrees
that all actions and proceedings relating directly or indirectly to this
Agreement shall, at Silicon's option, be litigated in courts located within
California, and that the exclusive venue therefor shall be Santa Clara County;
(ii) consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or any
other method permitted by law; and (iii) waives any and all rights Borrower may
have to object to the jurisdiction of any such court, or to transfer or change
the venue of any such action or proceeding.
9.18 Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY CONDUCT, ACTS OR
OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR BORROWER, IN
ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
Borrower:
AXIOM INC.
By /s/ Andrew P. Maunder By /s/ Frances Penfold
------------------------------ ------------------------------
President or Vice President Secretary or Ass't Secretary
<PAGE>
Silicon Valley Bank Loan and Security Agreement
---------------------------------------------------------------------
Silicon:
SILICON VALLEY BANK
By /s/ Peter Bendoris
-----------------------------
Title Account Officer
--------------------------
<PAGE>
---------------------------------------------------------------------
Silicon Valley Bank
Schedule to
Loan and Security Agreement
Borrower: Axiom Inc.
Address: 4000 Midlantic Drive
Mt. Laurel, New Jersey 08054-5476
Date: December 7, 1998
This Schedule forms an integral part of the Loan and Security Agreement between
Silicon Valley Bank and the above-borrower of even date.
================================================================================
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of: (i) $5,000,000 at
any one time outstanding (the "Maximum Credit Limit"); or
(ii) 80% of the amount of Borrower's Eligible Receivables
(as defined in Section 8 above)*.
* , except that, with respect to Foreign Receivables
which have been pre-approved by Silicon pursuant to
Section 8(viii) above, the advance rate shall be 70% of
the amount of such Foreign Receivables
Letter of Credit Sublimit
(Section 1.5): $1,000,000
================================================================================
2. INTEREST.
Interest Rate (Section 1.2):
A rate equal to the "Prime Rate" in effect from time to
time, plus 1.0% per annum. Interest shall be calculated on
the basis of a 360-day year for the actual number of days
elapsed. "Prime Rate" means the rate announced from time to
time by Silicon as its "prime rate;" it is a base rate upon
which other rates charged by Silicon are based, and it is
not necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall change on
each date there is a change in the Prime Rate.
Minimum Monthly
Interest
(Section 1.2): None.
================================================================================
3. FEES (Section 1.4):
-1-
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Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------
Loan Fee: $50,000, which fee has been paid prior to the execution of
this Agreement.
Collateral Monitoring
Fee: $1,250 per month, payable in arrears (prorated for any
partial month at the beginning and at termination of this
Agreement).
================================================================================
4. MATURITY DATE
(Section 6.1): Two years from the date of this Agreement, subject to
automatic renewal as provided in Section 6.1 above, and
early termination as provided in Section 6.2 above.
================================================================================
5. FINANCIAL COVENANTS
(Section 5.1): Borrower shall comply with the following covenant.
Compliance shall be determined as of the end of each
quarter.
Minimum Tangible
Net Worth: Borrower shall maintain a Tangible Net Worth of not less
than $13,647,600, plus 75% of the sum of (i) the Borrower's
net income earned subsequent to the date of the Loan
Agreement, plus (ii) the proceeds of any issuance(s) of
equity or subordinated debt by the Borrower subsequent to
the date of the Loan Agreement.
Definitions. For purposes of the foregoing financial covenant, the
following terms shall have the following meanings:
"Tangible Net Worth" shall mean the excess of total assets
over total liabilities, determined in accordance with
generally accepted accounting principles, with the following
adjustments:
(A) there shall be excluded from assets: (i) notes,
accounts receivable and other obligations owing to the
Borrower from its officers or other Affiliates, and (ii)
all assets which would be classified as intangible assets
under generally accepted accounting principles, including
without limitation goodwill, licenses, patents,
trademarks, trade names, copyrights, capitalized software
and organizational costs, licenses and franchises
(B) there shall be excluded from liabilities: all
indebtedness which is subordinated to the Obligations
under a subordination agreement in form specified by
Silicon or by language in the instrument evidencing the
indebtedness which is acceptable to Silicon in its
discretion.
"Assets" and "liabilities" shall have the meanings ascribed
thereto by generally accepted accounting principles.
================================================================================
6. REPORTING.
(Section 5.3):
Borrower shall provide Silicon with the following:
-2-
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------
1. Monthly Receivable agings, aged by invoice date, within *
ten days after the end of each month.
* fifteen
2. Monthly accounts payable agings, aged by invoice date,
and outstanding or held check registers, if any, within *
ten days after the end of each month.
* fifteen
3. Monthly reconciliations of Receivable agings (aged by
invoice date), transaction reports, and general ledger,
within * ten days after the end of each month.
* thirty
4. [Deleted]
5. Monthly reports which detail the following, each within
thirty days after the end of each month: (i) order
backlog; (ii) shipments to date; and (iii) any
modifications to the annual operating budget with respect
to revenue forecast for the then-current quarter.
6. Monthly unaudited financial statements, as soon as
available, and in any event within thirty days after the
end of each month.
7. Monthly Compliance Certificates, within thirty days after
the end of each month, in such form as Silicon shall
reasonably specify, signed by the Chief Financial Officer
of Borrower, certifying that * as of the end of such
month Borrower was in full compliance with all of the
terms and conditions of this Agreement, and setting forth
calculations showing compliance with the financial
covenants set forth in this Agreement and such other
information as Silicon shall reasonably request,
including, without limitation, a statement that at the
end of such month there were no held checks.
* , to the best of such officer's knowledge,
8. Quarterly unaudited financial statements, as soon as
available, and in any event within forty-five days after
the end of each fiscal quarter of Borrower.
9. Annual operating budgets (including income statements,
balance sheets and cash flow statements, by month) for
the upcoming fiscal year of Borrower within thirty days
prior to the end of each fiscal year of Borrower.
10. Annual financial statements, as soon as available, and in
any event within 120 days following the end of Borrower's
fiscal year, certified by independent certified public
accountants acceptable to Silicon.
================================================================================
7. COMPENSATION
(Section 5.5):
Without Silicon's prior written consent, Borrower shall
not pay total compensation, including salaries,
withdrawals, fees, bonuses,
-3-
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------
commissions, drawing accounts and other payments, whether
directly or indirectly, in money or otherwise, during any
fiscal year to all of Borrower's executives, officers and
directors (or any relative thereof) as a group in excess
of 115% of the total amount thereof in the prior fiscal
year.
================================================================================
8. BORROWER INFORMATION:
Prior Names of
Borrower
(Section 3.2): Securicor Telesciences Inc.
Prior Trade
Names of Borrower
(Section 3.2): None.
Existing Trade
Names of Borrower
(Section 3.2): Axiom AV, Inc.
Other Locations and
Addresses
(Section 3.3): 800 Glen Ave., Moorestown, New Jersey 08057; and
15092 Avenue of Sciences, San Diego, California 92128.
Material Adverse
Litigation
(Section 3.10): Civil Action No. 97-451-RRM in the United States District
Court for the District of Delaware, entitled Acxiom
------
Corporation v. Axiom Inc.
-------------------------
================================================================================
9. OTHER COVENANTS
(Section 5.1): Borrower shall at all times comply with all of the
following additional covenants:
(1) Banking Relationship. Borrower shall at all times
maintain its primary banking relationship with
Silicon.
(2) Subsidiaries. The following constitute all
subsidiaries of Borrower (the "Subsidiaries"):
(i) Axiom Finance, Inc., a Delaware
corporation;
(ii) AV Technology, Inc., a Delaware
corporation;
(iii) Axiom FSC, Inc., a Barbados corporation;
and
(iv) Axiom Europe Limited (formerly Greendown
Software Limited), a United Kingdom
corporation ("Axiom Europe")
All of the Subsidiaries, except for Axiom Europe,
are, and will remain throughout the term of this
Agreement, inactive, with assets having an aggregate
value of less than $5,000 each.
(3) Guaranty by Axiom Europe. Within thirty days
following the execution of this Agreement, Borrower
shall cause Axiom Europe to execute and deliver to
Silicon, on Silicon's standard form, a guaranty
containing terms and conditions as Silicon may
require,
-4-
<PAGE>
Silicon Valley Bank Schedule to Loan and Security Agreement
---------------------------------------------------------------------
together with such other documentation as Silicon
may require in connection therewith:
(4) Landlord Waivers. Within one hundred twenty days
following the execution of this Agreement, Borrower
shall cause the record owners (other than Borrower)
of all real property upon which Borrower maintains
inventory to execute and deliver to Silicon, on
Silicon's standard form, a landlord waiver
containing terms and conditions as Silicon may
require.
(5) Notification of Proposed Transfers and Transfer
Reports. Borrower shall immediately inform Silicon
of any proposed transfer of the record or beneficial
ownership of an aggregate of more than 20% of the
outstanding shares of stock of Borrower, in one or
more transactions, compared to the ownership of
outstanding shares of stock of Borrower in effect on
the date hereof, upon Borrower obtaining knowledge
of the same. Moreover, within 10 days of Borrower's
receipt of the quarterly transfer agent report from
Borrower's transfer agent, Borrower shall provide a
copy of the same to Silicon.
Borrower: Silicon:
AXIOM INC. SILICON VALLEY BANK
By /s/ Andrew P. Maunder By /s/ Peter Bendoris
---------------------------- --------------------------
President or Vice President Title Account Officer
----------------------
By /s/ Frances Penfold
----------------------------
Secretary or Ass't Secretary
<PAGE>
Exhibit 10.10
GENERAL PURCHASE AGREEMENT NUMBER GA03598
FOR
TELECOMMUNICATIONS NETWORK PRODUCTS
AND RELATED SERVICES
BETWEEN
AMERITECH SERVICES, INC.
AND
AXIOM, INC.
<PAGE>
CONTRACT NUMBER GA03598
SUMMARY OF CONTENTS
ARTICLE I GENERAL TERMS AND CONDITIONS
ARTICLE 2 SUPPORT AND WARRANTIES
ARTICLE 3 ENGINEERING SERVICES
ARTICLE 4 INSTALLATION SERVICES
ARTICLE 5 TRAINING SERVICES
ARTICLE 6 REPAIR SERVICES FOR GOODS NOT COVERED UNDER WARRANTY
ARTICLE 7 SOFTWARE
ARTICLE 8 ENTIRE AGREEMENT - SIGNATURE
<PAGE>
Contract Number GA03598
APPENDICES:
APPENDIX 1. PRICES AND FEES
SECTION A: NEGOTIATED PRICING DATED
MARCH 13, 1998
SECTION B: AXIOM 1998 PRICING AND CONFIGURATION
GUIDE FOR BILLING SYSTEMS AND
SUPPORT SERVICES, REVISION C, DATED
MARCH 1, 1998
APPENDIX 2. DELIVERY/COMPLETION INTERVALS
APPENDIX 3. NONDISCRIMINATION PROVISIONS
APPENDIX 4. TECHNICAL REQUIREMENTS (BELLCORE DOCUMENTS)
APPENDIX 5. PRODUCT CHANGE NOTICE
SECTION A. PARTIES FOR PRODUCT CHANGE NOTICES
SECTION B. REQUIRED INFORMATION
APPENDIX 6. MAINTENANCE SUPPORT SERVICES
<PAGE>
Contract Number GA03598
ARTICLE ONE GENERAL TERMS AND CONDITIONS
1.1 DEFINITIONS
1.2 PARTIES WHO MAY PLACE ORDERS UNDER THIS AGREEMENT
1.3 TERM OF AGREEMENT
1.4 PRICES FOR GOODS AND SERVICES AND SOFTWARE FEES
1.5 ACCEPTANCE
1.6 ACCESS TO SUPPLIER'S PREMISES
1.7 ASSIGNMENT
1.8 BILLING
1.9 BILLING RECORDS
1.10 CHOICE OF LAW
1.11 COMPLIANCE WITH LAWS
1.12 CONFIDENTIAL INFORMATION
1.13 DEFAULT
1.14 DELAYS
1.15 DELIVERY/COMPLETION INTERVAL
1.16 DISCLOSURE OF DEFECTS
1.17 DOCUMENTATION
1.18 EQUAL OPPORTUNITY REQUIREMENTS
1.19 EQUIPMENT CLASSIFICATION
1.20 F.O.B.
1.21 FORCE MAJEURE
1.22 HAZARDOUS/TOXIC MATERIAL
1.23 HEADINGS
1.24 IMPLEADER
1.25 INDEMNITY
1.26 LIMIT OF LIABILITY - SUPPLIER
1.27 INDEPENDENT CONTRACTOR
1.28 INFRINGEMENT
1.29 INSOLVENCY
1.30 INSPECTION
1.31 INSURANCE
1.32 INVOICING
1.33 JOINT WORK PRODUCT
1.34 MARKING
1.35 MINORITY / WOMEN OWNED ENTERPRISES
1.36 REPORTS
1.37 MOST FAVORED CUSTOMER
1.38 NEW OR CHANGED ROUTINES, PROCEDURES OR SERVICES
1.39 NEW EQUIPMENT, SOFTWARE, FUNCTIONALITIES AND FEATURES
1.40 NONWAIVER
1.41 NOTICES
<PAGE>
CONTRACT NUMBER GA03598
1.42 ORDERING PROCEDURES
1.43 PACKING AND SHIPPING
1.44 PAYMENT
1.45 PUBLICITY
1.46 REGULATORY PROCEEDINGS
1.47 RELIABILITY
1.48 REMEDIES
1.49 SERVICES PERFORMED ON BUYER'S PREMISES
1.50 SEVERABILITY
1.51 SPECIFICATIONS FOR GOODS AND SOFTWARE
1.52 SUBCONTRACTORS
1.53 SURVIVAL OF OBLIGATIONS
1.54 TAX
1.55 TECHNICAL AUDIT FOR SOFTWARE FEATURE(S)
1.56 TERMINATION OF AN ORDER FOR CONVENIENCE
ARTICLE TWO SUPPORT AND WARRANTIES
2.1 CHANGES TO GOODS
2.2 CONTINUING AVAILABILITY OF REPLACEMENT PARTS
2.3 DISCONTINUANCE OF GOODS
2.4 EMERGENCY REPLACEMENT SERVICE
2.5 ENGINEERING COMPLAINTS
2.6 EXTRAORDINARY SUPPORT
2.7 INSTALLATION/CUTOVER ASSISTANCE
2.8 RADIO FREQUENCY ENERGY STANDARDS
2.9 REGISTRATION
2.10 RETURN OF GOODS
2.11 TECHNICAL SUPPORT
2.12 WARRANTIES
ARTICLE THREE ENGINEERING SERVICES
3.1 ENGINEERING SERVICES
3.2 ENGINEERING ERRORS
3.3 ENGINEERING DRAWINGS
ARTICLE FOUR INSTALLATION SERVICES
4.1 INSTALLATION SPECIFICATIONS
4.2 CHANGES TO INSTALLATION SERVICES
4.3 TESTING AND ACCEPTANCE
4.4 PREMIUM TIME ALLOWANCES
ARTICLE FIVE TRAINING SERVICES
<PAGE>
Contract Number GA03598
5.1 TRAINING PROGRAMS AND MATERIALS
5.2 CERTIFICATES OF COMPLETION
5.3 TRAINING DEVELOPMENT
ARTICLE SIX REPAIR SERVICES FOR GOODS NOT COVERED UNDER WARRANTY
6.1 REPAIR/REPLACEMENT OF GOODS
ARTICLE SEVEN SOFTWARE
7.1 SOFTWARE LICENSE
7.2 SOURCE CODE ESCROW
7.3 STANDARD OF PERFORMANCE
7.4 INSTALLATION AND ACCEPTANCE
7.5 REPLACEMENT MEDIA
7.6 SOFTWARE SUPPORT
7.7 ENHANCEMENTS
7.8 WARRANTIES, RELATED REMEDIES
7.9 AUTHORIZED USERS
ARTICLE EIGHT ENTIRE AGREEMENT AND SIGNATURE
<PAGE>
Contract Number GA03598
TERMS AND CONDITIONS
ALPHABETICAL LISTING
TITLE ARTICLE CLAUSE
- ----- ------- ------
ACCEPTANCE 1 1.5
ACCESS TO SUPPLIER'S PREMISES 1 1.6
ASSIGNMENT 1 1.7
AUTHORIZED USERS 7 7.9
BILLING 1 1.8
BILLING RECORDS 1 1.9
CERTIFICATES OF COMPLETION 5 5.2
CHANGES TO GOODS 2 2.1
CHANGES TO INSTALLATION SERVICES 4 4.2
CHOICE OF LAW 1 1.10
COMPLIANCE WITH LAWS 1 1.11
CONFIDENTIAL INFORMATION 1 1.12
CONTINUING AVAILABILITY OF
REPLACEMENT PARTS 2 2.2
DEFAULT 1 1.13
DEFINITIONS 1 1.1
DELAYS IN DELIVERY OR COMPLETION 1 1.14
DELIVERY/COMPLETION INTERVAL 1 1.15
DISCLOSURE OF DEFECTS 1 1.16
DISCONTINUANCE OF GOODS 2 2.3
DOCUMENTATION 1 1.17
EMERGENCY REPLACEMENT SERVICE 2 2.4
ENGINEERING COMPLAINTS 2 2.5
ENGINEERING DRAWINGS 3 3.3
ENGINEERING ERRORS 3 3.2
ENGINEERING SERVICES 3 3.1
ENHANCEMENTS 7 7.7
EQUAL OPPORTUNITY REQUIREMENTS 1 1.18
EQUIPMENT CLASSIFICATION 1 1.19
EXTRAORDINARY SUPPORT 2 2.6
F.O.B. 1 1.20
FORCE MAJEURE 1 1.21
HAZARDOUS/TOXIC MATERIAL 1 1.22
HEADINGS 1 1.23
IMPLEADER 1 1.24
INDEMNITY 1 1.25
INDEPENDENT CONTRACTOR 1 1.27
INFRINGEMENT 1 1.28
INSOLVENCY 1 1.29
<PAGE>
Contract Number GA03598
INSPECTION 1 1.30
INSTALLATION SPECIFICATIONS 4 4.1
INSTALLATION/CUTOVER ASSISTANCE 2 2.7
INSTALLATION AND ACCEPTANCE 7 7.4
INSURANCE 1 1.31
INVOICING 1 1.32
JOINT WORK PRODUCT 1 1.33
MARKING 1 1.34
MINORITY / WOMEN OWNED ENTERPRISES 1 1.35
MOST FAVORED CUSTOMER 1 1.37
NEW EQUIPMENT, SOFTWARE,
FUNCTIONALITIES AND FEATURES 1 1.39
NEW OR CHANGED ROUTINES,
PROCEDURES OR SERVICES 1 1.38
NONWAIVER 1 1.40
NOTICES 1 1.41
ORDERING PROCEDURES 1 1.42
PACKING AND SHIPPING 1 1.43
PARTIES WHO MAY PLACE ORDERS UNDER
THIS AGREEMENT 1 1.2
PAYMENT 1 1.44
PREMIUM TIME ALLOWANCES 4 4.4
PRICES FOR GOODS AND SERVICES
AND SOFTWARE FEES 1 1.4
PUBLICITY 1 1.45
RADIO FREQUENCY ENERGY STANDARDS 2 2.8
REGISTRATION 2 2.9
REGULATORY PROCEEDINGS 1 1.46
RELIABILITY 1 1.47
REMEDIES 1 1.48
REPAIR/REPLACEMENT OF GOODS 6 6.1
REPLACEMENT MEDIA 7 7.5
REPORTS 1 1.36
RETURN OF GOODS 2 2.10
SERVICES PERFORMED ON BUYER'S
PREMISES 1 1.49
SEVERABILITY 1 1.50
SOFTWARE LICENSE 7 7.1
SOFTWARE SUPPORT 7 7.6
SOFTWARE WARRANTIES 7 7.8
SOURCE CODE ESCROW 7 7.2
SPECIFICATIONS FOR GOODS AND SOFTWARE 1 1.51
STANDARD OF PERFORMANCE 7 7.3
SUBCONTRACTORS 1 1.52
SURVIVAL OF OBLIGATIONS 1 1.53
<PAGE>
Contract Number GA03598
TAX 1 1.54
TECHNICAL AUDIT FOR SOFTWARE FEATURES 1 1.55
TECHNICAL SUPPORT 2 2.11
TERMINATION OF AN ORDER FOR
CONVENIENCE 1 1.56
TERM OF AGREEMENT 1 1.3
TESTING AND ACCEPTANCE 4 4.3
TRAINING DEVELOPMENT 5 5.3
TRAINING PROGRAMS AND MATERIALS 5 5.1
WARRANTIES, RELATED REMEDIES (SOFTWARE) 7 7.8
WARRANTIES (GENERAL) 2 2.12
<PAGE>
Contract GA03598
GENERAL PURCHASE AGREEMENT
FOR
TELECOMMUNICATIONS NETWORK PRODUCTS
AND RELATED SERVICES
This Agreement is entered into as of June 10, 1998, between Ameritech Services,
Inc., a Delaware corporation, with principal offices at 2000 West Ameritech
Center Drive, Hoffman Estates, Illinois 60196-1025, for itself and on behalf of
its Affiliates, and Axiom, Inc. (hereinafter "Supplier"), a New Jersey
corporation, with principal offices at 4000 Midlantic Drive, Mt. Laurel, New
Jersey 08054, for the purchase of telecommunications network products and
related services and the licensing of software.
In consideration of the mutual promises set forth herein, the parties agree as
follows:
<PAGE>
Contract GA03598
ARTICLE ONE
GENERAL TERMS AND CONDITIONS
1.1 DEFINITIONS
-----------
For purposes of this Agreement, the following words shall be defined as
below:
"Affiliates" shall mean Ameritech Corporation and any business entity which
is, directly or indirectly, owned or controlled by Ameritech Corporation.
For the purpose of this Agreement, owned means Ameritech Corporation or any
Affiliate owns an equity interest (or equivalent thereof) of more than
fifty percent (50%). Affiliate also means any successor to Ameritech
Corporation, whether by change of name, dissolution, merger, consolidation,
reorganization or otherwise.
"Buyer" shall mean (1) Ameritech Services, Inc. or any Affiliate with
respect to any Orders placed by it, or (2) any Affiliate with respect to
Goods, Services and/or Software ordered by Ameritech Services, Inc. and
transferred to such Affiliate, or (3) Ameritech Services, Inc. with respect
to matters relating to or affecting the terms and conditions of this
Agreement.
"E" or "engineer" shall mean the performance of functions such as design,
layout and planning by Supplier.
"Enhancement" shall mean additional Software functional capabilities,
efficiency improvements, modifications and/or the introduction of
functionality not originally implemented by the previous version of the
object code or the implementation of said functionality on new or different
technologies.
"FPP" shall mean a firm price proposal received from Supplier in response
to Buyer's EF&I, F&I, and E&F Orders. An FPP shall include itemized pricing
and, as applicable, a detailed list of the Goods and/or Software,
description of the Services, technical configuration of the Goods, and
performance calculations.
2
<PAGE>
CONTRACT GA03598
"FPQ" shall mean a firm price quotation received from Supplier in response
to Buyer's Request for Proposal. An FPQ shall include itemized pricing and,
as applicable, a detailed list of the Goods and/or Software, description of
the Services, technical configuration of the Goods, and performance
calculations.
"Furnish Only" shall mean the supplying of Goods by Supplier with no
engineering and/or installation Services required from Supplier.
"Goods" shall mean all products manufactured and/or supplied by Supplier.
"I" or "install" shall mean the performance of installation, removal,
rearrangement and other related Services by Supplier.
"Materials" shall mean products furnished by Buyer for Supplier's
performance of certain Services under an Order placed under this Agreement.
Materials may include products purchased from Supplier under another
purchase order or products purchased from other suppliers of Buyer.
"Order" shall mean Buyers form of order for purchasing Goods and Services
and/or licensing Software hereunder.
"Services" shall mean, as applicable, the performance of engineering,
installation, assembly, repair, replacement, training or other work, other
than manufacturing, by Supplier under this Agreement.
"Software" shall mean computer programs manufactured or distributed by
Licensor and described in an Order, including machine-readable object code,
but not source code. Computer programs means a set of statements or
instructions, in any verbal, schematic, or other form, in any language or
mechanical or other translation thereof, which is capable, when
incorporated in a machine-readable medium of directly or indirectly causing
a machine or device having information processing capabilities to indicate,
perform, or achieve a particular function. Such programs may be contained
in any medium whatsoever, including hardware containing a pattern of bits
representing such programs. Software does not include the medium in or on
which it is contained. Software does include, but is not limited to forms,
screens, reports, routines, subroutines, scripts,
3
<PAGE>
CONTRACT GA03598
control statements, models, and templates. Software also includes all
Documentation and Updates normally provided by Supplier to its customers.
"Update" shall mean changes to the Software that remedy deficiencies or
improve operating performance without altering its basic functionality.
1.2 PARTIES WHO MAY PLACE ORDERS UNDER THIS AGREEMENT
-------------------------------------------------
Ameritech Services, Inc. and each of the Affiliates may place Orders under
this Agreement in accordance with the terms and conditions of this
Agreement. The ordering party shall be solely liable for all applicable
obligations of Buyer specified herein which arise from any Order(s) it may
place under this Agreement including, but not limited to, payment
obligations, and the ordering party shall have the benefit of all
applicable obligations of Supplier established in this Agreement in
connection with any Orders it may place. In addition, each of the
Affiliates shall also have the benefit of all warranties and other
agreements of Supplier hereunder with respect to Goods, Services and/or
Software ordered by Ameritech Services, Inc. and transferred to any such
Affiliate.
1.3 TERM OF AGREEMENT
-----------------
This Agreement is effective for the placement of Orders for Goods,
Services, and/or Software from June 1, 1998 through May 31, 2003, and shall
continue to be effective for Orders placed during successive period(s) of
one (1) year each unless terminated at the expiration of the initial or any
such successive period by either party on not less than one hundred-twenty
(120) days prior written notice to the other.
1.4 PRICES FOR GOODS AND SERVICES AND SOFTWARE FEES
-----------------------------------------------
Prices for Goods and Services and fees for Software ordered hereunder are
set forth in Appendix 1, attached hereto and incorporated herein, or as
otherwise agreed in writing by Supplier and Ameritech Services, Inc. In the
event Supplier furnishes any foreign manufactured Goods hereunder, Supplier
shall comply with the provisions in Appendix 2, attached hereto and
incorporated herein.
4
<PAGE>
CONTRACT GA03598
1.5 ACCEPTANCE
----------
All Goods, Services, and Software shall be received by Buyer subject to
Buyer's inspection and right of rejection. Buyer shall have no obligation
to accept and pay for Goods, Services, and/or Software which do not conform
to the Supplier published specifications and requirements established in
this Agreement. Buyer assumes no liability for Goods produced or shipped in
excess of the quantity specified in any Order placed hereunder.
A. Goods:
Except where Supplier performs installation Services pursuant to the
Order for the Goods, Buyer shall have thirty (30) days after delivery
of the Goods to Buyer's destination to inspect such Goods for shipment
deficiencies, defects and/or damage. Failure of Buyer to notify
Supplier of any shipment deficiencies, defects and/or damage to the
Goods within said period shall be deemed acceptance of the Goods.
Whenever Supplier performs installation Services for Goods furnished
by Supplier, acceptance of the affected Goods shall be in accordance
with the provisions in Article Four. If Buyer notifies Supplier of any
deficiencies, defects and/or damage, Supplier shall have thirty (30)
days from the date of the notice to cure such deficiencies, defects,
and/or damage unless another period or procedure specifically or
expressly applies.
B. Software:
Software which is to be used with Goods to be installed by Supplier
and which is provided with such Goods shall be accepted in accordance
with the provisions in Article Four relating to such Goods. All other
Software shall be accepted in accordance with the provisions in
Article Seven.
