U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB-A2
Second Amended Registration Statement on Form 10-SB-A2
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
COMPUTER AUTOMATION SYSTEMS, INC.
---------------------------------
(Name of Small Business Issuer as specified in its charter)
NEVADA 75-2749166
------ ----------
(State or other jurisdiction of (I.R.S. incorporation or
organization) Employer I.D. No.)
1825 East Plano Parkway, Suite #200
Plano, TX 75074
-----------------------------------
(Address of Principal Executive Office)
Issuer's Telephone Number, including Area Code: (972) 578-3128
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
$0.001 par value common stock
-----------------------------
Title of Class
DOCUMENTS INCORPORATED BY REFERENCE: None.
<PAGE>
PART I
Item 1. Description of Business.
- ---------------------------------
Business Development.
- ---------------------
Computer Automation Systems, Inc. ("CASI" or the "Company") was
organized under the laws of the State of Utah on July 16, 1981, under the name
"Intercontinental Strategic Minerals, Inc." The Company was formed to acquire
and invest in mining properties. The endeavors were unsuccessful, and the
Company ceased operations in 1983.
The Company was dormant until it changed its domicile to the State
of Nevada by merging with a newly formed Nevada subsidiary under the same
name, "Intercontinental Strategic Minerals, Inc.," in March, 1998. In
connection with this change of domicile, the Company effected a one for 20
reverse split of its outstanding securities, while retaining the authorized
capital and par value, with appropriate adjustments to the capital accounts of
the Company. This reverse split is reflected in all computations below,
unless indicated otherwise.
On July 24, 1998, the Articles of Incorporation were amended to
change the name of the Company to "Computer Automation Systems, Inc."
Effective July 28, 1998, the Company acquired all of the outstanding
common stock of Computer Automation Systems, Inc., a Texas corporation ("CASI
Texas"), pursuant to an Agreement and Plan of Reorganization (the "CASI Texas
Plan")in exchange for 6,400,000 shares of $0.001 par value "restricted
securities" (common stock)of the Company. This transaction may be described as
a reverse purchase acquisition. Michael E. Cherry, the Company's President
and one of its directors, was the principal stockholder and the President of
CASI Texas, owning approximately 67% of the outstanding pre-CASI Texas Plan
securities, and received 4,256,000 shares of the "restricted securities"
issued under the CASI Texas Plan. Mr. Cherry currently owns approximately 51%
of the Company's outstanding voting securities. Sylvia McCollum and Sandra
Cobb were the other two stockholders of CASI Texas, and each received 912,000
shares of the "restricted securities" issued under the CASI Texas Plan; each
presently owns approximately 11% of the Company's outstanding voting
securities. In addition, James T. Williams, James Twedt and Frank Neukomm
each received 106,667 "unregistered" and "restricted" shares of the Company's
common stock in consideration of services rendered to CASI Texas prior to and
during the acquisition process. Messrs. Williams and Twedt are former
directors and executive officers of the Company and Mr. Neukomm has been a
director since October 22, 1999. See Part I, Item 4.
CASI Texas was incorporated under the laws of the State of Texas on
February 13, 1998, for the purpose of designing and manufacturing custom rack
mount and industrial computer applications for the telecommunications and
other high technology industries. "Rack mount" literally means installation
or mounting in a rack or metal frame of standard dimension numerous pieces of
diverse equipment which are interconnected to make a systems perform any
variety of functions. The Company succeeded to these business operations,
which are described in detail under the heading "Business" of this Item, Part
I, Item 1.
Copies of the initial Articles of Incorporation of the Company filed
in the State of Utah; the Articles of Incorporation of the Nevada subsidiary
into which the Company merged to change its domicile to Nevada; the Articles
of Merger respecting the change of domicile; the Articles of Amendment to
change the name of the Company to "Computer Automated Systems, Inc."; the
Bylaws of the Company; and the CASI Texas Plan were attached as exhibits to
the Company's Registration Statement on Form 10-SB, filed with the Securities
and Exchange Commission on September 22, 1999, and are incorporated herein by
reference. See Part III, Item 1.
This Registration Statement is being filed on a voluntary basis in
an attempt to maintain the Company's quotations on the OTC Bulletin Board of
the National Association of Securities Dealers, Inc. (the "NASD"). See the
heading "Effects of Existing or Probable Governmental Regulations," Part I,
Item 1.
Business.
- ---------
General
-------
The Company designs and manufactures custom rack mount and
industrial computer applications for the telecommunications and other
industries. The Company has in-house engineering to provide quick, customized
and innovative responses to customer specifications and requirements.
CASI is first provided with a set of requirements for a custom
application by a customer. Its engineering staff then completes a design
specification which includes hardware configuration and software control
programming. In some cases, prototypes are assembled for customer approval.
Once customer approval is received, the design specifications and bill of
materials, together with a purchase order, are delivered to Control
Manufacturing Co., Inc.("Control Manufacturing"), a custom assembly and
manufacturing facility co-located with the Company at its Plano, Texas,
facilities; these facilities are leased from Control Manufacturing.
Control Manufacturing sources the materials, assembles the hardware
and delivers the product to CASI for software installation and testing prior
to delivery to the customer. Control Manufacturing bills CASI for its
services when the hardware is complete; the cost of the materials is borne by
Control Manufacturing until the product is delivered and billed to the
customer.
The principals of Control Manufacturing, Sylvia McCollum and Sandra
Cobb, are also principal stockholders of the Company and were former
stockholders of CASI Texas, and Ms. McCollum has been a director of the
Company since October 22, 1999; however, the Company believes the cost of
services performed by Control Manufacturing is equal to or less than could be
obtained from other sources. Reference to this arrangement can also be found
in the audited financial statements of the Company for the years ended
December 31, 1998 and 1997, specifically, in Notes 4 and 7. Information
regarding the share holdings of Ms. McCollum and Ms. Cobb can be found in Part
1, Item 4.
The Company specializes in the development of National Equipment
Building Standards("NEBS") certified, Sun microprocessor based, fault tolerant
systems for the telecommunications industry. NEBS is a set of
telecommunication industry standards to guide manufacturers of equipment
designed for use in telephone applications.
CASI offers a full line of rack mountable chassis and systems with
embedded Intel PC's. The Company also offers a line of ruggedized or notebook
computers manufactured for operation under harsh environmental conditions for
industrial, military and hazardous environment applications. The full line of
CASI's standard and customizable products may be viewed at www.casi1.com
("casi" followed by the numeral "1"), and include various sized rack mount
chassis, disk expansion chassis, integral monitor chassis, wall mount
enclosures, industrial table top enclosures, large and small industrial
towers, rack mount keyboards, monitor/keyboard/mouse switches, modular and
expansion rack cabinets and rack mount monitors. See the heading "Principal
Products and Services" of this Item, Part I, Item 1.
The Company also owns the manufacturing, design and intellectual
property rights to the "Naked Mini Computer" product line originally
manufactured by Computer Automation, Inc. Revenues from the Naked Mini
Computer are less than one percent of the Company's gross revenues. These
computers are durable, reliable and fault tolerant or capable of continuous
function through extreme conditions like electrical spikes (i.e., temporary
delivery of alternating current above 120 volts) and software "glitches."
They have the ability to "reboot" without interruption in functions, which is
very important in the processing industry, but operate with a proprietary
software architecture. Today, CASI is a source for repair and upgrades of the
installed base of Naked Mini Computer systems, which still number in the
thousands worldwide. It also owns and designs other intellectual property
related to the Naked Mini Computers. Michael E. Cherry was formerly employed
by Computer Automation, Inc., a now defunct entity which manufactured these
computers.
Systems Integration
-------------------
The Company is also a systems integrator specializing in creating
custom process control systems for unique customer applications. A systems
integrator is one who takes components from multiple, unrelated suppliers and
assembles (i.e., integrates) them into a new system that performs a function
or functions not possible from any individual component. CASI is currently
providing a database management system for Alcatel Network Systems, Inc.
("Alcatel") which interfaces with a network switch controller to change switch
functions, alter switch activities and report on the functioning and
environment of the switch system. A "switch" is a telephone or Internet
(voice or data or both) device which is central to the delivery of a call or
data packet by routing them from point of origin to point of termination; this
is "switching." All telecommunications traffic is routed through one or more
switches. Alcatel makes switch controllers which it sells to AT&T. CASI makes
a database management system for Alcatel which is the interface with the
switch controller. The system which CASI created for Alcatel is embedded in
systems being installed by AT&T.
CASI is a true integrator in that it will design hardware, software,
components, enclosures and even colors to match a customer's specifications.
There is a trend by large manufacturers to out source system engineering and
assembly. CASI is actively targeting the outsourcing market. For companies
wishing to out source, CASI takes total responsibility for systems, providing
"one stop shop" convenience. The system engineering and software design are
created by CASI to customer specifications. Manufacturing and assembly of
diverse parts from multiple suppliers are delivered as one piece in a custom
enclosure, with CASI providing the technical specification documents and
warranty. CASI also takes responsibility to inform its clients on
obsolescence, appropriate upgrades and trends which might effect the client's
custom application, and thereby it can effectively be the engineering
department for the customer.
CASI intends to retain the services of one or more manufacturers
representatives on an interim basis to penetrate the outsourcing market while
it develops an in house direct sales force.
Any type of process control from automobile manufacturing to
agricultural processing is a potential user of a CASI designed system, but
because of the relative ease and minimal capital cost of addressing the
telecommunications market, this is market where CASI is concentrating its
efforts this year. Among companies to which CASI is promoting its services are
Telefon L.M.Ericsson, A.B., a Swedish telecommunications equipment
manufacturer ("Ericsson"); Intervoice, a telecommunications equipment
manufacturer; and Texas Instruments. Sun microprocessors are primarily
utilized in this line of business.
E-Commerce
- ----------
The Company is in the process of upgrading its web site,
www.casil.com, to provide for interactive e-commerce. A comprehensive, new
product line will be showcased and customers will be able to configure systems
and order online. The upgrade of the content and design of the web site was
completed in early October, 1999. To support the web e-commerce activity, the
Company will be hiring an inside sales and customer service person to provide
quick responses to inquiries for quotations and questions about CASI's
capabilities. The base product line to be available on the web site is an
inexpensive, rack mount computer line designed to sell for approximately
$1,500 or less and address customer "bread and butter applications. While the
Company has an appropriate mark up on these items, the primary benefit that
CASI will enjoy from this product line is the establishment of relationships
with new customers. CASI intends to assign an engineer/account manager to new
accounts to develop opportunities for custom development and CASI's value
added services.
Starting in November of 1999, CASI began advertising in the Thomas
Register. The Thomas Register is a comprehensive catalog resource of
electronic manufacturers and suppliers. CASI will have a banner advertisement
on each page of the industrial computer section directing interested parties
to its web site. CASI will also be listed in its source book.
Risk Factors.
- -------------
In any business venture, there are substantial risks specific to the
particular enterprise which cannot be ascertained in total until the business
is underway. However, at a minimum, the Company's present and proposed
business operations will be highly speculative and will be subject to the same
types of risks inherent in any new or unproven venture, and will include those
types of risk factors outlined below.
Limited Assets; No Immediate Source of Revenue.
-----------------------------------------------
The Company's revenues may be insufficient to fund expansion of its
business operations; the Company can provide no assurance that its business
prospects will produce material revenues adequate for the Company to continue
its present or proposed operations; or that its current and intended business
operations will be profitable. See the heading "Plan of Operation"of the
caption "Management's Discussions and Analysis or Plan of Operation," Part I,
Item 2.
Limited Funds Available for Operating Expenses.
-----------------------------------------------
The Company currently has limited operating capital or cash
resources. Substantial funding necessary to meet the Company's anticipated
expansion may be needed, though during the next 12 months the Company
anticipates financing its current operations from present revenues and cash
flow. The Company's ability to raise debt or equity funding from
non-affiliated sources will be severely limited by reason of its lack of
historical operations, limited assets and the limited public market for its
common stock. See the heading "Plan of Operation" of the caption "Management's
Discussion and Analysis or Plan of Operation," Part I, Item 2, regarding the
Company's current and intended operations; and the caption "Market Price of
and Dividends on the Company's Common Equity and Other Stockholder Matters,"
Part II, Item 1, respecting the limited market for the Company's common stock.
No "Established Trading Market" for Common Stock.
-------------------------------------------------
The Company's common stock was quoted on the OTC Bulletin Board of
the NASD until approximately October 7, 1999. The shares are currently quoted
on the "Pink Sheets" of the National Quotation Bureau, LLC. There is
currently no "established trading market" for its common stock and there can
be no assurance that any such market will ever develop or be maintained.
The Company's removal from the OTC Bulletin Board has impeded the
development of an "established trading market" in its common stock because the
"Pink Sheets" market is not as accepted by most brokers/dealers in securities
as the OTC Bulletin Board, and a broker/dealer must subscribe to this service
to use it. As a result, sales of such stock will be more difficult and
expensive.
Upon the effectiveness of this Registration Statement and the
clearance of all Securities and Exchange Commission comments, the Company
will, as soon as practicable, file for quotations on the OTC Bulletin Board.
However, no assurance can be given that the NASD will allow the quotations of
the Company's common stock to be reinstated on the OTC Bulletin Board.
Stock Market Volatility.
------------------------
Any market price for shares of common stock of the Company is likely
to be very volatile, and numerous factors beyond the control of the Company
may have a significant adverse effect. In addition, the stock markets
generally have experienced, and continue to experience, extreme price and
volume fluctuations which have affected the market price of many small capital
companies and which have often been unrelated to the operating performance of
these companies. These broad market fluctuations, as well as general economic
and political conditions, may adversely affect the market price of the
Company's common stock in any market that may develop. See the caption
"Market for Common Equity and Related Stockholder Matters," Part II, Item 1.
Sales of "restricted securities" under Rule 144 may also have an adverse
effect on any market that may develop in the Company's common stock, due to
the possibility that the supply of these shares will significantly exceed the
demand for such shares in the market. See the caption "Recent Sales of
Unregistered Securities," Part II, Item 4, for information regarding the
number of shares which may be available for sale under Rule 144 by present
stockholders of the Company.
Competition.
------------
The Company expects competition to persist, intensify and increase
in the future. Present competition includes almost every firm which designs
and manufactures custom computer applications, and the industry is growing
every day. Systems integration and e-commerce will result in even greater
competition.
Almost all of the Company's current and potential competitors have
longer operating histories, larger installed customer bases, longer
relationships with clients and significantly greater financial, technical,
marketing and public relation resources than the Company and could decide at
any time to increase their resource commitments to the Company's target
market. Competition from these competitors could make the Company unable to
generate or maintain enough clients to make a profit.
In addition, the Company's ability to generate clients will depend
to a significant degree on the quality of its products and services and its
reputation among its clients and potential clients, compared with the quality
of its services provided by, and the reputations of, the Company's
competitors. To the extent the Company loses clients to its competitors
because of dissatisfaction with the Company's services or its reputation is
adversely affected for any other reason, it may be unable to produce
sufficient operating revenue to stay in business.
Low Barriers to Entry.
----------------------
There are relatively low barriers to entry into the Company's
business. Because firms such as the Company rely on the skill of their
personnel and the quality of their client service, they have no patented
technology that would preclude or inhibit competitors from entering their
markets. The Company is likely to face additional competition from new
entrants into the market in the future. There can be no assurance that
existing or future competitors will not develop or offer services that provide
significant performance, price, creative or other advantages over those
offered by the Company, which could attract existing and potential customers
away from the Company and may make it unable to operate profitably.
Rapid Technology Change.
------------------------
The market for computer products and services is characterized by
rapid technological change, changes in user and client requirements and
preferences, frequent new product and service introductions embodying new
processes and technologies and evolving industry standards and practices that
could render the Company's intended service practices and methodologies
obsolete. Failure to keep pace with these changes could result in the loss of
customers or the inability to attract and retain customers, either of which
developments could make the Company unable to operate at a profit.
Potential Liability to Clients.
-------------------------------
Many of the Company's intended operations involve the development,
implementation and maintenance of applications that are critical to the
operations of their clients' businesses. Our failure or inability to meet a
client's expectations in the performance of our products or services could
injure the Company's business reputation or result in a claim for substantial
damages, regardless of its responsibility for such failure. In addition, the
Company possesses technologies and content that may include confidential or
proprietary client information. Although the Company will implement policies
to prevent such client information from being disclosed to unauthorized
parties or used inappropriately, any such unauthorized disclosure or use could
result in a claim for substantial damages.
The Company will attempt to limit contractually its damages arising
from negligent acts, errors, mistakes or omissions in rendering professional
services; however, there can be no assurance that any contractual protections
will be enforceable in all instances or would otherwise protect the Company
from liability for damages. The successful assertion of one or more large
claims against the Company that are uninsured, exceed available insurance
coverage, if any, or result in changes to any insurance policies the Company
may obtain, including premium increases or the imposition of a large
deductible or co-insurance requirements, could result in significant costs to
the Company and may make it unable to operate profitably.
Future Capital Needs; Uncertainty of Additional Financing.
----------------------------------------------------------
The Company currently does have the available cash resources and
credit facilities sufficient to meet its presently anticipated working capital
and capital expenditure requirements for this year. However, the Company's
future liquidity and capital requirements will depend upon numerous factors,
including the success of its product and service offerings and competing
technological and market developments. The Company will be required to raise
additional funds through public or private financing, strategic relationships
or other arrangements, particularly as its acquisition strategy matures. There
can be no assurance that such additional funding, if needed, will be available
on terms acceptable to the Company, or at all. Furthermore, any additional
equity financing may be dilutive to stockholders, and debt financing, if
available, may involve restrictive covenants, which may limit the Company's
operating flexibility with respect to certain business matters. Strategic
arrangements, if necessary to raise additional funds, may require the Company
to relinquish its rights to certain of its products or selected business
opportunities.
If adequate funds are not available on acceptable terms, the Company
may be unable to develop or enhance its services and products, take advantage
of future opportunities or respond to competitive pressures.
Government Regulation and Legal Uncertainties.
----------------------------------------------
The Company is not currently subject to direct governmental
regulation, other than the securities laws and the regulations thereunder
applicable to all publicly owned companies, and laws and regulations
applicable to businesses generally, and there are currently few laws or
regulations directly applicable to access to or commerce on the Internet.
However, due to the increasing popularity and use of the Internet, it is
likely that a number of laws and regulations may be adopted at the local,
state, national and international levels with respect to the Internet covering
issues such as user privacy, freedom of expression, pricing of products and
services, taxation, advertising, intellectual property rights, information
security or the convergence of traditional communication services with
Internet communications. The adoption of any such laws or regulations may
decrease growth of the Internet, which could in turn decrease the demand for
the Company's products or services or increase the cost of doing business,
either of which may make it more difficult for the Company to operate at a
profit.