C. Services:
Buyer shall accept Services performed hereunder upon completion of the
Services conforming to the service order specifications to Buyer's
reasonable satisfaction, in accordance with the provisions in Articles
Two through Seven relating to such Services, unless otherwise
specified in this Agreement.
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All required documentation (including central office base drawings where
applicable) shall be provided to Buyer prior to and as a condition of
Buyer's final acceptance.
Acceptance in no way relieves Supplier of its responsibilities under the
WARRANTIES Clause.
1.6 ACCESS TO SUPPLIER'S PREMISES
-----------------------------
Supplier shall permit reasonable access to its premises in connection with
the purchase of Goods and Services hereunder. Buyer shall comply with all
plant rules and regulations and any governmental requirements while on
Supplier's premises. Supplier shall not require waivers or releases of any
personal rights from Buyer in connection with visits to Supplier's
premises, and no such release or waiver shall be pleaded by Supplier in any
action or proceeding.
1.7 ASSIGNMENT
----------
Supplier shall neither 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
Supplier under this Agreement or any Order hereunder without Buyer's prior
written consent. Any attempted assignment or delegation in contravention of
the above provisions shall be void. Any assignment of monies shall be void
to the extent that (1) Supplier has not given Buyer at least thirty (30)
days prior written notice of such assignment, or (2) such assignment
imposes upon Buyer obligations to the assignee additional to the payment of
such monies or precludes Buyer from dealing solely and directly with
Supplier in all matters pertaining to this Agreement or any Order
hereunder.
Buyer may assign this Agreement or any Order, in whole or in part, to
Ameritech Corporation or any of its Affiliates. Upon such assignment and
assumption of liability thereto by assignee, the assignor shall be
discharged of any liability pursuant to this Agreement.
Without limiting the generality of the foregoing, this Agreement shall be
binding upon and shall inure to the benefit of the parties' respective
successors and assigns.
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1.8 BILLING
-------
When applicable, supplier's billing for Goods and/or Services furnished
hereunder shall be in accordance with the standards 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 the Uniform
System of Accounts.
1.9 BILLING RECORDS
---------------
Supplier shall maintain, at no additional charge to Buyer, in accordance
with generally accepted accounting principles, complete and accurate
records related to amounts billed to and payments made by Buyer hereunder,
including records reflecting all labor and equipment hours, materials
acquired and work subcontracted to other parties in connection with
Supplier's performance hereunder. Supplier shall provide Buyer supporting
documentation concerning any disputed invoice within thirty (30) days after
Buyer notifies Supplier of a dispute, or, at Buyer's option, Supplier shall
permit Buyer to examine and audit these records at all reasonable times to
verify any amounts in dispute. Payments made under this Agreement shall be
subject to final adjustment as determined by such review. Supplier shall
retain such records for a period of three (3) years from the expiration of
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.
1.10 CHOICE OF LAW
-------------
The construction, interpretation performance of this Agreement and any
claims arising hereunder or related hereto, whether in contract or tort,
shall be governed by and construed in accordance with the domestic laws,
without regard to its conflict of law rules, of the State of Illinois, or
with respect to any Order, the domestic laws, without regard to its
conflict of law rules, of the State to which the Goods and/or Software are
shipped or to be shipped, or, in the case of Services, the State in which
the related Goods and/or Software are used, or, if no Goods and/or Software
are involved, the State where performed.
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1.11 COMPLIANCE WITH LAWS
--------------------
Supplier and all persons furnished by Supplier shall comply with the
provisions of the Fair Labor Standards Act, the Federal Occupational Safety
and Health Act, environmental laws (the subject of which may include, but
shall not be limited to, air, water, noise, soil, and land-fill areas), and
all other applicable federal, state and local laws, ordinances and
regulations in the performance of this Agreement, including the procurement
of required permits and certificates. "Performance" as used herein shall
include, but not be limited to, Supplier's furnishing, installation,
removal, processing, transportation, use, disposal, treatment, reclamation
or other method of handling Goods and/or Materials under this Agreement.
Supplier shall indemnify Buyer from and against any loss, damage or expense
sustained by reason of Supplier's failure to comply.
Supplier shall maintain throughout the term of this Agreement all federal,
state and local licenses, permits, and certificates necessary to perform
this Agreement, which shall be promptly furnished to Buyer upon request.
1.12 CONFIDENTIAL INFORMATION
------------------------
Any information, including but not limited to specifications, drawings,
computer programs, technical or business information or other data in
whatever form (hereinafter "Information"), furnished by a disclosing party
to a receiving party, whether in writing, orally or visually, under or in
contemplation of this Agreement or any Order or to which the receiving
party has access through its performance hereunder shall be considered
confidential and shall be subject to the following:
A. Receiving party shall restrict disclosure of the Information to
Supplier's employees with a "need to know" (i.e., employees that
require the Information to perform their responsibilities in
connection with this Agreement or an Order) and not disclose it to any
other person or entity without the prior written consent of disclosing
party;
B. Receiving party shall use the Information only for purposes of
performing under this Agreement;
C. Receiving party shall advise those employees who access the
Information of their obligations with respect thereto;
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D. Receiving party shall copy the Information only as necessary for those
employees who are entitled to receive it and ensure that all
confidentiality notices are reproduced in full on such copies; and
E. Receiving party shall return all copies of such Information to
disclosing party at disclosing party's request.
Receiving party recognizes and agrees that the unauthorized use or
disclosure of the Information would cause irreparable injury to disclosing
party for which it would have no adequate remedy at law, and that an actual
or contemplated breach of this Clause shall entitle disclosing party to
obtain immediate injunctive relief prohibiting such breach, in addition to
any other rights and remedies available to it. The obligations herein
contained shall expressly survive the termination or expiration of this
Agreement.
The Information shall not be considered confidential and shall not be
subject to the foregoing if receiving party can demonstrate that the
Information:
A. is or becomes available to the public through no breach of this
Agreement or an Order;
B. was previously known by receiving party without any obligation to hold
it in confidence;
C. is received from a third party free to disclose such Information
without restriction;
D. is independently developed by receiving party without the use of
disclosing party's Information;
E. is approved for release by written authorization of disclosing party,
but only to the extent of such authorization;
F. is required by law or regulation to be disclosed, but only to the
extent and for the purposes of such required disclosure; or
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G. is disclosed in response to a valid order of a court or lawful request
of governmental agency, but only to the extent of and for the purposes
of such order or request, provided that receiving party first notifies
disclosing party of the order or request and permits disclosing party
to seek an appropriate protective order.
H. No Information furnished by receiving party to disclosing party
hereunder or in contemplation hereof shall be treated as confidential
by disclosing party, with the exception of product specifications,
hardware, or software information, and/or performance data, pricing
information and proposals, operation manuals and related operating
instructions, unless specifically labeled as such by receiving party
in advance of its disclosure to disclosing party. In such event
disclosing party shall safeguard and protect receiving party's
confidential Information in accordance with the provisions above,
except disclosing party may disclose such Information to employees of
Ameritech Services, Inc. and the Affiliates with a need to know.
1.13 DEFAULT
-------
In the event either party shall be in breach or default of any term 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 Goods, Services, and/or Software already received and accepted
by Buyer and the right of Supplier to reject any Orders if Buyer is in
breach; provided, however, that Buyer may receive the liquidated damages
set forth in the DELAYS Clause without having first given the aforesaid
written notice of breach or default. In the event the parties established a
commitment, purchase level or discount program, the quantity covered by
such cancelled Order(s) shall be deducted from such commitment, purchase
level or volume required for discount entitlement. Each party shall
cooperate with the other in every reasonable way to facilitate the remedy
of a breach or default hereunder.
Failure by Buyer to pay any amount allegedly due under any Order which is
the subject of a good faith dispute shall not be deemed to be a breach or
default by Buyer as long as the parties are negotiating in good faith,
provided further, however, that if the amount in dispute has not been paid
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or settlement reached within 90 days after the invoice due date,
Supplier may consider Buyer in default of said payment.
1.14 DELAYS
------
Supplier shall notify Buyer in writing prior to the agreed upon date
of delivery of Goods and/or Software to the designated F.O.B.
point, or date of completion of Services, or any possible delays in
the agreed upon schedule for delivery of Goods/Software, or for
completion of Services. Buyer shall review such notice, and if Buyer
determines it is not adversely affected by such delay, then Buyer
will consent in writing to such delay and the paragraphs below shall
not apply, unless Supplier subsequently fails to meet the extended
delivery or completion date, in which event such paragraphs shall
apply retroactively from the original date for delivery/completion
if Buyer does not consent in writing to such further delay.
If such consent is not granted to Supplier and Supplier fails to
meet the agreed upon date of delivery or date of completion through
no fault of Buyer or for any reason not covered by the FORCE MAJEURE
Clause, then, because damages to Buyer arising from such delay would
be difficult if not impossible to ascertain; Following a period of
fifteen (15) days from the required delivery date, buyer shall be
entitled to receive as liquidated damages, and not as a penalty, an
amount calculated by multiplying one half percent (.5%) times the
price of the Order for each day delivery of the Goods and/or
Software or completion of the Services is delayed until actual
delivery/completion or Supplier's receipt of Buyer's notice of
cancellation of the Order pursuant to the DEFAULT Clause, whichever
first occurs. The amount of liquidated damages shall not exceed 10%
of the price of the Order. At Buyers option, Supplier shall either
credit the liquidated damages against the price of the applicable
Order or promptly make payment thereof to Buyer. Buyer's entitlement
to liquidated damages for delayed delivery/completion under the
above paragraph shall not be construed to limit, diminish or
prejudice any of Buyer's other rights or remedies provided at law or
in equity or as set forth in this Agreement, including Buyer's right
to cancel any Order hereunder at any time pursuant to the DEFAULT
Clause.
Notwithstanding the foregoing, Supplier shall use diligent efforts
to deliver the Goods and/or Software or complete the Services
subject to this Clause expeditiously.
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CONTRACT GA03598
1.15 DELIVERY/COMPLETION INTERVAL
----------------------------
Goods and Software shall be delivered to the specified F.O.B. point
and Services shall be performed according to Supplier's standard
intervals; provided, however, Supplier and Buyer may agree to a
delivery schedule applicable to an Order that results in a reduction
in the standard intervals. Should Buyer require delivery of Goods
and Software and/or completion of Services sooner than the standard
intervals, Supplier shall use diligent efforts to comply with such
request. Supplier's standard intervals are set forth in Appendix 2,
attached hereto and incorporated herein.
1.16 DISCLOSURE OF DEFECTS
---------------------
Supplier acknowledges and understands the critical importance to
Buyer of avoiding network or other service degradation, adverse
media coverage or other adverse publicity regarding its network
services, or the deterioration or breach of the security of Buyer's
telecommunications facilities or network. For purposes of this
section, "Event" shall mean any malfunction of the Goods and/or
Software ordered hereunder or any failure of such Goods and/or
Software to conform to the Specifications of the Buyer or Supplier.
An Event includes but is not limited to:
(a) Actual failures or adverse functioning of such Goods and/or
Software;
(b) Actual or known defects in design and/or manufacturing of
Goods and/or Software which are known by Supplier regardless
of whether such potential, suspected, actual or known defects
have resulted in any actual malfunctions or failures of Goods
and/or Software; and
(c) uses of such Goods and/or Software in combination with other
goods, products, or services, whether those of Supplier or
others, where such combined usage actually does result in
failures or adverse functioning of the Goods and/or Software.
Supplier agrees to be aware of and compile reports concerning any
actual Events. Supplier further agrees to notify the affected
Buyer(s) and Ameritech Services, Inc. of the occurrence of any Event
within four (4) hours of Supplier's first knowledge of the Event.
Such notification shall include any and all actions taken by
Supplier, its agents and contractors and by the owner or user of
Goods and/or Software which are subject to the Event. Within
forty-eight (48) hours after such notification, Supplier shall
provide the Buyer(s) with a complete and detailed written
description of
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CONTRACT GA03598
(1) the activities which led up to or preceded the Event, (2) the
cause or causes of, including any and all known contributing factors
to, the Event, (3) any and all actions taken by Supplier, its
agents, and contractors, and by the owner or user of the Goods
and/or Software which are subject to the Event to control, correct,
or contain the Event, (4) the date the Event will be resolved and
(5) any and all measures which can be reasonably taken to avoid or
stop the occurrence of the Event in the Buyer's(s') facilities or
network. Supplier shall continue to provide these written
descriptions to the Buyer(s) every forty-eight (48) hours until such
time as the Event has been successfully resolved or until Supplier
and the Buyer(s) agrees on their discontinuance. If requested by the
Buyer(s), Supplier shall provide identical descriptions to
Belicore's National Control Center or Ameritech Services Inc.'s
specified agent.
1.17 DOCUMENTATION
-------------
Supplier shall provide its standard documentation and/or
site-specific documentation in accordance with Bellcore document
TR-TSY-oo0454 Issue 1, Supplier Documentation for Network Elements
-------------------------------------------
and Ameritech document AM-TR-EEN-0o0o15 Issue 1, dated June 1987,
Ameritech Central Office Equipment and Engineering Requirements, and
----------------------------------------------------------------
any revisions thereto. Documentation and any subsequent changes or
updates shall reference Supplier's part numbers, issue numbers, and
date of issue. Such changes and updates shall be provided at no
charge to Buyer and shall include all documentation associated with
all changes and enhancements to the Goods and/or Software.
All requested or required documentation, information and copies
shall be provided in Supplier's standard format.
Buyer reserves the right to provide certain standard documentation
required for the installation of Supplier's Goods to third parties
for the sole purpose of having such third parties install Goods
purchased hereunder.
A. Supplier's standard documentation means all materials, whether
supplied in printed form or on magnetic tape or other media,
that explain or facilitate the use of the Goods and Software.
Such documentation includes, but is not limited to, equipment
specification drawings, circuit schematic drawings, and wiring
diagrams; technical specifications; maintenance, operation and
installation manuals or instructions; training materials; user
manuals; systems manuals; programming manuals; and flow charts
and logic diagrams.
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CONTRACT GA03598
Buyer may reproduce Supplier's standard documentation for its
internal use, provided that Buyer reproduces Supplier's copyright
or other proprietary legend.
B. At no additional charge, Supplier shall provide to Buyer's site
one (1) complete set of all applicable standard documentation
under each Order placed by Buyer.
C. Site-specific documentation includes, but is not limited to,
engineering and installation specifications, central office base
drawings, list of required Goods and Software. Buyer shall have
title to, ownership of, and all proprietary rights in all
site-specific documentation prepared or conceived or developed by
Supplier or its employees, agents and subcontractors in
contemplation of during the course of, or in connection with or
arising out of performance under an Order placed hereunder.
Supplier shall, as necessary to implement the foregoing sentence,
obtain from such employees, agents or subcontractors the
assignment, transfer and conveyance to Supplier or Buyer of any
proprietary rights, including copyright, that they may have in
such documentation. Site-specific documentation shall be
considered Buyer's confidential information and shall be subject
to the provisions in the CONFIDENTIAL INFORMATION Clause.
D. Supplier shall provide to Buyer's job site two (2) complete sets
of site-specific documentation upon commencement of the
installation Services where Supplier is performing such Services.
E. Buyer shall have title to, ownership of, and all proprietary
rights in all site-specific documentation as described in
Subsection 1.17.C, except Supplier's standard documentation,
prepared or conceived or developed by Supplier or its employees,
agents and subcontractors in contemplation of, during the course
of, or in connection with or arising out of performance under an
Order placed hereunder. Supplier shall, as necessary to implement
the foregoing sentence, obtain from such employees, agents or
subcontractors the assignment, transfer and conveyance to
Supplier or Buyer of any proprietary rights, including copyright,
that they may have in such documentation. Site-specific
documentation shall be considered Buyer's confidential
information and shall be subject to the provisions in the Section
entitled "CONFIDENTIAL INFORMATION."
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CONTRACT GA03598
1.18 EQUAL OPPORTUNITY REQUIREMENTS
------------------------------
Supplier shall comply, to the extent applicable, with the
NONDISCRIMINATION PROVISIONS set forth in Appendix 3, attached
hereto and incorporated herein.
1.19 EQUIPMENT CLASSIFICATION
------------------------
Prior to or upon shipment of Goods ordered hereunder, Supplier
shall, at no additional charge to Buyer, provide Buyer's engineering
department a list of the 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 system in
accordance with the provisions in the MARKING Clause.
1.20 F.O.B.
------
Goods shipped to Ameritech Services, Inc. shall be F.O.B. origin,
prepaid and added. Buyer shall select the shipping company to be
used for shipment of all Goods and it shall notify the Supplier of
the company's address and telephone number. In the event that Buyer
fails to make such notification prior to the shipment date, Supplier
shall select the standard carrier used for the product being
shipped.
Goods shipped to an Affiliate shall be F.O.B. destination, freight
prepaid and added as a separate item on Supplier's invoice, unless
otherwise indicated in Buyer's Order.
Purchases under this Agreement shall be shipped subject to freight
charges appropriate for goods classified pursuant to the National
Motor Freight Classification. Supplier shall use value resulting in
lowest charge where rate is dependent on released value.
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CONTRACT GA03598
1.21 FORCE MAJEURE
-------------
Neither Buyer nor Supplier shall be liable to the other for any
delay or failure in performance hereunder due to strikes, threatened
strikes, stoppage of work, embargoes, requirements imposed by
governmental regulations, civil or military authorities, or other
causes which are beyond the control and without the fault or
negligence of the party unable to perform (hereinafter "force
majeure condition"). The party delayed or unable to perform shall
give immediate notice to the other party.
In the event Supplier is the party delayed or unable to perform for
a period of three months or more, Buyer may elect:
(a) to terminate any affected Order or portion thereof relating to
Goods and/or Software not already delivered or Services not already
performed without liability to Supplier; or (b) to suspend
performance under the affected Order or portion thereof for the
duration of the force majeure condition, during which period Buyer
may buy elsewhere substitute goods, services and/or software and, if
applicable, to allow Supplier to resume performance of the affected
Order once the force majeure condition ceases, with an option to
extend the delivery/completion date up to the length of time the
force majeure condition endured or (c) to take other action as may
be agreed to by the parties. In the event the parties established a
commitment, purchase level or discount program, the quantity bought
or for which commitments have been made elsewhere shall be deducted
from such commitment, purchase level or discount program. Buyer
shall not be obligated to pay for Services (or in the event of
prepayment shall be entitled to a refund) to the extent and for the
duration that performance thereof is delayed or prevented pursuant
hereto. The above shall not prevent Buyer from subsequently
terminating the affected Order pursuant to the terms and conditions
specified in Section 1, Paragraph 56.
1.22 HAZARDOUS/TOXIC MATERIAL
------------------------
Supplier shall identify to Buyer, in advance of delivery, any toxic
substances or hazardous materials incorporated in or associated with
the Goods or Services provided hereunder and shall advise Buyer of
all precautions to be taken for their use and disposal. When
applicable, Supplier shall furnish Buyer a completed Material Safety
Data Sheet for any materials furnished by Supplier hereunder as
required by any federal, state or local laws, ordinances or
regulations. Any
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transportation or other handling of the hazardous materials by
Supplier shall be performed in accordance with all applicable
federal, state and local laws, ordinances and regulations.
1.23 HEADINGS
--------
The Clause headings inserted in this Agreement are for convenience
only and are not intended to affect the meaning or interpretation of
this Agreement.
1.24 IMPLEADER
---------
Supplier shall not implead or bring any action against Ameritech
Services, Inc., any Affiliates, Ameritech Corporation 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, Services and/or
Software provided under this Agreement and which is caused by
Supplier's negligence or willful misconduct.
1.25 INDEMNITY
---------
Supplier shall defend, indemnify and hold harmless Buyer, its
corporate affiliates, their officers, employees and agents from and
against any and all losses, damages, expenses (including attorney's
fees and costs), claims, suits and liabilities, whether based in
contract or tort (including strict liability), to the extent arising
out of or resulting from (a) Supplier's negligent acts, omissions,
or willful misconduct of those of persons, including subcontractors,
furnished by it, (b) any defective Goods provided hereunder which
cause personal injury, (c) assertions under Workers' Compensation or
similar laws made by persons furnished by Supplier. Buyer shall
promptly notify Supplier of any written claim, loss, or demand for
which Supplier is responsible under this Clause.
Without limiting the generality of the foregoing, to the extent that
Services are performed in the State of Ohio, it is expressly agreed
that Supplier hereby waives any immunity from its obligations to
defend, indemnify and hold harmless Buyer (or The Ohio Bell
Telephone Company) from and against claims by employees of Supplier,
which immunity would otherwise arise by operation of Ohio Revised
Code (S)(S)4l23.74 and 4123.741 and Section 35, Article II, Ohio
Constitution or any other statute or constitutional provision.
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1.26 LIMIT OF LIABILITY - SUPPLIER
-----------------------------
Supplier's liability is limited as follows:
A. In no event shall supplier be liable for any incidental or
consequential damages, lost profits, or lost data, or any other
indirect damages even if supplier has been informed of the
possibility thereof.
B. Except for any liability for indemnification under sections 1.25
or 1.28, the total liability of Supplier to Buyer under the
Agreement shall be limited to 100% of the amount of the price for
the specific product(s) which gives rise to or is the subject of the
claim, breach or failure; except for any instance of non-delivery of
a product or inoperability of the major hardware component parts,
such as CPU's, Disks, CD-ROM, DAT Drive, WWVB Clock, FE 56 and
PCB's, CLU & PCB, tape interface modules, port selectors, and BX.25
PCBs (collectively referred to as "Major Hardware Components"),
resulting in an inability to use the system of which it is a part,
in which case the total liability of Supplier shall be 150% of the
price paid for the product or Major Hardware Component not delivered
or inoperable.
1.27 INDEPENDENT CONTRACTOR
----------------------
Supplier shall perform hereunder as an independent contractor and
nothing herein shall be construed as creating any other relationship
between the parties hereto including, but not limited to,
partnership, agency or joint venture. Neither Supplier nor
Supplier's subcontractors nor the employees of any of them shall be
deemed for any purpose to be employees of Buyer. Accordingly,
neither Supplier nor Supplier's subcontractors nor their employees
shall be entitled as a result of this Agreement to any of the
benefits under any employee benefit plan Buyer presently has in
effect or may put into effect. Supplier and Supplier's
subcontractors shall be solely responsible for the withholding or
payment of all applicable federal, state and local personal income
taxes, social security taxes, and other payroll taxes with respect
to their employees, as well as any taxes or contributions imposed by
applicable state unemployment or workers' compensation act(s).
Supplier has sole authority and responsibility to hire, fire and
otherwise control its employees.
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Supplier shall either obtain an Employer Identification Number from
the federal government (and, where appropriate, local government) or
file appropriate notification of self-employed status with the
federal (and, where appropriate, state and local) taxing agencies
and shall provide Buyer a copy thereof upon request. Supplier shall
maintain such employer status throughout the term of this Agreement.
1.28 INFRINGEMENT
------------
Supplier shall defend, indemnify and hold harmless Buyer and its
corporate affiliates from and against any suits, claims, actions,
losses, damages, expenses (including attorney's fees and costs) or
liabilities that may result by reason of any alleged violation,
infringement or misappropriation of a United States patent, trade
secret, copyright, or other proprietary right based on Buyer's use
of any Goods and/or Software or the performance and receipt of
Services (including any materials and/or equipment utilized or
supplied in the performance of such Services) provided under this
Agreement. Buyer shall promptly notify Supplier of any claim of
infringement, violation or misappropriation for which Supplier is
responsible and shall cooperate with Supplier to facilitate the
defense or settlement of any such claim. Supplier or Supplier's
attorney(s) shall keep Buyer reasonably apprised of the continuing
status of the claim, including any lawsuit resulting therefrom, and
shall permit Buyer, upon Buyer's written request, to participate in
the defense or settlement of such claim. If the indemnifying party
denies that an infringement of a patent(s) has (have) occurred, it
shall, upon written request of the indemnified party, provide to the
indemnified party a written, competent opinion of counsel concluding
that there is no infringement or that the patent(s) asserted is
(are) invalid.
If the use of Goods, Software or Services shall be prevented or
appears likely to be prevented by court order or settlement
resulting from any such claim, Supplier shall, at its expense,
either: (a) by license or release from claim of violation,
infringement or misappropriation, procure for Buyer the right to
continue using such Goods or Software or receiving such Services; or
(b) modify any such Goods and/or Software or Services so that they
are functionally equivalent to the original Goods and/or Software or
Services, but are no longer subject to a claim of violation,
infringement or misappropriation; or (c) remove such Goods or
Software from the premises of Buyer and replace same with equally
suitable substitute goods or software free from claim of
infringement or misappropriation, or (d) if none of the foregoing
alternatives is reasonably available to Licensor, refund the license
fee of the Software to Licensee and accept its return. Licensor's
refund of the
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license fee under this Section shall not constitute an election of
remedies by Licensee or otherwise limit the rights and remedies
available to Licensee under this Agreement. Unless otherwise agreed
in writing by Buyer, Supplier shall use its commercially reasonable
best efforts to procure the right for Buyer to use the Goods,
Software or Services as provided in (a) above.
The provisions of this Section shall survive the expiration or
termination of this Agreement and the pertinent Order.
1.29 INSOLVENCY
----------
If Supplier becomes insolvent; if a receiver of Supplier's assets is
appointed; if Supplier takes any step leading to its cessation as a
going concern; or if Supplier either ceases or suspends operations
for reasons other than a force majeure, then Buyer may immediately
terminate this Agreement and/or any Order(s) hereunder on written
notice to Supplier unless Supplier immediately gives adequate
assurance, satisfactory to Buyer, of the future performance of this
Agreement or such Order(s).
If bankruptcy proceedings are commenced with respect to Supplier and
if this Agreement has not otherwise terminated, and Supplier has
failed to perform, then Buyer max' suspend all further performance
of this Agreement or any Order(s) hereunder until Supplier assumes
and provides adequate assurance of future performance or rejects
this Agreement or such Order(s) pursuant to (S)365 of the Bankruptcy
Code or any successor provision. Any such suspension of further
performance by Buyer pending Supplier's assumption or rejection will
not be a breach of this Agreement and will not affect Buyer's right
to pursue or enforce any of its rights under this Agreement or such
Order(s) or otherwise.
1.30 INSPECTION
----------
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 twenty-four (24) hour
written notice to Supplier. In such event, Supplier shall notify
Buyer's agent or, if unknown, Buyer (at 847-248-8851), 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.
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CONTRACT GA03598
1.31 INSURANCE
---------
Supplier shall maintain during the term of this Agreement: (a)
Workers' Compensation insurance as prescribed by the law of the
state in which Supplier's obligations under this Agreement are
performed, (b) Employer's Liability insurance with limits of at
least $2,000,000 for each occurrence, (c) Commercial General
Liability insurance (including but not limited to contractual and
products liability coverage) with combined single limits for each
occurrence of at least $3,000,000, and (d) if the use of motor
vehicles is required, Commercial Automobile Liability insurance
(including hired and nonowned coverage) with combined single limits
for each occurrence of at least $3,000,000 for bodily injury and
property damage. Neither Supplier nor Supplier's insurer(s) shall
have a claim, right of action or right of subrogation against Buyer
based on any occurrence insured against, in whole or in part, under
the foregoing insurance. Supplier's policy shall be endorsed to name
Ameritech Corporation. and its affiliates as additional insureds and
state "Ameritech Services, Inc. is to be notified in writing at
least sixty (60) days prior to cancellation of or any material
change in this policy." Supplier shall furnish a copy of the
endorsement and certificates evidencing the foregoing insurance
prior to performance hereunder and annually thereafter during the
term of this Agreement. Supplier's purchase of insurance shall not,
in any way, limit Supplier's liability under this Agreement.