Further, the applicability to the Internet of existing laws
governing issues such as property ownership, copyrights and other intellectual
property issues, taxation, libel and personal property is uncertain. The vast
majority of such laws were adopted prior to the advent of the Internet and
related technologies and, as a result, do not contemplate or address the
unique issues of the Internet and related technologies. Changes to such laws
intended to address these issues, including some recently proposed changes,
could create uncertainty in the marketplace which could reduce demand for the
Company's products or services or increase the cost of doing business as a
result of litigation expenses or increased service delivery costs.
Year 2000
- ---------
Nearly all primary computer products and components utilized by the
Company are purchased from Sun or Intel. The Company has sent "Year 2000"
compliance questionnaires to these suppliers and to its other suppliers, such
as sheet metal and circuitboard manufacturers and disk drive and power supply
manufacturers and has received confirmation from all that their products are
Year 2000 compliant. In addition, the Company has conducted tests on its
internal personal computers and has determined that all of its computer
systems and applications are Year 2000 compliant.
The Company can give no assurance that third parties with whom it
does business, such as banks and utilities, will ensure Year 2000 compliance
in a timely manner or that, if they do not, their computer systems will not
have an adverse effect on the Company. However, the Company does not believe
that Year 2000 compliance issues of such third parties will result in a
material adverse effect on its financial condition or results of operations.
Status of any Publicly Announced New Product or Service.
- --------------------------------------------------------
New Products
------------
"U" or "Unit," is an industry standard measurement of the vertical
space in a rack, equaling 1 3/4 inches. A rack mountable PC 1 3/4 inches high
is said to be "1U." Space in racks is at a premium, and smaller is more
desirable than larger.
CASI is designing a "1UPC" chassis which will provide an inexpensive
gateway for Internet service providers ("ISP"). CASI's research has
determined that it can deliver more features in a smaller space (1U) than any
currently available product being delivered for this purpose. This product is
currently in three test locations.
Web Sales
---------
The upgrade of CASI's web site, www.casi1.com, will consist of two
stages. The first stage consisted of a complete listing of product offerings
for commercial and telecommunications applications, and was completed in
October, 1999. Stage two will follow with the implementation of interactive
e-commerce features which will automate sales inquiries, system
configurations, quotations and order placement. The Company is presently
working on stage two.
Principal Products and Services.
- --------------------------------
For a discussion of the Company's principal products and services,
see the heading "General" of Part I, Item 1 of this Registration Statement.
Distribution Methods of the Products or Services.
- -------------------------------------------------
Presently, the Company contacts potential customers directly,
attends trade shows and utilizes customer referrals.
The Company is in the process of upgrading its web site,
www.casil.com to provide for interactive e-commerce. A comprehensive, new
product line will be showcased and customers will be able to configure systems
and order online. To support the web e-commerce activity, the Company will be
hiring an inside sales and customer service person to provide quick responses
to inquiries for quotations and questions about CASI's capabilities. CASI also
intends to assign an engineer/account manager to new accounts to develop
opportunities for custom development and CASI's value added services to its
web site.
In November, 1999, CASI began advertising in the Thomas Register.
The Thomas Register is a comprehensive catalog resource of electronic
manufacturers and suppliers. CASI will have a banner advertisement
on each page of the industrial computer section directing interested parties
to its web site. CASI will also be listed in its source book.
With respect to its Systems Integration, CASI intends to retain the
services of one or more manufacturers representatives on an interim basis to
penetrate the outsourcing market while it develops an in house direct sales
force.
Competitive Business Conditions.
- --------------------------------
There are numerous manufacturers and vendors of industrial rack mount
computers, but the Company manufactures custom applications for customers
specific needs. See the heading "Risk Factors" of the heading "Business,"
Part I, Item 1, specifically, the risk factor "Competition; Low Barriers to
Entry."
Sources and Availability of Raw Materials and Names of Principal
Suppliers.
- ----------
There is ample supply of all products, components and related
materials necessary for the conduct of the Company's present and proposed
business operations, and no shortfalls of supplies are anticipated which would
have any adverse effect on the present or intended business operations of the
Company. Most products and components are purchased directly from Sun or
Intel or their distributors.
Dependence on One or a Few Major Customers.
- -------------------------------------------
The Company's largest single account is Alcatel, a subsidiary of a
diversified French telecommunications manufacturer, Alcatel, S.A. CASI is
currently providing a database management system for Alcatel which interfaces
with a network switch controller to change switch functions, alter switch
activities and report on the functioning and environment of the switch system.
A "switch" is a telephone or Internet (voice or data or both) device
which is central to the delivery of a call or data packet by routing them from
point of origin to point of termination; this is "switching." All
telecommunications traffic is routed through one or more switches. Alcatel
makes switch controllers and CASI makes a database management system for
Alcatel which is the interface with the switch controller.
The Company and Alcatel have entered into a Purchase Agreement,
dated July 1, 1999, which provides for the Company to supply Alcatel's
manufacturing requirements with respect to its database management system.
Alcatel places orders under the Purchase Agreement based on its projected
needs. The Purchase Agreement runs through December 31, 2002.
Alcatel has represented approximately 95% of CASI's 1999 revenues,
and it anticipates a projects increase of approximately 25% from current
levels over the next 12 months. This is based on a manufacturing forecast
delivered to the Company by Alcatel. This forecast is Alcatel's method of
keeping its suppliers prepared for Alcatel's requirements. The Company
generated approximately $619,000 or 67% of its revenues from business done
with Alcatel during the year ended December 31, 1998.
The loss of revenues associated with the services provided to
Alcatel would have a substantial adverse effect on the Company and its present
and future prospects.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements or Labor Contracts.
- ------------------------------
The Company owns the intellectual property rights to the "Naked Mini
Computer," which are of an undetermined value and duration, because the
Company does not know how many of these computers are still in existence, nor
how long they will continue in existence. The Company has valued these
intellectual property rights at $0 due to their age and the Company's lack of
a cost basis in them. For a discussion of the Naked Mini Computer, see the
heading "General" under the caption "Business" of this Registration Statement.
Need for any Governmental Approval of Principal Products or
Services.
- ---------
None presently; however, see the heading "Risk Factors" of the
heading "Business," Part I, Item 1, specifically, the risk factor "Government
Regulation and Legal Uncertainties."
Effect of Existing or Probable Governmental Regulations on
Business.
- ---------
The integrated disclosure system for small business issuers
adopted by the Securities and Exchange Commission in Release No. 34-30968 and
effective as of August 13, 1992, substantially modified the information and
financial requirements of a "Small Business Issuer," defined to be an issuer
that has revenues of less than $25 million; is a U.S. or Canadian issuer; is
not an investment company; and if a majority-owned subsidiary, the parent is
also a small business issuer; provided, however, an entity is not a small
business issuer if it has a public float (the aggregate market value of the
issuer's outstanding securities held by non-affiliates) of $25 million or
more.
The Securities and Exchange Commission, state securities commissions
and the North American Securities Administrators Association, Inc. ("NASAA")
have expressed an interest in adopting policies that will streamline the
registration process and make it easier for a small business issuer to have
access to the public capital markets.
Also, see the heading "Risk Factors" of the heading "Business," Part
I, Item 1, specifically, the risk factor "Government Regulation and Legal
Uncertainties."
Research and Development.
- -------------------------
The Company expended $214,945 during the year ended December 31,
1998, on research and development. The majority of these funds were expended
for the system currently being sold to Alcatel, or software development to
drive this system.
Cost and Effects of Compliance with Environmental Laws.
- -------------------------------------------------------
None; not applicable.
Number of Employees.
- --------------------
The Company has four employees.
Item 2. Management's Discussion and Analysis or Plan of Operation.
- --------------------------------------------------------------------
Plan of Operation.
- ------------------
The Company intends to concentrate on satisfying the demands of its
major customer, Alcatel, during the next 12 months. Once the details of
systems assembly, delivery and installation are at acceptable levels, the
Company will expand both its product line and customer base for similar and
ancillary applications.
The Company anticipates increased revenues for the next 12 months
from four areas: growth in sales to existing customers; new product
introductions; sales over the Internet; and from its upgraded web site and
advertising in the Thomas Register. Each of these items is discussed in more
detail below.
Research , development and design costs of the product currently
being delivered to Alcatel have been fully amortized, and CASI expects a
better gross profit margin on this account going forward than it has
experienced in the past. See the heading "Dependence on One or a Few Major
Customers" of Part I, Item 1 of this Registration Statement.
CASI is designing a "1UPC" chassis which will provide an inexpensive
gateway for Internet service providers ("ISP"). CASI's research has
determined that it can deliver more features in a smaller space (1U) than any
currently available product being delivered for this purpose. This is based
on the Company's review of product specifications of competitive products.
The upgrade of CASI's web site, www.casi1.com, will consist of two
stages. The first stage consisted of a complete listing of product offerings
for commercial and telecommunications applications, and was completed in
October, 1999. Stage two will follow with the implementation of interactive
e-commerce features which will automate sales inquiries, system
configurations, quotations and order placement. The Company is currently
working on the second stage.
In November of 1999, CASI began advertising in the Thomas Register.
The Thomas Register is a comprehensive catalog resource of electronic
manufacturers and suppliers. CASI will have a banner advertisement
on each page of the industrial computer section directing interested parties
to its web site. CASI will also be listed in its source book
CASI expects revenues to increase from a variety of market actions
with current customers, from new product introductions to e-commerce to
advertising. This expectation is based on Alcatel's manufacturing forecast for
the calendar year ended December 31, 2000. The new product research and
development costs have been paid from current cash flow and charged as an
expense against current income; accordingly, CASI anticipates generating solid
profits from its ongoing activities.
The Company has no major purchases planned for the next 12 months,
but it does expect to increase its personnel levels in engineering, sales and
sales support and administration. Cash provided from operations is believed
to be sufficient to fund these increases.
The Company has outstanding warrants with an exercise price of
$750,000 which may provide the Company with additional working capital, but
these warrants are presently "out of the market." See the heading "Warrants"
of the caption "Description of Securities," Part 1, Item 8.
Further, manufacturing costs of components are borne by the
Company's subcontractors until products are delivered to CASI for testing and
delivery to customers; as a result, any increased sales volume does not result
in a corresponding increase in working capital.
Results of Operations.
- ---------------------
The Company had revenues of $922,708 during the year ended December
31, 1998; there were no operations in fiscal 1997, and CASI Texas, which was
organized on February 13, 1998, was acquired by the Company on July 28, 1998.
Sixty-seven percent, or $619,000 of these revenues were attributable to
operations with Alcatel. The balance of these revenues were generated from
sales to a variety of small customers and from the repair of existing Naked
Mini Computers. The Company experienced a gross profit of $271,078 on these
revenues, before deduction of general and administrative expenses of $268,656.
Principal general and administrative expenses included payroll expenses
($106,901.83); contracted services ($84,711.22); and advertising ($15,115).
The contracted services were for an outside engineer that helped
design the system being sold to Alcatel, and the advertising expenses were
paid to an outside product sales consultant. Both of these relationships have
terminated and the Company does not expect to incur significant consultant
expenses in the foreseeable future. Fees payable to the Thomas Register will
be approximately $20,000 per year, starting in calendar year 2000.
The Company also incurred research and development expenses of
$214,945 during the period from inception on February 13, 1998, through
December 31, 1998. The majority of these funds were spent for the system
currently being sold to Alcatel, or software development to drive this system.
Taking into account a current year income tax provision of ($66,134), the
Company experienced a net loss of ($146,389) or $0.03 per share.
The Company had a tax loss carryforward of $200,525 at December 31,
1998. It is providing and reserving for the tax obligation exceeding this
carryforward amount as appropriate.
During the three months ended September 30, 1999, revenues were
$1,302,000, resulting in a gross profit of $473,000, before deduction of
general and administrative expenses of $178,000. Principal general and
administrative expenses during this period were payroll expenses ($68,000) and
outside services ($66,000). The Company did not incur any material research
and development expenses during this period and management does not believe
that material amounts will be expended on research and development in the
foreseeable future, because the expenses incurred during the period from
inception through December 31, 1998, were sufficient to achieve product
approval by Alcatel. During the three months ended September 30, 1999, the
Company received net income of $207,000. Management believes that its cash on
hand at December 31, 1999, will be sufficient to pay its income tax
liabilities for the year.
During the three months ended September 30, 1998, revenues were
$73,000, resulting in gross profit of $18,000 before deduction of general and
administrative expenses of $56,000. Contracted services of $45,000 were
the majority of these expenses. During the three months ended September 30,
1998, the Company incurred a net loss of ($38,000).
In calendar 1999, management expects sales to Alcatel to represent
over 95% of revenues. The Company does not anticipate any significant revenue
from internet sales or from advertising in the Thomas Register in that period.
Liquidity.
- ---------
As of September 30, 1999, the Company had cash assets of $279,046,
compared with $16,079 at December 31, 1998. During the first six months of
fiscal 1999, the Company raised $215,000 from the sale of Units consisting of
common stock and warrants pursuant to Regulation D, Rule 504 of the Securities
and Exchange Commission. See the caption "Recent Sales of Unregistered
Securities," Part II, Item 4.
During the calendar year ended December 31, 1998, the Company had a
net increase in cash in the amount of $16,079. This resulted principally from
sales of common stock for $101,000 cash and a $41,130 loan from a stockholder.
During the nine months ended September 30, 1999, the Company had a net
increase in cash of $262,967, which resulted principally from sales of
securities totaling $214,466.
Management does not believe that SFAS No's 131 and 133 regarding
segment reporting and derivatives, respectively, will have any impact on the
Company's financial condition and operations.
Item 3. Description of Property.
- ---------------------------------
The Company leases 2,000 square feet of office and light industrial
space at 1825 East Plano Parkway, Suite #200, Plano, TX 75074, on a month to
month basis, at a monthly rent of $1,505; total rent for these facilities in
1998 was $6,020, which was accrued at December 31, 1998, and paid in May,
1999. These facilities are leased from Control Manufacturing, the owners of
which are stockholders of the Company; however, management believes the lease
terms for these facilities are fair and reasonable, and are at rates
comparable to similar facilities in the areas where the Company conducts its
business operations. Messrs. McCollum and Cobb are the "affiliated"
stockholders who own Control Manufacturing; see Part I, Item 4, for
information concerning their stock ownership in the Company.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners.
- ------------------------------------------------
The following table sets forth the share holdings of those persons
who own more than five percent of the Company's common stock as of the date of
this Registration Statement, assuming 8,333,334 shares are outstanding:
<TABLE>
<CAPTION>
Number of Shares Percentage
Name and Address Beneficially Owned of Class
- ---------------- ------------------ --------
<S> <C> <C>
Michael E. Cherry 4,256,000 51.0%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
Sandra Cobb 912,000 10.9%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
Sylvia McCollum 912,000 10.9%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
TOTAL 6,080,000 72.8%
</TABLE>
Security Ownership of Management.
- ---------------------------------
The following table sets forth the share holdings of the Company's
directors and executive officers as of the date of this Registration
Statement, assuming 8,333,334 shares are outstanding:
Number of Shares Percentage of
Name and Address Beneficially Owned of Class
- ---------------- ------------------ -------------
[S] [C] [C]
Michael E. Cherry 4,256,000 51.0%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
William T. Criswell -0- -0-
2756 Fairwood Avenue
Carrollton, Texas 75006
Connie Cherry -0- (1) -0-
815 Autumn Ridge Drive
McKinney, Texas 75070
Chris Poinsatte -0- -0-
3924 Peter Pan
Dallas, Texas 75229
Sylvia McCollum 912,000 10.9%
1825 E. Plano Parkway
Suite 200
Plano, Texas 75074
Frank Neukomm 121,401 1.5%
6601 Kirby Drive
Suite 600
Houston, Texas 77005
TOTALS 5,289,401 63.4%
(1) Michael E. Cherry and Connie Cherry are husband and wife. As a
result, all shares beneficially owned by Mr. Cherry may also be deemed to be
beneficially owned by Ms. Cherry.
Changes in Control.
- -------------------
There are no present arrangements or pledges of the Company's
securities which may result in a change in control of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
- -------- -------------------------------------------------------------
Identification of Directors and Executive Officers.
- ---------------------------------------------------
The following table sets forth the names of all current directors
and executive officers of the Company. These persons will serve until the
next annual meeting of the stockholders or until their successors are elected
or appointed and qualified, or their prior resignation or termination.
<TABLE>
Date of Date of
Positions Election or Termination
Name Held Designation or Resignation
- ---- ---- ----------- --------------
<S> <C> <C> <C>
Michael E. Cherry President 7/28/98 10/22/99
Director 7/28/98 10/22/99
CEO 10/22/99 *
William T. Criswell Chairman 10/22/99 *
of the
Board
Connie Cherry Secretary 10/22/99 *
Director 10/22/99 *
Chris Poinsatte CFO 10/22/99 *
Director 10/22/99 *
Sylvia McCollum Director 10/22/99 *
Frank Neukomm Director 10/22/99 *
James R. Twedt Secretary 7/28/98 10/22/99
Treasurer 7/28/98 10/22/99
Director 7/28/98 10/22/99
James T. Williams Director 7/28/98 10/22/99
</TABLE>
* These persons presently serve in the capacities indicated.
Business Experience.
- --------------------
Michael E. Cherry, Chief Executive Officer. Mr. Cherry is 43 years
of age. During the previous five years, Mr. Cherry was Vice President of
Cytec Corporation where he was responsible for introducing Cytec Corporation
into the industrial computer marketplace. He was also responsible for sales
and marketing, administration and operations. He was the President and a
Director of CASI Texas from February, 1998, prior to its acquisition by the
Company pursuant to the CASI Texas Plan.
William T. Criswell, Chairman of the Board. Mr. Criswell, age 78, is
a graduate of the University of Miami. Starting in Brazil in 1946, he was
manager of Northern Brazil for the Winthrop Company. He later worked for IBM
and AM Corporations in Brazil and Venezuela. In 1953, Mr. Criswell entered
the insurance field as founder of the first health insurance program in Latin
America. He entered the development business in 1960 and for the next 18
years developed and constructed numerous projects in Central America. In
1978, Mr. Criswell came to Dallas to form the Criswell Development Company
with his son. He retired from the Criswell Development Company and did not
return to the development business until 1992. At that time, he formed
Dorchester International, Inc., a company devoted to pursuing resort
developments in Mexico and the Caribbean. Mr. Criswell is currently Director
of Development and Senior Vice President of Golfcraft Corporation, where he is
primarily responsible for identifying municipality development opportunities
and supervision of golf center developments. Mr. Criswell also serves on the
Dallas Area Rapid Transit Board of Directors.