1.32 INVOICING
---------
Supplier shall send invoices to the address specified in the Order
and rendered as follows:
A. Engineering -
100% upon Buyer's receipt of site-specific documentation.
B. Goods -
100% upon shipment of the Goods where Supplier does not
perform installation Services.
C. Software -
100% upon Supplier's shipment of the Software.
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CONTRACT GA03598
D. Installation Services -
100% upon Buyer's acceptance of the Services via Buyer's
execution of its Certificate of Acceptance.
E. Support Services -
An annual Software Support payment is due and payable
100% each January, unless otherwise specified per the
applicable Order.
Invoices shall contain the following applicable information: this
Agreement number; Order number; item number; Order date; invoice
date; invoice number; itemized description of the Goods, Software,
and/or Services; quantity, unit, unit price; total price; Continuing
Property Record (CPR) and Common Language--Equipment Identification
(CLEI) codes; remittance address; and payment terms. Supplier shall
include as a separate line item on the invoice prepaid
transportation charges that are to be charged back on the invoice
and shall furnish the supporting transportation bills with the
invoice.
1.33 JOINT WORK PRODUCT
------------------
The Agreement is the joint work product of the parties. For
convenience it has been drafted in final form by Buyer; accordingly,
in the event of any ambiguities, no inferences shall be drawn
against either party.
1.34 MARKING
-------
In addition to any marking otherwise required herein, Goods
furnished hereunder shall be marked, at no additional charge, in
accordance with the requirements set forth in the following Bellcore
documents and any revisions thereto:
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CONTRACT GA03598
GR383, Issue I, dated July 1997, Generic Requirements for
------------------------
Common Language Bar Code Labels;
--------------------------------
GR485, Issue 2, dated October 1995, Common Language CLEI Code
-------------------------
Assignment and Equipment Marking Requirements; and
----------------------------------------------
TR-EOP-000316, Issue 1, dated December 1986, Vendor/BOC
----------
Information Requirements for Servicing Defective Units
------------------------------------------------------
through the NPIAC.
------------------
Supplier shall, at no additional charge to Buyer, show, as
applicable, Buyer's Product Identifier (PID), a nine-digit number
for Goods, on all preliminary and final packaging and packing slips,
in addition to any other identification which might be requested by
Buyer. The PID shall be marked above the description of Goods and in
the same size print used to describe the Goods.
All Goods furnished hereunder shall be marked for identification
purposes with Supplier's coded name, model, serial number and month
and year of manufacture.
All packages containing circuit packs which are sensitive to
electrostatic discharge shall have warning labels. The labels shall
indicate that special handling is required.
Supplier shall remove any identification of Ameritech Services, Inc.
or any of the Affiliates from the Goods prior to any sale, use or
other disposition of Goods rejected, returned or not purchased by
Buyer.
1.35 MINORITY / WOMEN OWNED ENTERPRISES
----------------------------------
It is Buyer's policy that minority and women owned business
enterprises should have the maximum opportunity to participate in
the performance of its contracts. Supplier shall use diligent
efforts to further this policy by awarding subcontracts to minority
and women owned business enterprises or by using such enterprises to
provide goods and services incidental to this Agreement, with a goal
of awarding at least 5% of the contract price to such enterprises.
Upon request, Supplier shall furnish appropriate information about
its efforts to achieve this goal, including the identities of such
enterprises and amounts involved.
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CONTRACT GA03598
1.36 REPORTS
-------
Supplier shall provide to Ameritech Services, Inc., quarterly
reports containing the following information for the preceding
quarter:
Buyer's name, Order number, description of Goods, Software and
Services, price per unit, total price. Reports are to be sent to:
Ameritech Services, Inc.
2000 West Ameritech Center Drive
Hoffman Estates, Illinois 60196-1025
Attn: Diane P. Stott
Location 3A29D
1.37 MOST FAVORED CUSTOMER
---------------------
Supplier warrants that the prices for Goods, Software and Services
provided to Buyer under this Agreement and the terms and conditions
of this Agreement are not, at the date of order and shall not,
during the six month period following an Order, be less favorable
than the price and/or terms and conditions to any of Supplier's
other customers with respect to the same or like goods, software or
services in equal or less quantities. In the event Supplier offers,
during the term of this Agreement, lower prices and/or more
favorable terms and conditions to any such customer with respect to
the same or like goods, software or services than are offered to
Buyer, Supplier shall reduce the prices hereof correspondingly
and/or shall extend such terms and conditions to Buyer.
1.38 NEW OR CHANGED ROUTINES, PROCEDURES OR SERVICES
-----------------------------------------------
Supplier shall not implement or distribute to the Affiliates any
information regarding new or changed routines, procedures, or
services for Goods purchased or Software licensed under this
Agreement without sixty (60) days prior written notice to Ameritech
Services, Inc.
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CONTRACT GA03598
1.39 NEW EQUIPMENT, SOFTWARE, FUNCTIONALITIES AND FEATURES
-----------------------------------------------------
In the event at any time during the term of this Agreement Supplier
develops new equipment or software which is substantially similar to
any Goods or Software provided under this Agreement or any previous
agreement between Supplier and Buyer develops any modification,
upgrade or enhancement which provides additional or enhanced
functionalities and/or features for the Goods or Software provided
under this Agreement or any previous agreement between Supplier and
Buyer (any of the foregoing referred to as "Evolutionary Product")
and where any such Evolutionary Product is to be used primarily by
Supplier or Supplier's affiliate(s) in the provision directly by
Supplier or Suppliers affiliate of revenue-producing telephone
service via such Goods or Software to customers in the United States
and the Supplier or Supplier's affiliate provides such service as a
"Common Carrier" under the 1934 Communication Act, as amended
("Revenue Producing Service"), then Supplier shall make the
appropriate Evolutionary Product available to Ameritech Services.
Inc. and the Affiliates at the same time as such Evolutionary
Product is made generally available for such Revenue Producing
Service to Supplier's affiliate. Such Evolutionary Product shall be
provided at prices and/or fees negotiated in good faith, in
accordance with the terms and conditions of this Agreement.
Notwithstanding the foregoing, this provision shall not in any way
be applicable to any Evolutionary Product that is funded by a third
party or custom developed for a third party or where Supplier or
Supplier's affiliate does not have the legal right to provide such
Evolutionary Product to Buyer.
For purpose of this Clause, the term "Supplier's Affiliate" shall
mean (Supplier's name) or any corporation, company or other entity
doing business in the United States in which (Supplier's name) owns,
directly or indirectly, through a chain of such ownership, greater
than fifty percent (50%) of the outstanding shares or securities
representing the right to vote in the election of directors or other
managing authorities.
This Clause shall no longer apply in the event that there is a
merger, dissolution or liquidation, where the Supplier is not a
surviving party to such merger, dissolution or liquidation.
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CONTRACT GA03598
1.40 NONWAIVER
---------
Failure of either party to insist on performance of any provision,
term or condition of this Agreement or to exercise any right or
privilege hereunder shall not be construed as a waiver of such term,
condition, right or privilege in the future.
1.41 NOTICES
-------
Except as otherwise expressly provided herein, 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 given or made
by a reputable express delivery service or by certified or
registered mail addressed to the appropriate party or parties.
Notices will be deemed to have been received as of the earlier of
the date of actual receipt or, in the case of notices sent via U.S.
mail, three (3) days after mailing. A signed receipt shall be
obtained where a notice is delivered in person.
1.42 ORDERING PROCEDURES
-------------------
During the term of this Agreement, Buyer or an Affiliate may
purchase Goods, Software, and/or Services by issuing an Order to
Supplier, and Supplier shall provide the Goods, Software and/or
Services set forth on any such Order. Each Order issued by Buyer or
an Affiliate shall refer to, incorporate and be subject to the terms
and conditions of this Agreement. The terms and conditions of this
Agreement shall supersede any conflicting preprinted terms and
conditions on an Order or on Supplier's quotation, acknowledgement,
invoice or similar documents. No prepayment or minimum ordering
quantities or amounts shall apply to any Order and Orders shall be
in writing.
Orders shall specify as applicable, (a) description of Goods and/or
Software, inclusive of any numerical/alphabetical identifications;
(b) description of the Services; (c) required delivery and/or
completion date(s); (d) location to which the Goods and/or Software
are to be shipped and/or location at which Services are to be
performed; (e) location(s) to which documentation is to be
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CONTRACT GA03598
shipped; (f) location to which invoices shall be rendered for payment; (g)
Buyer's Order number; (h) prices, Buyer's Request for Proposal Number or
Supplier's FPQ Number, as appropriate; (i) this Agreement number; (j)
description and serial number, if known, of the specific equipment or site for
which Software is being furnished; and (k) any Materials to be provided by Buyer
and the location to which said Materials are to be shipped.
Buyer may at any time require additions, alterations, deductions or deviations
to an Order. Such changes and any adjustment resulting from such changes
including, but not limited to, schedules and prices, shall be mutually agreed
upon and subsequently detailed in a written revision to the original Order. Any
such change shall not result in a price increase unless such change results in
additional costs for Supplier, which shall be substantiated by Supplier.
Orders placed hereunder that are not electronically transmitted shall be sent to
the following address:
Axiom, Inc.
4000 Midlantic Drive
Mt. Laurel, New Jersey 08054
A. EF&I, F&I, and E&F Orders:
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 within four (4) weeks (three (3) weeks for
F&I Orders) from receipt of the Order or four (4) weeks prior to the
ship date, whichever is earlier. Supplier shall promptly notify
Buyer whenever it cannot meet the specified delivery and/or
completion date(s). Buyer and Supplier, at Buyer's option, may
negotiate new delivery and/or completion date(s) mutually acceptable
to both parties, which date(s) shall be acknowledged in writing by
Supplier within five (5) workdays of such agreement; absent any such
negotiations for a new date or an agreement by both parties for a
new date, Buyer's Order shall be deemed null and void.
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Should Buyer require Supplier's acceptance or rejection of an Order
in less than the applicable period specified above, Supplier shall
use its best efforts to respond within the interval requested by
Buyer.
Supplier shall provide an FPP within two to four (2 - 4) weeks of
receipt of all EF&I, F&I, and E&F Orders, but no later than five (5)
weeks prior to the scheduled ship date. In the event the FPP differs
from any previous FPQ (such difference shall be substantiated by
Supplier) or if an FPQ has not been previously provided to Buyer,
Buyer shall have up to four (4) weeks following receipt of the FPP
to 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 shall be
deemed null and void.
B. Furnish Only Orders:
Within five (5) workdays after Supplier's receipt of Furnish Only
Orders, Supplier shall, in writing, accept or reject the Order. In
the event Supplier fails to accept or reject any such Order within
the aforesaid period, such Order shall be deemed accepted. Supplier
shall promptly notify Buyer whenever it cannot meet the specified
delivery date. Buyer and Supplier, at Buyer's option, may negotiate
a new delivery date mutually acceptable to both parties, which date
shall be acknowledged in writing by Supplier within five (5)
workdays of such agreement; absent any such negotiations for a new
date or an agreement by both parties for a new date, Buyer's Order
shall be deemed null and void.
C. Installation Orders:
Prior to placement of an Installation Order, Buyer shall provide
Supplier its installation specifications and requirements and the
required job start and completion dates. Within two (2) weeks of
Supplier's receipt of such information, Supplier shall, in writing,
respond to Buyer's request. Supplier's response shall contain firm
prices for the installation Services requested by the Buyer.
Supplier shall notify Buyer whether Supplier can meet the specified
completion date and, in the event it cannot do so, Buyer and
Supplier, at Buyer's option, may negotiate a new completion date,
acceptable to both parties. In the event Supplier advises it cannot
perform the requested Services, Supplier shall return all
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CONTRACT GA03598
Buyer's installation specifications and requirements
within ten (10) workdays of such response.
Buyer shall have up to four (4) weeks following receipt
of Supplier's response to accept said response. Buyer's
acceptance 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 notifies Supplier that Buyer will not place an
Order, Supplier shall return all Buyer's installation
specifications and requirements within ten (10) workdays
of such notification.
1.43 PACKING AND SHIPPING
--------------------
Goods and Software furnished or required hereunder shall be packed,
marked and shipped by Supplier, at no additional charge, in
containers which are suitable for prevention of damage under normal
handling during loading/unloading, shipping and storage and in
accordance with the requirements of the carrier and the
specifications of Buyer. Buyer's specifications include Ameritech
document SHP92706AM, Issue 1, dated May 1988, Packing, Packaging and
-------------
Palletization, and Bellcore document TR-TSY-000081, Issue 1, dated
-------------
December 1984, Packaging, Packaging Palletization and Marking
----------------------------------------------
Requirements as such documents may be revised from time to time. In
------------
the event of a conflict or inconsistency between TR-TSY-000081 and
SHP92706AM, SHP92706AM shall prevail. Furthermore, Goods, as
applicable, shall be protected against electrostatic discharge in
accordance with the handling and packing requirements in Belleore
document TA-TSY-000870 Issue 1, dated April 1988, Electrostatic
-------------
Discharge Control in the Manufacture of Telecommunications
----------------------------------------------------------
Equipment.
-----------
Supplier shall ship Goods and Software in the quantities and at the
times specified by Buyer, unless otherwise agreed upon, in
accordance with the routing instructions given by Buyer. Supplier
shall combine all same day shipments to the same destination and
shall mark the shipping label with the destination exactly as shown
in the Order. Use the value resulting in the lowest charge where
rate is dependent on released value. Do not insure. The Order Number
shall be marked on all packages, shipping papers, and subordinate
documents. A packing memorandum must accompany each shipment, and
when more than one package is shipped, the one containing such
memorandum must be identified.
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CONTRACT GA03598
1.44 PAYMENT
-------
Payment of invoices shall be due forty five (45) days after receipt
of an invoice properly rendered and in keeping with the terms and
conditions set forth at 1.44, 4.3 and 7.4 of this Agreement;
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 a delay in the completion date or
precludes Buyer's use of the already delivered Goods or Software
under such Order.
1.45 PUBLICITY
---------
Supplier shall not identify, either expressly or by implication,
Buyer or its corporate affiliates, use any of their trademarks,
trade names, service marks or other proprietary marks, or reference
this Agreement in any advertising, press releases, publicity matters
or other promotional materials without the prior written permission
of Ameritech Services. Inc.
1.46 REGULATORY PROCEEDINGS
----------------------
If requested by Buyer, Supplier will provide information concerning
this Agreement and purchases hereunder which Buyer requires to
respond to regulatory requests and proceedings.
1 47 RELIABILITY
-----------
Goods and Software furnished hereunder shall meet the reliability
standards specified in Supplier's published technical
specifications; provided, however, such standards shall not be less
than the reliability standards specified in the Bellcore documents
listed in Appendix 4, attached hereto and incorporated herein, as
such documents may be revised from time to time. In the event any
such reliability standards are not maintained, in addition to all
other remedies available to Buyer, Supplier shall repair or replace
the affected Goods and correct the affected Software at no charge to
Buyer during the applicable Warranty Period.
1.48 REMEDIES
--------
The rights and remedies herein provided shall be cumulative and
shall be in addition to any other remedies available at law or in
equity.
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CONTRACT GA03598
1.49 SERVICES PERFORMED ON BUYER'S PREMISES
--------------------------------------
Supplier shall be solely responsible for all personnel furnished by
Supplier working in harmony with all other persons when Supplier is
performing Services on Buyer's premises. Supplier shall comply with
all Buyer's rules and regulations and any governmental security
requirements while on Buyer's premises. Supplier shall not interfere
with Buyer's operations or unreasonably encumber Buyer's premises
with any material, equipment, vehicles, waste materials or rubbish.
Supplier's personnel shall be limited to the immediate area of the
Services.
If any part of the Services performed by Supplier under an Order is
dependent upon work done by others, Supplier shall inspect such
other work and promptly report to Buyer any defect that renders such
other work unsuitable for Supplier's proper performance of its
Services. Supplier's silence shall constitute approval of such
other work as fit, proper and suitable for Supplier's performance
of the Services under such Order.
1.50 SEVERABILITY
------------
If any provision of this Agreement shall be held invalid or
unenforceable, such provision shall be deemed deleted from this
Agreement and replaced by a valid and enforceable provision which so
far as possible achieves the same economic and other benefits for
the parties as the severed provision was intended to achieve, and
the remaining provisions of this Agreement shall continue in full
force and effect.
1.51 SPECIFICATIONS FOR GOODS AND SOFTWARE
-------------------------------------
Goods and Software furnished hereunder shall conform to Supplier's
published technical specifications, literature and documentation in
effect on the date of this Agreement as such specifications,
literature and documentation may be modified in accordance with the
provisions in this Agreement, provided that the Goods and Software
conform to and are in compliance with the requirements in the
Ameritech and/or Bellcore documents listed in Appendix 4.
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1.52 SUBCONTRACTORS
--------------
No provisions of this Agreement or of any agreement between Supplier
and any subcontractor shall be construed as an agreement between
Buyer and any subcontractor. Supplier shall be as fully responsible
to Buyer for the acts and omissions of any of Supplier's
subcontractors or of any other contractors engaged by the
subcontractor, as Supplier is for the acts and omissions of
Suppliers own employees.
Any agreement Supplier enters into with a subcontractor for any
Services to be provided hereunder shall be in writing and signed by
Supplier and the subcontractor, and it shall set forth the agreement
of the subcontractor to comply with the requirements set forth in
the COMPLIANCE WITH LAWS Clause and all other applicable
requirements and specifications set forth herein. Supplier's
subcontractor shall maintain such insurance as will adequately
protect the subcontractor against any loss, damage, claim or
liability resulting from its performance hereunder including, but
not limited to, Workers' Compensation, Employer's Liability,
Commercial Automobile Liability, and Commercial General Liability
insurance. Supplier shall indemnify Buyer against all loss, cost,
expense or liability incurred by Buyer on account of Supplier's
failure to secure such written agreement by each subcontractor.
1.53 SURVIVAL OF OBLIGATIONS
-----------------------
The parties' obligations under this Agreement and/or any Order
placed hereunder which by their nature are intended to continue
beyond the termination or expiration of this Agreement shall survive
the termination or expiration of this Agreement.
1.54 TAX
---
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 Order, Goods
purchased hereunder are tax exempt under one of the following tax
exempt certificate numbers:
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CONTRACT GA03598
Illinois, 17097312; Indiana, 003228312-001-7; Michigan, 36-3258076;
Ohio, 99-029467 or 98-001120; and Wisconsin, 368774.
Supplier shall pay 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 paid on its behalf by Supplier, Supplier hereby assigns and
transfers to Buyer and authorizes Buyer to subrogate to all rights,
claims, interests and rights of action that Supplier may have
against any taxing authority for refund of any taxes paid. Supplier
authorizes Buyer to sue, compromise or settle in Supplier's name and
Buyer is fully substituted for Supplier and subrogated to all of
Supplier's rights with respect to obtaining refund of such taxes. It
is agreed 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.
1.55 TECHNICAL AUDIT FOR SOFTWARE FEATURE(S)
---------------------------------------
Supplier agrees to furnish, at no charge, all documentation
associated with the results of distributable Bellcore and/or
independent assessment on Technical Audits conducted on all new
Software features funded by Supplier. Said documentation will be
furnished to Buyer, within ten (10) working days of deployment of
such Software as part of a First Office Application (FOA) or no
later than ten (10) working days before the general availability
(GA) release of such Software, whichever comes first.
All Technical Audit results should be sent to:
Ameritech Network Services
Vendor Relations Manager
Loc. 4C82
Ameritech Center Drive
Hoffman Estates, IL. 60196-1025
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1.56 TERMINATION OF AN ORDER FOR CONVENIENCE
---------------------------------------
Buyer may at any time, up to ten days before the scheduled shipment
date, terminate any Order placed hereunder, in whole or in part, by
written notice to Supplier, for any or no reason. Buyer shall notify
Supplier as soon as Buyer knows of the need to terminate any Order
or portion thereof. In the event that Supplier has initiated work to
fill said Order, Supplier shall attempt to obtain another Buyer for
the Order for a period of thirty (30) business days. In the event
that Supplier is unable to obtain another Buyer for said order,
Buyer shall be responsible to reimburse Supplier for all costs
incurred to fill the Order, up to and including the date of Buyer's
notification of termination. Should this occur, Supplier shall
submit an invoice to Buyer for all costs, along with verification of
those costs.
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ARTICLE TWO
SUPPORT AND WARRANTIES
2.1 CHANGES TO GOODS
----------------
In the event any Product Change affects price, operation,
reliability or life of the Goods or the interchangeability of the
Goods with other goods, Supplier shall notify Buyer in writing
thereof not less than ninety (90) days prior to any planned change,
and in the event Buyer and Supplier fail to reach agreement thereon
Buyer shall have the right to terminate any and all Orders, in whole
or in part, for the Goods affected by such change. Notwithstanding
any notice requirement above to the contrary, Supplier shall
immediately notify Buyer when it determines that a Class A Product
Change (as defined hereinafter) shall be made.
Notwithstanding any notice requirements to the contrary elsewhere in
this Agreement, Product Change Notices for all changes that may
impact system functionality shall be provided, at no charge, to the
individuals designated in Appendix 5, attached hereto and
incorporated herein (Buyer reserves the right to revise such
designees at any time upon proper notice to Supplier). Product
Change Notices shall contain all the information set forth in
Appendix 5 (Supplier may copy and use the form, Product Change
Notice, contained in said Appendix). If Supplier cancels a Product
Change Notice, Supplier must so notify the individuals designated in
Appendix 5 hereto and state the reason for cancellation and what
action, if any, is to be taken in locations where the change may
already have been implemented.
Supplier shall determine the classification of any proposed Product
Change. In the event that Buyer and Supplier fail to reach agreement
on any such classification, then Buyer shall have the right to
terminate any or all Orders, in whole or in part, for Goods affected
by such Product Change without penalty or obligation of any kind.
A. Class A Product Change
Class A Product Changes are changes required to correct
a product deficiency (e.g., safety or fire hazard,
electrically or mechanically inoperative, unsatisfactory
operation, design
35
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CONTRACT GA03598
defects, product does not operate as documented). Class A Product Changes
require appropriate and timely action, ensuring ongoing system functionality by
the Supplier to correct all affected Goods, whether in the hands of Supplier or
Buyer, including spare Goods. In some cases, however, it may be necessary to
make a change to only a limited number of a particular type of product. (This
occurs when it is necessary to correct a condition that occurs only in certain
product combinations or with the use of certain options). Such conditions shall
be described in the Product Change Notice.
Supplier shall, no later than thirty (30) days from the date of the notification
of a Class A Product Change, provide a schedule, acceptable to Buyer, for
promptly implementing, at Supplier's expense, such changes with respect to Goods
in Buyer's possession. Such implementation shall include the deinstallation, if
necessary, of existing Goods and the engineering and installation of replacement
or modified Goods or any additional materials. Such obligation shall apply to
all Class A Product Changes made within ten (10) years from the effective date
of this Agreement or five (5) years from the date of shipment hereunder of the
affected Goods, whichever is longer.
For Class A Product 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. Unless otherwise agreed to between the parties, Supplier
shall not furnish component parts for Class A Product Changes to Buyer for
Buyer's assembly into circuit packs or printed wiring boards.
Supplier shall furnish quarterly status reports to Buyer for all Class A Product
Changes of which Supplier has notified Buyer. This report shall contain the
following information:
- Product Change Notice Number
- Identity of the Goods
- Model or part number and issue
- CLEI code, if applicable
- Date Product Change Notice issued
- Product ship date
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- Installation or application responsibility
- Locations at which change is to be made, (if the
Supplier maintains these records)
- Date completed, by location
- Changes on hold at any location
B. Class B Product Change
Class B Product Changes are 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.
All Goods shipped to Buyer after the effective date of any Class B
Product Change shall incorporate such change. Any Goods shipped to
Buyer prior to such date may be modified by Buyer at its option and
expense.
C. Class D Product Change
Class D Product Changes are design improvements, component changes,
new features, or other minor improvements not sufficiently
significant as to require a Class B classification. Class D Product
Changes are also used when a change is required to facilitate
manufacture or to effect a cost reduction not sufficiently important
to justify a Class B classification. Class D Product Changes are
automatically applied to undelivered Goods and are not suggested for
application to Goods previously shipped to Buyer.
If the Goods being changed require a CLEI code change, Supplier
shall contact Bellcore Language Standards Division directly for the
new code. A CLEI code change is required if:
(a) A changed plug-in-product is not bidirectionally
interchangeable physically, electrically or functionally
with its predecessor.
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(b) A manufacturer's part, model, drawing or identification
number is changed for that product.
Any Goods or Services provided to Buyer to effect a Product Change
hereunder shall be warranted in accordance with the provisions in
the WARRANTIES Clause.
2.2 CONTINUING AVAILABILITY OF REPLACEMENT PARTS
--------------------------------------------
Supplier shall offer for sale to Buyer, for a minimum period of ten
(10) years from the effective date of this Agreement, or five (5)
years from the last shipment, hereunder of the affected Goods,
whichever is longer, replacement parts or functionally equivalent
replacement parts for such Goods. During said period, should
Supplier fail to provide said parts or to obtain another source of
supply on terms acceptable to Buyer, then Supplier shall be required
to provide to Buyer, at Buyer's request, the technical information
or any other rights required, so that Buyer is able to obtain
replacement parts on its own or through a third party. The technical
information includes, by example and not by way of limitation: (a)
the most current documentation, including maintenance manuals,
procedures and the like required to perform maintenance; (b)
manufacturing drawings and specifications of raw materials and
components comprising such parts; (c) manufacturing drawings and
specifications covering special tooling and the operation thereof,
and (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. 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.
2.3 DISCONTINUANCE OF GOODS
-----------------------
Notwithstanding the prior termination or expiration of this
Agreement, Supplier shall provide Buyer advance written notice off
six (6) months prior to discontinuing the manufacture of any Goods
covered by this Agreement. Buyer shall have six (6) months from the
end of the six (6) month notification period to place all final
Orders and to take delivery of said Orders.
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CONTRACT GA03598
2.4 EMERGENCY REPLACEMENT SERVICE
-----------------------------
In the event of an emergency or an out-of-service condition
attributed to Goods furnished hereunder, Supplier agrees, for ten
(10) years from the effective date of this Agreement, or five (5)
years from the last shipment hereunder of the affected Goods,
whichever is longer, to ship functionally equivalent replacement
Goods within twenty-four (24) hours of verbal notification by Buyer.
If replacement Goods will not be available for shipment within
twenty-four (24) hours, Supplier shall notify Buyer immediately by
telephone and (a) arrange with Buyer for an alternate shipping
schedule acceptable to Buyer; (b) telephonically assist Buyer in
repair of the defect; and/or (c) supply field engineering assistance
to restore service. Buyer shall call (609) 866-0015 to obtain
emergency replacement service.
2.5 ENGINEERING COMPLAINTS
----------------------
Buyer may issue to Supplier an engineering complaint to report
unsatisfactory conditions related to the Goods, Software and
Services. Supplier shall take such action as may be necessary to
resolve Buyer's engineering complaint in a timely manner and to
Buyer's satisfaction in accordance with the applicable sections of
Ameritech document AM 010-700-010, Issue E, dated January 1990,
Ameritech Engineering Complaint Practices, as revised from time to
time. Supplier shall promptly acknowledge receipt of Buyer's
engineering complaint no later than seven (7) days from the date of
the engineering complaint and shall indicate in said acknowledgment
the projected date of final resolution of the engineering complaint
(The date of final resolution shall not exceed forty-five (45) days
from the date of the engineering complaint).
Issuance of an engineering complaint shall not be a precondition for
claims under warranty.
2.6 EXTRAORDINARY SUPPORT
---------------------
Notwithstanding the prior termination or expiration of this
Agreement, Supplier shall provide immediate extraordinary support
for Goods and Software furnished hereunder in order to assist Buyer
in restoring service which has been disrupted due to a catastrophic
condition. Such support includes, but is not limited to,
provisioning of materials and/or manpower at the then-current
agreement price or, in the absence of any agreed price, at
Supplier's then-current published prices or a premium price as
mutually agreed. If such condition occurs, Supplier shall waive any
delivery
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schedule priorities to the extent it is reasonably able to do so.
This Clause shall not be construed to require Supplier to maintain
any inventories whatsoever or to maintain any position or status of
readiness to perform in the future.
2.7 INSTALLATION/CUTOVER ASSISTANCE
------------------------------
If requested by Buyer, Supplier shall make available at the
installation site a field engineer to render assistance for
installation/cutover with respect to any Goods and/or Software
ordered hereunder. Such assistance shall be provided by Supplier at
the agreed upon rates reflected in Appendix 1, of this Agreement.
2.8 RADIO FREQUENCY ENERGY STANDARDS
---------------------------------
Goods furnished hereunder shall comply, to the extent applicable,
with the requirements of Part 15 of the Federal Communications
Commission's (hereinafter "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 in violation of Part
15, Supplier shall provide Buyer with information relating to
methods of suppressing such interference. If such interference
cannot be suppressed during the ninety (90) day period after the
Goods are placed into service, Supplier shall, upon request by
Buyer, accept return of the Goods and render to Buyer a full refund
of the purchase price for the Goods together with any engineering
and/or installation charges. Supplier shall be responsible for
removal of such Goods and restoration of the site and records to
their original condition. Nothing herein shall be deemed to diminish
or otherwise limit Supplier's obligations under the WARRANTIES
Clause.
2.9 REGISTRATION
------------
If Goods furnished hereunder are subject to Part 68 of the FCC's
Rules and Regulations, such Goods shall be registered under and in
compliance with Part 68 including, but not limited to, all labeling
and customer instruction requirements to the extent applicable on
the date of shipment.
2.10 RETURN OF GOODS
---------------
Surplus Goods resulting from Supplier's overshipments to Buyer or
performance of engineering and/or installation Services hereunder
shall be returned to Supplier. Buyer shall promptly notify
40
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Supplier of receipt of surplus Goods, and Supplier shall render Buyer a
full refund or credit for such Goods for which payment has been made.
Supplier shall bear risk of loss and damage and pay transportation charges
for the return of such Goods.
2.11 TECHNICAL SUPPORT
-----------------
For a minimum period often (10) years from the effective date of this
Agreement, or five (5) years from the last shipment hereunder of the
affected Goods, whichever is longer. Supplier shall provide Buyer ongoing
technical support for such Goods by making a qualified technician available
via telephone, seven (7) days-a-week, twenty-four (24) hours-a-day; Buyer
shall call (609) 866-0015 for such technical support. Supplier shall notify
Buyer in writing of any change to such telephone number. When required,
Supplier shall provide field assistance to resolve any problem. Supplier
shall provide such technical support at Supplier's then-current "Most
Favored Customer" prices.
2.12 WARRANTIES
----------
A. Supplier warrants to Buyer that:
Supplier shall convey good and valid title to the Goods; the Goods and
Services shall be provided free and clear of any liens or
encumbrances; and use of the Goods, Services and Software shall not
infringe any United State patents, copyrights or other proprietary
rights.
During the Warranty Period, the Goods shall be free from defects in
design, material and workmanship; shall conform to and perform in
accordance with all applicable supplier published specifications and
the mutually agreed requirements herein and Supplier's written
representations; and shall function properly when installed.
During the Warranty Period, the Software shall conform to and perform
in accordance with all applicable specifications; as described in the
"Product Release Notice," for the current release in use by Ameritech,
and shall be capable of operating fully and correctly with the
Supplier provided Goods acquired hereunder or the Supplier provided
equipment for which the Software is furnished.
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CONTRACT GA03598
Supplier shall have the right and power to grant any Software license
rights granted hereunder to Buyer; shall not have entered into
agreements or commitments which are inconsistent with or conflict with
such Software license rights; Buyer shall have quiet enjoyment and use
of the Software as long as such license rights shall remain in effect;
and, Buyer complies with all terms and conditions of such Software
license.
Services shall be performed in a safe, good and workmanlike manner in
conformity with all applicable specifications and requirements and in
accordance with applicable professional standards.
B. The term Warranty Period, as used herein, means the period of time
listed below:
Goods twelve (12) months
Software twelve (12) months
Services twelve (12) months
C. The Warranty Period shall commence as follows:
For Goods and/or Software installed by Supplier, upon Buyer's
acceptance via its Certification of Acceptance which shall be when
installation is complete, equipment is turned-up into production mode
and functioning properly in accordance with product specifications.
For engineering and/or installation Services performed in connection
with EF&I, F&I, and Installation Orders, upon Buyer's acceptance via
its Certification of Acceptance;
For engineering Services performed in connection with an E&F Order,
upon Buyer's acceptance of the Goods furnished thereunder, and
For all other Services, upon Buyer's acceptance of the Services.
D. All repairs of or replacements for Goods still under warranty
hereunder shall be warranted, as provided in this Clause, from the
date the repaired or replacement Goods are received by Buyer for the
remainder of the original unexpired Warranty Period (calculated from
the
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date the defective Goods were shipped to Supplier) or for a period of
ninety (90) days, whichever is longer.
E. Upon Buyer's discovery of a defect during the Warranty Period:
As discussed in Appendix 1 to this Agreement, Supplier shall repair or
replace Goods discovered to be defective without any additional
charge. Buyer shall bear all transportation costs and risk of
intransit loss or damage in connection with all Goods returned to
Supplier and all Goods shipped to Buyer under this Clause. Such repair
or replacement, if required, shall be completed within thirty (30)
days of receipt by Supplier or notification by Buyer, unless Buyer
agrees otherwise. Buyer shall bear the costs associated with removal
of the defective Goods and installation of the repaired or replacement
Goods, including all labor expenses. Buyer shall have the option of
removing the defective Goods and installing the repaired or
replacement Goods or of having Supplier remove the defective Goods and
installing the repaired or replacement Goods consistent with the
pricing reflected in Supplier's price list in Appendix lB of this
Agreement.
Supplier shall, at Buyer's option, promptly reperform Services
discovered defective at no cost to Buyer.
Supplier shall promptly correct any defects discovered in the Software
or related documentation and provide copies of the same at no charge
in accordance with the provisions in the SOFTWARE SUPPORT Clause.
F. All warranties shall survive inspection, acceptance and payment.
G. Except as provided, incorporated into, or referred to in this
Agreement or in an Order, which is accepted by Supplier, there are no
other express or implied warranties applicable to this Agreement.
Supplier and Buyer specifically exclude any implied warranties of
merchantability and fitness for a particular purpose regarding the
hardware, services, or software provided by Supplier hereunder.
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CONTRACT GA03598
ARTICLE THREE
ENGINEERING SERVICES
3.1 ENGINEERING SERVICES
--------------------
Supplier shall perform engineering Services and provide related
documentation and drawings in accordance with Ameritech document
AM-TR-EEN-000015, Issue 1, dated June 1987, Ameritech Central Office
------------------------
Equipment and Engineering Requirements, as revised from time to time.
--------------------------------------
3.2 ENGINEERING ERRORS
------------------
When Supplier furnishes engineering Services, Supplier shall be responsible
for engineering errors and correct such errors without additional charge to
Buyer. In addition, Supplier shall render Buyer a refund or credit for any
Goods delivered to Buyer as a result of such engineering errors in
accordance with the first paragraph in the RETURN OF GOODS Clause.
3.3 ENGINEERING DRAWINGS
--------------------
Supplier shall furnish all central office base drawings to Buyer within the
periods specified elsewhere in this Agreement; provided that final central
office base drawings shall be provided to Buyer no later than two (2) weeks
after Supplier's issuance of the Completion Report. Whenever engineering
Services result in changes, additions to or removal of existing equipment,
Supplier shall mark and return the existing central office base drawings
where Supplier does not perform central office records maintenance
functions for Buyer. Any drawing such as interface drawings prepared by
Supplier as a result of or in contemplation of Services provided under this
Agreement and paid for by Buyer shall be and remain Buyer's property.
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ARTICLE 4
INSTALLATION SERVICES
4.1 INSTALLATION SPECIFICATIONS
---------------------------
Supplier shall perform installation Services and provide related
documentation in accordance with Supplier's installation specifications
and/or the manufacturer's product specific installation manuals. Such
specifications shall comply with the requirements contained in Ameritech
document AT-TR-EEN-000011, Issue G, dated September 1992, Ameritech
---------
Installation Administrative and Workmanship Requirements, as revised from
--------------------------------------------------------
time to time by Buyer. Where Supplier's installation specifications
conflict with the requirements set forth in the above referenced Ameritech
document, Supplier shall promptly notify Buyer's representative, who shall
be responsible for resolving the conflict.
Supplier shall provide Buyer Supplier's pre-installation site preparation
requirements that are to be completed by Buyer. Such requirements shall be
provided to Buyer within a mutually agreed time-frame prior to the ship
date for Goods purchased hereunder or the installation commencement date
for Materials supplied by Buyer.
4.2 CHANGES TO INSTALLATION SERVICES
--------------------------------
Buyer may require additions, alternations, deviations or deductions to the
installation Services specified in any Order placed hereunder. Such changes
and any adjustment to the schedule or prices in the affected Order
resulting from such changes shall be mutually agreed upon and set forth in
a written revision to the original Order. Any such change shall not result
in a price increase unless said change results in additional costs for
Supplier, which shall be substantiated by Supplier.
4.3 TESTING AND ACCEPTANCE
----------------------
Buyer shall have the right to observe all phases of the installation
Services for the purpose of inspecting such Services and Supplier shall
keep Buyer advised of job progress. Unless otherwise specified in an Order,
when in Supplier's opinion it has completed the Services, Supplier or
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Supplier and Buyer, at Buyer's option, shall promptly conduct Supplier's
testing procedures for the Goods and/or Services utilizing the applicable
test sheets. Supplier's testing procedures shall demonstrate that the Goods
conform one hundred percent (100%) to Supplier's technical specifications
on an "end to end" total system basis and/or that the Goods will perform at
one hundred percent (100%) of the engineered load. At such time as all such
testing procedures have been completed to Supplier's satisfaction, Supplier
shall give Buyer written notice thereof via Buyer's Completion Report and
Certification of Acceptance together with copies of its test results.
Upon receipt of Supplier's written notification, Buyer shall have an
acceptance period of thirty (30) days to perform acceptance testing to
verify that the Goods and/or Materials and installation Services comply
with all applicable specifications and requirements. Upon successful
completion of its acceptance testing, Buyer shall promptly provide Supplier
written notice by executing its Certification of Acceptance. Goods and/or
Services shall be deemed accepted on the date specified in the
Certification of Acceptance.
In the event the Goods and/or Services fail Buyer's acceptance testing,
Buyer shall promptly give Supplier written notice of such failure to
conform to the applicable specifications and requirements and specify the
reasons for such failure. Supplier shall promptly correct the deficiencies
in the Goods and/or Services at no additional charge to Buyer. Supplier
shall use diligent efforts to complete the corrections within thirty (30)
days of notice thereof or such longer period as may be mutually agreed
upon. When such deficiencies have been corrected to Buyer's satisfaction,
Buyer shall promptly provide Supplier written notice by executing its
Certification of Acceptance. Goods and Services shall be deemed accepted on
the date specified in the Certification of Acceptance.
In the event Supplier fails to correct any deficiencies by the end of the
initial testing period or any extension thereof, Buyer may, at its option,
terminate its Order for the Goods upon written notice to Supplier, and
Supplier shall promptly remove such Goods.
Whenever Supplier installs Materials provided by Buyer and said Materials
and/or the installation Services fail Buyer's acceptance testing, Buyer
shall promptly give Supplier written notice of such failure. Supplier shall
cooperate with Buyer to determine the cause of such failure. In the event
the Materials are found to be the sole cause of such failure, Buyer shall
promptly provide Supplier written notice of its acceptance of the Services
by executing its Certification of Acceptance. Services shall be deemed
accepted on the date specified in the Certification of Acceptance. On the
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other hand, if the Materials are not the sole cause of such failure,
Supplier shall use diligent efforts to correct the nonconforming Services
within seven (7) days of notice thereof. When such deficiencies have been
corrected to Buyer's satisfaction, Buyer shall promptly provide Supplier
written notice by executing its Certification of Acceptance. Services shall
be deemed accepted on the date specified in the Certification of
Acceptance.
4.4 PREMIUM TIME ALLOWANCES
-----------------------
Premium time allowances and night shift bonuses resulting from Supplier's
performance of installation Services shall be billable to Buyer when such
expenses are necessary due to Buyer's requirements, provided that such
expenses are authorized by Buyer in writing prior to commencement of such
work.
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CONTRACT GA03598
ARTICLE FIVE
TRAINING SERVICES
5.1 TRAINING PROGRAMS AND MATERIALS
-------------------------------
Supplier shall, if requested by Buyer, train Buyer's personnel in the
operation of Goods and Software provided under this Agreement and shall
provide hands-on, task oriented training programs and materials covering
maintenance, repair, trouble shooting, installation and acceptance testing
of such Goods and Software at a charge to be negotiated, not to exceed
Supplier's then current published prices. All training provided hereunder
shall comply with the requirements set forth in TR-OPT-000839, Issue 3,
dated December 1991, Supplier Provided Training Generic Requirements and
-----------------------------------------------
any revisions thereto.
If requested by Buyer, Supplier and buyer shall negotiate to provide
training services to train the trainer and provide all related instructor
materials and student manuals. Whenever Buyer places an Order for such
training, said Order shall include (a) the requirements for certifying
Buyer's instructor, (b) a list of materials including, but not limited to,
instructor's guide, student manuals, slides, videos and equipment, and (c)
applicable prices.
Whenever Supplier travels to Buyer's location to provide training, unless
otherwise specified in the applicable Order, Buyer shall pay all reasonable
travel and living expenses incurred by Supplier in connection with
Supplier's presentation of such training. Supplier shall make every effort
to obtain the best possible prices for travel and lodging, including, but
not limited to coach class air travel. Such expenses shall be billed at
cost and itemized on Supplier's invoice. Supplier shall furnish adequate
supporting documentation to substantiate such charges. Training shall be
scheduled at times and locations mutually agreed upon by the parties.
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5.2 CERTIFICATES OF COMPLETION
--------------------------
At the completion of a training course, Supplier shall, if requested by
Buyer, inform Buyer in writing of those students who have, in Supplier's
judgment, satisfactorily completed the course and shall furnish Buyer with
a certificate of completion for each individual who satisfactorily
completed the course.
5.3 TRAINING DEVELOPMENT
--------------------
If requested by Buyer, Buyer and Supplier shall negotiate to develop
educational programs, including instructor's manuals and related student
materials, to allow Buyer to train its own employees. Development of such
programs shall be provided at the prices and in accordance with the terms
and conditions agreed upon by Supplier and Buyer in a separate agreement at
the time of such request.
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ARTICLE SIX
REPAIR SERVICES FOR GOODS NOT
COVERED UNDER WARRANTY
6.1 REPAIR/REPLACEMENT OF GOODS
---------------------------
Notwithstanding prior termination or expiration of this Agreement, Supplier
shall provide repair Services for Goods furnished hereunder for a period
often (10) years from the effective date of this Agreement, or five (5)
years from the last shipment, hereunder of the affected Goods, whichever is
longer. Supplier shall ship the repaired Goods within three (3) weeks of
receipt of the defective Goods (with the concurrence of Buyer, repair may
be made on-site by Supplier as scheduled by Buyer). In cases where Goods
require more than three (3) weeks to repair or where Goods are determined
to be beyond repair or repair costs are expected to exceed 50% of the cost
of a replacement, Supplier shall so inform Buyer. At Buyer's option,
Supplier shall (a) sell Buyer a replacement at the then-current agreement
price or at a price agreed upon by Supplier and Buyer; and/or (b) tag the
unrepairable Goods as "JUNK" and return them to Buyer at Buyer's expense
(the term JUNK shall appear on the outside of the package); and/or (c) take
the necessary steps to dispose of the unrepairable Goods, consistent with
sound commercial practices and environmental laws, and pay to Buyer the
salvage value, if any.
Charges for repairs shall be at the then-current agreement price or, in the
absence of any agreed price, at Supplier's then-current published "Most
Favored Customer" prices for such Services thereafter. Buyer shall bear all
transportation costs and risk of in-transit loss or damage in connection
with Goods returned to Supplier under this Clause, and Supplier shall bear
all transportation costs and risk of in-transit loss or damage in
connection with all repaired Goods or replacements shipped to Buyer under
this Clause. Goods repaired hereunder shall be repaired to a good operating
condition and shall be warranted as provided in the WARRANTIES Clause for a
period of ninety (90) days from the date of Buyer's receipt of the repaired
Goods. Replacement Goods shall be warranted as provided in the WARRANTIES
Clause.
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CONTRACT GA03598
Goods repaired hereunder shall be clearly marked with Supplier's name and logo
and, except in instances where Supplier is providing bar code labeling in
accordance with the technical requirements contained herein, with the warranty
expiration date for said Goods.
It is expressly understood that this Agreement does not grant Supplier an
exclusive privilege to repair any or all of the Goods purchased under this
Agreement and under any previous agreement for which Buyer may require repair.
In the event Buyer elects to have such Goods repaired, altered or in any way
serviced by a third party or if Buyer elects to perform such service within
Buyer's facility and Buyer's use of such Goods which have been repaired, altered
or serviced by such a third party or by Buyer affects in any measurable way the
performance of any Goods or switching systems provided hereunder or under any
previous agreement between Buyer and Supplier, Supplier shall have no liability
whatsoever and Supplier shall have no obligation to accept, at Supplier's Repair
Services Center, any such altered Goods which do not meet the applicable
Bellcore specifications. Notwithstanding the foregoing, in no event shall
Supplier take any steps to prevent any third party from repairing, altering or
otherwise servicing any Goods purchased under this Agreement or any previous
agreement and Supplier shall negotiate in good faith and/or mutually agree to
provide some third party repairers, which have successfully passed Bellcore
audit(s), with components, and documentation (CP schematics) and license
software and upgrades thereto for the purpose of repairing the Goods based on
Supplier's criteria, fees and terms and conditions
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ARTICLE SEVEN
SOFTWARE
7.1 SOFTWARE LICENSE
----------------
Supplier hereby grants to Buyer a perpetual, irrevocable, nonexclusive
license to use, the Software (including Updates to such Software) ordered
hereunder and any subsequent Enhancements ordered hereunder as long as
Buyer is in material compliance with the terms of such license. Buyer shall
have the right to make one archival and backup tape copy of the Software,
which will be updated weekly on tape, provided that Buyer reproduces and
includes any copyright or other proprietary notice on that copy of the
Software.
Supplier shall furnish Buyer all applicable Software documentation prior to
or upon delivery of any Software ordered hereunder at no additional charge
to Buyer.
Notwithstanding documentation distribution requirements in this Agreement
to the contrary, distribution of certain proprietary Software
documentation, including procedural code and developmental documentation
required for development, maintenance, and implementation of source code,
shall be limited to Buyer's employees with a need to know.
7.2 SOURCE CODE ESCROW
------------------
If Supplier already has placed the source code and related Documentation
for Software licensed by Customer into an escrow account pursuant to
Supplier's licensing agreements with other users of the Software, within
ten (10) days of Supplier's receipt of Buyer's payment of the Software
license fee (in the case of a year-to-year license, Buyer's initial annual
payment), Supplier shall add Buyer as a designated beneficiary of said
escrow account and shall inform the escrow agent of Buyer's entitlement to
the source code pursuant to the provisions of the escrow agreement.
Supplier shall provide Buyer with a copy of the escrow agreement, and, if
appropriate, Buyer shall be added as a party to said agreement.
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If Supplier has not placed the Software into an escrow account, if the
existing escrow account does not include each of the provisions set forth
in the remainder of this paragraph, or if Buyer cannot be made a
beneficiary of an existing escrow account, within thirty (30) days of a
written request from Buyer, Supplier shall deposit the source code and
related Documentation for the Software into an escrow account, pursuant to
reasonable and appropriate agreements entered into by and between Supplier,
Licensee, and the escrow agent. At a minimum, the escrow agreements shall
provide that (i) the copy of the source code placed in escrow shall be
reproduced and maintained on magnetic medium compatible with the equipment
on which Buyer uses the Software, (ii) the source code shall be accompanied
by full documentation therefore, and (iii) when a change is made to the
source code during the term of Buyer's license of the Software, the revised
source code, as well as the immediately preceding version of the source
code, shall be deposited into escrow no later than seven (7) days after the
source code has been revised. The escrow agreements shall authorize the
escrow agent to release the versions of the source code held in escrow to
Buyer, without the need for Supplier's concurrence, immediately upon
Buyer's notification to the escrow agent that one of the events set forth
in paragraphs A and B, below, has occurred and Supplier has failed to
immediately provide the source code to Buyer.
Provided that Buyer is not in material default under this Agreement or the
applicable Order, Supplier shall provide Buyer at no charge, with one (1)
complete copy of the then-current source code for Software licensed by
Buyer, along with all of the Documentation therefor, immediately upon the
occurrence of all or any of the following events:
(A) Supplier is in material breach of pursuant Agreement and has been
provided notice of such and has failed to cure such breach within the time
period as stated by the licensing Agreement.
(B) Supplier's failure to continue to do business in the ordinary course.
7.3 STANDARD OF PERFORMANCE
-----------------------
If requested by Buyer, Supplier shall perform tests, which utilize feature
interaction at the engineered full load condition, to demonstrate to Buyer,
----
or its designated agent, verification of the load handling capacity of the
Software prior to delivery. In addition, Supplier shall demonstrate feature
operation that complies with Supplier's technical specifications and the
requirements of an Order.
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7.4 INSTALLATION AND ACCEPTANCE
---------------------------
Upon installation of the Software by Supplier, Supplier shall successfully
conduct all of its own testing procedures on the Software. Upon completion
of Supplier's testing or upon installation by Buyer in the event Supplier
does not install the Software, Buyer may operate and test the Software for
a period of thirty (30) consecutive days or such longer period as may be
mutually agreed upon to verify that the Software runs the Supplier specific
equipment or performs the specific function for which it is licensed in
conformity with the requirements of the Order and Supplier's published
documentation in effect on the date of delivery of said Software. Buyer's
use of the Software for commercial purposes during said period shall not
constitute acceptance of the Software. Upon successful completion of the
acceptance testing, Buyer shall promptly provide Supplier written notice of
its acceptance by executing its Certification of Acceptance. The Software
shall be deemed accepted on the date specified in the Certification of
Acceptance.
In the event the Software fails the acceptance testing during the aforesaid
testing period, Buyer shall notify Supplier and Supplier shall promptly
correct any deficiencies without charge to Buyer. Buyer and Supplier may
extend the testing period to allow Supplier to correct any deficiencies
upon mutual agreement within thirty (30) days of the date of notice of such
deficiencies. When such deficiencies have been corrected to Buyer's
satisfaction, Buyer shall provide Supplier written notice by executing its
Certification of Acceptance. The Software shall be deemed accepted on the
date specified in the Certification of Acceptance. In the event Supplier
fails to correct any deficiencies by the end of the initial testing period
or any extension thereof, Buyer may, at its option, terminate its Order for
the Software upon written notice to Supplier, and Supplier shall promptly
remove the Software from Buyer's equipment.
7.5 REPLACEMENT MEDIA
-----------------
In the event any or all of the Software media or documentation is damaged
while in the possession of Buyer, at Buyer's request, Supplier shall
furnish Buyer, subject to its existing license, replacement media at
Supplier's actual costs for effecting the replacement.
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7.6 SOFTWARE SUPPORT
----------------
Supplier shall support up to the most recent two versions/major revisions
of Software licensed to Buyer hereunder for ten (10) years from the
effective date of this Agreement, or five (5) years from the last shipment,
hereunder of the affected Goods, whichever is longer. Such support shall
include, but not be limited to, installation, maintenance, error
correction, Enhancements, Updates, and other technical assistance.
Supplier shall maintain the Software in an operable condition in accordance
with Supplier's documentation. Such maintenance shall include all
corrections, replacements or modifications that are required to debug or
remedy any errors in the Software which affect the use of the Software and
all updates and changes to the related documentation, consistent with
Appendix 6, "Maintenance Support Services."
7.7 ENHANCEMENTS
------------
Supplier shall, at no charge, provide Ameritech Services, Inc. and each
Affiliate availability information and price estimates as applicable
regarding Enhancements developed by Supplier. If requested by Ameritech
Services, Inc. and/or any Affiliate(s), Supplier shall, at no charge,
provide each such requesting party's designated engineering center, as soon
as commercially available, one (1) copy of all applicable Software
documentation, except proprietary documentation such as source code, for
each Enhancement issued by Supplier to enable each such party to evaluate
the applicability and/or the effect of the Enhancement on its operations.
In the event the Enhancement affects the standard documentation for
associated equipment, Supplier shall also provide, at no charge, one (1)
copy of such revised documentation.
In the event Ameritech Services, Inc. and/or any Affiliate desires such
Enhancements, Supplier shall license such Enhancements to such party in
accordance with the terms and conditions of this Agreement and at an
applicable fee, if any. Supplier shall be responsible for advance testing
to ensure that the Enhancements meet Supplier's technical specifications
and Buyer's requirements of such Software. Buyer shall not be required to
license any particular Enhancement and may license subsequent Enhancements
without obligation to pay for any intervening Enhancements that have not
been licensed by Buyer.
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CONTRACT GA03598
Moreover, Supplier agrees to use diligent efforts to develop custom
Enhancements if requested by Buyer in accordance with the prices and terms
and conditions agreed upon between the parties in a separate agreement at
the time of such request.
7.8 WARRANTIES, RELATED REMEDIES
A. Axiom (Licensor) warrants and represents to Ameritech (Licensee) as
follows:
(1) It is the owner of and/or has the right to grant a license to use
the Software specified in this Agreement and each Order free of all
liens, claims, encumbrances, and other restrictions and without
otherwise violating any rights of any third party, including any
patent, copyright, trade secret or other proprietary rights;
(2) There are no actual or threatened suits or claims pending that
involve Licensor's right to grant a license to use the Software or
Licensor's alleged violation of the foregoing proprietary rights;
(3) Licensee shall quietly and peacefully possess the Software and
other materials provided subject to Licensee's compliance with and in
accordance with the provisions of Supplier's License Agreement and
Licensee's right of quiet enjoyment and use and possession of the
Software and other materials will not be interrupted or otherwise
disturbed by Licensor, its officers, directors, employees, agents,
successors, or assigns or any person, firm or entity asserting a claim
under or through Licensor.
(4) Software licensed under an Order shall be free of material defects
and shall function in conformance with its Specifications for a period
of twelve (12) months from the acceptance date of the Software or for
the period set forth in Licensor's standard warranty, whichever is
greater;
(5) All Documentation provided by Licensor to Licensee in connection
with the Software shall be accurate; and
(6) Any software support and other services that Licensor provides to
Licensee under this Agreement shall be provided by personnel who are
trained and skilled in the provision of such services and shall be
provided in a professional, effective, and efficient manner that
equals or exceeds the then-current industry standard for such
services.
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CONTRACT GA03598
(7) YEAR 2000 CAPABILITIES
----------------------
(a) Warranties, Related Remedies: Supplier warrants that any
version of the Licensed Software licensed hereunder shall
properly perform Year 2000 Processing as defined below. This year
2000 processing warranty shall begin upon acceptance of the
Licensed Software and shall continue through December 31, 2004,
or until expiration of any other warranty applicable thereto,
whichever is later. Upon receiving notice thereof Supplier shall
promptly remedy any breach of this warranty at no additional
charge to the Licensee by 1) correcting the version of the
Licensed Software currently used by the Buyer so as to make it
capable of correctly performing Year 2000 Processing; or 2)
providing replacement software for the Licensed Software which is
equivalent in function to the Licensed Software and which
correctly performs Year 2000 Processing.