Connie Cherry, Secretary and Director. Ms. Cherry, age 45, received
a B.S. Degree in Health and Physical Education from Penn State. After her
graduation, she worked for approximately five years as a surgical periodontal
assistant in Dallas, Texas. She then worked as an insurance salesperson form
MONY - Mutual of New York for three years. From 1981 to 1986, Ms. Cherry was
sales manager for Cosmopolitan Lady Health Clubs in Dallas, Texas. She spent
the next three years working in sales for Multi Market Media, which pioneered
the "1-800 Dentist" national dental referral program. From 1989 through 1992,
Ms. Cherry worked for Professional TV Productions, where she wrote, produced
and sold TV commercials for clients such as attorneys, chiropractors,
veterinarians and jewelers. From 1992 to 1995, she wrote, produced and sold
TV commercials for TM Century Productions. Since then, she has been employed
as Advertising Sales & Sales Manager for Power Media Group, dba "Texas
Technology Magazine."
Chris Poinsatte, Chief Financial Officer and Director. Mr.
Poinsatte, age 42, is the Chief Financial Officer of Dallas Area Rapid Transit
("DART"), a $2 billion transportation agency in Dallas, Texas. Mr. Poinsatte
has been at DART since 1987, and is currently responsible for the accounting,
investment, debt issuance, budgeting, financial planning, strategic planning,
information systems, total quality management and business process
reengineering functions. Before his employment at DART, Mr. Poinsatte was
Chief Financial Officer at Home Financing Specialists, Inc.; Vice President of
Operations of Associates Financial Express, Inc.; Controller at Associates
Corporation Diversified Services, Inc.; and Senior Auditor at Arthur Andersen,
LLP. He graduated from the University of Notre Dame with a B.A. in accounting
and is a Certified Public Accountant in Texas. Mr. Poinsatte also serves as
the Chair of the American Public Transit Association's Financial Management
Committee and is a founding member and Chair of the Transit Finance Learning
Exchange.
Sylvia McCollum, Director. Ms. McCollum is 58 years of age. She has
been the President of Control Manufacturing Co., Inc., of Plano, Texas, since
1977. Control Manufacturing is an electronics subcontractor that assembles
and delivers product for the Company. Prior to her involvement with Control
Manufacturing, Ms. McCollum was Director of Materials for International
Computer Products, Inc., a company specializing in peripherals for the
computer industry.
Frank Neukomm, Director. Mr. Neukomm, age 50, has been President of
FirstChoice Communications, Inc., since 1994. FirstChoice provides investment
banking services to the telecommunications and high-tech industries. Mr.
Neukomm has been in the telecommunications business for over 20 years and is a
former marketing executive of Southwestern Bell.
Significant Employees.
- ----------------------
The Company has no significant employees who are not executive
officers.
Family Relationships.
- ---------------------
Michael Cherry and Connie Cherry are husband and wife. Other
than
this relationship, there are no family relationships among the directors or
executive officers of the Company.
Involvement in Certain Legal Proceedings.
- -----------------------------------------
During the past five years, no present or former director,
executive officer or person nominated to become a director or an executive
officer of the Company:
(1) was a general partner or executive officer of any business
against which any bankruptcy petition was filed, either at the time of the
bankruptcy or two years prior to that time;
(2) was convicted in a criminal proceeding or named subject to a
pending criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; or
(4) was found by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and the judgment has not been reversed, suspended or vacated.
Item 6. Executive Compensation.
- --------------------------------
The following table sets forth the aggregate compensation paid
by the Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
ities All
Name and Year or Other Rest- Under- LTIP Other
Principal Period Salary Bonus Annual rictedlying Pay- Comp-
Position Ended ($) ($) Compen-Stock Optionsouts ensat'n
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael E.
Cherry, 12/31/98 $44,000 0 0 0 0 0 0
CEO 6/30/99 $22,000 0 0 0 0 0 0
William T. 12/31/98 0 0 0 0 0 0 0
Criswell, 6/30/99 0 0 0 0 0 0 0
Chairman
Connie 12/31/98 0 0 0 0 0 0 0
Cherry, 6/30/99 0 0 0 0 0 0 0
Secretary
and Director
Chris 12/31/98 0 0 0 0 0 0 0
Poinsatte, 6/30/99 0 0 0 0 0 0 0
CFO and
Director
Sylvia 12/31/98 0 0 0 0 0 0 0
McCollum, 6/30/99 0 0 0 0 0 0 0
Director
Frank 12/31/98 0 0 0 0 0 0 0
Neukomm, 6/30/99 0 0 0 0 0 0 0
Director
James R.
Twedt, 12/31/98 0 0 0 0 0 0 $6,941
Former 6/30/99 0 0 0 0 0 0 0
Sec/Treas/
Director
James T.
Williams 12/31/98 0 0 0 0 0 0 0
Former 6/30/99 0 0 0 0 0 0 0
Director
</TABLE>
No cash compensation, deferred compensation or long-term incentive
plan awards were issued or granted to the Company's management during the
calendar years ended December 31, 1998, or the period ended June 30, 1999.
Further, no member of the Company's management has been granted any
option or stock appreciation rights; accordingly, no tables relating to such
items have been included within this Item.
Compensation of Directors.
- --------------------------
There are no standard arrangements pursuant to which the Company's
directors are compensated for any services provided as director. No
additional amounts are payable to the Company's directors for committee
participation or special assignments.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements.
- -------------
There are no employment contracts, compensatory plans or
arrangements, including payments to be received from the Company, with respect
to any director or executive officer of the Company which would in any way
result in payments to any such person because of his or her resignation,
retirement or other termination of employment with the Company, any change in
control of the Company, or a change in the person's responsibilities following
a change in control of the Company.
Item 7. Certain Relationships and Related Transactions.
- --------------------------------------------------------
There have been no material transactions, series of similar
transactions, currently proposed transactions, or series of similar
transactions, to which the Company and any director, executive officer, five
percent stockholder or associate of any of these persons, except the CASI
Texas Plan (see Part I, Item 1, and Part II, Item 4) and the lease of the
Company's principal executive offices (see Part I, Item 3).
Item 8. Description of Securities.
- -----------------------------------
Common Stock
- ------------
The Company has 15,000,000 shares of $0.001 par value common voting
stock authorized; 8,333,334 shares of common stock are presently outstanding.
The holders of common stock are entitled to one vote per share on each matter
submitted to a vote at a meeting of stockholders. The shares of common stock
do not carry cumulative voting rights in the election of directors.
Stockholders of the Company have no pre-emptive rights to acquire
additional shares of common stock or other securities. The common stock is
not subject to redemption rights and carries no subscription or conversion
rights. In the event of liquidation of the Company, the shares of common
stock are entitled to share equally in corporate assets after satisfaction of
all liabilities. All shares of the common stock now outstanding are fully
paid and non-assessable.
There are no outstanding options or calls to purchase authorized
securities of the Company; however, there are 333,334 outstanding warrants
entitling the holders, for a period of twelve months, to purchase 2.25
additional shares of the Company's common stock at a purchase price of $1.00
per share.
There is no provision in the Company's Articles of Incorporation,
as amended, or By-Laws, that would delay, defer, or prevent a change in
control of the Company.
Preferred Stock
- ---------------
The Company is authorized to issue 5,000,000 shares of preferred
stock, having a par value of $0.001 per share. The Board of Directors, by
resolution and without the vote of the stockholders, may amend the Articles of
Incorporation of the Company to prescribe classes, series and the number of
each class or series of such preferred stock and the voting powers,
designations, preferences, limitations, restrictions and the relative rights
of each such class or series. No shares of preferred stock are outstanding;
and the Board of Directors has not authorized the amendment of the Company's
Articles of Incorporation to designate any class or series of this preferred
stock.
Warrants
--------
Each warrant grants the holder the right to purchase 2.25 additional
shares of common stock at a price of $1.00; to issue the shares underlying
these warrants under Rule 504, the warrants would have to be exercised prior
to the effective date of this Registration Statement, and the Company would
have to comply with the post April 6, 1999, amendments to Rule 504 of
Regulation D; otherwise, the underlying securities would have to be issued as
"restricted securities" under an available exemption from the registration
provisions of the Securities Act of 1933, as amended, or pursuant to a
registration statement filed with the Securities and Exchange Commission.
Warrants are not entitled to voting, liquidation or other rights attributable
to common stock holders.
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and
Other Stockholder Matters.
- --------------------------
Market Information.
- -------------------
There has never been any "established trading market" for shares of
common stock of the Company. Quotation of its common stock on the OTC
Bulletin Board of the NASD under the symbol "CASI" commenced December 24,
1997, as $0.01 to $0.05, and were terminated on or about October 7, 1999. The
Company's shares are currently quoted on the "Pink Sheets" of the National
Quotation Bureau, LLC. No assurance can be given that any market for the
Company's common stock will develop or be maintained. For any market that
develops for the Company's common stock, the sale of "restricted securities"
(common stock) pursuant to Rule 144 of the Securities and Exchange Commission
by members of management or any other person to whom any "restricted
securities" may be issued in the future may have a substantial adverse impact
on any public market for the Company's common stock. A minimum holding period
of one year is required for resales under Rule 144, along with compliance with
other pertinent provisions of the Rule, including publicly available
information concerning the Company (this requirement will be satisfied by the
filing and effectiveness of this Registration Statement, the passage of 90
days and the continued timely filing by the Company of all reports required to
be filed by it with the Securities and Exchange Commission; limitations on the
volume of "restricted securities" which can be sold in any 90 day period; the
requirement of unsolicited broker's transactions; and the filing of a Notice
of Sale of Form 144. For information regarding "restricted securities" issued
by the Company during the past three years and the commencement date of the
holding period of these securities, see the caption "Recent Sales of
Unregistered Securities," Part II, Item 4.
The following quotations were provided by the National Quotation
Bureau, LLC. They represent inter-dealer prices and do not represent actual
transactions; these quotations do not reflect dealer markups, markdowns or
commissions.
<TABLE>
<CAPTION>
STOCK QUOTATIONS*
CLOSING BID
Quarter ended: High Low
- -------------- ---- ---
<S> <C> <C>
December 31, 1997 $0.01 $0.01
January 2, 1998
through
March 18, 1998 $0.01 $0.01
March 19, 1998*
through
March 31, 1998 $0.1875 $0.1875
April 1, 1998
through
June 30, 1998 $0.1875 $0.125
July 1, 1998
through
September 30, 1998 $0.125 $0.03125
October 1, 1998
through
December 31, 1998 $0.125 $0.125
January 4, 1999
through
March 31, 1999 $1.50 $0.0625
April 1, 1999
through
June 30, 1999 $2.00 $0.125
* Takes into account a one for 20 reverse split of the
Company's
common stock effected at the time of the Company's change of domicile from
Utah to Nevada. See Part I, Item 1.
</TABLE>
Also, see the heading "Risk Factors" of the heading "Business," Part
1, Item 1, specifically the risk factor "No 'Established Trading Market' for
Common Stock."
Holders.
- --------
The number of record holders of the Company's securities as of the
date of this Registration Statement is approximately 127.
Dividends.
- ----------
The Company has not declared any cash dividends with respect to
its common stock, and does not intend to declare dividends in the foreseeable
future. The future dividend policy of the Company cannot be ascertained with
any certainty, and if and until the Company completes any acquisition,
reorganization or merger, no such policy will be formulated. There are no
material restrictions limiting, or that are likely to limit, the Company's
ability to pay dividends on its securities.
Item 2. Legal Proceedings.
- ---------------------------
The Company is not a party to any pending legal proceeding and, to
the knowledge of management, no federal, state or local governmental agency is
presently contemplating any proceeding against the Company. No director,
executive officer or affiliate of the Company or owner of record or
beneficially of more than five percent of the Company's common stock is a
party adverse to the Company or has a material interest adverse to the Company
in any proceeding.
Item 3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- ---------------------
There have been no changes in the Company's principal independent
accountants during the past two fiscal years ended December 31, 1998, or to
the date of this Registration Statement.
Item 4. Recent Sales of Unregistered Securities.
- -------------------------------------------------
Michael Cherry (1) 4,256,000 common 7/28/98
Sylvia McCollum (1) 912,000 common 7/28/98
Sandra Cobb (1) 912,000 common 7/28/98
James T. Williams (2) 106,667 common 7/28/98
James Twedt (2) 106,667 common 7/28/98
Frank Neukomm (2) 106,667 common 7/28/98
Cicero Cinzano Ltd. 21,500 common 9/14/98
Camisado Ventures 46,480 common 9/14/98
Outback Capital Ltd. 59,759 common 9/14/98
New York New York Ltd. 59,759 common 9/14/98
29 Subscribers
under Rule 504 333,334 common(3) 4/06/99
offering 333,334 Warrants(4) 4/06/99
(1) These securities were issued to each of the former stockholders
of CASI Texas pursuant to the CASI Texas Plan. See the heading "Business
Development" of Part I, Item 1 of this Registration Statement.
(2) Each of these persons received the share indicated in
consideration of services rendered to CASI Texas prior to and during the CASI
Texas Plan. See the heading "Business Development" of Part I, Item 1 of this
Registration Statement.
(3) These securities are freely tradeable securities under Rule
502
of Regulation D.
(4) Each warrant grants the holder the right to purchase 2.25
additional shares of common stock at a price of $1.00; to issue the shares
underlying these warrants under Rule 504, the warrants would have to be
exercised prior to the effective date of this Registration Statement, and the
Company would have to comply with the post April 6, 1999, amendments to Rule
504 of Regulation D; otherwise, the underlying securities would have to be
issued as "restricted securities" under an available exemption from the
registration provisions of the Securities Act of 1933, as amended, or pursuant
to a registration statement filed with the Securities and Exchange Commission.
Management believes each of the foregoing persons or entities was
either an "accredited investor," or "sophisticated investor" as defined in
Rule 506 of Regulation D of the Securities and Exchange Commission. Each had
access to all material information regarding the Company prior to the offer,
sale or issuance of these "restricted securities." The Company believes these
shares were exempt from the registration requirements of the Securities Act of
1933, as amended (the "1933 Act"), pursuant to Section 4(2) (with respect to
all issuances other than issuances as part the Company's offering under Rule
504) or 3(b) thereof (with respect to the issuances under the Rule 504
offering).
Item 5. Indemnification of Directors and Officers.
- ---------------------------------------------------
Section 78.751(1) of the Nevada Revised Statutes ("NRS")
authorizes a Nevada corporation to indemnify any director, officer, employee,
or corporate agent "who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or
in the right of the corporation" due to his or her corporate role. Section
78.751(1) extends this protection "against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with the action, suit or proceeding if he
or she acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful."
Section 78.751(2) of the NRS also authorizes indemnification of
the reasonable defense or settlement expenses of a corporate director,
officer, employee or agent who is sued, or is threatened with a suit, by or in
the right of the corporation. The party must have been acting in good faith
and with the reasonable belief that his or her actions were not opposed to the
corporation's best interests. Unless the court rules that the party is
reasonably entitled to indemnification, the party seeking indemnification must
not have been found liable to the corporation.
To the extent that a corporate director, officer, employee, or
agent is successful on the merits or otherwise in defending any action or
proceeding referred to in Section 78.751(1) or 78.751(2), Section 78.751(3) of
the NRS requires that he be indemnified "against expenses, including
attorneys' fees, actually and reasonably incurred by him or her in connection
with the defense."
Section 78.751 (4) of the NRS limits indemnification under
Sections 78.751 (1) and 78.751(2) to situations in which either (1) the
stockholders, (2)the majority of a disinterested quorum of directors, or (3)
independent legal counsel determine that indemnification is proper under the
circumstances.
Pursuant to Section 78.751(5) of the NRS, the corporation may
advance an officer's or director's expenses incurred in defending any action
or proceeding upon receipt of an undertaking. Section 78.751(6)(a) provides
that the rights to indemnification and advancement of expenses shall not be
deemed exclusive of any other rights under any bylaw, agreement, stockholder
vote or vote of disinterested directors. Section 78.751(6)(b) extends the
rights to indemnification and advancement of expenses to former directors,
officers, employees and agents, as well as their heirs, executors, and
administrators.
Regardless of whether a director, officer, employee or agent has
the right to indemnity, Section 78.752 allows the corporation to purchase and
maintain insurance on his behalf against liability resulting from his or her
corporate role.
PART F/S
Index to Financial Statements
Report of Certified Public Accountants
Financial Statements
- --------------------
Independent Auditor's Report
Balance Sheet-December 31, 1998
Statement of Operations for the Years Ended December 31, 1998
and 1997
Statement of Stockholder's Equity for the Years Ended December
31, 1998 and 1997
Statement of Cash Flows for the Years Ended December 31, 1998
and 1997
Notes to Financial Statements
Unaudited Balance Sheet - September 30, 1999
Unaudited Income Statement - September 30, 1999
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Computer Automation Systems, Inc. Texas
Consolidated Financial Statements
and
Independent Auditors' Report
December 31, 1998
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Computer Automation Systems, Inc. Texas
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Consolidated Balance Sheet -- December 31, 1998 2
Consolidated Statement of Operations for the Period from
Inception (February 13, 1998) through December 31, 1998 3
Consolidated Statement of Stockholders' Equity/(Deficit)
for the Period from Inception (February 13, 1998) through
December 31, 1998 4
Consolidated Statement of Cash Flows for the Period from
Inception (February 13, 1998) through December 31, 1998 5
Notes to Financial Statements 6 -- 11
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Computer Automation Systems, Inc.