(b) If, after using diligent efforts, Supplier is unable to
accomplish either of the foregoing options within ninety (90)
days of Buyer's notification to Licensor of any failure of the
Licensed Software to correctly perform Year 2000 Processing,
Supplier shall refund to Buyer, as the exclusive remedy under
this Section, no more than 150% of any and all amounts paid by
Buyer with respect to the Licensed Software and refund any
prepaid unearned maintenance or support fees. The amount of the
refund will be calculated as the amounts paid by Buyer plus the
amounts paid in excess of that price for any equivalent
replacement product, all not to exceed 150% of said amounts paid
for the non-Year 2000 ready product.
B. Upon learning of any other defects in the Software or any failure of
the Software to function in conformance with its Specifications during
the warranty period, Licensor promptly and at no charge to Licensee
shall repair or replace the Software, whichever is appropriate.
Licensor's remedial efforts shall be performed in accordance with the
response times and remedial measures set forth in Appendix 6 of this
Agreement entitled "MAINTENANCE SUPPORT SERVICES."
C. Upon learning of any inaccuracy in Documentation provided to Licensee,
Licensor promptly and at no charge to Licensee shall correct or
replace the inaccurate Documentation.
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CONTRACT GA03598
D. The warranty set forth in Section 7.8A(3) shall no longer apply if the
Software is modified or enhanced by Licensee without Licensor's
consent, and such consent shall not be unreasonably withheld.
7.9 AUTHORIZED USERS
----------------
Buyer shall not permit Software to be used by any other person except for
employees, agents, consultants, contractors, and outsourcers who need to
use the Software in performance of their duties for Buyer and who are
authorized and enabled by Buyer to access and utilize the Software.
A. In the event Buyer outsources a site(s), in whole or in part, Supplier
agrees to grant Software access to an outsourcer.
B. Buyer may move Software to a outsourcer upon thirty (30) days written
notice to Supplier at no charge.
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CONTRACT GA03598
ARTICLE EIGHT
ENTIRE AGREEMENT AND SIGNATURE
The terms contained in this Agreement, the attachments and specifications
referred to herein which are incorporated herein by this reference, shall
constitute the entire agreement between Buyer and Supplier with respect to the
subject matter hereof, shall supersede all prior understandings or
communications, written or oral, 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 subsequently in Supplier's quotation, acknowledgment,
invoice or in any other communication from Supplier. Acceptance of Goods and
Services, 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 conflict with this
Agreement, this Agreement shall control.
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CONTRACT GA03598
IN WITNESS WHEREOF, this Agreement, consisting of nine (9) articles and eight
(8) appendixes has been executed by a duly authorized representative of each
Party on the date indicated below.
AXIOM, INC. AMERITECH SERVICES, INC. for itself and
Supplier on behalf of its Affiliates
Signature: /s/ Greg R. Fegley Signature: /s/ Thomas E. Richards
-------------------------- -------------------------------
Printed Name: GREG R. FEGLEY Printed Name: Thomas E. Richards
----------------------- -----------------------------
Title V.P. OPERATIONS SUPPORT Title Executive VP: Communications & Info.
------------------------------- ------------------------------------
Date: 6-24-98 Date: 6-23-98
------------------------------- -------------------------------------
Reviewed for Vendor Negotiation Content by [SIGNATURE APPEARS HERE] 6/11/98
APPROVED AS TO LEGAL FORM [SIGNATURE APPEARS HERE] ATTORNEY ASI 6/10/98
------------------------ -------
Approved By [SIGNATURE APPEARS HERE] Finance Director
------------------------
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EXHIBIT 10.11
- --------------------------------------------------------------------------------
PRODUCT SCHEDULE NO. 97050894*P*2
This Product Schedule No. 97050894*P*2 ("this Product Schedule") is attached to
the Special Provisions Module - Products and is a part of Agreement No.
97050894, effective as of August 11, 1997, between US WEST Communications, Inc,
("Customer") and Axiom Inc., ("Supplier"). This Product Schedule is subject in
all respects to the Special Provisions Module - Products, except that in the
event of a conflict between this Product Schedule and the Special Provisions
Module - Products, the terms and conditions of this Product Schedule shall
govern for the purposes of this Product Schedule only.
- --------------------------------------------------------------------------------
Scope:
This Product Schedule establishes the terms and conditions under which
Customer may purchase the Product(s) set forth herein from Supplier from
time to time.
"Customer" for purposes of this Product Schedule means U S WEST
Communications, Inc.
Supplier's Owner's Manuals, Specifications, Software Test Plans,
Performance Standards and Pricing, specific to the SMDR Platform, are
incorporated herein by this reference as Supplier's representations.
Customer shall have the right to rely upon such representations, except as
expressly modified or otherwise deleted in this Agreement.
Supplier hereby represents that its Station Message Detail Recording (SMDR)
will function as follows: The Station Message Detail Recording (SMDR)
System will provide detail call record billing information for subscribed
business customers for the Business and Government Services section of U S
WEST Communications, Inc. This product receives Automatic Message
Accounting (AMA) data from the AMA host CSC/MDR call screening module.
Term Of Product Schedule: This Product Schedule shall be effective from
March 31, 1998 through March 31, 1999 unless terminated or canceled
pursuant to the terms of this Agreement. The parties may extend the term or
any subsequent term of this Product Schedule by executing a separate
written agreement of extension prior to the expiration of the term.
Product(s) Description And Purchase Price: Supplier shall provide to Customer
the Product(s) described in Exhibit "A," entitled "Product and Price List,
Station Message Detail Recording (SMDR) System," dated, March 31, 1998, a copy
of which is attached hereto and by this reference incorporated herein.
Warranty Term:
Supplier's warranty for Product(s) shall commence upon delivery of SMDR
Platform and Acceptance of supporting software and shall continue
thereafter for a period of one (1) year(s).
The warranty period for any Product(s) corrected or replaced shall be
ninety (90) days from Delivery of the corrected or replaced Product(s) or
the original warranty period, whichever period is longer.
Transportation, Shipping And Delivery:
Supplier shall ship Product(s) in accordance with Customer's instructions.
Product(s) shall be shipped FOB Origin, Freight Prepaid and Added to
Invoice (PPA). Customer shall have the right to designate the
transportation carrier in any Order(s). Unless otherwise agreed,
transportation charges shall be limited to actual common carrier charges.
Customer may specify the Product(s) freight classifications in its
Order(s).
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 Product(s) can normally
be shipped. Nothing herein shall be construed to alter or amend the
Delivery schedule contained in any Order(s).
Customer shall obtain and maintain, at its expense, cargo and riggers
insurance to cover the value of Product(s) being shipped.
Supplier shall be responsible for all misdirected shipments. Misdirected
shipments from Supplier shall be immediately reshipped by Supplier prepaid
to the correct destination. Customer shall be entitled to deduct from
Supplier's invoice all costs incurred by Customer due to the reshipping.
Supplier's noncompliance with Customer's routing instructions shall render
Supplier liable for all risk of loss and excess freight charges. Supplier
shall be responsible for all charges in excess of normal pricing, which
result from deviation from normal service or routing by Supplier.
Supplier shall not use premium transportation without the prior written
authorization of Customer. Premium transportation is any service that
produces a transportation cost higher than the cost that would be incurred
on a shipment via normal transportation.
It is understood and agreed to between the parties that Supplier remains
fully responsible to meet the Delivery Date as specified in any Order(s)
even though the Product(s) are shipped FOB Origin, Freight Prepaid and
Added to Invoice or per Customer's instructions. If Supplier fails to meet
a Delivery Date due to the sole negligence or fault of the common carrier
transporting said Product(s), Supplier agrees to use its best efforts to:
(a) reposition Customer to the front of
Page 1 of 3
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need to know.
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Supplier's manufacturing schedule; and (b) promptly and immediately reship
replacement Product(s) to Customer. Supplier will use reasonable efforts to
maintain a safety stock inventory on long lead Product(s).
Supplier shall Deliver Product(s) in time to meet the Delivery Date;
provided however: (a) Supplier shall not Deliver any Product(s) prior to
the Delivery Date without Customer's consent; and (b) Customer and Supplier
may agree in writing to change any Delivery Date.
Delivery interval(s) shall be thirty (30) days after receipt of Order(s).
If the Delivery date specified in an Order is not met by Supplier, then a
late charge of five percent (5%) of Order shall apply. Customer shall have
the right to credit any late charge against Supplier's invoices. Customer's
late charge shall not be deemed to constitute liquidated damages, and
Customer reserves all remedies provided in this Agreement or at law.
Price Protection:
For a period of one (1) year(s) after the effective date of this Product
Schedule the prices, rates, charges or fees for Product(s) shall be as set
forth in Paragraph 3, of this Product Schedule.
Supplier warrants that the prices, rates, charges or fees for Product(s)
sold hereunder are not less favorable than those currently and in the
future extended to other customers for the same or similar Product(s) in
similar quantities. Customer shall automatically have the benefit of any
lower prices, rates, charges or fees. Supplier warrants that the prices
shown on Order(s) are complete, and no additional charges (including but
not limited to shipping, packaging, labeling, custom duties, storage,
insurance, boxing and crating) shall be added to Order(s) without
Customer's express written consent.
Notwithstanding any other provision in this Product Schedule or Order(s),
Supplier shall not Deliver Product(s) and Customer shall not be required to
pay for Product(s) in excess of the quantity or requirements set forth in
the Order(s) unless Customer has first executed a written acknowledgment to
an Order(s) authorizing the increased expenditure.
Reports: Supplier shall maintain a performance service level of ninety-eight
(98%) or above for Delivery of all Order(s) issued within the contracted
intervals.
Supplier shall provide the following reports with respect to performance under
this contract:
Monthly:
Monthly Expenditure Report: including the following elements (USWC P0
Number, date of P0, Axiom invoice number, Axiom invoice to USWC, item
ordered, USWC job number, USWC office name, USWC contact name, date payment
was received, dollar amount invoiced, any pending charges).
Quarterly:
Program Management Report: this report (in contractor format) shall address
the following items (program activities for the quarter, technology
enhancements, program/order status, industry trends, important news items
related to Axiom's performance).
M/WBE Tier II Indirect Report: this is a quarterly furnished report on M/WBE
activities. This report shall incorporate the following information (Company
name, contract number, M/WBE objectives, sales, percentage of sales, Asian
purchases, African American purchases, Hispanic purchases, Native American
purchases, total MBE purchases, non-minority women purchases (WBE), total M/WBE
percentage of M/WBE).
Page 2 of 3
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
<PAGE>
- --------------------------------------------------------------------------------
The parties intending to be legally bound have caused this Product Schedule No.
97050894*P*2 to be executed by their duly authorized representatives.
U S WEST Business Resources, Inc., as agent for U S WEST Communications, Inc.,
(Customer)
/s/ Daniel J. Buckstein
- --------------------------------------
(Authorized Signature)
Daniel J. Buckstein
- --------------------------------------
(Print or Type Name of Signatory)
Contract Agent
- --------------------------------------
(Title)
3/23/98
- --------------------------------------
(Execution Date)
Axiom, Inc., (Supplier)
/s/ Greg R. Fegley
- --------------------------------------
(Authorized Signature)
Greg R. Fegley
- --------------------------------------
(Print or Type Name of Signatory)
V.P. Operations Support
- --------------------------------------
(Title)
March 25, 1998
- --------------------------------------
(Execution Date)
- --------------------------------------------------------------------------------
Page 3 of 3
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
<PAGE>
Agreement No. 97050894*SL*
- --------------------------------------------------------------------------------
SCHEDULE FOR SOFTWARE SUPPORT AND MAINTENANCE SERVICES
This Software Support and Maintenance Services Schedule No. 97050894*SL*2 ("this
Maintenance Schedule") is attached to the Special Provisions Module - Software
License and Services and is a part of Agreement No. 97050894, effective as of
March 31, 1998, between U S WEST Communications, Inc., ("Customer") and Axiom
Inc., ("Supplier"). This Maintenance Schedule is subject in all respects to the
Special Provisions Module - Software License and Services, except that in the
event of a conflict between this Maintenance Schedule and the Special Provisions
Module - Software License and Services, the terms and conditions of this
Maintenance Schedule shall govern for the purposes of this Maintenance Schedule
only.
- --------------------------------------------------------------------------------
1. Term of Schedule: This Schedule for Software Support and Maintenance Services
shall be effective from March 31, 1998 through March 31, 2000, unless
terminated, canceled or extended.
2. Term of Services: The initial term of provision of the Services shall be
twelve (12) months from the day following the date that the warranty obligations
of Supplier expire under the Agreement. The term shall be automatically renewed
for additional twelve (12) month terms unless and until either party shall
provide the other ninety (90) days written notice of termination.
Notwithstanding the above, Supplier shall not terminate this Schedule or the
Services so long as it offers maintenance services to others for the Software or
comparable software.
3. Definitions: The capitalized terms used in this Schedule shall have the
meanings as set forth in the Agreement. In addition, the following capitalized
terms used in this Schedule shall have the following meanings:
3.1. "Acceptance Period" means that period during which Customer
determines whether the Software conforms in all material respects to the
requirements of this Agreement (including Specifications).
3.2. "Acceptance Test" means Customer's determination of whether the
Software conforms in all material respects to the requirements of this
Agreement (including Specifications).
3.3. "Base Licensed Software Release" shall mean new generic features and
enhancement issues of Licensed Software which incorporates new features,
enhancements and or maintenance items.
3.4. "ByPass" (or "Work Around") shall mean a procedure by which Customer
can avoid a reported problem by changes to the procedures followed or data
supplied by the Customer when using the Software.
3.5. "Emergency Release" shall mean a new version of the Software that
incorporates Fixes to one or more Severity 1 Error and/or Severity 2 Error
reported to Supplier. Each Emergency Release will contain the following
materials: (i) the complete, revised code for the Software and (ii) all new
or modified Documentation in machine readable form.
3.6. "Error" shall mean an error in the Software or a failure of the
Software to conform to the Specifications, which negatively impacts the
performance of Customer's operations. Errors can occur as: (1) errors in
the Software or (ii) errors in Documentation.
3.7. "Fix" shall mean the replacement of code comprising the Software or
addition or replacements to Documentation to remedy a problem reported to
Supplier.
3.8. "Licensed Software" means Software programs, Base Licensed Software
releases, Maintenance Releases, and any other Software release associated
with Materiel and Supplier's TeleProcessing Product Line for which Supplier
has the right to grant licenses or sublicenses to customer and for which
Supplier shall receive a license fee.
3.9. "Maintenance Release" shall mean a licensed software generic issued
to correct problems or non-conformances with the licensed software release
as identified by Customer or Supplier during the warranty period.
Maintenance Releases contain, but not limited to, patches, fixes, overrides
and corrections provided by Supplier to correct licensed software defects
or malfunctions.
3.10. "Product Release Plan" shall be defined as the planned schedule for
release of future functionality of software.
3.11. "Technical Assistance Center" (TAC) Supplier Support Center providing
twenty-four (24) hour a day seven (7) days a week support during a
consecutive eleven (11) hour period from 8:00 a.m. to 7:00 p.m. Eastern
Time.
3.12. "Technical Assistance Request" (TAR)
3.13. "Updates" shall mean a release of the Software, subsequent to the
initial delivery of the Software, in which Supplier has incorporated any
accumulated corrections which make the Software conform to the then current
Documentation, any improvements in the performance of the Software, any new
functions which were not formerly functions of the Software and any changes
to the Software to properly operate with modifications made to other
components of the system.
4. Fees And Charges:
4.1. Fees. Customer agrees to pay as the annual support fee the following
amounts: ("Annual Charge") no charge for year one (1) (7/1/97 - 6/30/98)
and a fee not to exceed eighty-one thousand ($81,000.00) for year two (2).
Customer shall only be bound to pay the amounts specifically agreed to in
writing.
4.2. Invoicing. Supplier shall invoice Customer on and annual basis.
Customer shall pay within thirty (30) days from receipt of the invoice. In
the event that the Customer fails to make payments when due, Supplier may
send written notice to Customer that Supplier will terminate Services under
this
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need to know.
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Agreement No. 97050894*SL*1
Agreement. Customer shall have thirty (30) days from receipt of such notice
in which to pay all outstanding amounts. If Customer does not pay the
outstanding amount within such thirty (30) day period, Supplier shall have
the right to terminate Services. Supplier shall continue to have the right
to recover payment of all amounts for Services rendered prior to such
termination.
5. Services Provided By Supplier: Supplier agrees to provide the Services
described with respect to the Software as follows:
5.1. Supplier agrees to maintain the Software in conformity in all material
respects with the Specifications and the Documentation. Supplier shall
correct all Errors discovered by Customer or Supplier.
5.2. Software Maintenance. If Customer believes that there is an Error,
Customer will notify Supplier, describing the Error in such detail as is
reasonably necessary and available for Supplier to provide resolution of
the Error. Supplier shall promptly investigate the Error and shall advise
Customer of Supplier's plans for corrective action. Supplier shall remedy
such Error, as follows:
5.2.1. "Severity 1 Level" (or "Emergency") shall mean the Software is
unusable, produces incorrect results, or fails catastrophically in
response to internal errors, user errors, or incorrect input files.
The Software does not perform most of its documented functions.
Performance is materially degraded.
CONDITION This condition exists when Licensed Software is
critically impacting Customer's billing operations and / or
causing major billing losses or severe impact to SMDR
Distribution end user Customer, or when Materiel, Supplier's
Teleprocessing Product Line, or Licensed Software is inoperative.
Severity level shall be determined by Customer unless otherwise
agreed by both parties provided they conform to the definition
for the severity level.
CORRECTIVE ACTION Resolution of error will be in the form of
program code corrections, procedures for Customer to bypass or
work around the error conditions in order to continue operations
or correction to associated documentation.
RESOLUTION INTERVAL This condition requires resolution or
correction within four (4) hours after Customer's notification to
Supplier. If a bypass procedure is utilized, Supplier will
continue error correction activity on a twenty-four (24) hour a
day basis until a permanent correction is provided to Customer.
Resolution exceeding four (4) hours shall be escalated within
Supplier's organization.
5.2.2. "Severity 2 Level" (or "Detrimental") shall mean the Software
is usable, performs most, but not all of its documented functions.
CONDITION This condition exists when Licensed Software is
malfunctioning but is still usable by Customer or when Supplier's
Teleprocessing Product Line, Material, or Licensed Software, is
partially inoperative and inoperative portion has a less critical
impact on Customer's operations than Severity Level errors. The
malfunctioning Licensed Software or inoperative Teleprocessing
Line or Materiel severely restricts Customer's operations and/or
adversely effects billing accuracy or delivery to SMDR
distribution end user customer. Severity level shall be
determined by Customer unless otherwise agreed to by both parties
provided they conform to the definition for the severity level.
CORRECTIVE ACTION Resolution of error will be in the form of
program code corrections or procedures for Customer to bypass or
work around the error conditions. If a work-around procedure is
utilized, the condition may be reclassified to Severity Level 3
as mutually agreed.
RESOLUTION INTERVAL This condition required resolution or
correction within twenty-four (24) hours after Customer's
notification to Supplier. If a bypass procedure is utilized,
Supplier will continue error correction activity on an eight (8)
hours day basis until a permanent correction is provided to
Customer, Resolution exceeding twenty-four (24) hours shall be
escalated within Suppliers organization.
5.2.3. "Severity 3 Level" (or "Inconvenient") shall mean the Software
is usable but due to an error does not provide the function in the
most convenient way.
CONDITION This condition exists when Licensed Software or
Teleprocessing Product Line Materiel or Licensed Software is
useable but with limited functions. Error condition is not
critical to continuing operation and has less of an effect than
severity levels 1 and 2 above. Severity level shall be determined
by Customer unless otherwise agreed by both parties provided they
conform to the definition for the severity level.
CORRECTIVE ACTION Resolution of error will be in the form of
program code corrections or procedures for Customer to bypass or
workaround the error conditions with the objective of resolving
or correcting the condition and scheduling any correction,
replacement or change for inclusion in the next release of the
Licensed Software.
RESOLUTION INTERVAL This condition requires resolution or
correction within seventy-two (72) hours after Customer's
notification to Supplier.
5.2.4. "Severity 4 Level" shall mean that Licensed Software or
Teleprocessing Product Line usable and the error condition is not
critical.
CONDITION This condition exists when Licensed Software or
Teleprocessing Product Line or Materiel is useable, the error
condition is not
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need to know
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Agreement No. 97050894*SL*1
critical to continuing operation, and there is less of an effect than
severity levels 1,2, and 3 as referenced herein. Correction is
required in the next scheduled Licensed Software release. Error may be
marked as 1) severity level 4 "Major" this condition is used where a
problem has been addressed by a workaround or program change that need
to be included in the next scheduled software release, or 2) Severity
Level 4 "Informational," where a condition has been resolved or a
procedure was used in resolving a problem and documented for use as a
reference by Supplier. Severity level shall be determined by Customer
unless otherwise agreed by both parties provided they conform to the
definition for the severity level.
CORRECTIVE ACTION Resolution of error will be in the form of program
code corrections or procedures for Customer to bypass or workaround
the error conditions with the objective of resolving or correcting the
condition and scheduling any correction, replacement or change for
inclusion in the next scheduled Licensed Software release. Any
condition moved from severity level 1, 2, or 3 to severity level 4
will be with the consent of Customer's MDR Tier II Technical Support
and/or Product Manager.
RESOLUTION INTERVAL A resolution to Severity Level 4 condition shall
be included in the next scheduled Licensed Software release.
The priority level of an Error reported will be determined by Customer in
its reasonable judgment.
5.3. Support and Response Time. Supplier shall provide MSS twenty-four (24)
hours a day and seven (7) days a week through Supplier's TAC. Staffed TAC
coverage shall be provided by Supplier during a consecutive eleven (11)
hour period from 8:00 a.m. to 7:00 p.m. Eastern time, occurring daily,
Monday through Friday, excluding Holidays. For after hour emergencies, a
message may be left with Supplier's answering service at (609) 866-0015.
Generally, Customer's after hour calls shall be confined to those impacting
Customer's SMDR end users. During after-hour TAC coverage, including
holidays, Supplier shall return Customer calls within fifteen (15) minutes
from the time Customer contact Supplier. Telephone support shall include,
but not be limited to, engineering change information, diagnostic error
interpretation and diagnostic update information.
5.4. Telecommunications Link. Supplier shall, with Customer authorization,
access Customer's system and the Software directly, via telecommunications
link, to isolate Errors in the Software, resolve problems and, where
practicable, apply corrections or Work Arounds. Customer shall furnish
Supplier, free of charge, access to the computer facilities for the time
required by Supplier to furnish the support Services hereunder.
5.5. On-site Support. When requested by Customer, Supplier shall provide
MSS on-site. On-Site MSS shall be available twenty-four (24) hours a day
and seven (7) days a week including holidays. Supplier shall respond to an
emergency request for MSS by dispatching qualified personnel within three
(3) hours, or as agreed, from the time Customer contacts Supplier.
Customer's representative will be present at all times while Supplier is
performing in-site technical support. Such dispatched Supplier personnel
shall be Supplier's employees or agents and shall not be subcontracted
personnel.
5.6. Software Updates. Supplier shall provide, at a minimum of an annual
basis, Updates to the software and maintenance releases at no additional
charge. For Custom Software, Updates shall be provided in both source and
object code forms together with all programmers' comments and listings.
5.7. Maintenance Support Services Description Through Supplier's Technical
Assistance Center (TAC) Supplier shall provide MSS support for Supplier's
TeleProcessing Product Line Materiel and Licensed Software currently in and
out of warranty. Customer will contact TAC via telephone call with trouble
reports. The telephone number for TAC support is (609) 866-0015. Skilled
TAC representatives shall be available to determine whether a Customer call
in report is a hardware, firmware, Licensed Software, documentation,
facilities or operations problem. Customer shall determine the severity
level of such reported trouble in accordance with the defined "Severity
Levels." If Supplier determines that such reported trouble cannot be
corrected within the intervals specified in the Severity Levels, Suppler
shall immediately initiate an escalation procedure. The TAC shall also
facilitate and document the resolution of Customer called in reports via
Supplier's Technical Assistance Request (TAR) summary report.
5.7.1. For hardware related reports, the TAC will assist Customer in
identifying the failed component. For recurring problems, Customer
shall provide Supplier with as much supporting documentation as is
available. For problems requiring changes to Materiel, Supplier's SMDR
Product Line, Licensed Software or Firmware, Supplier shall make such
changes in accordance with U S WEST Technical Publication 77354,
entitled "Guidelines for Product Change Notices," incorporated by
reference an made a part hereof. Additionally, Supplier will document
such change in a technical bulletin.
5.8. Additional Services. Any services provided in addition to those
specified above ("Additional Services") will be billed to Customer at the
rates for such services as set forth in the applicable Schedule. Additional
Services will not be provided unless agreed to in writing by Customer.
6. Terms And Conditions Of Service:
6.1. For Standard Software, Supplier shall only be responsible for
providing Services for Supplier's most current version of the Software and
for the two (2) previous versions of the Software.
6.2. Supplier shall be under no obligation to furnish Services under this
Agreement should Services be required as a result of:
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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6.2.1. operation of the Software in environmental conditions outside
those prescribed by the hardware platform manufacturer;
6.2.2. failure by Customer to keep the hardware platform properly
maintained in accordance with standards of maintenance prescribed by
the manufacturer; or
6.2.3. the Software was maintained or modified by anyone other than
Supplier or a third party authorized by Supplier.
In the event it is determined that Supplier provided Services arising from the
above or from some other cause not related to the Software, Supplier reserves
the right to charge Customer for the performance of such Service as an
Additional Service.
Notwithstanding the exclusions specified above, Supplier's obligations to
provide Services shall not be affected by Customer's modification of the
Software so long as Supplier can discharge its Service obligations
notwithstanding such modifications or following their removal by Customer.
7. Customer Software Support. Customer will perform software support,
modifications / additions to, maintenance of, configurations pertaining to the
operations of SMDR platform.
8. Product Research Development. Customer and Supplier shall either meet or
conduct a conference call quarterly to discuss any potential progress changes or
problems with the product research development.
9. Technical Assistance Requests. Supplier shall provide to Customer a written
list, quarterly, of all open Technical Assistance Requests (TAR's) and of all
closed TAR's for the year-to-date. List shall include TAR's on both the SMDR
Delivery application and on the CSM/MDR Host software module. Supplier shall
maintain and provide reports to SMDR Tier II Tech Support, such reports shall
include but not be limited to the date and time of the call, the name of the
caller, the reported trouble or reason for the call, the severity level of the
trouble, the date and time of the TAC response to the caller, the resolution and
the resolution time, a separate description of the TAR still unresolved at the
report date and the anticipated date of the resolution, and the description of
the TARs closed by the Supplier during the quarter Customer and Suppler shall
either meet or conduct a conference call quarterly to discuss open TARs and any
potential changes or problems with Product Development Plan. Customer and
Supplier shall either meet quarterly, or conduct a conference call quarterly, to
discuss all outstanding TAR's and other technical issues with application
functionality, and address Customer's requests for product enhancements and
upgrades.
10. Deletion of Existing Enhancements or Features. Supplier will review with
Customer any enhancements or features they plan to delete. This will be outlined
in the PRP and deletion will be made after being mutually agreed upon in
writing.
11. Acceptance Period. The Acceptance Period shall begin on the date that
Supplier notifies Customer in writing that Supplier has completed installation
of final release Software. In the event that installation is to be performed by
a party other than supplier, the Acceptance Period shall begin five (5) business
days following delivery of the Software to Customer at the specified site(s).