We have audited the accompanying consolidated balance sheet of Computer
Automation Systems, Inc., formerly Computer Automation Systems, Inc., a Texas
corporation, as of December 31, 1998, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the period from
inception (February 13, 1998) through December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Computer Automation Systems,
Inc. as of December 31, 1998, and the results of operations and cash flows for
the period from inception (February 13, 1998) through December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Mantyla McReynolds
----------------------
Mantyla McReynolds
Salt Lake City, Utah
July 10, 1999
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Computer Automation Systems, Inc. Texas
Consolidated Balance Sheet
December 31, 1998
ASSETS
Current Assets:
Cash $ 16,079
Accounts receivable (net of allowance of $11,997) 212,047
Other receivable 4,193
Deferred tax asset - Note 3 66,134
Inventory 8,848
Total Current Assets 307,301
Property and Equipment - Note 6 56,323
Less: Accumulated depreciation (9,219
Net Property and Equipment 47,104
Other Assets:
Other assets - Note 10 2,944
Total Assets $ 357,349
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
Liabilities:
Current Liabilities:
Accounts payable $ 323,661
Accrued liabilities 29,635
Shareholder loan - Note 4 41,130
Total Current Liabilities 394,426
Total Liabilities 394,426
Stockholders' Equity/(Deficit): - Note 5
Preferred stock -- 5,000,000 shares authorized, $.001
par value; no shares issued or outstanding
Common stock -- 15,000,000 shares authorized, $.001 par value;
8,000,000 shares issued and outstanding 8,000
Additional paid-in capital 101,312
Accumulated deficit (146,389)
Total Stockholders' Equity/(Deficit) (37,077)
Total Liabilities and Stockholders' Equity/(Deficit) $ 357,349
See accompanying notes to financial statements.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Computer Automation Systems, Inc. Texas
Consolidated Statement of Operations
For the Period from Inception (February 13, 1998) through December 31, 1998
1998
Revenues $ 922,708
Cost of Sales 651,630
Gross Profit 271,078
General and Administrative Expenses 268,656
Research and Development Expense 214,945
Loss from Operations (212,523)
Other Income/Expense -0-
Loss Before Income Taxes (212,523)
Current Year Income Taxes Provision/(Benefit) (66,134)
Net Loss $ (146,389)
Loss Per Share $ (.02)
Weighted Average Shares Outstanding 7,127,273
See accompanying notes to financial statements.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Computer Automation Systems, Inc. Texas
Consolidated Statement of Stockholders' Equity/(Deficit)
For the Period from Inception (February 13, 1998) through December 31, 1998
<TABLE>
<CAPTION>
Additional Total
Number of Common Paid-in Accumulated Stockholders
Shares Stock Capital Deficit Equity/(Deficit)
<C> <S> <S> <S> <S> <S>
Initial capital
investment
February 13, 1998
(Texas
corporation) 1,000 1,000 1,000
Plan of
Reorganization,
stock for service 1,411,500 412 7,900 8,312
Shares issued in
reverse merger
with ISM 6,400,000 6,400 (6,400) -0-
Shares issued to
consultants for
cash 187,500 188 99,812 100,000
Net loss for the
year ended
December 31, 1998 (146,389) (146,389)
Balance,
December 31, 1998 8,000,000 $ 8,000 $ 101,312 $ (146,389) $ (37,077)
</TABLE>
See accompanying notes to financial statements.
<PAGE>
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Computer Automation Systems, Inc. Texas
Consolidated Statement of Cash Flows
For the Period from Inception (February 13, 1998) through December 31, 1998
Cash Flows Provided by/(Used for) Operating Activities 1998
Net Loss $ (146,389)
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 9,808
Issued stock for services in reorganization 8,312
Organization costs (3,533)
Increase in accounts and other receivables (216,241)
Increase in inventory (8,848)
Increase in deferred taxes (66,134)
Increase in accounts payable 323,660
Increase in current liabilities 29,637
Net Cash Provided by/(Used for) Operating Activities (69,728)
Cash Flows Used for Investing Activities
Purchases of property and equipment (56,323)
Net Cash Used for Investing Activities (56,323)
Cash Flows Provided by Financing Activities
Issuance of stock for cash 101,000
Principal loan from shareholder 41,130
Net Cash Provided by Financing Activities 142,130
Net Increase in Cash 16,079
Beginning Cash Balance -0-
Ending Cash Balance $ 16,079
Supplemental Disclosure Information:
Cash paid during the year for interest $ -0-
Cash paid during the year for income taxes 100
<PAGE>
See accompanying notes to financial statements.
COMPUTER AUTOMATION SYSTEMS, INC.
Formerly
Computer Automation Systems, Inc. Texas
Notes to Financial Statements
December 31, 1998
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
Intercontinental Strategic Minerals, Inc. ("ISM" or the "Company")
was incorporated in the State of Utah on July 16, 1981. The Company
was formed for the primary purpose of acquiring and investing in
mining properties. The Company was not successful in its endeavors
and ceased operations in or before 1983 when all assets and
liabilities were liquidated. The Company was then dormant until it
merged with and became Intercontinental Strategic Minerals, Inc., a
Nevada corporation formed for the purpose of changing the domicile
to Nevada, in March, 1998. On July 28, 1998 the Company acquired
all of the outstanding common stock of Computer Automation Systems,
Inc. ("CASI"), pursuant to an Agreement and Plan of Reorganization.
Computer Automation Systems, Inc. was a startup, Texas corporation
incorporated on February 13, 1998 for the purpose of designing and
manufacturing custom rack mount and industrial computer applications
for the telecom and other high tech industries. Subsequent to the
Agreement and Plan of Reorganization, the name of Intercontinental
Strategic Minerals, Inc. was changed to Computer Automation Systems,
Inc.
Pursuant to The Agreement and Plan of Reorganization, ISM issued
6,400,000 shares to CASI's shareholders. At the time of said
issuance, ISM had 1,600,000 shares outstanding. Immediately after
this issuance, CASI's shareholders owned 6,400,000 of the total
outstanding of 8,000,000 shares, or 80%.
The consolidated financial statements of CASI and its subsidiary
(CASI-Texas) include the
accounts of the Company and its subsidiary. All significant
intercompany transactions have been eliminated. The financial
statements of the Company have been prepared in accordance with
generally accepted accounting principles. The following summarizes
the more significant of such policies:
(b) Income Taxes
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 [the Statement],
Accounting for Income Taxes. The Statement requires an asset and
liability approach for financial accounting and reporting for income
taxes, and the recognition of deferred tax assets and liabilities
for the temporary differences between the financial reporting bases
and tax bases of the Company's assets and liabilities at enacted tax
rates expected to be in effect when such amounts are realized or
settled.
<PAGE>
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[continued]
(c) Net Loss Per Common Share
In accordance with Financial Accounting Standards No. 128, "Earnings
Per Share," basic loss per common share is computed using the
weighted average number of common shares outstanding. Diluted
earnings per share is computed using weighted average number of
common shares plus dilutive common share equivalents outstanding
during the period using the treasury stock method. Common stock
equivalents were not included in the computation of loss per share
for the periods presented because there were none issued until
April, 1999 and their inclusion is antidilutive.
(d) Statement of Cash Flows
For purposes of the statements of cash flows, the Company considers
cash and cash equivalents as deposits in commercial banks. The
Company had $16,079 cash at December 31, 1998.
(e) Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Property and Equipment
Property and equipment are stated at cost. Depreciation is provided
using the straight-line basis over the useful lives of the related
assets. Expenditures for maintenance and repairs are charged to
expense as incurred.
(g) Inventory
Inventory consists of component parts and supplies valued at the
lower of cost or market (net realizable value) using the first-in,
first-out (FIFO) method.
(h) Revenue Recognition
Revenue is recognized when earned. For products which the Company
designs and engineers or manufactures, revenue is recognized when
products are shipped. Revenue is recognized for services such as
custom design, configuration, and programing, when provided to
customers.
NOTE 2 REORGANIZATION
On July 28, 1998, CASI entered into an agreement and plan of
reorganization with ISM, wherein the owners of CASI exchanged all of
their common stock outstanding for 6,400,000 shares of ISM.
<PAGE>
Immediately subsequent to the exchange, CASI's shareholders held
approximately 80% of the outstanding shares of ISM. The Company
continues its operations in the ISM structure but has changed the
name of Intercontinental Strategic Minerals, Inc. to Computer
Automation Systems, Inc.. The transaction was a "reverse"
acquisition on a purchase basis. The parent company currently has
principally no operations nor activity outside the subsidiary.
NOTE 3 INCOME TAXES
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 109 [the Statement], Accounting for Income
Taxes, as of January 1, 1993. The tax effects of temporary
differences that give rise to significant portions of the deferred
tax asset at December 31, 1998 are summarized below.
Deferred tax assets Balance Tax Rate
Allowance for bad debt $11,997 $3,719 31%
Loss carryforward(expires 2014) 200,525 62,415 31%
Valuation allowance -0-
Deferred tax asset $66,134
A valuation allowance is required if it is more likely than not that
some or all of the deferred tax assets will be realized. The
Company has established a valuation allowance of $0 based on
unaudited, positive operating results through June 1999 and
anticipated additional contracts currently being negotiated.
NOTE 4 RELATED-PARTY TRANSACTIONS
The Company has a Cooperation Agreement with an entity controlled by
former directors and shareholders of the Company. The agreement
provides for sharing complimentary resources in the engineering,
manufacturing, and support of industrial computers. Pricing is
negotiated with each order as submitted. The related party balance
due as of December 31, 1998 was $6,020 for rent.
A shareholder advanced funds to the Company for the purchase of
testing equipment and for operating expenses throughout the year.
The balance due to this shareholder as of December 31, 1998 is
$41,048, is non-interest bearing, and is payable on demand.
<PAGE>
NOTE 5 COMMON STOCK
On February 13, 1998, Computer Automation Systems, Inc Texas
incorporated and recorded an initial investment of $1,000 for 1,000
shares of $0.00 par, common stock. The Company acquired assets and
operated until July when it combined with ISM. The book value of
net assets of CASI on 7/28/99 was approximately $282,000 (which
approximates market value of cash an equipment less related
liabilities).
As a result of the reorganization with ISM, the Company's capital
structure consists of 15,000,000 shares of authorized common voting
stock having a par value of one mill ($.001) per share. Preferred
shares authorized are 5,000,000 having a par value of one mill
($.001) per share. Prior to reorganization, ISM had 1,412,500
shares of common stock issued and outstanding. As part of the
reorganization, the Company issued 187,500 unregistered shares to
four consultants for $100,000 cash and 6,400,000 common shares to
officers and directors of CASI for 100% of the previously
outstanding securities of CASI Texas(See Note 2), thus bringing
total issued and outstanding common stock to 8,000,000 shares.
NOTE 6 PROPERTY AND EQUIPMENT
The major classes of assets as of the balance sheet date are as
follows:
Accumulated
Asset Class Cost Depreciation Method/Life
Testing & Manufacturing
Equip $ 51,372 $ (8,446) SL/5 or 7
Office Equipment 4,951 (773) SL/5 or 7
Total $56,323 ($9,219)
Current year depreciation expense was $9,219.
NOTE 7 OFFICE LEASE\SUBSEQUENT EVENT
In 1998 the Company entered into an operating lease with a related
party for its facilities. The lease agreement provides for rents of
$1,505 to be paid on a month-to-month basis.. Total rent expense
for 1998 on this facility was $6,020 and was accrued as of December
31, 1998, but was not paid until May 1999. The Company is in the
process of negotiating an operating lease for additional storage and
office space. Anticipated monthly rental is $700 for a twelve month
contract.
<PAGE>
NOTE 8 SUBSEQUENT EVENT
The Board of Directors, effective April 6, 1999, resolved to offer
333,334 Units pursuant to Rule 504 of the Securities and Exchange
Commission at a price of $0.75 per Unit. Each Unit being comprised
of one share of the Company's common stock, $0.001 par value per
share, and one common share purchase warrant entitling the holder
thereof, for a period of twelve months, to purchase 2.25 additional
shares of common stock at a purchase price of $1.00 per share.
Through June, 1999, the Company has collected approximately $215,000
from this offering. None of the warrants have been exercised.
NOTE 9 ACCOUNTS RECEIVABLE
The Company has sold customer accounts receivable of approximately
$580,000 to a financing institution with recourse. Activity has
been limited to one customer and one buyer within the Dallas/Fort
Worth metropolitan area. The buyer retains portions of the amounts
for which contracts were sold as reserves, which are released to the
Company as the customer makes payment. In the event of default, the
Company has granted a first priority interest in all accounts
receivable and inventory proceeds. The balance outstanding under
recourse contracts was approximately $38,714, at December 31, 1998.
NOTE 10 OTHER ASSETS
Other assets consist of organization costs incurred. Total
expenditures were $3,533 and are being amortized over 60 months on a
straight-line basis. Amortization for the 1998 was $589. Statement
of Position 98-5, Reporting on the Costs of Start-Up Activities,
requires start-up costs to be expensed as incurred and is applicable
for fiscal years beginning after December 15, 1998. The Company
will adopt this SOP for 1999 and will report any adjustments as the
cumulative effect of a change in accounting principle as
appropriate.
NOTE 11 SIGNIFICANT CONCENTRATION OF BUSINESS VOLUME RISK
Of the total revenue for 1998 of $922,708, approximately $619,000 or
67% was from a single customer. Accordingly, in the event that this
customer decreases or ceases its activities with the Company,
business volume would be significantly affected.
<PAGE>
Computer Automation Systems, Inc.
Balance Sheet
As of September 30, 1999
Sep 30, '99
ASSETS
Current Assets
Checking/Savings
WELLS FARGO BANK 279,046.23
Total Checking/Savings 279,046.23
Accounts Receivable
1200 Accounts Receivable 642,090.65
Total Accounts Receivable 642,090.65
Other Current Assets
Allowance For Bad Debts -11,997.13
Deferred Tax Asset 66,134.00
Deposits 500.00
1120 Inventory Asset 114,911.51
1201 Employee Receivables 28,624.31
1500 KBK Reserve Chargeback 106,946.35
1501 Allow on KBK Reserve -50,102.35
Total Other Current Assets 255,016.69
Total Current Assets 1,176,153.57
Fixed Assets
1600 Office Equipment 7,903.45
1610 Testing & Manufacturing Equip 51,655.90
1700 Accum Depr - Office Equip -1,942.00
1710 Accum Depr - Test/Mfg Equip -21,139.00
Total Fixed Assets 36,478.35
TOTAL ASSETS 1,212,631.92
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
2000 Accounts Payable 474,296.76
Total Accounts Payable 474,296.76
<PAGE>
Other Current Liabilities
Accrued Income Taxes 80,000.00
2001 Due to KBK 158,660.00
2100 Payroll Liabilities 6,368.64
Total Other Current Liabilities 245,028.64
Total Current Liabilities 719,325.40
Total Liabilities 719,325.40
Equity
Common Stock 92,465.00
Paid In Capital 231,312.00
3900 Retained Earnings -146,388.13
Net Income 315,917.65
Total Equity 493,306.52
TOTAL LIABILITIES & EQUITY 1,212,631.92
<PAGE>
Computer Automation Systems, Inc.
Quarterly Income Statement
($ in 1,000's) July 2 through September 30, 1999
Jul 2 - Sep. '99 Jul 2 - Sep '98 Jan - Sep '99
Ordinary Income/Expense
Income
AGR 0 (0) 0
KBK Discounts (45) 0 (175)
MISC INCOME (0) 1 0
OTHER 0 (3) 0
PARTS 1 (0) 0
RACKMOUNT 1 26 0
REPAIRS& SERVICE CA 25 5 62
SUN 1,321 43 2,571
Total Income 1,302 73 2,458
Cost of Goods Sold
Cost of Goods Sold 829 55 1,553
Total COGS 829 55 1,553
Gross Profit 473 18 905
Expense
ADVERTISING 4 5 16
AUTO EXPENSES 2 0 3
Bank Charges 0 0 1
Company Vehicle Expense 0 0 2
CONTRACTED SERVICES 1 45 5
Depreciation Expense 5 0 14
Donation 1 0 1
Interest Expense 0 0 0
Legal & Accounting 17 4 32
MISC EXPENSE 0 0 1
OFFICE SUPPLIES 2 0 4
Outside Services 66 0 108
POSTAGE 0 0 1
RENT 6 0 18
REPAIRS & MAINTENANCE 1 0 1
TELEPHONE 3 2 9
TRAVEL & ENTERTAINMENT 4 0 8
6560 Payroll Expenses 68 0 206
Total Expense 178 56 431
Net Ordinary Income 294 (38) 474
<PAGE>
Other Income/Expense
Other Expense
Amortization 3 0 3
Contract Services 5 0 76
Income Taxes 80 0 80
Total Other Expense 88 0 158
Net Other Income (88) 0 (158)
Net Income 207 (38) 316
<PAGE>
PART III
Item 1. Index to Exhibits.
- ---------------------------
The following exhibits are filed as a part of this Registration
Statement:
<TABLE>
<CAPTION>
Item 2. Description of Exhibits.
- --------------------------------
Exhibit
Number Description*
- ------ ------------
<S> <C>
3.1 Initial Articles of Incorporation filed in the State of Utah.**
3.2 Initial Articles of Incorporation filed in the State of Nevada.**
3.3 Articles of Merger to change the Company's domicile filed in the
State of Utah and Nevada and effecting a one for 20 reverse split
of the outstanding securities of the Company.**
3.4 Certificate of Amendment changing the name of the Company to
"Computer Automation Systems, Inc." in the State of Nevada.**
3.5 By-Laws**
10.1 Agreement and Plan of Reorganization with CASI Texas, with
exhibits.**
10.2 Purchase Agreement with Alcatel Network Systems, Inc., with
attachments
11 Calculation of Weighted Average Shares**
21 Subsidiaries**
27 Financial Data Schedule.**
</TABLE>
* Summaries of all exhibits contained within this
Registration Statement are modified in their
entirety by reference to these Exhibits.
** These documents and related exhibits have been
previously filed with the Securities and Exchange
Commission and are incorporated herein by reference.
SIGNATURES
In accordance with Section 12 of the Securities
Exchange Act of 1934, the Registrant has caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
COMPUTER AUTOMATION SYSTEMS, INC.
Date: 1-31-00 By/s/Michael E. Cherry
----------- -------------------------
Michael E. Cherry, Chief
Executive Officer and Director
Date: 1/28/00 By/s/William T. Criswell
------------ ------------------------
William T. Criswell, Director
Date: 1-31-2000 By/s/Chris Poinsatte
------------ ------------------------
Chris Poinsatte, Director and
Chief Financial Officer
Date: 28 Jan 00 By/s/Frank Neukomm
------------ ------------------------
Frank Neukomm, Director
Date: 1-31-2000 By/s/Sylvia McCollum
------------ ------------------------
Sylvia McCollum, Director
Date: 1-31-2000 By/s/Connie Cherry
------------ ------------------------
Connie Cherry, Director
PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 9th day of September, 1998, between
Computer Automation Systems, Inc. a corporation duly organized and existing
under the laws of the State of Texas with its principal office at 1825 E.
Plano Parkway, Suite 200, Plano, Texas 75074 ("Seller"), and ALCATEL NETWORK
SYSTEMS, INC., a corporation duly organized and existing under the laws of the
State of Delaware with its principal office at 1225 North Alma Road,
Richardson, Texas 75081 ("Buyer").
Recital
The parties hereto desire to establish the terms and conditions under
which purchase orders will be released by Buyer on such terms and conditions
as set forth in this Agreement.
Agreement
In consideration of the premises, mutual covenants and agreements
contained herein, the receipt and sufficiency of which are acknowledged, the
parties agree as follows:
1. DEFINITIONS
1.1 For purposes of this Agreement, the term "Buyer" is defined to be
Alcatel Network Systems, Inc. including any of its affiliated
companies.
1.2 For purposes of this Agreement, the term "Seller" is defined to
be Computer Automation Systems, Inc. including any of its
affiliated companies.
1.3 The term "product" as used herein shall refer to those items in
attachment A, a copy of which is attached hereto and incorporated
herein by reference. The product as a system shall meet
performance specifications and milestones as listed in Attachment
I.
2. ISSUANCE OF ORDERS AND TERM
2.1 Commitments to purchase will only be made by individual Purchase
Orders. Seller reserves the right to reject any purchase order
when outside the scope of this agreement.
2.2 Purchase orders will be placed from August 15, 1998 through
November 30, 2000 for delivery from September 1, 1998 through
December 31, 2000.
2.3 Purchase orders already placed for delivery during said period
are also included in any forecast subject to this Agreement.
2.4 If Buyer desires a non-standard product not listed in Attachment
A, Seller and Buyer will negotiate the terms of such sale and
purchase as mutually agreeable to the parties. Seller, however,
reserves the right to reject any orders outside the scope of this
agreement for any reason at any time prior to Seller and Buyer
reaching mutual agreement on the specific terms of such custom
order.
3. CHANGES
3.1 This Agreement may be revised by written amendment only, signed
and acknowledged by duly authorized officers or representatives
of the parties hereto.
3.2 New items may be added to or deleted from Attachment A without
additional amendment to the Purchase Agreement. Any changes that
require a revised Attachment A must be approved by authorized
representatives of the two parties and appropriately dated.
4. PRICING AND PAYMENT
4.1 Prices stated on Attachment A are not-to-exceed prices for all
products ordered for delivery through December 31, 2000. All
prices are stated in U.S. dollars.
4.2 Seller warrants that the prices contained in Attachment A are no
less favorable than those extended to any other customer for the
same or similar article in similar quantities and under similar
terms and conditions.
4.3 All prices are F.O.B. Seller's facility in Plano, Texas.
Products shall be shipped in accordance with routing instructions
as listed in Attachment A. Seller will not insure shipments made
unless specifically requested by Buyer. Buyer shall be invoiced
for the cost of any such insurance.
4.4 All prices do not include Federal Manufacturers and Retailers
excise, state or local sales and/or use taxes, nor any Federal,
state or local taxes of a similar nature. Any such taxes, if
applicable to and payable by Seller in connection with the
performance of this Agreement shall be billed to and paid by
Buyer as separate items on Seller's invoices.
4.5 Terms of payment are net forty-five (45) days after date of
invoice.
5. QUARTERLY MEETINGS
Both parties will use their best efforts to meet and review contract
performance.
6. SUPPLIER PULL AGREEMENT
6.1 Seller and Buyer agree to maintain quality levels and
documentation to support a supplier pull program. Seller and
Buyer further agree to use their best efforts to define and
implement Supplier Pull Shipments.
7. AGREEMENT COORDINATORS
For Seller: For Buyer:
Computer Automation Systems, Inc. Alcatel Network Systems, Inc.
1825 E. Plano Parkway, Ste 200 PO Box 833802
Plano, Texas 75074 Richardson, Texas 75081
Attention: Ken Bergstrom Attention: Michael L. Moore M/S 406-134
8. DISTRIBUTOR AND SUBCONTRACTOR PURCHASES
Seller agrees that if the Buyer chooses to purchase material covered by
Attachment A from a duly authorized distributor, the price in Attachment
A will be used as a basis for establishing pricing to the distributor if
such prices are lower than distributor's normal price.
9. EARLY WARNING
9.1 If Seller intends to change the product specifications, or to
cease manufacturing, and or unwilling to support the product,
then Buyer has the option to execute the lifetime buy or
withdrawing the deposited material from escrow in paragraph 9.4
Seller shall notify Buyer in writing at least twelve (12) months
in advance. Buyer has the right to execute a lifetime buy at
contract pricing. Failure to notify Buyer may be considered as
default by Seller.
9.2 Seller acknowledges its responsibility to stay abreast of new
developments and shall inform Buyer of available substitutes and
developments of the products.
9.3 Seller shall notify Buyer in writing at least three (3) months in
advance of any supply disruption so Buyer can take appropriate
action to meet its requirements; provided however, that Seller
has at lease three (3) months advance knowledge that such supply
disruption is reasonably likely to occur.
<PAGE>
9.4 It is agreed that Seller will if required by buyer, prior to
initial deliveries under this Agreement, enter into an Escrow
Agreement which would be acceptable to Buyer and under the
terms
and conditions which have been reviewed and approved by Buyer.
Attachment H to this Agreement is an example of an Escrow
Agreement which would be acceptable to Buyer. Seller will
submit
a detailed list to buyer of the material to be deposited in
escrow for Buyer's review and agreement, prior to submittal to
the Escrow agency. Buyer will be responsible for payment of
escrow fees with a third party escrow company.
10. QUALITY
10.1 Seller shall obtain and maintain Buyer's approval of its
inspection system in accordance with the then current version of
Alcatel Network Systems Specification 8BD 00041 3023 QRZZA titled
"Quality Assurance Requirements of Seller," a copy of which is
attached hereto as Attachment C and Quality Plan dated 8/15/98
Attachment J incorporated herein by reference.
10.2 Seller guarantees the system conformance of Attachment I with
the technical specification of the Part Number(s) referenced on
Attachment A. Seller agrees to promptly replace any products
rejected within sixty (60) days of delivery of such product.
10.3 Seller agrees to provide to Buyer finished product and test
data
if requested for upon initial shipment of prototypes in
accordance with Buyer's Quality Plan Requirements dated
8/15/98 as listed in Attachment J.
11. EDI
Both parties agree to make their best efforts to implement EDI on such basis
and schedule as is mutually agreed upon. The priority sequence of
implementation shall be mutually agreed upon.
12. COUNTRY OF ORIGIN AND PROHIBITION ON RESALE
12.1 Any item specified in Attachment A hereto may be sent to a
foreign location by Buyer for further assembly, or exported as
part of Buyer's end equipment under existing or future trade
agreements. When articles are imported into the U.S. after
further assembly under the Harmonized Tariff
<PAGE>
Schedules of the United States (HTSUS), or exported under other
trade agreements the country of origin of the items imported or
exported must be known. Attachment A to this Agreement includes
two (2) columns for certifying country of origin. Each part
number contained in Attachment A must indicate the country of
origin including the city and state where the article is
manufactured in the United States. If the article is foreign, the
name of the foreign country must be designated. In order for a
product to be designated as being of U.S. origin, it must have
been: (a) wholly manufactured in the United States, or (b)
substantially transformed in the United States into a new and
different article by either a process of manufacture or assembly.
Activities such as cleaning, painting, testing, marking, and
sorting are not considered substantial transformations. By
execution of this Agreement, Seller hereby certifies that the
specified country of origin designation in the Attachment A is
accurate and correct as stated.
12.2 Buyer will not sell, resell, offer to sell or resell, lease,
sublease, offer to lease or sublease, license, sub-license,
offer
to license or sub-license, export, re-export, offer to export
or
re-export, or in any way transfer, convey, assign, or offer to
transfer, convey, or assign ownership, title, or possession of
any of the products without compliance with the laws,
ordinances,
rules, and regulations of any appropriate federal, state,
local,
or other government jurisdiction, whether domestic or foreign.
12.3 Buyer agrees not to export or re-export any of the products ,
or
any product thereof, in violation of any export laws or
regulations, or to Afghanistan, the People's Republic of China
or
any Group Q, S, W, Y or Z country as specified in the U.S.
Export
Administration Regulations (as specified from time to time).
13. JUST IN TIME PROCEDURE
The Just In Time (or commonly known as "Supplier Pull") program is an
automated order release mechanism that generates purchase orders based on
pre-determined stocking levels and consumption. Purchase orders are
"triggered" when an inventory level falls below a "Minimum" as set forth in
Attachment A1, a copy of which is attached hereto and incorporated herein by
reference; the purchase order quantity is based upon the difference between
the "Minimum" and the "Maximum" (see Attachment A1). Both parties shall
determine lot sizes and will mutually agree to adjust, as necessary.
Buyer shall procure those products listed on Attachment A which are subject to
the "just in time" procedure and so indicated on Attachment A1. The following
guidelines shall apply to such products, unless the parties indicate
otherwise in writing on a case by case basis:
<PAGE>
13.1 In the event of termination of the Agreement for any reason
other
than Seller's breach of contract, Buyer shall purchase from
Seller:
(i) all finished units, up to the agreed upon level set forth in
Attachment A1, if an agreed upon level is established;
(ii) all work in process undertaken by Seller to cover the agreed
upon stock level as set forth in Attachment A1, if applicable; or
the issued Supplier Pull purchase orders; and
(iii) all non-cancelable unique parts ordered by Seller to cover
four (4) weeks' work in process to produce the products pursuant
to a purchase order placed by Buyer; unique parts must be
identified prior to incorporation on a separate attachment.
13.2 If the amount purchased by Buyer decreases for any product by
50%
during a continuous six (6) week period, then:
(i) Seller and Buyer will mutually agree on a reduced
manufacturing plan. The parties will monitor the situation for
any required changes to the plan.
(ii) Seller will maintain the agreed upon stock level of such
product for six (6) months after the expiration of the
aforementioned six (6) week period. After the six (6) month
period, Seller and Buyer will mutually agree upon the disposition
of this stock.
14. FORECASTS
Buyer shall deliver monthly to Seller a forecast of products Buyer foresees
needing on a continuing, medium to long term basis for blanket purchase
orders. The forecasts are intended for planning purposes only and will not be
considered to be binding purchase orders.
<PAGE>
15. SOFTWARE and SUPPORT
If Seller licenses software to Buyer which Seller, in its sole discretion,
deems necessary to require the execution of a license agreement prior to such
sale, Seller and Buyer agree to execute such license agreement on terms and
conditions substantially in the form set forth in Attachment D, a copy of
which is attached hereto and incorporated herein by reference. Buyer agrees
to execute and deliver all such additional and further documents as Seller may
require in connection with the license of Seller's software. Buyer has the
right to resell and sub-license the product in Attachment A at no cost and
without any additional obligations or restrictions other than those included
in Attachment D. Seller also agrees this product in Attachment A will require
a level of software and hardware technical support, including but not limited
to, drivers required by Specification referenced in Attachment I. Seller will
provide one (1) year of trouble shooting and bug fixing technical support, as
it relates to the sellers design specifications and feature sets, at no cost
to buyer. Seller shall maintain one primary contact for the Buyer's account
team. Buyer has the right to incorporate customer documentation into it's own
customer documentation. This includes product specifications, illustrations,
and operation and maintenance procedures.
16. CONFIDENTIALITY; ASSIGNMENT OF PRODUCT IMPROVEMENTS
16.1. Refer to the Proprietary Information Agreement, Mutual exchange
signed May 29, 1998 attached hereto and made a part hereof.
16.2. The obligations set forth herein shall expressly survive the
termination or expiration of this Agreement.
17. GOODWILL, TRADE SECRETS, TRADEMARKS, PATENTS, ETC.
Buyer hereby recognizes Seller's absolute right, title, and interest in all
patents, trademarks, trade names, copyrights, designs, software, and all other
proprietary interests incorporated as any part of the products. Buyer will
use its best efforts to protect and enforce Seller's goodwill, trade secrets,
trademarks, patents, trade names, copyrights, and other intellectual property
rights in conducting its business as set forth in Attachment G.
18. PRIVATE LABEL
Buyer may not private label any of Seller's products purchased hereunder,
without the express written consent of Seller. Seller will mark and reference
Buyer's part number and serial number to all shelves, racks, and modules if
required by Buyer as set forth in Attachment K.
19. TRAINING
As this is a "purchased part" no training is offered nor required.
<PAGE>
20. INCORPORATION BY REFERENCE
The following documents are incorporated as a part of this Agreement, AND THE
PARTIES HERETO AGREE TO BE BOUND BY THE TERMS AND CONDITIONS IN THESE
DOCUMENTS; PROVIDED THAT IN THE CASE OF CONFLICT, THE TERMS OF THIS AGREEMENT
GOVERN:
ATTACHMENT A Products, Pricing and Product Origin Listing
ATTACHMENT Al Just In Time Parameters
ATTACHMENT B Supplier Ship-To-Stock Audit Program (Alcatel
Specification 8BD 00041 5004 QRZZA)
ATTACHMENT C Quality Assurance Requirements of Seller (Alcatel
Network Systems Specification 8BD 00041 3023 QRZZA)
ATTACHMENT D Form of Licensing Agreement
ATTACHMENT E Routing Instructions
ATTACHMENT F Terms & Conditions (Rev. 7-96)
ATTACHMENT G Proprietary Information Agreement - Mutual Exchange
ATTACHMENT H Escrow Agreement
ATTACHMENT I Specifications and Development Milestones
ATTACHMENT J Quality Plan
ATTACHMENT K OEM Enablement Technical Requirements
ATTACHMENT L Product Control Understanding
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed by a duly authorized officer as of the day and year first written
above.
Computer Automation Systems, Inc. ALCATEL NETWORK SYSTEMS, INC.
By:Michael E. Cherry 9-29-98 By: Michael L. Moore
- ------------------------- -----------------------
Name: Michael E. Cherry Name: Michael L. Moore
Title: President Title: Subcontract Administrator, Specialist
COLUMBUS\257810.02
ATTACHMENT A
PURCHASE AGREEMENT NO. 9807-909
PRODUCTS, PRICING AND PRODUCT ORIGIN LISTING
1. Products and Pricing
Country of Origin
Alcatel Mfg ICS Vendor United States Estimated Unit Lead
Part Number Rev Rev P/N Name City/State Annual Qty Price Time JTT
MPS SYSTEM
3AL47880AAAA 01 01 Complete Assembly Plano, TX 80 Units $____ 6 weeks NO
3AL55361AAAA 02 01 Shelf.non-populated Plano,TX (1per system)$____ 6 weeks NO
3AL47878AAAA 02 02 Alarm Board Assmbly Plano,TX (1per system)$____ 6 weeks NO
3AL47876AAAA 01 01 Boot Disk Drive Ass Plano, TX(1per system)$____ 6 weeks NO
3AL47876AAAA 01 01 Data Disk Drive Ass Plano, TX(1per system)$____ 6 weeks NO
3AL47879AAAA 02 02 Fan Assembly Plano, TX (1per system)$____ 6 weeks NO
3AL47877AAAA 01 01 Optical Drive AsmbyPlano, TX (1per system)$____ 6 weeks NO
3AL47875AAAA 01 01 Power Supply AsmblyPlano, TX (1per system)$____ 6 weeks NO
3AL47874AAAA 03 02 CPU System Brd Asmb Plano, TX (1per system)$____ 6 weeks NO
3AL47966AAAA 01 01 Mounting Bracket AssPlano, TX (1per system)$____ 6 weeks NO
3AL47873AAAA 01 01 Air Filter Plano, TX (1per system)$____ 6 weeks NO
Note:
Shelf, 3AL55361AAAA, includes an air filter as part of the assembly.
Comments: The total repair and turn around time by Seller for faulty units
shall not exceed ten (10) business days. If necessary, material will be
exchanged to avoid delays. Seller will provide Buyer's CRG center with
failure analysis information if so requested by Buyer. All part number
labeling and repair process shall be in accordance with Attachment I
Specifications.
[THE PRICES LISTED IN THIS ATTACHMENT ARE DEEMED TO BE CONFIDENTIAL
INFORMATION. THEY HAVE BEEN OMITTED FROM THIS FILING AND HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]
ATTACHMENT A1
JIT PARAMETERS (Supplier Pull)
Part Number Unit Price 1 wk usage 4 wk usage min qty max qty lot size
Not applicable at this time
<PAGE>
Attachment B Supplier Ship to Stock Audit Program ( Alcatel Specification 8BD
00041 5004 QRZZA)
No longer Applicable
<PAGE>
Attachment C Quality Assurance Requirements of Seller (Alcatel Network Systems
Specification (8BD 0041 3023 QRZZA)
THIS DOCUMENT NOT INCLUDED DUE TO NON-MATERIAL INTERNAL PROCEDURES-COPYRIGHTED
<PAGE>
Attachment D Form of Licensing Agreement.
Attached is the signed agreement between Buyer and Seller.
Exhibit A PROGRAM/SOFTWARE
Exhibit B DOCUMENTATION
Exhibit C PRODUCTS
Exhibit D Licensee Fees
Exhibit E Maintenance/Support/Training and Fees
Not Applicable at this time.
<PAGE>
Attachment E
ALCATEL NETWORK SYSTEMS ROUTING INSTRUCTIONS
see attached
ALCATEL NETWORK SYSTEMS
DOMESTIC INBOUND ROUTING GUIDE
Alcatel has negotiated special discounted transportation rates.
DO NOT DEVIATE FROM ROUTING GUIDE WITHOUT PREAPPROVAL BY
THE COGNIZANT ALCATEL PURCHASING REPRESENTATIVE
Instructions:
1. Must follow routing guide. 6. All shipping docs must have PO# or RA#
listed. (e.g. packing slips, Freight
Noncompliance will result In bill bill, ship labels)
2. No shrink wrap. 7. Packing slips must indicate correct PO #,
Part and the number of boxes shipped
3. FOB Point of Shipment.
4. Boxes shall not contain multiple8.Ship to address must match address on
orders the PO
5. Boxes are to be marked with the 9. DO NOT INSURE. Alcatel is self insured.
PO#, part # and box # (1 of 2, 2
of 2, etc) 10. See contact list below.
FREIGHT PAYMENT TERMS
Carrier Alcatel Ship to Address Non-Alcatel Ship to Address (Drop Ship)
Eagle 3rdPtybillacct# ALCA12750A 3rd Pty bill acct# ALCA12750
Emery 3rd Pty bill acct#544922867 3rd Pty bill acct# 544509177
FedEx 3rd Pty bill acct# 11851-7676-2 3rd Pty bill acct# 1778-8466-9
RPS ship freight collect. ship ppd & add
Roadway ship freight collect. 3rd Pty bill: Alcatel Network Systems
1225 N. Alma Rd. Richardson Tx. 75081
APPROVED CARRIERS
SURFACE SHIPMENTS
REGIONAL NATIONAL CARRIERS
WEIGHT CARRIERS USA CANADA
1-150 lbs RPS RPS RPS
150+ lbs Conway Roadway Roadway
* Regional carriers are used within a 500 mile radius.