The Acceptance Period shall last for thirty (30) days. The Acceptance Period may
be extended as provided below in Section 11.1.
11.1. Failure of Acceptance Test; Retesting. If Customer reasonably
determines that the Software has not successfully completed the Acceptance
Test, Customer shall promptly notify Supplier in writing and shall specify
with as much detail as possible in which respects the Software failed to
pass the Acceptance Test. Supplier shall have a period of thirty (30) days
from the date of the notice in which to correct errors in the Software.
Following such corrections, Supplier shall notify Customer in writing that
the Software is ready for retesting. If the Software fails to pass the
Acceptance Test despite Supplier's efforts at correction, at Customer's
option, Customer can either terminate at that point or request Supplier to
make additional necessary corrections. Notwithstanding any request that
Supplier make necessary corrections, if Customer determines in its sole
discretion, that Supplier's efforts are not likely to correct the Software
within a timeframe needed by Customer, Customer may terminate the order.
Termination under this Section shall be effected by Customer giving written
notice to Supplier of such termination.
11.2. Customer's Rights Upon Termination After Failure of Acceptance Test.
Upon Customer's termination of an order due to Software failing to pass the
Acceptance Test, Customer shall cease further use of the Software. Customer
shall receive reimbursement of all payments made to Supplier under the
terminated Task Order(s) within five (5) days following the termination
notice.
12. User Manual Updates. Supplier shall provide updates to manuals with new
Licensed Software as appropriate. Discrepancies in the current release of a
Manual will be resolved within thirty (30) days with an addendum to existing
manual, the next update of the document, or the next scheduled Licensed Software
Release, whichever is sooner. If a documentation discrepancy has a serious
effect on operation, it will also be noted in a technical bulletin.
12.1. Supplier shall provide at no additional charge, one (1) complete set
of current manuals and documentation ("Manuals") for each type of Licensed
Software purchased by Customer to:
U S WEST Communications, Inc.
SMDR Tier II Technical Support
1005 17th Street
Denver, Colorado 80202
For each release of Licensed Software, Supplier shall provide, at no
additional charge, one (1) set of Order specific Manuals to each of
Customer's Primary Contacts. Such listing of Customer's primary contacts
and any updates to this information by Customer shall be provided to
Supplier by Customer.
13. Technical Bulletins. Supplier shall issue technical bulletins containing
timely, accurate information, concerning its Teleprocessing Product Line. Such
technical bulletins shall provide a quick reference point for determining
whether a solution or work-around is already documented for problems encountered
in operating or maintaining a system.
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need to know.
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Agreement No. 97050894*SL*1
14. Notice of Delays. Within ten (10) working days after any event of delay, or
when either party becomes aware of a delay, the delayed party shall provide the
other party with written notice thereof and the expected period of the delay.
The notice should provide information regarding the causes for delay. Supplier
and Customer agree to use diligent efforts to minimize all delays in meeting
their respective obligations. For the purposes of this Section, diligent efforts
shall include, but not be limited to, employment of Supplier's and/or
cooperative planning, extended work days, Materiel modifications and
substituting software patches, where feasible.
15. Most Favored Customer. Supplier shall not charge another customer less for
Software, Services, or similar software or services under comparable
circumstances. If a lower amount is charged, Customer shall have the benefit of
the lower charges and such benefit shall apply automatically.
16. Work-Arounds. Work-arounds are to be kept to a minimum and to be resolved
promptly. Every possible effort will be made by Supplier to ensure that
work-arounds will not be carried over into the new Licensed Software. These
work-arounds will be resolved through TARs, Engineering Complaints and
escalation procedures. Parties understand that work-arounds may need to be
utilized, but they will not be considered a fix.
17. Escalation Process. If Supplier determines that Customer reported trouble
cannot be corrected within the intervals specified herein, Supplier shall
immediately initiate an escalation process as mutually agreed to by both
parties. Customer reserves the right to escalate to Supplier management
hierarchy any unresolved technical issues, chronic or unresolved issues
encountered during acceptance testing, and chronic failure or inability of
Supplier to respond to Customer requests for enhancements and upgrades.
18. Frequency of Licensed Software Release. Subject to the terms and conditions
contained herein, Supplier shall provide, a minimum of one (1) Base Licensed
Software Release for each one (1) year period of this Agreement.
18.1. If Supplier cannot meet a schedule release date, Supplier shall
notify Customer and agree to provide functionally and economically
equivalent interim solutions reasonably acceptable to Customer, at no
charge, for features or Purchases not developed on time. At such time as
the features or Purchases become available, Supplier will upgrade these
interim solutions, at no cost to Customer not to exceed the price of the
release, by a date mutually agreed upon by the parties.
20. Warranties. Supplier warrants that the Services shall conform to the
requirements of this Exhibit B for a period of one (1) year including, but not
limited to, specifications in all material respects. Customer at it's option may
return non-conforming Licensed Software. The full warranty period shall be
extended and commence upon Customer's Acceptance of the re-delivered software.
21. Work Product. All items, in any medium, prepared or originated by or for
Supplier specifically for Customer at Customer's request in connection with the
Software and/or Services shall be the exclusive property of Customer and shall
be deemed to be works for hire, and to the extent they may not be works for
hire, Supplier assigns to Customer all rights, title and interest in and to such
items ("Work Product"), including rights to copyright. If Work Product includes
items previously developed or copyrighted by Supplier, Supplier hereby grants to
Customer an unrestricted, royalty-free, perpetual, irrevocable license to copy,
use, disclose and sublicense such Work Product for any lawful purpose.
19. Product Change Notices. Changes to Base Licensed Software Release, Materiel,
and Supplier's SMDR Product Line shall be made in accordance with U S WEST
Technical Publication 77354 entitled "Guidelines for Product Change Notices."
Supplier shall distribute to:
US WEST Communications, Inc.
SMDR Tier II Technical Support
1005 17th Street
Denver, CO 80202
20. Source Code Availability. Supplier agrees that the entire source code for
Software, together with all related listings and documentation, as now exists or
hereafter becomes available including, but not limited to, the then current
version(s) of Software being used by Customer will, at Customer's option, be
deposited, maintained by a third party accessible to Customer upon Customer's
request or rights transferred to Customer.
21. Warranties. See Warranties Section under General Terms and Conditions.
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Agreement No. 97050894*SL*1
- --------------------------------------------------------------------------------
The parties intending to be legally bound have caused this Software Support and
Maintenance Services Schedule, specific to SMDR, No. 97050894*SL*2 to be
executed by their duly authorized representatives.
U S WEST Business Resources, Inc., as agent for U S WEST
Communications, Inc., (Customer)
/s/ Daniel J. Buckstein
- --------------------------------------
(Authorized Signature)
Daniel J. Buckstein
- --------------------------------------
(Print or Type Name of Signatory)
Contract Agent
- --------------------------------------
(Title)
3/23/98
- --------------------------------------
(Execution Date)
Axiom, Inc., (Supplier)
/s/ Greg R. Fegley
- --------------------------------------
(Authorized Signature
Greg R. Fegley
- --------------------------------------
(Print or Type Name of Signatory)
V.P. Operations Support
- --------------------------------------
(Title)
March 25, 1998
- --------------------------------------
(Execution Date)
- --------------------------------------------------------------------------------
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Agreement No. 97050894
- --------------------------------------------------------------------------------
AGREEMENT
This Agreement is made by and between U S WEST Communications, Inc. with offices
for transaction of business located at 700 West Mineral Ave., Littleton,
Colorado 80120, as agent for the U S WEST Company(ies) identified herein
("Customer"), and Axiom, Inc. with offices for transaction of business located
at 351 New Albany Road, Moorestown, New Jersey 08057 ("Supplier").
In consideration of the mutual covenants and agreements contained herein, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
- --------------------------------------------------------------------------------
GENERAL TERMS AND CONDITIONS
1. Definitions: The terms defined herein shall have the meanings set forth
below.
1.1. "Acceptance," if applicable, is defined in the Special Provisions
Module(s).
1.2. "Agreement" means this written contract between Customer and Supplier,
including the General Terms and Conditions and all Special Provisions
Modules, together with Schedule(s), exhibits, any other attachments,
Order(s), and amendments to this Agreement.
1.3. "Confidential Information" is defined in Article 6.
1.4. "Customer" means U S WEST Communications, Inc. Customer shall also
have the right to designate Affiliate(s) who may purchase under this
Agreement as Customer, and such Affiliate(s) shall become additional
Customer(s) under this Agreement upon Customer's written notice to
Supplier. For purposes of this paragraph 1.4, "Affiliate" means any
entity which directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, Customer.
For purposes of this paragraph 1.4, "control" means (i) in the case of
corporate entities, direct or indirect ownership of twenty percent (20%) or
more of the stock or shares entitled to vote for the election of the board
of directors or other governing body of the entity; and (ii) in the case of
non-corporate entities, direct or indirect ownership of twenty percent
(20%) or greater of the equity interest.
1.5. "Deliver" ("Delivery") means Customer's receipt of Purchases at the
location specified in any Order(s) or in this Agreement.
1.6. "Documentation" means tangible or intangible information necessary for
the use, planning, engineering, installation, operation and maintenance of
Purchases, including but not limited to: Specifications, user manuals, test
data, flow charts, data file listings, loading and unloading procedures,
machine configuration information, programs, routines, subroutines, or
related information.
1.7. "Liabilities" shall mean all liabilities, claims, judgments, losses,
orders, awards, damages, costs, fines, penalties, costs of defense, and
attorneys' fees.
1.8. "Order(s)" means a written or electronic offer by Customer which shall
be deemed to incorporate all provisions of this Agreement.
1.9 "Product(s)" means those goods, supplies, materials, articles, items,
parts, components, assemblies, and the incidental associated Software,
listed and/or described in this Agreement or any Module(s), Schedule(s),
Order(s) and/or other attachments to this Agreement. "Purchases" means all
Product(s), Software and/or Services described in this Agreement,
Module(s), or on Schedule(s), Order(s), and/or other attachments to this
Agreement.
1.11. "Schedule(s)" means a written instrument made part of this Agreement
describing such things as the Purchase(s), price, Specifications, warranty
terms and related shipping and delivery instructions.
1.12. "Services" means any work performed by or for Supplier under this
Agreement, including any deliverables resulting from or incidental to the
Services, as listed and/or described in this Agreement, Module(s), or any
Schedule(s). Order(s) and/or other attachments to this Agreement.
1.13. "Software" means computer programs as listed and/or described in this
Agreement, Module(s) or any Schedule(s), Order(s) and/or other attachments
to this Agreement, and the related Documentation. "Software" includes,
without limitation, all versions and all updates, enhancements and
corrections, together with operating instructions, user manuals, training
materials and other Documentation. "Software" does not include source code
or proprietary design documentation, unless otherwise agreed to in writing
by the parties.
1.14. "Special Provisions Module(s)" or "Module(s)" means, as applicable,
the Special Provisions Module-Software License and Services, and/or the
Special Provisions Module-Services, and/or the Special Provisions Module-
Product(s), and/or any other similar set of provisions which are attached
to the General Terms and Conditions and form part of this Agreement.
1.15. "Specifications" means technical, functional, operational and other
criteria and/or performance requirements for Purchases, in any medium,
which criteria and/or requirements are referenced in or made part of this
Agreement, and schematics, prototypes, models, Supplier's proposals and
literature, and/or Documentation furnished to Customer.
2. Term: This Agreement shall be effective as of March 31, 1998, and shall
continue through March 31, 1999. This Agreement shall thereafter automatically
renew for successive
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Agreement No. 97050894
periods of one (1) year each unless a party gives written notice of intention to
terminate at least one hundred twenty (120) days before the end of any term, or
this Agreement is terminated or canceled under Articles 21 or 22. The Special
Provisions Modules, Schedules and/or other parts of this Agreement may specify a
different term(s) applicable specifically to that portion of this Agreement. If
any such specific term continues beyond this Agreement the General Terms and
Conditions and other applicable provisions of this Agreement shall continue to
govern that portion of this Agreement.
3. Invoices, Payments, Setoff, Taxes:
3.1. Supplier shall issue invoices in the format required by Customer
within thirty (30) days following Delivery of Products or Software or
completion of Services, which itemize all charges, costs, taxes and
Software license fees separately. No term or condition of any invoice shall
be binding upon Customer, and Customer hereby objects to any terms
inconsistent with or additional to the terms and conditions of this
Agreement.
3.2. Correct and undisputed amounts on invoices shall be paid within thirty
(30) days following receipt of the invoice and following Delivery of
Products or Software or completion of Services, unless otherwise provided
in a Schedule or other attachment. Notwithstanding the foregoing, payment
shall not be due then if on or before the due date Customer notifies
Supplier of rejection or non-Acceptance of Purchase(s). Disputed amounts on
invoices shall be paid within thirty (30) days after resolution of dispute.
Supplier agrees to provide to Customer reasonable supporting documentation
concerning any disputed amount within thirty (30) days after Customer
notifies Supplier of the dispute.
3.3. Credits due to Customer may be applied against amounts owed to
Supplier. If no amounts are owed by Customer to Supplier, Supplier shall
issue payment within thirty (30) days of Customer's written request, unless
otherwise mutually agreed upon.
3.4. Payment shall not constitute Acceptance or approval of the Purchases
or a waiver by Customer of any right to require fulfillment of all terms
and conditions of this Agreement.
3.5. The act of submission of an invoice constitutes Supplier's
certification that all claims, liens and causes of action, if any, for the
payment of wages or salaries or the payment of charges for materials,
tools, machinery or supplies have been satisfied, released or settled.
Customer reserves the right before making payments to require Supplier to
furnish sufficient evidence that all claims, liens and causes of action
have been satisfied, released or settled. If satisfactory evidence is not
furnished, the amount of such claims, liens and causes of action may be
withheld from any monies otherwise payable to Supplier hereunder until such
evidence of payment or a bond to indemnify Customer against any such
claims, liens, and causes of action has been furnished.
3.6. All claims for monies due from Customer shall be subject to deduction
or setoff by Customer for any claim arising out of any transaction with
Supplier.
3.7. Supplier shall be responsible for any and all taxes including, without
limitation, the income, payroll, sales, use, gross receipts, real estate,
personal property or other taxes imposed upon Supplier. Supplier will
indemnify and hold harmless Customer for any loss or damage (including
without limitation any penalties and interest) sustained because of
Supplier's failure to pay such taxes. Customer will be responsible only for
the sales or transaction taxes that are directly imposed upon any of the
Purchases furnished in accordance with this Agreement, and such sales or
transaction taxes shall be listed separately on Supplier's invoices.
4. Records: Supplier shall maintain complete and accurate records of all
amounts billable to and payments made by Customer hereunder in accordance with
recognized accounting practices. Supplier shall retain such records for a period
of four (4) years from the date of payment for Purchases covered thereby. During
the term of this Agreement and the respective periods in which Supplier is
required to maintain such records, Customer and its authorized agents and
representatives shall have access to such records for purposes of audit during
Supplier's normal business hours.
5. Warranties:
5.1. Supplier warrants that it has all rights, title, and interest, free of
all liens and encumbrances, in and to all Product(s) and Software sold,
leased or licensed to Customer, except that for Software which is not owned
by Supplier. Supplier warrants that it has the right to grant the licenses
granted hereunder.
5.2. Supplier warrants that Purchases shall conform to all descriptions,
Specifications, statements of work, representations, and other requirements
set forth in this Agreement, Module(s), Schedule(s) and/or any Order(s);
and will be free from defects in materials, performance, workmanship, and
design. Supplier further warrants it will perform Services with promptness,
diligence and in accordance with the highest standards in the field to the
reasonable satisfaction of Customer.
5.3. Any specific warranty periods shall be as set forth in the Special
Provisions Module(s) and/or Schedule(s).
5.4. Supplier represents and warrants that the [Software, Hardware,
Services, Products] will record, store, process, calculate and present
calendar dates falling on and after (and if applicable, spans of time
including) Jan. 1, 2000, and will calculate any information dependent on or
relating to such dates in the same manner, and with the functionality, data
integrity and performance, as the [Software, Hardware, Services, Products]
records, stores, processes, calculates and presents calendar dates on or
before Dec. 31, 1999, or calculates any information dependent on or
relating to such dates; and, without limiting the foregoing.
Supplier represents and warrants that the [Software, Hardware, Services,
Products] (i) will lose no functionality with respect to the introduction
of records containing dates falling on or after Jan. 1, 2000 and (ii) will
be interoperable with other software, hardware, and products used by
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Agreement No. 97050894
Customer ("Other Software") that may deliver records to the [Software, Hardware,
Services, Products] or receive records from or interact with the [Software,
Hardware, Services, Products], including but not limited to back-up and archived
data. Supplier agrees that Customer may request a test script from Supplier to
validate that the [Software, Hardware, Services, Products] is 2000 Compliant and
to determine the latest future date that the [Software, Hardware, Services,
Products] is able to process.
All products (including hardware and software) heretofore provided to Customer
by Supplier, whether hereunder or under separate agreements, if not currently
capable of using or rendering date or time-sensitive data or supporting
interoperability in the manner described above, but still under maintenance,
shall be modified or replaced by Supplier with products that provide all
existing functionality and are so capable, by a date no later than Jan. 1, 1999,
without incremental charge therefor. If Supplier is unable to modify or replace
such products in compliance with this section, or Supplier fails to do so,
Supplier shall refund to Customer any and all amounts paid by Customer with
respect to the Supplier product.
In addition, Supplier will indemnify and hold Customer harmless from and against
any and all liability, loss, or expense (including reasonable attorneys fees)
arising out of or resulting from any breach of this warranty. Notwithstanding
anything to the contrary set forth in this Agreement, breach of this warranty
shall not be subject to any provisions regarding limitations of Supplier's
liability.
5.5. Warranties will not be affected by removal, relocation, or resale of
Product(s), and warranties shall survive inspection, Acceptance and payment.
Warranties shall run to Customer, its agents, successors in interest, assigns
and customers.
5.6. Supplier shall promptly correct or make good nonconforming Purchases, to
the reasonable approval and acceptance of Customer, at no cost to Customer.
5.6.1. Non-conforming Purchases shall be either corrected on-site or
returned to Supplier for correction, at Supplier's expense and at
Customer's option. Customer agrees to be reasonable in requiring on-site
corrections.
5.6.2. If the non-conformity has not been corrected within thirty (30) days
from the receipt of Customer's written notification of such non-conformity,
Customer shall have the right to have such non-conformity remedied at the
expense of the Supplier. Suppliers liability is limited and such liability
is as follows:
Limitation of Warranties
------------------------
The foregoing states Axiom's sole and exclusive warranty to Customer
covering the product(s), deliverables hereunder. Axiom makes no additional
warranties, express, implied, arising from course of dealing or usage of
trade, as to any matter whatsoever. In particular, any and all warranties
of merchantability, fitness for a particular purpose, are expressly
excluded. Without limiting the generality of the foregoing, Axiom will have
no liability to Customer if any failure of performance by the product(s)
hereunder is covered by the use of such deliverables in connection or in
combination with equipment, devices or software not delivered, recommended
or approved in writing by Axiom (if such failure of performance could have
been avoided by the use of the unmodified deliverable with other equipment,
devices, or software) or the use of any such deliverable in a manner for
which was not intended or use of other than the most current release or
version of the deliverable if such failure would have been prevented by the
use of such release or version.
5.7. These Warranties are not sole and exclusive but are in addition to, and do
not limit, any rights afforded to Customer by this Agreement or as provided by
law.
5.8. Limitation of Liability: In no event shall either party be liable to the
other party or to any third party for any indirect, exemplary, incidental,
special or consequential damages arising out of or otherwise relating to this
Agreement, the services provided hereunder of the use or performance of the
Products or any portion thereof, however caused, whether based upon breach of
warranty, breach of contract, negligence, tort or any other legal theory, even
if such party has been advised of the possibility or likelihood of such damages.
Such excluded damages include but are not limited to loss of profits, loss of
savings or revenue, loss of data, loss of use of software, documentation,
computer equipment or any associated equipment, cost of capital, cost of any
substitute equipment or software, facilities or services. downtime, claims of
third parties or injury to person or property. Without limiting the foregoing,
Supplier's liability for any claim arising out of or related to this Agreement
shall in no event exceed the fees actually paid under this Agreement during the
twelve (12) months prior to the occurrence of the event for which such liability
exists.
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Agreement No. 97050894
6. Confidential Information:
6.1. Confidential Information shall mean any technical or business
information, including third-party information, marked as confidential or
proprietary and furnished, disclosed or made available in connection with
this Agreement, in any form or medium, by one party to the other,
including, without limitation, Specifications, prototypes, Software,
models, drawings, marketing plans, financial data and personnel statistics.
Confidential Information in oral form must be identified as confidential at
the time of disclosure and confirmed as such in writing within thirty (30)
days of such disclosure. Confidential Information does not include
information which (1) the recipient knew or had in its possession, prior to
disclosure, without confidential limitation; (2) is independently developed
by the recipient without breach of this Agreement; (3) becomes publicly
available without breach of this Agreement; (4) is received rightfully from
a third party and without obligation of confidentiality; or (5) is
disclosed without restriction by the disclosing party.
6.2. If the parties deem it necessary and request to receive Confidential
Information from each other, the parties agree:
6.2.1. To maintain and use Confidential Information only for the
purposes of this Agreement and only as permitted herein. To only make
copies as specifically authorized and with the same confidential or
proprietary notices as are on the original.
6.2.2. To restrict access and disclosure of Confidential Information
to their employees, agents and contractors who have a "need to know,"
and who agree to maintain confidentiality in accordance with this
Article.
6.2.3. To treat Confidential Information as confidential for a period
of three (3) years from the date of receipt.
6.3. Confidential Information shall at all times remain the property of the
disclosing party. Upon request, Confidential Information shall be returned
to the disclosing party upon termination, cancellation or expiration of
this Agreement.
6.4. Except as may be required by applicable law, regulations, legal or
agency order, demand or process, neither party shall disclose to a third
party any Confidential Information or the contents of this Agreement
without the prior written consent of the other party. In the case of
required disclosures, the owner of Confidential Information shall, to the
extent reasonably possible, be given notice prior to the disclosure and an
opportunity to seek an appropriate protective order. The obligations of
this Article shall be satisfied by handling Confidential Information with
the same degree of care which the receiving party applies to its own
similar confidential information but in no event less than reasonable care.
Customer's liability under this Article shall be subject to the same
limitations as set forth in Article 22.4. The obligations of this Article
shall survive the expiration, cancellation or termination of this
Agreement.
7. Ownership:
7.1 Work Product(s) shall mean all information, materials, products,
drawings, specifications, reports, proposals, and any other items, in
any medium, and any ideas, designs, concepts, techniques, inventions,
discoveries, improvements, software, documentation, and original works
of authorship, developed by Supplier or its contractors that result
in, are used with, or are delivered as part of the Purchases.
7.2 General. Except as provided in Section 7.2 below, Supplier shall
retain ownership of all Work Product(s) as well as any intellectual
property right related to the Work Product(s) or Purchases, including
but not limited to, copyright, trademark, patent, and trade secrets.
7.3 Ownership of Custom Stand Alone Modules. In the event that (1)
Supplier creates a separate module of Software only for Customer (such
software, both in executable and source code form shall be referred to as
`Stand Alone Software', and (2) the Schedule for the Stand Alone Software
expressly grants ownership to Customer, then, (a) the portions of the Stand
Alone Software created specifically for the Customer shall be deemed to be
a work made for hire, or in the event that it is not a work made for hire
Supplier shall assign all right, title and interest in the Stand Alone
Software to Customer, (b) Supplier shall assist Customer (at Customers
expense) in perfecting any right that it may have in such Stand Alone
Software, and (c) Supplier shall deliver to Customer both executable and
source code forms for such Stand Alone Software along with related
documentation, flow charts, and programmers notes. Supplier shall retain
ownership interest in any portions of the Stand Alone Software not created
specifically for the Customer (`Prior Existing Software'), and Supplier
hereby grants Customer a fully paid-up, perpetual, irrevocable, worldwide,
non-exclusive license to use, copy, transfer, display, distribute,
sublicense, modify and create derivative from the Prior Existing Software
in both executable and source code form. Prior Existing Software shall only
include software that Supplier either (i) identifies to Customer in writing
prior to or contemporaneously with delivery of the Stand Alone Software (by
identifying the names of prior existing software modules without revealing
the source code for such modules), or (ii) can reasonably demonstrate
existed prior to commencement of development of the Stand Alone Module.
7.4 Neither party grants the other party any express or implied licenses under
any patents, copyrights or trademarks, except to the extent necessary for each
party to fulfill its obligations to the other under this Agreement.
8. Independent Contractor:
8.1. Supplier warrants and agrees that it is engaged in an independent
business and that it and its employees and agents will perform under this
Agreement as independent contractors and not as agents or employees of
Customer; and that it will maintain complete control over performance by
its employees, agents and subcontractors. Customer is not liable for debts
or expenses incurred by Supplier, its employees, agents and subcontractors.
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Nothing in this Agreement or any subcontract shall create any contractual
relationship or liabilities between any agent or subcontractor and
Customer. Supplier shall be responsible for its own acts and those of its
agents, employees and subcontractors in connection with performance of this
Agreement.
8.2. Supplier will be solely responsible for all matters relating to
payment of its employees, including compliance with workers' compensation,
unemployment, disability insurance, social security withholding, and all
other federal, state and local laws, rules and regulations governing such
matters. Supplier and its employees are not entitled to unemployment
insurance benefits as a result of performing under this Agreement unless
unemployment compensation coverage is provided by Supplier. Supplier is
responsible for and shall pay all assessable federal and state income tax
on amounts paid under this Agreement.
9. Subcontractors: Supplier shall obtain Customer's written consent, which
consent will not be unreasonably withheld, prior to subcontracting any
obligations hereunder. Such requirement shall not apply to purchases of
incidental, standard commercial supplies or raw materials.
10. Plant And Work Rules: Each party while on the premises of the other shall
comply with all plant rules and regulations including. where required by
governmental regulation, submission of satisfactory clearance from the
appropriate governmental authorities.
11. Indemnity:
11.1. Supplier shall indemnify and hold harmless Customer, its owners,
parents, subsidiaries, affiliates, agents, directors and employees against
all Liabilities to the extent they arise from or in connection with: (1)
the fault or negligence of Supplier, its officers, employees, agents,
subcontractors and/or representatives; and/or (2) the furnishing,
performance or use of any Purchases under this Agreement or any product
liability claims relating to any Purchases; and/or (3) failure by Supplier,
its officers, employees, agents, subcontractors and/or representatives to
comply with Article 19 "Compliance with Laws;" and/or (4) assertions under
workers' compensation or similar employee benefit acts by Supplier or its
employees, agents, subcontractors, or subcontractors' employees or agents.
Suppliers liability under this Article shall be subject to the same
limitation as set forth in article 22.3.
11.2. Customer shall indemnify and hold harmless Supplier, its owners,
parents, subsidiaries, affiliates, agents, directors and employees against
all Liabilities to the extent they arise from or in connection with: (1)
the fault or negligence of Customer, its officers, employees, agents,
subcontractors and/or representatives; and/or (2) failure by Customer, its
officers, employees, agents, subcontractors and/or representatives to
comply with Article 19 "Compliance with Laws," and/or (3) assertions under
workers' compensation or similar employee benefit acts by Customer or its
employees. agents, subcontractors, or subcontractors' employees or agents.
Customer's liability under this Article shall be subject to the same
limitations as set forth in Article 22.4.
12. Patent, Trademark, Copyright or Trade Secret Indemnification:
12.1. Supplier shall, at its expense, indemnify, hold harmless, and defend
Customer, its owners, parents. subsidiaries, affiliates, agents, directors,
and employees against all Liabilities that arise from or in connection with
any infringement or claim of infringement of any patent, trademark,
copyright, trade secret or other intellectual property right, relating to
the Purchases and/or the use thereof. Customer may have its own counsel
participate in the defense of any such claim or action at its expense.