AIR SHIPMENTS (MUST BE AUTHORIZED BY BUYER OR OTHER ALCATEL AGENT)
USA/CANADA EXCEPTION ORIGINS:
WEIGHT ORIGIN WEIGHT Alaska, Hawaii, Puerto Rico
Letter Fed Ex Letter Federal Express
1-25 lbs Fed Ex 1-10 lbs Federal Express
26-70 lbs Emery 10 + lbs. Emery
170 + lbs Emery/Eagle**
If Emery or Eagle are unable to meet specified delivery requirements Fed Ex
may be used
CONTACT INFORMATION
Carrier Customer Service Contact Telephone e-mail address
Conway Tom McIntyre (817)-284-1794 [email protected]
Eagle USA Jill Roberts 1-800-364-3299 [email protected]
Emery Worldwide Vicky White 1-800-215-4758ext2491 [email protected]
Federal Express Lynn Winfrey (901)-757-3077
RPS John Grandel 1-800-762-3725 [email protected]
Roadway Leigh-Anne Hayes 1-80O-665-8374 [email protected]
Alcatel Contact Telephone e-mail address
Alcatel North America David Benson (972)-996-6500
[email protected]
Telecom Sector Jim Heatley (972)-996-5109 [email protected]
9/11/98
<PAGE>
Attachment F
THIS ORDER IS SUBJECT TO THE FOLLOWING
STANDARD TERMS AND CONDITIONS
1. This order constitutes Buyer's offer to purchase the materials, services
and articles, all of which are herein called "articles," described elsewhere
in this order, in accordance with its provisions which include the provisions
set forth on the face of this order, the provisions attached hereto, and the
provisions incorporated herein by reference.
2. DELIVERY AND SHIPPING INSTRUCTIONS: (a) On date of shipment, send
original bill of lading Delivery and, air bill or express receipt reflecting
this order number to Buyer's Traffic Department and one copy of Notice of
Shipment to Buyer's Purchasing Department. (b) Do not deliver ahead of
schedule unless authorized by Buyer. Describe shipments in accordance with
the carrier's tariffs to obtain the lowest freight rate. Do not insure or
declare value on shipments beyond F.O.B. point. Title and risk of loss or
damage to the products contained in each shipment shall pass to Buyer upon
delivery thereof to the carrier. When a shipment is subject to freight rates
dependent upon value, annotate the bill of lading, airbill or express receipt
to show that the shipment is released at the maximum value which applies to
the lowest rate provided in applicable tariffs. If the value of any one
shipment exceeds $200.00 notify Buyer's Traffic Department by collect wire in
advance of shipment. Consolidate all shipments to be forwarded on one day.
(c) Articles furnished in excess of the quantity specified or in excess of any
allowable coverage will be retained by Buyer at no additional cost, unless
Seller notifies Buyer within 45 days after shipment that it desires the
return thereof. Seller will reimburse Buyer for the full cost or returning
such overshipment or a minimum charge of $50.00 whichever is higher. No
notification will be given to Seller of any overshipment unless the value
thereof exceeds $150.00. (d) Mail original and two duplicate invoices to
Buyer's Accounting Department when articles are shipped. STATE SHIPPING POINT
ON ALL INVOICES. Each case or parcel and accompanying packing list of
contents must show Buyer's order number. If no packing list accompanies the
shipment, Buyer's count will be conclusive on Seller. Seller agrees that from
time to time in connection with this order that Buyer may wish to change the
delivery schedule information stated in this order. In conjunction therewith,
it is understood and agreed that no change shall accelerate the rate of
delivery hereunder without Seller's consent. If any such change in delivery
schedule causes an increase or decrease in the cost of articles ordered
hereunder, said changes shall be governed by the provisions or Article 12,
CHANGES, set forth elsewhere in this order. Articles received more than
fifteen (15) days before schedule may, at Buyer's option, be returned at
Seller's expense, or be accepted and payment therefore, withheld until
schedule date. Notwithstanding the foregoing, if Buyer is in default of any
of its payment obligations to Seller, Seller may, in addition to its other
rights and remedies, defer shipments or deliveries hereunder, except upon
receipt of the purchase price or satisfactory security.
3. PACKAGING AND EXTRAS: No charges will be allowed for transportation,
packaging, packing, or returnable containers unless stated in this order. All
shipments must be packaged and must conform with Buyer's packaging
specification referred to elsewhere in this order, if any, so as to permit
efficient handling and to provide protection in shipment, and if tendered to a
common carrier for delivery, must also conform to the packaging requirements
applicable to such carrier. Damage to any articles resulting from improper
packaging will be charged to Seller. Acceptance of this Purchase Order by the
Seller constitutes a certification that the materials shipped to Buyer are
properly classified, described, packaged, marked and labeled, and are in
proper condition for transportation, according to the applicable regulations
of the Department of Transportation. Acceptance of this Purchase Order by
the Seller constitutes a certification that the inner packaging in which the
materials are shipped to Buyer meets all applicable regulations of the
Department of Transportation as to classification, description, packaging,
marking and labeling.
4. SPECIFICATIONS: All articles ordered to Buyer's or Government
specifications will comply with such specifications current as of the date of
this order unless otherwise specified by Buyer.
5. WARRANTY: Unless otherwise agreed to in writing by the parties, Seller
warrants for a period of twelve (12) months after shipment of the products
that the products will conform to the description this Purchase Order, that
Seller will convey good title to the products free from any security interest
unknown to Buyer, and that the products will be free from defects in material
or workmanship when shipped to Buyer. SELLER MAKES NO WARRANTIES, EXPRESS OR
IMPLIED (INCLUDING, WITHOUT LIMITATION, MERCHANTABILITY, FITNESS FOR
PARTICULAR PURPOSE, OR AGAINST INFRINGEMENT OF ANY PATENT), EXCEPT AS
EXPRESSLY PROVIDED IN THIS PURCHASE ORDER. If the products supplied do not
conform to the limited warranty set forth above, Seller will, at its option,
(1) repair or replace the products which are defective ; provided, however,
that written notice of the defect and its nature is given to Seller as soon as
practical after discovery of the defect, but in no event later than one (1)
<PAGE>
year from the date of shipment of products by Seller. Upon request, Buyer
shall return all defective products to Seller for diagnosis. With respect to
any claim made by Buyer, Buyer will allow Seller reasonable time to inspect,
in place, the products and to remove the products for testing and analysis, at
Seller's expense. Buyer will not alter or remove any of the products until
Seller has made such inspection or waived its rights to do so. Seller shall
have no warranty obligations under this Purchase Order for any product which
has been: (i) subjected to misuse, neglect, accident, or abuse not caused by
Seller; (ii) improperly repaired or altered by anyone other than Seller; (iii)
damaged by fire, explosion, external power failure, or any acts of god or
nature; or (iv) used in material violation of the appropriate written
instructions furnished by Seller. The remedy of repair, replacement, or
refund of the purchase price is Buyer's sole and exclusive remedy and will
satisfy all of Seller's liabilities, whether based on contract, negligence,
tort, product liability, strict liability, or otherwise. After the expiration
of any warranty described in this Purchase Order, Seller agrees that, if it
elects to repair damaged products, it will do so at a charge equal to its then
established repair rates for such products and for a period of at least five
years after the termination of the agreement. 6. INSPECTION: All articles
shall be subject to inspection and test at all times and places, including the
period of manufacture, by Buyer and, if this order is replaced under a
Government contract, the Government. If any inspection or test is made on
Seller's premises, Seller, without additional charge, shall provide all
reasonable facilities and assistance for the safety and convenience of Buyer
and Government inspectors. Such inspections and tests shall provide all
reasonable facilities and assistance for the safety and convenience of Buyer's
and Government inspectors. Such inspections and tests shall be performed in
such a manner not unduly to delay the work. All articles are also subject to
final inspection and acceptance at Buyer's plant notwithstanding any payments
or other prior inspections. Such final inspection shall be made within a
reasonable time after delivery.
7. RELEASE OF NEWS INFORMATION AND ADVERTISING: Unless otherwise required
by law or regulatory agency, neither party shall disclose to third parties the
content of this Agreement, in whole or in part, without the prior written
consent of the other party.
8. TERMINATION: Buyer shall have the right to terminate this order or any
part thereof at any time: (a) Without Cause -- in case of termination by
Buyer of all or any part of this order without cause, any termination claim
must be submitted to Buyer within sixty (60) days after the effective date of
termination. The provisions of this subparagraph shall not limit or affect
the right of Buyer to terminate this order for cause and shall not apply to a
termination for cause. (b) For Cause -- if Seller fails to make any delivery
in accordance with the agreed delivery date or schedule or otherwise fails to
observe or comply with any of the other instructions, terms, conditions or
warranties applicable to this order or fails to make progress so as to
endanger performance of this order or in the event of any proceedings by or
against Seller in bankruptcy or insolvency or appointment of a receiver or
trustee or an assignment for the benefit of creditors. Buyer may, in addition
to any other right or remedy provided by this order or by law,
terminate all or any part of this order by telegraphic or other written notice
to Seller without any liability by Buyer to Seller on account thereof. Buyer
may require a financial statement from Seller at any time during the term of
this order for the purpose of determining Seller's financial responsibility.
9. INDEMNITY: (a) Each party hereto agrees to indemnify the other party
against, and to hold it harmless from, any and all damages, costs, and
expenses, including attorney fees, caused to or incurred by such other party
as a result of any and all claims, proceedings, suits, or causes of action
brought or alleged by any third party or parties arising out of the acts or
omissions of such other party or any of its directors, officers, employees,
agents, or subcontractors in connection with this Purchase Order or any
obligations arising hereunder, whether such claims are based on contract,
negligence, tort, strict liability, product liability, or otherwise. The
foregoing indemnity shall remain operative and in full force and effect,
regardless of any termination or expiration of this Purchase Order, and shall
be in addition to any liability which either party hereto may otherwise have
to the other party. (b) Seller hereby indemnifies Buyer, its successors and
assigns against loss, damage, or liability, including costs and expenses,
including attorneys fees, which may be incurred on account of any suit,
claims, judgment or demand involving infringement or alleged infringement
of any patent rights in the manufacture, use or disposition of any articles
supplied by Seller, provided Buyer shall notify Seller or any suit instituted
against it and, to the full extent of its ability to do so, shall permit
Seller to defend the same or make settlement in respect thereof. However,
Seller shall have no liability to Buyer under this section or otherwise for
any such patent infringement, or claim thereof, which is based upon (i) the
use of any product in combination with any other product, device or equipment
not supplied by Seller, (ii) the use of any product for a purpose or
application not intended by Seller, (iii) the furnishing to Buyer of any
information, data, service or applications assistance, or (iv) for Seller's
compliance with Buyer's designs or specifications or (v) any change or
modification to the product made by Buyer. No costs or expenses shall be
incurred for the account of Seller without Seller's written consent. The
foregoing states the entire liability of Seller with regard to patent
infringement of Seller's products. Buyer shall indemnify Seller for any loss,
damage, expense or liability in any suit or proceeding based upon any patent
infringement claim brought against Seller resulting from Seller's compliance
with Buyer's designs or specifications and for any trademark infringement
involving any marking or' branding applied by Seller at the request of Buyer.
(c) Any legal action against Seller for a default of its obligations to Buyer
must be commenced within the applicable statutory period for such action.
10. EXCUSABLE DELAYS: Neither party shall be liable for damages for delay in
delivery arising out of causes beyond its reasonable control and without its
fault or negligence, including, but not limited to, acts of God or of the
public enemy, acts of the Government in either its sovereign or contractual
capacity, fires, floods, epidemics, quarantine restrictions, strikes, freight
<PAGE>
embargoes, and unusually severe weather. If the delay is caused by the delay
of a subcontractor or Seller and if such delay arises out of causes beyond the
reasonable control or both Seller and the subcontractor, and without the fault
or negligence of either of them, Seller shall not be liable to Buyer in
damages unless the articles or services to be furnished by the subcontractor
were obtainable from other sources in sufficient time to permit the Seller to
meet the required delivery schedule. Seller will notify Buyer in writing
within ten (10) days after the beginning of any such cause.
11. ASSIGNMENT: Neither party may assign or transfer this Purchase Order or
any rights hereunder without the prior consent of the other party, except for
assignment by Seller to Applied Innovation International Inc. and assignment
of rights to receive payments. The terms and conditions of this order shall
bind any permitted successors and assigns of such parties. Any consent by
either party to assignment shall not be deemed to waive such party's right
to recoupment and/or set off of claims arising out of this or any other
transactions with the other party, its divisions, affiliates or subsidiaries,
or to settle or adjust matters with the other party without notice to
permitted successors and assigns.
12. CHANGES: Buyer may at any time, by a written notice, make changes in the
specifications, designs or drawings, samples or other description to which the
articles are to conform, in methods or shipment and packaging or place of
delivery. If any such change causes an increase or decrease in the cost of,
or the time required for, the performance of any part of the work under this
order, whether changed or not changed by any such order, and equitable
adjustment shall be made in the price or delivery schedule, or both, and this
order modified in writing accordingly. Any claim by Seller for an adjustment
be made in writing within thirty (30) days of the receipt of any such notice;
provided, however, that Buyer may, in its discretion, receive and act upon any
such claim so made at any time prior to final payment under this order.
Nothing in this clause shall excuse Seller from proceeding without delay to
perform this order as changed.
13. INFORMATION: (a) Drawings, data, design, inventions, computer software
and other technical information supplied by Buyer shall remain Buyer's
property and shall be held in confidence by Seller. Such information shall
not be reproduced, used or disclosed to others by Seller without Buyer's prior
written consent, and shall be returned to Buyer upon completion by Seller of
its obligations under this order or upon demand. (b) Except as otherwise
provided in the Purchase Agreement or this Purchase Order, any information
which Seller may disclose to Buyer with respect to the design, manufacture,
sale, or use of the articles covered by this order shall be deemed to have
been disclosed as part of the consideration for this order, and Seller shall
not assert any claim against Buyer by reason of Buyer's use thereof.
14. BUYER'S PROPERTY: (a) All property used by Seller in connection with
this order which is owned, furnished, charged to or paid for by Buyer
including, but not limited to, materials, tools, dies, jogs, molds, patterns,
fixtures, equipment, drawings and other technical information, specifications,
and any replacement thereof, shall be and remain the property of Buyer subject
to removal and inspection by Buyer at any time without cost or expense to
Buyer and Buyer shall have free access to Seller's premises for the purpose of
inspecting or removing such property. All such property shall be identified
and marked as Buyer's property, used only for this order and adequately
insured by Seller at its expense for Buyer's protection. Seller shall assume
liability for and maintain and repair such property and return the same to
Buyer in its original condition, reasonable wear and tear excepted, and when
such property is no longer required hereunder. Seller shall furnish Buyer
with a list thereof and shall comply with any Buyer disposition instructions
applicable thereto. Buyer shall not be obligated to pay any invoices for
tooling until the first article produced therefrom shall have been received
and accepted. Notwithstanding the foregoing, upon written notice to Buyer and
to the extent such use will not interfere with Seller's performance of this or
other orders from Buyer in effect at the time Seller enters into a direct
contract with the U.S. Government, Seller shall have the right to use Buyer's
property in the manufacture of end times for direct sale to the U.S.
Government to the extent the Government has the right under its prime contract
with Buyer to authorize such use by Seller, provided that, to the extent
practicable, Seller prominently identifies each such end item as being
manufactured by Seller for direct sale to the U.S. Government. (b) Materials,
excluding Government Property, furnished by Buyer on other than a charge basis
in connection with this order shall be deemed to be held by Seller as bailee
thereof. Seller agrees to pay Buyer's replacement cost for all such material
spoiled or otherwise not satisfactorily accounted for over and above 2%
thereof allowable for scrap loss.
15. GRATUITIES: Seller warrants that neither it nor any of its employees,
agents or representatives has offered or given any gratuities to Buyer's
employees, agents or representatives with a view toward securing this order or
securing favorable treatment with respect thereto.
16. UTILIZATION OF SMALL BUSINESS AND SMALL DISADVANTAGED BUSINESS,
WOMEN-OWNED SMALL BUSINESS AND LABOR SURPLUS AREA CONCERNS. To support
Government policy as declared by the Congress, and as consistent with the
efficient performance of this order, Seller agrees to accomplish a maximum
amount of subcontracting to small business, small disadvantaged business and
women-owned small business concerns, and to use its best efforts to place
subcontracts hereunder, if any, with subcontractors who will perform such
subcontracts substantially in areas of persistent or substantial labor surplus
when it can be done at prices no higher than are obtainable elsewhere
observing exemptions and preferential order established by applicable
Government regulations.
17. COMPLIANCE WITH LAWS: (a) The parties hereto will comply with all
applicable federal, state, and local laws, ordinances, rules, and regulations
in performance of their respective obligations under this Purchase Order.
<PAGE>
Buyer will not take any action which will cause Seller to be in violation of
any law of any jurisdiction. (b) To the extent applicable hereto, Seller
shall in the performance of this order comply with: the Fair Labor Standards
Act of 1938 (29 U.S.C. 201-219); the Welsh-Healey Public Contract Act (41
U.S.C. 35-45); the Contract Work Hours and Safety Standards Act (40 U.S.C.
327-333); laws prohibiting the use of convict labor, all other federal, state,
and local laws; all regulations and orders issued under any applicable law.
Seller warrants that the equipment to be furnished hereunder complies with the
Occupational Safety and Health Act of 1970 (29 U.S.C. 651-678) and the
Radiation Control for Health and Safety Act of 1969 (42 U.S.C. 263 b-n) and
all applicable regulations and standards promulgated thereunder.
18. NOTICE OF BUYER OF LABOR DISPUTES: (a) Whenever Seller has knowledge
that any actual or potential labor dispute is delaying or threatens to delay
the timely performance of this order, Seller shall immediately give notice
thereof, including all relevant information, with respect thereto, to Buyer.
(b) Seller agrees to insert the substance of this clause, including this
paragraph (b), in any subcontract hereunder as to which a labor dispute may
delay the timely performance of this order.
19. EFFECT OF INVALIDITY: The invalidity in whole or in part of any
provision hereof shall not affect the validity of any other provision.
20. RIGHTS, REMEDIES AND WAIVER: The rights and remedies provided to the
parties herein shall be cumulative, and in addition to any other rights and
remedies provided by law or equity. A waiver of a breach of any provision
hereof shall not constitute a waiver of any other breach. The construction,
interpretation, and performance of this Agreement shall be governed by the
laws of the State of Ohio.
21. DISPUTES: Any dispute arising under this order which is not settled by
agreement of the parties may be settled by appropriate legal proceedings.
Pending any decision, appeal or judgment in such proceedings or the
settlement of any dispute arising under this order, Seller shall proceed
diligently with the performance of this order in accordance with the decision
of Buyer.
22. BUYER APPROVALS AND REVIEWS: The review or approval by Buyer of any work
hereunder or of any designs, drawings, specifications or other documents
prepared hereunder shall not relieve Seller of any of its obligations under
this order, nor excuse or constitute a waiver of any defects or
nonconformities in any articles furnished under this order, not change, modify
or otherwise affect any of the provision of this order, including, but not
limited to, the prices and delivery schedules herein.
23. TAXES: Seller is liable for and shall pay all taxes, impositions,
charges and exaction's imposed on or measured by this order except those Buyer
specifically agrees or is required by law to pay and which are separately
stated on Seller's invoice. Prices shall not include any taxes, impositions,
charges and exaction's for which Buyer has furnished an exemption certificate.
24. TIME: Time is of the essence in the performance of this order by Seller.
25. TITLE: Except if title has heretofore passed to Buyer or Buyer's
customers under other provisions of this order, title to the articles shall
pass to Buyer upon delivery of the articles to the F.O.B. point named herein.
26. STOP WORK ORDER: The provisions of the clause contained in FAR 52.212-13
in effect on the date hereof are hereby incorporated herein by reference with
the following changes: the words "Contracting Officer" and "Government" means
Buyer; the word "Contractor" means Seller; the words "ninety (90) days" are
hereby changed to one hundred (100) days and the words "thirty (30) days" are
hereby changed to twenty (20) days wherever they appear; and the reference to
the "Termination for Convenience" clause shall be deemed to refer to paragraph
(b) of the clause hereof entitled "Termination."
27. HAZARDOUS MATERIALS: Seller shall notify Buyer of every article ordered
hereunder which contains material hazardous or injurious to the health or
physical safety of person even though said hazard or injury may only occur due
to mishandling or misuse of the article. In addition, Seller shall identify
the hazardous or injurious material and notify Buyer of the effects of such
material on human beings and the physical manifestations that could result.
For each article so identified, Seller shall supply Buyer warning labels or
instructional material appropriate to warn persons coming in contact therewith
of the hazard and its effects.
28. QUALITY ASSURANCE REQUIREMENT: Seller agrees that performance hereunder
will be in accordance with the current revision status of Buyer's
specification 8BD 00041 3023 QRZZA titled "Quality Standard -- Quality
Assurance Requirements for Suppliers."
29. LIMITATION OF LIABILITY: Notwithstanding any other provisions in the
agreement, neither Buyer nor Seller shall be liable for indirect, special,
incidental, remote, or consequential damages, (including but not limited to
the loss of revenue or profits) resulting from or arising out of the
respective parties' performance or failure to perform under this agreement, or
from the use of or the inability to use this material, software and/or service
either separately or in combination with other equipment or software, or from
any other cause.
<PAGE>
IF THIS ORDER INDICATES THAT IT IS PLACED UNDER A GOVERNMENT CONTRACT,
THE FOLLOWING ADDITIONAL PROVISIONS ARE APPLICABLE
30. The work covered by this order relates to a prime contract with the
United States Government, and is within the jurisdiction of a Department of
Agency of the United States. Unless otherwise indicated below, the following
terms and designations shall apply in each of the Government clauses
identified in this section: "Contractor" means Seller, "subcontractor" means
Seller's subcontractor, "Contract" means this order, and both "Contracting
Officer" and "Government" mean Buyer.
A. FEDERAL ACQUISITION REGULATION: The following Federal Acquisition
Regulation (FAR) clauses, in effect on the date hereof, are incorporated
herein by reference, except that "Government" and "Contracting Officer"
mean "Government" and "Contracting Officer" in FAR 52.204-2, 52.222-26,
52.222-35, 52.222-36 and 52.225-9, and except that "Government" means
"Government" in the terms "Government property," "Government-furnished
property," "Government-owned property," and "Former Government surplus
property." In addition, the first time "Government" appears in paragraph (f)
of FAR 52.245-2 it means "Government or Buyer." All references to disputes
procedures in Government clauses incorporated by reference shall be deemed to
be superseded by Article 21 "Disputes."
Security Requirements...............................................52.204-2
New Material........................................................52.210-5
Priorities, Allocations, and Allotments.............................52.212-8
Government Delay of Work...........................................52.212-15
*Examination of Records by Comptroller General
($10,000) (Except subparagraph (c))...............................52.215-1
*Audit-Negotiation ($10,000)........................................52.215-2
*Small Business and Small Disadvantaged Business
Subcontracting Plan ($500,000)....................................52.219-9
*Labor Surplus Area Subcontracting Program
($500,000)........................................................52.220-4
Equal Opportunity..................................................52.222-26
*Affirmative Action for Special Disabled and
Vietnam Era Veterans ($10,000)...................................52.222-36
*Affirmative Action for Handicapped Workers
($2,500).........................................................52.222-36
Buy American Act - Supplies.........................................52.225-3
Government Property (Fixed-Price Contracts).........................52.245-2
*Notice and Assistance Regarding Patent and Copyright
Infringement ($10,000) DAR 7-103-23 (or comparable FAR clause)
*Note - Clause is applicable if order exceeds the amount indicated
B. The following provisions are incorporated herein and replace Article 8
"Termination":
TERMINATION: (a) Buyer may terminate this order, in whole or in part in
accordance with the provisions of the "Default (Fixed Price Supply and
Service)" clause set forth in FAR 52.249-8 if Seller fails to comply with any
of the provisions hereof, or if Seller becomes the subject of a proceeding
under state or federal law for relief of debtors or makes an assignment for
the benefit of creditors. (b) Without affecting its right to terminate this
order under paragraph (a) hereof, Buyer may, for its convenience, terminate
this order in whole or, from time to time, in part in accordance with the
provisions of the "Termination for Convenience of the Government
(Fixed-Price)" clause set forth in FAR 52.249-2 except the term "1 year" in
paragraph (d) is changed to "6 months," (c) The FAR clauses referred to in
paragraphs (a) and (b) are hereby incorporated herein by reference as in
effect on this date hereof.
C. RIGHTS IN DATA: If this order is placed under a Government contract
having rights in data and computer software clauses, the provisions thereof
are incorporated herein and replace subparagraph (b) or Article 13
"Information." Seller assumes the obligations of such clauses as they pertain
in this order.
D. DOD CONTRACTS: If this order is placed under a Department of Defense
<PAGE>
(DOD) contract the following DOD FAR Supplement clause in effect on the date
hereof applies:
31. GOVERNMENT-FUNDED SUBCONTRACT OR AGREEMENT EXPECTED WITH VALUE OF $10,000
OR MORE: In the event this is a government-funded subcontract or agreement
and the total value of this purchase order is $10,000 or more, the provisions
of Fly-sheet LS titled "Socio-Economic Program Requirements," attached
thereto, are incorporated into and made a part hereof as though set out at
length hereunder.
As a condition precedent to this becoming a formal contract, it shall be
incumbent upon Seller to execute Form 130-Z titled "Equal Employment
Opportunity Compliance Certificate," and to return said certificate with the
Vendor's acknowledgment copy of the order.
<PAGE>
ATTACHMENT G
PROPRIETARY INFORMATION AGREEMENT- MUTUAL EXCHANGE
SIGNED 5/29/98
NOT ATTACHED DUE TO NON-MATERIAL INTERNAL PROCEDURE-COPYRIGHT
<PAGE>
ATTACHMENT H
CORPORATE SOURCEFLEX SOFTWARE SOURCE CODE AND HARDWARE ESCROW AGREEMENT
SOURCEFILE NUMBER 7442
CORPORATE SOURCEFLEX
SOFTWARE SOURCE CODE AND HARDWARE ESCROW AGREEMENT
SOURCEFILE NUMBER: ________
This Software Source Code and Hardware Escrow Agreement, dated as of 26
August, 1997, by and between FileSafe, Inc., a California corporation, doing
business as SourceFile ("SourceFile") located at 1350 West Grand Ave.,
Oakland, California 94607 and Alcatel Network Systems Inc., a corporation duly
organized and existing under the laws of the State of Delaware with its
principal office at 1225 North Alma Road, Richardson, Texas 75081
("Beneficiary"), and each Depositor identified by Beneficiary to SourceFile as
provided for in Section 3 hereof (each "Depositor", collectively the
"Depositors").
RECITALS:
A. Pursuant to certain software license agreements (each a "License
Agreement", collectively the "License Agreements"), Depositor licenses, to
certain beneficiaries, certain software in object code form (the "Software")
and hardware drawings in a format to manufacture material . A description of
the Software and Hardware effective as of the date hereof, is provided in
Addenda in Exhibit "A".
B. Depositor desires to ensure the availability to Beneficiary of the source
code and all necessary proprietary information related to the Software or
Hardware (the "Source Material") in the event any of the conditions set forth
in Section 4 of this Agreement should occur.
C. The Source Material is the proprietary and confidential information of
Depositor, and Depositor desires to protect such ownership and
confidentiality.
AGREEMENT:
1. Delivery of Source Material to SourceFile. Depositor shall deliver to
SourceFile a parcel (the "Parcel") sealed by Depositor, which Depositor
represents and warrants is the Source Material.
2. Acknowledgment of Receipt by SourceFile. SourceFile shall promptly
acknowledge to Beneficiary and Depositor, in writing, the receipt of the
Parcel and of any supplements to the Source Material which are added to the
Parcel. SourceFile will provide an account status report to the Beneficiary
and Depositor on a semi-annual basis.
3. Acknowledgment by Depositors. For purposes of this Agreement, a
Developer of the Software shall be a Depositor hereunder with such rights of a
Depositor as set forth herein, only if (i) such Developer has sent to
SourceFile a fully executed copy of the form of acknowledgment attached hereto
as Exhibit "B", in which the Developer accepts the terms of this Agreement and
(ii) all fees are paid. The names and addresses of the Depositors shall be
described in one or more schedules of Depositors to be presented to SourceFile
from time to time by Beneficiary. A schedule of Depositors effective as of
the date of this Agreement is attached hereto as Exhibit "D". All other
Developers of the Software shall have no rights hereunder and SourceFile shall
have no duties to such Developers.
4. Terms and Conditions of the Source Material Escrow. The Parcel shall be
held by SourceFile upon the following terms and conditions:
(i) In the event that SourceFile is notified by Beneficiary that
Depositor is unwilling or unable to support or maintain the Software, in
breach of the License Agreement with Beneficiary and that Beneficiary has
given Depositor written notice of such breach (the "Release Condition"),
SourceFile shall immediately notify Depositor of its receipt of the
Beneficiary's notice and shall provide a copy of such notice to Depositor
promptly thereafter.
(ii) If SourceFile does not receive Contrary Instructions from Depositor,
as defined below, within thirty (30) days of the giving of such notice to
Depositor, SourceFile shall deliver a copy of the Source Material to the
Beneficiary demanding delivery within sixty (60) days after the date of the
Beneficiary's original notice to SourceFile. "Contrary Instructions" for the
<PAGE>
purposes of this Section 4 shall mean the filing of a notice with SourceFile
by Depositor, with a copy to the Beneficiary demanding delivery, stating that
the Release Condition has not occurred or has been cured.
(iii) If SourceFile does receive Contrary Instructions from Depositor
within thirty (30) days of the giving of such notice to Depositor, SourceFile
shall not deliver a copy of the Source Material to the Beneficiary, but shall
continue to store the Parcel until: (1) otherwise directed by the Depositor
and Beneficiary jointly, (2) SourceFile has received notice of the resolution
of the dispute by a court of competent jurisdiction, or (3) SourceFile has
deposited the Parcel with a trustee selected by a court of competent
jurisdiction for the purpose of determination of its obligations under this
Agreement.
(iv) Upon receipt of Contrary Instructions from Depositor, SourceFile
shall have the absolute right, at SourceFile's election to file an action in
interpleader requiring the Depositor and Beneficiary to answer and litigate
their several claims and rights among themselves. SourceFile is hereby
authorized to comply with the applicable interpleader statutes of the State of
California in this regard.
5. Term of Agreement. This Agreement shall have an initial term of five (5)
years. The term shall be automatically renewed on a yearly basis thereafter,
unless Beneficiary or SourceFile notifies the other party at least forty-five
(45) days in advance of the end of the current term of its election to
terminate this Agreement.
6. Compensation of SourceFile. Beneficiary or Depositor agree to pay
SourceFile reasonable compensation for the services to be rendered hereunder,
in accordance with SourceFile's then current schedule of fees, and will pay or
reimburse SourceFile upon request for all reasonable expenses, disbursements
and advances, including software duplication charges and reasonable attorneys'
fees, incurred or made by it in connection with carrying out its duties
hereunder.
7. Limitation of Duties of SourceFile. SourceFile undertakes to perform
only such duties as are expressly set forth herein. SourceFile has no
knowledge of, and makes no representations with respect to, the contents or
substance of the Parcel, the Software or the Source Material.
8. Limitation of Liability of SourceFile. SourceFile may rely on and shall
sustain no liability as a result of acting or refraining from acting upon any
written notice, instruction or request furnished to SourceFile hereunder which
are reasonably believed by SourceFile to be genuine and to have been signed or
presented by a person reasonably believed by SourceFile to be authorized to
act on behalf of the parties hereto. SourceFile shall not be liable for any
action taken by it in good faith and believed by it to be authorized or within
the rights or powers conferred upon it by this Agreement. SourceFile may
consult with counsel of its own choice, and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder,
in good faith and in accordance with the opinion of such counsel.
9. Indemnification of SourceFile. Depositor and Beneficiary shall jointly
and severally indemnify, defend, and hold harmless SourceFile and its agents
and employees (collectively, "SourceFile") from any and all claims, demands,
liability, costs and expenses (including attorneys' fees) incurred by
SourceFile directly or indirectly arising from or relating to the Source
Material and/or SourceFile's performance of its duties under this Agreement.
10. Record Keeping and Inspection of Source Material. SourceFile shall
maintain complete written records of all materials deposited by Depositor
pursuant to this Agreement. During the term of this Agreement, Depositor
shall be entitled at reasonable times during normal business hours and upon
reasonable notice to SourceFile to inspect the records of SourceFile
maintained pursuant to this Agreement and to inspect the facilities of
SourceFile and the physical condition of the Source Material.
11. Technical Verification. Beneficiary reserves the option to request
SourceFile to verify the Source Material for completeness and accuracy.
SourceFile may elect to perform the verification at its site or at the
Depositors site. Depositor agrees to cooperate with SourceFile in the
verification process by providing its facilities and computer systems and by
permitting SourceFile and at least one employee of Beneficiary to be present
during the verification of Source Material.
12. Restriction on Access to Source Material. Except as required to carry
out its duties hereunder, SourceFile shall not permit any SourceFile employee,
Beneficiary or any other person access to the Source Material, unless
consented to in writing by Depositor. SourceFile shall use its best efforts
to avoid unauthorized access to Source Material by its employees or any other
person.
13. Updates of the Source Material.
(i) Depositor shall provide from time to time, supplements of the Source
Material.
(ii) A representative of SourceFile shall add such supplements into the
Parcel containing the Source Material without removing the Source Material.
(iii) Depositor shall send to SourceFile a duplicate of the Source
Material within three (3) days after receiving written notice from SourceFile
that the Source Material has been destroyed or damaged.
<PAGE>
(iv) All supplements to Source Material and duplicate Source Material
shall be subject to the terms and provisions of this Agreement.
14. Bankruptcy Depositor and Beneficiary acknowledge that this Agreement is
an "agreement supplementary to" the License Agreement as provided in Section
365 (n) of Title 11, United States Code (the "Bankruptcy Code"). Depositor
acknowledges that if Depositor, as a debtor in possession or a trustee in
Bankruptcy in a case under the Bankruptcy Code, rejects the License Agreement
or this Agreement, Beneficiary may elect to retain its rights under
the License Agreement and this Agreement as provided in Section 365 (n) of the
Bankruptcy Code. Upon written request of Beneficiary to Depositor or the
Bankruptcy Trustee, Depositor or such Bankruptcy Trustee shall not interfere
with the rights of Beneficiary as provided in the License Agreement and this
Agreement, including the right to obtain the Source Material from SourceFile.
15. Notices.
(i) Any notice or other communication required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given on
the date service is served personally, one business day after the date if sent
by overnight courier, or five (5) days after the date of mailing if sent
registered mail, postage prepaid, return receipt required, and addressed as
follows or to such other address or facsimile number as either party may, from
time to time, designate in a written notice given in like manner:
TO DEPOSITOR: AS SET FORTH ON EXHIBIT "D"
TO BENEFICIARY: Alcatel Network Systems Inc.
1225 North Alma Road
Richardson , Texas 75081-3802
Attn: Purchasing Keith Sowards
Phone: 972-996-2880
Fax: 972-996-7462
TO SOURCEFILE: SOURCEFILE
1350 West Grand Ave.
Oakland, California 94607
Attn: Client Services
Phone: 510.419.3888
Fax: 510.419.3875
(ii) Deposit update notices and invoices will be sent to parties listed
in Exhibit "C" and "D".
16. Miscellaneous Provisions.
(a) Waiver. Any term of this Agreement may be waived by the party entitled
to the benefits thereof, provided that any such waiver must be in writing and
signed by the party against whom the enforcement of the waiver is sought. No
waiver of any condition, or of the breach of any provision of this Agreement,
in any one or more instances, shall be deemed to be a further or continuing
waiver of such condition or breach. Delay or failure to exercise any right or
remedy shall not be deemed the waiver of that right or remedy.
(b) Modification or Amendment. Any modification or amendment of any
provision of this Agreement must be in writing, signed by the parties hereto
and dated subsequent to the date hereof.
(c) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
(d) Headings; Severability. The headings appearing at the beginning of the
sections contained in this Agreement have been inserted for identification and
reference purposes only and shall not be used to determine the construction
or interpretation of this Agreement. If any provision of this Agreement is
held to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(e) Further Assurances. The parties agree to perform all acts and execute
all supplementary instruments or documents which may be reasonably necessary
to carry out the provisions of this Agreement.
<PAGE>
(f) Entire Agreement. This Agreement, including the attachments hereto,
contains the entire understanding between the parties and supersedes all
previous communications, representations and contracts, oral or written,
between the parties, with respect to the subject matter thereof. It is agreed
and understood that this document and agreement shall be the whole and only
agreement between the parties hereto, with regard to these escrow instructions
and the obligations of SourceFile herein, in connection with this Agreement,
and shall supersede and cancel any prior instructions. SourceFile is
specifically directed to follow these instructions only and SourceFile shall
have no responsibility to follow the terms of any prior agreements or
understandings.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BENEFICIARY SOURCEFILE
Alcatel Network Systems Inc FileSafe, Inc.,
a Delaware corporation a California corporation
By: __________________________ By: __________________________
Name: Keith Sowards Name: ________________________
Title: Purchasing Manager Title: _________________________
<PAGE>
EXHIBIT "A-_____"
DESCRIPTION OF SOURCE MATERIAL
SourceFile Account #________
The Depositor agrees to deposit the Source Material for the benefit of the
Licensee of this escrow arrangement. Below is the acknowledgment that the
deposit arrived at SourceFile in good order. It is completed by the Depositor
and visually inspected by SourceFile. A copy of this form will be shared with
Licensees of the Source Material.( As multiple deposits are made please make
copies of this form and number them appropriately. For example, the initial
deposit will be Exhibit "A-1", the next "A-2" and so on.)
1. Source Material Deposit
Product Name Computer Automation Systems, Inc. same as Alcatel part
number 3AL47880AAAA
Version Current software version 1.3 or more recent as updated
2. Type of Media
-there can be more than one type (i.e. diskette, tape, hard copy
materials, etc.)