12.2. If any Purchase becomes, or in Supplier's reasonable opinion is
likely to become, the subject of a preliminary or final order or judgment
against Customer's use of any Purchase(s) due to such a claim of
infringement, Supplier shall, at its expense, either procure the right for
Customer to continue using such Purchase(s) or replace or modify the same
so as to become non-infringing, while remaining compatible, functionally
equivalent and in conformity with the requirements of this Agreement. If
neither of the foregoing alternatives is reasonably possible, Supplier
shall refund to Customer an appropriate pro rata portion of amounts paid
pursuant to this Agreement and reimburse Customer for all reasonable
expenses of removal and replacement.
13. Insurance: Supplier shall at all times during the term of this Agreement,
at its own cost and expense, carry and maintain at a minimum, the insurance
coverage listed below with insurers having a "Best's" rating of at least B+XIII.
Supplier shall not commence any work hereunder until Supplier has fulfilled all
insurance requirements herein. Supplier shall require its subcontractors and
agents to maintain the same insurance coverage listed below.
13.1. Workers' Compensation insurance with statutory limits as required in
the state(s) of operation; and providing coverage for any Supplier employee
entering onto Customer premises, even if not required by statute.
Employers' Liability or "Stop Gap" insurance with limits of not less than
$100,000 each accident.
13.2. Commercial General Liability Insurance covering claims for bodily
injury, death, personal injury or property damage occurring or arising out
of the performance of this Agreement, including coverage for independent
contractor's protection (required if any work will be subcontracted),
premises-operations, products/completed operations and contractual
liability with respect to the liability assumed by Supplier hereunder. The
limits of insurance shall not be less than:
Each Occurrence $ 1,000,000.00
General Aggregate Limit $ 2,000,000.00
Products-Completed
Operations Limit $ 1,000,000.00
Personal and Advertising
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Injury Limit $ 1,000,000.00
13.3. Comprehensive Automobile Liability Insurance covering ownership,
operation and maintenance of all owned, non-owned and hired motor vehicles
used in connection with the performance of this Agreement, with limits of
at least $1,000,000 per occurrence for bodily injury and property damage.
13.4. The insurance limits required herein may be obtained through any
combination of primary and excess or umbrella liability insurance. Supplier
shall forward to Customer certificates of such insurance upon execution of
this Agreement and upon any renewal of such insurance during the term of
this Agreement. The certificate(s) shall provide that (1) Customer
(including all participating affiliates) be named as an additional
insured(s) as their interest may appear with respect to this Agreement; (2)
thirty (30) days prior written notice of cancellation, material change or
exclusions in the policy shall be given to Customer; (3) coverage is
primary and not excess, or contributory with, any other valid and
collectible insurance purchased or maintained by Customer.
13.5. Any additional or different insurance requirements shall be specified
in Module(s), Schedule(s) or Attachment(s) to this Agreement.
14. Advertising; Publicity: Neither party shall use the other party's names,
marks, codes, drawings or Specifications in any advertising, promotional efforts
or any publicity of any kind without the prior written permission of such other
party.
15. Assignment:
15.1. This Agreement shall be binding upon the parties' respective
successors and permitted assigns. Neither party may assign or delegate this
Agreement and/or any of its rights and obligations hereunder without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. Any such attempted assignment shall be void.
However, Customer may assign this Agreement and delegate any of its rights
and/or obligations hereunder to its parents, subsidiaries, subsidiaries of
its parents, or other affiliates, without the consent of Supplier. Any
assignment of amounts payable is void to the extent that it attempts to
impose on Customer obligations to the assignee, or to preclude Customer
from dealing solely and directly with Supplier in all matters under this
Agreement.
16. Force Majeure: Neither party shall be liable for failure to perform solely
caused by unforeseeable force majeure circumstances beyond their control ("Force
Majeure"). If such circumstances occur, the party injured by the other's
inability to perform may elect to; (1) terminate this Agreement in whole or in
part; or (2) suspend the Agreement, in whole or part, for the duration of the
Force Majeure circumstances; or (3) terminate any affected Order(s) and delete
the canceled quantity from its committed quantity for the year in which the
canceled quantity was to have been purchased. The party experiencing the Force
Majeure circumstances shall cooperate with and assist the injured party in all
reasonable ways to minimize the impact of such circumstances on the injured
party, including assisting in locating and arranging for substitute Purchases.
17. Time is of the Essence: Time is of the essence in performance hereunder and
a significant and material term hereof.
18. Waiver: The failure of either party to exercise any right shall not be
construed to be a waiver unless agreed upon in writing. A waiver in any one
instance will not constitute an amendment to this Agreement or indicate any
continued waiver of such right on any other occasion.
19. Compliance with Laws:
19.1. Supplier shall obtain and maintain at its own expense all permits and
licenses and pay all fees required by law with respect to any Purchases
and/or performance of this Agreement. The parties shall, in connection with
performance of and Purchases under this Agreement, comply with all
applicable federal, state, and local laws, ordinances, rules, regulations,
court orders, and governmental or regulatory agency orders ("Laws"),
including, without limitation;
19.1.1. The Telecommunications Act of 1996 and all rules, regulations
and orders issued in connection with that Act and this Agreement
shall, to the greatest extent possible, be construed to be consistent
with the same;
19.1.2. Laws relating to non-discrimination in employment, fair
employment practices, equal employment opportunity, employment
opportunities for veterans, non-segregated facilities, and/or
employment of the disabled, except to the extent a party is exempt
therefrom; and the Laws and contract clauses required by those Laws
to be made a part of this Agreement are incorporated herein by this
reference;
19.1.3. The Laws referred to in Article 8 "Independent Contractor";
19.1.4, Supplier acknowledges that Purchase(s) and/or Confidential
Information ("Exports") may be subject to U.S. and applicable foreign
export laws or regulations. Supplier shall perform its obligations
under this Agreement in a manner consistent with the requirements of
all applicable U.S. and all applicable foreign laws and regulations,
including the U.S. export laws and regulations, the Foreign Corrupt
Practices Act, and anti-boycott laws, and U.S. export laws and
regulations prohibiting the unauthorized export or re-export of
certain items to residents of countries listed in U.S. Export
Administration Regulations. Specifically, Supplier certifies and
warrants that the shipment or provision of Exports, any associated
technical data or information, or the direct product thereof, will
not violate U.S. export laws or regulations, or the import laws and
regulations of all applicable foreign states. Supplier shall be
responsible for obtaining, recording, filing, maintaining, and paying
for all export and import documentation including all licenses and
permits.
19.1.5. The Occupational Safety and Health Act of 1970 (as amended)
and all other Laws relating to safety and health, including
applicable motor carrier safety regulations. Supplier shall be solely
responsible for its safety, the safety of its employees,
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Agreement No. 97050894
its subcontractors and agents, and its general work area, and the
safety of Purchases hereunder so that all Purchases comply with
safety and health Laws when used or performed. Supplier shall
immediately remedy any non-compliance and indemnify and hold Customer
harmless from any penalty, fine or Liabilities in connection
therewith; and
19.1.6. The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (as amended), and all other Laws relating to
that Act, and all other applicable environmental Laws, including Laws
relating to hazardous materials, asbestos or toxic items. Supplier
shall furnish Customer with Material Safety Data Sheets that comply
with Laws and other environmental compliance data requested by
Customer.
19.2. The requirements of this Article 19 shall survive the expiration,
termination or cancellation of this Agreement. All provisions of this
Article shall also apply to all subcontractors, and similar terms shall be
included in all Supplier's contracts with subcontractors.
20. Severability: Any term or provision of this Agreement which is held to be
invalid, void, unenforceable or illegal will in no way affect, impair or
invalidate the remaining terms or provisions, which will remain in full force
and effect, consistent with the original intent of the parties. However, if such
provision is an essential element of the Agreement, the parties shall promptly
attempt to negotiate a substitute therefore.
21. Termination of Agreement or Order(s):
21.1. Customer shall have the right to terminate this Agreement and/or any
Order(s), in whole or in part, upon thirty (30) days written notice to
Supplier. Upon receipt of notice of termination, Supplier shall place no
further orders, terminate contracts, take such action as directed by
Customer, and cease work, all in accordance with Customers notice.
21.2. For Orders terminated by Customer after Supplier's Acceptance in
writing, between forty-six (46) and sixty (60) 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 five (5)
calendar days after the date as agreed to in an Order incurring no
liability whatsoever.
22. Cancellation for Default:
22.1. Either party may cancel this Agreement and/or any Order(s), in whole
or part, without liability, by giving written notice of breach or default
if the other:
1) becomes insolvent, unable to pay debts when due, or the subject of
bankruptcy proceeding not terminated within thirty (30) days of any
filing; or makes a general assignment for the benefit of creditors; or
if a receiver is appointed for substantially all of its property;
provided however that Customer may not terminate pursuant to this
subclause (1) unless Supplier is in material breach of this agreement;
or
2) materially breaches or defaults on its obligations under this
agreement and, if the breach or default can be cured, fails to cure
the breach or default within thirty (30) days after receipt of written
notice expressly stating a breach has occurred and reasonably
describing such breach, provided that such termination may only occur
so long as such breach remains uncured; or
3) commits more than three (3) material breaches of this Agreement in a
four (4) month period, provided written notice of each such breach,
expressly stating a breach has occurred and reasonably describing such
breach, has been promptly provided to the breaching party.
22.2. If Services are being provided, Customer shall have the right to take
over and complete the Services at Supplier's expense.
22.3. If Customer cancels this Agreement and/or any Order(s) for Supplier's
default or breach, it shall be entitled to recover from Supplier all
losses, damages and expenses incurred as a result of Supplier's default or
breach. Supplier shall refund to Customer amounts previously paid for
Purchases which, due to such cancellation, cannot reasonably be used by
Customer, and shall bear all expenses for their removal and return.
Supplier shall, at Customer's option, promptly remove Purchases or bear the
cost of removal. Supplier shall restore or bear the expenses of restoration
of Customer's property to its original condition at the direction of
Customer and refund to Customer all monies previously paid for such
Purchases.
22.4. If Supplier cancels this Agreement and/or any Order(s) for Customer's
default or breach, it may recover from Customer reasonable expenses
incurred as a direct result of Customer's default or breach, which shall
not exceed the amounts which Customer has not yet paid under the terms
hereof. Customer shall not be liable for incidental, consequential or
indirect damages, including but not limited to lost profits or unallocated
overhead.
22.5. Any cancellation by Customer under this Article which is set aside or
deemed wrongful will be deemed a termination under Article 21 "Termination
of Agreement or Order(s)" of this Agreement.
23. Dispute Resolution:
23.1. Any claim, controversy or dispute which arises between the parties,
their agents, employees, officers, directors or affiliates ("Dispute")
which the parties are unable to settle through consultation and negotiation
may be mediated under the Commercial Mediation Rules of the American
Arbitration Association ("AAA") by a mutually acceptable mediator. Any
Dispute which cannot be resolved through negotiation or mediation shall be
resolved by binding arbitration as provided in this Article. The
arbitrability of claims shall be determined under the Federal Arbitration
Act, 9 USC Secs. 1-16. Notwithstanding the
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Agreement No. 97050894
foregoing, the parties may cancel or terminate this Agreement in accordance
with its terms and conditions without being required to follow the
procedures set forth in this Article.
23.2. A single arbitrator engaged in the practice of law, who is
knowledgeable about the subject matter of this Agreement and the matter in
Dispute, shall conduct the arbitration under the rules of the AAA then in
effect, except as otherwise provided herein. The arbitrator shall be
selected in accordance with AAA procedures from a list of qualified people
maintained by the AAA. The arbitration shall be conducted in Denver,
Colorado, and all expedited procedures prescribed by the AAA rules shall
apply. The laws of Colorado shall govern the construction and
interpretation of this Agreement. The arbitrator's decision and award shall
be final, conclusive and binding, and judgment may be entered upon it in
accordance with applicable law in any court having jurisdiction thereof. In
the event that a party must resort to judicial action to enforce any
decision of the arbitrator, the other party shall pay the enforcing party's
reasonable legal fees for such enforcement.
23.3. Either party may request from the arbitrator injunctive relief to
maintain the status quo until such time as the arbitration award is
rendered or the Dispute is otherwise resolved. The arbitrator shall not
have authority to award punitive damages. Each party shall bear its own
costs and attorneys' fees, and the parties shall share equally the fees and
expenses of the mediator and arbitrator.
23.4. If any party files a judicial action asserting claims subject to
arbitration, as prescribed herein, and another party successfully stays
such action and/or compels arbitration of said claims, the party filing
said action shall pay the other party's costs and expenses incurred in
seeking such stay and/or compelling arbitration, including reasonable
attorneys' fees.
23.5. Supplier agrees that in the event of any Dispute between the parties,
it will continue to provide Purchases without interruption.
23.6. Supplier shall include in all contracts with its subcontractors
provisions similar to those in this Article 23, requiring that all disputes
in any way involving Customer shall be settled by binding arbitration.
24. Several Liability and Joint Discounts: The term Customer as used herein may
be applicable to one or more parties and the singular shall include the plural.
If more than one party is referred to as Customer herein, then their obligations
and liabilities shall be several, not joint. Notwithstanding the foregoing, all
Purchases under this Agreement and/or related agreements shall be cumulative for
purposes of determining: (1) whether Customer has met any minimum purchase
requirements; (2) credits which may be applicable; (3) Customer's forecasts; (4)
the level of discount, if any, which shall apply to any Purchases; and (5) any
other requirements or incentives based upon the volume or amount of Purchases.
25. Nonexclusive Agreement: It is expressly understood and agreed that this
Agreement does not grant to Supplier any exclusive privileges or rights and
Customer may contract with other suppliers for the procurement of comparable
Purchases. Customer makes no guarantee or commitment for any minimum or maximum
amount of Purchases hereunder.
26. Remedies Cumulative: The remedies provided herein shall be cumulative and
in addition to any other remedies provided by law or equity.
27. Survival: The provisions of this Agreement that, by their sense and
context, are intended to survive performance by either or both parties shall
also survive the completion, expiration, termination or cancellation of this
Agreement.
28. Amendments: No change or modification of any terms or conditions herein
shall be valid or binding on either party unless made in writing and signed by
authorized representatives of both parties.
29. M/WBE Subcontracting Plan: Support of Minority and Women Businesses is part
of Customer's ongoing business strategy. If required by Customer, Supplier
agrees and commits to subcontract in accordance with its subcontracting plan as
approved by Customer, and such subcontracting plan shall be incorporated herein
as an attachment to the General Terms and Conditions entitled "M/WBE
Subcontracting Plan".
30. Electronic Data Interchange ("EDI"): It is Customer's objective to procure
Purchases utilizing EDI. If Supplier is EDI capable, Customer and Supplier shall
enter into a Trading Partner Arrangement to implement EDI transactions and such
arrangement will be incorporated herein as an attachment to the General Terms
and Conditions, entitled "Electronic Data Interchange."
31. Environmental: Supplier shall utilize its best efforts, wherever applicable
to the Schedule, to; Provide environmentally preferable energy efficient
Products and Services (based on EPA issued guidelines); provide Products and
Services that eliminate or reduce the generation of hazardous waste/materials
and the need for special material processing; and, Supplier shall provide
Products and Services that promote the use of non-hazardous, recovered and
recycled materials.
32. Entire Agreement: Terms and Conditions and all Special Provisions Modules,
together with all incorporated Schedules, exhibits, Order(s), any other
attachments, and amendments, shall constitute the entire Agreement between the
parties. Any pre-printed terms and conditions on Order(s), acknowledgment forms,
or other forms or documents shall not apply and are objected to. This Agreement
supersedes all prior oral and written communications, agreements and
understandings of the parties with respect to the subject of this Agreement.
33. Counterparts: This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original and all of which taken together shall
constitute one and the same instrument.
34. Authority; Joint Preparation: The parties represent and warrant that they
are duly authorized and have received all necessary consents to enter into this
Agreement, and that the signatories are duly authorized to bind the parties to
this Agreement. Each party acknowledges that it has reviewed this Agreement and
participated in its preparation and understands the provisions of this
Agreement.
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Agreement No. 97050894
This Agreement and any ambiguous language shall not be construed against either
party for having prepared it.
35. Supplier Relationship: It is the parties' objective to support and
strengthen their working relationship to ensure performance and mutual
satisfaction under this Agreement. In support of this objective, the parties may
enter into and attach to the General Terms and Conditions an attachment.
entitled "Working Relationship."
- --------------------------------------------------------------------------------
U S WEST Business Resources, Inc. as agent for
U S WEST Communications, Inc. (Customer)
/s/ Michael S. Thomas
- ----------------------------------------------
(Authorized Signature)
Michael S. Thomas, C.P.M
- ----------------------------------------------
(Print or Type Name of Signatory)
Contract Agent
- ----------------------------------------------
(Title)
March 23, 1998
- ----------------------------------------------
(Execution Date)
Axiom, Inc.
/s/ Greg R. Fegley
- ----------------------------------------------
(Authorized Signature
Greg R. Fegley
- ----------------------------------------------
(Print or Type Name of Signatory)
V.P. Operations Support
- ----------------------------------------------
(Title)
March 25, 1998
- ----------------------------------------------
(Execution Date)
- --------------------------------------------------------------------------------
Confidential. Disclose and distribute solely to those individuals who have a
need to know.
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Agreement No.:97050894*P
- --------------------------------------------------------------------------------
SPECIAL PROVISIONS MODULE - PRODUCTS
This Special Provisions Module - Products ("this Module") is hereby attached to
the General Terms and Conditions and is a part of Agreement No. 97050894,
effective as of March 31, 1998, between U S WEST Communications, Inc. and Axiom,
Inc. ("Supplier"). This Module is subject in all respects to the General Terms
and Conditions, except that in the event of a conflict between this Module and
any other portion of this Agreement, the terms and conditions of this Module
shall govern for the purposes of this Module only. This Module establishes the
terms and conditions under which Customer may purchase Products from Supplier
from time to time pursuant to Schedule(s), Order(s) or other similar documents,
in which the parties may agree to non-pre-printed additional terms and
conditions which would apply for that Schedule or Order only. Any pre-printed
terms and conditions on such documents shall not apply and are objected to.
- --------------------------------------------------------------------------------
1. Definitions: In addition to the terms defined in the General Terms and
Conditions, the following capitalized terms used in this Module shall have the
following meanings for purposes of this Module only:
1.1 "Customer" for purposes of this Module means U S WEST Communications,
Inc.
1.2 "Specifications" means, in addition to the items defined as
Specifications in the General Terms and Conditions, the functional and
operational characteristics of the Product(s) which may include, without
limitation, samples, results of benchmark testing, Supplier's descriptions,
drawings, and technical criteria, including physical, operating, timing,
maintenance, compatibility and other characteristics.
2. Order(s):
2.1 Acknowledgment or performance, in whole or in part, shall constitute
Supplier's acceptance of the Order(s). Acceptance of the Order(s) binds the
parties to honor all dates, amounts and other requirements of the Order(s).
Supplier shall accept all Order(s) which comply with the terms and
conditions of this Agreement and any applicable Product Schedule(s).
Supplier shall provide Customer with written acknowledgment of Order(s) in
a time frame and format approved by Customer.
2.2 If Supplier is unable to accept any Order(s) which differs from the
terms and conditions of this Agreement and any applicable Product
Schedule(s). Supplier shall provide Customer with a notice of
non-acceptance within five (5) days of receipt of the Order(s). Failure by
Supplier to give said written notice of non-acceptance within such period
shall constitute Supplier's acceptance of the Order(s). Supplier's notice
of non-acceptance shall state the modifications necessary to make it
acceptable. The proposed modifications shall not be binding on Customer
until accepted by Customer in writing.
2.3 Customer may modify or terminate Order(s), in whole in part, at any
time prior to Supplier's acceptance, or Customer's acceptance of a modified
order, with no liability.
2.4 When provisions of any Order(s) conflict with or supplement this Module
or this Agreement, provisions of the Order(s) which are not pre-printed or
otherwise in standard form shall control. Provisions of any Order(s) which
are preprinted or otherwise in standard form shall have no effect and the
terms and conditions of this Agreement shall control.
2.5 Warranties or written representations made by Supplier under any
Order(s) or in contemplation of any Order(s), shall be binding upon
Supplier, for purposes of those Order(s).
2.6 This Article shall not be waived, modified or amended except in writing
executed by both parties.
3. Inspection, Acceptance, Rejection And Revocation:
3.1 Customer reserves the right to inspect Product(s) provided by Supplier
and/or its subcontractors. All Product(s) shall be received subject to
Customer's right of inspection, acceptance, rejection, and revocation.
3.2 Customer's inspections are for the sole purpose of identifying
Product(s) and verifying quantities received in order to provide a basis
for payment to Supplier. Customer's inspections shall not be construed as
final or as constituting acceptance of Product(s) or a waiver of any
Customer's rights. If there are apparent defects, damage, deficiencies or
failure to conform to the Agreement, Order(s) or Specifications, Customer
shall have a reasonable period of time, which in no event shall be less
than thirty (30) days after Delivery, to notify Supplier of any
nonconformity. Customer's notification will be in writing.
3.3 Customer reserves the right to inspect manufacturing facilities,
processes and finished Product(s) prior to the shipment date to verify
compliance with the Order(s), Specifications or this Agreement. Such
inspection shall not relieve Supplier of any obligations under this
Agreement or any Order(s), nor shall such inspection be deemed acceptance.
3.4 Supplier shall have five (5) days, unless mutually agreed otherwise, to
remedy non-conforming Product(s), at Supplier's own expense. Should
Supplier fail to remedy the nonconformity, Customer, at the expense of
Supplier, in its sole discretion may: (1) reject the applicable Product(s);
(2) correct any nonconformity; (3) replace the applicable Product(s) with
equivalent Product(s); or (4) cancel the applicable Order(s) and/or any
unshipped portion and Supplier shall refund to Customer amounts paid for
such Product(s). Supplier shall remove the non-conforming Product(s) and
reimburse Customer for all costs of removing and returning such Product(s)
to Supplier.
3.5 Customer's receipt or the signing of receipt documents for Product(s)
or the use of Product(s) for business, profit, revenue or any other purpose
shall not constitute acceptance.
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3.6 Any repaired or replaced Product(s) by Supplier shall be subject to
this Article.
3.7 Customer reserves the right to conduct tests to ensure that Product(s)
or any part thereof; (I) conform to the Specifications and the requirements
of the Order(s); (2) perform as represented by Supplier; and (3) meet the
needs of Customer. The acceptance period shall be the time frame as agreed
upon by the parties for conducting said tests. Acceptance testing shall be
as described in the applicable Schedule(s). Order(s) or other attachments.
Product(s) provided for acceptance testing shall be for the purpose of
evaluation only. Such evaluation shall not obligate Customer to procure
Product(s) for future use, nor shall such usage be deemed acceptance.
3.8 This Article shall not be construed as a limitation on remedies
otherwise available under this Agreement or applicable law.
4. Furnishing Of Labor, Tools, Equipment, And Material: Supplier shall
furnish, at its own cost and expense, all labor, supervision, machinery, tools,
equipment, fuel, power, materials, expendable supplies, transportation,
licenses, permits, bonds, and all other items that may be required or
appropriate in the procurement of Product(s), except as otherwise specifically
agreed to in the applicable Product Schedule(s).
5. Shipping Containers And Packaging
5.1 Product(s) shall he 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.
5.2 All containers shipped by Supplier must utilize the specifications
described in the Electronics Industries Association Specification EIA-556A.
Outer Shipping Container Bar Code Label Standard, with the exception of
references made to mixed loads. Customer does not wish to receive mixed
load shipments.
5.3 If applicable, all circuit pack packages shipped to Customer by
Supplier must comply with the requirements of Bellcore Generic Requirements
GR-1421-CORE, Issue I, dated June, 1994. Customer's exceptions to the
publication are noted below:
5.3.1 If Supplier's package is transparent it must meet the external
CLEI TM Code labeling requirements of Bellcore Document TR-STS-000485.
An over-pack is permissible to provide protection during shipping and
handling.
5.3.2 Packaging flammability requirements per Section 4.6 of Bellcore
Generic Requirements GR-1421-CORE, Issue I, dated June, 1994 are
acceptable but not required.
5.3.3 Supplier's package should handle only one circuit pack at a
time, but be capable of handling a variety of different sized circuit
packs.
5.3.4 Supplier's package must be capable of carrying documentation per
Section 4.10.4 of Bellcore Generic Requirements GR-1421-CORE, Issue 1,
dated June, 1994.
5.4 Palletized loads should involve Product(s) that have a high production
level that is usually ordered in pallet load lots. Palletized loads shall
comply with the following and with the requirements of Customer, including
but not limited to;
5.4.1 Product(s) should be arranged and grouped to facilitate sorting
at the storage point;
5.4.2 Any reusable or expendable pallet may be used providing it
permits fork-lift handling and has dimensions of 42" X 42";
5.4.3 The maximum height of the pallet load shall not exceed 50";
5.4.4 Unitized and mixed loads shall not exceed 2,500 lbs. in gross
weight;
5.4.5 Product(s) shall be secured to the pallet with non-metallic
strapping. A minimum of two straps is required. Strapping will be of
sufficient quantity, width, and thickness to preclude failure during
transit and handling. The use of stretch netting film to secure the
load to the pallet is permitted; and
5.4.6 Containers that are too large or heavy to be palletized shall be
shipped in their own containers, crates, or whatever else Product(s)
would be shipped in and when practicable shall be skidded to
facilitate fork-lift handling.
5.5 Packages and containers shall be marked according to Customer's
requirements. Supplier shall utilize the following guidelines and
requirements of Customer in packing Product(s):
5.5.1 Product(s) container shall be labeled with PID No. and
Product(s) description;
5.5.2 Date sensitive material noted on outside of container as
required;
5.5.3 Case quantity noted on case lots;
5.5.4 Box quantity noted on each box; and
5.5.5 Multiple items shall not be packaged in the same box.
6. Compatibility Information; Licensing Technology:
6.1 Upon request by Customer during the term of this Agreement or within
three (3) years following its termination, cancellation or expiration,
Supplier shall provide Customer with interface specifications describing
the electrical, functional, physical and software interfaces of Product(s).
Upon Customer's request, Supplier shall provide such data and information
to other suppliers with whose products Customer requires Supplier's
Product(s) to interface.
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Agreement No.:97050894*P
6.2 Compatibility information which is proprietary and confidential shall
be treated in accordance with the General Terms and Conditions Article
entitled "Confidential Information".
6.3 In the event that any Product(s) provided under this Module contain,
provide or involve a protocol which will be present at a Customer network
interface, and which technology is proprietary to Supplier, Supplier is
required to provide to Customer assurance that a license will be made
available to applicants under reasonable terms and conditions that are free
of any unfair discrimination.
7. Reports
7.1 Monthly Reports
Monthly Expenditure Report- This report is to include the following
--------------------------
elements (USWC PO number, date of PO, Supplier invoice number, item
ordered, USWC job number, USWC office name. USWC contract name, date
payment was received, dollar amount invoiced, any pending charges). The
report is to be provided in hard copy and on a ASCII DOS formatted 3 1/2"
disk.
7.2 Quarterly Reports
Program Management Report - This report (in contractor format) shall
address the following items (program activities for the quarter, technology
enhancements, program/order status, industry trends, important industry
news items related suppliers performance).
M/WBE Tier II Indirect Report- This is a quarterly furnished report on
M/WBE activities. This report shall incorporate the following information:
company name, contract number, M/WBE objectives, sales, percentage of
sales, Axian purchases, African American purchases, Hispanic purchases,
Native American purchases, total M/WBE purchases, non-minority women
purchases (WBE), total M/WBE, and percentage of M/WBE.