-please include the quantity of type (i.e. two (2) diskettes)
engineering drawing and/or diskette to manufacture hardware and software
to
current revision level (tool chain information is required).
3. Please check one of the following:
Initial Deposit x Supplemental____ Replacement ____*
*If Replacement then: Destroy Deposit_____ or Return Deposit_____
___________________________________________________________________________
Completed by: Visually verified by:
DEPOSITOR SOURCEFILE
By: COMPUTER AUTOMATION SYSTEMS, INC. By:______________________
Name:_______________________ Name:____________________
Title:_______________________ Title: Client Services
Date:________________________ Date:_____________________
<PAGE>
EXHIBIT "B"
ACKNOWLEDGMENT BY DEPOSITOR
The undersigned hereby acknowledges, accepts, and agrees to be bound by
the terms of the attached Corporate SourceFlex Software Source Code Escrow
Agreement by and between FileSafe, Inc., a California corporation doing
business as SourceFile, as Escrow Agent and Alcatel Network Systems Inc., as
Beneficiary, dated August 26, 1997.
DEPOSITOR: By: _______________________________
Name: ____________________________
Title: ___________________________
Address: __________________________
__________________________
__________________________
Phone: ____________________________
Fax: ______________________________
BENEFICIARY: Alcatel Network Systems Inc.
1225 North Alma Road
Richardson , Texas 75081-3802
Attn: Purchasing Keith Sowards
Phone: 972-996-2880
Fax: 972-996-7462
Once executed, send original via CERTIFIED OR REGISTERED MAIL to:
SOURCEFILE: SOURCEFILE
1350 West Grand Ave.
Oakland, California 94607
Attn: Client Services
Phone: 510.419.3888
Fax: 510.419.3875
<PAGE>
EXHIBIT "C"
SCHEDULE OF NOTICES
BENEFICIARY
Beneficiary deposit notices should be sent to:Name: Keith Sowards
Title: Purchasing Manager
Address: P.O. Box 833802
Richardson Tx. 75083
Phone: 972-996-2880
Fax: 972-996-7462
Beneficiary invoices should be sent to: Name: Jim Schlebach
Title: Account Payable Manager
Address: P.O. Box 833802
Richardson Tx. 75083
Phone: 972-996-7949
Fax: 972-996-7462
<PAGE>
EXHIBIT "D"
SCHEDULE OF NOTICES
DEPOSITOR
Depositor deposit notices should be sent to: Name:____________________________
Title:___________________________
Address: _______________________
___________________________
___________________________
Phone: __________________________
Fax: ___________________________
Depositor invoices should be sent to: Name: ___________________________
Title: __________________________
Address: _______________________
___________________________
___________________________
Phone: __________________________
Fax: ___________________________
<PAGE>
Attachment I Specifications (IS NOT ATTACHED DUE TO COPYRIGHT), Development
Milestones (IS NOT ATTACHED DUE TO NON-MATERIAL INTERNAL PROCEDURES-
COPYRIGHTED), and CASI MPS shelf and module part number and Repair process.
CASI MPS SHELF AND MODULES
PART NUMBERS AND REPAIR PROCESS
1. Separate Alcatel part numbers will be assigned for the shelf and for each
module.
2. Buyer's Alcatel part number will be installed at Seller's factory prior to
shipment of the MPS shelf or modules. Buyer's Alcatel part numbers shall be in
the same format and label material as Seller's CLEI codes on the front
panels. Location to be determined by Buyer.
3. Defective shelves an/or modules will be returned by customers to Buyer's
Customer Return Goods (CRG) for repair and/or exchange.
4. CRG will forward the defective material - shelves or modules - to Seller
for repair.
5. Seller will designate a primary contact for Buyer's CRG to serve as the
liaison for the repair process and answer questions we may have.
6. If Seller repairs the unit(s), repair information will be included with
the material when returned to Buyer's CRG.
7. If Seller exchanges the units, information on any new or exchanged serial
numbers that were shipped shall be included with the material returned to
Buyer's CRG.
8. Seller's repair Turnaround time (TAT) will not exceed ten business days
from Buyer's shipment date. If necessary material may be exchanged to avoid
delays.
9. Seller will provide Buyer's CRG with failure analysis information if
requested by Buyer on the repair order.
10. Seller will install Buyer's Alcatel part number label on units that have
been exchanged by Seller.
<PAGE>
Attachment J Quality Plan Requirements (See attached)
QUALITY PLAN
For
Computer Automation Systems, Inc.
Agreement Number 9809-928
DATE: September 01, 1998
<PAGE>
Quality Plan
Requirements
PURPOSE: To obtain agreement between Computer Automation Systems, Inc.
and Alcatel USA, Inc. that describes additional quality requirements not
covered by Purchase Agreements or Alcatel document 8BD 00041 3023 QRZZA,
Quality Assurance Requirements For Suppliers which is required by Alcatel
Terms and Conditions of purchase section 28. The "Quality Plan" or checklist
of requirements serves as a guide to list all the relevant information a
supplier needs to deliver quality material. The agreed upon checklist of
requirements may be specific to a supplier and/or a purchased commodities.
SUPPLIER COMMITMENT: Computer Automation Systems, Inc. must maintain
an approved and auditable quality system throughout life of the contract.
Computer Automation is responsible for assuring a continuous supply of quality
material conforming to all the requirements of the Purchase Agreement and this
Quality Plan.
CUSTOMER SUPPLIED MATERIAL: Computer Automation shall maintain a control
system to inspect, protect, segregate, store and be accountable for all
material furnished by or sold to Alcatel in support of the Purchase Agreement.
SPECIFIC REQUIREMENTS:
Bellcore TR-NWT-000078 -Current revision specification for the "Generic
Design Requirements for Telecommunications Products and Equipment" Available
from Bellcore call 1-800-521-CORE (2673) in USA and Canada; for all others
call 1-908-699-5800.
Bellcore GR-929-CORE - Current revision specification for "Reliability
and Quality Measurements for Telecommunications
Systems Requirements". Available from Bellcore call 1-800-521-CORE (2673)
in USA and Canada; for all others call 1-908-699-5800.
Handling of Moisture Sensitive Components - Alcatel document 8BD 00019
4201 QRZZA describes the methods used in application and control of dry
packaging moisture sensitive components. Paragraph 6.0, 7.0, 8.0, and 9.0 are
specifically required during the manufacturing phase.
Electro-Static Discharge Control (ESD) - Computer Automation shall
establish a program to prevent electrostatic charge buildup in accordance with
ANS Document 1AB 00000 0021 ASZZA.
Alcatel Workmanship Standards Manual - Computer Automation shall adhere
to the applicable section(s) of Alcatel Workmanship Standards Manual 8BD 00051
0007 QRZZA as well as (Bellcore TR-NWT-000078). Alcatel Workmanship
Standards establish the accept/reject criteria for products built for Alcatel.
Inspection - Computer Automation shall perform all the necessary inspection of
products to assure compliance to drawings, specifications, workmanship
standards and this Quality Plan.
Fabrication Practices Manual Alcatel Specification 580-5400-00l -
Computer Automation shall adhere to this document for manufacturing fabricated
piece parts. These fabrication standards establish the accept/reject criteria
for machined parts and sheet metal products built for Alcatel at the piece
part level.
Silk Screening Specification 580-0096-000 - Computer Automation or
subcontractors used by Computer Automation shall adhere to this document when
Silk Screen Printing is required for products delivered to Alcatel.
Powder Coating Specification 580-0739-001- Subcontractors used by
Computer Automation shall adhere to this quality document when powder coating
is required for products delivered to Alcatel. The panel color is RAL 9002
in accordance with Alcatel specification 005-0663-030. Computer Automation
<PAGE>
will subcontract powder coating to Alcatel Approved Special Processors who
draw from the same powder batch approved by Alcatel for consistency. Approved
Special Processor lists are available from Alcatel. Approved Special
Processors are familiar with Alcatel requirements.
First Article Inspection - Computer Automation will perform first article
inspection to Alcatel mechanical and fabrication standards and furnish data
with the first article to Alcatel Quality for review and verification. Any
significant revision to the product will require additional First Article
inspection data and approval from Alcatel Quality.
Inspection/Test Data - Computer Automation shall maintain records (for 1
year) of all test and inspection criteria including Accept / reject decisions
to be supplied upon request to Alcatel.
Inspection/Test Status Identification - Computer Automation must indicate
acceptance of products using ink stamps such as INSPECTION and TEST. Computer
Automation must furnish Alcatel with information identifying and describing
the various inspection and test stamps as well as use criteria.
Packaging & Handling on Products - Material shipped to Alcatel shall be
packaged in non-static generating packaging and dunnage. All products
shipped to Alcatel or dropped shipped to Alcatel customers shall be packed and
handled in accordance with ANS document 8BD 00041 3023 QRZZA, or special
requirements.
Supplier/Alcatel Interface - The supplier and Alcatel will establish
interface contacts to report problems, issues, information, etc. using one or
more of the following:
ECN Engineering Change Notice
PDW Pre-Delivery Waiver (8BD 00019 0910 QRZZA)
LDSCAR Latent Defects Supplier Corrective Action Request (8BD
00019 0912 QRZZA)
SQPA Supplier Quality Performance Analysis
Supplier's Sub-Contractors - Computer Automation must provide to Alcatel,
a list of "major" subcontractors for evaluation and review of any required
quality action. Computer Automation is responsible for imposing quality and
process requirements to subcontractors.
Control of Procured Material - Computer Automation must supply
information as to how specification requirements are imposed on subcontractors
and other key suppliers.
Quality Plan Re-Evaluation - The Quality Plan may be reevaluated annually
by Alcatel to determine if any additions or deletions are necessary.
ADDITIONAL QUALITY REQUIREMENTS
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
Quality Plan Agreement
Authorized Signatures
[S] Michael E. Cherry 9-29-98
- ----------------------------------------------- ---------------
Supplier Representative Date
- ----------------------------------------------- ---------------
Supplier Representative Date
[S] Michael L. Moore 10-7-98
- ----------------------------------------------- ---------------
Alcatel Procurement Date
[S] (illegible) 10-12-98
- ----------------------------------------------- ---------------
Alcatel Quality Date
[S] (illegible) 10-7-98
- ----------------------------------------------- ---------------
Alcatel Engineering Date
<PAGE>
ATTACHMENT K
OEM Enablement Technical Requirements
PROCEDURE
ISO Element 4.8
Abstract: The purpose of this document is to define the product identification
and individualization requirements applicable to all vendors to ANSI of
configured assemblies intended for resale by ANSI to ANSI customers, (OEM
Vendors); where such assemblies are intended for quality tracking within the
ANSI Quality Database System. This document is referenced by applicable ANSI
Purchasing Document.
Keywords:
Location: Richardson Documentation/Data Management (DDM under applicable
part number.)
01 11/25/97 B. Scott
ED DATE APPROVED BY CHECKED BY ORIGINATOR
OEM ENABLEMENT TECHNICAL REQUIREMENTS
<PAGE>
TABLE OF CONTENTS:
1.0 OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.0 PROCESS FLOW . . . . . . . . . . . . . . . . . . . . . . . . . .29
3.0 OEM VENDOR LABELING REQUIREMENTS . . . . . . . . . . . . . . . .30
4.0 OEM PRODUCT IDENTIFICATION ENABLING STRATEGY . . . . . . . . . .30
5.0 RELATED REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . .33
<PAGE>
1.0 Overview
The purpose of this document is to define the product identification and
individualization requirements applicable to all vendors to ANSI of configured
assemblies intended for resale by ANSI to ANSI customers, (OEM Vendors); where
such assemblies are intended for quality tracking within the ANSI Quality
Database System. This is a living document and will be updated as new
requirements are identified.
2.0 Process Flow
<IMAGE NOT INCLUDED>
<PAGE>
3.0 OEM Vendor Labeling Requirements
3.1 This document requires that all vendors to ANSI of configured assemblies
intended for resale by ANSI to ANSI customers (OEM Vendors), will comply with
current Telecommunications Industry Forum (TCIF) product labeling
requirements. This will include, but is not limited to, the following:
3.2 Approved application to BellCore, Inc. for issuance of a
Manufacturer/Supplier/Related Service Company Code per American National
Standards Institute T1.220-1991.
3.3 Product label(s), to include a TCIF-compliant, industry-unique serial
number, presented as both ASCII text and Code 39 bar code, printed per
American National Standards Institute X3.182-1980 printing quality guidelines.
3.4 Product label(s), to include the ANSI documented top-level assembly part
number, ANSI manufacturing revision one, and ANSI manufacturing revision two
as ASCII text, per American National Standards Institute X3.182-1980 printing
quality guidelines.
3.5 Data Transmission: The OEM upload file must be electronically
transmitted from the OEM Vendor to the ANSI anonymous FTP site not less than
48 hours prior to product shipment to ANSI. This time delay will ensure that
the data will be successfully loaded into QDS prior to product handling.
3.5.1 All files placed onto the ANSI FTP server must be in compressed form,
compliant with the UNIX Tar file compression method. Multiple unique data
files may be compressed into one Tar file.
4.0 OEM Product Identification Enabling Strategy
4.1 Vendor Serialization System Each OEM vendor will be identified by a
unique 4 alpha-character TCIF compliant vendor code. This TCIF vendor code
will be prefixed to the OEM vendor serial number to ensure industry standard
uniqueness. This provides for OEM vendor serialization to coexist with ANSI
serialization in the Quality Database System. This is required for processing
of these serial numbers by ANSI computer-based applications such as
Serialization, A.Q.S, etc.
4.2 Product Identification Data Upload Text File Each OEM Vendor shall
provide a comma-delimited text file which contains 1 record of data per line
(i.e., each individual record is followed by a carriage return/line feed).
Each line of data in the file will contain individualization data for only one
serialized vendor item. At all times that such a file contains lines of data
identifying vendor items intended as sub-assemblies (children) to a vendor
configured item (parent), the first line of data in the file shall be used
to identify the vendor configured item (parent).
<PAGE>
The upload text file shall conform to the following format (example files
illustrated below):
Field 1 Concatenated TCIF vendor code and vendor serial number (max.
Twenty-position alphanumeric)(no spaces)
Field 2 ANSI part number (twelve-position alphanumeric)(no spaces)
Field 3 ANSI manufacturing rev (rev-1) (two-position; numeric)(no spaces)
Field 4 Concatenated TCIF vendor code and vendor configured-item serial number
(parent) for serial number in field one
(max. twenty-position alphanumeric)(no spaces)
Field 5 Vendor Warranty Start Date (YYMMDD)(six-position numeric)(no spaces)
Field 6 Vendor Warranty End Date (YYYYMMDD)(six-position numeric)(no spaces)
Field 7 Vendor Software Version on date of shipment to ANSI (max.
twenty-position alphanumeric)(no spaces)
Field 8 Vendor Ethernet Address (seventeen-position alphanumeric) (six
two-position; includes one space between adjacent
pairs)
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn,vendo
r_warranty_start_date,vendor_warranty_end_date,vendor_software_version,vendor_
ethernet_address
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn,vendo
r_warranty_start_date,vendor_warranty_end_date,vendor_software_version,vendor_
ethernet_address
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn,vendo
r_warranty_start_date,vendor_warranty_end_date,vendor_software_version,vendor_
ethernet_address
Where the warranty detail is not applicable, a space shall replace the
associated fields (see below).
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn, ,
,vendor_software_version,vendor_ethernet_address
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn, ,
,vendor_software_version,vendor_ethernet_address
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn, ,
,vendor_software_version,vendor_ethernet_address
Where the software version is not applicable, a space shall replace the
associated field (see below).
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn,vendo
r_warranty_start_date,vendor_warranty_end_date, , vendor_ethernet_address
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn,vendo
r_warranty_start_date,vendor_warranty_end_date, ,vendor_ethernet_address
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn,vendo
r_warranty_start_date,vendor_warranty_end_date, , vendor_ethernet_address
Where the ethernet address is not applicable, a space shall replace the
associated field (see below).
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn,vendo
r_warranty_start_date,vendor_warranty_end_date,vendor_software_version, ,
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn,vendo
r_warranty_start_date,vendor_warranty_end_date,vendor_software_version, ,
vendor_codevendor_sn,ans_pn,ans_rev1,vendor_codevendor_configureditem_sn,vendo
r_warranty_start_date,vendor_warranty_end_date,vendor_software_version, ,
Where the vendor serial number is a configured-item vendor serial number
(parent) OR the vendor serial number does not have a configured-item vendor
serial number (parent), a space shall replace the associated field (see
below).
vendor_codevendor_sn,ans_pn,ans_rev1,,vendor_warranty_start_date,vendor_warran
ty_end_date,vendor_software_version, vendor_ethernet_address
vendor_codevendor_sn,ans_pn,ans_rev1,,vendor_warranty_start_date,vendor_warran
ty_end_date,vendor_software_version, vendor_ethernet_address
vendor_codevendor_sn,ans_pn,ans_rev1,,vendor_warranty_start_date,vendor_warran
ty_end_date,vendor_software_version, vendor_ethernet_address
4.3 Vendor Upload Text File Naming Convention Each product data upload text
file electronically transferred to ANSI shall be named by concatenating the
digits of the creation calendar date, including two each of digits for year,
month, and day, with the creation hour and minute. Single-digit day dates,
hours, or minutes will have zero preceding them to fulfill a ten character
length requirement. Example: YYMMDDHHMM; such as: 9802151147
<PAGE>
5.0 Related Requirements
5.1 Parent/Child Relationships
The OEM product data file shall contain information denoting serialized
parent/child relationships between complex assemblies and their contained
configured sub-assemblies. These relationships shall be maintained within the
QDS database as part of the OEM product data upload process.
5.2 Failure Analysis
A method must be developed by which the OEM vendor may transmit failure
analysis data to ANSI on a regular basis. This failure analysis data should be
processed and uploaded into the Quality Database System, and a descriptive
specification for this requirement shall be developed in the future.
End of Document
<PAGE>
ATTACHMENT L
For all Computer Automation Systems, Inc. (CASI) suggested product changes
relating to form, fit, function, design or component changes, they shall be
directed through the Alcatel Network Systems (ANS) Product Control Center
(PCC) for acceptance and implimentation. Through ANS cross-functional
approval (e.g., R&D, Planning, Operations, Quality, etc.), the PCC will
evaluate the impact of the change(s), determine its merit, and assist in
facilitating the implimentation of the change(s), if applicable. Note that
after first article approval is granted, CASI shall make no changes in
electrical, mechanical, or alter specification limits to design(s) or
materials without prior approval from ANS PCC.
ANS Product Line Management (PLM) and R&D agree to review, on an on-going
basis, the feasibility of any new CASI product integration for ANS acceptance
and implimentation,(if applicable). PCC may assist in the coordination of
this activity.