7. Notices: All notices in connection with this Module, unless otherwise
specified, shall be addressed as set forth below and shall be deemed given:
(1) as of the day they are deposited with DHL, Federal Express, Airborne or
similar overnight courier, charges prepaid, return receipt requested, with
a confirming telefax; or (2) as of the day of receipt if they are deposited
in first class U. S. Mail, charges prepaid, return receipt requested; or
(3) as of the day of receipt if they are hand delivered to;
Supplier:
---------
Axiom, Inc.
351 New Albany Road
Mooretown, New Jersey 08057-1177
Attention: Mr. Greg Fegley
Telefax: (609) 866-2439
Customer:
---------
U S WEST Communications, Inc.
700 W. Mineral Avenue
Littleton, Colorado 80120
Attention: Mr. Michael S. Thomas, C.P.M.
Telefax: (303) 707-9497
Either Party may change its notice address or recipient by giving written notice
to the other Party of the change.
8. Transfer of Title: Customer shall have the right to transfer the title to the
Products to a third party along with all rights and obligations with respect to
any associated Software integral to the functioning of the Products, at no
charge to Customer or to transferee. The transferee shall be subject to the same
Software license conditions and restrictions as apply to Customer.
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Agreement NO.:97050894*P
9. 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. At Customer's or third party owner's option
and direction, Supplier shall replace or temporarily repair such property and/or
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.
- --------------------------------------------------------------------------------
The parties intending to be legally bound have caused this Special Provisions
Module - Product to be executed by their duly authorized representatives and
shall be deemed effective as of March 31, 1998.
U S WEST Business Resources, Inc. as agent for
U S WEST Communications., (Customer)
/s/ Michael S. Thomas
- ---------------------------------------------
(Authorized Signature)
Michael S. Thomas, C.P.M.
- ---------------------------------------------
(Print or Type Name of Signatory)
Contract Agent
- ---------------------------------------------
(Title)
March 25, 1998
- ---------------------------------------------
(Execution Date)
Axiom, Inc.
/s/ Greg R. Fegley
- ---------------------------------------------
(Authorized Signature)
Greg R. Fegley
- ---------------------------------------------
(Print or Type Name of Signatory)
V.P. Operations Support
- ---------------------------------------------
(Title)
March 25, 1998
- ---------------------------------------------
(Execution Date)
- --------------------------------------------------------------------------------
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Agreement No. 97050894*P*1
- --------------------------------------------------------------------------------
PRODUCT SCHEDULE NO. 97050894*P*1
This Product Schedule No. 97050894*P*1 ("this Product Schedule") is attached to
the Special Provisions Module - Products and is a part of Agreement No.
97050894, effective as of March 31, 1998, between U S WEST Communications, Inc.
("Customer") and Axiom, Inc. ("Supplier"). This Product Schedule is subject in
all respects to the Special Provisions Module - Products, except that in the
event of a conflict between this Product Schedule and the Special Provisions
Module - Products, the terms and conditions of this Product Schedule shall
govern for the purposes of this Product Schedule only.
- --------------------------------------------------------------------------------
Scope:
This Product Schedule establishes the terms and conditions under which
Customer may purchase the Product(s) set forth herein from Supplier from
time to time.
"Customer" for purposes of this Product Schedule means U S WEST
Communications, Inc.
Supplier's price listing is incorporated herein by this reference as
Supplier's representations. Customer shall have the right to rely upon such
representations, except as expressly modified or otherwise deleted in this
Agreement.
Supplier hereby represents that its (Sterling Line of hardware and software
will provide the necessary form, fit and functionality supporting
"Automatic Message Accounting. Data Network System" AMA program offer
within U S WEST Communications).
Term Of Product Schedule: This Product Schedule shall be effective from March
31, 1998 through March 31, 1999 unless terminated or canceled pursuant to the
terms of this Agreement. The parties may extend the term or any subsequent term
of this Product Schedule by executing a separate written agreement of extension
prior to the expiration of the term.
Product(s) Description And Purchase Price: Supplier shall provide to Customer
the Product(s) described in Exhibit "A," entitled "1998 Pricing and
Configuration Guide For Billing Systems and Support Services, Revision A,
effective January 1, 1998, a copy of which is attached hereto and by this
reference incorporated herein.
For orders issued and dated on or after March 31, 1998, and for a period of one
year, the prices, rates, charges or fees payable for Material, Licensed Software
and Services purchased under this Agreement shall be, regardless of the shipment
date, prices as set forth in Exhibit "A," entitled, "1998 Pricing and
Configuration Guide for Billing Systems and Support Services, Revision A, dated
January 1, 1998."
Supplier agrees to automatically extend, at least through (level 2), level of
discount to any Orders placed under this Agreement, during the time that
Customer is making payment under the Support Agreement.
If Suppliers' published prices, rates, charges or fees on the shipment date
of material 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.
Warranty Term: (Refer to Warranty Section of General Terms and Conditions)
Supplier's warranty for Product(s) shall commence upon acceptance and shall
continue thereafter for a period of one (1) year.
The warranty period for any Product(s) corrected or replaced shall be 1
year from Delivery of the corrected or replaced Product(s) or the original
warranty period, whichever period is longer.
Transportation, Shipping And Delivery:
Supplier shall ship Product(s) in accordance with Customer's instructions.
Product(s) shall be shipped FOB Origin, Freight prepaid and added to
invoice (PPA). Customer shall have the right to designate the
transportation carrier in any Order(s). Unless otherwise agreed,
transportation charges shall be limited to actual common carrier charges.
Customer may specify the Product(s) freight classifications in its
Order(s).
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 Product(s) can normally
be shipped. Nothing herein shall be construed to alter or amend the
Delivery schedule contained in any Order(s).
Customer shall obtain and maintain, at its expense, cargo and riggers
insurance to cover the value of Product(s) being shipped.
Supplier shall be responsible for all misdirected shipments. Misdirected
shipments from Supplier shall be immediately reshipped by Supplier prepaid
to the correct destination. Customer shall be entitled to deduct from
Supplier's invoice all costs incurred by Customer due to the reshipping.
Supplier's noncompliance with Customer's routing instructions shall render
Supplier liable for all risk of loss and excess freight charges. Supplier
shall be responsible for all charges
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Agreement No. 97050894*P*1
in excess of normal pricing, which result from deviation from normal service or
routing by Supplier.
Supplier shall not use premium transportation without the prior written
authorization of Customer. Premium transportation is any service that produces a
transportation cost higher than the cost that would be incurred on a shipment
via normal transportation.
It is understood and agreed to between the parties that Supplier remains fully
responsible to meet the Delivery Date as specified in any Order(s) even though
the Product(s) are shipped FOB Origin, Freight Prepaid and added to invoice or
per Customer's instructions. If Supplier fails to meet a Delivery Date due to
the sole negligence or fault of the common carrier transporting said Product(s),
Supplier agrees to use its best efforts to: (a) reposition Customer to the front
of Supplier's manufacturing schedule; and (b) promptly and immediately reship
replacement Product(s) to Customer. Supplier will use reasonable efforts to
maintain a safety stock inventory on long lead Product(s).
Supplier shall Deliver Product(s) in time to meet the Delivery Date; provided
however; (a) Supplier shall not Deliver any Product(s) prior to the Delivery
Date without Customer's consent; and (b) Customer and Supplier may agree in
writing to change any Delivery Date.
Delivery interval(s) shall be as specified on each specific order.
Customer shall have the right to credit any late charge against Supplier's
invoices. Customer's late charge shall not be deemed to constitute liquidated
damages, and Customer reserves all remedies provided in this Agreement or at
law.
Price Protection:
For a period of one (1) year(s) after the effective date of this Product
Schedule the prices, rates, charges or fees for Product(s) shall be as set
forth in Paragraph 3, of this Product Schedule.
Supplier warrants that the prices, rates, charges or fees for Product(s)
sold hereunder are not less favorable than those currently and in the
future extended to other customers for the same or similar Product(s) in
similar quantities. Customer shall automatically have the benefit of any
lower prices, rates, charges or fees. Supplier warrants that the prices
shown on Order(s) are complete, and no additional charges (including but
not limited to shipping, packaging, labeling, custom duties, storage,
insurance, boxing and crating) shall be added to Order(s) without
Customer's express written consent.
Notwithstanding any other provision in this Product Schedule or Order(s),
Supplier shall not Deliver Product(s) and Customer shall not be required
to pay for Product(s) in excess of the quantity or requirements set forth
in the Order(s) unless Customer has first executed a written acknowledgment
to an Order(s) authorizing the increased expenditure.
Customer and Supplier hereby agree to the following Price Discounts: (see
Exhibit B for Discount Schedule).
Customer and Supplier agree to the following Payment Discounts: Net 30
days.
Reports: (See Report Section, Item #7, in Product Module for reporting
requirements)
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The parties intending to be legally bound have caused this Product Schedule No.
_____ to be executed by their duly authorized representatives.
U S WEST Business Resources, Inc., as agent for
U S WEST Communications, Inc., (Customer)
/s/ Michael S. Thomas
- ---------------------------------------------
(Authorized Signature)
Michael S. Thomas, C.P.M.
- ---------------------------------------------
(Print or Type Name of Signatory)
Contract Agent
- ---------------------------------------------
(Title)
March 25, 1998
- ---------------------------------------------
(Execution Date)
Axiom, Inc.
/s/ Greg R. Fegley
- ---------------------------------------------
(Authorized Signature)
Greg R. Fegley
- ---------------------------------------------
(Print or Type Name of Signatory)
V.P. Operations Support
- ---------------------------------------------
(Title)
March 25, 1998
- ---------------------------------------------
(Execution Date)
- --------------------------------------------------------------------------------
<PAGE>
Agreement No. 97050894*SL
- --------------------------------------------------------------------------------
SPECIAL PROVISIONS MODULE - SOFTWARE SUPPORT AND MAINTENANCE SERVICES
This Special Provisions Module - Software License and Services ("this Module")
is hereby attached to the General Terms and Conditions and is a part of
Agreement No. 97050894, effective as of March 31, 1998, between U S WEST
Communications, Inc. ("Customer") and Axiom, Inc. ("Supplier"). This Module is
subject in all respects to the General Terms and Conditions, except that in the
event of a conflict between this Module and any other portion of this
Agreement, the terms and conditions of this Module shall govern for the purposes
of this Module only. This Module establishes the terms and conditions under
which Customer may procure Software licenses and services from Supplier from
time to time pursuant to Schedule(s), Order(s) or other similar documents, in
which the parties may agree to non-pre-printed additional terms and conditions
which would apply for that Schedule or Order only. Any pre-printed terms and
conditions on such documents shall not apply and are objected to.
- --------------------------------------------------------------------------------
1. Definitions: In addition to the terms defined in the General Terms and
Conditions, the following capitalized terms used in this Module shall have the
following meanings for purposes of this Module only:
1.1 "Acceptance" (or "Accepted" or "Accept") is defined in Article 4 of
this Module.
1.2 "Customer" for purposes of this Module means U S WEST Communications,
Inc., and any Affiliates who may purchase under this Agreement.
1.3 "Custom Software" means special, custom development of software
performed by Supplier at Customer's request.
1.4 "Software" means, in addition to the definition of Software in the
General Terms and Conditions, any Standard Software and/or Custom
Software.
1.5 "Standard Software" means Supplier's Software product(s) in the
version(s) and release(s) made generally available for license and
provided to customer under this agreement.
1.6 "CPU License" means 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. Such
back-up CPU shall be Materiel purchased by Customer from Supplier.
1.7 "Delivery Date" means the date stated in an Order by which Licensed
Software is required to be delivered.
1.8 "Firmware" means a set of logical instructions represented by a pattern
of bits contained in hardware.
1.9 "Licensed Software" means Software programs, Base Licensed Software
Releases, Maintenance Releases, and any other Software release associated
with Materiel and Supplier's TeleProcessing Product Line for which Supplier
has the right to grant licenses or sublicenses to Customer and for which
Supplier shall receive a license fee.
1.10 "Maintenance Support Services" ("MSS") means those services provided
by Supplier to assist Customer in the maintenance of Materiel and Licensed
Software both in and out of warranty.
1.11 "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.
1.12 "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.
1.13 "Base Licensed Software Release" shall mean new generic features and
enhancement issues of Licensed Software which incorporates new features,
enhancements and or maintenance items.
1.14 "Maintenance Release" shall mean a Licensed Software generic issued
to correct problems or nonconformances with the Licensed Software Release
as identified by Customer or Supplier.
1.15 "Sterling Product Line" means Supplier's Product Line shall include
but not be limited to Supplier's Firmware and Licensed Software.
1.16 "Software" means a set of logical instructions and tables of
information which guide the functioning of a processor.
2. Term of Agreement: This Agreement shall commence on March 31, 1998 and
continue in effect thereafter until March 31, 1999.
3. Scope And Term Of License:
3.1 Supplier grants Customer a nonexclusive, perpetual, irrevocable (except
for mutual breach) license for the Software as may be ordered by Customer
from time to time, in object code form, to use and make one backup copy for
its business with no right to sublicense, unless otherwise specified in a
Schedule, Order or other writing by the parties. Title to Software shall
remain with Supplier. Supplier agrees that any licenses granted hereunder
may be extended to any Affiliate on the terms and conditions of this
Agreement, without charge. Any such Affiliate shall be added to this Module
as an additional Customer. Customer may not, directly or indirectly,
attempt to reverse engineer or decompile the Software.
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3.2 Supplier grants to Customer a license to use (right-to-use - RTU) and
make copies of documentation for software at no cost for its use which
shall be delivered to Customer together with the Software. Supplier shall
also provide, and grants to Customer a license to use and make copies,
training materials necessary or helpful to use Software effectively, at no
cost. The term "documentation" shall include such training materials.
3.3 Copies of Software and Documentation made by Customer shall retain
Supplier's copyright notices and proprietary markings. Customer may modify,
correct or enhance Documentation in any manner, and Customer shall have all
right, title and interest in and to any such modifications, enhancements
and/or corrections, other than the pre-existing works belonging to
Supplier.
3.4 Customer may terminate this Module upon thirty (30) days written notice
to Supplier. Such termination, and/or cancellation or expiration of the
Agreement, shall not affect: (1) the licenses granted prior to the
effective date of termination; (2) the remaining term of any Software
Support and Maintenance Services: and/or (3) any obligations with respect
to escrow of Software.
3.5 The terms and conditions of this Section shall control unless modified
by subsequent sections of this Agreement or in an Order in accordance with
section entitled "Order Provisions."
4. Software Services: Customer may elect to have Supplier perform certain
Services as set forth in a Schedule(s). Order(s) or other document, such as
Software installation, Support and Maintenance, training, evaluation, Custom
Development and/or consultation.
4.1 Custom Software Development Services: Supplier agrees to develop and
provide for Customer Custom Software along with related Documentation, as
mutually agreed upon and as described in the Schedule(s) and/or Order(s),
in accordance with the requirements of the Agreement.
Unless the Custom Software is a Stand Alone Module and the Schedule
provides that Customer shall own the Stand Alone Module, as provided in
Article 7 of the General Terms and Conditions, ownership in the Custom
Software and all related Work Product shall remain with Supplier and
Customers use of the Custom Software shall be governed by the license
granted in section 3.1 hereof.
4.2 Software Support and Maintenance Services: For as long as Supplier
offers support and/or maintenance services for the Software or similar
software to any of its customers, Customer shall, at Customer's option and
expense, be entitled to receive such Services. Customer may request Support
and Maintenance Services in accordance with the applicable Schedule(s).
5. Acceptance:
5.1 Acceptance of Standard Software: For Standard Software, "Acceptance"
(or "Accept" or "Acceptable" or "Accepted") means Customer's acknowledgment
that Software conforms to the requirements of this Agreement Acceptance
shall be deemed to occur on the earlier of: (1) the date Customer gives
written acknowledgment, or (2) "Acceptance Period" means the forty-five (45
days after receipt of Licensed Software, during which Customer determines
if Licensed Software conforms to Specifications and the requirements of an
Order. The passage of forty-five (45) days shall not be deemed Acceptance
for Licensed Software delivered prior to the Delivery Date without
Customer's consent).
5.2 Acceptance of Custom Software: Supplier shall install Custom Software
unless otherwise provided in the applicable Schedule(s) or Order(s).
Customer shall test Custom Software upon installation according to the
Acceptance Test(s) described in the Schedule(s), Order(s) or other
applicable document(s), with Supplier's support. The Custom Software shall
be deemed Accepted after successful completion of the Acceptance Test(s)
and a determination by Customer that the Custom Software is free from
material error, and operates in conformance with the Documentation.
Specifications and other requirements as set forth in this Agreement.
Supplier agrees to provide support services during Acceptance Test(s) at no
expense to Customer other than reimbursement of Supplier's expenses to the
extent allowed under this Agreement.
5.3 Acceptance of Documentation for Custom Software: Customer will review
the Documentation delivered by Supplier for errors or defects, for
conformance to the terms of this Agreement, including Specifications, and
for consistency with the Software. Customer shall have the later of
forty-five (45) days following Acceptance of the Software or delivery of
all Documentation to Customer to complete such review. Customer shall
notify Supplier during this period if Customer determines that corrections
to the Documentation are required.
5.4 Nonconformance, Rejection, Non-Acceptance: In the event the Software
and/or Documentation is not Accepted by Customer, Supplier agrees to make
any necessary corrections to the Software and/or Documentation. Unless
otherwise agreed, the corrected Software and/or Documentation shall be
delivered within fifteen (15) days after Customer notifies
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Supplier that the Software and/or Documentation has not been Accepted. If
the corrected Software and/or Documentation is still not Accepted. Customer
may, at its option, terminate the applicable Schedule(s) and/or Order(s) in
whole or in part, effective immediately upon notice, and shall receive
reimbursement of all payments made to Supplier under the terminated
Schedule(s) and/or Order(s) within five (5) days following the termination
notice.
6. Order Acceptance, Modification and Termination:
6.1 If Supplier is unable to accept an Order as received, Supplier shall
provide Customer with a notice of non-acceptance within ten (10) business
days of receipt of the Order. The notice shall state the modifications
necessary to make the Order acceptable. The proposed modifications shall
not be binding on Customer until accepted by Customer in writing. If
Supplier fails to notify Customer of non-acceptance within ten (10)
business days the Order will be deemed accepted by Supplier.
6.2 Licensed Software shall be Delivered to Customer by the date agreed to
in an Order. Supplier shall, at Customer's option, either reduce the
invoice for such Licensed Software by an amount equal to five tenths of one
percent (0.5%) of cost of the Licensed Software Release, as identified in
Exhibit B, "Pricing", per business day for each business day the Licensed
Software has not been Delivered beginning five (5) business days after the
Delivery Date agreed to in an Order, up to a maximum of ten (10%) percent
of the Software Licensed fee unless otherwise agreed in writing, or, credit
Customer an amount equal to five tenths of one percent (0.5%) of the value
of the Licensed Software per business day, beginning five (5) business days
after the Delivery Date agreed to in an Order, up to a maximum of 10
percent (10%) of the Software Licensed fee. In the event Customer and
Supplier mutually agree to changes to the requirements of an Order, the
Order will be modified to reflect the changes and the Delivery date shall
be modified accordingly and as mutually agreed by both parties.
7. Fees and Charges: All fees, charges and timing of payments shall be
specified in the Schedule(s), Order(s) or other applicable attachment. Customer
shall only be bound to pay the amounts specifically agreed to in writing. (see
Exhibit B)
8. Invoices and Payments
8.1 Invoices for Licensed Software and MSS shall be issued by Supplier and
paid by Customer for services and licenses mentioned within the Product
Schedule, Exhibit "A".
8.2 Supplier shall issue invoices in the format required by Customer. All
invoices shall be sent to the billing address noted on the Order and shall
contain where applicable: Order number, ship-to location, description of
MSS, 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.
8.3 Customer is not required to pay invoiced amounts that are in dispute
until thirty (30) days after resolution. Both parties agree to resolve
disputes regarding invoices in an expeditious manner. Supplier shall
substantiate the disputed amount in writing.
8.4 Credits due Customer may be applied against amounts owned to Supplier.
Credits shall be stated on separate invoices and/or, at Customer's request,
a separate check will be issued to Customer within thirty (30) days.
8.5 Payment shall not be considered Acceptance of nonconforming Licensed
Software and MSS.
8.6 Supplier shall provide Licensed Software and MSS without interruption
in the event of disputes concerning payment or other provisions of this
Agreement.
8.7 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, prior to making any
payments for Licensed Software and MSS, require Supplier to furnish
satisfactory evidence that all such claims, liens and courses 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.
9. Escrow: Supplier agrees that the entire source code for Standard Software,
together with all related listings and Documentation, as now exists or hereafter
becomes available including, without limitation, the then current version(s) of
Standard Software being used by Customer ("Escrow Materials") will, at
Customer's option, be deposited, maintained and updated at Customer's expense in
escrow pursuant to an Escrow Agreement which may be executed between the
parties. The form of Escrow Agreement to be used is attached hereto as Exhibit F
to this Module, and incorporated herein. Unless otherwise agreed, Supplier shall
execute the Escrow Agreement and deposit the Escrow Materials within thirty (30)
days of Customer's exercise of its option.
10. Additional Warranties:
10.1 In addition to all Warranties stated in the Agreement, Supplier
warrants that the Software shall operate in accordance with and conform to
the requirements of this Agreement (including Specifications) in all
material respects. This warranty shall be voided by Customer's modification
of the Software or combination of Software with other software so long as
Supplier can reasonably discharge any warranty obligations notwithstanding
such modifications or combinations or, where required, following their
removal by Customer. Supplier's warranty with respect to Software shall be
for the period set forth in the applicable Schedule ("Warranty Period"),
10.2 Disabling Code. Supplier represents and warrants that to the best of
its knowledge no disabling code or devices are incorporated or present
within the Software at the time the Software is licensed by Supplier to
Customer.
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Agreement No. 97050894*SL
10.3 Supplier warrants that Licensed Software shall conform to
Specifications and requirements of the Order, and to Suppliers latest
published copy of its product announcement, For Licensed Software not
conforming to Supplier's latest published copy of its product announcement,
Supplier shall, at Customer's option, either reduce the invoice for such
Licensed Software by an amount equal to five tenths of one percent (0.5%)
of the cost of the Licensed Software, as identified in Exhibit B, paragraph
I entitled "Pricing", per business day, beginning five (5) business days
after the Acceptance period, continuing until the nonconformance has been
corrected up to a maximum of ten (10) percent of the Software Licensed fee:
or credit Customer an amount equal to five tents of one percent (0.5%) of
the value of the Licensed Software as identified in Exhibit B. "Pricing,
per business day, beginning five (5) business days after the Acceptance
period, continuing until the nonconformance has been corrected up to a
maximum of ten (10%) percent of the Software Licensed fee. The penalty
shall be applied toward Customer's future purchases or any other
outstanding invoices at that time. Supplier further agrees that multiple
problems reported by Customer will not prevent or be cause for Supplier's
delay in resolving other existing problems reported by Customer. This
penalty shall only apply to Severity Levels 1, 2.
11. Additional Reports: Upon execution of this Agreement Supplier shall provide
a software quarterly order and shipment report, mailed to Customer and
Customer's Manager AMA Technical Support.
1. Supplier's name and address.
2. This Agreement number,
3. Time period covered.
4. A description of Licensed Software shipped including:
a) The quantity ordered arid the quantity shipped
b) The ship-to location including the contact's name and phone number,
5. A description of the MSS performed including a detailed listing of
Customer trouble reports called to Supplier's Technical Assistance Center
("TAC"). Such report shall include, but not be limited to. the date and
time of the call, the name of the caller, the reported trouble or reason
for the call, the severity level of the trouble, the date and time of the
TAC response to the caller, the resolution and the resolution time, a
separate description of the open Technical Assistance Requests (TAR's)
still unresolved at the report date and the anticipated date of
resolution, and description of the TAR's closed by Supplier during the
quarter, and
6. A list of Sterling Product Line ordered by Customer to date, and
identification of how many of those are out of warranty.
12. Price Protection: Regardless of the Shipment Date, prices for Licensed
Software and MSS shall be as set forth in "Exhibit B to the Product Module."
13. Training:
13.1 Supplier shall provide, upon Customer's request and at prices as
mutually agreed upon, sufficient training, training materials and support
to Customer to enable Customer to use Licensed Software and to train
Customer's training instructors. Training and documentation to support
classes shall be furnished to Customer two (2) weeks prior to training
course.
13.2 Customer shall have the right to reproduce training material for the
purpose of training Customer's personnel. Such rights shall include
photographic, video, and audio recordings of any training or training
material.
14. Manuals and Documentation:
14.1 Supplier shall provide at no additional charge, one (1) complete set
of current manuals and documentation ("Manuals") for each type of Licensed
Software purchased by Customer to;
U S WEST Communications, Inc.
Network Reliability Operations Center
700 W. Mineral Ave.
Littleton, Colorado 80120
Attn.: AMA Group
For each release of Licensed Software, Supplier shall provide, at no
additional charge, one (1) set of Order specific Manuals to each of
Customer's Primary Contacts. Such listing of Customer's primary contacts
and any updates to this information by Customer shall be provided to
Supplier by Customer.
14.2 Manuals will describe in detail the operation of Licensed Software.
14.3 Supplier shall, at no additional charge, provide all future updates,
revisions and corrections of Manuals and Program Material.
14.4 Customer shall have the right to reproduce Manuals and Program
Material for the purpose of operating Licensed Software. Reproduction shall
include the copyright or similar proprietary notices.
15. Compatibility Information:
15.1 Upon request by Customer during the Initial Term of this Agreement or
within three (3) years following its termination or expiration, Supplier
shall provide Customer with interface specifications (for products as
described within the Products Schedule) Software interfaces of Supplier's
Licensed Software. Upon Customer's request, Supplier shall provide such
data and information to other suppliers with whose products Customer
requires Supplier's Licensed Software to interface.
15.2 Compatibility information which is proprietary and confidential shall
be treated in accordance with Item 6 of the General Terms and Conditions
Agreement.
16. Rights To Inventions, Discoveries and Other Developed Information: In the
course of, or as a result of, providing Licensed Software and MSS 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.
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Agreement No. 97050894*SL
("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 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.
17. Patent Licenses:
Customer does not hereby grant to the Supplier and licenses, express or implied,
under any Customer patents (copyright or trademarks), except to the extent
necessary for Supplier to fulfill its obligation to Customer pursuant to this
Agreement or an Order.
17.1
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Agreement No. 97050894*SL
- --------------------------------------------------------------------------------
The parties intending to be legally bound have caused this Special Provisions
Module - Software License and Services to be executed by their duly authorized
representatives and shall be deemed effective as of March 31, 1998.
U S WEST Business Resources, Inc., as agent for
U S WEST Communications, Inc. (Customer)
/s/ Michael S. Thomas
- ---------------------------------------------
(Authorized Signature)
Michael S. Thomas, C.P.M.
- ---------------------------------------------
(Print or Type Name of Signatory)
Contract Agent
- ---------------------------------------------
(Title)
March 25, 1998
- ---------------------------------------------
(Execution Date)
Axiom, Inc. (Supplier)
/s/ Greg R. Fegley
- ---------------------------------------------
(Authorized Signature)
Greg R. Fegley
- ---------------------------------------------
(Print or Type Name of Signatory)
V.P. Operations Support
- ---------------------------------------------
(Title)
March 25, 1998
- ---------------------------------------------
(Execution Date)
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need to know.
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EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Axiom FSC Inc., a Barbados Corporation
Axiom Finance Inc., a Delaware Corporation
Axiom (Europe) Limited, a UK Company
AV Technology, Inc., a Delaware Corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report included in this Form 10-K into Axiom Inc.'s previously filed
Registration Statement File No. 333-32919.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, PA
December 28, 1998
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